THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action you should take, you should consult a licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional advisor.

If you have sold or transferred all your shares in U-RIGHT International Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, the licensed securities dealer or registered institution or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the shares or other securities of the Company.

U-RIGHT INTERNATIONAL HOLDINGS LIMITED

(Provisional Liquidators Appointed) 佑威國際控股有限公司[*]

（已委任臨時清盤人）

(Incorporated in Bermuda with limited liability)

(Stock Code: 00627)

(1) STATUS ON RESUMPTION;

(2) CAPITAL RESTRUCTURING AND CHANGE OF BOARD LOT SIZE;

(3) DEBT RESTRUCTURING;

(4) FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS;

(5) THE BONUS ISSUE;

(6) ADOPTION OF NEW BYE-LAWS;

(7) PROPOSED APPOINTMENT OF NEW EXECUTIVE DIRECTOR; AND

(8) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser

Independent Financial Adviser

Underwriter

==> picture [157 x 29] intentionally omitted <==

A letter of advice from Messis Capital to the Independent Board Committee and the Independent Shareholders is set out on pages 55 to 71 of this circular.

To qualify for the Open Offer and the Bonus Issue, a Qualifying Shareholder’s name must appear on the register of members of the Company on the Record Date, which is currently expected to be 23 August 2013. In order to be registered as members of the Company on the Record Date, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 22 August 2013.

A notice convening the SGM to be held at Room 704, 3 Lockhart Road, Wanchai, Hong Kong at 10:00 a.m. on 19 August 2013 is set out on pages SGM-1 to SGM-10 of this circular. Whether or not you intend to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time fixed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting should you so wish. In such event, the instrument appointing a proxy shall be deemed revoked.

If the Underwriter terminates the Underwriting Agreement or if the conditions to the Underwriting Agreement have not been fulfilled in accordance therewith, the Open Offer will not proceed. Shareholders and potential investors are advised to exercise due caution when dealing in the Shares, and if they are in any doubt about their position they should consult their professional advisors.

For identification purpose only

26 July 2013

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from the Board and the Provisional Liquidators . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	54
Letter from Messis Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – Unaudited pro forma financial information of the Group. . . . .	II-1
Appendix III – Profit/(Loss) forecasts up to the year ending 31 March 2014
and comfort letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV – Summary of the New Bye-laws. . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

“Acquisition”
the acquisition of the Sale Share (as defined in the Acquisition Circular) and waiver of the Sale Loan by Right Season as detailed in the Acquisition Circular
“Acquisition Circular” the circular of the Company dated 25 August 2011
“acting in concert”
has the meaning ascribed to it under the Takeovers Code
“Admitted Claims”
all claims of the Creditors which would be provable in a winding up of the Company if an order for the winding up of the Company was made on the Effective Date and which have been admitted by the Scheme Administrators in accordance with the Scheme
“Advance Shine”
Advance Shine Holdings Limited, a company incorporated in the British Virgin Islands with limited liabilities which is directly and wholly-owned by Mr. Chau Pak Chuen
“Announcement”
the announcement of the Company dated 9 July 2013 in relation to, among others, the status on Resumption, the Capital Restructuring and change of board lot size, the Debt Restructuring, the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals and the Bonus Issue
“Application Form”
the application form for use by the Qualifying Shareholders to apply for the Offer Shares
“associate(s)”
has the same meaning ascribed thereto under the Listing Rules
“Board”
the board of Directors
“Bonus Issue”
the issue in the proportion of two (2) Bonus Shares for every one (1) New Share to the Qualifying Shareholders
“Bonus Share(s)”
up to 71,387,298 New Shares which may fall to be allotted and issued by way of the Bonus Issue

– 1 –

DEFINITIONS

“Business Day(s)” a day (other than a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours
“Bye-laws” bye-laws of the Company
“Capital Reduction” the reduction of the par value of each Consolidated Share from HK$10.00 to HK$0.01
“Capital Restructuring” the restructuring of the share capital of the Company including Share Consolidation, Capital Reduction and Share Subdivision
“CCASS” the Central Clearing and Settlement System established and operated by HKSCC
“Companies Act” Companies Act 1981 of Bermuda
“Companies Ordinance” the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company”
U-RIGHT International Holdings Limited (Provisional Liquidators Appointed), a company incorporated in Bermuda with limited liability and the Shares of which are listed on the Stock Exchange
“Completion” the completion of the Restructuring
“connected person(s)” has the same meaning ascribed thereto under the Listing Rules
“Consolidated Share(s)”
ordinary share(s) of HK$10.00 each in the share capital of the Company immediately upon the Share Consolidation becoming effective
“Creditor(s)”
collectively all the creditors of the Company (other than the Investor to the extent of the Working Capital Loans)
“Creditor Share(s)”
66,133,333 New Shares to be issued to the SchemeCo credited as fully paid upon completion of the Capital Restructuring and the Subscription for the benefit of Creditors with Admitted Claims

– 2 –

DEFINITIONS

“Creditors with Admitted Claims”
any Person with the benefit of an Admitted Claim, including (without limitation) the holders of the Existing Convertibles, other than the Investor
“Dateng”
廈門大騰工貿有限公司 (Xiamen Dateng Industry Trade Company Limited*), a company established in the PRC with limited liability, one of the Joint Venture Partners
“Debt Restructuring”
the proposed restructuring of the indebtedness and liabilities of the Company pursuant to the Scheme
“Director(s)” director(s) of the Company
“Disposal”
disposal of the Excluded Subsidiaries
“Easy Advance”
Easy Advance Investments Limited, a company incorporated in the British Virgin Islands with limited liabilities which is wholly-owned by Advance Shine
“Effective Date”
11 November 2011, the date of which the Scheme becomes effective by virtue of the delivery of an office copy of the order of the Hong Kong Court sanctioning the Scheme to the Registrar of Companies in Hong Kong for registration
“Excluded Items”
cash and cash equivalents held by the Company as at the Effective Date of approximately HK$7.0 million;
Receivables of the Company, if any, including but not limited to all intercompany debts owing by any of its subsidiaries;
all and any rights, causes of action or claims of the Restructured Group against the Excluded Subsidiaries in respect of transactions or events incurred up to the date of the completion of the Subscription (including but not limited to all intercompany debts owing by any of the Excluded Subsidiaries to any of the companies in the Restructured Group); and
Rights Against Third Parties.

– 3 –

DEFINITIONS

“Excluded Shareholder(s)”
the existing Shareholders whose names appear on the register of members as at the close of business on the Record Date but whose registered addresses in the Company’s register of members are in a place outside Hong Kong where, the Directors, after making enquires, considers it necessary or expedient on account either of legal restrictions under the laws of the relevant overseas places or the requirements of the relevant regulatory bodies or stock exchanges in those places not to offer the Offer Shares and the Bonus Shares to them
“Excluded Subsidiaries” the companies comprising the Group but excluding the Restructured Group
“Executive” the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“Existing Convertibles”
all the convertibles, options and other securities issued by the Company prior to the petition to wind-up the Company being presented to the Hong Kong Court on 6 October 2008, which were convertible into Shares or confer on the holder thereof rights to subscribe for any shares in the Company, but no longer exercisable after the Effective Date as a result of the Scheme
“Group” the Company and its subsidiaries
“HKSCC” Hong Kong Securities Clearing Company Limited
“HK$” and “cents” Hong Kong dollars and cents, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Hong Kong Court” the High Court of Hong Kong
“Independent Board Committee” an independent board committee comprising all the independent non-executive Directors

– 4 –

DEFINITIONS

“Independent Shareholder(s)”
“Independent Third Party(ies)”
“Interested Shareholder(s)”
“Investor”
“Joint Venture Partners”
“JV Contracts”
Shareholders other than (i) the Investor, its ultimate beneficial owners, its associates and parties acting in concert with any of them; (ii) the Interested Shareholders; and (iii) those who are interested in, or involved in the Debt Restructuring, the Underwriting Agreement, the Subscription, the Whitewash Waiver and/or the Special Deals
third party(ies) independent of the Company and connected person(s) of the Company and is/are not connected person(s) of the Company
Shareholders and/or their associates who are Creditors as at the date of the SGM. As at the Latest Practicable Date, the Interested Shareholders include Hang Seng Securities Limited, Shanghai Commercial Bank Limited, Bank of Communications Trustee Limited, East Asia Securities Company Limited, HSBC Broking Securities (Hong Kong) Limited, ICBC (Asia) Securities Limited, China Merchants Securities (HK) Co., Limited, HSBC Private Bank (Suisse) SA, The Bank of East Asia Limited, Public Financial Securities Limited, Industrial and Commercial Bank of China, Li Wing Kwong, Deutsche Bank AG, CIMB Securities Limited, Public Bank (Hong Kong) Limited, holding an aggregate of approximately 13.00% of the issued share capital of the Company
Advance Lead International Limited, a company incorporated with limited liability under the laws of the British Virgin Islands and is beneficially owned as to 40% by Mr. Chau Pak Chuen (through Advance Shine and Easy Advance), as to 30% by Ms. Au Tsui Yee, Maggie and as to 30% by Mr. Chau Kai Man
Shishi Yilking and Dateng, each of them interests in 10% of Xiamen U-Right
(i) the contract entered into between U-RIGHT Trading and the Joint Venture Partners for the establishment of Xiamen U-Right; and (ii) the constitutional documents of Xiamen U-Right, both dated 24 January 2010

– 5 –

DEFINITIONS

“Latest Acceptance Date”
“Last Trading Day”
“Latest Practicable Date”
“Latest Time for Termination”
“Listing Committee”
“Listing Rules”
“Long Stop Date”
“Messis Capital” or “Independent Financial Adviser”
“New Bye-laws”
“New Share(s)”
at 4:00 p.m. on Tuesday, 10 September 2013, being the tenth Business Day immediately following the date of the Prospectus, or such later time and date as the Company may notify the Underwriter as the last time and date for application and payment for the Offer Shares
16 September 2008, being the last trading day prior to the Latest Practicable Date
24 July 2013, being the latest practicable date for ascertaining certain information for inclusion in this circular
at 4:00 p.m. on Wednesday, 11 September 2013, being the Business Day immediately following the Latest Acceptance Date or 30 September 2013, whichever is earlier (or such later time and date the Company, the Provisional Liquidators and the Underwriter may agree in writing), being the latest time and date for the Underwriter to terminate the Underwriting Agreement
the Listing Committee of the Stock Exchange
the Rules Governing the Listing of Securities on the Stock Exchange
30 September 2013, (or such other date as the Company, the Provisional Liquidators and the Investor may agree), being the latest time for fulfillment of the conditions under the Subscription Agreement
Messis Capital Limited, a corporation licensed under the SFO to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders
the new Bye-laws proposed to be adopted at the SGM, the principal terms of which are summarised in Appendix IV to this circular
ordinary share(s) of HK$0.01 each in the share capital of the Company immediately upon the Capital Restructuring becoming effective

– 6 –

DEFINITIONS

“Offer Price”
a price of HK$0.15 per Offer Share
“Offer Share(s)”
178,468,245 New Shares which may fall to be allotted and issued under the Open Offer
“Open Offer”
the issue of the Offer Shares at the Offer Price in the proportion of five (5) Offer Shares for every one (1) New Share held as at the close of business on the Record Date
“Overseas Shareholder(s)”
Shareholder(s) with registered address (as shown in the register of member of the Company on the Record Date) which is outside Hong Kong
“Person”
any individual, partnership, company, body corporate, joint stock company, trust, unincorporated association or body or persons (including a partnership or consortium), joint venture or other entity, or a government or any political subdivision or agency thereof
“PRC”
the People’s Republic of China, for the purposes of this circular and for geographical reference only, excludes Taiwan, the Macao Special Administrative Region and Hong Kong (unless otherwise indicated)
“Prospectus”
the document containing details of the Open Offer and the Bonus Issue to be despatched to the Shareholders
“Prospectus Documents”
the Prospectus and the Application Form
“Provisional Liquidators”
Messrs. Lai Kar Yan (Derek) and Yeung Lui Ming both of Deloitte Touche Tohmatsu having been appointed jointly and severally as provisional liquidators of the Company
“Qualifying Shareholder(s)” the Shareholders, whose names appear on the register of members of the Company as at the close of business on the Record Date, other than the Excluded Shareholders. For the avoidance of doubt, Qualifying Shareholders shall not include the holders of the Subscription Shares and the Creditor Shares
“Receivables”
all the trade and other debts and amounts owing to the Company as at the Effective Date including but not limited to all intercompany debts owing by its subsidiaries

– 7 –

DEFINITIONS

“Record Date”
“Registrar”
“Restructured Group”
“Restructuring”
“Resumption”
“Resumption Conditions”
“Resumption Proposal”
“Rights Against Third Parties”
“Right Season”
Friday, 23 August 2013, being the date and time by reference to which entitlements to the Open Offer and the Bonus Issue will be determined
Tricor Tengis Limited, the Company’s branch share registrar in Hong Kong
the Group after Completion and the Scheme being effective, comprising of the Company, UR Group Limited, Nano Garment Holdings Limited, U-RIGHT Trading, Xiamen U-Right, Fame Ace Limited, Alfreda Limited, Right Season and Sino Hill Group Limited and its subsidiaries
the Capital Restructuring, the Open Offer, the Subscription, the Whitewash Wavier, the Special Deals, the Scheme, the Bonus Issue and the Disposal as proposed in the Resumption Proposal and the Announcement
the resumption of trading in the New Shares on the Stock Exchange
the conditions for the resumption of the trading in the Shares on the Stock Exchange as set out in the letter dated 26 April 2013 from the Stock Exchange to the Company and which had been set out in the same order in the announcement of the Company dated 26 April 2013, the Announcement and this circular
the proposal dated 19 April 2013 for the purpose of seeking approval of the Stock Exchange on the Resumption
the rights and claims against any Person and the benefit of all sums to which the Group is entitled from any Person arising from any claim, rights, action against such Person, subsisting on or before the date of the completion of the Subscription

Right Season Limited, a company incorporated in the British Virgin Islands and an indirectly wholly-owned subsidiary of the Company

– 8 –

DEFINITIONS

“Scheme”
a scheme of arrangement for the Creditors of the Company under Section 166 of the Companies Ordinance proposed by the Company with or subject to any modification thereof, or any addition thereto or any condition approved or imposed by the Hong Kong Court
“Scheme Administrators” Messrs. Lai Kar Yan (Derek) and Yeung Lui Ming both of Deloitte Touche Tohmatsu jointly and severally as scheme administrators pursuant to the Scheme or their successors
“Scheme Assets” assets to be transferred to the SchemeCo for the benefits of the Creditors with Admitted Claims as described under the sub-section headed “The Scheme” under the section headed “(3) DEBT RESTRUCTURING” in this circular
“Scheme Meeting”
the meeting of the Creditors duly convened at the direction of the Hong Kong Court on 7 September 2011, at which the Scheme was approved
“SchemeCo”
a special purpose vehicle owned and controlled by the Scheme Administrators to be incorporated to hold the Scheme Assets for the benefit of the Creditors with Admitted Claims
“SFC”
Securities and Futures Commission of Hong Kong
“SFO”
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM”
a special general meeting of the Company to be convened to consider and, if thought fit, approve, amongst other, the Capital Restructuring, the Open Offer, the Subscription, the Whitewash Waiver and Special Deals, the Bonus Issue, the issue of the Creditor Shares, adoption of the New Bye-laws and proposed appointment of the new executive Director
“Share Consolidation” the consolidation of every one hundred (100) issued Shares of the Company of HK$0.10 each into one (1) Consolidated Share of HK$10.00 each

“Share Subdivision”

subdivision of each unissued Share in the authorized share capital of the Company into ten (10) Subdivided Shares of HK$0.01 each

– 9 –

DEFINITIONS

“Share(s)”
ordinary shares of HK$0.10 each in the share capital of the Company
“Shareholder(s)” holders of the Shares
“Shishi Yilking” 石獅市意利王製衣發展有限公司 (Shishi City Yiliwang Clothes Development Co., Ltd*), a company established in the PRC with limited liability, one of the Joint Venture Partners
“Special Deals” special deals under Rule 25 of the Takeovers Code in connection with (i) the settlement of the liabilities due by the Company to the Creditors with Admitted Claims who are also Shareholders and/or their associates; and (ii) the Disposal, which is not extended to all Shareholders
“Stock Exchange” the Stock Exchange of Hong Kong Limited
“Subdivided Shares” unissued share(s) of HK$0.01 each in the authorized share capital of the Company immediately upon the Share Subdivision becoming effective
“Subscription” the subscription of the Subscription Shares in the amount of HK$145.5 million by the Investor
“Subscription Agreement” the subscription agreement dated 9 July 2013 and entered into between the Company, the Provisional Liquidators and the Investor in respect of the Subscription
“Subscription Price”
HK$0.15 per New Share, the price at which the Subscription Shares will be issued and allotted
“Subscription Shares”
970,000,000 New Shares to be issued and allotted under the Subscription
“Suspension”
the suspension of trading in the Shares since 17 September 2008
“Takeovers Code”
the Hong Kong Code on Takeovers and Mergers
“Underwriter”
Pacific Foundation Securities Limited, the underwriter of the Open Offer, a licensed corporation to carry out Type 1 (dealing in securities) and Type 9 (asset management) regulated activities under the SFO

– 10 –

DEFINITIONS

“Underwriting Agreement”
“Underwritten Offer Shares”
“U-RIGHT Trading”
“Whitewash Waiver”
“Working Capital Loan #1”
“Working Capital Loan #2”
“Working Capital Loans”
“Xiamen U-Right”

“%”

the underwriting agreement dated 9 July 2013 and entered into between the Company, the Provisional Liquidators and the Underwriter in relation to the Open Offer
all the Offer Shares, being 178,468,245 Offer Shares (assuming no issue of Shares or New Shares from the date of the Underwriting Agreement to the Record Date)
U-RIGHT Trading Development Limited, a company incorporated in Hong Kong and an indirectly whollyowned subsidiary of the Company
a waiver of the obligation of the Investor, its ultimate beneficial owners and parties acting in concert with any of them to make a mandatory general offer for all the New Shares not already owned or agreed to be acquired by them as a result of the Subscription pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code by the Executive
a working capital facility loan of up to HK$15 million provided by the Investor to meet the working capital requirements for U-RIGHT Trading and Xiamen U-Right
a working capital facility loan of up to HK$20 million provided by the Investor to meet the working capital requirements for Right Season
collectively Working Capital Loan #1 and Working Capital Loan #2

Xiamen U-Right Garment Co. Ltd. (廈門優威服飾有限公司), a sino foreign joint venture established in the PRC which is owned as to 80% by U-RIGHT Trading and as to 20% by the Joint Venture Partners in equal proportion

per cent
for identification purpose only

– 11 –

EXPECTED TIMETABLE

Set out below is the expected timetable for the SGM, the Capital Restructuring, the Open Offer, the Bonus Issue and the matching services for odd lots of the New Shares.

The expected timetable is for indicative purposes only and has been prepared on the assumption that all the conditions of the Capital Restructuring, the Open Offer and the Bonus Issue will be fulfilled. The expected timetable is subject to change, and any changes will be announced in a separate announcement by the Company as and when appropriate.

2013

Despatch of the Circular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 26 July Closure of register of members to ascertain the Shareholders who can vote at the SGM (both dates inclusive). . . . . . . . . . . . . . . . .Friday, 16 August to Monday, 19 August Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Saturday, 17 August Record date for the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 19 August Time and date of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Monday, 19 August SGM Results Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 19 August Re-open of register of members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 20 August Last day of cum-entitlements of the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 20 August First day of ex-entitlements of the Open Offer and the Bonus Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 21 August Latest time for lodging transfer of the existing Shares in order to qualify for the Open Offer and the Bonus Issue. . . . . . . . . . . . . . 4:30 p.m. on Thursday, 22 August Record Date for the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . .Friday, 23 August Closure of register of members to determine the eligibility of the Open Offer and the Bonus Issue (both dates inclusive). . . . . . .Friday, 23 August to Monday, 26 August Re-open of register of members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 27 August

– 12 –

EXPECTED TIMETABLE

Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 27 August Latest Acceptance Date (i.e. the latest time for acceptance of and payment for the Offer Shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Tuesday, 10 September Latest Time for Termination (of the Underwriting Agreement) . . . . . . . . . . . . . .4:00 p.m. on Wednesday, 11 September Announcement of results of the Open Offer . . . . . . . . . . . . . . . . . . .Thursday, 12 September Effective time and date of the Capital Restructuring and change of board lot size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Thursday, 12 September Completion of the Open Offer, the Subscription and the Bonus Issue (following the Capital Restructuring becoming effective) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 12 September Free exchange of existing Share certificates for New Share certificates commences (Note 2) . . . . . . . . . . . . . .Thursday, 12 September If the Open Offer is terminated, refund cheques to be despatched on or before. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 13 September Despatch of certificates for the Offer Shares and the Bonus Shares (in form of the share certificates for New Shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 13 September Resumption and trading in the New Shares . . . . . . . . . . . . . . . . . . . .Monday, 16 September Matching of odd lots of the New Shares commences . . . . . . . . . . . . . . . . . . . . .9:00 a.m. on Monday, 16 September Matching of odd lots of the New Shares ends . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday, 9 October Free exchange of existing Share certificates for New Share certificates ends (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Thursday, 17 October

Notes:

(a) The Offer Shares applied for by the Qualifying Shareholders or taken up by the Underwriter will not be entitled to any Bonus Shares under the Bonus Issue.
(b) The Subscription Shares subscribed by the Investor (i) will not be entitled to any Offer Shares under the Open Offer, and (ii) will not be entitled to any Bonus Shares under the Bonus Issuer, and

– 13 –

EXPECTED TIMETABLE

(c) The Bonus Shares to be issued to the Qualifying Shareholders will not be entitled to subscribe for any Offer Shares under the Open Offer.
The certificates of the New Shares will be available for collection within ten (10) Business Days after the submission of the existing Share certificates to the Registrar for exchange. Existing Share certificates will not be accepted for delivery, trading and settlement purposes after Thursday, 17 October 2013 but will remain effective as documents of title and may be exchanged for certificates in pink for New Shares at any time on payment of a fee of HK$2.50 (or such other amount as may from time to time be specified by the Stock Exchange).

All references to time in this circular are references to Hong Kong time. The expected timetable is subject to change and the date of the Resumption is subject to the fulfillment of all Resumption Conditions on or before 31 July 2013. As additional time is required for the fulfillment of the Resumption Conditions, the Company has made an application to the Stock Exchange for the extension of the date for the fulfillment of all the Resumption Conditions from 31 July 2013 to a date falling on or before 30 September 2013 (the “ Extension ”). As at the Latest Practicable Date, the Stock Exchange has indicated that the Extension will be granted. Any such change will be announced in a separate announcement by the Company as and when appropriate.

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OPEN OFFER

The latest time for acceptance of and payment for the Offer Shares will not take place if there is a tropical cyclone warning signal number 8 or above, or a “black” rainstorm warning:

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on the Latest Acceptance Date. Instead the latest time for acceptance of and payment for the Offer Shares will be extended to 5:00 p.m. on the same Business Day;
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Latest Acceptance Date. Instead the latest time for acceptance of and payment for the Offer Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of these warnings in force at any time between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Offer Shares does not take place on the Latest Acceptance Date, the dates mentioned in the section headed “Expected Timetable” in this circular may be affected. The Company will notify Shareholders by way of announcements on any change to the expected timetable as soon as practicable.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

U-RIGHT INTERNATIONAL HOLDINGS LIMITED (Provisional Liquidators Appointed) 佑威國際控股有限公司[*]

（已委任臨時清盤人）

(Incorporated in Bermuda with limited liability)

(Stock Code: 00627)

Board of Directors

Executive Directors Tang Kwok Hung Ng Cheuk Fan Keith

Independent non-executive Directors Chung Wai Man Mak Ka Wing Patrick Chan Chi Yuen

Joint and Several Provisional Liquidators Lai Kar Yan (Derek) and Yeung Lui Ming

Registered office Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong 35th Floor, One Pacific Place 88 Queensway Hong Kong

26 July 2013

To the Shareholders

Dear Madam or Sir,

(1) STATUS ON RESUMPTION;

(2) CAPITAL RESTRUCTURING AND CHANGE OF BOARD LOT SIZE;

(3) DEBT RESTRUCTURING;

(4) FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS;

(5) THE BONUS ISSUE;

(6) ADOPTION OF NEW BYE-LAWS ;

(7) PROPOSED APPOINTMENT OF NEW EXECUTIVE DIRECTOR; AND (8) NOTICE OF SPECIAL GENERAL MEETING

Reference is made to the Announcement.

The purpose of this circular is to provide you with, among other things, further information in respect of (i) the status on Resumption; (ii) the Capital Restructuring and the change of board lot size; (iii) the Debt Restructuring; (iv) fundraising by ways of the Open

* For identification purpose only

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Offer and the Subscription, the Whitewash Waiver and the Special Deals; (v) the Bonus Issue; (vi) the adoption of New Bye-laws; (vii) proposed appointment of new executive Director; (viii) a letter from the Independent Board Committee in relation to the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares; (ix) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares; and (x) a notice to convene the SGM.

(1) STATUS ON RESUMPTION

The Company is pleased to announce that the Stock Exchange decided to allow the Company to proceed with the Resumption Proposal subject to the Resumption Conditions to be fulfilled by 31 July 2013. As additional time is required for the fulfillment of the Resumption Conditions, the Company has made an application to the Stock Exchange for the extension of the date for the fulfillment of all the Resumption Conditions from 31 July 2013 to a date falling on or before 30 September 2013 (the “ Extension ”). As at the Latest Practicable Date, the Stock Exchange has indicated that the Extension will be granted. The Resumption Conditions are listed as follows:

Completion of the Open Offer, the Subscription, the Scheme and all transactions contemplated under the Resumption Proposal; and
Inclusion in the circular to Shareholders the following:
(a) the Group’s profit estimate for the year ended 31 March 2013 (if the 2013 audited accounts are not yet published when the circular is issued) and profit forecast for the year ending 31 March 2014 together with reports from its auditors and financial adviser under paragraph 29(2) of Appendix 1b of the Listing Rules; and
(b) a pro forma balance sheet of the Group upon completion of the Resumption Proposal and a comfort letter from its auditors under Rule 4.29 of the Listing Rules.

The Company should also comply with the Listing Rules. The Stock Exchange may modify the Resumption Conditions if the Company’s situation changes.

In respect of Resumption Condition 1, details of the Open Offer, the Subscription and other transactions contemplated under the Resumption Proposal are set out in the Announcement and this circular. The Scheme became effective on 11 November 2011 and will terminate if the Resumption Proposal is not approved by the Stock Exchange or any of the conditions precedent in the Capital Restructuring and the Subscription is not satisfied before the day falling 4 years after the Effective Date of the Scheme (i.e. 11 November 2015). In respect of Resumption Conditions 2(a) and (b), the required disclosures had been included in this circular.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

(2) CAPITAL RESTRUCTURING AND CHANGE OF BOARD LOT SIZE

As at the Latest Practicable Date, the authorized share capital of the Company was HK$500,000,000 divided into 5,000,000,000 Shares of which, 3,569,364,916 Shares had been issued and have been fully paid or credited as fully paid.

The Company proposes to effect the Capital Restructuring which involves:–

(i) Share Consolidation: every one hundred (100) issued Shares of par value of HK$0.10 each will be consolidated into one (1) Consolidated Share of par value of HK$10.00 each;
(ii) Capital Reduction: the par value of every Consolidated Share will be reduced from HK$10.00 to HK$0.01 and become a New Share; and
(iii) Share Subdivision: each of the authorized but unissued Shares will be subdivided into ten (10) Subdivided Shares of par value of HK$0.01 each.

Assuming no further Shares will be issued from the Latest Practicable Date up to the date of the SGM, there will be approximately 35,693,649 New Shares of HK$0.01 each in issue which are fully paid or credited as fully paid when the Capital Restructuring becomes effective.

For the avoidance of doubt, the authorized share capital of the Company will be HK$500 million comprising 50,000,000,000 New Shares after the Capital Restructuring.

Conditions of the Capital Restructuring

The Capital Restructuring is conditional upon:–

(i) the passing of a special resolution by the Shareholders to approve the Capital Restructuring at the SGM;
(ii) the Listing Committee granting the listing of, and permission to deal in, the New Shares in issue arising from the Capital Restructuring;
(iii) the Debt Restructuring, the Open Offer and the Subscription becoming unconditional (other than the conditions precedent of the Debt Restructuring, the Open Offer and the Subscription in relation to the Capital Restructuring becoming unconditional); and
(iv) the Scheme becoming effective and binding on all Creditors.

As at the Latest Practicable Date, condition (iv) of the above has been satisfied.

Effect and reason of the Capital Restructuring

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Restructuring by the Shareholders, the authorized share capital of the Company upon the Capital Restructuring becoming effective will be HK$500 million comprising 50,000,000,000 New Shares of which approximately 35,693,649 New Shares will be in issue.

Upon completion of the Capital Restructuring, the Company will have greater flexibility for future fundraising activities. Furthermore, on the assumption that no further Shares will be issued or repurchased before the Capital Restructuring becoming effective, the existing paid-up capital of the Company will be reduced from approximately HK$356.9 million to approximately HK$356,936 and generating a credit of approximately HK$356.6 million as a result of the Capital Reduction which will be applied in a manner as permitted by the Companies Act, including but not limited to eliminating part of the outstanding accumulated losses of the Company, which was approximately HK$2,481 million as at 31 March 2013.

The Capital Restructuring will also reduce the total number of Shares currently in issue. As such, the transaction and handling costs of the Company in relation to the dealings in the New Shares are expected to be reduced, which will be beneficial to the Company. Moreover, as the market value of each board lot upon the Capital Restructuring becoming effective will be higher than the market value of each existing board lot, the transaction cost as a proportion of the market value of each board lot will be lower.

Save for the necessary professional expenses, the implementation of the Capital Restructuring will not alter the underlying assets, business operation, management position of the Company and the interests and rights of the Shareholders.

Accordingly, the Board is of the view that the Capital Restructuring is beneficial to the Company and the Shareholders as a whole.

Status of the New Shares

The New Shares will rank pari passu in all respects with each other and the Capital Restructuring will not result in any change in the relative rights of the Shareholders. Fractional New Shares will not be issued by the Company to the Shareholders. Any fractional entitlement to the New Shares will be aggregated, sold and retained for the benefit of the Company.

Arrangement on odd lot trading

In order to facilitate the trading of odd lots (if any) of the New Shares, the Company has appointed Pacific Foundation Securities Limited to provide matching service, on a best effort basis, to those Shareholders who wish to acquire odd lots of the New Shares to make up a full board lot, or to dispose of their holding of odd lots of the New Shares.

Matching of odd lots of the New Shares arising from the Capital Restructuring will commence from 9:00 a.m. on Monday, 16 September 2013 and will end at 4:00 p.m. on Wednesday, 9 October 2013.

Exchange of Shares certificates

Subject to the Capital Restructuring becoming effective, which is expected to be 9:00 a.m. on Thursday, 12 September 2013, Shareholders may, on or after Thursday, 12 September 2013 until 4:00 p.m. on Thursday, 17 October 2013 (both days inclusive), submit share certificates

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

in grey for existing Shares to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong, to exchange, at the expense of the Company, for certificates in pink of the New Shares. It is expected that the New Shares certificates will be available for collection within ten (10) Business Days after the submission of the existing Share certificates to the Registrar for exchange.

From Friday, 18 October 2013 onwards, existing certificates of the Shares will be accepted for exchange only on payment of a fee of HK$2.50 (or such other amount as may from time to time be specified by the Stock Exchange) by the Shareholders for each certificate issued or cancelled, whichever is higher. Existing certificates for the Shares will remain effective as documents of title but will not be accepted for delivery, trading and settlement purpose and may be exchanged for certificates in pink for New Shares at any time.

Change of board lot size

As at the Latest Practicable Date, the Shares were traded in board lots of 2,000 Shares. It is proposed that the New Shares will be changed to be traded in board lots of 20,000 New Shares upon the Capital Restructuring becoming effective. The expected board lot value per board lot will initially be approximately HK$3,000.

(3) DEBT RESTRUCTURING

Based on the notices of claim received, the claims owed by the Company to the Creditors as at the Effective Date amounts to approximately HK$1,891 million, subject to determination by the Scheme Administrators in accordance with the Scheme. The indebtedness figure stated above is indicative only and any distribution made to the Creditors are ultimately subject to the claim determination procedures under the Scheme.

The Scheme

Under the Scheme, upon completion of the Subscription, all the indebtedness and liabilities of the Company owing to the Creditors as at the Effective Date (including but not limited to liabilities under the Existing Convertibles and any guarantee or indemnity given by the Company but excluding the Working Capital Loans which will be fully settled from the proceeds of the Subscription and the Open Offer upon Completion) will be discharged and released in full as against the Company and the SchemeCo shall accept and assume an equivalent liability in place of the Company in respect of the Admitted Claims. On completion of the Subscription, the following Scheme Assets will be paid or transferred to the SchemeCo as applicable and where they comprise of assets other than cash, such assets shall be realized by the Scheme Administrators for distribution to the Creditors with Admitted Claims in accordance with the terms of the Scheme:

(i) cash and cash equivalent of the Company as of the Effective Date of approximately HK$7.0 million;

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

(ii) cash payment of HK$50 million, which will be funded by the Company out of the proceeds of the Subscription;
(iii) 66,133,333 Creditor Shares be issued to the SchemeCo and credited as fully paid, representing approximately 5% of issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares, the Bonus Shares, the Creditor Shares and the Offer Shares. The value of Creditor Shares is dependent on the prevailing market condition at the time of its realization by the Scheme Administrators under the Scheme. Assuming the Creditor Shares are realized at an average price of HK$0.15 per share, which is the same as the Subscription Price and the Offer Price, realization proceeds before payment of any costs will be approximately HK$9.9 million;
(iv) upon completion of the Subscription, the issued shares of the Excluded Subsidiaries, which will be transferred to the SchemeCo in accordance with the terms of the Scheme. The transfer will be at a nominal consideration of HK$1 as a term of the Scheme. The Scheme Administrators shall take such steps as are appropriate, having regard to the potential costs of and benefits from such steps, to recover any amounts which may be realized from the Excluded Subsidiaries and their assets. It is estimated that the proceeds from the realization available for distribution to the Creditors with Admitted Claims before any costs are approximately HK$50.9 million. As a result of the Disposal, the Excluded Subsidiaries will cease to be subsidiaries of the Company and their results will not be consolidated in the consolidated financial statements of the Group after the completion of the Subscription; and
(v) to the extent not already mentioned above the Excluded Items.

Upon completion of the Subscription, the liabilities under the Existing Convertibles (the holders of which are among the Creditors with Admitted Claims) will be discharged and released and the rights attaching to them to convert into Shares will cease and will no longer be exercisable and the Existing Convertibles will no longer be convertible into the Shares.

The Provisional Liquidators are of the view that the Disposal forms part of the proposed Restructuring of the Company involving, inter alia , Debt Restructuring by way of the Scheme, which will fully discharge the Company from all its liabilities owing to the Excluded Subsidiaries and the Excluded Subsidiaries will also be disposed of and/or deconsolidated from the Group.

The Group is insolvent based on the latest audited consolidated financial statements of the Group with net liabilities of approximately HK$1,579 million as at 31 March 2013. If the Debt Restructuring is not successful, the Group will be placed into insolvent liquidation, by which all assets of the Company will be realized for the benefit of the Creditors. The Provisional Liquidators therefore consider that the Disposal at a consideration of HK$1 is fair and reasonable and is in the best interests of the Company and the Shareholders.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

At the Scheme Meeting that was held on 7 September 2011, the Scheme was duly approved by more than 50% in number representing not less than 75% in value of the indebtedness of all the Creditors who attended either in person or by proxy. On 3 November 2011, the Scheme was sanctioned by the Hong Kong Court and became effective on 11 November 2011 (i.e. the Effective Date) by virtue of the delivery of an official copy of the order of the Hong Kong Court sanctioning the Scheme to the Registrar of Companies in Hong Kong for registration.

Any indebtedness or liabilities of the Company as at the Effective Date will be, under the effect of the Scheme, discharged and released in full upon the completion of the Subscription.

After the Effective Date, the Scheme Administrators had issued notices to all possible Creditors whom they had knowledge, to notify them to deliver a notice of claim for dividend purposes to prove their claims, if any, against the Company as at the Effective Date, the same notice was also published in two local newspapers Sing Tao Daily and The Standard on 6 February 2012.

The Scheme Administrators are now in the process of determination of the claims received from the Creditors.

The Scheme will, however, come to an end if any of the conditions precedent in the Capital Restructuring and the Subscription is not satisfied before 11 November 2015, being the day falling 4 years after the Effective Date. In such case, the Company will be placed into liquidation by the Hong Kong Court.

For the avoidance of doubt, the holders of the Creditor Shares (i) are not entitled to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to be issued with Bonus Shares under the Bonus Issue since the Creditor Shares will only be issued immediately after completion of the Open Offer and Bonus Issue.

Conditions precedent

All the indebtedness and liabilities of the Company owing to the Creditors as at the Effective Date will be discharged and released in full upon the completion of the Subscription which will be subject to, among other things, the satisfaction or waiver (as the case may be) of following conditions:–

(i) the Capital Restructuring becoming effective;
(ii) the Scheme (together with all necessary modifications) being approved by the requisite majority of the Creditors at the Scheme Meeting and sanctioned by the Hong Kong Court;
(iii) granting of the Whitewash Waiver by the SFC and approval by the Independent Shareholders of such Whitewash Waiver by way of poll at the SGM;

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

(iv) granting the Special Deals consent by the SFC and approval by the Independent Shareholders of the Special Deals by way of poll at the SGM;
(v) all the other resolutions necessary to complete the Subscription having been passed by the Shareholders (and whereby required for by the Independent Shareholders) by way of poll at the SGM to approve:
(a) the Capital Restructuring;
(b) the allotment and issue of the New Shares (including the Bonus Shares, the Offer Shares, the Subscription Shares and the Creditor Shares) which is subject to the approval of the Independent Shareholders;
(c) the Whitewash Waiver to be granted by the Executive which is subject to the approval of the Independent Shareholders; and
(d) all transactions contemplated under the Subscription and subject to the approval of the Independent Shareholders;
(vi) the Stock Exchange having granted the listing of and permission to deal in the New Shares, including the Bonus Shares, the Creditor Shares, the Subscription Shares and the Offer Shares;
(xii) the Stock Exchange having approved the Resumption; and
(xiii) the dismissal of the winding-up petition and the removal and discharge of the Provisional Liquidators (in their capacity as provisional liquidators in Hong Kong).

As at the Latest Practicable Date, condition (ii) has been satisfied and the Stock Exchange has approved the Resumption subject to the satisfaction of the Resumption Conditions. All of the above conditions are not waivable.

(4) FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; AND APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS

A. Open Offer

Information on the Open Offer

Basis of the Open Offer:

In the proportion of five (5) Offer Shares for every one (1) New Share held as at the close of business on the Record Date (equivalent to one (1) Offer Share for every twenty (20) existing Shares)

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Offer Price:	HK$0.15 per Offer Share
Number of Shares in issue as at the	3,569,364,916 Shares (equivalent to
Latest Practicable Date:	approximately 35,693,649 New
	Shares assuming the Capital
	Restructuring becoming effective)
Number of Offer Shares:	178,468,245 Offer Shares
Underwriter:	Pacific Foundation Securities Limited

The Company has no outstanding options, warrants, derivatives or convertible securities in issue which confer any rights to subscribe for, convert or exchange into the Shares as at the Latest Practicable Date.

The Company has not procured any undertaking and has not received any undertaking provided by any Shareholders to subscribe for his entitlement under the Open Offer or any arrangement that may have an effect on the Open Offer.

Offer Price

The Offer Price of HK$0.15 per Offer Share represents a discount of approximately 89.29% to the closing price of HK$0.014 per Share (equivalent to HK$1.40 per New Share assuming the Capital Restructuring becoming effective) as quoted on the Stock Exchange on the Last Trading Day.

Trading of Shares had been suspended since 17 September 2008, the Company and the Provisional Liquidators had upon arm’s length negotiation, agreed with the Underwriter that the Offer Price should represent a substantial discount to the closing price before the Suspension so as to incentivize the Qualifying Shareholders to take up their entitlements under the Open Offer. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to his shareholding in the Company as at the Record Date. The Directors (including the independent non-executive Directors) consider the Offer Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Offer Shares

Assuming the Capital Restructuring becoming effective, the 178,468,245 Offer Shares represent: (i) 5 times of the total number of issued New Shares as at the Latest Practicable Date; (ii) approximately 83.33% of the total number of issued New Shares as enlarged by the Offer Shares; and (iii) approximately 13.50% of the total number of issued New Shares as enlarged by the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares.

For the avoidance of doubt, the Offer Shares validly applied for by the Qualifying Shareholders will not be entitled to the Bonus Shares under the Bonus Issue since the Offer Shares will only be issued conditional upon and immediately after completion of the Bonus Issue.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholders. The Company will send: (i) the Prospectus Documents to the Qualifying Shareholders; and (ii) if and to the extent legally and practically permissible, the Prospectus, for information purposes only, to the Excluded Shareholders.

To qualify for the Open Offer, a Shareholder must, at the close of business on the Record Date:

(i) be registered as a member of the Company on the register of members of the Company; and
(ii) not be an Excluded Shareholder.

In order to be registered as a member of the Company on the Record Date, Shareholders must validly lodge any transfer of the Shares (with the relevant share certificate(s) and other necessary documents) with Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wan Chai, Hong Kong by 4:30 p.m. on Thursday, 22 August 2013.

Rights of the Excluded Shareholders

The Prospectus Documents are not intended to be registered under the applicable securities legislation of any jurisdiction other than Hong Kong and Bermuda. Accordingly, the Prospectus Documents will not be registered or filed under the applicable securities or equivalent legislation of any jurisdiction other than Hong Kong and, if necessary, Bermuda. Shareholders whose address on the register of members of the Company is in a place outside Hong Kong, may not be eligible to take part in the Open Offer. The Company will send the Prospectus (but not the Application Form), for information purposes only, to the Excluded Shareholders (if any), if and to the extent legally and practically permissible.

Having reviewed the register of members as at the Latest Practicable Date, the Company noted that there was one Overseas Shareholder whose address on the register of members was in Taiwan. Pursuant to Rule 13.36(2) of the Listing Rules, the Directors and the Provisional Liquidators have made enquiry regarding the legal restrictions and the requirements of the relevant regulatory body or stock exchange with respect to the issue of the Offer Shares and the Bonus Shares to this Overseas Shareholder whose address is in Taiwan and based on the current legal opinion provided by the legal advisers of the Company as to Taiwan laws, the Directors and the Provisional Liquidators have formed the view that it is expedient for the Offer Shares and the Bonus Shares to be offered to the Overseas Shareholder in Taiwan as no local legal or regulatory compliance is required to be made in this jurisdiction. Consequently, the Overseas Shareholder whose address is in Taiwan will become a Qualifying Shareholder.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Notwithstanding the above, as at the Record Date, if there is any Shareholder who becomes Overseas Shareholder, the Directors and the Provisional Liquidators will make further enquiries pursuant to Rule 13.36(2) of the Listing Rules before the despatch of the Prospectus Documents to confirm whether other Overseas Shareholder(s), if any, will be regarded as Qualifying Shareholder(s) or Excluded Shareholder(s).

Closure of register of members

The Company’s register of members will be closed from Friday, 23 August 2013 to Monday, 26 August 2013 both dates inclusive, for the purpose of, among other things, establishing entitlements to the Open Offer. No transfer of Shares will be registered during this period.

Nil-paid entitlements

The provisional allotments under the Open Offer on an assured basis are not transferable nor are they capable of renunciation. No listing on the Stock Exchange will be sought for the nil-paid entitlements.

No application for excess Offer Shares

The Qualifying Shareholders will not be entitled to subscribe for any Offer Share in excess of their respective assured entitlements. Considering that each Qualifying Shareholder will be given an equal opportunity to participate in the Company’s future development by subscribing for his entitlements under the Open Offer, the Directors (including the independent nonexecutive Directors) consider that the Company will not be justified in making additional effort and incurring additional costs to administer the excess application procedures. All Offer Shares not taken up by the Qualifying Shareholders will be underwritten by the Underwriter.

Fractions of Offer Shares

Fractional entitlements to the Offer Shares will not be issued but will be aggregated and taken up by the Underwriter. The Company will not allot any fractions of Offer Shares. No odd lot matching services will be provided by the Company in respect of the Open Offer before Resumption. Matching of odd lots of the New Shares will be available from 9:00 a.m. on the date of Resumption, i.e. Monday, 16 September 2013 until 4:00 p.m. on Wednesday, 9 October 2013.

Certificates and refund cheques for the Offer Shares

Subject to the Open Offer becoming unconditional, certificates for all fully-paid Offer Shares shall be despatched by ordinary post to those Qualifying Shareholders who have accepted and paid for their Offer Shares, at their own risk. Refund cheques in respect of the Offer Shares if the Open Offer is terminated shall be despatched by ordinary post to the applicants at their own risk.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Underwriting Agreement

Principal terms of the Underwriting Agreement are set out as follows:

Date: 9 July 2013 Parties: the Company and the Underwriter Number of Underwritten Offer 178,468,245 Offer Shares Shares: Underwriting commission: 2.5%

As at the Latest Practicable Date, the Underwriter is not interested in any Shares (other than the interest in the Underwriting Agreement) and is an Independent Third Party and is a third party independent of the Investor and its ultimate beneficial owners and parties acting in concert with any of them.

Pursuant to the Underwriting Agreement, the Open Offer is fully underwritten by the Underwriter. The Underwriter will procure placees independent to the Company and its connected persons, the Investor, its ultimate beneficial owners, the Creditors and parties acting in concert with any of them to take up such number of Offer Shares so that neither the Underwriter nor any of the placees shall hold 10% or more of the issued share capital in the Company immediately upon completion of the Open Offer (on a full dilution basis).

Termination of the Underwriting Agreement

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing issued to the Company at any time prior to the Latest Time for Termination if there occurs:–

(i) in the reasonable opinion of the Underwriter, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date thereof) of a political, military, financial, economic or other nature, or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or

(ii) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction on trading in securities) occurs which in the reasonable opinion of the Underwriter is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(iii) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of the Underwriter will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(iv) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(vi) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus Documents, would have constituted, in the reasonable opinion of the Underwriter, a material omission in the context of the Open Offer.

Upon the giving of notice in accordance with the above, the Underwriting Agreement shall terminate and the obligations of the parties shall forthwith cease and be null and void and none of the parties shall, save in respect of any right or liability accrued before such termination, have any right against or liability towards any of the other parties arising out of or in connection with the Underwriting Agreement.

As at the Latest Practicable Date, the Board had not received any information from any substantial Shareholders of their intention to take up their entitlements under the Open Offer.

Conditions of the Open Offer

The Open Offer is conditional upon the conditions precedent to the Underwriting Agreement having been satisfied and the Underwriting Agreement is not terminated on or before the Latest Time for Termination by the Underwriter.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

The conditions precedent to the Underwriting Agreement are:

(i) the Capital Restructuring becoming effective;
(ii) the passing of a resolution by the Independent Shareholders by way of poll at the SGM to approve the Open Offer, the Underwriting Agreement and to approve the allotment, issue and dealing with the Offer Shares;
(iii) the Stock Exchange having approved in principle (subject to any conditions as may be imposed by the Stock Exchange) for the Resumption and such approval not having been lapsed or revoked for whatever reasons;
(iv) the delivery to the Stock Exchange and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents (and all other documents required to be attached to the Prospectus Documents) duly signed by two Directors (or by their agents duly authorized in writing) as having been approved by resolution of the Directors not later than the posting date of the Prospectus Documents and otherwise in compliance with the Listing Rules and the Companies Ordinance;
(v) if necessary, the filing with the Registrar of Companies in Bermuda of the Prospectus Documents in compliance with the Companies Act;
(vi) the posting of the Prospectus Documents to the Qualifying Shareholders on the posting date of the Prospectus Documents and where applicable and for information purpose only, the Prospectus, to the Excluded Shareholders;
(vii) if necessary, the Bermuda Monetary Authority granting consent to the issue of the Offer Shares;
(viii) the Listing Committee granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listings of and permission to deal in all the Offer Shares;
(ix) if required, the endorsement, sanction, consent or approval of all other relevant judicial government or regulatory authorities in relation to the Scheme, the Underwriting Agreement and the Resumption Proposal having been obtained and not having been revoked;
(x) the obligations of the Underwriter becoming unconditional and that the Underwriting Agreement is not terminated in accordance with its terms;
(xi) compliance by the Company with all of its obligations under the Underwriting Agreement; and
(xii) the Subscription and the Bonus Issue becoming unconditional (other than the conditions precedent of the Subscription and the Bonus Issue in relation to the Open Offer becoming unconditional).

– 28 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

None of the above conditions can be waived. In the event that the above conditions have not been satisfied on or before the Latest Time for Termination (or such later date as the Company, the Provisional Liquidators and the Underwriter may agree), all liabilities of the parties under the Underwriting Agreement shall cease and determine and no party shall have any claim against any other party other than for any antecedent breach.

Reasons for the Open Offer

The Board (including the independent non-executive Directors) considers that the Open Offer is in the interests of the Company and the Shareholders as a whole as it offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to continue to participate in the future development of the Group upon completion of all the transactions contemplated under the Resumption Proposal should they wish to do so.

Furthermore, the Open Offer allows the Company to credit part of the net proceeds raised from the Open Offer in the sum of HK$713,872.98 (or such sum as may be necessary to give effect to the Bonus Issue) to the share premium account of the Company and apply such amount to pay up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid to the Qualifying Shareholders.

Based on the closing price of HK$0.014 per Share (equivalent to HK$1.4 per New Share assuming the Capital Restructuring becoming effective) as quoted on the Stock Exchange on the Last Trading Day, the theoretical ex-entitlement price per New Share (assuming the Capital Restructuring becoming effective) after the Open Offer is approximately HK$0.3583, representing a discount of approximately 74.41% to the adjusted closing price of HK$1.4 per New Share (assuming the Capital Restructuring becoming effective).

The Directors (including the independent non-executive Directors) consider that the Open Offer (including the underwriting commission of 2.5%) is fair and reasonable and in the interests of the Company and the Shareholders as a whole having taken into account the terms of the Open Offer.

WARNING OF THE RISKS OF DEALING IN THE SHARES

The Open Offer is conditional, inter alia, upon the fulfillment of the conditions set out in the section headed “Conditions of the Open Offer” in this circular. In particular, the Open Offer is conditional upon the approval of the Open Offer by the Independent Shareholders at the SGM by way of poll, the Underwriting Agreement having become unconditional and the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof as set out in the paragraph headed “Termination of the Underwriting Agreement” in this circular. Accordingly, the Open Offer may or may not proceed. Shareholders should therefore exercise extreme caution when dealing in the Shares/New Shares, and if they are in any doubt about their position, they should consult their professional advisers.

– 29 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

B. Subscription

Subscription Agreement

Date:

9 July 2013

Parties the Company (as the issuer); and the Investor (as the subscriber) Amount of Subscription HK$145,500,000 Subscription Price: HK$0.15 per New Share Subscription Shares: 970,000,000 New Shares

Conditions of the Subscription Agreement

(i) the Capital Restructuring becoming effective;
(ii) the passing of a resolution by the Independent Shareholders by way of poll at the SGM to approve the Subscription, the Subscription Agreement and to approve the allotment, issue and dealing with the Subscription Shares;
(iii) the Stock Exchange having approved in principle (subject to any conditions as may be imposed by the Stock Exchange) for the Resumption and such approval not having been lapsed or revoked for whatever reasons;
(iv) the passing of a resolution by the Independent Shareholders by way of poll at the SGM to approve the Whitewash Waiver;
(v) the obtaining of the Whitewash Waiver from the Executive by the Investor, its ultimate beneficial owners and parties acting in concert with any of them;
(vi) granting the Special Deals consent by the SFC and approval by the Independent Shareholders of the Special Deals by way of poll at the SGM;
(vii) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the listing of, and permission to deal in all the Subscription Shares; and
(viii) the Open Offer and the Bonus Issue becoming unconditional (other than the conditions precedent of the Open Offer and the Bonus Issue in relation to the Subscription becoming unconditional).

None of the above conditions can be waived. In the event that the above conditions

have not been satisfied on or before the Long Stop Date (or such later date as the Company, the Provisional Liquidators and the Investor may agree), all liabilities of the parties under the Subscription Agreement shall cease and determine and no party shall have any claim against any other party other than for any antecedent breach.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Subscription Shares

Assuming the Capital Restructuring becoming effective, the 970,000,000 Subscription Shares represent: (i) approximately 27.2 times of the total number of issued New Shares as at the Latest Practicable Date; (ii) approximately 96.45% of the total number of issued New Shares as enlarged by the Subscription Shares; and (iii) approximately 73.39% of the total number of issued New Shares as enlarged by the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares.

For the avoidance of doubt, the Subscription Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus Shares under the Bonus Issue pursuant to the terms of the Subscription Agreement and in any event the Subscription Shares will only be issued conditional upon and immediately after completion of the Open Offer and the Bonus Issue.

Use of net proceeds of the Open Offer and the Subscription

The aggregate cash proceeds from the Open Offer and the Subscription will be approximately HK$172.3 million and the net proceeds (after deducting the resumption professional fees and commission for the Open Offer payable by the Company) will be approximately HK$150.1 million, of which will be applied as follows:

(i) HK$50 million for the cash payment to the SchemeCo as source of dividends to the Creditors with Admitted Claims under the Scheme;
(ii) up to HK$15 million for the repayment of the drawn portion of the Working Capital Loan #1;
(iii) up to HK$40 million for the Acquisition (as to up to HK$20 million for the repayment of the drawn portion of the Working Capital Loan #2 and as to HK$20 million for the repayment of the promissory note in the amount of HK$20 million for the purpose of settling part of the consideration of the Acquisition);
(iv) HK$20 million as an investment to operate and expand the garment retail business under the brand “U-RIGHT” of the Restructured Group; and
(v) the balance will be used as working capital for the Restructured Group.

Information of the Investor and the directors of the Investor

The principal business of the Investor is investment holding. The Investor is beneficially owned as to 40% by Mr. Chau Pak Chuen (“ Mr. Chau ”), as to 30% to Ms. Au Tsui Yee, Maggie (“ Ms. Au ”) and as to 30% by Mr. Chau Kai Man (“ Mr. Chau KM ”). The directors of the Investor are Mr. Chau KM and Mr. Chan Tak Hung (“ Mr. Chan ”).

– 31 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

The shareholding structure of the Investor is as follow:

==> picture [329 x 252] intentionally omitted <==

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

Mr. Chau
100%
Advance Shine
100%
Easy Advance Ms. Au Mr. Chau KM
40% 30% 30%
Investor
----- End of picture text -----

The information of principal members and directors of the Investor are set out as follows:–

Mr. Chau

Mr. Chau of Room 909A, Diyang Tower, Dong San Huan North Road, Chaoyang District, Beijing 100027 China is currently the Chief Executive Officer and the founder of Jaiboo.com, a company established in 2006. Prior to the establishment of Jiaboo.com, Mr. Chau was the project consultant and project director of Hainan Airlines Co., Ltd., a company listed on Shanghai Stock Exchange (Stock Code: 900945.SHA and 600221.SHA). During the period from 1986 to 1995, Mr. Chau was the executive director and Chief Executive Officer of CIL Holding Ltd. (Stock Code: 479.HK), a company listed on the main board of the Stock Exchange.

Ms. Au

Ms. Au of House 7, Greenery Villas, Nos. 2-10 Ma Ying Path, Shatin, New Territories, Hong Kong graduated from Caritas Medical Centre School of Nursing in 1987. Ms Au has worked in a private healthcare and medical group and has over 10 years’ working experience of marketing, management, human resources and business administration. Ms. Au is a registered nurse (general) from 1987 and has worked in a governmental hospital in Hong Kong from 1988-1991.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Mr. Chau KM

Mr. Chau KM of 2/F., No. 53 Tseng Tsun Yuen, Tseng Tau Village, Sai Sha Road, Sai Sha, Sai Kung, New Territories, Hong Kong has over 20 years’ experience in sales and marketing and around eight years’ experience in company secretarial matters. Mr. Chau KM was appointed as a director of the Investor since 31 December 2011. Mr. Chau KM joined Apollo Solar Energy Technology Holdings Limited (stock code: 566.HK), a company listed on the main board of the Stock Exchange, in 2007 and resigned his position as its chairman and executive director in August 2010.

Save for being shareholders of the Investor, there is no relationship amongst the shareholders of the Investor.

Mr. Chan

Mr. Chan of R2, 7/F., 7 Nam Ning Street, Aberdeen, Hong Kong holds a bachelor degree in Accounting at Charles Sturt University, Australia. He is a member of Hong Kong Institute of Certified Public Accountants. Mr. Chan has over 14 years of audit and tax experience in Hong Kong and the PRC. Mr. Chan was appointed as a director of the Investor since 19 September, 2011.

Easy Advance and Advance Shine

Both Easy Advance and Advance Shine are beneficially and wholly-owned by Mr. Chau and are limited companies incorporated in the British Virgin Islands. They are all principally engaged in investment holdings.

As at the Latest Practicable Date, the Investor, its ultimate beneficial shareholders and parties acting in concert with any of them are not interested in any Shares other than the interests under the Subscription Agreement.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, the Investor, its ultimate beneficial owners and parties acting in concert with any of them are (i) Independent Third Parties; and (ii) third parties independent to the proposed executive Director, the Joint Venture Partners and their respective ultimate beneficial owners and the vendor of Sino Hill Group Limited as detailed in the Acquisition Circular.

Update on the principal business of the Restructured Group

Prior to the Suspension, the Group was principally engaged in wholesale and retail trading of fashion garments.

On 1 October 2011, the Group acquired the entire issued share capital of Sino Hill Group Limited at a consideration of HK$40 million satisfied by ways of cash and promissory note. Sino Hill Group Limited is principally engaged in the design, distribution and sales of fashion apparel. The Acquisition is for the purpose of extending the existing principal business of the Group in relation to the wholesale and retail trading of fashion garments.

– 33 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Accordingly, the Acquisition had enriched the Group’s portfolio of the retail business. In preparation for the Resumption, the Group has undergone an organizational restructuring and the Group is currently engaged in operating with distinctive business lines of wholesale of garments and retail of fashion garments covering men, women and children’s wear.

Future intention of the Investor regarding the Restructured Group

It is the intention of the Investor that following the Completion, the Restructured Group will continue with the Group’s existing principal activities of engaging in wholesaling of garments, textiles as well as materials and retailing of fashion garments. The Investor will conduct a detailed review of the business of wholesaling and retailing of garments and operations of the Restructured Group in order to formulate a long term strategy for the Restructured Group and explore investment opportunities in line with the current principal business of the Group in enhancing its future business development and strengthening its revenue bases. Save for the Disposal, the Investor does not have any plan to inject any assets or businesses into the Restructured Group or to procure the Company to acquire or dispose of any assets or to redeploy the fixed assets of the Restructured Group other than in the ordinary course of business within 24 months after the Resumption. None of the Company, the Investor and/or the Directors (including the proposed Director) has any agreement, arrangement, negotiation, plan and/or intention to carry out a principal business other than the existing business of the Company within 24 months after the Resumption.

It is the intention of the Investor to maintain the listing status of the Company on the Stock Exchange after Completion. Each of the Investor and the Directors will take appropriate steps as soon as possible following the Completion to ensure that not less than 25% of the total number of New Shares will be held by the public. The Board expects to appoint the proposed Director effective upon Completion, subject to Shareholders’ approval. Save for the resignation of Mr. Tang Kwok Hung from the position as an executive Director and the appointment of the proposed Director upon Completion, the Board confirmed that it has no intention to change the directors or employees of the Group and has no intention to propose other new directors after the Completion. The existing Directors and the new proposed executive Director confirmed that they are not representatives of the Investor.

The Investor and its beneficial owners have no intention or plan to dispose its interests in the Company within 24 months after the Resumption resulting the Investor to cease to be the controlling Shareholder.

Fundraising activities of the Company in the past 12 months

The Company did not carry out any right issue, open offer or other issue of equity securities for fundraising purpose or otherwise within the past 12 months immediately prior to the Latest Practicable Date.

– 34 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

C. Application for Whitewash Waiver and Special Deals

Whitewash Waiver

As at the Latest Practicable Date, the Investor, its ultimate beneficial owners and parties acting in concert with any of them, are not interested in any Shares or securities of the Company. Immediately after the issue of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares, the Investor, its ultimate beneficial owners and parties acting in concert with any of them will hold 970,000,000 New Shares, representing approximately 73.39% of the issued share capital of the Company as enlarged by the issue of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares. Accordingly, the Investor, its ultimate beneficial owners and parties acting in concert with any of them would trigger an obligation, pursuant to Rule 26 of the Takeovers Code to make a mandatory general offer to acquire all the New Shares other than those already held by the Investor, its ultimate beneficial owners and parties acting in concert with any of them.

The Investor has made an application to the Executive for the Whitewash Waiver, pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Investor to make a mandatory general offer for all the Shares not already owned or agreed to be acquired by the Investor, its ultimate beneficial owners and parties acting in concert with any of them arising from the Subscription. The Executive has indicated that the grant of the Whitewash Waiver will be subject to, among other things, the approval of the Independent Shareholders at the SGM. If the Whitewash Waiver was not granted by the Executive or not approved by the Independent Shareholders, the Subscription will not proceed.

Please refer to the section headed “Effects on the shareholding structure of the Company” in this circular for the detailed analysis in the shareholding changes pursuant to the transactions contemplated under the Resumption Proposal.

If the Whitewash Waiver is approved by the Independent Shareholders, upon Completion, the aggregate shareholding of the Investor, its ultimate beneficial owners and parties acting in concert with any of them in the Company will exceed 50%. The Investor may further increase their shareholdings in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.

Investor’s dealing and interest in the Company’s securities

Save for the entering into of the Subscription Agreement, the Investor, its ultimate beneficial owners and parties acting in concert with any of them have not dealt in the Shares, outstanding options, derivatives, warrants or other securities convertible or exchangeable into the Shares during the period commencing on the date falling six months prior to the date of the Announcement up to the Latest Practicable Date.

– 35 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

As at the Latest Practicable Date,

(i) there are 3,569,364,916 Shares in issue;
(ii) the Company has no outstanding securities, options, warrants, or derivatives which are convertible into or which confer rights to require the issue of Shares and the Company has no other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code);
(iii) none of the Investor, its ultimate beneficial owners or parties acting in concert with any of them holds, owns or has control or direction over any Shares, rights over shares, warrants, options or convertible securities of the Company;
(iv) none of the Investor, its ultimate beneficial owners or parties acting in concert with any of them holds, owns or has control or direction over any derivatives in respect of the securities of the Company;
(v) there is no arrangement (whether by way of options, indemnity or otherwise) in relation to the Shares and shares of the Investor and which might be material to the transactions under the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals and/or the Bonus Issue;
(vi) none of the Investor, its ultimate beneficial owners and parties acting in concert with any of them has borrowed or lent any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company;
(vii) there is no agreement or arrangement pursuant to which any of the Investor, its ultimate beneficial owners or parties acting in concert with any of them is a party which relates to circumstances which it may or may not invoke or seek to invoke a pre-condition or a condition to the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals and/or the Bonus Issue; and
(viii) none of the Investor, its ultimate beneficial owners or parties acting in concert with any of them has received any irrevocable commitment to vote for or against the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals and/or the Bonus Issue.

Special Deals

– 36 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

The extent of the Creditors with Admitted Claims will be varied from time to time as the Scheme Administrators are now in the process of determination of the claims received from the Creditors. The maximum extent of the Creditors with Admitted Claims that include, among others, all the Interested Shareholders and/or their associates, who, directly or through their associates, hold an aggregate of 463,939,327 Shares representing approximately 13.00% of the existing share capital of the Company as at the Latest Practicable Date.

As at the Latest Practicable Date, the Interested Shareholders and/or their associates had in aggregate submitted claims of approximately HK$804 million against the Company to the Scheme Administrators, representing approximately 42.52% of the total claims against the Company received by the Scheme Administrators.

The following table sets out the breakdown of Shares and the relevant amount of claims received by the Scheme Administrators of the Interested Shareholders and their associates:

		% of issued	Amount of Claims
		Shares of	received by the
		the	Scheme
Name of Interested Shareholders		Company	Administrators
			(HK$’000)
Hang Seng Securities Ltd		6.30%	46,417
Shanghai Commercial Bank Ltd		1.74%	23,082
Bank of Communications Trustee Ltd		1.33%	54,542
East Asia Securities Co Ltd (Note 1)		1.32%	93,123
HSBC Broking Securities (Hong Kong) Ltd		0.73%	156
(Note 2)
ICBC (Asia) Securities Ltd (Note 3)		0.66%	160,530
China Merchants Securities (HK) Co Ltd		0.39%	36,591
HSBC Private Bank (Suisse) SA (Note 2)		0.36%	156
The Bank of East Asia Ltd (Note 1)		0.05%	93,123
Public Financial Securities Ltd (Note 4)		0.04%	13,526
Industrial and Commercial Bank of China		0.01%	160,530
(Note 3)
Li Wing Kwong		0.01%	1,209
Deutsche Bank AG		0.003%	352,147
CIMB Securities Ltd		0.001%	23,079
Public Bank (Hong Kong) Ltd (Note 4)		0.00%	13,526
Total	Approximately		804,402
		13.00%

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Notes:

East Asia Securities Co Ltd. and The Bank of East Asia Ltd. and/or their associates submitted an aggregated amount of approximately HK$93,123,000 of claims to the Scheme Administrators.
HSBC Broking Securities (Hong Kong) Ltd. and HSBC Private Bank (Suisse) SA and/or their associates submitted an amount of approximately HK$156,000 of claims to the Scheme Administrators.
ICBC (Asia) Securities Ltd. and Industrial and Commercial Bank of China and/or their associates submitted an aggregated amount of approximately HK$160,530,000 of claims to the Scheme Administrators.
Public Financial Securities Ltd. and Public Bank (Hong Kong) Ltd. and/or their associates submitted an amount of approximately HK$13,526,000 of claims to the Scheme Administrators.

Under the Scheme, the issued shares of the Excluded Subsidiaries will be transferred to the SchemeCo to be realized for the benefit of the Creditors with Admitted Claims. The Scheme Administrators shall take such steps as are appropriate, having regard to the potential costs of and benefits from such steps, to recover any amounts which may be realized from the Excluded Subsidiaries and their assets. Any realizations to be made from the Excluded Subsidiaries and their assets will be distributed to the Creditors with Admitted Claims in accordance with the terms of the Scheme. The arrangement is not extended to all Shareholders and therefore the Disposal constitutes a special deal under note 4 to Rule 25 of the Takeovers Code.

The Company has made an application to the Executive for the consent, under Rule 25 of the Takeovers Code in respect of (i) the settlement of debts due by the Company to the Creditors with Admitted Claims who are also Shareholders and/or their associates; and (ii) the Disposal under the Scheme which will be subject to the approval of the Independent Shareholders at the SGM by way of poll and provided that the independent financial adviser to the Company publicly states that in its opinion the terms of the settlement of debts to the Interested Shareholders and their associates are at arm’s length and on normal commercial terms and the Disposal is fair and reasonable.

Accordingly, (i) the Investor, its ultimate beneficial owners and parties acting in concert with any of them; (ii) the Interested Shareholders; and (iii) those involved in or interested in the Debt Restructuring, the Underwriting Agreement, the Subscription, the Whitewash Waiver and/or the Special Deals will abstain from voting for the resolutions in respect of the Open Offer, the Subscription and Whitewash Waiver, the Bonus Issue, the Debt Restructuring and the Special Deals.

(5) BONUS ISSUE

The Company proposes to issue the Bonus Shares to the Qualifying Shareholders whose names appear on the register of members of the Company as at the close of business on the Record Date in the proportion of two (2) Bonus Shares for every one (1) New Share (equivalent to one (1) Bonus Share for every fifty (50) existing Shares). On the basis of 3,569,364,916 Shares in issue (equivalent to approximately 35,693,649 New Shares assuming Capital Restructuring becoming effective), up to 71,387,298 Bonus Shares would be issued.

– 38 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Under the Open Offer, the Offer Shares will be issued at a premium of HK$0.14 each Offer Share to their par value. The Company proposes to apply part of the premium raised from the Open Offer, up to the sum of HK$713,872.98 (or such sum as may be necessary to give effect to the Bonus Issue) standing to the credit of the share premium account of the Company immediately after the Open Offer, to pay up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid. For the avoidance of doubt, no cash payment by the Company will be made in relation to the Bonus Issue.

The Bonus Issue would allow the Qualifying Shareholders to enjoy the results of the Restructured Group as a result of the transactions contemplated under the Resumption Proposal whether or not they have applied for the Offer Shares under the Open Offer upon completion of the transactions contemplated under the Resumption Proposal (other than the Bonus Issue).

Conditions of the Bonus Issue

The Bonus Issue is conditional upon:

(i) the Subscription and the Open Offer becoming unconditional (other than the conditions precedent of the Subscription and the Open Offer in relation to the Bonus Issue becoming unconditional);
(ii) the Capital Restructuring becoming effective;
(iii) the passing of a resolution by the Independent Shareholders by way of poll at the SGM to approve the Bonus Issue and to approve the allotment, issue and dealing with the Bonus Shares; and
(iv) the Stock Exchange granting the listing of, and permission to deal in, all the Bonus Shares.

Bonus Shares

Assuming the Capital Restructuring becoming effective, the 71,387,296 Bonus Shares represent: (i) approximately 2 times of the total number of issued New Shares as at the Latest Practicable Date; (ii) approximately 66.67% of the total number of issued New Shares as enlarged by the Bonus Shares; and (iii) approximately 5.40% of the total number of issued New Shares as enlarged by the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares.

For the avoidance of doubt, (i) the Bonus Shares do not have the entitlements to subscribe for the Offer Shares under the Open Offer since the Bonus Shares will only be issued conditional upon and immediately after completion of the Open Offer; and (ii) Qualifying Shareholders will be entitled to their respective Bonus Shares irrespective whether they have applied for any or all of the Offer Shares.

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LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS


(i)+(ii)+(iii)+(iv)+(v)	Upon completion of	Open Offer (assuming	100% acceptance)	New Shares %					970,000,000 73.39%					96,300,976 7.29%		189,248,216 14.32%		66,133,333 5.00%				– 0.00%	1,321,682,525 100.00%
	(i)+(ii)+(iii)+(iv)	Upon issue of	Creditor Shares	New Shares %					970,000,000 84.85%					36,112,866 3.16%		70,968,081 6.21%		66,133,333 5.78%					1,143,214,280 100.00%
As at the	Latest (i) Upon Capital (i)+(ii)+(iii)	Practicable Restructuring (i)+(ii) Upon issue of Upon completion of	Date becoming effective Bonus Shares Subscription	Shares New Shares % New Shares % New Shares %	Investor, its ultimate	beneficial owners	and parties acting	in concert with	any of them 970,000,000 90.06%	Independent	Shareholders	– Kingston	Securities Limited	(note 1) 1,203,762,179 12,037,622 33.72% 36,112,866 33.72% 36,112,866 3.35%	– other existing	Shareholders 2,365,602,737 23,656,027 66.28% 70,968,081 66.28% 70,968,081 6.59%	– Creditors with	Admitted Claims	– Underwriter and	independent	placees for Open	Offer	Total 3,569,364,916 35,693,649 100.00% 107,080,947 100.00% 1,077,080,947 100.00%

– 40 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS


(i)+(ii)+(iii)+(iv)+(v)	Upon completion of	Open Offer (assuming	0% acceptance)	New Shares %					970,000,000 73.39%					36,112,866 2.74%		70,968,081 5.37%		66,133,333 5.00%				178,468,245 13.50%	1,321,682,525 100.00%
	(i)+(ii)+(iii)+(iv)	Upon issue of	Creditor Shares	New Shares %					970,000,000 84.85%					36,112,866 3.35%		70,968,081 6.59%		66,133,333 5.78%					1,143,214,280 100.00%
As at the	Latest (i) Upon Capital (i)+(ii)+(iii)	Practicable Restructuring (i)+(ii) Upon issue of Upon completion of	Date becoming effective Bonus Shares Subscription	Shares New Shares % New Shares % New Shares %	Investor, its ultimate	beneficial owners	and parties acting	in concert with	any of them 970,000,000 90.06%	Independent	Shareholders	– Kingston	Securities Limited	(note 1) 1,203,762,179 12,037,622 33.72% 36,112,866 33.72% 36,112,866 3.35%	– other existing	Shareholders 2,365,602,737 23,656,027 66.28% 70,968,081 66.28% 70,968,081 6.59%	– Creditors with	Admitted Claims	– Underwriter and	independent	placees for Open	Offer (note 2)	Total 3,569,364,916 35,693,649 100.00% 107,080,947 100.00% 1,077,080,947 100.00%

– 41 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Notes:

Leung Ngok (“ Mr. Leung ”), the former chairman of the Company will no longer be a substantial Shareholder upon Completion.

On 20 October 2008, Mr. Leung and Ace Target (PTC) Inc. (the trustee of a unit trust of which all of the units in issue are owned by the trustee of The Leung Ngok Family Trust, a discretionary trust of which the objects include Mr. Leung’s family members) surrendered to Kingston Securities Limited all their voting rights in 109,221,000 Shares and 1,094,541,179 Shares correspondingly (in aggregate 1,203,762,179 Shares), which they have pledged to Kingston Securities Limited. As such, Kingston Securities Limited applied to, and received from, the Executive a waiver of the obligation to make a mandatory general offer for the Shares pursuant to Note 2 on dispensations from Rule 26 of the Takeovers Code.

To the best knowledge of the Directors, the Provisional Liquidators and the Investor, Kingston Securities Limited and their associates do not have any relationship with the Company; connected persons of the Company; the Provisional Liquidators; the Investor, its ultimate beneficial owners and parties acting in concert with any of them; and the Creditors with Admitted Claims. Save as aforesaid, Kingston Securities Limited is not involved or interested in the Restructuring.

Pursuant to the Underwriting Agreement, the Open Offer is fully underwritten by the Underwriter. The Underwriter will procure placees independent to the Company and its connected persons, the Investor, its ultimate beneficial owners, the Creditors and parties acting in concert with any of them to take up such number of Offer Shares so that neither the Underwriter nor any of the placees shall hold 10% or more of the issued share capital in the Company immediately upon completion of the Open Offer (on a full dilution basis).

FINANCIAL EFFECTS OF THE TRANSACTIONS UNDER THE RESUMPTION PROPOSAL

Upon completion of the Capital Restructuring, the Company will have greater flexibility for future fundraising activities. Furthermore, on the assumption that no further Shares will be issued or repurchased before the Capital Restructuring becoming effective, the existing paid-up capital of the Company will be reduced from HK$356.9 million to approximately HK$356,936 and generating a credit of approximately HK$356.6 million as a result of the Capital Reduction which will be applied in a manner as permitted by the Companies Act, including but not limited to eliminating part of the outstanding accumulated losses of the Company, which was approximately HK$2,481 million as at 31 March 2013.

As mentioned in the “Unaudited pro forma financial information of the Group” contained in Appendix II to this circular, the financial position of the Group will be improved by discharging and releasing indebtedness and liabilities of the Company pursuant to the Scheme and the completion of the Open Offer and the Subscription will provide new capital for the Group. The unaudited pro forma net asset value of the Group would be improved from a net liability of approximately HK$1,579 million as at 31 March 2013 to a net asset value of approximately HK$134.7 million if the Open Offer and the Subscription had been completed on 31 March 2013 and if the Scheme had been effective on 31 March 2013. Upon completion of the Scheme, save for those liabilities incurred or to be incurred in the ordinary course of business, the Restructured Group will be debt free.

– 42 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

GROUP INFORMATION

Business Overview

The Group was engaged in wholesale and retail trading of fashion garments prior to the Suspension. After the appointment of the Provisional Liquidators on 6 October 2008, the then management of the Company together with the Provisional Liquidators used their best endeavours to maintain the business of the Group both in Hong Kong and the PRC.

In August 2009, the Company built up a new management team to formulate the overall business development strategies of the Group with a view to restore, create and maximize the value of the Group to its shareholders. Upon the efforts of the new management of the Company, various businesses have been established.

In preparation for the Resumption, the Group has undergone organizational restructuring. The current businesses of the Restructured Group are mainly operated under U-RIGHT Trading, Xiamen U-Right and Sino Hill Group Limited with four distinctive business lines, namely (i) wholesale of garments and textiles; (ii) retail of men wear under the brand of “Yilking” ; (iii) retail of women wear under the brands of “ LeRoi” and “ Meridow �; and (iv) retail of fashion garments under the brand of “U-RIGHT”.

Background of operating subsidiaries

(i) U-RIGHT Trading

U-RIGHT Trading, incorporated in Hong Kong with limited liability and with businesses commenced in August 2010, is primarily engaged in the wholesale trading of garments and textile products. The major customers include wholesalers and distributors in the South-east Asia region whereas the supplies are mainly sourced from suppliers in Xiamen, Shishi and Jinjiang in Fujian province.

(ii) Xiamen U-Right

Xiamen U-Right, established with limited liability in the PRC as a non-wholly owned subsidiary of the Group, is primarily engaged in the i) retail of men wear under the brand of “Yilking” in the PRC; ii) wholesale trading of raw materials and textile products in the PRC; and (iii) retailing of fashion garments under the brand name of “ U-RIGHT ” in the PRC.

On 24 January 2010, Xiamen U-Right entered into an agreement with the Joint Venture Partners, specifying the operations, rights, duties and obligations including the use and transfer of rights and business of the retail of “Yilking” products and the wholesale trading business. Pursuant to the agreement and the JV Contracts, Shishi Yilking and Dateng were appointed as agents for and on behalf of Xiamen U-Right to operate the business of the retail of “Yilking” products and the wholesale trading business respectively until the integration of Xiamen U-Right was completed in return for a management fee.

– 43 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Xiamen U-Right has started to integrate the business of the retail of “Yilking” products and the wholesale trading business. The primary goal of the integration is to make Xiamen U-Right the contracting party, instead of through an agent (i.e. the Joint Venture Partners), to all transactions of its businesses. The integration of the wholesale business of Xiamen U-Right were completed in July 2012, while the integration of the retail business of Xiamen U-Right is expected to be completed by the end of September this year. Upon completion of the integration, the Joint Venture Partners will cease to carry out Xiamen U-Right’s business as agents.

(iii) Sino Hill Group Limited

Sino Hill Group Limited was incorporated in the British Virgin Islands with limited liability and, together with its subsidiaries, was principally engaged in design, distribution and sales of fashion apparel under the brand names of “ LeRoi” and “ Meridow”.

The Group acquired Sino Hill Group Limited at a consideration of HK$40 million. It was considered that the business of Sino Hill Group Limited was in line with and complementary to the existing principal business of the Group in relation to the wholesale and retail trading of fashion garment. Details of the operations of Sino Hill Group Limited were included in the Acquisition Circular dated 25 August 2011. The Acquisition of Sino Hill Group Limited was completed on 1 October 2011.

Business of retailing

The apparel retail business of the Group, as mentioned in the previous sections, consists of a wide range of products and markets under the brands of “ Yilking ”, “ LeRoi ”, “ Meridow ” and “ U-RIGHT ”.

Products

“ Yilking ” products focus on men’s outerwear, segregated into business formal and business casual, ranging from shirts, T-shirts, cardigans, jeans to suits, jackets, light coats and heavy coats, covering spring/summer and autumn/winter collections.

“LeRoi” and “Meridow” products focus on ladies’ outerwear market in the PRC and their products include coats, dresses, skirts, pants, blouses and cardigans in business formal, business casual and fashion casual styles.

Retail products of the Group are distributed through self-operated shops and sale counters, franchise shops and regional distributors.

The management opened the first self-operated shop dedicated to “ U-RIGHT ” branded products in the city of Xiamen in late 2011 through the Group’s internal resources.

Upon Resumption, the Company will have a HK$20 million capital injection to expand the retail business of Xiamen U-Right and the retailing of “ U-RIGHT ” branded products. The capital will be sourced from the proceeds arising from the Subscription and the Open Offer.

– 44 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

The management targets to expand the business by broadening the product range, including men’s outwear, women’s outwear and children’s outwear and focusing on fashionable family collection casual wear. The overall product portfolio will be family collection.

Product design and development

Retail product designs are initiated by in-house design team with suggestions from the distributors and the franchisees.

As for external collaborations, in-house design team communicates with manufacturers’ development team or external design house on required items, their intended material, construction and color tones for their creation of a prototype. The prototype will then be commented by the Group’s in-house design team for any amendment.

Manufacturers’ participation enriches the variety of products of the Group by their own strengths; and allows shorter transition from designer’s sketches into mass production through their comments on the practicality of the design, such as pattern development and stages of garment production, increasing the competitiveness of the brands.

Through this mode of collaboration, the Group retains control on the crucial stages of product development, namely the initiation and determination design proposals and the final decision on the design and make of the products; and outsources the non-core parts of product development, namely pattern development, layouts, cutting and stitching, to manufacturers’ design teams.

For peripheral products such as belts and shoes, designs are provided by manufacturers and then the Group purchases directly from them after brand labeling.

Production

The Group outsources productions to local manufacturers in the Guangdong and Fujian region. Product quality is assured through selection of suppliers, subcontracting agreement and quality inspection. Subcontracting the production process to the local manufacturers allows higher flexibility in product development without restriction imposed by facility specifications, and lowers production costs for a faster expansion of the Group’s chain of production in order to catch up with the booming market appetite.

Business of wholesale trading

The wholesale trading business of the Group is principally operated on an indent basis under U-RIGHT Trading, while Xiamen U-Right’s trading business holds inventory to match with sales orders. The Group also trades with the local suppliers in the Shishi District in Xiamen, Jiangsu and Xiamen. Apart from the PRC suppliers, the Group also trades with suppliers and buyers from overseas mainly in the Southeast Asia, Middle East and Europe.

The customer group of the wholesale trading business includes domestic textile processing and dying factories as well as garment distributors and wholesalers both in the PRC and overseas.

– 45 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Risk Factors

Production process

The Restructured Group’s ability to meet demands of, and contractual obligations with, the distributors and franchisee and the ability to expand the business are heavily dependent on efficient, proper and uninterrupted operations of the suppliers. Power failures or disruptions, failure or substandard performance of equipment, improper installation or operation of equipment and destruction of buildings, equipment and other facilities due to fire or natural disasters such as hurricanes, severe winter storms or earthquakes would severely affect the supplies to the Restructured Group.

Business in the PRC

Political and economic policies of the PRC government and social conditions and legal developments of the PRC could adversely affect the Restructured Group’s business.
The control of currency conversion by the PRC government could affect the Restructured Group’s business operations.
Uncertainties regarding interpretation and enforcement of the PRC laws and regulations may impose adverse impact on the Restructured Group’s business, operations and profitability and limit the legal protections available to investors.
The Restructured Group’s labour costs may increase for reasons such as the implementation of the Labour Contract Law of the PRC or a labour shortage in the places the Restructured Group operates.
Changes in government regulations such as environmental laws and regulations could affect the Restructured Group’s results of operations.
Any changes in the Restructured Group’s tax treatment, including an unfavourable change in preferential enterprise income tax rates in the PRC, may have a material adverse impact on the Restructured Group’s financial condition and results of operations.
Shortage of electricity and water supply in the PRC would affect the Restructured Group’s production, business and financial performance.

Risk relating to the business operations of the Restructured Group

Strong competition

The Restructured Group is engaged in a competitive and fragmented market and is facing a strong competition from competitors in the PRC. There is no assurance that the competition within the industry will not further intensify which could result in price reduction, diminution of the market share of the Restructured Group and have an adverse impact on the operation of the Restructured Group’s business.

– 46 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Economic downturns

Demand for fashion apparel may be adversely affected by economic downturns in the PRC. Most of the Restructured Group’s customers are based in the PRC. In the event of the PRC economic downturn or any financial crisis, operation of the Restructured Group will be adversely affected.

Reliance on the PRC market

Revenue of the Restructured Group is mainly generated in the PRC and thus the sales and business growth of the Restructured Group are subject to economic conditions of the PRC and consumer spending habits. Factors affecting the level of consumer spending also include but not limited to interest rates, currency exchange rates, recession, inflation, deflation, political uncertainty, taxation, stock market performance, unemployment level and general consumer confidence. Fluctuations in the abovementioned factors will affect the business of the Restructured Group.

Industry concentration

All the products of the Restructured Group are garment products. The performance of the Restructured Group could be adversely affected by fluctuations in the demand for such products and changes in the market conditions.

Business Integration

Before completion of the full integration of the business under Xiamen U-Right, the rights of the Group on its business is solely governed by the JV Contracts, and that,

A breach of the JV Contracts by the Joint Venture Partners may affect the Group’s operation significantly;
While the Joint Venture Partners are appointed agents of Xiamen U-Right to carry out the business, the JV Contracts may not provide control as effective as direct ownership;
The PRC government may determine that the JV Contracts do not comply with applicable regulations;
Such arrangements may be subject to scrutiny of the PRC tax authorities and additional tax may be imposed.
Others

The Restructured Group relies on “Yilking” , “LeRoi” , “Meridow” and “ U-RIGHT ” brands. There is no guarantee that the Restructured Group will continue to be successful in developing the “Yilking” , “LeRoi” , “Meridow” and “U-RIGHT” branded products and expanding its product lines and offerings.

– 47 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

It is difficult to accurately anticipate or respond in a timely manner to changes in continually evolving consumer tastes and preferences for garment products and the sales of the Restructured Group may be affected by seasonality and a number of other factors.

The Restructured Group relies on its distributors who either directly or through third party retail outlet operators, to operate authorized “Yilking” , “LeRoi” and “Meridow” retail outlets for the sales in the PRC.

The Restructured Group has limited control over the ultimate retail sales by its distributors. The Restructured Group’s brand image and business may be adversely affected if the distributors fail to adhere to, or fail to cause the third party retail outlet operators to adhere to the Restructured Group’s retail policies and standards.

The Restructured Group may not be able to accurately monitor the inventory levels at its distributors and third party retail outlet operators and therefore cannot determine the proportion of products sold to end-users.

Any excessive build-up of inventory by the distributors could affect the volume of future orders from the distributors and have an adverse impact the Restructured Group’s business (i.e. obsolete inventory).

Unauthorized use of the Restructured Group’s trademarks or sale of counterfeit products under any of the Restructured Group’s brands by third party could result in an erosion of goodwill and loss of sales.

Third parties may assert or claim that the Restructured Group has infringed their intellectual property rights.

Business trend for the Group

The Group recorded a turnover of approximately HK$331.1 million, HK$397.9 million and HK$392.6 million for the three years ended 31 March 2011, 2012 and 2013, respectively. Profit attributable to the Shareholders of the Company for the respective periods was approximately HK$1.7 million, HK$6.9 million and HK$8.3 million. Upon Resumption, the Company will have additional capital to operate and expand the Restructured Group’s garment retail business. The capital will be sourced from the proceeds arising from the Subscription. The management targets to expand the business by broadening the product range, including men’s outwear, women’s outwear and children’s outwear and focusing on fashionable family collection casual wear. The overall product portfolio will be family collection. The Group will also continue its focus on the integration of the existing business.

– 48 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

ADOPTION OF NEW BYE-LAWS

The existing Bye-laws were adopted in 2000 and have not been amended since 2006. Since then, there have been various amendments in applicable laws and regulations including the Listing Rules and changes in market practice. It is now proposed for the Company to adopt the New Bye-laws to reflect the latest amendments to the Listing Rules which became effective on 1 January 2012, 1 April 2012 and 1 January 2013 and the Companies Act which came into effect on 18 December 2011. As the amendments to the existing Bye-laws are substantial, it is proposed that the New Bye-laws, which complies with all current applicable laws and regulations, be adopted in substitution for and to the exclusion of the existing Bye-laws instead of amending the existing Bye-laws on a piecemeal basis, which may lead to confusion and complication in the future. The Board will seek the approval of the Shareholders by way of passing a special resolution at the SGM to adopt the New Bye-laws in substitution for and to the exclusion of the existing Bye-laws. A summary of the principal provisions of the New Bye-laws is set out in Appendix IV to this circular. The major changes brought about by the New Bye-laws are summarised as follows:

(a) any Director appointed by the Board to fill a casual vacancy shall hold office only until the next following annual general meeting of the Company;
(b) all resolutions at general meetings of the Company shall be decided by poll other than resolution which relates purely to a procedural or administrative matter as may be permitted under the Listing Rules to be voted by a show of hands;
(c) an annual general meeting shall be called by written notice of not less than 21 clear days and not less than 20 clear business days, any special general meeting called for the passing of a special resolution shall be called by written notice of not less than 21 clear days and not less than 10 clear business days, all other meetings may be called by written notice of not less than 14 clear days and not less than 10 clear business days;
(d) no longer permit a Director to disregard 5% interests when considering whether the Director has a material interest which would prevent him from forming part of the quorum or voting at a board meeting; and
(e) if a substantial shareholder or a Director has a conflict of interest in a matter to be considered by the Board which the Board has determined to be material, the matter shall be dealt with by a physical board meeting rather than a written resolution.

The legal adviser to the Company as to Hong Kong laws has confirmed that the New Bye-laws comply with the requirements of the Listing Rules. The legal adviser to the Company as to Bermuda laws has confirmed that the New Bye-laws do not violate the applicable laws of Bermuda. The Company confirms that there is nothing unusual about the proposed amendments for a Bermuda company listed on the Stock Exchange.

Shareholders are advised that the New Bye-laws are available only in English and the Chinese translation of the New Bye-laws provided in Appendix IV to this circular is for reference only. In case of any inconsistency, the English version shall prevail.

– 49 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

PROPOSED APPOINTMENT OF NEW EXECUTIVE DIRECTOR

The Board proposes to appoint Ms.Yeung Sau Han, Agnes as an executive Director, subject to the approval of the Shareholders by way of an ordinary resolution, at the SGM with her effective day of employment on the date of Completion.

The biographical detail of Ms. Yeung Sau Han, Agnes is set out in Appendix V to this circular.

(6) GENERAL

SGM

The SGM will be held for the purpose of considering and, if thought fit, approving the resolutions in respect of, inter alia, the Capital Restructuring, the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue, the issue of the Creditor Shares, adoption of the New Bye-laws and proposed appointment of new executive Director.

The Capital Restructuring, adoption of the New Bye-laws and proposed appointment of new executive Director are subject to the Shareholders’ approval at the SGM and no Shareholders are required to abstain from voting on the resolutions in relation to the Capital Restructuring, adoption of the New Bye-laws and proposed appointment of new executive Director.

Completions of the Open Offer, the Subscription and the Bonus Issue are interconditional. Accordingly, the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the issue of Creditor Shares and the Bonus Issue will be subject to the approval by the Independent Shareholders by way of poll at the SGM.

Shareholders including, (i) the Investor, its ultimate beneficial owners and parties acting in concert with any of them; (ii) the Interested Shareholders; and (iii) those who are interested in, or involved in the Debt Restructuring, the Underwriting Agreement, the Subscription, the Whitewash Waiver and/or the Special Deals are required to abstain from voting for the resolutions in respect of the Debt Restructuring, the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares at the SGM.

As at the Latest Practicable Date, none of the Investor, its ultimate beneficial owners and their respective associates and parties acting in concert with any of them and those who are interested in, or involved in, the Underwriting Agreement, the Subscription and/or the Whitewash Waiver holds any Share, or control the exercise of any voting rights of any Share. If any of those who are interested in, or involved in the Debt Restructuring, the Underwriting Agreement, the Subscription, the Whitewash Waiver and/or the Special Deals holds any Share, or control the exercise of any voting rights of any Share prior to the SGM, they will need to and procure their respective associates to abstain from voting at the SGM other than the resolutions relating to Capital Restructuring, adoption of the New Bye-laws and the proposed appointment of new executive Director.

– 50 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

As at the Latest Practicable Date, certain Creditors and/or their respective associates are interested in the Shares, such Interested Shareholders are required to abstain from voting on the resolutions in respect of the Debt Restructuring, the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares at the SGM.

Application for listing

The Company will apply to the Stock Exchange for the listing of, and permission to deal in the New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares. Subject to the granting of the listing of, and permission to deal in the New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares, on the Stock Exchange, the New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares, will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares, on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. Dealings in the New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares, may be settled through CCASS. The board lot size of the Offer Shares is 20,000.

Status of the New Shares

When allotted, issued and fully paid, the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares will rank pari passu in all respects with the then New Shares in issue on the date of allotment and issue of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares respectively. Holders of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares will be entitled to receive all future dividends and distributions which are declared, made and paid after the date of allotment and issue of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares respectively.

– 51 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all the independent non-executive Directors, who have no direct or indirect interest in the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and/or the issue of the Creditor Shares, has been established to advise the Independent Shareholders as to whether the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and issue of the Creditor Shares are fair and reasonable and in the interests of the Company and the Independent Shareholders taken as a whole and as to voting after taking into account the advice from the independent financial adviser.

INDEPENDENT FINANCIAL ADVISER

Messis Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares. Its appointment has been approved by the Independent Board Committee.

CONTINUED SUSPENSION OF TRADING IN THE SHARES

Trading in the Shares on the Stock Exchange has been suspended since 17 September 2008. Until satisfaction of all the Resumption Conditions set by the Stock Exchange, trading in the Shares will continue to be suspended. The release of this circular does not indicate that the Shares (or the New Shares) will resume trading. Shareholders should note that the Shares may be delisted by the Stock Exchange in the event that the Company fails to satisfy all the Resumption Conditions or within the time stipulated by the Stock Exchange. Accordingly, Shareholders and potential investors are advised to exercise caution when dealing in the Shares up to the date when the Resumption Conditions are satisfied.

RECOMMENDATIONS

The Directors (including the independent non-executive Directors) are of the opinion that all resolutions proposed for consideration and approval by the Shareholders or the Independent Shareholders at the SGM are on normal commercial terms, fair, reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Shareholders or the Independent Shareholders to vote in favor of the relevant resolutions to be proposed at the SGM.

– 52 –

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Your attention is drawn to the “Letter from the Independent Board Committee” set out on page 54 of this circular and the “Letter from Messis Capital” set out on pages 55 to 71 of this circular. The Independent Board Committee after considering the advice from Messis Capital which considers that the terms of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and issue of the Creditor Shares are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole, recommends the Independent Shareholders to vote for the resolutions in these respects. You are strongly advised to read the “Letter from the Independent Board Committee” and the “Letter from Messis Capital” before voting.

ADDITIONAL INFORMATION

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

By order of the Board

U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) Tang Kwok Hung Director

For and on behalf of

U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) Lai Kar Yan (Derek) Yeung Lui Ming Joint and Several Provisional Liquidators acting as agents for and on behalf of U-RIGHT International Holdings Limited without personal liability

– 53 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

U-RIGHT INTERNATIONAL HOLDINGS LIMITED

(Provisional Liquidators Appointed) 佑威國際控股有限公司[*]

（已委任臨時清盤人）

(Incorporated in Bermuda with limited liability)

(Stock Code: 00627)

26 July 2013

To the Independent Shareholders

Dear Madam/Sir,

FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS; AND BONUS ISSUE AND THE ISSUE OF CREDITOR SHARES

We refer to the circular of the Company dated 26 July 2013 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter when used herein unless the context otherwise requires.

The Independent Board Committee has been constituted to, among other things, give recommendations to the Independent Shareholders in respect of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares. Messis Capital has been appointed as the independent financial adviser to advise us in this respect. Details of its advice, together with the principal factors and reasons taken into consideration in arriving at such advices, are set out in its letter on pages 55 to 71 of this circular, and the additional information set out in other sections of and appendices to this circular.

Having considered the terms of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, issue of the Creditor Shares and the Bonus Issue as well as the advice and recommendations of Messis Capital as set out in its letter of advice, we consider that the terms of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares are fair and reasonable as far as the Independent Shareholders are concerned. The Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend that the Independent Shareholders to vote in favor of the resolutions to be proposed at the SGM to approve the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares respectively.

Yours faithfully,

Independent Board Committee

U-RIGHT International Holdings Limited (Provisional Liquidators Appointed)

Chung Wai Man

Mak Ka Wing Patrick

Chan Chi Yuen

Independent non-executive Directors

For identification purpose only

– 54 –

LETTER FROM MESSIS CAPITAL

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==> picture [237 x 42] intentionally omitted <==

26 July 2013

To the Independent Board Committee and the Independent Shareholders of U-RIGHT International Holdings Limited

Dear Sir/Madam,

FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS; AND BONUS ISSUE AND THE ISSUE OF CREDITOR SHARES

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of Creditor Shares, details of which are set out in the letter from the Board and the Provisional Liquidators (the “ Letter from the Board and Provisional Liquidators ”) contained in this circular (the “ Circular ”) dated 26 July 2013 issued by the Company, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 9 July 2013, the Company announced, among others, that

(i) on 9 July 2013, the Company entered into the Underwriting Agreement with the Underwriter, whereby the Company proposed to raise gross proceeds of approximately HK$26.8 million before expenses, by way of the Open Offer of 178,468,245 Offer Shares at the Offer Price of HK$0.15 per Offer Share, on the basis of five (5) Offer Shares for every one (1) New Share held on the Record Date;
(ii) on 9 July 2013, the Company entered into the Subscription Agreement with the Investor pursuant to which the Company will issue and the Investor will subscribe for 970,000,000 New Shares at the Subscription Price of HK$0.15 per New Share. The gross proceeds from the Subscription is HK$145.5 million; and
(iii) the Company proposed to issue the Bonus Shares to the Qualifying Shareholders whose names appear on the register of members of the Company on the Record Date on the basis of two (2) Bonus Shares for every one (1) New Share.

– 55 –

LETTER FROM MESSIS CAPITAL

Shares and the Creditor Shares, the Investor, its ultimate beneficial owners and parties acting in concert with any of them will hold 970,000,000 New Shares, representing approximately 73.39% of the issued share capital of the Company as enlarged by the issue of the Offer Shares, Subscription Shares, Bonus Shares and the Creditor Shares. Accordingly, the Investor, its ultimate beneficial owners and parties acting in concert with any of them would trigger an obligation, pursuant to Rule 26 of the Takeovers Code to make a mandatory general offer to acquire all the New Shares other than those already held by the Investor, its ultimate beneficial owners and parties acting in concert with any of them.

The extent of the Creditors with Admitted Claims will be varied from time to time as the Scheme Administrators are now in the process of determination of the claims received from the Creditors. The maximum extent of the Creditors with Admitted Claims that include, among others, all the Interested Shareholders and/or their associates, who, directly or through their associates, hold an aggregate of 463,939,327 Shares, representing approximately 13.00% of the existing share capital of the Company as at the Latest Practicable Date.

– 56 –

LETTER FROM MESSIS CAPITAL

The Company has made an application to the Executive for the consent, under Rule 25 of the Takeovers Code in respect of (i) the settlement of debts due by the Company to the Creditors with Admitted Claims who are also Shareholders and/or their associates; and (ii) the Disposal under the Scheme which will be subject to the approval of the Independent Shareholders at the SGM by way of poll and provided that the independent financial adviser to the Company publicly states that in its opinion the terms of the settlement of debts to the Interested Shareholders are at arm’s length and on normal commercial terms and the Disposal is fair and reasonable.

The Independent Board Committee comprising all the independent non-executive Directors has been established to advise the Independent Shareholders in respect of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of Creditor Shares. We have been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders as to (i) whether the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and issue of the Creditor Shares are in the interests of the Company and the Independent Shareholders as a whole; and (iii) whether the Independent Shareholders should vote in favour of the resolutions to approve the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of Creditor Shares at the SGM. The Independent Board Committee has approved our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in such regard.

BASIS OF OUR ADVICE

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained in the Circular and the information and representations provided to us by the Company, Directors and management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular, which have been provided by the Company, Directors and management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be true as at the Latest Practicable Date, and should there be any material changes to our opinion after the Latest Practicable Date, Shareholders would be notified as soon as possible.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular the omission of which would make any statement in the Circular, misleading. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading.

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We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group, the Investor, the Underwriter and their respective associates.

We have not considered the tax implications on the Qualifying Shareholders of their acceptances or non-acceptances of the Open Offer since these are particular to their own individual circumstances. Qualifying Shareholders should consider their own tax position with regard to the Open Offer and, if in any doubt, should consult their own professional advisers in due course.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of the Creditor Shares, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendations to the Independent Board Committee and the Independent Shareholders, we have taken into consideration the following principal factors and reasons. Our conclusions are based on the results of all analyses taken as a whole.

A. HISTORICAL FINANCIAL PERFORMANCE OF THE GROUP

(i) Financial year ended 31 March 2013

According to the annual report of the Company (“ AR 2013 ”) for the year ended 31 March 2013, the Group reported revenue of approximately HK$392.64 million, representing a decrease of approximately 1.33% from that for the year ended 31 March 2012 of approximately HK$397.94 million. As advised by the Company, the decrease in revenue was mainly due to a more cautious approach adopted by the Group during the period in accepting orders to protect margin of its wholesale business. The Group reported profit attributable to Shareholders of approximately HK$8.33 million for the year ended 31 March 2013, representing an increase of approximately 20.89% as compared to that for the year ended 31 March 2012 of approximately HK$6.89 million. As advised by the Company, such increase was mainly due to (i) the full-year operating results of Sino Hill Group Limited (“ Sino Hill ”) being consolidated into the Group after the completion of the acquisition of Sino Hill on 1 October 2011, and (ii) the maturity of a convertible note during the period resulted in lower finance charge for the period.

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It was noted from the independent auditor’s report in AR 2013 that because of the matters described in the basis for disclaimer of opinion paragraphs and the material uncertainty relating to the going concern basis as set out therein, the auditors of the Company did not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 March 2013 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. Details of the basis for disclaimer and material uncertainty relating to the going concern basis have been set out in the independent auditor’s report in AR 2013.

(ii) Financial year ended 31 March 2012

According to the annual report of the Company (“ AR 2012 ”) for the year ended 31 March 2012, the Group reported revenue of approximately HK$397.94 million, representing an increase of approximately 20.19% as compared to that for the year ended 31 March 2011 of approximately HK$331.08 million. As advised by the Company, the increase in revenue was mainly due to consolidation of Sino Hill into the Group upon completion of the Acquisition. The Group reported profit attributable to Shareholders of approximately HK$6.89 million for the year ended 31 March 2012, representing an increase of approximately 296.20% as compared to that for the year ended 31 March 2011 of approximately HK$1.74 million. As advised by the Company, such increase was mainly due to the increase in revenue.

As noted from the independent auditor’s report in AR 2012, because of the significance of the matters described in the basis for disclaimer of opinion paragraphs and the material uncertainty relating to the going concern basis as set out therein, the auditors of the Company did not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 March 2012 and of the Group’s result and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. Details of the basis for disclaimer and material uncertainty relating to the going concern basis have been set out in the independent auditor’s report in AR 2012.

B. FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION

Reasons for the fundraising and use of proceeds

As set out in the Letter from the Board and Provisional Liquidators, the Board considers that the Open Offer is in the interests of the Company and the Shareholders as a whole as it offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company and continue to participate in the future development of the Group should they wish to do so. Furthermore, the Open Offer allows the Company to credit part of the net proceeds raised from the Open Offer up to the sum of HK$713,872.98 (or such sum as may be necessary to give effect to the Bonus Issue) to the share premium account of the Company and apply such amount to pay up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid.

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LETTER FROM MESSIS CAPITAL

As noted from the Letter from the Board and Provisional Liquidators, the aggregate cash proceeds from the Open Offer and the Subscription will be approximately HK$172.3 million and the net proceeds (after deducting the resumption professional fees and commission for the Open Offer payable by the Company) will be approximately HK$150.1 million, of which will be applied as follows:

(1) HK$50 million for the cash payment to the SchemeCo as source of dividends to the Creditors with Admitted Claims under the Scheme;
(2) up to HK$15 million for the repayment of the drawn portion of the Working Capital Loan #1;
(3) up to HK$40 million for the Acquisition (as to up to HK$20 million for the repayment of the drawn portion of the Working Capital Loan #2 and as to HK$20 million for the repayment of the promissory note in the amount of HK$20 million (the “ Promissory Note ”) for the purpose of settling part of the consideration of the Acquisition);
(4) HK$20 million as an investment to operate and expand the garment retail business under the brand “U-RIGHT” of the Restructured Group; and
(5) the balance will be used as working capital for the Restructured Group.

The proceeds from the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow the Group to grasp suitable business/investment opportunities with immediately available fund should appropriate chance arise. In addition, the Subscription will enable the Group to reduce its indebtedness and liabilities.

As noted from AR 2013, the Company recorded bank and cash balances of approximately HK$9.42 million, net current liabilities of approximately HK$1,594.55 million and net liabilities of approximately HK$1,579.14 million as at 31 March 2013.

We also noted from the circular of the Company dated 25 August 2011 in relation to the Acquisition, the Company has issued the Promissory Note in the amount of HK$20 million to settle part of the consideration of the Acquisition and the Promissory Note should be repaid from 2 years from the date of issue (which is the date of completion of the Acquisition, i.e. 1 October 2011) or one year after Resumption, whichever is earlier.

Having considered (i) the financial position of the Group as at 31 March 2013 and the outstanding amount of the Promissory Note and the Working Capital Loans; (ii) the Subscription will enable the Group to reduce its indebtedness and liabilities; (iii) the proceeds from the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow the Group to grasp suitable business/investment opportunities with immediately available fund should appropriate chance arise; (iv) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional

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interests; (v) the Open Offer allows the Company to credit part of the net proceeds raised from the Open Offer to the share premium account of the Company and apply such amount to pay up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid; and (vi) the Open Offer and the Subscription are part of the Resumption Conditions, we are of the view that the Open Offer and the Subscription (including the use of proceeds) are in the interests of the Company and the Independent Shareholders as a whole.

The Offer Price and the Subscription Price

The Offer Price and the Subscription Price of HK$0.15 represented:

(i) a discount of approximately 89.29% to the closing price of approximately HK$0.014 per Share (equivalent to approximately HK$1.40 per New Share assuming the Capital Restructuring becoming effective) as quoted on the Stock Exchange on the Last Trading Day; and
(ii) a discount of approximately 58.14% to the theoretical ex-entitlement price of approximately HK$0.3583 per New Share, based on the closing price of approximately HK$0.014 per Share (equivalent to approximately HK$1.40 per New Share assuming the Capital Restructuring becoming effective) as quoted on the Stock Exchange on the Last Trading Day.

As set out in the Letter from the Board and Provisional Liquidators, trading of Shares had been suspended since 17 September 2008, the Company and the Provisional Liquidators had, upon arm’s length negotiation, agreed with the Underwriter that the Offer Price should represent a substantial discount to the closing price before Suspension so as to incentivize the Qualifying Shareholders to take up their entitlements under the Open Offer. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to his/her/its shareholding in the Company as at the Record Date. The Directors consider the Offer Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

As advised by the Company, the Subscription Price was determined under arm’s length negotiation between the Company, the Provisional Liquidators and the Investor with reference to the Offer Price. The Directors consider the Subscription Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

(a) Historical share price performance

We noted that the Offer Price and the Subscription Price represented substantial discount to the adjusted closing price of the New Shares on the Last Trading Day. However, in our opinion, the Last Trading Day is more than four years from the Latest Practicable Date, we considered the closing price on the Last Trading Day does not represent a major reference to the Offer Price and the Subscription Price because the current market sentiment is different from the market sentiment four year ago and closing price on the Last Trading Day does not reflect the existing business prospects and the existing financials of the Company.

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LETTER FROM MESSIS CAPITAL

(b) Comparison with other open offers

In assessing the fairness of the Offer Price, we have compared the Open Offer with all open offers (the “ Open Offer Comparables ”) conducted by companies listed on the Stock Exchange with their shares have been suspended for trading for more than one year and have announced their respective open offer transactions during the 12-month period preceding the date of the Underwriting Agreement (i.e. from 10 July 2012 up to and including 9 July 2013), being the date of the Underwriting Agreement, for comparison purposes. In view that (i) for prolonged suspension companies, it is a common market practice to price the open offer or rights issue at a discount to the market price of relevant shares in order to encourage subscription by their shareholders; and (ii) the market sentiment at the relevant time may also play an important role in the determination of the offer price, we believe that the Open Offer Comparables may reflect the recent trend of open offer transactions in the market for prolonged suspension companies and consider the Open Offer Comparables are fair and representative samples. Details of the Open Offer Comparables are summarized in the following table:

			Premium/	Premium/
			(discount) of	(discount) of
			Offer Price	Offer Price
			over/(to) the	over/(to) the
Open Offer			closing price	theoretical
Comparables	Date of	Basis of	on the last	ex-entitlement	Maximum	Excess
(Stock code)	announcement	entitlement	trading day	price	dilution	application
			(%)	(%)	(Note)

Warderly International	21/3/2013	4 for 1	(89.58)	(63.24)	80.00	Not available
Holdings Limited						in the
(607)						announcement
FU JI Food and Catering	21/1/2013	1 for 1	(99.03)	(98.07)	50.00	yes
Services Holdings
Limited (1175)
Aurum Pacific (China)	21/12/2012	4 for 1	(75.81)	(38.52)	80.00	no
Group Limited (8148)
		Maximum	(99.03)	(98.07)
		discount
		Minimum	(75.81)	(38.52)
		discount
		Median	(89.58)	(63.24)
		Mean	(88.14)	(66.61)
The Company		5 for 1	(89.29)	(58.14)	83.33	no

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

Note: Maximum dilution effect of each open offer is calculated as: ((number of offer shares and (if any) bonus shares to be issued under the basis of entitlement)/(number of existing shares held for the entitlement for the offer shares under the basis of entitlement + number of offer shares and (if any) bonus shares to be issued under the basis of entitlement) x 100%, e.g. for an open offer with basis of 5 offer shares for every share held, the maximum dilution effect is calculated as (5/(1+5)) x 100% = 83.33%.

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LETTER FROM MESSIS CAPITAL

As shown in the above table, the discounts represented by the offer prices to the closing prices of shares of the Open Offer Comparables on the last trading days prior to the release of the respective announcements ranged from approximately 75.81% to approximately 99.03% (the “ LTD Market Range ”). The discount of approximately 89.29% as represented by the Offer Price to the adjusted closing price of the New Shares on the Last Trading Day falls below the median and within the LTD Market Range notwithstanding such discount represented a deeper discount than the mean of the LTD Market Range.

The discount represented by the offer prices to the theoretical ex-entitlement prices of the shares of the Open Offer Comparables ranged from approximately 38.52% to approximately 98.07% (the “ TEP Market Range ”). The discount of approximately 58.14% as represented by the Offer Price to the theoretical ex-entitlement price falls below the mean and within the TEP Market Range.

In general, we consider that it is common for the listed issuers in Hong Kong to issue offer shares at a discount to the market price in order to enhance the attractiveness of an open offer transaction. Having considered that (i) the Shares have been suspended for trading for more than 4 years and hence, it is inevitable to set the Offer Price at a discount in order to enhance the attractiveness of the Open Offer and to encourage the existing Shareholders to participate in the Open Offer; (ii) the Offer Price was determined after arm’s length negotiations between the Company and the Underwriter; (iii) the discount represented by the Offer Price to the adjusted closing price of the New Shares on the Last Trading Day falls below the median and within the LTD Market Range; (iv) the discount represented by the Offer Price to the theoretical ex-entitlement price falls below the mean and within the TEP Market Range; and (v) all Qualifying Shareholders are offered an equal opportunity to subscribe for the Offer Shares at the Offer Price, we consider the Offer Price is fair and reasonable so far as the Independent Shareholders are concerned.

In addition, having considered (i) the Subscription Price is equivalent to the Offer Price and hence, the Investor will subscribe the Subscription Shares at a price which is not more favorable than the Offer Price offered to all Qualifying Shareholders under the Open Offer; (ii) the suspension of the trading of the Shares; (iii) the audited consolidated net liabilities of the Group of approximately HK$1,579.14 million as at 31 March 2013; and (iv) the Subscription Price represents a premium of approximately 87.5% over the unaudited pro forma consolidated net tangible assets of HK$0.08 per New Share upon completion of the Capital Restructuring, the Subscription, the Whitewash Waiver, the Special Deals, the Scheme, the Bonus Issue and the Disposal, we are of the view that the Subscription Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

Underwriting commission

As set out in the Letter from the Board and Provisional Liquidators, the Company will pay the Underwriter an underwriting commission of 2.50%. We have reviewed the underwriting commissions under all open offer transactions announced by the companies listed on the Stock Exchange during the six-month period preceding the date of the Underwriting Agreement (i.e. from 10 January 2013 to 9 July 2013) and noted that the underwriting commissions were ranging from 0.00% to 3.00%.

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LETTER FROM MESSIS CAPITAL

	Date of	Underwriting
Company (Stock code)	announcement	commission
		(%)
Larry Jewelry International Company Limited	5/4/2013	1.50
(8351)
Warderly International Holdings Limited (607)	21/3/2013	Not available
		in the
		announcement
Eternity Investment Limited (764)	13/3/2013	1.00
Summit Ascent Holdings Limited (102)	28/2/2013	1.25
Sustainable Forest Holdings Limited (723)	21/2/2013	3.00
TLT Lottotainment Group Limited (8022)	7/2/2013	3.00
Perception Digital Holdings Limited (1822)	30/1/2013	3.00
FU JI Food and Catering Services Holdings	21/1/2013	0.00 (Note)
Limited (1175)
Solargiga Energy Holdings Limited (757)	15/1/2013	1.00
	Maximum	3.00
	Minimum	0.00
	Mean	1.72
Company		2.50

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

Note: The underwriting commission has been disclosed in the relevant circular dated 1 March 2013 of FU JI Food and Catering Services Holdings Limited.

In view that the underwriting commission falls within the range of underwriting commissions of the recent open offer transactions, we consider the underwriting commission payable to the Underwriter is in line with the market and fair and reasonable as far as the Independent Shareholders are concerned.

Excess application

As set out in the Letter from the Board and Provisional Liquidators, Qualifying Shareholders will not be entitled to subscribe for any Offer Share in excess of their respective assured entitlements. Considering that each Qualifying Shareholder will be given an equal opportunity to participate in the Company’s future development by his entitlements under the Open Offer, the Directors consider that the Company will not be justified in making additional effort and incurring additional costs to administer the excess application procedures. All Offer Shares not taken up by the Qualifying Shareholders will be underwritten by the Underwriter.

Although the absence of the excess application arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements, in light of that (i) the nil excess application should be

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LETTER FROM MESSIS CAPITAL

balanced against the fact that the Offer Price has been set at discount to the adjusted closing price of the New Share on the Last Trading Day which provides reasonable incentive for the Qualifying Shareholders to take up their respective assured entitlement of the Offer Shares and participate in the Open Offer; (ii) those Qualifying Shareholders who choose to accept their respective entitlements under the Open Offer in full can maintain their respective existing shareholdings in the Company after the Open Offer; (iii) the Open Offer allows the Qualifying Shareholders who are optimistic about the future development of the Company to exercise their rights to subscribe for the Offer Shares with a fair chance; (iv) the nil excess application would lower the administrative costs of the Open Offer to the Company; and (v) the absence of excess application arrangement in an open offer conducted by long suspension company is not uncommon in the market as shown in the Open Offer Comparable, we are of the view that the absence of excess application arrangement, on balance, is acceptable.

Risk associated with the Open Offer

Shareholders and potential investors should note that the Open Offer is conditional, inter alia, upon the fulfillment of the conditions set out in the section headed “Conditions of the Open Offer” in the Letter from the Board and Provisional Liquidators. In particular, the Open Offer is conditional upon the conditions precedent to the Underwriting Agreement having been satisfied and the Underwriting Agreement is not terminated on or before the latest time for termination by the Underwriter. Accordingly, the Open Offer may or may not proceed. Shareholders and potential investors of the Company should therefore exercise extreme caution when dealing in the Shares/New Shares, and if they are in any doubt about their position, they should consult their professional advisers.

C. FUNDRAISING ALTERNATIVES

Comparing the Open Offer and the Subscription to other methods of fundraisings such as placement of new Shares or other convertible securities and bank borrowing, and taking into account that (i) debt financing and bank borrowing will incur interest burden to the Company; (ii) placing of new Shares may not be desirable alternatives as compared with the Subscription given the prolonged Suspension status of the Company and the cost of placing commission; and (iii) the Open Offer will enable the Shareholders to maintain their proportionate interests in the Company, we concur with the view of the Directors that fund raising by way of the Open Offer and the Subscription is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

D. BONUS ISSUE

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Under the Open Offer, the Offer Shares will be issued at a premium of HK$0.14 each Offer Share to their par value. The Company proposes to apply part of the premium raised from the Open Offer, up to the sum of HK$713,972.98 (or such sum as may be necessary to give effect to the Bonus Issue) standing to the credit of the share premium account of the Company immediately after the Open Offer, to pay up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid. For the avoidance of doubt, no cash payment by the Company will be made in relation to the Bonus Issue.

As noted from the Letter from the Board and Provisional Liquidators, the Creditor Shares, the Offer Shares and the Subscription Shares are not entitled to the Bonus Shares under the Bonus Issue. In view that (i) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the issue of the Creditor Shares, Offer Shares and Subscription Shares; (ii) the Bonus Issue is inter-conditional with the Open Offer and the Subscription and the completion of the Open Offer and the Subscription are part of the Resumption Conditions; and (iii) the Bonus Shares will be issued to all existing Shareholders on the same basis, we consider the Bonus Issue is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

E. ISSUE OF THE CREDITOR SHARES

Under the Scheme, the Creditors with Admitted Claims shall receive cash payment to discharge their Admitted Claims by ways of dividends arising from cash and cash equivalent of the Company, part of proceeds of the subscription, and proceeds of the realization from the Creditor Shares, the Excluded Subsidiaries and the Excluded Items, after payment of any cost. The extent of the Creditors with Admitted Claims will be varied from time to time as the Scheme Administrators are now in the process of determination of the claims received from the Creditors. The maximum extent of the Creditors with Admitted Claims that include, among others, all the Interested Shareholders and/or their associates, who, directly or through their associates, hold an aggregate of 463,939,327 Shares representing approximately 13.00% of the existing share capital of the Company as at the Latest Practicable Date. 66,133,333 New Shares as Creditor Shares will be issued to the SchemeCo and credited as fully paid, representing approximately 5% of issued share capital of the Company as enlarged by the allotment and issue of the Subscription Shares, the Bonus Shares, the Creditor Shares and the Offer Shares. The value of Creditor Shares is dependent on the prevailing market condition at the time of its realization by the Scheme Administrators under the Scheme. Assuming the Creditor Shares are realized at an average price of HK$0.15 per share, which is the same as the Subscription Price and the Offer Price, realization proceeds before payment of any costs will be approximately HK$9.9 million.

Taking into account (i) the principal factors and reasons analysed in the above section headed “B. FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION”; (ii) if the Debt Restructuring is not successful, the Group will be placed into insolvent

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liquidation, by which all assets of the Company will be realized for the Creditors; and (iii) the gross return to the Creditors for the discharge and release of all indebtedness and liabilities of the Company as of the effective date of the Scheme (“ Effective Date ”) is estimated at only approximately HK$117.8 million which is substantially lower than the claims owed by the Company to the creditors as of the Effective Date of approximately HK$1,891 million based on the claims received by the Scheme Administrators and subject to their determination, respectively, we are of the view that the terms of the issue of the Creditor Shares are at arm’s length, normal and commercial and fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

F. POSSIBLE FINANCIAL EFFECTS

(i) Working capital

Immediately upon completion the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares, the Group’s working capital is expected to be increased by the net proceeds from the Open Offer and the Subscription of approximately HK$150.1 million, of which approximately HK$25.1 million will be used as working capital for the Restructured Group. Accordingly, the working capital will be improved upon completion of the Open Offer, the Subscription,the Bonus Issue and the issue of the Creditor Shares.

(ii) Net assets

As set out in AR 2013, the audited consolidated net liabilities of the Group was approximately HK$1,579.14 million as at 31 March 2013. If the Debt Restructuring is not successful, the Group will be placed into insolvent liquidation, by which all assets of the Company will be realized for the Creditors and the Shareholders will not be able to receive anything for their shareholding.

As set out in Appendix II to the Circular, the unaudited pro forma financial information of the Group, upon completion of the Capital Restructuring, the Open Offer, the Subscription, the Bonus Issue, the Scheme and the Disposal, the Group’s financial position would be improved from net liabilities of approximately HK$1,579.14 million as at 31 March 2013 to net assets of approximately HK$134.70 million. The net liabilities of the Group per New Share was approximately HK$44.24 (equivalent to approximately HK$0.44 per Share) based on 35,693,649 New Shares issued as at the Latest Practicable Date assuming the Capital Restructuring has becoming effective. The unaudited pro forma consolidated net tangible assets per New Share upon completion of the Capital Restructuring, the Subscription, the Whitewash Waiver, the Special Deals, the Scheme, the Bonus Issue and the Disposal will be approximately HK$0.08.

Having considered the enhancement on the working capital and the financial position of the Group upon completion of the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares, we consider that the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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G. POTENTIAL DILUTION

Based on the shareholding structure of the Company as set out in the Letter from the Board and Provisional Liquidators, assuming the Capital Restructuring has become effective, 35,693,649 New Shares were held by the Independent Shareholders as at the Latest Practicable Date, representing approximately 100% of the issued share capital of the Company. The shareholding of the existing Independent Shareholders will (i) decrease to approximately 21.61% in the event that all existing Shareholders take up the entitlements under the Open Offer in full; and (ii) further decrease to approximately 8.11% in the event that none of the existing Independent Shareholders take up their entitlements under the Open Offer upon completion of the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares.

Having considered that:

(i) the financial position of the Group as at 31 March 2013 and the outstanding amount of the Promissory Note and the Working Capital Loans;
(ii) the Subscription will enable the Group to reduce its indebtedness and liabilities;
(iii) the proceeds from the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow the Group to grasp suitable business/investment opportunities with immediately available fund should appropriate chance arise;
(iv) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests;
(v) the Open Offer and the Subscription are part of the Resumption Conditions;
(vi) the Shares have been suspended for trading for more than 4 years and hence, it is inevitable to set the Offer Price at a discount in order to enhance the attractiveness of the Open Offer and to encourage the existing Shareholders to participate in the Open Offer;
(vii) the discount represented by the Offer Price to the adjusted closing price of the New Shares on the Last Trading Day falls below the median and within the LTD Market Range;
(viii)the discount represented by the Offer Price to the theoretical ex-entitlement price falls below the mean and within the TEP Market Range;
(ix) the Subscription Price is equivalent to the Offer Price and hence, the Investor will subscribe the Subscription Shares at a price which is not more favorable than the Offer Price offered to all Qualifying Shareholders under the Open Offer;

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LETTER FROM MESSIS CAPITAL

(x) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the issue of the Offer Shares, Subscription Shares and Creditor Shares; and
(xi) the enhancement on the working capital and the financial position of the Group upon completion of the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares,

we consider the dilution effects is acceptable.

H. WHITEWASH WAIVER

As at the Latest Practicable Date, the Investor, its ultimate beneficial owners and parties acting in concert with any of them, are not interested in any Shares or securities of the Company. Immediately after the issue of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares, the Investor, its ultimate beneficial owners and parties acting in concert with any of them will hold 970,000,000 New Shares, representing approximately 73.39% of the issued share capital of the Company as enlarged by the issue of the Offer Shares, Subscription Shares, Bonus Shares and Creditor Shares. Accordingly, the Investor, its ultimate beneficial owners and parties acting in concert with any of them would trigger an obligation, pursuant to Rule 26 of the Takeovers Code to make a mandatory general offer to acquire all the New Shares other than those already held by the Investor, its ultimate beneficial owners and parties acting in concert with any of them.

Based on our above analysis of the Open Offer and the Subscription, we consider that the Open Offer and the Subscription are in the interests of the Company and the Independent Shareholders as a whole. If the Whitewash Waiver were not approved by the Independent Shareholders at the SGM, the Open Offer and the Subscription will not proceed and given the Open Offer and the Subscription are part of the Resumption Proposal, the Shares/New Shares may not be able to resume trading as a result of the fail of the completion of the Open Offer and the Subscription. Accordingly, we are of the view that for the purposes of implementing the Open Offer and the Subscription, the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

– 69 –

LETTER FROM MESSIS CAPITAL

I. SPECIAL DEALS

The Company has made an application to the Executive for the consent, under Rule 25 of the Takeovers Code in respect of (i) the settlement of debts due by the Company to the Creditors with Admitted Claims who are also Shareholders and/or their associates; and (ii) the Disposal under the Scheme which will be subject to the approval of the Independent Shareholders and/or their associates at the SGM by way of poll and provided that the independent financial adviser to the Company publicly states that in its opinion the terms of the settlement of debts to the Interested Shareholders are at arm’s length, on normal commercial terms and fair and reasonable.

Taking into account (i) the principal factors and reasons analysed in the above section headed “B. FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION”; (ii) the Subscription and the Scheme, under which part of the net proceeds from the Subscription will be used to settle part of debts owed by the Company to the Creditors, are part of the Resumption Proposal; (iii) the terms offered to Interested Shareholders under the Scheme are the same as and not more favourable than, other Creditors who are not Interested Shareholders; (iv) the Disposal forms part of the proposed Restructuring of the Company and If the Debt Restructuring is not successful, the Group will be placed into insolvent liquidation,

– 70 –

LETTER FROM MESSIS CAPITAL

by which all assets of the Company will be realized for the benefit of the Creditors; and (v) the Interested Shareholders will abstain from voting on the resolutions to approve the Subscription Agreement and the Special Deals, respectively, we are of the view that the terms of the Special Deals are at arm’s length, normal and commercial and fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

RECOMMENDATION

Taking into consideration of the above mentioned principal factors and reasons, we consider that (i) the terms of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of Creditor Shares are on normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned; and (ii) the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of Creditor Shares are in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolutions to be proposed at the SGM to approve the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and the issue of Creditor Shares.

Yours faithfully, For and on behalf of Messis Capital Limited Robert Siu Executive Director

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

(A) Financial summary for the three years ended 31 March 2013

Financial information of the Group for each of the three years ended 31 March 2011, 2012 and 2013 are set out in the audited consolidated financial statements in the annual reports of the Company for the years ended 31 March 2011, 2012 and 2013 at:

http://www.hkexnews.hk/listedco/listconews/SEHK/2011/0705/LTN20110705013.pdf;

http://www.hkexnews.hk/listedco/listconews/SEHK/2012/0720/LTN20120720160.pdf; and

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0624/LTN20130624287.pdf

respectively and as extracted from the annual report for the year ended 31 March 2013 and 2012 as set out in section B and C in this Appendix I.

Set out below is a summary of the financial results of the Group for each of the three years ended 31 March 2011, 2012 and 2013 as extracted from the annual reports of the Company for each of the three years ended 31 March 2011, 2012 and 2013 respectively.

There were no extraordinary items or exceptional items or dividend declared or paid in the consolidated statement of comprehensive income of the Group for each of the three years ended 31 March 2011, 2012 and 2013. The profit for the year attributable to non-controlling interests for each of the three years ended 31 March 2011, 2012 and 2013 is approximately HK$703,000, HK$954,000 and HK$987,000 respectively. ANDA CPA Limited is the auditor of the Group. Disclaimer of opinions have been reported for the three years ended 31 March 2013, which have been extracted from the respective annual reports of the Company in the section headed “2. THE AUDITORS’ REPORTS FOR THE THREE YEARS ENDED 31 MARCH 2013” from page I-62 to I-69 in this Appendix I.

I-1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Comprehensive Income

	For the	year ended 31	March
	2013	2012	2011
	HK$’000	HK$’000	HK$’000
	(Audited)	(Audited)	(Audited)
RESULTS
Revenue	392,644	397,937	331,084
Cost of sales	(349,448)	(363,508)	(311,766)
Gross profit	43,196	34,429	19,318
Other income	977	1,781	2,013
Selling and distribution costs	(9,273)	(6,519)	(4,167)
Administrative expenses	(16,921)	(13,558)	(9,029)
Profit from operations	17,979	16,133	8,135
Finance cost	(4,564)	(4,788)	(3,939)
Profit before tax	13,415	11,345	4,196
Income tax expense	(4,095)	(3,501)	(1,754)
Profit for the year	9,320	7,844	2,442
Other comprehensive income:
Exchange differences on translation of
foreign operations	455	435	146
Total comprehensive income for the year	9,775	8,279	2,588


Profit for the year attributable to:
Owners of the Company	8,333	6,890	1,739
Non-controlling interests	987	954	703
	9,320	7,844	2,442


Total comprehensive income for
the year attributable to:
Owners of the Company	8,696	7,315	1,885
Non-controlling interests	1,079	964	703
	9,775	8,279	2,588


Earning per share attributable to owners
of the Company
Basic (HK cents per share)	0.23	0.19	0.05


Diluted (HK cents per share)	N/A	N/A	N/A

I-2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Financial Position

		As at 31 March
	2013	2012	2011
	HK$’000	HK$’000	HK$’000
	(Audited)	(Audited)	(Audited)
ASSETS AND LIABILITIES
Non-current assets	15,409	15,151	33
Current assets	105,417	99,731	72,351
Current liabilities	(1,699,970)	(1,686,446)	(1,669,582)
Non-current liabilities	–	(17,355)	–
Net liabilities	(1,579,144)	(1,588,919)	(1,597,198)


Attributable to:
Owners of the Company	(1,582,450)	(1,591,146)	(1,598,461)
Non-controlling interests	3,306	2,227	1,263
Total equity	(1,579,144)	(1,588,919)	(1,597,198)

I-3

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(B) For the year ended 31 March 2013

Set out below is the consolidated financial statements of the Group for the year ended 31 March 2013 as extracted from the annual report of the Company for the year ended 31 March 2013.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2013

		2013	2012
	Notes	HK$’000	HK$’000
Revenue	8	392,644	397,937
Cost of sales		(349,448)	(363,508)
Gross profit		43,196	34,429
Other income	9	977	1,781
Selling and distribution costs		(9,273)	(6,519)
Administrative expenses		(16,921)	(13,558)
Profit from operations		17,979	16,133
Finance cost	11	(4,564)	(4,788)
Profit before tax		13,415	11,345
Income tax expense	12	(4,095)	(3,501)
Profit for the year	13	9,320	7,844
Other comprehensive income:
Exchange differences on translation
of foreign operations		455	435
Total comprehensive income for the year		9,775	8,279


Profit for the year attributable to:
Owners of the Company		8,333	6,890
Non-controlling interests		987	954
		9,320	7,844


Total comprehensive income for
the year attributable to:
Owners of the Company		8,696	7,315
Non-controlling interests		1,079	964
		9,775	8,279


Earning per share attributable to
owners of the Company	15
Basic (HK cents per share)		0.23	0.19


Diluted (HK cents per share)		N/A	N/A

I-4

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2013

		2013	2012
	Notes	HK$’000	HK$’000
Non-current assets
Property, plant and equipment	17	1,207	949
Goodwill	18	14,202	14,202

		15,409	15,151

Current assets
Inventories	19	13,004	17,711
Trade and bill receivables	20	62,753	52,212
Prepayments, deposits and other receivables	21	20,236	9,571
Bank and cash balances		9,424	20,237

		105,417	99,731

Current liabilities
Trade payables	22	32,411	31,643
Accruals and other payables		13,787	14,264
Due to deconsolidated subsidiaries	23	416,314	416,314
Due to the Investor	24	11,300	20,000
Financial guarantee liabilities	25	1,118,325	1,118,325
Convertible notes	26	78,367	75,539
Promissory note	27	19,091	–
Current tax liabilities		10,375	10,361

		1,699,970	1,686,446

Net current liabilities		(1,594,553)	(1,586,715)
Total assets less current liabilities		(1,579,144)	(1,571,564)
Non-current liabilities
Promissory note	27	–	17,355
NET LIABILITIES		(1,579,144)	(1,588,919)


Capital and reserves
Share capital	28	356,936	356,936
Deficiency		(1,939,386)	(1,948,082)
Equity attributable to owners of the Company		(1,582,450)	(1,591,146)
Non-controlling interests		3,306	2,227
TOTAL EQUITY		(1,579,144)	(1,588,919)

I-5

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2013

							Attributable	Attributable	Attributable	Attributable	to	owners of the Company	owners of the Company	owners of the Company

														Foreign		Retained
				Share								Share-based currency				profits/					Non-
	Share		premium			Statutory				Capital		compensation translation			(accumulated				controlling					Total
	capital			account			reserve			reserve			reserve reserve			losses)		Total		interests				equity
	HK$’000		HK$’000			HK$’000			HK$’000				HK$’000 HK$’000			HK$’000		HK$’000		HK$’000				HK$’000
At 1 April 2011	356,936			614,493			220			3,020			1,904 146			(2,575,180)	(1,598,461)				1,263		(1,597,198)
Total comprehensive
income for the year		–			–			–			–			– 425		6,890		7,315			964			8,279
At 31 March 2012	356,936			614,493			220			3,020			1,904 571			(2,568,290)	(1,591,146)				2,227		(1,588,919)


At 1 April 2012	356,936			614,493			220			3,020			1,904 571			(2,568,290)	(1,591,146)				2,227		(1,588,919)
Total comprehensive
income for the year		–			–			–			–			– 363		8,333		8,696			1,079			9,775
Transfer upon forfeiture
of share options		–			–			–			–		(1,904) –			1,904			–			–		–
At 31 March 2013	356,936			614,493			220			3,020				– 934		(2,558,053)	(1,582,450)				3,306		(1,579,144)

I-6

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2013

		2013	2012
	Notes	HK$’000	HK$’000
Cash flows from operating activities
Profit before tax		13,415	11,345
Adjustments for:
Depreciation		387	126
Impairments on inventories		77	87
Finance cost		4,564	4,788
Interest income		(40)	(12)
Operating cash flows before working capital
changes		18,403	16,334
Change in inventories		4,630	(1,411)
Change in trade and bill receivables		(10,541)	(11,220)
Change in prepayments, deposits and other
receivables		(10,665)	(2,449)
Change in trade payables		768	10,691
Change in accruals and other payables		(477)	(9,555)
Change in due to deconsolidated subsidiaries		–	(9)
Cash generated from operations		2,118	2,381
Tax paid		(4,081)	(2,032)
Interest received		40	12

Net cash flows (used in)/generated from
operating activities		(1,923)	361
Cash flows from investing activities
Purchase of property, plant and equipment		(641)	(597)
Net cash inflow from acquisition of a subsidiary	31	–	9,938
Net cash flows (used in)/generated from
investing activities		(641)	9,341
Cash flows used in financing activities
Repayment to the Investor		(8,700)	(4,800)
Net cash flows used in financing activities		(8,700)	(4,800)
Net (decrease)/increase in cash and cash
equivalents		(11,264)	4,902
Effect of foreign exchange rate changes		451	535
Cash and cash equivalents at beginning of year		20,237	14,800
Cash and cash equivalents at end of year		9,424	20,237


Analysis of cash and cash equivalents
Bank and cash balances		9,424	20,237

I-7

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2013

1. GENERAL INFORMATION

U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”) was incorporated in Bermuda as an exempted company with limited liability under the Companies Act 1981 of Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The principal place of business is 35th Floor, One Pacific Place, 88 Queensway, Hong Kong. The Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and have been suspended for trading since 17 September 2008.

The Company is an investment holding company. The Group’s principal activities are trading and retailing of fashion garments, textiles and leathers.

2. WINDING-UP PETITION AND APPOINTMENT OF PROVISIONAL LIQUIDATORS

On 6 October 2008, Deutsche Bank A.G., Hong Kong Branch (the “Petitioner”) presented petitions (the “Petitions” and each referred to as “Petition”) to the High Court (the “High Court”) of the Hong Kong Special Administrative Region (“Hong Kong”) for the winding up of each of the Company and Uni-Capital Limited (In Liquidation) (“Uni-Capital”), an indirectly wholly-owned subsidiary of the Company, as the Company and Uni-Capital could not meet demands made against the Company and Uni-Capital for the repayment of outstanding debts. Upon the application of the Petitioner, Messrs. LAI Kar Yan Derek and YEUNG Lui Ming of Deloitte Touche Tohmatsu were appointed jointly and severally as provisional liquidators of the Company (the “Provisional Liquidators”) and Uni-Capital pursuant to the orders both dated 6 October 2008 made by the High Court.

After the appointment of the Provisional Liquidators on 6 October 2008, the then management of the Company together with the Provisional Liquidators used their best endeavours to maintain the business of the Group both in Hong Kong and the People’s Republic of China (the “PRC”). Notwithstanding the subsequent changes in personnel as the Provisional Liquidators gradually replaced the management team, the total revenue achieved by the Group according to the consolidated financial statements of the Group for the year ended 31 March 2013 was approximately HK$392.64 million.

The hearing of the Petition against the Company was originally scheduled on 10 December 2008 and the High Court adjourned the hearing of the Petition against the Company to 30 September 2013. A winding up order against Uni-Capital was granted by the High Court on 9 November 2009.

3. BASIS OF PREPARATION

Suspension of trading in shares of the Company

At the request of the Company, trading in shares of the Company had been suspended since 17 September 2008.

On 6 October 2008, the Petitioner petitioned for the winding-up of the Company as the Company could not meet demands for the repayment of outstanding debts. Upon the application of the Petitioner, on 6 October 2008, the Provisional Liquidators were appointed.

On 16 May 2009, the Provisional Liquidators, Advance Lead International Limited (the “Investor”), the Company and an escrow agent, entered into an escrow agreement (as supplemented by the five supplementary agreements and hereinafter collectively referred as to the “Escrow Agreement”, unless otherwise specified) for the implementation of the restructuring proposal. Pursuant to the Escrow Agreement, the Provisional Liquidators granted the Investor an exclusive right for a period up to 30 June 2010 (as subsequently extended to 30 September 2013) to negotiate a legally binding restructuring agreement for the implementation of the restructuring proposal.

On 30 July 2009, the Stock Exchange issued a letter to place the Company in the second stage of the delisting procedures under Practice Note 17 of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”).

On 26 February 2010, the Company was placed in the third stage of the delisting procedures pursuant to Practice Note 17 of the Listing Rules and that the Company was required to submit a viable resumption proposal which demonstrates its compliance with the requirements stipulated under Rule 13.24 of the Listing Rules.

I-8

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 6 August 2010, a directly wholly-owned subsidiary of the Company, UR Group Limited (“UR Group”) and the Investor entered into a secured loan facility agreement, pursuant to which the Investor agreed to provide a working capital facility up to HK$15,000,000 to UR Group. The advance of HK$4,800,000 has already been received from the Investor prior to the date of the said agreement. On the same day, a directly wholly-owned subsidiary of the Company, Alfreda Limited (“Alfreda”) and the Investor entered into another secured loan facility agreement, pursuant to which the Investor agreed to provide a facility up to HK$20,000,000 to Alfreda as part of the consideration of the acquisition (the “Acquisition”) of the entire interest in Sino Hill Group Limited (“Sino Hill”). Three advances of HK$10,000,000, HK$5,000,000 and HK$5,000,000 were drawn down from the Investor on 15 September 2010, 31 January 2011 and 30 September 2011 respectively in respect of the second loan facility agreement.

On 9 August 2010, an indirectly wholly-owned subsidiary of the Company, Right Season Limited (“Right Season”), entered into a sale and purchase agreement (the “S&P Agreement”) for the Acquisition, at a consideration of HK$40,000,000 by way of cash and the promissory note. Details of the S&P Agreement are set out in the Company’s announcement dated 31 August 2010. The Acquisition was completed on 1 October 2011.

On 9 August 2010, the Provisional Liquidators, with the assistance of the financial advisor of the Company, Veda Capital Limited, submitted the resumption proposal to the Stock Exchange.

By an order of the High Court dated 22 March 2013, the hearing of the Petition to the High Court for the winding-up of the Company was further adjourned to 30 September 2013.

After the revised resumption proposal of the Company was submitted to the Stock Exchange on 19 April 2013, the Stock Exchange decided to allow the Company to proceed with the resumption proposal subject to the resumption conditions to be fulfilled by 31 July 2013. Details of the resumption conditions were set out in the Company’s announcement dated 26 April 2013.

Going concern basis

As at 31 March 2013 the Group had net current liabilities of approximately HK$1,594,553,000 (2012: HK$1,586,715,000) and net liabilities of approximately HK$1,579,144,000 (2012: HK$1,588,919,000) respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern. Therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

To address the issues above, the Provisional Liquidators are in the process of implementing a capital restructuring, a debt restructuring and certain fund raising exercises.

Should the Group be unable to achieve a successful restructuring as mentioned above, or alternatively under other available options of restructuring, and therefore be unable to continue its business as a going concern, adjustments might have to be made to the carrying amounts of the Group’s assets to state them at their recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and liabilities to current assets and liabilities, respectively.

4. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants that are relevant to its operations and effective for its accounting year beginning on 1 April 2012. HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting Standards (“HKAS”); and Interpretations. The adoption of these new and revised HKFRSs did not result in significant changes to the Group’s accounting policies, presentation of the Group’s financial statements and amounts reported for the current year and prior years.

The Group has not applied the new and revised HKFRSs that have been issued but are not yet effective. The Group has already commenced an assessment of the impact of these new and revised HKFRSs but is not yet in a position to state whether these new and revised HKFRSs would have a material impact on its results of operations and financial position.

I-9

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These financial statements have been prepared in accordance with HKFRSs, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Listing Rules and by the Hong Kong Companies Ordinance.

These financial statements have been prepared under the historical cost convention. These financial statements are presented in Hong Kong Dollars (“HK$”) and all values are rounded to the nearest thousand except when otherwise indicated.

The preparation of financial statements in conformity with HKFRSs requires the use of key assumptions and estimates. It also requires the management of the Group (“Management”) to exercise its judgments in the process of applying the accounting policies. The areas involving critical judgments and areas where assumptions and estimates are significant to these financial statements, are disclosed in note 6 to the financial statements.

The significant accounting policies applied in the preparation of these financial statements are set out below.

Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to 31 March. Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has control.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date the control ceases.

The gain or loss on the disposal of a subsidiary that results in a loss of control represents the difference between (i) the fair value of the consideration of the sale plus the fair value of any investment retained in that subsidiary and (ii) the Company’s share of the net assets of that subsidiary plus any remaining goodwill relating to that subsidiary and any related accumulated foreign currency translation reserve.

Intragroup transactions, balances and unrealised profits are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the Company. Non-controlling interests are presented in the consolidated statement of financial position and consolidated statement of changes in equity within equity. Non-controlling interests are presented in the consolidated statement of comprehensive income as an allocation of profit or loss and total comprehensive income for the year between the non-controlling interests and owners of the Company.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners). The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Company.

I-10

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Business combination and goodwill

The acquisition method is used to account for the acquisition of a subsidiary in a business combination. The cost of acquisition is measured at the acquisition-date fair value of the assets given, equity instruments issued, liabilities incurred and contingent consideration. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. Identifiable assets and liabilities of the subsidiary in the acquisition are measured at their acquisition-date fair values.

The excess of the cost of acquisition over the Company’s share of the net fair value of the subsidiary’s identifiable assets and liabilities is recorded as goodwill. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed to the Company.

In a business combination achieved in stages, the previously held equity interest in the subsidiary is remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in consolidated profit or loss. The fair value is added to the cost of acquisition to calculate the goodwill.

If the changes in the value of the previously held equity interest in the subsidiary were recognised in other comprehensive income (for example, available-for-sale investment), the amount that was recognised in other comprehensive income is recognised on the same basis as would be required if the previously held equity interest were disposed of.

Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is measured at cost less accumulated impairment losses. The method of measuring impairment losses of goodwill is the same as that of other assets as stated in the accounting policy “Impairment of assets” below. Impairment losses of goodwill are recognised in consolidated profit or loss and are not subsequently reversed. Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the acquisition for the purpose of impairment testing.

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Hong Kong Dollars, which is the Company’s functional and presentation currency.

(b) Transactions and balances in financial statements

Transactions in foreign currencies are translated into the functional currency on initial recognition using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the exchange rates at the end of each reporting period. Gains and losses resulting from this translation policy are recognised in profit or loss.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

I-11

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Translation on consolidation

The results and financial position of all the Group entities that have a functional currency different from the Company’s presentation currency are translated into the Company’s presentation currency as follows:

(i) Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
(ii) Income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and
(iii) All resulting exchange differences are recognised in the foreign currency translation reserve.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings are recognised in the foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognised in consolidated profit or loss as part of the gain or loss on disposal.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss during the period in which they are incurred.

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less their residual values over the estimated useful lives on a straight-line basis. The principal annual rate is as follows:

Furniture, fixtures and equipment	18-33%
Leasehold improvement	20-45%
Machinery	9%
Motor vehicle	12.5-18%

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end of each reporting period.

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.

Operating leases

Leases that do not substantially transfer to the Group all the risks and rewards of ownership of assets are accounted for as operating leases. Lease payments (net of any incentives received from the lessor) are recognised as an expense on a straight-line basis over the lease term.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average basis. The cost of finished goods and work in progress comprises raw materials, direct labour and an appropriate proportion of all production overhead expenditure, and where appropriate, subcontracting charges. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of the instruments.

I-12

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Group transfers substantially all the risks and rewards of ownership of the assets; or the Group neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in the profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the receivables’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition. The amount of the allowance is recognised in profit or loss.

Impairment losses are reversed in subsequent periods and recognised in profit or loss when an increase in the receivables’ recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the receivables at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value. Bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents.

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of:

(a) the amount of the obligations under the contracts, as determined in accordance with HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; and
(b) the amount initially recognised less cumulative amortisation recognised in the profit or loss on a straight-line basis over the terms of the guarantee contracts.

I-13

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Convertible notes

Convertible loans which entitle the holder to convert the loans into a fixed number of equity instruments at a fixed conversion price are regarded as compound instruments consist of a liability and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible bonds and the fair value assigned to the liability component, representing the embedded option for the holder to convert the loans into equity of the Group, is included in equity as capital reserve. The liability component is carried as a liability at amortised cost using the effective interest method until extinguished on conversion or redemption.

Transaction costs are apportioned between the liability and equity components of the convertible loans based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly to equity.

If the loans are converted, the capital reserve, together with the carrying amount of the liability component at the time of conversion, is transferred to share capital and share premium as consideration for the shares issued. If the bond is redeemed, the capital reserve is released directly to retained profits.

Convertible loans which entitle the holder to convert the loans into equity instruments, other than into a fixed number of equity instruments at a fixed conversion price, are regarded as combined instruments consist of a liability and a derivative component. At the date of issue, the fair value of the derivative component is determined using an option pricing model; and this amount is carried as a derivative liability until extinguished on conversion or redemption. The remainder of the proceeds is allocated to the liability component and is carried as a liability at amortised cost using the effective interest method until extinguished on conversion or redemption. The derivative component is measured at fair value with gains and losses recognised in profit or loss.

Transaction costs are apportioned between the liability and derivative components of the convertible loans based on the allocation of proceeds to the liability and derivative components on initial recognition.

Trade and other payables

Trade and other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Revenue recognition

Revenue comprises the fair value of the consideration for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown, net of value-added tax, returns, rebates and discounts allowed and after eliminating sales within the Group. Revenue is recognised as follows:

(a) Revenues from the sales of goods are recognised on the transfer of significant risks and rewards of ownership, which generally coincides with the time when the goods are delivered and the title has passed to the customers.
(b) Interest income is recognised on a time-proportion basis using the effective interest method.

Employee benefits

(a) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the end of the reporting period.

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

I-14

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Pension obligations

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (“MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on 5% of the employees’ relevant income, subject to a ceiling of monthly relevant income of HK$25,000 (before 1 June 2012: HK$20,000) and are charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The Group also participates in a defined contribution retirement scheme organised by the government in the PRC. The Group is required to contribute a specific percentage of the payroll of its employees to the retirement scheme. The contributions are charged to profit or loss as they become payable in accordance with the rules of the retirement scheme. No forfeited contributions may be used by the employers to reduce the existing level of contributions.

(c) Termination benefits

Termination benefits are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit recognised in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused tax losses or unused tax credits can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

I-15

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Related parties

A related party is a person or entity that is related to the Group.

(A) A person or a close member of that person’s family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Company or of a parent of the Company.
(B) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (A).
(vii) A person identified in (A)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purpose of allocating resources to, and assessing the performance of the Group’s various lines of business.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of productions processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

Impairment of assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets except inventories and receivables to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

I-16

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

Events after the reporting period

Events after the reporting period that provide additional information about the Group’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes to the financial statements when material.

6. CRITICAL JUDGEMENTS AND KEY ESTIMATES

Critical judgements in applying accounting policies

In the process of applying the accounting policies, Management had made the following judgement that has the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

(a) Going concern basis

These financial statements have been prepared on a going concern basis, the validity of which depends upon the Group being able to achieve a successful restructuring and continue its business. Details are explained in note 3 to the financial statements.

(b) Financial results of Xiamen U-Right Garment Co. Ltd. (the “EJV”)

In accordance with an agency agreement, the sales and purchase transactions of the EJV were carried out on the EJV’s behalf by 石獅市意利王製衣發展有限公司 (for identification purpose, Shishi City Yiliwang Clothes Development Co., Ltd.) (“Shishi Yiliwang”) and 廈門大騰工貿有限公司 (for identification purpose, Xiamen Dateng Industry Trade Limited) (“Xiamen Dateng”). Each of them holds 10% of the ownership interest in the EJV. The financial statements have been prepared on the basis that those sales and purchases for the year ended 31 March 2013 have been included in the Group’s current year results. In view of the various terms stipulated in the agency agreement, the Directors regard such accounting treatments as appropriate.

I-17

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(a) Financial guarantee liabilities

The determination of the financial guarantee liabilities involves Management’s estimation. The Group assesses the probability and magnitude of the outflow of resources embodying economic benefits will be required to settle the obligations and if the expectation differs from the original estimate, such a difference may impact the carrying amount of the financial guarantee liabilities as at 31 March 2013.

(b) Impairment loss for bad and doubtful debts

The Group makes impairment loss for bad and doubtful debts based on assessments of the recoverability of the trade and other receivables, including the current creditworthiness and the past collection history of each debtor. Impairments arise where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgement and estimates. Where the actual result is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful debt expenses in the year in which such estimate has been changed.

(c) Income tax

The Group is subject to income taxes in several jurisdictions. Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(d) Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expense. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions. The Group will reassess the estimates by the end of each reporting period.

(e) Property, plant and equipment and depreciation

The Group determines the estimated useful lives, residual values and related depreciation charges for the Group’s property, plant and equipment. This estimate is based on the historical experience of the actual useful lives and residual values of property, plant and equipment of similar nature and functions. The Group will revise the depreciation charge where useful lives and residual values are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(f) Impairment of goodwill

Management reviews and determines whether goodwill is impaired at least on an annual basis. Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amount of goodwill at the end of the reporting period was approximately HK$14,202,000. No impairment loss was recognised during the year ended 31 March 2013.

7. FINANCIAL RISK MANAGEMENT

The major financial instruments of the Group include trade and other receivables, bank and cash balances, trade payables, financial guarantee liabilities, convertible notes and promissory note. The activities of the Group expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

I-18

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Risk management is carried out by the Directors under policies approved by the Board of Directors. The Directors identify, evaluate and hedge financial risks in close co-operation with the Group’s operating units.

(a) Market risk

Foreign exchange risk

The Group has minimal exposure to foreign currency risk as most of its business transactions, assets and liabilities are principally denominated in the functional currencies of the Group entities or United States dollars for Hong Kong dollars functional currency Group entities. The Group currently does not have a foreign currency hedging policy in respect of foreign currency assets and liabilities. The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

Interest rate risk

As at 31 March 2013, the Group did not have significant interest rate risk.

(b) Credit risk

The Group is exposed to credit risk mainly in relation to its trade and other receivables, cash deposits with banks and maximum exposure of credit risk is equal to the carrying amounts of these financial assets. Cash and bank transactions counterparties are limited to financial institutions with good credit rating assigned by international credit-rating agencies.

At the end of the reporting period, the Group had certain concentration of credit risk as approximately 20% (2012: 26%) and approximately 66% (2012: 57%) of the Group’s trade receivables were due from the Group’s largest trade debtor and the five largest trade debtors, respectively. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group reviews the recoverable amount of the trade and other receivables on a regular basis and provision for doubtful debts is made in accordance with the Group’s policies. In addition, the Management reviews the recoverable amount of each individual trade debt regularly to ensure that adequate impairment losses are recognised for irrecoverable debts. In this regard, the Management considers that the Group’s credit risk is significantly reduced.

(c) Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its current obligations when they fall due.

The Management has given careful consideration on the measures currently undertaken in respect of the Group’s liquidity position. The Management believes that the Group will be able to meet in full its financial obligations as they fall due upon the completion of the proposed restructuring of the Company, as further explained in note 3 to the financial statements.

(d) Fair values

The carrying amounts of the Group’s financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values.

8. REVENUE

Revenue represents the invoiced value of goods sold, less value-added tax, goods returns and trade discounts during the year.

						2013	2012
						HK$’000	HK$’000
Sales	of	fashion	garments	and	textiles	392,644	397,937

I-19

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. OTHER INCOME

	2013	2012
	HK$’000	HK$’000
Interest income	40	12
Net foreign exchange gain	–	13
Reimbursement of restructuring expenses from the Investor	910	1,749
Others	27	7

	977	1,781

10. OPERATING SEGMENT INFORMATION

For the years ended 31 March 2013 and 2012, no operating segment information is presented as the Group has only one operating segment of fashion garments, textile and leathers business.

Geographical information:

The Group’s revenue analysed by geographical location and information about its non-current assets by geographical location are detailed below:

	Revenue	Revenue		Non-current assets	Non-current assets
	Year ended	31	March	As at 31	March
	2013		2012	2013	2012
	HK$’000		HK$’000	HK$’000	HK$’000
Mainland China	143,861		142,041	1,207	949
The Philippines	93,459		93,171	–	–
United Arab Emirates	155,324		162,725	–	–

Consolidated total	392,644		397,937	1,207	949

In presenting the geographical information, revenue is based on the locations of the customers.

Information about major customers:

Revenue from major customers, each of whom accounted for 10% or more of the total revenue is set out below:

		2013	2012
		HK$’000	HK$’000
Customer	A	82,745	100,193
Customer	B	72,579	62,532
Customer	C	44,990	*
Customer	D	*	46,084

Less than 10% of total revenue of the Group

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. FINANCE COST

	2013	2012
	HK$’000	HK$’000
Interest expenses on borrowings wholly repayable
within five years
– convertible notes (Note 26)	2,828	3,962
– promissory note (Note 27)	1,736	826
	4,564	4,788

12. INCOME TAX EXPENSE

	2013	2012
	HK$’000	HK$’000
Current tax – Hong Kong Profits Tax
Provision for the year	581	1,399
Current tax – the PRC Enterprise Income Tax
Provision for the year	3,514	2,102
	4,095	3,501

Hong Kong profits tax is calculated at 16.5% (2012: 16.5%) of the estimated assessable profits for the year. Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of subsidiaries of the Company in the PRC is 25% for both years.

Tax charges on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.

The reconciliation between the income tax and profit before tax multiplied by the Hong Kong profits tax rate is as follows:

	2013	2012
	HK$’000	HK$’000
Profit before tax	13,415	11,345

Tax at the domestic income tax rate of 16.5% (2012: 16.5%)	2,214	1,872
Tax effect of expenses that are not deductible	968	876
Effect of different tax rates of subsidiaries operating in other
jurisdictions	913	753
	4,095	3,501

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. PROFIT FOR THE YEAR

The Group’s profit for the year is stated after charging/(crediting) the following:

	2013	2012
	HK$’000	HK$’000
Cost of inventories sold	349,448	363,508
Depreciation	387	126
Impairment on inventories	77	87
Staff costs (including Directors’ remuneration):
– salaries, bonuses and allowances	8,543	4,650
– retirement benefits scheme contributions	729	484
	9,272	5,134
Auditor’s remuneration	780	699
Net foreign exchange loss/(gain)	4	(13)
Operating lease charges on land and buildings	1,645	1,008

14. DIRECTORS’ EMOLUMENTS

(a) Directors’ emoluments

None of the Directors received any remuneration for the two years ended 31 March 2013 and 2012.

(b) Five highest paid individuals

Details of the aggregate emoluments for the five employees whose emoluments were the highest in the Group are as follows:

	2013	2012
	HK$’000	HK$’000
Salaries, allowances and benefit-in-kind	1,071	932
Retirement benefit costs	40	13

	1,111	945

The number of employees whose remuneration fell within the following bands are as follows:

			Number of Individual
			2013	2012
Nil	–	HK$1,000,000	5	5

Based on the audited results of the Group for the two years ended 31 March 2013 and 2012, the Directors were not entitled to any of the performance-based discretionary bonus during the years.

No emoluments had been paid by the Group to the Directors or the five highest paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office.

I-22

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. EARNING PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

Basic earning per share

The calculation of basic earning per share attributable to owners of the Company is based on the profit for the year attributable to owners of the Company of approximately HK$8,333,000 (2012: HK$6,890,000) and the weighted average number of ordinary shares of 3,569,364,916 (2012: 3,569,364,916) in issue during the year.

Diluted earning per share

No diluted earning per share for the years ended 31 March 2013 and 2012 is presented as the effects of all convertible notes are anti-dilutive for the years.

16. DIVIDENDS

The Directors do not recommend the payment of any dividend in respect of the years ended 31 March 2013 and 2012.

17. PROPERTY, PLANT AND EQUIPMENT

					Furniture,
		Motor		Leasehold	fixtures and
	Machinery	vehicle	improvement		equipment	Total
	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000
Cost:
At 1 April 2011	–	–		–	35	35
Acquisition of subsidiaries	67	72		–	301	440
Additions	–	350		183	64	597
Exchange differences	1	1		–	3	5
At 31 March 2012 and
1 April 2012	68	423		183	403	1,077
Additions	–	–		533	108	641
Exchange differences	1	3		2	3	9
At 31 March 2013	69	426		718	514	1,727

Accumulated
depreciation:
At 1 April 2011	–	–		–	2	2
Charge for the year	13	25		17	71	126
At 31 March 2012 and
1 April 2012	13	25		17	73	128
Charge for the year	23	72		137	155	387
Exchange differences	–	2		1	2	5
At 31 March 2013	36	99		155	230	520

Carrying amount:
At 31 March 2013	33	327		563	284	1,207


At 31 March 2012	55	398		166	330	949

I-23

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. GOODWILL

						2013	2012
						HK$’000	HK$’000
Arising	on	acquisition	of	a	subsidiary	14,202	14,202

The Group acquired 100% equity interest of Sino Hill on 1 October 2011. This transaction has been accounted for by the acquisition method of accounting.

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (“CGUs”) that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated to the Sino Hill cash generating unit.

The recoverable amounts of the CGUs are determined from value in use calculation.

The key assumptions for the value in use calculation are those regarding the discount rates, growth rates and budgeted gross margin and turnover during the period. The Group estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on long-term average economic growth rate of the geographical area in which the businesses of the CGUs operate. Budgeted gross margin and turnover are based on past practices and expectations on market development.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by the Directors for the next five years with the residual period using the growth rate of 5%. This rate does not exceed the average long-term growth rate for the relevant markets.

The rate used to discount the forecasted cash flows from the Sino Hill cash generating unit is 10%.

19. INVENTORIES

	2013	2012
	HK$’000	HK$’000
Merchandises	13,081	17,798
Less: Impairments	(77)	(87)
	13,004	17,711

20. TRADE AND BILL RECEIVABLES

Other than cash sales, invoices are normally payable within 30 to 90 days of issuance. Trade and bill receivables are recognised and carried at their original invoiced amounts less allowance for impairment when collection of the full amount is no longer probable. Bad debts are written off as incurred.

At the end of the reporting period, the aging analysis of the trade and bill receivables is as follows:

	2013	2012
	HK$’000	HK$’000
1-30 days	27,167	29,267
31-60 days	12,240	10,153
61-90 days	12,486	6,094
91-120 days	4,481	2,961
Over 120 days	6,379	3,737
Less: Impairments	–	–
	62,753	52,212

I-24

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the end of the reporting period, the trade and bill receivables with the carrying amounts of approximately HK$10,860,000 (2012: HK$6,698,000) were past due but not impaired. Approximately HK$4,481,000 and HK$6,379,000 (2012: approximately HK$2,961,000 and HK$3,737,000) of which were falling within the ageing band from 91 to 120 days and over 120 days respectively.

The gross amounts of the Group’s trade and bill receivables were denominated in the following currencies:

	2013	2012
	HK$’000	HK$’000
USD	32,680	21,983
RMB	30,073	30,229

	62,753	52,212

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

		2013	2012
	Notes	HK$’000	HK$’000
Deposit		13,487	3,540
Prepayments		480	3
Other receivables		5,825	5,590
Due from deconsolidated subsidiaries	(a)	444	438

		20,236	9,571

Notes(a): The advances are unsecured, non-interest bearing and have no fixed repayment terms.

22. TRADE PAYABLES

At the end of the reporting period, the ageing analysis of the trade payables is as follows:

	2013	2012
	HK$’000	HK$’000
1-30 days	18,328	12,036
31-60 days	11,409	11,646
61-90 days	2,181	7,085
91-120 days	56	156
Over 120 days	437	720
	32,411	31,643

The carrying amounts of the Group’s trade payables were denominated in the following currencies:

	2013	2012
	HK$’000	HK$’000
USD	24,565	18,415
RMB	7,846	13,228

	32,411	31,643

I-25

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. DUE TO DECONSOLIDATED SUBSIDIARIES

The amounts due to deconsolidated subsidiaries are unsecured, non-interest bearing and have no fixed repayment terms.

24. DUE TO THE INVESTOR

On 6 August 2010, a directly wholly-owned subsidiary of the Company, UR Group and the Investor entered into a secured loan facility agreement, pursuant to which the Investor agreed to provide a working capital facility up to HK$15,000,000 to UR Group. The advance of HK$4,800,000 has already been received from the Investor prior to the date of the said agreement. This advance is non-interest bearing, secured by the entire issued share capital of an indirectly wholly-owned subsidiary of the Company, U-RIGHT Trading Development Limited. The advance was repaid during last year.

On 6 August 2010, a directly wholly-owned subsidiary of the Company, Alfreda and the Investor entered into another secured loan facility agreement, pursuant to which the Investor agreed to provide a facility up to HK$20,000,000 to Alfreda as part of the consideration of the Acquisition. Three advances of HK$10,000,000, HK$5,000,000 and HK$5,000,000 were drawn down from the Investor on 15 September 2010, 31 January 2011 and 30 September 2011 respectively in respect of the second loan facility agreement. These advances are non-interest bearing, secured by the entire issued share capital of an indirectly wholly-owned subsidiary of the Company, Right Season, and repayable on 31 December 2013. An amount of HK$8,700,000 was repaid to the Investor during the year.

25. FINANCIAL GUARANTEE LIABILITIES

The Company has provided corporate guarantees for certain bank loans of its subsidiaries which had been deconsolidated from the consolidated financial statements of the Group since 1 April 2008. At the end of the reporting period, it is probable that the Company will be liable to the potential claims under any of these guarantees. Accordingly, a provision for financial guarantee liabilities of approximately HK$1,118,325,000 as at 31 March 2013 (2012: HK$1,118,325,000) for the Company has been made against the probable uncovered exposures to be borne by the Company under those guarantees at the end of the reporting period.

26. CONVERTIBLE NOTES

Pursuant to a subscription agreement dated 5 October 2006, the Company issued zero coupon convertible notes with principal value of HK$60,000,000 on 19 October 2006 (“CN1”). The holders of CN1 are entitled to convert any part of the principal amount into new ordinary shares of the Company at a conversion price of HK$0.288 each, subject to adjustments, at any time between the date of issue of CN1 and 19 October 2011. Any convertible notes not converted before 19 October 2011 would be redeemed at 137.69 per cent of its principal amount on 19 October 2011. During the year ended 31 March 2008, part of the CN1 with principal value of HK$30,000,000 have been converted into ordinary shares of the Company.

Pursuant to a subscription agreement dated 23 October 2007, the Company issued convertible notes with principal value of HK$24,000,000 on 15 November 2007 (“CN2”). The holders of CN2 are entitled to convert any part of the principal amount into new ordinary shares of the Company at a conversion price of HK$0.341 each, subject to adjustments, at any time between the date of issue of CN2 and 15 November 2010. Any convertible notes not converted before 15 November 2010 would be redeemed at 135.00 per cent of its principal amount on 15 November 2010. CN2 bears interests at 6 months HIBOR plus 1% per annum payable semi-annually until their settlement date.

During the year ended 31 March 2009, an event of default occurred in respect of the convertible notes with liability component totaling approximately HK$65,098,000 as at 31 March 2009 and such amounts have become repayable on demand. The liability component of convertible notes, together with the corresponding finance cost, was therefore reclassified as a current liability.

I-26

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The liability component of convertible bonds recognised at the end of the reporting period is analysed as follows:

	CN1	CN2	Total
	HK$’000	HK$’000	HK$’000
Liability component at 1 April 2011	39,177	32,400	71,577
Interest charged (Note 11)	3,071	891	3,962
Liability component at 31 March 2012 and
1 April 2012	42,248	33,291	75,539
Interest charged (Note 11)	2,169	659	2,828
Liability component at 31 March 2013	44,417	33,950	78,367

The interest charged for the years ended 31 March 2013 and 2012 for CN1 and CN2 are calculated with reference to the terms of the convertible notes and taking into consideration that the convertible notes were in default.

27. PROMISSORY NOTE

On 1 October 2011, Right Season, one of the subsidiaries of the Company issued a promissory note of HK$20,000,000 (the “Promissory Note”) as part of the consideration for the Acquisition of Sino Hill. The Promissory Note bears no interest and has a maturity date of 30 September 2013 or 12 month’s period following the resumption of trading in the shares of the Company whichever is earlier. The redemption is at par at maturity date.

		HK$’000
The fair value of the Promissory Note on issuance		16,529
Effective interest charged to profit or loss (Note 11)		826
At 31 March 2012		17,355
Effective interest charged to profit or loss (Note 11)		1,736
At 31 March 2013		19,091

The effective interest rate of the Promissory Note is 10%.
SHARE CAPITAL
	2013	2012
	HK$’000	HK$’000
Authorised:
5,000,000,000 ordinary shares of HK$0.10 each	500,000	500,000


Issued and fully paid:
3,569,364,916 ordinary shares of HK$0.10 each	356,936	356,936

28. SHARE CAPITAL

(a) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maximise the return to the shareholders through the optimisation of the debt and equity balance.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the payment of dividends, issue new shares, buy-back shares, raise new debts, redeem existing debts or sell assets to reduce debts. No changes were made in the objectives, policies or processes during the years ended 31 March 2013 and 2012.

I-27

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. MAJOR NON-CASH TRANSACTIONS

During last year, an advance of HK$5,000,000 was drawn down from the Investor on 30 September 2011 and was paid to the vendor of Sino Hill as part of the consideration to acquire 100% equity interest of Sino Hill.

30. SHARE-BASED PAYMENTS

Equity-settled share option scheme

The share option scheme of the Company (the “Share Option Scheme”) was adopted at the special general meeting of the Company on 9 July 2002 for the purpose of providing incentives or rewards to eligible participants for their contribution to the Group and/or to enable the Group to recruit and retain high-calibre employees and attract human resources that are valuable to the Group and any entity in which the Group holds any equity interest (the “Invested Entity”). Eligible participants of the Share Option Scheme include the directors and employees of the Company, its subsidiaries or any Invested Entity, suppliers and customers of the Group or any Invested Entity, any person or entity that provides research, development or other technological support to the Group or any Invested Entity, and any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity. The Share Option Scheme should, unless otherwise terminated or amended, remain in force for 10 years from 17 July 2002.

The maximum number of shares which may be issued upon exercise of all outstanding share options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30% of the total number of shares in issue from time to time. The total number of shares which may be issued upon exercise of all share options granted and to be granted under the Share Option Scheme and any other share option schemes of the Company shall not in aggregate exceed 10% of the total number of shares in issue on 31 August 2007 (i.e. not exceeding 351,191,691 shares of the Company). Share options lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company will not be counted for the purpose of calculating the 10% limit.

The Company may seek approval of the shareholders in the general meeting for refreshing the 10% limit under the Share Option Scheme save that the total number of shares which may be issued upon exercise of all share options to be granted under the Share Option Scheme and any other share option schemes of the Company under the limit as refreshed shall not exceed 10% of the total number of shares in issue as at the date of approval of the limit as refreshed. Share options previously granted under the Share Option Scheme or any other share option schemes of the Company (including share options outstanding, cancelled, lapsed or exercised in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) will not be counted for the purpose of calculating the limit as refreshed. The total number of shares issued and to be issued upon exercise of the share options granted to each eligible participant (including both exercised and outstanding options) in any 12-month period shall not exceed 1% of the total number of shares in issue.

The exercise price of the share options is determinable by the Directors, but may not be less than the highest of (i) the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotation sheets on the date of the offer of the share options which must be trading day; (ii) the average closing price of the Company’s shares as stated in the Stock Exchange’s daily quotation sheets for the five trading days immediately preceding the date of the offer; and (iii) the nominal value of the Company’s shares.

At 31 March 2012, the total number of the Company’s shares currently available for issue under the Share Option Scheme is 351,191,691, representing 9.8% of the issued share capital of the Company shares after the refreshment of the scheme mandate limit.

The Company did not have any outstanding share options granted under the Share Option Scheme during the year ended 31 March 2012.

As the Directors decided not to extend the Share Option Scheme nor adopt a new share option scheme for the Company, the operation of the Share Option Scheme was ceased from 17 July 2012.

I-28

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. ACQUISITION OF SUBSIDIARY – SINO HILL

On 1 October 2011, the Group acquired 100% of the issued share capital of Sino Hill at a consideration HK$40,000,000 satisfied by advances from the Investor of HK$10,000,000 and HK$5,000,000 paid in year 2011 as a deposits, an advance from the Investor of HK$5,000,000 paid last year and the Promissory Note of HK$20,000,000 (fair value of approximately HK$16,529,000). Sino Hill was engaged in the design, distribution and sales of fashion during the year. The Acquisition is for the purpose of extending existing principal business of the Group in relation to the wholesale and retail trading of fashion garments.

The fair value of the total consideration mentioned above was HK$36,529,000. The goodwill arising from the acquisition was HK$14,202,000.

The carrying amount of the identifiable assets and liabilities of Sino Hill acquired as at the date of Acquisition is the same as their fair values, which are disclosed as follows:

	Carrying amount
	and fair values
	HK$’000
Property, plant and equipment	440
Inventories	14,092
Trade receivables	6,898
Prepayments, deposits and other receivables	588
Cash and cash equivalents	9,938
Trade payables	(137)
Accruals and other payables	(2,604)
Tax payable	(6,888)
Net assets	22,327
Goodwill	14,202

	36,529

Satisfied by:
Advances from the Investor	20,000
Issue of Promissory Note	16,529
	36,529

Net cash inflow arising on Acquisition:
Cash and cash equivalents acquired	9,938

The goodwill arising on the Acquisition of Sino Hill is attributable to the Sino Hill cash generating unit.

I-29

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

32. STATEMENT OF FINANCIAL POSITION OF THE COMPANY AND RESERVES

(a) Statement of financial position of the Company

	2013	2012
	HK$’000	HK$’000
Non-current assets
Investments in subsidiaries	–	–
Current assets
Due from deconsolidated subsidiaries	444	438
Due from subsidiaries	315	7
Bank balances	6,919	6,984

	7,678	7,429

Current liabilities
Accruals and other payables	8,892	7,540
Due to deconsolidated subsidiaries	268,189	268,189
Financial guarantee liabilities	1,118,325	1,118,325
Convertible notes	78,367	75,539

	1,473,773	1,469,593

Net current liabilities	(1,466,095)	(1,462,164)

Total assets less current liabilities	(1,466,095)	(1,462,164)


Capital and reserves
Share capital	356,936	356,936
Deficiency	(1,823,031)	(1,819,100)
TOTAL EQUITY	(1,466,095)	(1,462,164)

(b) Reserves of the Company

								Retained
						Share-based		profits/
	Share	Contributed		Capital	compensation		(accumulated
	premium		surplus	reserve		reserve		losses)	Total
	HK$’000		HK$’000	HK$’000		HK$’000		HK$’000	HK$’000
At 1 April 2011	614,493		40,358	3,020		1,904		(2,474,089)	(1,814,314)
Total comprehensive loss
for the year	–		–	–		–		(4,786)	(4,786)
At 31 March 2012	614,493		40,358	3,020		1,904		(2,478,875)	(1,819,100)


At 1 April 2012	614,493		40,358	3,020		1,904		(2,478,875)	(1,819,100)
Total comprehensive loss
for the year	–		–	–		–		(3,931)	(3,931)
Transfer upon forfeiture
of share options	–		–	–		(1,904)		1,904	–
At 31 March 2013	614,493		40,358	3,020		–		(2,480,902)	(1,823,031)

I-30

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Nature and purpose of reserves of the Group

(i) Share premium account

The application of the share premium account is governed by the Companies Act of Bermuda.

(ii) Statutory reserve

In accordance with the relevant regulations of the PRC, the subsidiaries of the Group established in the PRC are required to transfer a certain percentage of the profit after tax, if any, to a statutory reserve. Subject to certain restrictions as set out in the relevant regulations, the statutory reserve may be used to offset the accumulated losses, if any, of the subsidiaries.

(iii) Capital reserve

The capital reserve represents the unexercised equity component of convertible notes issued by the Group recognised in accordance with the accounting policy adopted for convertible notes in note 5 to the financial statements.

(iv) Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 5 to the financial statements.

33. CONTINGENT LIABILITIES

The Group did not have any significant contingent liabilities at 31 March 2013 and 2012.

34. COMMITMENTS

Lease commitments

As at 31 March 2013, the total future minimum lease payments of the Group under noncancellable operating leases are payable as follows:

	2013	2012
	HK$’000	HK$’000
Future aggregate minimum lease payments under operating
leases in respect of land and buildings
– within one year	894	1,281
– in the second to fifth years inclusive	1,244	340
	2,138	1,621

Operating lease payments represent rentals payable by the Group for certain of its offices and shop. Leases are negotiated for an average term of 2 years and rentals are fixed over the lease terms and do not include contingent rentals.

35. CONNECTED TRANSACTIONS

					2013	2012
					HK$’000	HK$’000
Management	fee	paid	to	Shishi Yiliwang	2,679	2,500
Management	fee	paid	to	Xiamen Dateng	–	273

The above connected transactions do not constitute related party transactions under HKAS 24.

I-31

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. EVENTS AFTER THE REPORTING PERIOD

On 26 April 2013, the Stock Exchange decided to allow the Company to proceed with the resumption proposal subject to the resumption conditions to be fulfilled by 31 July 2013. Details of the resumption conditions were set out in the Company’s announcement dated 26 April 2013.

37. PARTICULARS OF THE SUBSIDIARIES OF THE COMPANY

		Issued and	Percentage of	Percentage of	Percentage of
	Place of	paid-up/	equity interest
	incorporation/	registered	attributable			Principal
Name of the subsidiary	registration/	capital	to the Group			activities
			2013	2012
*Direct subsidiaries:*
Lucky Formosa	British Virgin	10,000 ordinary	100%	100%		Investment
International Group	Islands	shares of				holding
Limited		US$1 each
UR Group Limited	British Virgin	1 ordinary	100%	100%		Investment
	Islands	share of US$1				holding
Alfreda Limited	British Virgin	1 ordinary	100%	100%		Inactive
	Islands	share of US$1
*Indirect subsidiaries:*
Nano Garment Holdings	Hong Kong	1 ordinary	100%	100%		Inactive
Limited		share of HK$1
U-RIGHT Trading	Hong Kong	1 ordinary	100%	100%		Trading of
Development Limited		share of HK$1				fashion
						garments and
						textiles
Fame Ace Limited	British Virgin	1 ordinary	100%	100%		Inactive
	Islands	share of US$1
Right Season Limited	British Virgin	1 ordinary	100%	100%		Investment
	Islands	share of US$1				holding
Xiamen U-Right	The PRC	US$240,000	80%		80%	Retailing of
Garment Co., Ltd.						fashion
						garments and
						trading of
						textiles
						and leathers
Sino Hill Group Limited	British Virgin	1 ordinary	100%	100%		Investment
	Islands	share of US$1				holding
Stand Fancy Limited	Hong Kong	10,000 ordinary	100%	100%		Investment
		shares of				holding
		HK$1 each
立宜服裝(深圳)有限公司	The PRC	HK$1,000,000	100%	100%		Design,
						distribution
						and sale of
						fashion
						apparel

Note: Xiamen U-Right Garment Co. Ltd. is a sino foreign joint venture established in the PRC.

立宜服裝(深圳)有限公司 is a wholly foreign-owned enterprise established in the PRC.

38. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 14 June 2013.

I-32

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(C) For the year ended 31 March 2012

Set out below is the consolidated financial statements of the Group for the year ended 31 March 2012 as extracted from the annual report of the Company for the year ended 31 March 2012.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2012

	Notes	2012	2011
		HK$’000	HK$’000
Revenue	8	397,937	331,084
Cost of sales		(363,508)	(311,766)
Gross profit		34,429	19,318
Other income	9	1,781	2,013
Selling and distribution costs		(6,519)	(4,167)
Administrative expenses		(13,558)	(9,029)
Profit from operations		16,133	8,135
Finance cost	11	(4,788)	(3,939)
Profit before tax		11,345	4,196
Income tax expense	12	(3,501)	(1,754)
Profit for the year	13	7,844	2,442
Other comprehensive income:
Exchange differences on translation of
foreign operations		435	146
Total comprehensive income for the year		8,279	2,588


Profit for the year attributable to:
Owners of the Company		6,890	1,739
Non-controlling interests		954	703
		7,844	2,442


Total comprehensive income for the
year attributable to:
Owners of the Company		7,315	1,885
Non-controlling interests		964	703
		8,279	2,588


Earning per share attributable to owners
of the Company	15
Basic (HK cents per share)		0.19	0.05


Diluted (HK cents per share)		N/A	N/A

I-33

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2012

	Notes	2012	2011
		HK$’000	HK$’000
Non-current assets
Property, plant and equipment	17	949	33
Goodwill	18	14,202	–

		15,151	33

Current assets
Inventories	19	17,711	3,305
Trade receivables	20	52,212	33,084
Prepayments, deposits and other receivables	21	9,571	21,162
Bank and cash balances		20,237	14,800

		99,731	72,351

Current liabilities
Trade payables	22	31,643	20,815
Accruals and other payables		14,264	20,843
Due to deconsolidated subsidiaries	23	416,314	416,323
Due to the Investor	24	20,000	19,800
Financial guarantee liabilities	25	1,118,325	1,118,325
Convertible notes	26	75,539	71,577
Current tax liabilities		10,361	1,899

		1,686,446	1,669,582

Net current liabilities		(1,586,715)	(1,597,231)
Total assets less current liabilities		(1,571,564)	(1,597,198)
Non-current liabilities
Promissory note	27	17,355	–
NET LIABILITIES		(1,588,919)	(1,597,198)


Capital and reserves
Share capital	28	356,936	356,936
Deficiency		(1,948,082)	(1,955,397)
Equity attributable to owners of the Company		(1,591,146)	(1,598,461)
Non-controlling interests		2,227	1,263
TOTAL EQUITY		(1,588,919)	(1,597,198)

I-34

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2012

							Attributable to	Attributable to	Attributable to	Attributable to	Attributable to	owners of the	owners of the	owners of the	Company
															Foreign		Retained
				Share									Share-based		currency		profits/					Non-
	Share		premium			Statutory				Capital		compensation			translation	(accumulated						controlling		Total
	capital		account				reserve			reserve			reserve		reserve		losses)			Total		interests		equity
	HK$’000		HK$’000			HK$’000			HK$’000				HK$’000		HK$’000		HK$’000			HK$’000		HK$’000		HK$’000
At 1 April 2010	356,936			614,493			220			3,020			1,904		–		(2,576,919)		(1,600,346)			69	(1,600,277)
Capital contributed from
non- controlling
shareholder		–			–			–			–			–	–			–			–	491		491
Total comprehensive
income for the year		–			–			–			–			–	146		1,739			1,885		703		2,588

At 31 March 2011	356,936			614,493			220			3,020			1,904		146		(2,575,180)		(1,598,461)			1,263	(1,597,198)


At 1 April 2011	356,936			614,493			220			3,020			1,904		146		(2,575,180)		(1,598,461)			1,263	(1,597,198)
Total comprehensive
income for the year		–			–			–			–			–	425		6,890			7,315		964		8,279

At 31 March 2012	356,936			614,493			220			3,020			1,904		571		(2,568,290)		(1,591,146)			2,227	(1,588,919)

I-35

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2012

	Notes	2012	2011
		HK$’000	HK$’000
Cash flows from operating activities
Profit before tax		11,345	4,196
Adjustments for:
Depreciation		126	2
Impairments on inventories		87	118
Finance cost		4,788	3,939
Interest income		(12)	–
Operating cash flows before working capital
changes		16,334	8,255
Change in inventories		(1,411)	(3,423)
Change in trade receivables		(11,220)	(23,828)
Change in prepayments, deposits and
other receivables	29	(2,449)	1,160
Change in trade payables		10,691	14,408
Change in accruals and other payables		(9,555)	14,293
Change in due to deconsolidated subsidiaries		(9)	(24)
Cash generated from operations		2,381	10,841
Tax paid		(2,032)	(16)
Interest received		12	–

Net cash flows generated from
operating activities		361	10,825
Cash flows from investing activities
Purchase of property, plant and equipment		(597)	(35)
Net cash inflow from acquisition of a subsidiary	31	9,938	–
Net cash flows generated from/(used in)
investing activities		9,341	(35)
Cash flows from financing activities
Contribution from non-controlling interests		–	491
Repayment to the Investor	24	(4,800)	–
Net cash flows (used in)/generated from
financing activities		(4,800)	491
Net increase in cash and cash equivalents		4,902	11,281
Effect of foreign exchange rate changes		535	146
Cash and cash equivalents at beginning of year		14,800	3,373
Cash and cash equivalents at end of year		20,237	14,800


Analysis of cash and cash equivalents
Bank and cash balances		20,237	14,800

I-36

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2012

1. GENERAL INFORMATION

U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”, together with its subsidiaries, the “Group”) was incorporated in Bermuda as an exempted company with limited liability under the Companies Act 1981 of Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The principal place of business is 35th Floor, One Pacific Place, 88 Queensway, Hong Kong. The Company’s shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and have been suspended for trading since 17 September 2008.

The Company is an investment holding company. The Group’s principal activities are trading and retailing of fashion garments, textiles and leathers.

2. WINDING-UP PETITION AND APPOINTMENT OF PROVISIONAL LIQUIDATORS

The Provisional Liquidators are empowered, inter alia, to take possession of the assets of the Group, to close or cease or operate all or any part of the business operations of the Group, to take control of such of the subsidiaries of the Company, joint ventures, associated companies or other entities in which the Company or any of its subsidiaries holds an interest and to consider if thought to be in the best interests of creditors of the Company, to enter into discussions and negotiations for and on behalf of the Company for the purpose of, but not limited to, restructuring of the Company’s business, operations, or indebtedness or to implement a scheme of arrangement between the Company and its creditors and/or shareholders for such restructuring.

After the appointment of the Provisional Liquidators on 6 October 2008, the then management of the Company together with the Provisional Liquidators used their best endeavours to maintain the business of the Group both in Hong Kong and the People’s Republic of China (the “PRC”). Notwithstanding the subsequent changes in personnel as the Provisional Liquidators gradually replaced the management team, the total revenue achieved by the Group according to the financial statements of the Group for the year ended 31 March 2012 was approximately HK$397.94 million.

The hearing of the Petition against the Company was originally scheduled on 10 December 2008 and the High Court adjourned the hearing of the Petition against the Company to 24 September 2012. A winding up order against Uni-Capital was granted by the High Court on 9 November 2009.

3. BASIS OF PREPARATION

Suspension of trading in shares of the Company

At the request of the Company, trading in shares of the Company had been suspended since 17 September 2008.

On 16 May 2009, the Provisional Liquidators, Advance Lead International Limited (the “Investor”), the Company and an escrow agent, entered into an escrow agreement (as supplemented by the four supplementary agreements and hereinafter collectively referred as to the “Escrow Agreement”, unless otherwise specified) for the implementation of the restructuring proposal. Pursuant to the Escrow Agreement, the Provisional Liquidators granted the Investor an exclusive right for a period up to 30 June 2010 (as subsequently extended to 31 December 2012) to negotiate a legally binding restructuring agreement for the implementation of the restructuring proposal.

I-37

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 9 August 2010, the Provisional Liquidators, with the assistance of the financial advisor of the Company, Veda Capital Limited, submitted the resumption proposal to the Stock Exchange and the resumption proposal is currently under review by the Stock Exchange.

By an order of the High Court dated 15 March 2012, the hearing of the Petition to the High Court for the winding-up of the Company was further adjourned to 24 September 2012.

After the resumption proposal of the Company was submitted to the Stock Exchange on 9 August 2010, the Stock Exchange had made certain queries on the resumption proposal. The Company had replied the Stock Exchange’s queries and the resumption proposal is currently under review by the Stock Exchange which the Stock Exchange had not indicated or confirmed that approval (with or without further conditions) may be granted.

Going concern basis

As at 31 March 2012 the Group had net current liabilities of approximately HK$1,586,715,000 (2011: HK$1,597,231,000) and net liabilities of approximately HK$1,588,919,000 (2011: HK$1,597,198,000) respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern. Therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

To address the issues above, the Provisional Liquidators have been in discussion and negotiation with the Investor to explore the possibility of injecting new funds into the Group through the proposed restructuring.

I-38

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted all the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants that are relevant to its operations and effective for its accounting year beginning on 1 April 2011. HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting Standards; and Interpretations. The adoption of these new and revised HKFRSs did not result in significant changes to the Group’s accounting policies, presentation of the Group’s financial statements and amounts reported for the current year and prior years.

The Group has not applied the new HKFRSs that have been issued but are not yet effective. The Group has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a material impact on its results of operations and financial position.

5. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The significant accounting policies applied in the preparation of these financial statements are set out below.

Consolidation

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date the control ceases.

I-39

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Business combination and goodwill

Foreign currency translation

(a) Functional and presentation currency

(b) Transactions and balances in financial statements

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined.

I-40

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Translation on consolidation

(i) Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
(ii) Income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and
(iii) All resulting exchange differences are recognised in the foreign currency translation reserve.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Furniture, fixtures and equipment	18-33%
Leasehold improvement	20-45%
Machinery	9%
Motor vehicle	12.5-18%

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end of each reporting period.

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in profit or loss.

Operating leases

Inventories

I-41

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of the instruments.

Trade and other receivables

Cash and cash equivalents

Financial liabilities and equity instruments

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

I-42

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial guarantee contract liabilities

Financial guarantee contract liabilities are measured initially at their fair values and are subsequently measured at the higher of:

(a) the amount of the obligations under the contracts, as determined in accordance with HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; and
(b) the amount initially recognised less cumulative amortisation recognised in the profit or loss on a straight-line basis over the terms of the guarantee contracts.

Convertible notes

Trade and other payables

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Revenue recognition

(a) Revenues from the sales of goods are recognised on the transfer of significant risks and rewards of ownership, which generally coincides with the time when the goods are delivered and the title has passed to the customers.
(b) Interest income is recognised on a time-proportion basis using the effective interest method.

I-43

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Employee benefits

(a) Employee leave entitlements

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(b) Pension obligations

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (“MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on 5% of the employees’ relevant income, subject to a ceiling of monthly relevant income of HK$20,000 and are charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The Group also participates in a defined contribution retirement scheme organised by the government in the People’s Republic of China (the “PRC”). The Group is required to contribute a specific percentage of the payroll of its employees to the retirement scheme. The contributions are charged to profit or loss as they become payable in accordance with the rules of the retirement scheme. No forfeited contributions may be used by the employers to reduce the existing level of contributions.

(c) Termination benefits

Borrowing costs

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Taxation

Income tax represents the sum of the current tax and deferred tax.

I-44

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Related parties

A related party is a person or entity that is related to the Group.

(A) A person or a close member of that person’s family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Company or of a parent of the Company.
(B) An entity is related to the Group if any of the following conditions applies:
(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (A).
(vii) A person identified in (A)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Segment reporting

I-45

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment of assets

Provisions and contingent liabilities

Events after the reporting period

6. CRITICAL JUDGEMENTS AND KEY ESTIMATES

Critical judgements in applying accounting policies

In the process of applying the accounting policies, Management had made the following judgement that has the most significant effect on the amounts recognised in the financial statements.

(a) Going concern basis

(b) Financial results of Xiamen U-Right Garment Co. Ltd. (the “EJV”)

In accordance with an agency agreement, the sales and purchase transactions of the EJV were carried out on the EJV’s behalf by 石獅市意利王制衣發展有限公司 (for identification purpose, Shishi City Yiliwang Clothes Development Co., Ltd.) (“Shishi Yiliwang”) and 廈門大騰工貿有限公司 (for identification purpose, Xiamen Dateng Industry Trade Limited) (“Xiamen Dateng”). Each of them holds 10% of the ownership interest

I-46

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

in the EJV. The financial statements have been prepared on the basis that those sales and purchases for the year ended 31 March 2012 have been included in the Group’s current year results. In view of the various terms stipulated in the agency agreement, the directors regard such accounting treatments as appropriate.

Key sources of estimation uncertainty

(a) Financial guarantee liabilities

(b) Impairment loss for bad and doubtful debts

(c) Income tax

(d) Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expense. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions in response to serve industry cycles. The Group will reassess the estimates by the end of each reporting period.

(e) Property, plant and equipment and depreciation

(f) Impairment of goodwill

7. FINANCIAL RISK MANAGEMENT

I-47

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Risk management is carried out by the directors of the Company (“Directors”) under policies approved by the Board of Directors. The Directors identify, evaluate and hedge financial risks in close co-operation with the Group’s operating units.

(a) Market risk

Foreign exchange risk

Interest rate risk

As at 31 March 2012, the Group did not have significant interest rate risk.

(b) Credit risk

At the end of the reporting period, the Group had certain concentration of credit risk as approximately 26% (2011: 30%) and approximately 57% (2011: 63%) of the Group’s trade receivables were due from the Group’s largest trade debtor and the five largest trade debtors, respectively. The Group has policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group reviews the recoverable amount of the trade and other receivables on a regular basis and provision for doubtful debts is made in accordance with the Group’s policies. In addition, the Management reviews the recoverable amount of each individual trade debt regularly to ensure that adequate impairment losses are recognised for irrecoverable debts. In this regard, the Management considers that the Group’s credit risk is significantly reduced.

(c) Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its current obligations when they fall due.

The Management has given careful consideration on the measures currently undertaken in respect of the Group’s liquidity position. The Management believes that the Group will be able to meet in full its financial obligations as they fall due upon the completion of the Proposed Restructuring, as further explained in note 3 to the financial statements.

(d) Fair values

The carrying amounts of the Group’s financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values.

8. REVENUE

Revenue represents the invoiced value of goods sold, less value-added tax, goods returns and trade discounts during the year.

						2012	2011
						HK$’000	HK$’000
Sales	of	fashion	garments	and	textiles	397,937	331,084

I-48

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. OTHER INCOME

	2012	2011
	HK$’000	HK$’000
Interest income	12	6
Net foreign exchange gain	13	27
Reimbursement of restructuring expenses from the Investor	1,749	1,934
Others	7	46

	1,781	2,013

10. OPERATING SEGMENT INFORMATION

For the years ended 31 March 2012 and 2011, no operating segment information is presented as the Group has only one operating segment of fashion garments, textile and leathers business.

Geographical information:

The Group’s revenue analysed by geographical location and information about its non-current assets by geographical location are detailed below:

	Revenue	Revenue		Non-current assets	Non-current assets
	Year ended	31	March	As at 31	March
	2012		2011	2012	2011
	HK$’000		HK$’000	HK$’000	HK$’000
Mainland China	142,041		123,466	949	33
The Philippines	93,171		81,356	–	–
Kingdom of Saudi Arabia	–		429	–	–
Germany	–		885	–	–
United Arab Emirates	162,725		124,948	–	–

Consolidated total	397,937		331,084	949	33

In presenting the geographical information, revenue is based on the locations of the customers.

11. FINANCE COST

	2012	2011
	HK$’000	HK$’000
Interest expenses on borrowings wholly repayable
within five years
– convertible notes (Note 26)	3,962	3,939
– promissory note (Note 27)	826	–
	4,788	3,939

I-49

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. INCOME TAX EXPENSE

	2012	2011
	HK$’000	HK$’000
Current tax – Hong Kong Profits Tax
Provision for the year	1,399	643
Current tax – the PRC Enterprise Income Tax
Provision for the year	2,102	1,111
	3,501	1,754

Hong Kong profits tax is calculated at 16.5% (2011: 16.5%) of the estimated assessable profits for the year. Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of subsidiaries of the Company in the PRC is 25% for both years.

Tax charge on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates, based on existing legislation, interpretation and practices in respect thereof.

The reconciliation between the income tax and profit before tax multiplied by the Hong Kong profits tax rate is as follows:

	2012	2011
	HK$’000	HK$’000
Profit before tax	11,345	4,196

Tax at the domestic income tax rate of 16.5% (2011: 16.5%)	1,872	692
Tax effect of expenses that are not deductible	876	678
Effect of different tax rates of subsidiaries operating in other
jurisdictions	753	384
	3,501	1,754

13. PROFIT FOR THE YEAR

The Group’s profit for the year is stated after charging/(crediting) the following:

	2012	2011
	HK$’000	HK$’000
Cost of sales	363,508	311,766
Depreciation	126	2
Impairment on inventories	87	118
Staff costs (including Directors’ remuneration):
– salaries, bonuses and allowances	4,650	2,196
– retirement benefits scheme contributions	484	334
	5,134	2,530
Auditor’s remuneration	699	480
Net foreign exchange loss/(gain)	(13)	(27)
Operating lease charges on land and buildings	1,008	481

I-50

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. DIRECTORS’ EMOLUMENTS

(a) Directors’ emoluments

None of directors received any remuneration for the two years ended 31 March 2012 and 2011.

(b) Five highest-paid individuals

Details of the aggregate emoluments for the five employees whose emoluments were the highest in the Group are as follows:

	2012	2011
	HK$’000	HK$’000
Salaries, allowances and benefit-in-kind	932	637
Retirement benefit costs	13	44

	945	681

The number of employees whose remuneration fell within the following bands are as follows:

			Number	individual
			2012	2011
Nil	–	HK$1,000,000	5	5

Based on the audited results of the Group for the two years ended 31 March 2012 and 2011, the Directors were not entitled to any of the performance-based discretionary bonus during the years.

Emoluments had been paid by the Group to the Directors or the five highest-paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office.

15. EARNING PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

Basic earning per share

The calculation of basic earning per share attributable to owners of the Company is based on the profit for the year attributable to owners of the Company of approximately HK$6,890,000 (2011: HK$1,739,000) and the weighted average number of ordinary shares of 3,569,364,916 (2011: 3,569,364,916) in issue during the year.

Diluted earning per share

No diluted earning per share for the years ended 31 March 2012 and 2011 is presented as the effects of all convertible notes are anti-dilutive for the years.

16. DIVIDENDS

The Directors do not recommend the payment of any dividend in respect of the years ended 31 March 2012 and 2011.

I-51

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. PROPERTY, PLANT AND EQUIPMENT

								Furniture,	Furniture,	Furniture,
			Motor		Leasehold			fixtures	and
		Machinery	vehicle	improvement				equipment			Total
		HK$’000	HK$’000			HK$’000		HK$’000			HK$’000
	Cost:
	At 1 April 2010	–	–			–				–	–
	Additions	–	–			–				35	35

	At 31 March 2011 and
	1 April 2011	–	–			–				35	35
	Acquisition of subsidiaries	67	72			–				301	440
	Additions	–	350			183				64	597
	Exchange differences	1	1			–				3	5
	At 31 March 2012	68	423			183				403	1,077

	Accumulated
	depreciation:
	At 1 April 2010	–	–			–				–	–
	Charge for the year	–	–			–				2	2
	At 31 March 2011 and
	1 April 2011	–	–			–				2	2
	Charge for the year	13	25			17				71	126
	At 31 March 2012	13	25			17				73	128

	Carrying amount:
	At 31 March 2012	55	398			166				330	949


	At 31 March 2011	–	–			–				33	33


18.	GOODWILL
								2012			2011
							HK$’000				HK$’000
	Arising on acquisition of a subsidiary							14,202			–

The Group acquired 100% of equity interest in Sino Hill on 1 October 2011. This transaction has been accounted for by the acquisition method of accounting.

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (“CGUs”) that are expected to benefit from that business combination. The carrying amount of goodwill had been allocated to the Sino Hill cash generating unit.

The recoverable amounts of the CGUs are determined from value in use calculation.

I-52

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The rate used to discount the forecasted cash flows from the Sino Hill cash generating unit is 10%.

19. INVENTORIES

	2012	2011
	HK$’000	HK$’000
Merchandises	17,798	3,423
Less: Impairments	(87)	(118)
	17,711	3,305

20. TRADE RECEIVABLES

Other than cash sales, invoices are normally payable within 30 to 90 days of issuance. Trade receivables are recognised and carried at their original invoiced amounts less allowance for impairment when collection of the full amount is no longer probable. Bad debts are written off as incurred.

At the end of the reporting period, the ageing analysis of the trade receivables is as follows:

	2012	2011
	HK$’000	HK$’000
1-30 days	29,267	22,479
31-60 days	10,153	3,652
61-90 days	6,094	2,853
91-120 days	2,961	2,244
Over 120 days	3,737	1,856
Less: Impairments	–	–
	52,212	33,084

At the end of the reporting period, the trade receivables with the carrying amounts of approximately HK$6,698,000 (2011: HK$4,100,000) were past due but not impaired. Approximately HK$2,961,000 and HK$3,737,000 (2011: approximately HK$2,244,000 and HK$1,856,000) of which were falling within the ageing band from 91 to 120 days and over 120 days respectively.

The gross amounts of the Group’s trade receivables were denominated in the following currencies:

	2012	2011
	HK$’000	HK$’000
US$	21,983	21,110
RMB	30,229	11,974

	52,212	33,084

I-53

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

	Notes	2012	2011
		HK$’000	HK$’000
Deposit		3,540	5,188
Prepayments		3	580
Other receivables		5,590	–
Due from deconsolidated subsidiaries	(a)	438	394
Refundable deposit for acquisition of a subsidiary	31	–	15,000
		9,571	21,162

Note (a): The advances are unsecured, non-interest bearing and have no fixed repayment terms.

22. TRADE PAYABLES

At the end of the reporting period, the ageing analysis of the trade payables is as follows:

	2012	2011
	HK$’000	HK$’000
1-30 days	12,036	17,983
31-60 days	11,646	1,635
61-90 days	7,085	748
91-120 days	156	92
Over 120 days	720	357
	31,643	20,815

The carrying amounts of the Group’s trade payables were denominated in the following currencies:

	2012	2011
	HK$’000	HK$’000
US$	18,415	19,804
RMB	13,228	1,011

	31,643	20,815

23. DUE TO DECONSOLIDATED SUBSIDIARIES

The amounts due to deconsolidated subsidiaries are unsecured, non-interest bearing and have no fixed repayment terms.

24. DUE TO THE INVESTOR

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. FINANCIAL GUARANTEE LIABILITIES

The Company has provided corporate guarantees for certain bank loans of its subsidiaries which had been deconsolidated from the consolidated financial statements of the Group since 1 April 2008. At the end of the reporting period, it is probable that the Company will be liable to the potential claims under any of these guarantees. Accordingly, a provision for financial guarantee liabilities of approximately HK$1,118,325,000 as at 31 March 2012 (2011: HK$1,118,325,000) for the Company has been made against the probable uncovered exposures to be borne by the Company under those guarantees at the end of the reporting period.

26. CONVERTIBLE NOTES

Pursuant to a subscription agreement dated 5 October 2006, the Company issued zero coupon convertible notes with principal value of HK$60,000,000 on 19 October 2006 (“CN1”). The holders of CN1 are entitled to convert any part of the principal amount into new ordinary shares of the Company at a conversion price of HK$0.288 each, subject to adjustments, at any time between the date of issue of CN1 and 19 October 2011. Any convertible notes not converted before 19 October 2011 will be redeemed at 137.69 per cent of its principal amount on 19 October 2011. During the year ended 31 March 2008, part of the CN1 with principal value of HK$30,000,000 have been converted into ordinary shares of the Company.

Pursuant to a subscription agreement dated 23 October 2007, the Company issued convertible notes with principal value of HK$24,000,000 on 15 November 2007 (“CN2”). The holders of CN2 are entitled to convert any part of the principal amount into new ordinary shares of the Company at a conversion price of HK$0.341 each, subject to adjustments, at any time between the date of issue of CN2 and 15 November 2010. Any convertible notes not converted before 15 November 2010 will be redeemed at 135.00 per cent of its principal amount on 15 November 2010. CN2 bears interests at 6 months HIBOR plus 1% per annum payable semi-annually until their settlement date.

The liability component of convertible notes recognised at the end of the reporting period is analysed as follows:

	CN1	CN2	Total
	HK$’000	HK$’000	HK$’000
Liability component at 1 April 2010	36,585	31,053	67,638
Interest charged	2,592	1,347	3,939
Liability component at 31 March 2011
and 1 April 2011	39,177	32,400	71,577
Interest charged	3,071	891	3,962
Liability component at 31 March 2012	42,248	33,291	75,539

The interest charged for the years ended 31 March 2012 and 2011 for CN1 and CN2 are calculated with reference to the terms of the convertible notes and taking into consideration that the convertible notes were in default.

I-55

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. PROMISSORY NOTE

On 1 October 2011, Right Season Limited, one of the subsidiaries of the Company issued a promissory note of HK$20,000,000 (the “Promissory Note”) as part of the consideration for the Acquisition of Sino Hill. The Promissory Note bears no interest and has a maturity date of 30 September 2013 or 12 month’s period following the resumption of trading in the shares of the Company whichever is earlier. The redemption is at par at maturity date.

	HK$’000
The fair value of the Promissory Note on issuance	16,529
Effective interest charged to profit or loss (Note 11)	826
At 31 March 2012	17,355

The effective interest rate of the Promissory Note is 10%.

28. SHARE CAPITAL

	2012	2011
	HK$’000	HK$’000
Authorised:
5,000,000,000 ordinary shares of HK$0.10 each	500,000	500,000


Issued and fully paid:
3,569,364,916 ordinary shares of HK$0.10 each	356,936	356,936

(a) Capital management

29. MAJOR NON-CASH TRANSACTIONS

During the prior year, two advances of HK$10,000,000 and of HK$5,000,000 were drawn down from the Investor on 15 September 2010 and on 31 January 2011 respectively. These advances were directly transferred from the Investor to the owner of Sino Hill as deposits pursuant to the S&P Agreement dated 9 August 2010.

During the year, an advance of HK$5,000,000 was drawn down from the Investor on 30 September 2011 and was paid to the owner of Sino Hill to acquire 100% of equity interest in Sino Hill.

30. SHARE-BASED PAYMENTS

Equity-settled share option scheme

I-56

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 31 March 2012, the total number of the Company’s shares currently available for issue under the Share Option Scheme is 351,191,691 (2011: 351,191,691), representing 9.8% (2011: 9.8%) of the issued share capital of the Company shares after the refreshment of the scheme mandate limit.

The Company did not have any outstanding share options granted under the Share Option Scheme during the two years ended 31 March 2012 and 2011.

The Directors decide not to extend the Share Option Scheme, which will be expired on 17 July 2012, nor adopt a new share option scheme for the Company.

31. ACQUISITION OF SUBSIDIARY – SINO HILL

On 1 October 2011, the Group acquired 100% of the issued share capital of Sino Hill at a consideration of HK$40,000,000 satisfied by advances from the Investor of HK$10,000,000 and HK$5,000,000 paid last year as deposits, an advance from the Investor of HK$5,000,000 in current year and a promissory note of HK$20,000,000 (fair value of approximately HK$16,529,000). Sino Hill was engaged in the design, distribution and sales of fashion apparel during the year. The Acquisition is for the purpose of extending existing principal business of the Group in relation to the wholesale and retail trading of fashion garments.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amount of the consolidated identifiable assets and liabilities of Sino Hill acquired as at its date of Acquisition are the same as their fair values, which are disclosed as follows:

	Carrying amounts
	and Fair values
	HK$’000
Property, plant and equipment	440
Inventories	14,092
Trade receivables	6,898
Prepayments, deposits and other receivables	588
Cash and cash equivalents	9,938
Trade payables	(137)
Accruals and other payables	(2,604)
Tax payable	(6,888)
Net assets	22,327
Goodwill	14,202

	36,529

Satisfied by:
Advance from the Investor	20,000
Issue of promissory note	16,529
	36,529

Net cash inflow arising on Acquisition:
Cash and cash equivalents acquired	9,938

The goodwill arising on the Acquisition of Sino Hill is attributable to the Sino Hill cash generating unit.

Sino Hill contributed approximately HK$25,441,000 and approximately HK$4,914,000 to the Group’s turnover and profit for the year respectively for the period between the date of Acquisition and the end of the reporting period.

If the Acquisition had been completed on 1 April 2011, the Group’s total turnover for the year would have been approximately HK$425,330,000, and profit for the year would have been approximately HK$13,385,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of the turnover and results of operations of the Group that actually would have been achieved had the Acquisition been completed on 1 April 2011, nor is intended to be a projection of future results.

32. STATEMENT OF FINANCIAL POSITION OF THE COMPANY AND RESERVES

(a) Statement of financial position of the Company

	2012	2011
	HK$’000	HK$’000
Non-current assets
Investments in subsidiaries	–	–
Current assets
Due from deconsolidated subsidiaries	438	394
Due from subsidiaries	7	–
Bank balances	6,984	7,068

	7,429	7,462

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	2012	2011
	HK$’000	HK$’000
Current liabilities
Accruals and other payables	7,540	6,749
Due to deconsolidated subsidiaries	268,189	268,189
Financial guarantee liabilities	1,118,325	1,118,325
Convertible notes	75,539	71,577

	1,469,593	1,464,840

Net current liabilities	(1,462,164)	(1,457,378)

Total assets less current liabilities	(1,462,164)	(1,457,378)


Capital and reserves
Share capital	356,936	356,936
Deficiency	(1,819,100)	(1,814,314)
TOTAL EQUITY	(1,462,164)	(1,457,378)

(b) Reserves of the Company

								Retained
						Share-based		profits/
	Share	Contributed		Capital	compensation		(accumulated
	premium		surplus	reserve		reserve		losses)	Total
	HK$’000		HK$’000	HK$’000		HK$’000		HK$’000	HK$’000
At 1 April 2010	614,493		40,358	3,020		1,904		(2,475,363)	(1,815,588)
Total comprehensive income
for the year	–		–	–		–		1,274	1,274
At 31 March 2011	614,493		40,358	3,020		1,904		(2,474,089)	(1,814,314)


At 1 April 2011	614,493		40,358	3,020		1,904		(2,474,089)	(1,814,314)
Total comprehensive loss for
the year	–		–	–		–		(4,786)	(4,786)
At 31 March 2012	614,493		40,358	3,020		1,904		(2,478,875)	(1,819,100)

(c) Nature and purpose of reserves of the Group

(i) Share premium account

The application of the share premium account is governed by the Companies Act of Bermuda.

(ii) Statutory reserve

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) Capital reserve

(iv) Foreign currency translation reserve

33. CONTINGENT LIABILITIES

The Group did not have any significant contingent liabilities as at 31 March 2012 and 2011.

34. COMMITMENTS

Lease commitments

As at 31 March 2012, the total future minimum lease payments of the Group under non-cancellable operating leases are payable as follows:

	2012	2011
	HK$’000	HK$’000
Future aggregate minimum lease payments under operating
leases in respect of land and buildings
– within one year	1,281	–
– in the second to fifth year inclusive	340	–
– over five years	–	–
	1,621	–

35. CONNECTED TRANSACTIONS

					2012	2011
					HK$’000	HK$’000
Management	fee	paid	to	Shishi Yiliwang	2,500	2,898
Management	fee	paid	to	Xiamen Dateng	273	287

The above connected transactions do not constitute related party transactions under HKAS 24.

36. EVENTS AFTER THE REPORTING PERIOD

After the resumption proposal of the Company was submitted to the Stock Exchange on 9 August 2010, the Stock Exchange had made certain queries on the resumption proposal. The Company had replied the Stock Exchange’s queries and the resumption proposal is currently under review by the Stock Exchange, which the Stock Exchange has not indicated or confirmed that approval (with or without further conditions) may be granted.

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APPENDIX I

37. PARTICULARS OF THE SUBSIDIARIES OF THE COMPANY

		Issued and	Percentage of	Percentage of	Percentage of
	Place of	paid-up/	equity interest
Name of the	incorporation/	registered	attributable		to	Principal
subsidiary	registration	capital	the Group			activities
			2012		2011
*Direct subsidiaries:*
Lucky Formosa	British Virgin	10,000 ordinary	100%	100%		Investment
International	Islands	shares of				holding
Group Limited		US$1 each
UR Group Limited	British Virgin	1 ordinary	100%	100%		Investment
	Islands	share of US$1				holding
Alfreda Limited	British Virgin	1 ordinary	100%	100%		Inactive
	Islands	share of US$1
*Indirect subsidiaries:*
Nano Garment	Hong Kong	1 ordinary	100%	100%		Inactive
Holdings Limited		share of HK$1
U-RIGHT Trading	Hong Kong	1 ordinary	100%	100%		Trading of
Development Limited		share of HK$1				fashion
						garments and
						textiles
Fame Ace Limited	British Virgin	1 ordinary	100%	100%		Inactive
	Islands	share of US$1
Right Season Limited	British Virgin	1 ordinary	100%	100%		Inactive
	Islands	share of US$1
Xiamen U-Right	The PRC	US$240,000	80%		80%	Retailing of
Garment Co. Ltd.						fashion
						garments and
						trading of
						textiles and
						leathers
Sino Hill Group Limited	British Virgin	1 ordinary	100%		–	Investment
	Islands	share of US$1				holding
Stand Fancy Limited	Hong Kong	1 ordinary	100%		–	Investment
		share of HK$1				holding
立宜服裝(深圳)	The PRC	HK$1,000,000	100%		–	Design,
有限公司						distribution
						and sale of
						fashion
						apparel

Note: Xiamen U-Right Garment Co., Ltd. is a sino foreign joint venture established in the PRC.

立宜服裝(深圳)有限公司 is a wholly foreign-owned enterprise established in the PRC.

38. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 26 June 2012.

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APPENDIX I

2. THE AUDITORS’ REPORTS FOR THE THREE YEARS ENDED 31 MARCH 2013

Disclaimer of opinion had been given in the auditor’s reports issued by ANDA CPA Limited in respect of the three years ended 31 March 2013, 2012 and 2011.

The auditors’ reports for the years ended 31 March 2013, 2012 and 2011 are set out below:

(a) For the year ended 31 March 2013

The Company’s auditor has qualified the report on the Group’s consolidated financial statements for the year ended 31 March 2013, an extract of which is as follows:

“We were engaged to audit the consolidated financial statements of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 23 to 63, which comprise the consolidated statement of financial position as at 31 March 2013, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The Directors of the Company are responsible for the preparation of these consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Except for the inability to obtain sufficient appropriate audit evidence as explained below, we conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Because of the matters as described in the basis for disclaimer of opinion paragraphs, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Basis for disclaimer of opinion

1. Opening balances and corresponding figures

Our audit opinion on the consolidated financial statements of the Group for the year ended 31 March 2012 (the “2012 Financial Statements”), which form the basis for the corresponding figures presented in the current year’s consolidated financial statements, was disclaimed because of the significance of the possible effect of the limitations on the scope of our audit and the material uncertainty in relation to going concern, details of which are set out in our audit report dated 26 June 2012. Accordingly, we were then unable to form an opinion as to whether the 2012 Financial Statements gave a true and fair view of the state of affairs of the Group as at 31 March 2012 and of the Group’s results and cash flows for the year then ended.

2. Deconsolidation of the subsidiaries

Certain subsidiaries of the Company were deconsolidated from the Group since 1 April 2008. No sufficient evidence has been provided to satisfy ourselves as to whether the Company had lost control of the subsidiaries since 1 April 2008 and throughout the year ended 31 March 2013.

Accordingly, no sufficient evidence has been provided to satisfy ourselves, in relation to the deconsolidated subsidiaries, as to the completeness of the transactions of the Group for the year ended 31 March 2013 and the Group’s financial position as at that date.

3. Financial guarantee liabilities

No direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the financial guarantee liabilities of approximately HK$1,118,325,000 as at 31 March 2013 in the consolidated statement of financial position.

4. Due to deconsolidated subsidiaries

No direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the amounts due to deconsolidated subsidiaries of approximately HK$416,314,000 as at 31 March 2013 in the consolidated statement of financial position.

5. Commitments and contingent liabilities

No sufficient evidence has been provided to satisfy ourselves as to the existence and completeness of the disclosures of commitments and contingent liabilities as at 31 March 2013.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Any adjustments to the figures as described from points 1 to 5 above might have a significant consequential effect on the Group’s results for the two years ended 31 March 2012 and 2013, the Group’s cash flows for the two years ended 31 March 2012 and 2013 and the financial positions of the Group as at 31 March 2012 and 2013, and the related disclosures thereof in the consolidated financial statements.

Material uncertainty relating to the going concern basis

In forming our opinion, we have considered the adequacy of the disclosures made in note 3 to the consolidated financial statements which explains that a proposal for the resumption of trading in the Company’s shares and the restructuring of the Group is in the process of being implemented.

The consolidated financial statements have been prepared on a going concern basis on the assumption that the proposed restructuring of the Company will be successfully completed, and that, following the restructuring, the Group will continue to meet in full its financial obligations as they fall due in the foreseeable future. The consolidated financial statements do not include any adjustments that would result from a failure to complete the restructuring. We consider that the disclosures are adequate. However, in view of the extent of the uncertainty relating to the completion of the restructuring, we disclaim our opinion in respect of the material uncertainty relating to the going concern basis.

Disclaimer of opinion

Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs and the material uncertainty relating to the going concern basis as described above, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 March 2013 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.”

(b) For the year ended 31 March 2012

The Company’s auditor has qualified the report on the Group’s consolidated financial statements for the year ended 31 March 2012, an extract of which is as follow:

“We were engaged to audit the consolidated financial statements of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 26 to 68, which comprise the consolidated statement of financial position as at 31 March 2012, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

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APPENDIX I

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

AUDITOR’S RESPONSIBILITY

Basis for disclaimer of opinion

1. Opening balances and corresponding figures

Our audit opinion on the consolidated financial statements of the Group for the year ended 31 March 2011 (the “2011 Financial Statements”), which form the basis for the corresponding figures presented in the current year’s consolidated financial statements, was disclaimed because of the significance of the possible effect of the limitations on the scope of our audit and the material uncertainty in relation to going concern, details of which are set out in our audit report dated 27 June 2011. Accordingly, we were then unable to form an opinion as to whether the 2011 Financial Statements gave a true and fair view of the state of affairs of the Group as at 31 March 2011 and of the Group’s results and cash flows for the year then ended.

2. Deconsolidation of the subsidiaries

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APPENDIX I

Accordingly, no sufficient evidence has been provided to satisfy ourselves, in relation to the deconsolidated subsidiaries, as to the completeness of the transactions of the Group for the year ended 31 March 2012 and the Group’s financial position as at that date.

3. Financial guarantee liabilities

No direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the financial guarantee liabilities of approximately HK$1,118,325,000 as at 31 March 2012 in the consolidated statement of financial position.

4. Due to deconsolidated subsidiaries

No direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the amounts due to deconsolidated subsidiaries of approximately HK$416,314,000 as at 31 March 2012 in the consolidated statement of financial position.

5. Commitments and contingent liabilities

No sufficient evidence has been provided to satisfy ourselves as to the existence and completeness of the disclosures of commitments and contingent liabilities as at 31 March 2012.

Any adjustments to the figures as described from points 1 to 5 above might have a significant consequential effect on the Group’s results for the two years ended 31 March 2011 and 2012, the Group’s cash flows for the two years ended 31 March 2011 and 2012 and the financial positions of the Group as at 31 March 2011 and 2012, and the related disclosures thereof in the consolidated financial statements.

Material uncertainty relating to the going concern basis

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disclaimer of opinion

Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs and the material uncertainty relating to the going concern basis as described above, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 March 2012 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.”

(c) For the year ended 31 March 2011

The Company’s auditor has qualified the reports on the Group’s consolidated financial statement for the year ended 31 March 2011, an extract of which is as follows:

“We were engaged to audit the consolidated financial statements of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 25 to 64, which comprise the consolidated statement of financial position as at 31 March 2011, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

AUDITOR’S RESPONSIBILITY

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. Because of the matters as described in the basis for disclaimer of opinion paragraphs, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.

Basis for disclaimer of opinion

1. Opening balances and corresponding figures

Our audit opinion on the consolidated financial statements of the Group for the year ended 31 March 2010 (the “2010 Financial Statements”), which form the basis for the corresponding figures presented in the current year’s consolidated financial statements, was disclaimed because of the significance of the possible effect of the limitations on the scope of our audit and the material uncertainty in relation to going concern, details of which are set out in our audit report dated 28 September 2010. Accordingly, we were then unable to form an opinion as to whether the 2010 Financial Statements gave a true and fair view of the state of affairs of the Group as at 31 March 2010 and of the Group’s results and cash flows for the year then ended.

2. Deconsolidation of the subsidiaries

Accordingly, no sufficient evidence has been provided to satisfy ourselves, in relation to the deconsolidated subsidiaries, as to the completeness of the transactions of the Group for the year ended 31 March 2011 and the Group’s financial position as at that date.

3. Financial guarantee liabilities

No direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the financial guarantee liabilities of approximately HK$1,118,325,000 as at 31 March 2011 in the consolidated statement of financial position.

4. Due to deconsolidated subsidiaries

No direct confirmation and other sufficient evidence have been received by us up to the date of this report in respect of the amounts due to deconsolidated subsidiaries of approximately HK$416,323,000 as at 31 March 2011 in the consolidated statement of financial position.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Commitments and contingent liabilities

No sufficient evidence has been provided to satisfy ourselves as to the existence and completeness of the disclosures of commitments and contingent liabilities as at 31 March 2011.

Any adjustments to the figures as described from points 1 to 5 above might have a significant consequential effect on the Group’s results for the two years ended 31 March 2010 and 2011, the Group’s cash flows for the two years ended 31 March 2010 and 2011 and the financial positions of the Group as at 31 March 2010 and 2011, and the related disclosures thereof in the consolidated financial statements.

Material uncertainty relating to the going concern basis

In forming our opinion, we have considered the adequacy of the disclosures made in note 2 to the consolidated financial statements which explains that a proposal for the resumption of trading in the Company’s shares and the restructuring of the Group (the “Resumption Proposal”) was submitted to The Stock Exchange of Hong Kong Limited on 9 August 2010.

Disclaimer of opinion

Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs and the material uncertainty relating to the going concern basis as described above, we do not express an opinion on the consolidated financial statements as to whether they give a true and fair view of the state of affairs of the Group as at 31 March 2011 and of the Group’s results and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.”

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. FINANCIAL AND TRADING PROSPECTS

Upon completion of the Open Offer and the Subscription, it is expected that additional income will be with Admitted Claims generated to the Group of which will be used (i) to settle the payment to the Creditors under the Scheme; (ii) to repay the drawn portion of the Working Capital Loans and settle the promissory note as part of the consideration of the Acquisition; (iii) to provide additional investment to operate and expand the Restructured Group’s garment retail business upon Resumption; and (iv) the Board believes that the Company would have sufficient level of operations and assets under Rule 13.24 of the Listing Rules.

4. INDEBTEDNESS STATEMENT

As at the close of business on 31 May 2013, being the Latest Practicable Date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had total outstanding borrowings of approximately HK$526 million, comprising the amount due to deconsolidated subsidiaries of approximately HK$417 million; the amount due to the Investor of approximately HK$11 million which is secured by the entire issued share capital of an indirectly wholly-owned subsidiary of the Company, Right Season; convertible notes of approximately HK$79 million; and promissory note of approximately HK$19 million.

As at the close of business on 31 May 2013, in addition to the above, the Group had financial guarantee liabilities of approximately HK$1,118 million arising from the corporate guarantees provided by the Company to its subsidiary over the bank loans maintained by the subsidiary which was deconsolidated from the consolidated financial statements of the Group since 1 April 2008.

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of the business, as at the close of business on 31 May 2013, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. WORKING CAPITAL SUFFICIENCY

The Directors (including the proposed Directors), after due and careful enquiry, are of the opinion that taking into account of the proceeds from the Open Offer and the Subscription, given the above, the Group will have sufficient working capital for at least 12 months following Resumption.

6. NO MATERIAL CHANGE

As at the Latest Practicable Date, the Directors confirm that there is no material change in the financial or trading position or outlook of the Group since 31 March 2013, being the date of which the latest published audited financial statements of the Group were made up.

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APPENDIX II

5050-51331.ACCOUNTANT’S REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE GROUP

==> picture [189 x 41] intentionally omitted <==

26 July 2013

The Provisional Liquidators and the Directors U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (Incorporated in Bermuda with limited liability)

Dear Sirs,

We report on the unaudited pro forma consolidated statement of financial position and the unaudited pro forma statement of adjusted consolidated net tangible assets (collectively the “Unaudited Pro Forma Financial Information”) of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company (the “Directors”) and the joint and several provisional liquidators of the Company (the “Provisional Liquidators”), for illustrative purposes only, to provide information about how the proposed restructuring might have affected the financial position and net tangible assets of the Group presented, for inclusion in Appendix II to the circular of the Company dated 26 July 2013 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages II-3 to II-9 to the Circular.

Respective responsibilities of the Provisional Liquidators and the Directors and reporting accountant

It is the responsibilities solely of the Provisional Liquidators and the Directors to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by Rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

II-1

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the Provisional Liquidators and the Directors. The engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the Provisional Liquidators and the Directors on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the Provisional Liquidators and the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position and net tangible assets of the Group as at 31 March 2013 or any future date.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the Provisional Liquidators and the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully,

ANDA CPA Limited

Certified Public Accountants

Sze Lin Tang

Practising Certificate Number P03614 Hong Kong

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. INTRODUCTION TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The accompanying unaudited pro forma consolidated statement of financial position and the unaudited pro forma statement of adjusted consolidated net tangible assets (collectively the “ Unaudited Pro Forma Financial Information ”) of the Group has been prepared to illustrate the effect of the proposed restructuring might have affected the financial position and net tangible assets of the Group.

The Unaudited Pro Forma Financial Information of the Group as at 31 March 2013 is prepared based on the audited consolidated statement of financial position of the Group as at 31 March 2013 as extracted from annual report 2013 of the Company, as if the proposed restructuring had been completed on 31 March 2013.

The Unaudited Pro Forma Financial Information of the Group is prepared based on a number of assumptions, estimates, uncertainties and the currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the Unaudited Pro Forma Financial Information of the Group, it may not give a true picture of the actual financial position and net tangible assets of the Group that would have been attained had the proposed restructuring actually occurred on the date indicated herein. Furthermore, the Unaudited Pro Forma Financial Information of the Group does not purport to predict the Group’s future financial position and net tangible assets.

The Unaudited Pro Forma Financial Information of the Group should be read in conjunction with the financial information of the Group as set out in Appendix I to this circular and other financial information included elsewhere in this circular.

II-3

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE GROUP AS AT 31 MARCH 2013	Unadjusted Unaudited	audited pro forma	consolidated consolidated	statement of Settlement statement of	financial Use of net of the financial	position of proceeds of liabilities position of	the Group the Open of the the Group	as at Offer and Company as at	31 March Capital the under the 31 March	2013 Restructuring Open Offer Subscription Bonus Issue Subscription Scheme The Disposal 2013	(Note 1) (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) (Note 7) (Note 8)	$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000	Non-Current Assets	Property, plant and equipment 1,207 1,207	Goodwill 14,202 14,202		15,409 15,409		Current assets	Inventories 13,004 13,004	Trade and bill receivables 62,753 62,753	Prepayments, deposits and other	receivables 20,236 (444) 19,792	Bank and cash balances 9,424 26,101 145,500 (32,800) (57,000) 91,225	105,417 186,774

II-4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

II-5

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II


Unaudited	pro forma	consolidated net	tangible assets of	the Group Unaudited		attributable to pro forma	owners of the adjusted	Company as at consolidated	31 March 2013 net tangible	The Capital upon on assets of	Unaudited Restructuring, completion of the Group	consolidated the the Capital attributable to	net tangible Subscription, Restructuring, the owners of	Unadjusted liabilities of the Whitewash the Subscription, the Company	audited the Group Wavier, the the Whitewash as at	consolidated attributable to Special Deals, Wavier, the 31 March 2013	net liabilities the owners of the Scheme, Special Deals, Estimated net upon	of the Group Less: the Company the Bonus the Scheme, the proceeds from completion	as at Intangible as at Issue and the Bonus Issue and the Open of the	31 March 2013 assets 31 March 2013 Disposal the Disposal Offer Restructuring	(Note 1) (Note 9) (Note 10) (Note 11)	$’000 $’000 $’000 $’000 $’000 $’000 $’000	(1,579,144) 14,202 (1,593,346) 1,687,747 94,401 26,101 120,502				Unaudited consolidated net tangible	liabilities per Share before the	Restructuring (Note 12) (HK$0.45)			Unaudited pro forma consolidated net	tangible assets per New Share upon	on completion of the Capital	Restructuring, the Subscription, the	Whitewash Wavier, the Special Deals,	the Scheme, the Bonus Issue and the	Disposal (Notes 13) HK$0.08			Unaudited pro forma adjusted	consolidated net tangible assets per	New Share upon completion of the	Restructuring (Note 14) HK$0.09

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The unadjusted audited consolidated statement of financial position/net liabilities of the Group as at 31 March 2013 is extracted from the audited consolidated financial statements of the Company for the year ended 31 March 2013.
This adjustment represents the effect of the Capital Restructuring which involves, among others, the Share Consolidation and Capital Reduction:
(i) Share Consolidation: every one hundred issued Shares of par value of HK$0.10 each will be consolidated into one Consolidated Share of par value of HK$10.00 each. As a result, the issued share capital of the Company will be consolidated from approximately HK$356,936,000 divided into 3,569,364,916 Shares of HK$0.1 each to approximately HK$356,936,000 divided into 35,693,649 Consolidated Shares of HK$10 each; and
(ii) Capital Reduction: the par value of every Consolidated Share will be reduced from HK$10.00 to HK$0.01 and become a New Share. As a result, the issued share capital of the Company after Share Consolidation and Capital Reduction will be reduced from approximately HK$356,936,000 divided into 35,693,649 Consolidated Shares of HK$10 each to approximately HK$356,936 divided into 35,693,649 New Shares of HK$0.01 each. The decrease in the issued share capital of the Company of approximately HK$356,580,000 will be credited to the accumulated losses of the Company.
This adjustment represents the issue of 178,468,245 Offer Shares under the Open Offer in the proportion of five Offer Shares for every one New Share to the Qualifying Shareholders whose names appear on the register of members of the Company as at the close of business on the Record Date at the Offer Price of HK$0.15 per Offer Share with the par value of HK$0.01 each. As a result of the Open Offer, the Group will raise net proceeds of approximately HK$26,101,000 after deducting commission of approximately HK$669,000 relating to the Open Offer, therefore increasing its share capital of approximately HK$1,785,000 and its share premium of approximately HK$24,316,000.
This adjustment represents the issue of 970,000,000 Subscription Shares at the Subscription Price of HK$0.15 per Subscription Share with the par value of HK$0.01 each. As a result of the Subscription, the Group will raise gross proceeds of HK$145,500,000 from the Subscription and the Company’s share capital and share premium will be increased by HK$9,700,000 and HK$135,800,000 respectively.
This adjustment represents the issue of up to 71,387,298 Bonus Shares to the Qualifying Shareholders whose names appear on the register of members of the Company as at the close of business on the Record Date in the proportion of two Bonus Shares for every New Share. The Company proposes to credit part of the net proceeds raised from the Open Offer up to the sum of HK$713,872.98 (or such sum as may be necessary to give effect to the Bonus Issue) to the share premium account of the Company and apply such amount to pay up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid.
This adjustment represents the proposed application of the aggregate cash proceeds from the Open Offer and the Subscription (after deducting commission for the Open Offer) for:
(i) payment of the resumption professional fees of approximately HK$21,500,000, of which (a) an amount of approximately HK$2,068,000 unsettled expenses recognised as “accruals and other payables” as at 31 March 2013; and (b) an amount of approximately HK$19,432,000 which is to be recognised as expenses.
(ii) repayment of the drawn portion of the Workings Capital Loans of HK$11,300,000, being the outstanding amount under “due to the Investor” as at 31 March 2013.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The adjustment represents the settlement of all the indebtedness and liabilities of the Company owing to the Creditors as at the Effective Date by way of the Scheme, under which accruals and other payables of the Company of approximately HK$6,075,000, financial guarantee provided by the Company to deconsolidated subsidiaries of approximately HK$1,118,325,000, convertible notes of the Company of approximately HK$78,367,000 and an amount of approximately HK$268,189,000 due to deconsolidated subsidiaries by the Company will be discharged and released in full against the Company. In accordance with the terms of the Scheme, the following assets will be paid or transferred to SchemeCo:
(i) cash and cash equivalent of the Company as of the Effective Date of approximately HK$7,000,000;
(ii) cash payment of HK$50,000,000 funded by the Company out of the proceeds from the Subscription;
(iii) 66,133,333 Creditor Shares at the issue price of HK$0.15 each will be issued and allotted to the SchemeCo in form of the equity-settled share-based payments, pursuant to which the Company’s share capital will be increased by approximately HK$661,000 and its share premium account will be increased by approximately HK$9,259,000; and
(iv) an amount of approximately HK$444,000 being receivables of the Company as at the Effective Date.
This adjustment represents the Disposal in accordance with the terms of the Scheme. The Disposal will be at a nominal consideration of HK$1 as a term of the Scheme. As result of the Disposal, the Excluded Subsidiaries will cease to be subsidiaries of the Company. In the unadjusted audited consolidated statement as at 31 March 2013, the Excluded Subsidiaries have net liabilities of approximately HK$148,167,000 which included accruals and other payables of approximately HK$42,000 and amount due to deconsolidated subsidiaries of approximately HK$148,125,000. Henceforth, the net liabilities carried by the Excluded Subsidiaries in the unadjusted audited consolidated statement as at 31 March 2013, in the sum of approximately HK$148,167,000 will not be consolidated in the consolidated financial statements of the Group and the accumulated losses of the Group will be decreased by approximately HK$148,167,000.
This adjustment represents the goodwill arising from the acquisition of Sino Hill Group Limited on 1 October 2011.
This adjustment represents the net effect of the Capital Restructuring, the Subscription, the Whitewash Wavier, the Special Deals, the Scheme, the Bonus Issue and the Disposal as described in Note 2, Note 4, Note 5, Note 6, Note 7 and Note 8 as above. As a result, the Group’s consolidated net tangible assets are increased by approximately HK$1,687,747,000, being the total amount from increase in the bank and cash balances of approximately HK$55,700,000; and decrease in the prepayments, deposits and other receivables of approximately HK$444,000; accruals and other payables of approximately HK$8,185,000; the amount due to deconsolidated subsidiaries of approximately HK$416,314,000; the amount due to the Investor of approximately HK$11,300,000; financial guarantee liabilities of approximately HK$1,118,325,000 and convertible notes of approximately HK$78,367,000.
This adjustment represents the net proceeds from the Open Offer as described in Note 3 as above.
It is based on the unaudited consolidated net tangible liabilities of the Group as at 31 March 2013 of approximately HK$1,593,346,000 divided by 3,569,364,916 Shares before the Restructuring.
It is based on the unaudited pro forma consolidated net tangible assets of the Group of approximately HK$94,401,000 divided by approximately 1,143,214,280 New Shares, of which 35,693,649 New Shares, 66,133,333 New Shares, 970,000,000 New Shares and 71,387,298 New Shares were issued upon the completion of the Capital Restructuring, the Scheme, the Share Subscription and the Bonus Issue respectively as at 31 March 2013, assuming that the Capital Restructuring, the Scheme, the Share Subscription and the Bonus Issue had become effective as at 31 March 2013.
It is based on the unaudited pro forma adjusted consolidated net tangible assets of the Group of approximately HK$120,502,000 divided by approximately 1,321,682,525 New Shares, of which 35,693,649 New Shares, 66,133,333 New Shares, 970,000,000 New Shares, 71,387,298 New Shares and 178,468,245 New Shares were issued upon the completion of the Capital Restructuring, the Scheme, the Share Subscription, the Bonus Issue and the Open Offer respectively as at 31 March 2013, assuming that the Restructuring had been completed on 31 March 2013.

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PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2014 AND COMFORT LETTERS

APPENDIX III

(A) PROFIT FORECASTS

Profit forecasts for the year ending 31 March 2014

Forecast consolidated profit attributable
to the Shareholders for the year ending
31 March 2014 (Note 1) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$1,545.2 million

Unaudited pro forma forecast profit per

New Share for the year ending

31 March 2014 (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$1.1691

Forecast consolidated profit attributable

to the Shareholders for the year ending

31 March 2014 (excluding extraordinary items to be incurred for the year) (Note 3) . . . . . . . . . . . . . . . . approximately HK$12.6 million

Unaudited pro forma forecast profit per

New Share for the year ending

31 March 2014 (excluding extraordinary items

to be incurred for the year) (Note 4) . . . . . . . . . . . . . . . . . . . . approximately HK$0.0095

Notes:

The basis and assumptions on which the above consolidated profit forecast for the year ending 31 March 2014 has been prepared are summarised in the section below.
The calculation of unaudited pro forma forecast profit per New Share for the year ending 31 March 2014 is based on the forecast consolidated profit attributable to the Shareholders for the year and approximately 1,321,682,525 New Shares in issue upon the Capital Restructuring becoming effective and completion of the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares.

The calculation takes no account of any New Shares which may be allotted and issued or repurchased by the Company from time to time.

The basis and assumptions on which the above consolidated profit forecast for the year ending 31 March 2014 has been prepared are summarized in the section below.

The forecast consolidated profit attributable to the Shareholders of the Company for the year ending 31 March 2014 excluding extraordinary items to be incurred for the year will be approximately HK$12.6 million.

Extraordinary items to be incurred for the year ending 31 March 2014 include (i) an expected gain from the Scheme of approximately HK$1,555 million, (ii) expenses regarding resumption professional fees of approximately HK$21.5 million, and (iii) a finance charge on promissory note of approximately HK$0.9 million.

The calculation of unaudited pro forma forecast profit per New Share for the year ending 31 March 2014 is (i) based on the forecast consolidated profit attributable to the Shareholders of the Company in the relevant year of approximately HK$12.6 million (excluding extraordinary items to be incurred for the year), and (ii) approximately 1,321,682,525 New Shares in issue upon the Capital Restructuring becoming effective and completion of the Open Offer, the Subscription, the Bonus Issue and the issue of the Creditor Shares.

The calculation takes no account of any New Shares which may be allotted and issued or repurchased by the Company from time to time.

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PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2014 AND COMFORT LETTERS

APPENDIX III

(B) BASIS AND ASSUMPTIONS

The Directors have prepared the forecast consolidated profit attributable to Shareholders of the Company for the year ending 31 March 2014 based on the audited consolidated accounts of the Group for the year ended 31 March 2013. The forecast has been prepared based on the accounting policies consistent in all material respects with those presently adopted by the Group as set out in the audited financial statements of the Company for the year ended 31 March 2013.
For the financial year ending 31 March 2014 (the “Forecast Period”), the Group is engaged in the wholesale and retail of fashion garments and trading of garment materials. The management is expecting a scale-down of the wholesale trading business and accordingly a decrease in turnover of the Group’s wholesale trading segment as compared to the year ended 31 March 2013 for the Forecast Period. The management is expecting a stable growth in the Group’s retail business as compared to the year ended 31 March 2013 which is the major cause to the expected increase in the forecast consolidated profit attributable to Shareholders (excluding extraordinary items) in the Forecast Period as compared to the Group’s consolidated profit attributable to the Shareholders for the year ended 31 March 2013.
All the transactions contemplated under the Resumption Proposal are duly completed by the end of September 2013.
The will be no material increases in the operating expenses of the Group throughout the Forecast Period.
There will be no material changes in existing political, legal, fiscal, foreign trade or economic condition in Hong Kong, the PRC and other countries in which the Group carries on business throughout the Forecast Period.

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PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2014 AND COMFORT LETTERS

APPENDIX III

There will be no material changes in the laws, regulations and policies in Hong Kong, the PRC, or elsewhere which affect the business that the Group carries on throughout the Forecast Period.
There will be no material changes in inflation rates, interest rates and foreign exchange rates from those currently prevailing throughout the Forecast Period. Conversion of HK$ to RMB is based on the approximate exchange rate of HK$1.23 to RMB1.00 throughout the Forecast Period.
There will be no material changes in the bases or rates of taxation, surcharges or government levies applicable to the operations of the Group throughout the Forecast Period. The applicable rates of taxation for Hong Kong profits tax is 16.5% and the PRC income tax is 25% throughout the Forecast Period.
There will be no disaster, natural, political or otherwise, which would materially disrupt the business or operations of the Group or cause substantial loss, damage or destruction to its facilities throughout the Forecast Period.
There will be no abnormal or extraordinary items, save for the gain result from the Scheme, restructuring cost and finance charge on a promissory note, occur during the Forecast Period.
There will be no interruption of the Group’s operations that will adversely affect the trading, financial and prospects of the Group as a result of any other circumstances beyond management control.

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PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2014 AND COMFORT LETTERS

APPENDIX III

(C) COMFORT LETTERS

(a) Letter from the reporting accountant

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TO THE PROVISIONAL LIQUIDATORS AND THE DIRECTORS OF U-RIGHT INTERNATIONAL HOLDINGS LIMITED (PROVISIONAL LIQUIDATORS APPOINTED) (Incorporated in Bermuda with limited liability)

In accordance with our engagement letter dated 30 May 2013, we have performed the procedures agreed with you which are set out below on the profit forecast (the “Forecast”) with respect to the Memorandum of Profit and Working Capital Forecasts for the 12 months ending 31 March 2014 of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “Company”) and its subsidiaries (collectively the “Group”) dated 26 July 2013. The Forecast has been prepared by the Directors of the Company (the “Directors”) in connection with Appendix III “Profit/(loss) forecasts up to the year ending 31 March 2014 and comfort letters” to the circular (the “Circular”) of the Company dated 26 July 2013.

Our engagement was conducted in accordance with Hong Kong Standard on Related Services 4400 “Engagements to Perform Agreed-upon Procedures Regarding Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). The procedures were performed solely to assist you in providing the Forecast in connection with the Circular.

For the purpose of this report, the procedures performed are summarised as follows:

Check whether the Forecast, so far as the accounting policies and calculations are concerned, is properly compiled in accordance with the basis of the assumptions set out in the Circular;
Check whether the Forecast is made by the Directors, after care and consideration by the board of Directors;
Check whether the Forecast is made in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA; and
Check the arithmetical calculations of the Forecast.

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PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2014 AND COMFORT LETTERS

APPENDIX III

Based on the information and documents made available to us, we report our findings below:

a. The Forecast, so far as the accounting policies and calculations are concerned, is properly compiled in accordance with the basis of the assumptions set out in the Circular;
b. The Forecast is made by the Directors, after care and consideration by the board of Directors;
c. The Forecast is made in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA; and
d. The arithmetical calculations of the Forecast are correct.

Because the above procedures did not constitute an assurance engagement performed in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the HKICPA (collectively referred to as Hong Kong Assurance Standards), we do not express any assurance on the Forecast.

Had we performed additional procedures or had we performed an assurance engagement in respect of the Forecast in accordance with Hong Kong Assurance Standards, other matters might have come to our attention that would have been reported to you.

Our report is solely for the purpose set forth in the second paragraph of this report and is for your information only, and is not to be used for any other purpose or to be distributed to any other parties and we expressly disclaim any liability or duty to any other party in this respect. This report relates only to the items specified above and does not extend to the financial statements of the Group taken as a whole.

ANDA CPA Limited

Certified Public Accountants

Sze Lin Tang Practising Certificate Number P03614 Hong Kong, 26 July 2013

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PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING 31 MARCH 2014 AND COMFORT LETTERS

APPENDIX III

(b) Letter from the Financial Adviser

26 July 2013

The Board of Directors U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) 35th Floor, One Pacific Place, 88 Queensway, Hong Kong

Dear Sirs,

We refer to the profit forecast of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”), for the financial year ending 31 March 2014 (the “ Profit Forecast ”) as set out in the circular dated 26 July 2013 issued by the Company to the Shareholders (the “ Circular ”) and of which this letter forms part. Terms used in this letter, unless otherwise defined, shall have the same meanings as those used in the Circular.

We are engaged to assist the directors of the Company (the “ Directors ”) and the joint and several provisional liquidators of the Company (the “ Provisional Liquidators ”) (together, the “ Parties ”), to comply with paragraph 29(2) of Appendix lb of the Listing Rules and Rule 10 of the Takeovers Code. We are not reporting on the arithmetical calculations of the Profit Forecast and the adoption of accounting policies thereof. We have reviewed the forecasts in deriving the Profit Forecast for which the Directors are solely responsible, and have discussed with the Parties the information and documents provided by the Directors which formed part of the bases and assumptions, which are set out in section B in Appendix III to the Circular, upon which the Profit Forecast has been prepared. We have also considered the letter from ANDA CPA Limited dated 26 July 2013 addressed to the Company regarding the calculations and accounting policies upon which the underlying profit forecast to the Profit Forecast have been made.

Our work has been undertaken for the purpose of reporting solely to the Board under paragraph 29(2) of Appendix lb of the Listing Rules and Rule 10 of the Takeovers Code and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

On the basis of the foregoing, we are of the opinion that the Profit Forecast, for which the Directors are solely responsible, have been made after due care and consideration by the Board.

Yours faithfully,

For and on behalf of Veda Capital Limited Julisa Fong Managing Director

III-6

SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

Set out below is a summary of certain provisions of the New Bye-laws:

(a) Directors

(i) Power to allot and issue shares and warrants

Subject to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board of Directors (the “board”) may determine). Subject to the Companies Act 1981 of Bermuda (the “Companies Act”), any preference shares may be issued or converted into shares that are liable to be redeemed, at a determinable date or at the option of the Company or, if so authorised by the memorandum of association (the “Memorandum of Association”), at the option of the holder, on such terms and in such manner as the Company before the issue or conversion may by ordinary resolution determine. The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as it may from time to time determine.

Subject to the provisions of the Companies Act, the New Bye-laws, any direction that may be given by the Company in general meeting and, where applicable, the rules of any Designated Stock Exchange (as defined in the New Bye-laws) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither the Company nor the board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

(ii) Power to dispose of the assets of the Company or any of its subsidiaries

There are no specific provisions in the New Bye-laws relating to the disposal of the assets of the Company or any of its subsidiaries.

Note: The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the New Bye-laws or the Companies Act to be exercised or done by the Company in general meeting.

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

(iii) Compensation or payments for loss of office

Payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are no provisions in the New Bye-laws relating to the making of loans to Directors. However, the Companies Act contains restrictions on companies making loans or providing security for loans to their directors.

(v) Financial assistance to purchase shares of the Company

Subject to compliance with the rules and regulations of the Designated Stock Exchange and any other relevant regulatory authority, the Company may give financial assistance for the purpose of or in connection with a purchase made or to be made by any person of any shares in the Company.

(vi) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may hold any other office or place of profit with the Company (except that of auditor of the Company) in conjunction with his office of Director for such period and, subject to the Companies Act, upon such terms as the board may determine, and may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other New Bye-laws. A Director may be or become a director or other officer of, or a member of, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise provided by the New Bye-laws, the board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.

Subject to the Companies Act and to the New Bye-laws, no Director or proposed or intending Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such

IV-2

SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his associates is materially interested but this prohibition shall not apply to any of the following matters, namely:

(aa) any contract or arrangement for giving to such Director or his associate(s) any security or indemnity in respect of money lent by him or any of his associates or obligations incurred or undertaken by him or any of his associates at the request of or for the benefit of the Company or any of its subsidiaries;
(bb) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;
(cc) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;
(dd) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company; or
(ee) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

Directors, his associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

(vii) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined by the Company in general meeting, such remuneration (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. The Directors shall also be entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably incurred or expected to be incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other Bye-law. A Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Company’s monies to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or ex-Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and ex-employees of the Company and their dependants or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependants, or to any of

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependants are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(viii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) will retire from office by rotation provided that every Director shall be subject to retirement at least once every three years. The Directors to retire in every year will be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

Note: There are no provisions relating to retirement of Directors upon reaching any age limit.

The Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the board or, subject to authorisation by the members in general meeting, as an addition to the existing board but so that the number of Directors so appointed shall not exceed any maximum number determined from time to time by the members in general meeting. Any Director appointed by the board to fill a casual vacancy shall hold office until the first general meeting of Members after his appointment and be subject to re-election at such meeting and any Director appointed by the board as an addition to the existing board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election. Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification.

A Director may be removed by an ordinary resolution of the Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention to do so and be served on such Director fourteen (14) days before the meeting and, at such meeting, such Director shall be entitled to be heard on the motion for his removal. Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors unless otherwise determined from time to time by members of the Company.

The board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

(subject to their continuance as Directors) and upon such terms as the board may determine and the board may revoke or terminate any of such appointments (but without prejudice to any claim for damages that such Director may have against the Company or vice versa). The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(ix) Borrowing powers

The board may from time to time at its discretion exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the Companies Act, to issue debentures, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Note: These provisions, in common with the New Bye-laws in general, can be varied with the sanction of a special resolution of the Company.

(b) Alterations to constitutional documents

The New Bye-laws may be rescinded, altered or amended by the Directors subject to the confirmation of the Company in general meeting. The New Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association, to confirm any such rescission, alteration or amendment to the New Bye-laws or to change the name of the Company.

(c) Alteration of capital

The Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Act:

(i) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe;
(ii) consolidate and divide all or any of its capital into shares of larger amount than its existing shares;
(iii) divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares as the directors may determine;
(iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association;

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(v) change the currency denomination of its share capital;
(vi) make provision for the issue and allotment of shares which do not carry any voting rights; and
(vii) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may, by special resolution, subject to any confirmation or consent required by law, reduce its authorised or issued share capital or, save for the use of share premium as expressly permitted by the Companies Act, any share premium account or other undistributable reserve.

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Act, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the New Bye-laws relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons or (in the case of a member being a corporation) its duly authorised representative holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or (in the case of a member being a corporation) its duly authorised representative or by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares of the class shall be entitled to one vote for every such share held by him.

(e) Special resolution-majority required

A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice of not less than twenty-one (21) clear days and not less than ten (10) clear business days specifying the intention to propose the resolution as a special resolution, has been duly given. Provided that if permitted by the Designed Stock Exchange (as defined in the New Bye-laws), except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than ninety-five per cent. (95%) in nominal value of the shares giving that right and, in the case of an annual general meeting, if so agreed by all members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which notice of less than twenty-one (21) clear days and not less than ten (10) clear business days has been given.

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APPENDIX IV

(f) Voting rights

Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the New Bye-laws, at any general meeting on a poll every member present in person or by proxy or (being a corporation) by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share.

A member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every member present in person (or being a corporation, is present by a duly authorized representative), or by proxy(ies) shall have one vote provided that where more than one proxy is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands.

If a recognised clearing house (or its nominee(s)) is a member of the Company it may authorise such persons as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares held by that clearing house (or its nominee(s)) in respect of the number and class of shares specified in the relevant authorisation including, where a show of hands is allowed, the right to vote individually on a show of hands.

Where the Company has any knowledge that any shareholder is, under the rules of the Designated Stock Exchange (as defined in the New Bye-laws), required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

(g) Requirements for annual general meetings

An annual general meeting of the Company must be held in each year other than the year in which its statutory meeting is convened at such time (within a period of not more than 15 months after the holding of the last preceding annual general meeting unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the New Bye-laws)) and place as may be determined by the board.

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

(h) Accounts and audit

The board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the provisions of the Companies Act or necessary to give a true and fair view of the Company’s affairs and to explain its transactions.

The accounting records shall be kept at the registered office or, subject to the Companies Act, at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right of inspecting any accounting record or book or document of the Company except as conferred by law or authorised by the board or the Company in general meeting.

Subject to the Companies Act, a printed copy of the Directors’ report, accompanied by the balance sheet and profit and loss account, including every document required by law to be annexed thereto, made up to the end of the applicable financial year and containing a summary of the assets and liabilities of the Company under convenient heads and a statement of income and expenditure, together with a copy of the auditors’ report, shall be sent to each person entitled thereto at least twenty-one (21) days before the date of the general meeting and at the same time as the notice of annual general meeting and laid before the Company at the annual general meeting in accordance with the requirements of the Companies Act provided that this provision shall not require a copy of those documents to be sent to any person whose address the Company is not aware or to more than one of the joint holders of any shares or debentures; however, to the extent permitted by and subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the New Bye-laws), the Company may send to such persons summarised financial statements derived from the Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on the Company, demand that the Company sends to him, in addition to summarised financial statements, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.

Subject to the Companies Act, at the annual general meeting or at a subsequent special general meeting in each year, the members shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the members appoint another auditor. Such auditor may be a member but no Director or officer or employee of the Company shall, during his continuance in office, be eligible to act as an auditor of the Company. The remuneration of the auditor shall be fixed by the Company in general meeting or in such manner as the members may determine.

The financial statements of the Company shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted

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auditing standards referred to herein may be those of a country or jurisdiction other than Bermuda. If the auditing standards of a country or jurisdiction other than Bermuda are used, the financial statements and the report of the auditor should disclose this fact and name such country and jurisdiction.

(i) Notices of meetings and business to be conducted thereat

An annual general meeting shall be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days and any special general meeting at which it is proposed to pass a special resolution shall (save as set out in sub-paragraph (e) above) be called by notice of at least twenty-one (21) clear days and not less than ten (10) clear business days. All other special general meetings shall be called by notice of at least fourteen (14) clear days and not less than ten (10) clear business days. The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such.

(j) Transfer of shares

All transfers of shares may be effected in any manner permitted by and in accordance with the rules of the Designated Stock Exchange or by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time. The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The board may also resolve either generally or in any particular case, upon request by either the transferor or the transferee, to accept mechanically executed transfers.

The board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

Unless the board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in Bermuda or such other place in Bermuda at which the principal register is kept in accordance with the Companies Act.

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the New Bye-laws) may determine to be payable or such lesser sum as the Directors may from time to time require is paid to the Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the New Bye-laws), at such times and for such periods as the board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole thirty (30) days in any year.

(k) Power for the Company to purchase its own shares

The New Bye-laws supplement the Company’s Memorandum of Association (which gives the Company the power to purchase its own shares) by providing that the power is exercisable by the board upon such terms and conditions as it thinks fit.

(l) Power for any subsidiary of the Company to own shares in the Company

There are no provisions in the New Bye-laws relating to ownership of shares in the Company by a subsidiary.

(m) Dividends and other methods of distribution

Subject to the Companies Act, the Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board. The Company in general meeting may also make a distribution to its members out of contributed surplus (as ascertained in accordance with the Companies Act). No dividend shall be paid or distribution made out of contributed surplus if to do so would render the Company unable to pay its liabilities as they become due or the realisable value of its assets would thereby become less than its liabilities.

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to a member by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think fit. The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to the Company.

(n) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.

(o) Call on shares and forfeiture of shares

Subject to the New Bye-laws and to the terms of allotment, the board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

way of premium). A call may be made payable either in one lump sum or by installments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding twenty per cent. (20%) per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect.

Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding twenty per cent. (20%) per annum as the board determines.

(p) Inspection of register of members

The register and branch register of members shall be open to inspection between 10:00 a.m. and 12:00 noon during business hours by members of the public without charge at the registered office or such other place in Bermuda at which the register is kept in accordance with the Companies Act, unless the register is closed in accordance with the Companies Act.

(q) Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be two members present in person or (in the case of a member being a corporation) by its duly authorised representative or by proxy and entitled to vote. In respect of a separate class meeting

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APPENDIX IV

(other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the New Bye-laws relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Bermuda law.

(s) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

If the Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Act, divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

(t) Untraceable members

The Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, the Company has not during that time received any indication of the existence of the member; and (iii) the Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the New Bye-laws) giving notice of its intention to sell such shares and a period of three months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the New Bye-laws), has elapsed since such advertisement and the Designated Stock Exchange (as defined in the New Bye-laws) has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

(u) Other provisions

The New Bye-laws provide that to the extent that it is not prohibited by and is in compliance with the Companies Act, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which

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SUMMARY OF THE NEW BYE-LAWS

APPENDIX IV

would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

The New Bye-laws also provide that the Company is required to maintain at its registered office a register of directors and officers in accordance with the provisions of the Companies Act and such register is open to inspection by members of the public without charge between 10:00 a.m. and 12:00 noon during business hours.

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GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules and the Takeovers Code 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.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to the Investor) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than opinions expressed by the Investor) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The directors of the Investor jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than that relating to the Company) and confirm having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately following completion of the Share Consolidation, the Open Offer, the Subscription, the Bouns Issue and issue of the Creditor Shares are as follows:

As at the Latest Practicable Date (approximate figures)

Authorised share capital:	Authorised share capital:	Authorised share capital:	HK$
5,000,000,000		Shares of HK$0.10 each	500,000,000.00

_Issued and fully _	paid:
3,569,364,916		Shares of HK$0.10 each	356,936,491.60

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GENERAL INFORMATION

APPENDIX V

Immediately following completion of the Share Consolidation, the Open Offer, the Subscription, the Bouns Issue and issue of the Creditor Shares

Authorised share capital:	Authorised share capital:	Authorised share capital:	HK$
50,000,000,000		New Shares of HK$0.01 each	500,000,000.00

_Issued and fully _	paid or credited as fully paid:		HK$
35,693,649		New Shares of HK$0.01 each	356,936.49
		(Capital Restructuring becoming effective)
178,468,245		Offer Shares to be issued	1,784,682.45
970,000,000		Subscription Shares to be issued	9,700,000.00
71,387,298		Bonus Shares to be issued	713,872.98
66,133,333		Creditor Shares to be issued	661,333.33

1,321,682,525		New Shares	13,216,825.25

All the New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares to be issued will rank pari passu in all respects with each other. The New Shares, including the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares to be issued will be listed on the Stock Exchange. No Shares have been issued since 31 March 2013, being the date on which the latest audited financial statements of the Company were made up.

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

As at the Latest Practicable Date, the Company has no outstanding warrants, options or convertible or exchangeable securities.

3. DIRECTORS’ INTERESTS

As at the Latest Practicable Date, no interest or short positions were held or deemed or taken to be held under Part XV of the SFO by any Directors or chief executives or their respective associates in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Part XV of the SFO or which

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GENERAL INFORMATION

APPENDIX V

were required to be entered in the register maintained by the Company pursuant to section 352 of the SFO or 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: (the “ Model Code ”)

4. (I) INTERESTS OF SUBSTANTIAL SHAREHOLDERS OF THE COMPANY

As at the Latest Practicable Date, save as disclosed below and so far as is known to the Directors or the chief executive of the Company, no parties (other than Directors and the chief executive of the Company) had an interest or short position in the Shares and underlying shares of the Company which would need to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

			Approximate
			% of the
			Company’s
		Number of	issued share
Name	Type of interest	Shares	capital
			(note 6)
Mr. Leung Ngok	Beneficial owner	109,221,000	3.06%
	Founder of a discretionary	1,094,541,179	30.66%
	trust	(note 1)
ACE Target (PTC) Inc.	Trustee	1,094,541,179	30.66%
		(note 1)
Trident Trust Company	Trustee	1,094,541,179	30.66%
(B.V.I.) Limited		(note 1)
Trident Corporate	Trustee	1,009,557,179	28.28%
Services (B.V.I.)		(note 1)
Limited
Kingston Securities	Other	1,203,762,179	33.72%
Limited		(note 2)
Ms. Chu Yuet Wah	Interest of corporation	1,216,614,179	34.08%
	controlled by the	(note 2)
	substantial shareholder

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APPENDIX V

			Approximate
			% of the
			Company’s
		Number of	issued share
Name	Type of interest	Shares	capital
			(note 6)
Ms. Yim Yuk Lam	Interest of spouse	1,203,762,179	33.72%
		(note 3)
Ms. Ma Siu Fong	Interest of corporation	1,203,762,179	33.72%
	controlled by the	(note 2)
	substantial shareholder
Advance Lead	Beneficial owner	97,000,000,000	2,718%
International Limited		(note 4)
(the “Investor”)
Advance Shine Holdings	Interest of corporation	97,000,000,000	2,718%
Limited	controlled by the	(note 4)
	substantial shareholder
Easy Advance	Interest of corporation	97,000,000,000	2,718%
Investments Limited	controlled by the	(note 4)
	substantial shareholder
Chau Pak Chuen	Interest of corporation	97,000,000,000	2,718%
	controlled by the	(note 4)
	substantial shareholder
Au Tsui Yee, Maggie	Interest of corporation	97,000,000,000	2,718%
	controlled by the	(note 4)
	substantial shareholder
Chau Kai Man	Interest of corporation	97,000,000,000	2,718%
	controlled by the	(note 4)
	substantial shareholder
Pacific Foundation	Beneficial owner	17,846,824,500	500%
Securities Limited		(note 5)

Notes:

These shares were owned by ACE Target (PTC) Inc. as trustee of The Target Unit Trust, a unit trust of which all of the units in issue are owned by Trident Trust Company (B.V.I.) Limited as trustee of The Leung Ngok Family Trust, a discretionary trust of which the objects include Mr. Leung Ngok’s family

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APPENDIX V

members. Accordingly, Mr. Leung Ngok, as founder of The Leung Ngok Family Trust, was deemed to be interested in the Shares owned by ACE Target (PTC) Inc. in its capacity as the trustee of The Target Unit Trust under Part XV of the SFO.

On 20 October 2008, Mr. Leung Ngok, the then executive Director and chairman of the Company, surrendered all his voting rights and other rights and powers attaching to 109,221,000 Shares to Kingston Securities Limited; and Ace Target (PTC) Inc. surrendered all its voting rights and other rights and powers attaching to 1,094,541,179 Shares to Kingston Securities Limited. Accordingly, Ms. Chu Yuet Wah and Ms. Ma Siu Fong, holding 51% and 49% interests respectively in Kingston Securities Limited, were deemed to retain the voting rights and other rights and powers surrendered by Mr. Leung Ngok and Ace Target (PTC) Inc. Ms. Chu Yuet Wah also owned the 12,852,000 Shares through Best China Limited, a wholly controlled company of Ms. Chu Yuet Wah.
Ms. Yim Yuk Lam was deemed to be interested in the 1,203,762,179 Shares through interest of her spouse, Mr. Leung Ngok.
The 97,000,000,000 Shares are equivalent to the 970,000,000 New Shares (after the Capital Restructuring becoming effective) the Investor is interested under the Subscription Agreement. The Investor is directly and beneficially owned as to 30% by Ms. Au and as to 30% by Mr. Chau KM. The remaining interest of 40% in the Investor is owned by Easy Advance which is a wholly-owned subsidiary of Advance Shine. Mr. Chau is the sole beneficial owner of Advance Shine. Since the Investor is accustomed to act in accordance with the directions of Ms. Au and Mr. Chau KM, and that Mr. Chau is interested in more than one-third of voting rights in the Investor, therefore, by virtue of the SFO, the above-mentioned parties were deemed to be interested in the same number of Shares held by the Investor.
The 17,846,824,500 Shares are equivalent to the 178,468,245 New Shares (after the Capital Restructuring becoming effective), being the maximum number of the underwritten Offer Shares under the Underwriting Agreement.
The percentage is calculated on the basis of 3,569,364,916 issued Shares as at the Latest Practicable Date.

(II) INTEREST IN OTHER MEMBERS OF THE GROUP

Name of subsidiary of	Name of substantial	Percentage of
the Group	shareholders	shareholding
Xiamen U-Right Garment Co.	Shishi City Yiliwang Clothes	10%
Ltd.* (廈門優威服飾有限公司)	Development Co. Ltd.*
	(石獅市意利王制衣發展有限
	公司)
	Xiamen Dateng Industry Trade	10%
	Limited* (廈門大騰工貿有限
	公司)

For identification purposes only

Save as disclosed above, the Company has not been notified of any other relevant interests or short positions in the Shares and underlying shares of the Company or interested in 10% or more nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group as at the Latest Practicable Date.

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APPENDIX V

5. INTERESTS IN CONTRACTS AND ASSETS

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

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which a Director was materially interested which was significant in relation to the business of the Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or controlling shareholders or substantial Shareholders or any of their respective associates had any interests in a business which competes or is likely to compete, either directly or indirectly with the business of the Group.

7. DIRECTORS’ SERVICE CONTRACTS

Ms. Yeung Sau Han, Agnes (“ Ms. Yeung ”) is proposed to be appointed as an executive Director, subject to Shareholders’ approval at the SGM with her effective day of employment on the date of Completion. As at the Latest Practicable Date, no service agreement is entered into for her proposed appointment.

As at the Latest Practicable Date, there were no existing or proposed service contracts between the Directors and any member or associated companies of the Company which (i) were not expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation); (ii) including both continuous and fixed term contracts, have been entered into or amended within 6 months of the date of the Announcement; (iii) are continuous contracts with a notice period of 12 months or more; and (iv) are fixed term contracts with more than 12 months to run irrespective of the notice period.

8. LITIGATION

On 6 October 2008, Deutsche Bank A.G., Hong Kong Branch presented petitions to the Hong Kong Court for the winding up of the Company and one of its indirectly wholly-owned subsidiaries (which is now in liquidation), as the Company and that particular subsidiary could not meet demands for the repayment of outstanding debts. The hearing of the petition against the Company was originally scheduled on 10 December 2008, and was adjourned by the Hong Kong Court to 30 September 2013.

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

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APPENDIX V

9. MATERIAL CONTRACTS

Save and except the transactions disclosed below, there are no material contracts (being contracts entered outside the ordinary course of business carried on or intended to be carried on by the Group) having been entered into by any member of the Group within the two years immediately preceding the date of the Announcement and up to the Latest Practicable Date:

(a) the Underwriting Agreement;
(b) the Subscription Agreement;
(c) on 31 December 2012, the Company, the Provisional Liquidators, the Investor and an escrow agent entered into a 5th supplemental escrow agreement, pursuant to which the exclusivity period granted by the Provisional Liquidators to the Investor to negotiate the terms for the restructuring of the outstanding indebtedness and/or share capital of the Company to be extended to 31 December 2013; and
(d) on 30 March 2012, the Company, the Provisional Liquidators, the Investor and an escrow agent entered into a 4th supplemental escrow agreement, pursuant to which the exclusivity period granted by the Provisional Liquidators to the Investor to negotiate the terms for the restructuring of the outstanding indebtedness and/or share capital of the Company to be extended to 31 December 2012.

10. EXPERTS AND CONSENTS

The following are the names and the qualification of the experts who have given opinions and advices which are included in this circular:

Name Qualification

ANDA CPA Limited Certified Public Accountants Messis Capital Licensed corporation to carry on business in type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Veda Capital Limited Licensed corporation to carry on business in type 6 (advising on corporate finance) regulated activity under the SFO

As at the Latest Practicable Date, none of the above experts had any shareholding, directly or indirectly, in any member of the Group, or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, or any interests, directly or indirectly, in any assets which have been acquired, disposed of or leased to or which are proposed to be acquired, disposed of or leased to any member of the Group since 31 March 2013, being the date to which the latest published audited accounts of the Company were made up.

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APPENDIX V

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

11. EXPENSES

The professional costs and expenses incurred in connection with the Open Offer, (including but not limited to the underwriting commission, printing, registration, translation, financial advisory and legal fee and accountancy charges) are estimated to amount to approximately HK$22.2 million and are payable by the Company.

12. MARKET PRICES

Trading in the Shares has been suspended since 17 September 2008, as such, the closing prices of the Shares as recorded on the Stock Exchange on the last day on which dealings took place in each of the six months immediately preceding the date of the Announcement and ending on the Latest Practicable Date prior to the posting of this circular and the Latest Practicable Date, are not available. The closing price of the Shares on the Last Trading Day was HK$0.014.

13. SHAREHOLDINGS AND DEALINGS

As at the Latest Practicable Date:

(a) none of the Company or the Directors had any shares, convertible securities, warrants, options or derivatives in the Investor;
(b) no persons, prior to the posting of this circular, irrevocably committed themselves to vote for or against the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, issue of the Creditor Shares and/or the Bonus Issue;
(c) none of the Directors holds, owns or has control or direction over any Shares, warrants, options, convertible securities or derivatives of the Company;
(d) none of (i) the Investor, its ultimate beneficial owners and parties acting in concert with any of them; and (ii) the directors of the Investor held, borrowed or lent any Shares, warrants, options, convertible securities or derivatives of the Company or any derivatives in respect of the securities of the Company;
(e) there is no agreement, arrangement or understanding (including any compensation arrangement) exists between (i) any of the Investor, its ultimate beneficial owners or parties acting in concert with any of them; and (ii) any Director, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, issue of the Creditor Shares and/or the Bonus Issue;

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GENERAL INFORMATION

APPENDIX V

(f) no benefit will be given to any Director as compensation for loss of office in any member of the Group or otherwise in connection with the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, issue of the Creditor Shares and/or the Bonus Issue;
(g) none of the Directors has entered into any agreement or arrangement with any other persons which is conditional on or dependent upon the outcome of the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, issue of the Creditor Shares and/or the Bonus Issue or otherwise connected with the Open Offer, the Subscription, the Whitewash Waiver, the Special Deals, the Bonus Issue and/or the issue of the Creditor Shares;
(h) no material contract was entered into by the Investor, its ultimate beneficial owners or parties acting in concert with any of them in which any Director has a material personal interest;
(i) there is no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between (i) any of the Investor, its ultimate beneficial owners and parties acting in concert with any of them; and (ii) any other person;
(j) no Shares, convertible securities, warrants, options and derivatives in the Company were owned or controlled by a subsidiary of the Company or by a pension fund of any member of the Group or by any advisor to the Company as specified in class (2) of the definition of associate under the Takeovers Code;
(k) no Shares, convertible securities, warrants, options or derivatives of the Company and the Investor were managed on a discretionary basis by fund managers connected with the Company; and
(l) there was no agreement, arrangement or understanding that any securities acquired by the Investor, its ultimate beneficial owners or parties acting in concert with any of them under the Subscription would be transferred, charged or pledged to any other persons.

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GENERAL INFORMATION

APPENDIX V

During the period of six months prior to the date of the Announcement and up to the Latest Practicable Date:

(a) none of the Company or the Directors had dealt for value in the Shares, convertible securities, warrants, options and derivatives of the Investor or the Company;
(b) no Shares, convertible securities, warrants, options and derivatives in the Company were dealt, owned, controlled, borrowed or lent by the Directors or by the Company;
(c) none of (i) the directors of the Investor; and (ii) any of the Investor, its ultimate beneficial owners and parties acting in concert with any of them had dealt for value in the Shares, convertible securities, warrants, options and derivatives of the Company;
(d) none of the subsidiaries of the Company, any pension fund of the Company or any of its subsidiaries, nor any adviser to the Company as specified in class (2) of the definition of associate in the Takeovers Code has dealt for value in the Shares, convertible securities, warrants, options or derivatives of the Company;
(e) no person had an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) within the definition of associate in the Takeovers Code;
(f) none of the Investor, its ultimate beneficial owners and parties acting in concert with any of them has borrowed or lent any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company; and
(g) no fund managers managing funds on a discretionary basis which are connected with the Company had dealt for value in the Shares, convertible securities, warrants, options or derivatives of the Company.

V-10

GENERAL INFORMATION

APPENDIX V

14. CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors: TANG Kwok Hung NG Cheuk Fan Keith

Independent Non-executive Directors: CHUNG Wai Man MAK Ka Wing Patrick CHAN Chi Yuen

COMPANY SECRETARY

NG Cheuk Fan Keith

AUDIT COMMITTEE MEMBERS

CHAN Chi Yuen (Committee Chairman) CHUNG Wai Man MAK Ka Wing Patrick

AUDITOR

ANDA CPA Limited Unit D, 21st Floor Max Share Centre 373 King’s Road, North Point Hong Kong

JOINT AND SEVERAL PROVISIONAL LIQUIDATORS

LAI Kar Yan Derek and YEUNG Lui Ming 35th Floor, One Pacific Place 88 Queensway, Hong Kong

REGISTERED OFFICE

Clarendon House 2 Church Street Hamilton HM11 Bermuda

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

35th Floor, One Pacific Place 88 Queensway, Hong Kong

PRINCIPAL REGISTRAR (IN BERMUDA)

Codan Services Limited Clarendon House 2 Church Street Hamilton HM11 Bermuda

AUTHORIZED REPRESENTATIVES

CHUNG Wai Man 35th Floor, One Pacific Place 88 Queensway Hong Kong

MAK Ka Wing Patrick 35th Floor, One Pacific Place 88 Queensway Hong Kong

BRANCH REGISTRAR (IN HONG KONG)

Tricor Tengis Limited 26th Floor, Tesbury Centre 28 Queen’s Road East Wan Chai, Hong Kong

V-11

GENERAL INFORMATION

APPENDIX V

15. PARTICULARS OF DIRECTORS AND COMPANY SECRETARY

Name, address and information of the Directors

(i) Executive Directors

Mr. Tang Kwok Hung (“ Mr. Tang ”) of 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, aged 46, was the financial controller of a company whose parent company is a company listed on NASDAQ and the group finance manager of a company listed on the main board of the Stock Exchange. He has over 20 years of experience in the strategic management, business development, corporate finance, and investment management in garment, retail, real estate development, hotel, high-tech business, logistics, international trade and manufacturing industries.

Mr. Tang holds a Master’s degree in Business Administration from Manchester Business School (MBS) of the University of Manchester in the United Kingdom and a Bachelor’s degree in Business Administration from Chinese University of Hong Kong. He is a fellow member of the Hong Kong Institute of Certified Public Accountants, a Certified Public Accountant of the American Institute of Certified Public Accountants, a Certified Management Accountant of the Institute of Management Accountants in the United States of America, and a member of Hong Kong Institute of Real Estate Administrators.

As at the Latest Practicable Date, Mr. Tang does not have any interest in shares or underlying shares of the Company within the meaning of Part XV of the SFO nor does he have any relationship with any director, senior management, chief executive or substantial or controlling shareholder of the Company. Save as disclosed, Mr. Tang did not hold directorship in any other listed companies or had any other major appointment and qualifications during the last three years prior to the Latest Practicable Date.

Upon Completion, Mr. Tang shall resign from the position as an executive Director.

Mr. Ng Cheuk Fan Keith (“ Mr. Ng ”) of 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, aged 52, was appointed as an executive Director and company secretary of the Company in January 2011. Mr. Ng graduated from the University of Alberta, Canada with a Bachelor’s degree in Commerce, majoring in Accounting. He also received a Master of Commerce degree in Professional Accounting from the University of New South Wales, Australia. Mr. Ng is a member of the CPA Australia and an associate member of the Hong Kong Institute of Certified Public Accountants.

Mr. Ng has over 20 years of experience in corporate development, corporate restructuring, management and accounting. He is currently the managing director of China Fortune Financial Group Limited (Stock code: 290). Mr. Ng was an executive director of New Environmental Energy Holdings Limited (Stock code: 3989) from 16 August 2010 to 26 May 2011 and Hao Tian Resources Group Limited (Stock code: 474) from 1 September 2009 to 20 September 2011 and an independent non-executive director of The Hong Kong Building and Loan Agency Limited (Stock code: 145) from 15 January 2010 to 3 August 2012. All aforesaid companies are listed on main board of the Stock Exchange.

V-12

GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, Mr. Ng does not have any interest in shares or underlying shares of the Company within the meaning of Part XV of the SFO nor does he have any relationship with any director, senior management, chief executive or substantial or controlling shareholder of the Company. Save as disclosed, Mr. Ng did not hold directorship in any other listed companies or had any other major appointment and qualifications during the last three years prior to the Latest Practicable Date.

Mr. Ng is also the company secretary of the Company.

(ii) Proposed Executive Director

Ms. Yeung Sau Han, Agnes (“ Ms. Yeung ”) of Room B, 13/F., Bing Fu Commercial Building, 450-454 Portland Street, Prince Edward, Kowloon, Hong Kong, aged 47 is the design director and assistant general manager of a subsidiary of Sino Hill Group Limited. Ms. Yeung had worked in various garment companies for over 20 years.

Ms. Yeung is currently the chief executive officer and executive director of PME Group Limited (stock code: 379) and the executive director of China Railway Logistics Limited (stock code: 8089).

As at the Latest Practicable Date, save as disclosed above, Ms. Yeung does not have any interest in shares or underlying shares of the Company within the meaning of Part XV of the SFO nor does she have any relationship with any director, senior management, chief executive or substantial or controlling shareholder of the Company. Save as disclosed, Ms. Yeung did not hold directorship in any other listed companies or had any other major appointment and qualifications during the last three years prior to the Latest Practicable Date.

There is no service contract entered into between Ms. Yeung and the Company in relation to her appointment as an executive Director. The length of services and emolument of Ms. Yeung with the Company will be determined upon the confirmation of her appointment. Further announcement will be made on Ms. Yeung’s appointment.

As at the Latest Practicable Date, save as disclosed above, there are no other matters concerning the appointment of Ms. Yeung as an executive Director that need to be brought to the attention of the Shareholders and there is no information relating to Ms. Yeung that is required to be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules.

(iii) Independent Non-executive Directors and the Audit Committee

The audit committee comprised three independent non-executive directors throughout the year ended 31 March 2013 namely Mr. Chan Chi Yuen (Chairman), Mr. Chung Wai Man and Mr. Mak Ka Wing Patrick.

V-13

APPENDIX V

GENERAL INFORMATION

Mr. Chan Chi Yuen (“ Mr. Chan ”) of 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, aged 46, holds a Bachelor’s degree with honours in Business Administration and a Master of Science degree in Corporate Governance and Directorship. He is a fellow of The Hong Kong Institute of Certified Public Accountants and The Association of Chartered Certified Accountants and is an associate of The Institute of Chartered Accountants in England and Wales. Mr. Chan is a practicing certified public accountant and has extensive experience in financial management, corporate finance and corporate governance.

Mr. Chan is currently an executive director and chairman of Kong Sun Holdings Limited (Stock code: 295). He is also an executive director and chief executive officer of Noble Century Investment Holdings Limited (formerly known as Sam Woo Holdings Limited) (Stock code: 2322) and an independent non-executive director of Asia Energy Logistics Group Limited (Stock code: 351), China Gamma Group Limited (Stock code: 164), Jun Yang Solar Power Investments Limited (formerly known as China Gogreen Assets Investment Limited) (Stock code: 397), China Sandi Holdings Limited (formerly known as China Grand Forestry Green Resources Group Limited) (Stock code: 910), Media Asia Group Holdings Limited (formerly known as Rojam Entertainment Holdings Limited) (Stock code: 8075), and New Times Energy Corporation Limited (Stock code: 166) (redesignated from non-executive director with effect from 18 May 2012).

Mr. Chan was an independent non-executive director of The Hong Kong Building and Loan Agency Limited (stock code: 0145) from October 2009 to February 2011, Richly Field China Development Limited (stock code: 0313) from February 2009 to August 2010 and Superb Summit International Group Limited (formerly known as Superb Summit International Timeber Company Limited) (stock code: 1228) from April 2007 to June 2010 (all the aforesaid companies are listed on the main board of the Stock Exchange, except for Media Asia Group Holdings Limited which is a company listed on the Growth Enterprise Market board of the Stock Exchange).

As at the Latest Practicable Date, Mr. Chan does not have any interest in Shares or underlying Shares of the Company within the meaning of Part XV of the SFO nor does he have any relationship with any Director, senior management, chief executive or substantial or controlling Shareholder of the Company. Save as disclosed, Mr. Chan did not hold directorship in any other listed companies or had any other major appointment and qualifications during the last three years prior to the Latest Practicable Date.

Mr. Chung Wai Man (“ Mr. Chung ”) of 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, aged 55, holds a Diploma in Business Management and a Certificate of Bank of China Banking Course. He started working in The Kwangtung Provincial Bank in 1976, and his last position before leaving the bank in 1996 was a manager in charge of the Tai Po sub-branch. After leaving The Kwangtung Provincial Bank, Mr. Chung established “Raymond Chung Company”, a finance and business consulting firm for corporations in Hong Kong and China. In 2004, he set up another consulting firm, Excel Linker Capital (Asia) Limited, which focused on providing financial services to corporations in China. Both Raymond Chung Company and Excel Linker Capital (Asia) Limited have been dissolved.

V-14

APPENDIX V

GENERAL INFORMATION

Mr. Chung is currently an independent non-executive director of China Kingston Mining Holdings Limited (stock code: 1380) from 6 February 2013. He was an independent non-executive director of FU JI Food and Catering Services Holdings Limited (stock code: 1175) from 1 June 2011 to 8 July 2013 and was an independent non-executive director of United Gene High-Tech Group Limited (stock code: 0399) (formerly known as Far East Pharmaceutical Technology Company Limited) from 23 March 2007 to 13 May 2009.

As at the Latest Practicable Date, Mr. Chung does not have any interest in Shares or underlying Shares of the Company within the meaning of Part XV of the SFO nor does he have any relationship with any Director, senior management, chief executive or substantial or controlling Shareholder of the Company. Save as disclosed, Mr. Chung did not hold directorship in any other listed companies or had any other major appointment and qualifications during the last three years prior to the Latest Practicable Date.

Mr. Mak Ka Wing Patrick (“ Mr. Mak ”) of 35th Floor, One Pacific Place, 88 Queensway, Hong Kong, aged 49, is a registered solicitor of the High Court of Hong Kong and Managing Partner of Patrick Mak & Tse, Solicitors. Mr. Mak has over 10 years’ legal experience as a practising solicitor. He was awarded the Common Professional Examination Certificate in Laws by the University of Hong Kong in 1995 and was awarded his Postgraduate Certificate in Laws (P.C.LL) by the University of Hong Kong in 1998.

Mr. Mak worked in Dublin, Ireland with Messrs. Donald T. McAuliffe & Co., Solicitors of Ireland from 1990 to 1991 and worked in London, England with Messrs. Sparrow & Trieu, Solicitors from 1991 to 1992.

Mr. Mak is an independent non-executive director of Karce International Holdings Company Limited (Stock Code: 1159) and a director of Asia Green Agriculture Corporation which was incorporated under the laws of the State of Nevada, USA. Mr. Mak is an independent non-executive director of FU JI Food and Catering Services Holdings Limited (stock code: 1175) with effect from 8 July 2013. He was an independent non-executive director and non-executive director of China Kingston Mining Holdings Limited (Stock code: 1380) for the period from 6 February 2013 to 16 April 2013 and from 17 April 2013 to 13 June 2013 respectively.

As at the Latest Practicable Date, Mr. Mak does not have any interest in Shares or underlying Shares of the Company within the meaning of Part XV of the SFO nor does he have any relationship with any Director, senior management, chief executive or substantial or controlling Shareholder of the Company. Save as disclosed, Mr. Mak did not hold directorship in any other listed companies or had any other major appointment and qualifications during the last three years prior to the Latest Practicable Date.

(iv) Company Secretary

Mr. Ng is the company secretary of the Company. Biographical information and the professional qualification of Mr. Ng were set out in the previous section under “(i) Executive Directors” in this appendix.

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GENERAL INFORMATION

APPENDIX V

16. CORPORATE INFORMATION AND PARTIES INVOLVED

Investor	Registered Office
	Advance Lead International Limited
	P.O. Box 957,
	Offshore Incorporations Centre,
	Road Town, Tortola
	British Virgin Islands
	Principal place of business
	Unit D, 12/F.
	Seabright Plaza
	9-23 Shell Street
	North Point, Hong Kong
Financial adviser to the Company	Veda Capital Limited
	Suite 3711, 37/F., Tower Two,
	Times Square, 1 Matheson Street,
	Causeway Bay, Hong Kong
Auditor	ANDA CPA Limited
	Unit D, 21st Floor
	Max Share Centre
	373 King’s Road, North Point
	Hong Kong
Branch Share Registrar	Tricor Tengis Limited
	26th Floor, Tesbury Centre
	28 Queen’s Road East, Wan Chai,
	Hong Kong
Underwriter	Pacific Foundation Securities Limited
	11th Floor
	New World Tower II
	16-18 Queen’s Road Central
	Hong Kong
Independent Financial Adviser	Messis Capital Limited
	Room 1606, 16/F
	Tower 2, Admiralty Centre
	18 Harcourt Road
	Hong Kong

V-16

GENERAL INFORMATION

APPENDIX V

Legal adviser David Chan & Carmen Chan, Solicitors as to Hong Kong laws 2308-9, 23rd Floor, Cosco Tower, 183 Queen’s Road Central, Hong Kong Legal adviser Conyers Dill & Pearman as to Bermuda laws 2901 One Exchange Square 8 Connaught Place Central Hong Kong Principal banker of the Company Nanyang Commercial Bank, Limited 151 Des Voeux Road, Central Hong Kong

17. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (Saturdays and public holidays excepted) at the principal place of business of the Company on 35th Floor, One Pacific Place, 88 Queensway, Hong Kong during 9:30 a.m. to 5:30 p.m., Monday to Friday (other than public holidays) from the date of this circular up to and including the date of the SGM and will be displayed on the website of the SFC (www.sfc.hk) and the website of the Company (http://www.uright-627.info/):

(a) the Bye-laws and the New Bye-laws;
(b) the memorandum and articles of association of the Investor;
(c) the letter from the Board and the Provisional Liquidators, the text of which is set out on pages 15 to 53 of this circular;
(d) the letter from the Independent Board Committee, the text of which is set out on page 54;
(e) the annual report of the Company for the two financial years ended 31 March 2013;
(f) the letter of advice from Messis Capital, the text of which is set out on pages 55 to 71 of this circular;
(g) the report from ANDA CPA Limited on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II to this circular;
(h) the letters of comfort in relation to the profit forecasts of the Group for the year ending 31 March 2014 issued by ANDA CPA Limited and Veda Capital Limited respectively, the text of which is set out in Appendix III to this circular;

V-17

GENERAL INFORMATION

APPENDIX V

(i) the material contracts as entered into by the Group as referred to in the paragraph headed “Material Contracts” in this appendix;
(j) the written consents referred to in the paragraph headed “Experts and Consents” in this appendix;
(k) the Acquisition Circular of the Company dated 25 August 2011; and
(l) this circular.

18. MISCELLANEOUS

The English text of this circular shall prevail over Chinese text in case of any inconsistency.

V-18

NOTICE OF SGM

U-RIGHT INTERNATIONAL HOLDINGS LIMITED (Provisional Liquidators Appointed) 佑威國際控股有限公司[*]

（已委任臨時清盤人）

(Incorporated in Bermuda with limited liability)

(Stock Code: 00627)

NOTICE OF THE SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the special general meeting (the “ Meeting ”) of U-RIGHT International Holdings Limited (Provisional Liquidators Appointed) (the “ Company ”) will be held at Room 704, 3 Lockhart Road, Wanchai, Hong Kong on Monday, 19 August 2013, at 10:00 am for the purposes of considering and, if thought fit, passing with or without modifications, the following resolutions of the Company:

The Capital Restructuring

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as a special resolution:

“ THAT subject to resolutions numbered 2, 3 and 6 as set out in this notice of the Meeting (the “ Notice ”) having been passed and subject to (i) the Listing Committee of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange” ) granting the listing of, and permission to deal in, all the New Shares (as defined below) either unconditionally or subject to such conditions as may be required by the Stock Exchange and (ii) compliance by the Company with the requirements of section 46 of the Companies Act 1981 of Bermuda (as amended) (the “ Bermuda Companies Act” ):

(a) every one hundred existing issued shares of the Company with par value of HK$0.10 each (each a “ Share ”) in the issued share capital of the Company be consolidated into one consolidated share with par value of HK$10.00 each (each a “ Consolidated Share ”) in the issued share capital of the Company (the “ Share Consolidation ”) and the directors (the “ Directors ”) and the provisional liquidators (the “ Provisional Liquidators ”) of the Company be authorized to aggregate and sell any fractional entitlements arising from the Share Consolidation in the form of New Shares (as defined below) for the benefit of the Company in such manner and on such terms as the Directors and the Provisional Liquidators may think fit;
For identification purpose only

– SGM-1 –

NOTICE OF SGM

(b) immediately following the Share Consolidation and the aggregation of fractional entitlements, the paid-up capital of each Consolidated Share be reduced from HK$10.00 to HK$0.01 by cancelling HK$9.99 of the paid-up or credited as paid up capital on each Consolidated Share such that the par value of each of the Consolidated Shares be reduced from HK$10.00 to HK$0.01 (the “ Capital Reduction ”) to create an ordinary share with par value of HK$0.01 credited as fully paid up (each a “ New Share ”);
(c) immediately following the Capital Reduction, each of the authorized but unissued Shares be subdivided into ten subdivided shares of HK$0.01 each (the “ Share Subdivision ”), and for the avoidance of doubt, the authorized share capital of the Company will be HK$500,000,000 comprising 50,000,000,000 New Shares of which up to 35,693,649 New Shares will be in issue;
(d) all of the New Shares resulting from the Share Consolidation, Capital Reduction and Share Subdivision shall rank pari passu in all respects and have the rights and privileges and be subject to the restrictions contained in the memorandum of association and bye-laws of the Company (the “ Bye-laws ”);
(e) the amount of credit arising from the Capital Reduction, following the Capital Restructuring becoming effective, be applied in such manner as permitted by the Bermuda Companies Act, the Bye-laws and all applicable laws, including but not limited to eliminating part of the outstanding accumulated loss of the Company and the crediting of any balance to the contributed surplus account of the Company (the “ Authorization ”); and
(f) the Provisional Liquidators and the Directors be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, implement or complete any matters relating to or in connection with the Share Consolidation, the Capital Reduction, the Share Subdivision and the Authorization and the transactions contemplated respectively thereunder (collectively as the “ Capital Restructuring ”).”

The Open Offer

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT subject to resolutions numbered 1, 3, 4 and 6 as set out in the Notice having been passed, and subject to the fulfillment of all the conditions precedent set out in the underwriting agreement dated 9 July 2013 (the “ Underwriting Agreement ”, a copy of which marked “ UA ” has been produced to the Meeting and signed by the chairman of the Meeting for identification purpose) and entered into between the Company, the Provisional Liquidators and Pacific Foundation Securities Limited as the underwriter (the “ Underwriter ”):

– SGM-2 –

NOTICE OF SGM

(a) the issue by way of an open offer (the “ Open Offer ”) of 178,468,245 New Shares (the “ Offer Shares ”) at the offer price of HK$0.15 per Offer Share (the “ Offer Price ”) in the proportion of five Offer Shares for every one New Share (equivalent to one Offer Share for every twenty existing Shares) to the qualifying shareholders of the Company (the “ Qualifying Shareholders ”) whose names appear on the register of members of the Company on such date and time as the Company, the Provisional Liquidators and the Underwriter may agree to be the record date of such Open Offer (the “ Record Date ”), other than those shareholders of the Company whose addresses on the register of members of the Company are in a place outside Hong Kong on the Record Date where, the Directors and the Provisional Liquidators, after making enquiries, are of the opinion that it would be unduly burdensome to, or consider it necessary or expedient on account either of legal restrictions under the laws of the relevant overseas places or the requirements of the relevant regulatory bodies or stock exchanges in those places not to offer the Offer Shares to them (the “ Excluded Shareholders ”) be and are hereby approved, confirmed and ratified, and that the Open Offer shall not be extended to the Excluded Shareholders and their Offer Shares shall be taken up by the Underwriter, be and are hereby approved, confirmed and ratified;
(b) the entering into of the Underwriting Agreement by the Company and the Provisional Liquidators and the performance of the transactions contemplated thereunder by the Company and the Provisional Liquidators be and are hereby approved, confirmed and ratified and the Directors and the Provisional Liquidators be and are hereby authorized to make such exclusions or other arrangements as they may, in their absolute discretion, consider necessary, desirable or expedient, in relation to the Excluded Shareholders, the treatment on fractional entitlements, the absence for application by the Qualifying Shareholders in excess of their entitlements, and the underwriting of the Offer Shares by the Underwriter;
(c) the Directors and the Provisional Liquidators be and are hereby authorized to allot and issue the Offer Shares pursuant to and in connection with the Open Offer; and
(d) the Directors and the Provisional Liquidators be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, implement or complete any matters relating to or in connection with the Underwriting Agreement and the Open Offer and the transactions contemplated thereunder.”

The Subscription

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

– SGM-3 –

NOTICE OF SGM

“ THAT subject to resolutions numbered 1, 2, 4 to 6 as set out in the Notice having been passed, and subject to the fulfillment of all the conditions precedent set out in the subscription agreement dated 9 July 2013 (the “ Subscription Agreement ”) (a copy of which marked “ SA ” has been produced to the Meeting and signed by the chairman of the Meeting for identification purpose) entered into between the Company, the Provisional Liquidators and Advance Lead International Limited (the “ Investor ”):

(a) the subscription (the “ Subscription ”) by the Investor of 970,000,000 New Shares (the “ Subscription Shares ”) at the subscription price of HK$0.15 each (the “ Subscription Price ”) pursuant to the terms of the Subscription Agreement be and are hereby approved, confirmed and ratified;
(b) the entering into of the Subscription Agreement by the Company and the Provisional Liquidators and the performance of the transactions contemplated thereunder by the Company and the Provisional Liquidators be and are hereby approved, confirmed and ratified;
(c) subject to the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Subscription Shares either unconditionally or subject to such conditions as may be required by the Stock Exchange, the Directors and the Provisional Liquidators be and are hereby authorized to allot and issue the Subscription Shares at the Subscription Price to the Investor; and
(d) the Directors and the Provisional Liquidators be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, implement or complete any matters relating to or in connection with the Subscription Agreement and the Subscription and the transactions contemplated thereunder.”

The Bonus Issue

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT subject to resolutions numbered 1-3 and 6 as set out in the Notice having been passed, and subject to (i) the Subscription and the Open Offer becoming unconditional (other than the conditions precedent to the Subscription and the Open Offer in relation to the Bonus Issue becoming unconditional); (ii) the Capital Restructuring becoming effective; and (iii) the Stock Exchange granting the listing of, and permission to deal in, the Bonus Shares:

– SGM-4 –

NOTICE OF SGM

(a) a bonus issue in the proportion of two New Shares (the “ Bonus Shares ”) for every one New Share (equivalent to one New Share for every fifty existing Shares) be made, such Bonus Shares be issued to the Qualifying Shareholders whose names appear on the register of members of the Company on the Record Date to the Open Offer (the “ Bonus Issue ”);
(b) part of the net proceeds to be raised from the Open Offer and credited to the share premium account up to the sum of HK$713,872.98 (or such sum as may be necessary to give effect to the Bonus Issue) be applied in paying up in full at par the Bonus Shares such that the Bonus Shares will be allotted, issued and credited as fully paid;
(c) the Directors and the Provisional Liquidators be and are hereby authorized to make such exclusions or other arrangements as they may, in their absolute discretion, consider necessary, desirable or expedient, in relation to the Excluded Shareholders and the treatment on fractional entitlements under the Bonus Issue;
(d) subject to the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Bonus Shares either unconditionally or subject to such conditions as may be required by the Stock Exchange, the Directors and the Provisional Liquidators be and are hereby authorized to allot and issue the Bonus Shares pursuant to and in connection with the Bonus Issue; and
(e) the Directors and the Provisional Liquidators be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, implement or complete any matters relating to or in connection with the Bonus Issue and the transactions contemplated thereunder.”

The Whitewash Waiver

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT subject to resolutions numbered 1-4 and 6 as set out in the Notice having been passed, the waiver (the “ Whitewash Waiver ”) granted or to be granted by the Executive Director (including his delegates) of the Corporate Finance Division (the “ Executive ”) of the Securities and Futures Commission of Hong Kong (the “ SFC ”) pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers (the “ Takeovers Code ”) waiving any obligation (either unconditionally or subject to such conditions as may be required by the SFC) on the part of the Investor, its ultimate beneficial owners and parties acting in concert with

– SGM-5 –

NOTICE OF SGM

it, to make a mandatory general offer for all the New Shares not already owned by them or agreed to be acquired by any of them arising from the Subscription, be and is hereby approved and the Directors and the Provisional Liquidators be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, implement or complete any matters relating to or in connection with the Whitewash Waiver and the transactions contemplated thereunder.”

The Debt Restructuring and the Special Deals

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT subject to resolutions numbered 1 to 5 having been passed and the Executive granting consent pursuant to Rule 25 of the Takeovers Code (either unconditionally or subject to such conditions as may be required by the Executive):

(a) the settlement of the indebtedness and liabilities (the “ Settlement ”) due by the Company to any person, firm or company to whom the Company owes any indebtedness and liabilities (including but not limited to the Existing Convertibles (as defined below) and any guarantee or indemnity given by the Company but other than the Working Capital Loans (as defined below) (the “ Creditors ”) under the Scheme (as defined below), some of whom are also shareholders of the Company (the “ Interested Shareholders ”) on the Effective Date (as defined below) by way of (i) cash and cash equivalent of the Company as of the Effective Date of approximately HK$7 million; (ii) cash payment of HK$50,000,000 which will be funded out of the proceeds of the Subscription; (iii) the allotment and issue of 66,133,333 New Shares (the “ Creditor Shares ”) (representing approximately 5% of the enlarged issued share capital of the Company following the allotment and issue of the Offer Shares, the Subscription Shares, the Bonus Shares and the Creditor Shares by the Company) credited as fully paid to the SchemeCo (as defined below) upon completion of the Capital Restructuring and the Subscription; (iv) the transfer of the issued Shares of Excluded Subsidiaries (as defined below) to SchemeCo at a nominal consideration of HK$1 pursuant to the terms of the Scheme (the “ Disposal ”, together with the Settlement as the “ Special Deals ”) upon completion of the Capital Restructuring and the Subscription; and (v) to the extent not already mentioned above the Excluded Items be and are hereby approved, confirmed and ratified;
(b) subject to the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Creditor Shares either unconditionally or subject to such conditions as may be required by the Stock Exchange, the Directors and the Provisional Liquidators be and are hereby authorized to allot and issue the Creditor Shares to SchemeCo; and

– SGM-6 –

NOTICE OF SGM

(c) the Directors and the Provisional Liquidators be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect, determine, implement or complete any matters relating to or in connection with the Scheme, the Settlement, the Disposal, the allotment and issue of the Creditor Shares and the Special Deals.”

For the purpose of this resolution,

“ Companies Ordinance ” means the Companies Ordinance (Chapter 32 of the Laws of Hong Kong);

“ Effective Date ” means 11 November 2011, the date of which the Scheme becomes effective by virtue of the delivery of an office copy of the order of the Hong Kong Court sanctioning the Scheme to the Registrar of Companies in Hong Kong for registration;

“ Excluded Items ” means cash and cash equivalents held by the Company as at the Effective Date of approximately HK$7.0 million; Receivables of the Company, if any, including but not limited to all intercompany debts owing by any of its subsidiaries; all and any rights, causes of action or claims of the Restructured Group against the Excluded Subsidiaries in respect of transactions or events incurred up to the date of the completion of the Subscription (including but not limited to all intercompany debts owing by any of the Excluded Subsidiaries to any of the companies in the Restructured Group); and Rights Against Third Parties;

“ Excluded Subsidiaries ” means the companies comprising the Company and its subsidiaries and excluding the Company, UR Group Limited, Nano Garment Holdings Limited, U-RIGHT Trading Development Limited, Xiamen U-Right Garment Co. Ltd., Fame Ace Limited, Alfreda Limited, Right Season Limited and Sino Hill Group Limited;

“ Existing Convertibles ” means all the convertibles, options and other securities issued by the Company prior to the petition to wind-up the Company being presented to the Hong Kong Court on 6 October 2008, which were convertible into Shares or confer on the holder thereof rights to subscribe for any shares in the Company, but no longer exercisable after the Effective Date as a result of the Scheme;

“ Hong Kong Court ” means the High Court of Hong Kong;

“ Person ” means any individual, partnership, company, body corporate, joint stock company, trust, unincorporated association or body or persons (including a partnership or consortium), joint venture or other entity, or a government or any political subdivision or agency thereof;

“ Receivables ” means all the trade and other debts and amounts owing to the Company as at the Effective Date including but not limited to all intercompany debts owing by its subsidiaries;

– SGM-7 –

NOTICE OF SGM

“ Restructured Group ” means the Group after Completion and the Scheme being effective, comprising of the Company, UR Group Limited, Nano Garment Holdings Limited, U-RIGHT Trading, Xiamen U-Right, Fame Ace Limited, Alfreda Limited, Right Season and Sino Hill Group Limited and its subsidiaries;

“ Rights Against Third Parties ” means the rights and claims against any Person and the benefit of all sums to which the Group is entitled from any Person arising from any claim, rights, action against such Person, subsisting on or before the date of the completion of the Subscription;

“ Scheme ” means the scheme of arrangement made under Section 166 of the Companies Ordinance between the Company and the Creditors which has been sanctioned by the Hong Kong Court (a copy of which marked “ SOA ” has been produced to the Meeting and signed by the chairman of the Meeting for identification purpose);

“ Scheme Administrators ” means Messrs. Lai Kar Yan (Derek) and Yeung Lui Ming of Deloitte Touche Tohmatsu jointly and severally as scheme administrators pursuant to the Scheme or their successors;

“ SchemeCo ” means a special purpose vehicle owned and controlled by the Scheme Administrators incorporated or to be incorporated; and

“ Working Capital Loans ” means two working capital facility loans of an aggregate sum up to HK$35 million provided by the Investor to meet the working capital requirements of some of the Excluded Subsidiaries.”

Adoption of New Bye-laws

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as a special resolution:

“ THAT the new bye-laws of the Company (the “ New Bye-laws ”) (a copy of which marked “ NBL ” has been produced to the Meeting and signed by the chairman of the Meeting for identification purpose) be approved and adopted as the new Bye-laws of the Company in substitution for, and to the exclusion of, the existing Bye-laws with immediate effect after the closing of the Meeting; and that the Directors and the Provisional Liquidators be and are hereby authorized generally to do all such acts, deeds and things and to sign, execute and deliver all such documents (including the affixation of the common seal of the Company where required) as they may, in their absolute discretion, consider necessary, desirable or expedient to give effect determine, implement or complete any matters relating to or in connection with the adoption of the New Bye-laws.”

– SGM-8 –

NOTICE OF SGM

Appointment of an Executive Director

As special business to consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

“ THAT Ms. Yeung Sau Han, Agnes be appointed as an executive Director and the board of Directors be authorised to determine her remuneration and any Director be authorised to execute a service contract or such other documents or supplemental agreements or deeds on behalf of the Company.”

By order of the Board For and on behalf of U-RIGHT International U-RIGHT International Holdings Limited Holdings Limited (Provisional Liquidators Appointed) (Provisional Liquidators Appointed) Tang Kwok Hung Lai Kar Yan (Derek) Director Yeung Lui Ming Joint and Several Provisional Liquidators acting as agents for and on behalf of U-RIGHT International Holdings Limited without personal liability

Hong Kong, 26 July 2013

Registered Office: Principal place of business in Hong Kong: Clarendon House 35th Floor, One Pacific Place 2 Church Street 88 Queensway Hamilton HM11 Hong Kong Bermuda

Notes:

Any member of the Company entitled to attend and vote at the Meeting convened by the above notice is entitled to appoint one or more proxies to attend and, subject to the provisions of the Bye-laws, vote in his stead. A proxy need not be a member of the Company. A member who is the holder of two or more shares of the Company may appoint more than one proxy to represent him to attend and vote on his behalf. Any corporation which is a shareholder of the Company may, by resolution of its directors or other governing body or by power of attorney, authorise such person or persons as it thinks fit to act as its corporate representative or representatives provided that if more than one person is so authorised, the authority shall specify the number and class of shares held by the relevant shareholder in respect of which each such person is authorised to act as corporate representative.
In order to be valid, the instrument appointing a proxy, together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof, must be deposited with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at the 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or at any adjournment thereof (as the case may be).
A form of proxy for use by the shareholders at the Meeting is enclosed with the circular of the Company dated 26 July 2013 (the “ Circular ”). Completion and return of the form of proxy shall not preclude any member from attending and voting in person at the Meeting or any adjournment thereof. Such form of proxy and the Circular are also published on the website of the Stock Exchange at www.hkexnews.hk and the Company’s website at http://www.uright-627.info/).

– SGM-9 –

NOTICE OF SGM

Where there are joint registered holders of any share, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint registered holders are present at the Meeting personally or by proxy, then one of the registered holders so present whose name stands first on the register of members of the Company in respect of such share, or his proxy, shall alone be entitled to vote and will be accepted to the exclusion of other joint registered holders in respect thereof.
Further information relating to all the matters set out in the above resolutions and further information relating to the Company are set out in the Circular.
The votes for approving all the resolutions shall be taken by poll.

As at the date of the Latest Practicable Date, the Company has two executive directors, namely Mr. Tang Kwok Hung and Mr. Ng Cheuk Fan, Keith; and three independent non-executive directors, namely Mr. Chung Wai Man, Mr. Mak Ka Wing, Patrick and Mr. Chan Chi Yuen.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Notice (other than that relating to the Investor) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Notice have been arrived at after due and careful consideration and there are no other facts not contained in this Notice, the omission of which would make any statement in this Notice misleading.

As at the Latest Practicable Date, the board of directors of the Investor comprises Mr. Chau Kai Man and Mr. Chan Tak Hung. The directors of the Investor jointly and severally accept full responsibility for the accuracy of the information contained in this Notice (other than that relating to the Company) and confirms, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this announcement have been arrived at after due and careful consideration and there are no other facts not contained in this Notice, the omission of which would make any statement in this Notice misleading.

– SGM-10 –

AI assistant

MS Group Holdings Limited — Proxy Solicitation & Information Statement 2013

49932_rns_2013-07-26_7a6b7020-c5a8-4724-8bd8-b2c09c9687da.pdf

U-RIGHT INTERNATIONAL HOLDINGS LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OPEN OFFER

U-RIGHT INTERNATIONAL HOLDINGS LIMITED (Provisional Liquidators Appointed) 佑威國際控股有限公司[*]

（已委任臨時清盤人）

(Stock Code: 00627)

Board of Directors

To the Shareholders

(1) STATUS ON RESUMPTION;

(2) CAPITAL RESTRUCTURING AND CHANGE OF BOARD LOT SIZE;

(3) DEBT RESTRUCTURING;

(4) FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS;

(5) THE BONUS ISSUE;

(6) ADOPTION OF NEW BYE-LAWS ;

(7) PROPOSED APPOINTMENT OF NEW EXECUTIVE DIRECTOR; AND (8) NOTICE OF SPECIAL GENERAL MEETING

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

(1) STATUS ON RESUMPTION

(2) CAPITAL RESTRUCTURING AND CHANGE OF BOARD LOT SIZE

Conditions of the Capital Restructuring

Effect and reason of the Capital Restructuring

Status of the New Shares

Arrangement on odd lot trading

Exchange of Shares certificates

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Change of board lot size

(3) DEBT RESTRUCTURING

The Scheme

LETTER FROM THE BOARD AND THE PROVISIONAL LIQUIDATORS

Conditions precedent

(4) FUNDRAISING BY WAYS OF THE OPEN OFFER AND THE SUBSCRIPTION; AND APPLICATION FOR WHITEWASH WAIVER AND SPECIAL DEALS

A. Open Offer

Information on the Open Offer

Offer Price

Offer Shares

Qualifying Shareholders

Rights of the Excluded Shareholders

Closure of register of members

Nil-paid entitlements

No application for excess Offer Shares

Fractions of Offer Shares

Certificates and refund cheques for the Offer Shares

Underwriting Agreement

Termination of the Underwriting Agreement

Conditions of the Open Offer

Reasons for the Open Offer

WARNING OF THE RISKS OF DEALING IN THE SHARES

B. Subscription

Subscription Agreement

Conditions of the Subscription Agreement

Subscription Shares

Use of net proceeds of the Open Offer and the Subscription

Information of the Investor and the directors of the Investor

Mr. Chau

Ms. Au

Mr. Chau KM

Mr. Chan

Easy Advance and Advance Shine

Update on the principal business of the Restructured Group

Future intention of the Investor regarding the Restructured Group

Fundraising activities of the Company in the past 12 months

C. Application for Whitewash Waiver and Special Deals

Whitewash Waiver

Investor’s dealing and interest in the Company’s securities

MS Group Holdings Limited Proxy Solicitation & Information Statement 2013