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 you should take, you should consult a licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisor.

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

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the shares or other securities of the Company.

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

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CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

(1) STATUS ON RESUMPTION

(2) CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE

(3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS

(4) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER; CONNECTED TRANSACTIONS AND APPLICATION FOR WHITEWASH WAIVER (5) BONUS ISSUE OF SHARES (6) CONTINUING CONNECTED TRANSACTIONS (7) NOTICE OF SPECIAL GENERAL MEETING

Underwriters

World Treasure Global Limited

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Financial Adviser

Independent Financial Adviser

A letter of advice from Messis Capital Limited to the Independent Board Committee and the Independent Shareholders is set out on pages 92 to 121 of this circular.

To qualify for the Open Offer and the Bonus Issue, a Qualifying Shareholder’s name must appear on the register of members of the Company on the Record Date, which is currently expected to be 10 April 2012. In order to be registered as members of the Company on the Record Date, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 2 April 2012.

A notice convening the SGM to be held at 3/F, Nexxus Building, 77 Des Voeux Road Central, Hong Kong at 11:00 a.m. on 28 March 2012 is set out on pages SGM-1 to SGM-5 of this circular. Whether or not you intend to attend the SGM, 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 Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time fixed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting should you so wish. In such event, the instrument appointing a proxy shall be deemed revoked.

If the Underwriters terminate the Underwriting Agreement or if the conditions to the Underwriting Agreement have not been fulfilled in accordance therewith, the Open Offer will not proceed. Shareholders and potential investors are advised to exercise due caution when dealing in the Shares, and if they are in any doubt about their position they should consult their professional advisors.

5 March 2012

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	90
Letter from Messis Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	92
Appendix I — Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II — Financial information of the Target Group . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix IIA — Financial information of New Spring Offset . . . . . . . . . . . . . . . . . . . . . . . . .	IIA-1
Appendix III — Unaudited pro forma financial information of the Enlarged Group . . . .	III-1
Appendix IV — Statement of pro forma net tangible asset of the Enlarged Group
for the Open Offer only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V — Profit/(Loss) forecasts up to the year ending 31 March 2013
and comfort letters on 2012 Guaranteed Amount and Forecasts . . . . .	V-1
Appendix VI — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

‘‘Acquired Assets’’

the machinery, equipment, furniture, office equipment, computer equipment together with all the data stored therein, communication equipment and including, without limitation, all rights, title, benefits and interests of NSG therein

‘‘Acquisition’’ the sale and purchase of the Sale Shares pursuant to the S&P Agreement
‘‘acting in concert’’ has the meaning ascribed to it under the Takeovers Code
‘‘Adjusted Share(s)’’ ordinary share(s) of HK$0.01 each in the capital of the Company immediately after the Capital Reorganisation becoming effective
‘‘Announcements’’ the announcements of the Company dated 16 January 2012, 20 January 2012 and 5 March 2012 in relation to: (1) the status on Resumption; (2) Capital Reorganisation and change of board lot size; (3) very substantial acquisition of paper business; (4) fundraising by ways of Subscription and Open Offer, connected transactions and application for Whitewash Waiver; (5) Bonus Issue of Shares; (6) continuing connected transactions; and (7) despatch of this Circular
‘‘Annual Caps’’ the maximum aggregate annual values of the transactions contemplated under the Master Agreement for the production of printing orders by the Target Group for New Spring Label for each of the three years ending 31 March 2015
‘‘Application Form’’ the application form for use by the Qualifying Shareholders to apply for the Offer Shares
‘‘Asset Purchase’’ the acquisition of the Acquired Assets as agreed by Sky Will from NSG at an agreed consideration
‘‘Asset Purchase Agreement’’
the agreement dated 31 January 2011 entered into between Sky Will as the purchaser and NSG as the vendor for the sale and purchase of the Acquired Assets
‘‘associate(s)’’
has the same meaning ascribed thereto in the Listing Rules
‘‘Board’’
board of Directors
‘‘Bonus Issue’’
the proposed issue of five (5) Bonus Shares for every seven (7) then Adjusted Shares
‘‘Bonus Share(s)’’
41,023,612 new Adjusted Share(s) which may fall to be allotted and issued by way of Bonus Issue

– 1 –

DEFINITIONS

‘‘Business Day’’

means a day on which banks are generally open for business in Hong Kong (excluding Saturdays, Sundays and public holidays)

‘‘BVI’’

British Virgin Islands

‘‘Bye-law(s)’’ Bye-laws of the Company
‘‘Capital Reduction’’

upon the Share Consolidation taking effect, the proposed reduction of the nominal value of the issued share capital of the Company from HK$0.20 per Consolidated Share to HK$0.01 per Adjusted Share by way of cancellation of HK$0.19 of the paid up capital on each Consolidated Share

‘‘Capital Reorganisation’’ the Share Consolidation, the Capital Reduction and the Share Subdivision
‘‘CCASS’’ the Central Clearing and Settlement System established and operated by HKSCC
‘‘CIL’’
Climax Investments Limited, a former wholly-owned subsidiary of the Company before a disposal completed on 17 March 2010
‘‘CIL Group’’ CIL and its subsidiaries
‘‘Circular’’
this circular of the Company in relation to, inter alia, the transactions under the Resumption Proposal
‘‘Companies Act’’
Companies Act 1981 of Bermuda (as amended from time to time)
‘‘Companies Ordinance’’ the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
‘‘Company’’
Climax International Company Limited (stock code: 439), a company incorporated in Bermuda with limited liability and the Shares of which are listed on the Stock Exchange
‘‘connected person(s)’’ has the same meaning ascribed thereto in the Listing Rules
‘‘Consideration’’ HK$110 million, being the consideration payable by the Company to the Vendor for the Sale Shares
‘‘Consideration Shares’’ an aggregate of 200,000,000 Adjusted Shares to be allotted and issued by the Company to the Vendor upon the completion of the S&P Agreement at an issue price of HK$0.10 per Adjusted Share pursuant to the S&P Agreement

– 2 –

DEFINITIONS

‘‘Consolidated Share(s)’’ ordinary share(s) of HK$0.20 each in the share capital of the Company after the Share Consolidation becoming effective but before the Capital Reduction and the Share Subdivision ‘‘Director(s)’’ director(s) of the Company

‘‘Enlarged Group’’ the Group and the Target Group

‘‘Excluded Shareholder(s)’’ those Overseas Shareholder(s) to whom the Company (having obtained relevant and necessary legal opinions) considers it necessary or expedient not to offer the Offer Shares on account of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place

‘‘Executive’’ the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director ‘‘First Right Deed’’ the deed of undertakings dated 29 February 2012 given by Mr. Ng and Ms. Li in favour of the Company ‘‘Group’’ the Company and its subsidiaries ‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited ‘‘HK$’’ and ‘‘cents’’ Hong Kong dollars and cents, the lawful currency of Hong Kong ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC ‘‘ICAC’’ the Independent Commission Against Corruption ‘‘ICAC Investigation’’ the investigation by the ICAC ‘‘Independent Board Committee’’ an independent board committee comprising all the independent non-executive Directors ‘‘Independent Shareholders’’ Shareholders other than (i) the Subscriber, Mr. Wong, their respective associates and parties acting in concert with any of them; (ii) the Vendor, its ultimate beneficial owners, their respective associates and parties acting in concert with any of them; and (iii) those who are interested in, or involved in, the S&P Agreement, the Underwriting Agreement, the Subscription Agreement, the Whitewash Waiver and the Master Agreement. For the avoidance of doubt, Shareholders who are only interested in the Bonus Issue are Independent Shareholders

– 3 –

DEFINITIONS

‘‘Independent Third Party(ies)’’

third party(ies) independent of the Company and connected person(s) of the Company and is/are not connected person(s) of the Company

‘‘Kingston Securities’’ Kingston Securities Limited, a licensed corporation to carry out business in type 1 regulated activity (dealing in securities) under the SFO, being one of the Underwriters
‘‘Last Acceptance Date’’ 25 April 2012, being the last date for acceptance of and payment for the Offer Shares
‘‘Last Trading Day’’ 22 September 2008, being the last trading day prior to the date of this circular
‘‘Latest Practicable Date’’ 2 March 2012, being the latest practicable date prior to the despatch of this Circular for ascertaining certain information in this Circular
‘‘Listing Committee’’ the Listing Committee of the Stock Exchange
‘‘Listing Division’’ the Listing Division of the Stock Exchange
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Lock Up Arrangement’’ the provisions under the Subscription Agreement and the Underwriting Agreement respectively that the Subscriber is restricted from transferring, charging or pledging any Subscription Shares and any Underwritten Offer Shares taken up by the Subscriber for six months from Resumption
‘‘Long Stop Date’’ 30 June 2012 (or such other date as the parties may agree in writing), being the long stop date of the S&P Agreement, the Subscription Agreement and the Underwriting Agreement
‘‘Master Agreement’’ an agreement entered into between the Target Company and New Spring Label on 29 February 2012 for the production of printing orders
‘‘Messis Capital’’
Messis Capital Limited, a corporation licensed under the SFO to conduct type 6 (advising on corporate finance) regulated activity as defined under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders
‘‘Mr. Ng’’
Mr. Ng Man Chan, one of the directors of the Target Company
‘‘Mr. Wong’’
Mr. Wong Hin Shek, an executive Director

– 4 –

DEFINITIONS

‘‘Ms. Li’’

Ms. Li Mi Lai, the spouse of Mr. Ng

‘‘New Spring Label’’
New Spring Label & Packaging Limited, a company incorporated in Hong Kong in which Mr. Ng and Ms. Li have beneficial interests
‘‘New Spring Offset’’ 新高準柯式印刷(深圳)有限公司 (New Spring Offset Printing (Shenzhen) Limited), a wholly foreign owned enterprise established in the PRC
‘‘New Spring Paper’’ 新高準紙製品(深圳)有限公司 (New Spring Paper Products (Shenzhen) Limited), a wholly foreign owned enterprise established in the PRC and a wholly owned subsidiary of Sky Will before completion of the Reorganisation
‘‘New Spring (SW)’’ New Spring (SW) Printing & Packaging Limited, a company incorporated in Hong Kong and a wholly owned subsidiary of Sky Will
‘‘NSG’’ New Spring Group Company Limited, a company incorporated in Hong Kong. NSG was the vendor of New Spring Offset and the vendor under the Asset Purchase
‘‘Offer Price’’ HK$0.10 per Offer Share
‘‘Offer Share(s)’’
459,464,456 new Adjusted Share(s) to be issued by the Company pursuant to the Open Offer
‘‘Open Offer’’
the issue of Offer Shares by the Company on the basis of eight (8) Offer Shares for every Adjusted Share to the Qualifying Shareholders at the Subscription Price
‘‘Open Offer Documents’’ the Prospectus and the Application Form
‘‘Overseas Shareholders’’ Shareholders with registered address (as shown in the register of member of the Company on the Record Date) which are outside Hong Kong
‘‘PRC’’ or ‘‘China’’ the People’s Republic of China, for the purposes of this circular and for geographical reference only, excludes Taiwan, the Macao Special Administrative Region and Hong Kong (unless otherwise indicated)
‘‘Promissory Note’’
the promissory note to be issued by the Company in the principal amount of HK$55,000,000 within seven Business Days after the issuance of the 2012 Audited Accounts with maturity date falling two calendar years from the date of issue

– 5 –

DEFINITIONS

‘‘Prospectus’’ the document containing details of the Open Offer to be despatched to the Shareholders
‘‘Qualifying Shareholder(s)’’ the Shareholders, whose names appear on the register of members of the Company as at the close of business on the Record Date, other than the Excluded Shareholders
‘‘Record Date’’ the date by reference to which entitlements to the Open Offer and the Bonus Issue will be determined
‘‘Registrar’’ Tricor Secretaries Limited, the Company’s branch share registrar in Hong Kong
‘‘Reorganisation’’ the reorganisation of the corporate structure of the Target Group comprising (i) Sky Will acquired the entire issued share capital of New Spring Offset; and (ii) the completion of deregistration of New Spring Paper
‘‘Resumption’’ the resumption of trading in the Shares/Adjusted Shares on the Stock Exchange
‘‘Resumption Conditions’’ the conditions for the Resumption as set out in the letter dated 14 December 2011 from the Stock Exchange to the Company, which had been set out in the same order in the announcement of the Company dated 16 January 2012
‘‘Resumption Proposal’’ the proposal compiled by Veda Capital on behalf of the Company dated 20 January 2011 for the purpose of seeking approval of the Stock Exchange on the Resumption and the subsequent related submissions to the Stock Exchange
‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘S&P Agreement’’ the sale and purchase agreement dated 20 January 2011 (as supplemented on 30 September 2011 and 29 February 2012 respectively) entered into between the Vendor and the Company in relation to the Acquisition
‘‘Sale Shares’’ 100 shares of the Target Company, being the entire issued share capital of the Target Company
‘‘SFC’’ Securities and Futures Commission of Hong Kong
‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

– 6 –

DEFINITIONS

‘‘SGM’’ a special general meeting of the Company to be convened to consider and, if thought fit, approve, amongst other, the Capital Reorganisation, the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps)

‘‘SGM Results Announcement’’ an announcement of the Company to be published on the date of the SGM stating the results of the SGM
‘‘Share Consolidation’’
the consolidation of every 20 issued and unissued Shares of HK$0.01 each in the share capital of the Company into one Consolidated Share of HK$0.20 each
‘‘Share Subdivision’’
the subdivision of each authorized but unissued Consolidated Share into 20 Adjusted Shares
‘‘Shareholder(s)’’ holder(s) of the Share(s) or Adjusted Shares, as the case may be
‘‘Share(s)’’ ordinary shares of HK$0.01 each in the share capital of the Company
‘‘Sky Will’’
Sky Will Printing & Packaging Limited, a wholly owned subsidiary of the Target Company
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Subscriber’’ the subscriber under the Subscription Agreement, i.e. World Treasure Global Limited which is a company incorporated in the BVI and wholly owned by Mr. Wong
‘‘Subscriber Undertaking’’ the undertaking dated 29 February 2012 provided by the Subscriber in favour of the Company that it will not transfer, charge or pledge any of its interest in the Company for the period of second six months up to two years from the date of the Resumption, resulting the Subscriber to cease to be the controlling Shareholder
‘‘Subscription’’ the subscription of the Subscription Shares in the amount of HK$45 million by the Subscriber
‘‘Subscription Agreement’’ the agreement dated 29 February 2012 entered into between the Company and the Subscriber in respect of the Subscription
‘‘Subscription Price’’ HK$0.10 per Subscription Share pursuant to the Subscription Agreement

– 7 –

DEFINITIONS

‘‘Subscription Share(s)’’
450,000,000 new Adjusted Share(s) to be issued and allotted under the Subscription
‘‘Suspension’’ the suspension of trading in the Shares since 23 September 2008
‘‘Sweet Wishful’’
Sweet Wishful Limited, a substantial Shareholder and is wholly owned by Mr. Deng Junjie
‘‘Takeovers Code’’
the Hong Kong Code on Takeovers and Mergers
‘‘Target Company’’
Sky Will Printing & Packaging (Holdings) Limited, a company incorporated in the BVI and is wholly-owned by the Vendor
‘‘Target Group’’ the Target Company and its subsidiaries upon completion of the Reorganisation
‘‘Underwriters’’ the Subscriber and Kingston Securities
‘‘Underwriting Agreement’’
the underwriting agreement dated 29 February 2012 entered into between the Company and the Underwriters in relation to the Open Offer
‘‘Underwritten Offer Shares’’
all the Offer Shares, being 459,464,456 Offer Shares (assuming no issue of Shares from the date of the Underwriting Agreement to the Record Date)
‘‘USA’’ United States of America
‘‘Veda Capital’’
Veda Capital Limited, a corporation licensed under the SFO to conduct type 6 (advising on corporate finance) regulated activity as defined under the SFO and is wholly and beneficially owned by Mr. Wong, the financial adviser to the Company in respect of the Resumption
‘‘Vendor’’
Sky Will Printing & Packaging (BVI) Limited, a company incorporated in the BVI and is owned as to 30% by Mr. Chan Fook Kai; as to 30% by Mr. Kao Wai Kwong, Eric and as to 40% by Mr. Fung Ming
‘‘Whitewash Waiver’’
a waiver of the obligation of the Subscriber and parties acting in concert with it to make a mandatory general offer for all the Adjusted Shares not already owned or agreed to be acquired by them as a result of the Subscription and its underwriting obligation under the Underwriting Agreement pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code by the Executive

– 8 –

DEFINITIONS

‘‘1st Deposit’’

HK$5 million paid by the Company to the Vendor as refundable deposit within 5 Business Days after signing of the S&P Agreement and shall be used as partial payment to settle the Consideration pursuant to the S&P Agreement

‘‘2nd Deposit’’

HK$10 million payable by the Company to the Vendor as refundable deposit within 7 Business Days after approval of the S&P Agreement by the Shareholders at the SGM and shall be used as partial payment to settle the Consideration pursuant to the S&P Agreement

‘‘2012 Audited Accounts’’

the audited accounts of the Target Group for the year ending 31 March 2012 to be prepared in accordance with the generally accepted accounting principles in Hong Kong by an accounting firm as agreed by the Company and the Vendor

‘‘2012 Guaranteed Amount’’
the amount undertaken by the Vendor to the Company that the 2012 Net Profit will not be less than HK$16 million
‘‘2012 Net Profit’’
the audited net profit after tax and before extraordinary items of the Target Group for the year ending 31 March 2012 under the 2012 Audited Accounts calculated in accordance with the generally accepted accounting principles in Hong Kong
‘‘%’’ per cent
English name translation is for identification purpose only

– 9 –

EXPECTED TIMETABLE

The expected timetable for the Capital Reorganisation, the Open Offer and the Bonus Issue set out below is for indicative purposes only and has been prepared on the assumption that all the conditions of the Capital Reorganisation, the Open Offer and the Bonus Issue will be fulfilled. The expected timetable is subject to change, and any changes will be announced in a separate announcement by the Company as and when appropriate.

2012

Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . 11:00 a.m. on Monday, 26 March Expected time and date of the SGM . . . . . . . . . . . . . . . . . . . . . .11:00 a.m. on Wednesday, 28 March SGM Results Announcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 28 March Effective time and date of the Capital Reorganisation and change of board lot size . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Thursday, 29 March Free exchange of existing Share certificates for Adjusted Share certificates commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 29 March Last day of cum-entitlements of the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 29 March First day of ex-entitlements of the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 30 March Latest time for lodging transfer of the Adjusted Shares in order to qualify for the Open Offer and the Bonus Issue . . . . . . . . . . 4:30 p.m. on Monday, 2 April Closure of register of members to determine the eligibility of the Open Offer and the Bonus Issue (both dates inclusive) . . Tuesday, 3 April to Tuesday, 10 April Record Date for the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 10 April Despatch of the Open Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 11 April Latest time for acceptance of and payment for the Offer Shares . . . . 4:00 p.m. on Wednesday, 25 April Latest time for termination of the Underwriting Agreement . . . . . . . . . 4:00 p.m. on Monday, 30 April Announcement of results of the Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 30 April Despatch of certificates for Offer Shares and Bonus Shares . . . . . . . . . . . . . . . . . . . .Thursday, 3 May If the Open Offer is terminated, refund cheques to be despatched on or before. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 3 May Completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 3 May

– 10 –

EXPECTED TIMETABLE

2012

Free exchange of existing Share certificates for

Adjusted Share certificates ends (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 4 May

Resumption of trading in the Adjusted Shares,

including, inter alia, the Offer Shares

and the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 7 May

Matching of odd lots of the Adjusted Shares commences . . . . . . . . . . . . 9:00 a.m. on Monday, 7 May

Matching of odd lots of the Adjusted Shares ends . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 25 May

Notes:

For the avoidance of doubt:
(a) the Consideration Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue;
(b) the Subscription Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue;
(c) the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue; and
(d) the Bonus Shares do not have the entitlements to subscribe for the Offer Shares under the Open Offer,

since the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares will be issued after the Record Date.

The certificates of the Adjusted Shares will be available for collection within ten (10) Business Days after the submission of the existing Share certificates for exchange. Existing Share certificates will not be accepted for delivery, trading and settlement purposes on and after Monday, 7 May 2012.
All references to time in this circular are references to Hong Kong time.

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OPEN OFFER

If there is:

. a tropical cyclone warning signal number 8 or above, or
. a ‘‘black’’ rainstorm warning
(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on the Last Acceptance Date, the latest time for acceptance of and payment for the Offer Shares will not take place at 4:00 p.m. on the Last Acceptance Date, but will be extended to 5:00 p.m. on the same day instead;

– 11 –

EXPECTED TIMETABLE

(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Last Acceptance Date, the latest time for acceptance of and payment for the Offer Shares will not take place on the Last Acceptance Date, but will be rescheduled to 4:00 p.m. on the following business day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Offer Shares does not take place on the Last Acceptance Date, the dates mentioned in the section headed ‘‘Expected Timetable’’ in this circular may be affected. An announcement will be made by the Company in such event.

– 12 –

LETTER FROM THE BOARD

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

CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

Executive Director

Mr. Wong Hin Shek (Chief Executive Officer)

Independent non-executive Directors Mr. Lau Man Tak Mr. Man Kwok Leung Dr. Wong Yun Kuen

Registered office Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business Unit 906, 9/F Wings Building 110–116 Queen’s Road Central Central, Hong Kong

5 March 2012

To the Shareholders

Dear Madam/Sir,

(1) STATUS ON RESUMPTION

(2) CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE
(3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS
(4) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER; CONNECTED TRANSACTIONS AND APPLICATION FOR

WHITEWASH WAIVER

(5) BONUS ISSUE OF SHARES

(6) CONTINUING CONNECTED TRANSACTIONS

(7) NOTICE OF SPECIAL GENERAL MEETING

References are made to the Announcements.

The purpose of this Circular is to provide you with, among other things, further information in respect of (1) the status on Resumption; (2) Capital Reorganisation and change of board lot size; (3) very substantial acquisition of paper business; (4) fundraising by ways of the Subscription and the Open Offer, connected transactions and application for Whitewash Waiver; (5) Bonus Issue of Shares; and (6) continuing connected transactions; (7) a letter from the Independent Board Committee in relation to the Acquisition, the Subscription, the Open Offer, the Whitewash Waiver, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps); (8) a letter of advice from Messis

– 13 –

LETTER FROM THE BOARD

Capital to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps); and (9) a notice to convene the SGM.

(1) STATUS ON RESUMPTION

On 22 September 2008, the ICAC executed a search warrant at the then Company’s principal place of business in Hong Kong. The Company was informed by the ICAC that certain then officers of the Group were arrested for offences under the Prevention of Bribery Ordinance and Theft Ordinance on the same day.

On 23 September 2008, trading of the Shares was suspended at the request of the Company pending the release of an announcement in relation to price sensitive information.

On 28 January 2010, the Stock Exchange informed the Company that in view of the prolonged suspension of trading in the Shares, the delisting procedures set out in Practice Note 17 to the Listing Rules have been applied to the Company and the first delisting stage commenced on 23 September 2008.

On 10 August 2010, the Stock Exchange has decided to place the Company in the second stage of delisting under Practice Note 17 to the Listing Rules with effect from 10 August 2010.

The Company is pleased to announce that the Stock Exchange decided to allow the Company to proceed with the Resumption Proposal subject to the following Resumption Conditions to be fulfilled by 13 June 2012:

Completion of the Acquisition, the Subscription, the Open Offer, the Bonus Issue and all transactions contemplated under the Resumption Proposal.
Inclusion in the Circular the following:
(a) detailed disclosure of the Resumption Proposal which is comparable to prospectus standards;
(b) profit forecasts of the Target Group and the Enlarged Group for each of the two years ending 31 March 2013 together with reports from the auditors and the financial adviser under paragraph 29(2) of Appendix 1b of the Listing Rules; and
(c) a pro forma balance sheet upon completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue and a comfort letter from the auditors under Rule 4.29 of the Listing Rules.
Informing the market of all material information relating to the ICAC Investigation and its implications on the Company.
Provision of an internal control review report before resumption confirming the Group has an adequate and effective internal control system.

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LETTER FROM THE BOARD

The Company should also comply with the Listing Rules. The Stock Exchange may modify the Resumption Conditions if the Company’s situation changes.

In respect of Resumption Condition 1, details of the Acquisition, the Subscription, the Open Offer, the Bonus Issue and all transactions under the Resumption Proposal has been set out in the Announcements and this Circular. In respect of Resumption Conditions 2(a), (b) and (c), the required disclosures had been included in this Circular. In respect of Resumption Conditions 3 and 4, separate announcement(s) will be made by the Company before Resumption.

(2) CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE

The Company proposed to effect the Capital Reorganisation which involves:

(i) Share Consolidation: the consolidation of every 20 issued and unissued Shares of HK$0.01 each into 1 Consolidated Share of HK$0.20 each;
(ii) Capital Reduction: upon the Share Consolidation taking effect, the proposed reduction of the issued share capital of the Company by cancelling the issued share capital to the extent of HK$0.19 on each issued Consolidated Share in the share capital of the Company such that the nominal value of the issued Consolidated Share will be reduced from HK$0.20 each to HK$0.01 each; and
(iii) Share Subdivision: upon the Share Consolidation taking effect, the subdivision of each authorized but unissued Consolidated Share of HK$0.20 each into 20 Adjusted Shares of HK$0.01 each.

As at the Latest Practicable Date, there are 1,148,661,140 Shares of HK$0.01 each in issue which are fully paid or credited as fully paid. Assuming no further Shares will be issued from the Latest Practicable Date and up to the date of the SGM, there will be 57,433,057 Adjusted Shares of HK$0.01 each in issue which are fully paid or credited as fully paid following the Capital Reorganisation but before the issue of the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares.

Conditions of the Capital Reorganisation

The Capital Reorganisation (which will be effected in accordance with the Bye-laws and the Companies Act) is conditional upon:

(a) the passing of a special resolution by the Shareholders to approve the Capital Reorganisation at the SGM;
(b) the Listing Committee granting the listing of, and permission to deal in, the Adjusted Shares in issue arising from the Capital Reorganisation; and
(c) the compliance with the requirements under the Companies Act.

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LETTER FROM THE BOARD

Effect and reason of the Capital Reorganisation

As at the Latest Practicable Date, the authorised share capital of the Company is HK$100,000,000 divided into 10,000,000,000 Shares of HK$0.01 each, of which 1,148,661,140 Shares have been issued and are fully paid. Subject to the approval of the Capital Reorganisation by the Shareholders, the authorised share capital of the Company upon the Capital Reorganisation becoming effective will be HK$100,000,000 comprising 10,000,000,000 Adjusted Shares, of which 57,433,057 Adjusted Shares will be in issue. On the assumption that no further Shares will be issued or repurchased, a credit of approximately HK$10,912,280 will arise as a result of the Capital Reduction. The credit will be transferred to the contributed surplus account of the Company and may be applied by the Directors to set off against the accumulated losses of the Company.

Upon completion of the Capital Reorganisation, the Company has greater flexibility for future fundraising activities and the credit in the contributed surplus account arising as a result of the Capital Reduction may be applied by the Directors to set off against the accumulated losses of the Company.

The Capital Reorganisation will also reduce the total number of Shares currently in issue. As such, the transaction and handling costs of the Company in relation to the dealings in the Adjusted Shares are expected to be reduced, which will be beneficial to the Company. Moreover, as the market value of each board lot upon the Capital Reorganisation becoming effective will be higher than the market value of each existing board lot, the transaction cost as a proportion of the market value of each board lot will be lower. It is expected that the liquidity in trading of the Adjusted Shares will increase accordingly and the market value of the Adjusted Shares will be more precise in reflecting the intrinsic value of the Company upon the Resumption.

Accordingly, the Board is of the view that the Capital Reorganisation is beneficial to the Company, the Shareholders and investors as a whole.

Save for the necessary professional expenses for the implementation of the Capital Reorganisation, the implementation of the Capital Reorganisation will not alter the underlying assets, business operation, management position of the Company and the interests and rights of the Shareholders.

Status of the Adjusted Shares

The Adjusted Shares will rank pari passu in all respects with each other and the Capital Reorganisation will not result in any change in the relative rights of the Shareholders. Fractional Adjusted Shares will not be issued by the Company to the Shareholders. Any fractional entitlement to the Adjusted Shares will be aggregated, sold and retained for the benefit of the Company.

Arrangement on odd lot trading

In order to facilitate the trading of odd lots (if any) of the Adjusted Shares, the Company has appointed Kingston Securities to provide matching service, on a best effort basis, to those Shareholders who wish to acquire odd lots of the Adjusted Shares to make up a full board lot, or to dispose of their holding of odd lots of the Adjusted Shares.

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LETTER FROM THE BOARD

Matching of odd lots of the Adjusted Shares arising from the Capital Reorganisation will commence from 9:00 a.m. on Monday, 7 May 2012 and will end at 4:00 p.m. on Friday, 25 May 2012.

Exchange of Share certificates

Subject to the Capital Reorganisation becoming effective, which is expected to be 9:00 a.m., Thursday, 29 March 2012, being the Business Day immediately after the date of the SGM, Shareholders may, on or after Thursday, 29 March 2012 until 4:00 p.m. on Friday, 4 May 2012 (both days inclusive), submit share certificates for existing Shares to the Registrar at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, to exchange, at the expense of the Company, for certificates of the Adjusted Shares. Thereafter, certificates of Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such other amount as may from time to time be specified by the Stock Exchange) by the Shareholders for each certificate issued or cancelled, whichever is higher. Existing certificates for the Shares will remain effective as documents of title but will not be accepted for delivery, trading and settlement purpose and may be exchanged for certificates for Adjusted Shares at any time.

The Adjusted Share certificates will be issued in yellow colour in order to distinguish them from the existing Share certificates which are in purple colour.

Change of board lot size

As at the Latest Practicable Date, the Shares are traded in board lots of 8,000 Shares. It is proposed that the Adjusted Shares will be changed to be traded in board lots of 20,000 Adjusted Shares upon the Capital Reorganisation becoming effective.

(3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS

The Group was engaged in the production and marketing of paper products at the time of Suspension.

On 20 January 2011, the Company entered into the S&P Agreement with the Vendor, whereby the Vendor agreed to sell and the Company agreed to purchase the Sale Shares, representing the entire issued share capital of the Target Company. The Target Group is principally engaged in the manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials in accordance with customers’ designs and specifications. Details of the transaction are as follows:

A. The S&P Agreement

Date: 20 January 2011 (as supplemented on 30 September 2011 and 29 February 2012 respectively)

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LETTER FROM THE BOARD

Parties: (1) Vendor: Sky Will Printing & Packaging (BVI) Limited which is a company incorporated in the BVI and is owned as to 30% by Mr. Chan Fook Kai; as to 30% by Mr. Kao Wai Kwong, Eric and as to 40% by Mr. Fung Ming. The Vendor is principally engaged in investment holding. All of the ultimate beneficial owners of the Vendor are merchants. As at the Latest Practicable Date, none of the Vendor or any of its ultimate beneficial owners is interested in any Shares.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Vendor and its ultimate beneficial owners are Independent Third Parties and independent of the Board (including the proposed Directors).

Mr. Wong is independent of, not acting in concert with and does not have any relationship with the Vendor and/or its ultimate beneficial owners.

(2) Purchaser: The Company

Assets to be acquired

The Sale Shares, representing the entire issued share capital of the Target Company.

Consideration

The Consideration for the sale and purchase of the Sale Shares was determined after arm’s length negotiation between the Vendor and the Company with reference to, among other things, (i) the 2012 Guaranteed Amount; and (ii) the prospect of the Target Group’s business as mentioned in the paragraphs headed ‘‘Future plans and development’’ under the section headed ‘‘Information of the Target Group’’ in this Circular. The 2012 Guaranteed Amount constitutes profit forecast under Rule 10 of the Takeovers Code and the relevant comfort letters have been set out in Appendix V to this Circular. Based on the 2012 Guaranteed Amount, the Consideration represents a price-to-earnings ratio of approximately 6.875 times which is within the range of the price-to-earnings ratio of companies listed on the Stock Exchange whose principal activity is the provision of production and marketing of paper products. The price-earnings ratios of the comparable listed companies in Hong Kong engaging in the similar businesses of the Target Group (with market capitalization less than HK$1,000 million), namely Come Sure Group (Holdings) Limited (stock code: 794), Hop Fung Group Holdings Limited (stock code: 2320), Samson Paper Holdings Limited (stock code: 731) and Starlite Holdings Limited (stock code: 403), ranged from approximately 5.91 times to approximately 13.07 times with an average of approximately 9.72 times as at 20 January 2011, being the date of the S&P Agreement.

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LETTER FROM THE BOARD

The Consideration of HK$110 million shall be payable in the following manners:

(a) the 1st Deposit of HK$5 million being paid to the Vendor within 5 Business Days after signing of the S&P Agreement;
(b) the 2nd Deposit of HK$10 million payable to the Vendor in cash or by cheque within 7 Business Days after the approval of the S&P Agreement by the Shareholders;
(c) HK$20 million payable to the Vendor in cash or by cheque upon the completion of the S&P Agreement;
(d) HK$20 million by way of the Company issuing the Consideration Shares to the Vendor (or its nominee(s)) upon the completion of the S&P Agreement; and
(e) HK$55 million (subject to adjustment(s) as stated under the section headed ‘‘Profit guarantee and adjustments of Consideration’’ in this Circular) by way of issuing the Promissory Note by the Company to the Vendor (or its nominee(s)) within 7 Business Days after the issuance of the 2012 Audited Accounts.

The 1st Deposit has been settled by the internal cash resources of the Group. The balance of the cash portion of the Consideration in the amount of HK$30 million will also be settled by the internal cash resources of the Group.

Conditions precedents

Completion of the S&P Agreement is conditional in all respects upon:

(a) the Reorganisation having been completed to the satisfaction of the Company;
(b) if necessary, all approvals by the Shareholders, government and regulatory authorities (including but not limited to the Stock Exchange) for the transactions contemplated under the S&P Agreement being obtained;
(c) the Asset Purchase having been completed to the satisfaction of the Company (please refer to the section headed ‘‘Asset Purchase’’ in this Circular for the details of the Asset Purchase);
(d) in relation to the transactions contemplated under the S&P Agreement, all relevant regulatory requirements (including but not limited to those under the Listing Rules and all relevant regulatory requirements in Hong Kong) having been complied with and satisfied;
(e) Mr. Ng having signed service agreement with the Company on such terms and conditions as may be agreed between the parties and the Company. (Please refer to the section headed ‘‘Experience of the Board and the Enlarged Group in paper business’’ in this Circular for the salient terms of the service agreement);

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LETTER FROM THE BOARD

(f) the Company having completed the due diligence investigation on the business, assets, liabilities and financial position of the Target Group, and fully or substantially satisfied with the result of the due diligence;
(g) the warranties under the S&P Agreement having remained true and accurate in all material respects;
(h) the Target Group having duly performed and complied with all agreements, obligations and conditions contained in the S&P Agreement that are required to be performed or complied with by it on or before the completion of the Acquisition;
(i) no material adverse change or prospective material adverse change in the Target Group’s business, operations, financial conditions or prospects taken as a whole has occurred since the date of signing of the S&P Agreement;
(j) the Capital Reorganisation becoming effective; and
(k) the completions of the Subscription, the Open Offer and the Bonus Issue.

The Vendor shall use its best endeavours to procure the fulfilment of the conditions (so far as it is within its power and practicable to do so) as soon as practicable and in any event before the Long Stop Date. As at the Latest Practicable Date, conditions (a), (c) and (e) have been fulfilled.

The Company may at any time waive in writing any conditions (other than conditions (a) to (d), (j) and (k)) and such waiver may be made subject to such terms and conditions as may be determined by the Company.

If the conditions have not been fulfilled or waived by the Company at or before 12:00 noon on the Long Stop Date (or such other date as the Vendor and the Company may agree), the S&P Agreement shall lapse, whereupon all rights and obligations of the parties to the S&P Agreement shall cease to have effect except in respect of any accrued rights and obligations of the parties to the S&P Agreement.

Profit guarantee and adjustments of Consideration

Pursuant to the S&P Agreement, the Vendor has irrevocably undertaken to the Company that the 2012 Net Profit will not be less than HK$16 million.

2012 Shortfall

In the event that the 2012 Net Profit is less than HK$16 million, the Consideration will be adjusted downward by an amount equal to the shortfall between the 2012 Guaranteed Amount and the 2012 Net Profit multiplied by 6.875, being

2012 Shortfall = (2012 Guaranteed Amount – 2012 Net Profit) X 6.875;

‘‘2012 Shortfall’’ means the actual amount in HK$ (if any) payable by the Vendor to the Company as set out above in this section.

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LETTER FROM THE BOARD

The 2012 Shortfall payable by the Vendor as illustrated above will be offset against the Promissory Note on a dollar for dollar basis.

For the avoidance of doubt, the maximum liability of the Vendor under this section shall not exceed the amount of the Promissory Note, being HK$55 million.

Completion

Completion of the Acquisition is expected to take place within 7 Business Days following the day on which all the conditions are satisfied in full (subject to those conditions having been waived), or such other date as the Vendor and the Company may agree. Upon completion of the Acquisition, the Target Group will become wholly-owned subsidiaries of the Company and the financial statements of the Target Group will be consolidated in the accounts of the Group.

Consideration Shares

The issue price per Consideration Share is equivalent to the Subscription Price and the Offer Price of HK$0.10 per Adjusted Share, representing a discount of 80% to the closing price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted Share assuming the Capital Reorganisation having become effective) as quoted on the Stock Exchange on the Last Trading Day. There is no restriction on subsequent sale of the Consideration Shares.

In order to relief cashflow pressure on the Group, the Company has proposed the issue of Consideration Shares as part of the settlement of the Consideration. In view of the long suspension of trading of the Shares since 23 September 2008, the Company has, upon arm’s length negotiation, agreed with the Vendor that the issue price of the Consideration Shares should represent a substantial discount to the closing price before Suspension.

Assuming the Capital Reorganisation becoming effective, the 200,000,000 Consideration Shares represent: (i) approximately 3.48 times of the total number of issued Adjusted Shares as at the Latest Practicable Date; (ii) approximately 77.69% of the total number of issued Adjusted Shares as enlarged by the Consideration Shares; and (iii) approximately 16.56% of the total number of issued Adjusted Shares as enlarged by the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares. The issue of the Consideration Shares will not result in a change of control of the Company. The Vendor has no intention to nominate any candidate to the Board.

For the avoidance of doubt, the Consideration Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue since the Consideration Shares will be issued after the Record Date.

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LETTER FROM THE BOARD

Major terms of the Promissory Note

Issuer : the Company Initial noteholder : the Vendor Principal amount : HK$55 million Date of issue : within 7 Business Days after the issuance of the 2012 Audited Accounts Maturity : the date falling two calendar years from the date of issue Interest : 0% Transferability : Freely transferable Restriction on early : the holder of the Promissory Note cannot redeem for cash of redemption the Promissory Note on or before 31 March 2013

B. Business operation of the Enlarged Group

Information on the Group

Before the Suspension on 23 September 2008, the Group was engaged in the design, development, production and marketing of paper products.

The Group established the business of trading of electronic products in 2009.

Taking into account the substantial net liabilities position and the continued loss of the then paper business of the Group, the Company decided to dispose of the paper business in October 2009. Following the completion of such disposal in March 2010, the then Group’s principal activity was trading of electronic products.

Revenue generated from the electronics business had been decreasing since the financial year ended 31 March 2011. During the six-month period ended 30 September 2011, no transaction was concluded to generate any trading income from trading of electronic products.

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LETTER FROM THE BOARD

Information on the Target Group

a. Development background of the Target Group

In January 2011, during the time when the Company entered into the S&P Agreement with the Vendor and after preliminary due diligence performed by the Group, it was agreed that New Spring Paper should not be included in the Target Group and hence the deregistration of New Spring Paper formed part of the Reorganisation. Taking into account the facts that (i) the Target Company, Sky Will and New Spring (SW) do not have manufacturing function; and (ii) the decision of shareholders of NSG to downsize its operation (details of which are set out in the section headed ‘‘Business of Target Group taken up from NSG’’ below in this Circular), it was agreed between the Company and the Vendor to expand the operation of the Target Group by way of acquisitions of (a) New Spring Offset (which formed part of the Reorganisation because New Spring Offset possesses the manufacturing function) and; (b) the Acquired Assets under the Asset Purchase (including the key operating assets of NSG which are relevant for the expansion of operation of the Target Group). Completion of the S&P Agreement will be subject to, amongst other, the Reorganisation and the Asset Purchase having been completed. Details of the Reorganisation and the Asset Purchase are set out in the following sections. As at the Latest Practicable Date, the Reorganisation and the Asset Purchase were completed.

(i) Reorganisation

The following is the organization structure chart of the Target Company before the Reorganisation:

==> picture [293 x 219] intentionally omitted <==

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

The Vendor
100%
The Target Company
100%
Sky Will
100% 100%
New Spring Paper New Spring (SW)
----- End of picture text -----

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LETTER FROM THE BOARD

The Reorganisation involved (i) Sky Will acquired the entire issued share capital of New Spring Offset from NSG; and (ii) the completion of deregistration of New Spring Paper.

As at the Latest Practicable Date, the Reorganisation has been completed. The following is the organization structure chart of the Target Group as at the Latest Practicable Date:

==> picture [293 x 219] intentionally omitted <==

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

The Vendor
100%
The Target Company
100%
Sky Will
100% 100%
New Spring (SW) New Spring Offset
----- End of picture text -----

(ii) Asset Purchase

On 31 January 2011, Sky Will as the purchaser and NSG as the vendor entered into the Asset Purchase Agreement for the acquisition of the Acquired Assets which represented the key operating assets of NSG. The Asset Purchase was completed on 31 January 2011. Principal terms of the Asset Purchase Agreement are set out as follows:

Date of the Asset Purchase 31 January 2011 Agreement:

Parties: Sky Will (as the purchaser) NSG (as the vendor)

Acquired Assets: the machinery, equipment, furniture, office equipment, computer equipment together with all the data stored therein, communication equipment and including, without limitation, all rights, title, benefits and interests of NSG therein

Consideration:

HK$13,800,000

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LETTER FROM THE BOARD

(iii) Current companies within the Target Group

The Target Group currently comprises three operating entities, namely Sky Will, New Spring (SW) and New Spring Offset.

The Target Company, incorporated in the BVI with limited liability on 2 November 2010, has been an investment holding company of the Target Group since 15 January 2011.

The first operating entity within the Target Group, namely Sky Will, was incorporated in Hong Kong on 19 March 2004 with limited liability. Sky Will was principally engaged in the sale of paper packaging products and paper gift items before the commencement of business of New Spring (SW). Since then, Sky Will has been reducing its participation in the sale of paper packaging products and paper gift items (by issuing letters to request customers to place their new sales orders with New Spring (SW)) and becoming an investment holding company.

New Spring (SW) was incorporated in Hong Kong on 3 November 2010 with limited liability and it is principally engaged in the sale of paper packaging products and paper gift items. It commenced business in January 2011.

New Spring Offset was incorporated in the PRC on 1 December 2009 with limited liability and commenced business in June 2010. The acquisition of New Spring Offset by Sky Will from NSG completed in April 2011. New Spring Offset is principally engaged in the manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials. New Spring Offset is the only entity within the Target Group engaging in the manufacturing function.

(iv) Business of Target Group taken up from NSG

NSG is a company incorporated in Hong Kong and was previously principally engaged in the manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials. Save for NSG being the vendor of New Spring Offset and the vendor under the Asset Purchase and Mr. Ng is a director of NSG, NSG and its ultimate beneficial owners are third parties independent of Mr. Ng, the Target Group, the Vendor and its ultimate beneficial owners and their respective associates.

Since 2011, the shareholders of NSG decided to downsize its operation and NSG disposed of (i) the Acquired Assets to Sky Will in January 2011; and (ii) New Spring Offset to Sky Will in April 2011. NSG has referred its customers to place new sales orders directly with the Target Group. Currently, most of the staffs in the sales and marketing department of NSG have now been employed by the Target Group. Since November 2011, NSG did not record any turnover from sales of paper packaging products.

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LETTER FROM THE BOARD

New Spring Label is principally engaged in the manufacture and trading of plastic labels and related products and trading of packaging products. New Spring Label is beneficially owned as to 20% by Mr. Ng, as to 30% by Ms. Li and as to 50% by an Independent Third Party.

New Spring Label was one of the previous customers of NSG before NSG disposed of New Spring Offset to Sky Will in April 2011. Before such disposal, New Spring Label engaged NSG to arrange for the production at New Spring Offset when it received sales orders from customers. Upon the completion of the Reorganisation, New Spring Label engaged New Spring (SW) to arrange for the production at New Spring Offset and is currently one of the customers of the Target Group.

Given the fact that Mr. Ng will become an executive Director upon completion of the Acquisition and New Spring Label is an associate of Mr. Ng, hence New Spring Label will become a connected person of the Company upon completion of the Acquisition. Accordingly, the Master Agreement was entered into between the Target Company and New Spring Label for governing the ongoing production of printing orders upon completion of the Acquisition and specifying the terms adopted including the Annual Caps. Please refer to the section headed ‘‘Continuing connected transactions’’ in this Circular for the terms of the Master Agreement. It is considered that the business of New Spring Label in plastic labels business is not in competition with the Target Group since the Target Group is not engaged in manufacture or trading in plastic labels business. In respect of the trading of packaging products business, Mr. Ng and Ms. Li have entered into the First Right Deed in favour of the Company so that upon the completion of the Acquisition, for new packaging transactions initiated by Mr. Ng and Ms. Li, they will give the first right of refusal to the Target Group. Please refer to the section headed ‘‘Competition from New Spring Label’’ in this Circular for the terms of the First Right Deed.

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LETTER FROM THE BOARD

b. Operation structure of the Target Group

The following is the simplified existing operation structure of the Target Group:

Place purchase orders and payment

Delivery of products

==> picture [272 x 202] intentionally omitted <==

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

Overseas customers PRC customers
New Spring (SW)
New Spring Offset
----- End of picture text -----

Most of the customers of the Target Group are from overseas in the USA and Europe and they prefer to trade with Hong Kong companies. In view of the simpler tax system in Hong Kong and the preferences from overseas customers, the management of the Target Group decided to incorporate New Spring (SW) to trade with overseas customers and New Spring Offset is designated to trade with PRC customers.

c. Products

The major products of the Target Group are as follows:

Paper packaging products

Paper packaging products include packaging for liquors, snacks, toys, domestic appliances and other packaging materials for gifts.

The Target Group manufactures and sells a variety of paper packaging products. It is made of different kinds of paper e.g. coated paper and cardboard, etc. which are die-cut into the required shapes and sizes, then are folded and glued to form gift packages and container boxes. The Target Group also prints logo, brands and graphics on the packaging products according to customers’ specifications.

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LETTER FROM THE BOARD

Paper gift items

The Target Group manufactures a range of paper gift items primarily made of different kinds of paper and decorated with elaborate designs. Examples of products include jewellery boxes, carrier bags, letter sets and other stationery and gift accessories.

Paper promotional materials

Paper promotional materials include promotional leaflets, product manuals, catalogues, brochures, calendars, posters, flyers and other paper promotional materials.

d. Customers and suppliers

The five largest major customers of the Target Group contributed to an aggregate of approximately 91% and approximately 71% of the total turnover of the Target Group for the year ended 31 March 2011 and for the 6 months ended 30 September 2011 respectively. The Target Group does not have long term sales commitments with its customers. However, the Target Group has maintained an average of around 5 years’ business relationship with the top five customers. Orders will be given by the customers throughout the year and each order would be a definitive agreement which lists out the terms of the order.

Set out below brief information of the major customers for the 6 months ended 30 September 2011:

Top five
customers	Product nature	Location of customer
1	Food packaging bags for a fast food	Hong Kong
	restaurant
2	Kid’s toys e.g. puzzles, stickers	Hong Kong
3	Packaging boxes for wines	Hong Kong
4	Packaging boxes for cosmetics	PRC
5	Stationery e.g. notebooks, files, photo	Europe
	albums, etc.

The Target Group offers credit terms to its customers ranging from 30 to 60 days depending on the length of their business relationship with the Target Group and their credibility based on the Target Group’s assessment.

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LETTER FROM THE BOARD

Instead of a general provision policy, the Target Group adopts a credit control measure. The senior management of the Target Group closely monitors the overdue balances of the customers. When trade receivables become overdue, reminders will be sent to the relevant customers and the responsible sales and marketing staff of the Target Group will contact the respective customers to follow up the collection status. Based on the results of discussion with problematic customers and past experience, the Target Group will assess if it is necessary to write-off or make provision for doubtful debts and/or terminate business relationship with those customers with long overdue balances of trade receivables. The Target Group may reject purchase orders from the respective customer until full settlement of all outstanding invoices. The Target Group makes allowance for doubtful debts based on assessments of the recoverability of the trade receivables, including the current creditworthiness and the past collection history of the respective customer. Impairments arise where events or changes in circumstances indicate that the balances may not be collectible. The Target Group may consider to take legal actions against customers with long outstanding unsettled balance with the Target Group. The Target Group has adopted an effective credit control measure and has not encountered material difficulty in the enforcement of debt collection.

The Target Group’s purchases from its five largest suppliers accounted for an aggregate of 100% and approximately 63% of the Target Group’s total purchases for the year ended 31 March 2011 and for the 6 months ended 30 September 2011 respectively. The Target Group mainly purchases certain key raw materials e.g. raw papers and packaging papers from these major suppliers located in Hong Kong and the PRC. No long-term agreement has been entered into between the Target Group and the suppliers. The Target Group usually places orders when necessary and each order represents an agreement between the Target Group and the supplier. The Target Group has maintained an average of around 5 years’ business relationship with the top five suppliers.

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LETTER FROM THE BOARD

e. Sales and marketing

The operation model on placing orders and delivery of products is illustrated as below:

==> picture [281 x 310] intentionally omitted <==

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

Place purchase orders and payment Brand name
Delivery of products companies
Customers of the Agents of brand
Target Group name company
Target Group
Received orders
Produce samples/
Modifications
Purchase materials
Production
----- End of picture text -----

Customers place their orders either directly or via the agents to the Target Group. The Target Group will base on their designs to produce samples for customers’ examination or modifications. Once the samples are confirmed with the customers, the final designs will be put into production and raw materials will be purchased at the same time. Final products will be further examined by the customers before delivery. Products and invoices will be delivered to the designated location per customers’ instruction. Customers will settle the bills according to the credit terms granted.

The Target Group has a sales and marketing team which focuses primarily on the promotion of sales through emphasizing the quality of the Target Group’s products, the reliability of its services and the competitiveness of its pricing. The sales and marketing team of the Target Group also makes regular visits to its customers to maintain good customer relations and provide after-sale services.

All the Target Group’s sales were conducted on the basis of receipt of purchase orders. To facilitate the planning of material procurement and production schedule of the Target Group, the sales and marketing team has maintained close communication

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LETTER FROM THE BOARD

with its major customers on their purchase forecasts and preliminary quotations. With extensive experience in the industry, the Target Group has established its market reputation in terms of product quality, reliability of delivery and after-sales services.

The products manufactured by the Target Group will be delivered to the designated locations in Hong Kong or the PRC according to customers’ instructions. In the case of delivery to Hong Kong, customs procedures are handled by the Target Group. In the case of delivery within the PRC through factory transfers, the Target Group will send details of such transfers to the relevant customs authorities in the PRC for their records. Products sold to overseas customers are delivered to Hong Kong prior to exports to overseas.

f. Pricing

Customers place their orders either directly or via the agents to the Target Group. The sales and marketing department with assistance from production department will prepare a cost estimate in accordance with the product specifications with special design requirements, expected raw materials usage and costs, complexity of manufacturing process, estimation of production manpower, production lead time and delivery arrangement. The senior management of the Target Group will assess and verify the cost estimation initiated by the sales and marketing department and then propose a target profit margin with reference among others the prevailing market price, the creditworthiness and business relationship with the customer, the volume of purchase order and re-ordering potential, etc. In the event that the customer rejects a quotation, the sales & marketing department and senior management of the Target Group may renegotiate and review the estimate in order to provide a more accommodating offer with products parameter.

g. Production facilities

Currently, all manufacturing activities of the Target Group are carried out by New Spring Offset in a leased production plant in Sha Jing Zhen, Baoan District, Shenzhen, the PRC. The production plant is leased from 深圳市沙井辛養股份合作公司 (Shenzhen Shi Shajing Xinyang Joint Stock Cooperation Company*) which is ultimately owned by various individuals who are Independent Third Parties under a lease term from 1 July 2011 to 30 June 2013.

The machineries in the leased production plant are owned by New Spring Offset and Sky Will. The gross floor area of the production plant is approximately 8,000 square metres. There are 7 production lines with maximum production capacity of 56,000 sheets of paper per hour.

Regular checking and maintenance are performed on the machinery and equipment by the Target Group’s staffs.

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Production facility

The key machinery and equipment are stated as follows:

Machinery Application Sheeters Devices used to cut paper rolling materials into individual sheets Die cutting machines Devices used to and trim paper sheets into specified shape and/or size Offset printing machines Machines which transfer an inked image from a printing plate to an intermediate blanket cylinder and then to a printing surface Hot foil stamping machines Machines which use heat to transfer metallic foil to a printing surface Varnishing machines Machines used in applying a coat of varnish on the surface of the paper and cardboard to protect them from scratching and to give a glossy surface Graining machines Machines used in embossing an artificial pattern in a printing surface and/or an offset printed paper

h. Production process

The production process of the Target Group can be simplified into three steps of pre-press, offset printing and post-press which are set out as follows:

Pre-press

Major Machinery involved: Sheeters, die cutting machines

All products are made according to the designs and specifications of customers. The designs are provided either in the form of mechanical artwork or computer-graphic designs. Based on the designs and specifications provided by the customers, the relevant structural designs of the packaging products are produced as a sample for review by the respective customers to ensure that the packaging product meets the packaging requirements of the customers. The structural designs approved by customers will then be sent for colour separation. At the colour separation stage, a set of films, each representing one of the four basic colours, namely cyan, magenta, yellow and black, as well as other special colours such as gold and silver, are prepared according to the approved structural designs.

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After the process of colour separation, film imposition and plate making processes, the set of films prepared at the colour separation stage will be placed and registered into the correct position and in the appropriate order. The image of each of the films will then be chemically applied onto an aluminum printing plate before offset printing.

Offset printing

Major Machinery involved: Offset printing machines

The set of aluminium plates will be mounted onto the cylindrical drum on each of the printing units of the printing machine and paper is cut to the required size to minimize wastage of paper. During the offset printing process, ink will be applied on the plate and transferred onto the paper that passes through a set of printing units each with different colour. For example, a five-colour printing machine will have five printing units which can produce colour prints of up to five colours at a time and printing products of six colours are required to be applied to a five-colour printing machine in two runs in order to produce the sixcolour effect.

Post-press

Major Machinery involved: Die cutting machines, hot foil stamping machines, graining machines, varnishing machines

After the printing process, a series of post-press operations including printing finishing, die-making, die-cutting and folding and gluing have to be undertaken. At the printing finishing stage, printed paper and cardboard are coated by applying a coat of varnish on the surface of the paper and cardboard to protect it from scratching and to give a glossy surface. The varnishing may be performed on various materials ranging from a selection of plastics to ultra lacquer and water-based polymer.

After the printing finishing process, the paper and cardboard are cut into the required box shapes using special die cutting machines which can cater for a wide range of printing materials from lightweight paper to laminated corrugated boards. Pattern embossing on the surface is also possible.

For those packaging boxes requiring a transparent window to display the goods contained in the box, polyvinyl chloride sheets are applied to die-cut windows of all shapes and sizes by window-patching machinery or manually. After window-patching, the die-cut paper and cardboard is folded and glued into its finished form to be packed and delivered.

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i. Procurement

The principal raw materials required by the Target Group for printing and manufacturing are paper and ink. The Target Group purchases raw paper of different weights, colours and strength according to the specifications of its customers. Currently, approximately 70% of raw materials are purchased from the PRC and the rest are from Hong Kong.

j. Inventory control

The Target Group monitors and controls inventory levels of its raw materials and finished products by implementing a comprehensive inventory management policy to enhance smooth operations and to minimize wastage.

Maintaining minimum stock level of raw materials is always the Target Group’s policy. Purchases of materials other than basic materials for paper products are usually made after receiving sales orders from customers. However, for basic raw materials such like raw paper, the Target Group develops an inventory cycle plan which reflects its production planning requirements and ensure that it maintains a systematic and cost effective control over its level of inventory. To meet general and planned production requirement, the Target Group has developed and adopted a policy to maintain inventory of raw paper which will be sufficient for approximately 60 days of its production usage under normal circumstances. Typically, the Target Group works closely with its customers to develop a production programmes in accordance with their expected delivery time frame. In light of this, the Target Group is able to plan it’s raw material reservation and indents. The Target Group’s sales and production departments are work closely with each other on a weekly basis to review and monitor the existing and potential sales orders from customers to ensure that the inventory levels of raw material is accommodating.

The Target Group performs quarterly full stock takes for all inventories. Impairment will be charged for any obsolete or damaged inventories identified during the stock takes. k. Quality control The Target Group adopts stringent internal quality control measures to ensure that products can meet the required quality standard and adhere to customers’ specifications before delivery. The Target Group will from time to time invest in machinery and equipment to enhance production efficiency and product quality.

The Target Group sources quality raw paper for production from selected suppliers principally based on their price, product quality, stability of supply and delivery and market reputation. Every batch of paper delivered to the Target Group will be tested before use. Colour is regularly matched against the relevant customer’s approved sample and the gloss level on coating is also measured. The quality control team is responsible

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for ensuring that the final products are produced according to the exact designs and specifications of the customers and established quality standards. Returns of unsatisfactory products from customers for the past years have been minimal.

The Target Group has been accredited with the internationally recognized ISO 9001 certification. ISO 9001 is a set of standards and guidelines relating to quality management systems, and represents an international consensus on good quality management practices. ISO 9001 is maintained by the International Organisation for Standardisation, or ISO, and are administered by accreditation and certification bodies. The certification of the Target Group to ISO 9001 standard certifies that consistent business processes are being applied, and provides an objective standard against which third parties can assess the quality of the Target Group’s management and products.

l. Logistics

The Target Group does not maintain its own logistic team to collect raw materials from its suppliers or deliver finished products to its customers. The suppliers usually deliver raw materials directly to the Target Group. For finished products, the Target Group arranges third party logistics operators to deliver the finished products from its factory to its customers, the delivery cost of which will be borne by the Target Group. The Target Group has entered into contract with a third party logistics operator to deliver its finished products to its customers.

m. Employees

Currently, the Target Group has 631 employees and the breakdown in departments is set out as below:

Department Management Finance and administration Procurement Production Sales and marketing Quality control Total	Number of employees 8 54 2 550 8 9
	631

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n. Licences and permits

The Target Group has obtained the printing licence (‘‘印刷經營許可證’’) in 2009, the pre-requisite of operating printing business in the PRC.

The Enlarged Group has obtained all licences, permits or certificates necessary to carry out its business in both Hong Kong and the PRC and has complied with the relevant PRC rules and regulations in conducting its printing business as at the Latest Practicable Date.

o. Insurance

Hong Kong

Under the Employees’ Compensation Ordinance (Cap. 282, Laws of Hong Kong), an employer is required to take out an insurance policy to cover his employees (including full-time and part-time) who are injured or die in the accidents out of and in the course of employment. The Target Group has maintained an insurance policy in relation to its staff employed in Hong Kong in accordance with the above statutory requirement. The Target Group has also maintained employees’ compensation insurance and is covered by property and vehicle insurances.

The PRC

In accordance with relevant regulatory requirements of the PRC, inter alia, Interim Regulation Concerning the Levy of Social Insurance 《( 社會保險費徵繳暫行條例》), Regulation on Pension for Employees in the Shenzhen Special Economic Zone 《( 深圳經濟特區企業員工社會養老保險條例》), Measures Concerning Social Medical Insurance in Shenzhen 《( 深圳市社會醫療保險辦法》), Regulation on Industrial Injury Insurance 《( 工傷保險條例》), Regulation on Industrial Injury Insurance for the Guangdong Province 《( 廣東省工傷保險條例》), and the Interim Regulation on Social Insurance in Shenzhen 《( 深圳市社會保險暫行規定》), the Group has made social security contribution which covers retirement, industrial injury and medical expenses for its PRC employees. The Target Group maintains insurance policies in respect of its buildings, machinery, equipment, inventory and other facilities owned by the Target Group covering physical loss or damage arising from natural hazards or accidents in relation to its operation in the PRC. At present, the Target Group does not maintain any public liability insurance or any product liability insurance, which is in line with market practice in the PRC.

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p. Environmental matters

The Target Group is subject to the PRC national environmental laws and regulations and environmental regulations promulgated by the local government. Details about the environmental protection requirements related to the Target Group’s operations are set out in the section headed ‘‘Regulations governing the industry’’ of this Circular.

The Target Group discharges waste water and chemical waste during production. For the year ended 31 March 2011 and for the 6 months ended 30 September 2011, fees paid by the Target Group in respect of waste water treatment were approximately RMB24,000 and RMB46,000 respectively. On 20 May 2011, a waste treatment and disposal and industrial service agreement was entered into between New Spring Offset and 東江環保股份有限公司 (DongJiang Environmental Protection Co., Ltd), effective from 20 May 2011 to 19 May 2012, according to which, New Spring Offset entrusts 東江環保股份有限公司 (DongJiang Environmental Protection Co., Ltd) to dispose the industrial wastes generated from its production process.

q. Labour and safety matters

Hong Kong

Under the Occupational Safety and Health Ordinance (Cap. 509, Laws of Hong Kong), an employer should provide and maintain a safe and healthy work environment by, inter alia, (i) providing and maintaining plant and work systems that do not endanger safety or health; and (ii) making arrangement for ensuring safety and health in connection with the use, handling, storage or transport of plant or substances. The Target Group has not been in contravention with the safety and health requirements set out in the above ordinance.

The PRC

New Spring Offset is subject to the relevant labour and safety laws and regulations in the PRC. According to the PRC Labour Law 《( 中華人民共和國勞動法》), a labour contract must be signed if an employment relationship is to be established between the employee and New Spring Offset. New Spring Offset is also required to establish a system for labour safety and sanitation and provide relevant education to their respective employees.

The PRC Production Safety Law 《( 中華人民共和國生產安全法》) requires that the New Spring Offset shall maintain conditions for safe production as provided in the PRC Production Safety Law and other relevant laws and industrial standards. The New Spring Offset is required to offer education and training programs to the employees regarding production safety. The design, manufacture, installation, use, checking and maintenance of New Spring Offset’s safety equipment are required to conform to applicable national or industrial standards.

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Furthermore, the Target Group monitors the operation of the production facilities itself to ensure they are in good condition. The Target Group is not involved in any material production safety matters.

As at the Latest Practicable Date, there has not been any material labour disputes and non-compliance of safety measures reported by New Spring Offset. New Spring Offset had been in compliance with applicable laws and regulations in the PRC and no material litigation or claims had been brought against New Spring Offset with regard to work safety and labour related issues since New Spring Offset commences production.

As at the Latest Practicable Date, the Enlarged Group has been in compliance with applicable laws and regulations in both Hong Kong and the PRC and no material litigation or claims had been brought against the Enlarged Group in respect of the work safety and labour related issues.

r. Information technology

The Target Group did not develop any in-house operational and management system in the past. However, in view of the business expansion, the management of the Target Group considers to implement an enterprise resource planning system (ERP system) to facilitate the flow of information between departments, such as procurement, production, sales and marketing, accounting and human resources. The ERP system is still under designing and testing stage.

s. Tax liabilities

The Target Group is subject to Hong Kong Profits Tax and PRC Enterprise Income Tax in respect of the assessable profit generated in tax jurisdiction respectively. The Group is not involved in any material tax disputes.

t. Legal and administrative proceedings

As at the Latest Practicable Date, the Target Group was not involved in any litigation, arbitration or claim of material importance, and no litigation, arbitration or claim of material importance was known to the management of the Target Group to be pending or threatened against any member of the Target Group. The Target Group is not currently involved in any material litigation, arbitration or administrative proceedings that could have a material adverse effect on its financial condition or results of operations.

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u. Competition

The Target Group is engaged in the manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials. Based on the knowledge and experience of the management of the Target Group in the paper packaging industry, the overall paper manufacturing industry is relatively fragmented with large number manufacturers. However, due to (i) intensive capital investment in technologically advanced machinery and (ii) industry knowledge, experience and skills of the management personnel and technical professionals in product development, these factors present significant entry barriers to newcomers. The management of the Target Group is of the view that the Target Group is well-positioned to face any competition.

The Target Group maintains its competitive edge through timely introduction of new products and continuous improvement of existing products. It will continue to devote resources to research and development for new and existing products and techniques in the production process to retain the market share in the industry.

Competition from New Spring Label

It is considered that the business of New Spring Label in plastic labels business is not in competition with the Target Group since the Target Group is not engaged in the manufacture or trading in plastic labels business. In respect of the trading of packaging products business, Mr. Ng and Ms. Li have entered into the First Right Deed in favour of the Company so that upon the completion of the Acquisition and Mr. Ng becoming an executive Director, for new packaging transactions initiated by Mr. Ng and Ms. Li, they will give the first right of refusal to the Target Group to resolve the issue on potential competition from trading of packaging products business of New Spring Label initiated by Mr. Ng and Ms. Li. Summary of the major terms of the First Right Deed is set out as follows:

Date of First Right Deed: 29 February 2012

Parties: Mr. Ng and Ms. Li in favour of the Company Terms: Commencing on the date of completion of the Acquisition and ending on the date on which (i) the shares of New Spring Label or other company engaged in trading of packaging products business cease to be owned directly or indirectly by Mr. Ng and Ms. Li in aggregate for less than 30%; or (ii) Mr. Ng ceases to be director of the Group

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Undertakings:

(1) Mr. Ng and Ms. Li have, jointly and severally, unconditionally and irrevocably undertaken to the Company that, during the terms of the First Right Deed, if Mr. Ng, Ms. Li and/or their respective associates identify or are offered any future business investment or other commercial opportunity relating to the trading of packaging products of the Group, Mr. Ng and Ms. Li will notify the Company immediately upon identifying or being offered such opportunity and provide the Company with all information which is reasonably necessary for the independent nonexecutive Directors to consider whether or not (i) such opportunity would constitute competition with the Group’s business (after completion of the Acquisition); and (ii) it is in the interest of the Company to acquire such opportunity. Mr. Ng and Ms. Li are also obliged to use their best efforts to procure that such opportunity is first offered to the Company on terms that are fair and reasonable.

(2) Mr. Ng and Ms. Li will be entitled to pursue such opportunity only if (i) they have received a notice from the Company declining such opportunity and confirming that such opportunity would not constitute competition with the Group’s core business; or (ii) Mr. Ng and Ms. Li have not received such notice from the Group within 10 Business Days from the date of receipt of the notice by the Company. If there is any material change in the terms and conditions of the opportunity pursued by Mr. Ng and/or Ms. Li, Mr. Ng and/or Ms. Li will refer the opportunity as so revised to the Company in the manner set out above.

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Given the safeguard measures as included in the undertakings provided by Mr. Ng and Ms. Li in favour of the Company pursuant to the First Right Deed, it is considered that the potential conflict of interests of Mr. Ng and Ms. Li for new packaging transactions initiated by them can be handled in accordance to the terms of the First Right Deed. Accordingly, the Directors consider the terms of the First Right Deed are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Reasons for the Acquisition

Before the Suspension, the Group was engaged in the design, development, production and marketing of paper products. Subsequently in 2009, the Group established the business of trading of electronic products. Taking into account the substantial net liabilities position and the continued loss of the then paper business of the Group, the Company decided to dispose of the paper business in October 2009. Following the completion of such disposal in March 2010, the then Group’s principal activity was trading of electronic products. Revenue generated from the electronics business had been decreasing since the financial year ended 31 March 2011. For the six months ended 30 September 2011, the Group did not record any revenue.

The Target Group is principally engaged in the manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials in accordance with customers’ designs and specifications. As such, the principal business of the Target Group is similar to that of the Group prior to the Suspension, being engaging in the design, development and production of paper products.

In view of the 2012 Guaranteed Amount provided by the Vendor, the Directors (including the proposed Directors) consider that the Acquisition provides an excellent opportunity for the development of the Group’s business and broadens its revenue and customer bases.

Upon completion of the Acquisition, it is expected that (i) the Acquisition will generate an additional income to the Group; (ii) the adjustment mechanism to the Consideration facilitates the safeguard of the 2012 Guaranteed Amount; and (iii) the Board believes that the Company would have sufficient level of operations and assets under Rule 13.24 of the Listing Rules.

The Directors (including the proposed Directors and the independent non-executive Directors) are of the view that the terms of the S&P Agreement are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

Experience of the Board and the Enlarged Group in paper business

Executive Director — Mr. Wong

Mr. Wong, aged 42, joined the Group on 18 June 2007 as an executive Director and was appointed as the chief executive officer of the Company on 17 June 2008. Mr. Wong worked in a number of reputable investment banks and the Listing Division and has extensive experience in finance, operation and strategic investment of listed companies in Hong Kong.

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Mr. Wong holds a Master of Science (Financial Management) degree from University of London in United Kingdom and a Bachelor of Commerce degree from University of Toronto in Canada. Mr. Wong is also a responsible officer of Veda Capital, the financial adviser to the Company for the Resumption. Mr. Wong was a director of the holding company of Kingston Securities, being Kingston Financial Group Limited (stock code: 1031) up to April 2011 and is currently a consultant to a subsidiary of Kingston Financial Group Limited.

The Group was principally engaged in (i) the design, development, production and marketing of paper products (through the CIL Group); and (ii) the trading of electronic products prior to the completion of the disposal of the CIL Group on 17 March 2010. Upon Mr. Wong’s appointment as an executive Director of the Company on 18 June 2007 and up to the date of the completion of the disposal of CIL Group, Mr. Wong has managed and overseen the operation of the paper business for more than 3 years.

Proposed executive Director — Mr. Ng

Mr. Ng, aged 61, is proposed to be an executive Director upon completion of the Acquisition. Mr. Ng will be responsible for the Target Group’s overall management and development of corporate policy and strategy, and liaison with various local government and authorities in the PRC. Mr. Ng commenced his career in the printing industry in 1960s. He has extensive experience in printing operations and printing machinery.

Mr. Ng is currently a director of NSG and certain companies within the Target Group, namely, the Target Company, Sky Will and New Spring Offset respectively. Mr. Ng is also one of the ultimate beneficial owners of New Spring Label. Mr. Ng does not have shareholdings in the Target Group, does not hold any securities of the Company and will not be interested in the securities of the Company upon Resumption. Save as New Spring Label, Mr. Ng does not have beneficial interest in any company which is engaged in the paper business.

Principal terms of the service agreement of Mr. Ng are set out as follows:

Date of service agreement: 29 February 2012 Effective date: Upon completion of the Acquisition Parties: The Company and Mr. Ng Engagement: Mr. Ng shall be appointed as an executive Director Term: Mr. Ng shall be engaged for an initial term of three years and shall continue thereafter unless and until terminated by either the Company or Mr. Ng giving to the other not less than three months’ notice in writing to determine the same.

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Remuneration:

Mr. Ng shall receive during the continuance of the term of engagement:

(a) an annual salary of HK$360,000 (inclusive of salary, commission, housing reimbursement and allowances) which shall accrue on a day to day basis payable by 12 equal monthly instalments, with each monthly instalment of HK$30,000 to be payable in arrears. Such annual salary may be reviewed annually after each year of service during the term of the service agreement at a rate to be determined by the Board. Salary of Mr. Ng shall be decided and approved by the Board; and
(b) in respect of each financial year during the term of engagement, a discretionary bonus of a sum to be determined and approved by the Board at its absolute discretion having regard to the operating results of the Group and the performance of Mr. Ng. The discretionary bonus shall be decided and approved by the Board.

Mr. Ng may, at the discretion of the Board, be granted share options entitling Mr. Ng to subscribe for shares of the Company under any share option scheme from time to time adopted by the Company.

Termination:

If the Company is for any reason not entitled to terminate the engagement of Mr. Ng in accordance with the service agreement, it may at any time, by giving Mr. Ng payment of salary in lieu of notice to terminate the engagement.

If the Company becomes entitled pursuant to the service agreement to terminate the engagement of Mr. Ng, it shall be entitled (but without prejudice to its right subsequently to terminate the engagement on the same or any other ground) to suspend the engagement of Mr. Ng without payment of salary, in full or in part, to the extent permitted by law.

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Proposed non-executive Director — Mr. Wong Hung Ki

Mr. Wong Hung Ki, aged 58, is proposed to be a non-executive Director upon completion of the Acquisition. Mr. Wong Hung Ki has over 40 years of experience in printing industry. He has been responsible for the overall management and operation and is involved in the development of corporate strategy and liaison with customers and suppliers in his current and previous engagements.

Senior management of the Target Group and their backgrounds are set out as follows:

Mr. Kao Wai Kwong, Eric

Mr. Kao Wai Kwong, Eric, aged 48, is a director of the Target Company and is interested in as to 30% of the Vendor. Mr. Kao Wai Kwong, Eric is working closely with Mr. Ng for the Target Group’s overall management and development. He has more than 15 years experience in the printing and packaging industry and was a senior management of a sizable company engaged in printing business. Mr. Ng has known Mr. Kao Wai Kwong, Eric for more than 12 years. They were colleagues in printing and packaging industry for several years.

Ms. Li

Ms. Li, aged 52, is responsible for human resources and administration policy of the Target Group. Ms. Li has over 24 years of experience in corporate and production management and marketing. Ms. Li was a production and administrative manager of a printing company before joining the Target Group. She is the spouse of Mr. Ng.

Mr. Tham Ming Yong

Mr. Tham Ming Yong, aged 49, joined the Target Group in July 2011 and is responsible for the accounting function of the Target Group. Mr. Tham Ming Yong is an associate member of the Association of International Accountants. He has over 20 years of experience in accounting, taxation and the PRC business. Prior to joining the Target Group, Mr. Tham Ming Yong had worked in an international accounting firm, then in various companies listed in Hong Kong or Malaysia as PRC office representative, financial controller, deputy general manager and executive director.

With the above mentioned, it is expected that the Board and the management has sufficient knowledge and experience in managing the paper business upon completion of the Acquisition.

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C. Competitive strengths

The achievements of the Target Group are principally attributable to the following competitive strengths:

A. Good relationship with suppliers

The Target Group has maintained good and long-term relationship with its local and overseas suppliers. In particular, the Target Group has maintained more than 4 years business relationship with a major supplier of raw paper. The Target Group has been given competitive pricing and credit terms and stable supply from these suppliers, which in turn allows the Target Group to offer competitive pricing to its customers and meet customers’ product specifications and delivery schedules on a timely basis.

B. Good relationship with customers

The Target Group has established long term business relationship with its customers. Currently, there are over 35 customers and most of which are distributors, manufacturers of consumer products and advertising agencies based in the USA, Europe, Hong Kong and the PRC. The Target Group manufacture packaging products for customers including, (i) branded cosmetic retailer which are sold in over 988 stores and 56 countries worldwide, (ii) international luxury fashion group based in Germany and (iii) world-leading cognac house which sells about 50 million bottles a year worldwide.

C. Strong production capability

As at 31 March 2011, the production plant had maximum production capacity of approximately 56,000 sheets of paper per hour and currently, the production capacity reaches to 25,000 sheets of paper per hour. The Target Group made considerable amount of investments in plant and machinery including those imported from Germany and Japan. Due to high production efficiency, the Target Group is able to product and delivers products to customers of a timely basis.

D. Stringent quality control

The Target Group has adopted stringent quality control measures throughout the entire production process which include sample testing of raw paper texture and random inspection of quality at each stage of production. Sample testing of finished products before delivery has been carried out.

The Target Group has been accredited with the internationally recognized ISO 9001 certification in respect of the quality management system they operate. The Target Group has maintained good reputation for product quality among the paper packaging industry as a result of its continual adherence to stringent quality control procedures.

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E. Strong management team with in-depth knowledge in the paper-based packaging and printing industry

The Target Group’s continued success, to a large extent, is attributable to its strong and experienced management team led by Mr. Ng. The management team has in-depth knowledge of the paper-based packaging and printing products and maintains good relationship with its customers and suppliers. In particular, Mr. Ng, a director of the Target Company, has over 40 years of experience and knowledge in the printing and paper packaging industry and packaging requirements for various industries such as domestic appliances, food and beverages, jewellery as well as toys. The senior management not only possesses extensive experience and profound knowledge of the paper-based packaging and printing industry in the PRC, but also understands the needs of the Target Group’s customers which enable the Target Group to maintain its competitive edges over its competitors.

D. Industry overview

Global packaging market

Used in a wide range of industries across food and drink, healthcare, cosmetics and other consumer goods as well as a range of industrial sectors, packaging has become an essential everyday item, with its usage growing broadly in line with the global economy.

According to the statistics provided by World Packaging Organization (www.worldpackaging.org), a non-profit and non-governmental international of national packaging institutes and associations, the sales in the packaging market has grown up by 51.4% from US$372 billion in 1999 to US$563 billion in 2009. In a report published in December 2011 from the Pira International Limited (www.pira-international.com), an organisation which provides independent, knowledge-based information and testing services to clients in the packaging, paper and print industry and their supply chains, has projected the global packaging sales to reach approximately US$696 billion in 2011 and will set to exceed US$800 billion by 2016. The growth is believed to be driven mainly by increasing demand for packaging in emerging and transitional economies including China, India, Brazil and some other eastern European countries.

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The global packaging market in 1999–2009

==> picture [428 x 172] intentionally omitted <==

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

600,000 563,847
477,094
500,000 459,263
427,210
372,400 383,352 376,140 382,803
400,000
300,000
200,000
100,000
–
1999 2000 2001 2002 2003 2004 2005 2009
Year
US$ Million
----- End of picture text -----

Note: constant 2004 prices from 2005 onwards

Source: Pira International Limited

In 2009, Asian market, including China and Japan accounted for the largest share of the global packaging market, ahead of North America and Western Europe. The largest single national packaging market during the same year was USA with sales of approximately US$128 billion. Japan ranked second with sales of US$58 billion, ahead of China at US$53 billion.

World packaging consumption by region in 2003–2009

==> picture [428 x 172] intentionally omitted <==

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

Oceania
Asia
South & Central America
2009
North America
2003
Africa
Middle East
Eastern Europe
Western Europe
- 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000
US$ million
----- End of picture text -----

Note: constant 2004 prices in 2009

Source: Pira International Limited

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Top 15 national packaging markets in 2003–2009

==> picture [418 x 263] intentionally omitted <==

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

Indonesia
South Korea
Turkey
India
Brazil
Spain
Canada
2009
Russia
2003
Italy
UK
France
Germany
China
Japan
USA
- 20,000 40,000 60,000 80,000 100,000 120,000 140,000
US$ million
----- End of picture text -----

Note: constant 2004 prices in 2009

Source: Pira International Limited

Packaging encompasses a wide range of material types across paper, board, plastic, metal, glass, wood and other materials. The largest share of global packaging is accounted for paper and board packaging with sales of US$165 billion in 2003, equating to 38% of the market. Paper and board remains the single largest element of the market in 2009, growing at an annual rate of around 4% in real terms, driven on the one hand by rising demand in fastgrowth national markets as well as steady growth in secondary/bulk packaging across the globe.

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World packaging consumption by sector in 2003–2009

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

Other
Glass
Metal 2009
2003
Flexible plastic
Rigid plastic
Paper and board
- 50,000 100,000 150,000 200,000 250,000
US$ million
----- End of picture text -----

Note: constant 2004 prices in 2009

Source: Pira International Limited

The largest market for paper and board packaging in 2009 was USA, accounted for approximately US$51 billion. China ranked second with sales of approximately US$30 billion and followed by Japan with sales of approximately US$23 billion.

Top ten paper and board packaging markets in 2009

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

Russia 4,768
Indonesia 5,377
UK 6,178
Italy 6,436
Canada 7,237
France 7,342
Germany 8,155
Japan 23,467
China 30,122
USA 50,533
- 10,000 20,000 30,000 40,000 50,000 60,000
US$ million
----- End of picture text -----

Source: Pira International Limited

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The need for packaging has been ‘‘long-lasting/sustainable’’ as suggested by the World Packaging Organization. Both USA and China have been putting efforts to improve environmental issues. Paper packaging has very strong environmental credentials and with further improving papers barrier properties the industry is increasing its viability as a packaging material. As technological improvement continue to progress and more countries striving for a more sustainable future, the continuous growth of paper packaging is further enhanced by its eco-friendly nature and emerging acceptance amongst consumers.

Pricing trend of wood pulp

Wood pulp is the most common raw material in the process of manufacturing of paper and paperboard. The commodity markets review published by the World Bank recorded an average price of wood pulp in 2011 to be US$899.3 per ton. As shown in the price graph of wood pulp below, the average price of wood pulp had suffered a slump of 33.3% in 2009 due to a weakened world-wide demand for general commodity goods along with a global economic downturn. In 2010, however, the demand for commodity goods had recovered and the average price of wood pulp had rebounded strongly illustrated a 41.0% growth reaching US$867 per ton. The graph also illustrated a positive trend in the average price of wood pulp through time with an average annual growth of 4.8% in the period from 2006 to 2011.

Wood pulp annual average price in 2006–2011

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

1,200
1,000 899
867
820
767
800 699
615
600
400
200
–
2006 2007 2008 2009 2010 2011
US$/t
----- End of picture text -----

Source: World Bank (www.worldbank.org)

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The packaging market in China

Over the past decade, China’s economy has experienced significant growth with strong potential for future growth, despite the economic crisis, and it is still one of the fastest growing economies in the world. China is believed to emerge from the economic crisis more quickly than the rest of the world with the aids of the government stimuli. According to the National Bureau of Statistics of China, China’s GDP had improved by 10.4% from approximately RMB34,051 billion to approximately RMB40,120 billion in 2009 and 2010 respectively. China’s economic outlook is expected to remain broadly favorable, according to reports from Bloomberg, China’s GDP is projected to grow at rates of 9.2%, 8.5% and 8.2% in 2011 to 2013. It is also noticeable that in 2010, China has already surpassed Japan to be the world’s second largest economy and estimated to overtake the USA as the world’s largest economy around 2020. The graph below has recorded the annual GDP of China’s from 1999 to 2010.

Annual GDP of China in 1999–2010

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

45,000
40,120
40,000
34,051
35,000
31,405
30,000
26,581
25,000 21,631
18,494
20,000
15,988
13,582
15,000 10,966 12,033
9,921
8,968
10,000
5,000
-
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
RMB Billion
----- End of picture text -----

Source: National Bureau of Statistics of China

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China has undergone a transformation of economic development to strengthen and improve macro economic control and encourage market mechanism performance. The rapid urbanization and steadily increase of urban and rural household disposable income have contributed to the significant growth of the China’s consumer market. Extracted from the National Bureau of Statistics of China, China’s urban household disposable income per capita had increased from approximately RMB11,759 to approximately RMB19,109 representing an average annual growth of 12.5% during the implementation of the Eleventh Five-Year plan. In addition, the per capita urban household disposable income in the first three quarters of 2011 had reached approximately RMB17,886 illustrating a year-on-year real growth of 7.8%. The Eleventh Five-Year Plan as a long-term strategic policy to maintain the momentum of economic growth had further stimulated domestic demand of consumer goods. According to the National Bureau of Statistics of China, China’s total retail sales of consumer goods had increased from approximately RMB7,641 billion to approximately RMB15,455 billion illustrating an average annual growth of 20.5% from 2006 to 2010. In the first three quarters of 2011, China’s total retail sales of consumer goods had reached approximately RMB13,081 billion illustrating a year-on-year real growth of 11.3%. The graph below has recorded China’s annual urban household disposable income and total retail sales of consumer goods from 1999 to 2010.

Annual urban household disposable income per capita in 1999–2010

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

22,500
20,000 19,109
17,175
17,500
15,781
15,000 13,786
12,500 11,759
10,493
9,422
10,000
8,472
7,703
6,860
7,500 6,280
5,854
5,000
2,500
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Urban household disposable income per capita
RMB per Capita
----- End of picture text -----

Source: National Bureau of Statistics of China

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Total retail sales of consumer goods in China in 1999–2010

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

15,455
16,000
14,000
12,534
12,000 11,243
10,000 8,921
7,641
8,000
6,718
6,000 5,252 5,950
4,814
4,306
3,565 3,911
4,000
2,000
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Total retail sales of consumer goods
RMB Billion
----- End of picture text -----

Source: National Bureau of Statistics of China

Emerged as the largest exporting country in the world, China’s GDP should continue its growth. Along with higher consumer spending powers and increasing demand for domestic consumer goods, the value of the packaging industry in China is expected to continue to blossom and will eventually pass and replace the packaging industry in USA as the leader. Following the positive impact of the Eleventh Five-Year Plan on the consumer market, the National People’s Congress of China has launched the Twelfth Five-Year Plan on 14 March 2011, covering the period from 2011 to 2015, emphasized more on the ideas of environmental sustainability. China’s continuous economic growth favoring the use of environmental friendly packaging materials has enhanced the growth of the paper packaging industry because the process of paper packaging is, in general, simpler and less energy and material consuming and paper is recyclable. As noted from articles from the Chinese Packaging Federation released in 2011, China packaging industry had a booming year in 2010 accounting a gross industrial output of approximately RMB1.2 trillion and the sales of the packaging industry will continue under the Twelfth Five-Year Plan to enjoy an average annual growth of 6% in 2011 to 2015 and that China’s packaging industry has become the pillar industry of national economy of the 40 major industrial categories ranked 14th.

Luxury packaging market

Increasing consumer purchasing power has also contributed to the demand for luxury goods in China to grow significantly to replace Japan as the largest luxury goods market and overtake Japan as the sustained influx of high-end stores continues to spread across China. Research conducted by CLSA Asia-Pacific Markets, an Asia leading independent brokerage and investment group, shows that, China will become the world’s foremost luxury goods market by 2020, with total expected sales amounting to approximately US$100 billion. This

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is supported by the fact that the high-end goods are now spilling over into 2nd and 3rd-tier cities, but not only concentrated in major cities like Beijing and Shanghai. In additional, according to another official report from Pira International Limited, although USA will remain the largest national market for luxury packaging in present, demand in China will continue to close the gap, and it anticipated that this type of packaging in China will grow by a projected CAGR of 7.1% over the next five years from 2010 to 2015.

The packaging market in USA

According to the Bureau of Economic Analysis (www.bea.gov) under the United States Department of Commerce, GDP of USA has recorded a growth from approximately US$9,951.5 billion in 2000 to approximately US$15,087.7 billion in 2011, representing an average annual growth rate of 4.7%. After a decrease of around 3% to 4% in 2009, the real GDP had increased 3.0% and 1.7% in 2010 and 2011 respectively, showed that the conditions of the economy in USA is recovering from the economic crisis started in 2008. The Bureau of Economic Analysis latest published news in January 2012 stated that the GDP in 2011 accelerated in the forth quarter at 2.8% after increased 1.8% in the third. The growth was partly contributed from the turning up of inventory investment and consumer spending for both durable goods and nondurable goods. According to reports from Bloomberg, GDP of USA is projected to grow at rates of 1.7%, 2.3% and 2.4% in 2011 to 2013. The graph below has recorded the annual GDP of USA in current dollars from 2000 to 2011.

Annual GDP of USA in current dollars in 2000–2011

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

16,000 15,088
14,029 14,292 13,939 14,527
14,000 13,377
12,623
11,853
12,000 11,142
10,642
9,952 10,286
10,000
8,000
6,000
4,000
2,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
US$ Billion
----- End of picture text -----

Source: Bureau of Economic Analysis

Personal income increased with a year on year growth rate of 3.7% and 4.7% in 2010 and 2011 resulting in more consumer goods expenditures. As illustrated in the graph below, personal consumption expenditures have increased in an average of 4% annually from US$7,804.1 billion to US$10,245.5 billion from 2003 to 2010. Real personal consumption expenditures recorded a year on year growth of 2.0% in 2010 and a further 2.2% in 2011. The graph below has recorded the annual personal consumption expenditures in USA from 2003 to 2010.

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Annual personal consumption expenditures in 2003–2010

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

12,000
9,772 10,036 9,866 10,246
10,000 9,301
8,804
8,271
7,804
8,000
6,000
4,000
2,000
–
2003 2004 2005 2006 2007 2008 2009 2010
US$ Billion
----- End of picture text -----

Source: Bureau of Economic Analysis

As noted from the report from Pira International Limited released on January 2012, USA was the largest consumer for packaging with a demand of US$137 billion in 2010. The leading consumer among the countries in the packaging industry has showed signs of slowly recovering from the recession from 2008. It is expected that the packaging industry will continue to be an essential part of the economy in USA and will experience a similar growing trend to the personal consumption expenditures in USA.

According to a report published in Spring 2011 by the Paperboard Packaging Council, an organization encompasses approximately 80% of all paper-based packaging manufactured in the USA and includes several Canada firms, the paperboard packaging industry is expected to grow at an average annual rate of 4.7% in sales, 0.6% in tons and the average value per ton per year is expected to rise 4.1% in five years from 2010 to 2014. Paperboard packaging council explains that 56% of all paperboard packaging is destined for food product segments including but not limited to beverages and dairy products, candy and confections and the balance services other vital industries including but not limited to pharmaceuticals, cosmetics and personal care products and most of the items found in grocery or club stores. The fact that most paper based packaging is used for consumer staples, a major strength to the industry, is to be able to bring steady growth and stable earnings. Paperboard Packaging Council expects that the demand for this industry will further enhanced by the fact that paperboard packaging is more environmental friendly and that currently, American forests are growing as the trees are being planted three times more than used, such that the supplies of paper will not affect the paperboard packaging industry.

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E. Regulations governing the industry

Laws and regulations relating to the printing industry in the PRC

Companies in the printing industry in the PRC have to comply with certain regulatory requirements established and published by the PRC government including but not limited to (i) the Regulations of Administration of Printing Industry 《( 印刷業管理條例》) promulgated and implemented on 2 August 2001 by the PRC State Council (中華人民共和國國務院); (ii) the Regulations on Publication Administration 《( 出版管理條例》) promulgated on 25 December 2001 and implemented on 1 February 2002 by the PRC State Council; (iii) the Administration Regulations on Fulfilling Printing Orders 《( 印刷品承印管理規定》) jointly promulgated on 18 July 2003 and implemented on 1 September 2003 by the General Administration of Press and Publication of the PRC (中華人民共和國新聞出版總署) and the Ministry of Public Security of the PRC (中華人民共和國公安部); (iv) the Temporary Regulations for the Establishment of Foreign Investment Printing Enterprises 《( 設立外商投資印刷企業暫行規定》) jointly promulgated and implemented by the General Administration of Press and Publication of the PRC and the Ministry of Foreign Trade and Economic Cooperation of the PRC (中華人民共和國對外貿易經濟合作部) (now known as the Ministry of Commerce of the PRC (中華人民共和國商務部)) on 29 January 2002 and the Supplementary Provisions of the Temporary Regulations for the Establishment of Foreign Investment Printing Enterprises 《( 關於<設立外商投資印刷企業暫行規定>的補充規定》) jointly promulgated on 12 November 2008 and implemented on 1 January 2009 by the General Administration of Press and Publication of the PRC and the Ministry of Commerce of the PRC; and (v) the Temporary Regulations for the Qualifications of the Operators in the Printing Industry 《( 印刷業經營者資格條件暫行規定》) promulgated and implemented on 9 November 2001 by the General Administration of Press and Publication of the PRC; and (vi) the Rules of the Shenzhen Special Economic Zone on the Implementation of Regulations of the Administration of Printing Industry (深圳經濟特區實施《印刷業管理條例》若干規定) promulgated on 25 June 2004 and implemented on 1 July 2004 by the Standing Committees of Shenzhen Municipal People’s Congress (深圳市人民代表大會常務委員會) (collectively, the ‘‘Printing Laws and Regulations’’).

Pursuant to the Printing Laws and Regulations, foreign entities are allowed to set up foreign capital invested printing enterprises which can be (i) a joint venture or cooperation engaging in the printing industry in the PRC (a PRC partner is required); or (ii) a wholly foreign owned enterprise engaging in package segment of the printing industry. Moreover, any legal entities (including those foreign capital invested enterprises) or individuals engaging in printing business in the PRC must apply for a printing license from the publication administrative authority at the relevant provincial, autonomous region or municipal level. The printing license may not be leased, lent or transferred by any means. The Printing Laws and Regulations also stipulate that, upon obtaining approval from relevant administrative departments in charge of publishing, those foreign capital invested enterprises engaging in printing business may receive production orders from foreign publishers to print publications, packaging and decorative printed products and other printed products that are to be exported out of the PRC.

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Furthermore, in accordance with the Temporary Regulations for the Qualification of the Operators in the Printing Industry 《( 印刷業經營者資格條件暫行規定》), as mentioned above, in order to obtain a printing licence, applicants are required to: (i) submit the name of the enterprise and its bylaws; (ii) provide a well-defined scope of business; (iii) be in possession of production and business premises that can meet the needs of its scope of business, and necessary capital, equipment and other production and business conditions as well; (iv) be in possession of an organizational structure and staff that can meet the needs of its scope of business; and (v) fulfill other conditions stipulated by the relevant laws and administrative regulations. In addition to the provisions stipulated above, the approval of the establishment of a printing enterprise must also conform to the planning of the PRC relating to the total number, structure and distribution of the printing enterprises.

Laws and regulations relating to processing trade arrangements in the PRC

According to the Interim Measures for the Administration of Examination and Approval of Processing Trade 《( 加工貿易審批管理暫行辦法》) (the ‘‘Interim Measures’’) (promulgated on 27 May 1999 and implemented on 1 June 1999 by the Ministry of Foreign Trade and Economic Cooperation of the PRC (now known as the Ministry of Commerce of the PRC), processing arrangements in the PRC refer to business activities involving the importing of all or part of the raw and auxiliary materials, parts and components, accessories, and packaging materials from abroad, and re-exporting the finished products after processing or assembling by PRC processing enterprises. Processing trade includes the processing of supplied materials and imported materials. In particular, processing of supplied materials refers to processing trade with materials supplied by foreign partners. Under such arrangement, PRC processing partners neither need to purchase materials with foreign currency nor reimburse its foreign partners with processing fees. However, the foreign partner shall take back all finished products for sale upon payment of the processing fees to PRC processing enterprises. A PRC processing enterprise shall be a manufacturing company with a legal person status or a factory established by an operating enterprise as non-legal person with business license and accounting independently with respect to the processing trade. In addition, the Interim Measures specify that approval from provincial level or the authorised district or county level departments of foreign economic relations and trade must be obtained by the PRC processing partner before it commences the processing activities.

Pursuant to the PRC Customs Supervision and Administration of Processing Trade Goods 《( 中華人民共和國海關對加工貿易貨物監管辦法》) (promulgated by the General Administration of Customs on 1 November 2010 and which came into effect on 5 December 2010), subject to the granting of the approval of customs and fulfillment of the required procedures, PRC processing partners may subcontract processing work of its products to other sub-contractors. Upon completion of the sub-contracting processing, the processed products shall be returned to the PRC processing partners.

The Regulations of the Export-oriented Processing and Assembly Trade of Guangdong Province 《( 廣東省對外加工裝配業務條例》) issued by the Standing Committee of the Guangdong Provincial People’s Congress on 28 November 2008, makes it clear that exportoriented processing and assembly companies may enter into contracts with foreign investors to coordinate and arrange the processing factory to manufacture products as agreed.

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Laws and regulations relating to quality and safety of products

The Product Quality Law of the PRC 《( 中華人民共和國產品質量法》) (‘‘Product Quality Law’’) was adopted by the Standing Committee of the National People’s Congress on 22 February 1993 and amended on 8 July 2000 and on 27 August 2009. The Product Quality Law is applicable to all production and marketing activities in China, and was formulated to strengthen the administration of rules pertaining to product quality, as well as to clarify product liability rules, protect consumers and maintain social and economic order.

The State Council established a national administration in charge of nationwide product quality, with local authorities performing this duty at the local level. Products offered for sale must meet relevant quality and safety standards. Enterprises may not produce or market counterfeit products in any fashion, including forging brand labels or providing false information about the manufacturer of a product. Violations of state or industrial standards for health and safety and any other related violations may result in civil liabilities and penalties, such as compensation for damages, fines, suspension or shutdown of businesses, as well as confiscation of products illegally produced and sold and the sales proceeds from such products. Serious violations may subject the responsible individual or enterprise to criminal liabilities. Manufacturers whose products cause personal or property damages due to their latent defects are liable for such damages.

The Interim Measures on the Administration of Quality Supervision of Printed Books and Periodicals 《( 書刊印刷產品質量監督管理暫行辦法》) (effected on 20 November 1992) and the Provisions on the Administration of Quality of Books 《( 圖書質量管理規定》) (effected on 1 March 2005) provide for special provisions with respect to quality supervision and inspection of printed books and periodicals. The printing of books and periodicals is subject to applicable quality standards and provisions in the contracts. Administrative penalties such as warnings, fines, suspension of business, and cancellation of printing license may be imposed in case of breaches of the above provisions.

Laws and regulations relating to production safety

The Production Safety Law of the PRC 《( 中華人民共和國安全生產法》) (‘‘Production Safety Law’’) was promulgated by the Standing Committee of the National People’s Congress on 29 June 2002 and became effective on 1 November 2002 and amended on 27 August 2009. The Production Safety Law provides safety standards for any production or business operation in order to reduce accidents and protect the general public security and safety of property. The State Administration of Work Safety (國家安全生產監督管理總局), a central government authority established by the State Council, is primarily responsible for the nationwide supervision and administration of the Production Safety Law. Local government authorities at the county level and above are responsible for supervision and administration of production safety within their respective local jurisdictions.

Enterprises are required to undertake necessary measures to set up and maintain appropriate equipment, monitor the safety of production procedures, assign designated personnel, conduct workplace safety training and undertake all other measures required by the law to ensure the safety of employees and the general public. Any responsible individual or enterprise that fails to perform its duty to meet the safety production standards may be

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ordered to rectify the breach within a prescribed period and/or pay a fine. Failure to rectify the breach within the prescribed period may result in suspension or closure of the business. Serious violations that result in any production safety accident may subject the responsible individuals to criminal liabilities.

Laws and regulations relating to labour protection

PRC Labour Law 《( 中華人民共和國勞動法》) which came into effect on 1 January 1995 and amended on 27 August 2009 stipulates general provisions with regard to labour contracts, working hours, wages, occupational safety and health, special protection for female staff and juvenile workers, vocational training, social insurance and welfare, and settlement of labor disputes. Enterprises failing to comply with the PRC Labour Law may be subject to warnings, fines, order to pay compensation, and cancellation of business license. Criminal liabilities may also be imposed for serious violations.

On 29 June 2007, the National People’s Congress enacted the PRC Labour Contract Law 《( 中華人民共和國勞動合同法》) which became effective on 1 January 2008. The Implementation Regulation for the PRC Labour Contract Law, or the Implementation Regulation 《( 中華人民共和國勞動合同法實施條例》), was promulgated by the State Council and took effect on 18 September 2008. The Labour Contract Law formalises, among others, workers’ rights concerning overtime hours, pensions and layoffs, the execution, performance, modification and termination of the labour contracts. In particular, it provides for specific standards and procedures for entering into non-fixed-term labour contracts. Both the employer or the employee is entitled to terminate the labour contract in circumstances as prescribed in the Labour Contract Law or if certain preconditions are fulfilled, and in certain cases, the employer is required to make a statutory severance payment upon the termination of the labour contract pursuant to the standards provided by the Labour Contract Law.

Laws and regulations relating to environmental protection

The PRC Environmental Protection Law 《( 中華人民共和國環境保護法》) (effected on 26 December 1989), the PRC Law on Appraisal of Environment Impact 《( 中華人民共和國環境影響評價法》) (effected on 1 September 2003), and the Regulations on Administration of Environmental Protection of Construction Projects 《( 建設項目環境保護管理條例》) (effected on 29 November 1998), together set out the legal framework on, among others, the design and construction requirements of production facilities of the Processing Facility in respect of pollution control and environmental protection. The PRC Law on the Prevention and Treatment of Air Pollution 《( 中華人民共和國大氣污染防治法》) (effected on 1 September 2000), the PRC Law on the Prevention and Treatment of Water Pollution 《( 中華人民共和國水污染防治法》) (effected on 1 June 2008), the PRC Law on the Prevention and Treatment of Noise Pollution 《( 中華人民共和國環境噪聲污染防治法》) (effected on 1 March 1997) and the PRC Law on the Prevention and Treatment of Solid Waste Pollution 《( 中華人民共和國固體廢物污染環境防治法》) (effected on 1 April 2005) together impose further requirements on the Processing Facility on the discharge and treatment of waste by-products, including wastewater and chemical waste.

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A person or an enterprise failing to comply with the Environmental Protection Law may be subject to various penalties imposed by environmental protection authorities, depending on the individual circumstances of each case and the extent of contamination. Such penalties may include warnings, fines, imposition of deadlines for remedying the contamination and orders to close down enterprises. Enterprises that cause air, water, noise or solid waste pollution are obligated to eliminate the pollution and are required to compensate the parties directly affected by the pollution for their losses. Criminal liabilities may also be imposed for serious violations.

Apart from the laws and regulations of Hong Kong and the PRC, the Enlarged Group is not subject to other rules and regulations in other jurisdictions.

F. Future plans and development

With its experienced management team and the adoption of proactive policies to capitalize on new market demands and trends, the Directors (including the proposed Directors) believe that the Target Group is well positioned to benefit from the business opportunities in the paper products industry. As such, the Target Group’s objective is to strengthen its market position in the paper packaging industry by (i) developing the PRC market; (ii) diversifying its product types and customer base; and, (iii) strengthening its production efficiency and product quality.

A. Development of the PRC market

In view of the high economic growth in the PRC, the Directors are of the view that the demand for consumer products in the PRC will continue to increase, which in turn will increase the demand for paper-based packaging products for consumer products. The Target Group will expand its production capacity by upgrading its production facilities and employing more headcounts with experience in paper packaging industry. More resources will be allocated to the sales and marketing team in developing the PRC market by visiting new customers and participating in packaging related exhibitions and seminars.

B. Diversification of products and customer base

The Target Group is committed to satisfy its customers’ requirements and to offer a comprehensive range of paper products to match customers’ specifications and broaden its customer base. The range of the products includes products that require advance printing technology, such as security printing products and three-dimension cards.

The production and sales and marketing team of the Target Group will further participate in exhibitions and seminars in relation to paper packaging industry in order to gain more advanced knowledge in both products and market trends. The management of the Target Group is considering engaging more headcount in developing new products.

C. Strengthening of the production efficiency and product quality

The Directors believe that with an increase in volume of orders, the Target Group’s manufacturing operations will enjoy increasing economies of scale. In order to enhance the efficiency of its existing production facilities, the Target Group intends to purchase or upgrade its machinery and equipment to enhance the production and processing capacity together with the production effectiveness. Such production machines and equipment may be imported from overseas with advanced technology.

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Furthermore, more qualified professional will be engaged to assist in devising more cost-effective production methods and refining its manufacturing process.

G. Risk factors

Risks relating to the Enlarged Group

A. No long-term sales agreements with most of the customers

The Target Group has not entered into any long-term sales agreements with its customers. If any of these customers, particularly the major customers, materially reduce their orders from the Target Group, the business and financial performance of the Target Group may be adversely affected.

With the amendments to the Clean Production Promotion Law of the PRC《中華人民共和國清潔生產促進法》by the National People’s Congress of the PRC on 29 February 2012, which prevent excessive packaging for products by enterprises, the demand for packaging products by the Target Group’s customers may be affected and the business and profit of the Target Group may be consequently affected.

The Target Group has established long term business relationship with its customers and has maintain good relationship with its customer by providing services with high product quality, reliability of delivery and after-sales service.

B. No long-term purchase agreements with its major suppliers

No long-term procurement contract has been entered into between the Target Group and any of these major suppliers. Should these major suppliers cease to supply materials to the Target Group and the Target Group fails to procure alternative replacement, the Target Group’s business and profitability may be adversely affected.

The Target Group has established long term business relationship with its suppliers and will continue in searching for other reliable suppliers.

C. Lease of production plant

The Target Group currently carries out its production in a leased production plant in Sha Jing Zhen, Baoan District, Shenzhen, the PRC. The management of the Target Group has signed a new tenancy agreement for the production plant with lease term from 1 July 2011 to 30 June 2013. Should the Target Group fail to renew the respective lease agreement upon expiry and fail to relocate the production lines to suitable sites, the business operation of the Target Group may be adversely affected.

D. Reliance on key management personnel

The Target Group’s success, to a significant extent, is attributable to the leadership, management, expertise and experience of the directors, in particular, Mr. Ng. He commenced his career in the printing industry in 1960s. He has extensive experience in printing operations and printing machinery. According to the conditions precedent to the S&P Agreement, Mr. Ng has to sign services agreement with the Target Company and/or its subsidiaries on such terms and conditions as may be agreed between the parties and the

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Company. The terms of the service agreement are set out in the section headed ‘‘Experience of the Board and the Enlarged Group in paper business’’ in this Circular. The reliance on Mr. Ng and other directors and management of the Target Group for the operation of the Target Group could have an adverse impact on the Target Group’s business and profitability should the Company fail to retain these competent key personnel or recruit competent replacement.

Mr. Kao Wai Kwong, Eric, the director of the Target Company has more than 15 years experience in the printing and packaging industry. Mr. Ng has known Mr. Kao for more than 12 years. They were colleagues in printing and packaging industry for several years. Currently, Mr. Kao and Mr. Ng are working closely for the operation and future development of the Target Group.

Besides, with the extensive experience of the senior management in the printing and packaging industry for more than 5 years, no material impact affecting the Target Group is expected when Mr. Ng cease his involvement in the Target Group.

Risks relating to the operation of the Enlarged Group

A. Operation disruption

Most of the Target Group’s production processes are semi-automated or involve the use of machineries, and therefore rely on an adequate and stable supply of electricity. A power surge or outage could disrupt or even result in the halt of our production process and thereby adversely affect our printing and manufacturing yield. In time of power shortage, the local government may limit the electricity supply during which some of the production processes of the Target Group would be forced to be suspended. The Target Group may need to limit or delay the production if we face any suspension or shortage of electricity supply which would have a material and adverse impact on our Group’s profitability. Production process might need to be rescheduled in order to fit the customer’s delivery schedule.

B. Payment delays and/or defaults by customers

Credit period of 30–60 days upon delivery of the finished paper products will be granted to the customers. There is no assurance that the Target Group’s major customers would make payment to the Group within the credit period granted by the Group. Should there be any of the Group’s major customers delay in making payment to the Group, the Group’s turnover and cash flows may be materially and/or adversely affected. However, as advised by the management of the Target Group, the Target Group had not experienced any default by the customers which had any material adverse effects on their operation and financial condition.

C. Major customers contributed to more than 50% of the Target Group’s turnover

The five largest major customers of the Target Group contributed to an aggregate of approximately 71% of the total turnover to the Target Group for the 6 months ended 30 September 2011. In view of the long business relationship with the customers, the Directors expect these major customers will continue to contribute more than 50% of the total turnover of the Enlarged Group. Therefore, any decrease or delay in the customers’ orders on packaging could have adverse effects on the business and profits of the Enlarged Group. In addition, there is no assurance that the Target Group can continue to diversify the composition of customer base.

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LETTER FROM THE BOARD

D. Focus on limited products

The Target Group is currently focusing on production of packaging boxes for wines, food and cosmetics, stationeries and kid’s toys. There is no assurance that these products will continue to be in demand in the future and should there be a decrease in demand for these packaging products, the business and profits of the Enlarged Group could be adversely affected. The Directors may need to explore other business opportunities in production of other paper packaging products.

E. Failure in implementation of safety measures and change of relevant laws, policies and regulations

The Target Group requires staffs to adhere to and implement all safety measures and procedures as stipulated in safety manual. The management of the Target Group have closely monitored and supervised the staffs in implementation of such safety measures and procedures during the operation of machines and equipment and executions of works, however the Target Group cannot guarantee that there will not be any violation of rules, law or regulations by the staffs. In the event that the staffs fail to implement safety measures, there may be higher number of occurrence and more seriousness of personal injuries, property damage or fatal accidents, which may adversely effect on the financial position of the Enlarged Group to the extent not covered by the insurance policy and may cause relevant licences being suspended or not renewed.

There is no assurance that the PRC government will not introduce new ordinances and regulations in the future and that the Target Group will be able to comply with such new ordinances and regulations. Any failure to comply with such new laws or regulations may have an adverse effect on the operations of the Enlarged Group.

F. Concentration on constant and reliable supplies

The Target Group’s purchases from the five largest suppliers accounted for an aggregate of approximately 63% of the Target Group’s total purchases for the 6 months ended 30 September 2011. The concentration in certain vendors for the purchases is due to the benefits of the long business relationship established with the suppliers and the convenience and economic benefits for bulk orders. As advised by the management of the Target Group, there are many suppliers providing identical or similar types of raw materials. The Directors believe that there is a concentration in vendors for purchases for the Target Group but there is no reliance. However, should any of those major suppliers cease to supply raw paper to the Target Group and the Target Group is unable to find suitable replacements, the Enlarged Group’s business operation may be adversely affected, and there is no assurance that the Enlarged Group will not encounter any interruption, delay or shortage in supplies from these vendors in the future. Any disruption in supplies may materially and adversely affect our business, financial condition, results of operations and prospects. In the event of any interruption, delay or shortage in supplies from these vendors in the future, the Enlarged Group may contact other suppliers and/or reschedule production process in order to achieve punctual delivery to the customers.

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LETTER FROM THE BOARD

G. Inadequate insurance coverage

The Target Group does not have any insurance cover for product liability. Accordingly, the Enlarged Group may suffer losses arising from any damage caused by its products which are not covered by insurance. The Directors are of the view that the exposure to product liability is remote and the cost of insurance coverage for product liability is not justifiable compared against such exposure. However, any payment the Enlarged Group makes to cover any uninsured losses, damages or liabilities could have a material adverse effect on its business, results of operations and financial condition. In addition, if the Enlarged Group does not have sufficient funds to cover any uninsured losses, damages or liabilities or to replace any asset that has been destroyed, the Group’s business, results of operations and financial condition could be adversely affected.

H. Seasonal factors

As advised by the management of the Target Group, the peak season of the paper packaging industry is normally from June to November each year, being the few months before the approach of Christmas and Chinese Lunar New Year. Should the Target Group fail to capture orders from customers during the peak season, the financial results of the Enlarged Group during the year may be adversely affected. In order to secure more orders during the peak season, the Target Group generally would increase human resources at the sales team and actively approach existing customers and contact new customers for orders.

Risks relating to the industry in which the Enlarged Group operates

A. Industry risk

The future growth and prospects of the packaging industry in which the Group specialises is likely to depend upon the general economic conditions of the consumer goods market. It is believed that the recent down-turned of economic performance has affected the spending power of individuals on consumer goods. If the Group’s end customer market suffers from this economic crisis, the spending power of individuals on consumer goods is likely to be weakened, which in turn will adversely affect the demand for packaging products for these consumer goods.

In addition, in amid of the credit tightening environment, loans from banks and financial facilities will have tighter terms and conditions to generate, if necessary, additional operational cash flow to both packaging business owners and suppliers resulting in a higher operation risk. If this economic down-turn continues, the Group’s financial position or business operations could be adversely affected.

B. Intense competition

The Directors consider that there are no significant entry barriers for those who wish to enter the business of producing packaging products. The packaging industry is highly competitive and the Group faces competition from other packaging suppliers around the world, especially from those in Thailand and those in Hong Kong production facilities based in the PRC, who produce similar products to the Group’s or other packaging products that may be used as substitute products for the Group’s. These competitors may possess more advanced technical know-how and better craftsmanship, and may have greater access to

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capital and generate manufacturing, financial, research and development, marketing and other resources when compared with the Group. As a result, the Group may be unable to compete successfully with these competitors in the future.

C. Environmental protection

Recently, there have been growing concerns in environmental protection globally. Environmental supporters argue that packaging materials consume depletive resources, such as wood (further produced into paper) and crude oil (further processed to plastic) and urge luxurious consumer goods producers to reduce the use of packaging materials. The Directors believe that such concerns are likely to continue and intensify at least in the near future and could affect the packaging materials requirements from the Group’s customers due to changes in consumer preferences. The Directors believe that any significant changes in consumer preferences, caused by growing environmental concerns, could have material adverse changes in the Group’s turnover.

In addition, the PRC government has placed great emphasis on environmental issues and imposed various environmental laws and regulations, and is believed that they will become more stringent in the near future. These environmental laws and regulations impose rigorous standards on us regarding water discharge, the use, handling, discharge and disposal of solid waste and hazardous materials, noise pollution, and remediation of environmental contamination. Failure by us to meet the environmental standards stipulated by the PRC law could cause us to suffer business suspension, fines, lawsuits and may cause significant damage to our reputation. In addition, failure by us to upgrade production facilities could result in less competitive and losing our current market position.

D. Fluctuation in price and supply of materials

The principal raw material used by the Group is raw paper and the prices of them are subject to fluctuations according to market conditions, in particular, the number and production capacity of paper manufacturers which affect the supply of raw paper, and demand of raw paper which is affected by the worldwide economic growth. In the event of any substantial increase in the cost of these raw materials, the profitability of the Group may be adversely affected since there is no guarantee that the Group can pass on all or part of the increased cost to its customers.

Risks relating to the social and economic conditions

A. Economic, social and legal considerations

The PRC has a long history of being a planned economy. The PRC economy is still to a large extent a planned economy, albeit that the PRC government has undergone economic reforms to transform the PRC economy into a market economy with socialist characteristics. These reforms have resulted in a more significant role being played by market forces in the overall economic performance. Nevertheless, many of the regulations are subject to further refinement and revision which aim at optimizing the economic system. There is no assurance that any change in the economic conditions as a result of the economic reforms or macroeconomic control measures adopted by the PRC government will have a positive effect on the economic development of the PRC.

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LETTER FROM THE BOARD

Since 1979, the PRC has promulgated various laws and regulations relating to economic issues in general as well as issues involving foreign investment. In 1982, the National People’s Congress of the PRC resolved to amend the PRC constitution to allow foreign investment and to protect the legal interests of foreign investors in the PRC. The enforcement of existing laws and regulations may be uncertain or inconsistent, and the interpretation of these laws and regulations may change from time to time. Any such change could have an adverse impact on the business operation of the Group.

B. Financial market crisis in the US and Europe

The tightening of liquidity, significant turmoil in the global financial markets and the resulting general recession in major economies that began in the second half of 2008 have adversely affected, and may continuously affect, the US and Europe economy, including the consumption power in the areas, which is directly related to the demand for paper packaging products. While there are signs that the global economies have begun to recover, there is no assurance of continuous recovery or that global financial crisis will not re-occur. Any global economic recession or financial market turmoil in the future may adversely affect consumption power of the area and lead to decrease in the general demand for packaging products and may have adverse impact in the financial position of the Enlarged Group.

C. Epidemics, acts of war and other disasters

The Group’s business is subject to general economic and social conditions in the PRC. Natural disasters, epidemics and other acts of God which are beyond human control may adversely affect the economy, infrastructure and livelihood of the people of the PRC. Many major cities in the PRC are under threat of flood, earthquake, typhoon, sandstorm or drought. The business, operation results and financial condition of the Group may be adversely affected if such natural disasters occur. In particular, any future outbreaks of SARS, Avian Flu or any other epidemic could have an adverse effect on the results of operation of the Group.

In addition, acts of war and terrorist attacks may cause damage or disruption to the manufacturing plants, employees, distribution channels, markets or customers, any of which could adversely impact turnover, cost of goods sold, overall result and financial condition or Share price of the Group. Potential war or terrorist attacks may also cause uncertainty and cause the business to suffer in ways that the Group cannot currently predict.

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LETTER FROM THE BOARD

Risks relating to certain information contained in this circular

A. Statistics and industry information

Statistics, industry data and other information relating to the economy and the industry contained in this circular have been derived, in part, from government official publications. The Company cannot ensure or make any representation as to the accuracy or completeness of such information. Neither the Company nor any of its respective affiliates or advisers, have prepared or independently verified the accuracy or completeness of such information derived from government official publication. Statistics, industry data and other information relating to the economy and the industry derived from government official publications may not be consistent with other information available from other sources and should not be unduly relied upon. Due to possible flawed collection methods, descrepancies between published information, different market practices or other problems, the statistics, industry data and other information relating to the economy and the industry derived from government official publications might be inaccurate or might not be comparable to statistics produced from other sources. In all cases, investors should give careful consideration as to how much weight or importance the investors should attach or place on such statistics, the projected industry data and other information relating to the economy and the industry.

B. Forward-looking statements contained in this document may not materialise

This circular contains certain statements and information that are ‘‘forward-looking’’ and uses of forward-looking terminology such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘expect’’, ‘‘estimate’’, ‘‘may’’, ‘‘ought to’’, ‘‘should’’ or ‘‘will’’. Those statements include, among other things, the discussion of the Group’s development strategy and expectations concerning its future operations, liquidity and capital resources. Although the Directors believe the assumptions on which the forward-looking statements are reasonable, any or all of those assumptions could prove to be incorrect and as a result, the forward-looking statements based on those assumptions could also be incorrect. The uncertainties in this regard include, but are not limited to, those identified in this ‘‘Risk factors’’ section, many of which are not within the Group’s control. In light of these and other uncertainties, the inclusion of forward-looking statements in this circular should not be regarded as representations by the Company that its plans or objectives will be achieved and investors should not place undue reliance on such forward-looking statements. The Company does not undertake any obligation to update publicly or release any revisions of any forward-looking statements, whether as a result of new information, future events or otherwise.

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LETTER FROM THE BOARD

H. Financial information of the Target Group

During the two financial years ended 31 March 2009 and 2010, Sky Will was the only operating entity in the Target Group. For the financial year ended 31 March 2011, the operating results of the Target Group, besides Sky Will, was also contributed by New Spring (SW) upon the commencement of business of New Spring (SW) in January 2011. Upon completion of the acquisition of New Spring Offset in April 2011, revenue and profit of the Target Group are currently generated from all three entities, being Sky Will, New Spring (SW) and New Spring Offset.

The following table sets out the historical financial information of the Target Group:

			For the
	For the	For the	6 months ended
	year ended	year ended	30 September
	31 March 2010	31 March 2011	2011
	(Note 1)	(Note 2)	(Note 3)
	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)
Revenue	18,633	43,644	54,936
Profit before taxation and
extraordinary items	3,155	5,667	18,279
Profit after taxation and
extraordinary items	2,627	4,738	15,885
Net (liabilities)/asset value as at
year/period end	(464)	4,265	20,150
Notes:

The operating entity within the Target Group was Sky Will only.
The operating entities within the Target Group were Sky Will and New Spring (SW) (which commenced business in January 2011).
The operating entities within the Target Group were Sky Will, New Spring (SW) (which commenced business in January 2011) and New Spring Offset (which was acquired by Sky Will in April 2011).

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LETTER FROM THE BOARD

The results of New Spring Offset has been consolidated into those of the Target Group since 1 April 2011. For information purpose, the historical financial information of New Spring Offset is set out as follows:

	From date of
	incorporation on
	1 December	For the	For the
	2009 to	year ended	9 months ended
	31 December	31 December	30 September
	2009	2010	2011
	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)
Revenue (Note 1)	—	52,944	60,503
Gross Profit	—	11,520	11,146
		(Note 2)	(Note 3)
(Loss)/Profit before taxation and
extraordinary items	(113)	8,350	7,955
(Loss)/Profit after taxation and
extraordinary items	(113)	6,186	5,992
Net (liabilities)/assets value as at
year/period end	(113)	16,939	24,631
Notes:

For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before the acquisition of New Spring Offset by Sky Will), revenue generated from the Target Group were approximately HK$23,373,000 and HK$10,534,000 respectively.
Based on the gross profit margin of New Spring Offset of approximately 21.76% for the year ended 31 December 2010, gross profit generated from the Target Group was approximately HK$5,411,000.
Based on the gross profit margin of New Spring Offset of approximately 18.42% for the 9 months ended 30 September 2011, gross profit generated from the Target Group (except New Spring Offset) for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset acquired by Sky Will) was approximately HK$1,943,000.
For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before the acquisition of New Spring Offset by Sky Will), purchases from the Target Group were approximately HK$nil and HK$15,198,000 respectively. Save as the aforesaid, there were no other transactions incurred between the Target Group and New Spring Offset for the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset acquired by Sky Will).

Further details of the financial information of the Target Group and the pro forma financial information of the Enlarged Group are contained in Appendices II, IIA and III respectively to this Circular.

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LETTER FROM THE BOARD

(4) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER; CONNECTED TRANSACTIONS AND APPLICATION FOR WHITEWASH WAIVER

A. Subscription

Subscription Agreement

Date: 29 February 2012 Parties: (i) The Company (as the issuer); and (ii) World Treasure Global Limited (as the Subscriber) Amount of Subscription: HK$45,000,000 Subscription Price: HK$0.10 per Subscription Share Subscription Shares: 450,000,000 new Adjusted Shares Lock Up Arrangement: The Subscriber is restricted from transferring, charging or pledging any Subscription Shares for six months from Resumption

Conditions of the Subscription Agreement

(a) the Listing Committee granting or agreeing to grant the listing of, and permission to deal in the Subscription Shares;
(b) the passing by the Independent Shareholders by way of poll at the SGM to approve the Whitewash Waiver and the allotment and issue of the Subscription Shares;
(c) the Stock Exchange has granted its approval-in-principle (subject to any conditions as may be imposed by the Stock Exchange) for the Resumption;
(d) the Capital Reorganisation having become effective;
(e) the obtaining of the Whitewash Waiver from the Executive by the Subscriber; and
(f) the completions of the Acquisition, the Open Offer and the Bonus Issue.

All of the above conditions are not waivable. If any of the aforesaid conditions has not been fulfilled by the Long Stop Date, the Subscription Agreement shall lapse and no party shall have any other claim against the other parties except in respect of any antecedent breach and the costs and expenses which shall be borne by the parties.

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LETTER FROM THE BOARD

Subscription Shares

Assuming the Capital Reorganisation becoming effective, the 450,000,000 Subscription Shares represent: (i) approximately 7.84 times of the total number of issued Adjusted Shares as at the Latest Practicable Date; (ii) approximately 88.68% of the total number of issued Adjusted Shares as enlarged by the Subscription Shares; and (iii) approximately 37.25% of the total number of issued Adjusted Shares as enlarged by the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares. Save for the Lock Up Arrangement and the Subscriber Undertaking, there is no restriction on the subsequent sale of the Subscription Shares.

For the avoidance of doubt, the Subscription Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue since the Subscription Shares will be issued after the Record Date.

B. Open Offer

Issue statistics of the Open Offer

Basis of the Open Offer: eight (8) Offer Shares for every Adjusted Share held on the Record Date Offer Price: HK$0.10 per Offer Share Number of Shares in issue as at 1,148,661,140 Shares (equivalent to 57,433,057 Adjusted the Latest Practicable Date: Shares assuming the Capital Reorganisation becoming effective) Number of Offer Shares: 459,464,456 Offer Shares Underwriters: Kingston Securities and the Subscriber

The Company has no outstanding options, warrants, derivatives or convertible securities in issue which confer any rights to subscribe for, convert or exchange into the Shares as at the Latest Practicable Date.

The Company has not procured any undertaking and has not received any undertaking provided by any Shareholders to subscribe for his entitlement under the Open Offer or any arrangement that may have an effect on the Open Offer.

Offer Price

The Offer Price of HK$0.10 per Offer Share represents a discount of 80% to the closing price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted Share assuming the Capital Reorganisation having become effective) as quoted on the Stock Exchange on the Last Trading Day.

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LETTER FROM THE BOARD

Trading of the Shares had been suspended since 23 September 2008, the Company has, upon arm’s length negotiation, agreed with the Underwriters that the Offer Price should represent a substantial discount to the closing price before Suspension so as to incentivize the Qualifying Shareholders to take up their entitlements under the Open Offer. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to his/her/its shareholding in the Company as at the Record Date. The Directors (including the proposed Directors and the independent non-executive Directors) consider the Offer Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Offer Shares

Assuming the Capital Reorganisation becoming effective, the 459,464,456 Offer Shares represent: (i) 8 times of the total number of issued Adjusted Shares as at the Latest Practicable Date; (ii) approximately 88.89% of the total number of issued Adjusted Shares as enlarged by the Offer Shares; and (iii) approximately 38.04% of the total number of issued Adjusted Shares as enlarged by the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares.

For the avoidance of doubt, the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue since the Offer Shares will be issued after the Record Date.

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholders. The Company will send (i) the Open Offer Documents to the Qualifying Shareholders; and (ii) if and to the extent legally and practically permissible, the Prospectus, for information purposes only, to the Excluded Shareholders.

To qualify for the Open Offer, a Shareholder must, at the close of business on the Record Date:

(i) be registered as a member of the Company on the register of members of the Company; and
(ii) not be an Excluded Shareholder.

In order to be registered as a member of the Company on the Record Date, Shareholders must lodge any transfer of the Shares (with the relevant share certificate(s)) with the Registrar at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong by 4:30 p.m. on Monday, 2 April 2012.

Rights of the Excluded Shareholders

If, at 4:30 p.m. on the Record Date, a Shareholder’s address on the register of members of the Company is in a place outside Hong Kong, that Shareholder may not be eligible to take part in the Open Offer. The Company will make enquiries pursuant to Rule 13.36(2)(a) of the Listing Rules with overseas legal advisors as to the feasibility of extending the Open

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LETTER FROM THE BOARD

Offer to Overseas Shareholders taking into account the applicable securities legislation of the relevant overseas jurisdictions or the requirements of the relevant regulatory body or stock exchange for the issue of the Offer Shares to the Overseas Shareholders and the result of such enquiries will be included in the Prospectus. If, after making such enquiry, the Company are of the opinion that it would be unduly burdensome to, or otherwise necessary or expedient not to offer the Offer Shares to such Overseas Shareholders on account of any legal restrictions under the laws of such jurisdiction or the requirements of the relevant regulatory body or stock exchange in that jurisdiction, the Open Offer will not be extended to such Overseas Shareholders and they will become Excluded Shareholders. The results of the enquiries and the basis of any exclusion of the Excluded Shareholders will be included in the Prospectus. As at the Latest Practicable Date, no Shareholder whose address on the register of members of the Company is outside Hong Kong.

The Open Offer Documents will not be registered or filed under the applicable securities or equivalent legislation of any jurisdiction other than Hong Kong and Bermuda. The Company will send the Prospectus (but not the Application Form), for information purposes only, to the Excluded Shareholders (if any), if and to the extent legally and practically permissible. The entitlements of the Excluded Shareholders under the Open Offer will be taken up by the Underwriters. The Open Offer is subject to, amongst other things, the approval of the Independent Shareholders at the SGM.

Closure of register of members

The Company’s register of members will be closed from Tuesday, 3 April 2012 to Tuesday, 10 April 2012 both dates inclusive, for the purpose of, among other things, establishing entitlements to the Open Offer. No transfer of Shares will be registered during this period.

Nil-paid entitlements

The provisional allotments under the Open Offer on an assured basis are not transferable nor are they capable of renunciation. No listing on the Stock Exchange will be sought for the nil-paid entitlements.

No application for excess Offer Shares

The Qualifying Shareholders will not be entitled to subscribe for any Offer Share in excess of their respective assured entitlements. Considering that each Qualifying Shareholder will be given an equal opportunity to participate in the Company’s future development by subscribing for his/her/its entitlements under the Open Offer, the Directors (including the proposed Directors and the independent non-executive Directors) consider that the Company will not be justified in making additional effort and incurring additional costs to administer the excess application procedures. All Offer Shares not taken up by the Qualifying Shareholders are underwritten by the Underwriters.

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LETTER FROM THE BOARD

Pursuant to Rule 7.26A(2) of the Listing Rules, since the Open Offer will be partly underwritten by the Subscriber which is ultimately beneficially owned by Mr. Wong, an executive Director, the absence of excess application arrangement of the Open Offer is required to be approved by the Independent Shareholders by way of poll at the SGM.

Fractions of Offer Shares

Fractional entitlements to the Offer Shares will not be issued but will be aggregated and taken up by the Underwriters. The Company will not allot any fractions of Offer Shares. No odd lot matching services will be provided by the Company in respect of the Open Offer before Resumption. Matching of odd lots of the Adjusted Shares will be available from 9:00 a.m. on the date of Resumption, i.e. Monday, 7 May 2012 until 4:00 p.m. on Friday, 25 May 2012.

Certificates and refund cheques for the Offer Shares

Subject to the Open Offer becoming unconditional, certificates for all fully-paid Offer Shares shall be despatched by ordinary post to those Qualifying Shareholders who have accepted and paid for their Offer Shares, at their own risk. Refund cheques in respect of the Offer Shares if the Open Offer is terminated shall be despatched by ordinary post to the applicants at their own risk.

Underwriting Agreement

Principal terms of the Underwriting Agreement are set out as follows:

Date:	29 February 2012
Parties:	the Company and the Underwriters
Underwriters:	the Subscriber and Kingston Securities
Number of Underwritten Offer	459,464,456 Offer Shares
Shares:
Commitment of the Subscriber	230,000,000 Offer Shares
under the Underwriting
Agreement:
Commitment of Kingston	229,464,456 Offer Shares
Securities under the
Underwriting Agreement:

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LETTER FROM THE BOARD

Priority of underwriting The obligations of the Subscriber under the obligations: Underwriting Agreement shall take precedence over that of Kingston Securities so that Kingston Securities shall only be required to perform its obligations under the Underwriting Agreement after the Subscriber has subscribed for any of the Underwritten Offer Shares which (i) has not been taken up by the Qualifying Shareholders; and (ii) the entitlements to Excluded Shareholders, up to the commitment of the Subscriber under the Underwriting Agreement, i.e. 230,000,000 Underwritten Offer Shares

Underwriting commission: As to the Subscriber, nil As to Kingston Securities, 2.5% Lock Up Arrangement: The Subscriber is restricted from transferring, charging or pledging any Underwritten Offer Shares taken up by the Subscriber for six months from Resumption

As at the Latest Practicable Date, none of the Underwriters is interested in any Shares.

Kingston Securities is an Independent Third Party. For information purpose, Mr. Wong was a director of the holding company of Kingston Securities, being Kingston Financial Group Limited (stock code: 1031) up to April 2011 and is a consultant to a subsidiary of Kingston Financial Group Limited.

Should the Open Offer be undersubscribed, Kingston Securities, as one of the Underwriters, may be required to take up certain Offer Shares. However, Kingston Securities has undertaken to the Company to place down any Offer Shares under the Open Offer to Independent Shareholders after the latest time for termination of the Underwriting Agreement at 4:00 p.m. on Monday, 30 April 2012 and before the date of Resumption so that (i) none of the placees to whom Kingston Securities will place down any Offer Shares will hold 10% or more shareholding in the Company; and (ii) Kingston Securities will not be interested in any Offer Shares immediately before the Resumption.

Termination of the Underwriting Agreement

Kingston Securities (after obtaining the agreement of the Subscriber) may terminate the arrangements set out in the Underwriting Agreement by notice in writing issued to the Company at any time prior to the latest time for termination if there occurs:

(i) in the reasonable opinion of Kingston Securities (on behalf of the Underwriters), the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of Kingston

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Securities (on behalf of the Underwriters) materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or

(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date thereof) of a political, military, financial, economic or other nature, or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of Kingston Securities (on behalf of the Underwriters) materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(ii) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of Kingston Securities (on behalf of the Underwriters) is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(iii) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of Kingston Securities (on behalf of the Underwriters) will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(iv) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(vi) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Open Offer Documents, would have constituted, in the reasonable opinion of Kingston Securities (on behalf of the Underwriters), a material omission in the context of the Open Offer.

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LETTER FROM THE BOARD

Upon the giving of notice in accordance with the above, the Underwriting Agreement shall terminate and the obligations of the parties shall forthwith cease and be null and void and none of the parties shall, save in respect of any right or liability accrued before such termination, have any right against or liability towards any of the other parties arising out of or in connection with the Underwriting Agreement.

Conditions of the Open Offer

The Open Offer is conditional upon the following conditions being fulfilled or waived (as appropriate):

(i) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Open Offer Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by resolution of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the Listing Rules and the Companies Ordinance not later than the posting date of the Open Offer Documents;
(ii) the registration with the Registrar of Companies in Bermuda one copy of each of the Open Offer Documents duly signed by a Director for and on behalf of all the Directors in compliance with the requirements under the Companies Act.
(iii) the passing by the Independent Shareholders by way of poll at the SGM to approve the Open Offer and the Whitewash Waiver;
(iv) the posting of the Open Offer Documents to the Qualified Shareholders on or before the posting date of the Open Offer Documents;
(v) the Listing Committee granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listings of and permission to deal in all the Offer Shares;
(vi) the Stock Exchange has granted its approval-in-principle (subject to any conditions as may be imposed by the Stock Exchange) for the Resumption;
(vii) the obligations of the Underwriters becoming unconditional and that the Underwriting Agreement is not terminated in accordance with its terms;
(viii) compliance by the Company with all of its obligations under the Underwriting Agreement;
(ix) the Capital Reorganisation having become effective;
(x) the obtaining of the Whitewash Waiver from the Executive by the Subscriber; and
(xi) the completions of the Acquisition, the Subscription and the Bonus Issue.

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LETTER FROM THE BOARD

All the above conditions are not waivable. In the event that the above conditions of the Open Offer have not been satisfied on or before 5:00 p.m. on the Long Stop Date, the Underwriting Agreement shall terminate and the obligations of the parties shall forthwith cease and be null and void and none of the parties shall, save in respect of any right or liability accrued before such termination, have any right against or liability towards any of the other parties arising out of or in connection with the Underwriting Agreement.

Reasons for the Open Offer

The Board (including the proposed Directors and the independent non-executive Directors) considers that in view of the potential dilution effect of the interests of the Shareholders due to the issue of the Subscription Shares and the Consideration Shares, the Open Offer is in the interests of the Company and the Shareholders as a whole as it offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and continue to participate in the future development of the Enlarged Group should they wish to do so.

Based on the closing price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted Share and assuming the Capital Reorganisation becoming effective) as quoted on the Stock Exchange on the Last Trading Day, the theoretical ex-entitlement price per Adjusted Share (assuming the Capital Reorganisation becoming effective) after the Open Offer is approximately HK$0.1444, representing a discount of approximately 71.12% to the adjusted closing price of HK$0.50 per Adjusted Share (assuming the Capital Reorganisation becoming effective).

The Directors (including the proposed Directors and the independent non-executive Directors) consider that the Open Offer is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole having taken into account the terms of the Open Offer.

WARNING OF THE RISKS OF DEALING IN THE SHARES

The Open Offer is conditional, inter alia, upon the fulfillment of the conditions set out in the section headed ‘‘Conditions of the Open Offer’’ in this Circular. In particular, the Open Offer is conditional upon the approval of the Open Offer and the Whitewash Waiver by the Independent Shareholders at the SGM by way of poll, the Underwriting Agreement having become unconditional and the Underwriters not having terminated the Underwriting Agreement in accordance with the terms thereof as set out in the paragraph headed ‘‘Termination of the Underwriting Agreement’’ in this Circular. Accordingly, the Open Offer may or may not proceed. Shareholders and potential investors of the Company should therefore exercise extreme caution when dealing in the Shares/Adjusted Shares, and if they are in any doubt about their position, they should consult their professional advisers.

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Financial resources of the Enlarged Group and use of net proceeds of the Subscription and the Open Offer

As at the Latest Practicable Date, the bank balances and cash of the Group was approximately HK$57 million, of which as to HK$30 million will be used to settle the balance of the cash portion of the Consideration.

As at the Latest Practicable Date, the bank balances and cash of the Target Group was approximately HK$2 million.

The aggregate gross proceeds from the Subscription and the Open Offer will be approximately HK$91 million and the net proceeds (after deducting the resumption professional fees and commission for the Open Offer payable by the Company) will be approximately HK$85 million, of which as to approximately HK$55 million will be used to settle the Promissory Note (such amount will be placed as fixed deposit in financial institution(s) until settlement).

Taking into account of the usages as mentioned above, the bank balances and cash of the Enlarged Group upon completion of the transactions under the Resumption will be approximately HK$59 million, of which as to (i) approximately HK$40 million for the general working capital of the Target Group taking into consideration of (a) the financial position of the Target Group as mentioned under the section headed ‘‘Emphasis of matter’’ as contained in Appendix II to this Circular; and (b) the future plans and development of the Target Group as mentioned under the section headed ‘‘Future plans and development’’ in this Circular; and (ii) approximately HK$19 million for general working capital of the Enlarged Group (other than the Target Group) and/or potential future investments of the Enlarged Group.

Information of the Subscriber

The Subscriber is wholly owned by Mr. Wong and is an investment holding company which its ordinary business does not involve underwriting. The sole director of the Subscriber is Mr. Wong. Please refer to the section headed ‘‘Experience of the Board and the Enlarged Group in paper business’’ above of this Circular for the background and experience of Mr. Wong.

The Subscriber and Mr. Wong have confirmed that the funding in relation to the Subscription and the underwriting obligation under the Open Offer are not from (i) the Vendor and/or its ultimate beneficial owners; (ii) Sweet Wishful and/or its ultimate beneficial owner; (iii) connected persons of the Company (save for Mr. Wong and his associates); and (iv) the respective associates of (i) to (iii) above.

The Subscriber entered into the Subscription Agreement and the Underwriting Agreement aiming to provide funding to the Company for future development of the Enlarged Group and acquire shares of the Company. In the event that the Qualifying Shareholders do not take up the entitlements under the Open Offer in full, the Subscriber may further consolidate control of the Company.

Intentions of the Subscriber regarding the Enlarged Group

The Subscriber intends to continue with the existing business of the Enlarged Group upon Resumption and will continue to identify suitable business opportunities to expand the revenue and income of the Enlarged Group. Mr. Wong, being the sole director of the Subscriber and a Director, and

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other Directors (including the proposed Directors) do not have any agreement, arrangement, negotiation, intention and/or plan to cause the Group to conduct its principal business other than manufacturing and trading of paper products or dispose of or re-deploy the Group’s assets other than in the ordinary course of the business of the Enlarged Group within 24 months upon Resumption.

It is the intention of the Subscriber that all the existing Directors will remain on the Board and employees of the Company will remain in employment upon Resumption.

Mr. Wong and/or the Subscriber does not have any plan, agreement, arrangement or understanding to transfer, charge or pledge any of his interest in the Company,

(i) for the first six-month from the date of the Resumption; and
(ii) for the period of second six months up to two years from the date of the Resumption, resulting the Subscriber to cease to be the controlling Shareholder.

Further to the Lock Up Arrangement, the Subscriber has undertaken to the Company pursuant to the Subscriber Undertaking that it will not transfer, charge or pledge any of his interest in the Company for the period of second six months up to two years from the date of the Resumption, resulting the Subscriber to cease to be the controlling Shareholder.

Fundraising activities of the Company in the past 12 months

The Company did not carry out any right issue, open offer or other issue of equity securities for fundraising purpose or otherwise within the past 12 months immediately prior to the date of the Announcements.

C. CONNECTED TRANSACTIONS

The Subscriber, being an associate of Mr. Wong who is a Director, is a connected person of the Company. The Subscription and the underwriting arrangement of the Subscriber under the Underwriting Agreement constitute connected transactions for the Company under Chapter 14A of the Listing Rules and are subject to the requirements of reporting, announcement and Independent Shareholders’ approval.

D. APPLICATION FOR WHITEWASH WAIVER

The sequence of completion of the transactions under the Resumption Proposal is (1) the Capital Reorganisation; (2) the Acquisition, the Subscription, the Open Offer and the Bonus Issue will be completed simultaneously since their completions are inter-conditional.

As at the Latest Practicable Date, the Subscriber and parties acting in concert with it are not interested in any Shares or securities of the Company. Upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert with it will hold (i) approximately 37.25% of the issued share capital (should all existing Shareholders take up their entitlements under the Open Offer to subscribe for the Offer Shares in full) as enlarged by the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares; and (ii) approximately 56.30% of the issued share capital (should no existing Shareholders take up their entitlements under the Open Offer to subscribe for the Offer Shares) as enlarged by the Consideration

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Shares, the Subscription Shares, the Offer Shares and the Bonus Shares. Accordingly, the Subscriber is required to make a mandatory general offer for all the issued Adjusted Shares (other than those already owned or agreed to be acquired by the Subscriber and parties acting in concert with it) pursuant to Rule 26 of the Takeovers Code.

The Subscriber has made an application to the Executive for the Whitewash Waiver, pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Subscriber and parties acting in concert with it to make a mandatory general offer for all the Adjusted Shares not already owned or agreed to be acquired by them, arising from the Subscription of 450,000,000 Subscription Shares and its underwriting obligation of 230,000,000 Offer Shares under the Underwriting Agreement by the Subscriber. The Executive has indicated that the grant of the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders at the SGM by way of poll. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Subscription and the Open Offer will not proceed.

Please refer to the section headed ‘‘SHAREHOLDING CHANGES UPON COMPLETION OF THE TRANSACTIONS UNDER THE RESUMPTION PROPOSAL’’ in this Circular for the detailed analysis in the shareholding changes pursuant to the transactions contemplated under the Resumption Proposal.

Investors should be aware that there is a possibility that, upon completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert with it will hold more than 50% of the voting rights in the Company. By then, the Subscriber and parties acting in concert with it may increase its shareholdings in the Company without incurring further obligation of making mandatory general offers pursuant to Rule 26 of the Takeovers Code.

Subscriber’s dealing and interest in the Company’s securities

Save for the entering into of the Subscription Agreement and the Underwriting Agreement, the Subscriber and parties acting in concert with it have not dealt in the Shares, outstanding options, derivatives, warrants or other securities convertible or exchangeable into the Shares during the period commencing on the date falling six months prior to 16 January 2012 up to the Latest Practicable Date.

As at the Latest Practicable Date,

(i) there are 1,148,661,140 Shares in issue;
(ii) the Company has no outstanding securities, options, warrants or derivatives which are convertible into or which confer rights to require the issue of Shares and the Company has no other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code);
(iii) none of the Subscriber, Mr. Wong or parties acting in concert with any of them holds, owns or has control or direction over any Shares, warrants, options or convertible securities of the Company;
(iv) none of the Subscriber, Mr. Wong or parties acting in concert with any of them holds, owns or has control or direction over any derivatives in respect of the securities of the Company entered into by the Subscriber, Mr. Wong or any person acting in concert with any of them;

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(v) there is no arrangement (whether by way of option, indemnity or otherwise) in relation to the Shares and shares of the Subscriber and which might be material to the transactions under the Acquisition, the Subscription, the Open Offer and the Whitewash Waiver;
(vi) none of the Subscriber, Mr. Wong or parties acting in concert with any of them has borrowed or lent any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company;
(vii) there is no agreement or arrangement pursuant to which any of the Subscriber, Mr. Wong or parties acting in concert with any of them is a party which relates to circumstances which it may or may not invoke or seek to invoke a pre-condition or a condition to the Acquisition, the Subscription, the Open Offer and the Whitewash Waiver; and
(viii) none of the Subscriber, Mr. Wong or parties acting in concert with any of them has received any irrevocable commitment to vote for or against the Acquisition, the Subscription, the Open Offer and the Whitewash Waiver.

(5) BONUS ISSUE OF SHARES

The Company proposed the Bonus Issue to issue the Bonus Shares to the existing Shareholders whose names appear on the register of members of the Company on the Record Date on the basis of five (5) Bonus Shares for every seven (7) then Adjusted Shares. On the basis of 1,148,661,140 Shares in issue (equivalent of 57,433,057 Adjusted Shares assuming Capital Reorganisation becoming effective), 41,023,612 Bonus Shares would be issued.

The Bonus Issue would allow the Shareholders to enjoy the results of the business growth of the Enlarged Group as a result of the transactions contemplated under the Resumption Proposal by way of capitalisation of a portion of the share premium account of the Company upon completions of the transactions contemplated under the Resumption Proposal (other than the Bonus Issue).

Conditions of the Bonus Issue

The Bonus Issue is conditional upon:

(i) completions of the Acquisition, the Subscription and the Open Offer;
(ii) the passing of an ordinary resolution by the Independent Shareholders at the SGM approving the Bonus Issue;
(iii) the Capital Reorganisation becoming effective; and
(iv) the Stock Exchange granting the listing of, and permission to deal in, the Bonus Shares.

Bonus Shares

Assuming the Capital Reorganisation becoming effective, the 41,023,612 Bonus Shares represent: (i) approximately 71.43% of the total number of issued Adjusted Shares as at the Latest Practicable Date; (ii) approximately 41.67% of the total number of issued Adjusted Shares as

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enlarged by the Bonus Shares; and (iii) approximately 3.40% of the total number of issued Adjusted Shares as enlarged by the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares.

For the avoidance of doubt, the Bonus Shares do not have the entitlements to subscribe for the Offer Shares under the Open Offer since the Bonus Shares will be issued after the Record Date.

SHAREHOLDING CHANGES UPON COMPLETION OF THE TRANSACTIONS UNDER THE RESUMPTION PROPOSAL

Scenario A: Assuming all existing Shareholders take up the entitlements under the Open Offer in FULL

Sequence (Note 1) Subscriber and parties acting in concert with it Vendor Independent Shareholders — Sweet Wishful (Note 2) — other existing Shareholders Total	As at the Latest Practicable Date Shares % — — — — 176,000,000 15.32 972,661,140 84.68 1,148,661,140 100.00	Step 1 Upon Capital Reorganisation becoming effective Adjusted Shares % — — — — 8,800,000 15.32 48,633,057 84.68 57,433,057 100.00			Step 2
			Upon completion of Acquisition Adjusted Shares — 200,000,000 8,800,000 48,633,057 257,433,057	Upon completion of Subscription Adjusted Shares 450,000,000 200,000,000 8,800,000 48,633,057 707,433,057	Upon completion of Open Offer Adjusted Shares 450,000,000 200,000,000 79,200,000 437,697,513 1,166,897,513	Upon completion of Bonus Issue Adjusted Shares % 450,000,000 37.25 200,000,000 16.56 85,485,714 7.08 472,435,411 39.11 1,207,921,125 100.00
							100.00

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LETTER FROM THE BOARD

Scenario B: Assuming NO existing Shareholders take up the entitlements under the Open Offer

Sequence (Note 1) Subscriber and parties acting in concert with it Vendor Independent Shareholders — Sweet Wishful (Note 2) — other existing Shareholders — placees from Open Offer (Note 3) Total	As at the Latest Practicable Date Shares % — — — — 176,000,000 15.32 972,661,140 84.68 — — 1,148,661,140 100.00	Step 1 Upon Capital Reorganisation becoming effective Adjusted Shares % — — — — 8,800,000 15.32 48,633,057 84.68 — — 57,433,057 100.00			Step 2
			Upon completion of Acquisition Adjusted Shares — 200,000,000 8,800,000 48,633,057 — 257,433,057	Upon completion of Subscription Adjusted Shares 450,000,000 200,000,000 8,800,000 48,633,057 — 707,433,057	Upon completion of Open Offer Adjusted Shares 680,000,000 200,000,000 8,800,000 48,633,057 229,464,456 1,166,897,513	Upon completion of Bonus Issue Adjusted Shares % 680,000,000 56.30 200,000,000 16.56 15,085,714 1.25 83,370,955 6.90 229,464,456 18.99 1,207,921,125 100.00
							100.00

Notes:

The sequence of completion of the transactions set out in the above tables is (1) the Capital Reorganisation; (2) the Acquisition, the Subscription, the Open Offer and the Bonus Issue.

For the avoidance of doubt:

(a) the Consideration Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue;
(b) the Subscription Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue;
(c) the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue; and
(d) the Bonus Shares do not have the entitlements to subscribe for the Offer Shares under the Open Offer,

since the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares will be issued after the Record Date.

Sweet Wishful is wholly owned by Mr. Deng Junjie and is a substantial Shareholder since November 2011 with no representation in the Board. Sweet Wishful will not nominate candidates to the Board. Save as being a substantial Shareholder, Sweet Wishful and Mr. Deng Junjie are Independent Third Parties and are independent of (a) Mr. Wong; (b) the Vendor and its ultimate beneficial owners; (c) the respective associates of (a) and (b) above; and (d) parties acting in concert with the Subscriber and Mr. Wong. Sweet Wishful and Mr. Deng Junjie were Independent Third Parties before becoming a Shareholder.
Kingston Securities has undertaken to the Company to place down any Offer Shares under the Open Offer to the Independent Shareholders after the latest time for termination of the Underwriting Agreement at 4:00 p.m. on Monday, 30 April 2012 and before the date of Resumption so that (i) none of the placees to whom Kingston Securities will place down any Offer Shares will hold 10% or more shareholding in the Company; and (ii) Kingston Securities will not be interested in any Offer Shares immediately before the Resumption.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE TRANSACTIONS UNDER THE RESUMPTION PROPOSAL

Upon completion of the Acquisition, the Target Group will become wholly owned subsidiaries of the Company and their financial statements will be consolidated in the Company’s financial statements. According to the unaudited consolidated statement of financial position of the Company as at 30 September 2011, the Group’s total assets was approximately HK$70.1 million and total liabilities was approximately HK$2.3 million. The Group recorded a net loss of approximately HK$4.4 million for the year ended 31 March 2011.

As set out in the ‘‘Unaudited pro forma financial information of the Enlarged Group’’ as contained in Appendix III to this Circular, upon completion of all transactions contemplated under the Resumption Proposal, (A) (i) the Enlarged Group’s total assets will be increased by approximately HK$141.1 million to approximately HK$309.4 million; (ii) the Enlarged Group’s total liabilities will be increased by approximately HK$49.8 million to approximately HK$130.2 million, assuming all the transactions contemplated under the Resumption Proposal were completed on 30 September 2011; and (B) the Enlarged Group would have recorded a net loss position of approximately HK$8.2 million, assuming all the transactions contemplated under the Resumption Proposal were completed on 31 March 2010.

(6) CONTINUING CONNECTED TRANSACTIONS

On 29 February 2012, the Master Agreement was entered into between the Target Company and New Spring Label for governing the ongoing production of printing orders and specifying the terms adopted including the Annual Caps.

Since New Spring Label is a company beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, New Spring Label is an associate of Mr. Ng and will become a connected person of the Company upon the completion of the Acquisition and the employment of Mr. Ng as an executive Director. Therefore, transactions contemplated under the Master Agreement, following the completion of the Acquisition and the employment of Mr. Ng as an executive Director, will constitute continuing connected transactions under the Listing Rules. The principal terms of the Master Agreement are set out below:

Master Agreement

Date: 29 February 2012 Parties: (i) The Target Company; and (ii) New Spring Label Term: The Master Agreement was entered into between the abovementioned parties for a term from the date of completion of the Acquisition and employment of Mr. Ng as an executive Director to 31 March 2015 Condition precedent: Conduct of the transactions contemplated under the Master Agreement shall be conditional upon the Independent Shareholders’ approval to be obtained at the SGM

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Nature of transactions: Printing and production of paper packaging and promotional products and materials by the Target Group to New Spring Label Pricing basis: The production of products and materials to New Spring Label should be provided on normal commercial terms or terms no less favourable than sales to independent customers of the Target Group Annual Caps: HK$24 million for the year ending 31 March 2013 HK$26 million for the year ending 31 March 2014 HK$28 million for the year ending 31 March 2015

The Annual Cap for the year ending 31 March 2013 is determined with reference to the actual amount of production of products and materials by the Target Group to the New Spring Label for the period from 1 April 2011 to 31 December 2011 of approximately HK$18 million and the expected growth in sales orders of New Spring Label for the year ending 31 March 2013. The annual increase of the Annual Caps for the two years ending 31 March 2014 and 2015 respectively is estimated at approximately HK$2 million from the previous year on a prudent basis with respect to the estimated growth rate of sales orders projected by New Spring Label.

Upon completion of the Acquisition, save as the transactions contemplated under the Master Agreement, there will be no other continuing connected transaction of the Company subject to reporting requirement pursuant to Chapter 14A of the Listing Rules.

Reasons for and benefits of the Master Agreement

New Spring Label is principally engaged in manufacture and trading of plastic labels and related products and trading of packaging products. New Spring Label is beneficially owned as to 20% by Mr. Ng, as to 30% by Ms. Li and as to 50% by an Independent Third Party. Mr. Ng will become an executive Director upon completion of the Acquisition.

New Spring Label does not have its production facilities for packaging products and the production of printing orders of New Spring Label has been provided by New Spring Offset which is currently one of the companies in the Target Group. In order to ensure the continual engagement of production of printing orders from New Spring Label, it was proposed to enter into the Master Agreement with New Spring Label so that New Spring Label will engage the Target Group for the production of orders. The Directors (including the proposed Directors and the independent nonexecutive Directors) are of the view that the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are (i) on arm’s length basis and on normal commercial terms; and (ii) fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

GENERAL

SGM

The SGM will be held for the purpose of considering and, if thought fit, approving the resolutions in respect of the Capital Reorganisation, the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps).

The Capital Reorganisation is subject to the Shareholders’ approval at the SGM and no Shareholders are required to abstain from voting on the resolution in relation to the Capital Reorganisation.

The completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue are inter-conditional. Accordingly, the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue and all transactions contemplated thereunder will be subject to the approval by the Independent Shareholders by way of poll at the SGM.

As all the relevant percentage ratios in respect of the Annual Caps exceed 5%, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are subject to the requirement of reporting, announcement and the Independent Shareholders’ approval at the SGM.

Shareholders including (i) the Subscriber, Mr. Wong, their respective associates and parties acting in concert with any of them; (ii) the Vendor, its ultimate beneficial owners, their respective associates and parties acting in concert with any of them; and (iii) those who are interested in, or involved in, the S&P Agreement, the Underwriting Agreement, the Subscription Agreement, the Whitewash Waiver and the Master Agreement shall abstain from voting for the resolutions in respect of the transactions contemplated under the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the Annual Caps.

As at the Latest Practicable Date, none of (i) the Subscriber, its associates and parties acting in concert with it; (ii) the Vendor, its associates and parties acting in concert with it; and (iii) those who are interested in, or involved in, the Acquisition, the Open Offer, the Subscription, the Whitewash Waiver and the Master Agreement is interested in the Shares. If any of those who are interested in, or involved in, the Acquisition, the Open Offer, the Subscription, the Whitewash Waiver and/or the Master Agreement become interested in the Shares prior to the SGM, they will need to abstain from voting at the SGM.

Application for listing

The Company will apply to the Stock Exchange for the listing of, and permission to deal in the Adjusted Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares. Subject to the granting of the listing of, and permission to deal in, Adjusted Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares, on the Stock Exchange, the Adjusted Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares, will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Adjusted

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Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares, on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Dealings in the Adjusted Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares, may be settled through CCASS.

Status of the Adjusted Shares

When allotted, issued and fully paid, the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares will rank pari passu in all respects with the then Adjusted Shares in issue on the date of allotment and issue of the Consideration Shares, the Subscription Shares, the Offers Shares and the Bonus Shares respectively. Holders of the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares will be entitled to receive all future dividends and distributions which are declared, made and paid after the date of allotment and issue of the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares respectively.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen, has been formed to advise the Independent Shareholders in relation to the terms of the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the Annual Caps.

INDEPENDENT FINANCIAL ADVISER

Messis Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the Annual Caps. The appointment of Messis Capital has been approved by the Independent Board Committee.

CONTINUED SUSPENSION OF TRADING IN THE SHARES

Trading in the Shares on the Stock Exchange has been suspended since 23 September 2008. Until satisfaction of all the Resumption Conditions set by the Listing Committee, trading in the Shares will continue to be suspended. The release of this Circular does not indicate that the Shares will resume trading or that the listing approval for the Adjusted Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares will be granted. Shareholders should note that the Shares may be delisted by the Stock Exchange in the event that the Company fails to satisfy all the Resumption Conditions within the time stipulated by the Stock Exchange. Accordingly, Shareholders and potential investors are advised to exercise caution when dealing in the Shares or Adjusted Shares up to the date when the Resumption Conditions are satisfied.

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RECOMMENDATIONS

The Directors (including the proposed Directors and independent non-executive Directors) consider that the terms of the transactions under the Resumption Proposal, including the Capital Reorganisation, the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver and the Bonus Issue; and the terms of the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the proposed Directors and independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the SGM.

Your attention is drawn to the ‘‘Letter from the Independent Board Committee’’ set out on pages 90 to 91 of this Circular and the ‘‘Letter from Messis Capital’’ set out on pages 92 to 121 of this Circular. The Independent Board Committee, after considering the advice from Messis Capital which considers that the terms of the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the Annual Caps 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 and recommends the Independent Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote for the resolutions in these respects. You are strongly advised to read the ‘‘Letter from the Independent Board Committee’’ and the ‘‘Letter from Messis Capital’’ before voting.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this Circular

Yours faithfully, For and on behalf of Climax International Company Limited Wong Hin Shek Executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

5 March 2012

To the Independent Shareholders

Dear Madam/Sir,

(1) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS

(2) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER; CONNECTED TRANSACTIONS AND APPLICATION FOR WHITEWASH WAIVER (3) BONUS ISSUE OF SHARES AND

(4) CONTINUING CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to the Shareholders dated 5 March 2012 (the ‘‘Circular’’) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

The Independent Board Committee has been constituted to, among other things, give recommendations to the Independent Shareholders in respect of the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps). Messis Capital has been appointed as the independent financial adviser to advise us in connection with the terms of the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) and as to voting. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advices, are set out in its letter on pages 92 to 121 of this Circular, and the additional information set out in other sections of and appendices to this Circular.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) as well as the advice and recommendations of Messis Capital as set out in its letter of advice, we consider that the terms of the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are fair and reasonable as far as the Independent Shareholders are concerned. The Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend that the Independent Shareholders vote in favour of the resolutions to be proposed at the SGM to approve the Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) respectively.

Yours faithfully,

Independent Board Committee

Climax International Company Limited

Lau Man Tak Man Kwok Leung Wong Yun Kuen Independent non-executive Directors

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LETTER FROM MESSIS CAPITAL

The following is the full text of the letter from Messis Capital which sets out its advice to the Independent Board Committee and the Independent Shareholders for inclusion in this circular.

5 March 2012

To the Independent Board Committee and the Independent Shareholders of Climax International Company Limited

Dear Sirs,

(1) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS;

(2) FUND RAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER; CONNECTED TRANSACTION AND APPLICATION FOR WHITEWASH WAIVER; (3) BONUS ISSUE OF SHARES; AND (4) CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, the Subscription, the Open Offer, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps), details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular (the ‘‘Circular’’) of the Company to the Shareholders dated 5 March 2012, 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 requires otherwise.

On 5 March 2012, the Company announced, among others, that

(i) on 20 January 2011 (as supplemented on 30 September 2011 and 29 February 2012 respectively), the Company entered into the S&P Agreement with the Vendor, whereby the Vendor agreed to sell and the Company agreed to purchase the Sale Shares, representing the entire issued share capital of the Target Company, at an aggregate consideration of HK$110 million;
(ii) on 29 February 2012, the Company entered into the Subscription Agreement with the Subscriber for the issuance of the Subscription Shares at the Subscription Price of HK$0.10 per Subscription Share to raise approximately HK$45 million;
(iii) on 29 February 2012, the Company entered into the Underwriting Agreement with the Underwriters, whereby the Company proposes to raise approximately HK$45.9 million, before expenses, by way of Open Offer of 459,464,456 Offer Shares at the Offer Price of HK$0.10 per Offer Share, on the basis of eight (8) Offer Shares for every Adjusted Share held on the Record Date;

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LETTER FROM MESSIS CAPITAL

(iv) the Company proposes the Bonus Issue to issue the Bonus Shares to the existing Shareholders whose names appear on the register of members of the Company on the Record Date on the basis of five (5) Bonus Shares for every seven (7) then Adjusted Shares; and
(v) on 29 February 2012, the Target Company has entered into the Master Agreement with New Spring Label for governing the ongoing production of printing orders and specifying the terms adopted including the Annual Caps.

As set out in the Letter from the Board, the Subscriber, being an associate of Mr. Wong who is a Director, is a connected person of the Company and therefore, the Subscription and the underwriting arrangement of the Subscriber under the Underwriting Agreement constitute connected transactions for the Company under Chapter 14A of the Listing Rules and are subject to the requirements of reporting, announcement and Independent Shareholders’ approval. Pursuant to Rule 7.26A(2) of the Listing Rules, since the Open Offer will be partly underwritten by the Subscriber which is ultimately beneficially owned by Mr. Wong, the absence of excess application arrangement of the Open Offer is required to be approved by the Independent Shareholders by way of poll at the SGM.

Completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue are interconditional and accordingly, the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue and all transactions contemplated thereunder will be subject to the approval by the Independent Shareholders by way of poll at the SGM. In addition, as all the relevant percentage ratios in respect of the Annual Caps exceed 5%,

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LETTER FROM MESSIS CAPITAL

the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are subject to the requirement of reporting, announcement and the Independent Shareholders’ approval at the SGM.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen, has been established to advise the Independent Shareholders in respect of the Acquisition, the Subscription, the Open Offer, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps). We, Messis Capital Limited, have been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders as to (i) whether the terms and conditions of the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are on normal commercial terms, and fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are in the interests of the Company and the Independent Shareholders as a whole; (iii) whether the Independent Shareholders should vote in favour of the resolutions to approve the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual Caps).

BASIS OF OUR ADVICE

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company, the Directors and the management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular, which have been provided by the Company, Directors and management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date, and should there be any material changes to our opinion after the Latest Practicable Date, Shareholders would be notified as soon as possible.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any statement in the Circular, misleading. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion.

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LETTER FROM MESSIS CAPITAL

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group, the Vendor, the Target Group, the Subscriber, the Underwriters, New Spring Label and their respective associates.

We have not considered the tax implications on the Qualifying Shareholders of their acceptances or non-acceptances of the Open Offer since these are particular to their own individual circumstances. Qualifying Shareholders should consider their own tax position with regard to the Open Offer and, if in any doubt, should consult their own professional advisers in due course.

This letter is issued for the information for the Board solely in connection with their consideration of the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue and the Master Agreement (including the Annual Caps), except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendations to the Independent Board Committee and the Independent Shareholders, we have taken into consideration the following principal factors and reasons:

1. Historical Financial Performance of the Group

The Group is principally engaged in the production and marketing of paper products at the time of suspension.

The Group established the business of trading of electronic products in 2009.

The table below summaries the audited consolidated financial results of the Group for each of the three years ended 31 March 2011 as extracted from the Group’s annual report for the year ended 31 March 2011 (‘‘AR 2011’’) and the Group’s annual report for the year ended 31 March 2010 (‘‘AR 2010’’):

	For the year ended 31 March	For the year ended 31 March
	2011	2010	2009
	HK$’000	HK$’000	HK$’000
	(Audited)	(Audited)	(Audited)
Continuing operation
Revenue	87,366	166,927	3,947
Loss for the year from continuing
operation	(4,371)	(11,886)	(16,227)
Profit/(Loss) for the year attributable
to the Shareholders	(4,371)	21,473	(99,622)

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LETTER FROM MESSIS CAPITAL

According to the AR 2011, the Group reported revenue from continuing operations, i.e. trading of electronic products, of approximately HK$87.37 million for the year ended 31 March 2011, representing a decrease of approximately 47.66% from that for the year ended 31 March 2010 of approximately HK$166.93 million. As advised by the Company, the reduction in revenue was mainly due to the drop of sales orders from customers. The Group reported profit attributable to the Shareholders of approximately HK$21.47 million for the year ended 31 March 2010 whilst reported loss attributable to Shareholders of approximately HK$4.37 million for the year ended 31 March 2011. As advised by the Company, the deterioration was mainly due to the absence of the profit from discontinued operation, i.e. the production and marketing of paper products, of approximately HK$33.36 million for the year ended 31 March 2010, of which approximately HK$44.83 million represented the gain on disposal of subsidiaries and approximately HK$11.47 million represented the operating loss of the discontinued operation.

As noted from the independent auditor’s report in AR 2011, the auditors of the Company have given disclaimer opinion on the consolidated financial statements of the Company for the year ended 31 March 2010. The basis of qualified opinion and the qualified opinion on the loss and cash flows arising from limitation of scope as set out in the independent auditor’s report in AR 2011 have been extracted as follows:

‘‘Basis for Qualified Opinion

Corresponding figures

As explained in our independent auditor’s report dated 13 July 2010 on the Group’s consolidated financial statements for the year ended 31 March 2010, due to the lost of accounting books and records and high turnover rate of accounting personnel of Climax Investments Limited and its subsidiaries (collectively referred to as the ‘‘CIL Group’’), which was disposed of during the year ended 31 March 2010, we were unable to obtain sufficient appropriate audit evidence to ascertain the appropriateness of the profit for the year from discontinued operation of HK$33,358,000 as recorded in the Group’s consolidated statement of comprehensive income for the year ended 31 March 2010, which included loss for the year of the CIL Group attributed to the Group of HK$11,470,000 and the gain on disposal of the CIL Group of HK$44,828,000, and the related amounts recorded in the consolidated statement of cash flows and the related amounts disclosed in the notes to the consolidated financial statements in respect of CIL Group for the year ended 31 March 2010. In addition, we were unable to obtain sufficient reliable evidence to satisfy ourselves as to the existence, accuracy and completeness of the adjustment and/or disclosures in relation to the contingent liabilities, commitment and pledge of assets of the CIL Group arising from the lawsuits and claims against it during the year ended 31 March 2010 and upon its disposal. We issued a ‘‘disclaimer opinion’’ on the consolidated financial statements for the year ended 31 March 2010 in respect of this scope limitation accordingly.

Any adjustments that might have been found necessary in respect of the above would have had a consequential impact on the related amounts recorded in the consolidated statement of comprehensive income and consolidated statement of cash flows; and the related disclosures thereof for the year ended 31 March 2010.

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LETTER FROM MESSIS CAPITAL

Qualified Opinion on the Loss and Cash Flows Arising from Limitation of Scope

In our opinion, except for the possible effects of any adjustments that might have been determined to be necessary had we been able to obtain sufficient information concerning the matters as described in the basis for qualified opinion paragraph, the consolidated statement of comprehensive income and the consolidated statement of cash flows give a true and fair view of the Group’s loss and cash flows for the year ended 31 March 2011 in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.’’

According to the AR 2010, for the year ended 31 March 2010, the Group’s revenue from continuing operations of approximately HK$166.93 million, representing a significant increase of approximately 4,126% over the preceding year of approximately HK$3.95 million. As advised by the Company, there was only 1 month revenue recognized for the year ended 31 March 2010 as the electronic products business commenced in March 2010 while revenue for the year ended 31 March 2011 represented a full year sales orders from customers. The Group reported profit attributable to the Shareholders of approximately HK$21.47 million for the year ended 31 March 2010 whilst reported loss attributable to Shareholders of approximately HK$99.62 million for the preceding year. As advised by the Company, the profit attributable to the Shareholder for the year ended 31 March 2010 is attributed from the profit from discontinued operation of approximately HK$33.36 million, of which approximately HK$44.83 million represented the gain on disposal of subsidiaries and approximately HK$11.47 million represented the operating loss of the discontinued operation. Also, approximately HK$83.40 million of loss from discontinued operation was recorded for the year ended 31 March 2009.

According to the interim report of the Company for the six months ended 30 September 2011 (‘‘IR 2011/12’’), the Group did not report any revenue from continuing operation for the six months ended 30 September 2011. As set out in IR 2011/12, for the six months ended 30 September 2010, the Group is organized into a single operating segment of trading of electronic products. The electronic products segment was deemed discontinued on 30 September 2011 as no transactions were concluded to generate any trading income from trading of electronic products during the six months ended 30 September 2011 and the Directors would like to focus on formulating a plan for the resumption of trading of the Shares. Accordingly, no reportable segment is presented.

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LETTER FROM MESSIS CAPITAL

The table below summaries the consolidated financial position of the Group as at 30 September 2011, 31 March 2011, 31 March 2010 and 31 March 2009 as extracted from IR 2011/ 12, AR 2011 and AR 2010:

	As at
	30 September		As	at 31 March
	2011	2011		2010	2009
	HK$’000	HK$’000		HK$’000	HK$’000
	(Unaudited)	(Audited)		(Audited)	(Audited)
Current assets	69,169	70,609		114,192	98,708
Non-current assets	884	240		303	14,330
Current liabilities	2,239	2,536		41,805	60,748
Non-current liabilities	15	18		24	—
Total equity attributable
to the Shareholders	67,799	68,295		72,666	52,289

As at 30 September 2011, the Group’s unaudited net assets were approximately HK$67.80 million. The gearing ratio of the Group as calculated as the percentage of total bearing debt to net asset value was approximately 0.03%.

2. The Acquisition

Information on the Target Group

The Target Company, incorporated in the BVI with limited liability on 2 November 2010, has been an investment holding company of the Target Group since 15 January 2011. The Target Group, which comprised three operating entities, namely Sky Will, New Spring (SW) and New Spring Offset as at the Latest Practicable Date, is principally engaged in the manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials in accordance with customers’ designs and specifications.

Sky Will was incorporated in Hong Kong on 19 March 2004 with limited liability. Sky Will was the first operating entity within the Target Group and was principally engaged in the sale of paper packaging products and paper gift items before the commencement of business of New Spring (SW), a wholly-owned subsidiary of Sky Will. Since then, Sky Will has been reducing its participation in the sale of paper packaging products and paper gift items (by issuing letters to request customers to place their new sales orders with New Spring (SW)) and becoming an investment holding company.

New Spring Offset, which is wholly owned by Sky Will as at the Latest Practicable Date, was incorporated in the PRC on 1 December 2009 with limited liability and commenced business in June 2010. The acquisition of New Spring Offset by Sky Will from NSG completed in April 2011. New Spring Offset is principally engaged in the manufacture

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LETTER FROM MESSIS CAPITAL

and sale of paper packaging products and paper gift items and the printing of paper promotional materials. New Spring Offset is the only entity within the Target Group engaging in the manufacturing function.

Set out below is the financial information of the Target Group as extracted from financial information of the Target Group in Appendix II to the Circular:

			For the
	For the year	For the year	6 months
	ended	ended	ended
	31 March	31 March	30 September
	2010	2011	2011
	(Note 1)	(Note 2)	(Note 3)
	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)
Revenue	18,633	43,644	54,936
Profit before taxation and
extraordinary items	3,155	5,667	18,279
Profit after taxation and
extraordinary items	2,627	4,738	15,885
	As at	As at	As at
	31 March	31 March	30 September
	2010	2011	2011
	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)
Net asset value/(deficiency in equity)	(464)	4,265	20,150
Notes:

The operating entity within the Target Group was Sky Will only.
The operating entities within the Target Group were Sky Will and New Spring (SW) (which commenced business in January 2011).

The operating entities within the Target Group were Sky Will, New Spring (SW) (which commenced business in January 2011) and New Spring Offset (which was acquired by Sky Will in April 2011).

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LETTER FROM MESSIS CAPITAL

As set out in the Letter from the Board, the results of New Spring Offset has been consolidated into the Target Group since 1 April 2011. For information purpose, the historical financial information of New Spring Offset is set out as follows:

	From date of	From date of
	incorporation			For the
	on	1 December	For the	9 months
		2009 to	year ended	ended
	31 December		31 December	30 September
		2009	2010	2011
		HK$’000	HK$’000	HK$’000
		(audited)	(audited)	(audited)
Revenue (Note 1)		—	52,944	60,503
Gross profit		—	11,520	11,146
			(Note 2)	(Note 3)
(Loss)/Profit before taxation and
extraordinary items		(113)	8,350	7,955
(Loss)/Profit after taxation and
extraordinary items		(113)	6,186	5,992
		As at	As at	As at
	31 December		31 December	30 September
		2009	2010	2011
		HK$’000	HK$’000	HK$’000
		(audited)	(audited)	(audited)
Net (liabilities)/asset value as at
year/period end		(113)	16,939	24,631

Notes:

For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset acquired by Sky Will), revenue generated from the Target Group were approximately HK$23,373,000 and approximately HK$10,534,000 respectively.
Based on the gross profit margin of New Spring Offset of approximately 21.76% for the year ended 31 December 2010, gross profit generated from the Target Group was approximately HK$5,411,000.
Based on the gross profit margin of New Spring Offset of approximately 18.42% for the 9 months ended 30 September 2011, gross profit generated from the Target Group (except New Spring Offset) for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset acquired by Sky Will) was approximately HK$1,943,000.
For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before the acquisition of New Spring Offset by Sky Will), purchases from the Target Group were approximately HK$nil and HK$15,198,000 respectively. Save as the aforesaid, there were

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no other transactions incurred between the Target Group and New Spring Offset for the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset acquired by Sky Will).

As set out above, the revenue of the Target Group for the year ended 31 March 2011 was approximately HK$43.64 million, representing an increase of approximately 134.25% from that for the year ended 31 March 2010 of approximately HK$18.63 million. As advised by the Company, such increase in revenue was mainly due to the gradual recovery of the worldwide economy from the financial tsunami in the second half of 2010 and the referral of customers from NSG to place new sales orders with the Target Group. The profit after taxation and extraordinary items of the Target Group for the year ended 31 March 2011 was approximately HK$4.74 million, representing an increase of approximately 80.23% from that for the year ended 31 March 2010 of approximately HK$2.63 million. As advised by the Company, such increase in profit after taxation and extraordinary items was mainly due to the increase in revenue for the year ended 31 March 2011. The revenue and profit after taxation and extraordinary items of the Target Group for the six months ended 30 September 2011 (which is on six-month basis) represented approximately 1.26 times and approximately 3.35 times respectively to the revenue and profit after taxation and extraordinary items of the Target Group for the year ended 31 December 2011 (which is on twelve-month basis). As advised by the Company, such improvement was mainly because of the consolidation of the account of New Spring Offset into the Target Group since 1 April 2011 and the recognition of gain on bargain purchase upon completion of the acquisition of New Spring Offset of approximately HK$8.0 million.

Independent Shareholders should note from the accountants’ report of the Target Group as set out in the financial information of the Target Group in Appendix II to the Circular that the auditors have given an adverse opinion for the financial statements of the Target Group for each of the three years ended 31 March 2011 and for the six months ended 30 September 2011 since that the Target Company has not consolidated the results of New Spring Paper into the combined financial statements for each of the three years ended 31 March 2011 and the effect on the combined financial statements of the failure to consolidate New Spring Paper have not been determined. In addition, the auditors, even though without qualifying its opinion, have expressed an uncertainty opinion concerning the going concern basis of the Target Group’s accounts for each of the three years ended 31 March 2011 and for the six months ended 30 September 2011 since that the Target Group had incurred net current liabilities as at 31 March 2009, 2010, 2011 and 30 September 2011. Details of the basis for such adverse opinion and uncertainty opinion have been set out in the financial information of the Target Group in Appendix II to the Circular.

Despite the adverse opinion and the going concern raised by the auditors, taking into account (i) the Target Group will become wholly-owned subsidiaries of the Company upon completion of the Acquisition, which will allow the Company to strengthen the internal control of the Target Group and closely monitor the operation of the Target Group; (ii) the improvement of the financial performance of the Target Group after commencement of operation of New Spring (SW) in January 2011 and the acquisition of New Spring Offset in April 2011; (iii) the 2012 Guaranteed Amount; (iv) in the event that the 2012 Net Profit is less than HK$16 million, the Consideration will be adjusted downward by an amount equal to the shortfall between the 2012 Guaranteed Amount and 2012 Net Profit multiplied by

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6.875 (the ‘‘Adjustment Mechanism’’); (v) the enhancement on the working capital and the financial position of the Group upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue; and (vi) the optimistic prospect of the paper packing business in the USA, Europe, the PRC and Hong Kong as mentioned under the below paragraph headed ‘‘Reasons for the Acquisition’’ under the section headed ‘‘2. The Acquisition’’, we consider such issues may not pose significant impact on arriving at our opinion regarding the fairness and reasonableness of the Acquisition. Furthermore, when considering the fairness and reasonableness of the Acquisition, Independent Shareholders should also consider other factors including the reasons for and benefits of the Acquisition as detailed under the below paragraph headed ‘‘Reasons for the Acquisition’’.

Further information of the Target Group has been set out under the section headed ‘‘Information on the Target Group’’ in the Letter from the Board and the financial information of the Target Group in Appendix II to the Circular.

Reasons for the Acquisition

We noted from IR 2011/12, the electronic products segment was deemed discontinued on 30 September 2011 as no transaction were concluded to generate any trading income from trading of electronic products during the six months ended 30 September 2011.

As demonstrated in the Resumption Proposal, upon completion of the Acquisition, the Subscription and the Open Offer, it is expected that (i) the Acquisition will generate an additional income to the Group; (ii) the Adjustment Mechanism facilitates the safeguard of the 2012 Guaranteed Amount; and (iii) the issuance of the Subscription Shares and the Offer Shares may provide funding to the Company for the Acquisition and future development of the Group; (iv) the Subscription and the Open Offer will strengthen the financial position,

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working capital position and Shareholders’ base of the Group; and (v) the Open Offer provides opportunity for the existing Shareholders to participate in the future development of the Enlarged Group (if they so wish), the Board therefore believes that the Company would have sufficient level of operations and assets under Rule 13.24 of the Listing Rules.

The Directors (including the proposed Directors) are of the view that the terms of the S&P Agreement are fair and reasonable and in the interests of the Shareholders and the Company as a whole.

As noted from the Letter from the Board, the Target Group has maintained good and long-term relationship with its local and overseas suppliers. In particular, the Target Group has maintained more than 4 years business relationship with a major supplier of raw paper. The Target Group has also established long term business relationship with its customers which include distributors, manufacturers of consumer products and advertising agencies based in the USA, Europe, Hong Kong and the PRC. As advised by the Company, sales from customers from the USA, Europe, Hong Kong and the PRC accounted for approximately 12.18%, 8.69%, 69.06% and 6.68% respectively of the Target Group’s revenue for the year ended 31 March 2011. For the year ended 31 March 2010, sales from customers from the USA, Europe, Hong Kong and the PRC accounted for approximately 30.96%, 38.21%, 28.47% and nil respectively of the Target Group’s revenue. The Target Group has maintained an average of around 5 years’ business relationship with its top five customers. As at 31 March 2011, the production plant of the Target Group had maximum production capacity of approximately 56,000 sheets of paper per hour and currently, the production capacity reaches to 25,000 sheets of paper per hour. In addition, the Target Group has been accredited with the internationally recognized ISO 9001 certification in respect of the quality management systems they operate.

According to a report headed ‘‘Market Statistics and Future Trends in Global Packaging’’ which was jointly issued by World Packaging Organisation (WPO), a non-profit, non-governmental and international federation of national packaging institutes and associations, regional packaging federations and other interested parties and Pira International Limited (‘‘Pira’’), an organisation provides independent, knowledge-based information and testing services to clients in the packaging, paper and print industry and their supply chains, the global packaging sales has increased substantially by approximately 52% from approximately US$372 billion in 1999 to approximately US$564 billion in 2009. The largest share of global packaging is paper and board packaging with sales of $165 billion in 2003, equating to 38% of the market. Paper and board remains the single largest element of the market into 2009, growing at an annual rate of approximately 4% in real terms, driven on the one hand by rising demand in fast-growth national markets as well as steady growth in secondary or bulk packaging across the globe. It is further announced by Pira in a report named ‘‘The Future of Global Packaging to 2016’’ on 23 December 2011, the global packaging sales is projected to grow by approximately 4% to reach approximately US$696 billion as compared to the previous year, driven mainly by increasing demand for packaging in emerging and transitional economies. Going forward, Pira predicts a growth of 3% per annum, with sales set to exceed US$800 billion by 2016.

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We further noted from Pira that USA was the largest consumption market for paper and board packaging in 2009 and the sales of which was approximately US$51 billion. The PRC ranked the second with sales of approximately US$30 billion. Asia, North America and Western Europe ranked as the top three paper and board packaging consumption regions in the world in 2009. According to CEPI Key Statistics 2010 issued in June 2011 by The Confederation of European Paper Industries (CEPI), a Brussels-based non-profit making organization which represents the European pulp and paper industry towards the European Institutions, the CEPI total packaging papers production in 2010 was approximately 41.47 million tonnes, representing an increase of approximately 9.07% as compared with the CEPI total packaging papers production in 2009 of approximately 38.02 million tonnes. The CEPI total packaging papers consumption in 2010 was approximately 37.07 million tonnes, representing an increase of approximately 7.82% as compared with the CEPI total packaging papers consumption in 2009 of approximately 34.38 million tonnes.

As stated in the above paragraph, the PRC ranked the second largest consumption market for paper and board packaging in 2009. In addition, as set out in the paragraph headed ‘‘D. Industry overview’’ under the section headed ‘‘(3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS’’ in the Letter from the Board, the packaging industry in the PRC had a booming year in 2010 accounting a gross industrial output of approximately RMB1.2 trillion and the sales of which will continue to grow under the Twelfth Five-Year Plan to enjoy an average annual growth rate of 6% in 2011 to 2015. On 29 February 2012, lawmakers in the PRC has passed an amendment (the ‘‘Amendment’’) to restrict excessive packaging and promoted clean production. However, the Amendment did not give a clear definition of what constitutes excessive packaging. Having considered (i) the products of the Target Group currently comprise packaging boxes for wines, food and cosmetics, stationeries and kid’s toys which are to be sold worldwide; (ii) as advised by the Company, the Amendment is not directly governing the paper packaging producers, we therefore concur with the Director’s view that the Amendment would have immaterial impact on the business of the Target Group.

According to the report headed ‘‘Packaging materials industry in Hong Kong’’, which is published by the Hong Kong Trade Development Council (HKTDC) on 28 November 2011, in addition to quick response, flexibility in customizing products and short delivery lead time, the development of Hong Kong packaging materials industry is also supported by the strong printing industry. For the year 2010, Hong Kong’s exports of packaging materials were approximately HK$866 million, representing an increase of approximately 6% over the year 2009. Hong Kong’s re-exports of packaging materials has reached approximately HK$26,170 million in 2010, increased by approximately 32% as compared to the year 2009.

Having taken into consideration that (i) the customers of the Target Group are based in the USA, Europe, Hong Kong and the PRC; and (ii) the optimistic prospect of the global paper packaging industry, in particular the huge market potential of the USA, Europe, the PRC and Hong Kong, as supported by the above mentioned statistics, we consider that the business performance of the Target Group will benefit from the positive development in the paper packaging industry in the aforesaid countries and regions.

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In view of (i) the Vendor has irrevocably undertaken to the Company that the 2012 Net Profit will not be less than HK$16 million; (ii) comfort letters (the ‘‘Comfort Letters’’) from Veda Capital and SHINEWING (HK) CPA LIMITED, the reporting accountant of the Company regarding the profit forecasts of the Target Group up to the year ending 31 March 2013 (the ‘‘Profit Forecast’’), details of which are set out in Appendix IV to the Circular; and (iii) the Adjustment Mechanism, details of which are disclosed in the paragraph headed ‘‘Profit guarantee and adjustments of Consideration’’ under the Section ‘‘(3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS’’ in the Letter from the Board, we consider that the 2012 Guaranteed Amount and the Profit Forecast are reasonable expectations and the interests of the Company and the Shareholders in the Acquisition will be safeguarded.

Having considered (i) the loss making of the Group and no revenue have been generated for the six months ended 30 September 2011 from the continuing operation of the Group; (ii) the improvement on revenue and profit of the Target Group for the year ended 31 March 2011 as compared with the year ended 31 March 2010; (iii) the 2012 Guaranteed Amount, the Adjustment Mechanism and the Comfort Letters; (iv) the Acquisition enables the Company to enhance its revenue base and broaden its customer base; (v) the Acquisition allows the Group to recommence its paper packaging business given the single operating segment of trading of electronic products was deemed discontinued on 30 September 2011; (vi) the optimistic prospect of the paper packing business in Europe and PRC as supported by the abovementioned statistics; and (vii) completion of the Acquisition is one of the Resumption Conditions, we concur with the view of the Directors that the Acquisition is in the interests of the Company and the Independent Shareholders as a whole.

Consideration for the Acquisition

As set out in the Letter from the Board, the Consideration of HK$110 million was determined after arm’s length negotiation between the Vendor and the Company with reference to, among other things, (i) the 2012 Guaranteed Amount; and (ii) the prospect of the Target Group’s business as mentioned in the paragraphs headed ‘‘Future plans and development’’ under the section headed ‘‘Information of the Target Group’’ in the Letter from the Board.

We have considered price-to-earnings ratio (‘‘PER’’) and price to book ratio approaches to access the fairness and reasonableness of the Consideration. However, given the Target Group does not have its own production factory and all manufacturing activities of the Target Group are carried out by New Spring Offset in a leased production plant in Shenzhen, we consider it is inappropriate to justify the Consideration with price-to-book ratio.

Based on the 2012 Guaranteed Amount, the Consideration represents a PER of approximately 6.875 times. In order to access the fairness and reasonableness of the PER of the Acquisition, we have identified comparable companies (the ‘‘Industry Comparables’’) being companies (i) listed on the Stock Exchange on or before 20 January 2011, being the date of the S&P Agreement; and (ii) engaging in businesses similar to those of the Target Group including, but not limited to, manufacture and sale of paper packaging products and other related paper products for their latest financial year. To the best of our knowledge, we

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have identified 4 Industry Comparables by searching through published information on the Stock Exchange’s website. The PERs are based on their respective market capitalisations as at 20 January 2011 and the profit attributable to the equity holders of the Industry Comparables as set out in their respective latest annual reports published on or before 20 January 2011. As the Industry Comparables are engaged in similar business of the Target Group and their respective PERs are determined with reference to their respective market capitalisations at the date of the S&P Agreement, we consider the list of the Industry Comparables is an exhaustive list and the Industry Comparables are fair and representative samples.

Industry Comparables

Industry Comparables
(Stock code) Principal business Starlite Holdings Limited (403) Printing and manufacturing of packaging materials, labels, paper products and environmentally friendly products. Samson Paper Holdings Limited (731) Trading and marketing of paper products, provision of logistics services, trading and marketing of aeronautic parts, and provision of marine services to marine, oil and gas industries. Come Sure Group (Holdings) Limited (794) Manufacture and sale of corrugated board, corrugated paper-based packing products and offset printed corrugated products Hop Fung Group Holdings Limited (2320) Manufacture and sale of containerboard, and corrugated packaging Maximum Minimum Mean The Acquisition	PER (times) 5.912 12.851 13.068 7.033 13.068 5.912 9.716
	6.875

(Stock code)
Principal business
Starlite Holdings Limited
(403)
Printing and manufacturing of packaging
materials, labels, paper products and
environmentally friendly products.
Samson Paper Holdings
Limited (731)
Trading and marketing of paper products,
provision of logistics services, trading and
marketing of aeronautic parts, and provision
of marine services to marine, oil and gas
industries.
Come Sure Group
(Holdings) Limited
(794)
Manufacture and sale of corrugated board,
corrugated paper-based packing products
and offset printed corrugated products
Hop Fung Group
Holdings Limited
(2320)
Manufacture and sale of containerboard, and
corrugated packaging
Maximum
Minimum
Mean
The Acquisition

PER (times)
5.912
12.851
13.068
7.033
13.068
5.912
9.716

6.875

Source: www.hkex.com.hk

As indicated in the above table, the PER based on the 2012 Guaranteed Amount, being 6.875 times, is below the mean and falls within the range of the PER of the Industry Comparables from approximately 5.912 times to approximately 13.068 times.

As set out in the Letter from the Board, pursuant to the S&P Agreement, the Vendor has irrevocably undertaken to the Company that the 2012 Net Profit will not be less than HK$16 million. In the event that the 2012 Net Profit is less than HK$16 million, the

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Consideration will be adjusted downward by an amount equal to the shortfall (the ‘‘2012 Shortfall’’) between the 2012 Guaranteed Amount and 2012 Net Profit multiplied by 6.875, being:

2012 Shortfall = (2012 Guaranteed Amount – 2012 Net Profit) X 6.875

The 2012 Shortfall payable by the Vendor as illustrated above will be offset against the Promissory Note on a dollar for dollar basis. For avoidance of doubt, the maximum liability of the Vendor under this section shall not exceed the amount of the Promissory Note, being HK$55 million.

In view that (i) the Adjustment Mechanism facilitates the safeguard of the 2012 Guaranteed Amount; (ii) the shortfall difference will be multiplied by the PER of the Acquisition; and (iii) the audited net profit after tax and extraordinary items of the Target Group which is amounted to approximately HK$15.89 million for the six months ended 30 September 2011 is in line with the 2012 Guaranteed Amount, we considered the Adjustment Mechanism is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Having considered (i) the Consideration represents a PER which is below the mean and falls within the range of the Industry Comparables PERs; (ii) the improvement of the financial performance of the Target Group after commencement of operation of New Spring (SW) in January 2011 and the acquisition of New Spring Offset in April 2011; and (iii) the 2012 Guaranteed Amount and the Adjustment Mechanism, we consider the Consideration is fair and reasonable so far as the Independent Shareholders are concerned.

(a) Consideration Shares

Pursuant to S&P Agreement, HK$20 million of the Consideration will be settled by way of the Company issuing the Consideration Shares at the issue price of HK$0.10 per Adjusted Share (the ‘‘Issue Price’’) to the Vendor (or its nominee(s)) upon completion of the S&P Agreement.

The Issue Price which is equivalent to the Offer Price and the Subscription Price represents a discount of 80% to the closing price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted Share assuming the Capital Reorganisation having become effective) as quoted on the Stock Exchange on the Last Trading Day. There is no restriction on subsequent sale of the Consideration Shares.

As set out in the Letter from the Board, in order to relief cashflow pressure on the Group, the Company has proposed the issue of the Consideration Shares as part of the settlement of the Consideration. In view of the long suspension of trading of the Shares since 23 September 2008, the Company has, upon arm’s length negotiation, agreed with the Vendor that the Issue Price should represent a substantial discount to the closing price before Suspension.

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As noted from AR 2011 and IR 2011/12, the Group reported loss-making for the financial year ended 31 March 2011 and for the six months ended 30 September 2011 and the Group had bank balances and cash of approximately HK$59.21 million (the ‘‘Cash Position’’) as at 30 September 2011.

Having considered (i) the Consideration Shares enables the Group to reduce cash outflow of the Group given no revenue has been generated from the continuing operation of the Group for the six months ended 30 September 2011 and the loss making financial performance of the Group for the financial year ended 31 March 2011 and for the six months ended 30 September 2011; (ii) the bargaining power of the Company given the prolonged suspension of the Shares and completion of the Acquisition is one of the Resumption Conditions; (iii) the Issue Price is equivalent to the Offer Price, hence, the Issue Price offered to the Vendor is not more favorable than the Offer Price offered to the Independent Shareholders under the Open Offer provided that we considered the Offer Price is fair and reasonable (details of the Offer Price analysis has been set out under the paragraph headed ‘‘The Offer Price and the Subscription Price’’ under below section headed ‘‘3. Fundraising by Ways of the Open Offer and the Subscription’’); and (iv) the Consideration Shares do not have entitlements to subscribe for Offer Shares under Open Offer and subscribe for Bonus Shares under the Bonus Issue, we are of the view that the terms of the Consideration Shares (including the Issue Price) are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

(b) Promissory Note

Pursuant to S&P Agreement, HK$55 million (subject to adjustment(s)) of the Consideration will be settled by way of issuing the Promissory Note by the Company to the Vendor (or its nominee(s)). The Promissory Note has a term of two calendar years and is interest free. The holder of the Promissory Note cannot redeem for cash of the Promissory Note on or before 31 March 2013.

As set out in the Letter from the Board, the 2012 Shortfall payable by the Vendor will be offset against the Promissory Note on a dollar for dollar basis and the maximum liability of the Vendor under this section shall not exceed the amount of the Promissory Note.

Having considered (i) the Cash Position of the Group of HK$59.21 million as at 30 September 2011 and the size of the Promissory Note; (ii) the issuance of the Promissory Note would not induce immediate cash outflow from the Group as a result of the Acquisition; (iii) the Promissory Note is non-interest bearing so that would not give rise to any interest payment burden on the Company; (iv) the issuance of the Promissory Note and the Adjustment Mechanism would safeguard the Group’s interest against possible unsatisfactory financial performance of the Target Group for the year ending 31 March 2012, we are of the view that the terms of the Promissory Note are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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3. Fundraising by Ways of the Open Offer and the Subscription

Reasons for the fundraising and use of proceeds

As set out in the Letter from the Board, the Board (including the proposed Directors) considers that the Open Offer is in the interests of the Company and the Shareholders as a whole as it offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company and continue to participate in the future development of the Enlarged Group should they wish to do so.

As noted from the Letter from the Board, the aggregate gross proceeds from the Subscription and the Open Offer will be approximately HK$91 million and the net proceeds (after deducting the resumption professional fees and commission for the Open Offer payable by the Company) will be approximately HK$85 million, of which as to HK$55 million for the settlement of the Promissory Note (such amount will be placed as fixed deposit in financial institution until settlement).

Having considered (i) the Group has been loss making for the year ended 31 March 2011 and for the six months ended 30 September 2011; (ii) the Cash Position of the Group of approximately HK$59.21 million as at 30 September 2011 and the remaining balance of the Consideration of approximately HK$85 million (after deduction of the 1st Deposit and the amount of the Consideration Shares); (iii) the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow the Group to grasp suitable business and/or investment opportunities with immediately available fund should appropriate chance arise; (iv) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests; and (v) that the Open Offer and the Subscription are part of the Resumption Conditions, we concur with the view of the Directors that the Open Offer and the Subscription (including the use of proceeds) are in the interests of the Company and the Independent Shareholders as a whole.

The Offer Price and the Subscription Price

The Offer Price and the Subscription Price are HK$0.10 per Adjusted Share, which represented:

(i) a discount of approximately 80.00% to the closing price of approximately HK$0.50 per Adjusted Share, as adjusted for the Capital Reorganisation (or approximately HK$0.025 per Share), as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 80.77% to the average closing price of approximately HK$0.52 per Adjusted Share, as adjusted for the Capital Reorganisation (or approximately HK$0.026 per Share), as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day; and

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(iii) a discount of approximately 28.57% to the theoretical ex-rights price of approximately HK$0.14 per Adjusted Share, as adjusted for the Capital Reorganisation (or approximately HK$0.0072 per Share), based on the closing price of approximately HK$0.50 per Adjusted Share, as adjusted for the Capital Reorganisation (or approximately HK$0.025 per Share) as quoted on the Stock Exchange on the Last Trading Day.

As set out in the Letter from the Board, trading of the Shares had been suspended since 23 September 2008, the Company has, upon arm’s length negotiation, agreed with the Underwriters that the Offer Price should represent a substantial discount to the closing price before Suspension so as to incentivize the Qualifying Shareholders to take up their entitlements under the Open Offer. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to his/her/its shareholding in the Company as at the Record Date. The Directors (including the proposed Directors) consider the Offer Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

As advised by the Company, the Subscription Price was determined under arm’s length negotiation between the Company and the Subscriber with reference to, among others, the Offer Price. The Directors (including the proposed Directors) consider the Subscription Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Comparison with other open offers

In assessing the fairness of the Offer Price, we have compared the Open Offer with other open offers (the ‘‘Open Offer Comparables’’) which are conducted by prolonged suspension companies listed on the Stock Exchange, which announced their respective open offer transactions from 1 February 2011 to 29 February 2012 (being around twelve-month period prior to the date of the Underwriting Agreement for comparison purposes. In view that (i) for prolonged suspension companies, it is a common market practice to price the open offer or rights issue at a discount to the market price of relevant shares in order to encourage subscription by their shareholders; and (ii) the market sentiment at the relevant time may also play an important role in the determination of the offer price, we believe that the Open Offer

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Comparables may reflect the recent trend of open offer transactions in the market for prolonged suspension companies and consider the list of the Open Offer Comparables is an exhaustive list and the Open Offer Comparables are fair and representative samples. Details of the Open Offer Comparables are summarised in the following table:

Open Offer Comparables (Stock code) Date of announcement Basis of entitlement Ocean Grand Holdings Limited (1220) 8/8/2011 2 for 3 Sunlink International Holdings Limited (2336) 11/11/2011 2 for 1 New City (China) Development Limited (456) 15/11/2011 23 for 3 Victory Group Limited (1139) 23/11/2011 110 for 1 Maximum Minimum Mean The Company 8 for 1	Premium/ (discount) of subscription price over/(to) the closing price on the last trading day (%) (95.61) (85.71) (77.36) (95.64) (95.64) (77.36) (88.58) (80.00)	Premium/ (discount) of subscription price over/(to) the theoretical ex-entitlement price (%) (92.89) (66.67) (28.14) (16.49) (92.89) (16.49) (51.05) (28.57)	Maximum dilution (Note 1) 40.00 66.67 88.46 99.10 99.10 40.00 73.56 88.89	Maximum underwriting Commission Excess application (%) 0.00 no 3.00 no 2.50 (Note 2) no 2.50 no 3.00 0.00 2.00 2.50 (Note 3) no

Source: website of the Stock Exchange (www.hkex.com.hk)

Notes:

Maximum dilution effect of each open offer is calculated as: ((number of offer shares and (if any) bonus shares to be issued under the basis of entitlement)/(number of existing shares held for the entitlement for the offer shares under the basis of entitlement + number of offer shares and (if any) bonus shares to be issued under the basis of entitlement) x 100%, e.g. for a open offer with basis of 8 offer shares for every share held, the maximum dilution effect is calculated as (8/(1+8)) x 100% = 88.89%.
As set out in the relevant announcement of the Open Offer Comparables, there were two underwriters for the open offer. The two underwriters received 0% and 2.50% underwriting commissions for the open offer. The higher underwriting commission has been used for illustration purposes.
As set out in the Letter from the Board, there are two underwriters for the Open Offer. The two Underwriters received 0% and 2.50% underwriting commissions for the Open Offer. The higher underwriting commission has been used for illustration purposes.

As shown in the above table, the discounts represented by the offer prices to the closing prices of shares of the Open Offer Comparables on the last trading days prior to the release of the respective announcements ranged from approximately 77.36% to approximately

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95.64% (the ‘‘LTD Market Range’’). The discount of approximately 80.00% as represented by the Offer Price to the closing price of the Adjusted Shares on the Last Trading Day falls below the mean and within the LTD Market Range.

The discount represented by the offer prices to the theoretical ex-entitlement prices of the shares of the Open Offer Comparables ranged from approximately 16.49% to approximately 92.89% (the ‘‘TEP Market Range’’). The discount of approximately 28.57% as represented by the Offer Price to the theoretical ex-entitlement price of the Adjusted Shares falls below the mean and within the TEP Market Range.

In general, we consider that it is common for the listed issuers in Hong Kong to issue offer shares at a discount to the market price in order to enhance the attractiveness of an open offer transaction. Having considered that (i) the loss-making performance of the Group and the Shares have been suspended for trading for more than 3 years and hence, it is inevitable to set the Offer Price at a discount in order to enhance the attractiveness of the Open Offer and to encourage the existing Shareholders to participate in the Open Offer; (ii) the Offer Price was determined after arm’s length negotiations between the Company and the Underwriters; (iii) the discount represented by the Offer Price to the adjusted closing price of the Adjusted Shares on the Last Trading Day falls below the mean and within the LTD Market Range; (iv) the discount represented by the Offer Price to the theoretical exentitlement price of the Adjusted Shares falls below the mean and within the TEP Market Range; and (v) all Qualifying Shareholders are offered an equal opportunity to subscribe for the Offer Shares at the Offer Price, we consider the Offer Price is fair and reasonable so far as the Independent Shareholders are concerned.

We noted from the Letter from the Board that the Subscriber is restricted from transferring, charging or pledging any Underwritten Offer Shares and Subscription Shares for six months from Resumption (the ‘‘Lock Up Arrangement’’). Having considered (i) the Subscription Price is equivalent to the Offer Price and hence, the Subscriber will subscribe the Subscription Shares at a price which is not more favorable than the Offer Price offered to all Qualifying Shareholders under the Open Offer; and (ii) the investment risk exposure to the Subscriber aroused from the Lock Up Arrangement, we are of the view that the Subscription Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Underwriting commission

As set out in the Letter from the Board, the Company will pay Kingston Securities an underwriting commission of 2.50% whilst there is no underwriting commission payable to the Subscriber. In view that the underwriting commission of 2.50% falls within the range of underwriting commission of the Open Offer Comparables and no underwriting commission will be paid to the Subscriber, we consider the underwriting commissions payable to the Underwriters are in line with the market and fair and reasonable as far as the Independent Shareholders are concerned.

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Excess application

As set out in the Letter from the Board, the Qualifying Shareholders will not be entitled to subscribe for any Offer Share in excess of their respective assured entitlements. Considering that each Qualifying Shareholder will be given an equal opportunity to participate in the Company’s future development by subscribing for his/her/its entitlements under the Open Offer, the Directors (including the proposed Directors) consider that the Company will not be justified in making additional effort and incurring additional costs to administer the excess application procedures. All Offer Shares not taken up by the Qualifying Shareholders are underwritten by the Underwriters.

Although the absence of the excess application arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements, in light of that (i) the nil excess application should be balanced against the fact that the Offer Price has been set at discounts to the closing price of the Adjusted Shares on the Last Trading Day which provides reasonable incentive for the Qualifying Shareholders to take up their respective assured entitlement of the Offer Shares and participate in the Open Offer; (ii) those Qualifying Shareholders who choose to accept their respective entitlements under the Open Offer in full can maintain their respective existing shareholdings in the Company after the Open Offer; (iii) the Open Offer allows the Qualifying Shareholders who are optimistic about the future development of the Company to exercise their rights to subscribe for the Offer Shares with a fair chance; (iv) the nil excess application would lower the administrative costs of the Open Offer to the Company; and (v) there is no excess application arrangement in the open offer transactions conducted by the Open Offer Comparables and hence, absence of excess application in an open offer conducted by long suspension companies is not uncommon in the market, we are of the view that the absence of excess application arrangement, on balance, is acceptable.

Risk associated with the Open Offer

Shareholders and potential investors should note that the Open Offer is conditional, inter alia, upon the fulfillment of the conditions set out in the section headed ‘‘Conditions of the Open Offer’’ in the Letter from the Board. In particular, the Open Offer is conditional upon the approval of the Open Offer and the Whitewash Waiver by the Independent Shareholders at the SGM by way of poll, the Underwriting Agreement having become unconditional and the Underwriters not having terminated the Underwriting Agreement in accordance with the terms thereof as set out in the paragraph headed ‘‘Termination of the Underwriting Agreement’’ in the Letter from the Board. Accordingly, the Open Offer may or may not proceed. Shareholders and potential investors of the Company should therefore exercise extreme caution when dealing in the Shares/Adjusted Shares, and if they are in any doubt about their position, they should consult their professional advisers.

4. Fundraising Alternatives

Comparing the Open Offer and the Subscription to other methods of fund raisings such as placement of new Shares or other convertible securities and bank borrowing, and taking into account that (i) debt financing and bank borrowing will incur interest burden to the Company; (ii) placing of new Shares may not be desirable alternatives as compared with the Subscription given

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the loss-making financial performance of the Company; and (iii) the Open Offer will enable the Shareholders to maintain their proportionate interests in the Company, we concur with the view of the Directors that fund raising by way of the Open Offer and the Subscription is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

5. Bonus Issue

The Company proposes the Bonus Issue to issue the Bonus Shares to the existing Shareholders whose names appear on the register of members of the Company on the Record Date on the basis of five (5) Bonus Shares for every seven (7) then Adjusted Shares. On the basis of 1,148,661,140 Shares in issue (equivalent to 57,433,057 Adjusted Shares assuming Capital Reorganisation becoming effective), 41,023,612 Bonus Shares would be issued.

As noted from the Letter from the Board, the Consideration Shares, the Subscription Shares and the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue. In view that (i) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the issue of the Consideration Shares, Subscription Shares and Offer Shares; (ii) the Bonus Issue will enhance the liquidity of the Shares in the market and thereby enlarging the Shareholder base; (iii) the Bonus Issue is one of the Resumption Conditions; and (iv) the Bonus Shares will be issued to all existing Shareholders on the same basis, we consider the Bonus Issue is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

6. Possible Financial Effects

(i) Working capital

Immediately upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the Group’s working capital is expected to be reduced by the cash outflow of the cash consideration of approximately HK$35 million and is expected to be increased by the net proceeds from the Subscription and the Open Offer of approximately HK$85 million, of which HK$55 million will be placed as fixed deposit in financial institution until settlement of the Promissory Note. Accordingly, the working capital will be improved upon completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.

(ii) Net assets

As set out in IR 2011/12, the unaudited consolidated net assets of the Group was approximately HK$67.80 million as at 30 September 2011. As set out in the unaudited pro forma financial information of the Enlarged Group in Appendix III to the Circular, upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the Group’s net assets will be increased by approximately HK$111.41 million to approximately HK$179.21 million.

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Also set out in the statement of pro forma net tangible asset of the Enlarged Group for the Open Offer only in Appendix IV to the Circular, upon completion of the Capital Reorganisation and immediately before the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the net assets of the Group per Adjusted Share was approximately HK$1.18 (equivalent to approximately HK$0.059 per Share). Upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the net assets of the Group per Adjusted Share will be decreased by approximately HK$1.11 (equivalent to approximately HK$0.0555 per Share) to approximately HK$0.07 (equivalent to approximately HK$0.0035 per Share).

Having considered the enhancement on the working capital and the financial position of the Group upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, we consider that the Acquisition, the Subscription, the Open Offer and the Bonus Issue are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

7. Potential Dilution after the Open Offer and the Bonus Issue

Based on the shareholding structure of the Company as set out in the section headed ‘‘SHAREHOLDING CHANGES UPON COMPLETION OF THE TRANSACTIONS UNDER THE RESUMPTION PROPOSAL’’ in the Letter from the Board, assuming the Capital Reorganisation has become effective, 57,433,057 Adjusted Shares were held by the Independent Shareholders as at the Latest Practicable Date, representing approximately 100% of the issued share capital of the Company. The shareholding of the existing Independent Shareholders will (i) decrease to approximately 46.19% in the event that all existing Shareholders take up the entitlements under the Open Offer in full; and (ii) further decrease to approximately 27.14% in the event that none of the existing Shareholders take up their entitlements under the Open Offer upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.

Having considered that:

(i) the Acquisition, the Subscription, the Open Offer and the Bonus Issue are part of the Resumption Conditions;
(ii) the loss making financial performance of the Group and no revenue have been generated for the six months ended 30 September 2011 from the continuing operation of the Group;
(iii) the Acquisition enables the Company to enhance its revenue base and broaden its customer base;
(iv) the Acquisition allows the Group to recommence its paper packaging business given the single operating segment of trading of electronic products was deemed discontinued on 30 September 2011;
(v) the optimistic prospect of the paper packing business in the USA, Europe, the PRC and Hong Kong as mentioned under the paragraph headed ‘‘Reasons for the Acquisition’’ under the section headed ‘‘2. The Acquisition’’;

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(vi) the Consideration Shares would reduce the cash outflow of the Company;
(vii) the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow the Group to grasp suitable business/investment opportunities with immediately available fund should appropriate chance arise;
(viii) the Cash Position of the Group of approximately HK$59.21 million as at 30 September 2011 and the remaining balance of the Consideration of approximately HK$85 million (after deduction of the 1st Deposit and the amount of the Consideration Shares);
(ix) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests;
(x) the discount represented by the Offer Price to the closing price of the Adjusted Shares on the Last Trading Day falls below the mean and within the LTD Market Range and the discount represented by the Offer Price to the theoretical ex-entitlement price of the Adjusted Shares falls below the mean and within the TEP Market Range;
(xi) the Issue Price and the Subscription Price are equivalent to the Offer Price and hence, the Vendor and the Subscriber will subscribe the Consideration Shares and the Subscription Shares respectively at a price which is not more favorable than the Offer Price offered to all Qualifying Shareholders under the Open Offer; and
(xii) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the issue of the Consideration Shares, Subscription Shares and Offer Shares;

we consider the dilution effects is acceptable and justifiable.

8. Whitewash Waiver

Immediately before completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert with it are not interested in any Shares or securities of the Company. Upon completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert with it will hold (i) approximately 37.25% of the issued share capital (should all existing Shareholders take up their entitlements under the Open Offer to subscribe for the Offer Shares in full) as enlarged by the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares; and (ii) approximately 56.30% of the issued share capital (should no existing Shareholders take up their entitlements under the Open Offer to subscribe for the Offer Shares) as enlarged by the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares. Accordingly, the Subscriber is required to make a mandatory general offer for all the issued Adjusted Shares (other than those already owned or agreed to be acquired by the Subscriber and parties acting in concert with it) pursuant to Rule 26 of the Takeovers Code.

The Subscriber has made an application to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Subscriber and parties acting in concert with it to make a mandatory general offer for all the Adjusted Shares not already owned or agreed to be acquired by them, arising from the

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LETTER FROM MESSIS CAPITAL

Subscription of 450,000,000 Subscription Shares and its underwriting obligation of 230,000,000 Offer Shares under the Underwriting Agreement by the Subscriber. The Executive has indicated that the grant of the Whitewash Waiver subject to, among other things, the approval of the Independent Shareholders at the SGM by way of poll. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Subscription and the Open Offer will not proceed.

Based on our above analysis of the Subscription and the Open Offer, we consider that the Subscription and the Open Offer are in the interests of the Company and the Independent Shareholders as a whole. If the Whitewash Waiver is not approved by the Independent Shareholders at the SGM, the Subscription and the Open Offer will not proceed and given the Subscription and the Open Offer are part of the Resumption Proposal, the Shares/Adjusted Shares may not be able to resume trading as a result of the fail of the completions of the Subscription and the Open Offer. Accordingly, we are of the view that for the purposes of implementing the Subscription and the Open Offer, the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

9. The Master Agreement

Reasons and benefits of the Master Agreement

New Spring Label is principally engaged in manufacture and trading of plastic labels and related products and trading of packaging products. New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li. Mr. Ng will become an executive Director upon completion of the Acquisition.

New Spring Label does not have its production facilities for packaging products and the production of printing orders of New Spring Label has been provided by New Spring Offset which is currently one of the companies in the Target Group. In order to ensure the continual engagement of production of printing orders from New Spring Label (the ‘‘Transactions’’), it was proposed to enter into the Master Agreement with New Spring Label so that New Spring Label will engage the Target Group for the production of orders. The Directors (including the proposed Directors) are of the view that the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are (i) on arm’s length basis and on normal commercial terms; and (ii) fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Having considered (i) the principal activities of the Target Group and the recurring nature of the Transactions; and (ii) the Transactions would enhance the income base of the Target Group which will be consolidated into the account of the Group upon completion of the Acquisition, we consider that the Master Agreement is fair and reasonable and in the interests of the Company and the Independent Shareholders as whole.

Pricing basis for Transactions

As advised by the Company, the production of products and materials to New Spring Label should be provided on normal commercial terms or terms no less favourable than sales to independent customers of the Target Group and the price for each production order made

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LETTER FROM MESSIS CAPITAL

from New Spring Label shall be with reference to the existing prices of similar products in the market. Given that (i) the independent non-executive Directors will, pursuant to Rule 14A.37 of the Listing Rules, review, amongst other things, whether the Transactions 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 customers of the Group who are Independent Third Parties; and (ii) the auditors of the Company will, pursuant to Rule 14A.38 of the Listing Rules, review for the purpose of confirming whether the Transactions are conducted in accordance with the Master Agreement, we are of the opinion that (i) the Transactions are fair and reasonable and on normal commercial terms; and (ii) adequate measures have been in place, as required under the said Listing Rules above, to monitor the Transactions in order to protect the interests of the Company and the Independent Shareholders.

The Annual Caps

Set out below are the Annual Caps for the three years ending 31 March 2015:

		For the year	For the year	For the year
		ending	ending	ending
		31 March 2013	31 March 2014	31 March 2015
		(HK$ million)	(HK$ million)	(HK$ million)
Annual	Caps	24.00	26.00	28.00
		(the ‘‘2013 Cap’’)	(the ‘‘2014 Cap’’)	(the ‘‘2015 Cap’’)

As set out in the Letter from the Board, the 2013 Cap is determined with reference to the actual amount of production of products and materials by the Target Group to the New Spring Label for the period from 1 April 2011 to 31 December 2011 of approximately HK$18 million (the ‘‘Nine Month Sales’’) and the expected growth in sales orders of New Spring Label for the year ending 31 March 2013.

As advised by the Company, based on the information provided by the Vendor, the Transactions, including the transactions provided by New Spring Offset which is the subsidiary of Sky Will since 1 April 2011, was amounted to approximately HK$24 million (the ‘‘Historical Sales’’) for the year ended 31 March 2011. In view the 2013 Cap is (i) equivalent to the annualized amount of the Nine Month Sales and (ii) in line with the amount of the Historical Sales, we consider the 2013 Cap has been arrived with an acceptable basis which is fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Independent Shareholders and the Company as a whole.

As noted from the Letter from the Board, the annual increase of the Annual Caps for the two years ending 31 March 2014 and 2015 respectively is estimated at approximately HK$2 million from the previous year on a prudent basis with respect to the estimated growth rate of sales orders projected by New Spring Label. As advised by the Company, New Spring Label expected around 10% growth for the sales orders to the Target Group for each of the two years ending 31 March 2015. In view the 2014 Cap represents approximately 8.33% growth from the 2013 Cap and the 2015 Cap represents approximately 7.69% growth from

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LETTER FROM MESSIS CAPITAL

the 2014 Cap, we consider the 2014 Cap and the 2015 Cap are arrived with an acceptable basis which is fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Independent Shareholders and the Company as a whole.

RECOMMENDATION

Taking into consideration of the above mentioned principal factors and reasons, in particular:

in relation to the Acquisition:

(i) the loss making of the Group and no revenue have been generated for the six months ended 30 September 2011 from the continuing operation of the Group;
(ii) the improvement on revenue and profit of the Target Group for the year ended 31 March 2011 as compared with the year ended 31 March 2010;
(iii) the Acquisition enables the Company to enhance its revenue base and broaden its customer base;
(iv) the Acquisition allows the Group to recommence its paper packaging business given the single operating segment of trading of electronic products was deemed discontinued on 30 September 2011;
(v) the optimistic prospect of the paper packing business in Europe and PRC as mentioned under the paragraph headed ‘‘Reasons for the Acquisition’’ under the section headed ‘‘2. The Acquisition’’ in this letter;
(vi) completion of the Acquisition is one of the Resumption Conditions;
(vii) the Consideration represents a PER which is below the mean and falls within the range of the Industry Comparables PERs;
(viii) the improvement of the financial performance of the Target Group after commencement of operation of New Spring (SW) in January 2011 and the acquisition of New Spring Offset in April 2011; and
(ix) the 2012 Guaranteed Amount and the Adjustment Mechanism;

in relation to the Subscription, the Open Offer (including the absence of excess application arrangement), the Bonus Issue and the Whitewash Waiver:

(i) the Acquisition, the Subscription, the Open Offer and the Bonus Issue are part of the Resumption Conditions;
(ii) the loss making financial performance of the Group and no revenue have been generated for the six months ended 30 September 2011 from the continuing operation of the Group;

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LETTER FROM MESSIS CAPITAL

(iii) the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow the Group to grasp suitable business/investment opportunities with immediately available fund should appropriate chance arise;
(iv) the Cash Position of the Group of approximately HK$59.21 million as at 30 September 2011 and the remaining balance of the Consideration of approximately HK$85 million (after deduction of the 1st Deposit and the amount of the Consideration Shares);
(v) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests;
(vi) the discount represented by the Offer Price to the closing price of the Adjusted Shares on the Last Trading Day falls below the mean and within the LTD Market Range and the discount represented by the Offer Price to the theoretical ex-entitlement price of the Adjusted Shares falls below the mean and within the TEP Market Range;
(vii) the Issue Price and the Subscription Price are equivalent to the Offer Price and hence, the Vendor and the Subscriber will subscribe the Consideration Shares and the Subscription Shares respectively at a price which is not more favorable than the Offer Price offered to all Qualifying Shareholders under the Open Offer; and
(viii) the nil excess application should be balanced against the fact that the Offer Price has been set at discounts to the closing price of the Adjusted Shares on the Last Trading Day which provides reasonable incentive for the Qualifying Shareholders to take up their respective assured entitlement of the Offer Shares and participate in the Open Offer;
(ix) those Qualifying Shareholders who choose to accept their respective entitlements under the Open Offer in full can maintain their respective existing shareholdings in the Company after the Open Offer;
(x) the Open Offer allows the Qualifying Shareholders who are optimistic about the future development of the Company to exercise their rights to subscribe for the Offer Shares with a fair chance;
(xi) the nil excess application would lower the administrative costs of the Open Offer to the Company;
(xii) there is no excess application arrangement in the open offer transactions conducted by the Open Offer Comparables;
(xiii) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the issue of the Consideration Shares, Subscription Shares and Offer Shares; and
(xiv) if the Whitewash Waiver is not approved by the Independent Shareholders at the SGM, the Subscription and the Open Offer will not proceed and given the Subscription and the Open Offer are part of the Resumption Proposal, the Shares/Adjusted Shares may not be able to resume trading as a result of the fail of the completions of the Subscription and the Open Offer;

– 120 –

LETTER FROM MESSIS CAPITAL

in relation to the Master Agreement (including the Annual Caps):

(i) the principal activities of the Target Group and the recurring nature of the Transactions;
(ii) the Transactions would enhance the income base of the Target Group which will be consolidated into the account of the Group upon completion of the Acquisition;
(iii) the 2013 Cap is equivalent to the annualized amount of the Nine Month Sales and in line with the amount of the Historical Sales; and
(iv) the annual increase of the Annual Caps for the two years ending 31 March 2014 and 2015 respectively is estimated at approximately HK$2 million from the previous year on a prudent basis with respect to the estimated growth rate of sales orders projected by New Spring Label,

we consider that (i) the terms of the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Bonus Issue, the Whitewash Waiver and the Master Agreement (including the Annual Caps) are normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned; and (ii) the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Bonus Issue, the Whitewash Waiver and the Master Agreement (including the Annual Caps) are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolutions to be proposed at the SGM to approve the Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement), the Bonus Issue, the Whitewash Waiver and the Master Agreement (including the Annual Caps).

Yours faithfully, For and on behalf of Messis Capital Limited Robert Siu

Executive Director

– 121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

(A) Financial summary for the six months ended 30 September 2011 and three years ended 31 March 2011

Financial information of the Group for the six months ended 30 September 2011 are set out in the unaudited consolidated financial statement in the interim report of the Company for the six months ended 30 September 2011 published at

http://www.hkexnews.hk/listedco/listconews/sehk/2011/1202/LTN20111202080.pdf and as extracted in section B in this Appendix I.

Financial information of the Group for each of the three years ended 31 March 2009, 2010 and 2011 are set out in the audited consolidated financial statements annual reports of the Company for the years ended 31 March 2009, 2010 and 2011 at

http://www.hkexnews.hk/listedco/listconews/sehk/2009/0730/LTN20090730683.pdf,

http://www.hkexnews.hk/listedco/listconews/sehk/2010/0716/LTN20100716009.pdf and

http://www.hkexnews.hk/listedco/listconews/sehk/2011/0630/LTN20110630340.pdf

respectively and as extracted from the annual report for the year ended 31 March 2011 as set out in section C in this appendix I.

Set out below is a summary of the financial results of the Group for the six months ended 30 September 2011 and each of the years ended 31 March 2009, 2010 and 2011 as extracted from the interim report of the Company for the six months ended 30 September 2011 and annual reports of the Company for the years ended 31 March 2009, 2010 and 2011 respectively. There was no material minority interest or extraordinary items or exceptional items or dividend declared or paid in the consolidated statement of comprehensive income of the Group for the six months’ period ended 30 September 2011 and each of the three years ended 31 March 2011. SHINEWING (HK) CPA Limited is the auditor of the Group. Qualified opinion have been reported for the year ended 31 March 2011 and disclaimer of opinion have been reported for the two years ended 31 March 2010, which have been extracted from the respective annual reports of the Company in the section headed ‘‘4. THE AUDITORS’ REPORTS FOR THE THREE YEARS ENDED 31 MARCH 2011’’ from page I-54 to I-60 in this appendix.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated statement of comprehensive income

Continuing operations Revenue Cost of sales Gross (loss)/profit Other revenue Selling and distribution expenses Administrative expenses Gain on redemption of financial assets at fair value through profit or loss Gain on change in fair value of financial assets at fair value through profit or loss (Loss) gain on changes in fair value of held for trading investments Loss on disposal of held for trading investments Finance costs Loss before tax Income tax expense Loss for the year from continuing operations Discontinued operation (Loss)/profit for the period attributable to owners of the Company from discontinued operation (Loss)/profit for the period and other comprehensive expense attributable to owners of the Company	For the six months ended 30 September 2011 HK$’000 (unaudited) — — — 492 — (1,199) — — 327 — (1) (381) — (381) (115) (496)	For the	year ended 31 March 2010 2009 HK$’000 HK$’000 (audited) (audited) (re-presented) 166,927 3,947 (165,238) (3,915) 1,689 32 917 1,257 — (32) (10,696) (11,698) — 187 — 131 432 (4,526) (4,227) (1,540) (1) (38) (11,886) (16,227) — — (11,886) (16,227) 33,358 (83,395) 21,472 (99,622)
		2011 HK$’000 (audited) 87,366 (86,045) 1,321 808 — (6,311) — — (183) — (2) (4,367) (4) (4,371) — (4,371)	2010 HK$’000 (audited) 166,927 (165,238) 1,689 917 — (10,696) — — 432 (4,227) (1) (11,886) — (11,886) 33,358 21,472

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated statement of financial position

As at 31 March	As at 31 March
2011 HK$’000 (audited) 240 — 240 — 21 6,211 4,299 — 170 59,908 70,609 2,526 4 6 — 2,536 68,073 68,313 18 68,295 11,486 56,809 68,295 — 68,295	2010 HK$’000 (audited) 303 — 303 — 39,494 431 4,482 — 63 69,722 114,192 41,800 — 5 — 41,805 72,387 72,690 24 72,666 11,486 61,180 72,666 — 72,666	2009 HK$’000 (audited) 4,113 10,217
		14,330
		200 7,224 8,861 9,820 63 69,803 2,737
		98,708
		57,844 2,330 492 82
		60,748
		37,960
		52,290
		—
		52,290
		11,486 40,803
		52,289 1
		52,290

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(B) For the six months ended 30 September 2011

Set out below is the financial statements of the Group for the six months ended 30 September 2011 as extracted from the interim report of the Company for six months ended 30 September 2011.

Condensed consolidated statement of comprehensive income

The board of directors (the ‘‘Board’’) of Climax International Company Limited (the ‘‘Company’’) announces the unaudited consolidated results of the Company and its subsidiaries (the ‘‘Group’’) for the six months ended 30 September 2011 as follows:

Notes
Continuing operation
Revenue
3
Other income
Administrative expenses
Gain on changes in fair value of held for trading
investments
Finance costs
Loss before tax
Income tax expense
4
Loss for the period attributable to owners of the
Company from continuing operation
5
Discontinued operation
(Loss)/profit for the period attributable to owners
of the Company from discontinued operation
6
Loss for the period and other comprehensive
expense for the period attributable to owners of
the Company
Loss per share
Basic and diluted loss per share (in Hong Kong
cents)
7
— From continuing operation
— From discontinued operation

Six months ended
30 September
2011
2010
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(Re-presented)
—
—
492
161
(1,199)
(3,336)
327
285
(1)
(1)
(381)
(2,891)
—
—
(381)
(2,891)
(115)
1,132
(496)
(1,759)
(0.03)
(0.25)
(0.01)
0.10
(0.04)
(0.15)

– I-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed consolidated statement of financial position

Notes Non-current asset Plant and equipment 9 Current assets Trade receivables 10 Deposits, prepayments and other receivables Held for trading investments Deposits in other financial institution Bank balances and cash Current liabilities Trade and other payables 11 Income tax payable Obligation under finance leases — amount due within one year Net current assets Total assets less current liabilities Non-current liability Obligations under finance leases — amount due after one year Net assets Capital and reserves Share capital 12 Reserves Total equity attributable to owners of the Company and total equity	At 30 September 2011 HK$’000 (Unaudited) 884 — 5,098 4,625 233 59,213 69,169 2,233 — 6 2,239 66,930 67,814 15 67,799 11,486 56,313 67,799	At 31 March 2011 HK$’000 (Audited) 240
		21 6,211 4,299 170 59,908
		70,609
		2,526 4 6
		2,536
		68,073
		68,313
		18
		68,295
		11,486 56,809
		68,295

– I-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed consolidated statement of changes in equity

At 1 April 2010 (audited) Loss for the period and other comprehensive expense for the period At 30 September 2010 (unaudited) At 1 April 2011 (audited) Loss for the period and other comprehensive expense for the period At 30 September 2011 (unaudited)	Share capital HK$’000 11,486 — 11,486 11,486 — 11,486	Share premium HK$’000 131,205 — 131,205 131,205 — 131,205	Attributable Share option reserve HK$’000 2,260 — 2,260 2,260 — 2,260	to owners of the Company Capital reserve Contributed surplus HK$’000 HK$’000 17,900 103,941 — — 17,900 103,941 17,900 103,941 — — 17,900 103,941	Accumulated losses HK$’000 (194,126) (1,759) (195,885) (198,497) (496) (198,993)	Total HK$’000 72,666 (1,759)
						70,907
						68,295 (496)
						67,799

Condensed consolidated statement of cash flows

CASH USED IN OPERATING ACTIVITIES INVESTING ACTIVITIES Interest received Dividend received Purchase of plant and equipment Increase in deposits in other financial institution NET CASH (USED IN)/FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Principal repayment for obligations under finance leases Finance leases charges paid NET CASH USED IN FINANCING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, represented by Bank balances and cash	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) (120) (3,281 406 181 86 78 (1,000) — (63) (55 (571) 204 (3) (3 (1) (1 (4) (4 (695) (3,081 59,908 69,722 59,213 66,641	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) (120) (3,281 406 181 86 78 (1,000) — (63) (55 (571) 204 (3) (3 (1) (1 (4) (4 (695) (3,081 59,908 69,722 59,213 66,641
		181 78 — (55
		204
		(3 (1
		(4
		(3,081 69,722
		66,641

– I-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the condensed consolidated financial statements

1. BASIS OF PREPARATION

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities (the ‘‘Listing Rules’’) on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) and with Hong Kong Accounting Standard (‘‘HKAS’’) 34 ‘‘Interim Financial Reporting’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’). The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 March 2011, which have been prepared in accordance with Hong Kong Financial Reporting Standards (the ‘‘HKFRSs’’).

The functional currency of the Company for the year ended 31 March 2011 is United States dollars (‘‘US$’’) as the major business is derived from US$. During the six months ended 30 September 2011, no transactions were concluded to generate any trading income from the major business, the functional currency of the other subsidiaries is Hong Kong dollars (‘‘HK$’’). Therefore, the functional currency of the Company is changed to HK$ for the six months ended 30 September 2011. The presentation currency is HK$ which is same as the functional currency of the Company.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as appropriate.

The accounting policies used in the condensed consolidated financial statements for the six months ended 30 September 2011 are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 March 2011 except as described below.

In the current interim period, the Group has applied, for the first time, the following new and revised standards, amendments and interpretations issued by the HKICPA, which are effective for the Group’s financial year beginning on 1 April 2011.

HKFRSs (Amendments)	Improvements to HKFRSs 2010
HKFRS 1 (Amendment)	Limited Exemption from Comparative HKFRS 7 Disclosures for
	First-time Adopters
HKAS 24 (Revised)	Related Party Disclosures
HKAS 32 (Amendments)	Classification of Rights Issues
HK(IFRIC)-Interpretation (‘‘Int’’) 14	Prepayments of a Minimum Funding Requirement
(Amendments)
HK(IFRIC)-Int 19	Extinguishing Financial Liabilities with Equity Instruments

The adoption of the new or revised HKFRSs had no material effect on how the results and financial position for the current or prior accounting periods have been prepared and presented.

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new or revised standards and amendments that have been issued but are not yet effective.

HKFRS 1 (Amendment)	Severe Hyperinflation and Removal of Fixed Dates
	for First-time Adopters1
HKFRS 7 (Amendments)	Disclosure — Transfers of Financial Assets1
HKFRS 9	Financial Instruments4
HKFRS 10	Consolidated Financial Statements4
HKFRS 11	Joint Arrangements4
HKFRS 12	Disclosure of Interests in Other Entities4
HKFRS 13	Fair Value Measurement4
HKAS 1 (Amendments)	Presentation of Item of Other Comprehensive Income3
HKAS 12 (Amendments)	Deferred Tax: Recovery of Underlying Assets2
HKAS 19 (2011)	Employee Benefits4
HKAS 27 (2011)	Separate Financial Statements4
HKAS 28 (2011)	Investments in Associates and Joint Ventures4
HK(IFRIC)-Int 20	Stripping Costs in the Production Phase of a Surface Mine4

1 Effective for annual periods beginning on or after 1 July 2011.
2 Effective for annual periods beginning on or after 1 January 2012.
3 Effective for annual periods beginning on or after 1 July 2012. 4 Effective for annual periods beginning on or after 1 January 2013.

The Group has not early adopted the new HKFRSs that have been issued but not yet effective. The directors of the Company are currently assessing the impact of these new HKFRSs but are not yet in a position to state whether they would have material financial impact on the Group’s result of operations and financial position.

3. REVENUE AND SEGMENT INFORMATION

For the six months ended 30 September 2010, the Group is organized into a single operating segment of trading of electronic products. The electronic products segment was deemed discontinued on 30 September 2011 as no transactions were concluded to generate any trading income from trading of electronic products during the six months ended 30 September 2011 and the directors of the Company would like to focus on formulating a plan for the resumption of trading of the shares of the Company. Accordingly, no reportable segment is presented.

The revenue and results of electronic products segment are stated in note 6.

The Group’s continuing operation is located in Hong Kong. Accordingly, no geographical segment information is presented.

4. INCOME TAX EXPENSE

Continuing operation

No provision for Hong Kong profits tax has been made as the Group had no estimated assessable profits arising in Hong Kong for both periods.

No provision for tax in other jurisdictions has been made as the Group did not have any assessable profits in the respective jurisdictions for both periods.

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. LOSS FOR THE PERIOD

Continuing operation

Loss for the period has been arrived at after charging: Staff costs: Directors’ remuneration Other staff costs Retirement benefit scheme contributions for staff Total staff costs Depreciation of plant and equipment Lease payment in respect of rented premises Loss on written off of plant and equipment and after crediting: Dividend income Interest income	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) 120 120 295 463 10 19 425 602 173 32 168 300 183 — 86 78 406 79	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) 120 120 295 463 10 19 425 602 173 32 168 300 183 — 86 78 406 79
		602
		32 300 — 78 79

6. DISCONTINUED OPERATION

During the six months ended 30 September 2011, no transactions were concluded to generate any trading income from trading of electronic products. The business segment of electronic products is classified as discontinued operation on 30 September 2011.

The results of the electronic products operation for the period from 1 April 2011 to 30 September 2011, which have been included in the condensed consolidated statement of comprehensive income, were as follows:

Revenue Cost of sales Gross profit Other income Administrative expenses (Loss)/profit before tax Income tax expense (Loss)/profit for the period	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) — 60,000 — (59,084 — 916 — 344 (115) (128 (115) 1,132 — — (115) 1,132	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) — 60,000 — (59,084 — 916 — 344 (115) (128 (115) 1,132 — — (115) 1,132
		916 344 (128
		1,132 —
		1,132

– I-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(Loss)/profit for the period from discontinued operation has been arrived at:

after charging: Staff costs and after crediting: Interest income Written off of other payables	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) 105 126 — 102 — 242

LOSS PER SHARE

From continuing and discontinued operations

The calculation of the basic and diluted loss per share attributable to owners of the Company is based on the following data:

Loss for the period attributable to owners of the Company and loss for the purposes of basic loss per share Number of shares: Weighted average number of ordinary shares for the purpose of basic and diluted loss per share	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) (496) (1,759 Six months ended 30 September 2011 2010 1,148,661,140 1,148,661,140

– I-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

From continuing operation

The calculation of the basic and diluted loss per share from continuing operation attributable to owners of the Company is based on the following data:

Loss figures are calculated as follows:

Loss for the period attributable to owners of the Company Less: (Loss)/profit for the period from discontinued operation Loss for the purpose of basic and diluted loss per share from continuing operation	Six months ended 30 September 2011 2010 HK$’000 HK$’000 (Unaudited) (Unaudited) (496) (1,759) (115) 1,132 (381) (2,891)

The denominators used are the same as those detailed above for both basic and diluted loss per share.

From discontinued operation

Basic and diluted loss per share for the discontinued operation is HK0.01 cent per share (2010: basic and diluted earnings per share of HK0.1 cent) based on the loss for the six months from the discontinued operation of approximately HK$115,000 (six months ended 30 September 2010: profit of approximately HK$1,132,000) and the denominators detailed above for basic and diluted loss per share.

The computation of diluted loss per share does not assume the exercise of the Company’s outstanding share options as the exercise price of those options is higher than the average market price for shares during the two periods ended 30 September 2011 and 2010 before the suspension of trading in shares on the Stock Exchange in September 2008.

8. INTERIM DIVIDEND

No dividends were paid, declared or proposed during the reported period. The directors do not recommend the payment of an interim dividend for both periods.

9. PLANT AND EQUIPMENT

For the six months ended 30 September 2011, the Group spent approximately HK$1,000,000 (2010: Nil) for acquisition of assets and certain furniture and fixtures of approximately HK$183,000 (2010: Nil) has been written off as no future economic benefits were expected to arise from these assets.

– I-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. TRADE RECEIVABLES

The Group allows an average credit period of 90 days to its trade customers.

The following is an analysis of trade receivables by age, presented based on the invoice date net of allowance for doubtful debts:

0–30 days 31–60 days 61–90 days 91–120 days Over 120 days 11. TRADE AND OTHER PAYABLES Trade payables Other payables and accrued charges 12. SHARE CAPITAL Authorised: 10,000,000,000 (2010:10,000,000,000) Ordinary shares of HK$0.01 each Issued and fully paid: Ordinary shares of HK$0.01 each At 31 March 2011 and 30 September 2011	30 September 2011 HK$’000 (Unaudited) — — — — — — 30 September 2011 HK$’000 (Unaudited) — 2,233 2,233 30 September 2011 HK$’000 (Unaudited) 100,000 Number of shares 1,148,661,140	31 March 2011 HK$’000 (Audited) — 9 9 3 —
		21
		31 March 2011 HK$’000 (Audited) — 2,526
		2,526
		31 March 2011 HK$’000 (Audited) 100,000
		Share capital HK$’000 11,486

– I-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. COMMITMENTS

Capital expenditure in respect of acquisition of assets contracted but not provided in the condensed consolidated financial statements	30 September 2011 HK$’000 (Unaudited) —	31 March 2011 HK$’000 (Audited) 565

14. RELATED PARTY TRANSACTIONS

Other than the details as disclosed elsewhere in the condensed consolidated financial statements, during the six months ended 30 September 2011, the Group entered into the following related party transactions:

(i) the Group paid rent amounting HK$100,000 during the six months ended 30 September 2011 (six months ended 30 September 2010: HK$300,000) to Kingston Property Investment Limited, of which Mr. Tse On Kin, the former director of the Company, is one of the directors.
(ii) the Group paid rent amounting HK$68,000 during six months ended 30 September 2011 (six months ended 30 September 2010: Nil) to Coast Holdings Limited, of which Mr. Tse On Kin, the former director of the Company, is one of the directors.

15. COMPARATIVES

The comparative figures of condensed consolidated statement of comprehensive income have been re-presented to conform with the current period’s presentation as a result of the discontinued operation in accordance with HKFRS 5 ‘‘NonCurrent Assets Held for Sale and Discontinued Operations’’.

– I-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(C) For the year ended 31 March 2011

Set out below is the financial statements of the Group for the year ended 31 March 2011 as extracted from the annual report of the Company for the year ended 31 March 2011.

Consolidated statement of comprehensive income

For the year ended 31 March 2011

Notes Continuing operations Revenue 7 Cost of sales Gross profit Other revenue 8 Administrative expenses (Loss) gain on changes in fair value of held for trading investments Loss on disposal of held for trading investments Finance costs 9 Loss before tax Income tax expense 10 Loss for the year from continuing operations Discontinued operation Profit for the year from discontinued operation 11 (Loss) profit for the year 12 Other comprehensive expense Release of exchange differences upon disposal of subsidiaries Other comprehensive expense for the year Total comprehensive (expense) income for the year	2011 HK$’000 87,366 (86,045) 1,321 808 (6,311) (183) — (2) (4,367) (4) (4,371) — (4,371) — — (4,371)	2010 HK$’000 166,927 (165,238) 1,689 917 (10,696) 432 (4,227) (1) (11,886) — (11,886) 33,358 21,472 (1,096) (1,096) 20,376

– I-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note (Loss) profit for the year attributable to: Owners of the Company — Loss for the year from continuing operations — Profit for the year from discontinued operation (Loss) profit for the year attributable to owners of the Company Non-controlling interests — Loss for the year from continuing operations — Profit for the year from discontinued operation Loss for the year attributable to non-controlling interests Total comprehensive (expense) income attributable to: Owners of the Company Non-controlling interests (LOSS) EARNINGS PER SHARE Basic and diluted (loss) earnings per share (in Hong Kong cents) 15 From continuing operations From discontinued operation	2011 HK$’000 (4,371) — (4,371) — — — (4,371) (4,371) — (4,371) (0.38) — (0.38)	2010 HK$’000 (11,885) 33,358 21,473 (1) — (1) 21,472 20,377 (1) 20,376 (1.03) 2.90 1.87

– I-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated statement of financial position

As at 31 March 2011

Notes Non-current asset Plant and equipment 16 Current assets Trade receivables 17 Deposits, prepayments and other receivables 18 Held for trading investments 19 Deposits in other financial institutions 20 Bank balances and cash 21 Current liabilities Trade and other payables 22 Income tax payable Obligation under finance lease — amount due within one year 23 Net current assets Total assets less current liabilities Non-current liability Obligation under finance lease — amount due after one year 23 Capital and reserves Share capital 24 Reserves Total equity attributable to owners of the Company and total equity	2011 HK$’000 240 21 6,211 4,299 170 59,908 70,609 2,526 4 6 2,536 68,073 68,313 18 68,295 11,486 56,809 68,295	2010 HK$’000 303
		39,494 431 4,482 63 69,722
		114,192
		41,800 — 5
		41,805
		72,387
		72,690
		24
		72,666
		11,486 61,180
		72,666

– I-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated statement of changes in equity

For the year ended 31 March 2011

		Attri	butable to own	ers of the Company	ers of the Company			Non- controlling interests HK$’000 1	Total HK$’000 52,290
Share capital HK$’000 11,486	Share premium HK$’000 131,205	Translation reserve HK$’000 1,096	Share options reserve HK$’000 2,935	Capital reserve HK$’000 (Note a) 17,900	Contributed surplus HK$’000 (Note b) 103,941	Accumulated losses HK$’000 (216,274)	Total HK$’000 52,289
— —	— —	— (1,096)	— —	— —	— —	21,473 —	21,473 (1,096)	(1) —	21,472 (1,096
— —	— —	(1,096) —	— (675)	— —	— —	21,473 675	20,377 —	(1) —	20,376 —
11,486 —	131,205 —	— —	2,260 —	17,900 —	103,941 —	(194,126) (4,371)	72,666 (4,371)	— —	72,666 (4,371
11,486	131,205	—	2,260	17,900	103,941	(198,497)	68,295	—	68,295

Notes:

(a) The balance of capital reserve represents the capital reserve arising from the group restructuring which took place in 1992.

(b) The balance of contributed surplus arose as a result of the Company’s capital reduction exercises which took place in the financial years of 2003 and 2006.

– I-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated statement of cash flows

For the year ended 31 March 2011

Note OPERATING ACTIVITIES Loss before tax from continuing operations Profit before tax from discontinued operation Adjustments for: Release of non-current prepayments Depreciation for plant and equipment Loss (gain) on changes in fair value of held for trading investments Loss on written off of plant and equipment Impairment loss recognised in respect of deposits, prepayments and other receivables Impairment loss recognised in respect of amount due from a related company Deposits forfeited for early termination of a rental agreement Interest income Dividend income Gain on disposal of subsidiaries 26 Finance costs Loss on disposal of held for trading investments Allowance for inventories Written off of other payables Operating cash flows before movements in working capital Decrease (increase) in trade receivables (Increase) decrease in deposits, prepayments and other receivables (Decrease) increase in trade and other payables Cash used in operations Income tax paid NET CASH USED IN OPERATING ACTIVITIES	2011 HK$’000 (4,367) — (4,367) — 63 183 — — — — (408) (155) — 2 — — (245) (4,927) 39,473 (780) (39,029) (5,263) — (5,263)	2010 HK$’000 (11,886) 33,282 21,396 524 243 (432) 3,610 454 320 691 (181) (148) (44,828) 15 4,227 200 (588) (14,497) (34,767) 1,050 41,411 (6,803) (118) (6,921)

– I-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note INVESTING ACTIVITIES Deposit paid for acquisition of an investment (Increase) decrease in deposits in other financial institutions Dividend received Interest received Purchase of plant and equipment Repayment from related companies Proceeds from disposal of held for trading investments Net cash inflow on disposal of subsidiaries 26 NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment for obligation under finance lease Interest paid NET CASH USED IN FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	2011 HK$’000 (5,000) (107) 155 408 — — — — (4,544) (5) (2) (7) (9,814) 69,722 59,908	2010 HK$’000 — 69,740 148 181 (13) 63 1,543 2,342 74,004 (1) (15) (16) 67,067 2,655 69,722

– I-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the consolidated financial statements

For the year ended 31 March 2011

1. GENERAL

Climax International Company Limited (the ‘‘Company’’) was incorporated in Bermuda as an exempted company with limited liability with its shares listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). The addresses of the registered office and principal place of business of the Company are disclosed in the section headed ‘‘Corporation Information’’ to the annual report.

The functional currency of the major operating subsidiary is United States dollars (‘‘US$’’) while that of the remaining subsidiaries are all in Hong Kong dollars (‘‘HK$’’). The functional currency of the Company is US$, which is different from its presentation currency, HK$. As the Company is listed in Hong Kong, the directors of the Company consider that it is appropriate to present the consolidated financial statements in HK$.

The Company is an investment holding company. Its subsidiaries principally engaged in trading of electronic products. Details of the principal activities of the subsidiaries are disclosed in note 31.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (‘‘HKFRSS’’)

In the current year, the Group has applied the following new and revised standards, amendments and interpretations (‘‘new and revised HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

HKFRSs (Amendments)	Amendment to HKFRS 5 as part of Improvements to HKFRSs 2008
HKFRSs (Amendments)	Improvements to HKFRSs 2009
Hong Kong Accounting Standard	Consolidated and Separate Financial Statements
(‘‘HKAS’’) 27 (Revised)
HKAS 32 (Amendment)	Classification of Rights Issues
HKAS 39 (Amendment)	Eligible Hedged Items
HKFRS 1 (Revised)	First-time Adoption of Hong Kong Financial Reporting Standards
HKFRS 1 (Amendment)	Additional Exemptions for First-time Adopters
HKFRS 2 (Amendment)	Group Cash-settled Share-based Payment Transactions
HKFRS 3 (Revised)	Business Combinations
HK-Interpretation (‘‘Int’’) 5	Presentation of Financial Statements — Classification by the Borrower of a
	Term Loan that Contains a Repayment on Demand Clause
HK(IFRIC)-Int 17	Distributions of Non-cash Assets to Owners

HKFRS 3 (Revised 2008) Business Combinations

The Group applies HKFRS 3 (Revised) Business Combinations prospectively to business combinations of which the acquisition date is on or after 1 April 2010. The requirements in HKAS 27 (Revised) Consolidated and Separate Financial Statements in relation to accounting for changes in ownership interests in a subsidiary after control is obtained and for loss of control of a subsidiary are also applied prospectively by the Group on or after 1 April 2010.

As there was no transaction during the current year in which HKFRS 3 (Revised) and HKAS 27 (Revised) are applicable, the application of HKFRS 3 (Revised), HKAS 27 (Revised) and the consequential amendments to other HKFRSs had no effect on the consolidated financial statements of the Group for the current or prior accounting periods.

Results of the Group in future periods, may be affected by future transactions for which HKFRS 3 (Revised), HKAS 27 (Revised) and the consequential amendments to the other HKFRSs are applicable.

– I-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRSs (Amendments)	Improvements to HKFRSs 2010 except for the amendments to
	HKFRS 3 (Revised in 2008), HKFRS 7, HKAS 1 and HKAS 281
HKFRS 1 (Amendment)	Limited Exemption from Comparative HKFRS 7 Disclosures for
	First-time Adopters2
HKFRS 1 (Amendment)	Severe Hyperinflation and Removal of Fixed Dates for First-time
	Adopters4
HKFRS 7 (Amendments)	Disclosures — Transfers of Financial Assets4
HKFRS 9	Financial Instruments6
HKFRS 10	Consolidated Financial Statements6
HKFRS 11	Joint Arrangements6
HKFRS 12	Disclosure of Interests in Other Entities6
HKFRS 13	Fair Value Measurement6
HKAS 12 (Amendment)	Deferred Tax: Recovery of Underlying Assets5
HKAS 24 (Revised)	Related Party Disclosures3
HKAS 27 (2011)	Separate Financial Statements6
HKAS 28 (2011)	Investments in Associates and Joint Ventures6
HK(IFRIC)-Int 14 (Amendment)	Prepayments of a Minimum Funding Requirement3
HK(IFRIC)-Int 19	Extinguishing Financial Liabilities with Equity Instruments2
1 Effective for annual periods	beginning on or after 1 July 2010 or 1 January 2011, as appropriate.
2 Effective for annual periods	beginning on or after 1 July 2010.
3 Effective for annual periods	beginning on or after 1 January 2011.
4 Effective for annual periods	beginning on or after 1 July 2011.
5 Effective for annual periods	beginning on or after 1 January 2012.
6 Effective for annual periods	beginning on or after 1 January 2013.

HKFRS 9 Financial Instruments issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition.

. HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.
. The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was recognised in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that HKFRS 9 that will be adopted in the Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new standard will have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

– I-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The amendments to HKFRS 7 titled Disclosures — Transfers of Financial Assets increase the disclosure requirements for transactions involving transfers of financial assets. These amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period.

The directors do not anticipate that these amendments to HKFRS 7 will have a significant effect on the Group’s disclosures regarding transfers of financial assets. However, if the Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected.

HKAS 24 Related Party Disclosures (as revised in 2009) modifies the definition of a related party and simplifies disclosures for government-related entities.

The disclosure exemptions introduced in HKAS 24 (as revised in 2009) do not affect the Group because the Group is not a government-related entity.

The directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange (the ‘‘Listing Rules’’) and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 1 April 2010, losses applicable to the non-controlling interests in excess of the non-controlling interests in the subsidiary’s equity were allocated against the interests of the Group except to the extent that the non-controlling interests had a binding obligation and were able to make an additional investment to cover the losses.

– I-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

Revenue from sale of goods is recognised when the goods are delivered and title has passed.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Rental income under operating leases of buildings is recognised on a straight-line basis over the lease team.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s policy on borrowing costs (see the accounting policy below).

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the translation reserve).

– I-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

From 1 April 2010 onwards, on the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

– I-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Plant and equipment

Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of plant and equipment less their residual values over their estimated useful lives using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

An item of plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Cash and cash equivalents

Bank balances and cash in the consolidated statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into financial assets at fair value through profit or loss (‘‘FVTPL’’) and loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments.

Financial assets at fair value through profit or loss

Financial assets at FVTPL represent financial assets held for trading.

– I-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A financial asset is classified as held for trading if:

. it has been acquired principally for the purpose of selling in the near future; or
. it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
. it is a derivative that is not designated and effective as a hedging instrument.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade receivables, deposits and other receivables, deposits in other financial institutions, and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For all other financial assets, objective evidence of impairment could include:

. significant financial difficulty of the issuer or counterparty; or
. breach of contract, such as default or delinquency in interest or principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
. the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade and other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

– I-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are mainly other financial liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade and other payables and obligation under finance lease are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to directors and employees after 7 November 2002 and vested on or after 1 January 2005

The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve).

– I-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit or loss, with a corresponding adjustment to share options reserve.

At the time when the share options are exercised, the amount previously recognised in share options reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to accumulated losses.

Share options granted to suppliers/consultants

Share options issued in exchange for goods or services are measured at the fair values of the goods or services received, unless that fair value cannot be reliably measured, in which case the goods or services received are measured by reference to the fair value of the share options granted. The fair values of the goods or services received are recognised as expenses, with a corresponding increase in equity (share options reserve), when the Group obtains the goods or when the counterparties render services, unless the goods or services qualify for recognition as assets.

Impairment losses on tangible assets

At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Estimated impairment of trade receivables

Allowances for estimated irrecoverable amounts are recognised in profit and loss when there is objective evidence that the receivables are not recoverable.

In making the judgement, management considered detailed procedures have been in place to monitor this risk as a significant proportion of the Group’s working capital is devoted to trade receivables. In determining whether provision for impairment is required, the Group takes into consideration the ageing status, and likelihood of collection. Specific provision is only made for trade receivables that are unlikely to be collected. As at 31 March 2011, the carrying amount of trade receivables is approximately HK$21,000 (31 March 2010: HK$39,494,000). No allowance for doubtful debts was provided for the year ended 31 March 2011 and 2010.

– I-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of debt representing obligation under finance lease, cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure on an annual basis. As part of this review, the directors of the Company consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Group will balance its overall capital structure through new shares issue. The directors of the Company will also consider the raise of long-term borrowings as second resource of capital when investment opportunities arise and the return of such investments will justify the cost of debts from the borrowings.

6. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

Financial assets Fair value through profit or loss — held for trading investments Loans and receivables (including cash and cash equivalents) Financial liabilities Other financial liabilities stated at amortised cost	2011 HK$’000 4,299 65,207 2,550	2010 HK$’000 4,482 109,386
		41,829

b. Financial risk management objectives and policies

The Group’s major financial instruments include trade receivables, deposits and other receivables, held for trading investments, deposits in other financial institutions, bank balances and cash, trade and other payables and obligation under finance lease. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Currency risk

As at 31 March 2011, majority bank balances and cash and trade receivables (2010: majority bank balances and cash, held for trading investments and other payables) of the Group are denominated in foreign currencies which expose the Group to currency risk. The Group did not have a foreign currency hedging policy as at the end of the reporting period. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

– I-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of the Group’s foreign currency denominated financial assets and financial liabilities at the reporting date are as follows:

HK$ Renminbi (‘‘RMB’’)	Financial assets HK$’000 6,810 41,948	2011 Financial liabilities HK$’000 2,526 —	Net exposure HK$’000 4,284 41,948	Financial assets HK$’000 74,374 —	2010 Financial liabilities HK$’000 3,384 —	Net exposure HK$’000 70,990
						—

Sensitivity analysis

The Group is mainly exposed to HK$ and RMB (2010: HK$).

The following table details the Group’s sensitivity to a possible percentage change in the functional currencies of the relevant group entities, US$ and HK$ against the relevant foreign currencies. The percentages in the table are the sensitivity rates used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for the relevant change in foreign currency rates.

A negative number below indicates an increase in loss (2010: a decrease in profit) after tax where the respective functional currencies strengthen certain percentages against the relevant foreign currencies. For the same percentages weakening of the respective functional currencies against the relevant foreign currencies, there would be an equal and opposite impact on the loss (2010: profit) after tax and accumulated losses, and the balances below would be positive.

Respective functional currencies strengthen against — HK$ by 1% — RMB by 5%	Effect on profit or loss after tax 2011 2010 HK$’000 HK$’000 (43) (710 (2,097) —

(ii) Interest rate risk

The Group is exposed to cash flow interest rate risk primarily in relation to variable-rate deposits in other financial institutions and bank balances. The Group currently does not have an interest rate risk hedging policy. However, the management monitors interest rate exposure and will consider other necessary action when significant interest rate exposure is anticipated.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of prevailing market interest rate arising from the Group’s deposits in other financial institutions and bank balances.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period were outstanding for the whole year. A 100 basis points (2010: 100 basis points) increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

– I-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

If interest rates had been 100 basis points (2010: 100 basis points) higher/lower and all other variables were held constant, the Group’s loss for the year ended 31 March 2011 would decrease/ increase by approximately HK$597,000 (2010: profit for the year would increase/decrease by HK$694,000).

(iii) Other price risk

The Group is exposed to equity price risk through its investments in listed equity securities in Hong Kong. The management manages this exposure by maintaining a portfolio of investments with different risks. The Group’s equity price risk is mainly concentrated on equity instruments operating in telecommunication industry section quoted in the Stock Exchange. The management will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date.

If the prices of the respective equity instruments had been 10% (2010: 10%) higher/lower, loss for the year ended 31 March 2011 would decrease/increase by approximately HK$430,000 (2010: profit for the year would increase/decrease by HK$448,000) as a result of the changes in fair value of held for trading investments.

Credit risk

As at 31 March 2011, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks and financial institutions with high credit-ratings assigned by international credit-rating agencies.

The Group’s concentration of credit risk by geographical locations is mainly in Europe, which accounted for 100% (2010: 100%) of the total trade receivables as at 31 March 2011.

The Group has concentration of credit risk as 100% (2010: 0%) and 100% (2010: 99.6%) of the total trade receivables was due from the Group’s largest customers and the five largest customers respectively.

Collateral held as security and other credit enhancement

The Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

– I-31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities based on the agreed repayment terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

The amounts included below for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates different to those estimates of interest rates determined at the end of the reporting period.

Liquidity table

At 31 March 2011 Non-derivative financial liabilities Trade and other payables Obligation under finance lease At 31 March 2010 Non-derivative financial liabilities Trade and other payables Obligation under finance lease	On demand or within 1 year HK$’000 2,526 7 2,533 41,800 7 41,807	More than 1 year but less than 2 years HK$’000 — 7 7 — 7 7	More than 2 years but less than 5 years HK$’000 — 13 13 — 20 20	Total undiscounted cash flows HK$’000 2,526 27 2,553 41,800 34 41,834	Carrying amount at 31 March HK$’000 2,526 24
					2,550
					41,800 29
					41,829

c. Fair value

The fair values of financial assets and financial liabilities are determined as follows:

the fair values of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices, and ask prices respectively; and
the fair values of other financial assets and financial liabilities are determined in accordance with generally accepted pricing model based on discounted cash flow analysis.

The directors of the Company consider that the fair values of other financial assets and financial liabilities recorded at amortised cost in the consolidated statement of financial position approximate their carrying amounts due to short term maturities.

– I-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Fair value measurements recognised in the consolidated statement of financial position

Financial instruments that are measured subsequent to initial recognition at fair value, are disclosed in the following hierarchy based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at 31 March 2011, the Group’s non-derivative financial assets held for trading of HK$4,299,000 (2010: HK$4,482,000) is classified as level 1.

During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 (2010: Nil).

7. REVENUE AND SEGMENT INFORMATION

The principle activity of the Group is trading of electronic products.

Revenue represents the net amounts received and receivable for goods sold by the Group to outside customers less discounts.

Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial data and information provided regularly to the Group’s chief operating decision maker, the Chief Executive Officer, for the purpose of allocating resources to segments and assessing their performance. The Group is organised into a single operating segment of trading of electronic products. Accordingly, no reportable segment is presented.

Paper products segment was discontinued with effect from 17 March 2010. Its revenue and results are stated in note

(a) Geographical information

The Group’s operations are located in Hong Kong during the year ended 31 March 2011. During the year ended 31 March 2010, the Group’s operations were located in Hong Kong and the People’s Republic of China (the ‘‘PRC’’) before the disposal of certain subsidiaries on 17 March 2010.

The Group’s revenue from continuing operations from external customers and information about its noncurrent assets by geographical location of the assets are detailed below:

Europe Australia Hong Kong	Revenue from external customers 2011 2010 HK$’000 HK$’000 87,366 135,900 — 31,027 — — 87,366 166,927	Non-current assets 2011 2010 HK$’000 HK$’000 — — — — 240 303 240 303	Non-current assets 2011 2010 HK$’000 HK$’000 — — — — 240 303 240 303
			303

Non-current asset excluded those relating to discontinued operation.

– I-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Information about major customers

Revenue from customers of the corresponding years contributing over 10% of the total sales of the Group are as follows:

Customer A Customer B	2011 HK$’000 —* 87,366	2010 HK$’000 92,064 74,863

The corresponding revenue did not contribute over 10% of the total sales of the Group in the respective year.

8. OTHER REVENUE

Continuing operations Dividend income Interest income Written off of other payables 9. FINANCE COSTS Continuing operations Interest on obligation under finance lease 10. INCOME TAX EXPENSE Continuing operations Hong Kong Profits Tax — Under-provision in prior year	2011 HK$’000 155 408 245 808 2011 HK$’000 2 2011 HK$’000 4	2010 HK$’000 148 181 588
		917
		2010 HK$’000 1
		2010 HK$’000 —

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for both years.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

No provision for Hong Kong Profits Tax has been made as the Group did not have any assessable profits subject to Hong Kong Profits Tax for both years.

No provision for tax in other jurisdictions has been made as the Group did not have any assessable profits in the respective jurisdictions for both years.

– I-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The income tax expense can be reconciled to the loss before tax per consolidated statement of comprehensive income as follows:

Loss before tax (from continuing operations) Tax at Hong Kong Profits Tax rate at 16.5% (2010: 16.5%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses and other deductible temporary differences not recognised Under-provision in prior year Income tax expense	2011 HK$’000 (4,367) (720) 187 (93) 626 4 4	2010 HK$’000 (11,886
		(1,961 196 (42 1,807 —
		—

At 31 March 2011, the Group had unused tax losses and other deductible temporary difference of approximately HK$20,247,000 (2010: HK$16,484,000) and HK$152,000 (2010: HK$123,000) respectively available for offsetting against future profits. No deferred tax asset has been recognised in respect of these tax losses and deductible temporary difference due to the unpredictability of future profit streams. The tax losses may be carried forward indefinitely.

11. DISCONTINUED OPERATION

On 8 October 2009, the Group entered into a sale agreement with Good Billion Holdings Limited (‘‘Good Billion’’), a company wholly-owned by Mr. Tse On Kin, who is a substantial shareholder of the Group, to dispose of Climax Investments Limited and its subsidiaries (hereinafter collectively referred to as the ‘‘CIL Group’’), which carried out the Group’s paper products business.

The disposal was effected in order to generate cash flows for the expansion of the Group’s electronic products business. The disposal was completed on 17 March 2010, on which date control of the CIL Group passed to the acquirer.

The profit for the year from the discontinued operation is analysed as follows:

Loss of paper products operation for the year attributable to the Group Gain on disposal of paper products operation (Note 26)	Year ended 31 March 2011 HK$’000 — — —	Year ended 31 March 2010 HK$’000 (11,470 44,828
		33,358

– I-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The results of the paper products operation for the period from 1 April 2009 to 17 March 2010, which have been included in the consolidated statement of comprehensive income, were as follows:

Revenue Cost of sales Gross loss Other revenue Selling and distribution expenses Administrative expenses Finance costs Loss before tax Income tax credit Loss for the year/period	Year ended 31 March 2011 HK$’000 — — — — — — — — — —	Period ended 17 March 2010 HK$’000 12,768 (13,339
		(571 1,347 (811 (11,497 (14
		(11,546 76
		(11,470

Loss for the year/period from discontinued operation has been arrived at after charging (crediting):

Allowance for inventories Release of non-current prepayments Loss on written off of plant and equipment Staff costs Rental income, net of outgoings included in administrative expenses of Nil (2010: HK$524,000)	Year ended 31 March 2011 HK$’000 — — — — —	Period ended 17 March 2010 HK$’000 200 524 2,659 6,573 (666

No charge or credit arose on gain on discontinuance of the operation.

Cash flows from discontinued operation:

Net cash outflows from operating activities Net cash inflows from investing activities Net cash outflows from financing activities Net cash inflows	Year ended 31 March 2011 HK$’000 — — — —	Period ended 17 March 2010 HK$’000 (850 1,247 (289
		108

The carrying amounts of the assets and liabilities of the CIL Group at the date of disposal were disclosed in Note 26.

– I-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. (LOSS) PROFIT FOR THE YEAR

(Loss) profit for the year has been arrived at after charging:

Continuing operations Directors’ emoluments (Note 13) Other staff costs Retirement benefit scheme contributions for staff Total staff costs Auditor’s remuneration Depreciation for plant and equipment Exchange loss Loss on written off of plant and equipment Impairment loss recognised in respect of deposits, prepayments and other receivables Impairment loss recognised in respect of amount due from a related company Deposits forfeited for early termination of a rental agreement Lease payment in respect of rented premises	2011 HK$’000 240 1,278 49 1,567 450 63 59 — — — — 600	2010 HK$’000 219 404 17
		640
		450 243 — 951 454 320 691 2,385

13. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(i) Directors’ emoluments

The emoluments paid or payable to each of the 5 (2010: 6) directors were as follows:

Year ended 31 March 2011 Executive directors Tse On Kin Wong Hin Shek Independent non-executive directors Lau Man Tak Man Kwok Leung Wong Yun Kuen	Fees HK$’000 60 — 60 60 60 60 180 240	Salaries and other benefits HK$’000 — — — — — — — —	Contributions to retirement benefits scheme HK$’000 — — — — — — — —	Share-based payment HK$’000 — — — — — — — —	Total HK$’000 60 —
					60
					60 60 60
					180
					240

– I-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Year ended 31 March 2010 Executive directors Tse On Kin (Note a) Wong Hin Shek Chan Hoi Ling (Note b) Independent non-executive directors Lau Man Tak Man Kwok Leung Wong Yun Kuen	Fees HK$’000 — — 39 39 60 60 60 180 219	Salaries and other benefits HK$’000 — — — — — — — — —	Contributions to retirement benefits scheme HK$’000 — — — — — — — — —	Share-based payment HK$’000 — — — — — — — — —	Total HK$’000 — — 39
					39
					60 60 60
					180
					219

Notes:

(a) Appointed on 31 March 2010.
(b) Resigned on 24 November 2009.

No director has waived any emoluments during the two years ended 31 March 2011 and 2010.

(ii) Employees’ emoluments

No director was included in the five highest paid individuals of the Group for the two years ended 31 March 2011 and 2010. The emoluments of the five highest paid employees are as follows:

Salaries and other benefits Contributions to retirement benefits scheme Emoluments of these employees were within the following bands: Nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000	2011 2010 HK$’000 HK$’000 1,278 2,527 49 24 1,327 2,551 Number of employee(s) 2011 2010 5 4 — 1 5 5	2010 HK$’000 2,527 24
		2,551
		5

– I-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

No emoluments have been paid by the Group to any of the directors of the Company and the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office during the two years ended 31 March 2011 and 2010.

14. DIVIDEND

No dividend was paid or proposed during the year ended 31 March 2011, nor has any dividend been proposed since the end of the reporting period (2010: Nil).

15. (LOSS) EARNINGS PER SHARE

For continuing and discontinued operations

The calculation of the basic and diluted (loss) earnings per share attributable to the owners of the Company is based on the loss for the year attributable to owners of the Company of approximately HK$4,371,000 (2010: profit of HK$21,473,000) and the following data:

Number of shares Weighted average number of shares for the purpose of basic and diluted (loss) earnings per share	2011 1,148,661,140	2010 1,148,661,140

From continuing operations

The calculation of the basic and diluted loss per share from continuing operations attributable to the owners of the Company is based on the following data:

(Loss) earnings figures are calculated as follows:

(Loss) profit for the year attributable to owners of the Company Less: Profit for the year from discontinued operation Loss for the purpose of basic and diluted loss per share from continuing operations	2011 HK$’000 (4,371) — (4,371)	2010 HK$’000 21,473 33,358
		(11,885

The denominators used are the same as those detailed above for both basic and diluted loss per share.

From discontinued operation

Basic and diluted earnings per share for the discontinued operation is HK2.90 cents per share (2011: Nil), based on the profit for the year ended 31 March 2010 from the discontinued operation of approximately HK$33,358,000 (2011: Nil) and the denominators detailed above for both basic and diluted earnings per share.

The computation of diluted earnings per share does not assume the exercise of the Company’s outstanding share options as the exercise price of those options is higher than the average market price for shares during two years ended 31 March 2011 and 2010 before the suspension of trading in shares on the Stock Exchange in September 2008.

– I-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. PLANT AND EQUIPMENT

COST At 1 April 2009 Additions Written off At 31 March 2010 and 31 March 2011 DEPRECIATION At 1 April 2009 Provided for the year Eliminated on written off At 31 March 2010 Provided for the year At 31 March 2011 CARRYING VALUES At 31 March 2011 At 31 March 2010	Furniture and fixtures HK$’000 7,318 43 (6,985) 376 5,864 243 (6,034) 73 63 136 240 303	Machinery and equipment HK$’000 56,743 — (56,743) — 54,300 — (54,300) — — — — —	Motor vehicles HK$’000 1,268 — (1,268) — 1,057 — (1,057) — — — — —	Office equipment HK$’000 6,776 — (6,776) — 6,771 — (6,771) — — — — —	Total HK$’000 72,105 43 (71,772
					376
					67,992 243 (68,162
					73 63
					136
					240
					303

The above items of plant and equipment are depreciated over their estimated useful lives, using the straight-line method, at the following rates per annum:

Furniture and fixtures	8% — 33%
Machinery and equipment	8% — 14%
Motor vehicles	20%
Office equipment	10% — 20%

As at 31 March 2011, the carrying value of furniture and fixtures in respect of assets held under finance lease was approximately HK$23,000 (2010: HK$29,000).

During the year ended 31 March 2010, certain machinery and equipment related to the paper products operation has been fully written off as no future economic benefits were expected to arise from these assets.

17. TRADE RECEIVABLES

Trade receivables Less: impairment loss recognised	2011 HK$’000 21 — 21	2010 HK$’000 39,494 —
		39,494

– I-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group allows an average credit period of 90 days (2010: 90 days) to its trade customers. The following is an aged analysis of trade receivables net of impairment loss recognised presented based on the invoice date at the end of the reporting period. The Group did not hold any collateral over these balances.

Within 30 days 31–60 days 61–90 days 91–120 days Over 120 days	2011 HK$’000 — 9 9 3 — 21	2010 HK$’000 34,099 4,961 252 171 11
		39,494

Included in the Group’s trade receivables balance are debtors with aggregate carrying amount of approximately HK$3,000 (2010: HK$182,000) which are past due as at the reporting date for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances. Trade receivables that were past due but not impaired relate to independent customers that have a good track record with the Group. Based on the past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

Ageing of trade receivables which are past due but not impaired

91–120 days Over 120 days Total	2011 HK$’000 3 — 3	2010 HK$’000 171 11
		182

Trade receivables that were neither past due nor impaired relate to customers for whom there was no recent history of default.

Movement in the impairment loss on trade receivables

1 April Disposal of subsidiaries 31 March	2011 HK$’000 — — —	2010 HK$’000 7,037 (7,037
		—

The Group did not hold any collateral over these balances. The factors considered by management in determining the allowance are described in note 4. It was assessed that the remaining portion of the receivables is expected to be recovered.

– I-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

2011 HK$’000 Other receivables — Less: impairment loss recognised — — Deposits and prepayments 1,211 Refundable deposit paid for acquisition of an investment 5,000 6,211 Movement in the impairment loss on deposits, prepayments and other receivables 2011 HK$’000 1 April 454 Impairment loss recognised — Written off on receivables (454) Disposal of subsidiaries — 31 March —	2010 HK$’000 454 (454
	— 431 —
	431
	2010 HK$’000 18,985 454 — (18,985
	454

As at 31 March 2010, included in other receivables amounting approximately HK$454,000 was due from an investee of unlisted equity investments held by the Group and full amount of impairment loss was recognised during the year ended 31 March 2010. As at 31 March 2010, included in the impairment loss on deposits, prepayments and other receivables were individually impaired other receivables with an aggregate balance of approximately HK$454,000 since the management considered the prolonged outstanding balances were uncollectible. No impairment loss on deposits, prepayments and other receivables was included as at 31 March 2011. The Group did not hold any collateral over these balances. The factors considered by management in determining the impairment are described in note 4.

Included in deposits, prepayments and other receivables as at 31 March 2011 are refundable deposit of HK$5,000,000 paid for acquisition of an investment.

Pursuant to a conditional sale and purchase agreement entered into between the Company and an independent third party (the ‘‘Vendor’’), on 20 January 2011, the Vendor agreed to sell and the Company agreed to purchase the entire issued share capital of a company which, together with its subsidiaries, is principally engaged in manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials.

Details are set out in the Company’s announcement dated 9 February 2011.

The proposed acquisition had not yet been completed at the date of this report.

19. HELD FOR TRADING INVESTMENTS

The held for trading investments comprise equity securities listed in Hong Kong and are stated at fair values which are based on the quoted market bid prices on the Stock Exchange.

20. DEPOSITS IN OTHER FINANCIAL INSTITUTIONS

The amounts represented deposits placed with securities brokers for trading listed securities in Hong Kong and carried interest at prevailing market rates for both years.

– I-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. BANK BALANCES AND CASH

Bank balances and cash comprise bank balances carrying interest at prevailing market rates.

22. TRADE AND OTHER PAYABLES

Trade payables Other payables and accruals	2011 HK$’000 — 2,526 2,526	2010 HK$’000 38,381 3,419
		41,800

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period.

Within 30 days 31–60 days	2011 HK$’000 — — —	2010 HK$’000 33,604 4,777
		38,381

The average credit period on purchases of goods is 90 days. The Group has financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

23. OBLIGATION UNDER FINANCE LEASE

Analysed for reporting purposes as: Current liabilities Non-current liabilities	2011 HK$’000 6 18 24	2010 HK$’000 5 24
		29

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

It is the Group’s policy to lease certain of its furniture and fixtures under finance lease. The contracted lease term is 5 years. Interest rates are fixed at the contract date. For the year ended 31 March 2011, the average effective borrowing rate (which was also equal to contracted interest rates) is 7.68% (2010: 7.68%). The lease is on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Minimum lease payments 2011 2010 HK$’000 HK$’000 Amounts payable under finance lease Within one year 7 7 In more than one year but not more than two years 7 7 In more than two years but not more than five years 13 20 27 34 Less: Future finance charges (3) (5) Present value of lease obligation 24 29 Less: Amount due for settlement within one year shown under current liabilities Amount due for settlement after one year The Group’s obligation under finance lease is secured by the lessors’ charge over	Present value of minimum lease payments 2011 2010 HK$’000 HK$’000 6 5 6 6 12 18 24 29 N/A N/A 24 29 (6) (5 18 24 the leased assets.	Present value of minimum lease payments 2011 2010 HK$’000 HK$’000 6 5 6 6 12 18 24 29 N/A N/A 24 29 (6) (5 18 24 the leased assets.
		29 N/A
		29 (5
		24

24. SHARE CAPITAL

Authorised: At 1 April 2009, 31 March 2010 and 31 March 2011 Issued and fully paid: At 1 April 2009, 31 March 2010 and 31 March 2011	Number of shares Par value per ordinary share HK$ 10,000,000,000 0.01 1,148,661,140 0.01	Share capital HK$’000 100,000
		11,486

– I-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. SHARE OPTIONS

On 29 August 2002, the Company adopted a share option scheme (the ‘‘Scheme’’) which complies with the new requirements of Chapter 17 of the Listing Rules effective 1 September 2001.

No option was granted during the year ended 31 March 2011 and 2010.

The details of the movements in the number of options outstanding during the year which have been granted under the Scheme are as follows:

Year ended 31 March 2011

		Number of s	hare options
Outstanding at 1.4.2010 9,000,000	Granted during the year —	Exercised during the year —	Lapsed during the year —	Cancelled during the year —
26,999,994	—	—	—	—
35,999,994	—	—	—	—
0.1740	N/A	N/A	N/A	N/A

The details of the movements in the number of options outstanding during the year which have been granted under the Scheme are as follows:

Year ended 31 March 2010

		Number of s	hare options
Outstanding at 1.4.2009 9,000,000	Granted during the year —	Exercised during the year —	Lapsed during the year —	Cancelled during the year —
6,180,000 26,999,994	— —	— —	— —	(6,180,000) —
33,179,994	—	—	—	(6,180,000)
42,179,994	—	—	—	(6,180,000)
0.1790	N/A	N/A	N/A	0.2084

– I-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(1) All dates are shown day/month/year.
(2) The vesting period of the options is from the date of grant until the commencement of the exercise period.
(3) The weighted average closing price of the Company’s shares immediately before the dates on which the options were exercised.
(4) The grantee of the share options is no longer the employee of the Group after the completion of disposal of the CIL Group on 17 March 2010. Those share options lapsed on the date of cessation of the employment with the Group.

26. DISPOSAL OF SUBSIDIARIES

As referred to in note 11, on 17 March 2010, the Group discontinued its paper products operation at the time of disposal of its subsidiaries, the CIL Group. The net liabilities of the CIL Group at the date of disposal were as follows:

Prepayments — non-current Trade receivables Deposits, prepayments and other receivables Bank balances and cash Trade and other payables Income tax payable Obligation under finance lease — amount due within one year Amount due to ultimate holding company Amount due to a fellow subsidiary Net liabilities disposed of Translation reserve realised on disposal of subsidiaries Disposal of the total indebtedness owned by the CIL Group to the Company at the date of disposal Gain on disposal Total consideration Satisfied by: Cash Net cash inflow arising from disposal: Cash consideration Bank balances and cash disposed of	HK$’000 9,693 2,497 6,235 158 (56,867 (2,136 (492 (364,843 (320
	(406,075 (1,096 364,843 44,828
	2,500
	2,500
	2,500 (158
	2,342

The impact of the CIL Group on the Group’s results and cash flows in the prior period is disclosed in note 11.

27. COMMITMENTS

Capital expenditure in respect of acquisition of assets contracted but not provided in the consolidated financial statements	2011 HK$’000 565	2010 HK$’000 1,420

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. OPERATING LEASES

The Group as lessee

Minimum lease payments paid under operating leases during the year: Premises	2011 HK$’000 600	2010 HK$’000 2,385

At the end of the reporting period, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of rented premises which fall due as follows:

Within one year	2011 HK$’000 —	2010 HK$’000 550

Operating lease payments represent rentals payable by the Group for its office premises. Leases are negotiated for a term of one year. The lease payments are fixed and no arrangements have been entered into for contingent rental.

29. RETIREMENT BENEFITS SCHEME

Hong Kong

A retirement plan has been established for all eligible employees of the Group in Hong Kong starting from 1 January 1996. Eligible employees enjoy a defined contribution scheme to which the employees and the Group contribute 5% and 5-10% of monthly salary respectively. Employees under the defined contribution scheme are entitled to 100% of the employers’ contribution and the accrued interest upon retirement or leaving the Group after completing ten years of service counting from the date of joining the Group, or at a reduced scale of between 30% and 90% after completing three to nine years of service counting from the date of joining the Group. From 1 December 2000 onwards, staff in Hong Kong are required to join the new Mandatory Provident Fund Scheme (the ‘‘MPF Scheme’’). Contributions to the MPF Scheme are made in accordance with the statutory limits prescribed by the Mandatory Provident Fund Ordinance.

	2011	2010
	HK$’000	HK$’000
Employers’ contributions under defined contribution schemes
and MPF Scheme	49	66

The PRC

No defined contribution retirement scheme organised by the government in PRC was noted for the year ended 31 March 2011. For the year ended 31 March 2010, the Group participates in a defined contribution retirement scheme organised by the government in PRC. All employees of the Group in PRC are entitled to an annual pension equal to a fixed portion of their individual final basic salaries at their retirement date. The Group is required to contribute a specified percentage of the payroll of its employees to the retirement scheme. The total contribution incurred in connection with the scheme for the year ended 31 March 2010 was approximately HK$81,000. No forfeited contributions may be used by the employers to reduce the existing level of contributions.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. RELATED PARTY TRANSACTIONS

Other than as disclosed elsewhere in the consolidated financial statements, during the year the Group entered into the following related party transactions:

(i) on 17 March 2010, the Company completed the disposal of the entire interest in CIL Group to Good Billion Holdings Limited, which is wholly-owned by Mr. Tse On Kin, a substantial shareholder and the director of the Company. Details of the disposal are stated in notes 11 and 26 respectively.
(ii) the Group paid rent amounting HK$600,000 during the year ended 31 March 2011 (2010: HK$400,000) to Kingston Property Investment Limited, of which Mr. Tse On Kin is one of the directors since 29 July 2009.
(iii) no consultancy fees was paid to Mr. Chan Hoi Lam during the year ended 31 March 2011 (2010: HK$207,000).

The remuneration of key management of the Group is set out in note 13.

31. PRINCIPAL SUBSIDIARIES

		Issued and
		fully paid
		share/
	Place of	registered	Percentage of		nominal value of issued share/
Name of subsidiary	incorporation	capital	registered	capital held by the Company				Principal activities
			2011			2010
			directly	indirectly		directly	indirectly
New Able Investments Limited	British Virgin	US$1	100%		—	100%	—	Investment holding
	Islands
New Able Trading Limited	Hong Kong	HK$1	100%		—	100%	—	Trading of electronic
								products
Instant Up Limited	Hong Kong	HK$1	100%		—	100%	—	Provision of
								administrative
								services
Advance Summit Limited (Note)	British Virgin	US$1	100%		—	—	—	Inactive
	Islands

Note:

The Company was incorporated on 15 June 2010.

None of the subsidiaries had any debt securities outstanding at 31 March 2011 and 2010 or at anytime during both

years.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

32. THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Notes Non-current assets Plant and equipment Investments in subsidiaries Current assets Amounts due from subsidiaries (a) Deposits, prepayments and other receivables Bank balances Current liabilities Accruals and other payables Amounts due to subsidiaries (a) Net current assets (liabilities) Total assets less current liabilities Capital and reserves Share capital Reserves (b) Total equity	2011 HK$’000 183 — 183 64,921 6,101 6 71,028 2,526 1,069 3,595 67,433 67,616 11,486 56,130 67,616	2010 HK$’000 233 —
		233
		2,833 270 7
		3,110
		3,176 163
		3,339
		(229
		4
		11,486 (11,482
		4

Notes:

(a) The amounts are unsecured, interest-free and repayable on demand.

(b) The movement of reserves of the Company is as follows:

At 1 April 2009 Profit for the year and total comprehensive income for the year Cancellation of share options At 31 March 2010 Profit for the year and total comprehensive income for the year At 31 March 2011	Share premium HK$’000 131,205 — — 131,205 — 131,205	Share options reserve HK$’000 2,935 — (675) 2,260 — 2,260	Contributed surplus HK$’000 103,941 — — 103,941 — 103,941	Accumulated losses HK$’000 (292,540) 42,977 675 (248,888) 67,612 (181,276)	Total HK$’000 (54,459 42,977 —
					(11,482 67,612
					56,130

– I-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. FINANCIAL AND TRADING PROSPECTS

3. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis on the Group

Set out below is the management discussion and analysis of the performance of the Group for the three years ended 31 March 2009, 2010 and 2011.

Business and Financial Review

For the year ended 31 March 2009, the Group commenced the business of electronic products and recorded turnover of approximately HK$3.9 million and gross profit of approximately HK$32,000. Net loss for the year ended 31 March 2009 was approximately HK$100 million.

For the year ended 31 March 2010, the Group recorded turnover of approximately HK$166.9 million and gross profit of approximately HK$1.7 million. Net profit for the year ended 31 March 2010 was approximately HK$21.5 million. The turnover was mainly contributed from the electronic business. Due to the poor performance of the paper business, the Company decided to dispose of it in October 2009 and re-allocated resources in the electronic business. The net profit mainly contributed from the profit for the year from the discontinued paper business which included the gain on disposal of the paper business of approximately HK$44.8 million.

For the year ended 31 March 2011, the Group recorded turnover of approximately HK$87.4 million and gross profit of approximately HK$1.3 million. Net loss for the year ended 31 March 2011 was approximately HK$4.4 million.

– I-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Upon the completion of the Acquisition, the results of the Target Group will be consolidated into the results of the Group using the purchase method. Approximately HK$89.4 million goodwill will be aroused from the Acquisition as set out in Appendix III of this Circular. Kovas Magni Appraisal Limited, an independent valuer, has been engaged to perform an impairment review on goodwill as if the Target Group has been consolidated into the Company. The basis of assessment includes (i) reviewed 5-years profit and cash flow projections of the Target Group; (ii) reviewed the assumptions made; (iii) discussed with the management of the Target Group; and (iv) taken into account of discount factors. Based on the assessment result, the recoverable amount of the goodwill exceeds its carrying amount. Therefore, no material impairment on goodwill is expected. The accounting standards adopted for the impairment review on goodwill is in accordance with the current accounting standards issued by the Hong Kong Institute of Certified Public Accountants which is the accounting standards adopted by the Group for the preparation of the annual report for the year ended 31 March 2011.

Capital Structure

On 23 June 2008, 191,000,000 ordinary shares of HK$0.01 each in the capital of the Company were issued pursuant to a placing agreement in relation to placing of new shares of the Company at the placing price of HK$0.159 per placing share.

On 30 September 2008, 6 ordinary shares of HK$0.01 each in the capital of the Company were issued upon exercise of share options granted on 17 June 2008.

During the year ended 31 March 2010 and 2011, the Group had no changes in the capital structure.

Liquidity, Financial Resources and Gearing Ratio

As at 31 March 2009, the audited total assets, total liabilities and net assets of the Group amounted to approximately HK$113.0 million, HK$60.7 million and HK$52.3 million respectively. The aggregate of deposits in other financial institution and cash and bank balances as at 31 March 2009 amounted to approximately HK$72.5 million. The gearing ratio, defined as the percentage of total liabilities to total equity, as at 31 March 2009 was approximately 1.16.

As at 31 March 2010, the audited total assets, total liabilities and net assets of the Group amounted to approximately HK$114.5 million, HK$41.8 million and HK$72.7 million respectively. The aggregate of deposits in other financial institution and cash and bank balances as at 31 March 2010 amounted to approximately HK$69.8 million. The gearing ratio, defined as the percentage of total liabilities to total equity, as at 31 March 2010 was approximately 0.58.

As at 31 March 2011, the audited total assets, total liabilities and net assets of the Group amounted to approximately HK$70.8 million, HK$2.6 million and HK$68.3 million respectively. The aggregate of deposits in other financial institution and cash and bank balances as at 31 March 2011 amounted to approximately HK$60.1 million. The gearing ratio, defined as the percentage of total liabilities to total equity, as at 31 March 2011was approximately 0.04.

– I-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Material Acquisitions and Disposals

During the year ended 31 March 2009, the Group had no material acquisition and disposal.

On 17 March 2010, the Group disposed of the CIL Group and assigned all the debts due from the CIL Group to the purchaser at approximately HK$2.5 million which resulted in a gain on disposal of approximately HK$44.8 million. The CIL Group was engaged in the paper products business. Upon the disposal of paper products business, resources were reallocated to electronic products business.

During the year ended 31 March 2011, the Group had no material acquisition and disposal.

Capital Commitment

As at 31 March 2009, the Group was committed to purchase plant and equipment of approximately HK$12.7 million and construction project of approximately HK$0.9 million.

As at 31 March 2010 and 2011, the Group was committed to purchase plant and equipment of approximately HK$1.4 million and HK$0.6 million respectively.

Contingent liabilities

During the year ended 31 March 2009, the Group had the following litigations:

(a) On 27 August 2008, Climax Paper Converters, Limited and Climax Paper Products Manufacturing (Dongguan) Co., Ltd, the then wholly-owned subsidiaries of the Company which were disposed of on 17 March 2010, were sued by their customer for a balance of deposit in aggregate of approximately RMB2.9 million together with interest. The Group had proper and valid defences, therefore, no provision for the claim was made as at 31 March 2009.
(b) On 18 March 2009, Climax Paper Converters, Limited, the then wholly-owned subsidiary which was disposed of on 17 March 2010, was sued for approximately HK$1.4 million plus costs and interest in respect of goods purchase. Judgment was issued on 8 April 2009. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(c) On 30 March 2009, Shiu’s Investments Limited and Climax Paper Converters, Limited, the then wholly-owned subsidiaries which were disposed of on 17 March 2010, were sued by their supplier for approximately HK$4.1 million in aggregate plus costs and interest in respect of goods purchase. Judgment was issued on 7 July 2009. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(d) On 29 May 2009, Climax Marketing Company Limited, the then wholly-owned subsidiary which was disposed of on 17 March 2010, was sued by its supplier for approximately HK$0.3 million plus costs and interest in respect of goods purchase. Notice of intention to enter judgment was served on 10 July 2009. The Group had accrued for such balance plus costs and interest as at 31 March 2009.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(e) On 5 March 2009, the Company was sued for recovery of approximately HK$0.2 million under the lease and guarantees agreements with Orix Asia Limited. On 16 April 2009, judgment has been issued. The Group had accrued for such balances plus costs and interest as at 31 March 2009.
(f) On 29 May 2009, the Company was sued for approximately HK$1.2 million plus costs and interest in respect of goods purchase. Judgment was issued on 11 August 2008. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(g) On 17 February 2008, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery Factory*), Shiu’s Investments Limited, Climax Paper Products Manufacturing (Dongguan) Co., Ltd, Climax Paper Converters, Limited and Climax Marketing Company Limited, the then wholly-owned subsidiaries which were disposed of on 17 March 2010, were sued by their suppliers for approximately RMB1.0 million plus costs and interest in respect of goods purchase. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(h) On 6 March 2009, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery Factory*), Shiu’s Investments Limited and Climax Paper Products Manufacturing (Dongguan) Co., Ltd, the then wholly-owned subsidiaries which were disposed of on 17 March 2010, were sued by their suppliers for approximately RMB0.6 million plus costs and interest in respect of goods purchase. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(i) On 5 November 2008, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery Factory*), Shiu’s Investments Limited, Climax Paper Converters, Limited and Climax Paper Products Manufacturing (Dongguan) Co., Ltd, the then wholly-owned subsidiaries which were disposed of on 17 March 2010, were sued by their suppliers for approximately RMB0.4 million plus costs and interest in respect of goods purchase. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(j) On 9 June 2009, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery Factory*), the then wholly-owned subsidiary which was disposed of on 17 March 2010, was sued by its employee for approximately RMB0.9 million in respect of compensation of medication and treatment from suffering leukemia. Judgment was issued on 16 July 2009. The Group had accrued for such balance plus costs and interest as at 31 March 2009.
(k) On 5 November 2008, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery Factory*) and Shiu’s Investments Limited, the then wholly-owned subsidiaries which were disposed of on 17 March 2010, were sued by their supplier for approximately RMB0.1 million in respect of goods purchase. Accommodation was reached between the parties. The Group had accrued for such balance as at 31 March 2009.

Upon the disposal of the CIL Group on 17 March 2010, there was no financial and other impact on the Group in respect of the above litigations as the CIL Group was no longer the subsidiaries of the Company.

The English names are for identification purpose only. The official name is in Chinese

– I-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 March 2010 and 2011, the Group had no material contingent liabilities.

Employees and Remuneration Policy

As at 31 March 2009, 2010 and 2011, the Group had 163, 5, 4 employees respectively.

Remuneration was determined by reference to market terms and the qualifications and experience of the staff concerned.

Pledged of assets

As at 31 March 2009, the Group pledged plant and equipment with carrying value of HK$nil after full impairment of approximately HK$1.5 million to financial institutions to secure the Group’s obligation under finance leases.

As at 31 March 2010 and 2011, the Group pledged furniture and fixtures with carrying value of HK$0.029 million and HK$0.023 million respectively to secure the Group’s obligation under finance leases.

Foreign Exchange Exposure

The Group’s business activities and its assets and liabilities were denominated in HK$ and United States dollars. The management of the Group considers the exposure to foreign currency risk is insignificant.

4. THE AUDITORS’ REPORTS FOR THE THREE YEARS ENDED 31 MARCH 2011

Set out below independent auditor’s report as extracted from each of the annual reports of the Company for the three years ended 31 March 2011.

(a) For the year ended 31 March 2011

We have audited the consolidated financial statements of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) set out on pages 22 to 69, which comprise the consolidated statement of financial position as at 31 March 2011, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

– I-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Except for the limitation in the scope of our work as described below, we conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

BASIS FOR QUALIFIED OPINION

Corresponding figures

– I-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

claims against it during the year ended 31 March 2010 and upon its disposal. We issued a ‘‘disclaimer opinion’’ on the consolidated financial statements for the year ended 31 March 2010 in respect of this scope limitation accordingly.

QUALIFIED OPINION ON THE LOSS AND CASH FLOWS ARISING FROM LIMITATION OF SCOPE

OPINION ON THE FINANCIAL POSITION

In our opinion, the consolidated statement of financial position gives a true and fair view of the state of affairs of the Group as at 31 March 2011 in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

(b) For the year ended 31 March 2010

We were engaged to audit the consolidated financial statements of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) set out on pages 22 to 83, which comprise the consolidated statement of financial position as at 31 March 2010, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the consolidated financial statements that

– I-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Except for the limitation in the scope of our work as explained below, we conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

However, because of the matters described in the basis for disclaimer of opinion paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

BASIS FOR DISCLAIMER OF OPINION

We were unable to obtain sufficient appropriate audit evidence in respect of the financial information of one of the Group’s subsidiaries, Climax Paper Products Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’), when we conducted the audit of the consolidated financial information of the Group as at 31 March 2009 and for the year then ended, and a disclaimer opinion on such financial statements was issued on 31 July 2009. As a result, the opening balances and related disclosures of the consolidated financial statements of the Group as at 1 April 2009 might have been significantly different had we been able to obtain such evidence.

As explained in note 1.2 to the consolidated financial statements, management was still unable to make available to us the complete and accurate financial information of CPD as a result of the lost of the accounting books and records of CPD during relocation of factory due to cessation of business in the year ended 31 March 2009 and such books and records were not able to be recovered. In addition, during the year ended 31 March 2010, Climax Investments Limited (‘‘CIL’’), the indirect controlling shareholder of CPD, was sold to Good Billion Holdings Limited, a connected person and a related party of the Company. The disposal was completed in March 2010. Certain accounting books and records of CIL and its subsidiaries (which included CPD and collectively referred to as the ‘‘CIL Group’’) were lost during relocation of office of the CIL Group in October 2009 and not be able to be recovered due to the high turnover rate of accounting personnel as a result of lack of financial resources of the CIL Group. Furthermore, as a result of the lost of accounting books and records and the high turnover rate of accounting personnel of the CIL Group, the directors of the Company were unable to provide us with complete information of the status of the lawsuits and claims of the CIL Group during the year and upon the completion of its disposal.

– I-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Against this background, we were unable to obtain sufficient appropriate audit evidence to ascertain the appropriateness of the profit for the year from discontinued operation of HK$33,358,000 as recorded in the Group’s consolidated statement of comprehensive income for the year ended 31 March 2010, which included loss for the year of the CIL Group attributed to the Group of HK$11,470,000 and the gain on disposal of the CIL Group of HK$44,828,000, and the related disclosures included in notes 11 and 31 respectively to the consolidated financial statements. In addition, we were unable to obtain sufficient reliable evidence to satisfy ourselves as to the existence, accuracy and completeness of the adjustment and/or disclosures in relation to the contingent liabilities, commitment and pledge of assets of the CIL Group arising from the lawsuits and claims against it during the year and upon its disposal. Consequently we were not able to determine whether any adjustments to the amounts and related disclosures might have been necessary had we been able to obtain such financial information.

There were no other satisfactory audit procedures that we could adopt to obtain sufficient evidence regarding the abovementioned 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 a consequential significant effect on the opening balances of the consolidated financial statements of the Group as at 1 April 2009 and the profit of the Group for the year ended 31 March 2010.

DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY LIMITATION OF SCOPE

Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do 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 profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other aspects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

(c) For the year ended 31 March 2009

We were engaged to audit the consolidated financial statements of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) set out on pages 23 to 79, which comprise the consolidated balance sheet as at 31 March 2009, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Except for the limitation in the scope of our work as explained below, we conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement.

However, because of the matters described in the basis for disclaimer of opinion paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

BASIS FOR DISCLAIMER OF OPINION

Our report on the consolidated financial statements of the Group for the year ended 31 March 2009 was disclaimed in view of the significance of the limitations in the scope of our audit resulting from insufficiency of supporting documentation and explanations. The accounting books and records of a Group’s subsidiary, namely Climax Paper Products Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’) located in Dongguan, were lost during relocation of factory due to cessation of business and not be able to be recovered. As a result, we were unable to carry out audit procedures to satisfy ourselves as to whether the income, expenses, assets and liabilities relating to CPD 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 for the year ended 31 March 2009:

Turnover	HK$1,070,000
Cost of sales	HK$8,063,000
Other income	HK$2,569,000
Selling and distribution expenses	HK$44,000
Administrative expenses	HK$6,767,000
Impairment loss recognised in respect of deposits,
prepayment and other receivable	HK$215,000

– I-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Assets and liabilities as at 31 March 2009 (in gross amount):

Deposits, prepayments and other receivables HK$808,000 Bank balances and cash HK$28,000 Trade and other payables HK$2,036,000 Tax payables HK$1,810,000

We were also unable to obtain sufficient reliable evidence to satisfy ourselves as to whether the Group has any significant contingent liabilities and commitment in respect of CPD that need to be adjusted for or disclosed in the consolidated financial statements.

DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY LIMITATION OF SCOPE

Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of the Group’s affairs as at 31 March 2009 and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other aspects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

5. INDEBTEDNESS STATEMENT OF THE ENLARGED GROUP

Borrowings

As at the close of business on 31 January 2012, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the indebtedness of the Enlarged Group was as follows:

(i) Interest bearing bank borrowings in the amount of approximately HK$8,150,000 due within one year;
(ii) Interest bearing other borrowings in the amount of approximately HK$5,000,000 due within one year;
(iii) Interest-bearing obligation under finance leases in the amount of approximately HK$6,178,000;
(iv) Amount due to a director in the amount of approximately HK$11,668,000 which is noninterest bearing and repayment on demand; and

– I-60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v) Amount due to related parties in the amount of approximately HK$19,513,000 which is non-interest bearing and repayment on demand.

Commitments

As at 31 January 2012, the Enlarged Group had total future minimum lease payments under non-cancellable operating leases which falling due as follows:

Within one year In the second to fifth years, inclusive	HK$`’`000 1,272 520
	1,792

Contingent liabilities

As at the close of business on 31 January 2012, the Enlarged Group had contingent liabilities of HK$39,394,000 representing maximum amount of guarantee given to a bank in respect of banking facilities granted to related companies.

Save as aforesaid and apart from intra-group liabilities, at the close of business on 31 January 2012, the Enlarged Group did not have any outstanding mortgages, charges, debentures or other loan capital or bank overdrafts, loans, debt securities or other similar indebtedness, liabilities under acceptances or acceptances credits or hire purchase commitments, or any guarantees.

The Directors have confirmed that, save as disclosed above, there has not been any material change in the indebtedness and contingent liabilities of the Group since 31 January 2012 and up to the Latest Practicable Date.

For the purpose of the above indebtedness statement, foreign currency accounts have been translated into Hong Kong Dollars at the approximately rates of exchange prevailing at the close of business on 31 January 2012.

Disclaimer

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of business, the Enlarged Group did not have any bank borrowings, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures or other loan capital, mortgage, charges, finance leases or hire purchases commitments, guarantees or other material contingent liabilities outstanding at the close of business on 31 January 2012.

– I-61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. WORKING CAPITAL SUFFICIENCY

The Directors, after due and careful enquiry, are of the opinion that taking into account its present available financial resources and the existing available credit facilities and subject to the completion of the transactions contemplated under the Resumption Proposal, including (i) the Capital Reorganisation; (ii) the Acquisition; (iii) the Subscription; (iv) the Open Offer; and (v) the Bonus Issue, the Enlarged Group will have sufficient working capital for its operations and to meet its financial obligations when they fall due for at least the next twelve months from the date of this Circular.

7. NO MATERIAL CHANGE

As at the Latest Practicable Date, save as the fact that no transaction was concluded to generate any trading income from trading of electronic products so that the Group did not record any revenue since 1 April 2011, the Directors confirm that there is no material change in the financial or trading position or outlook of the Group since 31 March 2011, being the date to which the latest published audited financial statements of the Group were made up.

– I-62 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

1. ACCOUNTANTS’ REPORT OF THE TARGET GROUP

==> picture [232 x 62] intentionally omitted <==

5 March 2012

The Directors Climax International Company Limited Unit 906, 9/F., Wings Building 110–116 Queen’s Road Central, Central, Hong Kong

Dear Sirs,

We set out below our report on the financial information regarding Sky Will Printing & Packaging (Holdings) Limited (‘‘Sky Will Holdings’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’), including the combined statements of financial position as at 31 March 2009, 2010, 2011 and 30 September 2011, the combined statements of comprehensive income, the combined statements of changes in equity and the combined statements of cash flows of the Target Group for each of the years ended 31 March 2009, 2010, 2011 and the six months ended 30 September 2011 (the ‘‘Relevant Periods’’), and notes thereto (the ‘‘Financial Information’’) for inclusion in the circular of Climax International Company Limited (the ‘‘Company’’) dated 5 March 2012 (the ‘‘Circular’’) in connection with the proposed very substantial acquisition of the entire equity interest of Sky Will Holdings by the Company.

Sky Will Holdings was incorporated with limited liability in the British Virgin Islands (the ‘‘BVI’’) on 2 November 2010 and is engaged in investment holding.

As at the date of this report, Sky Will Holdings has direct and indirect interests in the following subsidiaries, all of which are private companies, particulars of which are set out below:

Name of subsidiary
Place and date
of incorporation/
establishment
Issued and
fully paid
share capital/
registered
capital
Sky Will Printing &
Packaging Limited
(‘‘Sky Will’’)
天安印刷包裝有限公司
Hong Kong/
19 March 2004
HK$10,000
New Spring (SW) Printing
& Packaging Limited
(‘‘New Spring (SW)’’)
新高準(天安)印刷包裝
有限公司
Hong Kong/
3 November 2010
HK$10,000

Percentage of equity interest attributable
to Sky Will Holdings
Principal activities
As at 31 March
As at
30 September
2011
2009
2010
2011
100%
100%
100%
100%
Trading of
packaging
products
—
—
100%
100%
Trading of
packaging
products

– II-1 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Name of subsidiary Place and date of incorporation/ establishment Issued and fully paid share capital/ registered capital New Spring Offset Printing (Shenzhen) Limited (‘‘New Spring Offset’’)* 新高準柯式印刷(深圳) 有限公司 The People’s Republic of China (PRC)/ 1 December 2009 HK$12,000,000	Percentage of equity interest attributable to Sky Will Holdings Principal activities As at 31 March As at 30 September 2011 2009 2010 2011 — — — 100% Manufacture and trading of packaging products

Other than Sky Will, all subsidiaries are indirectly held by Sky Will Holdings.

All companies now comprising the Target Group have adopted 31 March as their financial year end date except the newly acquired subsidiary, New Spring Offset, which have adopted 31 December as its financial year end.

The statutory financial statements of Sky Will for the year ended 31 March 2009, 2010 and 2011 were prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’). The statutory financial statements of Sky Will for the year ended 31 March 2009 were audited by Law Tze Lun, certified public accountants registered in Hong Kong and the statutory financial statements of Sky Will for the year ended 31 March 2010 and 2011 were audited by us.

The statutory financial statements of New Spring Offset for the period from 1 December 2009 (date of establishment) to 31 December 2010 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC and were audited by 深圳永信瑞和會計師事務所 (Shenzhen Yongxin Ruihe Certified Public Accountants*), certified public accountants registered in the PRC.

No statutory financial statements have been prepared for Sky Will Holdings since its date of incorporation as there is no statutory requirement in the BVI. No statutory financial statements have been prepared for New Spring (SW) since its date of incorporation as it has not reached its first financial reporting year end. The auditor’s report on the financial statements of Sky Will for the year ended 31 March 2009 was qualified in respect of disagreement with the management of Sky Will as Sky Will had not consolidated the results of its subsidiary, namely 新高準紙製品(深圳)有限公司 (New Spring Paper Products (Shenzhen) Limited* (‘‘New Spring Paper’’)), into its financial statements in accordance with the requirements of Hong Kong Companies Ordinance and Hong Kong Accounting Standard 27 ‘‘Consolidated and Separate Financial Statements’’ issued by the HKICPA.

Adverse opinion in respect of disagreement with management was issued by us in our auditor’s reports dated 2 June 2011 and 14 September 2011 respectively, on the financial statements of Sky Will for the year ended 31 March 2010 and 2011 as Sky Will had not consolidated the results of New Spring Paper into its consolidated financial statements in accordance with the requirements of Hong Kong Companies Ordinance and Hong Kong Accounting Standard 27 ‘‘Consolidated and Separate Financial Statements’’ issued by the HKICPA.

The English names are for identification purpose only. The official name is in Chinese

– II-2 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

For the purpose of this report, the directors of Sky Will Holdings have prepared the combined financial statements of the Target Group for the Relevant Periods in accordance with HKFRSs issued by the HKICPA (the ‘‘Underlying Financial Statements’’). We have carried out independent audit procedures on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information of the Target Group for the Relevant Periods as set out in this report for inclusion in the Circular has been prepared from the Underlying Financial Statements, on the basis of presentation set out in note 1 of Section A, whereas no adjustment was considered necessary. We have examined the Financial Information and have carried out such additional procedures as considered necessary in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountants’’ as recommended by the HKICPA.

DIRECTORS’ RESPONSIBILITY

The directors of Sky Will Holdings are responsible for the preparation of the Underlying Financial Statements and the Financial Information which give a true and fair view. In preparing the Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, that the judgements and estimates made are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated. The directors of the Company are responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

In respect of the Financial Information for the Relevant Periods, our responsibility is to express an opinion on the Financial Information based on our audit. We conducted our audit in accordance with Hong Kong Standards of Auditing and the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

BASIS FOR ADVERSE OPINION

In accordance with Hong Kong Accounting Standard (‘‘HKAS’’) 27 ‘‘Consolidated and Separate Financial Statements’’ issued by the HKICPA, Sky Will Holdings is required to prepare consolidated financial statements which consolidated the assets, liabilities and results of its subsidiaries. As explained in note 16 to the Financial Information, Sky Will Holdings has not consolidated the results of one of the subsidiaries, New Spring Paper, into the combined financial statements for the year ended 31 March 2009, 2010 and 2011. The results for the year ended 31 March 2009, 2010 and 2011, the relevant assets and liabilities of New Spring Paper as at 31 March 2009, 2010 and 2011 are material to Sky Will Holdings. The effect on the combined financial statements of the failure to consolidate New Spring Paper have not been determined.

During the six months ended 30 September 2011, New Spring Paper was deregistered and the deregistration was completed on 18 July 2011 (the ‘‘Deregistration Date’’). The combined statement of comprehensive income and combined statement of cash flows for the six months ended 30 September 2011 has not consolidated the results and cash flows of New Spring Paper for the period from 1 April 2011 to the Deregistration Date.

– II-3 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

ADVERSE OPINION

In our opinion, on the basis of presentation set out in above, because of the significance of the matters discussed in the basis for adverse opinion paragraphs, the Financial Information does not give, for the purpose of this report, a true and fair view of the state of affairs of the Target Group as at 31 March 2009, 2010, 2011 and 30 September 2011 and of the Target Group’s combined results and cash flows for the year ended 31 March 2009, 2010 and 2011 and the six months ended 30 September 2011 in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the Financial Information has been properly prepared in accordance with the disclosure requirements of Hong Kong Companies Ordinance.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to note 1 of Section A to the Financial Information which states that the Target Group had incurred net current liabilities of HK$3,625,000, HK$912,000, HK$9,747,000 and HK$12,523,000 as at 31 March 2009, 2010, 2011 and 30 September 2011 respectively. The financial statements have been prepared on a going concern basis because the directors of Sky Will Holdings and certain related companies of the Target Group have agreed to provide adequate funds to enable the Target Group to meet in full its financial obligations as and when they fall due in the foreseeable future and not to demand for repayment for balances due from the Target Group until it is in a financial position to do so. Such matters indicated the existence of an uncertainty which may cast doubt on the Target Group’s ability to continue as a going concern.

REVIEW CONCLUSION

The comparative combined statements of comprehensive income, combined statement of changes in equity and combined statement of cash flows of the Target Group for the six months ended 30 September 2010 together with the notes thereto have been extracted from the Target Group’s unaudited combined financial statements for the same period (the ‘‘30 September 2010 Financial Information’’) which was prepared by the directors of Sky Will Holdings solely for the purpose of this report.

We have reviewed the 30 September 2010 Financial Information in accordance with the Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the HKICPA. Our review consists principally of making enquires, primarily of persons responsible for financial and accounting matters and applying analytical procedures and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the 30 September 2010 Financial Information.

Because of the significance of the matters described in the basis for adverse opinion paragraphs, we were unable to reach a review conclusion as to whether material modifications should be made to the 30 September 2010 Financial Information.

– II-4 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

A. FINANCIAL INFORMATION

Combined Statements of Comprehensive Income

Note Revenue 7 Cost of sales Gross profit Other income 8 Gain on bargain purchase of a subsidiary 30 Impairment loss of investment in a subsidiary Selling expenses Administrative expenses Finance costs 9 (Loss) profit before tax Income tax expense 10 (Loss) profit and total comprehensive (expense) income for the year/period attributable to the owners of Sky Will Holdings 11	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 39,490 18,633 43,644 (38,215) (14,489) (37,008) 1,275 4,144 6,636 89 119 1,188 — — — (4,500) — — (241) (140) (751) (740) (647) (943) (5) (321) (463) (4,122) 3,155 5,667 (63) (528) (929) (4,185) 2,627 4,738	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 8,254 54,936 (6,521) (40,456) 1,733 14,480 36 1,968 — 7,445 — — (149) (1,586) (403) (3,638) (253) (390) 964 18,279 (162) (2,394) 802 15,885

– II-5 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Combined Statements of Financial Position

The Target Group	The Target Group	Sky Will	Holdings
As at 31 March 2009 2010 HK$’000 HK$’000 620 521 — — 620 521 — — 4,091 3,212 — — 7,507 2,397 442 2,260 379 59 12,419 7,928 158 89 15,040 3,183 607 607 — — 208 499 31 — — 4,462 16,044 8,840 (3,625) (912) (3,005) (391) — — 86 73 86 73 (3,091) (464) 10 10 (3,101) (474) (3,091) (464)	2011 HK$’000 14,071 — 14,071 — 5,776 1 28,233 — 276 34,286 1,413 33,082 3,297 — 1,269 — 4,972 44,033 (9,747) 4,324 — 59 59 4,265 1 4,264 4,265	As at 31 March 2011 HK$’000 — 10 10 — — 1 — — — 1 — 2 10 — — — — 12 (11) (1) — — — (1) 1 (2) (1)	As at 30 September 2011 HK$’000 — 10
			10
			— — 1 — — —
			1
			— 2 10 — — — —
			12
			(11
			(1
			— —
			—
			(1
			1 (2
			(1

Note:

The statements of financial position as at 31 March 2009 and 2010 of Sky Will Holdings are not presented as Sky Will Holdings was incorporated in the BVI with limited liability on 2 November 2010. As at 31 March 2011 and 30 September 2011, Sky Will Holdings had 100 issued ordinary shares of US$1 each and minimal assets on the statement of financial position.

– II-6 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Combined Statements of Changes in Equity

At 1 April 2008 Loss and total comprehensive expense for the year At 31 March 2009 Profit and total comprehensive income for the year At 31 March 2010 Deemed distribution to the controlling shareholders under group reorganisation (Note 28) Profit and total comprehensive income for the year At 31 March 2011 Profit and total comprehensive income for the period At 30 September 2011 (Unaudited) Six months ended 30 September 2010 At 1 April 2010 Profit for the period and total comprehensive income for the period At 30 September 2010	Share capital HK$’000 10 — 10 — 10 (9) — 1 — 1 10 — 10	Retained profits (accumulated losses) HK$’000 1,084 (4,185) (3,101) 2,627 (474) — 4,738 4,264 15,885 20,149 (474) 802 328	Total HK$’000 1,094 (4,185) (3,091) 2,627 (464) (9) 4,738 4,265 15,885 20,150 (464) 802 338

– II-7 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Combined Statements of Cash Flows

OPERATING ACTIVITIES (Loss) profit before tax Adjustments for: Depreciation of plant and equipment Finance costs Impairment of plant and equipment (Gain) loss on disposal of plant and equipment Bad debts written off in respect of trade and other receivables Impairment loss on trade and other receivables Write-off of amount due from a subsidiary Waiver of amount due to a subsidiary Impairment loss on investment in a subsidiary Waiver of trade and other payables Gain on deregistration of a subsidiary Interest income Gain on bargain purchase of a subsidiary Operating cash flows before movements in working capital (Increase) decrease in amounts due from related companies Increase in inventories Decrease (increase) in trade and other receivables (Decrease) increase in trade and other payables Increase (decrease) in amounts due to related companies	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 (4,122) 3,155 5,667 100 99 250 5 321 463 — — — (5) — — — 90 — — 20 — 21 — — — — (902) 4,500 — — — (37) — — — — (1) — — — — — 498 3,648 5,478 — — (40,560) — — — 4,588 769 (2,564) (1,448) (32) 1,324 1,513 (5,189) 33,082	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 964 18,279 49 1,711 253 390 — 129 — 78 — — — — — — — — — — — — — (195) — (2) — (7,445) 1,266 12,945 (3,646) 46,091 — (613) (953) (14,947) 18 12,890 1,633 (28,351)

– II-8 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Cash generated from (used in) operations Tax paid NET CASH FROM (USED IN) OPERATING ACTIVITIES INVESTING ACTIVITIES Proceeds on disposal of plant and equipment Repayment from a subsidiary (Advance to) repayment from related companies (Advance to) repayment from directors Interest income received Additional investment in a subsidiary Advance to holding company Acquisition of a subsidiary Purchase of plant and equipment NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES New bank borrowings raised Advance from a director Advance to an ultimate shareholder Repayment to related companies Interest paid Repayment of obligations under finance leases Repayment of bank borrowings	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 5,151 (804) (3,240) — (250) (103) 5,151 (1,054) (3,343) 200 — — 9 — — (1,396) (1,553) 2,373 — (1,818) 2,251 1 — — (3,500) — — — — (1) — — — (9) — (3,800) (4,695) (3,371) 823 — 6,000 3,000 — — 2,690 — — — (72) (5) — (5) (321) (463) (81) (31) — — (1,538) (2,490)	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) (1,682) 28,015 — (1,741) (1,682) 26,274 — 1,032 — — — (530) 200 (220) — 2 — — — — — (11,514) — (6,202) 200 (17,432) 3,000 10,977 — 7,360 — 155 — (20,697) (253) (390) — (2,217) (1,221) (1,268)

– II-9 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

NET CASH (USED IN) FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR/PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR/ PERIOD, represented by bank balances and cash	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 (158) 4,105 2,737 298 (320) 217 81 379 59 379 59 276	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 1,526 (6,080) 44 2,762 59 276 103 3,038

– II-10 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Notes to the Financial Information

1. GENERAL AND BASIS OF PRESENTATION

Sky Will Holdings was incorporated with limited liability in the BVI on 2 November 2010. Its holding company is Sky Will Printing & Packaging (BVI) Limited (‘‘Sky Will BVI’’), a company incorporated in the BVI with limited liability which is owned by Chan Fook Kai, Fung Ming and Kao Wai Kwong, Eric (the ‘‘Beneficial Owners’’).

The address of the registered office and principal place of business of Sky Will Holdings is 10/F., Fook Hing Factory Building, 33 Lee Chung Street, Chaiwan, Hong Kong.

Sky Will Holdings is an investment holding company. The principal activities of its subsidiaries are manufacture and trading of packaging products.

Sky Will was originally directly held by the Beneficial Owners. Group reorganisation (the ‘‘Group Reorganisation’’) was taken by Sky Will Holdings as following:

(i) On 15 January 2011, the Beneficial Owners entered into an equity transfer agreement (the ‘‘Equity Transfer’’) with Sky Will Holdings which is indirectly owned by the Beneficial Owners whereby the Beneficial Owners transferred the entire equity interest in Sky Will to Sky Will Holdings for a total consideration of HK$10,000 on the same day; and
(ii) On 4 April 2011, Sky Will acquired New Spring Offset from a related company.

The Equity Transfer involved the incorporation of investment holding entities, including Sky Will BVI and Sky Will Holdings, between the Beneficial Owners and Sky Will. Accordingly, the combined financial statements are prepared as a continuation of Sky Will and its subsidiaries existed at the date of the Equity Transfer. The combined statement of comprehensive income, combined statement of changes in equity and combined statement of cash flows are prepared as if the group structure upon the completion of the Group Reorganisation (other than the acquisition of New Spring Offset) had been in existence throughout the Relevant Periods, or since the respective date of incorporation of the relevant entities to 30 September 2011, where this is a shorter period. The combined statement of financial position as at 31 March 2009, 31 March 2010, 31 March 2011 and 30 September 2011 presents the assets and liabilities of the companies comprising the Target Group upon the completion of the Group Reorganisation (other than the acquisition of New Spring Offset) which were in existence at those dates. The results of New Spring Offset acquired during the Relevant Periods are included in the combined statement of comprehensive income from the effective date of acquisition on 4 April 2011.

The Financial Information is presented in Hong Kong dollars (‘‘HK$’’), which is the same as the functional currency of Sky Will Holdings.

The Financial Information have been prepared on a going concern basis notwithstanding that the Target Group had incurred net current liabilities of HK$3,625,000, HK$912,000, HK$9,747,000 and HK$12,523,000 as at 31 March 2009, 2010, 2011 and 30 September 2011 respectively. The directors of Sky Will Holdings and certain related companies of the Target Group have undertaken to provide adequate funds to enable the Target Group to meet in full its financial obligations as they fall due in the foreseeable future and not to demand for repayment of the balances due from the Target Group until it is in a financial position to do so.

The results of one of the subsidiaries, namely New Spring Paper, have not been consolidated into the combined financial statements in accordance with Hong Kong Accounting Standard (‘‘HKAS’’) 27 ‘‘Consolidated and Separate Financial Statements’’ since in the opinion of the directors of Sky Will Holdings, it would involve expense and would be out of proportion to the value to shareholders of Sky Will Holdings.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (‘‘HKFRSs’’)

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Group has consistently adopted all of the new and revised HKAS, HKFRSs, amendments and interpretations issued by the HKICPA which are effective for the Target Group’s financial year beginning on 1 April 2011.

– II-11 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

New and revised standards, amendments and interpretations in issue but not yet effective

The Target Group has not early applied the following new and revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRS 1 (Amendments) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters[1] HKFRS 7 (Amendments) Disclosures — Transfers of Financial Assets[1] HKFRS 9 Financial Instruments[4] HKFRS 10 Consolidated Financial Statements[4] HKFRS 11 Joint Arrangements[4] HKFRS 12 Disclosure of Interests in Other Entities[4] HKFRS 13 Fair Value Measurement[4] Amendments to HKAS 1 (Revised) Presentation of Items of Other Comprehensive Income[3] HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets[2] HKAS 19 (Revised 2011) Employee Benefits[4] HKAS 27 (Revised 2011) Separate Financial Statements[4] HKAS 28 (Revised 2011) Investments in Associates and Joint Ventures[4] Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[5] HK(IFRIC)-Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine[4] 1 Effective for annual periods beginning on or after 1 July 2011. 2 Effective for annual periods beginning on or after 1 January 2012. 3 Effective for annual periods beginning on or after 1 July 2012. 4 Effective for annual periods beginning on or after 1 January 2013. 5 Effective for annual periods beginning on or after 1 January 2014.

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

. HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
. The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

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APPENDIX II

The directors of Sky Will Holdings anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Target Group’s financial assets and financial liabilities. Regarding the Group’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

To date, the Target Group has not entered into transactions involving transfers of financial assets. However, if the Target Group enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected.

The five new or revised standards on consolidation, joint arrangements and disclosures including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (Revised 2011) and HKAS 28 (Revised) were issued by the HKICPA in June 2011 and are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of the five new or revised standards are applied early at the same time. The directors of Sky Will Holdings anticipate that these new or revised standards will be applied in the Target Group’s consolidated financial statements for financial year ending 31 March 2014 and the potential impact is described below.

HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. Under HKFRS 10, there is only one basis for consolidation, that is control. In addition, HKFRS 10 includes a new definition of control that contains three elements; (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios. Overall, the application of HKFRS 10 requires a lot of judgement. The application of HKFRS 10 might result in the Target Group no longer consolidating some of its investees, and consolidating investees that were not previously consolidated.

The amendments to HKAS 1 have been issued to improve the presentation of other comprehensive income. The amendments require entities to group together the items of other comprehensive income that may be reclassified to profit or loss in the future by presenting them separately from those that would never be reclassified to profit or loss. The application of the amendment to HKAS 1 might result in changes in presentation of the statement of comprehensive income.

The directors of Sky Will Holdings anticipate that the application of other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Target Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with HKFRSs, except for the failure to consolidate New Spring Paper in accordance with HKAS 27 ‘‘Consolidated and Separate Financial Statements’’ issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance. These policies have been consistently applied throughout the Relevant Periods and materially consistent with the accounting policies adopted by the Company.

The Financial Information has been prepared on the historical cost basis except for certain financial instruments that are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

The principal accounting policies are set out below.

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APPENDIX II

Basis of combination

The Financial Information incorporates the financial statements of Sky Will Holdings and entities controlled by Sky Will Holdings (its subsidiaries) now comprising the Target Group.

The results of subsidiaries acquired or disposed of during the Relevant Periods are included in the combined statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the Financial Information of subsidiaries to bring their accounting policies into line with those used by other members of the Target Group.

All intra-group transactions, balances, income and expenses are eliminated in full on combination.

Business combinations under common control

Business combinations under common control are accounted for using merger accounting. In applying merger accounting, the consolidated financial information incorporates the financial information of the combining entities or businesses in which the common control combination occurs as if they had been consolidated from the date when the combining entities or businesses first came under the control of the Beneficial Owners.

The net assets of the combining entities or businesses are consolidated using the existing book values from the Beneficial Owners’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the Beneficial Owners’ interest.

The combined statements of comprehensive income include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination.

Investment in a subsidiary

Investment in a subsidiary is included in the combined statements of financial position at cost less any identified impairment loss.

Plant and equipment

Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

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APPENDIX II

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

Cash and cash equivalents

Bank balances and cash in the combined statements of financial position comprise cash at banks and on hand. For the purpose of the combined statements of cash flows, cash and cash equivalents consist of bank balances and cash.

Financial instruments

Financial assets and financial liabilities are recognised in the combined statements of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction cost directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit and loss.

Financial assets

The Target Group’s financial assets are loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amount due from holding company, amounts due from related companies, amounts due from directors, and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

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APPENDIX II

For all financial assets, objective evidence of impairment could include:

. significant financial difficulty of the issuer or counterparty; or
. breach of contract, such as default or delinquency in interest and principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
. the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period ranged from 30 to 60 days, observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, amount due from holding company, amounts due from related companies and amounts due from directors where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade or other receivable or an amount due from holding company/a related company/a director is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

Financial liabilities and equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Target Group after deducting all of its liabilities. The Target Group’s financial liabilities are classified as other financial liabilities.

Effective interest method

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade and other payables, amounts due to related companies, amount due to a director, amount due to an ultimate shareholder, obligations under finance leases and bank and other borrowings are subsequently measured at amortised cost, using the effective interest method.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Equity instruments

Equity instruments issued by Sky Will Holdings are recorded at the proceeds received, net of direct issue costs.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by the Target Group and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, Sky Will Holdings measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Target Group has transferred substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirely, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of sales related taxes and discounts.

Revenue from sale of goods is recognised when the goods are delivered and title has passed.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Target Group and the amount of revenue can be measured reliably. Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Borrowing costs

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Foreign currencies

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purposes of presenting the combined financial statements, the assets and liabilities of the Target Group’s foreign operations are translated into the presentation currency of the Target Group (i.e. HK$) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the reporting period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the translation reserve).

Leasing

The Target Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

The Target Group as lessee

Assets held under finance leases are recognised as assets of the Target Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the combined statements of financial position as a finance lease obligation.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the reporting period. Taxable profit differs from profit as reported in the combined statements of comprehensive income because it excludes items of income or expense that are taxable or deductible in other reporting periods and it further excludes items that are never taxable or deductible. The Target Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Target Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from

– II-18 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Retirement benefit costs

Payments to state-managed retirement benefit scheme and the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

Impairment losses on tangible assets

At the end of the reporting period, the Target Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Group’s accounting policies, which are described in note 3, the directors of Sky Will Holdings are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Critical judgements in applying the entity’s accounting policy

The followings are the critical judgements, apart from those involving estimations (see below), that the directors have made in the process of applying the entity’s accounting policies and that has the most significant effect on the amounts recognised in the Financial Information.

Going concern consideration

The assessment of the going concern assumption involves making judgement by the directors of Sky Will Holdings, at a particular point of time, about the future outcome of events or conditions which are inherently uncertain. The directors of Sky Will Holdings consider that the Target Group has the ability to continue as a going concern and the major events or conditions, which may give rise to business risks, that individually or collectively may cast significant doubt about the going concern assumptions are set out in note 1.

– II-19 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Depreciation of plant and equipment

Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account the estimated residual value. The Target Group assesses annually the residual value and the useful life of the plant and equipment and if the expectation differs from the original estimates, such differences from the original estimates will impact the depreciation charges in the period in which the estimates change.

Estimated impairment of plant and equipment

The Target Group assesses annually whether plant and equipment has any indication of impairment, in accordance with the relevant accounting policies. The recoverable amount of the plant and equipment has been determined based on value-in-use calculations. These calculations require the use of judgement and estimates on future operating cash flows and discount rates adopted. Where the actual cash flows are different from the original estimates, a material change in the amount of impairment may arise. Except for impairment of HK$129,000 recognised for the six months ended 30 September 2011, there was no impairment of plant and equipment recognised for the Relevant Periods.

Estimated impairment of investment in the non-consolidated subsidiary

In determining whether Sky Will Holdings’s investment in the non-consolidated subsidiary is impaired requires an estimation of the future cash flows expected to arise from the subsidiary in order to calculate the present value. Where the estimated future cash flows are less than expected, a material impairment loss may arise. Impairment assessment had been carried out at the end of the reporting period on the subsidiary in its entirety. As at 31 March 2009, 2010 and 2011, the investment cost in the non-consolidated subsidiary amounting HK$4,500,000 was fully impaired. The non-consolidated subsidiary was deregistered in July 2011.

Estimated impairment of trade and other receivables, amounts due from related companies and amounts due from directors

When there is objective evidence of impairment loss, the Target Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise.

As at 31 March 2009, 2010, 2011 and 30 September 2011, the carrying amounts of trade and other receivables are HK$4,091,000, HK$3,212,000, HK$5,776,000 and HK$23,444,000 respectively (Net of allowance for doubtful debts of nil, HK$20,000, HK$20,000 and HK$20,000 respectively).

As at 31 March 2009, 2010, 2011 and 30 September 2011, the carrying amounts of amounts due from related companies are HK$7,507,000, HK$2,397,000, HK$28,233,000 and HK$17,956,000 respectively. No allowance for doubtful debts was provided for the amounts due from related companies at the end of each reporting period.

As at 31 March 2009, 2010, 2011 and 30 September 2011, the carrying amounts of amounts due from directors are HK$442,000, HK$2,260,000, nil and HK$220,000 respectively. No allowance for doubtful debts was provided for the amounts due from directors at the end of each reporting period.

Provision for guarantees

The Target Group follows the guidance of HKAS 37 Provisions, Contingent Liabilities and Contingent Assets in determining the provision for guarantees. Provisions have been made based on management’s best estimates and judgements at the date of grant and at the end of the reporting period if it is probable that an outflow of resources

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

will be required to settle the defaulted guarantees and the amount of such provision can be measured reliably. Sky Will Holdings’s management considers the fair value of the guarantees at the date of grant is insignificant and the default risk is low at the end of the reporting period. No provision for contingent liability in respect of the guarantees provided is considered necessary by the directors of Sky Will Holdings.

5. CAPITAL RISK MANAGEMENT

The Target Group manages its capital to ensure entities in the Target Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Target Group’s overall strategy remains unchanged throughout the Relevant Periods.

The capital structure of the Target Group consists of bank and other borrowings, obligations under finance leases, amount(s) due to related companies and a director, bank balances and cash and equity attributable to owners of Sky Will Holdings, comprising issued share capital and reserve.

The directors of Sky Will Holdings review the capital structure on an annual basis. As part of this review, the directors of Sky Will Holdings consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, the Target Group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debts or the redemption of existing debts.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	2009 HK$’000 12,419 15,836	As at 31 March 2010 HK$’000 7,928 8,341	2011 HK$’000 34,286 41,564	As at 30 September 2011 HK$’000 43,799
				68,751

(b) Financial risk management objectives and policies

The Target Group’s major financial instruments include trade and other receivables, amount due from holding company, amount due to an ultimate shareholder, amounts due from/to related companies, amounts due from/to directors, bank balances and cash, trade and other payables, obligations under finance leases and bank and other borrowings. Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Currency risk

The Target Group’s business activities and its assets and liabilities were denominated in HK$, Renminbi (‘‘RMB’’), United States dollars (‘‘US$’’) and Euro (‘‘EUR’’). The management considers the Target Group is not exposed to significant foreign currency risk as majority of its operations and transactions are denominated in the functional currency of the Target Group. The Target Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(ii) Interest rate risk

The Target Group is exposed to cash flow interest rate risk in relation to variable-rate borrowing (see note 26 for details). It is the Target Group’s policy to keep its borrowings at floating rates of interest so as to minimise the fair value interest rate risk.

The Target Group’s exposures to interest rate risk on financial liabilities are detailed in the liquidity risk management section of this note. The Target Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of prime rate arising from the Target Group’s HK$ denominated borrowings.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments. The analysis is prepared assuming the financial instruments outstanding at the end of the reporting period were outstanding for the whole year. A 100 basis points increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rate had been 100 basis points higher/lower and all other variables were held constant, the Target Group’s post-tax profits for the Relevant Periods would decrease/increase as follows:

Profit for the year	For the 2009 HK$’000 —	year ended 31 2010 HK$’000 45	March 2011 HK$’000 49	Six months ended 30 September 2010 2011 HK$’000 HK$’000 62 91

Credit risk

As at the end of the reporting period, the Target Group’s maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Target Group is arising from:

. the carrying amount of the respective recognised financial assets as stated in the combined statements of financial position; and
. the amount of contingent liabilities in relation to financial guarantee issued by the Target Group as disclosed in note 35.

In order to minimise the credit risk, the management of the Target Group has imposed various monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Target Group reviews the recoverable amount of each individual debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of Sky Will Holdings consider that the Target Group’s credit risk is significantly reduced.

The credit quality of the counterparties in respect of amounts due from holding company/related companies/directors are assessed by taking into account their financial position, credit history and other factors. The directors are of the opinion that the risk of default by these counterparties is low.

The Target Group trades only with recognised and creditworthy third parties. The Target Group’s trading terms with its customers are mainly on credit. The normal credit period is generally for a period of 30 days to 60 days for major customers. Each customer has a maximum credit limit. The Target Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. In view of the aforementioned measures and the fact that the Target Group’s trade receivables relate to the customers with good creditworthiness, there is no significant credit risk.

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APPENDIX II

As at 31 March 2009, 2010 and 2011 and 30 September 2011, the Target Group had a concentration of credit risk as of approximately 47%, 43%, 44% and 37% of the total trade receivables was due from the Target Group’s largest customer respectively.

As at 31 March 2009, 2010 and 2011 and 30 September 2011, the Target Group had a concentration of credit risk as of approximately 100%, 100%, 75% and 81% of the total trade receivables were due from the Target Group’s five largest customers respectively.

The Target Group’s concentration of credit risk by geographical locations is mainly in Hong Kong, which accounted for 100%, 100%, 100% and 72% of the total trade receivable as at 31 March 2009, 2010, 2011 and 30 September 2011 respectively.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Collateral held as security and other credit enhancement

The Target Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Liquidity risk

In managing the liquidity risk, the Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Group’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of its bank borrowings.

As at 31 March 2009, 2010 and 2011 and 30 September 2011, the Target Group is exposed to liquidity risk as the Target Group had net current liabilities of HK$3,625,000, HK$912,000, HK$9,747,000 and HK$12,523,000 respectively. The liquidity of the Target Group primarily depends on the funding provided by the directors of Sky Will Holdings and certain related companies to meet its financial obligations when they fall due.

The following tables detail the Target Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities and based on the earliest date on which the Target Group can be required to pay. Specifically, bank borrowings with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

Liquidity tables

At 31 March 2009 Non-derivative financial liabilities Trade and other payables Amounts due to related companies Amount due to a director Obligations under finance leases Financial guarantee contract At 31 March 2010 Non-derivative financial liabilities Trade and other payables Amounts due to related companies Amount due to a director Bank and other borrowings Financial guarantee contract At 31 March 2011 Non-derivative financial liabilities Trade and other payables Amounts due to related companies Amount due to a director Bank and other borrowings Financial guarantee contract	On demand and within 1 year HK$’000 158 15,040 607 32 24,648 40,485 On demand and within 1 year HK$’000 89 3,183 607 4,721 20,815 29,415 On demand and within 1 year HK$’000 213 33,082 3,297 5,246 19,089 60,927	Total undiscounted cash flows HK$’000 158 15,040 607 32 24,648 40,485 Total undiscounted cash flows HK$’000 89 3,183 607 4,721 20,815 29,415 Total undiscounted cash flows HK$’000 213 33,082 3,297 5,246 19,089 60,927	Carrying amount HK$’000 158 15,040 607 31 —
			15,836
			Carrying amount HK$’000 89 3,183 607 4,462 —
			8,341
			Carrying amount HK$’000 213 33,082 3,297 4,972 —
			41,564

– II-24 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

At 30 September 2011 Non-derivative financial liabilities Trade and other payables Amount due to an ultimate shareholder Amounts due to related companies Amount due to a director Bank and other borrowings Obligations under finance leases Financial guarantee contract	On demand and within 1 year HK$’000 16,752 155 19,799 10,657 14,878 1,636 39,394 103,271	1 to 2 years HK$’000 — — — — — 1,770 — 1,770	2 to 5 years HK$’000 — — — — — 4,280 — 4,280	Total undiscounted cash flows HK$’000 16,752 155 19,799 10,657 14,878 7,686 39,394 109,321	Carrying amount HK$’000 16,752 155 19,799 10,657 14,681 6,707 —
					68,751

Bank borrowings with a repayment on demand clause are included in the ‘‘on demand or within 1 year’’ time band in the above maturity analysis. As at 31 March 2010, 2011 and 30 September 2011, the aggregate undiscounted principal amounts of these bank borrowings amounted to HK$2,489,000, HK$2,297,000 and HK$1,634,000 respectively. Taking into account the Target Group’s financial position, the directors of Sky Will Holdings do not believe that it is probable that the banks will exercise their discretionary rights to demand immediate repayment. The directors of Sky Will Holdings believe that such bank borrowings will be repaid approximately four years after the reporting date in accordance with the scheduled repayment dates set out in the loan agreements. At that time, the aggregate principal and interest cash outflows for the bank and other borrowings as at 31 March 2010, 2011 and 30 September 2011 will amount to HK$5,212,000, HK$5,976,000 and HK$15,388,000 respectively.

The amounts included above for financial guarantee contracts are the maximum amounts the Target Group could be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the Target Group considers that it is more likely than not that no amount will be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.

The amounts included above for variable interest rate instruments for non-derivative financial liabilities are subject to change if changes in variable interest rates are different from those estimates of interest rates determined at the end of the reporting period.

(c) Fair value

The fair value of financial guarantee contracts is determined using option pricing models where the major assumptions are the probability of default by the specified counterparty extrapolated from market-based credit information and the amount of loss, given the default.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate their fair values due to their immediate or short-term maturities.

– II-25 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

7. REVENUE AND SEGMENT INFORMATION

Revenue

Revenue represents revenue arising on sales of packaging products net of sales related taxes and discounts, during the Relevant Periods.

Segment information

The chief operating decision-makers have been identified as the directors of Sky Will Holdings. The Target Group is principally engaged in manufacture and trading of packaging products. The directors regard it as a single operating segment and therefore, no segment information is presented.

Geographical information

The Target Group’s operations are located in Hong Kong and the PRC (excluding Hong Kong).

The Target Group’s revenue from external customers and information about its non-current assets by geographical location of the assets are detailed below:

Hong Kong PRC (excluding Hong Kong) Europe United State of America Others Total		Revenue fr	om external	customers Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 1,233 29,130 1,950 12,399 403 13,339 4,554 68 114 — 8,254 54,936		Non-curre	nt assets
	Year 2009 HK$’000 6,533 66 11,976 20,452 463 39,490	ended 31 Ma 2010 HK$’000 5,304 — 7,120 5,769 440 18,633	rch 2011 HK$’000 30,142 2,917 3,794 5,318 1,473 43,644		As 2009 HK$’000 168 452 — — — 620	at 31 March 2010 HK$’000 112 409 — — — 521	2011 HK$’000 57 14,014 — — — 14,071	As at 30 September 2011 HK$’000 625 37,374 — — —
								37,999

Information about major customers

Revenues from customers of the corresponding years contributing over 10% of the total revenue of the Target Group are as follows:

Customer A Customer B Customer C Customer D Customer E Customer F Customer G Customer H	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 6,133 4,371 NA1 12,437 4,749 7,139 11,434 6,393 NA1 4,714 NA1 NA1 NA1 NA1 18,452 NA1 NA1 8,555 NA1 NA1 NA1 NA1 NA1 NA1 34,718 15,513 34,146	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) NA1 NA 4,472 NA 1,935 NA NA1 NA NA1 14,481 NA1 NA NA1 8,081 NA1 6,746 6,407 29,308	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) NA1 NA 4,472 NA 1,935 NA NA1 NA NA1 14,481 NA1 NA NA1 8,081 NA1 6,746 6,407 29,308
			29,308

1 The corresponding revenue did not contribute over 10% of the total sales of the Target Group.

– II-26 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

8. OTHER INCOME

Motor car rental income Gain on disposal of plant and equipment Net foreign exchange gain Gain on deregistration of a subsidiary (Note 16) Interest income Waiver of amount due to a subsidiary Waiver of trade and other payables Sundry income Compensation income (Note) Disposal of scrap materials	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 72 72 72 5 — — — — 56 — — — 1 — — — — 902 — 37 — 11 10 — — — 158 — — — 89 119 1,188	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 36 36 — — — 877 — 195 — 2 — — — — — 404 — — — 454 36 1,968	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 36 36 — — — 877 — 195 — 2 — — — — — 404 — — — 454 36 1,968
			1,968

Note: Compensation income represents amounts received from a customer of the Target Group for the cancellation of orders during the Relevant Periods.

9. FINANCE COSTS

Interest expenses on: Bank loans and other borrowings wholly repayable within five years Finance leases	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 — 320 463 5 1 — 5 321 463	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 253 255 — 135 253 390	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 253 255 — 135 253 390
			390

– II-27 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

10. INCOME TAX EXPENSE

Current tax Hong Kong Profits Tax PRC Enterprise Income Tax Deferred tax (Note 27) Current year/period Attributable to a change in tax rate	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 89 541 943 — — — 89 541 943 (20) (13) (14) (6) — — (26) (13) (14) 63 528 929	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 162 605 — 1,810 162 2,415 — (21 — — — (21 162 2,394	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 162 605 — 1,810 162 2,415 — (21 — — — (21 162 2,394
			2,415
			(21 —
			(21
			2,394

Under the Law of the People’s Republic of China on Enterprise Income Tax (the ‘‘EIT Law’’) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009.

The income tax expense for the Relevant Periods can be reconciled to the (loss) profit before tax per the combined statements of comprehensive income as follows:

(Loss) profit before tax Tax at domestic income tax rate of 16.5% Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Effect of different tax rates of subsidiaries operating in other jurisdictions Decrease in opening deferred tax liability resulting from a decrease in applicable tax rate Tax expense for the year/period	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 (4,122) 3,155 5,667 (680) 521 935 749 7 3 — — (9) — — — (6) — — 63 528 929	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 964 18,279 159 3,016 3 12 — (1,228 — 594 — — 162 2,394	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 964 18,279 159 3,016 3 12 — (1,228 — 594 — — 162 2,394
			3,016 12 (1,228 594 —
			2,394

– II-28 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

11. (LOSS) PROFIT FOR THE YEAR/PERIOD

(Loss) profit for the year/period has been arrived at after charging: Directors’ remuneration Other staff costs — salaries, allowances and other benefits — Retirement benefit schemes contributions Total staff costs Auditor’s remuneration Depreciation of plant and equipment Minimum lease payments under operating lease for rented office premise Bad debts written off in respect of trade and other receivables (Note) Impairment on plant and equipment Impairment loss on trade and other receivables Loss on disposal of plant and equipment Write-off of amount due from a subsidiary Cost of inventories recognised as expenses Net foreign exchange losses	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 42 8 — 419 224 953 28 14 42 489 246 995 15 20 25 100 99 250 180 180 180 — 90 — — — — — 20 — — — — 21 — — — — — 10 6 —	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) — — 315 13,263 15 249 330 13,512 — 51 49 1,711 90 233 — — — 129 — — — 78 — — — 40,456 6 —	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) — — 315 13,263 15 249 330 13,512 — 51 49 1,711 90 233 — — — 129 — — — 78 — — — 40,456 6 —
			13,512
			51 1,711 233 — 129 — 78 — 40,456 —

Note: The bad debts written off are the balances due from debtors which either had been deregistered or loss of contact.

– II-29 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

12. DIRECTORS’ EMOLUMENTS AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments

Details of the emoluments paid or payable to each of the directors during the Relevant Period were as follows:

Year ended 31 March 2009 Chan Fook Kai Fung Ming Kao Wai Kwong, Eric Ng Man Chan (Appointed on 8 December 2008) Year ended 31 March 2010 Chan Fook Kai Fung Ming Kao Wai Kwong, Eric Ng Man Chan	Fees HK$’000 — — — — — Fees HK$’000 — — — — —	Salaries, allowances and other benefits HK$’000 — 42 — — 42 Salaries, allowances and other benefits HK$’000 — 8 — — 8	Retirement benefit schemes contributions HK$’000 — — — — — Retirement benefit schemes contributions HK$’000 — — — — —	Total HK$’000 — 42 — —
				42
				Total HK$’000 — 8 — —
				8

No directors’ emoluments were incurred for the year ended 31 March 2011 and the six months ended 30 September 2010 and 2011.

During the Relevant Periods, no emoluments have been paid by the Target Group to the directors as an inducement to join or upon joining the Target Group or as compensation for loss of office.

None of the directors of Sky Will Holdings has waived any emoluments during the Relevant Periods.

– II-30 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Employees’ emoluments

The five highest paid individuals of the Target Group included 1 director for the year ended 31 March 2009 and 2010, none director for the year ended 31 March 2011 and the six months ended 30 September 2010 and 2011, whose remuneration are reflected in the analysis presented above. Details of remuneration paid to the remaining 4, 4, 5, 5 and 5 highest paid individuals of the Target Group for the years ended 31 March 2009, 2010 and 2011 and the six months ended 30 September 2010 and 2011 respectively were as follows:

Salaries, allowances and other benefits Retirement benefit schemes contributions	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 461 232 953 28 14 42 489 246 995	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 315 466 15 22 330 488	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 315 466 15 22 330 488
			488

The emoluments of the five highest paid individuals were individually less than HK$1,000,000.

During the Relevant Periods, no emoluments have been paid by the Target Group to the five highest paid individuals as an inducement to join or upon joining the Target Group or as compensations for loss of office.

13. DIVIDENDS

No dividend was paid or proposed during the Relevant Periods, nor has any dividend been proposed since the end of the reporting period.

14. LOSS/EARNINGS PER SHARE

No loss/earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

– II-31 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

15. PLANT AND EQUIPMENT

COST At 1 April 2008 Additions Disposals At 31 March 2009 and 31 March 2010 Additions At 31 March 2011 Additions Acquired on acquisition of a subsidiary Disposals At 30 September 2011 DEPRECIATION AND IMPAIRMENT At 1 April 2008 Provided for the year Eliminated on disposals At 31 March 2009 Provided for the year At 31 March 2010 Provided for the year At 31 March 2011 Provided for the period Impairment loss recognised in profit or loss Eliminated on disposals At 30 September 2011 CARRYING VALUES At 31 March 2009 At 31 March 2010 At 31 March 2011 At 30 September 2011	Plant and machinery HK$’000 916 — (263) 653 13,800 14,453 14,270 11,211 (1,086) 38,848 224 45 (68) 201 44 245 194 439 1,624 129 (48) 2,144 452 408 14,014 36,704	Office equipment HK$’000 44 9 — 53 — 53 70 24 — 147 17 3 — 20 6 26 5 31 8 — — 39 33 27 22 108	Furniture and fixtures HK$’000 14 — — 14 — 14 — — — 14 3 2 — 5 1 6 2 8 — — — 8 9 8 6 6	Motor vehicle HK$’000 245 — — 245 — 245 786 517 (84) 1,464 69 50 — 119 48 167 49 216 79 — (12) 283 126 78 29 1,181	Total HK$’000 1,219 9 (263
					965 13,800
					14,765 15,126 11,752 (1,170
					40,473
					313 100 (68
					345 99
					444 250
					694 1,711 129 (60
					2,474
					620
					521
					14,071
					37,999

– II-32 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The above items of plant and equipment are depreciated on a straight-line basis, after taking into account their estimated residual values, at the following rates per annum:

Plant and machinery 6.6%–20% Office equipment 10%–20% Furniture and fixtures 10% Motor vehicles 20%

During the six months ended 30 September 2011, impairment loss of HK$129,000 has been recognised in respect of plant and machinery sold after the end of the reporting period. The recoverable amounts of the disposed assets are the disposal consideration of those assets.

As at the end of the reporting years, the carrying values of plant and equipment held under finance leases were as follows:

					As at
			As at 31 March		30 September
		2009	2010	2011	2011
		HK$’000	HK$’000	HK$’000	HK$’000
	Plant and machinery	—	—	—	8,042
	Motor vehicle	126	—	—	586
		126	—	—	8,628
16.	INVESTMENT IN A SUBSIDIARY
	The Target Group
					As at
			As at 31 March		30 September
		2009	2010	2011	2011
		HK$	HK$	HK$	HK$
	Unlisted equity interest, at cost	4,500,000	4,500,000	4,500,000	—
	Impairment loss recognised	(4,500,000)	(4,500,000)	(4,500,000)	—
		—	—	—	—

The results of one of the subsidiaries, New Spring Paper with investment cost of HK$4,500,000 have not been consolidated in the Financial Information for the Relevant Periods in accordance with HKAS 27 issued by the HKICPA since in the opinion the directors, it would involve expense and delay out of proportion to the value to shareholders of Sky Will Holdings.

During the year, the directors of Sky Will Holdings reviewed the carrying values of the investment cost in New Spring Paper with references to the business operated by the subsidiary. Full impairment loss has been recognised in respect of New Spring Paper as at 31 March 2009, 2010 and 2011. New Spring Paper was de-registered in July 2011 with gain on deregistration of HK$195,000.

Sky Will Holdings

On 15 January 2011, Sky Will Holdings acquired the entire equity interest in Sky Will from the Beneficial Owners. Details are set out in note 1.

– II-33 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

17. INVENTORIES

Raw materials Work in progress Finished goods	2009 HK$’000 — — — —	As at 31 March 2010 HK$’000 — — — —	2011 HK$’000 — — — —	As at 30 September 2011 HK$’000 6,414 6,943 2,305
				15,662

18. TRADE AND OTHER RECEIVABLES

Trade receivables Less: allowance for doubtful debts Deposits, prepayments and other receivables	2009 HK$’000 3,953 — 3,953 138 4,091	As at 31 March 2010 HK$’000 3,184 (20) 3,164 48 3,212	2011 HK$’000 4,889 (20) 4,869 907 5,776	As at 30 September 2011 HK$’000 22,197 (20
				22,177 1,267
				23,444

The Target Group allows credit period ranged from 30 to 60 days to its trade customers. The following is an aged analysis of trade receivables net of allowance for doubtful debts presented based on the invoice date at the end of each reporting period.

Within 30 days 31 to 60 days Over 60 days	2009 HK$’000 2,315 589 1,049 3,953	As at 31 March 2010 HK$’000 1,439 1,198 527 3,164	2011 HK$’000 3,835 88 946 4,869	As at 30 September 2011 HK$’000 10,206 8,388 3,583
				22,177

Trade receivables disclosed as below include amounts which are past due at the end of each reporting period for which the Target Group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Target Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Target Group to the counterparty.

– II-34 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Ageing of trade receivables which are past due but not impaired

2009 HK$’000 31 to 60 days 300 Over 60 days 1,049 Total 1,349 Movement in the allowance for doubtful debts 2009 HK$’000 Balance at beginning of year/period — Impairment losses recognised in respect of trade receivables — Balance at end of year/period —	As at 31 March 2010 HK$’000 378 527 905 As at 31 March 2010 HK$’000 — 20 20	2011 HK$’000 64 946 1,010 2011 HK$’000 20 — 20	As at 30 September 2011 HK$’000 1,519 3,583
			5,102
			As at 30 September 2011 HK$’000 20 —
			20

Included in the allowance for doubtful debts are individually impaired trade receivables with an aggregate balance of HK$20,000 as at 31 March 2010, 31 March 2011 and 30 September 2011, which are long outstanding and the directors of Sky Will Holdings consider the probability of recovery is low. The Target Group does not hold any collateral over these balances.

19. AMOUNT DUE FROM HOLDING COMPANY

The amount was unsecured, non-interest bearing and repayable on demand.

– II-35 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

20. AMOUNTS DUE FROM RELATED COMPANIES

The details of amounts due from related companies are as follows:

Notes New Spring Label & Packaging Limited (‘‘New Spring Label’’) (a), (d) 力新時紙品(深圳)有限公司 (‘‘力新時’’) (b), (e) New Spring Group Company Limited (‘‘New Spring Group’’) (c), (d) New Pearl Hot Stamping & Packaging Limited (‘‘New Pearl’’) (b), (e) Beautiking Investment Limited (‘‘Beautiking’’) (c), (e) Glory Motion Company Limited (‘‘Glory Motion’’) (c), (e)	2009 HK$’000 844 6,663 — — — — 7,507	As at 31 March 2010 HK$’000 1,101 — — 1,296 — — 2,397	2011 HK$’000 19,685 — 8,419 24 45 60 28,233	As at 30 September 2011 HK$’000 14,898 — 2,399 483 — 176
				17,956

Notes:

(a) Kao Wai Kwong, Eric, the director of Sky Will Holdings is also the director of the related company. He has resigned as the director of the related company on 18 May 2010. For the year ended 31 March 2011 and six months ended 30 September 2011, Ng Man Chan, the director of Sky Will Holdings, is the shareholder of the related company.
(b) Kao Wai Kwong, Eric, the director of Sky Will Holdings was also the director of the related company. He has resigned as the director of the related company on 25 February 2011. For the year ended 31 March 2011 and 30 September 2011, Li Mi Lai, the spouse of the director of Sky Will Holdings, Ng Man Chan, is the director of the related company.
(c) Ng Man Chan, the director of Sky Will Holdings is also the director of the related company.
(d) The amounts are in trade nature with a credit term of 60 days.
(e) The amounts are unsecured, non-interest bearing and repayable on demand.

Maximum amount outstanding from related companies during the Relevant Periods:

New Spring Label 力新時 New Spring Group New Pearl Beautiking Glory Motion	2009 HK$’000 1,268 6,663 — — — —	As at 31 March 2010 HK$’000 1,292 6,663 — 1,551 — —	2011 HK$’000 35,792 — 18,095 1,356 60 60	As at 30 September 2011 HK$’000 35,792 12,793 18,095 1,356 60 176

– II-36 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

21. AMOUNTS DUE FROM DIRECTORS

The details of amounts due from directors are as follows:

Kao Wai Kwong, Eric Fung Ming Ng Man Chan	2009 HK$’000 — 442 — 442	As at 31 March 2010 HK$’000 — 442 1,818 2,260	2011 HK$’000 — — — —	As at 30 September 2011 HK$’000 30 — 190
				220

Maximum amount outstanding from directors during the Relevant Periods:

Kao Wai Kwong, Eric Fung Ming Ng Man Chan	2009 HK$’000 — 442 —	As at 31 March 2010 HK$’000 — 442 1,818	2011 HK$’000 — 442 1,818	As at 30 September 2011 HK$’000 30 — 190

The amounts are unsecured, non-interest bearing and repayable on demand.

22. BANK BALANCES AND CASH

Bank balances carried interest at prevailing market rates at a range from 0.01% to 0.5% per annum throughout the Relevant Periods.

23. TRADE AND OTHER PAYABLES

Trade payables Deposits received Accruals and other payables	2009 HK$’000 39 — 119 158	As at 31 March 2010 HK$’000 — — 89 89	2011 HK$’000 — 1,200 213 1,413	As at 30 September 2011 HK$’000 12,865 5,474 3,521
				21,860

The following is an aged analysis of trade payables presented based on the invoice date at the end of each reporting period.

Within 30 days 31 to 60 days Over 60 days	2009 HK$’000 2 — 37 39	As at 31 March 2010 HK$’000 — — — —	2011 HK$’000 — — — —	As at 30 September 2011 HK$’000 3,575 5,529 3,761
				12,865

– II-37 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The average credit period on purchases of goods is 30 days. The Target Group has financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

24. AMOUNTS DUE TO RELATED COMPANIES/A DIRECTOR/AN ULTIMATE SHAREHOLDER

The Target Group

The amounts are unsecured, non-interest bearing and repayable on demand except for the balances of amounts due to related companies of HK$15,035,000, HK$3,183,000, HK$28,351,000 and nil as at 31 March 2009, 2010, 2011 and 30 September 2011 respectively which are in trade nature with a credit term of 60 days.

Sky Will Holdings

The amounts are unsecured, non-interest bearing and repayable on demand.

25. OBLIGATIONS UNDER FINANCE LEASES

It is the Target Group’s policy to lease plant and machinery and motor vehicle under finance leases. The average lease term is 3 years and 4–5 years for the year ended 31 March 2009 and for the period ended 30 September 2011 respectively. Interest rates underlying obligations under finance leases are fixed at respective contract dates at a range from 6.95% to 9.04% for the year ended 31 March 2009 and 3.00% to 4.86% for the six months ended 30 September 2011.

Minimum lease payments	Present value of minimum lease payments	Present value of minimum lease payments
As at 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 32 — — — — — — — — 32 — — (1) — — 31 — —	As at 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 31 — — — — — — — — 31 — — N/A N/A N/A 31 — — (31) — — — — —	As at 30 September 2011 HK$’000 1,419 1,544 3,744
		6,707 N/A
		6,707 (1,419
		5,288

– II-38 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The Target Group’s obligations under finance leases are denominated in HK$ and secured by the lessor’s charge over the leased assets.

26. BANK AND OTHER BORROWINGS

Bank loans Other loans Carrying amount repayable: On demand or within one year Carrying amount of bank borrowings that are not repayable within one year from the end of the reporting period but contain a repayment on demand clause (shown under current liabilities)	2009 HK$’000 — — — — — —	As at 31 March 2010 HK$’000 4,462 — 4,462 1,973 2,489 4,462	2011 HK$’000 4,972 — 4,972 2,675 2,297 4,972	As at 30 September 2011 HK$’000 9,681 5,000
				14,681
				13,047 1,634
				14,681

The ranges of effective interest rates (which are also equal to contracted interest rates) on the Target Group’s borrowings are as follows:

Effective interest rate: Fixed-rate borrowings Variable-rate borrowings	2009 HK$’000 — —	As at 31 March 2010 HK$’000 — 7.5%	2011 HK$’000 — 7.5%	As at 30 September 2011 HK$’000 5% 6% to 7.5%

All bank and other borrowings were unsecured.

The bank borrowings were guaranteed by the directors of Sky Will Holdings. Details are stated in note 33(i).

The other borrowing was guaranteed by a director, Ng Man Chan.

– II-39 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

27. DEFERRED TAX LIABILITIES

The following is the major deferred tax (liabilities) assets recognised and movements thereon during the Relevant Periods:

At 1 April 2008 Effect of change in tax rate Credited to combined statement of comprehensive income At 31 March 2009 Credited to combined statement of comprehensive income At 31 March 2010 Credited to combined statement of comprehensive income At 31 March 2011 (Charged) credited to combined statement of comprehensive income At 30 September 2011	Accelerated tax depreciation HK$’000 (112) 6 20 (86) 13 (73) 14 (59) (13) (72)	Tax losses HK$’000 — — — — — — — — 34 34	Total HK$’000 (112 6 20
			(86 13
			(73 14
			(59 21
			(38

Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the Financial Information in respect of temporary differences attributable to accumulated profits of a PRC subsidiary amounting to HK$1,913,000 as at 30 September 2011 as the Target Group is able to control the timing of the reversal of temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. There is no such temporary difference as at 31 March 2009, 2010 and 2011.

As at 30 September 2011, the Target Group had unused tax losses of HK$206,000 available for offset against future profits. Deferred tax asset has been recognised in respect of such losses. There was no tax loss as at 31 March 2009, 2010 and 2011.

28. SHARE CAPITAL

Sky Will Holdings was incorporated on 2 November 2010. Sky Will Holdings’ 100 ordinary shares of US$1 each which equivalent to a total of HK$780 were issued and allotted to and fully paid by Sky Will Printing & Packaging (BVI) Limited on 2 November 2010.

For the purpose of this report, the share capital as at 31 March 2009 and 2010 represented the share capital of Sky Will amounting to HK$10,000. As mentioned in note 1, after the Equity Transfer, the newly incorporated company, Sky Will Holdings, became the holding company of the Target Group and share capital contributed by the shareholders was decreased from HK$10,000 to HK$780. The decrease of HK$9,220 in share capital contributed by the shareholders was treated as deemed distribution to the controlling shareholder under group reorganisation.

29. MAJOR NON-CASH TRANSACTIONS

During the year ended 31 March 2011, the Target Group acquired plant and equipment at a total consideration of HK$13,800,000 of which HK$10,000,000 was settled through off setting of amount due from New Spring Group, this amount was included in amount due from the related company, New Spring Group.

– II-40 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

During the year ended 31 March 2010, pursuant to an agreement signed as at 30 September 2009 among Sky Will, 力新時 and New Spring Group, an amount of HK$6,663,000 due from 力新時, as included in amounts due from related companies as at 30 September 2009, was set off with an equivalent amounts due to New Spring Group, of which the amount was included in amounts due to related companies as at 30 September 2009.

During the six months ended 30 September 2011, the Target Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the lease of approximately HK$8,924,000.

During the six months ended 30 September 2011, the gain on deregistration of a subsidiary of approximately HK$195,000 was settled through off setting of amount due from a related company.

30. ACQUISITION OF A SUBSIDIARY

On 4 April 2011, Sky Will acquired entire equity interest of New Spring Offset from a related company for consideration of HK$12,000,000. This acquisition has been accounted for using the purchase method. The amount of gain on bargain purchase arising as a result of the acquisition was HK$7,445,000. New Spring Offset is engaged in manufacturing and trading of packaging products. New Spring Offset was acquired so as to continue the expansion of the Target Group’s operation on manufacture and trading of packaging products.

Cash consideration of HK$12,000,000 had been transferred in respect of this acquisition of subsidiary. No acquisition-related costs had been incurred.

Assets acquired and liabilities recognised at the date of acquisition are as follows:

Plant and equipment Inventories Trade and other receivables Amounts due from related companies Bank balances and cash Trade and other payables Amounts due to related companies Income tax payable	HK$’000 11,752 15,049 2,721 35,089 486 (7,557 (35,765 (2,330
	19,445

The fair value of trade and other receivables at the date of acquisition amounted to HK$3,455,000 which is same as the gross contractual amounts of those trade and other receivables acquired. No amount is not expected to be collected based on the best estimate at acquisition date of the contractual cash flows.

Gain on bargain purchase arising on acquisition:

Consideration transferred Less: net assets acquired Gain on bargain purchase arising on acquisition	HK$’000 12,000 (19,445
	(7,445

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The gain on bargain purchase is attributable to the ability of the Target Group in negotiating the agreed terms of the transaction with the vendor.

Net cash outflow on acquisition of New Spring Offset:

Cash consideration paid Less: cash and cash equivalent balances acquired	HK$’000 12,000 (486
	11,514

Included in the profit for the six months ended 30 September 2011 is HK$5,185,000 attributable to the additional business generated by New Spring Offset. Revenue for the six months ended 30 September 2011 includes HK$3,862,000 generated from New Spring Offset.

As the date of acquisition is close to the beginning of six months ended 30 September 2011, no pro-forma information of revenue and profit for the six months ended 30 September 2011 is presented.

31. CAPITAL COMMITMENTS

				As at
		As at 31 March		30 September
	2009	2010	2011	2011
	HK$’000	HK$’000	HK$’000	HK$’000
Capital expenditure in respect of the
acquisition of plant and machinery
contracted but not provided in the
Financial Information	—	—	7,749	—
Commitment in respect of capital
contribution to a subsidiary contracted
for but not provided in the Financial
Information	3,500	3,500	—	—

On 20 August 2008, the registered capital of a subsidiary, New Spring Paper, was increased by HK$7,000,000, from HK$1,000,000 to HK$8,000,000. Up to 8 July 2008, Sky Will had paid up for capital of HK$3,500,000. The remaining amount of HK$3,500,000 has not yet been paid as at 31 March 2009 and 2010. No capital commitment existed in respect of such event as at 31 March 2011 and 30 September 2011 since the contract for contribution to the remaining capital amount was expired on 20 August 2010. The subsidiary had been de-registered on 18 July 2011.

32. RETIREMENT BENEFITS SCHEME

The Target Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The assets of the scheme are held separately from those of the Target Group, in funds under the control of trustees. The Target Group contributes 5% of relevant basic salaries to the scheme, which contribution is matched by employees.

The employees of the Target Group’s subsidiary in PRC are members of a state-managed retirement benefit scheme operated by the government of PRC. The subsidiary is required to contribute 10% of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions.

The total costs charged to the combined statements of comprehensive income of HK$28,000, HK$14,000, HK$42,000, HK$15,000 and HK$249,000 for the year ended 31 March 2009, 2010, 2011 and the six months ended 30 September 2010 and 2011 respectively, represent contributions payable to these schemes by the Target Group during the Relevant Periods.

– II-42 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

33. RELATED PARTY TRANSACTIONS

(i) The directors of Sky Will Holdings, Chan Fook Kai, Kao Wai Kwong, Eric, Ng Man Chan and spouse of Ng Man Chan, provided personal guarantees for the Target Group’s banking facility at HK$6,000,000, HK$9,000,000 and HK$29,534,000 for the year ended 31 March 2010, 2011 and the six months ended 30 September 2011 respectively.
(ii) The remuneration of the directors and other members of key management of the Target Group is disclosed in note 12.
(iii) Other than as disclosed elsewhere in the Financial Information, the Target Group entered into the following transactions with its related companies during the Relevant Periods:

Name of related company Nature of transactions Notes Beautiking Rental expenses (a) New Spring Group Rental expenses (a) New Spring Group Sales of packaging products (b) New Spring Group Purchase of plant and machinery (c) New Spring Group Sub-contracting charges (d) New Pearl Rental income (e) New Spring Label Sub-contracting charges (d) New Spring Label Sales of packaging products (b) New Spring Label Management fee income (f) New Spring Label Disposal of plant and equipment (g) New Spring Offset Sub-contracting charges (d), (h), (i) & (j) Notes:	Year ended 31 March 2009 2010 2011 HK$’000 HK$’000 HK$’000 — 180 180 180 — — — — 8,623 — — 13,800 36,560 14,055 2,541 72 72 72 404 49 — — — 18,384 — — — — — — — — 34,041	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 90 90 — — — 244 — — — — 36 36 — — 49 15,137 — 360 — 860 — N/A	Six months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 90 90 — — — 244 — — — — 36 36 — — 49 15,137 — 360 — 860 — N/A
			—
			244
			—
			—
			36
			—
			15,137
			360
			860
			N/A

(a) The rental expenses were charged on a monthly fixed amount basis as mutually agreed by the Target Group and the related company.
(b) The sales of packaging products was mutually agreed by the Target Group and the related company.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

(c) The purchase of plant and equipment at fair value was executed under a sale and purchase agreement with the related company.
(d) The sub-contracting charges were charged on certain percentage of sales price which was mutually agreed by the Target Group and the related companies.
(e) The rental income was charged at a monthly fixed amount mutually agreed by the Target Group and the related company.
(f) New Spring (SW) signed a management agreement with New Spring Label on 1 April 2011 for the provision of general management services to New Spring Label for the period from 1 April 2011 to 31 March 2012.
(g) Certain plant and equipment was disposed at the net book value.
(h) Ng Man Chan, the director of Sky Will Holdings, is also the director of New Spring Offset.
(i) Certain plant and machinery were leased to the related company without charges.
(j) New Spring Offset became the subsidiary of the Target Group since April 2011. The subcontracting charges were eliminated in the Financial Information for the six months ended 30 September 2011.

34. OPERATING LEASES

The Target Group as leasee

At the end of the reporting period, the Target Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive	2009 HK$’000 — — —	As at 31 March 2010 HK$’000 — — —	2011 HK$’000 180 270 450	As at 30 September 2011 HK$’000 1,452 1,047
				2,499

Operating lease payments represent rentals payable by the Target Group for certain of its manufacturing facilities and office properties. Leases are negotiated for an average term of one to three years and rentals are fixed for an average of one to three years.

At 31 March 2009 and 2010, the Target Group had no commitments under operating leases.

35. CONTINGENT LIABILITIES

As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group provided financial guarantees to a bank in respect of banking facilities granted to a related company, New Spring Label. Outstanding balance of the relevant facilities utilised by the related company amounted to HK$24,648,000, HK$20,815,000, HK$19,089,000 and nil as at 31 March 2009, 2010, 2011 and 30 September 2011 respectively. The fair value of the financial guarantees at its grant date was zero which was based on the valuation report issued by RHL Appraisal Ltd, an independent professional valuer. In addition, the directors of Sky Will Holdings reviewed the financial information of New Spring Label and considered that the related default risk was low at the end of each reporting period. No provision for contingent liability in respect of the guarantees provided is considered necessary by the directors of Sky Will Holdings.

– II-44 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

As at 30 September 2011, the Target Group provided financial guarantees to a bank in respect of banking facilities granted to related companies, Beaumax Company Limited, Beautiking Investments Limited and Glory Motion Company Limited. Outstanding balance of the relevant facilities utilised by the related companies amounted to HK$8,617,000, HK$17,235,000 and HK$13,542,000 respectively as at 30 September 2011. The fair value of the financial guarantees at its grant date on 9 June 2011 was zero which was based on the valuation report issued by RHL Appraisal Ltd, an independent professional valuer. In addition, the directors of Sky Will Holdings reviewed the financial information of the related companies and considered that the related default risk of the financial guarantee was low at the end of the reporting period. No provision for contingent liability in respect of the guarantees provided is considered necessary by the directors of Sky Will Holdings.

B. SUBSEQUENT FINANCIAL STATEMENTS

As at the date of this report, no audited financial statements have been prepared by the Target Group in respect of any period subsequent to 30 September 2011.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants Wong Hon Kei, Anthony Practising Certificate Number: P05591 Hong Kong

– II-45 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

2. MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis on the Target Group

Set out below is the management discussion and analysis of the performance of the Target Group for the three years ended 31 March 2009, 2010 and 2011 and the six months ended 30 September 2011.

Business and Financial Review

For the years ended 31 March 2009 and 2010, the operating entity within the Target Group was Sky Will only.

For the year ended 31 March 2009, the Target Group recorded turnover of approximately HK$39.5 million and gross profit of approximately HK$1.3 million. Net loss for the year ended 31 March 2009 was approximately HK$4.2 million which was mainly contributed from the impairment loss of investment in New Spring Paper which was de-registered on 18 July 2011.

For the year ended 31 March 2010, the Target Group recorded turnover and gross profit of approximately HK$18.6 million and HK$4.1 million respectively. Net profit for the year ended 31 March 2010 was approximately HK$2.6 million.

The Target Group’s revenue dropped of approximately HK$20.9 million as compared to revenue for the year ended 31 March 2010 of approximately HK$39.5 million. Gross profit margin for the year ended 31 March 2010 increased to approximately 22.2% from 3.2% for the year ended 31 March 2009. Starting from the fiscal year 2010, going through the experience during the global financial tsunami, the management of the Target Group changed their business strategy that they target to select and accept orders with higher profit margins and from those customers with better credit record. Therefore, resources can be reallocated to maximize the profit and improve the quality of the products. Sales orders received during the year ended 31 March 2010 was less than those for the year ended 31 March 2009. Sales orders received for the year ended 31 March 2010 were mainly paper packaging products for liquor, cosmetics and perfume with prestigious brand names which were in higher profit margins. Net profit for the year ended 31 March 2009 and adjusted to impairment loss on investment in a subsidiary amounted to approximately HK$0.3 million, representing approximately 0.8% to revenue whereas the net profit to revenue for the year ended 31 March 2010 was approximately 14.1% of revenue. The increase in net profit margin was primarily attributable from the increase in gross profit margin.

For the year ended 31 March 2011, the operating entities within the Target Group were Sky Will and New Spring (SW) which commenced business in January 2011.

For the year ended 31 March 2011, the Target Group recorded turnover and gross profit of approximately HK$43.6 million and HK$6.6 million respectively. Net profit for the year ended 31 March 2011 was approximately HK$4.7 million.

Revenue for the year ended 31 March 2011 represented an increase of approximately HK$25 million as compared to revenue for the year ended 31 March 2010 of approximately HK$18.6 million. With the benefit from the gradual recovery of the worldwide economy from the financial

– II-46 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

tsunami in the second half of 2010 and the referral of customers from NSG to place new sales orders with the Target Group, the number of sales orders and revenue increased significantly. Gross profit margin for the year ended 31 March 2011 was approximately 15.2% whereas that for the year ended 31 March 2010 was approximately 22.2%. Net profit to revenue for the year ended 31 March 2011 was approximately 10.9% whereas that for the year ended 31 March 2010 was approximately 14.1%. The decrease in gross profit and net profit margin was primarily due to increase in material costs.

For the six months ended 30 September 2011, the operating entities within the Target Group were Sky Will, New Spring (SW) which commenced business in January 2011 and New Spring Offset which was acquired by Sky Will in April 2011.

For the six months ended 30 September 2011, the Target Group recorded turnover and gross profit of approximately HK$54.9 million and HK$14.5 million respectively. Net profit for the six months ended 30 September 2011 was approximately HK$15.9 million.

Upon the completion of the acquisition of New Spring Offset in April 2011, the Target Group had expanded its sales in the PRC market. In the first quarter of 2011, the gross domestic product growth rate of the PRC market was 9.4% whereas the real gross domestic product growth rate of the Hong Kong market was 4.6%. Taken the advantage from the economic growth in consumer market in both Hong Kong and the PRC, more sales orders were received during the six months ended 30 September 2011. Gross profit margin for the six months ended 30 September 2011 was approximately 26.4% whereas that for the year ended 31 March 2011 was approximately 15.2%. With advanced machinery and equipment and recognized product quality and services among customers, the Target Group had maintained certain gross profit margin. Most of the paper packaging products produced by the Target Group were with prestigious brand name and most of them were in complex design were in higher profit margin comparatively. Net profit for the six months ended 30 September 2011 and adjusted to the gain on bargain purchase of a subsidiary amounted to approximately HK$8.4 million, representing approximately 15.4% to revenue whereas that for the year ended 31 March 2011 was approximately 10.9%. The increase in net profit margin was primarily due to increase in gross profit margin.

Capital Structure, Liquidity, Financial Resources and Gearing Ratio

As at 31 March 2009, the audited total assets, total liabilities and net liabilities of the Target Group amounted to approximately HK$13.0 million, HK$16.1 million and HK$3.1 million respectively. The cash and bank balances as at 31 March 2009 amounted to approximately HK$0.4 million.

As at 31 March 2010, the audited total assets, total liabilities and net liabilities of the Target Group amounted to approximately HK$8.4 million, HK$8.9 million and HK$0.5 million respectively. The cash and bank balances as at 31 March 2010 amounted to approximately HK$0.06 million.

As the Target Group had net liabilities at 31 March 2009 and 2010, no gearing ratio is calculated.

– II-47 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

As at 31 March 2011, the audited total assets, total liabilities and net assets of the Target Group amounted to approximately HK$48.4 million, HK$44.1 million and HK$4.3 million respectively. The cash and bank balances as at 31 March 2011 amounted to approximately HK$0.3 million.

The gearing ratio, defined as the percentage of total liabilities to total equity, as at 31 March 2011 was approximately 10.3.

As at 30 September 2011, the audited total assets, total liabilities and net assets of the Target Group amounted to approximately HK$98.3 million, HK$78.2 million and HK$20.2 million respectively. The cash and bank balances as at 30 September 2011 amounted to approximately HK$3 million.

The gearing ratio, defined as the percentage of total liabilities to total equity, as at 30 September 2011 was approximately 3.9.

Material Acquisitions and Disposals

During the year ended 31 March 2009 and 2010, the Target Group had no material acquisition and disposal.

During the year ended 31 March 2011, the Target Group acquired machinery and equipment from New Spring Group at a consideration of HK$13.8 million.

During the six months ended 30 September 2011, the Target Group acquired entire equity interest of New Spring Offset so as to continue the expansion of the Target Group’s business.

Capital Commitment

The registered capital of New Spring Paper was HK$8 million. Up to 8 July 2008, the Target Group had paid up for capital of HK$3.5 million. The Target Group committed to contribute for the remaining capital amount of HK$3.5 million as at 31 March 2009 and 2010. Subsequent to the year ended 31 March 2010, no such capital commitment existed as New Spring Paper had been deregistered on 18 July 2011.

As at 31 March 2011, the Target Group committed to capital expenditure of HK$7.7 million in respect of the acquisition of plant and machinery.

As at 30 September 2011, the Target Group had no material capital commitment.

Contingent liabilities

As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group provided financial guarantees to a bank in respect of banking facilities granted to New Spring Label. Outstanding balance of the relevant facilities utilized by New Spring Label amounted to approximately HK$24.6 million, HK$20.8 million, HK$19.1 million and HK$nil respectively.

– II-48 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

The management of the Target Group reviewed the financial information of the related companies and considered that the related default risk was slow at 31 March 2009, 2010, 2011 and 30 September 2011, no provision for contingent liability in respect of the guarantees provided.

Employees and Remuneration Policy

As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group had 5, 5, 10, 625 employees respectively.

Remuneration was determined by reference to market terms and the qualifications and experience of the staff concerned.

Pledged of assets

As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group did not have any pledge of its assets.

Foreign Exchange Exposure

The Target Group’s business activities and its assets and liabilities were denominated in HK$, RMB, United States dollars and Euro. The management of the Target Group considers the exposure to foreign currency risk is insignificant.

Prospects

The management of the Target Group believes the PRC will provide strong growth opportunities for the Target Group as it grows rapidly to become a major market for consumer products. In the first quarter of 2011, the gross domestic product growth rate of the PRC market was 9.4%. Strengthening its expansion of sales in the PRC market is part of the means to achieve long-term sustainable growth.

Given that the customers will continue to adopt conservative strategies in the coming financial year, the Target Group is adopting measures to enhance the efficiency of its existing production facilities by upgrading its machinery and equipment, and on the other hand, diversifying the products range and broadening the customer base.

– II-49 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

==> picture [232 x 62] intentionally omitted <==

5 March 2012

The Directors Climax International Company Limited Unit 906, 9/F., Wings Building 110–116 Queen’s Road Central Central, Hong Kong

Dear Sirs,

We set out below our report on the financial information regarding New Spring Offset Printing (Shenzhen) Limited* (新高準柯式印刷(深圳)有限公司) (‘‘New Spring Offset’’) including the statements of financial position as at 31 December 2009, 2010 and 30 September 2011, the statements of comprehensive income, the statements of changes in equity and the statements of cash flows of New Spring Offset for the period from 1 December 2009 (date of establishment) to 31 December 2009, year ended 31 December 2010 and the nine months ended 30 September 2011 (the ‘‘Relevant Periods’’) and notes thereto (the ‘‘Financial Information’’) for inclusion in the circular issued by Climax International Company Limited (the ‘‘Company’’) dated 5 March 2012 (the ‘‘Circular’’) in connection with the proposed very substantial acquisition of 100% equity interest in Sky Will Printing & Packaging (Holdings) Limited (‘‘Sky Will Holdings’’) by the Company. Sky Will Holdings has become the intermediate holding company of New Spring Offset since 4 April 2011.

New Spring Offset was established in the People’s Republic of China (the ‘‘PRC’’) on 1 December 2009 and is engaged manufacture and trading of packaging products.

New Spring Offset has adopted 31 December as its financial year end date. The statutory financial statements of New Spring Offset which were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC for the period from 1 December 2009 (date of establishment) to 31 December 2010 were audited by Shenzhen Yongxin Ruihe Certified Public Accountants* (深圳永信瑞和會計師事務所), certified public accountants registered in the PRC. No audited financial statements for the year ended 31 December 2011 has been issued up to the date of this report.

For the purpose of this report, the sole director of New Spring Offset has prepared the financial statements of New Spring Offset for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (the ‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’) (the ‘‘Underlying Financial Statements’’). We have carried out independent audit procedures on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information of New Spring Offset for the Relevant Periods as set out in this report for inclusion in the Circular has been prepared from the Underlying Financial Statements, on the basis of presentation set out in note 1 of Section A, whereas no adjustment was concluded necessary. We have

The English name is for identification purpose only. The official name is in Chinese.

– IIA-1 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

examined the Financial Information and have carried out such additional procedures as considered necessary in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and Reporting Accountant’’ as recommended by the HKICPA.

DIRECTOR’S RESPONSIBILITY

The sole director of New Spring Offset is responsible for the preparation of the Underlying Financial Statements and the Financial Information which give a true and fair view. In preparing the Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, that the judgements and estimates made are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated. The directors of the Company are responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

AUDIT OPINION

In our opinion, the Financial Information together with the notes thereon gives, for the purpose of this report, a true and fair view of the state of affairs of New Spring Offset as at 31 December 2009 and 2010 and 30 September 2011 and of the results and cash flows of New Spring Offset for the Relevant Periods.

REVIEW CONCLUSION

The comparative statement of comprehensive income, statement of changes in equity and statement of cash flows of New Spring Offset for the nine months ended 30 September 2010 together with the notes thereto have been extracted from New Spring Offset’s unaudited financial statements for the same period (the ‘‘30 September 2010 Financial Information’’) which was prepared by the sole director of New Spring Offset solely for the purpose of this report.

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FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Based on our review, nothing has come to our attention that causes us to believe that the 30 September 2010 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRSs.

A. FINANCIAL INFORMATION

Statements of Comprehensive Income

Note Revenue 7 Cost of sales Gross profit (loss) Other income 8 Selling expenses Administrative expenses (Loss) profit before tax Income tax (expense) credit 9 (Loss) profit and total comprehensive (expense) income for the period/year 10	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 — — — — — (113) (113) — (113)	Year ended 31 December 2010 HK$’000 52,944 (41,424) 11,520 546 (499) (3,217) 8,350 (2,164) 6,186	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 7,093 60,503 (7,292) (49,357) (199) 11,146 360 754 (132) (596) (1,930) (3,349) (1,901) 7,955 475 (1,963) (1,426) 5,992

– IIA-3 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Statements of Financial Position

Note Non-current asset Plant and equipment 14 Current assets Inventories 15 Trade and other receivables 16 Amounts due from related companies 17 Amount due from a fellow subsidiary 20 Bank balances and cash 18 Current liabilities Trade and other payables 19 Amounts due to related companies 20 Amount due to immediate holding company 20 Amount due to a director 20 Amount due to an ultimate shareholder 20 Income tax payables Net current (liabilities) assets Net (liabilities) assets Capital and reserves Paid-up capital 21 Reserves (Deficiency) shareholder’s equity	As at 31 December 2009 2010 HK$’000 HK$’000 — 12,170 — 13,163 — 7,264 — 28,399 — — 9 134 9 48,960 — 13,113 11 11,560 — 17,236 111 115 — 3 — 2,164 122 44,191 (113) 4,769 (113) 16,939 — 10,300 (113) 6,639 (113) 16,939	As at 30 September 2011 HK$’000 21,811
		15,662 2,536 4,467 11,463 667
		34,795
		16,785 658 7,089 4,447 154 2,842
		31,975
		2,820
		24,631
		12,000 12,631
		24,631

– IIA-4 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Statements of Changes in Equity

As 1 December 2009 (dated of establishment) Loss and total comprehensive expense for the period At 31 December 2009 Capital injection Profit and total comprehensive income for the year At 31 December 2010 Capital injection Profit and total comprehensive income for the period At 30 September 2011 (Unaudited) Nine months ended 30 September 2010 At 31 December 2009 Capital injection Loss and total comprehensive expense for the period At 30 September 2010	Paid-up capital HK$’000 — — — 10,300 — 10,300 1,700 — 12,000 — 10,300 — 10,300	Capital reserve HK$’000 (Note) — — — 566 — 566 — — 566 — 566 — 566	(Accumulated loss) retained profits HK$’000 — (113) (113) — 6,186 6,073 — 5,992 12,065 (113) — (1,426) (1,539)	Total HK$’000 — (113) (113) 10,866 6,186 16,939 1,700 5,992 24,631 (113) 10,866 (1,426) 9,327

Note: The paid-in capital of HK$7,000,000 was satisfied by the plant and equipment with fair value of HK$7,566,000. The surplus of HK$566,000 was recognised as capital reserve.

– IIA-5 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Statements of Cash Flow

OPERATING ACTIVITIES (Loss) profit before tax Adjustments for: Loss on disposal of plant and equipment Interest income Impairment of plant and equipment Depreciation for plant and equipment Operating cash flows before movements in working capital Increase in inventories (Increase) decrease in trade and other receivables (Increase) decrease in amounts due from related companies Increase in amount due from a fellow subsidiary Increase in trade and other payables Increase (decrease) in amount due to immediate holding company Cash (used in) generated from operations Tax paid NET CASH (USED IN) FROM OPERATING ACTIVITIES	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 (113) — — — — (113) — — — — — — (113) — (113)	Year ended 31 December 2010 HK$’000 8,350 — (1) — 1,174 9,523 (13,163) (7,264) (28,367) — 13,113 17,236 (8,922) — (8,922)	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) (1,901) 7,955 — 19 (1) (2) — 129 880 1,716 (1,022) 9,817 (13,865) (2,499) (7,880) 4,728 (90) 26,748 — (11,463) 17,493 3,672 — (10,147) (5,364) 20,856 — (1,285) (5,364) 19,571

– IIA-6 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

INVESTING ACTIVITIES Purchase of plant and equipment Proceed of disposal of plant and equipment Advance to related companies Interest received NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Advance from a director Capital injection Advance from (repayment to) related companies Advance from an ultimate shareholder NET CASH FROM (USED IN) FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD/ YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR, represented by bank balances and cash	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 — — — — — 111 — 11 — 122 9 — 9	Year ended 31 December 2010 HK$’000 (5,778) — (32) 1 (5,809) 4 3,300 11,549 3 14,856 125 9 134	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) (5,544) (11,558) — 53 (32) 2,816 1 2 (5,575) (14,319) 3 4,332 3,300 1,700 7,674 (10,902) — 151 10,977 (4,719) 38 533 9 134 47 667

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FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Notes to the Financial Information

1. GENERAL

New Spring Offset was established and registered in the PRC with limited liability on 1 December 2009. At the date of this report, the ultimate holding company of New Spring Offset is Sky Will Printing & Packaging (BVI) Limited, a company incorporated in the British Virgin Islands and its immediate holding company is Sky Will Printing and Packaging Limited.

The principal activity of New Spring Offset is manufacture and trading of packaging products. The address of the registered office and principal place of business of New Spring Offset is at Xinyang Industrial Zone, Shajing Town, Bao’an District, Shenzhen, Guangdong, the PRC.

The Financial Information is presented in Hong Kong dollars (‘‘HK$’’), which is the same as the functional currency of New Spring Offset.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (‘‘HKFRSs’’)

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, New Spring Offset has consistently adopted all of the new and revised HKAS, amendments and interpretations issued by the HKICPA that are effective for New Spring Offset’s financial year beginning on 1 January 2011 throughout the Relevant Periods.

New and revised standards, amendments and interpretations in issue but not yet effective

New Spring Offset has not early applied the following new or revised standards, amendments or interpretations that have been issued but are not yet effective.

HKFRS 1 (Amendments)	Severe Hyperinflation and Removal of Fixed Dates for
	First-time Adopters1
HKFRS 7 (Amendments)	Disclosures — Transfers of Financial Assets1
HKFRS 9	Financial Instruments4
HKFRS 10	Consolidated Financial Statements4
HKFRS 11	Joint Arrangements4
HKFRS 12	Disclosure of Interests in Other Entities4
HKFRS 13	Fair Value Measurement4
Amendments to HKAS 1 (Revised)	Presentation of Items of Other Comprehensive Income3
HKAS 12 (Amendments)	Deferred Tax: Recovery of Underlying Assets2
HKAS 19 (Revised 2011)	Employee Benefits4
HKAS 27 (Revised 2011)	Separate Financial Statements4
HKAS 28 (Revised 2011)	Investments in Associates and Joint Ventures4
Amendments to HKAS 32	Offsetting Financial Assets and Financial Liabilities5
HK(IFRIC) — Interpretation 20	Stripping Costs in the Production Phase of a Surface Mine4

1 Effective for annual periods beginning on or after 1 July 2011.

2 Effective for annual periods beginning on or after 1 January 2012.

3 Effective for annual periods beginning on or after 1 July 2012.

4 Effective for annual periods beginning on or after 1 January 2013.

5 Effective for annual periods beginning on or after 1 January 2014.

– IIA-8 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Key requirements of HKFRS 9 are described as follows:

. HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
. The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

The directors of New Spring Offset anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of New Spring Offset’s financial assets and financial liabilities. Regarding New Spring Offset’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

To date, New Spring Offset has not entered into transactions involving transfers of financial assets. However, if New Spring Offset enters into other types of transfers of financial assets in the future, disclosures regarding those transfers may be affected.

The sole director of New Spring Offset anticipates that the application of other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of New Spring Offset.

– IIA-9 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance. These policies have been consistently applied throughout the Relevant Periods and materially consistent with the accounting policies adopted by the Company.

The principal accounting policies are set out below.

Plant and equipment

Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

Cash and cash equivalents

Bank balances and cash in the statements of financial position comprise cash at banks and on hand. For the purpose of the statements of cash flows, cash and cash equivalents consist of bank balances and cash.

Financial instruments

Financial assets and financial liabilities are recognised in the statements of financial position when a entity becomes a party to the contractual provisions of the instrument.

Financial assets

New Spring Offset’s financial assets are loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

– IIA-10 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Effective interest method

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amount(s) due from related companies/a fellow subsidiary and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Impairment of financial assets

For all financial assets, objective evidence of impairment could include:

. significant financial difficulty of the issuer or counterparty; or
. breach of contract, such as default or delinquency in interest or principal payments; or
. it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
. the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include New Spring Offset’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 to 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, amount(s) due from related companies/a fellow subsidiary where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade or other receivable, an amount due from related company/a fellow subsidiary is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

– IIA-11 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by an entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of New Spring Offset after deducting all of its liabilities. New Spring Offset’s financial liabilities are classified as other financial liabilities.

Effective interest method

Other financial liabilities

Other financial liabilities including trade and other payables, amount(s) due to related parties/immediate holding company/a director and an ultimate shareholder are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by New Spring Offset are recorded at the proceeds received, net of direct issue

costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and New Spring Offset has transferred substantially all the risks and rewards of ownership of the financial assets.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business and net of sales related taxes and discounts.

Revenue from sale of goods is recognised when the goods are delivered and title has passed.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to New Spring Offset and the amount of revenue can be measured reliably. Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Leasing

– IIA-12 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Foreign currencies

In preparing the financial statements of New Spring Offset, transactions in currencies other than the functional currency of New Spring Offset (foreign currencies) are recorded in the functional currency (i.e. the currency of the primary economic environment in which New Spring Offset operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Retirement benefit costs

Payments to state-managed retirement benefit schemes are charged as an expense when employees have rendered service entitling them to the contributions.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period/year. Taxable profit differs from profit as reported in the statements of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. New Spring Offset’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which New Spring Offset expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Impairment losses on tangible assets

At the end of the reporting period, New Spring Offset reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

– IIA-13 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of New Spring Offset’s accounting policies, which are described in note 3, the sole director of New Spring Offset is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Key sources of estimation uncertainty

Depreciation of plant and equipment

Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual values. New Spring Offset assesses annually the residual value and the useful life of the plant and equipment and if the expectation differs from the original estimate, such differences from the original estimates will impact the depreciation changes in the period in which the estimate change.

Estimated impairment of plant and equipment

New Spring Offset assesses annually whether plant and equipment has any indication of impairment, in accordance with the relevant accounting policies. The recoverable amount of the plant and equipment has been determined based on value-in-use calculations. These calculations require the use of judgement and estimates on future operating cash flows and discount rates adopted. Where the actual cash flows are different from the original estimates, a material change in the amount of impairment may arise.

Estimated impairment of trade and other receivables, amount(s) due from related companies/a fellow subsidiary

When there is objective evidence of impairment loss, New Spring Offset takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise.

As at 31 December 2009 and 2010, and 30 September 2011, the carrying amounts of trade and other receivables are nil, HK$7,264,000 and HK$2,536,000 respectively. No allowance for doubtful debts was provided for the trade and other receivables at the end of each reporting period.

As at 31 December 2009 and 2010, and 30 September 2011, the carrying amounts of amounts due from related companies are nil, HK$28,399,000 and HK$4,467,000 respectively. No allowance for doubtful debts was provided for the amounts due from related companies at the end of each reporting period.

As at 31 December 2009 and 2010, and 30 September 2011, the carrying amounts of amount due from a fellow subsidiary are nil, nil and HK$11,463,000 respectively. No allowance for doubtful debts was provided for the amount due from a fellow subsidiary at the end of each reporting period.

– IIA-14 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

5. CAPITAL RISK MANAGEMENT

New Spring Offset manages its capital to ensure that it will be able to continue as a going concern while maximising the return to the shareholder through the optimisation of the debt and equity balance. New Spring Offset’s overall strategy remains unchanged throughout the Relevant Periods.

The capital structure of New Spring Offset consists of equity attributable to owner of New Spring Offset, comprising paid-up capital and reserve.

The sole director of New Spring Offset reviews the capital structure on an annual basis. As part of this review, the sole director considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the sole director, New Spring Offset will balance its overall capital structure through the payment of dividends to shareholder as well as the issue of new debt.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	As at 31 December 2009 2010 HK$’000 HK$’000 9 35,402 122 42,003	As at 30 September 2011 HK$’000 18,381
		26,598

(b) Financial risk management objectives and policies

New Spring Offset’s major financial instruments include trade and other receivables, amount(s) due from (to) related companies/a fellow subsidiary/related parties/immediate holding company/a director/an ultimate shareholder, bank balances and cash and trade and other payables. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– IIA-15 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

Market risk

(i) Currency risk

Certain bank balances, receivables and payables of New Spring Offset are denominated in foreign currencies. New Spring Offset currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises.

The carrying amounts of New Spring Offset’s foreign currency denominated monetary assets and monetary liabilities were Reminbi (‘‘RMB’’) at the reporting date are as follows:

			As at
	As at 31 December		30 September
	2009	2010	2011
	HK$’000	HK$’000	HK$’000
Assets	9	7,003	2,437
Liabilities	—	13,204	14,250

Sensitivity analysis

The following table details the Company’s sensitivity to a 5% increase or decrease in HK$ against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currencies denominated monetary items and adjusts their translation at the period/year end for a 5% change in foreign currency rates. A positive number below indicates a increase in profit where HK$ strengthen 5% against RMB. For a 5% weakening of HK$ against the relevant currencies, there would be an equal and opposite impact on the profit and the balances below would be negative.

			For the period
			from
			1 December 2009
			(date of		Nine months
			establishment) to	Year ended	ended
			31 December	31 December	30 September
			2009	2010	2011
			HK$’000	HK$’000	HK$’000
Profit	or	loss	—	310	591

(ii) Interest rate risk

New Spring Offset is exposed to cash flow interest rate risk in relation to variable-rate bank balances carried at the prevailing market rate. However, in the opinion of its sole director, the exposure is insignificant.

Credit risk

As at the end of reporting period, New Spring Offset’s maximum exposure to credit risk which will cause a financial loss to New Spring Offset due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the statements of financial position.

In order to minimise the credit risk, the management of New Spring Offset imposed various monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, New Spring Offset reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the sole director of New Spring Offset considers that New Spring Offset’s credit risk is significantly reduced.

– IIA-16 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

The credit quality of the counterparties in respect of amount(s) due from related companies/a fellow subsidiary are assessed by taking into account their financial position, credit history and other factors. The sole director of New Spring Offset is of the opinion that the risk of default by these counterparties is low.

New Spring Offset trades only with recognised and creditworthy third parties. New Spring Offset’s trading terms with its customers are mainly on credit. The normal credit period is generally for a period of 30 days to 60 days for major customers. Each customer has a maximum credit limit. New Spring Offset seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. In view of the aforementioned measures and the fact that New Spring Offset’s trade receivables relate to the customers with good creditworthiness, there is no significant credit risk.

The revenue of New Spring Offset was mainly arisen from the sales to the related companies and a fellow subsidiary which represented 81% and 93% of total revenue for the year ended 31 December 2010 and the nine months ended 30 September 2011 respectively. The concentration of credit risk of trade receivable balances including the trade balances with the related companies and a fellow subsidiary are as follows:

As at 31 December 2010 and 30 September 2011, New Spring Offset had a concentration of credit risk as of approximately 64% and 78% respectively of the total trade receivable balances were due from its largest customer which is its related company and its fellow subsidiary as at 31 December 2010 and 30 September 2011 respectively.

As at 31 December 2010 and 30 September 2011, New Spring Offset had a concentration of credit risk as of 100% and 99% respectively of the total trade receivable balances were due from its five largest customers including the related company and the fellow subsidiary.

New Spring Offset’s concentration of credit risk by geographical locations is mainly in the PRC, which accounted for 100% of the total trade receivables as at 31 December 2010 and 30 September 2011.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Collateral held as security and other credit enhancement

New Spring Offset does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Liquidity risk

In the management of the liquidity risk, New Spring Offset monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance New Spring Offset’s operations and mitigate the effects of fluctuations in cash flows.

As at 31 December 2009, New Spring Offset is exposed to liquidity risk as New Spring Offset had net current liabilities of HK$113,000. The liquidity of New Spring Offset primarily depends on the funding provided by its immediate holding company to meet its financial obligations when they fall due.

All financial liabilities are non-interest bearing and their maturity dates are within one year or on demand.

(c) Fair value

The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using the relevant prevailing market rates.

The sole director considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate their fair values due to their immediate or short-term maturities.

– IIA-17 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

7. REVENUE AND SEGMENT INFORMATION

Revenue

Revenue represents revenue arising on sales of packaging products, net of sale related taxes and discounts, during the Relevant Periods.

Segment information

The chief operating decision-maker has been identified as sole director of New Spring Offset. New Spring Offset is principally engaged in manufacture and trading of packaging products. The sole director regards it as a single operating segment and therefore, no segment information is presented.

Geographical information

New Spring Offset’s operations are located in the PRC (excluding Hong Kong). New Spring Offset’s revenue from external customers by geographical location are detailed below:

PRC (excluding Hong Kong) Hong Kong	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 — — —	Year ended 31 December 2010 HK$’000 9,975 42,969 52,944	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 1,950 4,474 5,143 56,029 7,093 60,503	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 1,950 4,474 5,143 56,029 7,093 60,503
				60,503

Information about major customers

Revenues from customers of the corresponding periods/years contributing over 10% of the total revenue of New Spring Offset are as follows:

Customer A Customer B Customer C Customer D Customer E	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 — — — — — —	Year ended 31 December 2010 HK$’000 23,373 13,884 9,107 5,713 — 52,077	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 5,143 N/A — — 1,205 N/A — — — 50,809 6,348 50,809	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 5,143 N/A — — 1,205 N/A — — — 50,809 6,348 50,809
				50,809

1 The corresponding revenue did not contribute over 10% of the total sales of New Spring Offset.

– IIA-18 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

8. OTHER INCOME

Sales of scrap materials Interest income Net foreign exchange gain	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 — — — —	Year ended 31 December 2010 HK$’000 545 1 — 546	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 359 669 1 2 — 83 360 754	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 359 669 1 2 — 83 360 754
				754

INCOME TAX EXPENSE (CREDIT)

PRC Enterprise Income Tax Current tax Deferred tax for the year/period	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 — — —	Year ended 31 December 2010 HK$’000 2,164 — 2,164	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) — 1,963 (475) — (475) 1,963	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) — 1,963 (475) — (475) 1,963
				1,963

Income tax expense for the year ended 31 December 2010 and the nine months ended 30 September 2011 represented the current PRC income tax for the year/period. Income tax credit for the nine months ended 30 September 2010 represented the deferred tax assets regarding the tax losses of approximately HK$1,901,000 for the period. There were no tax losses as at 31 December 2009, 2010 and 30 September 2011.

No provision of Hong Kong Profit Tax has been made as New Spring Offset’s income neither arise in, nor is derived from Hong Kong.

Under the Law of the People’s Republic of China on Enterprise Income Tax (the ‘‘EIT Law’’) and Implementation Regulation of the EIT Law, the tax rate of New Spring Offset is 25% since New Spring Offset was established onwards.

– IIA-19 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

The income tax expense (credit) for the period/year can be reconciled to the (loss) profit before tax per the statements of comprehensive income as follows:

For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 (Loss) profit before tax (113) Tax at domestic income tax rate of 25% (28) Tax effect of expenses not deductible for tax purposes 28 Tax effect of income not taxable for tax purposes — Income tax expense (credit) — 10. (LOSS) PROFIT FOR THE PERIOD/YEAR For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 (Loss) profit for the period/year has been arrived at after charging: Director’s remuneration — Other staff costs — salaries, allowances and other benefits 85 — Retirement benefits schemes contributions — Total staff costs 85 Auditors’ remuneration — Cost of inventories recognised as an expense — Depreciation for plant and equipment — Minimum lease payments under operating lease for rented premises — Loss on disposal of plant and equipment — Impairment loss of plant and equipment — Net foreign exchange losses —	Year ended 31 December 2010 HK$’000 8,350 2,088 76 — 2,164 Year ended 31 December 2010 HK$’000 — 10,418 204 10,622 17 41,424 1,174 818 — — 299	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) (1,901) 7,955 (475) 1,989 — 34 — (60 (475) 1,963 Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) — — 5,832 15,379 130 234 5,962 15,613 — — 7,292 49,357 880 1,716 548 621 — 19 — 129 27 —	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) (1,901) 7,955 (475) 1,989 — 34 — (60 (475) 1,963 Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) — — 5,832 15,379 130 234 5,962 15,613 — — 7,292 49,357 880 1,716 548 621 — 19 — 129 27 —
			15,613
			— 49,357 1,716 621 19 129 —

– IIA-20 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

11. DIRECTOR’S EMOLUMENTS AND EMPLOYEES’ EMOLUMENTS

Director’s emoluments

During the Relevant Periods, no emoluments were paid or payable to the sole director of New Spring Offset.

During the Relevant Periods, no emoluments have been paid by New Spring Offset to the sole director of New Spring Offset as an inducement to join or upon joining New Spring Offset or as compensation for loss of office.

The sole director of New Spring Offset has not waived any emoluments during the Relevant Periods.

Employees’ emoluments

The emoluments of the five highest paid individuals, which were individually less than HK$1,000,000 during the Relevant Periods and the nine months ended 30 September 2010, were as follows:

Salaries and other benefits Contributions to retirement benefits schemes	For the period from 1 December 2009 (date of establishment) to 31 December 2009 HK$’000 85 — 85	Year ended 31 December 2010 HK$’000 432 9 441	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 307 364 6 19 313 383	Nine months ended 30 September 2010 2011 HK$’000 HK$’000 (Unaudited) 307 364 6 19 313 383
				383

During the Relevant Periods, no emoluments have been paid by New Spring Offset to the five highest paid individuals as an inducement to join or upon joining New Spring Offset, or as compensation for loss of office.

12. DIVIDENDS

No dividend was paid or proposed during the Relevant Periods, nor has any dividend been proposed since the end of the reporting period.

13. (LOSS) EARNINGS PER SHARE

No (loss) earnings per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

– IIA-21 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

14. PLANT AND EQUIPMENT

COST At 1 December 2009 (date of establishment) and 31 December 2009 Additions At 31 December 2010 Additions Disposals At 30 September 2011 DEPRECIATION AND IMPAIRMENT At 1 December 2009 (date of establishment) and 31 December 2009 Provided for the year At 31 December 2010 Provided for the period Impairment loss Elimination on disposals At 30 September 2011 CARRYING VALUES At 31 December 2009 At 31 December 2010 At 30 September 2011	Plant and machinery HK$’000 — 12,779 12,779 11,275 — 24,054 — 1,164 1,164 1,630 129 — 2,923 — 11,615 21,131	Furniture, fixtures and office equipment HK$’000 — 16 16 81 — 97 — 2 2 5 — — 7 — 14 90	Motor vehicles HK$’000 — 549 549 202 (84) 667 — 8 8 81 — (12) 77 — 541 590	Total HK$’000 — 13,344
				13,344 11,558 (84
				24,818
				— 1,174
				1,174 1,716 129 (12
				3,007
				—
				12,170
				21,811

The above items of plant and equipment are depreciated on a straight-line basis, after taking into account of their estimated residual values, at the following rates per annum:

Plant and machinery 10%–20% Furniture, fixtures and office equipment 20% Motor vehicles 20%

During the nine months ended 30 September 2011, impairment loss of HK$129,000 has been recognised in respect of plant and machinery which was sold after the end of the reporting period. The recoverable amount of those assets is reference to their net sales proceeds.

– IIA-22 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

15. INVENTORIES

Raw materials Work-in-progress Finished goods	As at 31 December 2009 2010 HK$’000 HK$’000 — 6,634 — 5,438 — 1,091 — 13,163	As at 30 September 2011 HK$’000 6,414 6,943 2,305
		15,662

16. TRADE AND OTHER RECEIVABLES

Trade receivables Prepayment and deposits paid and other receivables	As at 31 December 2009 2010 HK$’000 HK$’000 — 6,707 — 557 — 7,264	As at 30 September 2011 HK$’000 1,529 1,007
		2,536

New Spring Offset allows a credit period ranging from 30 days to 60 days to its trade customers. The following is an aged analysis of trade receivables presented based on the invoice date at the end of each reporting period.

Within 30 days 31 to 60 days	As at 31 December 2009 2010 HK$’000 HK$’000 — 6,707 — — — 6,707	As at 30 September 2011 HK$’000 790 739
		1,529

Before accepting any new customer, the Company assesses the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed twice a year. Majority of the trade receivables that are neither past due nor impaired have no default payment history.

No balance was past due as at the reporting date. New Spring Offset does not hold any collateral over these balances.

– IIA-23 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

17. AMOUNTS DUE FROM RELATED COMPANIES

Note New Spring Group Co. Ltd (‘‘New Spring Group’’) (a) & (e) Sky Will Printing & Packaging Limited (‘‘Sky Will’’) (a) & (d) New Spring Label & Packaging Limited (‘‘New Spring Label’’) (b) & (d) New Pearl Hot Stamping & Packaging Limited (‘‘New Pearl’’) (c) & (e)	As at 31 December 2009 2010 HK$’000 HK$’000 — — — 22,603 — 5,764 — 32 — 28,399	As at 30 September 2011 HK$’000 2,400 — 1,619 448
		4,467

Notes:

(a) Ng Man Chan is the common director.
(b) Ng Man Chan, the shareholder of New Spring Label is also the director of New Spring Offset.
(c) Li Mi Lai, the Director of New Pearl is the spouse of the sole director of New Spring Offset, Ng Man Chan.
(d) The amounts are in trade nature with a credit term of 60 days.
(e) The amounts are unsecured, non-interest bearing and repayable on demand.

Maximum amount outstanding from related companies during the Relevant Periods:

					As at
			As at 31	December	30 September
			2009	2010	2011
			HK$’000	HK$’000	HK$’000
New	Spring	Group	N/A	N/A	2,706
Sky	Will		N/A	24,002	28,289
New	Spring	Label	N/A	5,957	8,098
New	Pearl		N/A	32	448

18. BANK BALANCES AND CASH

Bank balances carried interest at prevailing market rates at a range from 0.36% to 0.5% per annum as at 31 December 2009, 31 December 2010 and 30 September 2011.

– IIA-24 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

19. TRADE AND OTHER PAYABLES

Trade payables Accruals, deposits received and other payables	As at 31 December 2009 2010 HK$’000 HK$’000 — 10,562 — 2,551 — 13,113	As at 30 September 2011 HK$’000 10,531 6,254
		16,785

The following is an aged analysis of trade payables presented based on the invoice date at the end of each reporting period.

Within 30 days 31 to 60 days Over 60 days	As at 31 December 2009 2010 HK$’000 HK$’000 — 2,408 — 2,694 — 5,460 — 10,562	As at 30 September 2011 HK$’000 2,949 4,754 2,828
		10,531

The average credit period on purchases of goods is 30 days. New Spring Offset has financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

20. AMOUNT DUE FROM A FELLOW SUBSIDIARY/AMOUNT(S) DUE TO RELATED COMPANIES/ IMMEDIATE HOLDING COMPANY/A DIRECTOR/AN ULTIMATE SHAREHOLDER

The amount(s) due to related companies/a director/an ultimate shareholder are unsecured, interest-free and repayable on demand.

The amount due from a fellow subsidiary and amount due to immediate holding company are in trade nature with a credit term of 60 days.

21. PAID-UP CAPITAL

Registered capital: At 1 December 2009 (date of establishment), 31 December 2009, 31 December 2010 and 30 September 2011 Paid-up capital: At 1 December 2009 (date of establishment) and 31 December 2009 Capital injection on 13 January 2010 Capital injection on 18 March 2010 Capital injection on 18 June 2010 At 31 December 2010 Capital injection on 22 February 2011 At 30 September 2011	HK$’000 12,000
	HK$’000 — 2,400 7,000 900
	10,300 1,700
	12,000

– IIA-25 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

On 13 January 2010 and 18 June 2010, New Spring Group injected cash of HK$2,400,000 and HK$900,000 respectively as paid-up capital of New Spring Offset.

On 18 March 2010, New Spring Group Limited (‘‘New Spring Group’’), the shareholder of New Spring Offset, injected plant and equipment to New Spring Offset as paid-up capital of HK$7,000,000 of New Spring Offset. The excess of fair value of those plant and equipment of HK$7,566,000 over the paid-up capital of HK$7,000,000 was recorded as capital reserve.

On 22 February 2011, New Spring Group injected cash of HK$1,700,000 as paid-up capital of New Spring Offset.

22. MAJOR NON-CASH TRANSACTIONS

As mentioned in note 21, the capital injection of HK$7,000,000 was satisfied by the plant and equipment with fair value of HK$7,566,000 for the year ended 31 December 2010.

23. OPERATING LEASES

The Company lease its office premises and staff quarters under operating lease. Leases are negotiable for an average term of one to two years and lease payments are fixed during the lease term.

At the end of the reporting period, New Spring Offset had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth year inclusive	As at 31 December 2009 2010 HK$’000 HK$’000 — 684 — — — 684	As at 30 September 2011 HK$’000 1,288 878
		2,166

24. RETIREMENT BENEFITS SCHEMES

The employees of New Spring Offset in PRC are members of a state-managed retirement benefit scheme operated by the government of PRC. New Spring Offset is required to contribute 10% of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of New Spring Offset with respect to the retirement benefit scheme is to make the specified contributions.

The total costs charged to the statements of comprehensive income of nil, HK$204,000, HK$130,000 and HK$234,000 for the period from 1 December 2009 (date of establishment) to 31 December 2009, the year ended 31 December 2010 and the nine months ended 30 September 2010 and 2011 respectively, represent contributions payable to these schemes by New Spring Offset during the Relevant Periods.

– IIA-26 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

25. RELATED PARTY TRANSACTIONS

(i) Other than disclosed elsewhere on the Financial Information, New Spring Offset entered into the following transactions with its related companies during the Relevant Periods and the nine months ended 30 September 2010:

==> picture [383 x 455] intentionally omitted <==

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

For the period
from 1
December 2009
(date of
establishment) For year ended For nine months period
Name of related Nature of to 31 December 31 December ended 30 September
party transactions 2009 2010 2010 2011
Notes HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited)
Sky Will Sales of goods (a) — 23,373 5,143 5,223
New Spring Group Sales of goods (a) — 13,884 — —
New Spring Label Sales of goods (a) — 5,713 — —
New Spring (SW) Sales of goods (a) — — — 50,809
寶安區沙井鎮辛養新 Purchases of raw
高准柯式印刷廠 materials
(‘‘New Spring’’) (b) & (e) — 1,617 — —
New Spring Group Purchases of raw
materials (b) — 20,796 — 176
新高準紙製品 (深圳) Purchases of raw
有限公司 (‘‘New materials and
Spring paper’’) finished goods (b) & (f) — 135 — —
New Spring (SW) Purchases of raw
materials (b) — — — 15,198
New Spring paper Purchase of motor
vehicles (c) & (f) — 284 — —
New Spring Rental expenses (d) & (e) — 459 — —
Zhang Xiangnong Rental expenses (d) & (g) — 31 — —
----- End of picture text -----

Notes:

(a) The sales of paper products were mutually agreed by New Spring Offset and the related companies.
(b) The purchases of raw materials and finished goods were mutually agreed by New Spring Offset and the related companies.
(c) The purchase of motor vehicles was mutually agreed by New Spring Offset and the related party.

– IIA-27 –

FINANCIAL INFORMATION OF NEW SPRING OFFSET

APPENDIX IIA

(d) The rental expenses were charged on a monthly fixed amount basis as mutually agreed by New Spring Offset and the related parties.
(e) Ng Man Chan, the director of New Spring Offset, is also the director of the related companies.
(f) Li Mi Lai, the spouse of Ng Man Chan, is the director of the related company.
(g) Zhang Xiangnong is one of the ultimte shareholder of New Spring Offset before 4 April 2011.
(ii) Compensation of key management personnel

No remuneration was paid to key management personnel during the Relevant Periods.

B. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by New Spring Offset in respect of any period subsequent to 30 September 2011.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants Wong Hon Kei, Anthony Practising Certificate Number: P05591 Hong Kong

– IIA-28 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

A. ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

==> picture [232 x 61] intentionally omitted <==

5 March 2012

The Board of Directors Climax International Company Limited

Dear Sirs,

We report on the unaudited pro forma financial information (the ‘‘Unaudited Pro Forma Financial Information’’) of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) set out in Appendix III of the circular dated 5 March 2012 (the ‘‘Circular’’) in connection with the following proposed transactions (the ‘‘Transactions’’):

(i) the proposed share consolidation (the ‘‘Share Consolidation’’) of every 20 issued and unissued shares of the Company of HK$0.01 each into 1 share of the Company of HK$0.2 each (the ‘‘Consolidated Share’’);
(ii) upon the Share Consolidation taking effect, the proposed reduction (the ‘‘Capital Reduction’’) of issued share capital of the Company by cancelling the issued share capital to the extent of HK$0.19 on each issued Consolidated Share in the share capital of the Company such that the nominal value of the issued Consolidated Share will be reduced from HK$0.20 each to HK$0.01 each;
(iii) upon the Share Consolidation and Capital Reduction taking effect, the proposed subdivision of each authorised but unissued Consolidated Share of HK$0.20 each into 20 ordinary shares of HK$0.01 each (the ‘‘Adjusted Shares’’);
(iv) the proposed subscription of 450,000,000 Adjusted Shares at a subscription price of HK$0.10 each by World Treasure Global Limited which is a company incorporated in the British Virgin Islands and wholly-owned by Mr. Wong Hin Shek, the executive director of the Company;
(v) the proposed open offer of 8 offer shares for every Adjusted Shares held by the existing shareholders at an offer price of HK$0.10 each;
(vi) the proposed issue of bonus (the ‘‘Bonus Issue’’) shares of 5 ordinary shares for every 7 Adjusted Shares held by the existing shareholders;

– III-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

(vii) the proposed acquisition 100% of the issued share capital of Sky Will Printing & Packaging (Holdings) Limited (‘‘Sky Will Holdings’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’) (together with the Group collectively referred to as the ‘‘Enlarged Group’’).

The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company (the ‘‘Directors’’), for illustrative purpose only, to provide information about how the transactions might have affected the financial information presented. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on page III-4 of the Circular.

Respective responsibilities of the Directors and reporting accountants

It is the responsibility solely of the Directors to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in Investment Circulars’’ issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the Directors. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

– III-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

. the financial position of the Enlarged Group as at 30 September 2011 or at any future date; or
. the results and cash flows of the Enlarged Group for the year ended 31 March 2011 or for any future period.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

SHINEWING (HK) CPA Limited Certified Public Accountants Wong Hon Kei, Anthony Practising Certificate Number: P05591

Hong Kong

– III-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

B. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction to the unaudited pro forma financial information of the Enlarged Group

The accompanying unaudited pro forma financial information (the ‘‘Unaudited Pro Forma Financial Information’’) of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and Sky Will Printing & Packaging (Holdings) Limited (‘‘Sky Will Holdings’’) and its subsidiaries (hereinafter referred to as the ‘‘Target Group’’; together with the Group hereinafter referred to as the ‘‘Enlarged Group’’) has been prepared by the directors of the Company (the ‘‘Directors’’) to illustrate the effect of the following proposed transactions (the ‘‘Transactions’’):

(i) the proposed share consolidation (the ‘‘Share Consolidation’’) of every 20 issued and unissued shares of the Company of HK$0.01 each into 1 share of the Company of HK$0.2 each (the ‘‘Consolidated Share’’);
(ii) upon the Share Consolidation taking effect, the proposed reduction (the ‘‘Capital Reduction’’) of issued share capital of the Company by cancelling the issued share capital to the extent of HK$0.19 on each issued Consolidated Share in the share capital of the Company such that the nominal value of the issued Consolidated Share will be reduced from HK$0.20 each to HK$0.01 each;
(iii) upon the Share Consolidation and Capital Reduction taking effect, the proposed subdivision (the ‘‘Share Subdivision’’) of each authorised but unissued Consolidated Share of HK$0.20 each into 20 ordinary shares of HK$0.01 each (the ‘‘Adjusted Shares’’);
(iv) the proposed subscription (the ‘‘Subscription’’) of 450,000,000 Adjusted Shares at a subscription price of HK$0.10 each by World Treasure Global Limited (‘‘World Treasure’’) which is a company incorporated in the British Virgin Islands and whollyowned by Mr. Wong Hin Shek, the executive director of the Company;
(v) the proposed open offer (the ‘‘Open Offer’’) of 8 offer shares for every Adjusted Shares held by the existing shareholders at an offer price of HK$0.10 each;
(vi) the proposed issue of bonus shares (the ‘‘Bonus Issue’’) of 5 ordinary shares for every 7 Adjusted Shares held by the existing shareholders;
(vii) the proposed acquisition 100% of the issued share capital of Sky Will Holdings (the ‘‘Acquisition’’).

The following is the Unaudited Pro Forma Financial Information of the Enlarged Group as if the Transactions have been completed (the ‘‘Completion’’) on 30 September 2011 for the unaudited pro forma consolidated statement of financial position and on 1 April 2010 for the unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows.

– III-4 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group are prepared based on the audited consolidated statement of comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 March 2011 as extracted from the published annual report of the Group for the year ended 31 March 2011, and the audited combined statement of comprehensive income and the audited combined statement of cash flows of the Target Group for the year ended 31 March 2011 as set out in Appendix II to the Circular.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group is prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 30 September 2011 as extracted from the published interim report of the Group for the six months ended 30 September 2011, and the audited combined statement of financial position of the Target Group as at 30 September 2011 as extracted from the accountants’ reports of the Target Group as set out in Appendix II to the Circular.

The accompanying Unaudited Pro Forma Financial Information of the Enlarged Group is prepared by the Directors and based on a number of assumptions, estimates, uncertainties and currently available information to provide information of the Enlarged Group upon completion of the Transactions. As it is prepared for illustrative purpose only and because of its hypothetical nature, it does not purport to give a true picture of the actual financial position, results and cash flow of the Enlarged Group on completion of the Transactions. Further, the accompanying Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to predict the future financial position or results of operations of the Enlarged Group after the completion of the Transactions.

– III-5 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE ENLARGED GROUP

Revenue Cost of sales Gross profit Other revenue Selling expenses Administrative expenses Loss on changes in fair value of held for trading investments Finance costs (Loss) profit before tax Income tax expense (Loss) profit and total comprehensive (expense) income for the year attributable to owners of the Company	The Group for the year ended 31 March 2011 HK$’000 87,366 (86,045) 1,321 808 — (6,311) (183) (2) (4,367) (4) (4,371)	The Target Group for the year ended 31 March 2011 HK$’000 43,644 (37,008) 6,636 1,188 (751) (943) — (463) 5,667 (929) 4,738	Pro forma adjustment Note HK$’000 — — — — — (5,000) 1 — (3,585) 4a (8,585) — (8,585)	The Enlarged Group HK$’000 131,010 (123,053
				7,957 1,996 (751 (12,254 (183 (4,050
				(7,285 (933
				(8,218

– III-6 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

Non-current assets Plant and equipment Goodwill Current assets Inventories Trade and other receivables Amounts due from directors Amount due from holding company Amounts due from related companies Deposit in other financial institution Held for trading investments Bank balances and cash Current liabilities Trade and other payables Amount due to a director Amounts due to related companies Amount due to an ultimate holding shareholder Income tax payables Obligations under finance leases Bank and other borrowings Net current assets (liabilities) Total assets less current liabilities Non-current liabilities Obligations under finance leases Deferred tax liabilities Promissory note Net assets	The Group as at 30 September 2011 HK$’000 884 — 884 — 5,098 — — — 233 4,625 59,213 69,169 2,233 — — — — 6 — 2,239 66,930 67,814 15 — — 15 67,799	The Target Group as at 30 September 2011 HK$’000 37,999 — 37,999 15,662 23,444 220 1 17,956 — — 3,038 60,321 21,860 10,657 19,799 155 4,273 1,419 14,681 72,844 (12,523) 25,476 5,288 38 — 5,326 20,150	Pro forma adjustment Note HK$’000 1,284 3 89,408 2 90,692 — (5,000) 5 — — — — — (5,000) 1 (30,000) 5 45,372 10 45,000 11 50,372 — — — — — — — — 50,372 141,064 — 281 3 49,527 4a 49,808 91,256	The Enlarged Group HK$’000 40,167 89,408
				129,575
				15,662 23,542 220 1 17,956 233 4,625 117,623
				179,862
				24,093 10,657 19,799 155 4,273 1,425 14,681
				75,083
				104,779
				234,354
				5,303 319 49,527
				55,149
				179,205

– III-7 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

CAPITAL AND RESERVES Share capital Reserves Total equity attributable to the owners of the Company and total equity	The Group as at 30 September 2011 HK$’000 11,486 56,313 67,799	The Target Group as at 30 September 2011 HK$’000 1 20,149 20,150	Pro forma adjustment Note HK$’000 (1) 6 2,000 4b (10,912) 9 4,594 10 4,500 11 410 12 (5,000) 1 24,034 4b (20,149) 7 10,912 9 40,778 10 40,500 11 (410) 12 91,256	The Enlarged Group HK$’000 12,078 167,127
				179,205

– III-8 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE ENLARGED GROUP

OPERATING ACTIVITIES (Loss) profit before tax Adjustments for: Depreciation of plant and equipment Finance costs Waiver of amount due to a subsidiary Interest income Loss on changes in fair value of held for trading investments Dividend income Written off of other payables Operating cash flows before movements in working capital Decrease (increase) in trade and other receivables Increase in amounts due from related companies (Decrease) increase in trade and other payables Increase in amounts due to related companies Cash used in operations Tax paid NET CASH USED IN OPERATING ACTIVITIES	The Group for the year ended 31 March 2011 HK$’000 (4,367) 63 2 — (408) 183 (155) (245) (4,927) 38,693 — (39,029) — (5,263) — (5,263)	The Target Group for the year ended 31 March 2011 HK$’000 5,667 250 463 (902) — — — — 5,478 (2,564) (40,560) 1,324 33,082 (3,240) (103) (3,343)	Pro forma adjustment Note HK$’000 (5,000) 1 (3,585) 4a — 3,585 — — — — — (5,000) — — — — (5,000) — (5,000)	The Enlarged Group HK$’000 (7,285
				313 4,050 (902 (408 183 (155 (245
				(4,449 36,129 (40,560 (37,705 33,082
				(13,503 (103
				(13,606

– III-9 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

INVESTING ACTIVITIES Advance to holding company Repayment from directors Repayment from related companies Interest income Dividend income Acquisition of a subsidiary Deposit paid for acquisition of an investment Increase in deposits in other financial institution Purchase of plant and equipment NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES New bank borrowings raised Advance from a director Proceeds from issue of shares Interest paid Repayment of obligations under finance leases Repayment of bank borrowings NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	The Group for the year ended 31 March 2011 HK$’000 — — — 408 155 — (5,000) (107) — (4,544) — — — (2) (5) — (7) (9,814) 69,722 59,908	The Target Group for the year ended 31 March 2011 HK$’000 (1) 2,251 2,373 — — — — — (3,800) 823 3,000 2,690 — (463) — (2,490) 2,737 217 59 276	Pro forma adjustment Note HK$’000 — — — — — (35,000) 5 5,000 5 — — (30,000) — — 90,372 10&11 — — — 90,372 55,372 — 55,372	The Enlarged Group HK$’000 (1 2,251 2,373 408 155 (35,000 — (107 (3,800
				(33,721
				3,000 2,690 90,372 (465 (5 (2,490
				93,102
				45,775 69,781
				115,556

– III-10 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

This represents the legal and professional fees of approximately HK$5,000,000 which are directly attributable to the Transactions. This adjustment has no continuing effect on the pro forma consolidated statement of comprehensive income of the Enlarged Group.
The adjustment on goodwill of approximately HK$89,408,000 resulted from the Acquisition is calculated as follows:

Fair value of consideration (Note 4) Less: Fair value of consolidated identifiable assets and liabilities acquired (Note 3) Goodwill on Acquisition	HK$’000 110,561 21,153
	89,408

Pursuant to the sale and purchase agreement dated 20 January 2011 in respect of the Acquisition (the ‘‘Agreement’’), the total consideration of HK$110,000,000 is to be satisfied by (i) cash consideration of HK$35,000,000; (ii) issuance of interest-free promissory note of HK$55,000,000 (the ‘‘Promissory Note’’); and (iii) issuance of 200,000,000 ordinary shares of HK$0.1 each of the Company (the ‘‘Consideration Shares’’).

Pursuant to the Agreement, the consideration settled by the Promissory Note of HK$55,000,000 is subject to the adjustment based on the consolidated net profit of the Target Group not be less than HK$16,000,000 for the year ending 31 March 2012 (the ‘‘Guaranteed Amount’’). The consideration shall be reduced by such amount equal to the shortfall in the Guaranteed Amount multiplied by 6.875 and limited to HK$55,000,000. For the purpose of the Unaudited Pro Forma Financial Information, the Directors assume that the Guaranteed Amount will be achieved and considered that the fair value of the contingent consideration is approximate to zero. The consideration would be adjusted if the Guaranteed Amount cannot be met.

The Directors have reviewed the carrying value of goodwill of the Target Group in accordance with Hong Kong Accounting Standard 36 Impairment of Assets (‘‘HKAS 36’’), taking into account the assessment result carried out by an independent valuer, Kovas Magni Appraisal Limited. Based on the assessment result, the Directors are of the opinion that there are no indications that the values of the goodwill of the Target Group may be impaired.

During the business combination, except for plant and equipment held by the Target Group, it is assumed that the fair value of the identifiable assets and liabilities of the Target Group approximate to their carrying amounts as at 30 September 2011.

The fair value of the plant and equipment as at 30 September 2011 is approximately HK$39,283,000 which was determined with reference to valuation carried out by Kovas Magni Appraisal Limited, an independent valuer. The adjustment represented the fair value increase of plant and equipment held by the Target Group of approximately HK$1,284,000 and the corresponding deferred tax liability of approximately HK$281,000 charged at PRC and Hong Kong applicable tax rates of 25% and 16.5% respectively. No pro forma adjustment regarding the depreciation of the increment on fair value of plant and equipment for the Pro Forma Financial Information as such depreciation is insignificant.

– III-11 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The fair value of consolidated identifiable assets and liabilities acquired is calculated as follows:

Carrying amounts of consolidated identifiable assets and liabilities acquired Fair value adjustment to the plant and equipment Deferred tax liability Fair value of consolidated identifiable assets and liabilities acquired	HK$’000 20,150 1,284 (281
	21,153

Upon the Completion, the fair value of the identifiable assets and liabilities of the Target Group will be reassessed and may be different from the fair value as stated above. As a result, the goodwill on acquisition at the date of the Completion may be different from that estimated amount presented.

The fair value of total consideration at the Completion as if the Acquisition was completed on 30 September 2011 and the Promissory Note was issued on the same date which is to be satisfied in the following manners, is:

Consideration settled by Promissory Note Consideration settled by cash Consideration settled by Consideration Shares	Non-discounted HK$’000 55,000 35,000 20,000 110,000	Fair value HK$’000 49,527 (Note 4a) 35,000 26,034 (Note 4b) 110,561

(a) The fair value of the Promissory Note is determined by discounting the nominal amount of HK$55,000,000 at the discount rate of 7.24% as determined by the directors of the Company with reference to valuation carried out by Kovas Magni Appraisal Limited, an independent valuer, as if it is to be paid in 1 April 2013, being 18 months from its issue date.

Imputed interest of HK$3,585,000 is to be recognised in the profit or loss for the year ended 31 March 2011. The adjustment has continuing effect on the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group.

(b) Pursuant to the Agreement, the 200,000,000 Consideration Shares will be issued at an issue price of HK$0.1 per Consideration Share, credited as fully paid. The estimated fair value of the Consideration Shares is approximately HK$26,034,000 as at 30 September 2011 which was determined by the directors of the Company with reference to valuation carried out by Kovas Magni Appraisal Limited, an independent valuer. The share capital and share premium of the Company will increase by HK$2,000,000 and HK$24,034,000 respectively. The issue of the Consideration Shares is a non-cash transaction.

Upon the Completion, the fair values of the Promissory Note and the Consideration Shares would be reassessed upon actual issuance and may be different from the estimated ones as stated above and will be used to determine the cost of the Acquisition. As a result, the goodwill on acquisition at the date of the Completion may be different from that estimated amount presented.

The decrease in bank balances and cash of HK$30,000,000 represents the consideration settlement with cash of HK$30,000,000 (HK$35,000,000 net of deposit of HK$5,000,000 paid by the Company included in other receivables) (Note 2).
The elimination of the issued share capital of Sky Will Holdings of approximately HK$1,000.
The elimination of the pre-acquisition reserves of the Target Group of approximately HK$20,149,000.

– III-12 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The Share Consolidation and Share Subdivision do not have any impact on the Unaudited Pro Forma Financial Information. There are 1,148,661,140 shares of HK$0.01 each in issue as at 30 September 2011. After the Share Consolidation, there will be 57,433,057 adjusted shares of HK$0.2 each in issue.
This represents the reversal of the share capital and share premium of approximately HK$10,912,000 arising from the Capital Reduction. The share capital of the Company will decrease from HK$11,486,000 to HK$574,000 following the Capital Reduction. After the Capital Reduction, there will be 57,433,057 Adjusted Shares of HK$0.01 each in issue.
The adjustment reflects Open Offer of 459,464,456 Adjusted Shares at an offer price of HK$0.10 each with net proceed of approximately HK$45,372,000 after deduction of a direct cost of HK$574,000. The shares issued in the Open Offer do not have the entitlements to subscribe for the shares in the Bonus Issue.
The adjustment reflects the Subscription of 450,000,000 Adjusted Shares at a subscription price of HK$0.10 each by World Treasure to approximately HK$45,000,000. The shares issued in the Subscription do not have the entitlements to subscribe for shares in the Open Offer and the Bonus Issue.
The adjustment reflects the Bonus Issue of 41,023,612 Bonus Shares to the existing shareholders of the 57,433,057 Adjusted Shares. The Bonus Shares are issued on the basis of 5 Bonus Shares for every 7 Adjusted Shares held.

– III-13 –

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

APPENDIX IV

A. ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA NET TANGIBLE ASSETS

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5 March 2012

The Board of Directors Climax International Company Limited

Dear Sirs,

We report on the unaudited pro forma statement of adjusted consolidated net tangible assets (the ‘‘Unaudited Pro Forma NTA’’) of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and Sky Will Printing & Packaging (Holdings) Limited and its subsidiaries (together with the Group collectively referred to as the ‘‘Enlarged Group’’) which has been prepared by the directors of the Company (the ‘‘Directors’’) for illustrative purposes only, to provide information about how the transactions contemplated under the resumption proposal (the ‘‘Resumption Proposal’’) might have affected the unaudited consolidated net tangible assets of the Enlarged Group as if it had taken place and completed on 30 September 2011, for the inclusion as Appendix IV to the circular of Company dated 5 March 2012 (the ‘‘Circular’’). The transactions contemplated under the Resumption Proposal which were defined in the Circular include: (i) the Capital Reorganisation; (ii) the Acquisition; (iii) the Subscription; (iv) the Open Offer; and (v) the Bonus Issue. Two scenarios are presented for the Unaudited Pro Forma NTA: (a) after the completion of the Resumption Proposal, but before the Open Offer; and (b) after the completion of the Resumption Proposal (including the Open Offer). The basis of preparation of the Unaudited Pro Forma NTA is set out on page IV-3 to the Circular.

Respective responsibilities of the Directors and reporting accountants

It is the responsibility solely of the Directors to prepare the Unaudited Pro Forma NTA in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma NTA and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma NTA beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– IV-1 –

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

APPENDIX IV

Basis of opinion

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in Investment Circulars’’ issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma NTA with the Directors. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma NTA has been properly compiled by the Directors on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma NTA as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The Unaudited Pro Forma NTA is for illustrative purpose only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the consolidated net tangible assets per share of the Group as at 30 September 2011 or at any future date.

Opinion

In our opinion:

(a) the Unaudited Pro Forma NTA has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma NTA as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants

Wong Hon Kei, Anthony

Practising Certificate Number: P05591

Hong Kong

– IV-2 –

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

APPENDIX IV

B. UNAUDITED PRO FORMA NET TANGIBLE ASSETS OF THE ENLARGED GROUP

Introduction to the unaudited pro forma statement of adjusted consolidated net tangible assets of the Enlarged Group

The following is an illustrative and unaudited pro forma statement of adjusted consolidated net tangible assets (the ‘‘Unaudited Pro Forma NTA’’) of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and Sky Will Printing & Packaging (Holdings) Limited and its subsidiaries (together with the Group hereinafter referred to as the ‘‘Enlarged Group’’) which has been prepared on the basis of the notes set out below for illustrating the effect of the transactions contemplated under the resumption proposal (the ‘‘Resumption Proposal’’), which were defined in the Circular including (i) the Capital Reorganisation; (ii) the Acquisition; (iii) the Subscription; (iv) the Open Offer; and (v) the Bonus Issue under 2 scenarios, (a) after the completion of the Resumption Proposal, but before the Open Offer; and (b) after the completion of the Resumption Proposal (including the Open Offer), on the consolidated net tangible assets of the Enlarged Group as if it had taken place on 30 September 2011. This pro forma financial information has been prepared for illustrative purposes only, and because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at 30 September 2011 or any future date.

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Enlarged Group is prepared based on the unaudited consolidated net tangible assets of the Group as at 30 September 2011 as set out in the financial information of the Group in Appendix I of the Circular and is adjusted for the effect of the completion of the Resumption Proposal under 2 scenarios, (a) after the completion of the Resumption Proposal, but before the Open Offer; and (b) after the completion of the Resumption Proposal (including the Open Offer).

– IV-3 –

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

APPENDIX IV

Unaudited pro forma statement of adjusted consolidated net tangible assets of the Enlarged Group

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Enlarged Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Enlarged Group following the Resumption Proposal under 2 scenarios.

Net tangible assets Unaudited consolidated net tangible assets of the Group per share attributable to the owners of the Company as at 30 September 2011 (Note 4)	Unaudited consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 September 2011 HK$’000 (Note 1) 67,799	Estimated net proceeds from the transactions contemplated under the Resumption Proposal, but before the Open Offer HK$’000 (Note 2) (23,374)	Unaudited Pro Forma NTA of the Enlarged Group attributable to the owners of the Company upon the completion of the transactions contemplated under the Resumption Proposal, but before the Open Offer as at 30 September 2011 HK$’000 44,425	Estimated proceeds from the Open Offer HK$’000 (Note 3) 45,372	Unaudited Pro Forma NTA of the Enlarged Group attributable to the owners of the Company upon the completion of the transactions contemplated under the Resumption Proposal (including the Open Offer) as at 30 September 2011 HK$’000 89,797
					HK$1.18

Unaudited consolidated net tangible assets of the Group per share attributable to the owners of the Company upon completion of the Capital Reorganisation and Open Offer, but before the Acquisition, the Subscription and the Bonus Issue as at 30 September 2011 (Note 5)

HK$0.22

– IV-4 –

APPENDIX IV

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

Unaudited
consolidated net
tangible assets of
the Group
attributable to
the owners of the
Company as at
30 September
2011
Estimated net
proceeds from
the transactions
contemplated
under the
Resumption
Proposal,
but before the
Open Offer
Unaudited
Pro Forma
NTA of the
Enlarged Group
attributable to
the owners of the
Company upon
the completion of
the transactions
contemplated
under the
Resumption
Proposal, but
before the Open
Offer as at
30 September
2011
Estimated
proceeds from
the Open Offer
HK$’000
HK$’000
HK$’000
HK$’000
(Note 1)
(Note 2)
(Note 3)
Scenario 1
Unaudited Pro Forma NTA of the
Enlarged Group per share
attributable to the owners of the
Company after the transactions
contemplated under the
Resumption Proposal, but before
the Open Offer as at 30
September 2011 (Note 6)
Scenario 2
Unaudited Pro Forma NTA of the
Enlarged Group per share
attributable to the owners of the
Company after the transactions
contemplated under the
Resumption Proposal (including
the Open Offer) as at 30
September 2011 (Note 7)

Unaudited
Pro Forma
NTA of the
Enlarged Group
attributable to
the owners of the
Company upon
the completion of
the transactions
contemplated
under the
Resumption
Proposal
(including the
Open Offer) as at
30 September
2011
HK$’000
HK$0.06

HK$0.07

Notes:

The unaudited consolidated net tangible assets of the Group attributable to the owners of the Company (the ‘‘Group’s NTA’’) as at 30 September 2011 of approximately HK$67,799,000 are extracted from published unaudited interim report of the Company for the six months ended 30 September 2011.

– IV-5 –

APPENDIX IV

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

The adjustment to the unaudited consolidated net tangible assets of the Enlarged Group attributable to the owners of the Company as at 30 September 2011 represents the estimated net proceeds from the transactions contemplated under the Resumption Proposal, but before the Open Offer of approximately HK$23,374,000 as follows:

Net proceeds from the subscription (Refer to pro forma adjustment 11 in Appendix III)
Estimated professional fee and other direct expenses for the resumption of trading
(Refer to pro forma adjustment 1 in Appendix III)
Net assets from the acquisition of Sky Will Printing & Packaging (Holdings) Limited and
its subsidiary (hereinafter referred to as the ‘‘Target Group’’) (Refer to pro forma
adjustments 2, 3 and 4 in Appendix III)
—
fair value of consolidated identifiable assets and liabilities of the Target Group
—
consideration settled by cash
—
fair value consideration settled by the promissory note

HK$’000
45,000
(5,000
21,153
(35,000
(49,527

(23,374)

The adjustment to the unaudited consolidated net tangible assets of the Enlarged Group attributable to the owners of the Company as at 30 September 2011 represents the estimated net proceeds from the Open Offer of approximately HK$45,372,000 after deduction of a direct cost of HK$574,000 from the gross proceeds of approximately HK$45,946,000 (which are calculated based on the 459,464,456 offer shares (the ‘‘Offer Shares’’) to be issued at the subscription price of HK$0.1 per Offer Share).
The unaudited consolidated net tangible assets attributable to owners of the Company per share before completion of the Resumption Proposal are based on 57,433,057 shares (after taking into the effect of the Capital Reorganisation) in issue as at 30 September 2011.
The unaudited consolidated adjusted net tangible assets attributable to owners of the Company per share upon completion of the Capital Reorganisation and the Open Offer, but before the Acquisition, the Subscription and the Bonus Issue, is calculated based on the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company upon completion of the Open Offer of approximately HK$113,171,000 (which is the Group’s NTA as at 30 September 2011 of approximately HK$67,799,000 plus the estimated net proceeds from the Open Offer of approximately HK$45,372,000) and on the basis of 516,897,513 shares issued and issuable, comprising 57,433,057 shares (after taking into the effect of the Capital Reorganisation) in issue as at 30 September 2011 and 459,464,456 Offer Shares to be issued.
The Unaudited Pro Forma NTA of the Enlarged Group attributable to the owners of the Company per share after the transactions contemplated under the Resumption Proposal, but before the Open Offer are based on the Unaudited Pro Forma NTA of the Group attributable to owners of the Company upon completion of the transactions contemplated under the Resumption Proposal, but before the Open Offer and on the basis of 748,456,669 shares issued and issuable in the following transactions:

Shares in issue as at 30 September 2011 after taking into the effect of the Capital Reorganisation Consideration shares for the Acquisition (Refer to pro forma adjustment 4(b) in Appendix III) Shares for the Subscription (Refer to pro forma adjustment 11 in Appendix III) Shares for the Bonus Issue (Refer to pro forma adjustment 12 in Appendix III)	Number of shares 57,433,057 200,000,000 450,000,000 41,023,612
	748,456,669

– IV-6 –

APPENDIX IV

STATEMENT OF PRO FORMA NET TANGIBLE ASSET OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY

The Unaudited Pro Forma NTA of the Enlarged Group attributable to the owners of the Company per share after the transactions contemplated under the resumption proposal (including the Open Offer) is calculated based on the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company upon completion of the transactions contemplated under the Resumption Proposal (including the Open Offer) and on the basis of 1,207,921,125 shares issued and issuable, comprising 748,456,669 shares stated in adjustment 6 and 459,464,456 shares to be issued under the Open Offer.
No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2011.

– IV-7 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

A. PROFIT/(LOSS) FORECASTS

FORECASTS FOR THE YEAR ENDING 31 MARCH 2012

Group

Forecast consolidated net loss attributable to the Shareholders for the year ending 31 March 2012 (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$7.5 million Unaudited pro forma forecast loss per Adjusted Share for the year ending 31 March 2012 (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$0.0062 Forecast consolidated net loss attributable to the Shareholders for the year ending 31 March 2012 (excluding the Resumption Fees incurred for the year) (Note 3) . . . . . . . . . . . . . . . . . . . approximately HK$2.5 million Unaudited pro forma forecast loss per Adjusted Share for the year ending 31 March 2012 (excluding the Resumption Fees incurred for the year) (Note 4) . . . . . . . . . . . . . . . . . . . . . . approximately HK$0.0021 Target Group Forecast consolidated net profit for the year ending 31 March 2012 (Note 5) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$16.0 million

Target Group

FORECASTS FOR THE YEAR ENDING 31 MARCH 2013

Enlarged Group

Forecast consolidated net profit attributable to the Shareholders for the year ending 31 March 2013 (Note 6) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$10.5 million Unaudited pro forma forecast profit per Adjusted Share for the year ending 31 March 2013 (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$0.0087

2. Target Group

Forecast consolidated net profit for the year ending 31 March 2013 (Note 8) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$17.8 million

– V-1 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

Notes:

The bases and assumptions on which the above consolidated loss forecast for the year ending 31 March 2012 has been prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.
The calculation of unaudited pro forma forecast loss per Share for the year ending 31 March 2012 is based on the forecast consolidated loss attributable to the Shareholders for the year and 1,207,921,125 Adjusted Shares in issue upon the Capital Reorganisation becoming effective and completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.
The Resumption Fee incurred for the year ending 31 March 2012 is estimated to be HK$5 million.
The calculation of unaudited pro forma forecast loss per Share for the year ending 31 March 2012 is based on the forecast consolidated loss attributable to the Shareholders for the year (excluding the Resumption Fee incurred for the year) and 1,207,921,125 Adjusted Shares in issue upon the Capital Reorganisation becoming effective and completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.
The forecast consolidated net profit for the year ending 31 March 2012 of approximately HK$16.0 million has excluded the gain on bargain purchase of a subsidiary of approximately HK$7.4 million which set out in the ‘‘FINANCIAL INFORMATION OF THE TARGET GROUP’’ of Appendix II in this Circular. The bases and assumptions on which the above consolidated net profit for the year ending 31 March 2012 has been prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.
The bases and assumptions on which the above consolidated profit forecast for the year ending 31 March 2013 has been prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.
The calculation of unaudited pro forma forecast profit per Adjusted Share for the year ending 31 March 2013 is based on the forecast consolidated profit attributable to the Shareholders for the year and 1,207,921,125 Adjusted Shares in issue upon the Capital Reorganisation becoming effective and completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.
The bases and assumptions on which the above consolidated net profit for the year ending 31 March 2013 has been prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.

B. BASES AND ASSUMPTIONS

(a) For the year ending 31 March 2012 for the Group

The Directors have prepared the forecast consolidated loss attributable to the Shareholders for the year ending 31 March 2012 based on:

(i) the audited consolidated results of the Group for the year ended 31 March 2011;
(ii) the unaudited consolidated results in the management accounts of the Group for the 6 months ended 30 September 2011; and
(iii) a forecast of the consolidated results of the Group for the remaining 6 months ending 31 March 2012.

The forecast has been prepared based on the accounting policies consistent in all material respects with those presently adopted by the Group.

– V-2 –

APPENDIX V

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

(b) For the year ending 31 March 2012 for the Target Group

The Directors have prepared the forecast consolidated profit for the year ending 31 March 2012 based on:

(i) the audited consolidated results of the Target Group for the year ended 31 March 2011;
(ii) the audited consolidated results of the Target Group for the six months ended 30 September 2011 (including the audited revenue of approximately HK$55 million); and
(iii) a forecast of the consolidated results of the Target Group for the remaining 6 months ending 31 March 2012 (including (a) the unaudited revenue of approximately HK$26 million for the 4 months ended 31 January 2012; (b) confirmed orders in the amount of approximately HK$9 million as at 31 January 2012; and (c) orders in negotiation of approximately HK$11 million as at 31 January 2012).

The forecast has been prepared based on the accounting policies consistent in all material respects with those presently adopted by the Group.

(c) For the year ending 31 March 2013 for the Enlarged Group

The Directors have prepared the forecast consolidated profit attributable to the Shareholders for the year ending 31 March 2013 based on:

(i) the audited consolidated results of the Group for the year ended 31 March 2011;
(ii) the unaudited consolidated results in the management accounts of the Group for the 6 months ended 30 September 2011;
(iii) a forecast of the consolidated results of the Group for the remaining 18 months ending 31 March 2013;
(iv) the audited consolidated results of the Target Group for the year ended 31 December 2011;
(v) the audited consolidated results of the Target Group for the six months ended 30 September 2011; and
(vi) a forecast of the consolidated results of the Target Group for the remaining 18 months ending 31 March 2013.

The forecast has been prepared based on the accounting policies consistent in all material respects with those presently adopted by the Group.

– V-3 –

APPENDIX V

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

(d) For the year ending 31 March 2013 for the Target Group

The Directors have prepared the forecast consolidated profit for the year ending 31 March 2013 based on:

(i) the audited consolidated results of the Target Group for the year ended 31 March 2011;
(ii) the audited consolidated results of the Target Group for the six months ended 30 September 2011 (including the audited revenue of approximately HK$55 million); and
(iii) a forecast of the consolidated results of the Target Group for the remaining 18 months ending 31 March 2013 (including (a) the unaudited revenue of approximately HK$26 million for the 4 months ended 31 January 2012; (b) confirmed orders in the amount of approximately HK$9 million as at 31 January 2012; and (c) orders in negotiation of approximately HK$11 million as at 31 January 2012).

The forecast has been prepared based on the accounting policies consistent in all material respects with those presently adopted by the Group.

(e) General

There will be no material changes in the existing political, legal, fiscal, market or economic conditions in the PRC, Hong Kong or any other countries or territories in which the Enlarged Group has arrangements or agreements, which may materially adversely affect the Enlarged Group’s business or operation.
There will be no changes in legislation, regulations or rules in the PRC, Hong Kong or any other countries or territories in which the Enlarged Group operates or with which the Enlarged Group has arrangements or agreements, which may materially adversely affect the Enlarged Group’s business or operation.
There will be no material changes in inflation rates or interest rates from those currently prevailing in the context of the Enlarged Group’s operation.
There will be no material changes in the bases or applicable rates of taxation, surcharges or other government levies in the countries or territories in which the Enlarged Group operates.
There will be no other unforeseen circumstances, including but not limited to the occurrence of natural disasters or catastrophes (such as floods and typhoons), epidemics or serious accidents, beyond the control of the Enlarged Group which will have a material adverse effect on the results of operations of the Enlarged Group.
All the transactions contemplated under the Resumption Proposal are duly completed in May 2012.
During the forecast period conversion of RMB to HK$ is assumed as RMB0.84: HK$1.0.

– V-4 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

C. COMFORT LETTERS

(a) Letter from the reporting accountant

The following is the text of a report received from SHINEWING (HK) CPA Limited, the reporting accountant of the Company and prepared for the sole purpose of inclusion in this Circular.

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5 March 2012

The Board of Directors Climax International Company Limited Unit 906, 9/F., Wings Building 110–116 Queen’s Road Central Central, Hong Kong

Dear Sirs,

Re: Independent Assurance Report on the profit forecast of Sky Will Printing & Packaging (Holdings) Limited and its subsidiaries (the ‘‘Target Group’’) for the year ending 31 March 2012

We have examined the accounting policies adopted and calculations of the underlying profit forecast (the ‘‘Underlying Forecast’’) to the guaranteed amount of not less than HK$16 million net profit after tax and before extraordinary items of the Target Group for the year ending 31 March 2012 as set out in the circular of Climax International Company Limited (the ‘‘Company’’) dated 5 March 2012 (the ‘‘Circular’’).

Responsibilities

The directors of the Company and the Target Group (the ‘‘Directors’’) are solely responsible for the preparation of the Underlying Forecast including the assumptions. The Underlying Forecast has been prepared using a set of assumptions (the ‘‘Assumptions’’), which are set out in section B in Appendix V to the Circular, that include hypothetical assumptions about future events and management’s actions that are not necessarily expected to occur. Even if the events anticipated occur, actual results are still likely to be different from the Underlying Forecast and the variation may be material. The Directors are responsible for the reasonableness and validity of the Assumptions.

It is our responsibility to form an opinion, based on our work on the Underlying Forecast and to report our opinion solely to you, as a body, solely for the purpose of reporting under Rule 10 of the Code on Takeovers and Mergers issued by Securities and Futures Commission of Hong Kong

– V-5 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

and for no other purpose. We have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and express no opinion on the reasonableness and validity of the Assumptions on which the Underlying Forecast is based. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

Summary of our work

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements 3000 ‘‘Assurance Engagements Other Than Audits or Review of Historical Financial Information’’ issued by the Hong Kong Institute of Certified Public Accountants and with reference to the procedures specified in Auditing Guideline 3.341 ‘‘Accountants’ Report on Profit Forecasts’’. We examined the consistency of accounting policies adopted and the arithmetical accuracy of the Underlying Forecast. Our work has been undertaken solely to assist the Directors in evaluating whether the Underlying Forecast, so far as the accounting policies and calculations are concerned, has been properly compiled in accordance with the Assumptions made by the Directors.

Opinion

In our opinion, so far as the accounting policies and calculations are concerned, the Underlying Forecast has been properly compiled in accordance with the Assumptions made by the Directors and is presented on a basis consistent in all material aspects with the accounting policies currently adopted by the Company.

Yours faithfully,

SHINEWING (HK) CPA Limited Certified Public Accountants Wong Hon Kei, Anthony

Practising Certificate Number: P05591 Hong Kong

– V-6 –

APPENDIX V

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

==> picture [106 x 50] intentionally omitted <==

5 March 2012

The Board of Directors Climax International Company Limited Unit 906, 9/F., Wings Building 110–116 Queen’s Road Central Central, Hong Kong

Dear Sirs,

Re: Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’)

We have examined the accounting policies adopted and calculations made in arriving at the profit forecast of the Group and Sky Will Printing & Packaging (Holdings) Limited and its subsidiaries (the ‘‘Target Group’’; together with the Group collectively referred to as the ‘‘Enlarged Group’’) for the fifteen months from 1 January 2012 to 31 March 2013 (the ‘‘Forecast’’) as set out in sections A and B in Appendix V to circular of the Company dated 5 March 2012 (the ‘‘Circular’’).

Responsibilities

The directors of the Company (the ‘‘Directors’’) are solely responsible for the preparation of the Forecast including the assumptions. The Forecast has been prepared using a set of assumptions (the ‘‘Assumptions’’), which are set out in section B in Appendix V to the Circular, that include hypothetical assumptions about future events and management’s actions that are not necessarily expected to occur. Even if the events anticipated occur, actual results are still likely to be different from the Forecast and the variation may be material. The Directors are responsible for the reasonableness and validity of the Assumptions.

It is our responsibility to form an opinion, based on our work on the Forecast and to report our opinion solely to you, as a body, solely for the purpose of reporting under Rule 14.62 of Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and Rule 10 of the Code on Takeovers and Mergers issued by Securities and Futures Commission of Hong Kong and for no other purpose. We have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and express no opinion on the reasonableness and validity of the Assumptions on which the Forecast is based. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

– V-7 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

Summary of our work

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements 3000 ‘‘Assurance Engagements Other Than Audits or Review of Historical Financial Information’’ issued by the Hong Kong Institute of Certified Public Accountants and with reference to the procedures specified in Auditing Guideline 3.341 ‘‘Accountants’ Report on Profit Forecasts’’. We examined the consistency of accounting policies adopted and the arithmetical accuracy of the Forecast. Our work has been undertaken solely to assist the Directors in evaluating whether the Forecast, so far as the accounting policies and calculations are concerned, has been properly compiled in accordance with the Assumptions made by the Directors.

Opinion

In our opinion, so far as the accounting policies and calculations are concerned, the Forecast has been properly compiled in accordance with the Assumptions made by the Directors as set out in sections A and B in Appendix V to the Circular and is presented on a basis consistent in all material aspects with the accounting policies currently adopted by the Company.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants Wong Hon Kei, Anthony

Practising Certificate Number: P05591 Hong Kong

– V-8 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

(b) Comfort letter from the financial adviser

The following is the text of a report from the financial adviser and prepared for the sole 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

5 March 2012

The Board of Directors Climax International Company Limited Unit 906, 9/F Wings Building 110–116 Queen’s Road Central Central, Hong Kong

Dear Sirs,

We refer to the circular dated 5 March 2012 issued by the Company to the Shareholders (the ‘‘Circular’’) of which this letter forms part. Terms used in this letter, unless otherwise defined, shall have the same meanings as those used in the Circular. We refer to (i) the 2012 Guaranteed Amount of not less than HK$16 million net profit after tax and before extraordinary items of Sky Will Printing & Packaging (Holdings) Limited and its subsidiaries (the ‘‘Target Group’’) provided by Sky Will Printing & Packaging (BVI) Limited (the ‘‘Vendor’’) for the year ending 31 March 2012; (ii) (a) the consolidated loss of the Group attributable to the Shareholders for the year ending 31 March 2012; (b) the consolidated profit of the Target Group for the year ending 31 March 2012; (c) the consolidated profit of the Enlarged Group attributable to the Shareholders for the year ending 31 March 2013; and (d) the consolidated profit of the Target Group for the year ending 31 March 2013 (collectively, the ‘‘Forecasts’’). The 2012 Guaranteed Amount constitutes profit forecast under Rule 10 of the Takeovers Code and the Forecasts constitute profit forecasts under paragraph 29(2) of Appendix 1b of the Listing Rules and Rule 10 of the Takeovers Code.

We are engaged to assist the Directors to comply with paragraph 29(2) of Appendix 1b of the Listing Rules and Rule 10 of the Takeovers Code. We are not reporting on the arithmetical calculations of the 2012 Guaranteed Amount and the Forecasts and the adoption of accounting policies thereof. We have reviewed the forecasts in deriving the 2012 Guaranteed Amount and the Forecasts for which the directors of the Target Group and you as the Directors are solely responsible, and have discussed with you the information and documents provided by you which formed part of the bases and assumptions, which are set out in section B in Appendix V to the Circular, upon which the 2012 Guaranteed Amount and the Forecasts have been prepared. We have also considered the two letters from SHINEWING (HK) CPA Limited both dated 5 March 2012 addressed to yourselves regarding the calculations and accounting policies upon which the underlying profit forecast to the 2012 Guaranteed Amount and the Forecasts have been made.

– V-9 –

PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2013 AND COMFORT LETTERS ON 2012 GURANTEED AMOUNT AND FORECASTS

APPENDIX V

Our work has been undertaken for the purpose of reporting solely to you under paragraph 29(2) of Appendix 1b of the Listing Rules and Rule 10 of the Takeovers Code and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

On the basis of the foregoing, we are of the opinion that the 2012 Guaranteed Amount and the Forecasts, for which the directors of the Target Group and you as the Directors are solely responsible, have been made after due and careful enquiry and due and careful consideration by you.

Yours faithfully, For and on behalf of Veda Capital Limited Julisa Fong Managing Director

– V-10 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules and the Takeovers Code 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 facts not contained in this Circular, the omission of which would make any statement herein or this Circular misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Circular (other than that relating to the Subscriber) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Circular (other than opinions expressed by the Subscriber) have been arrived at after due and careful consideration and there are no other facts not contained in this Circular, the omission of which would make any statement in this Circular misleading.

The sole director of the Subscriber accepts full responsibility for the accuracy of the information contained in this Circular (other than that relating to the Company) and confirms having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this Circular have been arrived at after due and careful consideration and there are no other facts not contained in this Circular, the omission of which would make any statement in this Circular misleading.

2. SHARE CAPITAL

Authorised share capital 10,000,000,000 Shares of HK$0.01 each (before and after Capital Reorganisation becoming effective) Issued and to be issued as fully paid 1,148,661,140 Shares in issue as at the Latest Practicable Date 57,433,057 Adjusted Shares of HK$0.01 each (after Capital Reorganisation becoming effective) 200,000,000 Consideration Shares to be issued 450,000,000 Subscription Shares to be issued 459,464,456 Offer Shares to be issued 41,023,612 Bonus Shares to be issued 1,207,921,125 Adjusted Shares	HK$ 100,000,000.00
	11,486,611.40
	574,330.57 2,000,000.00 4,500,000.00 4,594,644.56 410,236.12
	12,079,211.25

– VI-1 –

GENERAL INFORMATION

APPENDIX VI

No shares have been issued since the end of the financial year on 31 March 2011 until the Latest Practicable Date. As at the Latest Practicable Date, there were no outstanding options, warrants, derivatives or convertible securities which may confer any right to the holder thereof to subscribe for, convert or exchange into Shares.

All the Consideration Shares, Subscription Shares, Offer Shares and Bonus Shares, when allotted and issued, will rank pari passu in all respects among themselves and with the Shares then in issue on the date of allotment and issue including the rights as to voting, dividends and return of capital.

3. DISCLOSURE OF INTERESTS

(a) Interests of Directors and chief executives

As at the Latest Practicable Date, the following directors or chief executives of the Company or their associates had interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations, as notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or as recorded in the register to be kept under Section 352 of the SFO or as notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’).

			Percentage of
		Interest in ordinary	the issued
Name of Directors	Capacity	shares held	share capital
The Subscriber	Beneficial owner	13,600,000,000	1,183.99%
		(Note 1)
Mr. Wong	Interest of controlled	13,600,000,000	1,183.99%
	corporation	(Note 1)

Note:

Upon completion of the Subscription and the Open Offer (assuming that the Subscriber takes up all the Offer Shares pursuant to its obligation under the Underwriting Agreement), the Subscriber will be interested in 13,600,000,000 shares (before the Capital Reorganisation becoming effective). The Subscriber is wholly owned by Mr. Wong. By virtue of the SFO, Mr. Wong is deemed to be interested in the same shares held by the Subscriber.

Save as disclosed above, as at the Latest Practicable Date, the Company was not aware of any other directors or chief executives of the Company who had an interest, directly or indirectly, or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under provisions of Divisions 7 and 8 of Part XV of the SFO or as recorded in the register required to be kept by the Company under Section 352 of the SFO and the Stock Exchange pursuant to the Model Code.

– VI-2 –

GENERAL INFORMATION

APPENDIX VI

(b) Interests of substantial Shareholders

As at the Latest Practicable Date, the following shareholders had interests, directly or indirectly, or short positions in the shares and underlying shares of the Company would fall to be disclosed to the Company and the Stock Exchange under provisions of Division 2 and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company under Section 336 of the SFO:

			Percentage of
		Interest in ordinary	the issued
Name of shareholders	Capacity	shares held	share capital
The Vendor	Beneficial owner	4,000,000,000	348.23%
		(Note 1)
Fung Ming	Interest of controlled	4,000,000,000	348.23%
	corporation	(Note 1)
Kingston Securities	Beneficial owner	229,464,456	18.99%
		(Note 2)
Mrs. Chu Yuet Wah	Interest of controlled	229,464,456	18.99%
(‘‘Mrs. Chu’’)	corporation	(Note2)
Active Dynamic Limited	Interest of controlled	229,464,456	18.99%
	corporation	(Note2)
Kingston Financial	Interest of controlled	229,464,456	18.99%
Group Limited	corporation	(Note2)
Kingston Capital Asia	Interest of controlled	229,464,456	18.99%
Limited	corporation	(Note2)
Galaxy Sky Investments	Interest of controlled	229,464,456	18.99%
Limited	corporation	(Note2)
Sweet Wishful	Beneficial owner	176,000,000	15.32%
Deng Junjie	Interest of controlled	176,000,000	15.32%
	corporation

Notes:

Upon completion of the Acquisition, the Vendor will be interested in 4,000,000,000 shares (before the Capital Reorganisation becoming effective). The Vendor is owned as to 40% by Fung Ming. By virtue of the SFO, Fung Ming is deemed to be interested in the same shares held by the Vendor.
Upon completion of the Open Offer (assuming that Kingston Securities takes up all the Offer Shares pursuant to its obligation under the Underwriting Agreement), Kingston Securities will be interested in 229,464,456 shares (after the Capital Reorganisation becoming effective, completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue).

Kingston Securities is wholly owned by Galaxy Sky Investments Limited; Galaxy Sky Investments Limited is wholly owned by Kingston Capital Asia Limited; Kingston Capital Asia Limited is wholly owned by Kingston Financial Group Limited; Kingston Financial Group Limited is owned as to 40.48% by Active Dynamic Limited; Active Dynamic Limited is wholly owned by Mrs. Chu. Accordingly by virtue of the SFO, the abovementioned parties are deemed to be interested in the same shares held by Kingston Securities.

– VI-3 –

GENERAL INFORMATION

APPENDIX VI

Save as disclosed above, as at the Latest Practicable Date, the Company was not aware of any other person (other than the directors or chief executives of the Company) who had an interest, directly or indirectly, or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under provisions of Divisions 2 and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company under Section 336 of the SFO.

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or controlling shareholder or substantial Shareholder or any of their respective associates has any interest in business which competes with or may compete with the business of the Group or has any other conflict of interests which any person has or may have with the Group.

5. MATERIAL CONTRACTS

Save as disclosed below, there are no material contracts (being contracts entered outside the ordinary course of business carried on or intended to be carried on by the Enlarged Group) having been entered into by any member of the Enlarged Group within the two years immediately preceding 16 January 2012:

(a) the sale and purchase agreement dated 27 July 2010 in relation to an acquisition of companies engaged in sales, design, installation and repair of audio visual equipment and trading of electronic products;
(b) the termination agreement dated 23 November 2010 in relation to the termination of the sale and purchase agreement dated 27 July 2010;
(c) the Asset Purchase Agreement;
(d) the sale and purchase agreement dated 4 April 2011 in relation to an acquisition of entire interest of New Spring Offset by Sky Will;
(e) the Master Agreement;
(f) the S&P Agreement;
(g) the Subscription Agreement; and
(h) the Underwriting Agreement.

6. DIRECTORS’ SERVICE CONTRACTS

Mr. Ng is proposed to be the executive Director upon completion of the Acquisition. Terms of the service agreement is set out in the letter from the Board of this Circular. Mr. Wong Hung Ki is proposed to be a non-executive Director upon completion of the Acquisition. As at the Latest Practicable Date, no service agreement is entered into for his proposed appointment.

– VI-4 –

GENERAL INFORMATION

APPENDIX VI

Please refer to the principal terms of the service agreement of Mr. Ng under the section headed ‘‘Experience of the Board and the Enlarged Group in paper business — Proposed executive Director — Mr. Ng’’ on pages 42 to 43 in the Letter from the Board.

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

7. INTEREST IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors has any direct or indirect interest in any assets acquired or disposed of by or leased to any member of the Enlarged Group or is proposed to be acquired or disposed of by or leased to any member of the Enlarged Group since 31 March 2011, being the date to which the latest published audited accounts of the Company were made up.

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to the business of the Enlarged Group.

8. LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was 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 Enlarged Group as at the Latest Practicable Date.

9. EXPERTS AND CONSENTS

The following is the qualification of the expert who has given opinions or advices, which are contained in this Circular.

Name Qualification Veda Capital Limited a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO Messis Capital Limited a licensed corporation to carry out type 6 (advising on corporate finance) regulated activity under the SFO SHINEWING (HK) CPA Limited Certified Public Accountants

As at the Latest Practicable Date, save for the fact that both the Subscriber and Veda Capital are wholly and beneficially owned by Mr. Wong and the interests of the Subscriber in the Company pursuant to the Subscription Agreement and the Underwriting Agreement, none of the above experts has direct or indirect shareholdings in any member of the Enlarged Group, or any right to subscribe for or to nominate persons to subscribe for shares in any member of the Enlarged Group, or any interests, directly

– VI-5 –

GENERAL INFORMATION

APPENDIX VI

or indirectly, in any assets which have been acquired, disposed of or leased to or which are proposed to be acquired, disposed of or leased to any member of the Enlarged Group since 31 March 2011, being the date to which the latest published audited accounts of the Company were made up.

Each of the above experts has given and has not withdrawn its written consent to the issue of this Circular with the inclusion therein of its reports and references to its name in the form and context in which they appear.

10. SHAREHOLDINGS AND DEALINGS

As at the Latest Practicable Date:

(a) the Subscriber is wholly owned by Mr. Wong, an executive Director. Aside from Mr. Wong, none of the Company or the Directors had shareholdings in the Subscriber;
(b) no Shares, convertible securities, warrants, options and derivatives in the Company were owned, controlled, borrowed or lent by the Directors or by the Company;
(c) no persons, prior to the posting of this Circular, irrevocably committed themselves to vote for or against the Acquisition, the Open Offer, the Subscription, the Whitewash Waiver and/or the Bonus Issue;
(d) none of the Directors holds, owns or has control or direction over any Shares, warrants, options or convertible securities of the Company;
(e) none of the Subscriber, Mr. Wong or parties acting in concert with any of them held, borrowed or lent any Shares, warrants, options or convertible securities of the Company or any derivatives in respect of the securities of the Company;
(f) there is no agreement, arrangement or understanding (including any compensation arrangement) exists between (i) any of the Subscriber, Mr. Wong or parties acting in concert with any of them; and (ii) any Director, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Acquisition, the Open Offer, the Subscription, the Whitewash Waiver and/or the Bonus Issue;
(g) no benefit will be given to any Director as compensation for loss of office in any member of the Group or otherwise in connection with the Acquisition, the Subscription, the Open Offer, the Whitewash Waiver and/or the Bonus Issue;
(h) none of the Directors has entered into any agreement or arrangement with any other persons which is conditional on or dependent upon the outcome of the Acquisition, the Subscription, the Open Offer, the Whitewash Waiver and/or the Bonus Issue;
(i) save as the Underwriting Agreement and the Subscription Agreement pursuant to which Mr. Wong has personal interest, there was no material contract entered into by the Subscriber, Mr. Wong or parties acting in concert with any of them in which any Director had a material personal interest;

– VI-6 –

GENERAL INFORMATION

APPENDIX VI

(j) there is no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between (i) any of the Subscriber, Mr. Wong or parties acting in concert with any of them; and (ii) any other person;
(k) no Shares, convertible securities, warrants, options and derivatives in the Company were owned or controlled by a subsidiary of the Company or by a pension fund of any member of the Group or by any advisor to the Company as specified in class (2) of the definition of associate under the Takeovers Code;
(l) no Shares, convertible securities, warrants, options and derivatives in the Company were owned or controlled by a person who had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate and neither the Company nor such person who is an associate of the Company have entered into such an arrangement; and
(m) no Shares, convertible securities, warrants, options or derivatives of the Company and the Subscriber were managed on a discretionary basis by fund managers connected with the Company.

During the period of six months prior to the date of the announcement of the Company dated 16 January 2012 and up to the Latest Practicable Date:

(a) none of the Company or the Directors had dealt for value in the Shares, convertible securities, warrants, options and derivatives of the Subscriber or the Company or shares of the Subscriber (except for Mr. Wong, being the wholly-owned beneficial owner of the Subscriber);
(b) none of (i) the sole director of the Subscriber; and (ii) any of the Subscriber, Mr. Wong and parties acting in concert with any of them had dealt for value in the Shares, convertible securities, warrants, options and derivatives of the Company;
(c) none of the subsidiaries of the Company, any pension fund of the Company or any of its subsidiaries, nor any adviser to the Company as specified in class (2) of the definition of associate in the Takeovers Code has dealt for value in the Shares, convertible securities, warrants, options or derivatives of the Company;
(d) no person had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) or the definition of associate in the Takeovers Code; and
(e) no fund managers managing funds on a discretionary basis which are connected with the Company had dealt for value in the Shares, convertible securities, warrants, options or derivatives of the Company.

– VI-7 –

GENERAL INFORMATION

APPENDIX VI

11. EXPENSES

The professional costs and expenses incurred in connection with the implementation of the Resumption Proposal, including financial advisory fees, printing, registration, translation, legal and accountancy charges are estimated to amount to approximately HK$5 million and are payable by the Company.

12. MARKET PRICES

Trading in the Shares has been suspended since 23 September 2008, as such, the closing prices of the Shares as recorded on the Stock Exchange on the last day on which dealings took place in each of the six months immediately preceding 16 January 2012 and ending on the Latest Practicable Date prior to the posting of this Circular and the Latest Practicable Date, are not available. The closing price of the Shares on the Last Trading Day was HK$0.025.

– VI-8 –

GENERAL INFORMATION

APPENDIX VI

13. CORPORATE INFORMATION

Board of directors

Executive Director WONG Hin Shek (Chief Executive Officer)

Independent Non-executive Directors LAU Man Tak MAN Kwok Leung WONG Yun Kuen

Company secretary TSANG Kwai Ping

Audit committee

LAU Man Tak (Chairman) MAN Kwok Leung WONG Yun Kuen

Remuneration committee LAU Man Tak (Chairman) MAN Kwok Leung WONG Yun Kuen

Auditor

SHINEWING (HK) CPA Limited 43/F., The Lee Gardens 33 Hysan Avenue Causeway Bay, Hong Kong

Registered office

Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head office and principal place of business

Unit 906, 9/F Wings Building 110–116 Queen’s Road Central Central Hong Kong

Registrars Hong Kong Tricor Secretaries Limited 26th Floor, Tesbury Centre 28 Queen’s Road East Hong Kong

Bermuda Codan Services Limited 2 Church Street Hamilton HM 11 Bermuda

Principal bankers

Standard Chartered Bank (Hong Kong) Limited The Bank of East Asia, Limited Bank of China (Hong Kong) Limited

– VI-9 –

GENERAL INFORMATION

APPENDIX VI

14. PARTICULARS OF DIRECTORS AND COMPANY SECRETARY

Set out below the full name, business or residential address and brief biographical details of the Directors:

(A) Executive Director

Mr. Wong Hin Shek (Chief executive officer)

Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

Mr. Wong Hin Shek, aged 42, joined the Group on 18 June 2007 as an executive Director of the Company and was appointed as the chief executive officer of the Company on 17 June 2008. Mr. Wong is the director of certain subsidiaries of the Company. Mr. Wong worked in a number of reputable investment banks and the Listing Division of the Stock Exchange and has extensive experience in finance, operation and strategic investment of listed companies in Hong Kong. Mr. Wong holds a Master of Science (Financial Management) degree from University of London in United Kingdom and a Bachelor of Commerce degree from University of Toronto in Canada. Mr. Wong is also a responsible officer of a licensed corporation which carries out Type 6 (advising on corporate finance) regulated activity under the SFO. Mr. Wong is currently the chairman and an executive director of Hua Yi Copper Holdings Limited (stock code: 559) and is an executive director of Interchina Holdings Company Limited (stock code: 202). Mr. Wong has been involved in management, business development, strategic investment and investor relations in these companies. He was an executive director of China Public Procurement Limited (stock code: 1094) from November 2007 to September 2009 and Kingston Financial Group Limited (stock code: 1031) from February 2005 to April 2011.

(B) Proposed executive Director

Mr. Ng Man Chan

10/F., Fook Hing Factory Building, 33 Lee Chung Street, Chaiwan, Hong Kong

Mr. Ng Man Chan, aged 61, is proposed to be an executive Director upon completion of the Acquisition and is a director of the Target Company. Mr. Ng is responsible for the Target Group’s overall management and development of corporate policy and strategy, and liaison with various local government and authorities in the PRC. Mr. Ng commenced his career in the printing industry in 1960s. He has extensive experience in printing operations and printing machinery.

– VI-10 –

GENERAL INFORMATION

APPENDIX VI

(C) Proposed non-executive Director

Mr. Wong Hung Ki

Flat 405, 4/F, Block K, Kornhill, 35–37 Hong Yue Street, Hong Kong

(D) Independent non-executive Directors

Dr. Wong Yun Kuen

Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

Dr. Wong Yun Kuen, aged 54, joined the Group on 26 June 2007 and is the member of audit committee and remuneration committee of the Company. Dr. Wong received his Ph.D. degree from Harvard University, and was ‘‘Distinguished Visiting Scholar’’ at Wharton School of the University of Pennsylvania. Dr. Wong has worked in financial industries in the United States and Hong Kong for many years, and has considerable experience in corporate finance, investment and derivative products. He is a member of the Hong Kong Securities Institute. Dr. Wong is an executive director of UBA Investments Limited (stock code: 768), and an independent non-executive director of Harmony Asset Limited (stock code: 428), Bauhaus International (Holdings) Limited (stock code: 483), Kaisun Energy Group Limited (stock code: 8203), China Yunnan Tin Minerals Group Company Limited (stock code: 263), Kong Sun Holdings Limited (stock code: 295), Kingston Financial Group Limited (stock code: 1031), ZMAY Holdings Limited (stock code: 8085), Hua Yi Copper Holdings Limited (stock code: 559), China Grand Forestry Green Resources Group Limited (stock code: 910) and New Island Printing Holdings Limited (stock code: 377). Harmony Asset Limited is also listed on Toronto Stock Exchange. Dr. Wong was an independent non-executive director of Grand Field Group Holdings Limited (stock code: 115) from September 2004 to September 2009, Superb Summit International Timber Company Limited (stock code: 1228) from April 2007 to June 2010 and China E-Learning Group Limited (stock code: 8055) from August 2007 to June 2010, and an executive director and chairman of Green Energy Group Limited (stock code: 979) from December 2009 to May 2010.

Mr. Lau Man Tak

Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

Mr. Lau Man Tak, aged 42, joined the Group on 27 March 2008 and is the chairman of audit committee and remuneration committee of the Company. Mr. Lau graduated from Hong Kong Polytechnic University with a Bachelor degree in Accountancy. Mr. Lau has more than 15 years of finance, accounting and auditing experiences. Mr. Lau is a fellow member of the Association of Chartered Certified Accountants in the United Kingdom and an associate

– VI-11 –

GENERAL INFORMATION

APPENDIX VI

member of the Hong Kong Institute of Certified Public Accountants. He is also a member of the Hong Kong Securities Institute. Mr. Lau is currently an executive director of China Grand Forestry Green Resources Group Limited (stock code: 910), an independent non-executive director of Kingston Financial Group Limited (stock code: 1031), Kong Sun Holdings Limited (stock code: 295) and Guojin Resources Holdings Limited (stock code: 630). Mr. Lau was an executive director of Warderly International Holdings Limited (stock code: 607) from December 2007 to January 2010.

Mr. Man Kwok Leung

Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

Mr. Man Kwok Leung, aged 65, joined the Group on 13 May 2008 and is the member of audit committee and remuneration committee of the Company. Mr. Man is a solicitor of the High Court of Hong Kong and a civil celebrant of marriages. Mr. Man has extensive experience in legal practice. He had been appointed by Xinhua News Agency as a district advisor from 1995 to 1997. Mr. Man is currently appointed as a director of Apleichau Kai Fong Primary School, the deputy chairman of Apleichau Kai Fong Welfare Association, the secretary of Apleichau Promotion of Tourism Association and the honorary legal advisor of Junior Police Officers’ Association. Mr. Man is currently an independent non-executive director of ZMAY Holdings Limited (stock code: 8085), Kong Sun Holdings Limited (stock code: 295), Hua Yi Copper Holdings Limited (stock code: 559) and Sam Woo Holdings Limited (stock code: 2322).

(E) Company secretary

Ms. Tsang Kwai Ping

Ms. Tsang is a member of the Hong Kong Institute of Certified Public Accountants and the Institute of Chartered Accountants in England and Wales. Ms. Tsang has extensive experiences in auditing and financial management.

15. PARTIES INVOLVED AND REGISTERED OFFICE

Subscriber World Treasure Global Limited OMC Chambers Wickhams Cay 1 Road Town Tortola British Virgin Islands Financial adviser to the Company Veda Capital Limited Suite 3214, 32/F COSCO Tower 183 Queen’s Road Central Hong Kong

– VI-12 –

GENERAL INFORMATION

APPENDIX VI

Independent financial adviser Messis Capital Limited Room 2002, 20th Floor Tower 1, Lippo Centre 89 Queensway, Hong Kong Reporting Accountant SHINEWING (HK) CPA Limited 43/F., The Lee Gardens 33 Hysan Avenue Causeway Bay, Hong Kong Legal adviser as to Hong Kong laws D.S. Cheung & Co. 29/F Bank of East Asia Harbour View Centre 56 Gloucester Road Wanchai, Hong Kong Legal adviser as to Bermuda laws Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place Central, Hong Kong Branch share registrar Tricor Secretaries Limited 26th Floor, Tesbury Centre 28 Queen’s Road East Hong Kong Underwriter Kingston Securities Limited Suite 2801, 28th Floor One International Finance Centre 1 Harbour View Street Central, Hong Kong

16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal office of business in Hong Kong of the Company at Unit 906, 9th Floor, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong during 9:30 a.m. to 5:30 p.m., Monday to Friday (other than public holidays) from the date of this Circular up to and including the date of the SGM and will be displayed on the website of the SFC (www.sfc.hk) and the website of the Company (www.climaxintlco.com).

(a) the Bye-laws of the Company;
(b) the memorandum and articles of association of the Subscriber;
(c) the interim report of the Company for the six months ended 30 September 2011 and the annual reports of the Company for the three financial years ended 31 March 2011 as set out in Appendix I to this Circular;

– VI-13 –

GENERAL INFORMATION

APPENDIX VI

(d) the accountants’ report on the financial information of the Target Group as set out in Appendix II to this Circular;
(e) the accountants’ report on the financial information of New Spring Offset as set out in Appendix IIA to this Circular;
(f) the report from SHINEWING (HK) CPA Limited on unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this Circular;
(g) the statement of pro forma net tangible asset of the Enlarged Group for the Open Offer only, as set out in Appendix IV to this Circular;
(h) the letters of comfort in relation to the profit forecasts of the Enlarged Group and the Target Group for the two years ending 31 March 2013 issued by SHINEWING (HK) CPA Limited and Veda Capital Limited respectively, as set out in Appendix V to this Circular;
(i) the letter from the Board, the text of which is set out on pages 13 to 89 of this Circular;
(j) the letter from the Independent Board Committee, the text of which is set out on pages 90 to 91 of this Circular;
(k) the letter from Messis Capital, the text of which is set out on pages 92 to 121 of this Circular;
(l) the letters of consent from the experts as referred to in the paragraph headed ‘‘Experts and consents’’ in this appendix;
(m) material contracts as referred to in the section headed ‘‘Material contracts’’ in this appendix;
(n) the service contract as referred to in the section headed ‘‘Directors’ service contracts’’ in this appendix; and
(o) this Circular.

17. MISCELLANEOUS

(a) The English text of this Circular shall prevail over Chinese text in case of any inconsistency.
(b) As at the Latest Practicable Date, the Subscriber was wholly owned by Mr. Wong who is also the sole director of the Subscriber. The correspondence address of Mr. Wong is Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong.

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NOTICE OF SGM

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CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

NOTICE IS HEREBY GIVEN that a special general meeting of Climax International Company Limited (the ‘‘Company’’) will be held at 3/F., Nexxus Building, 77 Des Voeux Road Central, Hong Kong at 11:00 a.m. on Wednesday, 28 March 2012 for the purpose of considering and, if thought fit, passing, with or without modification, the following resolutions:

SPECIAL RESOLUTION

‘‘THAT subject to (i) the fulfillment of all the conditions set out in the section headed ‘‘Conditions of the Capital Reorganisation’’ in the circular of the Company dated 5 March 2012 (the ‘‘Circular’’), a copy of which has been produced to the meeting marked ‘‘A’’ and initialled by the chairman of the meeting for the purpose of identification:
(a) every twenty (20) issued and unissued shares of HK$0.01 each in the share capital of the Company be consolidated into one (1) share of HK$0.20 each (the ‘‘Consolidated Share’’) in the share capital of the Company (the ‘‘Share Consolidation’’), and any fractional entitlements to the then issued Consolidated Shares resulting from the Share Consolidation shall be aggregated and sold in the form of Consolidated Shares for the benefit of the Company in such manner and on such terms as the directors of the Company (the ‘‘Directors’’) may think fit;
(b) subject to and forthwith upon the Share Consolidation taking effect, the issued share capital of the Company be reduced by canceling the paid up capital to the extent of HK$0.19 on each of the then issued Consolidated Shares such that the nominal value of all the issued Consolidated Shares will be reduced from HK$0.20 to HK$0.01 each (the ‘‘Adjusted Share’’) (the ‘‘Capital Reduction’’);
(c) subject to and forthwith upon the Capital Reduction taking effect, each of the authorized but unissued Consolidated Shares be sub-divided into twenty (20) Adjusted Shares of HK$0.01 each (the ‘‘Subdivision’’);
(d) the credit arising from the Capital Reduction be transferred to the contributed surplus account of the Company where it will be utilized by the Directors in accordance with the bye-laws of the Company and all applicable laws of Bermuda, including without limitation to set-off against the accumulated losses of the Company (the ‘‘Credit Application’’); and

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(e) the Directors be and are hereby authorised to do all things and acts and sign all documents which they consider necessary, desirable, or expedient in connection with the implementation of the Share Consolidation, the Capital Reduction, the Subdivision and the Credit Application.’’

ORDINARY RESOLUTIONS

‘‘THAT
(a) the conditional agreement dated 20 January 2011 (as supplemented by the supplemental agreements dated 30 September 2011 and 29 February 2012) (collectively the ‘‘S&P Agreement’’) entered into between Sky Will Printing & Packaging (BVI) Limited (the ‘‘Vendor’’) as vendor and the Company as purchaser (a copy of which has been produced to the meeting marked ‘‘B’’ and initialled by the chairman of the meeting for the purpose of identification) in relation to, among other matters, the acquisition of the entire issued share capital of Sky Will Printing & Packaging (Holdings) Limited (the ‘‘Acquisition’’) and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed;
(b) the allotment and issue of 200,000,000 Adjusted Shares, credited as fully paid at an issue price of HK$0.10 per Adjusted Share, as consideration shares by the Company to the Vendor (or its nominees) pursuant to the terms and conditions of the S&P Agreement be and is hereby approved; and
(c) the Directors be and are hereby authorised to execute such all other documents, do all other acts and things and take such action as may in the opinion of the Directors be necessary, desirable or expedient to implement and give effect to the S&P Agreement and any other transactions contemplated under the S&P Agreement.’’
‘‘THAT
(a) the conditional agreement dated 29 February 2012 entered into between the Company as issuer and World Treasure Global Limited (the ‘‘Subscriber’’) as subscriber (the ‘‘Subscription Agreement’’) in relation to the subscription of 450,000,000 new Adjusted Shares in the share capital of the Company (the ‘‘Subscription Share(s)’’) at the subscription price of HK$0.10 per Subscription Share, a copy of which has been produced to the meeting marked ‘‘C’’ and initialled by the chairman of the meeting for the purpose of identification, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) subject to the fulfillment of the conditions set out in the Subscription Agreement, the allotment and issue of the Subscription Shares to the Subscriber pursuant to the Subscription Agreement be and is hereby approved; and
(c) the Directors be and are hereby authorised to execute such all other documents, do all other acts and things and take such action as may in the opinion of the Directors be necessary, desirable or expedient to implement and give effect to the Subscription Agreement and any other transactions contemplated thereunder.’’

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NOTICE OF SGM

‘‘THAT subject to the fulfillment of the conditions in the underwriting agreement dated 29 February 2012 entered into between World Treasure Global Limited and Kingston Securities Limited as the underwriters and the Company (the ‘‘Underwriting Agreement’’), a copy of which has been produced to the meeting marked ‘‘D’’ and initialled by the chairman of the meeting for the purpose of identification):
(a) the allotment and issue by way of open offer (the ‘‘Open Offer’’) of 459,464,456 Adjusted Shares (the ‘‘Offer Shares’’) to the shareholders of the Company (the ‘‘Shareholders’’) at the subscription price of HK$0.10 per Offer Share on the basis of eight (8) Offer Shares for every one (1) Adjusted Share then held by the Shareholders whose names appear on the register of members of the Company at the close of business on a date to be fixed by the Directors (the ‘‘Record Date’’), other than those Shareholders whose addresses as shown on the register of members of the Company are outside Hong Kong on the Record Date and whom the Directors, after making enquiry as required under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, consider it necessary or expedient on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place not to offer the Offer Shares to such Shareholders, and on the terms and conditions as set out in the Circular, and such other terms and conditions as may be determined by the Directors be and is hereby approved;
(b) the absence of arrangement for excess application for the Offer Shares according to the terms and conditions set out in the Circular be and is hereby approved and confirmed;
(c) the Underwriting Agreement be and is hereby approved, confirmed and ratified and any Director be and is hereby authorised to do such acts or execute such documents which may be necessary, desirable or expedient in his or her opinion to carry into effect or to give effect to the terms of the Underwriting Agreement; and
(d) the Directors be and are hereby authorised to allot and issue the Offer Shares pursuant to and in connection with the Open Offer and to do all such acts and things and execute all such documents which in their opinion may be necessary, desirable or expedient to carry out or give effect to or in connection with the Open Offer or any transactions contemplated thereby.’’
‘‘THAT the waiver (the ‘‘Whitewash Waiver’’), granted or to be granted by the Executive Director (the ‘‘Executive’’) of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers waiving any obligation on the part of World Treasure Global Limited (the ‘‘Subscriber’’) and parties acting in concert with it, to make a general offer for all the issued Adjusted Shares not already owned or agreed to be acquired by them as a result of the subscription of 450,000,000 Subscription Shares by the Subscriber and the Subscriber’s underwriting obligation of 230,000,000 Offer Shares under the Underwriting Agreement, be and is hereby approved, and the Directors be and are hereby authorised to do all such acts and things and take all such action and execute all documents (including the

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NOTICE OF SGM

affixation of the common seal of the Company where execution under seal is required) as they may consider to be necessary or desirable to give effect to any of the matters relating to, or incidental to, the Whitewash Waiver.’’

‘‘THAT subject to and conditional upon the completion of the Acquisition, the Subscription Agreement and the Open Offer and the Listing Committee of the Stock Exchange of Hong Kong Limited granting the listing of and permission to deal in the new Shares to be issued pursuant to this resolution:
(a) the allotment and issue of 41,023,612 Adjusted Shares (the ‘‘Bonus Shares’’) by the Company, credited as fully paid, to the Shareholders whose names appear on the register of members of the Company on the Record Date on the basis of five (5) Bonus Shares for every seven (7) then Adjusted Shares held by the Shareholders be and is hereby approved;
(b) the Bonus Shares to be issued and allotted pursuant to this resolution shall be subject to the memorandum of association and bye-laws of the Company and shall rank pari passu in all respects with the Adjusted Shares then in issue, except that they will not rank for the Offer Shares and the bonus issue of the Adjusted Shares mentioned in this resolution; and
(c) the Directors be are hereby authorised to do all acts and things as may be necessary and expedient in connection with the allotment and issue of the Bonus Shares, including, but not limited to, determining and applying the amount to be capitalized out of the share premium account of the Company for paying up the Bonus Shares and the number of Bonus Shares to be issued, allotted and distributed in the manner referred to in paragraph (a) of this resolution.’’
‘‘THAT
(a) the master agreement dated 29 February 2012 entered into between Sky Will Printing & Packaging (Holdings) Limited and New Spring Label & Packaging Limited (the ‘‘Master Agreement’’) (a copy of which has been produced to the Meeting and marked ‘‘E’’ and initialed by the chairman of the meeting for the purpose of identification) in relation to, among other matters, the production of printing orders for a term up to 31 March 2015 and the transactions contemplated thereunder be and are hereby approved, ratified and confirmed;
(b) the proposed annual caps in relation to the transactions under the Master Agreement for the period commencing from the date on which the Master Agreement becoming effective until 31 March 2013 and each of the years ending 31 March 2014 and 31 March 2015 will not exceed HK$24 million, HK$26 million and HK$28 million respectively be and are hereby approved; and

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NOTICE OF SGM

(c) the Directors be and are hereby authorised to execute such other documents, do all other acts and things and take such action as they may consider necessary, desirable or expedient to implement and/or give effect to or otherwise in connection with the Master Agreement and any or all the matters contemplated in the Master Agreement and this resolution.’’

By order of the Board Climax International Company Limited Wong Hin Shek Executive Director

Hong Kong, 5 March 2012

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal Place of Business in Hong Kong: Unit 906, 9/F Wings Building 110–116 Queen’s Road Central Central, Hong Kong

Notes:

Any member entitled to attend and vote at the special general meeting shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.
Where there are joint holders of shares, any one of such joint holders may vote at the special general meeting, either in person or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holders are present at the special general meeting, 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 holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members and where applicable, any branch register of members of the Company to be kept pursuant to the provisions of the Companies Act 1981 of Bermuda, as amended from time to time, 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 certified copy of such power or authority, shall be delivered to the Company’s Hong Kong branch share registrar, Tricor Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than forty-eight (48) hours before the time appointed for holding the special general meeting or adjourned meeting at which the person named in the form proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, 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.

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AI assistant

Genesis Scale Holdings Limited — Proxy Solicitation & Information Statement 2012

49218_rns_2012-03-04_2f985846-aa6c-445b-bb24-ac1ce2df37ef.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

CLIMAX INTERNATIONAL COMPANY LIMITED

(1) STATUS ON RESUMPTION

World Treasure Global Limited

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OPEN OFFER

CLIMAX INTERNATIONAL COMPANY LIMITED

(1) STATUS ON RESUMPTION

WHITEWASH WAIVER

(5) BONUS ISSUE OF SHARES

(6) CONTINUING CONNECTED TRANSACTIONS

(7) NOTICE OF SPECIAL GENERAL MEETING

(1) STATUS ON RESUMPTION

(2) CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE

Conditions of the Capital Reorganisation

Effect and reason of the Capital Reorganisation

Status of the Adjusted Shares

Arrangement on odd lot trading

Exchange of Share certificates

Change of board lot size

(3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS

A. The S&P Agreement

(2) Purchaser: The Company

Assets to be acquired

Consideration

Conditions precedents

Profit guarantee and adjustments of Consideration

2012 Shortfall

Completion

Consideration Shares

Major terms of the Promissory Note

B. Business operation of the Enlarged Group

Information on the Group

Information on the Target Group

a. Development background of the Target Group

(ii) Asset Purchase

(iii) Current companies within the Target Group

(iv) Business of Target Group taken up from NSG

b. Operation structure of the Target Group

Delivery of products

c. Products

Paper packaging products

Paper gift items

Paper promotional materials

d. Customers and suppliers

e. Sales and marketing

f. Pricing

g. Production facilities

Production facility

h. Production process

Pre-press

Major Machinery involved: Sheeters, die cutting machines

Offset printing

Major Machinery involved: Offset printing machines

Post-press

i. Procurement

j. Inventory control

l. Logistics

m. Employees

n. Licences and permits

o. Insurance

Hong Kong

The PRC

p. Environmental matters

q. Labour and safety matters

Hong Kong

The PRC

r. Information technology

s. Tax liabilities

t. Legal and administrative proceedings

u. Competition

Competition from New Spring Label

Genesis Scale Holdings Limited Proxy Solicitation & Information Statement 2012