Genesis Scale Holdings Limited — Proxy Solicitation & Information Statement 2013

Nov 15, 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser for independent advice.

If you have sold or transferred all your shares in Climax International Company Limited, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

This circular appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities.

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CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

REVISION OF EXISTING ANNUAL CAPS

OF CONTINUING CONNECTED TRANSACTIONS

AND

NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 3 to 9 of this circular. A letter from the Independent Board Committee containing its recommendation is set out on pages 10 to 11 of this circular. A letter from Nuada containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 12 to 18 of this circular.

A notice convening the SGM to be held at 3/F, Nexxus Building, 77 Des Voeux Road Central, Hong Kong on 6 December 2013 at 11 a.m. is set out on pages 23 to 24 of this circular.

Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the registrar of the Company, Tricor Secretaries Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof (as the case may be) should you so wish.

15 November 2013

CONTENTS

			Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from	the	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from	the	Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from	Nuada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
Appendix	—	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Notice of SGM		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23

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DEFINITIONS

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

• ‘‘Announcement’’ the announcement of the Company dated 21 October 2013 in relation to the revision of Existing Annual Caps

• ‘‘Board’’ board of Directors

• ‘‘BVI’’ British Virgin Islands

‘‘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 Main Board of the Stock Exchange

• ‘‘Director(s)’’ director(s) of the Company

• ‘‘Existing Annual Cap(s)’’ the respective expected maximum aggregate annual amount of the transactions for the Services pursuant to the Independent Shareholders’ approval obtained at the special general meeting of the Company held on 28 March 2012 for each of the three years ending 31 March 2015

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Board an independent board committee comprising all the Committee’’ independent non-executive Directors

• ‘‘Independent Shareholders’’

• Shareholders other than Mr. Ng, Ms. Li, Sky Will and New Spring Label, if any one of them is interested in any Share

• ‘‘Latest Practicable Date’’ 12 November 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Master Agreement’’ an agreement entered into between Sky Will and New Spring Label on 29 February 2012 for the Services

• ‘‘Mr. Ng’’ Mr. Ng Man Chan, who is an executive Director, a director of Sky Will, and together with his associate are interested in 50% issued share capital of New Spring Label

‘‘Ms. Li’’ Ms. Li Mi Lai, the spouse of Mr. Ng and a 30% beneficial owner of New Spring Label

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DEFINITIONS

• ‘‘New Spring Label’’

• New Spring Label & Packaging Limited, a company incorporated in Hong Kong in which Mr. Ng and Ms. Li together are interested in 50% of its issued share capital

• ‘‘Nuada’’ or ‘‘Independent Financial Adviser’’

• Nuada Limited, being a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the Proposed New Caps

• ‘‘PRC’’ the People’s Republic of China

• ‘‘Proposed New Cap(s)’’

• the proposed new maximum aggregate annual amount of the transactions for the Services for the years ending 31 March 2014 and 2015

• ‘‘Services’’

• the ongoing printing and production of paper packaging and promotional products and materials by Sky Will Group to New Spring Label

• ‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘SGM’’

• the special general meeting of the Company to be convened at 3/F, Nexxus Building, 77 Des Voeux Road Central, Hong Kong on 6 December 2013 at 11 a.m. for the Independent Shareholders to consider and, if thought fit, approve the Proposed New Caps

• ‘‘Shareholder(s)’’ holder(s) of the Share(s)

• ‘‘Share(s)’’ ordinary share(s) of HK$0.01 each in the share capital of the Company

• ‘‘Sky Will’’ Sky Will Printing & Packaging (Holding) Limited, a company incorporated in the BVI and is wholly-owned by the Company

• ‘‘Sky Will Group’’ Sky Will and its subsidiaries

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘%’’ per cent

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LETTER FROM THE BOARD

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CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

Executive Directors: Mr. Wong Hin Shek Mr. Ng Man Chan

Non-executive Director: Mr. Wong Hung Ki

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

Head office and principal place of business in Hong Kong: Unit 906, 9/F Wings Building 110–116 Queen’s Road Central Central Hong Kong 15 November 2013

• To the Shareholders or

Independent Shareholders (as the case may be)

Dear Sir/Madam,

REVISION OF EXISTING ANNUAL CAPS OF CONTINUING CONNECTED TRANSACTIONS AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in relation to the revision of Existing Annual Caps of continuing connected transactions under the Master Agreement.

The purpose of this circular is, inter alia, (i) to provide you with further information relating to the Proposed New Caps; (ii) to set out the opinions and recommendations of the Independent Board Committee and Nuada in relation to the Proposed New Caps; and (iii) to give Shareholders the notice of the SGM.

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LETTER FROM THE BOARD

BACKGROUND

Reference is made to the Company’s announcement and circular both dated 5 March 2012, in relation to, among other things, the continuing connected transactions under the Master Agreement. On 29 February 2012, the Master Agreement was entered into between Sky Will and New Spring Label for the provision of the Services for the three years ending 31 March 2015. Since Mr. Ng is an executive Director and a director of Sky Will and New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, the spouse of Mr. Ng. Therefore, transactions contemplated under the Master Agreement constitute continuing connected transactions under the Listing Rules. Pursuant to the approval obtained at the special general meeting of the Company held on 28 March 2012, the Existing Annual Caps for the provision of the Services for the years ending 31 March 2013, 2014 and 2015 were HK$24 million, HK$26 million and HK$28 million respectively.

Due to the increase in the business volume of New Spring Label in 2013, the demand for the Services has correspondingly increased. The Board anticipated that the Existing Annual Caps for the years ending 31 March 2014 and 2015 will be exceeded. To cope with the increasing demand for the Services, the Directors propose to revise the Existing Annual Caps to the Proposed New Caps for the years ending 31 March 2014 and 2015 to HK$50 million and HK$60 million respectively.

REVISION OF EXISTING ANNUAL CAPS

On the above basis, the parties thereto agreed to revise the Existing Annual Caps to the Proposed New Caps as follows:

Year	ended/ending	31	March	Existing Annual Caps	Proposed New Caps
2013				HK$24 million	N/A
2014				HK$26 million	HK$50 million
2015				HK$28 million	HK$60 million

Basis of the Proposed New Caps

In determining the Proposed New Caps, the Directors have taken into account the following factors:

• (i) the production and operation capacity of the Group;

• (ii) the total actual sales amount of the Services provided for the year ended 31 March 2013 was approximately HK$24 million, representing approximately 100% of the Existing Annual Cap for the period;

• (iii) the total unaudited sales amount of the Services provided for the six months period from 1 April 2013 to 30 September 2013 was approximately HK$20.6 million, representing approximately 79.2% of the Existing Annual Cap for the year ending 31 March 2014 or an annualised increase of approximately 71.7%;

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LETTER FROM THE BOARD

• (iv) as at the Latest Practicable Date, based on the total unaudited sales incurred up to 30 September 2013 as mentioned in point (iii) above and the sales orders in progress and under negotiation, the expected aggregate sales amount with New Spring Label for the year ending 31 March 2014 is approximately HK$40 million, which has already exceeded the Existing Annual Cap for the period. To cater for any further upward adjustments in price and/or quantities of the orders, an additional buffer of approximately 25% has factored-in to consider the Proposed New Cap, which is determined based on the discussions with and understanding from the management of New Spring Label, taking into consideration the possible increase in demand for Services during the peak seasons before Christmas and Chinese New Year festivals; and

• (v) in considering the historical trend and the increasing demand for the Services, it is expected that the Existing Annual Cap for the year ending 31 March 2015 will also be exceeded. Based on the Proposed New Cap for the year ending 31 March 2014 of HK$50 million and assuming a growth rate of approximately 20%, it is expected that the Proposed New Cap for the year ending 31 March 2015 to be HK$60 million.

Based on the above, it is therefore expected that the Existing Annual Caps for the remaining term of the Master Agreement shall be adjusted accordingly and the Directors consider that the Proposed New Caps will facilitate the business relationship with New Spring Label and future growth of the Group and is therefore beneficial and in the interest of the Shareholders and the Company as a whole. Save for the Proposed New Caps, there are no other material changes to the terms of the continuing connected transactions which require the approval from the Independent Shareholders.

Basis of the pricing policy

The production of products and materials to New Spring Label were provided on normal commercial terms. The pricing for the Services are determined by the parties upon arm’s length negotiation on a case-by-case basis at the prevailing market rates for the same types of transactions. In determining the prevailing market rates, Sky Will Group takes into reference, among others, its existing price list, historical pricing for similar type of services and/or products with other existing customers, products quality, quantity involved, delivery lead time, payments terms and as well as customers’ responses etc. to ensure the pricing for the Services is not less favorable to the Group. To stay competitive, the Group will continue monitoring its pricing strategies and quality of services and will use its best endeavor to transact with counterparties that offer more favourable terms. In addition to the terms offered by the counterparties, the Company also considers factors such as the corporate background, creditworthiness and reliability of the counterparties; their ability to execute transactions in accordance with the contractual terms; their understanding of the needs of the Company, etc., in order to maximise the Company’s overall interest in a particular transaction and minimise the costs.

Based on the aforesaid, the Company considers that the pricing mechanisms of the continuing connected transactions under the Proposed New Caps are transparent, on normal commercial terms and reasonable to the Company.

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE PROPOSED NEW CAPS

New Spring Label does not have its own production facilities for packaging products and the production of printing orders has been provided by Sky Will Group pursuant to the Master Agreement. Due to the increase in the business volume of New Spring Label in 2013, the demand for the Services has correspondingly increased. Based on the Existing Annual Caps for the two years ending 31 March 2014 and 2015 of HK$26 million and HK$28 million respectively, and the anticipated aggregate sales amount with New Spring Label for the year ending 31 March 2014 of approximately HK$40 million, the Board considers that the Existing Annual Caps for the remaining two years are likely to exceed and it is necessary to revise the Existing Annual Caps to the Proposed New Caps to ensure the continued smooth running of the business of the Group and to capture the increasing demand of the Services from New Spring Label.

Sky Will Group has a long standing cooperation relationship with New Spring Label. Over the years, both parties have built a thorough understanding on the needs and requirements of each other, and Sky Will Group is able to offer the Services that address the needs of New Spring Label. The Group considers that having a good long-term relationship with existing customers will be valuable to any businesses and it is in the interest of the Company and Shareholders as a whole.

RISKS IN OVER-RELIANCE ON NEW SPRING LABEL

As at the Latest Practicable Date, the Group’s customers are principally distributors, manufacturers of consumer products and advertising agencies based in the United States of America, Europe, Hong Kong and the PRC.

As at the Latest Practicable Date, New Spring Label is the largest customer of Sky Will Group. For the financial year ended 31 March 2013, the amount of Services provided amounted to approximately HK$23.97 million, representing approximately 29.5% of the total revenue of the Group of approximately HK$81.18 million for the same period. The Board also noted that the Proposed New Caps of HK$50 million and HK$60 million for the two years ending 31 March 2014 and 2015 accounted for approximately 61.6% and 73.9% respectively of the total revenue of the Group for the year ended 31 March 2013. On the basis that the revenue from other existing customers of the Group remains stable and maintains at the current level, it is anticipated that the maximum Proposed New Cap of HK$60 million shall account for approximately 50% of the total revenue of the Group on an enlarged basis.

In assessing whether the Group has over-reliance on a single customer, the Board has assessed the amount of revenue generated from the existing customers (other than New Spring Label) for the period between 1 April and 30 September in 2012 and 2013 and noted that the amount of revenue generated from such customers has remained stable with slight increase. Given the revenue attributable by New Spring Label for the year ended 31 March 2013 accounted for approximately 29.5% of the total revenue of the Group, which the Company did not consider itself over-reliance on New Spring Label at that juncture, with other things being equal, the Company therefore considers that the increasing demand of Services from New Spring Label is beneficial to the business and financial position of the Group. However, in the circumstances that the number of and sales to existing customers of the Group (other than New

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LETTER FROM THE BOARD

Spring Label) shall decline, the Group’s business may consider over-reliance on New Spring Label. In this case, if there is any material adverse change to the business of New Spring Label, the Group’s business and financial position maybe adversely affected.

Taking into account the current business conditions and operating environment of the Group, the Group will use its best endeavor to monitor and maintain the total amount of Services to New Spring Label during the term of the Master Agreement to be not more than 60% of the total revenue of the Group in order to minimise any potential negative impact or reliance on the business from New Spring Label. In addition, the Group will continue to improve its quality of services such as workflow and logistics arrangement to enhance its efficiency and output quality and maintain good relationships with existing customers and at the same time will promote its services to new customers to broaden its customer base.

Apart from the paper business, the Group has also acquired residential properties for property investment and rental purposes which further broadened the income source in order to improve the performance and maximise the returns to Shareholders under the increasing competitive market environment. The Group will continue seeking for new business opportunities in order to broaden its income source.

INTERNAL CONTROL

The Group has good corporate governance and has a dedicated team in place to monitor the internal control policies, the pricing policy and annual caps for the continuing connected transactions under the Master Agreement.

Internal control procedures including monitoring price quotation from existing customers on same type of Services and taking reference to the prevailing market prices are in place to ensure the pricing policies are on normal commercial terms or no less favorable to the Group.

The independent non-executive Directors will also perform an annual review pursuant to Rule 14A.37 of the Listing Rules including that whether the Services provided to New Spring Label were conducted on normal commercial terms or, if there were not sufficient comparable transactions to judge whether they were on normal commercial terms, whether the terms were no less favourable to the Group than those offered to independent third parties.

Sky Will Group provides business reports to the management of the Group on a regular basis on its business operations and, in particular, the continuing connected transactions under the Master Agreement. For instance, a report sets out historical transactions, transactions in progress and transactions in negotiation with New Spring Label will be presented to the Board on a monthly basis. Hence, the conditions and annual caps with New Spring Label are closely monitored.

LISTING RULES IMPLICATIONS

Pursuant to the Listing Rules, if the Company proposes to revise the annual caps for continuing connected transaction, the Company will be required to re-comply with the provisions of Chapter 14A of the Listing Rules in relation to the relevant connected transaction.

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LETTER FROM THE BOARD

As certain applicable percentage ratios (as defined in the Listing Rules) in respect of the Proposed New Caps exceed 5% on the annual basis, the Proposed New Caps will be subject to reporting, announcement and independent shareholders’ approval pursuant to Rule 14A.35 of the Listing Rules. Since Mr. Ng is an executive Director and a director of Sky Will and New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, the spouse of Mr. Ng, accordingly, Mr. Ng, Ms. Li, Sky Will and New Spring Label, if any one of them is interested in any Share, will be abstained from voting at the SGM to approve the Proposed New Caps. Save for the aforesaid, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, no Director has a material interest in the transactions contemplated under the Proposed New Caps.

INFORMATION ON THE COMPANY, SKY WILL AND NEW SPRING LABEL

The Company is an investment holding company. The principal activities of its subsidiaries are manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials and property investments.

Sky Will is an investment holding company and the principal activities of its subsidiaries, i.e. Sky Will Group, are manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials.

New Spring Label is principally engaged in trading of labels and packaging products.

GENERAL

The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders in respect of the continuing connected transactions. Nuada has also been appointed as the independent financial adviser of the Company to advise the Independent Board Committee and the Independent Shareholders in this connection.

SGM

A notice convening the SGM to be held at 3/F, Nexxus Building, 77 Des Voeux Road Central, Hong Kong on 6 December 2013 at 11 a.m. is set out on pages 23 to 24 of this circular. An ordinary resolution will be proposed to the Independent Shareholders to consider and, if thought fit, approve the Proposed New Caps.

Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the registrar of the Company, Tricor Secretaries Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof (as the case may be) should you so wish.

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LETTER FROM THE BOARD

Since Mr. Ng is an executive Director and a director of Sky Will and New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, the spouse of Mr. Ng, accordingly, Mr. Ng, Ms. Li, New Spring Label and Sky Will, if any one of them is interested in any Share, will be abstained from voting at the SGM approving the Proposed New Caps.

RECOMMENDATION

The Directors (including the independent non-executive Directors whose view has been set out in this circular together with the advice from Nuada) consider that the Proposed New Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM approving the Proposed New Caps.

Your attention is drawn to the letter from the Independent Board Committee set out on pages 10 to 11 of this circular containing its recommendation to the Independent Shareholders and the letter from Nuada sets out on pages 12 to 18 of this circular containing its advice and recommendation to the Independent Board Committee and to the Independent Shareholders, on the Proposed New Caps.

Your attention is also drawn to the general information set out in the appendix to this circular.

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

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

15 November 2013

To the Independent Shareholders

Dear Sir or Madam,

REVISION OF EXISTING ANNUAL CAPS OF CONTINUING CONNECTED TRANSACTIONS AND NOTICE OF SPECIAL GENERAL MEETING

We refer to the circular dated 15 November 2013 (the ‘‘Circular’’) issued by the Company of which this letter forms part. Terms defined in the Circular shall have the same meanings herein unless the context otherwise requires.

We have been appointed by the Board to form the Independent Board Committee to advise the Independent Shareholders as to whether, in our opinion, the Proposed New Caps, are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Nuada has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in the same respect.

We wish to draw your attention to the letter from the Board sets out on pages 3 to 9 of the Circular which contain information in connection with Proposed New Caps, and the letter from the Nuada sets out on pages 12 to 18 of the Circular which contains its advice and recommendation in the same respect.

Having considered the terms of the Proposed New Caps, the advice and recommendation of Nuada and the relevant information contained in the letter from the Board, we are of the opinion that the Proposed New Caps are on normal commercial terms and in the ordinary and usual course of business of the Group. We also take the view that the terms of the Proposed New Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM approving the Proposed New Caps.

Yours faithfully For and on behalf of the Independent Board Committee Mr. Lau Man Tak Mr. Man Kwok Leung Independent Non-executive Director Independent Non-executive Director Dr. Wong Yun Kuen Independent Non-executive Director

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LETTER FROM NUADA

The following is the full text of the letter of advice to the Independent Board Committee and Independent Shareholders from Nuada Limited dated 15 November 2013 prepared for incorporation in this circular.

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Unit 1805-08, 18/F, New Victory House, 93-103 Wing Lok Street, Sheung Wan, Hong Kong 香港上環永樂街93-103號樹福商業大廈18樓1805-08室

15 November 2013

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

Dear Sirs,

REVISION OF EXISTING ANNUAL CAPS OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the continuing connected transactions, details of which are set out in the letter from the Board (the ‘‘Letter’’) contained in the circular to the Shareholders dated 15 November 2013 (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter have the same meanings as defined in the Circular unless the context requires otherwise.

On 29 February 2012, the Master Agreement was entered into between Sky Will and New Spring Label for the provision of the Services for the three years ending 31 March 2015. Since Mr. Ng is an executive Director and a director of Sky Will and New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, the spouse of Mr. Ng, the transactions contemplated under the Master Agreement constitute continuing connected transactions under the Listing Rules.

Pursuant to the approval obtained at the special general meeting of the Company held on 28 March 2012, the Existing Annual Caps for the provision of the Services for the years ending 31 March 2013, 2014 and 2015 were HK$24 million, HK$26 million and HK$28 million respectively.

Due to the increase in the business volume of New Spring Label in 2013, the demand for the Services has corresponding increased and the Board anticipated that the Existing Annual Caps for the years ending 31 March 2014 and 2015 will be exceeded. To cope with the increasing demand for the Services, the Directors propose to revise the Existing Annual Caps to the Proposed New Caps for the years ending 31 March 2014 and 2015 to HK$50 million and HK$60 million respectively.

All the existing terms and conditions under the Master Agreement remain unchanged.

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LETTER FROM NUADA

Pursuant to the Listing Rules, if the Company proposes to revise the annual caps for continuing connected transaction, the Company will be required to re-comply with the provisions Chapter 14A of the Listing Rules in relation to the relevant connected transaction.

As certain applicable percentage ratios (as defined in the Listing Rules) in respect of the Proposed New Caps exceed 5% on the annual basis, the Proposed New Caps will be subject to reporting, announcement and independent shareholders’ approval pursuant to Rule 14A.35 of the Listing Rules. The SGM will be convened by the Company at which resolution will be proposed to seek approval from the Independent Shareholders in respect of the Proposed New Caps and the vote will be taken by poll. Since Mr. Ng is an executive Director and a director of Sky Will and New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, the spouse of Mr. Ng, accordingly, Mr. Ng, Ms. Li, Sky Will and New Spring Label, if any one of them is interested in any Share, will be abstained from voting at the SGM to approve the Proposed New Caps.

Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen, being the independent non-executive Directors, have been appointed by the Board to form the Independent Board Committee to advise and make recommendation to the Independent Shareholders as to how to vote at the SGM on the relevant ordinary resolution(s) regarding the continuing connected transactions.

We, Nuada Limited, have been appointed by the Independent Board Committee as the Independent Financial Adviser to give our independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether the terms of the Master Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Proposed New Caps are in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote on the relevant resolution(s) to approve the Proposed New Caps at the SGM.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the information, opinions and representations contained or referred to in the Circular and the information, opinions and representations provided to us by the management of the Company and the Directors. We have assumed that all information, opinions and representations contained or referred to in the Circular and all information, opinions and representations which have been provided by the management of the Company and the Directors, for which they are solely and wholly responsible, were true, accurate and complete at the time when they were made and continue to be so as at the Latest Practicable Date.

Accordingly, we have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and representations contained in the Circular and provided to us by the Company and the Directors, or the reasonableness of the opinions expressed by the management of the Company and the Directors. The Directors collectively and individually accept full responsibility for the accuracy of the information in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts the omission of which would

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LETTER FROM NUADA

make any statement in the Circular misleading. We have relied on such information and opinions but have not, however, conducted any independent in-depth investigation into the business, financial conditions and affairs or the future prospects of the Group nor have we considered the taxation implication on the Group or the Shareholders as a result of the continuing connected transactions.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation in relation to the continuing connected transactions in respect of the Proposed New Caps, we have considered the following principal factors and reasons:

a. Reasons and benefits of the Proposed New Caps

The principal activities of the Group are manufacture and sale of paper packaging products and paper gift items, the printing of paper promotional materials and property investments. Sky Will is a wholly-owned subsidiary of the Company. Sky Will Group is principally engaged in the provision of printing and packaging services, and manufacture and sale of paper packaging products and paper gift items and the printing of paper promotional materials.

New Spring Label is principally engaged in trading of labels and packaging products. It does not have its own production facilities for packaging products.

On 29 February 2012, the Master Agreement was entered into between Sky Will and New Spring Label for the provision of the Services for the three years ending 31 March 2015. Pursuant to the approval obtained at the special general meeting of the Company held on 28 March 2012, the Existing Annual Caps for the provision of the Services for the years ending 31 March 2013, 2014 and 2015 were HK$24 million, HK$26 million and HK$28 million respectively.

Since 2013, the demand for the Services from New Spring has increased due to its expansion of business volume. The Directors expected that the sales amount for the Services with New Spring Label for the year ending 31 March 2014 will be approximately HK$40 million, which will exceed the Existing Annual Caps. Therefore, the Board considers that it is necessary to seek the Independent Shareholders’ approval to revise the Existing Annual Caps to the Proposed New Caps in order to capture the increasing demand of the Services from New Spring Label.

Having considered that (i) the provision of Services is one of the income sources of the Group; and (ii) the Proposed New Caps will enable the Group to capture the increasing demand of the Services from New Spring Label, we are of the view that the revision of Existing Annual Caps to the Proposed New Caps is beneficial to the Company and in the interests of the Shareholders and the Company as a whole.

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LETTER FROM NUADA

b. Basis of the pricing policy

As advised by the Company, the production of products and materials to New Spring Label were provided on normal commercial terms. The pricing for the Services is determined by the parties upon arm’s length negotiation on a case-by-case basis at the prevailing market rates for the same types of transactions. In determining the prevailing market rates, Sky Will Group takes into reference, among others, its existing price list, the historical pricing for similar type of services and/or products with other existing customers, products quality, quantity involved, delivery lead time, payments terms and as well as customers’ responses, etc., to ensure the pricing for the Services being not less favourable to the Group. To stay competitive, we have been advised that the Group will continue monitoring its pricing strategies and quality of services and will use its best endeavor to transact with counterparties that offer more favourable terms. In addition to the terms offered by the counterparties, the Company also considers factors such as the corporate background, creditworthiness and reliability of the counterparties; their ability to execute transactions in accordance with the contractual terms; their understanding of the needs of the Company, etc., in order to maximise the Company’s overall interest in a particular transaction and minimise the costs.

According to the internal control procedure of the Group, the Company will also monitor price quotation from existing customers on same type of Services and take reference to the prevailing market prices in order to ensure the pricing policy for the Services is on normal commercial terms or no less favourable to the Group.

In order to ensure the annual cap as approved by the Shareholders will not be exceeded, we are advised that the management will keep track and review on the aggregate amount of the continuing connected transaction.

In addition to the above internal procedure, the independent non-executive Directors will perform an annual review pursuant to Rule 14A.37 of the Listing Rules including that whether the Services provided to New Spring Label were conducted on normal commercial terms or, if there were not sufficient comparable transactions to judge whether they were on normal commercial terms, whether the terms were no less favourable to the Group than those offered to independent third parties. Pursuant to Rule 14A.38 of the Listing Rules, the Company’s auditors will also confirm, amongst other thing, (i) whether the Service is in accordance with the pricing policy of the Company; (ii) whether the Service has been entered into in accordance with the Master Agreement; and (iii) whether the Proposed New Caps have been exceeded.

Based on the above control procedures, we consider that there are adequate measures in place to ensure that (i) the transactions identified are entered into in accordance with the Company’s pricing policy; and (ii) transaction will not exceed the annual caps as approved by the Shareholders in order to protect the interests of the Company and the Shareholders as a whole.

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LETTER FROM NUADA

c. The basis for the Proposed New Caps

The following table shows the Existing Annual Caps and the Proposed New Caps for the three years ending 31 March 2015:

Year ended/ending 31 March Existing Annual Caps Proposed New Caps 2013 HK$24 million N/A 2014 HK$26 million HK$50 million 2015 HK$28 million HK$60 million

As set out in the Letter, the Directors have taken into account the following factors in determining the Proposed New Caps:

• (i) the production and operation capacity of the Group;

• (ii) the total actual sales amount of the Services provided for the year ended 31 March 2013 was approximately HK$24 million, representing approximately 100% of the Existing Annual Cap for the period;

• (iii) the total unaudited sales amount of the Services provided for the six months period from 1 April 2013 to 30 September 2013 was approximately HK$20.6 million, representing approximately 79.2% of the Existing Annual Cap for the year ending 31 March 2014 or an annualised increase of approximately 71.7%;

• (iv) as at the Latest Practicable Date, based on the total unaudited sales incurred up to 30 September 2013 as mentioned in point (iii) above and the sales orders in progress and under negotiation, the expected aggregate sales amount with New Spring Label for the year ending 31 March 2014 is approximately HK$40 million, which has already exceeded the Existing Annual Cap for the period. To cater for any further upward adjustments in price and/or quantities of the orders, an additional buffer of approximately 25% has factored-in to consider the Proposed New Cap, which is determined based on the discussions with and understanding from the management of New Spring Label, taking into consideration the possible increase in demand for Services during the peak seasons before Christmas and Chinese New Year festivals; and

• (v) in considering the historical trend and the increasing demand for the Services, it is expected that the Existing Annual Cap for the year ending 31 March 2015 will also be exceeded. Based on the Proposed New Cap for the year ending 31 March 2014 of HK$50 million and assuming a growth rate of approximately 20%, it is expected that the Proposed New Cap for the year ending 31 March 2015 to be HK$60 million.

Save for the Proposed New Caps, there are no other material changes to the terms of the continuing connected transactions which require the approval from the Independent Shareholders.

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LETTER FROM NUADA

Given (i) the 100% utilisation of the Existing Annual Cap for the year ended 31 March 2013; (ii) the surge of demand from New Spring Label for the Services according to the existing Services orders on hand for the year ending 31 March 2014; (iii) the long term business relationship between Sky Will Group and New Spring Label; (iv) there will be no change in other existing terms of the Master Agreement, such as pricing policy, we are of the view that the Proposed New Caps are justifiable, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Shareholders and the Company as a whole.

RISKS IN OVER-RELIANCE ON NEW SPRING LABEL

As at the Latest Practicable Date, the Group’s customers are principally distributors, manufacturers of consumer products and advertising agencies based in the United States of America, Europe, Hong Kong and the PRC.

As at the Latest Practicable Date, New Spring Label is the largest customer of Sky Will Group. For the financial year ended 31 March 2013, the amount of Services provided amounted to approximately HK$23.97 million, representing approximately 29.5% of the total revenue of the Company of approximately HK$81.18 million for the same period. The Proposed New Caps of HK$50 million and HK$60 million for the two years ending 31 March 2014 and 2015 accounted for approximately 61.6% and 73.9% respectively of the total revenue of the Group for the year ended 31 March 2013. On the basis that the revenue from other existing customers of the Group remains stable and maintains at the current level, it is anticipated that the maximum Proposed New Cap of HK$60 million in 2015 will account for approximately 50% of the total revenue of the Group on an enlarged basis.

In assessing whether the Group has over-reliance on a single customer, we have reviewed the amount of revenue generated from the existing customers (other than New Spring Label) for the period between 1 April and 30 September in 2012 and 2013 and noted that the amount of revenue generated from such customers has remained stable with slight increase. Given the revenue attributable by New Spring Label for the year ended 31 March 2013 accounted for approximately 29.5% of the total revenue of the Group, which the Company did not consider itself over-reliance on New Spring Label at that juncture, with other things being equal, therefore, we concur with the Board that the increasing demand of Services from New Spring Label is beneficial to the business and financial position of the Group. However, in the circumstances that the number of and sales to existing customers of the Group (other than New Spring Label) shall decline, the Group’s business may consider over-reliance on New Spring Label. In this case, if there is any material adverse change to the business of New Spring Label, the Group’s business and financial position may be adversely affected.

Taking into account the current business conditions and operating environment of the Group, the Group will use its best endeavor to monitor and maintain the total amount of Services to New Spring Label during the term of the Master Agreement to be not more than 60% of the total revenue of the Group in order to minimise any potential negative impact or reliance on the business from New Spring Label. In addition, we have been advised by the Board that the Group will continue to improve its quality of services such as workflow and

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LETTER FROM NUADA

logistics arrangement to enhance its efficiency and output quality and maintain good relationships with existing customers and at the same time will promote its services to new customers to broaden its customer base.

Apart from the paper business, the Group has also acquired residential properties for property investment and rental purposes which further broadened the income source in order to improve the performance and maximise the returns to Shareholders under the increasing competitive market environment.

RECOMMENDATION

Having considered the above reasons, we consider that the terms and conditions of the continuing connected transactions are on normal commercial terms and are in the ordinary and usual course of business of the Group and the revision of the Existing Annual Caps to the Proposed New Caps are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Shareholders and the Company as a whole. Accordingly, we recommend (i) the Independent Board Committee to advise the Independent Shareholders to vote in favor of the relevant resolution(s) at the SGM to approve the Proposed New Caps; and (ii) the Independent Shareholders to vote in favor of the relevant resolution(s) at the SGM to approve the Proposed New Caps.

Yours faithfully, For and on behalf of Nuada Limited Kevin Chan Director

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. 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’’).

Long positions in shares and underlying shares of the Company

		Approximate
	Number of	percentage of
Name of Director	Shares held	Shares in issue
Mr. Wong Hin Shek (Note)	638,981,013	44.08%

Note: The 638,981,013 Shares are beneficially owned by World Treasure Global Limited (‘‘World Treasure’’), a company incorporated in the British Virgin Islands, whose entire issued share capital is wholly and beneficially owned by Mr. Wong Hin Shek. By virtue of the SFO, Mr. Wong Hin Shek is deemed to be interested in the same Shares held by World Treasure.

Save as disclosed above, at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have been taken under such provisions of the SFO) or the Model Code for Securities Transactions by Directors of Listed Issuers or which were required to be entered in the register required to be kept under section 352 of the SFO.

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GENERAL INFORMATION

APPENDIX

(b) Substantial Shareholders’ Interest in Shares and Underlying Shares

		Approximate
	Number of	percentage of
Name of Substantial Shareholder	Shares held	Shares in issue
World Treasure (Note b)	638,981,013	44.08%
Ruan Yuan (Note c)	223,722,285	15.43%
Zhang Ming (Note c)	223,722,285	15.43%

Notes:

• a. As at the Latest Practicable Date, the authorised share capital and issued share capital of the Company were 10,000,000,000 Shares, and 1,449,501,125 Shares respectively.

• b. World Treasure is wholly owned by Mr. Wong Hin Shek. By virtue of the SFO, Mr. Wong Hin Shek is deemed to be interested in the same shares held by World Treasure.

• c. As at the Latest Practicable Date, of the 223,722,285 Shares, 219,867,657 Shares were held by Mr. Ruan Yuan while 3,854,628 Shares are held by Ms. Zhang Ming, the spouse of Mr. Ruan Yuan. By virtue of the SFO, Mr. Ruan Yuan and Ms. Zhang Ming were deemed to be interested in these 223,722,285 Shares.

3. LITIGATION

As far as the Directors are aware, as at the Latest Practicable Date, neither the Company nor its subsidiaries was involved in any litigation or arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

4. MATERIAL ADVERSE CHANGE

The Directors confirm that there was no material adverse change in the financial or trading position or outlook of the Group since 31 March 2013, being the date to which the latest published audited financial statements of the Group were made up.

5. SERVICE CONTRACTS

At the Latest Practicable Date, none of the Directors had any service contract or a proposed service contract with any member of the Group which is not expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

6. COMPETING BUSINESS INTERESTS OF DIRECTORS

As at the Latest Practicable Date, none of the Directors, controlling Shareholder or substantial Shareholder or their respective associates had any interest in a businesses (other than those businesses where the Directors were appointed as directors to represent the interests

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GENERAL INFORMATION

APPENDIX

of the Company and/or member of the Group) which compete or is likely to compete directly or indirectly with the business of the Group or had any other conflict of interests with the Group.

7. DIRECTORS’ INTERESTS IN ASSETS OF THE GROUP OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date, none of the Directors had any interest in any assets which had been, since 31 March 2013 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to, any member of the Group, or were proposed to be acquired or disposed of by or leased to, any member of the Group.

As set out in this circular, on 29 February 2012, the Master Agreement was entered into between Sky Will and New Spring Label for the provision of the Services for the three years ending 31 March 2015. Sky Will Group is wholly-owned by the Company, which provides production of printing orders to New Spring Label. As at the Latest Practicable Date, Mr. Ng is an executive Director and New Spring Label is beneficially owned as to 20% by Mr. Ng and as to 30% by Ms. Li, spouse of Mr. Ng. Apart from the information stated above, none of the Directors was materially interested in contract or arrangement subsisting which was significant in relation to the business of the Group.

8. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion and advice, which is contained in this circular:

Name Qualification Nuada Limited a licensed corporation to carry out type 6 (advising on corporate finance) regulated activities as defined under to SFO

Nuada has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which it appears.

9. EXPERT’S INTEREST

Nuada has confirmed that, at the Latest Practicable Date:

• (a) it did not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and

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GENERAL INFORMATION

APPENDIX

• (b) it did not have any direct or indirect interest in any assets which had since 31 March 2013 (being the date to which the latest published audited consolidated financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during business hours at the office of the Company at Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong from the date of this circular up to and including 29 November 2013 (except Saturdays and Sundays) and will be available for inspection at the SGM:

• (a) the Master Agreement;

• (b) the letter from the Independent Board Committee, the text of which is set out in the section headed ‘‘Letter from the Independent Board Committee’’ of this circular;

• (c) the letter from Nuada, the text of which is set out in the section headed ‘‘Letter from Nuada’’ of this circular; and

• (d) the written consent from Nuada referred to in the paragraph headed ‘‘Expert and Consent’’ in this appendix.

11. GENERAL

The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text.

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NOTICE OF SGM

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

CLIMAX INTERNATIONAL COMPANY LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

NOTICE OF SGM

NOTICE IS HEREBY GIVEN that the SGM of the Company to be held at 3/F, Nexxus Building, 77 Des Voeux Road Central, Hong Kong on 6 December 2013 at 11 a.m. for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution as ordinary resolution of the Company.

ORDINARY RESOLUTION

‘‘THAT:

• (a) the proposed annual caps for the ongoing continuing connected transactions between Sky Will Printing & Packaging (Holding) Limited and its subsidiaries (collectively refer to ‘‘Sky Will Group’’) and New Spring Label & Packaging Limited (‘‘New Spring Label’’) in relation to the printing and production of paper packaging and promotional products and materials services provided by Sky Will Group to New Spring Label pursuant to the master agreement dated 29 February 2012 for the proposed new maximum aggregate annual amount of the transactions for the services for the two years ending 31 March 2014 and 2015 (‘‘Proposed New Caps’’) be revised to HK$50 million and HK$60 million respectively and are hereby approved; and

• (b) any one director of the Company be and is hereby authorised for and on behalf of the Company to execute any such other documents, instruments and agreements and to do any such acts or things deemed by him to be incidental to, ancillary to or in connection with the Proposed New Caps.’’

By order of the Board Climax International Company Limited Wong Hin Shek Executive Director

Hong Kong, 15 November 2013

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NOTICE OF SGM

Registered Office: Head Office and Principal Place of Clarendon House Business of Hong Kong: 2 Church Street Unit 906, 9/F Hamilton HM 11 Wings Building Bermuda 110–116 Queen’s Road Central Central Hong Kong

Notes:

1. Every member of the Company entitled to attend and vote at the above Meeting is entitled to appoint more than one proxy (if a member who is holder of two or more shares) to attend and vote for him/her on his/her behalf of the Meeting. A proxy need not be a member of the Company.

2. A form of proxy for use at the Meeting is enclosed. In order to be valid, the form of proxy together with the power of attorney or other authority (if any) under which it is signed, or a certified copy thereof, must be lodged with the Company’s share registrar and transfer office in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, in accordance with the instructions printed thereon as soon as possible but in any event not less than 48 hours before the time appointed for holding the Meeting or any adjourned meeting thereof.

3. Completion and return of the form of proxy will not preclude members from attending and voting in person at the Meeting or any adjourned meeting thereof.

4. As at the date of this notice, the board of Directors of the Company comprises two executive Directors, Mr. Wong Hin Shek and Mr. Ng Man Chan; one non-executive director, Mr. Wong Hung Ki; and three independent non-executive Directors, Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen.

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