OCI International Holdings Limited - Proxy Solicitation & Information Statement 2012

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 to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in Dragonite International Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company. Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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DRAGONITE INTERNATIONAL LIMITED 叁龍國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 329)

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Underwriter of the Rights Issue

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FREEMAN SECURITIES LIMITED

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

Grand Vinco Capital Limited

(A wholly-owned subsidiary of Vinco Financial Group Limited)

It should be noted that the Shares will be dealt on an ex-rights basis from 7 January 2013. Dealings in the Rights Shares in the nil-paid form will take place from 18 January 2013 to 25 January 2013 (both dates inclusive). If the conditions of the Underwriting Agreement are not fulfilled or the Underwriting Agreement is terminated by the Underwriter, the Rights Issue will not proceed. Any Shareholders or other persons contemplating selling or purchasing Rights Shares in the nil-paid Rights Shares during the period from 18 January 2013 to 25 January 2013 (both dates inclusive) who are in any doubt about their position are recommended to consult their professional advisers. Any Shareholders or other persons dealing in the Shares up to the date on which all the conditions to which the Rights Issue is subject are fulfilled (and the date on which the Underwriter ’s right of termination of the Underwriting Agreement ceases) and any persons dealing in the nil-paid Rights Shares during the period from 18 January 2013 to 25 January 2013 (both dates inclusive) will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholders or other persons contemplating dealing in the Shares and/or the Rights Shares in their nil-paid form are recommended to consult their own professional advisers.

A letter of advice from Grand Vinco Capital Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 26 to 41 of this circular and a letter of recommendation from the Independent Board Committee to the Independent Shareholders is set out on pages 24 to 25 of this circular. A notice convening the EGM (as defined in this circular) of the Company to be held at 30th Floor, China United Centre, 28 Marble Road, North Point, Hong Kong at 4:30 p.m. on 3 January 2013 is set out on pages 61 to 63 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, being Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

It should be noted that the Underwriting Agreement in respect of the Rights Issue contains provisions entitling the Underwriter by notice in writing to the Company at any time prior to 4:00 p.m. on 1 February 2013 to terminate the obligations of the Underwriter thereunder on the occurrence of certain events including force majeure. These events are set out under the section headed “Termination of the Underwriting Agreement” on pages 12 to 14 of this circular. If the Underwriter terminates the Underwriting Agreement in accordance with the terms thereof, the Rights Issue will not proceed. In addition, the Rights Issue is conditional on all conditions set out on page 11 of this circular being fulfilled or waived (as applicable). If such conditions have not been satisfied or waived (as applicable) in accordance with the Underwriting Agreement on or before the time and dates specified therein, all liabilities of the parties to the Underwriting Agreement shall cease and determine and none of the parties shall have any claim against the other save that all such reasonable costs, fees and other out of pocket expenses as have been properly incurred by the Underwriter in connection with the underwriting of the Underwritten Shares by the Underwriter (excluding the underwriting commission, sub underwriting fees and related expenses) shall, to the extent agreed by the Company, be borne by the Company. In such event, the Rights Issue will not proceed.

14 December 2012

	Page
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from Vinco Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I: Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Appendix II: Unaudited pro forma financial information of the Group . . . . . . . . . . . . . . .	43
Appendix III: General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61

— i —

EXPECTED TIMETABLE

The expected timetable for the proposed Rights Issue is set out below:

(Hong Kong time) Latest time for lodging proxy form of EGM (not less than 48 hours prior to time of EGM) . . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on Tuesday, 1 January 2013 Expected date and time of EGM . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on Thursday, 3 January 2013 Announcement of results of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 3 January 2013 Last day of dealings in the Shares on cum-rights basis . . . . . . . . . . . . . . . . .Friday, 4 January 2013 Ex-date (the first day of dealings in the Shares on ex-rights basis) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 7 January 2013 Latest time for lodging transfers of Shares in order to qualify for the Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on Tuesday, 8 January 2013 Register of members closes (both days inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 9 January 2013 to Tuesday, 15 January 2013 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 15 January 2013 Register of members to be re-opened . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 16 January 2013 Prospectus Documents to be posted . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 16 January 2013 First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . .Friday, 18 January 2013 Latest time for splitting of nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . .4:30 p.m. on Tuesday, 22 January 2013 Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . .Friday, 25 January 2013 Latest time for acceptance of and payment for Rights Shares and application for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday, 30 January 2013 Latest time for the termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Friday, 1 February 2013 Announcement of allotment results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Monday, 4 February 2013

— ii —

EXPECTED TIMETABLE

Despatch of certificates for fully-paid

Rights Shares and refund cheques . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 7 February 2013

Expected first date of dealing

in fully-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 8 February 2013

All times and dates in this circular refer to Hong Kong local times and dates. Dates or deadlines specified in expected timetable above are indicative only. Any changes to the expected timetable will be published or notified to Shareholders as and when appropriate.

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES AND FOR APPLICATION AND PAYMENT FOR EXCESS RIGHTS SHARES

The latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights 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 Acceptance Date. Instead the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be extended to 5:00 p.m. on the same Business Day; or
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Acceptance Date. Instead the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares does not take place on the Acceptance Date, the dates mentioned in this section may be affected. An announcement will be made by the Company in such event.

— iii —

DEFINITIONS

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

“Acceptance Date” 30 January 2013 or such other date as the Underwriter may agree in writing with the Company, as the latest date for acceptance of, and payment for, Rights Shares and application and payment for excess Rights Shares
“Announcement” the announcement of the Company dated 20 November 2012 relating to the proposed Rights Issue
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Board” the board of Directors
“Business Day” any day (excluding Saturday, Sundays and Public Holidays) on which banks generally are open for business in Hong Kong
“CCASS” the Central Clearing and Settlement System established and operated by HKSCC
“Companies Law” The Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands
“Companies Ordinance” The Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company” Dragonite International Limited, a company incorporated in the Cayman Islands with limited liability and the Shares are listed on the main board of the Stock Exchange
“connected person(s)” has the meaning ascribed thereto under the Listing Rules
“Director(s)” director(s) of the Company “EAF(s)” the form(s) of application for excess Rights Shares, being in such usual form as maybe agreed between the Company and the Underwriter
“EGM” the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve the proposed Rights Issue
“Group” the Company and its subsidiaries
“HKSCC” Hong Kong Securities Clearing Company Limited “HK$” Hong Kong dollar, the lawful currency of Hong Kong

— 1 —

DEFINITIONS

“Hong Kong”
“Independent Board Committee”
“Independent Shareholders”
“Independent Third Party (Parties)”
“Last Trading Day”
“Latest Practicable Date”
“Latest Termination Date”
“Listing Rules”
“Non-Qualifying Shareholders”
“Options”
“Overseas Shareholder(s)”

the Hong Kong Special Administrative Region of the People’s Republic of China

comprising all independent non-executive Directors established to advise the Independent Shareholders in respect of the proposed Rights Issue any Shareholders other than controlling Shareholders and their respective associates or, where there are no controlling Shareholders, any Shareholder other than Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates

third party (parties) independent of the Company and its connected persons
20 November 2012, being the date of the Underwriting Agreement
11 December 2012, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
1 February 2013, being the second business day following the Acceptance Date or such other date as the Underwriter may agree in writing with the Company
the Rules Governing the Listing of Securities on the Stock Exchange
those Overseas Shareholders to whom the Directors, based on opinions provided by the Company’s legal advisers, consider it necessary or expedient not to offer the Rights Issue to such Shareholders on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place
the outstanding share options pursuant to the Share Option Scheme
Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose address(es) as shown on such register is (are) outside Hong Kong

— 2 —

DEFINITIONS

“PAL(s)” the renounceable provisional allotment letter(s) proposed to be issued to the Qualifying Shareholders in connection with the Rights Issue, being in such usual form as may be agreed between the Company and the Underwriter “Posting Date” 16 January 2013 or such other date as the Underwriter may agree in writing with the Company, as the expected date of despatch of the Prospectus Documents to the Qualifying Shareholders or the Prospectus to the Non-Qualifying Shareholders for information only (as the case may be) “PRC” the People’s Republic of China “Prospectus” the prospectus to be despatched to Shareholders containing details of the Rights Issue “Prospectus Documents” the Prospectus, PAL and EAF “Qualifying Shareholders” Shareholders, other than the Non-Qualifying Shareholders “Record Date” 15 January 2013 or such other date as the Underwriter may agree in writing with the Company, as the date by reference to which entitlements to the Rights Issue are expected to be determined “Registrar” the branch share registrar of the Company in Hong Kong, being Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong “Rights Issue” the proposed issue by way of rights on the basis of one Rights Share for every Share in issue and held on the Record Date at the Subscription Price on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents “Rights Shares” Shares to be issued and allotted under the Rights Issue, being not less than 105,974,992 Shares, but not more than 106,084,914 Shares (if the Options are exercised in full on or prior to the Record Date) “SFO” The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “Share(s)” ordinary share(s) in the issued and unissued capital of the Company, the par value of which being HK$0.01 each “Shareholder(s)” holder(s) of the Shares

— 3 —

DEFINITIONS

“Share Option Scheme”

the share option scheme of the Company adopted on 30 May 2003

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Subscription Price”

HK$1.00 per Rights Share

“Underwriter” Freeman Securities Limited, a corporation licensed to carry out Type 1 (dealing in securities) regulated activities within the meaning of the SFO
“Underwriting Agreement”
the underwriting agreement dated 20 November 2012 entered into between the Company and the Underwriter in relation to the underwriting arrangement in respect of the Rights Issue (as supplemented by the supplemental agreement dated 11 December 2012 between the same parties)
“Underwritten Shares”
not less than 105,974,992 and not more than 106,084,914 Rights Shares underwritten by the Underwriter pursuant to the terms of the Underwriting Agreement
“Vinco Capital” or “Independent Financial Adviser”
Grand Vinco Capital Limited, a wholly-owned subsidiary of Vinco Financial Group Limited (Stock Code: 8340), a licensed corporation to carry out business in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the proposed Rights Issue
“%” or “per cent.” percentage or per centum

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LETTER FROM THE BOARD

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Dragonite International Limited 叁龍國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 329)

Executive Directors: Mr. Wong Yin Sen (Chairman) Mr. Gary Drew Douglas (Managing Director) Mr. Hon Lik Ms. Chan Mee Sze Mr. Lam Suk Ping

Independent non-executive Directors:

Mr. Chung Yuk Lun Mr. Liu Kwong Sang Mr. Lam Man Sum, Albert Mr. Ho Tak Fun

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

Head office and principal place of business in Hong Kong: Room 1101, 11th Floor, China United Centre, 28 Marble Road, North Point, Hong Kong 14 December 2012

To the Shareholders

Dear Sir/Madam,

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

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LETTER FROM THE BOARD

issue of new Shares or repurchase of Shares) by issuing not less than 105,974,992 and not more than 106,084,914 new Share to the Qualifying Shareholders by way of the Rights Issue at a subscription price of HK$1.00 per Rights Share on the basis of one Rights Share for every Share held on the Record Date.

In compliance with Rule 7.19(6) of the Listing Rules, the Rights Issue is conditional upon the approval of the Independent Shareholders by way of poll at the EGM. The purpose of this circular is to provide you, among other things, (i) further details about the the proposed Rights Issue; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in respects of the Rights Issue; (iii) a letter of advice from Vinco Capital to the Independent Board Committee and the Independent Shareholders on the Rights Issue; and (iv) a notice convening the EGM.

The Independent Board Committee has been formed to advise the Independent Shareholders in respect of the Rights Issue. Vinco Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

PROPOSED RIGHTS ISSUE

Details of the Rights Issue are set out below:

Issue statistics

Basis of the Rights Issue : One Rights Share for every Share held on the Record Date Number of Shares in : 105,974,992 Shares issue as at the Latest Practicable Date Number of Rights Shares : Not less than 105,974,992 new Shares (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) and not more than 106,084,914 new Shares (assuming (i) the Options are fully exercised on or before the Record Date and (ii) no further issue of Shares or repurchase of Shares) Subscription Price : HK$1.00 per Rights Share with nominal value of HK$0.01 each

As the Latest Practicable Date, there are 109,922 Options which are exercisable to subscribe for an aggregate of 109,922 new Shares. Therefore, the maximum number of Rights Shares that may be issued under the Rights Issue would be 106,084,914.

Save as disclosed above, as at the Latest Practicable Date, the Company has no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares. Assuming no further issue of new Shares or repurchase of Shares on or before

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LETTER FROM THE BOARD

the Record Date, the 105,974,992 nil-paid Rights Shares proposed to be provisionally allotted represent 100% of the Company’s issued share capital and approximately 50% of the Company’s issued share capital as enlarged by the issue of the 105,974,992 Rights Shares. The aggregate nominal value of the 105,974,992 Rights Shares will be HK$1,059,749.92.

QUALIFYING SHAREHOLDERS

The Company will send the Prospectus Documents to the Qualifying Shareholders. To qualify for the Rights Issue, a Shareholder must:

be registered as a member of the Company at the close of business on the Record Date; and
be a Qualifying Shareholder.

In order to be registered as members of the Company at the close of business on the Record Date, owners of Shares must lodge any transfers of Shares (together with the relevant share certificates) with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 8 January 2013.

Holders of the Share Options who wish to participate in the Rights Issue should exercise the subscription rights attaching to their Share Options in accordance with the terms of the Share Option Scheme on or before 4:30 p.m. on 8 January 2013 so as to enable them to be registered as members of the Company on or before the Record Date.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from 9 January 2013 to 15 January 2013, both dates inclusive. No transfer of Shares will be registered during this period.

RIGHTS OF OVERSEAS SHAREHOLDERS

The Prospectus Documents are not intended to be registered under the applicable securities legislation of any jurisdiction other than Hong Kong.

In compliance with Rule 13.36(2)(a) of the Listing Rules, the Company will make enquiries regarding the feasibility of extending the Rights Issue to the Overseas Shareholders. If, based on legal advice, the Directors consider that it is necessary or expedient not to offer the Rights Shares to the Overseas Shareholders on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place, the Rights Issue will not be available to such Overseas Shareholders. Further information in this connection will be set out in the Prospectus Documents containing, among other things, details of the Rights Issue, to be despatched to the Qualifying Shareholders on the Posting Date. The Company will send copies of the Prospectus to the Non-Qualifying Shareholders for their information only, but will not send any PAL and EAF to them on the Posting Date.

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LETTER FROM THE BOARD

Arrangements will be made for Rights Shares which would otherwise have been provisionally allotted to the Non-Qualifying Shareholders to be sold in the market in their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence, if a premium (net of expenses) can be obtained. The proceeds of such sale, less expenses, of more than HK$100 will be paid pro rata to the Non-Qualifying Shareholders. The Company will retain individual amounts of HK$100 or less for the benefits of the Company. Any unsold entitlement of Non-Qualifying Shareholders, together with any Rights Shares provisionally allotted but not accepted, will be made available for excess application on EAFs by Qualifying Shareholders.

According to the register of members of the Company as at the Latest Practicable Date, there were no Overseas Shareholders.

SUBSCRIPTION PRICE

The Subscription Price for the Rights Shares is HK$1 per Rights Share, payable in full upon acceptance of the relevant provisional allotment of Rights Shares and, where applicable, application for excess Rights Shares under the Rights Issue or when a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents:

(i) a discount of approximately 48.98% to the closing price of HK$1.96 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 32.43% to the theoretical ex-rights price of approximately HK$1.48 per Share based on the closing price of HK$1.96 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 49.49% to the average closing price of approximately HK$1.98 per Share as quoted on the Stock Exchange for the five consecutive trading days ended on the Last Trading Date; and
(iv) a discount of approximately 32.43% to the theoretical ex-rights price of approximately HK$1.48 per Share, based on the closing price of HK$1.95 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Subscription Price was determined after arm’s length negotiations between the Company and the Underwriter with reference to the market price of the Shares under the prevailing market conditions. The Directors (including the independent non-executive Directors) consider the terms of the Rights Issue, including the Subscription Price which has been set as a discount as described above with an objective to encourage existing Shareholders to take up their entitlements so as to participate in the potential growth of the Company, to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole. The net price per Rights Share (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) will be approximately HK$0.961.

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LETTER FROM THE BOARD

BASIS OF PROVISIONAL ALLOTMENT

The basis of the provisional allotment shall be one Rights Share for every Share in issue and held at the close of business on the Record Date, being not less than 105,974,992 Rights Shares (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) and not more than 106,084,914 Rights Shares (assuming (i) the Options are fully exercised on or before the Record Date and (ii) no further issue of new Shares or repurchase of Shares) at the Subscription Price payable in full on acceptance and otherwise on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents. Application for all or any part of a provisional allotment should be made by completing the PAL and lodging the same with a remittance for the Rights Shares being applied for.

FRACTIONS OF RIGHTS SHARES

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

STATUS OF RIGHTS SHARES

The Rights Shares, when allotted and fully paid, will rank pari passu in all respects with the Shares then in issue. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment of the Rights Shares in their fully-paid form.

APPLICATION FOR EXCESS RIGHTS SHARES

Qualifying Shareholders or transferees of nil-paid Rights Shares may apply, by way of excess application, for any unsold entitlements of the Non-Qualifying Shareholders and for any Rights Shares provisionally allotted but not accepted. Applications for excess Rights Shares may be made by completing the EAFs for application for excess Rights Shares and lodging the same with a separate remittance for the excess Rights Shares being applied for. The Directors will allocate the excess Rights Shares at their discretion on a fair and equitable basis on the following principles:

(1) preference will be given to applications for less than a board lot of Rights Shares where they appear to the Directors that such applications are made to round up odd-lot holdings to whole-lot holdings and that such applications are not made with intention to abuse this mechanism; and
(2) subject to availability of excess Rights Shares after allocation under principle (1) above, the excess Rights Shares will be allocated to the Qualifying Shareholders who have applied for excess application on a pro rata based on the excess Rights Shares applied by them, with board lots allocation to be made on a best effort basis.

Investors with their Shares held by a nominee company should note that the Board will regard the nominee company as a single Shareholder according to the register of members of the Company.

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LETTER FROM THE BOARD

Accordingly, the Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to beneficial owners individually. Investors with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date.

Investors whose Shares are held by their nominee(s) and who would like to have their names registered on the register of members of the Company at the close of business on the Record Date, must lodge all necessary documents with the share registrar of the Company, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, for completion of the relevant registration by 4:30 p.m. on Tuesday, 8 January 2013.

SHARE CERTIFICATES AND REFUND CHEQUES FOR RIGHTS ISSUE

Subject to the fulfillment of the conditions of the Rights Issue, share certificates for all fully-paid Rights Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before 7 February 2013. Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares (if any) are expected to be posted on or before 7 February 2013 by ordinary post to the applicants at their own risk.

APPLICATION FOR LISTING

The Company will apply to the Listing Committee of the Stock Exchange for the listing of and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms to be issued and allotted pursuant to the Rights Issue.

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

Both nil-paid Rights Shares and fully-paid Rights Shares will be traded in board lots of 4,000 Shares.

Dealings in the Rights Shares in both their nil-paid and fully-paid forms which are registered in the branch register of members of the Company in Hong Kong will be subject to the payment of stamp duty, Stock Exchange trading fee, transaction levy and any other applicable fees and charges in Hong Kong.

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LETTER FROM THE BOARD

CONDITIONS OF THE RIGHTS ISSUE

The Rights Issue is conditional upon certain conditions being fulfilled or waived (as appropriate):

the passing of the necessary resolution(s) by the Independent Shareholders at the EGM to approve the Rights Issue and the transactions contemplated under the Underwriting Agreement;
the Listing Committee of the Stock Exchange granting or agreeing to grant and not having withdrawn or revoked the listing of and permission to deal in all the Rights Shares, in both nil-paid and fully-paid forms, by no later than the Posting Date;
the delivery to the Stock Exchange and registration by the Registrar of Companies in Hong Kong of one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by a resolution of the Directors (and all other documents required to be attached thereto) not later than the Posting Date and otherwise in compliance with the Listing Rules and the Companies Ordinance;
the posting of the Prospectus Documents to the Qualifying Shareholders and the posting, to the extent reasonably practicable, of the Prospectus for information purposes only to the Non-Qualifying Shareholders;
compliance with and performance of all the undertakings and obligations of the Company under the terms of the Underwriting Agreement.

In the event that the above conditions have not been satisfied on or before 31 March 2013 (or such later date as the Underwriter and the Company may agree in writing), all liabilities of the parties to the Underwriting Agreement shall cease and determine and no party shall have any claim against the other parties save for any antecedent breach of the Underwriting Agreement and the Rights Issue will not proceed.

THE UNDERWRITING AGREEMENT

Date : 20 November 2012 Underwriter : Freeman Securities Limited, as at the Latest Practicable date, an associate of the Underwriter held 5,276,000 Shares (representing approximately 4.98% of the issued share capital of the Company). To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, as at the Latest Practicable Date, the Underwriter and its associates are Independent Third Parties.

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LETTER FROM THE BOARD

Underwriting commitment : The Rights Shares will be fully underwritten by the of the Underwriter Underwriter pursuant to the terms and conditions of the Underwriting Agreement. Commission : 2.5% of the aggregate Subscription Price multiplied by the number of all the Rights Shares

The Board considers the terms of the Underwriting Agreement including the commission rate in accordance with the market practice and are fair and reasonable so far as the Company and the Shareholders are concerned.

The commission rate was determined after arm’s length negotiation between the Company and the Underwriter by reference to the prevailing market rate. The Directors consider that the terms of the Underwriting Agreement (including the underwriting commission) are fair and reasonable and in the interests of the Company and the Shareholders are concerned.

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 4:00 p.m. on the Latest Termination Date if:

(a) in the reasonable opinion of the Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(i) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(ii) 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 of the Underwriting Agreement, of a political, financial, economic, currency market or other nature (whether or not ejusdem generis with any of the foregoing) or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities market 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
(iii) any material adverse change in the business or in the financial or trading position or prospects of the Group as a whole; or
(iv) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out which would, 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

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LETTER FROM THE BOARD

(v) there occurs or comes into effect the imposition of any moratorium, suspension or material restriction on trading in the Shares generally on the Stock Exchange due to exceptional financial circumstances or otherwise; or
(vi) the commencement or taking by any third party of any litigation or claim or other action against any member of the Group which is or might be material to the Group taken as a whole; or
(b) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities, imposition of economic sanctions, on Hong Kong, the Cayman Islands, the PRC or other jurisdiction relevant to the Group or any member of the Group and a change in currency conditions for the purpose of this clause includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs which in the reasonable opinion of the Underwriter makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(c) the Prospectus when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which in the reasonable opinion of the Underwriter is material to the Group as a whole and is likely to affect materially and adversely the success of the Rights Issue or might cause a prudent investor not to accept the Rights Shares provisionally allotted to it; or
(d) the Company commits any material breach of or omits to observe any of the material obligations or material undertakings expressed to be assumed by it under the Underwriting Agreement; or
(e) if, at or prior to 4:00 p.m. on the Latest Termination Date:
(i) any material breach of any of the warranties or undertakings of the Company contained under the Underwriting Agreement comes to the knowledge of the Underwriter; or
(ii) any event occurring or matter arising on or after the date of the Underwriting Agreement and prior to 4:00 p.m. on the Latest Termination Date which if it had occurred or arisen before the date of the Underwriting Agreement would have rendered any of the warranties of the Company contained under the Underwriting Agreement untrue or incorrect in any material respect comes to the knowledge of the Underwriter,

then and in such case, that Underwriter may, in addition to and without prejudice to any other remedies to which the Underwriter may be entitled, by notice in writing to the Company terminate the Underwriting Agreement.

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LETTER FROM THE BOARD

Upon the giving of such notice, all obligations of the Underwriter under the Underwriting Agreement shall cease and determine (save for any antecedent breaches thereof) and no party to the Underwriting Agreement shall have any claim against any other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement. If the Underwriter exercises such right, the Rights Issue will not proceed.

WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES

The Shares will be dealt in on an ex-rights basis from 7 January 2013. Dealings in the Rights Shares in the nil-paid form will take place from 18 January 2013 to 25 January 2013 (both dates inclusive). If the conditions of the Underwriting Agreement are not fulfilled or the Underwriting Agreement is terminated by the Underwriter, the Rights Issue will not proceed.

Any Shareholders or other persons contemplating selling or purchasing Rights Shares in their nil-paid form during the period from 18 January 2013 to 25 January 2013 (both dates inclusive) who are in any doubt about their position are recommended to consult their professional advisers. Any Shareholders or other persons dealing in the Shares up to the date on which all the conditions to which the Rights Issue is subject are fulfilled (and the date on which the Underwriter’s right of termination of the Underwriting Agreement ceases) and any persons dealing in the nil-paid Rights Shares during the period from 18 January 2013 to 25 January 2013 (both dates inclusive) will accordingly bear the risk that the Rights Issue may not become unconditional or may not proceed.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company from the Latest Practicable Date to immediately after completion of the Rights Issue:

Scenario 1:

Assuming no further issue of new Shares and no repurchase of Shares on or before the Record Date:

								Immediately after
								completion of the Rights
								Issue assuming no
								Qualifying Shareholder
								takes up any of the Rights
				Immediately after				Shares and the
				completion of the Rights				Underwriter,
				Issue assuming all the				sub-underwriters and
				Qualifying Shareholders				subscribers procured by
				take up their respective				them take up the Rights
	As at the Latest			allotment of Rights Shares				Shares to the maximum
Name of Shareholder	Practicable Date			in full				extent
	No. of Shares	% (approx.)		No. of Shares	_% _	(approx.)		No. of Shares % (approx.)
Unity Investments Holdings
Limited (Note 1)	10,010,000		9.45	20,020,000			9.45	10,010,000 4.72
HEC Capital Limited
(Note 2)	7,514,700		7.09	15,029,400			7.09	7,514,700 3.55
Absolute Target Limited
(Note 3)	1,672,650		1.58	3,345,300			1.58	1,672,650 0.79
The Underwriter,
sub-underwriters and
subscribers procured by
them	—		—	—			—	105,974,992 50.00
Other public Shareholders	86,777,642		81.88	173,555,284			81.88	86,777,642 40.94
Total	105,974,992	100.00		211,949,984		100.00		211,949,984 100.00

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LETTER FROM THE BOARD

Scenario 2:

Assuming issue of new Shares upon exercising the Options in full and no further issue of new Shares or repurchase of Shares on or before the Record Date:

										Immediately	after	after
										completion of the Rights
										Issue assuming		no
										Qualifying Shareholder
										takes up any	of	the
				Assuming issue of			Immediately	after		Rights Shares	and the
				new Shares upon fully			completion of the Rights			Underwriter,
				exercising the	Options		Issue assuming all the			sub-underwriters		and
				and no further issue		of	Qualifying Shareholders			subscribers procured by
				new Shares or repurchase			take up their respective			them take up the Rights
	As at the Latest			of Shares on or before			allotment of Rights			Shares to the maximum
Name of Shareholder	Practicable Date			the Record Date			Shares in	full		extent
			%			%			%			%
	No. of Shares	(approx.)		No. of Shares	(approx.)		No. of Shares	(approx.)		No. of Shares	(approx.)
Unity Investments Holdings
Limited (Note 1)	10,010,000		9.45	10,010,000		9.44	20,020,000		9.44	10,010,000		4.72
HEC Capital Limited (Note 2)	7,514,700		7.09	7,514,700		7.08	15,029,400		7.08	7,514,700		3.54
Absolute Target Limited (Note 3)	1,672,650		1.58	1,672,650		1.58	3,345,300		1.58	1,672,650		0.79
The Underwriter and
sub-underwriters and
subscribers procured by them	—		—	—		—	—		—	106,084,914		50.00
Other public Shareholders	86,777,642	81.88		86,887,564	81.90		173,775,128	81.90		86,887,564		40.95
Total	105,974,992	100.00		106,084,914	100.00		212,169,828	100.00		212,169,828		100.00

Notes:

These Shares are held by Great Panorama International Limited which is a wholly-owned subsidiary of Unity Investments Holdings Limited, a company listed on the Stock Exchange.
These Shares are held by Murtsa Capital Management Limited which is a wholly-owned subsidiary of HEC Capital Limited.
Absolute Target Limited is controlled as to 46.25% by Mr. Wong Yin Sen, 42.50% by Mr. Hon Lik and 11.25% by Mr. Wong Hei Lin. Both of Mr. Wong Yin Sen and Mr. Hon Lik are executive Directors.

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LETTER FROM THE BOARD

The scenarios are for illustrative purpose only. Pursuant to the Underwriting Agreement, the Underwriter has sub-underwritten its underwriting obligations under the Underwriting Agreement to sub-underwriters and declares that it or any of the sub-underwriters has no intention of becoming, whether by itself or together with the parties acting in concert with it (if any), the controlling shareholder (as defined under the Listing Rules) of the Company as a result of performance of its obligations under the Underwriting Agreement.

As stipulated in the Underwriting Agreement, in the event that the Underwriter or any of the sub-underwriters is required to take up the Rights Shares pursuant to their underwriting/ sub-underwriting obligations, the Underwriter shall and shall cause the sub-underwriters to procure the subscribers to take up such number of Rights Shares as necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rules are complied with.

REASONS FOR THE RIGHTS ISSUE

The Group is principally engaged in (i) production and sales of health care products, pharmaceutical products and RUYAN atomizing cigarettes, (ii) securities trading and investments, (iii) property investment, and (iv) money lending.

The Group holds an extensive patent portfolio for its Ruyan electronic cigarette and the Group has been actively enforcing its intellectual property rights, in particular against those infringing in the United States. Notwithstanding the Company has engaged an international investment bank to advise the Company on the possible disposal of the electronic cigarette business in whole or in parts, the disposal may or may not materialize. The Board believes that to continue the business development of the Ruyan products is in the interests of the Shareholders and the Company as a whole.

The Group also holds a number of registered trademarks for its health care products. Production approval was granted by the Ministry of Public Health of the PRC to produce “Chenlong Baoling Longevity Ginseng”, the core health care product of the Group. The Group expects to obtain the renewal of GMP accreditation for its manufacturing plant in the PRC to produce health care products before the forthcoming Chinese New Year. Upon the grant of GMP accreditation and other relevant approvals, the Group plans to develop a series of “Chenglong Baoling Longevity Ginseng” related health care products.

In order to facilitate the development of Ruyan and health care products of the Group, the Directors have decided to raise fund by the Rights Issue.

The Board has considered debt financing and other methods of equity financing as possible financing alternatives available to the Group.

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LETTER FROM THE BOARD

For debt financing, it is expected that the Group would find it difficult to obtain bank borrowings with favourable terms under the current volatile market condition and given the Group’s loss-making position as announced in the most recent interim results. In addition, debt financing will increase the Group’s gearing ratio, debt-servicing costs and subject the Group to repayment obligations. Equity financing (such as in the form of the Rights Issue), on the other hand, will enable the Group to strengthen its capital base and enhance its financial position. Therefore, the Board considers that it is prudent to finance the Group’s long-term growth by long-term financing, preferably in the form of equity.

With regard to equity financing, any placing of new Shares without first offering existing Shareholders the opportunity to participate would result in a dilution of shareholding interests of the existing Shareholders. Moreover, as the Board has confidence in the future business development of the Group, the Board would like to provide an opportunity for all Shareholders to share in the prospects of the Group.

Although both open offer and rights issue would allow all Shareholders to participate in the fund-raising exercise and to maintain their proportionate shareholding interests in the Company, the Board considers that a rights issue would further allow those Shareholders who do not want to participate in the fund-raising to dispose of their rights shares entitlements in the market in nil-paid form.

Having taken into consideration the aforesaid weaknesses of the other financing alternatives and the benefits of the Rights Issue, the Board considers that the Rights Issue is an appropriate financing method currently available to the Company and the Rights Issue is in the interests of the Company and the Shareholders as a whole.

USE OF PROCEEDS FOR THE RIGHTS ISSUE

The gross proceeds from the Rights Issue will be not less than approximately HK$105.97 million (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) and not more than approximately HK$106.08 million (assuming (i) the Options are exercised in full on or before the Record Date and (ii) no further issue of new Shares or repurchase of Shares). The estimated net proceeds from the Rights Issue will be not less than approximately HK$101.83 million (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) and not more than approximately HK$101.93 million (assuming (i) the Options are exercised in full on or before the Record Date and (ii) no further issue of new Shares or repurchase of Shares).

The Company intends to apply the net proceeds of the Rights Issue to finance its existing businesses and any relating investment opportunities, in particular to develop the electronic cigarette business, including strengthening of Ruyan brand, legal and administration cost for enforcing the intellectual property rights and operating expenses. In addition, the Company intends to apply the net proceeds to develop its health care business, including but not limited to fueling the future expansion of a series of “Chenlong Baoling Longevity Ginseng” products, legal and administration expenses for obtaining all necessary approvals from the Ministry of Public Health of the PRC and other relevant regulatory authorities, branding and marketing expenses as well as general working capital.

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LETTER FROM THE BOARD

The Company intends to apply approximately HK$25 million to HK$30 million for the corporate expenses and general working capital in Hong Kong, such as the payroll, administrative expenses, professional fee and in particular the legal cost for strengthening and enforcing the Group’s intellectual property rights. Following the resumption of production of health care products, additional cash resources are also required for the growth of the business and to continue the business development of electronic cigarettes. The balance of approximately HK$70 million to HK$75 million is expected to be utilized to support the operational activities in the PRC, including but not limited to production cost, material purchase cost, capital expenditure, branding and marketing expenses, professional fee, administrative expenses and payroll.

BUSINESS REVIEW & TRADING PROSPECTS

Electronic cigarettes

The Group continues to improve its electronic cigarette products and to enforce and strengthen its intellectual property rights globally. In respect of the civil actions for infringement of United States Patent No. 7,832,410 (the “410 Patent”) against a total of 11 defendants, Vapor Corp. is the only remaining defendant. The litigation has been resolved against the other 410 patent defendants. Recently, new claims submitted in a continuation application (U.S. Application No. 13/079,937) were allowed by the US Patent Office. As previously announced, the Group filed ten new complaints in June 2012 for infringement of United States Patent No. 8,156,944 (the “944 Patent”) in the United States District Court of the Central District of California. The 944 Patent is related to the fundamental architecture and functionality of the electronic cigarette. The Group continues to actively pursue the ten 944 Patent cases. No rulings by the court have been made as yet for the 944 Patent cases. The Company is in the process of filing national phase applications for a core patent (“Improved Atomizing Electronic Cigarette” - PCT/CN2010/000125) in countries including the United States, Canada, Japan, Brazil, Egypt, Israel and Singapore.

To overcome common problems among other electronic cigarettes, the Group has developed several new technologies to prevent leakage and to improve overall performance. The unique design of the Ruyan atomizer provides for consistent nicotine release in the vapor. The Group continues to improve the taste, quality and reliability of its electronic cigarettes and is making progress in expanding distribution channels in overseas markets.

The Group has improving prospects for overseas sales and has received prepayments. However, production for these new orders is not expected until the first quarter of 2013.

Health care and pharmaceutical products

The Group has temporarily suspended the sales and production of health care products pending the renewal of GMP accreditation. During the suspension, revenue derived from this business segment is minimal. It is expected that the Group will be granted the renewal of GMP accreditation before the forthcoming Chinese New Year. Upon obtaining all the necessary approvals from the relevant regulatory authorities, the Group plans to develop a new series of “Chenlong Baoling Longevity Ginseng” health care products.

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LETTER FROM THE BOARD

Azithromyscin Granules and Rosiglitazone Hydrochloride Capsules are and will remain the two key pharmaceutical products of the Group. The Group has recorded somewhat stable revenue from the sales of pharmaceutical products since January 2012. Based on the financial information currently available, turnover from sales of pharmaceutical products for the ten months ended 31 October 2012 (subject to audit) is very close to the turnover for the entire year of 2011. Turnover of pharmaceutical products for the six months ended 30 June 2012 was approximately HK$8.9 million, representing an increase of 69.6% as compared to the corresponding period in 2011.

Securities trading and investments

The Group’s securities portfolio recorded an unaudited net realized gain on the change in fair value of financial assets at fair value through profit or loss of approximately HK$3.1 million for the six months ended 30 June 2012. The unaudited net realized and unrealized loss for the aforesaid period was approximately HK$16.6 million. Following the rights issue in the second quarter of 2012, the Group invested in the stocks of some listed companies in Hong Kong, including but not limited to constituent stock of Hang Seng Index and the stocks in property sector, media and entertainment sector, retail sector as well as manufacturing and trading sector. The unaudited net realized gain on the change in fair value of financial assets at fair value through profit or loss for the eleven months ended 30 November 2012 amounted to approximately HK$17 million. With an aim to capture future appreciation of share price and as a treasury function, the Group will continue to take opportunities to diversify its securities investment portfolio.

Other Businesses

The Group has fully leased out the entire area of the Basement (except the common area for public access), China United Centre, 28 Marble Road, North Point, Hong Kong generating an aggregate of HK$410,000 rental income per month since May 2012.

Since July 2012, as many major banks have tightened their credit policy due to the euro zone debt crisis, the Group has also found new opportunities to develop its money lending business.

Prospects

Although the Group’s pharmaceutical products sales for the first half of 2012 have been generally satisfactory, faced with competition from imported goods, the Board believes it will not be able to achieve significant growth in the short term. However, upon obtaining GMP accreditation for its production plant in Shenyang, the Group will launch “Chenlong Baoling Longevity Ginseng” in China with new packaging. The Group also plans to expand its range of health care products in order to diversify its revenue stream.

In November 2012, the Company has engaged an international investment bank to advise the Company on the possible disposal of the electronic cigarette business in whole or in parts. The Group is proceeding with the due diligence process with acquirer candidates. The Board expects this process will take several months or longer. The Group has not yet concluded the form of the possible disposal with the potential acquirers and no definitive agreement have been signed with potential acquirers. The disposal may or may not materialize.

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LETTER FROM THE BOARD

FUND RAISING EXERCISES OF THE COMPANY IN THE PAST TWELVE MONTHS

		Net proceeds to
Date of	Fund raising	be raised	Proposed use of	Actual use of the
announcement	activity	(Approximately)	the net proceeds	net proceeds
22 June 2012	Placing of	HK$20.4 million	The entirety of	Approximately
	326,076,900 new		the net proceeds	HK$7.8 million
	pre-consolidated		was intended to	was dedicated to
	shares under		be dedicated to	the paid-up
	general mandate		the paid-up	capital of the new
	on a fully		capital of the new	subsidiary in
	underwritten		subsidiary in	California and the
	basis, which was		Southern	balance in the
	completed on 29		California as	sum of
	June 2012.		disclosed in the	approximately
			announcement of	HK$12.6 million
			the Company	has not yet
			dated 22 June	utilized.
			2012.
3 November 2011	Rights issue of	HK$102.9 million	It was intended to	Approximately
	1,086,923,000		use as to (i)	HK$50 million
	pre-consolidated		HK$25 million to	was utilized for
	shares at HK$0.1		HK$50 million for	retirement of
	each on the basis		electronic	debts. The balance
	of 2		cigarette business;	of approximately
	pre-consolidated		(ii) HK$25	HK$52.9 million
	rights shares for		million to HK$65	was utilized for
	every		million for health	general working
	pre-consolidated		care products	capital, of which
	share held on the		business; and (iii)	approximately
	record date, which		HK$25 million to	HK$6 million for
	was completed on		HK$50 million for	administrative
	2 May 2012.		additional	costs and
			working capital	operating
			and/or for	activities,
			retirement of	approximately
			debts. If and	HK$2 million for
			when there is	electronic
			surplus cash	cigarette business
			available, up to	particularly and
			HK$50 million	approximately
			will be used for	HK$44.9 million
			securities trading.	for securities
				trading.

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LETTER FROM THE BOARD

Save as abovementioned, the Company had not conducted any other fund raising exercise in the past twelve months immediately preceding the Latest Practicable Date.

POSSIBLE ADJUSTMENTS TO THE SHARE OPTIONS

As a result of the Rights Issue, the exercise price and the number of Shares to be issued pursuant to the Share Options may be adjusted in accordance with the respective terms and conditions of the Share Option Scheme and Chapter 17 of the Listing Rules and the supplementary guidelines issued by the Stock Exchange on 5 September 2005. The Company will instruct its auditors to certify the adjustments, if any, to the Share Options and will inform holders of the Share Options of the adjustments, if any, accordingly. Further announcement will be made by the Company in respect of such adjustments as and when appropriate.

TAXATION

Qualifying Shareholders are recommended to consult their professional advisers if they are in any doubt as to the tax implications of the holding or disposal of, or dealing in the Rights Shares in both their nil-paid and fully-paid forms, as regards the Non-Qualifying Shareholders, their receipt of the net proceeds of sale of the Rights Shares otherwise falling to be issued to them under the Rights Issue. It is emphasised that none of the Company, its Directors or any other parties involved in the Rights Issue accepts responsibility for any tax effects or liabilities of holders of the Rights Shares resulting from the purchase, holding or disposal of, or dealing in the Rights Shares in both their nil-paid and fully-paid forms.

THE EGM

The EGM will be convened and held for the Independent Shareholders to consider and, if thought fit, to approve the proposed Rights Issue.

In compliance with Rule 7.19(6) of the Listing Rules, the Rights Issue is conditional upon the approval of the Independent Shareholders by way of poll at the EGM. The Company does not have any controlling Shareholder as at the Latest Practicable Date. As at the Latest Practicable Date, to the best knowledge, information and belief of the Directors, Absolute Target Limited which is controlled as to 46.25% by Mr. Wong Yin Sen, 42.50% by Mr. Hon Lik and 11.25% by Mr. Wong Hei Lin (both of Mr. Wong Yin Sen and Mr. Hon Lik are executive Directors), holds 1,672,650 Shares (representing approximately 1.58% of the entire issued share capital of the Company as at the Latest Practicable Date) will abstain from voting in favour of the proposed resolution approving the Rights Issue at the EGM.

As at the Latest Practicable Date, to the best knowledge, information and belief of the Directors, an associate of the Underwriter holds 5,276,000 Shares, representing approximately 4.98% of the entire issued share capital of the Company. As the Underwriter is a party to the Underwriting Agreement, the Underwriter and its associate have a material interest in the Rights Issue. Hence, the associate of the Underwriter, to the extent of its shareholding at the EGM, will be required to abstain from voting on the proposed resolution to approve the Rights Issue at the EGM.

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LETTER FROM THE BOARD

Save as disclosed above, none of the Directors nor the chief executive of the Company and their respective associates, hold any Shares and none of the Shareholders are required to abstain from voting in favour of the proposed resolution approving the Rights Issue at the EGM pursuant to the Listing Rules and/or the articles of association of the Company.

Upon approval of the Rights Issue by the Independent Shareholders at the EGM, the Prospectus Documents setting out details of the Rights Issue will be despatched to the Qualifying Shareholders as soon as practicable and the Prospectus will be despatched to the Non-Qualifying Shareholders for information only.

A notice convening the EGM is set out on pages 61 to 63 of this circular. The EGM will be held at 30/F., China United Centre, 28 Marble Road, North Point, Hong Kong at 4:30 p.m. on 3 January 2013.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the meeting in person, please complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, being Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for holding of the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish and in such event, the proxy shall be deemed to be revoked.

RECOMMENDATION

You are advised to read carefully the letter from the Independent Board Committee and the letter of advice from Vinco Capital set out on pages 24 to 25 and pages 26 to 41 respectively of this circular. The Independent Board Committee, having taken into account the advice of Vinco Capital, considers that the terms of the Rights Issue are fair and reasonable so far as the Independent Shareholders are concerned and the Rights Issue is in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the proposed resolution(s) approving the Rights Issue at the EGM.

Accordingly, the Directors believe that the Rights Issue is in the interests of the Company and the Shareholders as a whole, therefore, the Directors recommend the Independent Shareholders to vote in favour of the aforesaid resolution(s) to be proposed at the EGM.

ADDITIONAL INFORMATION

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

Yours faithfully, By order of the Board Dragonite International Limited Gary Drew Douglas Managing Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter of recommendation, prepared for the purpose of incorporation in this circular, from the Independent Board Committee to the Independent Shareholders regarding the Rights Issue:

==> picture [70 x 100] intentionally omitted <==

Dragonite International Limited 叁龍國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 329)

14 December 2012

To the Independent Shareholders

Dear Sirs or Madam,

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE

We refer to the circular of the Company dated 14 December 2012 (the “Circular”) of which this letter forms part. Unless the context specifies otherwise, capitalized terms used herein have the same meanings as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the Rights Issue are fair and reasonable insofar as the Independent Shareholders are concerned. Vinco Capital has been appointed as the Independent Financial Adviser to advise you and us in this respect.

Having taken into account the principal reasons and factors considered by, and the advice of Vinco Capital as set out in its letter of advice to you and us on pages 26 to 41 of the Circular, we are of the opinion that the Rights Issue is in the interests of the Company and the Independent Shareholders as a whole and the terms of which are fair and reasonable insofar as the Company and

— 24 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Rights Issue.

Yours faithfully, For and on behalf of

Independent Board Committee Mr. Chung Yuk Lun, Mr. Liu Kwong Sang, Mr. Lam Man Sum, Albert, Mr. Ho Tak Fun Independent non-executive Directors

— 25 —

LETTER FROM VINCO CAPITAL

The following is the text of a letter of advice from Vinco Capital to the Independent Board Committee and the Independent Shareholders in connection with the proposed Rights Issue which has been prepared for the purpose of incorporation in this circular:

==> picture [56 x 36] intentionally omitted <==

Grand Vinco Capital Limited Units 4909-4910, 49/F., The Center 99 Queen’s Road Central, Hong Kong

14 December 2012

To the Independent Board Committee and the Independent Shareholders of Dragonite International Limited

Dear Sirs,

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE

A. INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in connection with the proposed Rights Issue, details of which are set out in the “Letter from the Board” in the circular (the “Circular”) issued by the Company to the Shareholders dated 14 December 2012 of which this letter forms part. Capitalized terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

On 20 November 2012, the Company announced that the Company proposed to raise not less than approximately HK$105.97 million, before expenses (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) to approximately HK$106.08 million before expenses (assuming (i) the Options are fully exercised on or before the Record Date and (ii) no further issue of new Shares or repurchase of Shares on or before the Record Date) by issuing not less than 105,974,992 and not more than 106,084,914 new Shares to the Qualifying Shareholders by way of the Rights Issue at a subscription price of HK$1.00 per Rights Share on the basis of one Rights Share for every Share held on the Record Date.

As stated in the Letter of the Board, the Company intends to apply the net proceeds of the Rights Issue to finance its existing businesses and any related investment opportunities, in particular to develop the electronic cigarette business and health care business.

— 26 —

LETTER FROM VINCO CAPITAL

The Independent Board Committee, comprising Mr. Chung Yuk Lun, Mr. Liu Kwong Sang, Mr. Lam Man Sum, Albert and Mr. Ho Tak Fun, all being the independent non-executive Directors, has been formed to advise the Independent Shareholders in respect of the Rights Issue. We have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders for the purposes of the Listing Rules, our role is to give you an independent opinion as to whether the terms of the Rights Issue are on normal commercial terms, fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole and whether the Independent Shareholders should vote in favour of the resolution to be proposed at the EGM to approve the Rights Issue.

B. BASIS OF OUR OPINION AND RECOMMENDATION

In forming our opinion and recommendation, we have relied on the information, facts and representations contained or referred to in the Circular and the information, facts and representations provided by, and the opinions expressed by the Directors, management of the Company and its subsidiaries. We have assumed that all information, facts, opinions and representations made or referred to in the Circular were true, accurate and complete at the time they were made and continued to be true, accurate and complete as at the date of the Circular and that all expectations and intentions of the Directors, management of the Company and its subsidiaries, will be met or carried out as the case may be. We have no reason to doubt the truth, accuracy and completeness of the information, facts, opinions and representations provided to us by the Directors, management of the Company and its subsidiaries. The Directors have confirmed to us that no material facts have been omitted from the information supplied and opinions expressed. We have no reason to doubt that any relevant material facts have been withheld or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided to us by the Directors, management of the Company and its subsidiaries.

— 27 —

LETTER FROM VINCO CAPITAL

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 relied on such information and opinions and have not, however, conducted any independent verification of the information provided, nor have we carried out any independent investigation into the business, financial conditions and affairs of the Group or its future prospect.

In formulating our opinion, we have not considered the taxation implications on Independent Shareholders in relation to the subscription for, holding or disposal of the Rights Shares or otherwise, since these are particular to their individual circumstances. It is emphasized that we will not accept responsibility for any tax effects on, or liabilities of any person resulting from the subscription for, holding or disposal of the Rights Shares or otherwise. In particular, Independent Shareholders subject to overseas taxation or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

Based on the foregoing, we confirm that we have taken all reasonable steps, which are applicable to the Rights Issue, as referred to in Rule 13.80 of the Listing Rules (including the notes thereto).

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the proposed Rights Issue and, 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.

C. PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Rights Issue, we have considered the principal factors and reasons set out below:

I. The Proposed Rights Issue

1. Background information of the Group

— 28 —

LETTER FROM VINCO CAPITAL

Set out below is a summary of the audited consolidated financial results of the Group for the two years ended 31 December 2011 and unaudited consolidated financial results of the Group for six months ended 30 June 2012, as extracted from the Company’s annual report 2011 (the “Annual Report”) and interim report 2012 (the “Interim Report”):

		For the	For the	For the
	six months ended		year ended	year ended
Consolidated Income	30 June 2012		31 December 2011	31 December 2010
Statement		(unaudited)	(audited)	(audited)
		HK$’000	HK$’000	HK$’000
Turnover		(10,539)	(232,907)	(61,425)
Profit/(loss) attributable to
Shareholders		(56,386)	(314,081)	(233,331)
		As at	As at	As at
Consolidated Statement of	30 June 2012		31 December 2011	31 December 2010
Financial Position		(unaudited)	(audited)	(audited)
		HK$’000	HK$’000	HK$’000
Net assets value		305,744	235,852	72,890
Total assets		387,595	375,323	129,210
Total liabilities		81,851	139,471	56,320

As stipulated in the Annual Report, we noted that the Group recorded negative turnover of approximately HK$232.91 million for the year ended 31 December 2011, representing an increase of loss in turnover of approximately 279.17% as compared to that of 2010 (approximately HK$61.43 million). The Group also recorded a loss attributable to Shareholders of approximately HK$314.08 million, representing an increase in loss attributable to Shareholders of approximately 34.6% as compared to that of 2010 (approximately HK$233.33 million). With reference to the Annual Report, such increase in loss was mainly attributable to (i) the Group recorded net realized and unrealized losses of approximately HK$214.41 million on change in fair value of financial assets at fair value through profit or loss in the income statement as a result of the market turbulence in the stock market during the year; (ii) sales of electronic cigarette products were very minimal during the first half of 2011 as the Group had been revamping its products; (iii) a provision for impairment of inventory at about HK$31.8 million was made for the year due to technical or commercial obsolescence; and (iv) the temporary suspension of the sales and production of health care products caused substantial decrease in sales as compared to 2011. As at 30 June 2012, the Group recorded total assets, total liabilities and net assets value of approximately HK$387.6 million, HK$81.85 million and HK$305.74 million respectively.

— 29 —

LETTER FROM VINCO CAPITAL

During the past twelve months, we noted that the Company conducted two fund-raising activities with net proceeds of approximately HK$123.3 million, which the Company raised (i) approximately HK$20.4 million by a placing of 326,076,900 new shares (prior to share consolidation in October 2012) under general mandate to Independent Third Parties as announced on 22 June 2012; and (ii) approximately HK$102.9 million by rights issue of 1,086,923,000 shares (prior to share consolidation in October 2012) at HK0.1 each on the basis of 2 rights shares for every share (prior to share consolidation in October 2012) held on the record date as announced on 3 November 2011.

Date of		Net proceeds	Proposed use of the	Actual use of the net
announcement	Fund raising activity	raised	net proceeds	proceeds
		(approximately)
22 June 2012	Placing of 326,076,900	HK$20.4 million	The entirety of the net	Approximately HK$7.8
	new pre-consolidated		proceeds was intended	million was dedicated
	shares under general		to be dedicated to the	to the paid-up capital
	mandate on a fully		paid-up capital of the	of the new subsidiary
	underwritten basis,		new subsidiary in	in California and the
	which was completed		Southern California as	balance in the sum of
	on 29 June 2012		disclosed in the	approximately
			announcement of the	HK$12.6 million has
			Company dated 22	not yet utilized.
			June 2012.
3 November	Rights issue of	HK$102.9 million	It was intended to use	Approximately HK$50
2011	1,086,923,000		as to (i) HK$25	million was utilized
	pre-consolidated shares		million to HK$50	for retirement of debts.
	at HK$0.1 each on the		million for electronic	The balance of
	basis of 2		cigarette business;	approximately
	pre-consolidated rights		(ii) HK$25 million to	HK$52.9 million was
	shares for every		HK$65 million for	utilized for general
	pre-consolidated share		health care products	working capital, of
	held on the record		business; and (iii)	which approximately
	date, which was		HK$25 million to	HK$6 million for
	completed on 2 May		HK$50 million for	administrative costs
	2012		additional working	and operating
			capital and/ or for	activities,
			retirement of debts. If	approximately HK$2
			and when there is	million for electronic
			surplus cash available,	cigarette business
			up to HK$50 million	particularly and
			will be used for	approximately
			securities trading.	HK$44.9 million for
				securities trading.

Save as abovementioned, the Company had not conducted any other fund raising exercise in the past twelve months immediately preceding the Latest Practicable Date.

— 30 —

LETTER FROM VINCO CAPITAL

2. Reasons for the Rights Issue and proposed use of proceeds

As stated in the Letter from the Board, the Company intends to apply the net proceeds of the Rights Issue to finance its existing businesses and any related investment opportunities, in particular to develop the electronic cigarette business, including strengthening of Ruyan brand, legal and administration cost for enforcing the intellectual property rights and operating expenses. In addition, the Company intends to apply the net proceeds to develop its health care business, including but not limited to fueling the future expansion of a series of “Chenlong Baoling Longevity Ginseng” products, legal and administration expenses for obtaining all necessary approvals from the Ministry of Public Health of the PRC and other relevant regulatory authorities, branding and marketing expenses as well as general working capital.

We noted that the Group has made substantial investments on both of its electronic cigarette business and the health care business. The Group holds an extensive patent portfolio for its Ruyan electric cigarettes and a number of registered trademarks for its health care products. The use of proceeds by the Group in these two business segments would enable the Group to take leverage on its existing patents and trademarks for further business development and revenue diversification. As per our discussion with the Directors, the allocation of the net proceeds from the Rights Issue are based on the historical expenses and the budget forecast of the Group for the coming 12 months. We are of the view that the proposed use of proceeds from the Rights Issue is in line with operation needs, the business development and objectives of the Group and in the interests of the Company and the Independent Shareholders as a whole.

The Rights Issue, which is on a fully underwritten basis, will remove a certain degree of uncertainty as compared to best-efforts placing. In addition, the Rights Issue will not incur burden on interest expenses to the Group as compared to the bank borrowing. As such, we are of the view that the Rights Issue is a preferred source of financing over the debt financing alternative.

We have also considered that the Rights Issue will (i) strengthen the Group’s capital base and enhance its financial position, so as to strengthen the Group’s core businesses; (ii) allow the Qualifying Shareholders to maintain their respective pro rata shareholding interest and an equal opportunity to participate in the enlargement of the capital base of the Company; and (iii) the Rights Issue is a preferred source of financing over other alternative fund-raising methods, we are of the view that raising funds by means of a rights issue is fair and reasonable and is in the interests of the Company and the Independent Shareholders as a whole.

— 31 —

LETTER FROM VINCO CAPITAL

Pricing for the Rights Issue

The Subscription Price is HK$1.00 per Rights Share, payable in full upon acceptance of the relevant provisional allotment of Rights Shares and, where applicable, application for excess Rights Shares under the Rights Issue or when a transferee of nil-paid Rights Shares applies for the Rights Shares. The Subscription Price represents:

(i) a discount of approximately 48.98% to the closing price of HK$1.96 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 49.49% to the average closing price of approximately HK$1.98 per Share as quoted on the Stock Exchange for the five consecutive trading days ended on the Last Trading Day; and
(iii) a discount of approximately 32.43% to the theoretical ex-rights price of approximately HK$1.48 per Share, based on the closing price of HK$1.96 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iv) a discount of approximately 32.43% to the theoretical ex-rights price of approximately HK$1.48 per Share, based on the closing price of HK$1.95 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(v) a discount of approximately 65.27% to the unaudited consolidated net asset value per Share of approximately HK$2.88 of the Company as at 30 June 2012 as published in the Interim Report of the Company (based on 105,974,992 Shares in issue as at Latest Practicable Date).

As stated in the Letter from the Board, the Subscription Price was determined after arm’s length negotiations between the Company and the Underwriter with reference to the market price of the Shares under the prevailing market conditions. The Directors consider the terms of the Rights Issue, including the Subscription Price which has been set as a discount as described above with an objective to encourage existing Shareholders to take up their entitlements so as to participate in the potential growth of the Company, to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole. The net price per Rights Share (assuming no further issue of new Shares or repurchase of Shares on or before the Record Date) will be approximately HK$0.961.

To assess as to the fairness and reasonableness of the Subscription, we set out the following analysis for illustrative purpose for the Independent Board Committee and the Independent Shareholders’ consideration. To the best of our knowledge, we have identified and reviewed 19 rights issue (the “Market Comparables”) by companies which are listed on the Main Board and Growth Enterprise Market of the Stock Exchange from 21 May 2012 up to and including the Last Trading Day (the “Review Period”), which is considered to be exhaustive, for comparison purpose. We are of the view that the Review Period being six months prior to and including the Last Trading Day would provide the recent relevant information on the market sentiment, which plays an important role in determining the subscription price of a rights issue in general. We also noted that the business activities of the Market Comparables are not directly comparable to those carried out by the Group

— 32 —

LETTER FROM VINCO CAPITAL

since the principal businesses of the Market Comparables are not directly comparable to those carried out by the Group and the terms of the rights issues of the Market Comparables may vary for companies with different financial standings, business performance and future prospects. Since the Market Comparables are the most recent rights issue transactions announced to the public, we consider that the Market Comparables could represent the recent trend of the rights issue transactions in the prevailing market condition and could provide a general reference for the terms of the Rights Issue. Set out below are the 19 Market Comparables:

					Premium/
					(discount) of the
					subscription	Premium/
					price over/(to)	(discount) of the
					the closing	subscription
					price on the	price over/(to)
		Date of	Basis of	Underwriting	respective last	the theoretical
Company name	Stock code	announcement	entitlement	commission	trading day	ex-right price
China Agri-Industries Holdings Limited	606	5-Nov-12	3-for-10	Nil	(31.38)	(25.98)
Tack Fiori International Group Limited	928	2-Nov-12	1-for-2	2.50%	(40.48)	(31.13)
Qin Jia Yuan Media Services Company
Limited	2366	2-Nov-12	1-for-1	2.50%	(55.70)	(55.58)
Esprit Holdings Limited	330	22-Oct-12	1-for-2	2.25%	(35.70)	(27.00)
National Arts Holdings Limited	8228	18-Oct-12	4-for-1	3.75%	(81.13)	(46.24)
Easyknit Enterprises Holdings Limited	616	11-Oct-12	5-for-1	1.00%	(75.61)	(34.07)
SIM Technology Group Limited	2000	5-Oct-12	1-for-2	2.00%	(55.56)	(45.50)
Goldin Financial Holdings Limited	530	27-Sep-12	11-for-10	2.50%	37.18	14.81
Pou Sheng International (Holdings)
Limited	3813	21-Sep-12	1-for-4	Nil	3.40	2.70
Daiwa Associate Holdings Limited	1037	17-Aug-12	1-for-4	Nil	(52.38)	(46.81)
Easyknit Enterprises Holdings Limited	616	15-Aug-12	1-for-2	1.00%	Nil	Nil
UDL Holdings Limited	620	6-Aug-12	1-for-3	2.50%	(57.60)	(50.40)
China Properties Investment
Holdings Limited	736	25-Jul-12	1-for-2	3.00%	(63.44)	(53.74)
Pacific Plywood Holdings Limited	767	10-Jul-12	2-for-1	1.95%,2.5%	(83.39)	(28.02)
United Gene High-Tech
Group Limited	399	25-Jun-12	3-for-10	5.00%	(29.03)	(24.14)
Bright Smart Securities & Commodities
Group Limited	1428	25-Jun-12	1-for-2	3.84%	(20.29)	(14.46)
TLT Lottotainment Group Limited	8022	8-Jun-12	1-for-2	3.00%	11.11	6.38
Hop Fung Group Holdings Limited	2320	23-May-12	1-for-2	1.00%	(56.10)	(45.95)
Luxey International (Holdings) Limited	8041	23-May-12	1-for-2	2.50%	(39.80)	(30.60)
Maximum				5.00%	37.18	14.81
Minimum				Nil	(83.39)	(55.58)
Average				2.14%	(38.21)	(28.20)
The Company				2.50%	(48.98)	(32.43)

Source: The Stock Exchange

— 33 —

LETTER FROM VINCO CAPITAL

Based on the above table, we noted that (i) the subscription prices to the closing price on the respective last trading day of the Comparables ranged from a premium of approximately 37.18% to a discount of 83.39%, with an average at a discount of approximately 38.21%. The discount of the Subscription Price to the closing price of the Shares on the Last Trading Day is approximately 48.98%, which represents a higher discount than the average and falls within the range of the Comparables; and (ii) the subscription prices to the theoretical ex-rights prices per share based on the respective last trading day in relation to the Comparables ranged from a premium of 14.81% to a discount of 55.58%, with an average at a discount of approximately 28.20%. The discount of the Subscription price to the theoretical ex-rights price per Share of approximately 32.43%, based on the closing price of the Shares on the Last Trading Day, represents a higher discount than the average but falls within the range of the Comparables.

Set out below are the graph of daily closing price and the table of historical trading volume of the Shares under the Review Period:

The daily closing price during the Review Period

==> picture [426 x 174] intentionally omitted <==

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

2.50
2.00
1.50
1.00
Closing Price
0.50
Subscription Price = HK$1.00
0.00
21/5/12 21/6/12 21/7/12 21/8/12 21/9/12 21/10/12 20/11/12
Closing price of the Shares (HK$)
----- End of picture text -----

Source: Website of the Stock Exchange

— 34 —

LETTER FROM VINCO CAPITAL

			Percentage of
			average daily
			trading volume
			to total number
		Average daily	of Shares in
	Total trading	trading volume	issue as at the
	volume for the	for the month/	Latest
	month/period	period	Practicable Date
2012
May (Note 1)	346,365,300	38,485,033	2.36%
June (Note 2)	1,044,263,640	49,726,840	2.89%
July (Note 2)	1,288,941,180	61,378,151	3.01%
August	755,260,020	32,837,392	1.55%
September	199,085,000	9,954,250	0.47%
October	431,935,361	21,596,768	1.02%
November (Note 3)	13,556,425	968,316	0.91%

Source: Website of the Stock Exchange

Notes:

Since the start of Review Period, 21 May 2012.
Calculated based on the weighted average number of the Shares in issue for the month.
Up to and including the Last Trading Date.

During the Review Period, the highest and lowest closing price of the Shares were HK$2.22 on 31 July 2012, 7 August 2012, 24 August 2012 and 29 August 2012 and HK$0.94 on 21 May 2012 respectively per Share as quoted on the Stock Exchange. The average closing price of the Shares during the Review Period was approximately HK$1.72. The Subscription Price represents (i) a discount of approximately 54.95% to the highest closing price; (ii) a discount of approximately 41.86% to the average closing price; and (iii) a premium of approximately 6.38% over the lowest closing price during the Review Period.

In addition, the average daily trading volume in the Shares during the Review Period were relatively thin as shown on the table above. During the Review Period, the highest daily average trading volume of the Shares to the total number of Shares in issue was approximately 3.01% in July 2012 and the lowest daily average trading volume of the Shares to the total number of Shares in issue were approximately 0.91% in November 2012.

— 35 —

LETTER FROM VINCO CAPITAL

In order to increase the attractiveness of a rights issue exercise, it is the market practice that the subscription price of a rights issue represents a discount to the prevailing market prices of the relevant shares. Hence, we are of the view that the Subscription Price being lower than the prevailing market prices of the Shares is in line with the normal market practice.

Having considered (i) the low liquidity in the trading of the Shares under the Review Period; and (ii) the common practice by the Comparables to set their subscription prices of their rights issues at a discount to the prevailing market prices of the relevant shares before the relevant announcements, we concur with the Directors’ view that the discount would encourage Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth of the Group and are of the view that the Subscription Price of the Rights Issue is in line with market practice and is justifiable.

4. Application for excess Rights Shares

As stated in the Letter from the Board, Qualifying Shareholders or transferees of nil-paid Rights Shares may apply, by way of excess application, for any unsold entitlements of the Non-Qualifying Shareholders and for any Rights Shares provisionally allotted but not accepted. Applications for excess Rights Shares may be made by completing the EAFs and lodging the same with a separate remittance for the excess Rights Shares being applied for. The Directors will allocate the excess Rights Shares at their discretion on a fair and equitable basis on the following principles:

(1) preference will be given to applications for less than a board lot of Rights Shares where they appear to the Directors that such applications are made to round up odd-lot holdings to whole-lot holdings and that such applications are not made with the intention to abuse this mechanism; and
(2) subject to availability of the excess Rights Shares after allocation under principle (1) above, the excess Rights Shares will be allocated to the Qualifying Shareholders who have applied for excess application on a pro rata basis based on the excess Rights Shares applied by them, with board lots allocation to be made on a best effort basis.

Investors with their Shares held by a nominee company should note that the Board will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, the Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to beneficial owners individually. Investors with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date.

After reviewing the circulars of the Comparables, we noted that the above practices are in line with market practice. Based on the foregoing, we are of the view that such arrangement is fair and reasonable to the Company and the Independent Shareholders as a whole.

— 36 —

LETTER FROM VINCO CAPITAL

5. Underwriting Agreement

Pursuant to the Underwriting Agreement, the Underwriter has conditionally agreed to underwrite to the Rights Shares not subscribed by the Qualifying Shareholders on a fully underwritten basis, subject to the terms and conditions of the Underwriting Agreement.

In addition, based on the Underwriting Agreement, the Company will pay the Underwriter an overall underwriting commission of 2.5% of the aggregate Subscription Price multiplied by the number of all the Rights Shares. The Comparables showed a range of nil to 5% of underwriting commission with a mean of 2.14%. On this basis, we noted the underwriting commission charged by the Underwriter is higher than the mean but still within the range of the Comparables. As such, we are of the view that the underwriting commission charged by the Underwriter is under normal commercial terms and is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

6. Termination of the Underwriting Agreement

It also should be noted that the Rights Issue would not proceed if the Underwriter exercises its termination rights under the Underwriting Agreement. Details of the provisions granting the Underwriter such termination rights are included in the Letter from the Board. After reviewing the circulars of the Comparables, we consider such provisions are on normal commercial terms and in line with the market practice.

7. Dilution effect of the Rights Issue on shareholding interests

All Qualifying Shareholders are entitled to subscribe for the Rights Shares. For those Qualifying Shareholders who take up their entitlements in full under the Rights Issue, their shareholding interests in the Company will remain unchanged after the Rights Issue.

For those Qualifying Shareholders who do not exercise their rights to subscribe for the Rights Shares in full, depending on the extent that they accept their entitlements, their shareholding interests will be diluted depending on the assumptions set out below. However, it should be noted that such Shareholders will have the opportunity to realise their nil-paid rights to subscribe for the Rights Shares (the “Nil-Paid Rights”) in the market when dealing of Nil-Paid Rights commences on the Stock Exchange, subject to the then prevailing market conditions.

Meanwhile, Qualifying Shareholders who wish to increase their shareholdings in the Company through the Rights Issue may, subject to availability, acquire additional Nil-Paid Rights in the market. The Qualifying Shareholders may also apply for excess Rights Shares.

— 37 —

LETTER FROM VINCO CAPITAL

We are of the view that the arrangement for the Rights Issue is in line with recent market practice for rights issue and are able to cater for different objectives for the Qualifying Shareholders.

Set out below is the shareholding structure of the Company from the Latest Practicable Date to immediately after completion of the Rights Issue:

Scenario 1:

Assuming no further issue of new Shares and no repurchase of Shares on or before the Record Date:

					Immediately after completion
					of the Rights Issue assuming
					no Qualifying Shareholder
			Immediately after completion		takes up any of the Rights
			of the Rights Issue assuming		Shares and the Underwriter,
			all the Qualifying		sub-underwriters and
			Shareholders take up their		subscribers procured by them
	As at the Latest		respective allotment of Rights		take up the Rights Shares to
Name of Shareholder	Practicable	Date	Shares in full		the maximum extent
		%		%	%
	Number of Share	(approx.)	Number of Shares	(approx.)	Number of Shares (approx.)
Unity Investments
Holdings Limited
(Note 1)	10,010,000	9.45	20,020,000	9.45	10,010,000 4.72
HEC Capital Limited
(Note 2)	7,514,700	7.09	15,029,400	7.09	7,514,700 3.55
Absolute Target Limited
(Note 3)	1,672,650	1.58	3,345,300	1.58	1,672,650 0.79
The Underwriter,
sub-underwriters and
subscribers procured
by them	—	—	—	—	105,974,992 50.00
Other public Shareholders	86,777,642	81.88	173,555,284	81.88	86,777,642 40.94
Total	105,974,992	100.00	211,949,984	100.00	211,949,984 100.00

— 38 —

LETTER FROM VINCO CAPITAL

Scenario 2:

Assuming further issue of new Shares upon exercising the Options in full and no further issue of new Shares or repurchase of Shares on or before the Record Date:

									Immediately after
									completion of the
									Rights Issue
									assuming no
									Qualifying
									Shareholder takes up
						Immediately after			any of the Rights
			Assuming issue of new			completion	of the		Shares and the
			Shares upon		exercising	Rights Issue assuming			Underwriter,
			the Options in full and			all the Qualifying			sub-underwriters and
			no further issue of new			Shareholders take		up	subscribers procured
			Shares or repurchase			their respective			by them take up the
Name of	As at the Latest		of shares on		or before	allotment of Rights			Rights Shares to the
Shareholder	Practicable Date			the Record Date		Shares in full			maximum extent
	Number of	%		Number of	%	Number of		%	Number of %
	Share	(approx.)		Shares	(approx.)	Shares	(approx.)		Shares (approx.)
Unity Investments
Holdings Limited
(Note 1)	10,010,000	9.45		10,010,000	9.44	20,020,000		9.44	10,010,000 4.72
HEC Capital Limited
(Note 2)	7,514,700	7.09		7,514,700	7.08	15,029,400		7.08	7,514,700 3.54
Absolute Target
Limited (Note 3)	1,672,650	1.58		1,672,650	1.58	3,345,300		1.58	1,672,650 0.79
The Underwriter,
sub-underwriters
and subscribers
procured by them	—	—		—	—	—		—	106,084,914 50.00
Other public
Shareholders	86,777,642	81.88		86,887,564	81.90	173,775,128	81.90		86,887,564 40.95
Total	105,974,992	100.00	106,084,914		100.00	212,169,828	100.00		212,169,828 100.00

Notes:

These Shares are held by Great Panorama International Limited which is a wholly-owned subsidiary of Unity Investments Holdings Limited, a company listed on the Stock Exchange.
These Shares are held by Murtsa Capital Management Limited which is a wholly-owned subsidiary of HEC Capital Limited.
Absolute Target Limited is controlled as to 46.25% by Mr. Wong Yin Sen, 42.50% by Mr. Hon Lik and 11.25% by Mr. Wong Hei Lin. Both of Mr. Wong Yin Sen and Mr. Hon Lik are executive Directors.

— 39 —

LETTER FROM VINCO CAPITAL

The Independent Shareholders who are Qualifying Shareholders should note that, should they decide to subscribe for their full provisional allotment entitlements of the Rights Shares, there would not be any dilution effect on their shareholding interests in the Company. However, we would like to draw the Independent Shareholders’ attention to the fact that, for those Independent Shareholders who do not wish to take up all or part of their provisional allotment entitlements to the Rights Shares, their corresponding interest in the Company will be diluted. If all the Qualifying Shareholders (other than the Underwriter) decide not to take up the provisional allotments of the Rights Issue and the Underwriter has taken up all the provisional allotments in its capacity as the Underwriter, the percentage of shareholding of the other public Shareholders will be reduced from approximately 81.88% to approximately 40.94% in case of no further issue of new Shares or repurchase of Shares on or before the Record Date as shown in Scenario 1 or to approximately 40.95% in case of issue of new Shares upon exercising the Options in full and no further issue of new Shares or repurchase of Shares on or before the Record Date as shown in Scenario 2.

We are of the view that the dilution effect is not prejudicial to the Independent Shareholders’ interests in the Company if they choose to subscribe for their full entitlement of the Rights Shares under the Rights Issue.

8. Arrangement of the Excluded Overseas Shareholders

We have reviewed the arrangements of the Excluded Shareholders regarding the Rights Issue. We noted that the Directors are of the opinion that it is necessary or expedient not to offer the Rights Shares to the Overseas Shareholders on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place, the Rights Issue will not be available to such Overseas Shareholders. As such, the Company will send copies of the Prospectus to the Non-Qualifying Shareholders for their information only and will not send any PAL and EAF to them on the Posting Date.

We also noted that as at the Latest Practicable Date, there is no Overseas Shareholder as shown in the register of members of the Company.

9. Financial effects of the Rights Issue

a) Net assets value

With reference to the Interim Report of the Company, the unaudited net assets value attributable to the shareholders of the Group was approximately HK$305.74 million as at 30 June 2012. After taking the net proceeds from the Rights Issue into account, the net assets of the Group will increase by not less than approximately HK$101.83 million to not more than HK$101.93 million. We noted that the proposed Rights Issue should enhance the net asset value of the Group. However, the Shareholders should note that the total number of shares after the Rights Issue will be increased from 105,974,992 Shares to not less than 211,949,984 Shares and not more than 212,169,828 Shares. Thus the net asset value per Shares will be decreased from approximately HK$2.88 to approximately HK$1.92.

— 40 —

LETTER FROM VINCO CAPITAL

b) Gearing ratio (total borrowings / total equity)

According to the Interim Report of the Company, the gearing ratio of the Group was approximately 8.67% as at 30 June 2012. Immediately after completion of the Rights Issue, assuming the total borrowings of the Group would remain unchange whereas the shareholders’ equity of the Group would increase by not less than approximately HK$101.83 million to not more than approximately HK$101.93 million. Hence, the gearing ratio of the Group would be improved to approximately 6.5%.

c) Working capital

With reference to the Interim Report of the Company, the working capital of the Group was approximately HK$124.58 million as at 30 June 2012. Immediately after completion of the Rights Issue, the working capital of the Group would increase by not less than approximately HK$101.83 million to not more than approximately HK$101.93 million. In this regard, we are of the view that the Rights Issue will improve the liquidity position of the Group.

Based on the foregoing, the Rights Issue will enhance the net assets value of the Group and improve the liquidity position of the Group. Hence, we are of the view that the Rights Issue is in the interest of the Company and the Independent Shareholders as a whole.

D. CONCLUSION

Having taken into consideration of the above principal factors and reasons, we are of the view that the terms of Rights Issue are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned and the Rights Issue is in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Rights Issue.

Yours faithfully, For and on behalf of Grand Vinco Capital Limited Alister Chung Managing Director

— 41 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the three years ended 31 December 2009, 2010 and 2011 are disclosed in the annual reports of the Company for the years ended 31 December 2009 (pages 32 to 93), 2010 (pages 30 to 87) and 2011 (pages 37 to 145) respectively, which are published on both the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.dragonite.com.hk).

2. INDEBTEDNESS

As at the close of business on 31 October 2012, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had outstanding indebtedness of a secured bank borrowing of approximately HK$25,957,000.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables, as at the close of business on 31 October 2012, the Group did not have any debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptance (other than normal trade bills) or acceptable credits, debentures, mortgages, charges, finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the financial resources presently available to the Group and the estimated net proceeds from the Rights Issue, in the absence of unforeseen circumstances, the Group has sufficient working capital for its present requirements that is for at least the next twelve months following the date of this circular.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2011, being the date to which the latest published audited consolidated financial statements of the Company were made up.

— 42 —

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma financial information of the Group (the “Unaudited Pro Forma Financial Information”) has been prepared by the directors of the Company in accordance with paragraph 4.29 of the Listing Rules to illustrate the effect of the proposed Rights Issue on the basis of one Rights Share for every existing Share held on the Record Date at HK$1.00 per Rights Share on the consolidated net tangible assets of the Group as if the Rights Issue had been taken place on 30 June 2012.

The Unaudited Pro Forma Financial Information is prepared for illustrative purpose only and, because of its hypothetical nature, it may not give a true picture of the financial position of the Group as at the date to which it is made up or at any future date.

The Unaudited Pro Forma Financial Information is prepared based on the unaudited consolidated net assets of the Group attributable to the owners of the Company derived from the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2012, extracted from the interim report of the Company for the six months ended 30 June 2012, with adjustment described below:

Unaudited consolidated net	Unaudited pro forma consolidated	Unaudited pro forma consolidated	Unaudited pro forma consolidated
tangible assets of the	net	tangible assets of the Group
Group attributable to the	attributable to the owners of the
owners of the Company as Estimated net proceeds		Company immediately after
at 30 June 2012 from the Rights Issue	completion of		the Rights Issue
HK$’000 HK$’000			HK$’000
(Note 1) (Note 2)
305,744 101,830			407,574
			HK$
Unaudited consolidated net tangible assets of the Group per Share
attributable to the owners of the Company as at 30 June 2012
before completion of the Rights Issue (Note 3)			3.13
Unaudited pro forma adjusted consolidated net tangible assets of
the Group per Share attributable to the owners of the Company
immediately after the issue of Rights Shares (Note 4)			2.00

Notes:

(1) The amount is the unaudited consolidated net tangible assets of the Group, which is extracted from the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2012 set out in the interim report of the Company dated on 24 August 2012.

— 43 —

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(2) The estimated net proceeds from the Rights Issue of approximately HK$101,830,000 are based on 105,974,992 Rights Shares to be issued at the subscription price of HK$1.00 per Rights Share and after deduction of estimated related expenses, include among others, underwriting commission, financial advisory fee and other professional fees, which are directly attributable to the Rights Issue, of approximately HK$4,145,000. The number of Rights Shares to be issued based on 1,956,461,400 Shares of the Company in issue as at 30 June 2012 and issue of 163,038,450 new Shares on 13 July 2012 pursuant to the exercise of share options and adjustment of share consolidation on the basis of every 20 issued Shares into 1 consolidated share on 31 October 2012.
(3) The number of shares used for the calculation of the unaudited consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 June 2012 and prior to completion of Rights Issue of 97,823,070 Shares is based on 1,956,461,400 issued Shares of the Company as at 30 June 2012 adjusting by share consolidation on the basis of every 20 issued Shares into 1 consolidated share on 31 October 2012.
(4) Unaudited pro forma consolidated net tangible assets of the Group per Share attributable to the owners of the Company as at 30 June 2012 immediately after completion of the Rights Issue is determined based on the unaudited pro forma consolidated net tangible assets of the Group attributable to the owners of the Company immediately after completion of the Rights Issue of approximately HK$407,574,000, divided by 203,798,062 Shares which represents
(i) 97,823,070 Shares, which is calculated based on 1,956,461,400 Shares of the Company in issue as at 30 June 2012 adjusting by share consolidation on the basis of every 20 issued Shares into 1 consolidated share on 31 October 2012; and
(ii) 105,974,992 Rights Shares to be issued pursuant to the Rights Issue.
(5) As the number of Rights Shares to be issued would be affected by number of shares options that may become exercisable up to and including the Record Date which involve uncountable possibilities, for simplicity, the preparation of the pro forma financial information as set out above does not assume the exercise of share options. However, assuming all the share options outstanding as at the Latest Practicable Date were exercised in full, an additional 109,922 Rights Shares may be issued, and a maximum number of 106,084,914 Rights Shares may fall to be issued. The maximum number of Rights Shares is subject to changes as a result of share options which become exercised or forfeited during the period from the Latest Practicable Date up to and including the Record Date.
(6) No adjustment has been made to reflect the effect on consolidated net assets of the Group of the 163,038,450 Shares of the Company issued on 13 July 2012 pursuant to the exercise of share options and any trading results or other transactions of the Group subsequent to 30 June 2012.

— 44 —

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

B. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

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ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF DRAGONITE INTERNATIONAL LIMITED

We report on the unaudited pro forma financial information of Dragonite International Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group” as set out in section A of Appendix II to the circular dated 14 December 2012 (the “Circular”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed Rights Issue (as defined in the Circular) might have affected the financial information presented. The basis of preparation of the unaudited pro forma financial information of the Group is set out in Section A of Appendix II to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information of the Group 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.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information of the Group 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 of the Group beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. 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 directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

— 45 —

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

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 of the Group has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information of the Group as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information of the Group is for illustrative purpose only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of the financial position of the Group as at 30 June 2012 or any future date.

Opinion

In our opinion:

(a) the unaudited pro forma financial information of the Group has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group so far as such policies related to the transaction; and
(c) the adjustments are appropriate for the purpose of the unaudited pro forma financial information of the Group as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

14 December 2012

— 46 —

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

The authorised and issued share capital of the Company (a) as at the Latest Practicable Date; (b) immediately following completion of the Rights Issue (assuming (i) the Outstanding Share Options are not exercised; and (ii) no other issue of new Shares or repurchase of existing Shares, on or before the Record Date); and (c) immediately following completion of the Rights Issue (assuming (i) the Outstanding Share Options are fully exercised; and (ii) no other issue of new Shares or repurchase of existing Shares, on or before the Record Date) were as follows:

(i) As at the Latest Practicable Date

Number of shares Nominal Value Authorised: HK$ 100,000,000,000 Shares of HK$0.01 each 1,000,000,000.00

Issued and fully paid:

105,974,992 Shares of HK$0.01 each 1,059,749.92

— 47 —

GENERAL INFORMATION

APPENDIX III

(ii) Immediately following the completion of the Rights Issue (assuming (i) the Outstanding Share Options are not exercised; and (ii) no other issue of new Shares or repurchase of existing Shares, on or before the Record Date)

Number of shares Nominal Value Authorised: HK$ 100,000,000,000 Shares of HK$0.01 each 1,000,000,000.00

Issued and to be issued:

105,974,992 Shares of HK$0.01 each in issue immediately before completion of the Rights Issue 105,974,992 Rights Shares to be alloted and issued under the Rights Issue 211,949,984 Shares in issue immediately after completion of the Rights Issue	1,059,749.92 1,059,749.92
	2,119,499.84

(iii) Immediately following the completion of the Rights Issue (assuming (i) the Outstanding Share Options are fully exercised; and (ii) no other issue of new Shares or repurchase of existing Shares, on or before the Record Date)

Number of shares Authorised: 100,000,000,000 Shares of HK$0.01 each Issued and to be issued: 106,084,914 Shares of HK$0.01 each in issue immediately before completion of the Rights Issue 106,084,914 Rights Shares to be alloted and issued under the Rights Issue 212,169,828 Shares in issue immediately after completion of the Rights Issue	Nominal Value HK$ 1,000,000,000.00
	1,060,849.14 1,060,849.14
	2,121,698.28

All the Rights Shares to be issued will rank pari passu with the Shares in all respects. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid after the date of allotment and issue of the fully-paid Rights Shares. The Rights Shares to be issued will be listed on the Stock Exchange.

— 48 —

GENERAL INFORMATION

APPENDIX III

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

Save as disclosed in this circular, the Company has no outstanding convertible securities, options or warrants in issue which confer any right to convert into or subscribe for Shares as at the Latest Practicable Date.

3. DISCLOSURE OF INTERESTS BY DIRECTORS

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to the Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

(a) Long positions in the Shares

			Approximate
			percentage of
		Number of	shareholding
Name of Director	Capacity	Shares	(Note 2)
Mr. Wong Yin Sen	Interest of controlled	1,672,650	1.58%
	corporation	(Note 1)
Mr. Hon Lik	Interest of controlled	1,672,650	1.58%
	corporation	(Note 1)

Notes:

These represent the interests in the 1,672,650 Shares directly held by Absolute Target Limited which is controlled as to 46.25%, 42.50% and 11.25% by Mr. Wong Yin Sen, Mr. Hon Lik and Mr. Wong Hei Lin, respectively. Both Mr. Wong Yin Sen and Mr. Hon Lik are executive Directors.
The percentage shareholding in the Company is calculated by reference to the number of Shares in issue as at the Latest Practicable Date.

— 49 —

APPENDIX III

GENERAL INFORMATION

(b) Long positions in the underlying Shares

				Number of
				Shares to be
				issued upon
				full exercise of
			Exercise price	the Options
			per Share	granted to the
		Exercise	(subject to	relevant
Name of Director	Date of grant	period	adjustments)	person
Mr. Wong Yin Sen	09.01.2008	11.01.2008 to	275.958	3,259
		10.01.2013
Mr. Hon Lik	09.01.2008	04.02.2008 to	275.958	3,259
		03.02.2013

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to the Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

4. INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions 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.

(a) Long positions in the Shares

			Approximate
			percentage of
		Number of	shareholding
Name	Capacity	Shares	(Note 3)
HEC Capital Limited	Interest of controlled	7,514,700	7.09%
	corporation	(Note 1)
Unity Investments	Interest of controlled	10,010,000	9.45%
Holdings Limited	corporation	(Note 2)

— 50 —

GENERAL INFORMATION

APPENDIX III

Notes:

(1) These Shares are held by Murtsa Capital Management Limited which is a wholly owned subsidiary of HEC Capital Limited.
(2) These Shares are held by Great Panorama International Limited which is a wholly-owned subsidiary of Unity Investments Holdings Limited, a company listed on the Stock Exchange.
(3) The percentage of shareholding in the Company is calculated by reference to the number of Shares in issue as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, no person (other than a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or 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 or any options in respect of such capital.

5. DIRECTORS’ INTERSETS IN ASSETS/CONTRACTS AND OTHER INTERESTS

(i) None of the Directors has, or has had, any direct or indirect interest in any assets which have been acquired, disposed of or leased to or which are proposed to be acquired, disposed of or leased to the Company or any of their respective subsidiaries, respectively, since 31 December 2011, the date to which the latest published audited financial statements of the Group were made up.
(ii) There is no contract or arrangement entered into by any member of the Group, subsisting as at the Latest Practicable Date in which any of the Directors is materially interested and which is significant in relation to the business of the Group as a whole.

6. EXPERTS

The following are the qualifications of the experts who have given opinions or advice, which are contained in this circular:

Name Qualification Vinco Capital a licensed corporation to carry out in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO Deloitte Touche Certified Public Accountants Tohmatsu

— 51 —

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, none of the above experts had direct or indirect shareholdings in any member of the Group, or any right to subscribe for or to nominate persons to subscribe for shares 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 the Company or any of their respective subsidiaries, respectively, since 31 December 2011, the date to which the latest published audited financial statements of the Group were made up.

Each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion therein of its reports and references to its name in the form and context in which they appear.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any service contracts with the Company or any other member of the Group (excluding contracts expiring or which may be terminated by the Company within a year without payment of any compensation (other than statutory compensation)).

8. LITIGATION

Save as disclosed in the announcements of the Company dated 18 April 2012, 2 May 2012 and 26 June 2012, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

9. MATERIAL CONTRACTS

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

i. a subscription agreement dated 30 March 2011 entered into between the Company and Ms. Choi Ka Nam in relation to the subscription of 18,470,000 Shares at the subscription price of HK$0.16 per Share;
ii. a deed of release of charge over shares of Chenlong Group Limited executed by Time Beyond Limited in favour of the Company dated 16 April 2011;
iii. a deed of release of charge over shares executed by DB Trustees (Hong Kong) Limited in favour of Ruyan Group Investments Limited (formerly known as Wealthy Well Investments Limited dated 4 May 2011;

— 52 —

GENERAL INFORMATION

APPENDIX III

iv. a conditional placing agreement (as supplemented by a supplemental agreement dated 28 June 2011) entered into between the Company and Chung Nam Securities Limited dated 4 May 2011 in relation to the placing of 750,000,000 new Shares at a price of HK$0.145 per Share by the placing agent on a fully underwritten basis pursuant to the terms of such placing agreement;
v. a conditional sale and purchase agreement dated 4 May 2011 entered into between Power Global Limited (as vendor), Nation Wealth Holdings Limited (as purchaser), Heritage International Holdings Limited (as guarantor of the vendor) and the Company (as guarantor of the purchaser) for the sale and purchase of the entire issued share capital of and the shareholder’s loan extended to Central Town Limited;
vi. a deed of release of charge over cash deposit executed by DB Trustees (Hong Kong) Limited in favour of Ruyan Group (Hong Kong) Limited dated 17 June 2011;
vii. a supplemental placing agreement dated 28 June 2011 entered into between the Company and Chung Nam Securities Limited in relation to the amendments of certain terms in the placing agreement mentioned in the above point (iv);
viii. a loan agreement and memorandum dated 21 July 2011 entered into between the Company and Hansom Finance Limited, an independent third party, regarding the loan facility for an amount of HK$25,000,000 provided by Hansom Finance Limited to the Company with interests at the rate of prime rate plus two percent per annum with the maturity date of 21 August 2011;
ix. a loan agreement and memorandum dated 5 August 2011 entered into between the Company and Time Beyond Limited, an independent third party, regarding the loan facility for an amount of HK$50,000,000 provided by Time Beyond Limited to the Company with interests at 1% flat rate with the maturity date of 5 September 2011;
x. an options agreement dated 8 August 2011 entered into between Power Global Limited and Nation Wealth Holdings Limited (a wholly owned subsidiary of the Company) pursuant to which Power Global Limited grant the call option to Nation Wealth Holdings Limited and Nation Wealth Holdings Limited grant the put option to Power Global Limited in relation to the acquisition of the entire issued share capital of and the shareholder’s loan extended to Apex Corporate Investments Limited by Nation Wealth Holdings Limited;
xi. a deed of assignment dated 8 August 2011 between Power Global Limited (as assignor), Nation Wealth Holdings Limited (as assignee) and Central Town Limited in relation to the transfer and assignment of the loan of HK$123,849,991.50 owned by Central Town Limited to Nation Wealth Holdings Limited;

— 53 —

GENERAL INFORMATION

APPENDIX III

xii. a settlement agreement dated 2 September 2011 entered into between BOCI Asia Limited and the Company in relation to the settlement of the claim of HK$4,478,185 against the Company being service fees for the debt restructuring of the Company, and the counterclaim of HK$236,000,000 by the Company against BOCI Asia Limited;
xiii. an underwriting agreement dated 7 October 2011 entered into between the Company and Chung Nam Securities Limited in relation to the underwriting arrangement in respect of the rights issue of not less than 1,086,923,000 but not more than 1,326,511,802 on the basis of 2 rights shares for every Share held at the subscription price of HK$0.1 per Share (as supplemented by the supplemental agreement dated 3 November 2011 between the same parties;
xiv. an agreement dated 27 October 2011 entered into between the Company and Heritage International Finance Limited, an independent third party, regarding the revolving loan facility for an amount of HK$65,000,000 provided by Heritage International Finance Limited to the Company with interests at 5% per annum with the final repayment date within three months from 27 October 2011;
xv. a supplemental agreement dated 3 November 2011 entered into between the Company and Chung Nam Securities Limited in relation to the amendments of certain terms in the underwriting agreement mentioned in the above point (xiii);
xvi. an agreement dated 20 March 2012 entered into between the Company and Heritage International Finance Limited, an independent third party, regarding the revolving loan facility for an amount of HK$15,000,000 provided by Heritage International Finance Limited to the Company with interests at prime rate per annum with the final repayment date within six months from 20 March 2012;
xvii. an agreement dated 2 April 2012 entered into between the Company and Chung Nam Finance Limited, an independent third party, regarding the revolving loan facility for an amount of HK$35,000,000 provided by Chung Nam Finance Limited to the Company with interests at 0.2% per month with the final repayment date on 2 July 2012;
xviii.a subscription agreement dated 23 April 2012 entered into between the Company and Ms. Yu Man Fung, Alice in relation to the subscription of 78,692,300 Shares at the subscription price of HK$0.138 per Share;
xix. a conditional placing agreement entered into between the Company and Freeman Securities Limited dated 22 June 2012 in relation to the placing of 326,076,900 new Shares at a price of HK$0.066 per Share by the placing agent on a fully underwritten basis pursuant to the terms of such placing agreement;
xx. the Underwriting Agreement; and
xxi. a supplement agreement dated 11 December 2012 entered into between the Company and Freeman Securities Limited in relation to the amendments of certain terms in the underwriting agreement mentioned in the above point (xx).

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GENERAL INFORMATION

APPENDIX III

10. CORPORATION INFORMATION

Registered office	Cricket Square, Hutchins Drive
	P.O. Box 2681
	Grand Cayman KY1-1111
	Cayman Islands
Head office and principal place of	Room 1101, 11th Floor
business in Hong Kong	China United Centre,
	28 Marble Road, North Point
	Hong Kong
Branch Share registrar and transfer	Computershare Hong Kong Investor Services Limited
office in Hong Kong	Shops 1712-1716, 17th Floor
	Hopewell Centre
	183 Queen’s Road East
	Wanchai, Hong Kong
Authorised representatives	Mr. Gary Drew Douglas
	Room 1101, 11th Floor
	China United Centre
	28 Marble Road, North Point
	Hong Kong
	Ms. Chan Mee Sze
	Room 1101, 11th Floor
	China United Centre
	28 Marble Road, North Point
	Hong Kong
Company secretary	Ms. Chan Mee Sze
Legal adviser to the Company in	Shum & Co. Solicitors
relation to the Rights Issue	Suite 2801-03 & 06
	28th Floor
	China United Centre
	28 Marble Road
	North Point, Hong Kong
	(As to Hong Kong law)
Auditors	Deloitte Touche Tohmatsu
	Certified Public Accountants
	35/F One Pacific Place
	88 Queensway
	Central, Hong Kong

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GENERAL INFORMATION

APPENDIX III

Principal banker The Hongkong and Shanghai Banking Corporation Limited No. 1 Queen’s Road Central Hong Kong

DIRECTORS

Particulars of Directors

Name Address

Executive Directors

Mr. Wong Yin Sen (Chairman) Room 1101, 11th Floor China United Centre 28 Marble Road, North Point Hong Kong Mr. Gary Drew Douglas Room 1101, 11th Floor (Managing Director) China United Centre 28 Marble Road, North Point Hong Kong Mr. Hon Lik Room 1101, 11th Floor China United Centre 28 Marble Road, North Point Hong Kong Ms. Chan Mee Sze Room 1101, 11th Floor China United Centre 28 Marble Road, North Point Hong Kong Mr. Lam Suk Ping Room 1101, 11th Floor China United Centre 28 Marble Road, North Point Hong Kong

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GENERAL INFORMATION

APPENDIX III

Name Address Independent non-executive Directors Mr. Chung Yuk Lun Room 2201, 22nd Floor China United Centre 28 Marble Road, North Point Hong Kong Mr. Lam Man Sum, Albert 3rd Floor, Sun Hung Kai Centre 30 Harbour Road, Hong Kong Mr. Liu Kwong Sang Unit 1003, 10th Floor Rightful Centre, 12 Tak Hing Street Tsim Sha Tsui, Hong Kong Mr. Ho Tak Fun Unit A, 5/F., Phase 1, Tung Chun Industrial Centre, 9-11 Cheong Wing Road, Kwai Chung, New Territories, Hong Kong

Executive Directors:

Mr. Wong Yin Sen , aged 60, is one of the co-founders and currently the Chairman and President of the Group. Mr. Wong is familiar with commercial, political and social affairs in the PRC and has over 26 years of experience managing PRC enterprises. After settling down in Hong Kong in 1992, he established and invested in the Group. Mr. Wong has accumulated abundant knowledge in the medical and health care product industry and has extensive experience in enterprise management.

Mr. Gary Drew Douglas , aged 63, holds a Master’s Degree in Business Administration from the University of Santa Clara, USA. Mr. Douglas is the Managing Director of the Company and responsible for the electronic cigarette business of the Group. Mr. Douglas has over 20 years of professional experience in general management, consumer electronics, IT business, project management and software, and commercial and retail banking in Japan and the USA. Mr. Douglas is also fluent in Japanese. Mr. Douglas is presently an independent non-executive director of Freeman Financial Corporation Limited, a company listed on the main board of the Stock Exchange. During 30 June 2011 to 20 October 2011, Mr. Douglas was appointed as an independent non-executive director of Radford Capital Investment Limited, a company listed on the main board of the Stock Exchange. Also, Mr. Douglas was appointed as an independent non-executive director of Willie International Holdings Limited, a company listed on the main board of the Stock Exchange from 1 June 2011 to 1 September 2012.

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APPENDIX III

GENERAL INFORMATION

Mr. Hon Lik , aged 56, is a senior pharmacist, a co-founder and currently Chief Executive Officer of the Group. Mr. Hon graduated from Liaoning College of Traditional Chinese Medicine in 1982 and began his career with Liaoning Academy of Traditional Chinese Medicine in the same year. Mr. Hon was promoted to the position of vice superintendent of Liaoning Academy of Traditional Chinese Medicine in 1990, and was responsible for the company’s technology development. Mr. Hon has approximately 27 years of experience in the medical field and invented and patented the technology used in Chenlong Baoling Longevity Ginseng and electronic cigarette products.

Ms. Chan Mee Sze , aged 38, holds a Bachelor ’s degree in Laws from University of London and a Master’s degree in Business Administration from University of Dundee. Ms. Chan is also an associate member of The Hong Kong Institute of Company Secretaries with Practitioner’s Endorsement and an associate member of The Institute of Chartered Secretaries and Administrators. She has over 12 years of experience in corporate secretaryship and corporate finance. She is also the Company Secretary of the Company.

Mr. Lam Suk Ping , aged 55, holds a Master’s Degree in Business Administration from the University of Hull, the United Kingdom. Mr. Lam joined the Group in May 2011 to oversee the accounts department. He has over 30 years of experience in auditing, finance and accounting, investment and business management. Prior to joining the Group, Mr. Lam was an executive director of Mascotte Holdings Limited, a company listed on the main board of the Stock Exchange during the period from 7 April 2008 to 27 April 2011. During 30 June 2011 to 20 October 2011, Mr. Lam was also appointed as an independent non-executive director of Radford Capital Investment Limited, a company listed on the main board of the Stock Exchange.

Independent non-executive Directors:

Mr. Chung Yuk Lun , aged 52, is a fellow member of The Association of Chartered Certified Accountants, an associate member of The Hong Kong Institute of Certified Public Accountants and an Associate Chartered Accountant (England and Wales). Mr. Chung has over 22 years’ experience in finance and project investment. He is currently an executive director of Radford Capital Investment Limited and Ming Fung Jewellery Group Limited, an independent non-executive director of Heritage International Holdings Limited and Forefront Group Limited, all of which are companies listed on the main board of the Stock Exchange.

Mr. Liu Kwong Sang , aged 50, has been practising as a certified public accountant in Hong Kong with more than 20 years’ experience. He graduated with honours from the Hong Kong Polytechnic University with a Bachelor degree in accountancy and obtained the Master’s Degree in Business Administration from the University of Lincoln, the United Kingdom. Mr. Liu is an associate member of the Institute of Chartered Accountants in England and Wales, a fellow member of The Association of Chartered Certified Accountants, a fellow member of the Institute of Financial Accountants, the United Kingdom and a fellow member of the National Institute of Accountants, Australia. He is also a fellow member of The Hong Kong Institute of Certified Public Accountants, a fellow member of the Taxation Institute of Hong Kong and a fellow member of the Society of

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APPENDIX III

GENERAL INFORMATION

Registered Financial Planners. Mr. Liu acts as an independent non-executive director of Polytec Asset Holdings Limited and China Railsmedia Corporation Limited, securities of both are listed on the main board of the Stock Exchange, and of abc Multiactive Ltd whose securities are listed on the GEM board of the Stock Exchange. He was also an independent non-executive director of Tack Fiori International Group Limited whose securities are listed on the main board of the Stock Exchange; and of KH Investments Limited whose securities are listed on the GEM board of the Stock Exchange; and of Pacific CMA, Inc. whose securities were previously listed on the America Stock Exchange.

Mr. Lam Man Sum, Albert , aged 57, is a fellow member of The Association of Chartered Certified Accountants and The Hong Kong Institute of Certified Public Accountants and member of the Hong Kong Securities Institute, Society of Chinese Accountants and Auditors, Taxation Institute of Hong Kong and Certified Tax Advisor. Mr. Lam holds a Bachelor’s Degree in Arts (Economics) from the University of Manchester, United Kingdom. He is currently an independent non-executive director of Junefield Department Store Group Limited, the shares of which are listed on the Stock Exchange. He was the shareholder and director of Hopkins CPA Limited from 2007 to 2011 and the proprietor of Albert Lam & Co. CPA from 1993 to 2007.

Mr. Ho Tak Fun , aged 59, received a Bachelor’s degree in Business Administration, Marketing from The Chinese University of Hong Kong and a Master’s Degree in Science, Information Systems from the Hong Kong Polytechnic University. Mr. Ho is a seasoned retail executive with profound experience in launching new businesses, strategic planning, business development and operations in both the China and Hong Kong retail markets. He also has extensive knowledge in marketing, merchandising, distribution and promotion of consumer products and mass merchandise. During the period from 5 August 2011 to 31 October 2011, Mr. Ho was an executive director of Tack Fiori International Group Limited, a company listed on the main board of the Stock Exchange.

11. MISCELLANEOUS

The English text of this circular shall prevail over their Chinese text in case of inconsistencies.

12. EXPENSES

The expenses in connection with the Rights Issue, including the underwriting commission, financial advisory fees, printing, registration, translation, legal and accounting fees, are estimated to be approximately HK$4.2 million on the basis of not less than 105,974,992 Rights Shares and not more than 106,084,914 Rights Shares to be issued, and will be payable by the Company.

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GENERAL INFORMATION

APPENDIX III

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at Room 1101, 11th Floor, China United Centre, 28 Marble Road, North Point, Hong Kong, from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the three financial years ended 31 December 2009, 31 December 2010 and 31 December 2011;
(c) the letter of advice from Vinco Capital, the text of which is set out on pages 26 to 41 of this circular;
(d) the report on the unaudited pro forma financial information of the Group issued by Deloitte Touche Tohmatsu, the text of which is set out in Appendix II to this circular;
(e) the material contracts disclosed in the paragraph under the heading “Material Contracts” in this Appendix; and
(f) the written consent referred to in the paragraph under the heading “Experts” in this Appendix.

— 60 —

NOTICE OF THE EGM

==> picture [70 x 99] intentionally omitted <==

Dragonite International Limited 叁龍國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 329)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Meeting”) of Dragonite International Limited (the “Company”) will be held at 30th Floor, China United Centre, 28 Marble Road, North Point, Hong Kong at 4:30 p.m. on 3 January 2013 for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“THAT :

(a) the underwriting agreement dated 20 November 2012 (the “Underwriting Agreement”) as amended by a supplemental agreement dated 11 December 2012 (the “Supplemental Agreement”) between the Company and Freeman Securities Limited (the “Underwriter”) in relation to the Rights Issue (as defined in paragraph (b) below), (a copy of which has been produced to this meeting and marked “A” and initialed by the Chairman of this meeting for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) the issue of not less than 105,974,992 shares of HK$0.01 each in the share capital of the Company (the “Shares”) and not more than 106,084,914 Shares (“Rights Shares”) pursuant to an offer by way of rights to holders of Shares (the “Shareholders”) at HK$1.00 per Rights Share (the “Rights Issue”) in the proportion of one Rights Share for every Share held by Shareholders whose names appear on the register of members of the Company on 15 January 2013 (or such other date as the Underwriter may agree in writing with the Company) (the “Record Date”) other than those Shareholders whose addresses on the register of members of the Company are outside Hong Kong on the Record Date and whom the Directors, based on legal opinions provided by legal advisers, consider it necessary or expedient not to offer the Rights Issue to such Shareholders on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place (the “Non-Qualifying Shareholders”), on and subject to the terms and conditions set out in a circular to the Shareholders in respect of the Rights Issue dated 14 December 2012 (the “Circular”) (a copy of which having been produced to this meeting and marked “B” and initialed by the chairman of the meeting for the purpose of identification) and on such other terms and conditions

— 61 —

NOTICE OF THE EGM

as may be determined by the directors of the Company be and is hereby approved provided that (i) no Rights Shares shall be offered to Non-Qualifying Shareholders and the Rights Shares which would otherwise have been offered to them shall be sold if a premium net of expenses is obtained and to the extent that such rights can be sold, the net proceeds of such sale (after deducting the expenses of sale) be distributed to the Non-Qualifying Shareholders pro rata to their holding of shares provided further that individual amounts of HK$100 or less shall be retained for the benefit of the Company; and (ii) to the extent that the Rights Shares referred to in (i) above is not sold as aforesaid, such Rights Shares together with any Rights Shares provisionally allotted but not accepted shall be offered for application under forms of application for excess Rights Shares; and
(c) any one director of the Company be and is hereby authorised to issue and allot the Rights Shares on terms as set out in the Circular and to do all such acts and things, to sign and execute all such further documents and to take such steps as the directors of the Company may in their absolute discretion consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Underwriting Agreement and/or the Supplemental Agreement and/or the Rights Issue and any of the transactions contemplated thereunder.”

Yours faithfully, By order of the Board

Dragonite International Limited Chan Mee Sze

Executive Director and Company Secretary

Dated 14 December 2012

Registered office: Head office and principal place of Cricket Square, Hutchins Drive business in Hong Kong: P.O. Box 2681 Room 1101, 11th Floor Grand Cayman KY1-1111 China United Centre Cayman Islands 28 Marble Road North Point Hong Kong

Notes:

A form of proxy to be used for the meeting is enclosed.
Any member of the Company entitled to attend and vote at the meeting of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. On a poll votes may be given either personally or by proxy. A proxy need not be a member of the Company. A member of the Company 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.

— 62 —

NOTICE OF THE EGM

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised in writing, or if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly authorised to sign the same.
The instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered at the branch registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for the meeting or adjourned meeting at which the person named in the instrument proposes to vote and in default the instrument of proxy shall not be treated as valid. Delivery of an instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.
Where there are joint holders of any share, any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

As at the date of this notice, the Board comprises the following Directors:

Executive Directors: Independent non-executive Directors: Mr. Wong Yin Sen (Chairman) Mr. Chung Yuk Lun Mr. Gary Drew Douglas (Managing Director) Mr. Liu Kwong Sang Mr. Hon Lik Mr. Lam Man Sum, Albert Ms. Chan Mee Sze Mr. Ho Tak Fun Mr. Lam Suk Ping

— 63 —

AI assistant

OCI International Holdings Limited — Proxy Solicitation & Information Statement 2012

49131_rns_2012-12-13_0cbbf97f-8c20-407f-80b8-5f10fcb51700.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

DRAGONITE INTERNATIONAL LIMITED 叁龍國際有限公司

Underwriter of the Rights Issue

FREEMAN SECURITIES LIMITED

Grand Vinco Capital Limited

CONTENTS

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES AND FOR APPLICATION AND PAYMENT FOR EXCESS RIGHTS SHARES

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

Dragonite International Limited 叁龍國際有限公司

(Stock Code: 329)

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

PROPOSED RIGHTS ISSUE

Issue statistics

LETTER FROM THE BOARD

QUALIFYING SHAREHOLDERS

CLOSURE OF REGISTER OF MEMBERS

RIGHTS OF OVERSEAS SHAREHOLDERS

LETTER FROM THE BOARD

SUBSCRIPTION PRICE

LETTER FROM THE BOARD

BASIS OF PROVISIONAL ALLOTMENT

FRACTIONS OF RIGHTS SHARES

STATUS OF RIGHTS SHARES

APPLICATION FOR EXCESS RIGHTS SHARES

LETTER FROM THE BOARD

SHARE CERTIFICATES AND REFUND CHEQUES FOR RIGHTS ISSUE

APPLICATION FOR LISTING

LETTER FROM THE BOARD

CONDITIONS OF THE RIGHTS ISSUE

THE UNDERWRITING AGREEMENT

LETTER FROM THE BOARD

TERMINATION OF THE UNDERWRITING AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Scenario 1:

LETTER FROM THE BOARD

Scenario 2:

LETTER FROM THE BOARD

REASONS FOR THE RIGHTS ISSUE

LETTER FROM THE BOARD

USE OF PROCEEDS FOR THE RIGHTS ISSUE

LETTER FROM THE BOARD

BUSINESS REVIEW & TRADING PROSPECTS

Electronic cigarettes

Health care and pharmaceutical products

LETTER FROM THE BOARD

Securities trading and investments

Other Businesses

Prospects

LETTER FROM THE BOARD

FUND RAISING EXERCISES OF THE COMPANY IN THE PAST TWELVE MONTHS

LETTER FROM THE BOARD

POSSIBLE ADJUSTMENTS TO THE SHARE OPTIONS

TAXATION

THE EGM

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

Dragonite International Limited 叁龍國際有限公司

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

PROPOSED RIGHTS ISSUE AT A SUBSCRIPTION PRICE OF HK$1.00 ON THE BASIS OF ONE RIGHTS SHARE FOR EVERY SHARE HELD ON THE RECORD DATE

A. INTRODUCTION

LETTER FROM VINCO CAPITAL

B. BASIS OF OUR OPINION AND RECOMMENDATION

LETTER FROM VINCO CAPITAL

OCI International Holdings Limited Proxy Solicitation & Information Statement 2012