KLN Logistics Group Limited — Proxy Solicitation & Information Statement 2017

Sep 19, 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt about this circular or as to the action to be taken, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Vitasoy International Holdings Limited 維他奶國際集團有限公司 (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) 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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(Incorporated in Hong Kong with limited liability) (Stock code: 345)

MAJOR TRANSACTION

IN RELATION TO

A PROJECT IN CHANGPING TOWN, DONGGUAN CITY, THE PEOPLE’S REPUBLIC OF CHINA,

RE-ELECTION OF DIRECTOR

AND NOTICE OF GENERAL MEETING

A notice convening the General Meeting of the Company to be held at Salon 5, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Friday, 20th October, 2017 at 10:00 a.m., at which the above proposals will be considered, is being dispatched to shareholders together with this circular. Whether or not you are able to attend the General Meeting, you are required to complete and return the form of proxy that is being dispatched to the shareholders, in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the General Meeting. Completion of the form of proxy shall not preclude you from attending and voting at the General Meeting should you so wish.

20th September, 2017

CONTENTS

	Page
DEFINITIONS...............................................................................................................	1
LETTER FROM THE BOARD....................................................................................	3
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP....................	12
APPENDIX II – GENERAL INFORMATION......................................................	14
NOTICE OF GENERAL MEETING...........................................................................	19

– i –

DEFINITIONS

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

• “Associate(s)” has the meaning given to it under the Listing Rules “Board” the board of Directors “Changping Enterprise” an enterprise to be established in Changping Town, Dongguan City, the PRC

• “Changping Town 中國廣東省東莞市常平鎮人民政府 (The People’s Government of Government” Changping Town, Dongguan City, Guangdong Province, the PRC) “Company” Vitasoy International Holdings Limited (維他奶國際集團有限公 司), a company incorporated in Hong Kong, the shares of which are listed on the Stock Exchange (Stock Code: 345)

• “Connected person(s)” has the meaning given to it under the Listing Rules “Controlling shareholder” has the meaning given to it under the Listing Rules

• “Directors” the directors (including the independent non-executive directors) of the Company

• “Dongguan Government” 中國廣東省東莞市人民政府 (The People’s Government of Dongguan City, Guangdong Province, the PRC)

“Fiscal Year(s)” the calendar year(s) commencing from 1st January, to 31st December, of each year “General Meeting” the general meeting of the Company to be held at Salon 5, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Friday, 20th October, 2017 at 10:00 a.m. “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Investment Agreement” the investment agreement dated 31st August, 2017 entered into between Vitasoy (China) and the Changping Town Government in relation to the Project

– 1 –

DEFINITIONS

“Land”	a piece of land with total land area of not less than 100,000 square
	meters (approximately 150 Chinese acres) located in Changping
	Town, Dongguan City, the PRC
“Latest Practicable Date”	14th September, 2017, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining certain
	information contained herein
“Listing Rules”	The Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“Model Code”	the Model Code for Securities Transactions by Directors of Listed
	Issuers, as set out in Appendix 10 to the Listing Rules
“Percentage ratios”	the percentage ratios under Rule 14.07 of the Listing Rules
“PRC”	the People’s Republic of China, which for the purpose of this
	circular, shall exclude Hong Kong, Macau Special Administrative
	Region of the PRC and Taiwan
“Project”	the proposed investment by the Group, through Vitasoy (China),
	for the construction of a production base on the Land in Changping
	Town, Dongguan City in the PRC
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	ordinary shares of the Company
“Shareholder(s)”	holders of the issued shares of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vitasoy (China)”	Vitasoy (China) Holdings Limited (維他奶（中國）控股有限公司),
	a company incorporated with limited liability in Hong Kong and a
	direct wholly-owned subsidiary of the Company
“%”	per cent

For the purpose of this circular, conversions of RMB into HK$ are based on the approximate exchange rate of RMB1 to HK$1.21 for the purpose of illustration only. No representation is made that any amount of HK$ or RMB, as the case may be, could have been or could be converted at the above rate or at any other particular rate.

– 2 –

LETTER FROM THE BOARD

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(Incorporated in Hong Kong with limited liability)

(Stock code: 345)

Directors:

Mr. Winston Yau-lai LO (Executive Chairman)

Dr. the Hon. Sir David Kwok-po LI (Independent Non-executive Director)

Mr. Jan P. S. ERLUND (Independent Non-executive Director)

Mr. Anthony John Liddell NIGHTINGALE

Registered office: No. 1 Kin Wong Street Tuen Mun, New Territories, Hong Kong

(Independent Non-executive Director)

Mr. Paul Jeremy BROUGH (Independent Non-executive Director)

Dr. Roy Chi-ping CHUNG (Independent Non-executive Director)

Ms. Myrna Mo-ching LO (Non-executive Director)

Ms. Yvonne Mo-ling LO (Non-executive Director)

Mr. Peter Tak-shing LO (Non-executive Director)

Ms. May LO (Non-executive Director)

Mr. Roberto GUIDETTI (Executive Director)

20th September, 2017

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

IN RELATION TO

A PROJECT IN CHANGPING TOWN, DONGGUAN CITY,

THE PEOPLE’S REPUBLIC OF CHINA,

RE-ELECTION OF DIRECTOR AND NOTICE OF GENERAL MEETING

INTRODUCTION OF THE PROJECT

Reference is made to the announcement of the Company dated 31st August, 2017 in relation to a project in Changping Town, Dongguan City, the PRC. Pursuant to the Investment Agreement, Vitasoy (China) has agreed, through a project company, to construct a production plant on the Land in Changping Town, Dongguan City in the PRC and invest approximately RMB1,000 million (equivalent to HK$1,210 million) into the Project, which will be completed in phases over the next few years according to the Group’s business needs. It is anticipated that the production at the factory is expected to commence in 2021.

The purpose of this circular is to provide you with information regarding the Investment Agreement.

– 3 –

LETTER FROM THE BOARD

DETAILS OF THE INVESTMENT AGREEMENT

Date

31st August, 2017

Parties

• (i) Vitasoy (China)

• (ii) Changping Town Government

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Changping Town Government is a third party independent of the Company and its connected persons (as defined in the Listing Rules).

Summary of the Project

Scope of the Project:

(i) To establish Changping Enterprise with a registered capital of RMB335 million (equivalent to approximately HK$405.35 million)

(ii) To acquire the land use right to the Land

(iii) To construct a production plant on the Land

Production activities to Manufacturing, processing, packaging and sales of different varieties of be carried out at the food and beverages production base:

Location of the Land:

Changping Town, Dongguan City, Guangdong Province, the PRC

Land use right period: 50 years from the date of issue of the land use right licence Total area of the Land: Not less than 100,000 square meters (approximately 150 Chinese acres)

Total Investment Amount

Vitasoy (China) has agreed to invest approximately RMB1,000 million (equivalent to HK$1,210 million) into the Project (including the registered capital of RMB335 million to be injected in the Changping Enterprise and the price for the land use right to the Land) in phases from 2017 to 2021. The land use right to the Land will be offered to the public through a listing-for-sale process, under which Vitasoy (China) had capped the maximum bidding price that it will offer to purchase the land use right to the Land. The estimated price for the land use right to the Land, which is determined by reference to the price for the land use rights to the industrial lands situated in a neighboring town in Dongguan City, represents a small portion of the total investment amount and less than 5% of the total assets of the Group. The total investment amount of the Project was determined after arm’s length negotiation between the parties with reference to the estimated construction and operational cost of the production base and the price for the land use right in respect of the Land, and will be financed by internal resources of the Group and/or bank facilities.

– 4 –

LETTER FROM THE BOARD

Principal terms of the Investment Agreement

Pursuant to the Investment Agreement, the Changping Town Government shall be responsible for the following:

• (i) carrying out development work on the Land, including resumption, demolition and levelling of the Land, as well as supply of electricity, water, gas, drainage, road and telecommunication infrastructure;

• (ii) dealing with the claims or compensation made by any parties against the Land or claims from local authority, if any;

• (iii) removing the underground power line or cables or similar facilities to the extent that it will affect the construction work, if any;

• (iv) taking such appropriate acts to minimise the loss suffered by Vitasoy (China) or Changping Enterprise if there is any antiques, munitions, materials or pollutants found underground which would affect the construction work;

• (v) providing the architectural plan of the Land, coordinating and facilitating the construction work on the Land;

• (vi) assisting Vitasoy (China) to obtain the Land through listing-for-sale process;

• (vii) assisting Vitasoy (China) to obtain relevant approval(s) from the relevant authority(ies) in the PRC in relation to the implementation of the Project, such as environmental permits and construction permits;

• (viii) assisting Vitasoy (China) to apply for the Project to be qualified for “Significant Investment Project of Dongguan City” in 2018 under the “Measures for Attracting Enterprise and Investment in Dongguan City”, and to apply for such available subsidy, sponsor or preferential treatments provided by the government; and

• (ix) assisting Vitasoy (China) to implement the Project in general.

Vitasoy (China) shall be responsible for the following:

• (i) organising and implementing the construction plan and proposals;

• (ii) implementing the construction work within twelve months upon obtaining the land use right to the Land and completing construction of the production plant within three years; and

• (iii) putting the production plant into operation within six months upon its completion and attaining its maximum output capacity within one year upon the commencement of the operation.

– 5 –

LETTER FROM THE BOARD

Effectiveness of the Investment Agreement

The Investment Agreement shall only become effective upon execution by the parties and approval of the Investment Agreement by the Shareholders.

Vitasoy (China)’s Undertakings

Under the Investment Agreement, Vitasoy (China) provides the following undertakings:

• (i) the value of the average manufacturing output per Chinese acre (calculated on a moving average basis) for the five years commencing from the first full Fiscal Year after the plant attains its maximum output capacity, shall be not less than RMB12,000,000 (equivalent to HK$14,520,000) per year (the “ Annual Manufacturing Output ”);

• (ii) the average tax contribution per Chinese acre (calculated on a moving average basis) for the five years commencing from the first full Fiscal Year after the plant attains its maximum output capacity, shall be not less than RMB400,000 (equivalent to HK$484,000) per year (the “ Annual Target Tax Contribution ”); and

• (iii) within three years from the acquisition of the land use right to the Land, Vitasoy (China) shall not transfer the land use right to other parties (except the affiliates of Vitasoy (China)) without consent from Changping Town Government.

According to the “Measures for Attracting Enterprise and Investment in Dongguan City” promulgated by the Dongguan Government in 2012, in order for a foreign investment to be qualified as a “Significant Investment Project of Dongguan City”, the annual manufacturing output per Chinese acre shall not be less than RMB13.1 million and the annual target tax contribution per Chinese acre shall not be less than RMB1 million. The abovementioned performance targets could be adjusted if the investment has strategic impact on Dongguan City. The Annual Manufacturing Output and the Annual Target Tax Contribution are determined by Changping Town Government after negotiating with Vitasoy (China) and considering the impact of the Project.

If Vitasoy (China) fails to meet the Annual Manufacturing Output, the relevant authority has the right to disqualify the Project from being a “Significant Investment Project of Dongguan City”, resulting in Vitasoy (China) losing certain benefits and preferential treatments set out in the “Measures for Attracting Enterprise and Investment in Dongguan City” promulgated by the Dongguan Government in 2012, including the fast track approval for environmental permits and cash incentive for investment. The Board is of the view that such disqualification, if it occurs, will not have a material adverse effect on the Project.

If Vitasoy (China) fails to meet the Annual Target Tax Contribution, Vitasoy (China) has an obligation to pay the Changping Town Government a one-off penalty equivalent to 20% of the shortfall in respect of the moving average of RMB400,000 per Chinese acre over five full Fiscal Years.

– 6 –

LETTER FROM THE BOARD

Termination

The parties agree that Vitasoy (China) shall have the right to terminate the Investment Agreement unilaterally if:

• (i) the permitted sewage discharge volume is below 5,000 cubic meters per day;

• (ii) the land use right of the Land is less than 50 years;

• (iii) the Land has not been offered for sale through the listing-for-sale procedure on or before 31st December 2017 (if under very special circumstances such as force majeure, change in public policy, no later than 28th February 2018); or

• (iv) the permitted plot ratio is below 52%.

If, at the occurrence of any of the above situations, Vitasoy (China) or Changping Enterprise has already acquired the land use right to the Land, Vitasoy (China) or Changping Enterprise shall have the right to return such land use right to the Changping Town Government and be refunded the purchase price for the land use right. Changping Town Government understood that permitted sewage discharge volume, the land use right period and the permitted plot ratio are crucial to the Project, it undertook to use its best endeavour to obtain relevant approvals from other government departments.

The Investment Agreement shall terminate automatically if Vitasoy (China) or Changping Enterprise is not able to acquire the land use right to the Land through the listing-for-sale procedure due to a higher offer price made by a third party, and the parties shall be released and discharged from any further obligations under the Investment Agreement.

FURTHER INFORMATION OF THE PROJECT

The details of the construction plan and expected timetable of the Project are as follows:

Timeline	Task
By December 2017	Vitasoy (China) or Changping Enterprise to acquire the land use right to the Land through listing-for-saleprocess.
By November 2018	Commencement of the construction work of the new production plant on the Land.
ByOctober 2020	Completion of the buildingof the newproductionplant.
ByApril 2021	Commencement of operation of the newproductionplant.

– 7 –

LETTER FROM THE BOARD

The timeline for the use of the investment amount is as follows:

Financial Year	2017/2018	2018/2019	2019/2020	2020/2021	Total
Estimated capital expenditure (in RMB million)	115.3	251.3	504.1	129.3	1,000

The breakdown of the investment amount is as follows:

Item	Estimated amount(in RMB million)
Land use right to the Land and infrastructure construction fee and levy charged by Changping Town Government, tax and others etc.; and construction cost of the building	426.3
Production equipment	473.9
Utilities	76.2
Operational cost	10.0
Contingencybudget	13.6

REASONS FOR THE PROPOSED INVESTMENT

The Group is principally engaged in the manufacturing and sale of food and beverages and is committed to sustainable development in the PRC. The Group is actively exploring opportunities for expansion of its business to construct a large production base in the PRC to ensure that the Group has adequate production capacity for future expansion if and when demand builds up. Furthermore, the existing production plant of the Group located in Guangming New District, Shenzhen, the PRC (the “Shenzhen Production Plant”) has reached its maximum production capacity and the Group is looking for a suitable location to relocate the Shenzhen Production Plant. The Land located in Changping Town, Dongguan City, the PRC is suited for construction of a larger production plant. In the meantime, the Group will fully utilise the production lines of the Shenzhen Production Plant to meet the market demand prior to its relocation, as well as to carefully consider all available options relating to the Shenzhen Production Plant which will be vacated after the relocation. The Directors consider that the Project offers the Group an excellent opportunity to integrate its existing production facilities and to achieve its business objectives and is in the interests of the Group and the Shareholders as a whole. In case Vitasoy (China) is not able to acquire the land use right to the Land, the Group will consider other alternative location for building a new production plant in the Guangdong Province.

– 8 –

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE PROJECT

Given that the investment commitment of approximately RMB1,000 million (equivalent to HK$1,210 million) under the Investment Agreement will be funded by the internal resources of the Group, the Board considers that the Project will not have any immediate material effect on the total assets, earnings and liabilities of the Group.

Other than the above, the investment commitment under the Investment Agreement is not expected to have any significant impact on the earnings of the Group for the current financial year. The overall effects of the Project on the future earnings of the Group will depend on, amongst other matters, the return to be generated from the operation of the new production plant.

INFORMATION OF THE COMPANY, VITASOY (CHINA) AND CHANGPING TOWN GOVERNMENT

The principal business activities of the Company are the manufacture and sale of food and beverages.

Vitasoy (China) is a direct wholly-owned subsidiary of the Company. The principal business activity of Vitasoy (China) is investment holding.

Changping Town Government is a local government authority in the PRC and is in charge of, among other things, coordinating investment projects in Changping Town, Dongguan City, the PRC. To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, Changping Town Government is a third party independent of and not connected with the Company and its connected person(s) (as defined in the Listing Rules).

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined in the Listing Rules) for the Project exceed 25% but are less than 100%, the Investment Agreement and the underlying Project constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and Shareholders’ approval requirements under the Listing Rules.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, no Shareholder or its/his associate(s) has a material interest in the Investment Agreement and accordingly, no Shareholder is required to abstain from voting in respect of the proposed ordinary resolution to approve the Investment Agreement.

– 9 –

LETTER FROM THE BOARD

PROPOSED RE-ELECTION OF DIRECTOR

In accordance with the code provision A.4.2 of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules, all directors appointed to fill a casual vacancy should be subject to election by shareholders at the first general meeting after appointment.

Mr. Eugene LYE (“ Mr. Lye ”) will be appointed as an Executive Director of the Company with effect from 1st October, 2017. Accordingly, Mr. Lye is subject to re-election at the General Meeting.

The details of Mr. Lye are as follows:

Mr. Lye, aged 47, is currently the President and Chief Executive Officer of Vitasoy USA Inc., a wholly owned-subsidiary of the Company. Mr. Lye holds a Bachelor’s Degree in Economics from the University of Toronto and a MBA from the Chinese University of Hong Kong. Mr. Lye is responsible for the general management and development of the Group’s import business of the Group’s products for sales in North America. He joined the Group in 2002 and has been closely involved in all aspects of the North American business for over 14 years. During his time at Vitasoy USA Inc., Mr. Lye has held management positions in sales and marketing in the Mainstream Channel, and has had oversight responsibilities for both the research & development and quality control departments as well as serving as the Senior Vice President of the Asian Channel.

Mr. Lye is the son of Ms. Myrna Mo-ching Lo, a Non-executive Director of the Company, a relative of Mr. Winston Yau-lai Lo, the Executive Chairman of the Company, Ms. Yvonne Mo-ling Lo, Mr. Peter Tak-shing Lo and Ms. May Lo who are the Non-executive Directors of the Company, Mr. Lye is also the relative of Ms. Irene Chan and Mr. Kai-tun Lo who are the substantial shareholders of the Company.

Save as disclosed above, Mr. Lye is not related to any Director, senior management or substantial or controlling shareholder of the Company. Mr. Lye has not held any directorship in other listed public companies in the last three years.

As at the Latest Practicable Date, Mr. Lye has a personal interest of 442,313 shares in the Company (representing 0.04% of the total issued shares of the Company) within the meaning of Part XV of the SFO.

– 10 –

LETTER FROM THE BOARD

The Company has entered into a letter of appointment with Mr. Lye for the appointment of him as an Executive Director of the Company. The appointment is for a term of three years, subject to re-election at the forthcoming general meeting of the Company pursuant to the code provision A.4.2 of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules, as well as the subsequent retirement by rotation and re-election at the Company’s annual general meeting pursuant to the Articles of Association of the Company, whichever comes earlier. The basic director’s fee of HK$119,904 per annum payable to Mr. Lye is determined by the Board of the Company on the recommendation of the Remuneration and Nomination Committee and with reference to his duties and responsibilities with the Company and the market benchmark, subject to review by the Board and the Remuneration and Nomination Committee from time to time.

Save as disclosed above, there is no information to be disclosed under Rule 13.51(2) (h) to (v) of the Listing Rules and the Board is not aware of any other matters that need to be brought to the attention of the Company’s shareholders.

NOTICE OF GENERAL MEETING

A notice convening the General Meeting to be held at Salon 5, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Friday, 20th October, 2017 at 10:00 a.m., for the purpose of considering and, if thought fit, approve the Investment Agreement, is contained on pages 19 to 20 of this circular.

A form of proxy for use at the General Meeting is enclosed. Whether or not you are able to attend the General Meeting, you are required to complete and return the form of proxy that is being dispatched to the shareholders, in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the General Meeting. Completion of the form of proxy shall not preclude you from attending and voting at the General Meeting should you so wish.

RECOMMENDATION

The Directors consider that the terms of the Investment Agreement and the Project are on normal commercial terms and are fair and reasonable and in the best interest, and for the benefit of, the Company and the Shareholders as a whole. The Directors also consider that the re-election of Mr. Lye as an Executive Director is in the best interest of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favor of the resolutions to be proposed at the General Meeting.

ADDITIONAL INFORMATION

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

By Order of the Board Winston Yau-lai LO Executive Chairman

– 11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY OF THE GROUP

The published audited consolidated financial statements of the Group for the years ended 31st March, 2015, 2016 and 2017 are disclosed in the annual reports of the Company for the years ended 31st March, 2015, 2016 and 2017 respectively. They can be accessed on the website of the Company (www.vitasoy.com) and the website of the Stock Exchange (www.hkexnews.hk).

2. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the Investment Agreement, the underlying Project and the present available financial resources, the Group will have sufficient working capital for its present requirements and for the period up to 12 months from the date of this circular in the absence of unforeseen circumstances.

3. INDEBTEDNESS

Borrowings

As at the close of business on 31st July, 2017, being the latest practicable date for ascertaining the information prior to the printing of this circular, the Group had aggregate bank borrowings of approximately HK$31,128,000 which were unsecured and guaranteed by the Company and a noncontrolling interest shareholder.

As at the close of business on 31st July, 2017, being the latest practicable date for ascertaining the information prior to the printing of this circular, the Group had finance leases payable of approximately HK$1,817,000 which was secured by property, plant and equipment with a carrying amount of approximately HK$2,727,000.

Certain of the Group’s banking facilities are subject to the fulfilment of covenants relating to certain financial ratios, as are commonly found in lending arrangements with financial institutions. If the Group were to breach the covenants, the drawn down facilities would become payable on demand. The Group regularly monitors its compliance with these covenants. Further details of the Group’s management of liquidity risk are set out in note 27(b) of the 2016/2017 Annual Report. As at 31st July, 2017, none of the covenants relating to the drawn down facilities had been breached.

Contingent Liabilities

As at the close of business on 31st July, 2017, being the latest practicable date for ascertaining the information prior to the printing of this circular, the Group had no material contingent liabilities.

Save as aforesaid above and apart from intra-group liabilities and normal trade payables in the ordinary course of business, the Group did not have at the close of business on 31st July, 2017, being the latest practicable date for ascertaining the information prior to the printing of this circular, any debt securities authorised or created but unissued, issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases, hire purchase commitments, guarantees or other material contingent liabilities.

– 12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Despite the challenging economic environment, the Group delivered another year of steady performance in the financial year of 2016/2017.

Due to the divestiture of the North American Mainstream and SAN SUI Business (the “North American divestiture”), the Group registered a net sales decrease of 3% (flat on a constant currency basis). Excluding the impact of the North American divestiture, revenue increased by 6% year-on-year to HK$5,360 million, and 8% on a constant currency basis. Profit attributable to equity shareholders of the Company increased by 16% to HK$618 million, was mainly due to the gain from the North American divestiture. Net of the impact of the North American divestiture, the underlying profit attributable to equity shareholders of the Company grew by 2%.

Net of the North American divestiture, the Group achieved a year-on-year sales growth of 6% (8% on a constant currency basis) whilst profit from operations grew 3%. The slower operating profit growth was due to our deliberate investment in building brand equity and geographical expansion – which are designed to secure the Group’s long-term position in our chosen markets.

Mainland China delivered another year of strong double digit sales growth at 17% in RMB. Hong Kong maintained its leadership position, whilst Australia also had a good year with a sales growth of 10% in AUD.

During the year, the Group formed a new joint venture with Universal Robina Corporation in the Philippines, focusing on the sale of soya milk drinks. Sales will start in the financial year of 2017/2018. Although expected contributions will be modest in this first phase, this venture will help the Group explore the potential of plant-based, sustainable beverages in the Philippines, and together with our Singapore operation will enable us to scale up in the promising South East Asian market.

By divesting from the North American tofu business and establishing the Philippines soya milk joint venture, the Group’s business has been reconfigured to be more geographically focused on the high potential Asian region and on our core category expertise.

Looking forward towards the financial year of 2017/2018, the Group will continue to invest in growing brand equity and expanding its geographical presence while scaling up its business and growing market share in its core operating markets.

– 13 –

GENERAL INFORMATION

APPENDIX II

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) Directors

As at the Latest Practicable Date, save as disclosed below, none of the Directors or chief executives of the Company had or was deemed to have any interest or short position 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 was required (a) 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 in which he/she was taken or deemed to have under such provisions of the SFO); (b) pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

Long position in Shares and underlying Shares of the Company as at the Latest Practicable Date

						% of total
					Total number	issued shares
			Trusts		of issued shares	(including
	Personal	Family	and similar	Share	and underlying	underlying
Name of Director	interests	interests	interests	option	shares held	shares)*
Mr. Winston Yau-lai LO	61,583,800	28,702,500	72,678,300	11,066,000	174,030,600	16.50%
(Notes (i), (v))
Dr. the Hon. Sir David	6,000,000	–	–	–	6,000,000	0.57%
Kwok-po LI
Mr. Jan P.S. ERLUND	150,000	–	–	–	150,000	0.01%
Ms. Myrna Mo-ching LO	–	–	100,653,000	–	100,653,000	9.54%
(Notes (ii), (v))
Ms. Yvonne Mo-ling LO	–	–	93,344,750	–	93,344,750	8.85%
(Notes (iii), (v))
Mr. Peter Tak-shing LO	9,198,000	–	121,657,000	–	130,855,000	12.41%
(Notes (iv), (v))
Ms. May LO	2,074,000	–	–	–	2,074,000	0.20%
Mr. Roberto GUIDETTI	1,600,000	–	–	7,460,000	9,060,000	0.86%

• The percentage has been compiled based on the total number of shares of the Company in issue (i.e. 1,054,727,500 ordinary shares) as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX II

Notes:

• (i) Mr. Winston Yau-lai LO is deemed to be interested in 28,702,500 shares through interests of his wife.

• (ii) Ms. Myrna Mo-ching LO is interested in 27,974,700 shares held by Swift Luck Development Limited which in turn holds such shares in trust for Lo Myrna Trust.

• (iii) Ms. Yvonne Mo-ling LO is interested in 3,338,300 shares held by Yvonne Lo Charitable Remainder Unitrust, 4,890,150 shares held by Yvonne Lo Separate Property Trust and 12,438,000 shares held by Lo/Higashida Joint Trust. Ms. Yvonne Mo-ling LO is a beneficiary of such three trusts and is therefore deemed to be interested in such shares.

• (iv) Mr. Peter Tak-shing LO is interested in 48,978,700 shares held by two discretionary family trusts. Mr. Peter Tak-shing LO is a beneficiary of such two trusts and is therefore deemed to be interested in such shares.

• (v) Each of Mr. Winston Yau-lai LO, Ms. Myrna Mo-ching LO, Ms. Yvonne Mo-ling LO and Mr. Peter Tak-shing LO is interested in 72,678,300 shares held by The Bank of East Asia (Nominees) Limited which holds such shares as a nominee for the K.S. Lo Foundation, a charitable trust. Each of them is a trustee of the K.S. Lo Foundation and is therefore deemed to be interested in such shares.

(b) Substantial shareholders

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

				Trusts and	Total
	Personal	Family	Corporate	similar	number of	% of total
Substantial shareholders	interests	interests	interests	interests	shares held	issued shares*
Commonwealth Bank	–	–	136,964,000	–	136,964,000	12.99%
of Australia_(Note (i))_
Ms. Irene CHAN	23,514,700	750,000	–	72,678,300	96,943,000	9.19%
(Notes (ii), (iii))
Mr. Kai-tun LO_(Note (iii))_	18,508,950	–	–	72,678,300	91,187,250	8.65%
Wasatch Advisors, Inc.	–	–	63,715,173	–	63,715,173	6.04%
(Note (iv))
Arisaig Asia Consumer	60,600,000	–	–	–	60,600,000	5.75%
Fund Limited (“Arisaig”)
(Note (v))
Arisaig Partners (Mauritius)	–	–	60,600,000	–	60,600,000	5.75%
Limited (“Arisaig
Mauritius”)(Note (vi))
Mr. Lindsay William Ernest	–	–	60,600,000	–	60,600,000	5.75%
COOPER (“Cooper”)
(Note (vii))

• The percentage has been compiled based on the total number of shares of the Company in issue (i.e. 1,054,727,500 ordinary shares) as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX II

Notes:

• (i) These interests are held by Commonwealth Bank of Australia through its wholly-owned subsidiaries.

• (ii) Ms. Irene CHAN is interested in 750,000 shares held for her daughter Alexandra CHAN who was under the age of 18.

• (iii) Each of Ms. Irene CHAN and Mr. Kai-tun LO is interested in 72,678,300 shares held by The Bank of East Asia (Nominees) Limited which holds such shares as a nominee for the K.S. Lo Foundation, a charitable trust. Each of them is a trustee of the K.S. Lo Foundation and is therefore deemed to be interested in such shares.

• (iv) These interests are held by Wasatch Advisors, Inc. in the capacity of investment manager.

• (v) These interests are held by Arisaig in the capacity of beneficial owner.

• (vi) These interests are held by Arisaig Mauritius in the capacity of investment manager of Arisaig. These interests are duplicated by the interests disclosed in Note (v) above.

• (vii) These interests represent Cooper’s interests through his indirect 33% interest in Arisaig Mauritius. These interests are duplicated by the interests disclosed in Notes (v) and (vi) above.

Save as disclosed above, so far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, no other person (who is not a Director or chief executive of the Company) 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.

3. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31st March, 2017, the date to which the latest published audited consolidated financial statements of the Group were made up.

4. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries have been engaged in any litigation or claims of material importance and, so far as the Directors are aware, there was not litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Company or any other member of the Group which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX II

6. DIRECTORS’ INTERESTS IN THE GROUP’S ASSETS OR CONTRACTS OR ARRANGEMENTS SIGNIFICANT TO THE GROUP

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 Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 31st March, 2017 (being the date to which the latest published audited financial statements of the Group were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Group.

7. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors, controlling Shareholder, management Shareholders or substantial Shareholders of the Company or any of its respective associates had any interest in a business that competes or might compete, either directly or indirectly, with the business of the Group or had any other conflict of interests with the Group.

8. MATERIAL CONTRACTS

Other than the Investment Agreement and the assets purchase agreement set out in paragraph 10(d) below, no other material contracts (not being contract entered into in the ordinary course of business carried out by the Group) have been entered into by any member of the Group within the two years immediately preceding the date of this circular.

9. GENERAL

• (a) The secretary of the Company is Ms. Paggie Ah-hing Tong, she is a fellow of the Institute of Chartered Secretaries and Administrators and fellow of the Hong Kong Institute of Chartered Secretaries;

• (b) The registered office of the Company in Hong Kong is at No. 1 Kin Wong Street, Tuen Mun, New Territories, Hong Kong;

• (c) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited, 46/F., Hopewell Centre, 183 Queen’s Road East, Hong Kong;

• (d) The English text of this circular shall prevail over the Chinese text in case of discrepancy.

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GENERAL INFORMATION

APPENDIX II

10. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (except public holidays) at the Company’s registered office at No. 1 Kin Wong Street, Tuen Mun, New Territories, Hong Kong from the date of this circular up to and including 20th October 2017:

• (a) the Articles of association of the Company;

• (b) the annual reports of the Company containing audited consolidated financial statements of the Company for the three years ended 31st March, 2015, 2016 and 2017;

• (c) the Investment Agreement;

• (d) the assets purchase agreement dated 23 March, 2016 entered into between Vitasoy USA Inc. as seller, Coast Acquisition Company LLC as purchaser, the Company as seller’s parent and Pulmuone Foods Co., Ltd. as purchaser’s parent in relation to the sale and purchase of the certain assets underlying some of the Group’s business operation in North America at the consideration of US$50.0 million (equivalent to approximately HK$387.5 million), details of which are set out in the announcement of the Company dated 24th March, 2016;

• (e) this circular.

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NOTICE OF GENERAL MEETING

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(Incorporated in Hong Kong with limited liability) (Stock code: 345)

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a general meeting (the “General Meeting”) of the shareholders of Vitasoy International Holdings Limited (the “Company”) will be held at Salon 5, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong on Friday, 20th October, 2017 at 10:00 a.m., for the following purposes:

1. To consider and, if thought fit, to pass with or without modification, the following resolution as ordinary resolution of the Company:

“ THAT :

• (A) the Investment Agreement (as defined in the circular (the “Circular”) of the Company dated 20th September, 2017), a copy of which has been produced by the chairman of the meeting and marked “A” for identification, and the transactions contemplated thereunder be and are hereby approved;

• (B) the Directors be and are hereby authorised to do all things and acts and sign all documents (if applicable) which they consider desirable or expedient to implement and/or give effect to any matter relating to or in connection with the Project (as defined in the Circular) of which is limited to administrative nature and ancillary to the implementation of the Investment Agreement.”

• To re-elect Mr. Eugene Lye as an Executive Director of the Company.

By Order of the Board Winston Yau-lai LO Executive Chairman

Hong Kong, 20th September, 2017

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NOTICE OF GENERAL MEETING

Notes:

1. A shareholder entitled to attend and vote at the General Meeting is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not be a shareholder of the Company.

2. 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 notarially certified copy thereof, must be deposited with the Company Secretary at the Registered Office of the Company at No. 1 Kin Wong Street, Tuen Mun, New Territories, Hong Kong not less than 48 hours before the appointed time for holding the General Meeting or any adjournment hereof (as the case may be).

3. For determining eligibility to attend and vote at the General Meeting, the register of members of the Company will be closed as follows:

4. Latest time to lodge transfer documents for At 4:30 p.m. on 16th October, 2017 registration with the Company’s Share Registrar

5. – Closure of the Company’s Register of Members 17th October, 2017 to 20th October, 2017 (both dates inclusive)

6. – Record date 20th October, 2017

7. During the above closure periods, no transfer of shares will be registered. To be eligible to attend and vote at the General Meeting, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s Share Registrar, Computershare Hong Kong Investor Services Limited of Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong for registration no later than the aforementioned latest time.

8. All resolutions will be conducted by way of a poll.

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