Innovax Holdings Limited — Proxy Solicitation & Information Statement 2005

Jul 15, 2005

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 licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Kith Holdings Limited, you should at once hand this circular to the purchaser or transferee or the bank, licensed securities dealer or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

==> picture [289 x 52] intentionally omitted <==

==> picture [189 x 20] intentionally omitted <==

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

(Incorporated in Bermuda with limited liability)
(Stock Code: 1201)
----- End of picture text -----

DISCLOSEABLE TRANSACTION

A letter from the board of Directors is set out on pages 3 to 6 of this circular.

14th July, 2005

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
INFORMATION ON THE SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
REASONS FOR, BENEFITS AND THE EFFECTS OF THE TRANSACTION . . . . . . . . . .	5
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7

DEFINITIONS

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

• “Announcement”

the announcement dated 24th June, 2005 in relation to, inter alia, the Agreement

• “Agreement”

the sale and purchase agreement dated 24th June, 2005 entered into between the Purchaser and the Vendor in relation of the disposal of 100% interest in the issued share capital of the Subsidiary

• “Associate(s)” the meaning ascribed thereto in the Listing Rules

• “Board”

the board of Directors

• “Company” Kith Holdings Limited, a company incorporated in Bermuda with limited liability and listed on the main board of the Stock Exchange

• “Director(s)” director(s) of the Company

• “Group” the Company and its subsidiaries

• “Independent Third Party”

• to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, a party and the ultimate beneficial owner of which are third parties independent of the Company and of connected persons (as defined in the Listing Rules) of the Company

• “Latest Practicable Date” 8th July, 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Purchaser” Wealthy Bearing International Limited, a company incorporated in the British Virgin Islands who is an Independent Third Party

• “PRC”

• the People’s Republic of China, excluding Hong Kong, Macau and Taiwan

• “SFO”

• the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)

• “Sale Shares”

• 20,000 ordinary shares of € 1.00 each of the Subsidiary, which represent 100% of the issued capital of the Subsidiary

– 1 –

DEFINITIONS

“Shareholder(s)” holder(s) of shares of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “Subsidiary” Espace IT B.V., a company incorporated in Netherlands with limited liability and a wholly-owned subsidiary of the Vendor

“Vendor” Kith Distribution Limited, a company incorporated in the British Virgin Islands with limited liability. Kith Distribution Limited is an indirect wholly-owned subsidiary of the Company

– 2 –

LETTER FROM THE BOARD

==> picture [289 x 52] intentionally omitted <==

(Incorporated in Bermuda with limited liability)

(Stock Code: 1201)

Executive Directors:

Mr. Hui King Chun, Andrew (Chairman) Mr. Yau Chau Min, Paul Mr. Hui Bin Long Mr. Li Chun Ren Mr. Zhou Jin Mr. Wang Feng Wu

Independent Non-Executive Directors:

Mr. Lam Ping Cheung, Andrew Mr. Ng Chi Yeung, Simon Mr. Tam Yuk Sang, Sammy

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

Head Office and Principal Place of Business: 1st Floor Hing Lung Commercial Building 68 Bonham Strand East Hong Kong

14th July, 2005

To the Shareholders

Dear Sir/Madam,

DISCLOSEABLE TRANSACTION

INTRODUCTION

As referred to in the Announcement, on 24th June, 2005 the Purchaser and the Vendor entered into a sale and purchase agreement for the disposal of all its interests in the Subsidiary to the Purchaser, at a total consideration of HK$800,000.

The transaction constitutes a discloseable transaction of the Company under the Listing Rules. This circular contains details of the Agreement as required under the Listing Rules.

THE AGREEMENT

The Agreement dated 24th June, 2005 contains terms set out below.

Parties

Vendor: Kith Distribution Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of the Company.

– 3 –

LETTER FROM THE BOARD

Purchaser: Wealthy Bearing International Limited, a company incorporated in the British Virgin Islands with limited liability. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner are Independent Third Parties. The Purchaser is a sole purpose investment holding company set up for the investment in the Subsidiary.

Terms

The Vendor agreed to sell its interest in 100% of the issued share capital of the Subsidiary to the Purchaser upon completion of the Agreement.

Consideration

The total consideration for the Sale Shares was HK$800,000, paid in cash on completion of the transaction, which took place on 24th June, 2005.

The consideration was reached after arm’s length negotiation between the parties with reference to the net asset value of the Subsidiary as stated in the unaudited balance sheet of the Subsidiary as at 31st December, 2004. The total consideration represented a premium of 37.9% over the unaudited net assets value of the Subsidiary as at 31st December, 2004 of approximately HK$580,000.

Completion

Completion took place on 24th June, 2005.

Upon the completion of the sale and purchase of the Sale Shares, the Company will no longer hold any shares in the Subsidiary and the Subsidiary has ceased to be a subsidiary of the Company.

INFORMATION ON THE SUBSIDIARY

The Subsidiary was set up by the Company in 2000. The Subsidiary is principally engaged in the distribution of computer, telecommunication components, electronic components and other computer peripherals in Europe. The Subsidiary is the Group’s sole operating subsidiary outside Hong Kong and the PRC.

The unaudited net (loss)/profit before taxation for the financial year ended 31st December, 2003 and the financial year ended 31st December, 2004 of the Subsidiary were (approximately HK$73,000) and approximately HK$697,000 respectively. The unaudited (loss)/profit after taxation of the Subsidiary for the financial years ended 31st December, 2003 and 31st December, 2004 was (approximately HK$73,000) and approximately HK$545,000 respectively. The unaudited net asset value of the Subsidiary was approximately HK$36,000 as at 31st December, 2003 and approximately HK$580,000 as at 31st December, 2004.

– 4 –

LETTER FROM THE BOARD

REASONS FOR, BENEFITS AND THE EFFECTS OF THE TRANSACTION

The Company and its subsidiaries are principally engaged in printing and manufacturing of packaging products and distribution of electronic components.

The Group’s operations (apart from those of the Subsidiary) are based on mainly in Hong Kong and the PRC. If the Group were to further develop its distribution business in Europe through the Subsidiary, it will have to divert more of its resources in to the Subsidiary. Hence the Company disposed of the Subsidiary in Europe to avoid diverting more of the Group’s resources, both in the financial and human resources aspects, to the Subsidiary, whose the contribution to the Group was relatively insignificant. Consistent with statements made in the Group’s 2004 Annual Report, the Group plans to further develop the European markets to enhance the margin of the overall distribution business. This can be achieved in different ways. The Group intends to continue to distribute electronic and computer products to Europe through its customers or agents, instead of through the Subsidiary, which is a more cost-effective way of doing business in Europe for the Group. The net profit before taxation of the Subsidiary represents approximately 1% of the net profit before taxation of the Group for the year ended 31st December, 2004. Having taken into account the fact that the Subsidiary’s contribution to the results of the Group had been relatively insignificant, the Directors have determined that the Group should dedicate its resources on its core business of printing and manufacturing of packaging products in the PRC and its distribution operations in Hong Kong with a view to enhancing the competitiveness of the Group as a whole. Through the Agreement, the Company will be able to achieve its objective of disposing of its non-core and non Hong Kong based operations at a profit. The unaudited gain (before taxation and before the expenses relating to this transaction) on the disposal of the Subsidiary, based on its unaudited net asset value of approximately HK$580,000 as at 31st December, 2004 is approximately HK$220,000.

Accordingly, the disposal would result in an increase in both of the Group’s unaudited profit attributable to Shareholders and unaudited total assets by the amount of the unaudited gain (before taxation and before the expenses relating to the transaction) of approximately HK$220,000 which may be adjusted if there are updated unaudited financial statements of the Subsidiary available at the time of finalising the unaudited consolidated accounts of the Group for the six months ended 30th June, 2005. Saved as disclosed above, the entering into of the Agreement will not have any immediate effect on the earnings, assets and liabilities of the Group.

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

USE OF PROCEEDS

The net proceeds of the transaction will be used as general working capital of the Group.

– 5 –

LETTER FROM THE BOARD

GENERAL

The transaction constitutes a discloseable transaction for the Company under the Listing Rules.

Your attention is drawn to the general information regarding the Group which is required to be included in this circular under the Listing Rules as set out in the Appendix of this circular.

Yours faithfully, By order of the Board Kith Holdings Limited Hui King Chun, Andrew Chairman

– 6 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any associated corporation (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 they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Companies and which were required to be entered into the register required to be kept under section 352 of the SFO were as follows:-

Long positions in shares of the Company

		Total number of	Approximate %
Name of Director	Capacity	shares	shareholding
Mr. Hui King Chun, Andrew	Held by Trust	199,500,000	74.53
(Note)

Note: The 199,500,000 shares are registered in the name of Accufit Investments Inc., which is 100% owned by Basab Inc. as trustee of The Basab Unit Trust. The Basab Unit Trust is a unit trust owned by Guardian Trustee Limited as trustee of a discretionary trust. The family members of Mr. Hui King Chun, Andrew, are the beneficiaries of the discretionary trust.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any interests and short positions in the shares, underlying shares and debentures of the Company or any associated corporation (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 they are taken or deemed to have under such provisions of the SFO), the Model Code for Securities Transactions by Directors of Listed Companies and which were required to be entered into the register required to be kept under section 352 of the SFO.

(b) Interests of Shareholders

As at the Latest Practicable Date, so far as is known to the Directors and the chief executives of the Company, the following persons (other than a Director or chief executive of the Company)

– 7 –

GENERAL INFORMATION

APPENDIX

had an interest or short position in the shares and underlying shares of the Company which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who are, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at a general meeting of any member of the Group.

Interest in the Company

		Number of
	Interest in	shares interested	Percentage
Name of Shareholders	the Company	(Long position)	interest
Basab Inc.(Note)	Trustee Interest	199,500,000	74.53%
Guardian Trustee Limited	Trustee Interest	199,500,000	74.53%
(Note)

Note: The 199,500,000 shares are registered in the name of Accufit Investments Inc., which is 100% owned by Basab Inc. as trustee of The Basab Unit Trust. The Basab Unit Trust is a unit trust owned by Guardian Trustee Limited as trustee of a discretionary trust. The family members of Mr. Hui King Chun, Andrew, are the beneficiaries of the discretionary trust.

As at the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had an interest in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of the members of the Group.

Interest in other members of the Group

			Percentage
Name of the company	Name of the shareholder	Capacity	interest
雲南僑通包裝印刷有限公司	Yunnan Zhaotong Cigarette	Corporate	10%
(Yunnan Qiaotong Package	Factory
Printing Co., Ltd.)
	Finance Bureau of Zhaotong City,	Corporate	30%
	Yunnan Province
昆明僑通印刷設計有限公司	昆明嘉佳廣告有限公司	Corporate	30%
	Finance Bureau of Zhaotong City,	Corporate	21%
	Yunnan Province
哈爾濱高美印刷有限公司	哈爾濱九隆印刷一廠	Corporate	20%
(Harbin Gaomei Printing
Company Limited )
安徽僑豐包裝印刷有限公司	Chuzhou Newspaper Printing	Corporate	35%
(Anhui Qiaofeng Package	Factory
Printing Co. Ltd.)

– 8 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, the Directors and the chief executives of the Company are not aware that there is any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at a general meeting of any other member of the Group.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has entered into or proposed to enter into any service contract with the Company which will not expire or may not be terminated by the Company within a year without payment of any compensation (other than statutory compensation).

4. LITIGATION

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

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and his/her respective Associates was considered to have an interest in a business which competes or may compete, either directly or indirectly, with the business of the Group.

6. GENERAL

• (i) The secretary and qualified accountant of the Company for the purpose of the Listing Rules is Mr. Chan Chi Ngai, John. Mr. Chan is an associate member of the Hong Kong Institute of Certified Public Accountants and a fellow member of Association of Chartered Certified Accountants. He is also a Certified Public Accountant (Practising) in Hong Kong.

• (ii) The principal share registrar and transfer office of the Company is the Bank of Bermuda Limited, Bank of Bermuda Building, 6 Front Street, Hamilton HM11, Bermuda.

• (iii) The branch share registrar and transfer office of the Company in Hong Kong is Abacus Share Registrars Limited, of Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (iv) The English version of this circular shall prevail over the Chinese text.

– 9 –