Litu Holdings Limited - Proxy Solicitation & Information Statement 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares of Brilliant Circle Holdings International Limited, you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or the 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 howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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BRILLIANT CIRCLE HOLDINGS INTERNATIONAL LIMITED 貴聯控股國際有限公司 (incorporated in the Cayman Islands with limited liability) (Stock code: 1008)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPEROR GREAT INVESTMENTS LIMITED AND

EFFECTIVE VARIATION OF TERMS OF THE 2012 SP AGREEMENT

Independent financial adviser to the Independent Board Committee and the independent Shareholders

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

A letter from the Independent Board Committee is set out on page 16 of this circular.

A letter of advice from TC Capital, the independent financial adviser to the Independent Board Committee and the independent Shareholders in relation to the Acquisition and the Variation, is set out on pages 17 to 35 of this circular.

12 December 2014

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from	TC Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix	– General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36

– i –

DEFINITIONS

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

“2012 Acquisition”
the acquisition of 60% equity interest in Giant Sino by the Company as contemplated under the 2012 SP Agreement
“2012 Completion Date”
3 July 2012, being the completion date of the 2012 Acquisition
“2012 SP Agreement”
the conditional sale and purchase agreement dated 17 April 2012 entered into between the Company as purchaser and the Target as vendor in relation to the 2012 Acquisition
“Acquisition”
the proposed acquisition of the Sale Shares by the Company from the Seller pursuant to the Agreement
“Agreement”
the conditional sale and purchase agreement dated 13 November 2014 entered into between the Company as purchaser and the Seller as vendor in relation to the Acquisition
“Anniversary Date”
the date each year that is the anniversary of the 2012 Completion Date, provided that if the 2012 Completion Date is not the first day of the month, the 2012 Completion Date will be deemed to be the first day of the month during which the 2012 Completion Date falls for the purposes of determining the Anniversary Date, that is 1 July
“Board”
the board of Directors
“Business Day”
a day (excluding Saturdays) on which banks in Hong Kong are generally open for business
“BVI”
British Virgin Islands
“Company”

Brilliant Circle Holdings International Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on the main board of the Stock Exchange

“Completion”
completion of the Acquisition under the Agreement
“connected person”
has the meaning ascribed thereto in the Listing Rules

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DEFINITIONS

“Consideration”
“Director(s)”
“Giant Sino”
“Giant Sino Group”
“Group”
“Independent Board Committee”
“Interest Deduction”
the cash consideration payable for the Acquisition
director(s) of the Company
Giant Sino Investments Limited, a company incorporated with limited liability in the BVI and owned as to 60% by the Company and 40% by the Target as at the date of the Agreement
Giant Sino and its subsidiaries including Fortune Chaser Limited and Yangfeng
the Company and its subsidiaries
the independent board committee of the Company comprising all the independent non-executive Directors for the purpose of giving a recommendation to the independent Shareholders on the Acquisition and the effective variation of the terms of the 2012 Acquisition as described in the letter from the Board in this circular
an amount equal to:
(the Shortfall of 2012/0.60) x 4%
“Latest Practicable Date”
“Listing Rules”
“PRC”
“Profitcharm”
“Relevant Period”
10 December 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information referred to in this circular
the Rules Governing the Listing of Securities on the Stock Exchange
the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region and Taiwan
Profitcharm Limited, a company incorporated in the BVI and is interested in 274,325,278 Shares, representing 18.4% of the issued share capital of the Company
the twelve-month period commencing on the 2012 Completion Date (in the case of the Relevant Period of 2012) or the last Anniversary Date (in the case of the Relevant Period of other years) and ending on the next Anniversary Date

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DEFINITIONS

“Sale Shares”

100 ordinary shares of US$1 each in the capital of the Target representing the entire issued share capital of the Target
“Seller” Prime Prestige Limited, a company incorporated with limited liability in the BVI and the beneficial owner of the Target
“SFO”
the Securities and Futures Ordinance (Chapter 571 of Laws of Hong Kong)
“Share(s)” ordinary share(s) of HK$0.005 each in the issued share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)
“Sinorise”
Sinorise International Limited, a company incorporated in the BVI and is interested in 577,131,614 Shares, representing about 38.8% of the issued share capital of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Target”

Emperor Great Investments Limited, a company incorporated with limited liability in the BVI and wholly-owned by the Seller as at the date of the Agreement

“TC Capital”

TC Capital Asia Limited, a licensed corporation registered to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser to the Independent Board Committee and the independent Shareholders in relation to the Acquisition and the Variation

“Variation”

the elimination of any payment by the Target to the Company which may arise under the profit guarantee provided by the Target pursuant to the 2012 SP Agreement to the Company at the consolidated accounts of the Group in accordance with the applicable accounting standards after the Target has become a wholly-owned subsidiary of the Company, such elimination being considered as a removal of the profit guarantee under the terms of the 2012 Acquisition

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DEFINITIONS

“Yangfeng”	深圳揚豐印刷有限公司	(Yangfeng Printing &	(Yangfeng Printing &
	Packaging Co., Ltd.*), a	company established with
	limited liability in the PRC and an		indirect
	wholly-owned subsidiary	of Giant Sino
“HK$”	Hong Kong dollars, the	lawful currency	of Hong
	Kong
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollars, the lawful currency of the
	United States of America

For illustration purposes only, amounts denominated in Renminbi in this circular have been translated into Hong Kong dollars at an exchange rate of RMB1 = HK$1.25.

For identification purpose only

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LETTER FROM THE BOARD

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BRILLIANT CIRCLE HOLDINGS INTERNATIONAL LIMITED 貴聯控股國際有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1008)

Executive Directors:

Mr. Cai Xiao Ming, David (Chairman) Mr. Qin Song Mr. Kiong Chung Yin, Yttox

Non-executive Director:

Registered office:

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

Mr. Sean Xing He

Independent non-executive Directors:

Mr. Lui Tin Nang Mr. Lam Ying Hung, Andy Mr. Siu Man Ho, Simon

Head office and principal place of business in Hong Kong: Room 3104–5, 31/F Universal Trade Centre 3–5 Arbuthnot Road Central Hong Kong

12 December 2014

To the Shareholders

Dear Sir or Madam

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPEROR GREAT INVESTMENTS LIMITED AND EFFECTIVE VARIATION OF TERMS OF THE 2012 SP AGREEMENT

INTRODUCTION

Reference is made to the announcement of the Company dated 13 November 2014 whereby the Board announced that the Company and the Seller entered into the Agreement, pursuant to which, the Company has conditionally agreed to purchase and the Seller has conditionally agreed to sell the Sale Shares for a Consideration of HK$82.4 million. The Sale Shares represent the entire issued share capital of the Target. After

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LETTER FROM THE BOARD

Completion, the Target will become a wholly-owned subsidiary of the Company and, any payment, if required, to be made by the Target to the Company in respect of the profit guarantee in relation to the financial performance of Yangfeng for the period from 1 July 2014 to 30 June 2016 pursuant to the 2012 SP Agreement would be eliminated at the consolidated accounts of the Group in accordance with the applicable accounting standards. The Board considers such elimination is in substance a removal of the profit guarantee under the terms of the 2012 Acquisition (the “Variation”) and thus it constitutes a material variation to the terms of the 2012 SP Agreement. Hence the Acquisition and the Variation will be subject to the independent Shareholders’ approval requirements under the Listing Rule.

The purpose of this circular is to provide you with (i) further details of the Acquisition; (ii) further details of the Variation; (iii) a letter of recommendation from the Independent Board Committee to the independent Shareholders; (iv) a letter of advice from TC Capital to the Independent Board Committee and the independent Shareholders in relation to the Acquisition and the Variation; and (v) other information of the Group as required under the Listing Rules.

THE AGREEMENT

Date:

13 November 2014

Parties:

(i) The Company, as purchaser; and
(ii) Prime Prestige Limited, as Seller.

Assets to be acquired:

Pursuant to the Agreement, the Company has conditionally agreed to purchase and the Seller has conditionally agreed to sell the Sale Shares, free from encumbrances together with all accrued benefits and rights attached thereto and all dividends declared, made or paid after the date of the Agreement. The Sale Shares represent the entire issued share capital of the Target. Further details of the Target are set out in the paragraph headed “Information on the Target” below.

Consideration:

The Consideration for the Sale Shares is HK$82.4 million payable in cash on 30 June 2015. In the event that the Company elects to settle the payment for the Consideration before 30 June 2015, the Consideration shall be reduced by about HK$8,890 for each day that the payment is made earlier than 30 June 2015.

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LETTER FROM THE BOARD

The Consideration was determined after arm’s length negotiations between the Company and the Seller with reference to the historical financial performance of Yangfeng for the year ended 31 December 2013 and after taking into consideration that the Company has already controlled the operation of Yangfeng and the Variation.

The Company has conducted researches on companies listed on the Stock Exchange engaging in business similar to that of Yangfeng, which is principally engaged in printing of cigarette packages in the PRC. The Company has identified five comparable companies (which do not include the Company as one of the comparable companies) and noticed that one the them was loss making for the latest financial year and the price to earnings ratios for the remaining four comparable companies ranged from approximately 8.3 times to approximately 11.9 times with an average of approximately 9.5 times. In negotiating the terms of the Agreement and determining the Consideration, other than the commercial and strategic reasons for the Acquisition, the Company and the Seller also made reference to the financial performance of Yangfeng for the year ended 31 December 2013 and a price to earnings ratio of approximately 6 times (by reference to the price to earnings ratio of approximately 8.8 times for the 2012 Acquisition with a discount as mutually agreed between the Company and the Seller) which is below the range of comparable companies. In addition, the management of the Company has assessed the potential compensation which may or may not be obtained from the Target, depending on the actual net profit of Yangfeng for the period from 1 July 2014 to 30 June 2016, pursuant to the profit guarantee given by the Target under the 2012 SP Agreement. Taking into account that the Company has already controlled the operation of Yangfeng and has sufficient knowledge on the business performance of it, the long experience of the management of the Group in the cigarette packaging industry, and the strategic reasons for the Acquisition as detailed in the paragraph headed “Reasons for the Acquisition” below, the management of the Company has estimated the financial performance of Yangfeng for the period from 1 July 2014 to 30 June 2016 based on the historical financial performance of Yangfeng and their projection on the future sales with reference to the sales orders of existing customers, the annual production plan of the customers, the target set by the State Tobacco Monopoly Administration, and the forecast PRC economic growth and inflation rate in coming years so as to evaluate the possibility of achieving the guaranteed profit by Yangfeng as described under the paragraph headed “Profit guarantee under the 2012 SP Agreement” below. Based on the projection prepared by the management of the Company, the Board had conducted a sensitivity analysis to assess the likely Shortfall (as defined hereinafter) under different scenario and has taken into account the possible compensation which might be obtained by the Company from the Target in arriving at the Consideration.

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LETTER FROM THE BOARD

Summary of the sensitivity analysis is set out as follows:

Sensitivity analysis

					Target net
					profit
					pursuant to
					the profit
					guarantee
	Projected			Projected	under the
	net profit of			net profit of	2012 SP
	Yangfeng	scenario	change by	Yangfeng	Agreement	Shortfall
	approximately			approximately		approximately
	RMB million			RMB million	RMB	RMB million
In the Relevant	104.9	(i)	0	104.9	110,250,000	25.7
Period of 2014		(ii)	+5%	110.1	110,250,000	0.6
		(iii)	-5%	99.6	110,250,000	50.9
		(iv)	+10%	115.4	110,250,000	(24.6)
		(v)	-10%	94.4	110,250,000	76.1
In the Relevant	115.6	(i)	0	115.6	115,762,500	0.7
Period of 2015		(ii)	+5%	121.4	115,762,500	(27.1)
		(iii)	-5%	109.8	115,762,500	28.4
		(iv)	+10%	127.2	115,762,500	(54.8)
		(v)	-10%	104.1	115,762,500	56.2

For negotiation with the Seller for the Consideration, the Board had assessed different scenario to project the net profit of Yangfeng for the Relevant Period of 2014 and 2015 respectively. Based on the experience of the management of the Group in the cigarette packaging industry and their sufficient knowledge on the business performance of Yangfeng, the Company reached an agreement with the Seller that scenario (iii) (i.e. a 5% decrease in the projected net profit of Yangfeng for the Relevant Period of 2014 and 2015 respectively) would be more reflective on the possible performance of Yangfeng in the Relevant Period of 2014 and 2015 and thus took into account the amount of possible compensation of approximately RMB79.3 million for the Relevant Period of 2014 and 2015 in determining the Consideration. The Board also noticed that the net profit of Yangfeng for the year ended 31 December 2013 decreased as compared to that for the year ended 31 December 2012, the reasons for such decrease are detailed in the paragraph headed “Reasons for the Acquisition” below.

The projected net profit of Yangfeng for the Relevant Period of 2014 and 2015 as disclosed above is prepared by the management of the Group for illustrative purposes only with reference to the historical financial information of Yangfeng and based on a number of assumptions, estimates and current available information, which does not represent a forecast of the net profit of Yangfeng nor does it provide any assurance that the actual net profit of Yangfeng for the Relevant Period of 2014 and 2015 would have been achieved. The Board wishes to emphasis that scenario (iii) above is a result of the

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LETTER FROM THE BOARD

commercial negotiation between the Company and the Seller in reaching the Consideration. As such, it does not represent the view of the Board on the level of profit of Yangfeng for the Relevant Period of 2014 and 2015 respectively. Based on the net profit of Yangfeng for the year ended 31 December 2013, the Consideration represents a price to earnings ratio of approximately 1.5 times (calculated based on the Consideration of HK$82.4 million and 40% of the net profit after tax of Yangfeng for the year ended 31 December 2013 of approximately HK$136.9 million).

Pursuant to the 2012 SP Agreement, the Company acquired 60% equity interest in Giant Sino at a consideration of HK$720 million. The aggregate of the Consideration for acquiring the remaining 40% equity interest in Giant Sino Group, which is owned by the Target, and the consideration for the 2012 Acquisition is HK$802.4 million.

Having considered that the price to earnings ratio of Yangfeng implied by the Consideration of 1.5 times (calculated based on the Consideration of HK$82.4 million and 40% of the net profit after tax of Yangfeng for the year ended 31 December 2013 of approximately HK$136.9 million) is lower than that as represented by the consideration of the 2012 Acquisition of approximately 8.8 times (calculated based on the consideration of HK$720 million for the 2012 Acquisition and 60% of the net profit after tax of Yangfeng for the year ended 31 December 2011 of approximately RMB110.32 million (equivalent to approximately HK$135.86 million adopting the then exchange rate)), the Company’s assessment on the potential compensation which might be obtained from the Target and the effect of the Variation, the Board considers that the Consideration is fair and reasonable and in the interest of the Company and its Shareholders as a whole.

Conditions of the Acquisition:

Completion is conditional upon the fulfilment or waiver (as the case maybe) of the following conditions:

(i) the due diligence investigation by the Company covering, among other things, the business, affairs, operations, assets and liabilities of the Target having been conducted and the results of which are to its satisfaction;
(ii) all necessary consents, authorisation, permits and approvals in relation to the Acquisition having been obtained; and
(iii) there having been no breach of any of the warranties and other provisions given by the Seller under the Agreement.

The Seller shall use its best endeavours to fulfil or procure the fulfilment of the above conditions. The Company may at its absolute discretion at any time waive in writing conditions (i) and (iii) above. If all of the above conditions have not been satisfied or waived (if applicable) by the Company and the Seller at or before 12:00 noon on 31 December 2014, the Agreement shall cease and determine and no party shall have any obligations and liabilities under the Agreement save for any antecedent breaches of the terms thereof. Pursuant to the Agreement, the Acquisition and the Variation are not inter-conditional on each other. After Completion, the Vendor or its beneficial owners are

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LETTER FROM THE BOARD

not required to assume the liabilities of the Target under the 2012 SP Agreement. Any shortfall will be compensated by the Target to the Company through any dividend income from the Giant Sino Group. If the dividend income is insufficient to cover the shortfall, it will be recorded as an intercompany balance due by the Target to the Company to be settled by any of the future dividend income receivable by the Target. Since the Target will become a wholly-owned subsidiary of the Company after Completion, such settlement arrangement will become an internal affair of the Group and the profit guarantee under the 2012 SP Agreement is in substance removed as a result of the Acquisition, and thus the Acquisition and the Variation will be subject to independent Shareholders’ approval requirements under the Listing Rules. Pursuant to Rule 14A.37 of the Listing Rules, the Company has obtained a written shareholders’ approval on the Acquisition and the Variation from Profitcharm and Sinorise (both being wholly-owned by Mr. Cai Xiao Ming, David, the Chairman of the Board and an executive Director), who together hold approximately 57.2% of the issued share capital of the Company and hence no general meeting for the independent Shareholders’ approval of the Acquisition and the Variation is required to be held. As at the Latest Practicable Date, save for the obtaining of the aforementioned written shareholders’ approval, none of the above conditions had been fulfilled.

Completion:

Completion shall take place on the second Business Day after fulfilment or waiver (if applicable) of the above conditions.

INFORMATION ON THE SELLER

The Seller is an investment holding company incorporated in the BVI with limited liability. The Seller owns the entire issued share capital of the Target. The ultimate beneficial owners of the Seller are the same ultimate beneficial owners of the Target under the 2012 Acquisition. The investment cost of the Target and Giant Sino Group for the Seller was approximately HK$780 and RMB55 million (equivalent to approximately HK$68.75 million) respectively. The investment cost for Giant Sino Group of approximately RMB55 million includes the acquisition cost for the entire equity interest in Yangfeng incurred by the Seller.

INFORMATION ON THE TARGET

The Target is a company incorporated in the BVI with limited liability and is holding 40% equity interest in Giant Sino. Giant Sino is holding the entire issued share capital of Fortune Chaser Limited, an investment holding company incorporated in Hong Kong, which in turn holds the entire equity interest in Yangfeng. Yangfeng is principally engaged in the business of the printing of cigarette packages in the PRC. On 3 July 2012, the Company acquired 60% equity interest in Giant Sino from the Target pursuant to the 2012 SP Agreement with a view to expanding business in the PRC, details of which can be referred to in the circular of the Company dated 25 May 2012. Giant Sino Group including Yangfeng has become non-wholly owned subsidiaries of the Company since then.

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LETTER FROM THE BOARD

The unaudited financial information of the Target (taking into account of its share of profit of Giant Sino Group by way of dividend income) for the two financial years ended 31 December 2013 is set out below:

			Year ended	Year ended
			31 December	31 December
			2013	2012
			approximately	approximately
			HK$’million	HK$’million
			(unaudited)	(unaudited)
Net	profits	before taxation	35.75	728.15
Net	profits	after taxation	35.75	656.15

The Target did not generate any revenue for the two years ended 31 December 2013. The net profits before/after taxation of the Target for the year ended 31 December 2013 were mainly dividend income and interest income. The net profits before taxation of the Target for the year ended 31 December 2012 mainly represent dividend income and gain on disposal of 60% equity interest in Giant Sino which was one-off in nature. The unaudited net asset value of the Target as at 30 June 2014 was approximately HK$10,060.

The unaudited financial information of Giant Sino Group for the two financial years ended 31 December 2013 is set out below:

			Year ended	Year ended
			31 December	31 December
			2013	2012
			approximately	approximately
			HK$’million	HK$’million
Net	profits	before taxation	135.36	279.11
Net	profits	after taxation	128.96	233.57

The unaudited net asset value of Giant Sino Group as at 30 June 2014 was approximately HK$125.86 million.

After Completion, the Target will become a wholly-owned subsidiary of the Company and its accounts will be consolidated into the books and accounts of the Group.

PROFIT GUARANTEE UNDER THE 2012 SP AGREEMENT

Pursuant to the 2012 SP Agreement, the Target agreed to provide a profit guarantee to the Company in relation to the financial performance of Yangfeng for a period of four years from 2012 Completion Date. The total consideration for the 2012 Acquisition is HK$720 million, out of which HK$360 million is subject to downward adjustment and the Company is obliged to pay interest to the Target accrued at 4% per annum on such HK$360 million calculated from the 2012 Completion Date to the first Anniversary Date (both dates inclusive). No interest is payable by the Company to the Target under the profit

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LETTER FROM THE BOARD

guarantee. The profit guarantee requires that Yangfeng meet a target net profit amount each year, which grows at a rate of 5% per year, during a period of four years from 2012 Completion Date, failing which the consideration for the 2012 Acquisition should be adjusted in the following manner:

(i) if the net profit of Yangfeng is less than RMB100 million (equivalent to approximately HK$125 million) in the Relevant Period of 2012, the remaining HK$360 million should be reduced by the Shortfall (as defined hereinafter) in the Relevant Period of 2012. In this case, the interest payable by the Company should be reduced by the Interest Deduction:

Shortfall (the “Shortfall”) is an amount equal to:

the target net profit (as set out in the 2012 SP Agreement for the Relevant Period) – actual net profit during such Relevant Period) x 8 x 60%;

except that for the Shortfall in the Relevant Period of 2013, the amount should be equal to:

{the target net profit in the Relevant Period of 2013 (i.e. RMB105,000,000 (equivalent to approximately HK$129,310,344.83)) – (actual net profit in the Relevant Period of 2013 + excess profit in the Relevant Period of 2012 (which is an excess amount equal to the 2012 actual net profit exceeds the 2012 target net profit) (if any))} x 8 x 60%.

The multiple of 8 in the above calculations represents the price to earnings ratio of approximately 8 times for the 2012 Acquisition.

If the Shortfall in the Relevant Period of 2012 exceeds the remaining HK$360 million, the Company should not be required to pay any of the remaining HK$360 million and the Target should pay the amount by which the Shortfall in the Relevant Period of 2012 exceeds the remaining HK$360 million to the Company;

(ii) if the net profit of Yangfeng is less than RMB105 million (equivalent to approximately HK$131.25 million) in the Relevant Period of 2013, the Target should pay an amount equal to the Shortfall in the Relevant Period of 2013 to the Company;
(iii) if the net profit of Yangfeng is less than RMB110.25 million (equivalent to approximately HK$137.81 million) in the Relevant Period of 2014, the Target should pay an amount equal to the Shortfall in the Relevant Period of 2014 to the Company; and
(iv) if the net profit of Yangfeng is less than RMB115,762,500 (equivalent to approximately HK$144.70 million) in the Relevant Period of 2015, the Target should pay an amount equal to the Shortfall in the Relevant Period of 2015 to the Company.

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LETTER FROM THE BOARD

Based on the historical financial performance of Yangfeng, the Target is not required to compensate the Company for any shortfall in respect of the profit guarantee of Yangfeng given by it under the 2012 SP Agreement for the first two years from 2012 Completion Date up to 30 June 2014. After Completion, the Vendor or its beneficial owners are not required to assume the liabilities of the Target under the 2012 SP Agreement. Any shortfall will be compensated by the Target to the Company through any dividend income from the Giant Sino Group. If the dividend income is insufficient to cover the shortfall, it will be recorded as an intercompany balance due by the Target to the Company to be settled by any of the future dividend income receivable by the Target. As the Target will become a wholly-owned subsidiary of the Company after Completion, any payment, if required, to be made by the Target to the Company in respect of the profit guarantee in relation to the financial performance of Yangfeng for the period from 1 July 2014 to 30 June 2016 pursuant to the 2012 SP Agreement would be eliminated at the consolidated accounts of the Group in accordance with the applicable accounting standards. Such settlement arrangement will become an internal affair of the Group and thus the profit guarantee under the 2012 SP Agreement is in substance removed as a result of the Acquisition.

REASONS FOR THE ACQUISITION

The Company is an investment holding company with its subsidiaries principally engaged in the printing of cigarette packages for PRC cigarette manufactures and provision of printing services to customers including international publishers and multi-national corporations.

Subsequent to completion of the 2012 Acquisition, the Group benefits from the financial performance of Giant Sino Group as the profits of Giant Sino Group have been consolidated to the accounts of the Group. The Board considers that the 2012 Acquisition was in line with the development strategy of the Company. Despite the financial performance in the printing of cigarette packages segment of the Group was slightly affected in the first half of 2014 due to the short term decrease in high tier customer orders in the first quarter of 2014 brought by their stockpiling around the end of 2013, the Board considers that such situation has bottomed out in the second quarter and expects a strong recovery and is optimistic to foresee a compensating rebound in the second half of 2014 as the industry stock piled in early 2014 dwindles.

Notwithstanding that the results of this segment experienced a slight drop under strong price pressure brought by the intensifying tendering system, such pressure has been fully mitigated by the Group’s ongoing cost-cutting maneuver. Through the Acquisition, the Company could acquire the remaining 40% equity interest in Yangfeng, which is indirectly owned by the Target, and take full control in operating and managing Yangfeng, which will enhance the efficiency in implementing business decisions and developing strategies relating to Yangfeng. The Board is of the view that the 2012 Acquisition was part of the Group’s development strategies to enlarge its production capacity and market share through acquisition and by building a strategic relationship with major customers of Yangfeng, including a major customer who is one of the largest cigarette manufacturers in the PRC and has a dominating market position. After two years of relationship building and operational transition since the 2012 Completion Date, the Group has built up good relationship with the major customers, i.e. cigarette

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LETTER FROM THE BOARD

manufacturers, of Yangfeng. However, given that the Group is only interested in 60% of the equity interest in Yangfeng and not the sole decision maker in practice, the major customers, i.e. cigarette manufacturers, of Yangfeng would involve the Seller or the previous management of Yangfeng for discussion or negotiation. Acquiring the remaining equity interest in Yangfeng through the Acquisition can further strengthen the strategic relationship between the Group and the major customers of Yangfeng. In addition, the Company expects to generate cost saving synergies as a result of sharing of resources between the Group and the Giant Sino Group after Completion and to utilise the research and development capacity of Yangfeng efficiently. Furthermore, the Group believes that the Acquisition would further strengthen its product base offered to the customers and improve the performance of the Company in future by expanding its sales with the customer network of the Group and Yangfeng.

Taking into account that (i) the Acquisition is in line with the Group’s business strategy; (ii) taking full control in operating and managing Yangfeng would enhance the efficiency in implementing business decisions and developing strategies relating to Yangfeng; (iii) the Acquisition could further strengthen the strategic relationship between the Group and the major customers of Yangfeng; (iv) the cost saving synergies expected to be generated from the Acquisition; (v) the Acquisition would further strengthen the product and customer base of the Group; and (vi) the Consideration has taken into account the potential compensation which might be obtained from the Target under the profit guarantee pursuant to the 2012 SP Agreement notwithstanding that the Variation is regarded as a removal of the profit guarantee pursuant to the 2012 SP Agreement, as balance with the benefits of the Acquisition as described above, the Board considers the Acquisition is beneficial to the Company and that the terms of the Agreement and the Variation are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

After Completion, the Target will become a wholly-owned subsidiary of the Company and the Variation constitutes a material variation to the terms of the 2012 SP Agreement and hence the Acquisition and the Variation will be subject to independent Shareholders’ approval requirements under the Listing Rules.

No Director has any material interest in the Acquisition and the Variation and none of them is required to abstain from voting on the Board resolution for approving the Acquisition and the Variation. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquires, no Shareholder has a material interest in the Acquisition and the Variation. No Shareholder is required to abstain from voting if the

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LETTER FROM THE BOARD

Company were to convene a general meeting for the approval of the Acquisition and the Variation. Pursuant to Rule 14A.37 of the Listing Rules, a written shareholders’ approval of the Company has been obtained from Profitcharm and Sinorise (both being wholly-owned by Mr. Cai Xiao Ming, David, the Chairman of the Board and an executive Director), who together hold approximately 57.2% of the issued share capital of the Company and hence no general meeting for the independent Shareholders’ approval of the Acquisition and the Variation is required to be held.

GENERAL

The Independent Board Committee comprising Mr. Lui Tin Nang, Mr. Lam Ying Hung, Andy and Mr. Siu Man Ho, Simon, being all independent non-executive Directors, has been formed to advise the independent Shareholders on the Acquisition and the Variation. TC Capital has been appointed to advise the Independent Board Committee and the independent Shareholders in this regard.

Your attention is drawn to the letter from the Independent Board Committee set out on page 16 of this circular. The Independent Board Committee, having taken into account the advice of TC Capital, the text of which is set out on pages 17 to 35 of this circular, considers that the Acquisition and the Variation are not in the ordinary and usual course of business of the Company but are on normal commercial terms after arm’s length negotiations between the parties and that the terms of the Agreement and the Variation are fair and reasonable so far as the Company and the independent Shareholders are concerned and the entering into of the Agreement and the Variation are in the interests of the Company and the Shareholders as a whole.

No general meeting will be held to approve the Acquisition and the Variation and the transactions contemplated thereunder.

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

Yours faithfully For and on behalf of the Board

Brilliant Circle Holdings International Limited Cai Xiao Ming, David Chairman

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [45 x 57] intentionally omitted <==

BRILLIANT CIRCLE HOLDINGS INTERNATIONAL LIMITED 貴聯控股國際有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 1008)

12 December 2014

To the independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPEROR GREAT INVESTMENTS LIMITED AND EFFECTIVE VARIATION OF TERMS OF THE 2012 SP AGREEMENT

We refer to the circular dated 12 December 2014 issued by the Company (the “Circular”), of which this letter forms part. Terms used in this letter shall bear the same meanings as given to them in the Circular unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider the Acquisition and the Variation and to advise the independent Shareholders as to the fairness and reasonableness of the Acquisition and the Variation. TC Capital has been appointed to advise the Independent Board Committee and the independent Shareholders in this regard.

We wish to draw your attention to the letter from the Board, as set out on pages 5 to 15 of the Circular, and the letter from TC Capital to the Independent Board Committee and the independent Shareholders which contains its advice to us in respect of the Acquisition and the Variation, as set out on pages 17 to 35 of the Circular.

Having taken into account the advice of TC Capital, we consider that: (i) the Acquisition and the Variation are on normal commercial terms but not in the ordinary and usual course of business of the Company; (ii) the terms of the Agreement and the Variation are fair and reasonable so far as the Company and the independent Shareholders are concerned, and (iii) the entering into of the Agreement and the Variation are in the interests of the Company and the Shareholders as a whole. We would recommend the independent Shareholders to vote in favor of the ordinary resolution(s) to approve the Acquisition and the Variation if a general meeting were to be held to approve the Acquisition and the Variation and the transactions contemplated thereunder.

Yours faithfully, for and on behalf of the Independent Board Committee

Lam Ying Hung, Andy Lui Tin Nang Siu Man Ho, Simon Independent Independent Independent non-executive Director non-executive Director non-executive Director

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LETTER FROM TC CAPITAL

The following is the full text of the letter of advice from TC Capital in respect of the Acquisition and the Variation, and is prepared for the purpose of incorporation into this circular.

==> picture [61 x 61] intentionally omitted <==

TC Capital Asia Limited 天財資本亞洲有限公司

12 December 2014

The Independent Board Committee and the independent Shareholders of Brilliant Circle Holdings International Limited

Dear Sir/Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPERIOR GREAT INVESTMENTS LIMITED AND EFFECTIVE VARIATION OF TERMS OF 2012 SP AGREEMENT

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the independent Shareholders in relation to the Acquisition and the Variation, details of which are set in the section headed “Letter from the Board” (the “ Board Letter ”) contained in the circular dated 12 December 2014 (the “ Circular ”) issued to the Shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

Background and terms of the Acquisition and the Variation are set out in the Board Letter contained in the Circular. Our role as the independent financial adviser is to give our opinion as to whether the terms of the Agreement and the Variation are on normal commercial terms, fair and reasonable so far as the independent Shareholders are concerned and whether the entering into of the Acquisition and the Variation are in the interests of the Company and the Shareholders as a whole.

The Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. The Target holds 40% equity interest in Giant Sino, the remaining 60% equity interest in Giant Sino is held by the Company. The Seller, through the Target, is therefore regarded as a substantial shareholder of a non-wholly owned subsidiary of the Company. Accordingly, the Seller is a connected person of the Company at the subsidiary level, and thus the Acquisition also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. After Completion, the Target will become a wholly-owned subsidiary of the Company and the Variation constitutes a material variation to the terms of the 2012 SP Agreement and hence the Acquisition and the Variation will be subject to independent Shareholders’ approval requirements under the Listing Rules.

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LETTER FROM TC CAPITAL

As set out in the Board Letter, no Shareholder has a material interest in the Acquisition and the Variation and no Shareholder is required to abstain from voting if the Company were to convene a general meeting for the approval of the Acquisition and the Variation. Pursuant to Rule 14A.37 of the Listing Rules, written shareholders’ approvals have been obtained from Profitcharm and Sinorise (both being wholly-owned by Mr. Cai Xiao Ming, David, the Chairman of the Board and an executive Director), who together hold approximately 57.2% of the issued share capital of the Company and hence no general meeting for the independent Shareholders’ approval of the Acquisition and the Variation is required to be held.

An Independent Board Committee, comprising all independent non-executive Directors, namely Mr. Lui Tin Nang, Mr. Lam Ying Hung, Andy and Mr. Siu Man Ho, Simon, has been formed to advise the independent Shareholders as to whether the terms of the Acquisition and the Variation are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. We have been appointed by the Company as the independent financial adviser to advise the Independent Board Committee and the independent Shareholders in this regard. As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to our independence.

BASIS OF OPINION

In formulating our opinion and recommendation, we have considered, among other things, (i) the Agreement; (ii) the 2012 SP Agreement; (iii) the annual report of Company for the year ended 31 December 2013 (the “ 2013 AR ”); (iv) the interim report of the Company for the six months ended 30 June 2014 (the “ 2014 IR ”); (v) the circular of the Company dated 25 May 2012 in relation to the 2012 Acquisition (the “ 2012 Acquisition Circular ”) and (vi) other information as set out in the Circular.

We have also relied on all relevant information, opinions and facts supplied and represented by the Company, the Directors and the management of the Company. We have assumed that all such information, opinions, facts and representations, including those contained or referred to in the Circular, for which the Company is fully responsible, were true and accurate in all respects as at the date hereof and may be relied upon. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company, and the Company has confirmed that no material facts have been withheld or omitted from the information provided and referred to in the Circular, which would make any statement therein misleading.

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 independent verification of the information provided by the Directors and the representatives of the Company, nor have we conducted any form of in-depth investigation into the businesses, affairs, operations, financial position or future prospects of the Group, the Target, the Giant Sino Group, the Seller and any of their respective subsidiaries and associates.

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LETTER FROM TC CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion in respect of the Acquisition and the Variation, we have taken into consideration the following principal factors and reasons:

I. Background of and reasons for the Acquisition

Information of the Group

The Company is an investment holding company with its subsidiaries principally engaged in the printing of cigarette packages for PRC cigarette manufacturers and provision of printing services to customers including international publishers and multi-national corporations. The Group’s operating and reportable segments currently are: (i) printing of cigarette packages, (ii) provision of printing services, and (iii) manufacturing of laminated papers.

Set out below are the audited consolidated financial information of the Group for the two years ended 31 December 2013 and the unaudited consolidated financial information of the Group for the six months ended 30 June 2014 as extracted from the 2013 AR and 2014 IR respectively:

Revenue: – Printing of cigarette packages – Provision of printing services – Manufacturing of laminated papers Net profit after tax	Year ended 31 December Six months ended 30 June 2012 2013 2013 2014 HK$’million HK$’million HK$’million HK$’million (audited) (audited) (unaudited) (unaudited) 1,653.2 1,846.1 808.8 762.2 250.2 209.7 116.9 86.1 36.0 36.8 26.2 23.2 1,939.4 2,092.6 951.9 871.5 463.1 501.9 248.1 199.3	Year ended 31 December Six months ended 30 June 2012 2013 2013 2014 HK$’million HK$’million HK$’million HK$’million (audited) (audited) (unaudited) (unaudited) 1,653.2 1,846.1 808.8 762.2 250.2 209.7 116.9 86.1 36.0 36.8 26.2 23.2 1,939.4 2,092.6 951.9 871.5 463.1 501.9 248.1 199.3
		871.5 199.3

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LETTER FROM TC CAPITAL

				As at
		As at 31	December	30 June
		2012	2013	2014
		HK$’million	HK$’million	HK$’million
		(audited)	(audited)	(unaudited)
Net	assets	2,482.2	2,895.3	2,829.5

As illustrated in the table above, the revenue and net profit of the Group increased by approximately 7.9% and 8.4% for the year ended 31 December 2013 as compared to the corresponding amount in the previous year. As disclosed in the 2013 AR, such increases were mainly attributable to the full-year consolidation of the revenue and results of Giant Sino Group in the Group’s account in 2013 after completion of the acquisition of Giant Sino Group in July 2012. As disclosed in the 2014 IR, the revenue of the Group decreased by approximately 8.4% as compared to the corresponding period in the previous year. The decrease in revenue from the cigarette package printing segment was mainly due to short term decrease in high tier customer orders in the first quarter of 2014 brought by their stockpiling around the end of 2013. Such problem has bottomed out in the second quarter and the Group’s management expected a strong recovery for the rest of 2014. As a result, the Group’s net profit decreased by approximately 19.7% for the six months ended 30 June 2014 as compared to the same period in last year. The Group’s net assets increased by approximately 16.6% as at 31 December 2013 as compared to 31 December 2012, and was approximately HK$2.8 billion as at 30 June 2014.

Information of the Target and Giant Sino Group

The Target is a company incorporated in the BVI with limited liability and is holding 40% equity interest in Giant Sino. Giant Sino is holding the entire issued share capital of Fortune Chaser Limited, an investment holding company incorporated in Hong Kong, which in turn holds the entire equity interest in Yangfeng. Yangfeng is principally engaged in the business of the printing of cigarette packages in the PRC. On 3 July 2012, the Company acquired 60% equity interest in Giant Sino from the Target pursuant to the 2012 SP Agreement, details of which can be referred to the 2012 Acquisition Circular. At present, Giant Sino Group including Yangfeng are non-wholly owned subsidiaries of the Company.

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LETTER FROM TC CAPITAL

Upon Completion, the Target will become a wholly-owned subsidiary of the Company and its accounts will be consolidated into the books and accounts of the Group. In essence, the Company will have both a direct interest of 60% and an indirect interest (through the Target) of 40% in Giant Sino and therefore Giant Sino will become a wholly-owned subsidiary of the Company upon Completion. The following chart illustrates the shareholding structure of the Target and Giant Sino Group:

• Existing

==> picture [318 x 193] intentionally omitted <==

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

Seller
100%
Target Company
40% 60%
Giant Sino
100%
Giant Sino Fortune Chaser Limited
Group
100%
Yangfeng
----- End of picture text -----

Immediately upon Completion

==> picture [292 x 192] intentionally omitted <==

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

Company
100%
Target 60%
40%
Giant Sino
100%
Giant Sino Fortune Chaser Limited
Group
100%
Yangfeng
----- End of picture text -----

– 21 –

LETTER FROM TC CAPITAL

The unaudited financial information of the Target (taking into the account of its share of profit of Giant Sino Group by way of dividend income) for the two financial years ended 31 December 2013 is set out below:

		Year ended 31 December	Year ended 31 December
		2012	2013
		HK$’million	HK$’million
		(unaudited)	(unaudited)
Profit	before taxation	728.15	35.75
Profit	after taxation	656.15	35.75

The unaudited financial information of Giant Sino Group for the two financial years ended 31 December 2013 is set out below:

		Year ended 31 December	Year ended 31 December
		2012	2013
		HK$’million	HK$’million
		(unaudited)	(unaudited)
Profit	before taxation	279.11	135.36
Profit	after taxation	233.57	128.96

The unaudited net asset value of Giant Sino Group was approximately HK$125.86 million as at 30 June 2014.

Based on the financial information above, we noted that the performance of Giant Sino Group has dropped significantly in financial year ended 2013 compared to financial year 2012. We have discussed with the Company and noted that the high net profit in 2012 was attributable to other income of approximately HK$97.65 million (HK$7.69 million for financial year ended 2013) arising mainly from the accounting gains due to consolidation of Yangfeng accounts as part of the 2012 Acquisition. Among the HK$97.65 million other income, the waiver of shareholder’s loan of approximately HK$67.72 million and negative goodwill of approximately HK$22.58 million, together contributed approximately HK$90.30 million to the other income. Excluding the aforesaid waiver of shareholder’s loan and negative goodwill, the profit after tax of Giant Sino Group drops from approximately HK$143.27 million in 2012 to approximately HK$128.96 million in 2013, representing a decrease of approximately 9.99%. According to the Company, this

– 22 –

LETTER FROM TC CAPITAL

slight decrease is attributable to the increase of packaging stockpile of its customers. It is expected that the orders will resume to normal levels as the stockpile drops to a low level in 2014.

Outlook of the cigarette packaging industry in the PRC

With the continued growth in the national economy and consumption, domestic demand for cigarettes witnessed a sustained steady growth in the past few years. According to statistics of the National Bureau of Statistics of the PRC, total cigarettes sales quantities in the PRC increased from approximately 6,192.0 billion sticks in 2010 to approximately 6,674.7 billion sticks in 2013. As shown in the table below, cigarettes sales in the PRC has a seasonal pattern in which sales was the lowest in the first quarter and gradually increased in the next quarter throughout the year until the last quarter which generates the highest sales for the whole year. On a year on year basis, the industry has grown at a compounding annual growth rate of approximately 2.5%.

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total	(Approximate quantity in billion sticks) 2010 2011 2012 2013 670.5 700.0 705.2 743.0 1,259.3 1,290.1 1,323.2 1,338.0 1,898.0 1,960.1 1,998.6 2,017.7 2,364.2 2,443.2 2,540.3 2,576.0 6,192.0 6,393.4 6,567.3 6,674.7	(Approximate quantity in billion sticks) 2010 2011 2012 2013 670.5 700.0 705.2 743.0 1,259.3 1,290.1 1,323.2 1,338.0 1,898.0 1,960.1 1,998.6 2,017.7 2,364.2 2,443.2 2,540.3 2,576.0 6,192.0 6,393.4 6,567.3 6,674.7
		6,674.7

Source: National Bureau of Statistics of the PRC

As the cigarette industry further expanded, it has been undergoing a consolidation initiated by the PRC government in recent years. In 2010, the State Tobacco Monopoly Administration (中國國家煙草專賣局) (the “ STMA ”) announced the “532” and “461” plans to facilitate the consolidation process and enhance the business scale of top-tier cigarette brands. According to an article dated 11 August 2010 published on the website of the STMA (www.tobacco.gov.cn), the “532” plan aims to cultivate five cigarette brands achieving an annual production volume of over two million master cartons, three cigarette brands with an annual production volume of over three million master cartons, and two cigarette brands realising over five million master cartons by 2015 and the “461” plan was set to bring up twelve cigarette brands with an annual sales turnover of over RMB40 billion, among which six brands would reach a turnover of over RMB60 billion with one cigarette brand achieving an annual turnover of over RMB100 billion by 2015. In additional to further the consolidation process and enhance the business scale of the top-tier cigarette brands, the PRC government continues to encourage cigarette manufacturers to develop high-end products that require a higher level of production and technological standards so as to maintain cigarette brands value. As such, these higher end products would require not just a higher and better quality

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LETTER FROM TC CAPITAL

packaging to protect its cigarette, but also to reflect a higher brand value. New packaging technologies, such as better sealing boxes to retain the freshness of the cigarettes to prevent it from turning stale or to retain the taste of the tobacco, preventing it from turning moldy, packaging that uses more recycle paper, high crush resistance cigarette boxes, auto-lock flip cigarette box designs, counterfeit protection technologies, are some of the new technologies revolutionising the current cigarettes packaging, including the shift of soft pack to flip-top box pack as soft pack cigarettes soon becomes obsolete or used only by low end cigarettes. As mentioned in the 2013 AR, in face of irreversible trend of dwindling profit of market of lower tier products, the Company restructured its marketing and production teams gearing towards top tier market and such effort had proved to be fruitful where the sales amount of these products in 2013 has doubled, compared with last year. In addition, the ongoing pursuit to boost manufacturing efficiency had complemented the benefit of such market repositioning, and together gave rise to modest increase of profit margin and production volume in 2013 when compared with 2012.

Looking ahead, the upgrade of cigarette products will definitely stimulate the demand for packaging and will enhance the quality of cigarette packaging. The PRC government has implemented measures to support the growth of the cigarette printing and packaging industry in the PRC. According to the Printing Industry Twelfth Five-Year Period (2011–2015) Development Plan (印刷業 “十二五” 時期發展規劃) published in May 2011 and available on the website of the State Administration of Press, Publication, Radio, Film and Television of the PRC (中華人民共和國國家新聞出版廣電總局) (www.gapp.gov.cn), the PRC government estimated that the total value of production output of the PRC printing industry will exceed RMB1,100 billion towards the end of the Twelfth Five-Year Period and China will become the second largest printing country in the world. Therefore, it is expected that cigarette packaging printing industry will benefit from the expected increase in the production output of the PRC printing industry in general. According to an article dated 20 October 2014 published on the website of the Jiangsu Province Wuxi City Tobacco Monopoly Administration (江蘇省無錫市煙草專賣局) (tobacco.wuxi.gov.cn), the total cigarette recycled packaging usage was approximately 7.52 million boxes for the nine months ended 30 September 2014, representing approximately 75.2% of the total target for the 2014 whole year which implies that the total target is 10 million boxes in 2014. In addition, according to an article dated 22 October 2014 published on the website of the STMA (www.tobacco.gov.cn), the STMA targets the cigarette packaging recycling usage in the packaging industry to reach 13.5 million boxes in 2015, representing a growth rate of approximately 35% as compared to the 2014 target. This increase in cigarette packaging recycling usage will result in new and quality packaging manufacturer, who has a better control over the use of recycle paper, having a market advantage over traditional paper manufacturers. Based on the above, we are of the view that there is growth potential in the cigarette packaging industry in the PRC and the outlook remains positive in the future.

Reasons for and benefits of the Acquisition

Since the completion of the 2012 Acquisition, the Group has been benefiting from the financial performance of Giant Sino Group as the profits of Giant Sino Group have been consolidated to the accounts of the Group. Despite the financial

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LETTER FROM TC CAPITAL

performance in the printing of cigarette packages segment of the Group was slightly affected in the first half of 2014 due to the short term decrease in high tier customer orders in the first quarter of 2014 brought by their stockpiling around the end of 2013, the Directors consider that such situation has bottomed out in the second quarter and expects a strong recovery and is optimistic to foresee a compensating rebound in the second half of 2014 as the industry stock piled in early 2014 dwindles. As analysed under the paragraph headed “Outlook of the cigarette packaging industry in the PRC” above, we note that cigarettes sales quantities in the PRC has a seasonal pattern in recent years where sales in the first quarter was the lowest in a year and sales in the second half, particularly in the fourth quarter, was generally greater than sales in the first half of a year. Therefore, we are of the view that the expected rebound in the second half of 2014 of the Group’s cigarette packaging segment as compared to the first half of 2014 is in line with the industry trend.

Notwithstanding that the results of this segment experienced a slight drop under strong price pressure brought by the intensifying tendering system, such pressure has been fully mitigated by the Group’s ongoing cost-cutting maneuver. Through the Acquisition, the Company could acquire the remaining 40% equity interest in Yangfeng, which is indirectly owned by the Target, and take full control in operating and managing Yangfeng, which will enhance the efficiency in implementing business decisions and developing strategies relating to Yangfeng. In addition, the Company expects to generate cost saving synergies as a result of sharing of resources between the Group and the Giant Sino Group after Completion and to utilise the research and development capacity of Yangfeng efficiently. Furthermore, we are advised by the Company that the Group combine the strengths of the Group and Yangfeng to improve on the products offered to its customers. The Group can also cross market each other’s products, and utilise an enlarged network of customers improving the performance of the Company in the long run.

In view of (i) the Acquisition being in line with the Group’s business strategy to expand its business; (ii) there is growth potential in the cigarette packaging industry in the PRC and the outlook remains positive in the future; and (iii) the full ownership control of Yangfeng will enhance the efficiency in implementing business decisions and developing strategies relating to Yangfeng, generate cost saving synergies to the Group, enable the Group to utilise the research and development capacity of Yangfeng efficiently and strengthen the Group’s product base offered to its customers and improve the performance of the Company in the future by expanding its sales with the customer network of the Group and Yangfeng, we are of the view that the reasons for the Acquisition is fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

II. Principal Terms of the Agreement

Assets to be acquired

Pursuant to the Agreement, the Company has conditionally agreed to purchase the Sale Shares (which represents the entire issued share capital of the Target) from the Seller, free from encumbrances together with all accrued benefits and rights attached thereto and all dividends declared, made or paid after the date of the Agreement.

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LETTER FROM TC CAPITAL

Completion is conditional upon certain conditions precedent, being fulfilled or waived (as the case maybe) by the Company and the Seller at or before 12:00 noon on 31 December 2014, details of which are set out in the section headed “Conditions of the Acquisition” in the Board Letter.

The Consideration

Pursuant to the Agreement, the Consideration for the Sale Shares is HK$82.4 million, payable in cash on 30 June 2015. In the event that the Company elects to settle the payment for the Consideration before 30 June 2015, the Consideration shall be reduced by approximately HK$8,890 per day (the “ Downward Adjustment ”) if the payment is made earlier than 30 June 2015. As advised by the Company, the Downward Adjustment is calculated based on the assumed interest saved on 4% per annum (on the basis of a year of 365 days) during the period from September 2014 (when the negotiation with the Seller in relation to the Acquisition commenced) to June 2015 and that the 4% per annum used was the same as that in the 2012 SP Agreement.

As stated in the Board Letter, the Consideration was determined after arm’s length negotiations between the Company and the Seller with reference to the historical financial performance of Yangfeng for the year ended 31 December 2013 and after taking into consideration that the Company has already controlled the operation of Yangfeng and the Variation.

As disclosed in the announcement dated 3 July 2012, the Company completed acquisition of approximately 60% equity interest in Giant Sino for a consideration of HK$720 million in cash (“ 2012 Consideration ”). The maximum Consideration of HK$82.4 million, together with the 2012 Consideration, would imply a total consideration of approximately HK$802.4 million (“ Total Consideration ”). We are of the view that the Acquisition and the 2012 Acquisition should be taken as a whole as pricing of the remaining 40% equity interest has taken into consideration the terms of the Acquisition and the 2012 Acquisition, and the Variation. As such, comparing the Total Consideration as a whole could reflect better on the pricing of Giant Sino Group as a whole.

In order to determine the fairness and reasonableness of the Total Consideration, we have adopted the comparable approach whereby the Total Consideration is compared to the valuation of its industry peers, as this approach is a direct and commonly used valuation methodology. For our purpose of comparison and to the best of our knowledge, effort and endeavor and based on the information available from the website of the Stock Exchange, we have identified an exhaustive list of 6 comparable companies (the “ Comparable Companies ”) based on the following criteria: (i) companies listed on the Stock Exchange; (ii) companies whose principal business is similar to that of Yangfeng, i.e. being primarily engaged in the business of printing of cigarette packages in the PRC; and (iii) companies with more than 50% of its total revenue derived from the business of printing of cigarette packages in the PRC in their latest financial year. We consider that the Comparable Companies are fair and representative samples for comparison as the principal

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LETTER FROM TC CAPITAL

business of the Comparable Companies are similar to that of Yangfeng. We have made reference to the price to earnings ratio (“ PER ”) of the Comparable Companies. Details of our findings on the Comparable Companies are summarized in the table below:

		Closing price
		as at 13
		November
		2014, being
Company name		the date of the
(stock code)	Principal activities	Agreement	PER
		(HK$)	(times)
			(Note 1)
Brilliant Circle	Provision of the printing of	1.30	4.2
Holdings	package and decoration
International Ltd.	matters, research and
(1008)	development on printing
	technology, wholesale, import
	and export of the packaging
	products; printing of cigarette
	packages and manufacturing
	of laminated papers.
Jin Cai Holdings Co.	Design, printing and sale of	1.21	11.9
Ltd. (1250)	cigarette packages in the PRC
Sheen Tai Holdings	Manufacture and supply of	1.68	8.8
Group Co. Ltd.	cigarette packaging materials
(1335)	in the PRC
Jia Yao Holdings Ltd.	Design, manufacture and sales	1.20	n/a
(1626)	of paper cigarette packages		(Note 2)
	and, to a lesser extent, social
	product paper packages, in
	the PRC
Huaxi Holdings Co.	Manufacturing and sales of	1.93	8.9
Ltd. (1689)	cigarette packing materials in
	the PRC

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LETTER FROM TC CAPITAL

		Closing price
		as at 13
		November
		2014, being
Company name		the date of the
(stock code)	Principal activities	Agreement	PER
		(HK$)	(times)
			(Note 1)
AMVIG Holdings Ltd.	Print and manufacture cigarette	3.53	8.3
(2300)	packages and manufacture
	laminated papers and laser
	film
		Maximum	11.9
		Minimum	4.2
		Average	8.4
		Median	8.8
Yangfeng	Printing of cigarette packages in		5.9
	the PRC		(Note 3)

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

Notes:

The PER of the Comparable Companies is calculated based on their respective closing prices as quoted on the Stock Exchange on 13 November 2014, being the date of the Agreement, and their respective earnings per share for the latest full financial year.
Jia Yao Holdings Ltd. was listed on the Stock Exchange on 27 June 2014 and it has not yet published the earnings per share for the latest full year financial results as at the Latest Practicable Date. Therefore, no PER is calculated.
The implied PER is calculated based on the Total Consideration divided by the net profit after tax of Yangfeng for the year ended 31 December 2013 of approximately RMB108.3 million (equivalent to approximately HK$136.9 million) based on the unaudited management accounts of Yangfeng provided by the Company.

As shown in the above table, the implied PER as represented by the Total Consideration of approximately 5.9 times. If the 2012 Acquisition is ignored and the Acquisition is considered by itself without considering the Total Consideration, the Consideration would imply a PER of 1.5 times. We have also calculated the PER of the 2012 Acquisition and noted that a PER of 8.83 times was used in 2012 to determine the consideration of the 2012 Acquisition, which incidentally is the median PER of the Comparable Companies. If the Consideration were to be based on a PER of 8.8 times and the profit of Yangfeng in 2013 of approximately HK$136.9 million, the remaining 40% equity interest in Yangfeng, being the subject of the Acquisition would cost the Company a total of HK$481.95 million or an additional amount of approximately HK$399.55 million after deducting the current Consideration of HK$82.4 million.

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LETTER FROM TC CAPITAL

Based on the above, we are of the view that the Consideration and in particular the Total Consideration, which is substantially lower than the average and median of the PERs of the Comparable Companies of approximately 8.4 times and 8.8 times, respectively, is fair and reasonable so far as the independent Shareholders are concerned.

III. The Variation

Pursuant to the 2012 SP Agreement, the Target agreed to provide a profit guarantee to the Company in relation to the financial performance of Yangfeng for a period of four years from the 2012 Completion Date. The profit guarantee requires that Yangfeng meet a target net profit amount each year, which grows at a rate of 5% per year, during a period of four years from 2012 Completion Date, details of which are set out in the 2012 Acquisition Circular.

As set out in the Board Letter, based on the historical financial performance of Yangfeng, the Target is not required to compensate the Company for any shortfall in respect of the profit guarantee of Yangfeng given by it under the 2012 SP Agreement for the first two years from 2012 Completion Date up to 30 June 2014. We note that the Company has disclosed in its 2014 IR that the guaranteed net profits of Yangfeng for the first two years in aggregate up to 30 June 2014 have been met. As the Target will become a wholly-owned subsidiary of the Company after Completion, any payment, if required, to be made by the Target to the Company in respect of the profit guarantee in relation to the financial performance of Yangfeng for the period from 1 July 2014 to 30 June 2016 pursuant to the 2012 SP Agreement would be eliminated at the consolidated accounts of the Group in accordance with the applicable accounting standards. Such elimination is in substance a removal of the profit guarantee under the terms of the 2012 Acquisition.

In regards to the Variation, we have discussed with the management of the Company and were advised the inclusion of the profit guarantee under the 2012 SP Agreement was originally served to protect the interests of the Company from any potential short-term business operational issues that may result in poor profit performance in the process of integration and co-ordination with the newly acquired Giant Sino Group when the Company first acquired 60% of Giant Sino from the Target at the time of entering into of the 2012 SP Agreement. We are further advised by the Company that since the 2012 Completion Date up to the Latest Practicable Date, the Company did not encounter any material business operational issues with the operations of Giant Sino Group and the Giant Sino Group has been assisting the Group in making in-roads into new markets, which provided new opportunities for future growth.

In assessing the fairness and reasonableness of the Variation, we believed that it should be assessed together with the Acquisition as the Variation arises out of the Acquisition and was a factor considered in arriving at the Consideration. Although we noted that the Acquisition and the Variation are independent of each other in terms of documentation, we noted that the Variation was effectively factored into the Agreement by way of the structure of the Acquisition, which is the elimination of the profit guarantee upon completion of the Acquisition. Therefore, by assessing either the Acquisition or the Variation alone would present a biased view and they should therefore be considered as a whole.

– 29 –

LETTER FROM TC CAPITAL

As stated above, the Consideration of HK$82.4 million represents a discount of approximately HK$399.55 million if the Consideration were to be based on the PER of 2012 Acquisition or the median PER of the Comparable Companies. If the discount is calculated using the profit guarantee formula under the Variation, which is approximately HK$399.55 million discount divided by the product of 8 multiply by 0.60, it would equate to a Shortfall of almost HK$83.24 million (approximately RMB65.84 million) of future earnings below those promised within the profit guarantee of the Variation. The multiple of 8 in the above calculation represents the price earnings ratio of approximately 8 times for the 2012 Acquisition.

In assessing if the discount is fair, we would need to review the performance of Yangfeng over the most recent years.

	Financial	year ended	31 December	31 December
	2010	2011	2012	2013
Net profit after tax (RMB million)	71.22	110.32	116.39	108.31
Net profit after tax
(HK$ million)Note 1	90.03	139.46	147.13	136.92
Change year on year of net profit
after tax (%)		54.90	5.50	(6.94)

Note 1: Based on an exchange rate of HK$1.264171 to RMB1.

The net profit after tax of Yangfeng has grown significantly in 2010 and has been relatively stable in the most recent 3 years maintaining around the RMB110 million region per year with a drop of almost 7% in the most recent financial year end.

Taking a conservative approach, if we assume, for the purpose of a sensitivity analysis, that Yangfeng is unable to sustain the current profitability level and forms a downtrend from the current level over the next three years leading to a decline of net profit after tax of 7% per annum, based on 2013 decline of net profit after tax, the expected net profit after tax of Yangfeng in the next three years would look as if in the scenario modeling below. In the absence of any unforeseeable major events, including but not limited to disasters, epidemic or technology breakthrough that eliminate the smoking habit, we are of the view that taking a 7% decline is rather aggressive in view of (i) Yangfeng net profit after tax has been relatively stable for the last few years, (ii) cigarette is a product with a stable consumer base that has a relatively constant demand whereby smokers are not going to stop smoking abruptly, and (iii) the customers of Yangfeng, especially large cigarette companies, will not replace a packaging supplier within a short notice period and risk its cigarette products on new packager, including the risk of price and quality fluctuation of the packaging.

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LETTER FROM TC CAPITAL

Based on the above assumptions, we have created a scenario modeling below:

	Financial year	ending 31	December
	2014	2015	2016
Net profit after tax (RMB million)Note 5	100.72	93.67	87.12
Net profit after tax (HK$ million)Note 1, 5	127.33	118.42	110.13
Average net profit after tax of current and
next year (RMB million)Note 2	97.20	90.39
Profit guaranteed for the year
(RMB million)	110.25	115.76
Hypothetical guarantee Shortfall
(RMB million)Note 3	(13.05)	(25.37)
Hypothetical guarantee amount
(RMB million)Note 4	62.65	121.76
Hypothetical guarantee amount
(HK$ million)Note 1, 4	79.19	153.93

Notes:

Based on an exchange rate of HK$1.264171 to RMB1.
Average net profit after tax of current and following year is taken because the guarantee period starts from July each year to June of the following year.
Hypothetical guarantee Shortfall is the hypothetical Shortfall amount.
Hypothetical guarantee amount to be paid is based on the formula of Shortfall x 8 x 0.60.
The net profit after tax for each of the years ending 31 December 2014, 2015 and 2016 are just calculated assuming a decline of 7% in the net profit after tax from 2013. These figures do not represent a forecast by the Company for these financial years.

Based on the above illustration, if we apply a possible decline in net profit of Yangfeng, the Company could stand to gain back a total of approximately HK$233.12 million in the next 2 years, or a potential loss of this income if the Variation is accepted. However, we would need to consider if the Seller is still willing to offer the remaining 40% of Yangfeng at a heavily discounted price of HK$82.4 million. If the Seller insist on pricing the Acquisition at the market price or HK$481.95 million (calculated based on the product of the PER of 8.8 times and 40% of the net profit of Yangfeng for the year ended 31 December 2013 of HK$136.9 million) based on the same valuation formula used in the 2012 Acquisition, accepting the Variation and a discounted Consideration would be a much better option.

In view of the Variation is part of the terms of the Acquisition, whereby the Consideration and the Total Consideration is fair and reasonable on its own, we are of the view that accepting the Variation in return for a lower Consideration and Total Consideration is fair and reasonable. Furthermore, based on historical performance, the Giant Sino Group has performed within the expected profit guarantee range.

– 31 –

LETTER FROM TC CAPITAL

IV. Assessment of the Terms of the Agreement and the Variation

We are of the view that the terms of the Agreement and the Variation should be considered as a whole and not individually, as negotiation of the terms of the Agreement has taken into consideration of the 2012 Consideration and the Variation. In assessing if terms of the Agreement and the Variation is fair and reasonable, we have considered if:

(i) Total Consideration paid for 100% of Giant Sino Group is fair and reasonable

Based on our assessment of PER of Comparable Companies above, the Total Consideration paid for Giant Sino Group is substantially below both the average and mean PER of the Comparable Companies. Therefore, we are of the view that based solely on the consideration paid/to be paid, the Total Consideration is fair and reasonable. Furthermore, significant dividends has been declared by Giant Sino Group of approximately HK$68.6 million and HK$122.9 million for the year ended 31 December 2013 and the six months ended 30 June 2014, respectively. Since the completion of the 2012 Acquisition, the Company is entitled to receive its proportionate share of dividends from the Giant Sino Group, which implies the actual consideration paid for Giant Sino Group is actually lower than the Total Consideration.

(ii) The Variation is fair in view of the 100% ownership by the Group of the Giant Sino Group

Upon Completion, the Company will control 100% of the Giant Sino Group and the management of the Company would operate the Giant Sino Group as a wholly owned subsidiary of the Group. As (i) the Acquisition is related to the 2012 Acquisition as it is a further acquisition by the Company in the equity interest of Giant Sino through the Target; (ii) the Acquisition, in additional to the 2012 Acquisition, would give the Company full ownership control of the Giant Sino Group, and (iii) the Company is able to purchase the whole of Giant Sino Group at a fair and reasonable price due to the low price offered for the remaining 40% equity interest of the Giant Sino Group, the Acquisition together with the 2012 Acquisition should be considered in totality as a whole. As such, it is rational for the Group to be fully accountable for the financial performance of the Giant Sino Group under the management of the Company and accept the Variation. As such, we are of the view that the Variation as a result of the acquisition of Giant Sino Group in totality is fair and reasonable.

(iii) Accepting the Variation does not expose the Group to significant risk

The profit guarantee under the 2012 SP Agreement was originally planned as an insurance from any unforeseen business or operational issues that may result in poor profit performance during integration and co-ordination of the newly acquired Giant Sino Group. Since 2012, the Group has operated together with the Giant Sino Group and noted that the integration and co-ordination was smooth and effective. As such, the Company is of the view that the Giant Sino Group will bring significant benefits, both strategically and financially, to the Group. In view of (i) the performance of the Giant Sino Group over the last few years up till 30 June 2014,

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LETTER FROM TC CAPITAL

which has met all the profit guarantee levels, and (ii) the Company, after managing the subsidiary for more than two years and is aware of the factors affecting its profitability, is confident of having a better influence over the financial performance of Yangfeng, we are of the view that accepting the Variation is fair and reasonable as part of the terms of the Acquisition as the Company will have a better control on the revenue and cost of the Giant Sino Group.

(iv) The Acquisition provide benefits to the long term development of the Group’s business in future

As analysed under the paragraph headed “Outlook of the cigarette packaging industry in the PRC” in the section headed “Background of and reasons for the Acquisition” of this letter above, the STMA has been promulgating policies aiming at consolidating the cigarette production industry and promoting the overall quality of cigarette products in the PRC. The consolidation of the cigarette industry gives rise to increasing market concentration in terms of number of customers with strong bargaining power, brands positioned at high quality with a need for high level of production standards. We are advised by the Company that the 2012 Acquisition was part of the Group’s development strategies to enlarge its production capacity and market share through acquisition by building strategic relationships with the major customers of Yangfeng, which are among the largest cigarette manufacturers in the PRC. After two years of relationship building and operational transition since the 2012 Completion Date, the Board is satisfied with the new relationship between the Group and the major customers of Yangfeng. However, given the Group’s existing equity interest in Yangfeng that is only 60%, the major customers of Yangfeng in practice may not simply regard the Group as the sole decision maker but will sometimes also look to the Seller or the previous management of Yangfeng for discussion or negotiation. Acquiring the remaining equity interest in Yangfeng through the Acquisition can further strengthen the strategic relationship with the major customers of Yangfeng. In view of the market consolidation pressure in the cigarette industry and the dominating market position of the major customers of Yangfeng and their influential strategic relationships with the Group, we are of the view that although the Acquisition will result in the Variation, the Variation is a small risk, in view of the scenario analysis above whereby a Shortfall due to continual decline in net profit for 3 years will still be buffered by the low Consideration, that the Group should bear for the benefits that the Acquisition can bring to the long-term development of the Group’s business and is therefore fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM TC CAPITAL

V. Possible financial effects of the Acquisition

As at the Latest Practicable Date, the Company was interested in 60% of the total issued share capital of Giant Sino. As Giant Sino is currently a direct non-wholly owned subsidiary of the Company, the assets, liabilities and financial results of the Giant Sino Group have already been consolidated into the financial statements of the Group. Following completion of the Acquisition, the Target will become a wholly-owned subsidiary of the Company and its accounts will be consolidated into the books and accounts of the Group. In essence, the Company will have both a direct interest of 60% and an indirect interest (through the Target) of 40% in Giant Sino and therefore Giant Sino will become a wholly-owned subsidiary of the Company upon Completion.

Effect on earnings

As the Target will become a wholly-owned subsidiary of the Company upon Completion, the earnings of the Target will be consolidated into the financial statements of the Group. Furthermore, the Company’s equity interest in Giant Sino will increase from 60% to 100% upon Completion and therefore the profit attributable to the minority interest is expected to decrease and profit attributable to the owners of the Company is expected to increase.

Effect on net assets

As the Target will become a wholly-owned subsidiary of the Company upon Completion, the assets and liabilities of the Target will be consolidated into the financial statements of the Group. Furthermore, the shareholders’ equity attributable to minority interest is expected to decrease and the shareholders’ equity attributable to owners of the Company is expected to increase after taking into account the increase in the Company’s equity interest in Giant Sino upon Completion.

Effect on working capital

According to the 2014 IR, the Group had bank balances and cash of approximately HK$352.5 million as at 30 June 2014 which is sufficient to settle the Consideration. Therefore, the net current assets of the Group may be decreased by the payment of the Consideration.

It should be noted that the aforementioned analyses are for illustrative purposes only and do not purport to represent how the financial position of the Group will be upon completion of the Acquisition.

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LETTER FROM TC CAPITAL

RECOMMENDATION

Having considered the principal factors and reasons as discussed above, in particular, (i) the terms of the Acquisition, the Variation and the 2012 Acquisition should be considered as a whole; (ii) the implied PER as represented by the Consideration of approximately 1.5 times and the Total Consideration of approximately 5.9 times is substantially lower than the average and median of the PERs of the Comparable Companies; (iii) the Variation in consideration for the lower Consideration and Total Consideration and in view of the 100% ownership by the Group of the Giant Sino Group; (iv) the Variation only exposes the Group to a small risk in view of the Group’s control over Yangfeng, and (v) in return the Acquisition further cements the relationships of the Group with Yangfeng’s major customers, we are of the view that the terms of the Agreement and the Variation are on normal commercial terms, fair and reasonable so far as the independent Shareholders are concerned, and that the Acquisition and the Variation are in the interests of the Company and the Shareholders as a whole. Accordingly, we would recommend that the independent Shareholders, as well as the Independent Board Committee to advise the independent Shareholders, to approve the Acquisition and the Variation.

Yours faithfully, For and on behalf of TC Capital Asia Limited Edward Wu Managing Director

Note: Mr. Edward Wu of TC Capital Asia Limited is a responsible officer licensed under the SFO to engage in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities having over 13 years of experience in investment banking and corporate finance.

– 35 –

APPENDIX

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Director’s and chief executives’ interests and short positions in the shares, underlying shares or debentures of the Company or its associated corporations

As at the Latest Practicable Date, the following Directors or the chief executive of the Company had or were deemed to have interests or short positions 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 provision 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 pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules were as follows:

				Approximate
				percentage
		No. of		of issued
Name of Director	Nature of interest	Shares held	Position	share capital
Mr. Cai Xiao Ming,	Interest of	851,456,892	Long	57.20%
David_(Note 1)_	controlled
	corporation
Mr. Qin Song	Beneficial owner	321,062	Long	0.02%

Note:

274,325,278 Shares are held by Profitcharm and 577,131,614, Shares are held by Sinorise, the entire issued share capital of these two entities are wholly and beneficially owned by Mr. Cai Xiao Ming, David.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions 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

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APPENDIX

GENERAL INFORMATION

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, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange to be disclosed in this circular.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, an interest or a short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

				Approximate
				percentage
			No. of	of issued
Name of Shareholder	Notes	Nature of interest	Shares held	share capital
Sinorise	1	Beneficial owner	577,131,614 (L)	38.8%
Profitcharm	2	Beneficial owner	274,325,278 (L)	18.4%
Ares BCH Holdings L.P.	3	Beneficial owner	183,034,214 (L)	12.3%
ACOF Asia Management	3	Controlled	183,034,214 (L)	12.3%
L.P.		Corporation
Ares Management	3	Controlled	183,034,214 (L)	12.3%
(Cayman) Ltd.		Corporation
Partners Group Holding	4	Beneficial owner	50,961,240 (L)	7.0%
AG

(L) denotes long position

Notes:

Sinorise is a company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is wholly and beneficially owned by Mr. Cai Xiao Ming, David. Mr. Cai Xiao Ming, David is also the director of Sinorise.
Profitcharm is a company incorporated in the British Virgin Islands with limited liability, the entire issued share capital of which is wholly and beneficially owned by Mr. Cai Xiao Ming, David. Mr. Cai Xiao Ming, David is also the director of Profitcharm.
Mr. Sean Xing He, a non-executive Director, joined Ares Management (Cayman), Ltd. in March 2010 and is a director of Ares Management (Cayman), Ltd. Ares Management (Cayman), Ltd. is the general partner of ACOF Asia Management, L.P. which is the general partner of Ares BCH Holdings, L.P.
The number of Shares held by Partners Group Holding AG was filed on or about 23 September 2011. As such, the Board believes that the number of Shares reported may not reflect: (i) the subdivision of one issued share of HK$0.01 in the capital of the Company into two Shares effective on 11 June 2013; and (ii) the scrip dividend of HK5.9 cents paid by the Company to all Shareholders for the year ended 31 December 2012.

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APPENDIX

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, an interest or a short position in the Shares or underlying Shares (including any interests in options in respect of such share capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO. Save as disclosed above, none of the Director is a director or employee of the companies which has an interest or a short position in the Shares or underlying shares of the Company.

(c) Director’s interests in contracts and assets

As at the Latest Practicable Date,

(i) there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to the business of the Group; and
(ii) none of the Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 December 2013, being the date to which the latest published audited consolidated financial statements of the Group were made up.

(d) Competing business

As at the Latest Practicable Date, none of the Directors and their respective associates were interested in businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group.

3. SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, save for the drop in both the turnover and the profit of the Group for the six months ended 30 June 2014 as compared to the same period of 2013 due to the short term setback in early months of 2014 as disclosed in the interim report of the Company for 2014, the Directors were not aware of any circumstances or events that may give rise to a material adverse change in the financial or trading position of the Group since 31 December 2013, being the date of which the latest audited financial statement of the Group were made up.

– 38 –

APPENDIX

GENERAL INFORMATION

5. EXPERT’S QUALIFICATION AND CONSENT

TC Capital is a licensed corporation to carry out type 1 and type 6 regulated activities under the SFO which has provided its opinion contained in this circular.

TC Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and/or references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, TC Capital was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any Shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group nor did it have any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2013, being the date to which the latest published audited financial statements of the Group were made up.

6. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on a business day at the principal office of the Company in Hong Kong at Room 3104–5, 31/F, Universal Trade Centre, 3–5 Arbuthnot Road, Central, Hong Kong for a period of 14 days from the date of this circular:

(a) the letter from the Independent Board Committee, the text of which is set out on page 16 of this circular;
(b) the letter of advice from TC Capital, the text of which is set out on pages 17 to 35 of this circular;
(c) the written consent referred to in the paragraph headed “Expert’s qualification and consent” in this appendix;
(d) the 2012 SP Agreement;
(e) the Agreement; and
(f) this circular.

– 39 –

AI assistant

Litu Holdings Limited — Proxy Solicitation & Information Statement 2014

49624_rns_2014-12-11_5a372a1a-2768-41f8-ba90-35dbbc77a84f.pdf

BRILLIANT CIRCLE HOLDINGS INTERNATIONAL LIMITED 貴聯控股國際有限公司 (incorporated in the Cayman Islands with limited liability) (Stock code: 1008)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPEROR GREAT INVESTMENTS LIMITED AND

EFFECTIVE VARIATION OF TERMS OF THE 2012 SP AGREEMENT

BRILLIANT CIRCLE HOLDINGS INTERNATIONAL LIMITED 貴聯控股國際有限公司

(Stock code: 1008)

Executive Directors:

Non-executive Director:

Registered office:

Independent non-executive Directors:

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPEROR GREAT INVESTMENTS LIMITED AND EFFECTIVE VARIATION OF TERMS OF THE 2012 SP AGREEMENT

INTRODUCTION

THE AGREEMENT

Date:

Parties:

Assets to be acquired:

Consideration:

Sensitivity analysis

Conditions of the Acquisition:

Completion:

INFORMATION ON THE SELLER

INFORMATION ON THE TARGET

PROFIT GUARANTEE UNDER THE 2012 SP AGREEMENT

REASONS FOR THE ACQUISITION

LISTING RULES IMPLICATIONS

GENERAL

BRILLIANT CIRCLE HOLDINGS INTERNATIONAL LIMITED 貴聯控股國際有限公司

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPEROR GREAT INVESTMENTS LIMITED AND EFFECTIVE VARIATION OF TERMS OF THE 2012 SP AGREEMENT

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF EMPERIOR GREAT INVESTMENTS LIMITED AND EFFECTIVE VARIATION OF TERMS OF 2012 SP AGREEMENT

INTRODUCTION

BASIS OF OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Background of and reasons for the Acquisition

Information of the Group

Information of the Target and Giant Sino Group

• Existing

Outlook of the cigarette packaging industry in the PRC

Reasons for and benefits of the Acquisition

II. Principal Terms of the Agreement

Assets to be acquired

The Consideration

III. The Variation

IV. Assessment of the Terms of the Agreement and the Variation

(i) Total Consideration paid for 100% of Giant Sino Group is fair and reasonable

V. Possible financial effects of the Acquisition

Effect on earnings

Effect on net assets

Effect on working capital

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

(c) Director’s interests in contracts and assets

(d) Competing business

3. SERVICE CONTRACT

4. MATERIAL ADVERSE CHANGE

5. EXPERT’S QUALIFICATION AND CONSENT

6. DOCUMENTS AVAILABLE FOR INSPECTION

More from Litu Holdings Limited

Litu Holdings Limited Proxy Solicitation & Information Statement 2014