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 advisers.

If you have sold or transferred all your shares in KNT Holdings Limited, you should at once hand this circular together with the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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 however arising from or in reliance upon the whole or any part of the contents of this circular.

This circular appears for information purposes only and does not constitute an invitation or offer to sell, dispose, acquire, purchase or subscribe for any securities of the Company.

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1025)

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial Adviser

Placing Agent

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

Capitalised terms used on this cover page shall have the same meanings as defined in this circular.

A letter from the Board is set out on pages 7 to 31 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders is set out on page IBC-1 of this circular. A letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages IFA-1 to IFA-33 of this circular.

A notice convening the EGM to be held at 30/F, EW International Tower, No. 120 Texaco Road, Tsuen Wan, New Territories, Hong Kong on Thursday, 6 February 2025 at 11:00 a.m. or any adjournment thereof is set out on pages EGM-1 to EGM-3 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend and vote at the EGM in person, you are requested to complete and sign the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Registrar, Tricor Investor Services Limited, at 17/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong, as soon as possible and in any event no less than 48 hours before the time appointed for holding the EGM (i.e. Tuesday, 4 February 2025 at 11:00 a.m.) or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish and, in such event, the instrument appointing the proxy shall be deemed to be revoked.

The Rights Issue will proceed on a non-underwritten basis irrespective of the level of acceptance of the provisionally allotted Rights Shares and is subject to the fulfilment of conditions set out in the section headed "Letter from the Board - Conditions of the Rights Issue" in this circular. Accordingly, the Rights Issue may or may not proceed. Shareholders and potential investors should exercise extreme caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers. In the event that the Rights Issue is not fully subscribed, the Rights Shares not taken up by the Qualifying Shareholders will be placed to independent Places under the Compensatory Arrangements. The Placing Shares which are not placed under the Compensatory Arrangements will not be issued by the Company and the size of the Rights Issue will be reduced accordingly. There is no minimum amount to be raised under the Rights Issue.

For identification purposes only

10 January 2025

CONTENTS

Pages

EXPECTED TIMETABLE ii
DEFINITIONS 1
LETTER FROM THE BOARD 7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE IBC-I
LETTER FROM GRANDE CAPITAL IFA-I
APPENDIX I FINANCIAL INFORMATION OF THE GROUP I-1
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP II-1
APPENDIX III GENERAL INFORMATION III-1
NOTICE OF EGM EGM-1

EXPECTED TIMETABLE

Set out below is the expected timetable for the Rights Issue, which is subject to the results of the EGM and has been prepared on the assumption that all the conditions to the Rights Issue and the Placing Agreement will be fulfilled or otherwise waived and is therefore for indicative purpose only. Any change to the expected timetable will be announced in a separate announcement by the Company as and when appropriate. All times and dates in this circular refer to the Hong Kong local times and dates:

Event	Timeline
Latest time for lodging transfer documents of the Shares to qualify for attendance and voting at the EGM.	4:30 p.m. on
Monday, 27 January 2025
Closure of register of members of the Company to determine the entitlements of the Shareholders to attend and vote at the EGM	Tuesday, 28 January 2025 to
Thursday, 6 February 2025
(both days inclusive)
Latest time for lodging proxy forms for the EGM	11:00 a.m. on
Tuesday, 4 February 2025
Record date for attending and voting at the EGM	Thursday, 6 February 2025
Expected time and date of the EGM	11:00 a.m. on
Thursday, 6 February 2025
Announcement of poll results of the EGM	Thursday, 6 February 2025

The following events are conditional on the fulfilment of the conditions for the implementation of the Rights Issue and therefore the dates are tentative:

Last day of dealings in Shares on a cum-rights basis of the Rights Issue Monday, 17 February 2025

First day of dealings in Shares on an ex-rights basis of the Rights Issue Tuesday, 18 February 2025

EXPECTED TIMETABLE

Event	Timeline
Latest time for lodging transfer documents of Shares
to qualify for the Rights Issue	4:30 p.m. on
Wednesday, 19 February 2025
Closure of register of members of the Company to
determine the entitlements to the Rights Issue	Thursday, 20 February 2025 to
Wednesday, 26 February 2025
(both days inclusive)
Record Date for determining entitlements
to the Rights Issue	Wednesday, 26 February 2025
Re-opening of the register of members of the Company	Thursday, 27 February 2025
Prospectus Documents are made available and/or despatched
(as the case may be) to the Qualifying Shareholders
(in the case of the Non-Qualifying Shareholders,
the Prospectus only)	Monday, 3 March 2025
First day of dealings in nil-paid Rights Shares	Wednesday, 5 March 2025
Latest time for splitting of the PAL(s)	4:30 p.m. on
Friday, 7 March 2025
Last day of dealings in nil-paid Rights Shares	Wednesday, 12 March 2025
Latest time to lodge transfer documents of nil-paid Rights Shares
in order to qualify for the payment of Net Gain	4:00 p.m. on
Monday, 17 March 2025
Latest Time for Acceptance of, and payment for,
the Rights Shares and application for and
payment for the Rights Shares	4:00 p.m. on
Monday, 17 March 2025
Announcement of the number of the Unsubscribed
Rights Shares and the NQS Unsold Rights Shares subject
to the Compensatory Arrangements	Thursday, 20 March 2025
Commencement of the placing of the Unsubscribed
Rights Shares and the NQS Unsold Rights Shares
by the Placing Agent	Friday, 21 March 2025

– iii –

EXPECTED TIMETABLE

Event	Timeline
Latest Placing Time/Latest Placing Date for the placing
of the Unsubscribed Rights Shares and the NQS Unsold
Rights Shares by the Placing Agent.	4:00 p.m. on
Tuesday, 1 April 2025
Placing Long Stop Date/Latest time for the Rights Issue and
placing of the Unsubscribed Rights Shares and NQS
Unsold Rights Shares to become unconditional	4:00 p.m. on
Wednesday, 2 April 2025
Rights Issue settlement and Placing completion date	Wednesday, 2 April 2025
Announcement of the results of Rights Issue
(including the results of the placing of the Unsubscribed
Rights Shares and the NQS Unsold Rights Shares by the
Placing Agent and the amount of the Net Gain per the
Unsubscribed Rights Share and the NQS Unsold
Rights Share under the Compensatory Arrangements).	Thursday, 3 April 2025
Despatch of share certificates for fully-paid Rights Shares	Monday, 7 April 2025
Refund cheques, if any, to be despatched
(if the Rights Issue is terminated).	Monday, 7 April 2025
Expected commencement of dealings
in fully-paid Rights Shares	9:00 a.m. on
Tuesday, 8 April 2025
Payment of the Net Gain (if any) to the relevant
No Action Shareholders (if any)	Thursday, 17 April 2025

All times and dates in this circular refer to Hong Kong local times and dates.

Dates or deadlines specified in the expected timetable above or in other parts of this circular are indicative only and may be extended or varied by the Company. Any change to the expected timetable will be published or notified to the Shareholders and the Stock Exchange as and when appropriate.

iv -

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER OR EXTREME CONDITIONS ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

The latest time for acceptance of and payment for Rights Shares will not take place at the time indicated above if there is a tropical cyclone warning signal number 8 or above, a "black" rainstorm warning or "extreme conditions" caused by super typhoons as announced by the Government of Hong Kong:

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on Monday, 17 March 2025. Instead, the latest time for acceptance of and payment for the Rights Shares will be extended to 5:00 p.m. on the same Business Day; or

(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Monday, 17 March 2025. Instead, the latest time for acceptance of and payment for the Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Rights Shares does not take place on Monday, 17 March 2025, the dates mentioned in the section headed "EXPECTED TIMETABLE FOR THE RIGHTS ISSUE" above may be affected. The Company will notify the Shareholders by way of announcement(s) of any change to the expected timetable as soon as practicable.

DEFINITIONS

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

"acting in concert" has the same meaning ascribed to it under the Takeovers Code

"AFRC" the Accounting and Financial Reporting Council of Hong Kong

"Announcement" the announcement issued by the Company dated 10 December 2024 in relation to, among other things, the Rights Issue

"associate(s)" has the same meaning ascribed to it under the Listing Rules

"Board" the board of directors of the Company

"Business Day(s)" means a day (other than a Saturday and a day on which "extreme conditions" is announced by the Government of Hong Kong or a tropical cyclone warning no. 8 or above or a "black rainstorm warning signal" is hoisted in Hong Kong at any time between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a "black" rainstorm warning signal is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon) on which licensed banks in Hong Kong are open for business throughout their normal business hours

"CCASS" the Central Clearing and Settlement System established and operated by HKSCC

"Company" KNT Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 1025)

"Compensatory Arrangements" the compensatory arrangements pursuant to Rule 7.21(1)(b) of the Listing Rules as described in the section headed "Procedures in respect of Unsubscribed Rights Shares and the NQS Unsold Rights Shares and the Compensatory Arrangements" in this circular

DEFINITIONS

"controlling shareholder(s)" has the same meaning ascribed to it under the Listing Rules

"Designated Broker" Grand China Securities, a corporation licensed to carry on type 1 (dealing in securities), type 2 (dealing in futures contracts); type 4 (advising on securities) and type 9 (asset management) regulated activities under the SFO, being the agent to provide matching services to the Shareholders who wish to top up or sell their holdings of odd lots of the Shares

"Director" the director(s) of the Company

"EGM" the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve, among other things, the proposed Rights Issue

"Group" the Company and its subsidiaries

"HK$" Hong Kong dollar(s), the lawful currency of Hong Kong

"HKSCC" Hong Kong Securities Clearing Company Limited

"Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China

"Independent Board Committee" an independent board committee of the Company comprising all the independent non-executive Directors, which has been established under the Listing Rules to advise the Independent Shareholders in respect of the Rights Issue and the transactions contemplated thereunder

"Independent Financial Adviser" Grande Capital Limited, a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Rights Issue and the transactions contemplated thereunder, and as to voting

"Independent Shareholder(s)" any Shareholder(s) who are not required to abstain from voting at the EGM under the Listing Rules

DEFINITIONS

"Independent Third Party(ies)"
any persons or company and their respective ultimate beneficial owner(s) which, to the best of the Directors' knowledge, information and belief having made all reasonable enquires, are third parties independent of and not connected with the Company and its connected persons (or any of their respective associate)

"Last Trading Day"
Tuesday, 10 December 2024, being the last trading day of the Shares on the Stock Exchange before the release of the Announcement

"Latest Placing Date"
Tuesday, 1 April 2025 or such other date as the Company and the Placing Agent may agree in writing, being the latest date for the Placing Agent to place the Placing Shares

"Latest Placing Time"
4:00 p.m. on the Latest Placing Date

"Latest Practicable Date"
7 January 2025, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein

"Latest Time for Acceptance"
4:00 p.m. on Monday, 17 March 2025 or such later time or date as may be determined by the Company, being the latest time for acceptance of, and payment for, the Rights Shares as described in the Prospectus Documents

"Listing Committee"
has the same meaning ascribed to it under the Listing Rules

"Listing Rules"
the Rules Governing the Listing of Securities on GEM

"Net Gain"
the aggregate of any premiums (being the aggregate amount paid by the places after deducting the aggregate amount of the Subscription Price for the Unsubscribed Rights Shares and the NQS Unsold Rights Shares placed by the Placing Agent under the Placing Agreement) under the Compensatory Arrangements

"No Action Shareholder(s)"
Qualifying Shareholder(s) who do not subscribe for the Rights Shares (whether partially or fully) under the PALs or their renounces who hold any nil-paid rights at the time such nil-paid rights are lapsed, and/or the Non-Qualifying Shareholders (if any)

DEFINITIONS

"Non-Qualifying Shareholder(s)"
the Overseas Shareholder(s) whom the Board considers necessary or expedient to exclude from the Rights Issue on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place

"NQS Unsold Rights Share(s)"
the Rights Share(s) which would otherwise has/have been provisionally allotted to the Non-Qualifying Shareholders (if any) in nil-paid form that has/have not been sold by the Company

"Overseas Shareholder(s)"
Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose registered address(es) as shown on such register at that time is (are) in (a) place(s) outside Hong Kong

"PAL(s)"
the provisional allotment letter(s) proposed to be issued to the Qualifying Shareholders in connection with the Rights Issue

"Placee(s)"
any individuals, corporate, institutional investor(s) or other investor(s), who and whose ultimate beneficial owner(s) shall not be the Shareholder(s) and shall be the Independent Third Party(ies), procured by the Placing Agent and/or its sub-placing agent(s), who and whose ultimate beneficial owners shall not be the Shareholder(s) and shall be the Independent Third Party(ies), to subscribe for any of the Unsubscribed Rights Shares and the NQS Unsold Rights Shares pursuant to the Placing Agreement

"Placing"
the offer by way of private placing of the Unsubscribed Rights Shares and the NQS Unsold Rights Shares on a best effort basis by the Placing Agent and/or its sub-placing agents(s), who and whose ultimate beneficial owners shall not be the Shareholder(s) and shall be the Independent Third Party(ies), to the independent placee(s) during the Placing Period on the terms and subject to the conditions set out in the Placing Agreement

DEFINITIONS

"Placing Agent"
Gransing Securities Co Limited, a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, being the placing agent appointed by the Company to place any Unsubscribed Rights Shares and the NQS Unsold Rights Shares under the Compensatory Arrangements

"Placing Agreement"
the placing agreement dated 10 December 2024 and entered into between the Company and the Placing Agent in relation to the placing of Unsubscribed Rights Shares and the NQS Unsold Rights Shares

"Placing Long Stop Date"
Wednesday, 2 April 2025 (being the next Business Day after the Latest Placing Date) or such later date as the Company may announce

"Placing Period"
a period commencing from the first Business Day after the date of announcement of the number of Unsubscribed Rights Shares and the NQS Unsold Rights Shares, which is expected to be Friday, 21 March 2025, and ending at the Tuesday, 1 April 2025 or such later date as the Company and the Placing Agent may agree in writing

"Placing Shares"
all the Unsubscribed Rights Shares and the NQS Unsold Rights Shares

"Prospectus"
the prospectus to be despatched to the Shareholders containing details of the Rights Issue

"Prospectus Documents"
Collectively, the Prospectus and the PAL

"Prospectus Posting Date"
Monday, 3 March 2025 or such other date as may be agreed by the Company, being the date of despatch of the Prospectus Documents to the Qualifying Shareholders and the Prospectus for information only to the Non-Qualifying Shareholders

"Qualifying Shareholder(s)"
Shareholder(s), other than the Non-Qualifying Shareholders, whose name(s) appear(s) on the register of members of the Company on the Record Date

DEFINITIONS

"Record Date"
Wednesday, 26 February 2025 or such other date as may be determined by the Company, being the date by reference to which the Shareholders' entitlements to the Rights Issue are to be determined

"Registrar"
Tricor Investor Services Limited, the Hong Kong branch share registrar and transfer office of the Company

"Rights Issue"
the proposed issue of the Rights Shares on the basis of three (3) Rights Shares for every one (1) Share held on the Record Date at the Subscription Price pursuant to the Prospectus Documents

"Rights Share(s)"
up to 151,637,790 new Shares proposed to be allotted and issued by the Company to the Qualifying Shareholders or subscription pursuant to the Rights Issue, assuming no change in the number of Shares in issue on or before the Record Date

"SFC"
Securities and Futures Commission of Hong Kong

"SFO"
the Securities and Futures Ordinance (Cap 571 of the laws of Hong Kong)

"Share(s)"
ordinary shares of HK$0.20 each in the share capital of the Company

"Shareholder(s)"
the holder(s) of the Share(s)

"Stock Exchange"
the Stock Exchange of Hong Kong Limited

"Subscription Price"
HK$0.29 per Rights Share

"substantial shareholder"
has the meaning ascribed to it under the Listing Rules

"Takeovers Code"
the Hong Kong Code on Takeovers and Mergers

"Unsubscribed Rights Shares"
the Rights Shares that are not subscribed by the Qualifying Shareholders

"%"
per cent.

LETTER FROM THE BOARD

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1025)

Executive Directors:

Mr. Chong Sik

(Chairman and Chief Executive Officer)

Mr. Chong Pun

Mr. Lam Chi Yuen

Mr. Tsui Wing Tak

Ms. Wu Zongmei

Dr. Dong Bin (Vice Chairman)

Independent non-executive Directors

Mr. Leung Martin Oh Man

Mr. Lau Koong Yep

Mr. Yuen King Sum

Mr. Chan Kai Chung

Registered office:

Cricket Square

Hutchins Drive

P.O. Box 2681

Grand Cayman KY1-1111

Cayman Islands

Principal place of business in Hong Kong:

30th Floor

EW International Tower

No. 120 Texaco Road

Tsuen Wan

New Territories

Hong Kong

10 January 2025

To the Shareholders

Dear Sir or Madam,

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE;

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with, among other things, (i) further details of the Rights Issue and the transactions contemplate thereunder; (ii) a letter from the Independent Board Committee to the Independent Shareholders in respect of the Rights Issue; (iii) a letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the Rights Issue; (iv) other information required under the Listing Rules; and (v) a notice convening the EGM.

For identification purposes only

LETTER FROM THE BOARD

PROPOSED RIGHTS ISSUE

The Company proposes to raise gross proceeds of up to approximately HK$44.0 million by way of the issue of up to 151,637,790 Rights Shares at the Subscription Price of HK$0.29 per Rights Share on the basis of three (3) Rights Shares for every one (1) Share held at the close of business on the Record Date. The Rights Issue is not underwritten and is only available to the Qualifying Shareholders and will not be extended to the Non-Qualifying Shareholders.

Rights Issue Statistics

Basis of the Rights Issue : Three (3) Rights Shares for every one (1) Share held by the Shareholders at the close of business on the Record Date

Subscription Price : HK$0.2900 per Rights Share

Net subscription price per Rights Share (i.e. Subscription Price less Rights Issue expenses) : Approximately HK$0.2743 per Rights Share

Number of Shares in issue as at the Latest Practicable Date : 50,545,930 Shares

Number of Rights Shares to be issued under the Rights Issue : Up to 151,637,790 Rights Shares (assuming there is no change to the total number of Shares in issue on or before the Record Date)

Total number of Shares in issue as enlarged by the allotment and issue of the Rights Shares : Up to 202,183,720 Shares (assuming there is no change to the total number of Shares in issue on or before the Record Date and all Rights Shares are taken up by the Qualifying Shareholders)

Maximum amount to be raised before expenses (assuming the Rights Issue is fully subscribed) : Up to approximately HK$44.0 million before expenses (assuming there is no change to the total number of Shares in issue on or before the Record Date and all Rights Shares are taken up by the Qualifying Shareholders)

Aggregate nominal value of the Rights Shares : HK$30.3 million (assuming there is no change to the total number of Shares in issue on or before the Record Date and all Rights Shares are taken up by the Qualifying Shareholders)

LETTER FROM THE BOARD

As at the Latest Practicable Date, the Company has no outstanding convertible bonds, options, derivatives, warrants, conversion rights or other similar rights entitling holders thereof to subscribe for or convert into or exchange into Shares. The Company has no intention to issue or grant any Shares, convertible securities, warrants and/or options on or before the Record Date.

Assuming there is no change in the total number of Shares in issue on or before the Record Date and that no new Shares (other than the Rights Shares) will be allotted and issued on or before completion of the Rights Issue, the 151,637,790 Rights Shares to be issued pursuant to the terms of the proposed Rights Issue represents (i) 300.0% of the issued share capital of the Company as at the Latest Practicable Date; and (ii) 75% of the issued share capital of the Company as enlarged by the allotment and issue of the Rights Shares.

Non-underwritten basis

Subject to the fulfilment of the conditions of the Rights Issue, the Rights Issue will proceed on a non-underwritten basis irrespective of the level of acceptances of the provisionally allotted Rights Shares. In the event the Rights Issue is not fully subscribed, any Rights Shares not taken up by the Qualifying Shareholders will be placed to independent Places under the Compensatory Arrangements. Any Unsubscribed Rights Shares or NQS Unsold Rights Shares which are not placed under the Compensatory Arrangements will not be issued by the Company and the size of the Rights Issue will be reduced accordingly. There is no minimum amount to be raised under the Rights Issue. There are no applicable statutory requirements regarding minimum subscription levels in respect of the Rights Issue.

As the Rights Issue will proceed on a non-underwritten basis, the Shareholders who apply to take up all or part of his/her/its entitlement under the PAL(s) may unwittingly incur an obligation to make a general offer for the Shares under the Takeovers Code or cause the public float of the Company to decrease to below 25%. Accordingly, the Rights Issue will be made on terms that the Company will provide for the Shareholders to apply on the basis that if the Rights Shares are not fully taken up, the application of any Shareholder (except for HKSCC Nominees Limited) for his/her/its assured entitlement under the Rights Issue will be scaled down to a level which (a) does not trigger an obligation on part of the relevant Shareholder to make a general offer under the Takeovers Code in accordance to the note to Rule 7.19(5) of the Listing Rules; (b) does not cause the Company's public float to decrease to below 25%. Any subscription monies not utilised due to the scaled-down application of entitled Rights Shares will be refunded to the affected applicants.

Undertakings

As at the Latest Practicable Date, the Company has not received any information or irrevocable undertaking from any Shareholder of their intention as to whether such Shareholder will take up his/her entitlements under the Rights Issue or will not take up his/her entitlements under the Rights Issue.

LETTER FROM THE BOARD

Subscription Price

The Subscription Price of HK$0.2900 per Rights Share is payable in full by a Qualifying Shareholder upon acceptance of the relevant provisional allotment of the Rights Shares under the Rights Issue, and, where applicable, when a transferee of the nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents:

(i) a discount of approximately 9.38% to the closing price of HK$0.3200 per Share as quoted on the Stock Exchange on the Last Trading Day;

(ii) a discount of approximately 10.22% to the average closing price per Share as quoted on the Stock Exchange for the last five (5) consecutive trading days up to and including the Last Trading Day of approximately HK$0.3230 per Share;

(iii) a discount of approximately 12.78% to the average closing price per Share as quoted on the Stock Exchange for the last ten (10) consecutive trading days up to and including the Last Trading Day of approximately HK$0.3325 per Share;

(iv) a discount of approximately 2.52% to the theoretical ex-rights price of approximately HK$0.2975 per Share based on the closing price of HK$0.3200 per Share as quoted on the Stock Exchange on the Last Trading Day and number of Shares in issue as at the date of the Announcement;

(v) a discount of approximately 68.50% to the latest published audited consolidated net asset value per Share as at 31 March 2024 of approximately HK$0.9206 (based on the annual report 2024 of the Company published on 25 July 2024 in relation to, among others, the annual results of the Company for the year ended 31 March 2024). The Directors consider the discount represented by the Subscription Price to the audited consolidated net asset value per Share as at 31 March 2024 to be fair and reasonable with reasons set out below in the Letter from the Board of this circular;

(vi) a discount of approximately 59.90% to the latest published unaudited consolidated net asset value per Share as at 30 September 2024 of approximately HK$0.7232 (based on the interim results announcement of the Company published on 26 November 2024 in relation to, among others, the interim results of the Company for the six months ended 30 September 2024). The Directors consider the discount represented by the Subscription Price to the unaudited consolidated net asset value per Share as at 30 September 2024 to be fair and reasonable with reasons set out below in the Letter from the Board of this circular; and

10 -

LETTER FROM THE BOARD

(vii) a theoretical dilution effect (as defined under Rule 7.27B of the Listing Rules) of approximately 8.08%, represented by the theoretical diluted price of approximately HK$0.2988 per Share to the benchmarked price (as defined under 7.27B of the Listing Rules, taking into account the closing price on the Last Trading Day of HK$0.3200 per Share and the average of the closing prices of the Shares as quoted on the Stock Exchange for the five previous consecutive trading days prior to the date of the Announcement of approximately HK$0.3250 per Share) of approximately HK$0.3250 per Share.

The net price per Rights Share (i.e. Subscription Price less cost and expenses incurred in the Rights Issue) upon full acceptance of the provisional allotment of Rights Shares will be approximately HK$0.2743.

The Subscription Price was determined by the Company with reference to, among others, (i) the recent market price of the Shares under the prevailing market conditions; (ii) the prevailing market conditions of the capital market in Hong Kong; (iii) the financial position of the Group; and (iv) the amount of funds the Company intends to raise under the Rights Issue as discussed in the section headed "REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS OF THE RIGHTS ISSUE" below in the Letter from the Board of this circular.

The Subscription Price was determined after taking into account factors including the recent market price of the Shares and the current market conditions, in particular,

(i) the prevailing trading price of the Shares over the period from 2 September 2024 to the Last Trading Day, being three months prior and up to the Last Trading Day which presented a fluctuation in the range of HK$0.3200 to HK$0.7600 which presented a downward trend;

(ii) throughout the period from 2 September 2024 to the Last Trading Day, the price of the Share ranged between HK$0.3200 to HK$0.7600, representing (a) a discount ranging from approximately 17.44% to 65.24% to the latest published audited net asset value per Share of approximately HK$0.9206 as at 31 March 2024; and (b) ranging from a premium of approximately 5.09% to a discount of approximately 55.75% to the latest published unaudited net asset value per Share of approximately HK$0.7232 as at 30 September 2024;

11 -

LETTER FROM THE BOARD

under review is adequate and representative to illustrate the recent price movement of the Shares for conducting a reasonable comparison among the historical closing prices prior to the Last Trading Day and such comparison is relevant for the assessment of the fairness and reasonableness of the Subscription Price. In addition, the period under review enables the Board to account for market conditions and macroeconomic factors that may influence investor sentiment.

The Board recognizes that the net asset value per Share is not a relevant factor in determining the Subscription Price for the following reasons:

(i) The Share price has exhibited a consistent downward trend throughout the period under review. This trend indicates that market sentiment to the Shares is relatively negative, which diminishes the relevance of net asset value in price determination; and

(ii) Since 2 September 2024, the Share has traded below its net asset value continuously. This persistent undervaluation suggests that market participants do not perceive the net asset value as reflective of the Share's current value, further supporting the decision to exclude it as a basis for setting the Subscription Price.

The Company has also exhaustively conducted a search of recent proposed rights issue exercises, announced by the companies listed on the Main Board of the Stock Exchange during the period from 2 September 2024 to the Last Trading Day to understand the trend of the recent market practice regarding rights issue exercises. The Company has identified a total of 15 rights issue comparables (the "Comparables") during the respective period.

Although the Comparables include rights issues in different scale, engaged in different business or have different financial performance and funding needs from the Company, having considered (i) all of the Comparables and the Group are listed on the Main Board of the Stock Exchange; (ii) including transactions conducted by the Comparables with different funding needs and business represents a more comprehensive overall market sentiment in our comparable analysis; (iii) the respective period for the selection of the Comparables has generated a reasonable and meaningful number of sample size of 15 Hong Kong listed issuers to reflect the market practice regarding recent rights issue; and (iv) the 15 Comparables identified during the aforementioned period were exhaustively included without any artificial selection or filtering on our part so the Comparables represent a true and fair view of the recent market trends for rights issue conducted by other Hong Kong listed issuers in the Main Board of the Stock Exchange, the Company consider that the Comparables are fair and representative samples.

It should be noted that all the subject companies constituting the Comparables may have different principal activities, market capitalization, profitability and financial position as compared with those of the Company, and the circumstances leading to the subject companies to proceed with the rights issues may also be different from that of the Company.

12 -

LETTER FROM THE BOARD

The following table sets forth the relevant details of the Comparables:

Company name	Stock Code	Principal Business	Announcement Date	Basis for entitlement	Premium/ (Discount) of the subscription price over/to the latest net asset value per share
Graphex Group Limited	6128	The company is principally engaged in the provision of processing and sale of graphite products.	2024-12-03	3 for 1	(51.51)%
Luxxu Group Limited	1327	The company is principally engaged in the manufacture and trading of watches.	2024-12-02	1 for 1	(79.45)%
Rare Earth Magnesium Technology Group Holdings Limited	601	The company is engaged in the manufacture and sale of magnesium products.	2024-11-19	1 for 2	(86.19)%
HG Semiconductor Limited	6908	The company is principally engaged in the design, development, manufacturing, subcontracting service and sales of semiconductor products.	2024-11-12	1 for 4	(44.20)%
Far East Holdings International Limited	36	The company is mainly engaged in property investment.	2024-11-11	2 for 1	(80.59)%
IRC Limited	1029	The company is principally engaged in production and development of industrial commodities products.	2024-10-22	1 for 2	(67.30)%
Kingkey Financial International (Holdings) Limited	1468	The company is principally engaged in the provision of securities brokerage services.	2024-10-18	1 for 2	124.60%
Gaodi Holdings Limited	1676	The company is mainly engaged in the packaging and sales of seafood products.	2024-10-18	1 for 2	(65.50)%
Eminence Enterprise Limited	616	The company is mainly engaged in the investment and development of property.	2024-10-15	2 for 1	(98.98)%
China Water Industry Group Limited	1129	The company is principally engaged in the exploitation and sale of renewable energy business.	2024-10-04	1 for 1	(91.65)%

13 -

LETTER FROM THE BOARD

Company name	Stock Code	Principal Business	Announcement Date	Basis for entitlement	Premium/ (Discount) of the subscription price over/to the latest net asset value per share
Innovax Holdings Limited	2680	The company is mainly engaged in the provision of financial services.	2024-09-26	3 for 1	(88.59)%
Shougang Fushan Resources Group Limited	639	The company is principally engaged in coking coal mining, production and sales of coking coal products.	2024-09-23	1 for 30	(20.49)%
Dragon Rise Group Holdings Limited	6829	The company is principally engaged in undertaking foundation works in Hong Kong.	2024-09-13	1 for 1	(89.20)%
Shougang Century Holdings Limited	103	The company is principally engaged in the steel cord business.	2024-09-13	1 for 5	(62.50)%
Guangdong – Hong Kong Greater Bay Area Holdings Limited	1396	The company is primarily engaged in the property development and sale as well as property management and operation.	2024-09-02	1 for 2	(90.50)%
				Average	(59.47)%
				Max	124.60%
				Min	(98.98)%
				Median	(79.45)%
The Company		The Company is mainly engaged in the manufacturing and sale of apparel products.	2024-12-10		(59.90)%

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

As illustrated in the table above, the Company note that the subscription price to the consolidated net asset value per share of the respective Comparables ranges from a discount of approximately 98.98% to a premium of approximately 124.60%, with an average and median figure being a discount of approximately 59.47% and 79.45% respectively. The Subscription Price's discount to the consolidated net asset value per share of approximately 59.90% therefore falls within the range of discount to the consolidated net asset value per share of the Comparables and represents a similar discount to the average figure, a lower discount than the median figure thereof and is far lower than the maximum discount figure thereof.

LETTER FROM THE BOARD

The Board considers that under the current market condition of the capital market in Hong Kong and with reference to the recent market performance of the Shares, it would not be practical and make any commercial sense to set a subscription price which is significantly higher than the prevailing market price and net asset value per Share, which would defeat the whole purpose of attracting the Shareholders and/or investors for new funding.

The Directors consider that the discount of the Subscription Price would encourage Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth and development of the Group. After taking into consideration the reasons for the Rights Issue as stated in the section headed "REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS OF THE RIGHTS ISSUE" below, the Directors consider the terms of the Rights Issue, including the Subscription Price, to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions of the Rights Issue

The Rights Issue is conditional on each of the following conditions being fulfilled:

(i) the passing by the Shareholders or Independent Shareholders (as the case may be) at the EGM of the necessary resolution(s) to approve the Rights Issue, the Placing Agreement and the transactions contemplated thereunder (including but not limited to the allotment and issue of the Rights Shares) by no later than the Prospectus Posting Date;

(ii) the Listing Committee granting and not having withdrawn or revoked the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms and such listing and permission to deal not having been withdrawn or revoked;

(iii) the delivery to the Stock Exchange for authorisation and the filing and registration with the Companies Registry in Hong Kong respectively one duly certified copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by resolution of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance not later than the Prospectus Posting Date;

(iv) following registration, the posting of the Prospectus Documents to the Qualifying Shareholders (and, where applicable, the posting of the Prospectus to the Non-Qualifying Shareholder(s), if any, for information purpose only) and the publication of the Prospectus Documents on the website of the Stock Exchange on or before the Prospectus Posting Date;

(v) the Company having complied with the requirements under all applicable laws and regulations; and

15 -

LETTER FROM THE BOARD

(vi) the Placing Agreement not being terminated pursuant to the terms thereof and remain in full force and effect.

None of the above conditions can be waived. None of the above conditions has been fulfilled as at the Latest Practicable Date. The Company shall use all reasonable endeavours to procure the fulfilment of all the above conditions by the respective dates specified above. If any of the conditions above are not fulfilled by the Placing Long Stop Date, the Rights Issue will not proceed.

As the proposed Rights Issue is subject to the fulfilment of the above conditions, it may or may not proceed.

Status of the Rights Shares

The Rights Shares, when allotted, issued and fully paid, shall rank pari passu in all respects with the Shares then in issue, including the right to receive all future dividends and distributions which may be declared, made or paid on or after the date of allotment of the Rights Shares in their fully-paid form.

Qualifying Shareholders and Non-Qualifying Shareholders

To qualify for the Rights Issue, a Shareholder must be registered as a member of the Company on the Record Date and is not a Non-Qualifying Shareholder.

In order to be registered as members of the Company on the Record Date, all transfers of Shares (together with the relevant share certificates and instruments of transfer) must be lodged with the Registrar, Tricor Investor Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road. Hong Kong by not later than 4:30 p.m. on Wednesday, 19 February 2025. The register of members of the Company will be closed from Thursday, 20 February 2025 to Wednesday, 26 February 2025 (both days inclusive) for determining the entitlements to the Rights Issue. No transfer of Shares will be registered during this period.

Subject to the approval of the Rights Issue by the Independent Shareholders at the EGM, the Prospectus containing further information regarding, among other things, the Rights Issue, including information on acceptances of the Rights Shares and other information of the Group, and PAL(s) are expected to be despatched to the Qualifying Shareholders on Monday, 3 March 2025. The Company will, to the extent reasonably practicable and legally permitted and subject to the advice of legal advisers in the relevant jurisdictions in respect of applicable local laws and regulations, despatch the Prospectus to the Non-Qualifying Shareholders (if any) for their information only, but the Company will not send the PAL(s) to the Non-Qualifying Shareholders (if any).

Qualifying Shareholders who do not take up the Rights Shares to which they are entitled, and Non-Qualifying Shareholders should note that their shareholdings in the Company will be diluted.

LETTER FROM THE BOARD

Basis of provisional allotment

The Rights Shares will be allotted on the basis of three (3) Rights Shares for every one (1) Share held by the Qualifying Shareholders as at the close of business on the Record Date.

The PAL relating to the Rights Shares will be enclosed with the Prospectus entitling the Qualifying Shareholders to whom it is addressed to subscribe for the Rights Shares as shown therein. Acceptance for all or any part of a Qualifying Shareholder’s provisional allotment should be made only by completing a PAL and lodging the same with a remittance for the Rights Shares being accepted with the Registrar by the Latest Time for Acceptance.

Application for all or any part of a Qualifying Shareholder’s provisional allotment should be made by lodging a duly completed PAL and a cheque or a banker’s cashier order for the sum payable for the Rights Shares being applied for with the Registrar on or before the Latest Time for Acceptance.

Procedures in respect of Unsubscribed Rights Shares and the NQS Unsold Rights Shares and the Compensatory Arrangements

The Company will make arrangements described in Rule 7.21(1)(b) of the Listing Rules to dispose of the Unsubscribed Rights Shares and the NQS Unsold Rights Shares by offering the Unsubscribed Rights Shares and the NQS Unsold Rights Shares to independent Places for the benefit of Shareholders to whom they were offered by way of the Rights Issue. There will be no excess application arrangements in relation to the Rights Issue as stipulated under Rule 7.21(1)(a) of the Listing Rules.

The Company therefore appointed the Placing Agent to place the Unsubscribed Rights Shares and the NQS Unsold Rights Shares after the Latest Time for Acceptance of the Rights Shares to be allotted and issued under the Rights Issue to independent Places on a best effort basis. Any premium over the Subscription Price for those Rights Shares that is realised will be paid to the No Action Shareholders and Non-Qualifying Shareholders on a pro-rata basis. The Placing Agent will, on a best effort basis, procure, by not later than 4:00 p.m., on Tuesday, 1 April 2025, acquirers for all (or as many as possible) of those Unsubscribed Rights Shares and the NQS Unsold Rights Shares if a premium over the Subscription Price and the expenses of procuring such acquirers (including any related commissions and any other related expenses/fees) can be obtained. Any Unsubscribed Rights Shares and the NQS Unsold Rights Shares remain not placed after completion of the Placing Arrangement will not be issued by the Company and the size of the Rights Issue will be reduced accordingly.

Net Gain (if any) will be paid (without interest) on pro-rata basis (on the basis of all Unsubscribed Rights Shares and NQS Unsold Rights Shares) to the No Action Shareholders and the Non-Qualifying Shareholders (but rounded down to the nearest cent) as set out below:

17 -

LETTER FROM THE BOARD

(i) the relevant Qualifying Shareholders (or such persons who hold any nil-paid rights at the time such nil-paid rights are lapsed) whose nil-paid rights are not validly applied for in full, by reference to the extent that Shares in his/her/its nil-paid rights are not validly applied for; and

(ii) the relevant Non-Qualifying Shareholders with reference to their shareholdings in the Company on the Record Date.

It is proposed that Net Gain to any of the No Action Shareholder(s) mentioned above which is in an amount of HK$100 or more will be paid to them in Hong Kong Dollars only and the Company will retain individual amounts of less than HK$100 for its own benefit. Shareholders are reminded that Net Gain may or may not be realised, and accordingly the No Action Shareholders may or may not receive any Net Gain.

Rights of the Overseas Shareholder(s) (if any)

The Prospectus Documents to be issued in connection with the Rights Issue will not be registered or filed under the securities law of any jurisdiction other than Hong Kong. Overseas Shareholders may not be eligible to take part in the Rights Issue as explained below.

The Board will comply with Rule 13.36(2)(a) of the Listing Rules and make necessary enquiries regarding the feasibility of extending the Rights Issue to the Overseas Shareholders (if any) under the laws of the relevant overseas jurisdictions and the requirements of the relevant regulatory bodies or stock exchanges. If, based on legal advice, the Board is of the opinion that it would be necessary or expedient not to offer the Rights Shares to any Overseas Shareholders on account either of the legal restrictions under the laws of relevant place(s) or the requirements of the relevant overseas regulatory body or stock exchange, no provisional allotment of the nil-paid Rights Shares or allotment of fully paid Rights Shares will be made to such Overseas Shareholders. In such circumstances, the Rights Issue will not be extended to the Non-Qualifying Shareholders. The basis for excluding the Non-Qualifying Shareholders, if any, from the Rights Issue will be set out in the Prospectus to be issued. The Company will send the Prospectus to the Non-Qualifying Shareholders for their information only, but will not send the PAL to them.

The Non-Qualifying Shareholders (which are excluded from the Rights Issue) will not have any entitlement under the Rights Issue. However, arrangements will be made for the Rights Shares, which would otherwise have been provisionally allotted to the Non-Qualifying Shareholders, to be sold in their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence, if a premium (net of expenses) can be obtained. The proceeds of such sale, less expenses, will be paid pro-rata (but rounded down to the nearest cent) to the Non-Qualifying Shareholders in Hong Kong dollars, except that the Company will retain individual amounts of less than HK$100 for its own benefit.

Any NQS Unsold Rights Shares, which would otherwise have been provisionally allotted to the Non-Qualifying Shareholders in nil-paid form, will be placed by the Placing Agent at a price

18 -

LETTER FROM THE BOARD

not less than the Subscription Price under the Placing Agreement together with the Unsubscribed Rights Shares. Any Unsubscribed Rights Shares and the NQS Unsold Rights Shares remain not placed under the Compensatory Arrangements will not be issued by the Company and the size of the Rights Issue will be reduced accordingly.

As at the Latest Practicable Date, based on the register of members of the Company, there is no Overseas Shareholders.

Overseas Shareholders should note that they may or may not be entitled to the Rights Issue, subject to the results of enquiries made by the Directors pursuant to Rule 13.36(2)(a) of the Listing Rules. The Company reserves the right to treat as invalid any acceptance of Rights Shares where it believes that such acceptance or application would violate the applicable securities or other laws or regulations of any territory or jurisdiction. Accordingly, Overseas Shareholders and beneficial owners of the Shares who are residing outside Hong Kong should exercise caution when dealing in the Shares.

Share certificates of the Rights Shares and refund cheques for the Rights Issue

Subject to fulfilment of the conditions of the Rights Issue, (i) share certificates for the fully-paid Rights Shares; and (ii) refund cheques in respect of wholly or partially unsuccessful applications for Rights Shares are expected to be sent on or before Monday, 7 April 2025 to those entitled thereto by ordinary post, at their own risk, to their registered addresses. Each allottee will receive one share certificate for all allotted Rights Shares.

Fractional entitlements to the Rights Shares

On the basis of provisional allotment of three (3) Rights Shares for every one (1) Share held by the Qualifying Shareholders on the Record Date, no fractional entitlements to the Rights Shares will arise under the Rights Issue.

Taxation

Qualifying Shareholders are recommended to consult their professional advisers if they are in doubt as to the taxation implications of subscribing for the Rights Shares, or about purchasing, holding or disposals of, or dealings in or exercising any rights in relation to the Shares or the Rights Shares, and similarly, the Non-Qualifying Shareholders (if any) as regards their receipt of the net proceeds of sale of the Rights Shares otherwise falling to be issued to them under the Rights Issue under the laws of jurisdictions in which they are liable to taxation. It is emphasised that none of the Company, the Directors nor any other parties involved in the Rights Issue accepts responsibility for any tax effects on, or liabilities of, any person resulting from subscribing for, purchasing, holding, disposal of, dealings in or exercising any rights in relation to the Shares or the Rights Shares.

19 -

LETTER FROM THE BOARD

Application for listing

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and the permission to deal in, the Rights Shares (in both nil-paid and fully-paid forms) to be issued and allotted pursuant to the Rights Issue. No part of the securities of the Company is listed or dealt in, and no listing of or permission to deal in any such securities is being or is proposed to be sought, on any other stock exchanges.

Dealing in the Rights Shares in both their nil-paid and fully-paid forms will be in the board lots of 8,000 Rights Shares.

Rights Shares will be eligible for admission into CCASS

Subject to the granting of the listing of, and the permission to deal in, the Rights Shares (in both their nil-paid and fully-paid forms) on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Rights Shares (in both their nil-paid and fully-paid forms) will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares (in both their nil-paid and fully-paid forms) on the Stock Exchange, or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of HKSCC and HKSCC Operational Procedures in effect from time to time.

Shareholders should seek advice from their licensed securities dealer(s) or other professional adviser(s) for details of those settlement arrangements and how such arrangements will affect their rights and interests if they are in any doubt.

Stamp duty and other applicable fees and charges

Dealings in the Rights Shares (in both nil-paid and fully-paid forms) will be subject to payment of stamp duty, Stock Exchange trading fee, SFC transaction levy, AFRC transaction levy and any other applicable fees and charges in Hong Kong.

LETTER FROM THE BOARD

THE PLACING ARRANGEMENT

On 10 December 2024 (after trading hours), the Company and the Placing Agent entered into the Placing Agreement, pursuant to which the Placing Agent has conditionally agreed as agent of the Company (either by itself or through its sub-placing agents) to procure independent Places, on a best effort basis, to subscribe for the Unsubscribed Rights Shares and the NQS Unsold Rights Shares as part of the Compensatory Arrangements. Details of the Placing Arrangement are as follows:

Date: 10 December 2024 (after trading hours)

Issuer: the Company

Placing Agent: Gransing Securities Co Limited, a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, was appointed as the Placing Agent to procure, on a best efforts basis, independent Places to subscribe for Unsubscribed Rights Shares and the NQS Unsold Rights Shares.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Placing Agent and its ultimate beneficial owner(s) are Independent Third Parties.

Placing Period: The period from Friday, 21 March 2025 up to 4:00 p.m. on Tuesday, 1 April 2025, or such other dates as the Company may announce, being the period during which the Placing Agent will seek to effect the Placing.

Placing fee: Subject to the completion of the Placing, the Company shall pay to the Placing Agent a placing commission in Hong Kong Dollars of 3.0% of the amount which is equal to the placing price multiplied by the number of Unsubscribed Rights Shares and NQS Unsold Rights Shares successfully placed by the Placing Agent and/or its sub-placing agent(s) pursuant to the terms of the Placing Agreement.

No fees shall be paid by the Company if the Placing is not completed.

21 -

LETTER FROM THE BOARD

Placing price:
The placing price of each of the Unsubscribed Rights Shares and/or the NQS Unsold Rights Shares (as the case may be) shall be not less than the Subscription Price.

The determination of the final price is dependent on the demand and market conditions for the Unsubscribed Rights Shares and/or the NQS Unsold Rights Shares during the process of Placing.

Placees:
The Unsubscribed Rights Shares and the NQS Unsold Rights Shares are expected to be placed to the Placee(s) who and whose ultimate beneficial owner(s) shall be the Independent Third Party(ies).

Ranking:
Unsubscribed Rights Shares and the NQS Unsold Rights Shares (when placed, allotted, issued and fully paid) shall rank pari passu in all respects among themselves and with the Shares then in issue.

Condition Precedent:
The obligations of the Placing Agent and the Company under the Placing Agreement are conditional upon, among other things, the following conditions being fulfilled (or being waived by the Placing Agent in writing, if applicable):

(ii) the Listing Committee having granted the approval for the listing of, and the permission to deal in, the Rights Shares, including the Unsubscribed Rights Shares and/or the NQS Unsold Rights Shares;

22 -

LETTER FROM THE BOARD

(iii) none of the representations, warranties or undertakings contained in the Placing Agreement being or having become untrue, inaccurate or misleading in any material respect at any time before the completion, and no fact or circumstance having arisen and nothing having been done or omitted to be done which would render any of such undertakings, representations or warranties untrue or inaccurate in any material respect if it was repeated as at the time of completion of the Placing Agreement; and

(iv) the Placing Agreement not having been terminated in accordance with the provisions thereof, including provisions regarding the termination events.

The Placing Agent may, in its absolute discretion, waive the fulfilment of all or any or any part of the conditions (other than those set out in paragraphs (i) to (ii) above) by notice in writing to the Company.

In the event that the above condition precedents have not been fulfilled on or before the Placing Long Stop Date, all rights, obligations and liabilities of the parties thereunder in relation to the Placing shall cease and determine and none of the parties shall have any claim against the other in respect of the Placing (save for any antecedent breaches thereof).

For the avoidance of doubt, if all the Rights Shares are fully subscribed under the Rights Issue, the Placing will not proceed.

23 -

LETTER FROM THE BOARD

Termination:

Notwithstanding anything contained in the Placing Agreement, the Placing Agent shall be entitled, without any liability to the Company, by notice in writing to the Company served prior to the 4:00 p.m. on Wednesday, 2 April 2025 (the “Latest Placing Time”), to terminate the Placing Agreement, if, prior to the Latest Placing Time:

(a) in the reasonable opinion of the Placing Agent, the success of the Placing would be materially and adversely affected by:

(i) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof), of a political, military, financial, economic or other nature, or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of the Placing Agent, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or

(ii) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of the Placing Agent materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Placing; or

(iii) there occurs or comes into effect the imposition of any moratorium, suspension or material restriction on trading in the Shares (for more than ten (10) consecutive trading days) generally on the Stock Exchange due to exceptional financial circumstances or otherwise; or

24 -

LETTER FROM THE BOARD

(iv) any adverse change in the business or in the financial or trading position of any members of the Group, which in the reasonable opinion of the Placing Agent, is material in the context of the Placing; or

(b) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities, and a change in currency conditions which includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs in Hong Kong, the United States of America or the PRC which in the reasonable opinion of the Placing Agent makes it inexpedient or inadvisable to proceed with the Placing; or

(c) any material breach of any of the representations and warranties by the Company that comes to the knowledge of the Placing Agent, or any event occurs or any matter arises on or after the date of this Agreement and prior to the Latest Placing Time which, if it had occurred or arisen before the date of the Placing Agreement, would have rendered any of such representations and warranties untrue or incorrect in any material respect, or there has been a material breach by the Company of any other provision of the Placing Agreement.

Upon the giving of such notice as referred to above by the Placing Agent, all obligations of the Placing Agent under the Placing Agreement shall cease and determine and no party shall have any claim against any other party, save for any prior breaches of this Agreement.

The terms of the Placing Agreement (including the placing fee) were determined after arm's length negotiations between the Placing Agent and the Company by reference to the financial position of the Group, the size of the Rights Issue and the prevailing market conditions. The Directors (excluding the members of the Independent Board Committee whose opinion will be set forth in the circular of the Company after having been advised by the independent financial adviser) consider that the terms of the Placing Agreement, including the placing fee charged, are

25 -

LETTER FROM THE BOARD

fair and reasonable and the transactions contemplated under the Placing Agreement are on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

The Placing Agent shall ensure that the Placing Shares are placed only to institutional, corporate or individual investors who and whose ultimate beneficial owners shall be Independent Third Parties. The Placing Agent shall also ensure that (i) the Placing will not have any implication under the Takeovers Code and no Shareholder will be under any obligation to make a general offer under the Takeovers Code as a result of the Placing; and (ii) the Placing will not result in the Company incapable of complying with the public float requirements under Rule 8.08(1)(a) of the Listing Rules immediately following the Placing.

Given that the Compensatory Arrangements would provide (i) a distribution channel of the Unsubscribed Rights Shares and the NQS Unsold Rights Shares to the Company; (ii) channel of participation in the Rights Issue for independent investors; and (iii) a compensatory mechanism for No Action Shareholders and the Non-Qualifying Shareholders, the Directors considers that the Compensatory Arrangements are fair and reasonable and would provide adequate safeguard to protect the interest of the Company's minority Shareholders.

REASONS FOR THE RIGHTS ISSUE AND THE USE OF PROCEEDS

The Group is principally engaged in the manufacturing and sale of bridesmaid dresses, bridal gowns, special occasion dresses, accessories, fashion apparels, fabrics and other accessories.

Assuming full subscription under the Rights Issue, the expected gross proceeds of the Rights Issue will be up to approximately HK$44.0 million and the relevant expenses would be approximately HK$2.4 million, which includes placing commission and professional fees payable to financial adviser, legal advisers and other parties involved in the Rights Issue. Accordingly, the estimated net proceeds of the Rights Issue, after deducting the related expense, will be up to approximately HK$41.6 million.

As stated in the annual report 2024 of the Company for the year ended 31 March 2024 and the interim report 2024 of the Company for the six months ended 30 September 2024, 2024 was a volatile and challenging year to the Group. The global economy has been adversely affected by the protracted trade war between the United States of America and China. The downturn in the global market was continued to be aggravated by the outbreak of novel coronavirus disease in past three years which brought unprecedented challenges and uncertainties. The business of the Group was inevitable being affected. The Group continued to experience a challenging operating environment in view of prolonged trade disputes between the United States and China, tariffs imposed, political tensions and continuing uncertainties in the global economy. Since the Group's revenue was mostly derived from customers based in the United States, these factors in aggregate led to a certain extent of impact on the overall business performance of the Group. The Group expects that the business environment and outlook for the coming financial year would remain highly challenging and uncertain. The Group will continue to review its existing business from time to time and take appropriate measures to tackle any possible impacts. In view of the unprecedented business environment, the management is actively exploring new business opportunities with a view to diversifying the income stream of the Group and

26 -

LETTER FROM THE BOARD

mitigating risks. The Company considers that the proceeds from the Rights Issue will provide the necessary resources to seize investment opportunities as they arise, ensuring that the Group remains agile and well-positioned for future growth.

The Company considers further development in the manufacturing and sale of bridesmaid dresses, bridal gowns, special occasion dresses, accessories, fashion apparels, fabrics and other accessories, recognizing that exploring new opportunities beyond our existing operations could provide potential for growth. The Company is of the view that diversifying the manufacturing efforts may allow the Group to respond more effectively to changing market demands and consumer preferences. Financially, expanding the manufacturing capabilities could lead to increased production efficiency, which may result in lower per-unit costs and improved profit margins. Additionally, a broader product range could attract new customers and drive higher sales volumes, contributing to overall revenue growth.

The Group intends to utilize part of the net proceeds from the Rights Issue to explore potential investment opportunities in the manufacturing sector within southeast Asia, such as Vietnam, Indonesia, Philippines and/or Cambodia. By expanding the operations in this region, the Company aims to mitigate the adverse effects of trade disputes and diversify its customer base, thereby enhancing its resilience and positioning the Group for sustainable growth in a more stable market environment.

The Group is currently primarily engaged in the manufacturing and sale of apparel products. The Company believes that focusing on its core apparel products business while further diversifying into additional segments could yield significant benefits. By expanding its offerings beyond bridesmaid dresses, bridal gowns and special occasion dresses to include related categories, the Company can tap into new market opportunities and cater to a wider range of customer preferences. This strategic diversification would not only enhance the Group's product portfolio but also help mitigate risks associated with dependence on a limited range of products. Such approach aligns with its goal of sustainable growth and positions the Group to remain competitive in a dynamic market.

As at the Latest Practicable Date, the Company has not identified any potential targets or joint venture in relation to its planned development of the Group's business. As at the Latest Practicable Date, the Company is not in any negotiation and/or any discussion for any potential investment, whether concluded or not. Meanwhile, it is the intention of the Company that the Group will maintain its existing principal business activities and has no plans to downsize these operations in light of any potential acquisition or investment opportunity. As at the Latest Practicable Date, the Company does not has any intention to dispose of or deinvest in the Company's existing assets and/or businesses.

With reference to the interim results announcement for the six months ended 30 September 2024 of the Company, as at 30 September 2024, the Group recorded total liabilities of approximately HK$62.2 million mainly comprising borrowings and amounts due to directors of approximately HK$20.1 million and HK$14.1 million, respectively. Given the Group's current indebtedness (being amounted to approximately HK$35.0 million, among which (i) bank borrowings amounted to approximately HK$7.7 million; (ii) other borrowing amounted to approximately HK$5.5 million; (iii) lease liabilities amounted to approximately HK$0.8 million;

27 -

LETTER FROM THE BOARD

(iv) amounts due to directors amounted to approximately HK$15.0 million; and (v) bank overdrafts amounted to approximately HK$6.0 million, as at the close of business on 30 November 2024, being the latest practicable date for the purpose of ascertaining information of the indebtedness of the Group prior to the printing of this Circular) and gearing ratio (being 48.3% as at 31 March 2024 and further increase to 55.1% as at 30 September 2024), the Directors believe it is financially prudent to utilize a portion of the proceeds from the Rights Issue to repay outstanding loans, which will alleviate the Group's financial burden and enhance the Group's overall financial stability. In the meantime, the directors consider the Group could enhance its general working capital reserve and support its operations by conducting equity financing via the Rights Issue.

Intended use of proceeds

Assuming full subscription under the Rights Issue, the Company intends to apply the net proceeds of approximately HK$41.6 million from the Rights Issue (assuming no other change in the number of Shares in issue on or before the Record Date) as to as to (i) approximately HK$17.0 million for investment in potential opportunity in southeast Asia, among which approximately HK$12.0 million for investment in further expanding and/or diversifying the manufacturing business of the Group and approximately HK$5.0 million for investment in new business segment opportunity for diversifying the business operation of the Group; (ii) approximately HK$15.0 million for the repayment of debt of the Group; and (iii) approximately HK$9.6 million for the general working capital, including but not limited to operational costs, staff costs, rental expenses, professional fees and other office overheads of the Group.

The Rights Issue will proceed irrespective of the level of acceptance of the provisionally allotted Rights Shares. In the event that there is an under-subscription of the Rights Issue, the net proceeds of the Rights Issue will be allocated and utilised in accordance with the same proportion to the above uses.

Fund-raising alternatives

Apart from the Rights Issue, the Board has considered various fund-raising alternatives before resolving to the Rights Issue, including but not limited to debt financing, placing of new shares and open offer. The Board notes that bank borrowings, if available, would result in additional interest burden of the Company and create pressure to the liquidity of the Company. Hence, the Board does not consider it to be beneficial to the Company. As for placing of new Shares, it would lead to immediate dilution in the shareholding interest of existing Shareholders without offering them the opportunity to participate in the enlarged capital base of the Company and it is relatively smaller in scale as compared to fund raising through rights issue. As for open offer, while it is similar to a rights issue, offering Qualifying Shareholders to participate, it does not allow free trading of rights entitlements in the open market. As opposed to open offer, Rights Issue would allow Qualifying Shareholders to participate in the future development of the Company and at the same time offer more flexibility to the Qualifying Shareholders to choose whether to maintain their respective pro-rata shareholding interests in the Company and dealing with the Shares.

28 -

LETTER FROM THE BOARD

Having considered all the other fund-raising alternatives, the Directors are of the view that the Rights Issue is in the best interests of the Company and the Shareholders as a whole, and that it is an appropriate fund-raising method to strengthen the capital base of the Company and support the Company's continuing business development and growth.

FUND RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS

The Company has conducted the following fund-raising activities involving issue of its securities in the past 12 months immediately prior to the Latest Practicable Date:

Date of announcement	Completion date	Fund raising	Net Proceeds raised (approximately)	Intended use of proceeds	Actual use of proceeds as at the date of the Announcement
23 September 2024	15 October 2024	Placing of 168,486,000 new shares at the placing price of HK$0.0315 per placing share under general mandate granted to the Directors at the annual general meeting of the Company held on 26 August 2024	HK$4.9 million	General working capital of the Group and the repayment of existing loans	Approximately HK$4.9 million has been applied as intended

Save as disclosed above, the Company did not conduct any equity fund raising activities in the past twelve months immediately prior to the Latest Practicable Date.

LISTING RULES IMPLICATIONS

In accordance with Rule 7.19A(1) and Rule 7.27A(1) of the Listing Rules, as the Rights Issue will increase the total number of issued Shares or the market capitalisation of the Company by more than 50% within the 12 months period immediately preceding the date of the Announcement, the Rights Issue must be made conditional on approval by the Shareholders at the EGM, and any controlling shareholders of the Company and their respective associates, or where there are no controlling shareholders, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution(s) in relation to the proposed Rights Issue.

As at the Latest Practicable Date, the Company has no controlling Shareholder as defined under the Listing Rules. Mr. Chong Sik, the Chairman, the executive Director and the Chief Executive Officer of the Company, beneficially owns 11,797,500 Shares in aggregate, representing approximately 23.34% of the entire issued share capital of the Company as at the

LETTER FROM THE BOARD

Latest Practicable Date. Mr. Chong Pun, the executive Director of the Company, beneficially owns 2,500 Shares in aggregate, representing approximately 0.005% of the entire issued share capital of the Company as at the Latest Practicable Date. Accordingly, Mr. Chong Sik and Mr. Chong Pun are required to abstain from voting in favour of the proposed resolution(s) to approve the Rights Issue at the EGM in accordance with Rule 7.27A of the Listing Rules. Save as disclosed above, no other Director are interested in the Shares of the Company as at the Latest Practicable Date. Accordingly, no other Shareholder is required to abstain from voting in favour of the relevant resolution(s) of the proposed Rights Issue at the EGM.

The Rights Issue will not result in a theoretical dilution effect of 25% or more. As such, the theoretical dilution impact of the Rights Issue is in compliance with Rule 7.27B of the Listing Rules.

EXTRAORDINARY GENERAL MEETING, PROXY ARRANGEMENT AND CLOSURE OF REGISTER OF MEMBERS

The Company will convene the EGM or any adjourned meeting hereof at 30/F, EW International Tower, No. 120 Texaco Road, Tsuen Wan, New Territories, Hong Kong on Thursday, 6 February 2025 at 11:00 a.m. to approve matters referred to in this circular at which relevant resolution will be proposed to the Shareholders to consider, and if thought fit, approve the Rights Issue. The notice convening the EGM is set out on pages EGM-1 to EGM-3 of this circular.

A form of proxy for use in connection with the EGM is enclosed herewith. Whether or not you intend to be present and vote at the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Registrar, Tricor Investor Services Limited, at 17/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). The completion and delivery of a form of proxy will not preclude you from attending and voting at the EGM (or any adjourned meeting thereof) in person should you so wish, and in such case, the authority of your proxy will be revoked.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll, except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the resolutions proposed at the EGM will be taken by way of poll. An announcement on the poll results will be made by the Company after the EGM in the manner prescribed under Rule 13.39(4) of the Listing Rules.

30 -

LETTER FROM THE BOARD

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Tuesday, 28 January 2025 to Thursday, 6 February 2025 (both days inclusive) for determining the entitlements of the Shareholders to attend and vote at the EGM, and will further be closed from Thursday, 20 February 2025 to Wednesday, 26 February 2025 (both days inclusive) for determining the entitlements to the Rights Issue, during which period no transfer of Shares will be registered.

RECOMMENDATIONS

The Board considers that the Rights Issue are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the ordinary resolution as set out in the notice of the EGM.

Your attention is drawn to the letter from the Independent Board Committee set out on pages IBC-1 to IBC-2 of this circular and the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages IFA-1 to IFA-33 of this circular in connection with the Rights Issue and the transactions contemplated thereunder and the principal factors and reasons considered by the Independent Financial Adviser in arriving at such advice.

The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, considers that the Rights Issue and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and on normal commercial terms or better and in the ordinary and usual course of business of the Company and in the interests of the Company and the Shareholders as a whole.

ADDITIONAL INFORMATION

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

By order of the Board

KNT Holdings Limited

Chong Sik

Chairman and Executive Director

31 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter form the Independent Board Committee setting out its recommendation to the Independent Shareholder in respect of the Rights Issue.

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1025)

10 January 2025

To the Independent Shareholders

Dear Sir or Madam,

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE

We refer to the circular issued by KNT Holdings Limited to its shareholders dated 10 January 2025 of which this letter forms part (the "Circular"). Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee and to advise you the Rights Issue and the transactions contemplated thereunder, whether such terms are fair and reasonable and in the interests of the Company and the Shareholders as a whole and how to vote on the resolution at the EGM approving the Rights Issue and the transactions contemplated thereunder.

The Independent Financial Adviser has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the Rights Issue and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned, whether such terms are in the interests of the Company and the Shareholders as a whole. Details of its advice, together with the principal factors taken into consideration in arriving at such advice, are set out on pages IFA-I to IFA-33 of the Circular.

We wish to draw your attention to the letter from the Board set out on pages 7 to 31 of the Circular and the additional information set out in the appendices of the Circular.

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account (i) the terms and conditions of the Rights Issue and the transactions contemplated thereunder; and (ii) the advice and recommendations of the Independent Financial Adviser as set out from pages IFA-I to IFA-33 of the Circular, we are of the opinion that the Rights Issue and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, in the ordinary and usual course of business of the Company and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Rights Issue and the transactions contemplated thereunder.

Yours faithfully,

Independent Board Committee

KNT Holdings Limited

Mr. Leung Martin Oh Man
Independent
non-executive Director

Mr. Lau Koong Yep
Independent
non-executive Director

Mr. Yuen King Sum
Independent
non-executive Director

Mr. Chan Kai Chung
Independent
non-executive Director

IBC-2 -

LETTER FROM GRANDE CAPITAL

The following is the text of a letter of advice from the Independent Financial Adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, which has been prepared for the purposes of incorporation in this Circular.

Grande Capital Limited
Room 2701, 27/F.,
Tower 1, Admiralty Centre,
18 Harcourt Road,
Admiralty
Hong Kong

10 January 2025

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to (i) advise the Independent Board Committee and the Independent Shareholders in respect of whether the terms of the Rights Issue are fair and reasonable as far as the Independent Shareholders are concerned; (ii) give our recommendation as to whether the Rights Issue is in the interest of the Company and the Shareholders as a whole; and (iii) advise the Independent Shareholders on how to vote at the EGM, details of which are set out in the "Letter from the Board" contained in the circular of the Company dated 10 January 2025 (the "Circular"). Capitalised terms used in this letter shall have the same meanings as those defined in the Circular, unless the context requires otherwise.

The Company proposes to raise gross proceeds of up to approximately HK$44.0 million by way of the issue of up to 151,637,790 Rights Shares at the Subscription Price of HK$0.29 per Rights Share on the basis of three (3) Rights Share for every one (1) Share held on the Record Date. The Rights Issue is not underwritten and is only available to the Qualifying Shareholders and will not be extended to the Non-Qualifying Shareholders. There will be no excess application arrangements in relation to the Rights Issue as stipulated under Rule 7.21(1)(a) of the Listing Rules.

LETTER FROM GRANDE CAPITAL

Assuming full subscription of the Rights Issue, the net proceeds from the Rights Issue after deducting the expenses are estimated to be approximately HK$41.6 million (assuming no change in the total number of Shares in issue on or before the Record Date). The Company intends to apply the net proceeds as to (i) approximately HK$17.0 million for investment in potential opportunity in both the PRC and Hong Kong; (ii) approximately HK$15.0 million for the repayment of debt of the Group; and (ii) approximately HK$9.6 million for the general working capital.

Subject to the fulfilment of the conditions of the Rights Issue, the Rights Issue will proceed on a non-underwritten basis irrespective of the level of acceptance of the provisionally allotted Rights Shares. There are no applicable statutory requirements regarding minimum subscription levels in respect of the Rights Issue.

The Rights Shares, when allotted, issued and fully paid, will rank pari passu in all respects among themselves and with the Shares in issue at the time. Holders of fully paid Rights Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid by the Company after the date of allotment and issue of the Rights Shares in their fully paid form.

According to Rule 7.21(1)(b) of the Listing Rules, the Company will make the Compensatory Arrangements to dispose of the Placing Shares by offering these Shares to independent Places for the benefit of the Shareholders to whom they are offered by way of the Rights Issue. Accordingly, on 10 December 2024 (after trading hours), the Company entered into the Placing Agreement with the Placing Agent in relation to the placing of the Unsubscribed Rights Shares and the NQS Unsold Rights Shares to the independent Places on a best effort basis.

LISTING RULES IMPLICATIONS

As at the Last Practicable Date, the Company has no controlling Shareholder as defined under the Listing Rules. Mr. Chong Sik, the Chairman, the executive Director and the Chief Executive Officer of the Company, beneficially owns 11,797,500 Shares in aggregate, representing approximately 23.34% of the entire issued share capital of the Company as at the Last Practicable Date. Mr. Chong Pun, the executive Director of the Company, beneficially owns 2,500 Shares in aggregate, representing approximately 0.005% of the entire issued share capital of the Company as at the Latest Practicable Date. Accordingly, Mr. Chong Sik and Mr. Chong

IFA-2 -

LETTER FROM GRANDE CAPITAL

Pun are required to abstain from voting in favour of the proposed resolution(s) to approve the Rights Issue at the EGM in accordance with Rule 7.27A of the Listing Rules. Save as disclosed above, no other Director are interested in the Shares of the Company as at the Last Practicable Date. Accordingly, no other Shareholder is required to abstain from voting in favour of the relevant resolution(s) of the proposed Rights Issue at the EGM.

The Rights Issue will not result in a theoretical dilution effect of 25% or more. As such, the theoretical dilution impact of the Rights Issue is in compliance with Rule 7.27B of the Listing Rules.

THE INDEPENDENT BOARD COMMITTEE

An Independent Board Committee comprising all independent non-executive Directors, namely Mr. Leung Martin Oh Man, Mr. Lau Koong Yep, Mr. Yuen King Sum and Mr. Chan Kai Chung, to advise the Independent Shareholders as to whether the terms of the Rights Issue and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the EGM.

THE INDEPENDENT FINANCIAL ADVISER

As the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders on (i) whether the terms of the Rights Issue are fair and reasonable as far as the Independent Shareholders are concerned; (ii) give our recommendation as to whether the Rights Issue is in the interest of the Company and the Shareholders as a whole; and (iii) advise the Independent Shareholders on how to vote at the EGM.

As at the Latest Practicable Date, we were not connected with the Company or any of its respective substantial shareholders, directors or chief executives, or any of their respective associates and accordingly, are considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue.

We have not acted as an independent financial adviser or financial adviser for other transactions of the Company in the last two years prior to the date of the Circular. Pursuant to Rule 13.84 of the Listing Rules, and given that remuneration for our engagement to opine on the Rights Issue is at market level and not conditional upon successful passing of the resolution, and that our engagement is on normal commercial terms, we are independent of the Company.

IFA-3 -

LETTER FROM GRANDE CAPITAL

BASIS OF OUR ADVICE

In formulating our opinion, we have reviewed, amongst others, (i) the annual report of the Company for the year ended 31 March 2024 (the "Annual Report"); (ii) the interim report of the company for the six months ended 30 September 2024 (the "Interim Report"); and (iii) other information contained or referred to in the Circular.

We have also relied on the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us by the Company, the Directors and the management of the Group (the "Management"). We have assumed that all the statements, information, opinions and representations for matters relating to the Group contained or referred to in the Circular and/or provided to us by the Company, the Directors and the Management were reasonably made after due and careful enquiry and were true, accurate and complete at the time they were made and continued to be so as at the date of the Circular.

We have no reason to believe that any of such statements, information, opinions or representations are untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render them untrue, inaccurate or misleading.

We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter. We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made, or opinion expressed by the Directors and the Management, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Group, or any of its respective substantial shareholders, subsidiaries or associates. We have assumed that the Rights Issue will be consummated in accordance with the terms and conditions set forth in the Circular without any waiver, amendment, addition or delay of any terms or conditions. We have assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents as required for the Rights Issue, no delay, limitation, condition or restriction will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived from the Rights Issue. In addition, our opinion is necessarily based on the financial, market, economic, industry-specific and other conditions as they existed on, and the information made available to us as at the Latest Practicable Date. We will notify the shareholders of any material change of information in the circular up to the date of EGM.

In the event of inconsistency, the English text of this letter shall prevail over the Chinese translation of this letter.

IFA-4 -

LETTER FROM GRANDE CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Group

1.1 The Group is principally engaged in the manufacturing and sale of bridesmaid dresses, bridal gowns and special occasion dresses, accessories, fashion apparels, fabrics and other accessories.

1.2 Financial information of the Group

Set out below is a summary of financial information of the Group extracted from the Annual Report and Interim Report:

Extract of the Group's consolidated statement of profit or loss

	For the year ended 31 March 2024 (“FY2024”) (audited) HK$’000	For the year ended 31 March 2023 (“FY2023”) (audited) HK$’000	For the six months ended 30 September 2024 (“1H2024”) (unaudited) HK$’000	For the six months ended 30 September 2023 (“1H2023”) (unaudited) HK$’000
Revenue	54.312	71,667	40,206	22,468
Other gains and losses, net	(649)	(461)	(1,026)	575
Finance costs	(1,230)	(897)	(847)	(465)
Loss for the year/period	(24,444)	(31,284)	(10,194)	(14,665)

Source: Annual Report and Interim Report

LETTER FROM GRANDE CAPITAL

FY2024 compared to FY2023

The Group's revenue is derived from the sale of bridesmaid dresses, bridal gowns, special occasion dresses, accessories, fashion apparels and fabrics and other garment accessories. The revenue decreased by approximately HK$17.4 million or approximately 24.3% from approximately HK$71.7 million FY2023 to approximately HK$54.3 million for FY2024, which was primarily attributable to the decrease in revenue generated from the sale of bridesmaid dresses of approximately HK$9.8 million, the decrease in revenue generated from the sale of special occasion dresses of approximately HK$3.8 million, and the decrease in revenue generated from the sale of accessories of approximately HK$3.5 million. The decrease in sales quantity of bridesmaid dresses and special occasion dresses was attributable to fewer orders from customers which facing keen competition.

The increase in finance cost from approximately HK$0.9 million in FY2023 to approximately HK$1.2 million in FY2024 was primarily due to increases in the borrowings during FY2024.

For FY2024, the Group recorded a loss for the year of approximately HK$24.4 million and as compared to approximately HK$31.3 million for FY2023. The decrease in loss was mainly attributable to the increase in gross profit margin and decrease in administrative expenses for FY2024.

1H2024 vs 1H2023

The significant increased by approximately HK$17.7 million or approximately 78.7% from approximately HK$22.5 million 1H2023 to approximately HK$40.2 million for 1H2024 was primarily attributable to the increase in sales quantity of bridesmaid dresses was attributable to orders from a new customer during 1H2024, which resulting in the increase in revenue generated from the sale of bridesmaid dresses of approximately HK$15.3 million and the increase in revenue generated from the sale of special occasion dresses of approximately HK$3.0 million.

Finance costs slightly increased by approximately HK$0.4 million from approximately HK$0.5 million for 1H2023 to approximately HK$0.9 million for 1H2024 was mainly attributable to the increase in the average borrowings during 1H2024.

The Group's loss for the period decreased from approximately HK$14.7 million in 1H2023 to approximately HK$10.2 million in 1H2024 was mainly attributable to the increase in revenue as mentioned above.

IFA-6 -

LETTER FROM GRANDE CAPITAL

Extract of the Group’s consolidated statement of financial position

	As at 31 March 2024 (audited) HK$’000	As at 31 March 2023 (audited) HK$’000	As at 30 September 2024 (unaudited) HK$’000
Non-current assets	40,945	48,431	40,205
Property, plant and equipment	29,604	33,445	28,980
Investment properties	11,200	12,300	11,200
Current assets	69,189	65,675	58,598
Bank balances and cash	4,432	3,155	1,652
Deposits, prepayments and other receivables	36,699	34,734	41,259
Current liabilities	(58,658)	(36,005)	(57,392)
Bank overdrafts	(5,876)	(5,962)	(5,782)
Amount due to directors	(17,077)	(7,500)	(14,117)
Borrowing	(16,599)	(9,260)	(14,361)
Net current assets	10,531	29,670	1,206
Net assets	46,531	72,573	36,555
Gearing ratio (Note)	48.3%	21.0%	55.1%

Source: Annual Report and Interim Report
Note: Gearing ratio is calculated on the basis of the Group’s total debts (including the bank borrowing, and bank overdrafts) divided by equity attributable to owners of the Company.

31 March 2023 vs 31 March 2024

As illustrated above, non-current assets of the Group mainly comprise its property, plant and equipment and investment properties. The total assets of the Group amounted to approximately HK$110.1 million as at 31 March 2024, representing a decrease of approximately 3.5% as compared to approximately HK$114.1 million as at 31 March 2023. As at 31 March 2023 and 2024, the Group’s bank balance and cash amounted to approximately HK$3.2 million and HK$4.4 million respectively.

The Group recorded current liabilities of approximately HK$36.0 million as at 31 March 2023 and HK$58.7 million as at 31 March 2024 mainly due to its substantial balances of bank borrowing and amount due to directors. As at 31 March 2023 and 2024, the Group’s bank borrowing and amount due to directors in aggregate amounted to approximately HK$16.8 million and HK$33.66 million respectively. In view of the significant amounts of debts above, its gearing ratio increased significantly from approximately 21.0% to approximately 48.3% as at 31 March 2023 and 2024 respectively.

IFA-7 -

LETTER FROM GRANDE CAPITAL

31 March 2024 vs 30 September 2024

As at 30 September 2024, the Group's bank balances and cash decreased to approximately HK$1.7 million and the net assets of the Group decreased from approximately HK$46.5 million as at 31 March 2024 to HK$36.6 million as at 30 September 2024, representing a decrease of approximately 21.2%. Meanwhile, due to increase in amount due to directors, the Group's gearing ratio continue to increase to 55.1% as at 30 September 2024.

Our view on the reasons for the Rights Issue and the intended use of proceeds

As disclosed in the Letter from the Board, assuming full subscription under the Rights Issue, the expected gross proceeds of the Rights Issue will be up to approximately HK$44.0 million and the relevant expenses would be approximately HK$2.4 million, which includes placing commission and professional fees payable to financial adviser, legal advisers and other parties involved in the Rights Issue. Accordingly, the estimated net proceeds of the Rights Issue, after deducting the related expense, will be up to approximately HK$41.6 million.

We understood from the Management that 2024 was a volatile and challenging year to the Group. The global economy has been adversely affected by the protracted trade war between the United States of America and China. The downturn in the global market was continued to be aggravated by the outbreak of novel coronavirus disease in past three years which brought unprecedented challenges and uncertainties. The business of the Group was inevitable being affected. The Group continued to experience a challenging operating environment in view of prolonged trade disputes between the United States and China, tariffs imposed, political tensions and continuing uncertainties in the global economy. Since the Group's revenue was mostly derived from customers based in the United States, these factors in aggregate led to a certain extent of impact on the overall business performance of the Group. The Group, therefore, would like to mitigate the operating risk and adverse effects of trade disputes as well as to diversify its customer base as mentioned above by investing in potential opportunity in southeast Asia markets.

The Group expects that the business environment and outlook for the coming financial year would remain highly challenging and uncertain while these uncertainties have resulted in the deterioration of financial and cashflow of the Company. As discussed in the section headed "Background information of the Group - 1.2 Financial information of the Group" above in this letter, the Group only had bank balances and cash of approximately HK$1.7 million as at 30 September 2024 as compared with the total borrowings of approximately HK$19.8 million. We have obtained and reviewed the list of borrowings and the expected repayment schedule. The Company intends to apply approximately HK$15.0 million from the net proceeds from the Rights Issue for the repayment of debt of the Group. Based on the preliminary estimation by the Management in the repayment schedule that we have reviewed, assuming the Rights Issue is fully subscribed, the repayment of debts by the net proceeds from the Rights Issue will reduce the financial costs of approximately HK$0.5 million.

IFA-8 -

LETTER FROM GRANDE CAPITAL

We consider that the Rights Issue could (i) provide funds with no additional financial burden to the Group to satisfy its funding needs in repayment of debts; (ii) reduce the debt level and the gearing ratio as discussed in the section headed "4. Possible financial effects of the Rights Issue" below in this letter; and (iii) reduce the financial costs from the debts, which will in turn reduce the financial burden on the financial performance of the Group as the Group has been making loss for FY2023, FY2024 and IH2024.

As stated in the Letter from the Board, in view of the unprecedented business environment, the management is actively exploring new business opportunities with a view to diversifying the income stream of the Group and mitigating risks. Therefore, the Company considers that the proceeds from the Rights Issue will provide the necessary resources to seize investment opportunities as they arise, ensuring that the Group remains agile and well-positioned for future growth. As discussed with the Management, they would like to invest in potential opportunity in southeast Asia which could mitigate the adverse effects of trade disputes and diversify its customer base, thereby enhancing its resilience and positioning the Group for sustainable growth in a more stable market environment. Therefore, the Group intends to apply (i) approximately HK$17.0 million for investment in potential opportunity in southeast Asia, among which approximately HK$12.0 million for investment in further expanding and/or diversifying the manufacturing business of the Group and approximately HK$5.0 million for investment in new business segment opportunity for diversifying the business operation of the Group.

We also noted that the economic growth in southeast Asia market in the next 10 years from the "Southeast Asia Outlook 2024-2034" jointly issued by Singapore Angsana Council, Bain &Co and DBS Bank, the report predicts that the GDP of six major economies in Southeast Asia, Malaysia, the Philippines, Singapore, Thailand and Vietnam will grow at an average annual rate of 5.1% by 2034, which is higher than China's expected growth of 3.5% to 4.5% and other countries in the world, which demonstrated there is reasonable potential growth in the southeast Asia market. We also concurred with the Management that investing in potential opportunity in southeast Asia which could mitigate the adverse effects of trade disputes and potentially diversifying its customer base in new markets.

We have further discussed with the Management and understood that pursuant to some local agency on business sales in manufacturing industry in southeast Asia market, the price-to assets ratio is approximately 1 to 5 times, and the net assets level that the Management considered would be appropriate would be small to medium size (i.e. below HK$10 million). Whilst for new business segment, it will be highly depending on the industry which the Management considered will be suitable and create synergy to the Group.

IFA-9 -

LETTER FROM GRANDE CAPITAL

Therefore, we consider the amounts allocated for potential investment in the southeast Asia for expanding and/or diversifying the manufacturing business and new business segment opportunity for diversifying the business operation of the Group to be fair and reasonable and thereby concur with the Company's view that the Rights Issue would enable the Group to have enough funding to expanding and/or diversifying its business. Nonetheless, as at the Last Practicable Date, the Company has not identified any potential targets or joint venture in relation to its planned development of the Group's business. As at the Latest Practicable Date, the Company is not in any negotiation and/or any discussion for any potential investment, whether concluded or not. Meanwhile, it is the intention of the Company that the Group will maintain its existing principal business activities and has no plans to downsize these operations in light of any potential acquisition or investment opportunity. As at the Latest Practicable Date, the Company does not has any intention to dispose of or deinvest in the Company's existing assets and/or businesses.

We have also obtained the details of proceeds for the general working capital. Based on the information provided by the management of the Company, we note that the Company would allocate the proceeds from the Rights Issue of approximately HK$9.6 million for its operational costs, staff costs, rental expenses, professional fees and other office overheads for around three to six months.

After considering (i) the Group's financial position and latest debt level; (ii) the reduction of the gearing ratio after the completion of the Rights Issue as discussed in the section headed "4. Possible financial effects of the Rights Issue" below in this letter; (iii) the reduction of the financial costs from the debts which will reduce the financial burden on the financial performance of the Group; (iv) the funding needs for the potential investment opportunity in southeast Asia; (v) the use of proceeds for the general working capital of the Group; and (vi) the potential fund size from the Rights Issue, we consider that the equity fund raising by the Rights Issue can reduce the Group's debt level and provide a sizeable financial resources for the repayment of debts and the business development of the Group, therefore the Rights Issue is in the interest of the Company and the Shareholders as a whole.

2.1 Intended use of proceeds

IFA-10 -

LETTER FROM GRANDE CAPITAL

2.2 Fund-raising alternatives

We have discussed with the management of the Company that the Board has considered the pros and cons of alternative fund-raising methods, including but not limited to debt financing and equity financing such as placing of the new Shares and open offer, before resolving to the Rights Issue, which are summarized as follows:

Apart from the Rights Issue, the Board has considered various fund-raising alternatives before resolving to the Rights Issue, including but not limited to debt financing, placing of new shares and open offer. In respect of debt financing, the Directors considered that the cost of debt financing may increase together with additional requirements with asset pledging or guarantees to be provided by the Group and may not be achievable on favourable terms in a timely manner. Also, the Board noted that bank borrowings, if available, would result in additional interest burden of the Company and create pressure to the liquidity of the Company. Hence, the Board does not consider it to be beneficial to the Company. As for placing of new Shares, it would lead to immediate dilution in the shareholding interest of existing Shareholders without offering them the opportunity to participate in the enlarged capital base of the Company and it is relatively smaller in scale as compared to fund raising through rights issue. As for open offer, while it is similar to a rights issue, offering Qualifying Shareholders to participate, it does not allow free trading of rights entitlements in the open market. As opposed to open offer, Rights Issue would allow Qualifying Shareholders to participate in the future development of the Company and at the same time offer more flexibility to the Qualifying Shareholders to choose whether to maintain their respective pro-rata shareholding interests in the Company and dealing with the Shares.

In light of the above, in particular that (i) the Group intends to repay the debts and improve its financial position; (ii) the placing will dilute the interests of existing Shareholders without offering them the opportunity to take part in the exercise; and (iii) the open offer does not offer flexibility to the existing Shareholders in dealing with the nil-paid rights attaching to the Rights Shares while the Rights Issue offers flexibility to the Qualifying Shareholders to dispose of their entitled nil-paid rights in the open market if they do not wish to take up the entitlements, the Rights Issue is an equitable means to raise funding for the Group by allowing pro-rata participation of the Qualifying Shareholders after considering other financing alternatives by the Directors. We consider that the Rights Issue represents an opportunity to raise fund for the Group and it is in the interests of the Company and the Shareholders as a whole to proceed with the Rights Issue.

IFA-11 -

LETTER FROM GRANDE CAPITAL

3. Principal terms of the Rights Issue and the Placing

(a) Terms of the Rights Issue

Set out below is the summary of the principal terms of the Rights Issue, further details of which are set out in the Letter from the Board:

Basis of the Rights Issue : Three (3) Rights Share for every one (1) Shares held by the Shareholders at the close of business on the Record Date

Subscription Price : HK$0.2900 per Rights Share

Net subscription price per Rights Share (i.e. Subscription Price less Rights Issue expenses) : Approximately HK$0.2743 per Rights Share

Number of Shares in issue as at the Latest Practicable Date : 50,545,930 Shares

Number of Rights Shares to be issued under the Rights Issue : Up to 151,637,790 Rights Shares (assuming there is no change to the total number Shares in issue on or before the Record Date)

IFA-12 -

LETTER FROM GRANDE CAPITAL

As at the Latest Practicable Date, the Group has no outstanding derivatives, options, warrants, conversion rights or other similar rights which are convertible into or giving rights to subscribe for, convert or exchange into any Existing Shares or Consolidated Shares, as the case may be. For further information of the Rights Issue and the Placing, please refer to the "Letter from the Board" in the Circular.

(b) Terms of the Placing Agreement

The Company has entered into the Placing Agreement with the Placing Agent in relation to the placing of the Unsubscribed Rights and the NQS Unsold Rights Shares as part of the Compensatory Arrangements. Details of the Placing Arrangement are as follows:

Date: 10 December 2024 (after trading hours)

Issuer: the Company

Placing Agent: Gransing Securities Co Limited, a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, was appointed as the Placing Agent to procure, on a best-efforts basis, independent Places to subscribe for Unsubscribed Rights Shares and the NQS Unsold Rights Shares.

To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Placing Agent and its ultimate beneficial owner(s) are Independent Third Parties.

IFA-13 -

LETTER FROM GRANDE CAPITAL

Placing fee:
Subject to the completion of the Placing, the Company shall pay to the Placing Agent a placing commission in Hong Kong Dollars of 3.0% of the amount which is equal to the placing price multiplied by the number of Unsubscribed Rights Shares and NQS Unsold Rights Shares successfully placed by the Placing Agent and/or its sub-placing agent(s) pursuant to the terms of the Placing Agreement.

No fees shall be paid by the Company if the Placing is not completed.

Placing price:
The placing price of each of the Unsubscribed Rights Shares and/or the NQS Unsold Rights Shares (as the case may be) shall be not less than the Subscription Price.

The determination of the final price is dependent on the demand and market conditions for the Unsubscribed Rights Shares and/or the NQS Unsold Rights Shares during the process of Placing.

– IFA-14 –

LETTER FROM GRANDE CAPITAL

Condition Precedent:

The obligations of the Placing Agent and the Company under the Placing Agreement are conditional upon, among other things, the following conditions being fulfilled (or being waived by the Placing Agent in writing, if applicable):

(iv) the Placing Agreement not having been terminated in accordance with the provisions thereof, including provisions regarding the termination events,

the Placing Agent may, in its absolute discretion, waive the fulfilment of all or any or any part of the conditions (other than those set out in paragraphs (i) to (ii) above) by notice in writing to the Company.

IFA-15 -

LETTER FROM GRANDE CAPITAL

For the avoidance of doubt, if all the Rights Shares are fully subscribed under the Rights Issue, the Placing will not proceed.

Termination:

Notwithstanding anything contained in the Placing Agreement, the Placing Agent shall be entitled, without any liability to the Company, by notice in writing to the Company served prior to the 4:00 p.m. on Wednesday, 2 April 2025, to terminate the Placing Agreement, if, prior to the Latest Placing Time:

(a) in the reasonable opinion of the Placing Agent, the success of the Placing would be materially and adversely affected by:

– IFA-16 –

LETTER FROM GRANDE CAPITAL

IFA-17 -

LETTER FROM GRANDE CAPITAL

Considering the funding needs of the Company and the difficulties in conducting alternative fund-raising methods as discussed under the paragraph headed "2.1 Intended use of proceeds" and "2.2 Fund-raising alternatives" in this letter, as the Placing offers additional means to facilitate the subscription of the untaken portion of the Rights Issue to the maximum extent, we consider that adopting the Placing is in the interests of the Company and the Shareholders.

The Placing Price

The placing price of the Unsubscribed Rights Shares and/or NQS Unsold Rights Shares shall not be less than the Subscription Price, and the final price determination will depend on the demand for and the market conditions of the Unsubscribed Rights Shares during the placement process. As we consider that the Subscription Price is fair and reasonable as discussed in the paragraph headed "3.1 Subscription Price" above in this letter, we also consider the arrangement of setting the placing price at or above the Subscription Price to be fair and reasonable.

IFA-18 -

LETTER FROM GRANDE CAPITAL

The Placing Commission

According to the Placing Agreement, the Company will pay the Placing Agent a placing commission (the “Placing Commission”) in Hong Kong Dollars of 3.0% of the amount which is equal to the placing price multiplied by the number of Unsubscribed Rights Shares and NQS Unsold Rights Shares successfully placed by the Placing Agent and/or its sub-placing agent(s). To assess the fairness and reasonableness of the Placing Commission, we have considered the commission charged by placing agents of the Comparables (as defined below), where applicable. We noted that the placing commission paid by these companies ranged from 0% to 3.5%. The Placing Commission of 3.0% falls within the range of the Comparables. Hence, we consider that the Placing Commission pursuant to the Placing Agreement is fair and reasonable.

Taking into consideration (i) the Subscription Price and the Placing Price are fair and reasonable; (ii) the Placing offers additional means to raise funds for the Company; (iii) the competitive nature of the Placing Commission relative to market norms, we concur with the Management that the terms of the Rights Issue and the Placing are fair and reasonable.

3.1 Subscription Price

As stated in the “Letter from the Board”, the Subscription Price was arrived at after arm’s length negotiation with reference to, among other things, the prevailing market price of the Shares and the financial conditions of the Group. For details of the Directors’ rationale for determining the Subscription Price, please refer to the paragraph headed “Subscription Price” under the “Letter from the Board” in the Circular.

The Subscription Price of HK$0.2900 per Rights Share represents:

(i) a discount of approximately 9.38% to the closing price of HK$0.3200 per Share as quoted on the Stock Exchange on the Last Trading Day;

IFA-19 -

LETTER FROM GRANDE CAPITAL

(v) a discount of approximately 68.50% to the latest published audited consolidated net asset value per Share as at 31 March 2024 of approximately HK$0.9206 (based on the annual report 2024 of the Company published on 25 July 2024 in relation to, among others, the annual results of the Company for FY2024). The Directors consider the discount represented by the Subscription Price to the audited consolidated net asset value per Share as at 31 March 2024 to be fair and reasonable with reasons set out above in the Letter from the Board of this circular;

(vi) a discount of approximately 59.90% to the latest published unaudited consolidated net asset value per Share as at 30 September 2024 of approximately HK$0.7232 (based on the interim results announcement of the Company published on 26 November 2024 in relation to, among others, the interim results of the Company for 1H2024). The Directors consider the discount represented by the Subscription Price to the unaudited consolidated net asset value per Share as at 30 September 2024 to be fair and reasonable with reasons set out above in the Letter from the Board of this circular; and

The Subscription Price was determined by the Company with reference to, among others, (i) the recent market price of the Shares under the prevailing market conditions; (ii) the prevailing market conditions of the capital market in Hong Kong; (iii) the financial position of the Group; and (iv) the amount of funds the Company intends to raise under the Rights Issue as discussed under the paragraph headed "2.2 the intended use of proceeds".

The Subscription Price was determined after taking into account factors including the recent market price of the Shares and the current market conditions, in particular,

IFA-20 -

LETTER FROM GRANDE CAPITAL

(ii) throughout the period from 2 September 2024 to the Last Trading Day, the price of the Share ranged between HK$0.3200 to HK$0.7600, representing (a) a discount ranging from approximately 17.44% to 64.24% to the latest published audited net asset value per Share of approximately HK$0.9206 as at 31 March 2024; and (b) ranging from a premium of approximately 5.09% to a discount of approximately 55.75% to the latest published unaudited net asset value per Share of approximately HK$0.7232 as at 30 September 2024;

(iii) whilst the Subscription Price represents a discount of approximately 68.50% to the latest published audited consolidated net asset value per Share as at 31 March 2024 and 59.90% to the latest published unaudited consolidated net asset value per Share as at 30 September 2024, the Board is of the view that the net asset value per Share is not a relevant factor to determine the Subscription Price due to the fact that (a) the price of the Share ranged between HK$0.3200 to HK$0.7600 throughout the period from 2 September 2024 to the Last Trading Day which presented a downward trend; (b) the price of the Share traded below the net asset value per Share continuously since 2 September 2024 to the Last Trading Day. The Board considers that the period under review is adequate and representative to illustrate the recent price movement of the Shares for conducting a reasonable comparison among the historical closing prices prior to the Last Trading Day and such comparison is relevant for the assessment of the fairness and reasonableness of the Subscription Price. In addition, the period under review enables the Board to account for market conditions and macroeconomic factors that may influence investor sentiment.

The Board recognizes that the net asset value per Share is not a relevant factor in determining the Subscription Price for the following reasons:

IFA-21 -

LETTER FROM GRANDE CAPITAL

The Directors consider that the discount of the Subscription Price would encourage Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth and development of the Group. After taking into consideration the reasons for the Rights Issue as discussed under the paragraph headed "Our View on reasons for the Rights Issue and the intended use of proceeds", the Directors consider the terms of the Rights Issue, including the Subscription Price, to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

3.2 Non-Underwriting Basis

IFA-22 -

LETTER FROM GRANDE CAPITAL

3.3 Historical price performance

In order to assess the fairness and reasonableness of the Subscription Price, we have performed a review on the daily closing prices and trading volume of the Shares from 11 December 2023 up to and including the Last Trading Day (the "Share Price Review Period") (being a period of 12 months prior to and including the Last Trading Day) and compared with the Subscription Price. We consider that the Share Price Review Period is adequate and representative to illustrate the recent price movement of the Shares for conducting a reasonable comparison among the historical closing prices prior to the Announcement and such comparison is relevant for the assessment of the fairness and reasonableness of the Subscription Price, as the share price before the Announcement represent a fair market value of the Company the Shareholders had expected, while that after the Announcement, the value may have taken into account the potential effect of the Rights Issue which may distort the analysis.

Source: the website of the Stock Exchange

During the Share Price Review Period, the closing prices of the Shares were fluctuated between a low of HK$0.32 per Share and a high of HK$7.90 per Share, with an average closing price of approximately HK$2.76 per Share. As shown in the chart, the closing price of the Share generally showed a decreasing trend from the highest closing price of HK$7.9 per Share on 11 December 2024 to the lowest closing price of HK$0.32 per Share on 10 December 2024, which represents a decrease of approximately 59.5% from the highest closing price of the Shares. Overall, we did not notice any specific reasons for the aforementioned movements of the closing prices during the Share Price Review Period save

IFA-23 -

LETTER FROM GRANDE CAPITAL

for (i) the publication of 2023 Interim Report on 14 December 2023; (ii) the publication of placing of existing shares and top-up subscription of new shares under general mandate on 11 April 2024; (iii) the publication of a voluntary announcement in relation to unusual price and trading volume movements on 23 April 2024; (iv) the publication of 2024 Annual Report on 25 July 2024; and (iv) the publication of 2024 Interim Report on 2 December 2024. As advised by the Management, the Company is also not aware of any reasons for the aforementioned Share price fluctuations. The reasons for these surges remain unclear, aside from possible market reactions to announcements by the Company during that time. Despite the obvious movements in April 2024, the overall trend indicates a consistent decrease in the closing prices throughout the Share Price Review Period.

The Subscription Price of HK$0.29 represents (i) discount of approximately 96.33% to the highest closing price of HK$7.90 per Share; (ii) discount of approximately 9.38% to the lowest closing price of HK$0.32 per Share; and (iii) discount of approximately 89.4% to the average closing price of HK$2.76 per Share over the Share Price Review Period. Although the Subscription Price is out of range of the closing price of the Shares during the Share Price Review Period as mentioned above, after considering that (i) the closing price of the Shares has been decreasing during the Share Price Review Period which indicates that market sentiment to the Shares is relatively negative; (ii) the low liquidity of the Shares as discussed in sub-section headed "3.4 Historical trading liquidity of the Shares" below in this letter indicating that the Shares were generally illiquid in the open market and thus we consider that the Company is unlikely to be able to raise equity funds from third parties without a discount to the prevailing Share price; (iii) the funding needs to repay the debts of the Group and other intended usages as discussed in the section headed "2. Our view on the reasons for the Rights Issue and the intended use of proceeds" above in this letter; and (iv) we note that it is a common market practice to set the subscription price at a discount to the prevailing market prices of the relevant shares in order to increase the attractiveness and encouraging shareholders to participate in the rights issue and the Subscription Price represents a discount of approximately 48.7% to the Adjusted Closing Price of HK$0.2 per Consolidated Share on the Last Trading Day to encourage the existing shareholders to participate in a rights issue as to meet the need of equity fund raising. Such price discount is also within the range in the comparable analysis as discussed in the sub-section headed "3.5 Comparison with recent rights issue exercises" below in this letter, we consider that the discount of the Subscription Price is fair and reasonable and the Rights Issue is in the interests of the Company and the Shareholders as a whole.

IFA-24 -

LETTER FROM GRANDE CAPITAL

3.4 Historical trading liquidity of the Shares

The table below sets out the average daily trading volume of the Shares for each month during the Share Price Review Period.

Month	Trading days	Trading volume	Average daily trading volume of Shares	Average daily trading volume as a percentage to the total number of issue Shares as at the end of each month/period (Note 1) (%)
2023
December (from 11 December 2023)	13	510,400	39,262	0.0047%
2024
January	22	1,711,400	77,791	0.0092%
February	19	5,214,900	274,468	0.0326%
March	20	16,479,000	823,950	0.0978%
April	20	25,870,700	1,293,535	0.1535%
May	21	21,671,250	1,031,964	0.1225%
June	19	3,564,600	187,611	0.0223%
July	22	1,253,800	56,991	0.0068%
August	22	3,088,600	140,391	0.0167%
September	19	4,496,100	236,637	0.0281%
October	21	17,844,100	849,719	0.1009%
November	21	2,063,600	98,267	0.1944%
December (up to the Last Trading Day)	7	204,400	29,200	0.0578%
Max			1,293,535	0.1944%
Min			29,200	0.005%
Average			395,368	0.065%

Source: Website of the Stock Exchange
Note 1: Calculated based on the total number of the Shares at the end of each month.

IFA-25 -

LETTER FROM GRANDE CAPITAL

We noted from the above table that the liquidity of the Shares was generally thin during the Share Price Review Period, with an average daily trading volume of 395,368 Shares, representing about 0.065% of the total issued Shares. The percentage of the average daily trading volume of the Shares over total number of Shares in issue were in the range of approximately 0.005% to approximately 0.1944% with an average of approximately 0.065%. Upon our review of the "HKEx Monthly Market Highlights" for the period from December 2023 to November 2024 (the "Relevant Period") available on the website of the Stock Exchange (https://www.hkex.com.hk/Market-Data/Statistics/Consolidated-Reports/HKEX-Monthly-Market-Highlights?sc_lang=en), we note that the average daily trading turnover over total market capitalisation of listed securities (including Main Board and GEM listed issuers) (the "Market Trading Turnover Ratio") during such period ranged from approximately 0.299% to approximately 0.725% with the average of approximately 0.394%. We consider that the Market Trading Turnover Ratio, as extracted from "HKEx Monthly Market Highlights", is a representative indicator for overall trading volume of the securities listed on the Stock Exchange. Given that the percentage of the average daily trading volume of the Shares over total number of Shares in issue during the Share Price Review Period is below the Market Trading Turnover Ratio, we consider that the trading of the Shares as a listed issuer of the Stock Exchange are relatively thin during the Share Price Review Period. Given the closing price of the Shares has been decreasing since April 2024 as shown above and the trading of the Shares was relatively thin during the Share Price Review Period as discussed above, we consider that the Company would likely face difficulty in raising equity funds from third parties without offering a substantial discount to the prevailing Share price. Considering the low trading liquidity and the prevailing weak market sentiment in Hong Kong from the Market Trading Turnover Ratio and the closing price of the Shares has been decreasing during the Share Price Review Period, as well as the Company's high gearing ratio of approximately 55.1% as at 30 September 2024 which hinder the Group from obtaining further fundings from financial institutions, we are of the view that the Rights Issue is an appropriate equity financing method for the Group, and the Subscription Price is fair and reasonable.

IFA-26 -

LETTER FROM GRANDE CAPITAL

3.5 Comparison with recent rights issues exercise

In order to assess the fairness and reasonableness of the Subscription Price, we have identified an exhaustive list of 39 rights issue transactions (the "Comparables") announced by other companies listed on the Stock Exchange during the period from 10 June 2024 up to the Last Trading Day (being a six-month period immediately prior to and including the Last Trading Day) (the "Comparable Review Period"), excluding those rights issue transactions that have been terminated as at the Latest Practicable Date or were proposed by companies, which the shares were in prolonged suspension on the date of the relevant announcement with trading suspension for over three months or more according to the "Prolonged Suspension Status Report" released monthly by the Stock Exchange. Although the Comparables include rights issue in different basis, engaged in different business or have different financial performance and funding needs from the Company, having considered that: (i) all of the Comparables and the Company are listed on the Stock Exchange; and (ii) our analysis is mainly concerned with the principal terms of the rights issue and we are not aware of any established evidence showing any correlation between the entitlement basis of the rights issue and its underlying principal terms; (iii) including transactions conducted by the Comparables with different funding needs and business represent a more comprehensive overall market sentiment in our comparable analysis; (iv) an approximately six months period for the selection of the Comparables has generated a reasonable samples size to reflect the market practice regarding rights issue in the recent period; and (v) the Comparables were included without any artificial selection or filtering on our part so the Comparables represent a true and fair view of the recent market trends for similar rights issue transactions conducted by other issuers listed on the Stock Exchange, we consider that the list of Comparables are fair and representative samples. In addition, we consider that the Comparable Review Period is adequate and fair and representative given that (i) such period would provide us with the recent and relevant information in relation to the rights issue to demonstrate the prevailing market practices prior to the Last Trading Day under the prevailing market conditions; and (ii) we are able to identify sufficient number of samples of 39 representative Comparables that meet the aforesaid criteria for comparison analysis in such period.

The Comparables listed below have been identified through our research using public information. We believe that it is an exhaustive list based on our selection criteria.

IFA-27 -

LETTER FROM GRANDE CAPITAL

The major terms of the rights issue conducted by the Comparables are summarised below:

Announcement date	Company name	Stock code	Basis for entitlement	Premium/(Discount) of the subscription price over/to the theoretical ex-right entitlement price (%)			Theoretical dilution effect	Excess application or compensatory arrangements	Placing commission	Underwritten
				Closing price (%)	the latest net asset value per share (%)	Note (%)
6-Dec-24	Xinming China Holdings Limited	2699	4 for 1	(13.80)	N/A	N/A	16.90	Compensatory arrangement	3.00%	No
3-Dec-24	Graphex Group Limited	6128	3 for 1	(32.00)	(10.53)	(51.51)	24.00	Compensatory arrangement	1.50%	No
2-Dec-24	Lavisa Group Limited	1327	1 for 1	(44.44)	N/A	(79.45)	22.22	Compensatory arrangement	1.50%	No
21-Nov-24	Legend Strategy International Holdings Group Company Limited	1355	1 for 1	(49.71)	(33.08)	N/A	24.86	Excess application	N/A	No
21-Nov-24	Elife Holdings Limited	223	5 for 1	(6.54)	(9.09)	(96.10)	0.61	Excess application	N/A	No
19-Nov-24	China Wood International Holdings Co., Limited	1822	1 for 1	(45.00)	(29.10)	N/A	24.90	Excess application	N/A	No
15-Nov-24	Global Strategic Group Limited	8007	1 for 4	(12.50)	(3.20)	(91.60)	11.30	Excess application	N/A	No
12-Nov-24	HG Semiconductor Limited	6908	4 for 1	(36.00)	(31.00)	(44.20)	8.30	Compensatory arrangement	1.00%	No
11-Nov-24	Far East Holdings International Limited	36	2 for 1	(35.77)	(15.66)	(80.59)	23.85	Compensatory arrangement	2.50%	No
31-Oct-24	Yuzhou Group Holdings Company Limited	1628	49 for 100	(73.68)	(65.27)	N/A	24.23	Excess application	N/A	No
22-Oct-24	IRC Limited	1029	1 for 2	(15.00)	(10.50)	(67.30)	4.90	Excess application	N/A	No
21-Oct-24	China 33 Media Group Limited	8087	3 for 2	(7.41)	(3.23)	(55.62)	5.12	Compensatory arrangement	1.50%	No
18-Oct-24	Kingkay Financial International (Holdings) Limited	1468	1 for 2	(2.56)	(4.04)	124.60	2.06	Excess application	N/A	No
18-Oct-24	Gaodi Holdings Limited	1676	1 for 2	(37.90)	(12.10)	(65.50)	0.00	Compensatory arrangement	1.00%	No
15-Oct-24	Eminence Enterprise Limited	616	2 for 1	(8.00)	(2.85)	(98.98)	21.30	Excess application	N/A	No
8-Oct-24	V&V Technology Holdings Limited	8113	2 for 1	(31.51)	(23.47)	(32.23)	10.50	Excess application	N/A	No
7-Oct-24	China Water Industry Group Limited	1129	1 for 1	(49.44)	(32.84)	(91.65)	21.72	Compensatory arrangement	2.00%	No
4-Oct-24	Pulinda Group Holdings Limited	8179	1 for 2	(18.70)	(13.29)	(66.10)	6.23	Excess application	N/A	No

IFA-28 -

LETTER FROM GRANDE CAPITAL

Announcement date	Company name	Stock code	Basis for entitlement	Closing price (%)	Premium/(Discount) of the subscription price over/to the theoretical ex-right entitlement price (%)	the latest net asset value per share (%)	Note (%)	Excess application or compensatory arrangements	Placing commission	Underwritten
2-Oct-24	China National Culture Group Limited	745	1 for 2	(31.97)	N/A	(53.36)	21.31	Compensatory arrangement	N/A	No
26-Sep-24	Innovax Holdings Limited	2680	1 for 2	(67.39)	(59.02)	(88.59)	22.78	Compensatory arrangement	1.00%	No
23-Sep-24	Hatcher Group Limited	8365	3 for 1	(31.50)	(10.40)	(94.10)	23.60	Compensatory arrangement	N/A	Yes
23-Sep-24	Shongqing Fushan Resources Group Limited	639	1 for 30	1.96	1.90	(20.49)	0.06	Excess application	N/A	No
13-Sep-24	Dragon Rise Group Holdings Limited	6829	1 for 1	(48.70)	(33.10)	(89.20)	24.90	Compensatory arrangement	1.00%	Yes
13-Sep-24	Shongqing Century Holdings Limited	103	1 for 5	8.20	1.37	(62.50)	0.00	Excess application	N/A	No
9-Sep-24	Crown International Corporation Limited	727	2 for 1	2.27	1.50	162.35	less than 25%	Excess application	N/A	No
4-Sep-24	China New Consumption Group Limited	8275	1 for 2	(5.66)	(4.76)	(61.09)	2.47	Compensatory arrangement	3.50%	No
2-Sep-24	Guangdong — Hong Kong Greater Buy Area Holdings Limited	1396	1 for 2	(22.30)	(15.85)	(90.50)	8.28	Excess application	N/A	No
22-Aug-24	BeijingWest Industries International Limited	2339	1 for 2	(13.85)	(9.68)	(88.72)	4.62	Excess application	1.00%	Yes
2-Aug-24	Asia Television Holdings Limited	707	1 for 2	(46.80)	(37.00)	36.38	15.60	Compensatory arrangement	2.00%	No
31-Jul-24	Emperor International Holdings Limited	163	1 for 2	(30.60)	(23.60)	(96.10)	10.50	Excess application	1.50%	Yes
22-Jul-24	ROMA (Meta) Group Limited	8072	3 for 1	(23.08)	(7.41)	(97.23)	18.18	Compensatory arrangement	N/A	No
19-Jul-24	Trendzon Holdings Group Limited	1865	4 for 1	(14.30)	(3.23)	(93.70)	14.60	Compensatory arrangement	N/A	Yes
12-Jul-24	Guan Chao Holdings Limited	1872	4 for 1	(20.00)	(4.76)	(89.86)	20.07	Compensatory arrangement	0.75%	No
2-Jul-24	Tonking New Energy Group Holdings Limited	8326	1 for 2	(41.18)	(33.33)	(69.70)	11.76	Compensatory arrangement	1.00%	No
28-Jun-24	Jiading International Group Holdings Limited	8153	3 for 1	(16.67)	(4.76)	(91.67)	12.50	Compensatory arrangement	3.00%	No
27-Jul-24	Hunvey Group Holdings Limited	8219	1 for 2	(59.30)	(49.20)	(7.40)	19.80	Compensatory arrangement	3.50%	No
26-Jun-24	Ev Dynamics (Holdings) Limited	476	3 for 2	(3.06)	(1.04)	(93.79)	1.84	Compensatory arrangement	1.50%	No
25-Jun-24	Cheng Fai Jewellery Group Holdings Company Limited	8537	3 for 1	(32.20)	(10.40)	(87.40)	24.60	Excess application	1.00%	No

– IFA-29 –

LETTER FROM GRANDE CAPITAL

Announcement date	Company name	Stock code	Basis for entitlement	Premium/(Discount) of the subscription price over/to the theoretical ex-right entitlement price (%)			Theoretical dilution effect	Excess application or compensatory arrangements	Placing commission	Underwritten
				Closing price (%)	(%)	Share (%)
19-Jun-24	Bonny International Holding Limited	1906	1 for 4	(43.02)	(38.16)	(14.93)	8.71	Excess application	N/A	No
	Maximum			8.20	1.90	124.60	24.90		3.50%
	Minimum			(73.68)	(65.27)	(98.98)	0.00		0.80%
	Average			(27.16)	(17.78)	(56.80)	13.66		1.74%
	Median			(30.60)	(10.52)	(79.45)	13.55		1.50%
	The Company	3 for 1		(9.38)	(2.52)	(59.90)	8.08	Compensatory arrangement	3.00%

Source: website of the Stock Exchange

Notes:

"N/A" denotes that the announcement did not disclose such information.
The theoretical dilution effect is calculated in according to Rule 10.44A of the Rules Governing of the Listing of Securities on GEM or Rule 7.27B of the Listing Rules.

As set out in the table above, we noted that:

(a) the discount of subscription price to the closing price on the last trading day of the Comparables ranged from approximately 73.68% to approximately positive 8.20%, with the average of discounts being approximately 27.16%. The Subscription Price represents a discount of approximately 9.38% to the closing price on the Last Trading Day, which is within the range and also much lower than the average discount of the Comparables;

(b) the discount of subscription price to the theoretical ex-rights price of the Comparables ranged from approximately 65.27% to approximately positive 1.90%, with the average of discounts of approximately 17.78%. The Subscription Price represents a discount of approximately 2.52% to the theoretical ex-rights price per Share on the Last Trading Day which is close to the lowest in the Comparables;

(c) the theoretical dilution effect of the Rights Issue Comparables ranged from 0% to approximately 24.90%. The theoretical dilution effect of the Rights Issue of approximately 8.08% is within the theoretical dilution range of the Comparables;

IFA-30 -

LETTER FROM GRANDE CAPITAL

(d) the discount of subscription price to the latest net asset value per Share of the Comparables ranged from approximately 98.98% to approximately positive 124.60%, with the average of discounts of approximately 56.80%. The Subscription Price represents a discount of approximately 59.90% to the net asset value as at 30 September 2024 per Share which is close to the average in the Comparables;

(e) 18 out of 39 Comparables have facilitated excess application arrangements. Despite that the arrangement of excess application is less popular among the Comparables, such arrangement is permissible under Rule 7.21(1)(a) of the Listing Rules and allows fair participation of all Shareholders in the subscription of untaken rights should they wish to;

(f) the Rights Issue is on a non-underwritten basis, which is considered to be in line with market practice, given that 34 out of 39 Comparables were also conducted on a non-underwritten basis; and

(g) the placing commission rate of 3.0% under the Placing Agreement is within the range of the placing commission rates provided by the placing agents of the Comparables, which was ranged from nil to 3.50% of the fund raised.

We noted that the Subscription Price represents a significant discount to the Company's net asset value as at 31 March 2024 and 30 September 2024 as understand from the Management that the huge discount to the Company's unaudited net asset value per Share is due to the fact that the Shares have been traded at a price representing a low price-to-book ratio (PB ratio). The fact that (i) since 2 September 2024, the Share has traded below its net asset value continuously and this persistent undervaluation suggests that market participants do not perceive the net asset value as reflective of the Share's current value and (ii) the Subscription Price represents a discount of approximately 59.90% to the net asset value as at 30 September 2024 per Share which is within the range and close to the average in the Comparables, we are of the view that it is not relevant and practical to set a subscription price that benchmarks against the net asset value of the Company which would be significantly higher than the prevailing market price and defeat the purpose of attracting the Shareholders to participate in this fund raising exercise.

Whilst it is a common market practice to set the subscription price of a rights issue at a discount to the closing share prices on the last trading day and the theoretical ex entitlement prices in order to enhance the attractiveness of the rights issue for encouraging qualifying shareholders to participate in the rights issue.

In view of (i) the recent general downward trend of the closing price of the Shares and the trading volume of the Shares during the Share Price Review Period was generally thin as discussed in the section headed "3.4 Historical trading liquidity of the Shares" above; (ii) the discounts represented by the Subscription Price all fall within the range of the Comparables; and (iii) the Rights Issue is available to all Qualifying Shareholders, we

IFA-31 -

LETTER FROM GRANDE CAPITAL

consider that the principal terms of the Rights Issue (including the Subscription Price) to be fair and reasonable to the Shareholders and in the interests of the Company and the Shareholders as a whole.

4. Possible financial effects of the Rights Issue

It should be noted that the analysis below is for illustrative purpose only and does not purport to represent how the financial position of the Group will become upon completion of the Rights Issue and the Placing.

4.1 Net tangible assets

With reference to "Unaudited pro forma financial information of the Group" as set out in Appendix II to the Circular, the unaudited consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 September 2024 amounted to approximately HK$36.5 million. Upon completion of the Rights Issue, the Group will have unaudited consolidated net tangible assets of the Group attributable to owners of the Company being approximately HK$78.1 million.

4.2 Gearing

As at 30 September 2024, the Group's gearing ratio, which is measured on the basis of the Group's total debts divided by equity attributable to owners of the Company, was approximately 55.1%. Upon the completion of the Rights Issue, a portion of the net proceeds from the Rights Issue will be used for the repayment of the Group's debts. Therefore, the gearing ratio would be reduced after completion of the Rights Issue. Hence, the Directors consider that the Rights Issue will enable the Group to improve the financial position and future fundraising opportunities of the Group.

Considering that (i) the financial position would be improved; (ii) the gearing ratio of the Group would be enhanced; and (iii) the Group's negotiation power for future fundraising opportunities with the third parties financial institutions will be strengthened assuming the lowering of the gearing ratio and improved financial performance, we are of the view that the overall financial impact to the Group upon completion of the Rights Issue is in the interests of the Company and the Shareholders.

We draw attention to the shareholders and the Independent Board Committee and Independent Shareholders that the above analysis is based on full subscription basis. Subject to the fulfilment of conditions, the Rights Issue will proceed on a non-underwritten basis irrespective of the level of acceptance of provisionally allotted Rights Shares. Accordingly, if the Rights Issue is undersubscribed, the size of the Rights Issue will be reduced.

IFA-32 -

LETTER FROM GRANDE CAPITAL

5. Possible dilution effect on interests of other public Shareholders

All Qualifying Shareholders are entitled to subscribe for the Rights Shares. For those Qualifying Shareholders who take up their full provisional allotments under the Rights Issue, their shareholding interests in the Company will remain unchanged after the Rights Issue. Qualifying Shareholders who do not take up the Rights Issue can, subject to the then-prevailing market conditions, consider selling their nil-paid rights to subscribe for the Rights Shares in the market. However, they should note that their shareholdings in the Company will be diluted upon completion of the Rights Issue.

For those Qualifying Shareholders who do not take up their full provisional allotments under the Rights Issue, depending on the extent to which they subscribe for the Rights Shares, their shareholding interests in the Company upon completion of the Rights Issue will be diluted by up to a maximum of approximately 75.0%.

Having considered (i) the dilution effect is not prejudicial as all Qualifying Shareholders are offered an equal opportunity to participate in the enlargement of the capital base of the Company and Shareholders' interests in the Company will not be diluted if they elect to exercise their full provisional allotments under the Rights Issue; and (ii) the Qualifying Shareholders have the opportunity to realise their nil-paid rights to subscribe for the Rights Shares in the market, subject to availability, we are of the view that the potential dilution effect on the shareholding, which may only happen to the Qualifying Shareholders who decide not to subscribe for their pro-rata Rights Shares, is acceptable and justifiable.

RECOMMENDATION

We are of the opinion that the terms of the Rights Issue (including the Subscription Price and the potential dilution effect) are on normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned and the Rights Issue is in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Rights Issue.

Yours faithfully,

For and on behalf of

Grande Capital Limited

Erica Mak

Responsible Officer

Ms. Erica Mak is a Responsible Officer of Grande Capital Limited licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and has over 12 years of experience in accounting and corporate finance in Hong Kong.

IFA-33 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(I) FINANCIAL SUMMARY

The financial information of the Group for each of the three financial years ended 31 March 2022, 2023 and 2024 and the six months ended 30 September 2024 are set out in the following documents which have been published on the website of the Stock Exchange at www.hkexnews.hk and the Company’s website at www.kntholdings.com:

the annual report of the Company for the year ended 31 March 2022 published on 20 July 2022 (pages 73 to 147)
(https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0720/2022072000355.pdf);
the annual report of the Company for the year ended 31 March 2023 published on 20 July 2023 (pages 75 to 155)
(https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0720/2023072000216.pdf);
the annual report of the Company for the year ended 31 March 2024 published on 25 July 2024 (pages 72 to 151)
(https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0725/2024072500348.pdf); and
the interim report of the Company for the six months ended 30 September 2024 published on 2 December 2024 (pages 22 to 44)
(https://www1.hkexnews.hk/listedco/listconews/sehk/2024/1202/2024120201375.pdf)

(II) STATEMENT OF INDEBTEDNESS

As at the close of business on 30 November 2024, being the latest practicable date for the purpose of ascertaining information contained in this statement of indebtedness prior to the printing of this Circular, the details of the Group’s indebtedness are as follows:

	HKD’000
Bank borrowings – secured and guaranteed (note a)	4,125
Bank borrowings – unsecured and guaranteed (note b)	3,582
Other borrowing – secured and guaranteed (note c)	5,500
Lease liabilities – unsecured and unguaranteed	848
Amounts due to directors – unsecured and unguaranteed (note d)	14,964
Bank overdrafts – secured and guaranteed (note e)	5,982
	35,001

Note:

a. The bank borrowings are secured by leasehold land and buildings of the Group with carrying amount of approximately HK$26,958,000 as at 30 November 2024, interest bearing from 2.50% to 7.93% and corporate guaranteed by the Company.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b. The bank borrowings are unsecured, interest bearing of 3.125% and guaranteed by Mr. Chong Sik (“Mr. S Chong”) and Mr. Chong Pun (“Mr. P Chong”), directors of the Company.

c. The other borrowing is secured by the Group’s investment properties with an aggregate net carrying amount of approximately HK$11,200,000 as at 30 November 2024, interest bearing at 12.25% per annum and guaranteed by Mr. S Chong and Mr. P Chong.

d. The amounts due are interests free and did not have any guarantee.

e. The variable-rate bank overdrafts bear interest at Hong Kong Prime Rate per annum. The effective interest rate (which is also equal to contracted interest rate) on the Group’s variable-rate bank overdrafts was 5.75%.

Save as aforesaid or otherwise disclosed herein, and apart from intra-group liabilities, normal trade and other payables and contract liabilities, as at 30 November 2024, being the latest practicable date for the purpose of preparing this statement of indebtedness prior to the printing of this Circular, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages and charges, hire purchase commitments, material contingent liabilities or guarantees outstanding.

To the best knowledge of the Directors, having made all reasonable enquiries, (i) there has been no material change in indebtedness or contingent liabilities of the Group since indebtedness; (ii) there has not been any default on repayments or other obligations in any material respect under the loan agreements; (iii) the Group does not have material covenants relating to the outstanding debts; (iv) the Group has complied with all of the finance covenants up to the Latest Practicable Date; and (v) the Group does not have any material external debt financing plans as at the Latest Practicable Date.

(III) WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, taking into consideration the estimated net proceeds from the Rights Issue and the financial resources available to the Group including internally generated funds, bank and other facilities, the Group will have sufficient working capital for its operation for at least twelve months from the date of this circular.

(IV) MATERIAL ADVERSE CHANGE

The Board confirmed that there has been no material adverse change in the financial or trading position of the Group since 31 March 2024, being the date to which the latest published audited accounts of the Group were made up, up to and including the Latest Practicable Date.

I-2 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(V) FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is a one-stop solutions provider of bridesmaid dresses, bridal gowns and special occasion dresses. The Group principally sells its products to brand apparel companies based in the United States. Over the years, the Group has built reputation and gained customers' recognition from its dedication to provide its customers with one-stop solutions and consistently high quality products, which has increased its customers' reliance on it and in turn enabled it to maintain its market position as one of the leading bridesmaid dresses manufacturers in the PRC. The Group is the sole supplier of certain largest customers for bridesmaid dresses whom had maintained long years of relationship with the Group. In addition to manufacturing products for its customers, the Group strives to become an integral part of its customers' business operations by offering a wide range of value added services ranging from fashion trend analysis, product design and development, raw material procurement, production, quality assurance to inventory management. The Group has also engaged in online business for the sale of fashion apparel; and the business of selling accessories.

2024 was a volatile and challenging year to the Group. The global economy has been adversely affected by the protracted trade war between the United States of America ("US" or "United States") and China. The downturn in the global market was continued to be aggravated by the outbreak of novel coronavirus disease ("COVID-19") in past three years which brought unprecedented challenges and uncertainties throughout the year ended 31 March 2024. The business of the Group was inevitable being affected.

During the year ended 31 March 2024, the Group continued to experience a challenging operating environment in view of prolonged trade disputes between the United States and China, tariff imposed, political tensions and continuing uncertainties in global economy. Since the Group's revenue was mostly derived from customers based in the United States, these factors in aggregate led to a certain extent of impact on the overall business performance of the Group.

In addition, the outbreak of the COVID-19 in past three years has brought significant disruption to the global economy and caused adverse impact to the business environment of the Group.

In light of the prolonged trade disputes between the US and China and the resulting unprecedented negative business outlook from COVID-19 crisis, the Group expects that the business environment and outlook for the coming financial year would remain highly challenging and uncertain. The Group will continue to review its existing business from time to time and take appropriate measures to tackle any possible impacts. In view of the unprecedented business environment, the management is actively exploring new business opportunities with a view to diversifying the income stream of the Group and mitigating risks.

Revenue represents revenue from the sale of bridesmaid dresses, bridal gowns, special occasion dresses, accessories, fashion apparel and fabrics and other garment accessories.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Revenue decreased by approximately HK$17.4 million or approximately 24.3% from approximately HK$71.7 million for the year ended 31 March 2023 to approximately HK$54.3 million for the year ended 31 March 2024. The overall decrease in revenue was primarily attributable to the decrease in revenue generated from the sale of bridesmaid dresses of approximately HK$9.8 million, the decrease in revenue generated from the sale of special occasion dresses of approximately HK$3.8 million, and the decrease in revenue generated from the sale of accessories of approximately HK$3.5 million.

The decrease in revenue generated from the sale of bridesmaid dresses from approximately HK$35.0 million for the year ended 31 March 2023 to approximately HK$25.2 million for the year ended 31 March 2024 was primarily a result of the aggregate effect of the decrease in sales quantity from 113.7 thousand units for the year ended 31 March 2023 to 97.9 thousand units for the year ended 31 March 2024 and the decrease in average selling prices of bridesmaid dresses from HK$308 for the year ended 31 March 2023 to HK$258 for the year ended 31 March 2024.

The decrease in revenue generated from the sale of special occasion dresses from approximately HK$13.5 million for the year ended 31 March 2023 to approximately HK$9.7 million for the year ended 31 March 2024 was primarily as a result of the decrease in sales quantity from 23.1 thousand units for the year ended 31 March 2023 to 15.3 thousand units for the year ended 31 March 2024.

The decrease in sales quantity of bridesmaid dresses and special occasion dresses was attributable to fewer orders from customers which facing keen competition.

The Group recorded a gross profit of approximately HK$7.5 million for the year ended 31 March 2024 and a gross profit of approximately HK$8.8 million for the year ended 31 March 2023. Gross profit margin was 13.8% for the year ended 31 March 2024 and gross profit margin was 12.3% for the year ended 31 March 2023. The decrease in gross profit was mainly attributable to the decrease in revenue for the year ended 31 March 2024 compared to that of last year.

The Group recorded a loss of approximately HK$24.4 million for the year ended 31 March 2024 and a loss of approximately HK$31.3 million for the year ended 31 March 2023. The decrease in loss was primarily attributable to (i) the decrease in administrative expenses and selling and distribution expenses of the Group; (ii) the decrease in impairment loss recognised in respect of property, plant and equipment; and (iii) the decrease in share of losses of associates.

The Group generally finances its operation by internal cash generated from operations and bank borrowings. As at 31 March 2024, the Group had bank balances and cash of approximately HK$4.4 million and bank overdrafts of approximately HK$5.9 million (31 March 2023: approximately HK$3.2 million and bank overdrafts of approximately HK$6.0 million) and had net current assets of approximately HK$10.5 million (31 March 2023: HK$29.7 million).

I-4 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The current ratio of the Group was approximately 1.2 times as at 31 March 2024, compared to that of approximately 1.8 times as at 31 March 2023. The current ratio decreased was mainly attributable to the increase in other payables and accruals, amounts due to directors and borrowings.

The gearing ratio of the Group, which is calculated by dividing the total borrowings by the total equity and then multiplied by 100%, was 48.3% as at 31 March 2024 (31 March 2023: 21.0%). The gearing ratio increased was mainly attributable to the increase in borrowings as at 31 March 2024 and the increase in loss which led to decrease in total equity compared to that of 31 March 2023.

During the six months ended 30 September 2024, the Group continued to experience a challenging operating environment in view of prolonged trade disputes between the United States and China, tariff imposed, political tensions and continuing uncertainties in global economy. Since the Group's revenue was mostly derived from customers based in the United States, these factors in aggregate led to a certain extent of impact on the overall business performance of the Group.

Revenue increased by approximately HK$17.7 million or approximately 78.7% from approximately HK$22.5 million for the six months ended 30 September 2023 to approximately HK$40.2 million for the six months ended 30 September 2024. The overall increase in revenue was primarily attributable to the increase in revenue generated from the sale of bridesmaid dresses of approximately HK$15.3 million and the increase in revenue generated from the sale of special occasion dresses of approximately HK$3.0 million.

The increase in revenue generated from the sale of bridesmaid dresses from approximately HK$10.5 million for the six months ended 30 September 2023 to approximately HK$25.8 million for the six months ended 30 September 2024 was primarily as a result of the increase in sales quantity from 33.4 thousand units for the six months ended 30 September 2023 to 121.9 thousand units for the six months ended 30 September 2024.

The increase in revenue generated from the sale of special occasion dresses from approximately HK$2.0 million for the six months ended 30 September 2023 to approximately HK$5.0 million for the six months ended 30 September 2024 was primarily as a result of the increase in sales quantity from 3.7 thousand units for the six months ended 30 September 2023 to 10.6 thousand units for the six months ended 30 September 2024.

The increase in sales quantity of bridesmaid dresses was attributable to orders from a new customer during the six months ended 30 September 2024.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Gross profit increased by approximately HK$3.1 million or approximately 140.9% from approximately HK$2.2 million for the six months ended 30 September 2023 to approximately HK$5.3 million for the six months ended 30 September 2024. Gross profit margin increased from 9.8% for the six months ended 30 September 2023 to 13.2% for the six months ended 30 September 2024. The increase in gross profit and the increase in gross profit margin was mainly attributable to the increase in revenue during the six months ended 30 September 2024 as compared to that of last period.

The Group recorded a loss of approximately HK$10.2 million for the six months ended 30 September 2024 and a loss of approximately HK$14.7 million for the six months ended 30 September 2023. The decrease in loss was mainly attributable to (i) the increase in gross profit; (ii) the decrease in administrative expenses; and (iii) the decrease in share of losses of associates.

The Group generally finances its operation by internal cash generated from operations and bank borrowings. As at 30 September 2024, the Group had bank balances and cash of approximately HK$1.7 million (31 March 2024: approximately HK$4.4 million) and bank overdrafts of approximately HK$5.8 million (31 March 2024: approximately HK$5.9 million) and had net current assets of approximately HK$1.2 million (31 March 2024: HK$10.5 million).

The current ratio of the Group was approximately 1.0 times as at 30 September 2024, as compared to that of approximately 1.2 times as at 31 March 2024. The current ratio decreased was mainly attributable to the decrease in amount due from an associate.

The gearing ratio of the Group, which is calculated by dividing the total bank borrowings by the total equity and then multiplied by 100%, was 55.1% as at 30 September 2024 (31 March 2024: 48.3%). The gearing ratio increased was mainly attributable to the increase in loss for the period which led to a decrease in total equity compared to that of 31 March 2024.

I-6 -

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Introduction

The following unaudited pro forma statement of adjusted consolidated net tangible assets of the Group attributable to the owners of the Company (the “Unaudited Pro Forma Financial Information”) has been prepared by the Directors in accordance with paragraph 4.29 of the Listing Rules and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for inclusion in Investment Circular” issued by the Hong Kong Institute of Certified Public Accountants is for illustration only, and is set out in this appendix to illustrate the effect of the Rights Issue on the consolidated net tangible assets of the Group as at 30 September 2024 attributable to the owners of the Company as if the Rights Issue had taken place on such date.

The Unaudited Pro Forma Financial Information is prepared for illustrative purposes only, because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 September 2024 or at any future date; and

The Unaudited Pro Forma Financial Information of the Group as at 30 September 2024 is prepared by the Directors based on the unaudited condensed consolidated statement of financial position of the Group as at 30 September 2024, extracted from the Group’s consolidated financial statements for the six months ended 30 September 2024, on which an interim report has been published, with adjustments described below.

	Unaudited consolidated net tangible assets attributable to owners of the Company as at 30 September 2024 HK$’000 (Note 1)	Unaudited estimated net proceeds from the Rights Issue HK$’000 (Note 2)	Unaudited pro forma adjusted consolidated net tangible assets attributable to owners of the Company as at 30 September 2024 immediately after the completion of the Rights Issue HK$’000	Unaudited consolidated net tangible assets attributable to owners of the Company per Share as at 30 September 2024 before the completion of the Rights Issue HK$ (Note 4)	Unaudited Pro forma adjusted consolidated net tangible assets attributable to owners of the Company per Share as at 30 September 2024 immediately after the completion of the Rights Issue HK$ (Note 5)
Based on 3 Rights Shares to be issued at the Subscription Price of HK$0.29 per Rights Share	36,530	41,600	78,130	0.72	0.39

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Notes:

The consolidated net tangible assets of the Group attributable to owners of the Company of approximately HK$36,530,000 as at 30 September 2024 is based on the consolidated net assets of the Group attributable to owners of the Company as at 30 September 2024 of approximately HK$36,555,000 less right-of-use assets of approximately HK$12,000 and intangible assets of approximately HK$13,000, as extracted from the published interim report of the Group for the six months ended 30 September 2024.
The estimated net proceeds from the Rights Issue of approximately HK$41,600,000 are based on 3 Rights Shares to be issued at the Subscription Price of HK$0.29 per Rights Share and after deducting estimated related expenses, including among others, placing commission, legal and professional fees, which are directly attributable to the Rights Issue, of approximately HK$2,400,000.
The Company has completed the share consolidation of every twenty (20) issued shares of the Company into one (1) consolidated share on 31 October 2024 (“Share Consolidation”). By way of illustration, the 842,432,607 shares of the Company in issue as at 30 September 2024 would be consolidated to 50,545,930 shares of the Company (“Share(s)”), assuming the Share Consolidation had been completed on 30 September 2024.
The calculation of unaudited consolidated net tangible assets of the Group attributable to owners of the Company as at 30 September 2024 per Share before the completion of the Rights Issue is based on the unaudited consolidated net tangible assets of the Group as at 30 September 2024 of approximately HK$36,530,000, divided by 50,545,930 Shares.
The calculation of unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company as at 30 September 2024 per Share immediately after the completion of the Rights Issue is based on unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 September 2024 immediately after the completion of the Rights Issue of approximately HK$78,130,000, being the aggregate unaudited consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 September 2024 of approximately HK$36,530,000 and the estimated net proceeds from the Rights Issue of approximately HK$41,600,000, divided by 202,183,720 shares which represents the sum of 50,545,930 Shares and 151,637,790 Rights Shares (assuming no new shares are issued and no repurchase of shares on or before the Record Date) were issued immediately after the completion of the Rights Issue, as if the Rights Issue had been completed on 30 September 2024.
Save as disclosed above, no adjustments have been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2024.

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

B. ACCOUNTANT'S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from Infinity CPA Limited, Certified Public Accountants, Hong Kong, the independent reporting accountants of the Company, in respect of the Group's unaudited pro forma financial information prepared for the purpose of incorporation in this Circular.

Infinity CPA Limited
Room 1501, 15th Floor
Olympia Plaza
255 King's Road
North Point, Hong Kong

The Board of Directors of KNT Holdings Limited

INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

We have completed our assurance engagement to report on the compilation of pro forma financial information of KNT Holdings Limited (the "Company") and its subsidiaries (collectively, the "Group") by the directors of the Company for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible assets as at 30 September 2024 and related notes as set out on pages II-1 to II-2 of the circular issued by the Company dated 10 January 2025 (the "Circular"). The applicable criteria on the basis of which the directors of the Company have compiled the unaudited pro forma financial information are described in Section A of Appendix II of the Circular.

The unaudited pro forma financial information has been compiled by the directors of the Company to illustrate the impact of the proposed rights issue on the basis of 3 rights shares ("Rights Shares") for each existing share of the Company at the subscription price of HK$0.29 per rights share (the "Rights Issue") on the Group's condensed consolidated financial position as at 30 September 2024 as if the Rights Issue had taken place at 30 September 2024. As part of this process, information about the Group's condensed consolidated financial position has been extracted by the directors of the Company from the Group's consolidated financial statements for the six months ended 30 September 2024, on which an interim report has been published.

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

DIRECTORS' RESPONSIBILITY FOR THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The directors of the Company are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and with reference to Accounting Guideline ("AG") 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").

OUR INDEPENDENCE AND QUALITY MANAGEMENT

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

The firm applies Hong Kong Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

REPORTING ACCOUNTANT'S RESPONSIBILITIES

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by the HKICPA. This standard requires that the reporting accountant plan and perform procedures to obtain reasonable assurance about whether the directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

II-4 -

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the Rights Issue had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Rights Issue at 30 September 2024 would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the Rights Issue, and to obtain sufficient appropriate evidence about whether:

The unaudited related pro forma adjustments give appropriate effect to those criteria; and
The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant's judgment, having regard to the reporting accountant's understanding of the nature of the Group, the Rights Issue in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

II-5 -

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

OPINION

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

Infinity CPA Limited

Certified Public Accountants

Hong Kong

II-6 -

APPENDIX III

GENERAL INFORMATION

(I) 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.

(II) SHARE CAPITAL

The authorised and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately following the completion of the Rights Issue (assuming there is no change in the issued share capital of the Company on or before the Record Date) are as follows:

(i) As at the Latest Practicable Date

Authorised:	500,000,000	Ordinary Shares of HK$0.20 each	100,000,000
Issued and fully paid:	50,545,930	Ordinary Shares of HK$0.20 each	10,109,186

(ii) immediately following the completion of the Rights Issue (assuming there is no change in the issued share capital of the Company on or before the Record Date)

Authorised:	500,000,000	Ordinary Shares of HK$0.20 each	100,000,000
Issued and fully paid:	50,545,930	Ordinary Shares of HK$0.20 each	10,109,186
	151,637,790	Rights Shares of HK$0.20 each to be issued pursuant to the Rights Issue	30,327,558
	202,183,720	Ordinary Shares of HK$0.20 each to be issued pursuant to the Rights Issue	40,436,744

III-1 -

APPENDIX III

GENERAL INFORMATION

All the Rights Shares in issue and to be issued rank and will rank pari passu in all respects with each other including rights to dividends, voting and return of capital. The Rights Shares in issue and to be issued are or will be listed on Main Board of the Stock Exchange.

As at the Latest Practicable Date, the Company did not have any other derivatives, options, warrants, other securities or conversion rights or other similar rights which are convertible or exchangeable into, any Shares and no capital of any member of the Group was under option, or agreed conditionally or unconditionally to be put under option. The Company has no intention to issue or grant any convertible securities, warrants and/or options on or before the Record Date.

No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, there was no arrangement under which future dividends are waived or agreed to be waived.

(III) DISCLOSURE OF INTERESTS

(a) Directors' and Chief Executives' Interests and Short Positions in Shares, Underlying Shares and Debentures

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange

III-2 -

APPENDIX III

GENERAL INFORMATION

pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set out in Appendix C3 to the Rules Governing the Listing Rules, were as follows:

Long positions in the Shares of the Company

Name	Capacity/Nature of interest	Number of Shares held/ interested	Percentage of shareholding
Mr. Chong Sik	Interest in a controlled corporation (Note 1)	11,797,500	23.340%
Mr. Chong Pun	Interest in a controlled corporation (Note 2)	2,500	0.005%

Notes:

These shares were held by Strategic Elite Limited ("Strategic Elite"), a company in which beneficially and wholly-owned by Mr. Chong Sik. Mr. Chong Sik was deemed to be interested in all the shares held by Strategic Elite by virtue of the SFO. Mr. Chong Sik, a Director, is also the sole director of Strategic Elite.
These shares were held by Total Clarity Investments Limited ("Total Clarity"), a company in which beneficially and wholly-owned by Mr. Chong Pun. Mr. Chong Pun was deemed to be interested in all the shares held by Total Clarity by virtue of the SFO.

Save as disclosed above, as 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 or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares, Underlying Shares and Debentures

As at the Latest Practicable Date, so far as known to the Directors or the chief executive of the Company, the following corporations or individuals (other than the Directors or chief executive of the Company) had interests or short positions in the shares or 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 be directly or indirectly interested in 5% or more of any class of share capital carrying rights to vote in all circumstances at the general meetings of the Company or which were recorded in the

APPENDIX III

GENERAL INFORMATION

register of substantial shareholders maintained by the Company pursuant to Section 336 of the SFO or had otherwise notified to the Company and the Stock Exchange:

Name of Substantial Shareholders	Capacity/Nature of interest	Number of Shares held/ interested	Percentage of shares in issue (Note 1)
Strategic Elite	Beneficial owner	11,797,500 (L)	23.340%
Ms. Lok Pui Yee, Fanny	Interest of spouse (Note 1)	11,797,500 (L)	23.340%
Total Clarity	Beneficial owner	2,500 (L)	0.005%
Ms. Tsang Kit Fong	Interest of spouse (Note 2)	2,500 (L)	0.005%
Mr. Tsang Ming Sophronia	Beneficial owner	1,189,500 (L)	2.353%
	Interest in controlled corporation	1,546,000 (L)	3.059%

Notes:
(L): Long position

Ms. Lok Pui Yee, Fanny is the spouse of Mr. Chong Sik and is deemed to be interested in all the shares indirectly held or interested in by Mr. Chong Sik through Strategic Elite pursuant to the SFO.
Ms. Tsang Kit Fong is the spouse of Mr. Chong Pun and is deemed to be interested in all the shares indirectly held or interested in by Mr. Chong Pun through Total Clarity pursuant to the SFO.

Apart from Mr. Chong Sik, no Director was also a director or an employee of any substantial Shareholders.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other corporation or individual (other than the Directors or chief executive of the Company) who had any interests or short positions in the shares or 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 5% or more of any class of share capital carrying rights to vote in all circumstances at the general meetings of the Company, or as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

APPENDIX III

GENERAL INFORMATION

(IV) DIRECTORS SERVICE CONTRACTS

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

(V) DIRECTOR INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors has or had any interest, either directly or indirectly, in any assets which have since 31 March 2024 (being the date to which the latest published audited consolidated financial statements of the Group were made up), been acquired or disposed of by or leased to, any member of the Group or are proposed to be acquired or disposed of by, or leased to, any member of the Group.

(VI) DIRECTORS INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group.

(VII) MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2024 (being the date to which the latest published audited financial statements of the Group were made up).

(VIII) COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, none of the Directors or their respective close associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group as required to be disclosed pursuant to the Listing Rules.

(IX) LITIGATION

As at the Latest Practicable Date, so far as the Directors are aware, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or arbitration of material importance was pending or threatened against any member of the Group.

(X) MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

(a) the Placing Agreement;

APPENDIX III

GENERAL INFORMATION

(b) the agreement dated 30 September 2024 entered into between the Company and Huhu Trade Co Limited (the "Purchaser"), pursuant to which the Company has agreed to sell and the Purchaser has agreed to purchase the 100% of the issued share capital of Mission Master Group Limited for a consideration of HK$5,500,000;

(c) the agreement dated 23 September 2024 entered into between the Company and Tiger Faith Securities Limited (the "Placing Agent"), pursuant to which the Company has conditionally agreed to place, through the Placing Agent, on a best effort basis, a maximum of 168,486,000 Placing Shares at the Placing Price of HK$0.0315 per Placing Share to not less than six Places who and whose ultimate beneficial owners are Independent Third Parties;

(d) the agreement dated 23 May 2024 entered into between the Company and China Agricultural Innovation Cross-Border E-Commerce Industrial Park Limited (the "Subscriber"), pursuant to which, the Subscriber has agreed to subscribe for, and the Company has agreed to allot and issue an aggregate of 168,480,000 new Shares at the price of HK$0.1 per new Share subscribed; and

(e) the agreement dated 11 April 2024 entered into between the Company and Bloomyears Limited (the "Placing Agent"), pursuant to which, (i) Strategic Elite Limited (the "Seller") agreed to appoint the Placing Agent, and the Placing Agent agreed to act as agent of the Seller, to procure not less than six (6) Places, on a best effort basis, to purchase a total of 168,480,000 existing Shares at (the "Sale Shares") HK$0.208 per Sale Share; and (ii) the Seller conditionally agreed to subscribe for, and the Company conditionally agreed to allot and issue to the Seller, a total of 168,480,000 new Shares at HK$0.208 per Share.

(XI) EXPERT QUALIFICATION AND CONSENT

The following is the qualification of the expert who has given opinion or advice, which are contained or referred to in this circular:

Name	Qualification
Infinity CPA Limited	Certified Public Accountants
Grande Capital Limited	a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letters or reports and the reference to its name in the form and context in which they respectively appear.

APPENDIX III

GENERAL INFORMATION

As at the Latest Practicable Date, none of the experts had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of the experts had any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to any member of the Group, or which were proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2024 (being the date to which the latest published audited accounts of the Company were made up).

(XII) EXPENSES

The expenses payable by the Company in connection with the Rights Issue, including Independent Financial Adviser fees, placing commission, printing, registration, translation, legal and accounting fees, are estimated to be approximately HK$2.4 million.

(XIII) CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Board of Directors

Executive Directors:
Mr. Chong Sik (Chairman and Chief Executive Officer)
Mr. Chong Pun
Mr. Lam Chi Yuen
Mr. Tsui Wing Tak
Ms. Wu Zongmei
Dr. Dong Bin (Vice Chairman)

Independent non-executive Directors
Mr. Leung Martin Oh Man
Mr. Lau Koong Yep
Mr. Yuen King Sum
Mr. Chan Kai Chung

Registered office

Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands

Head office and principal place of business in Hong Kong

30th Floor
EW International Tower
No. 120 Texaco Road
Tsuen Wan
New Territories
Hong Kong

III-7 -

APPENDIX III
GENERAL INFORMATION

Authorised representatives
Mr. Chong Sik
Ms. Chan Nga Chun

Joint Company secretary
Ms. Chan Nga Chun
Mr. Chan Chiu Hung Alex

Principal share registrar and transfer office in the Cayman Islands
Conyers Trust Company (Cayman) Limited
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands

Hong Kong branch share registrar and transfer office
Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong

Principal banker
The Hongkong and Shanghai Banking Corporation Limited
DBS Bank (Hong Kong) Limited

Auditor
CL Partners CPA Limited
3203A-05
Tower 2, Lippo Centre
Admiralty
Hong Kong

Reporting accountant
Infinity CPA Limited
Room 1501, 15th Floor
Olympia Plaza
255 King’s Road
North Point
Hong Kong

Legal adviser to the Company as to Hong Kong laws
Simmons & Simmons
30th Floor, One Taikoo Place
979 King’s Road
Hong Kong

Financial adviser to the Company
Draco Capital Limited
4/F, Connaught Harbour Front House
35–36 Connaught Road West
Sheung Wan
Hong Kong

– III-8 –

APPENDIX III

GENERAL INFORMATION

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders
Grande Capital Limited
Room 2701, 27/F.
Tower One, Admiralty Centre
18 Harcourt Road
Admiralty
Hong Kong

Placing Agent
Gransing Securities Co., Limited
Unit 4103, 41/F
Hopewell Centre
183 Queen’s Road East
Wan Chai
Hong Kong

(XIV) PARTICULARS OF THE DIRECTORS AND SENIOR MANAGEMENT

Executive Directors

Mr. Chong Sik (莊穎先生) (“Mr. S Chong”), aged 57, is one of the co-founders of the Group and incorporated KNT Limited (“KNT”) in February 1993. Mr. S Chong is currently the chairman, chief executive officer and executive Director. He is also a director of KNT Group Limited (“KNTGL”), KNT International Holdings Limited (“KNT Int’l”), MyStyle Limited (“MyStyle”) (formerly known as KNT MyStyle Limited) and KNT Global Trading Limited (“KNT Global”). He was appointed as a Director on 5 July 2016 and re-designated as an executive Director on 23 April 2018. He is the younger brother of Mr. Chong Pun (“Mr. P Chong”). He is primarily responsible for the Group’s overall strategic planning, corporate management and business development.

Mr. S Chong was awarded the Professional Diploma in Diagnostic Radiography from the Hong Kong Polytechnic University (formerly known as Hong Kong Polytechnic) in November 1991. He commenced his start-up business in 1993 by incorporating KNT together with Mr. P Chong and since then has accumulated over 30 years of experience in bridal wear and special occasion dresses business.

In January 2003, Mr. S Chong further established Dong Guan HYG Garment Limited Company* (東莞巡藝製衣有限公司) (“HYG”) together with Mr. P Chong to meet the business expansion needs and develop a design and manufacturing capacity with a view to provide one-stop solutions to our customers.

Mr. S Chong is currently a member of Chinese People’s Political Consultative Conference (“CPPCC”) Yunfu Committee, a member of standing committee of CPPCC Yunfu Committee, a president of The Association of All Levels Current and Previous CPPCC Hong Kong Members of Yunfu City Limited (formerly known as The Friendship Liaison Association of the CPPCC Hong Kong Members of Yunfu City Limited) and a council member of Yunfu Public Diplomacy Association.

III-9 -

APPENDIX III

GENERAL INFORMATION

Mr. Chong Pun (莊斌先生), aged 60, is an executive Director and one of the co-founders of the Group. He was appointed as a Director on 9 August 2016 and re-designated as an executive Director on 23 April 2018. Mr. P Chong is the elder brother of Mr. S Chong. He is also a director of KNTGL, KNT Int'l, MyStyle, KNT Global and the legal representative of HYG. He is responsible for the overall management of the Group's operations, general administration and compliance matters in China.

Mr. P Chong received secondary school education in China and graduated in 1978. During the period from 1983 to 1992, he worked as a factory manager in Florist Trading Company (H.K.) Limited, of which the principal business is manufacturing of festival decorative products. He set up KNT together with Mr. S Chong in February 1993 and has been a director of KNT since April 1993. In January 2003, Mr. P Chong, together with Mr. S Chong, established HYG to meet the business expansion needs and since then has been the legal representative of HYG. He possesses over 30 years of experience in the bridal wear and special occasion dresses business.

Mr. Lam Chi Yuen (林志遠先生) (“Mr. Lam”), aged 51, is an executive Director and the chief operating officer of the Group. He was appointed as an executive Director on 23 April 2018. He is responsible for overseeing the daily operation of the Group, including but not limited to procurement, production, shipping and marketing.

Mr. Lam was awarded a Bachelor of Arts degree with second class honours in Clothing Studies from the Hong Kong Polytechnic University in November 1996. He joined the Group in July 1996 as junior merchandiser. He was promoted as senior merchandiser in April 2003 and was further promoted as merchandising manager in July 2007. He was subsequently promoted as the chief operating officer in April 2017. Mr. Lam possesses over 25 years of experience in the bridal wear and special occasion dresses business.

Mr. Tsui Wing Tak (徐永得先生) (“Mr. Tsui”), aged 56, has been appointed as an executive Director of the Group on 18 November 2024. Mr. Tsui is an independent non-executive director of Bingo Group Holdings Limited (stock code: 8220), a company listed on the GEM of the Stock Exchange, since August 2020.

Mr. Tsui has over 30 years of corporate finance and accounting experience.

He was an executive director of CBK Holdings Limited (stock code: 8428), a company listed on the GEM of the Stock Exchange, from December 2020 to September 2024.

Mr. Tsui obtained a degree of Bachelor of Economics from Macquarie University in Australia in 1992. He is a fellow member of the Hong Kong Institute of Certified Public Accountants and a Certified Practising Accountant of CPA Australia.

Ms. Wu Zongmei (吳宗梅女士) (“Ms. Wu”), aged 39, has been appointed as an executive Director of the Group on 16 December 2024. Ms. Wu has over 14 years’ experience in finance, accounting and management.

III-10 -

APPENDIX III

GENERAL INFORMATION

Ms. Wu holds a Master of Finance degree from Renmin University of China and Bachelor of Sciences from Beijing JiaoTong University. She is currently a Certified Public Accountant in PRC.

Dr. Dong Bin (董斌博士) (“Dr. Dong”), aged 47, has been appointed as an executive Director and vice-chairman of the Group with effect from 1 June 2023. Dr. Dong graduated from the Department of Economics of the Tianjin Institute of Finance in 1997. From 2002 to 2003 when serving at Beijing Urban Construction Group Co., Ltd, he was sent to Keele University in the United Kingdom to take the master of business administration course under the Department of Management of the Faculty of Social Sciences. He obtained a doctorate in management science and engineering from the China University of Mining and Technology (Beijing) in 2018.

Dr. Dong possesses over 20 years of experience in business management. In 2005, Dr. Dong was appointed as the International Marketing Director of Beijing Urban Construction Group Co., Ltd. Dr. Dong was subsequently appointed as the managing director of 北京城建德博建築技術有限公司. From 2013 to 2017, Dr. Dong was the General Manager of the International Cooperation Department of Beijing Capital Group and served at the Capital Account Management Department of the State Administration of Foreign Exchange on secondment. Since 2019, Dr. Dong has been the chairman of 北京郡王府文化藝術有限公司. Dr. Dong is currently the honorary president of the Chaoyang (Beijing) Foreign Economic Cooperation Association, the Chief Representative of the Beijing Centre of the Sino-International Entrepreneurs Federation, an executive member of the Chaoyang District Federation of Industry and Commerce of Beijing Municipality, the Director of the Center for the Study of Group 20, and the chairman of the organising committees of the Sino-European Entrepreneurs Summit, the China-Africa Investment Summit and the Sino-Australasian Entrepreneurs Summit. During the period between 2010 and 2013, Dr. Dong was the Special Assistant to Mr. Long Yongtu, the former Secretary-General of the Boao Forum for Asia, and the founder and vice chairman of the organising committee of the International Capital Conference of the Boao Forum for Asia. Dr. Dong has been appointed as an executive director of Jimu Group Limited (stock code: 8187) with effect from 8 November 2024.

Independent Non-Executive Directors

Mr. Leung Martin Oh Man (梁做文先生) (“Mr. Leung”), aged 44, was appointed as an independent non-executive Director on 31 January 2019. Mr. Leung graduated from the University of Toronto with a Bachelor of Commerce degree in November 2002. He was admitted as a certified public accountant of the Hong Kong Institute of Certified Public Accountants (“HKICPA”) in July 2006 and a member of the Hong Kong Institute of Surveyors in January 2014. He is currently registered as a certified public accountant (practising) of HKICPA.

Mr. Leung has over 20 years of experience in the field of financing, financial management, accounting, auditing and valuation. He worked with Deloitte Touche

III-11 -

APPENDIX III

GENERAL INFORMATION

Tohmatsu from March 2003 to March 2011, where he was principally responsible for audit related matters and was also engaged with accounting and taxation related matters. He is currently serving as the general manager of TL Property Consultants International Limited responsible for making and execution of the company's strategy and management of human resources and daily operation.

Mr. Leung has been serving as an independent non-executive director of Global Strategic Group Limited (a company listed on the GEM of the Stock Exchange, stock code: 8007) since October 2014. He also is serving various social responsibilities, including member of the CPPCC of Shanghai, Deputy President of the professionals committee of Shanghai Chinese Overseas Friendship Association, founding member of the Hong Kong Professionals and Senior Executives Association and executive director of the International Nature Loving Association Limited.

Mr. Lau Koong Yep (劉冠業先生) (“Mr. Lau”), aged 47, was appointed as an independent non-executive Director on 31 January 2019. Mr. Lau was awarded a Bachelor of Business Administration degree in Quantitative Analysis for Business Student (minoring Finance) from the City University of Hong Kong in July 1999. He was in the direct selling and social commerce industry for over 24 years. He is currently the Regional Managing Director of Mainland China, Hong Kong, Taiwan and Japan of Envisionary Life LLC. Mr. Lau worked with Viiva, LLC and served as the Global Director, Global Chief Operating Officer and International Chief Executive Officer from July 2021 to September 2023. He worked with Lotus Wellness Limited* (荷康人體博物館管理服務(馬鞍山)有限公司) from June 2020 to June 2021 with his last position as the chief executive officer. He worked with Jason Pharmaceuticals Inc., a wholly owned subsidiary of Medifast, Inc. (a company listed in the New York Stock Exchange with stock code: MED) from October 2018 to June 2020 with his last position as the market vice president of business development for Asia Pacific. He worked with WeMedia Shopping Network Technology Co., Limited (“WeMedia”) from February 2017 to October 2017 with his last position as the chief operating officer. Before Mr. Lau joined WeMedia, he worked with NU SKIN Enterprises Hong Kong, LLC from June 2012 to December 2016 with his last position as a vice president, executive partners Greater China. He also worked with USANA Hong Kong Limited from 2011 to 2012, Market Hong Kong Limited from 2007 to 2010 and Herbalife International of Hong Kong Limited from 2001 to 2004.

Mr. Yuen King Sum (袁景森先生) (“Mr. Yuen”), aged 61, was appointed as an independent non-executive Director on 31 January 2019. Mr. Yuen graduated from Hang Seng School of Commerce (now known as The Hang Seng University of Hong Kong) with a Diploma in Business Studies in July 1984. He was admitted as a Fellow of Life Management Institute in 1987.

For identification purposes only

APPENDIX III

GENERAL INFORMATION

Mr. Yuen has over 30 years of experience in the operation, marketing and management of insurance companies. He worked with Hong Kong Family Insurance Company Limited as an administrative assistant from August 1984 to July 1987, and subsequently worked with American International Underwriters, Limited (now known as AIG Insurance Hong Kong Limited) from November 1987 to March 2010 as an insurance agent. Since July 2010, Mr. Yuen has been working with Finexis Advisory (HK) Limited and is presently holding the position as chief agency officer.

Mr. Chan Kai Chung (陳繼忠先生) (“Mr. Chan”), aged 45, has been appointed as an Independent non-executive Director of the Group on 16 December 2024. Mr. Chan has over 20 years’ experience in auditing, accounting and risk consulting.

Mr. Chan holds a Bachelor of Art in Accountancy from The Hong Kong Polytechnic University. He is currently a member of The Association of Chartered Certified Accountants, Information Systems Audit and Control Association and The Institute of Internal Auditor.

Senior Management

Ms. Chan Nga Chun (陳雅珍女士) (“Ms. Chan”), aged 46, is the chief financial officer and the joint company secretary of the Company. Ms. Chan joined the Group in June 2017 as the chief financial officer and was further appointed as the Company’s company secretary on 23 April 2018, and is responsible for the overall accounting, financial management and reporting, and company secretarial matters of the Group.

Ms. Chan obtained a bachelor’s degree in accounting from The Hong Kong Polytechnic University in November 2001. She is a fellow member of the Association of Chartered Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants. Ms. Chan has over 20 years of experience in accounting and auditing. Ms. Chan worked at various accounting firms in the audit department during August 2001 to December 2004. From January 2005 to August 2008, Ms. Chan worked at Deloitte Touche Tohmatsu and her last position was a senior in the audit department. From January 2009 to May 2013 and January 2014 to December 2016, Ms. Chan worked at SHINEWING (HK) CPA Limited and her last position was a senior audit manager.

Mr. Chan Chiu Hung Alex (陳鈞洪先生) (“Mr. Chan”), aged 58, is the joint company secretary of the Company. He is an independent non-executive director of Allegro Culture Limited (formerly known as Kingkey Intelligence Culture Holdings Limited, stock code: 550), a company listed on the Main Board of the Stock Exchange, since March 2016.

He has over 18 years of experience in managing companies listed in Hong Kong or overseas.

III-13 -

APPENDIX III

GENERAL INFORMATION

Mr. Chan was an independent non-executive director of Royal Century Resources Holdings Limited (stock code: 8125), a company listed on the GEM of the Stock Exchange, from September 2015 to October 2023. He was a company secretary of CBK Holdings Limited (stock code: 8428), a company listed on the GEM of the Stock Exchange, from April 2021 to September 2024.

He obtained his Bachelor of Business Administration (honours) degree in finance from the Hong Kong Baptist University in 1990, and completed an advance diploma in specialist taxation from the Hong Kong Institute of Certified Public Accountants in 2012. Mr. Chan is currently a fellow member of The Chartered Governance Institute, a fellow member of The Hong Kong Chartered Governance Institute, a fellow member of the Association of Chartered Certified Accountants, a fellow member of the Institute of Chartered Accountants in England and Wales and a member of the Hong Kong Institute of Certified Public Accountants.

(XV) AUDIT COMMITTEE

As at the Latest Practicable Date, the audit committee of the Board comprises all the independent non-executive Directors, namely Mr. Leung Martin Oh Man, Mr. Lau Koong Yep, Mr. Yuen King Sum and Mr. Chan Kai Chung, being the primary duties of the audit committee include the review of the Group's financial reporting process and the internal control systems as well as risk management of the Group.

(XVI) DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (www.kntholdings.com) for 14 days from the date of this circular up to and including the date of the EGM:

(a) the second amended and restated articles of association of the Company;

(b) the annual reports of the Company for each of the three financial years ended 31 March 2022, 2023 and 2024;

(d) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out in the section headed "Letter from the Independent Board Committee" in this circular;

(e) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed "Letter from the Independent Financial Adviser" in this circular;

III-14 -

APPENDIX III
GENERAL INFORMATION

(f) the accountants’ report on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II to this circular;

(g) the material contracts referred to in the paragraph headed “(X) Material Contracts” of this appendix; and

(h) the letter of consent referred to the paragraph headed “(XI) Expert Qualification and Consent” in this appendix.

(XVII) MISCELLANEOUS

(a) As at the Latest Practicable Date, to the best knowledge of the Directors, there was no restriction affecting the remittance of profit or repatriation of capital of the Company into Hong Kong from outside Hong Kong.

(b) As at the Latest Practicable Date, the Company has no significant exposure to foreign exchange liabilities;

(c) As at the Latest Practicable Date, save as disclosed elsewhere in this circular, there was no material contract for the hire or hire purchase of plant to or by any member of the Group for a period of over a year which is substantial in relation to the Group’s business; and

(d) In the event of any inconsistency, the English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts.

III-15 -

NOTICE OF EGM

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1025)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the "Meeting") of KNT Holdings Limited (the "Company") will be held at 30/F, EW International Tower, No. 120 Texaco Road, Tsuen Wan, New Territories, Hong Kong on Thursday, 6 February 2025 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

"THAT subject to and conditional upon The Stock Exchange of Hong Kong Limited granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the listing of, and permission to deal in, the Rights Shares (as defined below, in their nil-paid and fully-paid forms) to be allotted and issued to the shareholders of the Company (the "Shareholder(s)") pursuant to the terms and conditions of the Rights Issue becoming unconditional:

the issue by way of rights issue (the "Rights Issue") of up to 151,637,790 ordinary shares (the "Rights Share(s)") at the subscription price of HK$0.29 per Rights Share to the qualifying shareholders (the "Qualifying Shareholders") of the Company whose names appear on the date (the "Record Date") by reference to which entitlement under the Rights Issue will be determined (other than those shareholders (the "Non-Qualifying Shareholders") with registered addresses outside Hong Kong whom the Directors, after making relevant enquiry, consider their exclusion from the Rights Issue to be necessary or expedient on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place) in the proportion of three (3) Rights Shares for every one (1) existing share of the Company then held on the Record Date at the subscription price of HK$0.29 per Rights Share and otherwise on the terms and conditions set out in the circular of the Company dated 10 January 2025 (the "Circular") be and is hereby approved;
For identification purposes only
EGM-1 -

NOTICE OF EGM

the Directors be and are hereby authorised to allot and issue the Rights Shares pursuant to the Rights Issue notwithstanding the same may be offered, allotted or issued otherwise than pro-rata to the Qualifying Shareholders and, in particular, the Directors may make such exclusions or other arrangements in relation to the Non-Qualifying Shareholders as they may deem necessary, desirable or expedient having regard to any restrictions or obligations under the bye-laws of the Company or the laws of, or the rules and regulations of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong; and
the Directors be and are hereby authorised to approve, sign and execute such documents and take any and all steps, and to do and/or procure to be done any and all acts and things which in their opinion may be necessary, desirable or expedient to implement and carry into effect this resolution."

By order of the Board

KNT Holdings Limited

Chong Sik

Chairman and Executive Director

Hong Kong, 10 January 2025

Registered office:
Cricket Square
Hutchins Drive
P.O. Box 2681
Grand Cayman KY1-1111
Cayman Islands

Principal place of business in Hong Kong:
30th Floor
EW International Tower
No. 120 Texaco Road
Tsuen Wan
New Territories
Hong Kong

Notes:
1. Unless otherwise defined in this notice or the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this notice.
2. Voting at the EGM will be taken by poll as required under the Listing Rules.
3. For determining the entitlement of the Shareholders to attend and vote at the EGM, the register of members of the Company will be closed from Tuesday, 28 January 2025 to Thursday, 6 February 2025 (both days inclusive) during which period no transfer of the Shares will be registered. In order to qualify for entitlement to attend and vote at the EGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company's branch share registrar in Hong Kong, Tricor Investor Services Limited at 17/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong for registration no later than 4:30 p.m. on Monday, 27 January 2025.
4. Any shareholder entitled to attend and vote at the EGM is entitled to appoint one or more proxies to attend, speak and vote instead of him/her at the EGM (or at any adjournment of it). A member who is the holder of two or more shares may appoint more than one proxy to represent him/her and vote on his/her behalf at the EGM of the Company. A proxy need not be a shareholder of the Company.

EGM-2 -

NOTICE OF EGM

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without further evidence of the facts.
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 notarially certified copy of such power of attorney or authority, must be lodged with the Company's branch share registrar in Hong Kong, Tricor Investor Services Limited at 17/F., Far East Finance Centre, 16 Harcourt Road, Hong Kong for registration not less than 48 hours before the time appointed for holding the EGM.
Completion and return of the form of proxy shall not preclude a member of the Company from attending the EGM and voting in person at the EGM or any adjournment thereof if he/she/it so desires. If a member of the Company attends the EGM after having deposited the form of proxy, his/her/its form of proxy will be deemed revoked.
Where there are joint registered holders of any Share, any one of such persons may vote at any meeting, either personally or by proxy, in respect of such share as if he/she/it were solely entitled thereto; but if more than one of such joint holders be present at any meeting personally or by proxy, then one of the said persons so present being the most, or as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holder stand on the register in respect of the relevant joint holding.
References to time and dates in this notice are to Hong Kong time and dates.
The English text of this notice shall prevail over the Chinese text in case of inconsistency.
If a black rainstorm warning signal, a tropical cyclone warning signal no. 8 or above or "extreme conditions" caused by super typhoons is in force at or at any time after 8:00 a.m. on the date of the meeting, the meeting will be postponed. The Company will publish an announcement on the website of the Stock Exchange (www.hkexnews.hk) and the Company's website (www.kntholdings.com) to notify members of the date, time and place of the rescheduled meeting.
As at the date of this notice, the Board comprises six executive Directors, namely, Mr. Chong Sik, Mr. Chong Pun, Mr. Lam Chi Yuen, Mr. Tsui Wing Tak, Ms. Wu Zongmei and Dr. Dong Bin; and four independent non-executive Directors, namely, Mr. Leung Martin Oh Man, Mr. Lau Koong Yep, Mr. Yuen King Sum and Mr. Chan Kai Chung.
EGM-3 -

AI assistant

KNT Holdings Limited — Proxy Solicitation & Information Statement 2025

49632_rns_2025-01-10_a57db377-3819-4212-aa89-075d2059cb11.pdf

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司*

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE; AND NOTICE OF EXTRAORDINARY GENERAL MEETING

EFFECT OF BAD WEATHER OR EXTREME CONDITIONS ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司*

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE;

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

PROPOSED RIGHTS ISSUE

Rights Issue Statistics

Non-underwritten basis

Undertakings

Subscription Price

Conditions of the Rights Issue

Basis of provisional allotment

Procedures in respect of Unsubscribed Rights Shares and the NQS Unsold Rights Shares and the Compensatory Arrangements

Rights of the Overseas Shareholder(s) (if any)

Share certificates of the Rights Shares and refund cheques for the Rights Issue

Fractional entitlements to the Rights Shares

Taxation

Application for listing

Rights Shares will be eligible for admission into CCASS

Stamp duty and other applicable fees and charges

THE PLACING ARRANGEMENT

REASONS FOR THE RIGHTS ISSUE AND THE USE OF PROCEEDS

Intended use of proceeds

Fund-raising alternatives

FUND RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS

LISTING RULES IMPLICATIONS

EXTRAORDINARY GENERAL MEETING, PROXY ARRANGEMENT AND CLOSURE OF REGISTER OF MEMBERS

CLOSURE OF REGISTER OF MEMBERS

RECOMMENDATIONS

ADDITIONAL INFORMATION

KNT

KNT HOLDINGS LIMITED

嘉藝控股有限公司

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE

PROPOSED RIGHTS ISSUE ON THE BASIS OF THREE (3) RIGHTS SHARES FOR EVERY ONE (1) SHARE HELD ON THE RECORD DATE

INTRODUCTION

LISTING RULES IMPLICATIONS

THE INDEPENDENT BOARD COMMITTEE

THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Group

1.2 Financial information of the Group

FY2024 compared to FY2023

1H2024 vs 1H2023

2.1 Intended use of proceeds

2.2 Fund-raising alternatives

3. Principal terms of the Rights Issue and the Placing

(a) Terms of the Rights Issue

The Placing Commission

3.1 Subscription Price

3.2 Non-Underwriting Basis

3.3 Historical price performance

3.4 Historical trading liquidity of the Shares

3.5 Comparison with recent rights issues exercise

4. Possible financial effects of the Rights Issue

4.1 Net tangible assets

4.2 Gearing

5. Possible dilution effect on interests of other public Shareholders

RECOMMENDATION

(I) FINANCIAL SUMMARY

(II) STATEMENT OF INDEBTEDNESS

(V) FINANCIAL AND TRADING PROSPECTS OF THE GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Introduction

B. ACCOUNTANT'S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

INDEPENDENT REPORTING ACCOUNTANTS' ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

DIRECTORS' RESPONSIBILITY FOR THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

OUR INDEPENDENCE AND QUALITY MANAGEMENT

REPORTING ACCOUNTANT'S RESPONSIBILITIES

OPINION

KNT Holdings Limited Proxy Solicitation & Information Statement 2025