Sinopec Engineering Group Co Ltd. — Proxy Solicitation & Information Statement 2015

Jun 25, 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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

UNIVERSE INTERNATIONAL HOLDINGS LIMITED 寰宇國際控股有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1046)

MAJOR TRANSACTION –

THE ACQUISITION OF WINSTON ASIA LIMITED AND CONSIDERATION ISSUE AND

NOTICE OF SPECIAL GENERAL MEETING

A notice convening a special general meeting of Universe International Holdings Limited to be held at 18/F, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, N.T., Hong Kong on Wednesday, 15 July 2015 at 12:00 noon is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the special general meeting is enclosed with this circular.

Whether or not you are able to attend the special general meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit the same at the Company’s Hong Kong branch share registrar and transfer office, Tricor Abacus Limited at Level 22, 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 the holding of the special general 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 special general meeting or any adjournment thereof should you so wish and in such event, the form of proxy shall be deemed to be revoked.

26 June 2015

• for identification purposes only

CONTENTS

			Page
DEFINITIONS	. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . .	I-1
APPENDIX II	–	ACCOUNTANTS’ REPORT ON THE TARGET GROUP . . . . .	II-1
APPENDIX III	–	UNAUDITED PRO FORMA FINANCIAL INFORMATION
		OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	MANAGEMENT DISCUSSION AND ANALYSIS OF
		THE TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	–	ADJUSTMENTS TO CONVERSION PRICE . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI	–	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			SGM-1

– i –

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

• ‘‘Acquisition’’

the acquisition of the Sale Shares pursuant to the terms and conditions of the SP Agreement

• ‘‘associate’’

has the meaning ascribed thereto under the Listing Rules

• ‘‘Board’’

the board of Directors

• ‘‘Business Day’’

a day (excluding Saturday and any day on which a tropical cyclone warning no.8 or above is hoisted or remains hoisted between 9:00 a.m. and 12:00 noon and is not lowered at or before 12:00 noon or on which a ‘‘black’’ rainstorm warning is hoisted or remains in effect between 9:00 a.m. and 12:00 noon and is not discontinued at or before 12:00 noon) on which licensed banks in Hong Kong are open for business

‘‘BVI’’

the British Virgin Islands

• ‘‘close associate’’

has the meaning ascribed thereto under the Listing Rules

• ‘‘Company’’

• ‘‘Completion’’

Universe International Holdings Limited, a company incorporated in Bermuda, the issued shares of which are listed on the Stock Exchange (stock code:1046) the completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of the SP Agreement

• ‘‘Completion Accounts’’

the unaudited consolidated profit and loss accounts of the Target for the period from 1 January 2015 and up to (and inclusive of) the Completion Date and the unaudited consolidated statement of financial position of the Target as at the Completion Date, which shall be prepared in accordance with (i) the Hong Kong Financial Reporting Standards and (ii) the accounting policies applied in the preparation of the underlying financial information for the Target Audited Accounts

– 1 –

DEFINITIONS

• ‘‘Completion Date’’

the fifth Business Day after all the Conditions (other than those Conditions which can be fulfilled only at Completion) shall have fulfilled or waived on which the Completion shall take place (or such other date as the Purchaser and the Vendors may agree in writing)

• ‘‘Condition(s)’’

• the condition(s) precedent to which Completion is subject as set out in the sub-section headed ‘‘Letter from the Board – B. THE ACQUISITION – Conditions Precedent’’

• ‘‘connected person’’ has the meaning ascribed thereto under the Listing Rules

• ‘‘Consideration’’

• the consideration for the purchase of the Sale Shares under the SP Agreement, the maximum amount being HK$64,000,000 (subject to adjustments)

• ‘‘Convertible Notes’’

• convertible notes with the aggregate principal amount of HK$64,000,000 to be issued by the Company to the Vendors at Completion to settle the Consideration

• ‘‘Conversion Price’’

• the conversion price at which each Conversion Share is issued under the terms and conditions of the Convertible Notes (subject to adjustment as set out and in accordance with the terms and conditions of the Convertible Notes and the SP Agreement). Please refer to the sub-section headed ‘‘Letter from the Board – B. THE ACQUISITION – The Convertible Notes’’ for details. The initial Conversion Price was fixed at HK$0.75 per Conversion Share at the time when the SP Agreement was entered into

• ‘‘Conversion Shares’’

• such number of new shares of the Company to be allotted and issued by the Company upon conversion of the Convertible Notes in accordance with the terms and conditions thereof, each a ‘‘Conversion Share’’

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘Enlarged Group’’

the Group immediately upon Completion

• ‘‘Group’’

• the Company and its subsidiaries from time to time

• ‘‘Guarantors’’

• Ng Tang and Lo Lai Kuen

• ‘‘HK$’’

Hong Kong dollars, the lawful currency of Hong Kong

– 2 –

DEFINITIONS

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Third Party(ies)’’

• third party(ies) who is/are independent of and not connected with the Company, its connected persons and their respective associates

• ‘‘Last Trading Day’’ 6 May 2015, being the last trading day of the Shares on the Stock Exchange immediately before the signing of the SP Agreement

• ‘‘Latest Practicable Date’’ 24 June 2015, being the latest practicable date before the printing of this circular for the purpose of ascertaining certain information contained herein

• ‘‘Listing Rules’’

• the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘Long Stop Date’’

• 31 October 2015 (or such later date as the Purchaser and the Vendors may agree in writing)

• ‘‘MOU’’

the memorandum of understanding dated 20 April 2015 and entered into between Victor Meg Limited, the Guarantors and the Purchaser in relation to the potential acquisition of all or part of the issued share capital of the Target, details of which were disclosed in the announcement of the Company dated 20 April 2015

• ‘‘Noteholder(s)’’

• the holder(s) of the Convertible Notes

• ‘‘PRC’’

• the People’s Republic of China (excluding, for the purposes of this circular, Hong Kong, the Macau Special Administrative Region and Taiwan)

• ‘‘Purchaser’’

• Fragrant River Entertainment Culture (Holdings) Limited, a company incorporated in BVI with limited liability and a wholly-owned subsidiary of the Company

• ‘‘Restructuring’’

• the restructuring of the shareholdings of the Target and the Target Group

– 3 –

DEFINITIONS

‘‘SGM’’

• a special general meeting of the Company to be held to consider and, if though fit, approve the Acquisition and the transactions contemplated thereunder including the grant of the Specific Mandate, the notice of which is set out on pages SGM-1 to SGM-3 of this circular

• ‘‘Sale Shares’’ 2,655 issued shares of the Target, which shall represent approximately 79.99% of the enlarged share capital of the Target immediately after the Restructuring and as at Completion

• ‘‘Share(s)’’ the ordinary share(s) in the share capital of the Company

• ‘‘Shareholder(s)’’ holder(s) of the Share(s)

• ‘‘SP Agreement’’ the agreement dated 7 May 2015 entered into between the Purchaser, the Vendors and the Guarantors in relation to the Acquisition

• ‘‘Specific Mandate’’ the mandate for the creation and issue of the Convertible Notes and the allotment and issue of the Conversion Shares

• ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

• ‘‘Target’’

• Winston Asia Limited, a company incorporated in BVI with limited liability

• ‘‘Target Audited Accounts’’ the audited consolidated financial statements of the Target for the year ended 31 December 2014

• ‘‘Target Group’’ the Target and its subsidiaries

• ‘‘Universe Watch’’

• Universe Watch & Jewellery Group Company Limited, a company incorporated in Hong Kong with limited liability

• ‘‘Vendors’’

• (i) Victor Meg Limited, a company incorporated in BVI with limited liability; (ii) Ng Tang; and (iii) Most Profitable Investment Ltd., a company incorporated in BVI with limited liability

• ‘‘%’’

per cent.

– 4 –

LETTER FROM THE BOARD

UNIVERSE INTERNATIONAL HOLDINGS LIMITED 寰宇國際控股有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1046)

Executive Directors: Mr Lam Siu Ming, Daneil (Chairman) Mr Hung Cho Sing Mr Yeung Kim Piu Mr Lam Kit Sun

Non-executive Director: Mr. Chan Shiu Kwong, Stephen

Independent Non-executive Directors: Mr Lam Wing Tai Mr Lam Chi Keung Mr Choi Wing Koon

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head office and principal place of business in Hong Kong: 18th Floor Wyler Centre Phase II 192-200 Tai Lin Pai Road Kwai Chung New Territories Hong Kong 26 June 2015

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION – THE ACQUISITION OF WINSTON ASIA LIMITED AND CONSIDERATION ISSUE AND

NOTICE OF SPECIAL GENERAL MEETING

A. INTRODUCTION

The Board announced on 20 April 2015 that the Purchaser (a wholly-owned subsidiary of the Company), Victor Meg Limited and the Guarantors entered into the MOU to form the basis of negotiation of the proposed acquisition of all or part of the direct or indirect interests of Victor Meg Limited and the Guarantors in the Target.

• for identification purposes only

– 5 –

LETTER FROM THE BOARD

The Board further announced on 7 May 2015 that the Purchaser, the Vendors and the Guarantors entered into the SP Agreement pursuant to which the Purchaser has conditionally agreed to acquire, and the Vendors have conditionally agreed to sell, the Sale Shares (which shall represent approximately 79.99% of the enlarged share capital of the Target immediately prior to Completion) at the Consideration of HK$64,000,000 (subject to adjustments).

The purpose of this circular is to provide you with, among other matters, (i) further details regarding the SP Agreement and the Acquisition; (ii) financial information of the Group and the Target Group; (iii) pro forma financial information of the Enlarged Group; (iv) the general information of the Company; and (v) a notice convening the SGM.

B. THE ACQUISITION

Date

7 May 2015

Parties

• (1) the Purchaser, Fragrant River Entertainment Culture (Holdings) Limited, a company incorporated in BVI and a wholly-owned subsidiary of the Company;

• (2) the Vendors:

• (i) Victor Meg Limited;

• (ii) Ng Tang; and

• (iii) Most Profitable Investment Ltd; and

• (3) the Guarantors

• (i) Ng Tang, being one of the shareholders of Victor Meg Limited; and

• (ii) Lo Lai Kuen, being one of the shareholders of Victor Meg Limited and the sole shareholder of Most Profitable Investment Ltd..

The principal activity of each of Victor Meg Limited and Most Profitable Investment Ltd. is investment holding.

As at the date of the SP Agreement, (i) Victor Meg Limited, an investment holding company, and Ng Tang respectively owned approximately 72.33% and approximately 5.54% of the issued share capital of the Target, and indirectly owned approximately 65.38% and

– 6 –

LETTER FROM THE BOARD

approximately 5.00% of the issued share capital of Universe Watch; and (ii) Most Profitable Investment Ltd., an investment holding company, owned approximately 9.61% of the issued share capital of Universe Watch.

Pursuant to the SP Agreement, the Target has completed the Restructuring such that as at the Latest Practicable Date, (i) the Purchaser owned approximately 20.01% of the enlarged share capital of the Target and the Vendors owned the remaining, i.e. approximately 79.99%, of the enlarged share capital of the Target; and (ii) the Target owned 100% of the issued share capital of Universe Watch.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Vendors and (where applicable) its ultimate beneficial owners are Independent Third Parties.

Assets to be acquired

Pursuant to the SP Agreement, the Purchaser has conditionally agreed to acquire, and the Vendors have conditionally agreed to sell their respective portion of, the Sale Shares, which shall, in aggregate, represent approximately 79.99% of the enlarged share capital of the Target immediately prior to Completion.

As discussed above, as at the Latest Practicable Date and upon completion of the Restructuring, the Target owned 100% equity interest of Universe Watch, which was the holding company of a group of companies which were principally engaged in business activities including trading of watches and jewellery, trademark holding, wholesales and retail of watches and jewellery in Hong Kong and the PRC. Further details about the Target and its subsidiaries are set out in the section headed ‘‘Information on the Target Group’’ below.

Upon Completion, the Target will become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the Group.

Consideration and Payment Terms

The Consideration for the acquisition of the Sale Shares is HK$64,000,000, subject to the adjustment described in the paragraph headed ‘‘Adjustment to the Consideration’’ below.

The Consideration shall be satisfied by the issue of the Convertible Notes in the aggregate principal amount of HK$64,000,000 by the Company to the Vendors at Completion according to their respective shareholding ratio in the Target immediately before Completion.

– 7 –

LETTER FROM THE BOARD

The Consideration was determined after arm’s length negotiations between the Purchaser and the Vendors principally taking into account, among other things, (i) the historical financial performance of the Target Group and the synergetic effect to be brought by the expansion to the jewellery business as disclosed below under the section headed ‘‘Reasons for and benefits of the Acquisition’’; (ii) the mechanism to adjust the Consideration as detailed below; (iii) the average price to earnings ratio of other listed companies which are principally engaged in the trading of watches in Hong Kong and the PRC of approximately 17.99 times; (iv) the payment terms of the Consideration; and (v) the opportunity for the Group to further diversify its current business and broaden the income sources of the Group.

The Board has identified a list of eight companies listed on the Stock Exchange which are principally engaged in the trading of watches in Hong Kong and the PRC (the ‘‘Comparables’’) and reviewed their price to earnings ratios (the ’’PE Ratio(s)’’). Based on the respective closing price per share of the Comparables on 7 May 2015 and the respective earnings per share as disclosed in their respective then latest available annual reports, the PE Ratios of the Comparables were within the range of approximately 5.29 times to approximately 37.67 times, with an average of approximately 17.99 times (one of the Comparable recorded a loss for its latest financial year and was excluded in calculating the average PE Ratio). Given that Universe Watch is not a listed company, the Board considers that a lower PE Ratio of the Target Group to be more favourable to the Company. Therefore, a benchmark PE Ratio of 8 times, i.e. approximately half of market average, is adopted for determining the Consideration. Having also taken into account (i) the target profit for FY2015 (as defined below) of HK$10,000,000 as detailed below; and (ii) the Sale Shares which represent approximately 79.99% of the enlarged share capital of the Target immediately prior to Completion, a benchmark consideration of HK$64,000,000 is obtained (rounding up 8 x HK$10,000,000 x 79.99%).

Adjustment to the Consideration

In the event that the audited consolidated profit after tax of the Target Group attributable to the owners of the Target for the year ending 31 December 2015 (‘‘FY 2015’’) (the ‘‘2015 Net Profit’’) (which will only comprise income or gain generated by activities in the ordinary and usual course of business of the Target Group) is less than the target profit for FY 2015 of HK$10,000,000, the Vendors and the Guarantors shall collectively pay the Purchaser in cash a sum equal to the Adjustment Amount (as defined below) without any set off, withholding or deduction within 10 Business Days upon the receipt of the audited consolidated financial statements of the Target for FY 2015 (the ‘‘Adjustment Accounts’’).

– 8 –

LETTER FROM THE BOARD

The adjustment amount (the ‘‘Adjustment Amount’’) is determined in accordance with the formula set out below:

• A = (B-C) x 8

Where:

• ‘‘A’’ means the Adjustment Amount payable by the Vendors to the Purchaser provided that the Adjustment Amount shall in any event be capped at such amount as is equal to the difference between (i) HK$64,000,000 and (ii) the lower of (aa) the audited consolidated net asset value of the Target as at 31 December 2014 as shown in the Target Audited Accounts (being HK$23,461,765); or (bb) where the net asset value of the Group as shown in the Completion Accounts (‘‘Completion NAV’’) is less than the audited consolidated net asset value of the Target as at 31 December 2014 as shown in the Target Audited Accounts, the Completion NAV;

• ‘‘B’’ means HK$10,000,000;

• ‘‘C’’ means the 2015 Net Profit. In case the 2015 Net Profit is a negative figure, ‘‘C’’ shall be deemed to be zero;

If the 2015 Net Profit is equal to or exceeds HK$10,000,000, the Consideration shall be fixed at HK$64,000,000. In no event shall the Consideration be subject to any upward adjustment.

The Adjustment Accounts will be prepared by staff of the Group who are members of the Hong Kong Institute of Certified Public Accountants and will be audited by the auditors appointed by the Purchaser. Further announcement will be made by the Company in relation to the 2015 Net Profit and the Adjustment Amount (if any) when the Adjustment Accounts become available.

The Convertible Notes

The principal terms of the Convertible Notes are summarized as follows:

Aggregate principal amount: HK$64,000,000 Maturity date: The date falling on the second anniversary of the date of first issue of the Convertible Notes or, if that is not a Business Day, the first Business Day thereafter (‘‘Maturity Date’’)

– 9 –

LETTER FROM THE BOARD

Interest: The principal amount of the Convertible Notes does not bear interest. However, if any amount due under the Convertible Notes is not paid in full when due, interest shall accrue on the overdue sum at the rate of 5% per annum (beginning on the due date) until such amount has been paid in full. Conversion Period: The period commencing from the date of first issue of the Convertible Notes and up to 4:00 p.m. on the Maturity Date (‘‘Conversion Period’’) Conversion Price: Initially fixed at HK$0.75 per Conversion Share at the date of the SP Agreement (subject to adjustments as set out and in accordance with the terms and conditions of the Convertible Notes and the SP Agreement). It is a term in the SP Agreement that the initial Conversion Price shall be subject to adjustment in the event there occurs any adjustment event between the date of the SP Agreement and the C om pletion D at e, accordingly, the Conversion Price as at the date of issue of the Convertible Notes may be subject to further change. In this regard, please also refer to the paragraph headed ‘‘ The Conversion Price’’ below.

– 10 –

LETTER FROM THE BOARD

Adjustment events:

The initial Conversion Price shall from time to time be subject to adjustment upon occurrence of certain adjustment events after the date of SP Agreement. Details of such adjustment events and the applicable formulae for adjustment of Conversion Price upon the happening of such adjustment events are set out in Appendix V to this circular.

Conversion:

Subject to, and in compliance with, the terms and conditions of the Convertible Notes, a Noteholder shall have the right to convert its Convertible Notes into Conversion Shares at any time during the Conversion Period, in amounts not less than a whole multiple of HK$1,000,000 on such conversion, save that if at any time the outstanding principal amount of the Convertible Note held by a Noteholder is less than HK$1,000,000, or if a Noteholder intends to exercise the conversion rights attached to the entire principal amount of the Convertible Note held by it, the Noteholder may convert the whole of such outstanding principal amount.

No conversion right may be exercised to the extent that following and as a result of such exercise, the public float of the Company as prescribed under the Listing Rules cannot be maintained.

Ranking of Conversion Shares:

The Conversion Shares, when allotted and issued, will rank pari passu in all respects with all Shares then in issue on the date of registration of the converting Noteholder in the register of members of the Company as holder of such Conversion Shares.

– 11 –

LETTER FROM THE BOARD

Transferability:

The Convertible Notes or any amount outstanding thereunder may be assigned or transferred to any person at any time prior to the Maturity Date provided that (i) any such transfer shall be in whole multiples of HK$1,000,000 (or such amount as may represent the entire principal amount thereof); and (ii) any transfer of the Convertible Notes to any connected person of the Company shall be subject to the requirements (if any) that the Stock Exchange may impose from time to time.

Listing:

No application has been or will be made for the listing of the Convertible Notes on the Stock Exchange or any other stock exchange. Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares on the Stock Exchange.

The Conversion Price

The initial Conversion Price of HK$0.75 per Conversion Share (subject to adjustment) represents:

• (i) a premium of approximately 7.14% over the closing price of HK$0.7 per Share as quoted on the Stock Exchange on the date of the SP Agreement;

• (ii) a discount of approximately 5.06% to the average of the closing prices of the Share as quoted in the daily quotations sheets of the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day of HK$0.79 per Share;

• (iii) a discount of approximately 3.72% to the average of the closing prices of the Share as quoted in the daily quotations sheets of the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day of HK$0.779 per Share;

• (iv) a discount of approximately 47.18% to the unaudited net asset value attributable to equity holders of the Company of approximately HK$1.42 per Share as at 31 December 2014 (based on the unaudited net assets attributable to the Company’s equity holders of approximately HK$351.96 million as at 31 December 2014 and

– 12 –

LETTER FROM THE BOARD

248,650,307 Shares then in issue as set out in the interim report of the Company for the 6 months ended 31 December 2014 after the capital reorganisation announced on 3 February 2015 and took effect on 16 March 2015); and

• (v) a discount of approximately 9.64% to the closing price of HK$0.83 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Conversion Price was determined after arm’s length negotiations between the parties to the SP Agreement with reference to the prevailing market price of the Shares and the above-mentioned net asset value per Share attributable to the Shareholders.

It is a term of the SP Agreement that the initial Conversion Price of HK$0.75 per Conversion Share will be subject to adjustment in case any adjustment event as described in the terms and conditions of the Convertible Notes takes place from the date of the SP Agreement up to the Completion Date. The Company announced on 26 May 2015 a proposed 2-for-1 rights issue (the ‘‘Rights Issue’’) and placing on a best effort basis (the ‘‘Placing’’) and both such events constitute adjustment events to the initial Conversion Price if (as regards the Rights Issue) the related rights shares are allotted and issued before the Completion Date and/or (as regards the Placing) the placing shares are allotted and issued before the Completion Date.

The formula for adjustment of Conversion Price in the event of rights issue of Shares or options, etc. over Shares (by which the adjustment of Conversion Price pursuant to the Rights Issue is calculated) is set out in the section headed ‘‘(iv) Rights issue of Shares or options, etc. over Shares’’ in Appendix V to this circular. Based on the average closing price of HK$0.732 per Share as quoted on the Stock Exchange for the fifteen consecutive dealing days immediately preceding the date of the announcement of the Rights Issue on 26 May 2015, the initial Conversion Price per Conversion Share will be adjusted from HK$0.75 to HK$0.3880 (subject to further adjustment in accordance with the terms and conditions of the Convertible Notes). On the basis of the adjusted initial Conversion Price of HK$0.3880 per Conversion Share, the number of Conversion Shares falling to be issued under the Convertible Notes in the aggregate principal amount of HK$64,000,000 will be 164,948,453 Shares.

Such adjustment will become effective on the date of allotment and issue of the rights shares under the Rights Issue.

Such adjusted initial Conversion Price of HK$0.3880 per Conversion Share represents a discount of approximately 5.66% to the theoretical ex-rights price of approximately HK$0.4113 taking into account the Rights Issue and based on the closing price of HK$0.83 per share as quoted on the Stock Exchange on the Latest Practicable Date.

– 13 –

LETTER FROM THE BOARD

The formula for adjustment of Conversion Price in the event of issue of Shares at less than current market price (by which the adjustment of Conversion Price pursuant to the Placing is calculated) is set out in the sub-section headed ‘‘(vi) Issue at less than Current Market Price’’ in Appendix V to this circular. Based on the average closing price of HK$0.732 per Share as quoted on the Stock Exchange for the fifteen consecutive dealing days immediately preceding the date of the announcement of the Placing on 26 May 2015, the initial Conversion Price per Conversion Share will be adjusted from HK$0.75 to HK$0.4846 (subject to further adjustment in accordance with the terms and conditions of the Convertible Notes). On the basis of the adjusted initial Conversion Price of HK$0.4846 per Conversion Share, the number of Conversion Shares falling to be issued under the Convertible Notes in the aggregate principal amount of HK$64,000,000 will be 132,067,684 Shares.

According to the terms of the Convertible Notes, where more than one event giving rise to an adjustment to the Conversion Price occurs within such a short period of time that the independent financial adviser considers in good faith that the operation of the adjustment provisions contained in the Convertible Notes would need to be subject to some modification in order to give the intended commercial result, such modification shall be made to the operation of the adjustment provisions as may be advised by the independent financial adviser to be in its opinion appropriate in order to give such intended result.

According to the opinion of the independent financial adviser appointed by the Company for such purpose, where the Placing and the Rights Issue proceed together, the initial Conversion Price shall only be subject to adjustment as caused by the effect of the Rights Issue (i.e. the adjusted initial Conversion Price will be HK$0.3880).

In the event that only the Placing (but not the Rights Issue) is completed, the adjustment of the initial Conversion Price to HK$0.4846 pursuant to the Placing as set out above shall become effective on the date of issue of the Shares under the Placing.

Such adjusted initial Conversion Price of HK$0.4846 per Conversion Share represents a discount of approximately 41.61% to the closing price of HK$0.83 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The adjustment formulae used for the adjustment of Conversion Price are terms of the Convertible Notes and are normal commercial terms generally adopted in similar convertible notes.

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LETTER FROM THE BOARD

Number of Conversion Shares

If the conversion rights attached to the Convertible Notes are exercised in full at the initial Conversion Price of HK$0.75 per Conversion Share, the maximum number of the Conversion Shares to be allotted and issued will be 85,333,333 Shares representing (i) approximately 28.60% of the existing issued share capital of the Company; and (ii) approximately 22.24% of the issued share capital of the Company as enlarged by the allotment and issue of the Conversion Shares.

On the basis that the Rights Issue announced by the Company on 26 May 2015 takes place before the Completion Date, the Conversion Price will be adjusted to HK$0.3880 per Conversion Share and if the conversion rights attached to the Convertible Notes are exercised in full at such adjusted Conversion Price of HK$0.3880 per Conversion Share, the maximum number of the Conversion Shares to be allotted and issued will be 164,948,453 Shares representing (i) approximately 55.28% of the existing issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 18.43% of the issued share capital of the Company as enlarged by the allotment and issue of the rights shares under the Rights Issue (assuming minimum number of 596,760,614 rights shares are issued under the Rights Issue); and (iii) approximately 11.13% of the issued share capital of the Company as enlarged by the allotment and issue of the placing shares under the Placing (assuming that the maximum of 586,350,000 placing shares are placed under the Placing) and the rights shares under the Rights Issue (assuming minimum number of 596,760,614 rights shares are issued under the Rights Issue).

On the basis that only the Placing takes place before the Completion Date, the Conversion Price will be adjusted to HK$0.4846 per Conversion Share and if the conversion rights attached to the Convertible Notes are exercised in full at such adjusted Conversion Price of HK$0.4846 per Conversion Share, the maximum number of the Conversion Shares to be allotted and issued will be 132,067,684 Shares, representing (i) approximately 44.26% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 14.93% of the issued share capital of the Company as enlarged by the allotment and issue of the placing shares under the Placing (assuming that the maximum of 586,350,000 placing shares are placed under the Placing).

Conditions Precedent

Completion is subject to the fulfilment or (if applicable) waiver of the following Conditions:

• (1) the Stock Exchange having granted or having agreed to grant the listing of, and permission to deal in, the Conversion Shares;

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LETTER FROM THE BOARD

• (2) (where applicable) the compliance with the applicable requirements under the Listing Rules for the sale and purchase of the Sale Shares as contemplated under the SP Agreement having been fulfilled by the Company;

• (3) the passing of resolution(s) by the Shareholders (to the extent they are entitled to vote on such resolution) at the SGM approving the transactions as contemplated under the SP Agreement and the grant of the specific mandate for the creation and issue of the Convertible Notes and the allotment and issue of the Conversion Shares by the Company;

• (4) (if applicable) all necessary consents and approvals in relation to the transactions contemplated under the SP Agreement having been obtained by the Vendors and such consents and approvals should be valid up to the Completion Date;

• (5) (if applicable) all necessary consents and approvals in relation to the transactions contemplated under the SP Agreement having been obtained by the Purchaser and such consents and approvals should be valid up to the Completion Date;

• (6) the Purchaser being reasonably satisfied with the results of the due diligence exercise (whether legal, accounting, financial, operational or other aspects that the Purchaser may consider necessary) on the business assets, liability, activities, operations, prospects and other status of each of the companies within the Target Group which the Purchaser, its agents or professional advisers think reasonably necessary and appropriate to conduct;

• (7) the completion of the Restructuring having taken place;

• (8) the Purchaser being satisfied, from the date of the SP Agreement and at any time before the Completion, that the Vendors’ warranties as given by each of the Vendors and the Guarantors in the SP Agreement remain true, accurate and not misleading and that no events have occurred that would result in any breach of any of the Vendors’ warranties or other provisions of the SP Agreement given by the Vendors and the Guarantors; and

• (9) there being no material adverse change in the Group’s business, operations, financial conditions or prospects taken as a whole since the date of the SP Agreement.

The Purchaser may waive the Conditions (6), (8) and (9) at any time before the Long Stop Date by notice in writing to the Vendors. None of the other Conditions are capable of being waived by any party to the SP Agreement.

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LETTER FROM THE BOARD

If the Conditions shall not have been fulfilled (or waived by the Purchaser as stated above) by 5:00 p.m. on the Long Stop Date, all rights and obligations of the parties to the SP Agreement shall cease and terminate, save and except certain provisions relating to confidentiality, costs and expenses and certain miscellaneous matters which provisions shall remain in full force and effect, and no party to the SP Agreement shall have any claim against the other save for claim (if any) in respect of any antecedent breach thereof.

As at the Latest Practicable Date, other than condition (7) (which has been fulfilled), none of the Conditions has been fulfilled or waived.

The Purchaser has no intention to waive any of the Conditions. If the Purchaser has waived any of the Conditions, the Company will announce such fact in the announcement of the Company in relation to the completion of the Acquisition.

Completion

Subject to the fulfilment or waiver (as the case may be) of all the Conditions set out above, Completion shall take place on the Completion Date (i.e. the fifth Business Day after all the Conditions have been fulfilled or waived).

Upon Completion, the Target will become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the Enlarged Group.

C. INFORMATION ON THE TARGET GROUP

As at the date of the SP Agreement, the Purchaser owned 22.13% of issued share capital of the Target, a company incorporated in BVI with limited liability. The Target owned 90.39% of the issued share capital of Universe Watch, a company incorporated in Hong Kong with limited liability, which in turn owned 100% of the equity interests of various companies as operating subsidiaries of the Target Group. Therefore, the Purchaser indirectly owned approximately 20.01% of Universe Watch as at the date of SP Agreement.

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LETTER FROM THE BOARD

Set out below is the group structure of the Target as at the date of the SP Agreement:

==> picture [397 x 241] intentionally omitted <==

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

Vendor – Vendor – Most
Purchaser Vendor – Ng Tang
Victor Meg Limited Profitable Investment Ltd.
22.13% 72.33% 5.54%
Target
90.39% 9.61%
Universe Watch
100.00%
Subsidiaries of
Universe Watch
----- End of picture text -----

One of the Conditions is that the Target shall complete the Restructuring to the effect that:

• (1) the Target shall acquire from Most Profitable Investment Ltd. all of its 9.61% interest in Universe Watch to the intent that immediately after completion of such acquisition, the entire issued share capital of Universe Watch shall be owned by the Target; and

• (2) in consideration of Most Profitable Investment Ltd. selling to the Target Company all its 9.61% interest in Universe Watch, the Target shall allot and issue such number of shares representing 9.61% of the enlarged share capital of the Target after the completion of the Restructuring and immediately prior to Completion, credited as fully paid, to Most Profitable Investment Ltd..

The Restructuring has been completed as at the Latest Practicable Date and the Target is now the holding company of Universe Watch, which was incorporated in Hong Kong on 26 February 1991 with limited liability.

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LETTER FROM THE BOARD

Set out below is the group structure of the Target Group upon completion of the Restructuring and as at the Latest Practicable Date:

==> picture [397 x 237] intentionally omitted <==

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

Vendor – Vendor – Most
Purchaser Vendor – Ng Tang
Victor Meg Limited Profitable Investment Ltd.
20.01% 65.38% 5.00% 9.61%
Target
100.00%
Universe Watch
100.00%
Subsidiaries of
Universe Watch
----- End of picture text -----

Upon Completion, the Target will become a wholly-owned subsidiary of the Company. Set out below is the group structure of the Target Group upon Completion:

==> picture [421 x 151] intentionally omitted <==

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

Purchaser
100.00%
Principal activities:
Target Investments holding
100.00%
Universe Watch Principal activities:
Investments holding
100.00%
100% 100% 100% 100% 100% 100%
Shenzhen Li Chang Shenzhen Right
Watch Co Ltd Sales Trading Ltd Garona HK Ltd Garona International Ltd Garona Worldwide Limited World Time (Asia) Ltd
深圳市利昌鐘錶有限公司 當盛貿易（深圳）有限公司
Principal activities: Trading, wholesales Trading, wholesales Trading, wholesales Dormant Trademark holding Trademark holding
and retails of watches, and retails of watches, and retails of watches,
gems and jewellery gems and jewellery gems and jewellery
----- End of picture text -----

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LETTER FROM THE BOARD

Both the Target and Universe Watch are principally engaged in investment holding. The Target holds the entire issued share capital of Universe Watch, which in turn holds a group of companies principally engaged in business activities including the trading of watches and jewellery, trademark holding, wholesale and retail of watches and jewellery in Hong Kong and the PRC. Universe Watch is an authorised dealer in the PRC of various lifestyle brands watches such as Casio, Seiko, Citizen, Edwin, Esprit, Timex, Luminox, Calvin Klein and Tissot. It also sells timepieces as well as luxury products under the brand ‘‘Garona’’ owned and managed by it.

The Target currently has over thirty retail points in the PRC and two retail shops in Hong Kong. In view of the growth of retail sales of jewellery and watches in recent years, the management of the Target commenced the selling of gems and jewellery business in late December 2014 which is expected to have a synergetic effect with the current business in trading, wholesale and retail of watches.

Principal business activities and business model

Universe Watch is an authorised dealer in the PRC of various lifestyle brands watches such as Casio, Seiko, Citizen, Edwin, Esprit, Timex, Luminox, Calvin Klein and Tissot and procures watches from suppliers of these brands. Universe Watch also sells timepieces as well as luxury products under the brand ‘‘Garona’’ owned and managed by it.

Universe Watch sells its goods (i) to retail customers at retail points in the department stores and shopping malls rented by the Target Group in the PRC and shops in Hong Kong and (ii) to other distributors or retailers in the PRC and Hong Kong. As at the Latest Practicable Date, the Target Group had 31 retail points in the PRC and 2 retail shops in Hong Kong (opened in 2015) and the location of which are set out as follow:

Locations Beijing 北京 Tianjin 天津 Kunming 昆明 Hong Kong 香港 Shanghai 上海 Chengdu 成都 Dalian 大連 Harbin 哈爾濱 Shenyang 瀋陽 Suzhou 蘇州 Panjin 盤錦 Mudanjiang 牡丹江 Qingdao 青島 Dongying 東營 Total	No. of retail point/shop 12 3 3 2 2 2 2 1 1 1 1 1 1 1
	33

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LETTER FROM THE BOARD

The retail business accounted for approximately 83.99%, 83.47% and 79.34% of the Target Group’s total revenue before value added tax during the year ended 31 December 2012, 2013 and 2014, respectively. It also accounted for approximately 96.31%, 94.24% and 79.66% of the Target Group’s gross profit during the year ended 31 December 2012, 2013 and 2014, respectively.

The wholesale business accounted for approximately 16.01%, 16.53% and 20.66% of the Group’s total revenue before value added tax during the years ended 31 December 2012, 2013 and 2014, respectively. It also accounted for approximately 3.69%, 5.76% and 20.34% of the Target Group’s gross profit during the year ended 31 December 2012, 2013 and 2014, respectively.

In view of the growth of retail sales of jewellery and watches in the recent year, the Target Group commenced business in the selling of gems and jewellery in late December 2014 and recorded a revenue of approximately HK$22,000 for the year ended 31 December 2014 (for the year ended 31 December 2013 and 2012: Nil). This new business is expected to have synergetic effect with the current trading, wholesale and retails of watches business of the Target Group. The Target Group purchased approximately HK$5 million worth of inventory of jewellery in December 2014 and invested approximately HK$600,000 in total to lease and renovate two new retail shops in Hong Kong in February 2015 in order to expand the jewellery business. As at the Latest Practicable Date, there is no further plan to increase number of retail points/shops in selling jewellery in the current year but the Company plans to further invest HK$20 million in the purchase of jewellery as inventory for the development of the trading, wholesales and retails of jewellery products business after the completion of the Acquisition.

Customers

Regarding retail business, as the Target Group mainly conducts sales through its retail points in the department stores and shopping malls in the PRC and shops in Hong Kong to retail customers, the customers of the Target Group are mostly individuals. Regarding the wholesale business, all of the customers are distributers or retailers in the PRC and Hong Kong. Given that the business focus of the Target Group is the sale of lifestyle brand watches as well as luxury products such as jewellery, the Directors believe that most of its customers are mid-income consumers as well as mass market consumers in the PRC and Hong Kong.

Regarding the retail points in PRC, the department stores and shopping malls received the sales proceeds from retail customers directly and will generally make payment (after deducting the rent) to the Target Group in 30-60 days via bank remittance. For the retail shops in Hong Kong, all of the sales are settled by cash and credit cards. For wholesale, all of the sales are settled by cheques or bank remittance.

There are no major customers in the retail business of the Target Group. For wholesale business, the top five largest customers of the Target Group accounted for approximately 14.4%, 14.2% and 14.4% of the total sales of the Target Group for the year ended 31 December 2012, 2013 and 2014, respectively.

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LETTER FROM THE BOARD

Suppliers

Since the Target Group conducts business in wholesale and retail of watches and jewellery, the major suppliers are distributors of various lifestyle brands watches such as Casio, Seiko, Citizen, Edwin, Esprit, Timex, Luminox, Calvin Klein, Tissot and jewellery wholesaler.

The top five largest suppliers of the Target Group accounted for approximately 87.4%, 89.3% and 91.4% of the total purchases of the Target Group for the year ended 31 December 2012, 2013 and 2014, respectively.

Risk factors

The risk of the trading, wholesale and retail of watch and jewellery products business in Hong Kong and the PRC is that business hinges upon the performance of the retail market of watch products in Hong Kong and the PRC, which in turn is dependent on the economy of PRC and Hong Kong.

In addition, given that demand on the Target Group’s timepieces and luxury products is highly related to the customer’s preference of brands sourced by the Target Group, the market share and result of operations will be affected by changes in market trends and consumers’ tastes. The Target Group may also face the risk of keeping obsolete and slow-moving inventory which may impact on cash flow and liquidity.

Key financial information of the Target Group

According to the accountants’ report of the Target Group as set out in Appendix II to this circular, the audited (i) consolidated turnover and (ii) profit/(loss) before and after taxation of the Target Group for the year ended 31 December 2013 and 31 December 2014 respectively are as follows:

	For the	For the
	year ended	year ended
	31 December	31 December
	2014	2013
	HK$	HK$
Turnover	49,746,197	60,100,223
(Loss) before and after taxation	(4,727,984)	(3,645,821)

The net loss increased by HK$1,082,163 for the year ended 31 December 2014 as compared with that of the year ended 31 December 2013 was mainly due to the combined net effect of (i) the decrease in gross profit of HK$3,220,755, (ii) the decrease of selling and distribution expenses of HK$2,214,172; (iii) the decrease of administrative expenses of HK$877,632; and (iv)

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LETTER FROM THE BOARD

the decrease of other income of HK$934,435. The reasons (i), (ii), (iii) and (iv) are the results of the closure of retail points with unsatisfactory performance and the expiry of rental period of retail points during the year.

The audited consolidated total asset value and audited consolidated net asset value of the Target Group as at 31 December 2014 were HK$37,993,894 and HK$23,461,765 respectively.

As disclosed in the announcement of the Company dated 7 May 2015, the profit before and after taxation of the Target Group for the year ended 31 December 2014 was HK$8,254,631 which included a non-recurrent income of approximately HK$12.98 million from the waiver of amount due to a shareholder.

However, according to the accountants’ report of the Target Group as set out in Appendix II to this circular, the accounting treatment for the waiver of amount due to a shareholder of approximately HK$12.98 million was changed from the recognition as other income in the consolidated statements of profit or loss for the year ended 31 December 2014 to the recognition as capital contribution by holding company in the consolidated statement of changes in equity for the year ended 31 December 2014. As a result of the above change in accounting treatment, the profit before and after taxation of the Target Group of HK$8,254,631 have become loss before and after taxation of HK$4,727,984.

Nevertheless, there is no change in the audited consolidated total asset value and audited consolidated net asset value of the Target as at 31 December 2014.

According to the accountants’ report of the Target Group as set out in Appendix II to this circular, the revenue decreased by approximately 21.0% for the year ended 31 December 2013 as compared to that of the year ended 31 December 2012. The decrease was mainly due to (i) the decrease in number of retail points as a result of closure of retails points with unsatisfactory performance and the expiry of rental period of retail points during the year; (ii) the scale down of the sales of the brands with lower gross profit margin during the year; and (iii) the decrease in average selling price of the products as more discount were offered to customers during the year.

The revenue decreased by approximately 17.2% for the year ended 31 December 2014 as compared to that for the year ended 31 December 2013. The decrease was mainly due to the decrease in number of retail points as a result of the closure of retail points with unsatisfactory performance and the expiry of rental period of retail points during the year.

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LETTER FROM THE BOARD

Despite the decrease in revenue, the closure of retails points with unsatisfactory performance kept the gross profit margin at a level around 40% in recent years. The gross profit margin for the year ended 31 December 2013 decreased to approximately 39.9% from approximately 43.4% for the corresponding period in 2012, which was mainly due to the decrease in average selling price of the products as more discounts were offered to customers for clearance of slow-moving inventories. The gross profit margin for the year ended 31 December 2014 was approximately 41.7% which was similar to gross profit of approximately 39.9% for the corresponding period in 2013.

According to the statistics released by the National Bureau of Statistics of the PRC, (i) the gross domestic product of the PRC has raised from approximately RMB47,957 billion in 2011 to approximately RMB63,646 billion in 2014, which gives rise to a cumulative annual growth rate (‘‘CAGR‘‘）of approximately 9.89%; and (ii) the total retail sales of consumer goods has been increased from approximately RMB18,122.6 billion in 2011 to approximately RMB26,239.4 billion in 2014, which gives rise to a CAGR of approximately 13.13%. This reflects the growth in income of consumers in the PRC and demonstrates that the retail market in the PRC is following an upsurge trend.

The Target Group is expanding the trading, wholesale and retail of watch and jewellery products business in Hong Kong. According to the Reports on Monthly Survey of Retail Sales released by the Census and Statistics Department of Hong Kong on 2 February 2012 and 2 February 2015, the value index of retail sales of jewellery, watches and clocks, and valuable gifts has increased from approximately HK$89.4 billion in 2011 to approximately HK$102.1 billion in 2014, representing a CAGR of approximately 4.5%. This reflects a general growth trend in the retail sales of those luxury products in Hong Kong. In view of this, the Directors consider that Hong Kong will be a growing point for the Target Group.

Please refer to Appendix IV to this circular for the management discussion and analysis of the Target Group for the three years ended 31 December 2014.

Retail points and market share

As at the Latest Practicable Date, the Target Group had a retail network which comprised 33 retail points in 14 cities such as Beijing, Shanghai and Dalian in the PRC and Hong Kong (including two new retail shops that were opened in Hong Kong in 2015). The Target Group has also launched online retail shops in December 2014 and will release new series of Garona brand watches including new products with jewellery feature to broaden the income source and enhance the profitability of the Target Group.

In view of the growth of retail sales of jewellery and watches in recent years, the management of Target Group intends to expand the jewellery business and the Company intended to apply approximately HK$20 million for the purchase of jewellery as inventory for the

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LETTER FROM THE BOARD

development of the trading, wholesale and retail of jewellery products which is expected to have a synergetic effect with the current trading, wholesale and retail of watches business of the Target Group.

There are many competitors in the watch industry in the PRC and Hong Kong and the Target Group accounts for an insignificant portion of the market share. However, based on the growth of the industry as well as the expansions of new locations and product types of the Target Group, it is expected that the market share of the Target Group will increase.

Management team

It is the intention of the Group to retain the existing management team of the Target Group to oversee the operation and management of Target Group after completion of the Acquisition.

D. REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in distribution of films in various videogram formats, film exhibition, licensing and sub-licensing of film rights, leasing of investment properties, securities investment and money lending.

It is the Company’s policy to further diversify its business and broaden the income sources of the Group. The Board believes that given the Target Group has well-established business in trading, wholesales and retail of watches, gems and jewellery in Hong Kong and PRC, the Acquisition will enable the Company to further diversify its current business and broaden the income sources of the Group. The Board has not considered other targets before concluding the Acquisition.

The Company is of the view that the risks of the trading, wholesale and retail of watch and jewellery products business in Hong Kong and the PRC hinges upon the performance of the retail market of watch products in Hong Kong and the PRC.

Based on the statistics as disclosed under the section headed ‘Information on the Target Group’ above, the Directors are of the view that the retail market of watch products in the PRC and Hong Kong will continue to grow, and that the Acquisition presents a suitable investment opportunity to the Group to broaden its income sources, which is in line with the Group’s policy. In addition, the consideration for the Acquisition will be subject to downward adjustment as set out in the paragraph headed ‘‘Adjustment to the Consideration’’ above. As such, the Directors consider that the risk and return of this new business is further protected in this regard.

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LETTER FROM THE BOARD

Although the Target Group incurred loss for the years ended 31 December 2012, 31 December 2013 and 31 December 2014, the Board considers that the amount of the loss and negative cash flow from operating activities for the years ended 31 December 2012, 31 December 2013 and 31 December 2014 of the Target Group were marginal and immaterial, and the Board is confident in the business prospects of the Target Group taking into account the following factors:

1. The Target Group has well-established business in trading, wholesales and retail of watch products and the Acquisition will create synergetic advertising effect which will be a positive factor in promoting the products of the Target Group in Hong Kong and PRC by leveraging the known name of the Company in Hong Kong and PRC to reach the customers;

2. The Target Group commenced the selling of gems and jewellery business in late December 2014 which is expected to have synergetic effect with existing business of the Target Group and has contributed the current business in trading, wholesale and retail of watches;

3. The revenue and gross profit of the Target Group from Hong Kong market have increased after the opening of the two retail shops in Hong Kong in the first quarter of 2015. There was no retail shop operated in Hong Kong during the years ended 31 December 2012, 31 December 2013 and 31 December 2014 and the revenue from Hong Kong market accounted for 0%, 1.01% and 7.84% of the total revenue of the Target Group for each of the years ended 31 December 2012, 31 December 2013 and 31 December 2014, respectively; and

4. The introduction of the new series of products under the Garona brand, being watches with jewellery feature to broaden the income source and enhance the profitability of the Target Group.

Accordingly, the Board considers that the terms of the Acquisition as well as the Consideration are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

As stated under the section headed ‘‘Information on the Target Group’’ above, in view of the growth of retail sales of jewellery and watches in recent years, the management of Target Group intends to expand the jewellery business and the Company intended to apply approximately HK$20 million, which will be raised by way of the Placing as announced by the Company on 26 May 2015, for the purchase of jewellery as inventory for the development of the trading, wholesale and retail of jewellery products, which is expected to have a synergetic effect with the current trading, wholesale and retail of watches. Save for the net proceeds of HK$20.0 million from the Placing to be applied for the expansion as disclosed above, as at the Latest Practicable Date, the Company had no plan to provide further capital to the Target Group for its development and expansion.

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LETTER FROM THE BOARD

E. EFFECT OF POSSIBLE CONVERSION OF CONVERTIBLE NOTES ON THE SHAREHOLDING STRUCTURE

Set out below are summary of the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately upon Completion; (iii) immediately upon full conversion of the Convertible Notes at the initial Conversion Price of HK$0.75 per Conversion Share; and (iv) immediately upon full conversion of the Convertible Notes at the adjusted initial Conversion Price of HK$0.3880 per Conversion Share and allotment and issue of the rights shares under the Rights Issue (assuming minimum number of 596,760,614 rights shares are issued under the Right Issue) and the placing Shares under the Placing (assuming a maximum of 586,350,000 placing shares are placed under the Placing):

Globalcrest Enterprises Limited (Note 1) Vendors Ever Robust Holdings Limited Other public Shareholders (Note 4)	As a Latest Prac No. of Shares 18,913,170 – 29,650,000 249,817,137	t the ticable Date Approximate % 6.34 0.00 9.94 83.73	Immediately upon Completion No. of Shares Approximate % 18,913,170 6.34 – 0.00 29,650,000 9.94 249,817,137 83.73 298,380,307 100.00	Immediately upon full conversion of the Convertible Notes at the initial Conversion Price of HK$0.750 per Conversion Share (Note 2) No. of Shares Approximate % 18,913,170 4.93 85,333,333 22.24 29,650,000 7.73 249,817,137 65.10 383,713,640 100.00	Immediately upon full Conversion of the Convertible Notes at the adjusted Conversion Price of HK$0.3880 per Conversion Share and the allotment and issue of the rights shares and the placing shares (Note 3) No. of Shares Approximate % 56,739,510 3.45 164,948,453 10.02 88,950,000 5.40 1,335,801,411 81.13 1,646,439,374 100.00	Immediately upon full Conversion of the Convertible Notes at the adjusted Conversion Price of HK$0.3880 per Conversion Share and the allotment and issue of the rights shares and the placing shares (Note 3) No. of Shares Approximate % 56,739,510 3.45 164,948,453 10.02 88,950,000 5.40 1,335,801,411 81.13 1,646,439,374 100.00
	298,380,307	100.00	298,380,307	383,713,640	1,646,439,374	100.00

Notes:

1. The entire issued share capital of Globalcrest Enterprises Limited is held by Central Core Resources Limited, which is the trustee of a discretionary trust under which certain immediate family members of Mr. Lam Shiu Ming, Daneil, an executive Director and chairman of the Company, are discretionary objects.

2. This assumes that other than the allotment and issue of the Conversion Shares, there is no other change in the issued share capital of the Company from the Latest Practicable Date up to the full conversion of the Convertible Notes.

3. This assumes that (i) other than the allotment and issue of the Conversion Shares, the placing shares pursuant to the Placing and the rights shares pursuant to the Rights Issue, there is no other change in the issued share capital of the Company from the Latest Practicable Date up to the full conversion of the Convertible Notes and the allotment and issue of the new Shares pursuant to the Rights Issue and the Placing; (ii) the maximum number of 586,350,000 placing shares are placed pursuant to the Placing; (iii) the minimum number of 596,760,614 rights shares are allotted and issued pursuant to the Rights Issue; and (iv) the Convertible Notes are converted in full at the adjusted initial Conversion Price of HK$0.3880 per Conversion Share after the allotment and issue of the rights shares and the placing shares.

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LETTER FROM THE BOARD

1. These comprise the other public Shareholders including the existing public Shareholders, the placees which may be procured by the placing agent under the Placing and the subscribers for the untaken shares under the Rights Issue to be procured by the underwriter to the Rights Issue. It is a term of the Placing that none of the placees of the Placing will become a substantial Shareholder of the Company upon completion of the Placing.

As at the Latest Practicable Date, the Company did not have any controlling Shareholder. As illustrated in the above shareholding table, it is expected that there will not be any change in control of the Company as a result of the conversion of the Convertible Notes in full.

F. FINANCIAL EFFECTS OF THE ACQUISITION

Assets and liabilities

Based on the unaudited pro forma financial information of the Enlarged Group set out in Appendix III to this circular and the bases and assumptions taken into account in preparing such unaudited pro forma financial information, the total assets of the Group as at 31 December 2014 (adjusted by the Placing and Rights Issue as announced by the Group on 26 May 2015 and on the calculation based on the number of 586,350,000 placing shares to be issued at the placing price of HK$0.3411 per placing share after deduction of estimated related expenses of approximately HK$7,500,000 and the minimum number of 596,760,614 rights shares to be issued at the subscription price of HK$0.202 per rights shares under the Rights Issue and after deduction of estimated related expenses of approximately HK$5,750,000) would increase from approximately HK$737.0 million to approximately HK$848.5 million; and its total liabilities as at 31 December 2014 would increase from approximately HK$76.8 million to approximately HK$149.8 million, as a result of the Acquisition.

Earnings

The Target Group recorded an audited consolidated loss attributable to shareholders of the Target Group of approximately HK$4.7 million for the year ended 31 December 2014. In light of the potential future prospects offered by the Acquisition and other factors considered by the Directors as stated in the section headed ‘‘Reasons for and benefits of the Acquisition’’ above, the Directors are of the view that the Acquisition will likely contribute positively to the Group. However, the actual effect on earnings will depend on the future financial performance of the Target Group.

G. LISTING RULES IMPLICATIONS

As certain of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) in respect of the Acquisition (in aggregate with the discloseable transaction in relation to the acquisition of approximately 22.13% of the then issued share capital of the Target as announced by the Company on 17 November 2014) is more than 25% and all applicable percentage ratios are

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LETTER FROM THE BOARD

less than 100%, the Acquisition constitutes a major transaction of the Company and is subject to the notification, publication and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The creation and issue of the Convertible Notes under the SP Agreement and the allotment and issue of the Conversion Shares are subject to the grant of the Specific Mandate by the Shareholders at the SGM.

As no Shareholder has any material interest in the Acquisition, none of the Shareholders is required to abstain from voting at the SGM in respect of the resolution to approve the Acquisition and the grant of the Specific Mandate. In compliance with the Listing Rules, the resolution will be voted on by way of a poll at the SGM.

H. SGM

Set out on pages SGM-1 to SGM-3 of this circular is a notice convening the SGM to be held at 18/F, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong on Wednesday, 15 July 2015 at 12:00 noon at which an ordinary resolution will be proposed to the Shareholders to consider and, if thought fit, approve the Acquisition and the transactions contemplated thereunder (including the grant of the Specific Mandate). To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholder; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby it has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a caseby-case basis.

A form of proxy for the SGM is enclosed with this circular. Whether or not you are able to attend and vote at the SGM, you are requested to complete and return the same to the Company’s Hong Kong branch share registrar and transfer office, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM. Completion and return of the form of proxy will not preclude you from attending and voting at SGM or any adjournment thereof if you so wish.

I. RECOMMENDATIONS

The Directors consider that the terms of the SP Agreement are on normal commercial terms and are fair and reasonable and the Acquisition and the transactions contemplated thereunder, (including the grant of the Specific Mandate) are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders should vote in favour of the resolution to be proposed at the SGM to approve the Acquisition and the grant of the Specific Mandate.

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Warning Statement

Shareholders and potential investors should note that the Acquisition is conditional upon fulfilment of the conditions precedent of the SP Agreement, details of which have been set out under the section headed ‘‘Conditions Precedent’’ above. Accordingly, the Acquisition may or may not proceed.

J. ADDITIONAL INFORMATION

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

The English text of this circular, the notice of the SGM and the form of proxy for use at the SGM shall prevail over the Chinese text in case of inconsistency.

Yours faithfully, For and on behalf of Universe International Holdings Limited Lam Shiu Ming, Daneil

Chairman and Executive Director

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION INCORPORATED BY REFERENCE

Financial information and management discussion and analysis of the Group for each of the three years ended 30 June 2014, 2013, 2012 and the six months ended 31 December 2014 are disclosed in the following documents which have been published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.uih.com.hk/).

The unaudited consolidated financial statements, including the notes thereto, and the management discussion and analysis of the Group for the six months ended 31 December 2014 has been set out in pages 2 to 48 and pages 50 to 52 respectively of the interim report 2014 of the Company which are incorporated by reference into this circular and are available on the Stock Exchange’s website (http://www.hkexnews.hk). Please also see below quick link to the interim report 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0318/LTN20150318316.pdf

The audited consolidated financial statements, including the notes thereto, and the management discussion and analysis of the Group for the year ended 30 June 2014 has been set out in pages 70 to 215 and pages 8 to 25 respectively of the annual report 2014 of the Company which are incorporated by reference into this circular and are available on the Stock Exchange’s website (http://www.hkexnews.hk). Please also see below quick link to the annual report 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/1016/LTN20141016216.pdf

The audited consolidated financial statements, including the notes thereto, and the management discussion and analysis of the Group for the year ended 30 June 2013 has been set out in pages 60 to 186 and pages 10 to 19 respectively of the annual report 2013 of the Company which are incorporated by reference into this circular and are available on the Stock Exchange’s website (http://www.hkexnews.hk). Please also see below quick link to the annual report 2013:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/1031/LTN20131031155.pdf

The audited consolidated financial statements, including the notes thereto, and the management discussion and analysis of the Group for the year ended 30 June 2012 has been set out in pages 50 to 162 and pages 10 to 15 respectively of the annual report 2012 of the Company which are incorporated by reference into this circular and are available on the Stock Exchange’s website (http://www.hkexnews.hk). Please also see below quick link to the annual report 2012:

http://www.hkexnews.hk/listedco/listconews/SEHK/2012/1031/LTN20121031175.pdf

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. STATEMENT OF INDEBTEDNESS

Borrowings

As at the close of business on 30 April 2015, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Enlarged Group had total borrowings of approximately HK$16,470,000, comprising (i) the obligations under non-interest bearing finance leases of approximately HK$57,000; (ii) an unsecured loan note of approximately HK$9,200,000 which is interest bearing at 6.5% per annum; (iii) an unsecured loan of the Target Group of approximately HK$5,185,000 which is interest bearing at 10% per annum; (iv) a non-interest bearing non-controlling shareholder’s loan of the Target Group of approximately HK$1,521,000; and (v) a non-interest bearing loan from a director of the Target Group of approximately HK$507,000.

Litigations and Contingent Liabilities

As at the close of business on 30 April 2015, the Group has the following material litigations and contingent liabilities:

• (a) A court action was commenced in the Court of First Instance of the Hong Kong Special Administrative Region on 17th April 2002 by The Star Overseas Limited (‘‘Star’’), an independent third party, against Universe Entertainment Limited (‘‘UEL’’), an indirect wholly-owned subsidiary of the Company.

By the above action, Star alleges that a sum of US$935,872 (equivalent to HK$7,299,799) was payable by UEL to Star as its share of the revenue of the movie entitled ‘‘Shaolin Soccer’’ (the ‘‘Movie’’).

Pursuant to an Order (the ‘‘Order’’) made by the High Court on 21st February 2003, UEL was ordered and had paid to Star a sum of HK$5,495,700, being part of the licence fee of the Movie received by UEL from Miramax Films (being the licencee of the Movie) and which was also part of the sum claimed by Star. Pursuant to the Order, UEL is also liable to pay Star interest in the sum of HK$350,905 and some of the costs of the application leading to the making of the Order, all of which have been settled. As the Order has not disposed of all the claims of US$935,872 (equivalent to HK$7,299,799) by Star, UEL is entitled to continue to defend the claim by Star for recovering the remaining balance in the sum of approximately HK$1,804,099 (HK$7,299,799 less HK$5,495,700).

On 30th April 2002, UEL issued a Writ of Summons against Star for the latter’s wrongful exploitation of certain rights in the Movie co-owned by both parties. UEL claimed to recover all losses and damages suffered by UEL as a result of the wrongful exploitation.

I – 2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 9th September 2002, Universe Laser & Video Co. Limited (‘‘ULV’’), an indirect wholly owned subsidiary of the Company, issued a Writ of Summons against Star for the latter’s infringement of the licensed rights in the Movie held by ULV. ULV claimed to recover all loss and damages suffered by ULV as a result of the said infringement.

In the opinion of legal counsel, it is premature to predict the outcome of the claim against UEL. The Board is of the opinion that the outcome of the said claim against UEL will have no material financial impact on the Group for the Period.

• (b) On 1st September 2008, Koninklijke Philips Electronics N.V. (‘‘KPE’’) issued a Writ of Summons against among other persons, the Company, ULV and Mr. Lam Shiu Ming, Daneil (one of the Directors), being three of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Video Compact Disc owned by KPE.

In the opinion of legal counsel, it is premature to predict the outcome of the said claim made against the Company, ULV and Mr. Lam Shiu Ming, Daneil. The Board is of the opinion that the outflow of economic benefits cannot be reliably estimated and accordingly no provision for any liability that may result has been made in the unaudited condensed consolidated interim financial information.

• (c) On 8th January 2010, KPE issued a Writ of Summons against among other persons, the Company, ULV and Mr. Lam Shiu Ming, Daneil (one of the Directors), being three of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Digital Video Disc owned by KPE.

In June 2012, the action was discontinued against the Company and Mr. Lam Shiu Ming, Daneil. The claim made against ULV has been agreed with KPE and settled by ULV and appropriate legal costs provision was recognised accordingly in the consolidated financial statements for the year ended 30th June 2012.

No additional provision has been made in the unaudited condensed consolidated interim financial information for the Period. Based on the consultation with legal counsel, no further material outflow of economic benefits will be incurred for ULV.

I – 3

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (d) Universe Artiste Management Limited (‘‘UAM’’) commenced Court of First Instance Action against Kwong Ling and Oriental Prosperous Int’l Entertainments Limited (collectively the ‘‘Defendants’’) on 30th June 2014 claiming inter alia for a declaration that UAM is entitled to extend/renew the term of the Artist Management Contract of the Defendants with UAM (the ‘‘Artist Management Contract’’) for 5 years as from 3rd May 2014 to 2nd May 2019.

The Defendants filed their defence and counterclaim on 29th September 2014. By such counterclaim, the Defendants claiming against UAM inter alia for a declaration that the Artist Management Contract was void and unenforceable, the Artist Management Contract to be rescinded, damages for breach of the Artist Management Contract and for breach of fiduciary duties, a declaration that UAM is liable to account to the Defendants and an order for payment of all sums found to be due by UAM to the Defendants.

In the opinion of legal counsel, it is premature to predict the outcome of the said claim against UAM. The Board considers that the amounts of counterclaim by the Defendants against UAM is insignificant to the Group as a whole.

Disclaimer

Save as aforesaid and apart from intra-group liabilities and normal accruals and other payables in the ordinary course of the business, as at the close of business on 30 April 2015, the Group did not have other outstanding mortgages, charges, or other loan capital, bank overdrafts, loans or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

The Directors confirmed that there has been no material changes in the indebtedness and contingent liabilities of the Group since 30 April 2015 and up to and including the Latest Practicable Date.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the existing cash and bank balances, other internal resources available, and the estimated net proceeds from the Placing and Rights Issue and also the effect of the Acquisition, the Enlarged Group has sufficient working capital for its present requirements and for at least 12 months from the date of this circular in the absence of unforeseen circumstances.

I – 4

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. MATERIAL ADVERSE CHANGE

Save for the fact that the Group has recorded a net loss for the six months period ended 31 December 2014 (the ‘‘Period’’) against a net profit for the six months period ended 31 December 2013, which was mainly due to the recognition of the fair value loss arising from the investment securities and the recognition of the share based payment expenses of approximately HK$19.0 million and approximately HK$9.4 million, respectively during the Period as disclosed in the interim report of the Company for the six months ended 31 December 2014, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 30 June 2014, being the date to which the latest published audited financial statements of the Group was made up.

5. BUSINESSES ACQUIRED AFTER 30 JUNE 2014

On 6 November 2014, Gold Summit International Limited, a wholly-owned subsidiary of the Company, and Round Table Family Group Limited entered into a joint venture agreement to jointly invest in Round Table Performance Entertainment Limited, which is principally engaged in holding and sponsoring stage performance, concerts and other cultural events, as well as developing the entertainment business in Hong Kong and the PRC. The aggregate amount of capital contribution was HK$3,330,000, which was contributed as to as to HK$2,330,000 by Gold Summit International Limited and as to HK$1,000,000 by Round Table Family Group Limited.

On 17 November 2014, the Purchaser, a wholly-owned subsidiary of the Company, and 4 vendors entered into a sale and purchase agreement in relation to the acquisition of the 22.13% of the issue of share capital of the Target which has a group of subsidiaries which in turn are principally engaged in business activities including the trading of watches, trademark holding, wholesales and retail of watches in Hong Kong and PRC, at a consideration of HK$5,060,000.

On 7 May 2015, Precise Reach Group Limited (‘‘Precise Reach’’), a wholly-owned subsidiary of the Company, as purchaser, Fairy Fresh International Limited (‘‘Fairy Fresh’’) as vendor and Mr. Poon Chun Yin, the ultimate beneficial owner of Fairy Fresh as warrantor entered into a sale and purchase agreement in relation to the sale and purchase of (i) the amount of HK$1,155,000 owing by Hong Kong Optical Company Limited to Fairy Fresh; and (ii) 11% of the issued share capital of Hong Kong Optical Company Limited at an aggregate consideration of HK$1,600,000. On 8 May 2015, Precise Reach as purchaser, Fairy Fresh as vendor and Mr. Poon Chun Yin as warrantor entered into a sale and purchase agreement in relation to the sale and purchase of 80% of the issued share capital of Fine Ocean Limited at a consideration of HK$2,400,000. Each of Hong Kong Optical Company Limited and Fine Ocean Limited is a company incorporated in Hong Kong with limited liability and is principally engaged in the wholesale and retail of optical products in Hong Kong.

On 7 May 2015, the Purchaser, the Vendors and the Warrantors entered into the SP Agreement in relation to the Acquisition, at a maximum consideration of HK$64,000,000 (subject to adjustments).

I – 5

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as disclosed, no business was acquired by the Group after 30 June 2014, being the date to which the latest published audited consolidated financial statements of the Group was made up.

6. FINANCIAL AND TRADING PROSPECTS

Financial and Trading Prospect of the Enlarged Group

The Group’s unaudited consolidated revenue for the six months period ended 31 December 2014 (the ‘‘Period’’) decreased by approximately 80.0% over the same period last year to approximately HK$30.5 million. It was mainly due to the decrease in revenue from film exhibition, licensing and sub-licensing of film rights segment from approximately HK$144.4 million for the six months period ended 31 December 2013 to approximately HK$22.5 million during the Period as a result of the decrease in number of newly released film and no new self-produced films released during the Period under review.

The Group recorded a net loss of approximately HK$30.4 million for the Period against a net profit of approximately HK$5.9 million for the corresponding period last year, which is mainly due to the recognition of the fair value loss arising from the investment securities and the recognition of the share based payment expenses of approximately HK$19.0 million and approximately HK$9.4 million respectively during the Period.

The total box revenue of film exhibition industry in the PRC is increasing in recent years. Due to the high production, advertising and distribution cost, this makes the operating environment of this segment more challenging than before. In response to the above, the Group adopted a cautious approach towards investment in the film exhibition, licensing and sub-licensing of film rights which in turn resulted in the decrease in number of newly released films and the absence of new self-produced film released during the Period. Nevertheless, the Group will closely monitor the market environment and continue to evaluate new opportunities in this sector.

Upon Completion, each of the companies comprising the Target Group will become a subsidiary of the Company and the financial information of the Target Group will be consolidated into the consolidated financial statements of the Group. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, net assets recorded by the Group as at 31 December 2014 (adjusted by the Placing and Rights Issue as announced by the Group on 26 May 2015 on the calculation based on the number of 586,350,000 placing shares to be issued at the placing price of HK$0.3411 per placing share after deduction of estimated related expenses of approximately HK$7,500,000 and the minimum number of 596,760,614 rights shares to be issued at the subscription price of HK$0.202 per rights share under the Rights Issue and after deduction of estimated related expenses of approximately HK$5,750,000) was approximately HK$660.3 million, the unaudited pro forma net assets of the Enlarged Group will be approximately HK$698.7 million after Completion.

I – 6

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In the coming year, after Completion, the Enlarged Group will continue to develop its existing businesses. Business development of the Enlarged Group will continue to be monitored by the management of the Enlarged Group where periodic business performance review will be conducted. Based on the results of the business review, the Enlarged Group will allocate appropriate resources to different business segments of the Enlarged Group depending on the then business environment and performance of each segment with the view of improving its business performance.

The Enlarged Group will continue to identify different investment opportunities to further diversify its business and broaden the income sources to maximise the return to its shareholders.

The Directors consider that the Acquisition will diversify the source of income and will result in an enlarged business portfolio of the Enlarge Group. Upon Completion, the Acquisition will enable the Enlarged Group to broaden its business by tapping into sector of trading, wholesale and retail of watch products. Having considered (i) the growing retail market of watch products; and (ii) that the Target Group is equipped with experience in the industry, the Directors are of the view the Acquisition represents an opportunity for the Group to diversify from its existing business to a broader business base which will meet the Group’s business development objectives.

Upon Completion, the Target Group will become wholly-owned subsidiaries of the Company and it is expected synergetic advertising effect will be created. This will be a positive factor in promoting the products of the Target Group in Hong Kong and PRC as the Target Group is wholly-owned by a listed company in Hong Kong with over 20 years of history in the entertainment industry and is a known film licensing and production company in Hong Kong and PRC.

In view of the foregoing, the Directors believe that the Acquisition is in the interest of the Group and the Shareholders as a whole.

I – 7

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

==> picture [193 x 46] intentionally omitted <==

Unit 1801-2, 18/F, Jubilee Center 46 Gloucester Road Wanchai, Hong Kong

26 June 2015

The Board of Directors Universe International Holdings Limited 18/F., Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information (the ‘‘Financial Information’’) of Winston Asia Limited (the ‘‘Target Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’) comprising the Consolidated Statements of Financial Position of the Target Group as at 31 December 2012, 2013 and 2014, the Consolidated Statements of Profit or Loss and Other Comprehensive Income, the Consolidated Statements of Changes in Equity and the Consolidated Statements of Cash Flows of the Target Group for each of the years ended 31 December 2012, 2013 and 2014 (the ‘‘Relevant Periods’’) and the notes thereto. The Financial Information has been prepared by the directors of the Target Company (the ‘‘Directors’’) for inclusion in the circular dated 26 June 2015 (the ‘‘Circular’’) issued by Universe International Holdings Limited (the ‘‘Company’’) in connection with the proposed acquisition of 79.99% equity interest in the Target Company by a subsidiary of the Company (the ‘‘Proposed Acquisition’’).

The Target Company was incorporated in the British Virgin Islands (‘‘BVI’’) as a limited liability company on 11 November 2010. The principal activity of the Target Company is investment holding.

The Consolidated Financial Statements of the Target Company for the year ended 31 December 2012, 2013 and 2014 have been prepared by the Target Company in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) and were audited by us in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

II – 1

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

As at the date of this report, the Target Company has direct and indirect interests in the subsidiaries as set out in Note 1 to Section II of this report below. All companies now comprising the Target Group have adopted 31 December as their financial year end date. Details of the generally accepted accounting principles and the statutory auditors of the subsidiaries during the Relevant Periods are set out in Note 1 of Section II below.

For the purpose of this report, the Directors have prepared the Consolidated Financial Statements of the Target Group (the ‘‘Underlying Financial Statements’’) for each of the Relevant Periods in accordance with HKFRSs issued by the HKICPA and the applicable disclosure provisions of the Hong Kong Companies Ordinance and the Listing Rules. The Underlying Financial Statements for each of the Relevant Periods were audited by us in accordance with Hong Kong Standard on Auditing issued by the HKICPA.

The Financial Information set out in this report has been prepared from the Underlying Financial Statements with no adjustments made thereon.

DIRECTORS’ RESPONSIBILITY

The Directors are responsible for the preparation of the Underlying Financial Statements, and the Financial Information that give a true and fair view in accordance with HKFRSs issued by HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules, and for such internal control as the Directors determine is necessary to enable the preparation of the Underlying Financial Statements and the Financial Information that are free from material misstatement, whether due to fraud or error. The Directors are responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

It is our responsibility to form an independent opinion on the Financial Information and to report our opinion thereon to you. For the purpose of this report, we have carried our procedures on the Financial Information in accordance with Auditing Guideline 3.340 Prospectuses and the Reporting Accountant issued by the HKICPA.

OPINION

In our opinion, for the purpose of this report and on the basis of preparation set out in Note 3 to Section II below, the Financial Information gives a true and fair view of the state of affairs of the Target Group as at 31 December 2012, 2013 and 2014, and of the consolidated results and cash flows of the Target Group during the Relevant Periods.

II – 2

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

I. FINANCIAL INFORMATION

Consolidated Statements of Profit or Loss and Other Comprehensive Income

Notes Revenue 6 Costs of goods sold 7 Gross profit Other income 8 Selling and distribution expenses Administrative expenses Finance costs 9 Loss before tax Income tax expense 10 Loss for the year 11 Other comprehensive (expense)/income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Other comprehensive (expense)/income for the year Total comprehensive expense for the year Loss for the year attributable to: Owners of Target Company Non-controlling interests Total comprehensive expense for the year attributable to: Owners of Target Company Non-controlling interests	Year 2012 HK$ 76,102,925 (43,096,038) 33,006,887 339,832 (25,826,096) (10,291,443) (4,375) (2,775,195) – (2,775,195) (55,314) (55,314) (2,830,509) (2,082,941) (692,254) (2,775,195) (2,124,427) (706,082) (2,830,509)	ended 31 December 2013 2014 HK$ HK$ 60,100,223 49,746,197 (36,119,897) (28,986,626) 23,980,326 20,759,571 2,074,896 1,140,461 (22,175,150) (19,960,978) (7,525,893) (6,648,261) – (18,777) (3,645,821) (4,727,984) – – (3,645,821) (4,727,984) 499,607 (79,462) 499,607 (79,462) (3,146,214) (4,807,446) (2,734,366) (3,665,457) (911,455) (1,062,527) (3,645,821) (4,727,984) (2,359,661) (3,723,412) (786,553) (1,084,034) (3,146,214) (4,807,446)	ended 31 December 2013 2014 HK$ HK$ 60,100,223 49,746,197 (36,119,897) (28,986,626) 23,980,326 20,759,571 2,074,896 1,140,461 (22,175,150) (19,960,978) (7,525,893) (6,648,261) – (18,777) (3,645,821) (4,727,984) – – (3,645,821) (4,727,984) 499,607 (79,462) 499,607 (79,462) (3,146,214) (4,807,446) (2,734,366) (3,665,457) (911,455) (1,062,527) (3,645,821) (4,727,984) (2,359,661) (3,723,412) (786,553) (1,084,034) (3,146,214) (4,807,446)
			20,759,571 1,140,461 (19,960,978) (6,648,261) (18,777)
			(4,727,984) –
			(4,727,984)
			(79,462)
			(79,462)
			(4,807,446)
			(3,665,457) (1,062,527)
			(4,727,984)
			(3,723,412) (1,084,034)
			(4,807,446)

II – 3

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

Consolidated Statements of Financial Position

Notes Non-current assets Property, plant and equipment 14 Current assets Inventories 15 Trade and other receivables 16 Amount due from a holding company 17 Cash and cash equivalents 18 Current liabilities Trade and other payables 19 Amounts due to directors 20 Amount due to a shareholder 20 Amounts due to a holding company 20 Other tax payables 21 Short-term borrowing 22 Net current assets Net Assets Capital and reserves Share capital 25 Reserves Equity attributable to owners of Target Company Non-controlling interests	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 678,138 386,149 850,774 21,913,074 20,770,265 23,386,581 9,658,443 8,765,299 9,442,769 – – 11,544 637,956 776,270 4,302,226 32,209,473 30,311,834 37,143,120 1,590,348 1,540,867 4,907,723 8,478,030 10,311,783 300,000 – – 1,515,240 275,242 275,242 – 4,111,181 3,283,495 2,809,166 – – 5,000,000 14,454,801 15,411,387 14,532,129 17,754,672 14,900,447 22,610,991 18,432,810 15,286,596 23,461,765 23,400 23,400 23,400 14,450,618 12,090,957 21,350,160 14,474,018 12,114,357 21,373,560 3,958,792 3,172,239 2,088,205 18,432,810 15,286,596 23,461,765	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 678,138 386,149 850,774 21,913,074 20,770,265 23,386,581 9,658,443 8,765,299 9,442,769 – – 11,544 637,956 776,270 4,302,226 32,209,473 30,311,834 37,143,120 1,590,348 1,540,867 4,907,723 8,478,030 10,311,783 300,000 – – 1,515,240 275,242 275,242 – 4,111,181 3,283,495 2,809,166 – – 5,000,000 14,454,801 15,411,387 14,532,129 17,754,672 14,900,447 22,610,991 18,432,810 15,286,596 23,461,765 23,400 23,400 23,400 14,450,618 12,090,957 21,350,160 14,474,018 12,114,357 21,373,560 3,958,792 3,172,239 2,088,205 18,432,810 15,286,596 23,461,765
		23,386,581 9,442,769 11,544 4,302,226
		37,143,120
		4,907,723 300,000 1,515,240 – 2,809,166 5,000,000
		14,532,129
		22,610,991
		23,461,765
		23,400 21,350,160
		21,373,560 2,088,205
		23,461,765

II – 4

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

Consolidated Statements of Changes in Equity

At 1 January 2012 Loss for the year Other comprehensive expense Total comprehensive expense for the year Capital contribution by holding company At 31 December 2012 Loss for the year Other comprehensive income Total comprehensive expense for the year At 31 December 2013 Loss for the year Other comprehensive expense Total comprehensive expense for the year Capital contribution by holding company At 31 December 2014		Attributable to owner	Attributable to owner	of Target Company	of Target Company	Sub-total HK$ 15,988,445 (2,082,941) (41,486) (2,124,427) 610,000 14,474,018 (2,734,366) 374,705 (2,359,661) 12,114,357 (3,665,457) (57,955) (3,723,412) 12,982,615 21,373,560	Non- controlling interests HK$ 4,664,874 (692,254) (13,828) (706,082) – 3,958,792 (911,455) 124,902 (786,553) 3,172,239 (1,062,527) (21,507) (1,084,034) – 2,088,205	Total HK$ 20,653,319 (2,775,195) (55,314)
	Share capital HK$ 23,400 – – – – 23,400 – – – 23,400 – – – – 23,400	Share premium HK$ 9,976,600 – – – – 9,976,600 – – – 9,976,600 – – – – 9,976,600	Foreign currency translation reserve HK$ 369,859 – (41,486) (41,486) – 328,373 – 374,705 374,705 703,078 – (57,955) (57,955) – 645,123	Capital reserve HK$ – – – – 610,000 610,000 – – – 610,000 – – – 12,982,615 13,592,615	Retained earnings HK$ 5,618,586 (2,082,941) – (2,082,941) – 3,535,645 (2,734,366) – (2,734,366) 801,279 (3,665,457) – (3,665,457) – (2,864,178)
								(2,830,509)
								610,000
								18,432,810
								(3,645,821) 499,607
								(3,146,214)
								15,286,596
								(4,727,984) (79,462)
								(4,807,446)
								12,982,615
								23,461,765

II – 5

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

Consolidated Statements of Cash Flows

OPERATING ACTIVITIES Loss before tax Adjustments for: Bank interest income Bank borrowing interest Short-term borrowing interest Depreciation Written off of accounts payables Operating cash flows before movements in working capital Decrease/(increase) in inventories (Increase)/decrease in trade and other receivables Increase in amount due from a holding company (Decrease)/increase in trade and other payables Decrease in amount due to a holding company Decrease in other tax payables NET CASH FROM USED IN OPERATING ACTIVITIES INVESTING ACTIVITIES Payment for the purchase of property, plant and equipment Bank interest income received NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Short-term borrowing raised Cash advanced from a non-controlling shareholder Cash contribution by holding company Net cash advanced by directors Bank borrowing interest paid Short-term borrowing interest paid

Year ended 31 December 2012 2013 2014 HK$ HK$ HK$ (2,775,195) (3,645,821) (4,727,984) – (3,924) – 4,375 – – – – 18,777 900,672 927,903 617,363 – (325,978) – (1,870,148) (3,047,820) (4,091,844) 1,314,688 1,142,809 (2,616,316) (50,370) 1,219,122 (677,470) – – (11,544) (861,583) (49,481) 3,303,910 (4,758) – – (381,426) (827,686) (474,329) (1,853,597) (1,563,056) (4,567,593) (491,064) (617,609) (1,083,425) – 3,924 – (491,064) (613,685) (1,083,425) – – 5,000,000 – – 1,515,240 610,000 – – 1,886,790 1,833,753 2,705,654 (4,375) – – – – (18,777)

II – 6

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

NET CASH FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	Year ended 31 December 2012 2013 2014 HK$ HK$ HK$ 2,492,415 1,833,753 9,202,117 147,754 (342,988) 3,551,099 516,116 637,956 776,270 (25,914) 481,302 (25,143) 637,956 776,270 4,302,226

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II. NOTES TO THE FINANCIAL INFORMATION

1. Corporate information

The Target Company was incorporated on 11 November 2010 with limited liability in the BVI. The Target Company’s registered office is located at 263 Main Street, Road Town, Tortola, British Virgin Islands. The principal place of business of the Target Company is located at Room 506, 5/F., Silvercord Tower 2, No. 30 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.

The Target Group is principally engaged in investment holding, trademark holding and trading of watches, gems and jewelleries.

In the opinion of the Directors, the ultimate holding company of the Target Company is Victor Meg Limited, which is incorporated in the BVI. As at the date of this report, the Target Company had direct and indirect interests in its subsidiaries, all of which are private limited liability companies (or, if incorporated outside Hong Kong, have substantially similar characteristics to a private company incorporated in Hong Kong), the particulars of which are set out below:

		Particulars of	Proportion of	ownership	ownership
	Place and date of	issued shares/	interest held by
	registration and	registered and	the Target Company
Name of company	business	paid-up capital	Direct	Indirect		Principal activities
Universe Watch & Jewellery	Hong Kong	HK$73,944,255	100%		–	Investments holding
Group Company Limited	26 February 1991	(2012 & 2013:	(2014:
		HK$58,364,000)	90.39%;
			2012 &
			2013: 75%)
Garona (HK) Limited	Hong Kong	HK$300,000	–	100%		Trading of watches,
	23 December 2006					gems and
						jewelleries
Garona International Limited	Hong Kong	HK$1,000	–	100%		Dormant
	23 December 2006
Garona Worldwide Limited	Hong Kong	HK$10,000	–	100%		Trademark holding
	20 April 2007
World Time (Asia) Limited	Hong Kong	HK$100,000	–	100%		Trademark holding
	2 November 2001
Shenzhen Li Chiang	People’s Republic	RMB27,500,000	–	100%		Trading of watches
Watch Limited*	of China					and jewelleries
深圳市利昌鐘錶有限公司	7 September 2001
Shenzhen Right Sales	People’s Republic	HK$9,000,000	–	100%		Trading of watches
Trading Limited*	of China					and jewelleries
當盛貿易（深圳）有限公司	18 August 2005

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The statutory Financial Statements of Universe Watch & Jewellery Group Company Limited, Garona (HK) Limited, Garona International Limited, Garona Worldwide Limited and World Time (Asia) Limited for the years ended 31 December 2012, 2013 and 2014 were prepared in accordance with Hong Kong Financial Reporting Standard for Private Entities and were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The statutory Financial Statements of Shenzhen Li Chiang Watch Limited 深圳市利 昌鐘錶有限公司 and Shenzhen Right Sales Trading Limited 當盛貿易(深圳)有限公司 for the years ended 31 December 2012, 2013 and 2014 were prepared in accordance with generally accepted accounting principles of the People’s Republic of China (‘‘PRC GAAP’’) and were audited by Shenzhen Delik Certified Public Accountants* 深圳德永會計師事務所 registered in the PRC.

• The English names are for identification purpose only.

2. Application of new and revised HKFRSs

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Group has consistently applied all of the new and revised Hong Kong Accounting Standards (‘‘HKASs’’), HKFRSs, amendments and interpretations (‘‘Ints’’) (hereinafter collectively referred to as ‘‘new and revised HKFRSs’’) issued by the HKICPA which are effective for the financial year beginning on 1 January 2014.

At the date of this report, the Target Group has not early applied the following new and revised HKFRSs that have been issued by the HKICPA but are not yet effective:

HKFRS 9	Financial Instruments1
HKFRS 14	Regulatory Deferral Accounts2
HKFRS 15	Revenue from Contracts with Customers3
Amendments to HKFRS 11	Accounting for acquisitions of interests in joint
	Operations5
Amendments to HKAS 16	Clarification of Acceptable Methods of Depreciation and
and HKAS 38	Amortisation5
Amendments to HKAS 16	Agriculture: Bearer Plants5
and HKAS 41
Amendments to HKAS 19	Defined Benefit Plans – Employee Contributions4
Amendments to HKAS 27	Equity Method in Separate Financial Statements5
Amendments to HKFRS 10	Sale or Contribution of Assets between an Investor and
and HKAS 28	its Associate or Joint Venture5
Amendments to HKFRSs	Annual Improvements to HKFRSs 2010-2012 Cycle6
Amendments to HKFRSs	Annual Improvements to HKFRSs 2011-2013 Cycle4
Amendments to HKFRSs	Annual Improvements to HKFRSs 2012-2014 Cycle5

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• 1 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted. 2 Effective for first annual HKFRS financial statements beginning on or after 1 January 2016, with earlier application permitted.

• 3 Effective for annual periods beginning on or after 1 January 2017, with earlier application permitted. 4 Effective for annual periods beginning on or after 1 July 2014, with earlier application permitted. 5 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted. 6 Effective for annual periods beginning on or after 1 July 2014, with limited exceptions. Earlier application is permitted.

The directors of the Target Group have already commenced an assessment of the impact of these new standards, amendments and interpretations, but are not in a position to state whether these new standards, amendments and interpretations would have a significant impact to its results of operations or financial position.

3. Basis of preparation and accounting policies

The Financial Information has been prepared in accordance with the HKFRSs issued by HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance. The Financial Information is presented in Hong Kong dollars (‘‘HK$’’), which is the same as the functional currency of the Target Company.

The Financial Information has been prepared on the historical cost basis.

Historical cost is generally based on the fair value of the consideration given in exchange of goods and services.

The principal accounting policies are set out below.

(a) Basis of consolidation

The Financial Information incorporates the Financial Statements of the Target Company and all of its subsidiaries (including those directly or indirectly held or held through nominee arrangement). Control is achieved when the Target Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Target Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

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Consolidation of a subsidiary begins when the Target Group obtains control over the subsidiary and ceases when the Target Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Statements of Profit or Loss and Other Comprehensive Income from the date the Target Group gains control until the date when the Target Group ceases to control the subsidiary.

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

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Target Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Target Group are eliminated in full on consolidation.

Changes in the Target Group’s ownership interests in subsidiaries that do not result in the Target Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Target Group’s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Target Company.

When the Target Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Target Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.

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(b) Business combinations

The Target Group applies the acquisition method to account for business combinations. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Target Group, liabilities incurred by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

• deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Target Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date (see the accounting policy below); and

• assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another HKFRS.

(c) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and is shown net of discounts, rebates, returns and sales-related taxes.

Revenue from sales of goods is recognised when goods are delivered and title has passed, at which time all the following conditions are satisfied:

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• the Target Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• the Target Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Target Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Target Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

(d) Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

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(e) Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each Relevant Periods, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

• exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

• exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

• exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purposes of presenting Consolidated Financial Statements, the assets and liabilities of the Target Group’s foreign operations are translated into the presentation currency of the Target Company (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of foreign currency translation reserve.

(f) Borrowing costs

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

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(g) Employee benefit obligations

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

The Target Group has no further payment obligations once the contributions have been paid to the retirement scheme plan. The Target Group’s contributions to the retirement plan are recognised in the Consolidated Statements of Profit or Loss and Other Comprehensive Income when they are due.

(h) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the Relevant Periods. Taxable profit differs from profit as reported in the Consolidated Statement of Profit or Loss and Other Comprehensive Income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Target Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the Relevant Periods.

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

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

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APPENDIX II

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each of the Relevant Periods. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Group expects, at the end of each of the Relevant Periods, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(i) Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each of the Relevant Periods, with the effect of any changes in estimate accounted for on a prospective basis. The following annual rates are used for the depreciation of property, plant and equipment:

Leasehold improvements	50%
Display	50% – 100%
Furniture and equipment	20% – 33.33%
Motor vehicles	33.33%

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

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(j) Impairment of property, plant and equipment

At each reporting date, property, plant and equipment are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If an estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

Recoverable amount is the higher of fair value less costs to sell and value in use. When it is not possible to estimate the recoverable amount of an individual asset, the Target Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

(k) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted-average method. The cost of inventories comprises cost of finished goods. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. At each reporting date, inventories are assessed for impairment and the carrying amount is reduced to its net realisable value with the impairment loss recognised immediately in profit or loss.

(l) Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

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APPENDIX II

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Target Group only has loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

During the Relevant Periods, the Target Group held only loans and receivables which were initially measured at fair value plus transaction costs.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each of the Relevant Period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

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Evidence of impairment for the Target Group’s loans and receivable (mainly trade and other receivables) may include:

• significant financial difficulty of the debtors; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• the disappearance of an active market for that financial asset because of financial difficulties; or

• measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

The trade and other receivables are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. The amount of the impairment loss recognised for receivables, if any, is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the trade and other receivables is reduced through the use of an allowance account. Change in the carrying amount of the allowance account are recognised in profit or loss. When a trade or other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

Derecognition of financial assets

The Target Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Target Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Target Group continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Target Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Group continues to recognise the financial asset and also recognizes a collateralised borrowing for the proceeds received.

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On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety, the Target Group allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Financial liabilities and equity instruments

Debt and equity instruments issued by a Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Target Group are recognised at the proceeds received, net of direct issue costs.

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Financial liabilities

The Target Group only has financial liabilities which are subsequently measured at amortised cost using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, (where appropriate), a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Derecognition of financial liabilities

The Target Group derecognises financial liabilities when, and only when, the Target Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

(m) Related parties

• (a) A person, or a close member of that person’s family, is related to the Group if that person:

• (i) has control or joint control over the Target Group; or

• (ii) has significant influence over the Target Group; or

• (iii) is a member of the key management personnel of the Target Group or the Target Group’s parent.

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• (b) An entity is related to the Target Group if any of the following conditions applies:

• (i) the entity and the Target Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

• (ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

• (iii) both entities are joint ventures of the same third party.

• (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.

• (v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group.

• (vi) the entity is controlled or jointly controlled by a person identified in (a).

• (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

4. Critical judgments and key sources of estimation uncertainty

In the application of the Target Group’s accounting policies, which are described in Note 3, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

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

(a) Inventories valuation

Inventories are valued at the lower of cost and net realizable value. The Target Group performs regular review of the carrying amounts of inventories with reference to aged inventories analysis, historical consumption trends and management experience and judgment. Based on this review, the write down of inventories will be made if the inventories are defined as obsolete.

(b) Allowance for doubtful debts

The Target Group maintains an allowance for doubtful debts for estimated losses resulting from the inability of the debtors to make required payments. The Target Group is based on the estimates of future cash flows on the aging of trade receivables’ balances, debtors’ credit-worthiness, and historical write-off experience. If the financial condition of the debtors were to deteriorate, actual write-offs would be higher than estimated.

(c) Income taxes

The Target Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Target Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

5. Segment information

For the Relevant Periods, the Target Group has one single reportable segment which was managed as a single strategic business unit that engaged in the retail and wholesale of watches, gems and jewelleries. Information reported to the Target Group’s chief operation decision maker, for the purpose of resource allocation and assessment performance is focused on the operating results of the Target Group as a whole as the Target Group’s resources are integrated and no discrete financial information is available. Accordingly, no segment analysis is presented.

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Geographical information

Turnover Hong Kong The PRC (excluding Hong Kong)	Year 2012 HK$ – 76,102,925 76,102,925	ended 31 December 2013 2014 HK$ HK$ 605,915 3,902,270 59,494,308 45,843,927 60,100,223 49,746,197	ended 31 December 2013 2014 HK$ HK$ 605,915 3,902,270 59,494,308 45,843,927 60,100,223 49,746,197
			49,746,197

In presenting the geographical information, revenue is based on the location of the customers and non-current assets are based on the physical location of the assets. Over 90% of the Target Group’s non-current assets are located in the PRC.

Revenue from retail and wholesale businesses

Significant part of the revenue generated by the Target Group is from its retail business. Revenue from retail and wholesale businesses of the corresponding years of the Target Group are as follows:

Retail business Wholesale business Less: output VAT	Year 2012 HK$ 72,832,311 13,879,740 86,712,051 (10,609,126) 76,102,925	ended 31 December 2013 2014 HK$ HK$ 57,080,214 44,551,860 11,307,789 11,598,369 68,388,003 56,150,229 (8,287,780) (6,404,032) 60,100,223 49,746,197	ended 31 December 2013 2014 HK$ HK$ 57,080,214 44,551,860 11,307,789 11,598,369 68,388,003 56,150,229 (8,287,780) (6,404,032) 60,100,223 49,746,197
			56,150,229 (6,404,032)
			49,746,197

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II

Revenue from major customers

Revenue from major customers of the corresponding years contributing over 5% of the total sales of the Target Group is as follows:

Customer A Customer B	Year 2012 HK$ 8,366,802 – 8,366,802	ended 31 December 2013 2014 HK$ HK$ 7,066,206 2,418,238 459,710 4,585,803 7,525,916 7,004,041	ended 31 December 2013 2014 HK$ HK$ 7,066,206 2,418,238 459,710 4,585,803 7,525,916 7,004,041
			7,004,041

6. Revenue

Revenue, which is also the Target Group’s turnover, represents the net invoiced value of goods sold, after allowances for returns, trade discounts and sales related tax during the Relevant Periods.

Sales of goods	Year 2012 HK$ 76,102,925	ended 31 December 2013 2014 HK$ HK$ 60,100,223 49,746,197

7. Costs of goods sold

Costs of goods sold is the weighted-average cost of goods sold, after purchase returns, trade discounts and purchase related tax during the Relevant Periods.

Costs of goods sold	Year 2012 HK$ 43,096,038	ended 31 December 2013 2014 HK$ HK$ 36,119,897 28,986,626

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8. Other income

Bank interest income Exchange gain Reversal of provision for obsolete inventories Reversal of provision for VAT payable Sundry income Written off of accounts payables	Year 2012 HK$ – 151,051 – – 188,781 – 339,832	ended 31 December 2013 2014 HK$ HK$ 3,924 – – 10,063 1,023,310 1,067,452 720,538 – 1,146 62,946 325,978 – 2,074,896 1,140,461	ended 31 December 2013 2014 HK$ HK$ 3,924 – – 10,063 1,023,310 1,067,452 720,538 – 1,146 62,946 325,978 – 2,074,896 1,140,461
			1,140,461

9. Finance costs

Bank interest Short-term borrowing interest	Year 2012 HK$ 4,375 – 4,375	ended 31 December 2013 2014 HK$ HK$ – – – 18,777 – 18,777	ended 31 December 2013 2014 HK$ HK$ – – – 18,777 – 18,777
			18,777

10. Income tax expense

No provision for Hong Kong Profits Tax has been made as there were no assessable profits for the Relevant Periods.

PRC subsidiaries of Target Group are subject to PRC Enterprise Income Tax at prevailing rate at 25% of the assessable profits. No provision for PRC Enterprise Income Tax has been made as the PRC subsidiaries have not generated any assessable profits in the Relevant Periods.

Pursuant to the rules and regulations of the BVI, the Target Company is not subject to any income tax in the BVI.

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APPENDIX II

The income tax expense for the Relevant Periods can be reconciled to the loss before tax per the Consolidated Statements of Profit or Loss and Other Comprehensive Income as follows:

Loss before tax Tax at the domestic income tax rate of 16.5%: Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Tax effect of tax losses not recognised Utilisation of tax losses previously not recognized Effect of different statutory tax rates of overseas jurisdictions Income tax expense for the year	Year 2012 HK$ (2,775,195) (457,907) (131,149) 69,378 684,208 – (164,530) –	ended 31 December 2013 2014 HK$ HK$ (3,645,821) (4,727,984) (601,561) (780,117) – (12,046) 91 1,346 1,105,435 1,713,603 (291,230) (368,492) (212,735) (554,294) – –

As at 31 December 2012, 2013 and 2014, the Target Group had tax losses available for offset against future profits. No deferred tax assets have been recognized due to the unpredictability of future profit streams.

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11. Loss for the year

Loss for the year has been arrived at after charging:

Staff costs (including directors’ emoluments) Salaries and other short-term benefits Retirement benefit scheme contributions Total staff costs Auditors’ remuneration Depreciation Operating lease charges in respect of rental premises* Provision for obsolete inventories	Year 2012 HK$ 9,247,776 1,463,198 10,710,974 188,000 900,672 16,573,109 2,308,891	ended 31 December 2013 2014 HK$ HK$ 8,653,000 8,482,869 1,661,922 1,607,672 10,314,922 10,090,541 135,500 158,000 927,903 617,363 13,582,535 11,709,670 – –	ended 31 December 2013 2014 HK$ HK$ 8,653,000 8,482,869 1,661,922 1,607,672 10,314,922 10,090,541 135,500 158,000 927,903 617,363 13,582,535 11,709,670 – –
			10,090,541
			158,000 617,363 11,709,670 –

• Salaries and other short-term benefits and retirement benefit scheme contributions of the salesmen work at retail counters are included in ‘‘selling and distribution expenses’’ while salaries and other short-term benefits and retirement benefit scheme contributions of back office staff are in ‘‘administrative expenses’’ on the face of the Consolidated Statements of Profit or Loss and Other Comprehensive Income.

• ** Depreciation of property, plant and equipment used in retail counters is included in ‘‘selling and distribution expenses’’ while the depreciation of property, plant and equipment used in back offices is included in ‘‘administrative expenses’’ on the face of the Consolidated Statements of Profit or Loss and Other Comprehensive Income.

• *** Operating lease charges in respect of the retail counters are included in ‘‘selling and distribution expenses’’ while the operating lease charges related to back offices are included in ‘‘administrative expenses’’ on the face of the Consolidated Statements of Profit or Loss and Other Comprehensive Income.

12. Dividend

No dividend has been declared by the Target Company during the Relevant Periods.

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13. Directors’ remuneration and five highest paid employees

Directors’ remuneration for the Relevant Periods, disclosed pursuant to section 78 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622), which requires compliance with section 161 of the predecessor Hong Kong Companies Ordinance (Cap. 32), is as follows:

Fees Other emoluments: Salaries, allowances and benefits in kind Retirement scheme contribution	Year 2012 HK$ – – – –	ended 31 December 2013 2014 HK$ HK$ – – – 131,970 – 4,500 – 136,470	ended 31 December 2013 2014 HK$ HK$ – – – 131,970 – 4,500 – 136,470
			136,470

(a) Directors’ emoluments

Details of the emoluments paid or payable to the directors of the Target Group during the Relevant Periods were as follows:

Year ended 31 December 2012 Directors Kwok Shun Tim (Note (i)) Wong Tat Tung	Salaries, allowances and other benefits HK$ – – –	Retirement benefit scheme contributions HK$ – – –	Total HK$ – –
			–

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Salaries,	Retirement
allowances and	benefit scheme
other benefits	contributions	Total
HK$	HK$	HK$

Year ended 31 December 2013 Directors Kwok Shun Tim (Note (i)) Wong Tat Tung Year ended 31 December 2014 Directors Kwok Shun Tim (Note(i)) Lo Lai Kuen (Note (ii)) Wong Tat Tung	– – – – 101,970 30,000 131,970	– – – – 4,500 – 4,500	– –
			–
			– 106,470 30,000
			136,470

Notes:

(i) Mr. Kwok Shun Tim resigned on 30 December 2014.

(ii) Ms. Lo Lai Kuen appointed as Director on 10 December 2014.

No emoluments were paid by the Target Group to the directors as an incentive payment to join or upon joining the Target Group or as compensation for loss of office during the Relevant Periods.

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(b) Employees’ emoluments

Of the five individuals with highest emoluments for the Relevant Periods, no directors were included in the five highest paid individuals of the Target Group. The emoluments of the highest paid individuals were as follows:

Salaries, allowances and other benefits Retirement benefit scheme contribution	Year 2012 HK$ 1,130,856 93,220 1,224,076	ended 31 December 2013 2014 HK$ HK$ 1,246,951 1,248,344 82,280 130,672 1,329,231 1,379,016	ended 31 December 2013 2014 HK$ HK$ 1,246,951 1,248,344 82,280 130,672 1,329,231 1,379,016
			1,379,016

The emoluments of each of the above non-directors, the five highest paid individuals, were below HK$1,000,000.

During the Relevant Periods, no emoluments were paid by the Target Group to the five highest paid individuals as an inducement to join or upon joining the Target Group or as compensations for loss of office during the Relevant Periods.

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14. Property, plant and equipment

COST At 1 January 2012 Additions Effect of foreign currency exchange difference At 31 December 2012 and 1 January 2013 Additions Effect of foreign currency exchange difference At 31 December 2013 and 1 January 2014 Additions Effect of foreign currency exchange difference At 31 December 2014 ACCUMULATED DEPRECIATION At 1 January 2012 Annual depreciation Effect of foreign currency exchange difference At 31 December 2012 and 1 January 2013 Annual depreciation Effect of foreign currency exchange difference At 31 December 2013 and 1 January 2014 Annual depreciation Effect of foreign currency exchange difference At 31 December 2014 CARRYING AMOUNTS At 31 December 2012 At 31 December 2013 At 31 December 2014	Leasehold improvement HK$ 322,561 – 2,140 324,701 76,188 11,617 412,506 – (2,048) 410,458 291,536 31,236 1,929 324,701 76,188 11,617 412,506 – (2,048) 410,458 – – –	Display HK$ 5,721,052 384,520 37,903 6,143,475 442,152 207,109 6,792,736 1,068,633 (32,621) 7,828,748 5,252,830 465,686 34,782 5,753,298 645,959 196,899 6,596,156 547,727 (32,182) 7,111,701 390,177 196,580 717,047	Furniture and equipment HK$ 3,023,907 106,544 19,862 3,150,313 99,269 103,657 3,353,239 14,792 (16,491) 3,351,540 2,445,022 401,358 15,972 2,862,352 205,756 95,562 3,163,670 69,636 (15,493) 3,217,813 287,961 189,569 133,727	Motor vehicles HK$ 142,566 – 946 143,512 – 4,707 148,219 – (736) 147,483 140,190 2,392 930 143,512 – 4,707 148,219 – (736) 147,483 – – –	Total HK$ 9,210,086 491,064 60,851
					9,762,001 617,609 327,090
					10,706,700 1,083,425 (51,896)
					11,738,229
					8,129,578 900,672 53,613
					9,083,863 927,903 308,785
					10,320,551 617,363 (50,459)
					10,887,455
					678,138
					386,149
					850,774

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15. Inventories

Finished goods	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 21,913,074 20,770,265 23,386,581

During the Relevant Periods, there was a significant increase in the net realizable value of certain finished goods of the Target Group due to the change of fashion trend. As a result, a reversal of provision of impairment loss of finished goods of HK$1,023,310 and HK$1,067,452 for the years ended 31 December 2013 and 2014 were recognized and included in other income for the respective years.

16. Trade and other receivables

Trade receivables Other receivables Deposits and prepayments	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 7,152,837 6,426,682 6,698,486 641,401 492,384 447,238 1,864,205 1,846,233 2,297,045 9,658,443 8,765,299 9,442,769	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 7,152,837 6,426,682 6,698,486 641,401 492,384 447,238 1,864,205 1,846,233 2,297,045 9,658,443 8,765,299 9,442,769
		9,442,769

The Target Group trades on credit for its businesses. In general, a credit period of 30 days to 60 days will be provided to customers. The Target Group seeks to maintain strict control over its outstanding receivables and overdue balances are reviewed regularly by senior management. The Target Group does not hold any collateral over trade receivables. The carrying amounts of trade receivables are approximately their fair values as at the end of the Relevant Periods. No impairment made for trade receivables.

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The following is an aged analysis of trade receivables of the Target Group presented based on the invoice date at the end of the Relevant Periods.

Trade receivable analysis

0 – 30 days 31 – 60 days 61 – 90 days 91 – 120 days Over 120 days Total Not yet due Past due	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 5,024,916 3,612,797 4,348,116 1,563,863 1,485,858 1,114,276 445,208 512,201 486,702 36,662 496,939 293,217 82,188 318,887 456,175 7,152,837 6,426,682 6,698,486 As at 31 December 2012 2013 2014 HK$ HK$ HK$ 4,961,759 3,765,399 4,788,774 2,191,078 2,661,283 1,909,712 7,152,837 6,426,682 6,698,486	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 5,024,916 3,612,797 4,348,116 1,563,863 1,485,858 1,114,276 445,208 512,201 486,702 36,662 496,939 293,217 82,188 318,887 456,175 7,152,837 6,426,682 6,698,486 As at 31 December 2012 2013 2014 HK$ HK$ HK$ 4,961,759 3,765,399 4,788,774 2,191,078 2,661,283 1,909,712 7,152,837 6,426,682 6,698,486
		6,698,486

Aging analysis of past due trade receivables by due dates of invoices as at the end of the Relevant Periods, is as follows:

0 – 30 days 31 – 60 days 61 – 90 days 91 – 120 days Over 120 days Total	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 1,472,469 1,085,030 947,357 511,322 521,535 668,138 101,973 344,548 227,127 23,126 376,642 21,566 82,188 333,528 45,524 2,191,078 2,661,283 1,909,712	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 1,472,469 1,085,030 947,357 511,322 521,535 668,138 101,973 344,548 227,127 23,126 376,642 21,566 82,188 333,528 45,524 2,191,078 2,661,283 1,909,712
		1,909,712

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17. Amount due from a holding company

A holding company’s current account disclosed pursuant to section 78 of Schedule 11 to the Hong Kong Companies Ordinance (Cap. 622), which requires compliance with section 161B of the predecessor Hong Kong Companies Ordinance (Cap. 32), is as follows:

Victor Meg Limited

For the year ended 31 December 2012 For the year ended 31 December 2013 For the year ended 31 December 2014	Balance at end of year HK$ – – –	Balance at beginning of year HK$ – – 11,544	Maximum amount outstanding during the year HK$ –
			–
			11,544

The amount is unsecured, interest-free and repayable on demand.

18. Cash and cash equivalents

						As	at	31	December
						2012			2013	2014
						HK$			HK$	HK$
Cash	in	bank	and	on	hand	637,956			776,270	4,302,226

The cash and cash equivalents of the Target Group are denominated in both RMB and HKD.

The RMB is not freely convertible into other currencies. The remittance of funds out of Mainland China is subject to exchange restrictions imposed by the PRC government.

Cash at banks earns interest at prevailing market rate. The bank balances are deposited with creditworthy banks with no recent history of default. The carrying amounts of the cash and cash equivalents are approximately their fair values at the end of the Relevant Periods.

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ACCOUNTANTS’ REPORT ON THE TARGET GROUP

19. Trade and other payables

Trade payables Other payables Accrued expenses	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 167,845 2,076 3,462,411 239,410 364,702 364,486 1,183,093 1,174,089 1,080,826 1,590,348 1,540,867 4,907,723	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 167,845 2,076 3,462,411 239,410 364,702 364,486 1,183,093 1,174,089 1,080,826 1,590,348 1,540,867 4,907,723
		4,907,723

The following is an aged analysis of trade payable presented based on the invoice date at the end of each Relevant Periods.

0 – 30 days 31 – 60 days 61 – 90 days 91 – 120 days Over 120 days Total	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 108,238 – 3,462,411 1,158 – – 36,204 – – – – – 22,245 2,076 – 167,845 2,076 3,462,411	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 108,238 – 3,462,411 1,158 – – 36,204 – – – – – 22,245 2,076 – 167,845 2,076 3,462,411
		3,462,411

20. Amount(s) due to a holding company, directors and a non-controlling shareholder

The amounts are unsecured, non-interest bearing and repayable on demand.

21. Other tax payables

Provision for Value-Added Tax and other PRC taxes	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 4,111,181 3,283,495 2,809,166

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22. Short-term borrowing

Short-term borrowing	As at 31 December 2012 2013 2014 HK$ HK$ HK$ – – 5,000,000

On 17 December 2014, the Target Group entered into a loan agreement with Way Union Finance Limited (authorized money lender). The principal amount is HK$5,000,000. The short-term borrowing is unsecured, interest bearing at 10% per annum and will be required to be settled on 18 June 2015.

23. Retirement benefits scheme

The Target Group operates a Mandatory Provident Fund Scheme (the MPF scheme) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance and not previously covered by the defined benefit retirement plan. The MPF scheme is a defined contribution retirement plan administered by independent trustees.

The employees of the Target Group’s subsidiaries in the PRC are members of a statemanaged retirement benefit plan operated by the government of the PRC. The subsidiaries are required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Target Group with respect to the retirement benefit plan is to make the specified contributions.

The total expenses charged to the Consolidated Statements of Profit or Loss and Other Comprehensive Income amounted to HK$1,463,198, HK$1,661,922 and HK$1,607,672 for the years ended 31 December 2012, 2013 and 2014 respectively.

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24. Commitments under operating lease

The Target Group as leasee

The Target Group leases certain of its office properties under operating lease arrangements. Leases are negotiated for a term ranging from one year to three years. The Target Group does not have an option to purchase the leased asset at the expiry of the lease period.

At the end of each of the Relevant Periods, the Target Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 829,324 679,830 1,896,227 – – 2,335,492 829,324 679,830 4,231,719	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 829,324 679,830 1,896,227 – – 2,335,492 829,324 679,830 4,231,719
		4,231,719

25. Share capital

Authorized 50,000 ordinary shares of US$1 each, equivalent to HK$ Issued and fully paid 3,000 ordinary shares of US$1 each, equivalent to HK$	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 390,000 390,000 390,000 23,400 23,400 23,400	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 390,000 390,000 390,000 23,400 23,400 23,400
		23,400

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26. Related party transactions

Balances and transactions between the Target Company and its subsidiaries, which are related parties of the Target Group, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Target Group and other related parties are disclosed below.

Related party Nature of transaction Hong Kong Wuyi Youth Association Limited Sales of goods Shenzhen 3 Wells Watch Industries Limited Purchases Sales 3 Wells Watch Industries Limited Bank borrowing interests Sundry income	As at 31 December 2012 2013 2014 HK$ HK$ HK$ – – 104,000 63,973 – – 2,575 – – 2,741 – – – – 62,946

At the end of each of the Relevant Periods, the amounts arising from the transactions due from/to the related parties:

Related party Year-end balances Hong Kong Wuyi Youth Association Limited Trade receivable 3 Wells Watch Industries Limited Other payable	As at 31 December 2012 2013 2014 HK$ HK$ HK$ – – 104,000 60,372 62,946 –

The emoluments of the directors, who are also identified as members of key management of the Target Group, are set out in Note 13(a).

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27. Capital risk management

The Target Group’s objectives when managing capital are to safeguard the Target Group’s ability to continue as a going concern in order to provide returns for the shareholders, to procure adequate financial resources from the shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Target Group’s overall strategy remains unchanged during the Relevant Periods. The capital structure of the Group consists of share capital, share premium and reserves.

The capital structure of the Target Group consists of net debt, which includes the short-term borrowing disclosed in Note 22, cash and cash equivalents and equity attributable to owners of Target Group, comprising share capital, share premium and reserves. The Target Group monitors capital using a gearing ratio (Total debt/Total equity). The gearing ratio at the end of each of the Relevant Periods was as follows:

	As at 31 December	As at 31 December
	2012	2013	2014
	HK$	HK$	HK$
Total Equity	18,432,810	15,286,596	23,461,765
Total liabilities	14,454,801	15,411,387	14,532,129
Gearing ratio	78%	101%	62%

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28. Financial instruments

The carrying amounts of each of the categories of the financial instruments as at the end of each of the Relevant Periods are as follows:

Financial assets: Loans and receivables Trade receivables Deposits Other receivables Amount due from a holding company Cash and cash equivalents Financial liabilities: At amortized costs Trade payables Other payables Accrued expenses Amounts due to directors Amount due to a shareholder Amount due to a holding company Short-term borrowing	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 7,152,837 6,426,682 6,698,486 1,413,276 1,632,533 1,830,452 641,401 492,384 447,238 – – 11,544 637,956 776,270 4,302,226 9,845,470 9,327,869 13,289,946 167,845 2,076 3,462,411 239,410 364,702 364,486 1,183,093 1,174,089 1,080,826 8,478,030 10,311,783 300,000 – – 1,515,240 275,242 275,242 – – – 5,000,000 10,343,620 12,127,892 11,722,963	As at 31 December 2012 2013 2014 HK$ HK$ HK$ 7,152,837 6,426,682 6,698,486 1,413,276 1,632,533 1,830,452 641,401 492,384 447,238 – – 11,544 637,956 776,270 4,302,226 9,845,470 9,327,869 13,289,946 167,845 2,076 3,462,411 239,410 364,702 364,486 1,183,093 1,174,089 1,080,826 8,478,030 10,311,783 300,000 – – 1,515,240 275,242 275,242 – – – 5,000,000 10,343,620 12,127,892 11,722,963
		13,289,946
		3,462,411 364,486 1,080,826 300,000 1,515,240 – 5,000,000
		11,722,963

29. Financial risk management objective and policies

The Target Group’s major financial instruments include trade receivables, deposits, other receivables, amount due from a holding company, cash and cash equivalents, trade payables, other payables, accrued expenses, amounts due to directors, amount due to a shareholder, amount due to a holding company and short-term borrowing. Details of the financial instruments are disclosed in respective notes.

The risks associated with these financial instruments include credit risk, liquidity risk, interest rate risk and currency risk. The policies on how to mitigate these risks are set out below. The Target Group does not hold or issue derivative financial instruments either for

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APPENDIX II

hedging or for trading purposes. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner and to create value for its shareholders.

Credit risk

The Target Group’s credit risk is primarily attributable to trade receivables, other receivables and bank balances.

The credit risk on liquid funds is limited because the counterparty is an authorized financial institution regulated in Hong Kong and Mainland China.

In respect of trade receivables, most of the balances of trade receivables are due from owners of shopping malls in which the Target Group has display counters. Sales will be settled by customers with shopping mall immediately and the proceeds will be subsequently received from the owners of shopping malls. Thus, the credit risk with the sales in shopping malls is low.

For wholesales transactions, individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations are performed on all customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. The Target Group reviews the recoverable amount of each individual trade debt and debt investment at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management considers that the Target Group’s credit risk is significantly reduced.

Liquidity risk

The Target Group controls liquidity by maintaining sufficient banking facilities and cash and cash equivalents, which is generated from the operating cash flows. The Target Group is not exposed to liquidity risk as the current assets of the Target Group exceed its current liabilities by HK$17,754,672, HK$14,900,447 and HK$22,610,991 as at 31 December 2012, 31 December 2013 and 31 December 2014 respectively.

The following table details the Target Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Target Group can be required to pay. The maturity dates for the non- derivative financial liabilities are based on the agreed repayment dates. The table includes both interest and principal cash flows.

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Liquidity risk tables

Interest rate % At 31 December 2012 Non-derivative financial liabilities Trade and other payables – Amounts due to directors – Amount due to a holding company – At 31 December 2013 Non-derivative financial liabilities Trade and other payables – Amounts due to directors – Amount due to a holding company – At 31 December 2014 Non-derivative financial liabilities Trade and other payables – Amounts due to directors – Amount due to a non- controlling shareholder – Short-term borrowing (unsecured) 10%	On demand or within one year HK$ 1,590,348 8,478,030 275,242	More than one year but not exceeding two years HK$ – – –	More than two years but not exceeding five years HK$ – – –	More than five years HK$ – – –	Total undiscounted cash flows HK$ 1,590,348 8,478,030 275,242	Carrying amount HK$ 1,590,348 8,478,030 275,242
	10,343,620	–	–	–	10,343,620	10,343,620
	1,540,867 10,311,783 275,242	– – –	– – –	– – –	1,540,867 10,311,783 275,242	1,540,867 10,311,783 275,242
	12,127,892	–	–	–	12,127,892	12,127,892
	4,907,723 300,000 1,515,240 5,231,223	– – – –	– – – –	– – – –	4,907,723 300,000 1,515,240 5,231,223	4,907,723 300,000 1,515,240 5,000,000
	11,954,186	–	–	–	11,954,186	11,722,963

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Interest rate risk

The Target Group is exposed to interest rate risk in relation to fixed-rate shortterm borrowing (Note 22) during the Relevant Periods. The Target Group does not have an interest rate hedging policy. However, the management has an opinion that the interest rate risk exposure is not significant because the short-term borrowing of HK$5,000,000 as at 31 December 2014 is subjected to the fixed interest rate of 10% per annum instead of floating interest rate.

Currency risk

Currency risk exposure arise primarily through sales and purchases made by the subsidiaries in the PRC which give rise to receivables, payables and cash balances that are denominated in RMB which is different from the functional currency of the Target Company. In the opinion of the management, the functional currency for all subsidiaries in the PRC is RMB and these subsidiaries are not exposed to any currency risk due to the exchange rate movement of RMB. For subsidiaries established outside of the PRC, they have no material financial assets and liabilities denominated in RMB. Accordingly, the Target Group’s exposure to RMB currency risk is insignificant.

30. EVENT AFTER THE END OF THE RELEVANT PERIODS

On 29 May 2015, the Directors passed a written resolution to purchase the remaining 9.61% of issued shares of Universe Watch & Jewellery Group Company Limited from Most Profitable Investment Limited. The share transfer took place on the same date as the written resolution was passed. Universe Watch & Jewellery Group Company Limited became the wholly owned subsidiary of the Target Company on 29 May 2015 (Note 1).

Yours faithfully,

Focus Asia CPA Limited

Certified Public Accountants (Practising) Cheung Ming Ho Practising Certificate Number: P05602

Hong Kong

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is an illustrative and unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group (the ‘‘Unaudited Pro Forma Financial Information’’), which has been prepared on the basis of the notes set out below and in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effects of the Proposed Acquisition, as if the Proposed Acquisition had been completed on 31 December 2014.

The Unaudited Pro Forma Financial Information has been prepared using accounting policies consistent with that of the Group, as set out in the published annual report of the Group for the year ended 30 June 2014.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the financial information contained in this circular.

The Unaudited Pro Forma Financial Information has been prepared by the directors of the Group for illustrative purposes only and is based on a number of assumptions, estimates, uncertainties and currently available information. Because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not give a true picture of the financial position of the Enlarged Group had the Proposed Acquisition been completed at 31 December 2014 or at any future date.

III – 1

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

ASSETS Non-current assets Property, plant and equipment Investment properties Other intangible assets Film rights and films in progress Investment in an associate Investments in joint ventures Loan receivable from a joint venture Loans receivable Film deposits Deferred income tax assets Available-for-sale financial assets Goodwill Current assets Inventories Accounts receivable Loans receivable Deposits paid, prepayments and other receivables Amount due from a related party Financial assets at fair value through profit or loss Cash and cash equivalents Total assets	Unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31st December 2014 after Placing and Rights Issue (note 1) HK$’000 1,482 25,060 1,858 30,016 4,869 824 8,032 7,000 37,311 372 55,032 – 171,856 2,623 8,725 61,930 40,811 – 92,849 358,243 565,181 737,037	Pro forma adjustments Notes Target Group as at 31st December 2014 Other pro forma adjustments (note 2) HK$’000 HK$’000 851 – – 1,085 4 – – (4,869) 5 – – – – – – – 77,282 4 851 23,387 6,698 – 2,744 12 – 4,302 37,143 37,994	Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group HK$’000 2,333 25,060 2,943 30,016 – 824 8,032 7,000 37,311 372 55,032 77,282
			246,205
			26,010 15,423 61,930 43,555 12 92,849 362,545
			602,324
			848,529

III – 2

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

EQUITY Capital and reserves attributable to the equity holders of the Company Share capital Share premium Other reserves Retained earnings Total shareholders’ equity Non-controlling interest Total equity LIABILITIES Non-current liabilities Obligations under finance lease Deferred income tax liabilities Convertible note Current liabilities Accounts payable Other payables and accrued charges Amount due to related parties Deposits received Amount due to the ultimate holding company Short term borrowing Obligations under finance lease Taxation payable Total liabilities Total equity and liabilities	Unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31st December 2014 after Placing and Rights Issue (note 1) HK$’000 61,561 490,137 92,957 14,600 659,255 1,000 660,255 45 1,645 – 1,690 3,608 32,644 – 36,408 1 – 17 2,414 75,092 76,782 737,037	Pro forma adjustments Notes Target Group as at 31st December 2014 Other pro forma adjustments (note 2) HK$’000 HK$’000 23 (23) 8 9,977 (9,977) 8 14,238 32,490 3 (14,238) 8 (2,864) 7,960 5 (2,000) 6 2,864 8 21,374 2,088 (2,088) 23,462 – – – 56,510 3 – 3,462 4,255 2,000 6 1,815 – – 5,000 – – 14,532 14,532 37,994	Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group HK$’000 61,561 490,137 125,447 20,560
			697,705 1,000
			698,705
			45 1,645 56,510
			58,200
			7,070 38,899 1,815 36,408 1 5,000 17 2,414
			91,624
			149,824
			848,529

III – 3

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

Note 1:

The unaudited pro forma consolidated statement of assets and liabilities of the Group was extracted from unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 December 2014 as set out in the Company’s circular dated 24 June 2015, on which the financial information was adjusted by the Placing and Rights Issue as announced by the Group on 26 May 2015.

Note 2:

The consolidated balance sheet of the Target Group as at 31 December 2014 was extracted from the accountant’s report of the Target Group as set out in Appendix II to this circular.

Note 3:

Adjustments are made to reflect the issuance of zero coupon convertible notes will mature at the date falling on the second anniversary of the issuance upon Completion.

The accounting treatment and valuation of convertible notes are based on the assumption that on 7 May 2015, the completion of the acquisition is not dependent on further actions of either party and the issuing date of convertible notes (acquisition date) is on 31 May 2015. The actual accounting might be different because the conditions to complete the transactions are not fulfilled on 7 May 2015.

Fair value of the convertible note is estimated to be approximately HK$89,000,000 as at 31 May 2015 by Grant Sherman Appraisal Limited (‘‘Grant Sherman’’), the independent valuer appointed by the Company for the purposes of the Acquisition, which comprises an equity portion of approximately HK$32,490,000 and a liability portion of approximately HK$56,510,000. The fair value assessment of the liability component and equity components of the Convertible Notes was performed by Grant Sherman, using discounted cash flow method and binomial option pricing model respectively. Based on the historical volatility of the shares of the Company and the prevailing stock price as at 31 May 2015, the estimated fair values of the liability component and equity component of the Convertible Notes are approximately HK$56,510,000 and HK$32,490,000 respectively. The fair value of liability component of the Convertible Notes has been calculated by discounting the future cash flows at the market rate and the effective interest rate of the liability component is 6.42%. The inputs used in the model in determining the fair value were as follow:

Share price – HK$0.89

Conversion price – HK$0.75

Time to maturity – 2 years

Risk-free rate 0.41%

Expected dividend yield – 0%

Volatility – 92.98%

III – 4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Fair values of the liability component and the equity component shall be assessed on the date of completion and are therefore subject to change upon completion of the Acquisition.

One of the components of the consideration comprises the profit guarantee from vendor (contingent consideration receivables). The contingent consideration receivables should be measured at fair value at each reporting date, with changes in fair value recognised in profit and loss. As the probability of meeting the profit guarantee by vendor is highly probable and therefore it is assume that the fair value on 31 May 2015 is nil.

Note 4:

In accordance with Hong Kong Financial Reporting Standard 3 ‘‘Business Combinations’’ (‘‘HKFRS 3’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’), the identifiable assets and liabilities of the Target Group will be accounted for in the consolidated financial statements of the Enlarged Group at their fair value under the purchase method of accounting upon the completion of the Acquisition. The amount of excess of the cost of the Acquisition (including the fair value of the convertible notes of approximately HK$89,000,000 and the fair value of the 20.01% equity interest of the Target Group owned by the Group of approximately HK$12,829,000 (note 5) before the Acquisition) over the fair value of acquired net assets of the Target Group of approximately HK$24,547,000 (being the allocated purchase price for net assets of approximately HK$23,462,000 of the Target Group as at 31 December 2014 and trademarks of approximately HK$1,085,000) is recognized as goodwill amounting to approximately HK$77,282,000 in the unaudited pro forma consolidated balance sheet as if the Acquisition had taken place on 31 December 2014. The goodwill is associated with an assemble workforce and Group’s strategic objectives to capitalize the business growth in Hong Kong and PRC.

The Target Group owns the brand of ‘‘Garona’’ and the carrying amount of its trademarks of approximately HK$1,085,000 represents the fair value of the trademarks. Such carrying amount of trademarks is calculated using the relief-from-royalty method at an effective interest rate of 2%. The fair value assessment was carried out by Grant Sherman. Under the relief-from-royalty method, an asset is valued base upon the incremental after tax cash flow accruing to the owner by virtue of the fact that the owner does not have to pay a fair royalty to a third party for the use of that asset. Accordingly, a portion of the Target Group’s earnings, equal to the after-tax royalty that would have been paid for use of the patents can be attributed to the patents. The value of the trademarks depends on the present worth of future after-tax royalties derived from ownership. Indication of value is developed by discounting future after-tax royalties attributable to the trademarks to the present worth at market-derived rate of return appropriate for the risks of the patents. In preparation of the Unaudited ProForma Financial Information, it is assumed that 15.8% is the effective interest rate. The effective interest rate was determined by the Capital Asset Pricing Model being carried out by Grant Sherman. Grant Sherman has considered that the most appropriate method for valuing the aforesaid patents is the relief from-royalty method. The carrying amount of the patents represents its fair value as at 31 December 2014.

The Directors confirm that consistent policies and assumptions have been applied for the purpose of assessing impairment of goodwill and other intangible assets under HKAS 36 ‘‘Impairment of Assets’’, and the Directors are not aware of any indications that an impairment of the Enlarged Group’s goodwill and other intangible assets is required after considering the nature, prospects, financial condition and business risks of the Enlarged Group.

The Directors confirm that they will apply consistent accounting policies and assumptions to assess impairment of goodwill and other intangible assets in subsequent reporting periods in accordance with the requirements under HKAS 36 annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s auditor will audit and opine on the consolidated financial statements of the Company in accordance with Hong Kong Standards on Auditing during the future annual audit.

III – 5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Note 5:

Based on the valuation performed by Grant Sherman, the fair value of the 20.01% equity interest of the Target Group owned by the Group of approximately HK$12,829,000 which is determined under the requirements of HKFRS 3 (revised).

Investment in an associate of approximately HK$4,869,000 represented the book value of the 20.01% equity interest of the Target Group owned by the Group before the Acquisition. The fair value of the 20.01% equity interest of the Target Group is approximately HK$12,829,000 and therefore a fair value gain of approximately HK$7,960,000 is recognized in the retained earnings of the Group.

Note 6:

Adjustments are made to reflect the accrual for the expenses, such as professional fees and printing costs, of approximately HK$2,000,000 incurred that directly attributable to the Acquisition.

Note 7:

As mentioned in note 1 above, the unaudited pro forma adjusted consolidated statement of assets and liabilities of the Enlarged Group has adjusted the Placing and Rights Issue. If no adjustment on the Placing and Rights Issue was made, the unaudited consolidated net tangible assets attributable to the shareholders of the Company was HK$350,098,000 and the unaudited consolidated net tangible assets attributable to the shareholders of the Company per share was HK$1.41.

No other adjustment has been made to the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group to reflect any trading results or other transactions of the Group and the Target Group entered into subsequent to 31 December 2014. In particular, the Unaudited Pro Forma Financial Information has not taken into account the placing by the Group of 49,730,000 new shares completed on 22 April 2015 at a placing price of HK$0.4055 per placing share, of which the net proceeds from this placing after deduction of commission and other expenses are approximately HK$19,330,000.

Note 8:

The share capital, share premium, other reserves and, retained earning of the Target Group are eliminated in the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group.

III – 6

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR

TO THE DIRECTORS OF UNIVERSE INTERNATIONAL HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Universe International Holdings Limited (the ‘‘Company’’) and its subsidiaries (collectively the ‘‘Group’’), and Winston Asia Limited and its subsidiaries (the ‘‘Target Group’’) (collectively the ‘‘Enlarged Group’’) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of assets and liabilities as at 31 December 2014, and related notes (the ‘‘Unaudited Pro Forma Financial Information’’) as set out on pages III-1 to III-6 of the Company’s circular dated 26 June 2015, in connection with the proposed acquisition of the Target Group (the ‘‘Transaction’’) by the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages III-1 to III-6.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the Transaction on the Group’s financial position as at 31 December 2014 as if the Transaction had taken place at 31 December 2014. As part of this process, the unaudited pro forma consolidated statement of assets and liabilities of the Group has been extracted by the directors from the Company’s circular dated 24 June 2015 for the placing and rights issue, on which the independent reporting accountants assurance report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

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

III – 7

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Reporting Accountant’s Responsibilities

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

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’, issued by the HKICPA. This standard requires that the reporting accountant complies with ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

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

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 31 December 2014 would have been as presented.

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

• The related pro forma adjustments give appropriate effect to those criteria; and

• The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

III – 8

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

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

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

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information 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; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants Hong Kong, 26 June 2015

III – 9

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

Set out below is the management discussion and analysis on the Target Group for the three financial years ended 31 December 2012, 2013 and 2014:

Review of business

The Target is the holding company of Universe Watch and Universe Watch is principally engaged in business activities including the trading of watches and jewellery, trademark holding, wholesale and retail of watches and jewellery in Hong Kong and the PRC. As at the Latest Practicable Date, Universe Watch has a retail network which comprised 33 retail points/shops in 14 cities in the PRC and Hong Kong. It is an authorised dealer in the PRC of various lifestyle brands such as Casio, Seiko, Citizen, Edwin, Esprit, Timex, Luminox and Calvin Klein.

The retail business accounted for approximately 83.99%, 83.47% and 79.34% of the Target Group’s total revenue before value added tax during the year ended 31 December 2012, 2013 and 2014, respectively. The wholesale business accounted for approximately 16.01%, 16.53% and 20.66% of the Target Group’s total revenue before value added tax during the years ended 31 December 2012, 2013 and 2014, respectively.

The retail network sells timepieces as well as luxury watch products under the brand ‘‘Garona’’ owned and managed by the Target. In late December 2014, the Target commenced to sell gems and jewellery. Universe Watch employs over 100 staff and manages concessions and retail stores which are located in department stores and shopping malls within the retail network.

The Target rented counters in department stores and shopping-malls and hired sales clerk to fulfill retails sales. The department stores and shopping-malls received the sales proceeds from retail customers directly and will generally make payment after deducting the rent to the Target in 30-60 days.

Universe Watch strategically maintains regional offices under the supervision of regional managers in Beijing, Shanghai and Shenzhen in order to manage its retail points in different provinces. The regional managers have extensive experience in consumer product retailing in the PRC and have a good understanding of the local market and consumer preferences.

The PRC headquarters of Universe Watch based in Beijing supports the retail network with brand management, logistics, information technology, planning and forecasting, inventory control as well as finance services.

In terms of geographical contribution, PRC markets accounted for 100%, approximately 98.99% and 92.16% of the Group’s total revenue during the year ended 31 December 2012, 2013 and 2014, respectively. Hong Kong markets accounted for 0%, approximately 1.01% and 7.84% of the Group’s total revenue during the years ended 31 December 2012, 2013 and 2014, respectively.

IV – 1

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

Prospect and outlook

The Target will continue to hold Universe Watch and will become a wholly-owned subsidiary of the Company upon Completion and it is expected synergetic advertising effect will be created. This will be a positive factor in promoting the products of the Target Group in Hong Kong and the PRC as the Target Group is wholly-owned by a listed company in Hong Kong with over 20 years of history in the entertainment and film industry and is a known film licensing and production company in Hong Kong and the PRC.

It is planned that Universe Watch will expand its retail network leveraging off its infrastructure and brand portfolio. It will enhance certain of its brand and supply chain management systems to enable itself to effectively manage existing retail points and retail points that may be opened at new locations.

Garona has been established as a sophisticated and affordable luxury brand, and is sold alongside international fashion brands in the retail network of Universe Watch. In the first quarter of 2015, two Garona image shops were opened in Hong Kong and the Target Group commenced to sell the watches under the brand ‘‘Garona’’, jewellery and diamonds in these two shops in Hong Kong.

The Target Group did not operate any retail shop in Hong Kong for the three years 31 December 2012, 2013 and 2014. With the new shops and the synergic advertising effect upon Completion, it is expected the revenue and gross profit contribution from Hong Kong retail shops will increase and account for greater proportion in the Target Group in the future.

In addition, Universe Watch has launched online retail shops in December 2014 and will release new series of Garona brand watches including new products with jewellery feature to broaden the income source and enhance the profitability of the Target Group.

Financial revenue

The Target Group recorded revenue for the three financial years ended 31 December 2012, 2013 and 2014 of approximately HK$76,102,925, HK$60,100,223 and HK$49,746,197 respectively, which represented the revenue generated from the retail and wholesale of watches, gems and jewelleries in Hong Kong and the PRC.

The revenue decreased by approximately 21.0% for the year ended 31 December 2013 as compared to the year ended 31 December 2012. The decrease was mainly due to (i) the decrease in number of retail points as a result of closure of retails points with unsatisfactory performance and the expiry of rental period of the retails points during the year; (ii) the scale down of the sales of the brands with lower gross profit margin during the year; and (iii) the decrease in average selling price of the products as more discount were offering to customers during the year.

IV – 2

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

The revenue decreased by approximately 17.2% for the year ended 31 December 2014 as compared to the year ended 31 December 2013. The decrease was mainly due to the decrease in number of retail points as a result of the closure of retails points with unsatisfactory performance and the expiry of the rental period of retails points during the year..

The gross profit margin for the year ended 31 December 2013 decreased to 39.9% from approximately 43.4% for the corresponding period in 2012, which was mainly due to the decrease in average selling price of the products as offering more discounts to customers for clearance of slow-moving inventories. The gross profit margin for the year ended 31 December 2014 was approximately 41.7% which was similar to gross profit of approximately 39.9% for the corresponding period in 2013.

Other income

The Target Group had recorded other income for the financial year ended 31 December 2012 of approximately HK$339,832 which mainly comprised exchange gains.

The Target Group had recorded other income for the financial year ended 31 December 2013 of approximately HK$2,074,896 which mainly comprised reversal of provision for obsolete inventories and value added tax payables.

The Target Group had recorded other income for the financial year ended 31 December 2014 of approximately HK$1,140,461 which mainly comprised reversal of provision for obsolete inventories.

Selling and distribution expenses

The Target Group had recorded selling and distribution expenses of approximately HK$25,826,096, HK$22,175,150 and HK$19,960,978 for the year ended 31 December 2012, 2013 and 2014 respectively, which mainly comprised rents, salaries and staff welfare and utilities expenses of the retail points.

The selling and distribution expenses decreased by approximately 14.1% for the year ended 31 December 2013, as compared to the year ended 31 December 2012, and further decreased by approximately 10.0% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The decrease was mainly due to the decrease in the rental and staff costs as a consequences of decrease in retail points with unsatisfactory performance and the expiry of rental period of the retails points.

IV – 3

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

General and administrative expenses

The Target Group had recorded administrative expenses of approximately HK$10,291,443, HK$7,525,893 and HK$6,648,261 for the financial years ended 31 December 2012, 2013 and 2014 respectively, which mainly comprised salaries and staff welfare of administrative staff, the rental expense, travel and entertainment expenses, provision for obsolete inventories and depreciation etc.

The administrative expenses decreased by approximately 26.9% for the year ended 31 December 2013 as compared to the year ended 31 December 2012. The decrease was mainly due to the decrease in provision for obsolete inventories, depreciation and travel and entertainment expenses and stringent cost control by undergoing internal resources integration.

The administrative expenses decreased by approximately 11.7% for the year ended 31 December 2014 as compared to the year ended 31 December 2013. The decrease was mainly due to the decrease in travel and entertainment expenses and depreciation and stringent cost control by undergoing internal resources integration.

Finance costs

The Target Group recorded finance costs of approximately HK$4,375, nil and HK$18,777 for the three financial years ended 31 December 2012, 2013 and 2014 respectively which were the interest expenses for the outstanding bank and short term borrowings.

Loss for the year

The Target Group recorded net loss of approximately HK$2,775,195, HK$3,645,821 and HK$4,727,984 respectively for the three financial years ended 31 December 2012, 2013 and 2014. The net loss increased by approximately HK$870,626 for the year ended 31 December 2013 as compared with the year ended 31 December 2012 and was mainly due to the combined net effect of (i) the decrease in gross profit of approximately HK$9,026,561, (ii) the decrease of selling and distribution expenses of HK$3,650,946; (iii) the decrease of administrative expenses of HK$2,765,550; and (iv) the increase of other income of approximately HK$1,735,064. The reason of (i), (ii) and (iii) are the results of (a) the decrease in number of retail points as a result of closure of retail points with unsatisfactory performance and the expiry of rental period of the retail points during the year; (b) the scale down of the sales of the brands with lower gross profit margin during the year; and (c) the decrease in average selling price of the products as higher discounts were offered to customers during the year.

IV – 4

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

The net loss increased by approximately HK$1,082,163 for the year ended 31 December 2014 as compared with the year ended 31 December 2013 and was mainly due to the combined net effect of (i) the decrease in gross profit of approximately HK$3,220,755, (ii) the decrease of selling and distribution expenses of HK$2,214,172; (iii) the decrease of administrative expenses of HK$877,632; (iv) and the decrease of other income of approximately HK$934,435. The reason of (i), (ii) and (iii) are the results of the decrease of number of retail points with unsatisfactory performance and the expiry of rental period of the retail points during the year.

Liquidity and financial resources

As at 31 December 2012, 2013 and 2014, the Target Group had net current assets of approximately HK$17,754,672, HK$14,900,447 and HK$22,610,991 respectively. The current ratio (being current assets over current liabilities) as at 31 December 2012, 2013 and 2014 were approximately 2.23 times, 1.97 times and 2.56 times respectively. The decrease in current ratio for the year ended 31 December 2013 was mainly due to the net loss incurred during the year of approximately HK$3,645,821, while the increase in current ratio for the year ended 31 December 2014 was mainly due to the net effect of the capital contribution by holding company of approximately HK$12.98 million and the net loss incurred during the year of approximately HK$4,727,984.

As at 31 December 2012, 2013 and 2014, the Target Group had net assets of approximately HK$18,432,810, HK$15,286,596 and HK$23,461,765 respectively. The gearing ratio (being total debt/total equity) as at 31 December 2012, 2013, 2014 were approximately 78.4%, 100.8% and 61.9% respectively. The increase in gearing ratio for the year ended 31 December 2013 was mainly due to the net loss incurred during the year of approximately HK$3,645,821 resulting in the increase in total debt and decrease in total equity. The decrease in gearing ratio for the year ended 31 December 2014 was mainly due to the net effect of the capital contribution by holding company of approximately HK$12.98 million and the net loss incurred during the year of approximately HK$4,727,984.

As at 31 December 2012, 2013 and 2014, the cash and cash equivalents of the Target Group amounted to approximately HK$637,956, HK$776,270 and HK$4,302,226 respectively, which were mainly denominated in Renminbi and Hong Kong dollars.

The Target Group had amounts due to directors of approximately HK$8,478,030, HK$10,311,783 and HK$300,000 respectively as at 31 December 2012, 2013 and 2014. The Target Group had amounts due to a shareholder of approximately nil, nil and HK$1,515,240 respectively as at 31 December 2012, 2013 and 2014. All of these amounts were unsecured, noninterest bearing and repayable on demand.

IV – 5

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

As at 31 December 2012, 2013 and 2014, short-term borrowing of approximately nil, nil, HK$5,000,000 respectively carried interest of market rate of 10% per annum, and were unsecured. The amount was denominated in Hong Kong dollars and will be required to be settled on 18 June 2015.

Capital structure

As at 31 December 2012, 2013 and 2014, the Target Company had the same total number of issued shares of 3,000 shares and share capital of approximately HK$23,400.

For each of the three financial years ended 31 December 2012, 2013 and 2014, the Target Group did not declare or pay any dividend.

Treasury policies

During the three financial years ended 31 December 2012, 2013 and 2014, the Target Group usually financed its working capital through internal funds and short term loans. To manage liquidity risk, the management of the Target Group closely monitors the liquidity position to ensure that the liquidity structure of the Target Group’s assets, liabilities and commitments can meet its funding requirements.

Capital expenditures

For the years ended 31 December 2012, 2013 and 2014, capital expenditure of approximately HK$491,064, HK$617,609 and HK$1,083,425 were incurred respectively representing the additions to property, plant and equipment.

Significant investments and material acquisitions and disposals

The Target Group did not have any significant investment or material acquisitions and disposal for each of the three financial years ended 31 December 2012, 2013 and 2014.

Employees and remuneration policies

As at 31 December 2012, 2013 and 2014, the total number of employees of the Target Group were 154, 135 and 119 respectively. The staff costs the three financial years ended 31 December 2012, 2013 and 2014 were approximately HK$10,710,974, HK$10,314,922 and HK$10,090,541 respectively. Decrease in number of employees was mainly due to the decrease in number of retail points. However, there were not much change in the total staff cost for the year ended 31 December 2012, 2013 and 2014 as the average staff cost per head count is increasing during the years ended 31 December 2012, 2013 and 2014. Each of the employees is either member of the Mandatory Provident Fund scheme (for employees employed under the jurisdiction of the Hong Kong Employment Ordinance) or state-managed retirement benefit plan (for employees of the Target Group’s subsidiaries in the PRC).

IV – 6

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

APPENDIX IV

Foreign exchange exposure

The cash and bank balances of the Target Group were mainly denominated in Renminbi and Hong Kong dollars. The business operation of the Target Group had been primarily conducted in Renminbi and Hong Kong dollars. During each of the three financial years ended 31 December 2012, 2013 and 2014, the impact of fluctuations in foreign currency on the Target Group were generally minimal and the Target Group did not have any foreign currency hedging policy. The Target Group does not use financial instruments for hedging purpose. No foreign currency net investments are hedged by currency borrowings or other hedging instruments. However, the management of the Target Group monitors foreign exchange exposure and would consider hedging significant foreign currency exposure should the need arise.

Contingent liabilities

As at 31 December 2012, 2013 and 2014, the Target Group did not have any contingent liabilities.

Commitments

Except for the operating leases commitments, the Target Group did not have other commitment as at 31 December 2012, 2013 and 2014.

Pledge of assets

As at 31 December 2012, 2013 and 2014, no assets were pledged.

Future plans for material investment and capital assets and new business

As at the Last Practicable Date, the Target Group had no future plan for material investment and capital assets and new business.

IV – 7

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

Pursuant to the terms of the SP Agreement and the terms and conditions of the Convertible Notes, upon the happening of any event on which the Conversion Price falls to be adjusted in accordance with the conditions of the Convertible Notes, the Conversion Price shall, subject to other provisions in the Convertible Notes, be adjusted in relation to subsequent conversions of the Convertible Notes as follows:

(i) Consolidation or sub-division or reclassification

If and whenever there shall be an alteration to the nominal value of the Shares as a result of consolidation or subdivision or reclassification, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such alteration by the following fraction:

==> picture [49 x 20] intentionally omitted <==

where:

• A is the nominal amount of one Share immediately after such alteration; and

• B is the nominal amount of one Share immediately before such alteration.

Such adjustment shall become effective on the date such alteration takes effect.

(ii) Capitalisation of profits or reserves

If and whenever the Company shall issue any Shares credited as fully paid to the Shareholders by way of capitalisation of profits or reserves (including any share premium account contributed surplus and/or capital redemption reserve), other than a Scrip Dividend (as defined below) where the Market Value (as defined below) of the Shares issued in respect of each existing Share does not exceed 120 per cent. of the amount of the cash dividend (or the relevant part thereof where scrip is offered in place of part of the cash dividend (‘‘relevant part’’) in respect of each existing Share, the Conversion Price shall be adjusted:

• (1) in the case of an issue of Shares other than by way of a Scrip Dividend by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

==> picture [49 x 20] intentionally omitted <==

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

A
B
----- End of picture text -----

V – 1

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

where:

• A is the aggregate nominal amount of issued Share immediately before such issue; and

• B is the aggregate nominal amount of issued Share immediately after such issue; and

• (2) in the case of a Scrip Dividend where the Market Value of the Shares issued in respect of each existing Share is equal to or more than 120 per cent. of the amount of the cash dividend (or the relevant part thereto), by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

==> picture [49 x 20] intentionally omitted <==

where:

• A is the aggregate nominal amount of issued Shares immediately before such issue;

• B is the aggregate nominal amount of Shares issued by way of such Scrip Dividend multiplied by a fraction of which:

• (i) the numerator is the amount of the cash dividend or the relevant part thereof; and

• (ii) the denominator is the Market Value of the Shares issued by way of Scrip Dividend in respect of each existing Share in lieu of the whole of the cash dividend, or the relevant part thereof; and

• C is the aggregate nominal amount of Shares issued by way of such Scrip Dividend.

Such adjustment shall become effective from the date of issue of such Shares.

V – 2

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

(iii) Capital Distribution

If and whenever the Company shall pay or make any Capital Distribution to the Shareholders (except where and to the extent that the Conversion Price falls to be adjusted under sub-paragraph (ii) above), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such Capital Distribution by the following fraction:

==> picture [49 x 19] intentionally omitted <==

where:

• A is the Current Market Price (as defined below) of one Share on the dealing day immediately preceding the date on which the Capital Distribution is publicly announced or (failing such announcement) the dealing date immediately preceding the date of the Capital Distribution; and

• B is the Fair Market Value (as defined below) on the date of such announcement of the portion of the Capital Distribution attributable to one Share (or as the case may require, the dealing date falling on the date of the Capital Distribution).

Provided that if in the opinion of the Independent Financial Adviser (as defined below), the fair market value as aforesaid produces a result which is significantly inequitable, the Independent Financial Adviser may, acting as an expert, instead determine (and in such event the above formula shall be construed accordingly) the amount which should properly be attributed to the value of the Capital Distribution.

Such adjustment shall become effective on the date that such Capital Distribution is announced or (as the case may require), the dealing date falling on the date of such Capital Distribution.

V – 3

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

(iv) Rights issue of Shares or options, etc. over Shares

If and whenever the Company shall issue Shares to all or substantially all Shareholders as a class by way of rights, or issue or grant to all or substantially all Shareholders as a class by way of rights, options, warrants or other rights to subscribe for or purchase or otherwise acquire any Shares, in each case at a price per Share which is less than 80 per cent. of the Current Market Price per Share on the dealing day immediately preceding the date of the announcement of the terms of the issue or grant of such Shares, options, warrants or other rights, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue or grant by the following fraction:

==> picture [49 x 20] intentionally omitted <==

where:

• A is the number of Shares in issue immediately before the date of such announcement;

• B is the number of Shares which the aggregate amount (if any) payable for the Shares issued by way of rights, or for the options or warrants or other rights issued by way of rights and for the total number of Shares comprised therein, would subscribe for or purchase at such Current Market Price per Share; and

• C is the aggregate number of Shares issued or, as the case may be, comprised in the grant.

Such adjustment shall become effective on the date of the issue of such Shares or issue or grant of such options, warrants or other rights (as the case may be).

(v) Rights issue of other securities

If and whenever the Company shall issue any securities (other than Shares or options, warrants or other rights to subscribe for or purchase any Shares) to all or substantially all Shareholders as a class by way of rights or grant to all or substantially all Shareholders as a class by way of rights, options, warrants or other rights to subscribe for or purchase any securities (other than Shares or options, warrants or other rights to subscribe for or purchase Shares), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue or grant by the following fraction:

==> picture [49 x 20] intentionally omitted <==

V – 4

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

where:

• A is the Current Market Price of one Share on the dealing day immediately preceding the date on which such issue or grant is publicly announced or (failing such announcement) on the dealing day immediately preceding the Record Date for such issue or grant; and

• B is the Fair Market Value on the date of such announcement of the portion of the rights attributable to one Share (or as the case may require, the dealing day falling on the Record Date for such issue or grant).

Such adjustment shall become effective from the commencement of the day next following the Record Date for such issue or grant.

(vi) Issue at less than Current Market Price

If and whenever the Company shall issue (otherwise than as mentioned in sub-paragraph (iv) above) wholly for cash any Shares (other than Shares issued on the exercise of the conversion rights or of any rights of conversion into, or exchange or subscription for, Shares), or issue or grant (otherwise than as mentioned in (iv) above) any options, warrants or other rights to subscribe for or purchase any Shares, at a price per Share which is less than 80 per cent. of the Current Market Price per Share on the dealing day immediately preceding the date of announcement of the terms of such issue or grant, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue by the following fraction:

==> picture [49 x 19] intentionally omitted <==

where:

• A is the number of Shares in issue immediately before the issue of such additional Shares;

• B is the number of Shares which the aggregate consideration receivable for the issue of such additional Shares would purchase at such Current Market Price; and

• C is the maximum number of Shares to be issued pursuant to the issue of such additional Shares or upon exercise of the options, warrants or other rights at the initial conversion or exchange or subscription rate or price.

Such adjustment shall become effective on the date of issue or grant of such additional Shares, options, warrants or other rights.

V – 5

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

(vii) Other issues at less than Current Market Price

Save in the case of an issue of securities arising from a conversion or exchange of other securities in accordance with the terms of such securities themselves falling within this paragraph (vii), if and whenever the Company or any subsidiary or (at the direction or request of or pursuant to any arrangements with the Company or any subsidiary) any other company, person or entity (otherwise than as mentioned in sub-paragraphs (iv), (v) or (vi) above) shall issue wholly for cash any securities (other than the Convertible Notes) which by their terms of issue carry rights of conversion into, or exchange or subscription for, Shares (or shall grant any such rights in respect of existing securities so issued) or securities which by their terms might be redesignated as Shares, and the consideration per Share receivable by the Company in respect of such conversion, exchange, subscription or redesignation is less than 80 per cent. of the Current Market Price per Share on the dealing day immediately preceding the date of announcement of the terms of such securities (or the terms of such grant), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue or grant by the following fraction:

==> picture [49 x 19] intentionally omitted <==

where:

• A is the number of Shares in issue immediately before such issue or grant;

• B is the number of Shares which the aggregate consideration (if any) receivable by the Company for the Shares to be issued, or otherwise made available, upon conversion or exchange or upon the exercise of the right of subscription attached to such securities would purchase at such Current Market Price per Share; and

• C is the maximum number of Shares to be issued upon conversion or exchange of such securities or upon the exercise of such rights of subscription attached thereto at the initial conversion, exchange or subscription price or rate.

Such adjustment shall become effective on the date of issue or grant of such securities.

V – 6

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

(viii) Modification of rights of conversion, etc.

If and whenever there shall be any modification of the rights of conversion, exchange, subscription or redesignation attaching to any such securities as are mentioned in sub-paragraph (vii) above (other than the Convertible Notes and any adjustment of the conversion price in accordance with the terms applicable to such securities) so that following such modification the consideration per Share receivable by the Company in respect of such conversion, exchange, subscription or redesignation is less than 80 per cent. of the Current Market Price per Share on the dealing day immediately preceding the date of announcement of the proposal for such modification, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such modification by the following fraction:

==> picture [49 x 20] intentionally omitted <==

where:

• A is the number of Shares in issue immediately before such modification;

• B is the number of Shares which the aggregate consideration (if any) receivable by the Company for the Shares to be issued, or otherwise made available, upon conversion, exchange or redesignation or upon exercise of the right of subscription attached to the securities so modified would purchase at such Current Market Price per Share, or the existing conversion, exchange, subscription or redesignation price of such securities; and

• C is the maximum number of Shares to be issued, or otherwise made available, upon conversion, exchange or redesignation of such securities or upon the exercise of such rights of subscription attached thereto at the modified conversion, exchange, redesignation or subscription price or rate but giving credit in such manner as the Independent Financial Adviser shall, acting as an expert, consider in good faith to be appropriate (if at all) for any previous adjustment under this sub-paragraph or subparagraph (vii) above.

Such adjustment shall become effective on the date of modification of the rights of conversion, exchange, subscription or redesignation attaching to such securities.

V – 7

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

(ix) Other offers to Shareholders

If and whenever the Company or any of its subsidiaries or (at the direction or request of or pursuant to any arrangements with the Company or any of its subsidiaries) any other company, person or entity shall issue, sell or distribute any securities in connection with an offer in connection with which the Shareholders generally (meaning for these purposes the holders of at least 60 per cent. of the Shares outstanding at the time such offer is made) are entitled to participate in arrangements whereby such securities may be acquired by them (except where the Conversion Price falls to be adjusted under sub-paragraphs (iii) to (vii) above) at an effective price per Share which is less than 80 per cent. of the Current Market Price per Share on the dealing day immediately preceding the date of announcement of the terms of such offer, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before the making of such offer by the following fraction:

==> picture [49 x 19] intentionally omitted <==

where:

• A is the Current Market Price of one Share on the dealing day immediately preceding the date on which the terms of such offer are publicly announced; and

• B is the Fair Market Value on the date of such announcement of the portion of the rights attributable to one Share.

Such adjustment shall become effective on the date of the issue, sale or distribution of the securities.

(x) Other events

If the Company determines that an adjustment should be made to the Conversion Price as a result of one or more events or circumstances (whether or not referred to in sub-paragraphs (i) to (ix) above) (even if the relevant event or circumstance is specifically excluded in this Instrument or these Conditions from the operation of paragraphs (i) to (ix) above), or that an adjustment should not be made (even if the relevant event or circumstance is specifically provided for in paragraphs (i) to (ix) above), or that the effective date for the relevant adjustment should be a date other than that mentioned in paragraphs (i) to (ix) above, provided that the Board considers that such determination of the Company or, as the case may be, the holder of the Convertible Notes is fair and reasonable, the Company shall, at the expense of the Company, request the Independent Financial Adviser, acting as expert, to determine as soon as practicable (a) what adjustment (if any) to the Conversion Price is fair and reasonable to take account thereof and is appropriate to give the result which the Independent Financial Adviser considers in good faith to reflect the intentions of the provisions of the Convertible Notes; and (b) the date on which such adjustment should take effect; and upon such determination such adjustment (if any) shall be

V – 8

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

made and shall take effect in accordance with such determination, provided that an adjustment shall only be made pursuant to this sub-paragraph (x) if the Independent Financial Adviser are so requested to make such a determination.

For the purpose of this Appendix:

‘‘Capital Distribution’’ means any dividend or distribution in cash or any distribution in specie (whether on a reduction of capital or otherwise) charged or provided for in the accounts of the Company for any financial period (whenever paid or made and however described) or any reduction of any uncalled liability in respect of capital unless:

• (a) (and to the extent that) it does not, when taken together with any dividend or distribution in cash or any distribution of assets in specie previously made or paid in respect of any financial period of the Company ended after 30 June 2015, exceed an amount equal to the aggregate of the cumulative consolidated net profit less the aggregate of the cumulative consolidated losses (after taxation and extraordinary losses and excluding any net realised gains (net of all losses) made on a disposal of investments and any extraordinary gain) attributable to the Shareholders in respect of financial periods ended after 30 June 2015 as shown in the audited consolidated profit and loss accounts of the Company and its subsidiaries for such periods (provided that in determining the amount of the consolidated net profit of the Company and its subsidiaries, no account shall be taken of any amount arising as a result of any reduction of share capital, share premium account or capital redemption reserve); or

• (b) (in so far as (a) above does not apply) and to the extent that the rate of that dividend or distribution, together with all other dividends or distributions on the class of capital in question charged or provided for in the accounts of the Company for that period, does not exceed the aggregate rate of dividend or distribution on such class of capital charged or provided for in the accounts of the Company for the immediately preceding financial period. In computing such rates, the value of distributions in specie shall be taken into account and such adjustment as are in the opinion of the auditors of the Company as appropriate to the circumstances shall be made (including adjustment where the lengths of the financial periods differ); or

• (c) it comprises a purchase or redemption of share capital of the Company provided.

‘‘Current Market Price’’ means in respect of a Share (or, in the application of the definition of Capital Distribution, such other shares as are therein referred to) at a particular date, the average of the closing price published in the Stock Exchange’s Daily Quotations Sheet for one Share for the fifteen (15) consecutive dealing days ending on the dealing day immediately preceding such date provided that if at any time during the said fifteen (15) dealing days the Shares shall have been quoted ex-dividend and during some other part of that period the Shares shall have been quoted cum-dividend then:

V – 9

ADJUSTMENTS TO CONVERSION PRICE

APPENDIX V

• (a) if the Shares to be issued do not rank for the dividend in question, the closing price on the dates on which the Shares shall have been quoted cum-dividend shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per Share;

• (b) if the Shares to be issued rank for the dividend in question, the closing price on the dates on which the Shares shall have been quoted ex-dividend shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount.

‘‘Fair Market Value’’ means, with respect to any asset, security, option, warrant or other right on any date, the fair market value of that asset, security, option, warrant or other right as determined by the Independent Financial Adviser provided that (i) the fair market value of a cash dividend paid or to be paid per Share shall be the amount of such cash dividend per Share determined as at the date of announcement of such dividend; (ii) where options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by such Independent Financial Adviser) the fair market value of such options, warrants or other rights shall equal the arithmetic mean of the daily closing prices of such options, warrants or other rights during the period of fifteen (15) trading days on the relevant market commencing on the first such trading day such options, warrants or other rights are publicly traded.

‘‘Independent Financial Adviser’’ means an independent financial adviser (acting as an expert) selected by the Company.

‘‘Market Value’’ means the price or value of the Shares stated in, or calculated in accordance with the provisions and at the time of, the announcement, circular or other document relating to the relevant Scrip Dividend issued by the Company to its Shareholders and used for the purpose of determining the nominal amount of Shares to be issued by way of such Scrip Dividend, provided that if the Market Value is less than 80 per cent. of the Current Market Price as at the dealing day before the publication of such announcement, circular or other document as aforesaid, the Market Value shall be deemed to be such Current Market Price.

‘‘Record Date’’ means the date and time by which a subscriber or transferee of securities of the class in question would have to be registered in order to participate in the relevant distribution or rights.

‘‘Scrip Dividend’’ means an issue of Shares paid up out of distributable profits or reserves (including any share premium account and/or contributed surplus and/or capital redemption reserve) and issued instead of the whole or any part of a cash dividend which the Shareholders would or could otherwise have received.

V – 10

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

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 or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be: (a) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); (b) entered in the register kept by the Company pursuant to Section 352 of the SFO; or (c) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions of Listed Issuer contained in the Listing Rules (‘‘Model Code’’) were as follows:

Interests in Shares – Long positions

			Subtotal Number of
			Shares and
			underlying shares
			of the Company	Approximate
		Number of Shares	held by each	percentage of the
		and underlying	Director/chief	total issued share
Name of Director or chief		shares of the	executive of the	capital of the
executive of the Company	Capacity	Company held	Company	Company
Mr. Lam Shiu Ming, Daneil	founder of a	56,739,510
	discretionary trust	(note i)
	beneficial owner	3,783,770	60,523,280	6.76%
		(note ii)		(note iv)
Mr. Lam Siu Keung, Alvin	beneficial owner	2,072,000	2,072,000	0.69%
		(note iii)		(note v)
Mr. Hung Cho Sing	beneficial owner	2,072,000	2,072,000	0.69%
		(note iii)		(note v)
Mr. Yeung Kim Piu	beneficial owner	2,072,000	2,072,000	0.69%
		(note iii)		(note v)
Mr. Lam Kit Sun	beneficial owner	2,072,000	2,072,000	0.69%
		(note iii)		(note v)

VI – 1

GENERAL INFORMATION

APPENDIX VI

Notes:

• (i) These 56,739,510 Shares are held in the capacity of beneficial owner by Globalcrest Enterprises Limited, which is wholly owned by Central Core Resources Limited. Central Core Resources Limited is the trustee of a discretionary trust founded by Mr. Lam Shiu Ming, Daneil, the chairman of the Board and an executive Director. As such, Mr. Lam Shiu Ming Daneil is deemed to be interested in all the 56,739,510 Shares held by Globalcrest Enterprises Limited. Certain immediate family members of Mr. Lam Shiu Ming, Daneil are discretionary objects of the aforesaid discretionary trust. As at the Latest Practicable Date, Globalcrest Enterprises Limited held 18,913,170 Shares and had irrevocably undertaken to apply for and pay for 37,826,340 rights shares to which it will be provisionally allotted pursuant to the Rights Issue.

• (ii) These 3,783,770 underlying shares of the Company are share options granted by the Company to Mr. Lam Shiu Ming Daneil.

• (iii) These interests are underlying shares of the Company in respect of share options granted by the Company to each of Mr. Lam Siu Keung Alvin, Mr. Hung Cho Sing, Mr. Yeung Kim Piu and Mr. Lam Kit Sun.

• (iv) The percentage holding is calculated based on the expected issued share capital of the Company as enlarged by the issue of the rights shares (assuming there is no change in the issued share capital of the Company from the Latest Practicable Date to the record date of the Rights Issue) comprising 895,140,921 Shares.

• (v) The percentage holding is calculated based on the issued share capital of the Company as at the Latest Practicable Date comprising 298,380,307 Shares.

Save as disclosed herein, as at the Latest Practicable Date, none of the Director or chief executive of the Company had any interest or short position in the shares, underlying shares (within the meaning of Part XV of the SFO) or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be: (a) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); (b) entered in the register kept by the Company pursuant to Section 352 of the SFO; or (c) notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Other interests

(i) Interests in service contracts

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

VI – 2

GENERAL INFORMATION

APPENDIX VI

(ii) Interests in assets of the Group

As at the Latest Practicable Date, none of the Directors has, or has had, any direct or indirect interest in any assets which have been, since 30 June 2014, being the date to which the latest audited accounts of the Group were made up, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to, any member of the Group.

(iii) Interests in contracts or arrangements

Save for the undertaking signed by Globalcrest Enterprises Limited (a company which is wholly-owned by Central Core Resources Limited. Central Core Resources Limited is the trustee of a discretionary trust founded by Mr. Lam Shiu Ming Daneil, the chairman of the Board and an executive Director) in favour of the Company and the underwriter of the Rights Issue to undertake to, among other matters, accept and pay for the 37,826,340 rights shares which will be provisionally allotted to Globalcrest Enterprises Limited under the Rights Issue, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group taken as a whole.

3. 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 (not being Directors or chief executive of the Company) had an interest or short position 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 in any options in respect of such capital:

Long positions in Shares/underlying shares of the Company

			Subtotal Number of	Approximate
		Number of Shares	Shares and	percentage of the
		and underlying	underlying shares	total issued share
		shares of the	of the Company	capital of the
Name	Capacity	Company held	held	Company
		(note vi)	(note vi)
Jun Yang Securities Company	Other	593,334,274 (L)	593,334,274 (L)	59.47%
Limited (note i)		294,000,000 (S)	294,000,000 (S)	29.97%
Golden Moral Investments	Interest of a controlled	593,334,274 (L)	593,334,274 (L)	59.47%
Limited (note i)	corporation	294,000,000 (S)	294,000,000 (S)	29.97%
Jun Yang Solar Power	Interest of controlled	593,334,274 (L)	593,334,274 (L)	59.47%
Investments Limited	corporations	294,000,000 (S)	294,000,000 (S)	29.97%
(note i)

VI – 3

APPENDIX VI

GENERAL INFORMATION

			Subtotal Number of	Approximate
		Number of Shares	Shares and	percentage of the
		and underlying	underlying shares	total issued share
		shares of the	of the Company	capital of the
Name	Capacity	Company held	held	Company
		(note vi)	(note vi)
Fordjoy Securities &	Other	147,000,000 (L)	147,000,000 (L)	14.73%
Futures Limited (note ii)
Yuen Shu Ming (note ii)	Interest of a controlled	147,000,000 (L)	147,000,000 (L)	14.73%
	corporation
Mr. Ng Tang (Note iii)	beneficial owner	5,335,342 (L)
	interest of a controlled	69,745,134 (L)	75,080,476 (L)	25.16%
	corporation
Victor Meg Limited (Note iii)	beneficial owner	69,745,134 (L)	69,745,134 (L)	23.37%
Globalcrest Enterprises Limited	beneficial owner	56,739,510 (L)	56,739,510 (L)	6.34%
(Note iv)
Central Core Resources	Trustee (other than a	56,739,510 (L)	56,739,510 (L)	6.34%
Limited (Note iv)	bare trustee)
Ever Robust Holdings Limited	beneficial owner	63,650,000 (L)	63,650,000 (L)	7.11%
(Note v)
China Mobile Games and	interest of a controlled	63,650,000 (L)	63,650,000 (L)	7.11%
Culture Investment Limited	corporation
(Note v)

Notes

• (i) The long position in respect of 593,334,274 Shares represent the maximum number of Shares that Jun Yang Securities Company Limited, as the underwriter for the Rights Issue, is required to subscribe for pursuant to the underwriting agreement for the Rights Issue. The short position in respect of 294,000,000 Shares represent the number of Shares sub-underwritten or placed by Jun Yang Securities Company Limited to various sub-underwriters as at the Latest Practicable Date. Jun Yang Securities Company Limited is a wholly-owned subsidiary of Golden Moral Investments Limited, which is a wholly-owned subsidiary of Jun Yang Solar Power Investments Limited. By virtue of the provisions of Part XV of the SFO, each of Golden Moral Investments Limited and Jun Yang Solar Power Investments Limited is deemed to be interested in the Shares in which Jun Yang Securities Company Limited is interested. The percentage holdings are calculated based on the expected number of issued Shares upon completion of the Rights Issue comprising 997,740,921 Shares. This assumes that all Shares which may fall to be allotted and issued upon the exercise of the subscription rights attached to the unlisted warrants issued by the Company entitling the holders thereof to subscribe up to an aggregate amount of HK$85,500,000 for a maximum of 34,200,000 new Shares are issued prior to the record date of the Rights Issue.

• (ii) Fordjoy Securities and Futures Limited entered into a sub-underwriting letter with Jun Yang Securities Company Limited to take up 147,000,000 rights shares under the Rights Issue. Based on the notices of disclosure of interests of Fordjoy Securities and Futures Limited and Mr. Yuen Shu Ming dated 22 June 2015, Fordjoy Securities and Futures Limited is 76% owned by Mr. Yuen Shu Ming. By virtue of the provisions of Part XV of the SFO, Mr. Yuen Shu Ming is deemed to be interested in the Shares in which Fordjoy Securities and Futures Limited is interested. The percentage holdings are calculated based on the

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expected number of issued Shares upon completion of the Rights Issue comprising 997,740,921 Shares. This assumes that all Shares which may fall to be allotted and issued upon the exercise of the subscription rights attached to the unlisted warrants issued by the Company entitling the holders thereof to subscribe up to an aggregate amount of HK$85,500,000 for a maximum of 34,200,000 new Shares are issued prior to the record date of the Rights Issue.

• (iii) Victor Meg Limited is held as to 40% by Mr. Ng Tang and Mr. Ng Tang is deemed to be interested in the 69,745,134 underlying shares of the Company held by Victor Meg Limited. Other than the underlying shares of the Company held by Victor Meg Limited, Mr. Ng Tang holds 5,335,342 underlying shares of the Company as beneficial owner. The underlying shares of the Company owned by Victor Meg Limited and Mr. Ng represent the maximum number of Conversion Shares that may be allotted and issued to each of them pursuant to the exercise of the conversion rights attaching to the Convertible Notes in accordance with the terms and conditions thereof.

• (iv) As at the Latest Practicable Date, Globalcrest Enterprises Limited held 18,913,170 Shares and had irrevocably undertaken to apply for and pay for 37,826,340 rights shares to which it will be provisionally allotted pursuant to the Rights Issue. As Globalcrest Enterprises Limited is wholly owned by Central Core Resources Limited, Central Core Resources Limited is deemed to be interested in all the 56,739,510 Shares held by Globalcrest Enterprises Limited. Central Core Resources Limited is the trustee of a discretionary trust founded by Mr. Lam Shiu Ming, Daneil, the chairman of the Board and an executive Director. Certain immediate family members of Mr. Lam Shiu Ming, Daneil are discretionary objects of the aforesaid discretionary trust. Mr. Lam Shiu Ming Daneil is a director of each of Globalcrest Enterprises Limited and Central Core Resources Limited. The percentage holding is calculated based on the expected issued share capital of the Company as enlarged by the issue of the rights shares under the Rights Issue (assuming there is no change in the issued share capital of the Company from the Latest Practicable Date to the record date of the Rights Issue) comprising 895,140,921 Shares.

• (v) As at the Latest Practicable Date, Ever Robust Holdings Limited held 29,650,000 Shares and had irrevocably undertaken to apply for and pay for 34,000,000 rights shares to which it will be provisionally allotted pursuant to the Rights Issue. As the entire issued share capital of Ever Robust Holdings Limited is held by China Mobile Games and Culture Investment Limited, China Mobile Games and Culture Investment Limited is deemed to be interested in all the 63,650,000 Shares held by Ever Robust Holdings Limited. The percentage holding is calculated based on the expected issued share capital of the Company as enlarged by the issue of the rights shares under the Rights Issue (assuming there is no change in the issued share capital of the Company from the Latest Practicable Date to the record date of the Rights Issue) comprising 895,140,921 Shares.

• (vi) ‘‘L’’ denotes a long position whilst ‘‘S’’ denotes a short position.

Save as disclosed above, the Directors or chief executive of the Company are not aware of any other persons (not being Directors or chief executive of the Company) as at the Latest Practicable Date, who had an interest or short position 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 in any options in respect of such capital.

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4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective close associates had any interest in a business which competes or is likely to compete either directly or indirectly with the business of the Group.

5. QUALIFICATIONS OF EXPERTS, CONSENTS AND THEIR INTERESTS IN ASSETS

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

Name Qualification PricewaterhouseCoopers Certified Public Accountants Focus Asia CPA Limited Certified Public Accountants (Practising) Grant Sherman Appraisal Limited Independent valuer

PricewaterhouseCoopers, Focus Asia CPA Limited and Grant Sherman Appraisal Limited have given and have not withdrawn their written consents to the issue of this circular with the inclusion herein of their respective letters to their names in the form and context in which they appear.

As at the Latest Practicable Date, none of PricewaterhouseCoopers, Focus Asia CPA Limited and Grant Sherman Appraisal Limited was beneficially interested in the share capital of any member of the Group, nor did they have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did they have any direct interest in any assets which were, since 30 June 2014 (being the date which the latest published audited consolidated financial statements of the Group were made up) acquired or disposed of by or leased to, or proposed to be acquired or disposed of by or leased to, any member of the Group.

6. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Lam Kit Sun, who is a fellow and practicing member of the Hong Kong Institute of Certified Public Accountants, a fellow of the Association of Chartered Certified Accountants and an associate of the Hong Kong Institute of Chartered Secretaries.

• (b) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

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• (c) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

7. MATERIAL CONTRACTS

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

• (a) the placing agreement dated 16 September 2013 and entered into between the Company as the issuer and Astrum Capital Management Limited as the placing agent, pursuant to which the Company has conditionally agreed to place, through Astrum Capital Management Limited on a best effort basis, the unlisted warrants that entitle the holders thereof to subscribe in cash for up to an aggregate amount of HK$85,500,000 for warrant shares, at initial subscription price of HK$0.250 per warrant share (subject to adjustments). The gross proceeds from the placing of the warrants was HK$0.9 million;

• (b) the subscription agreement dated 14 November 2013 and entered into between the Company as the issuer, and 貴州豐瑞投資有限公司 (in English, for identification purpose only, Guizhou Fengrui Investment Co., Ltd.) and 貴州光大能源發展有限公司 (in English, for identification purpose only, Guizhou Guangda Energy Development Co., Ltd.) as the subscribers, pursuant to which the subscribers have agreed to subscribe for the 5% convertible note in the aggregate principal amount of HK$95,000,000, which is convertible into Shares at HK$0.50 per share (subject to adjustments);

• (c) the joint venture agreement dated 5 December 2013 and entered into between Ample China Development Limited, a wholly-owned subsidiary of the Company and Computech Holdings Limited (which has subsequently changed its name to China Mobile Games and Culture Invertment Limited), in relation to the establishment of a joint venture company to be established in Hong Kong or overseas which will be principally engaged in development and sale of computer and mobile phone games. The maximum investment in the joint venture company was HK$40,000,000 and shall be contributed by the joint venture partners in equal shares;

• (d) the conditional sale and purchase agreement dated 10 December 2013 and entered into between Universe Films (Holdings) Limited (‘‘UFH’’), a direct wholly-owned subsidiary of the Company, as vendor and Mr. Lam Shiu Ming, Daneil (‘‘Mr. Lam’’) as the purchaser in relation to the sale and purchase of the entire issued share capital in Joy Talent Investment Limited at a consideration of HK$6,277,000;

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• (e) the conditional sale and purchase agreement dated 10 December 2013 entered into between Universe Laser & Video Co., Limited（寰宇鐳射錄影有限公司）, an indirect wholly-owned subsidiary of the Company, and UFH as the vendors and Mr. Lam as the purchaser in relation to the sale and purchase of the entire issued share capital in Universe Property Investment Limited（寰宇物業投資有限公司）at a consideration of HK$73,862,000;

• (f) the agreement made between Weluck Development Limited (‘‘Weluck’’), a whollyowned subsidiary of the Company, and Rich Place Investment Limited in relation to the sale and purchase of 171,500,000 shares of China Railsmedia Corporation Limited at a consideration of HK$60,025,000 on 7 January 2014;

• (g) the subscription agreement dated 22 May 2014 and entered into between Weluck as the subscriber and Hydra Capital SPC a segregated portfolio company as an issuer in relation to a HK$55 million investment in an investment portfolio of Hydra Capital SPC by way of subscription for shares;

• (h) the placing agreement dated 23 June 2014 and entered into between the Company as the issuer and Lucky Securities Company Limited as the placing agent, pursuant to which the Company has conditionally agreed to place, through Lucky Securities Company Limited on a best effort basis, a maximum aggregate amount of 343,200,000 new Shares at the placing price of HK$0.1 per Placing Share;

• (i) the joint venture agreement dated 6 November 2014 and entered into between Gold Summit International Limited, a wholly-owned subsidiary of the Company and Round Table Family Group Limited to jointly invest in Round Table Performance Entertainment Limited, which is principally engaged in holding and sponsoring stage performance, concerts and other cultural events, as well as developing the entertainment business in Hong Kong and the PRC. The aggregate amount of capital contribution was HK$3,330,000, which was contributed as to HK$2,330,000 by Gold Summit International Limited and as to HK$1,000,000 by Round Table Family Group Limited;

• (j) the sale and purchase agreement dated 17 November 2014 and entered into between the Purchaser and 4 vendors in relation to the acquisition of 22.13% of the issue of share capital of Target at a consideration of HK$5,060,000;

• (k) the placing agreement dated 9 December 2014 and entered into between the Company as the issuer and Lucky Securities Company Limited as the placing agent, pursuant to which the Company has conditionally agreed to place, through Lucky Securities Company Limited on a best endeavour basis, a maximum aggregate amount of 414,415,000 new Shares at the placing price of HK$0.1 Per Placing Share;

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• (l) the placing agreement dated 28 January 2015 and entered into between the Company as the issuer and Convoy Asset Management Limited as the placing agent pursuant to which the Company has conditionally agreed to place, through Convoy Asset Management Limited on a best endeavour basis, a maximum aggregate amount of 6% per annum notes in an aggregate principal amount of up to HK$50,000,000, maturing on the same calendar date of the 18th month after the issue date of the notes at the placing price equal to 100% of the principal amount of the notes;

• (m) the placing agreement dated 10 April 2015 and entered into between the Company as the issuer and Fordjoy Securities and Futures Limited as the placing agent, pursuant to which the Company has conditionally agreed to place, through Fordjoy Securities and Futures Limited on a best endeavour basis, a maximum aggregate amount of 49,730,000 new Shares at a placing price of HK$0.477 per Placing Share;

• (n) the sale and purchase agreement dated 7 May 2015 and entered into between Precise Reach Group Limited (‘‘Precise Reach’’), a wholly-owned subsidiary of the Company, as purchaser, Fairy Fresh International Limited (‘‘Fairy Fresh’’) as vendor and Mr. Poon Chun Yin, the ultimate beneficial owner of the vendor, as warrantor in relation to the sale and purchase of (i) the amount of HK$1,155,000 owing by Hong Kong Optical Company Limited to Fairy Fresh; and (ii) 11% of the issued share capital of Hong Kong Optical Company Limited at an aggregate consideration of HK$1,600,000;

• (o) the sale and purchase agreement dated 7 May 2015 and entered into between Precise Reach as purchaser, Fairy Fresh as vendor and Mr. Poon Chun Yin, the ultimate beneficial owner of the vendor, as warrantor in relation to the sale and purchase of 80% of the issued share capital of Fine Ocean Limited at a consideration of HK$2,400,000;

• (p) the SP Agreement;

• (q) the placing agreement dated 26 May 2015 and entered into between the Company as the issuer and China Everbright Securities (HK) Limited and Jun Yang Securities Company Limited as the placing agents, pursuant to which the Company has conditionally agreed to place, through China Everbright Securities (HK) Limited and Jun Yang Securities Company Limited on a best effort basis, a maximum aggregate amount of 586,350,000 new Shares at a placing price of HK$0.3411 per new Share; and

• (r) the underwriting agreement dated 25 May 2015 entered into between the Company and Jun Yang Securities Company Limited as the underwriter in relation to the underwriting arrangement in respect of the rights issue of not less than 596,760,614 Shares and not more than 665,160,614 Shares at a subscription price of HK$0.202 per Share on the basis of two (2) Shares of every one (1) existing Shares held.

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8. LITIGATION

• (a) A court action was commenced in the Court of First Instance of the Hong Kong Special Administrative Region on 17th April 2002 by The Star Overseas Limited (‘‘Star’’), an independent third party, against Universe Entertainment Limited (‘‘UEL’’), an indirect wholly-owned subsidiary of the Company.

By the above action, Star alleges that a sum of US$935,872 (equivalent to HK$7,299,799) was payable by UEL to Star as its share of the revenue of the movie entitled ‘‘Shaolin Soccer’’ (the ‘‘Movie’’).

Pursuant to an Order (the ‘‘Order’’) made by the High Court on 21st February 2003, UEL was ordered and had paid to Star a sum of HK$5,495,700, being part of the licence fee of the Movie received by UEL from Miramax Films (being the licencee of the Movie) and which was also part of the sum claimed by Star. Pursuant to the Order, UEL is also liable to pay Star interest in the sum of HK$350,905 and some of the costs of the application leading to the making of the Order, all of which have been settled. As the Order has not disposed of all the claims of US$935,872 (equivalent to HK$7,299,799) by Star, UEL is entitled to continue to defend the claim by Star for recovering the remaining balance in the sum of approximately HK$1,804,099 (HK$7,299,799 less HK$5,495,700).

On 30th April 2002, UEL issued a Writ of Summons against Star for the latter’s wrongful exploitation of certain rights in the Movie co-owned by both parties. UEL claimed to recover all losses and damages suffered by UEL as a result of the wrongful exploitation.

On 9th September 2002, Universe Laser & Video Co. Limited (‘‘ULV’’), an indirect wholly owned subsidiary of the Company, issued a Writ of Summons against Star for the latter’s infringement of the licensed rights in the Movie held by ULV. ULV claimed to recover all loss and damages suffered by ULV as a result of the said infringement.

In the opinion of legal counsel, it is premature to predict the outcome of the claim against UEL. The Board is of the opinion that the outcome of the said claim against UEL will have no material financial impact on the Group for the Period.

• (b) On 1st September 2008, Koninklijke Philips Electronics N.V. (‘‘KPE’’) issued a Writ of Summons against among other persons, the Company, ULV and Mr. Lam Shiu Ming, Daneil (one of the Directors), being three of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Video Compact Disc owned by KPE.

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In the opinion of legal counsel, it is premature to predict the outcome of the said claim made against the Company, ULV and Mr. Lam Shiu Ming, Daneil. The Board is of the opinion that the outflow of economic benefits cannot be reliably estimated and accordingly no provision for any liability that may result has been made in the unaudited condensed consolidated interim financial information.

• (c) On 8th January 2010, KPE issued a Writ of Summons against among other persons, the Company, ULV and Mr. Lam Shiu Ming, Daneil (one of the Directors), being three of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Digital Video Disc owned by KPE.

In June 2012, the action was discontinued against the Company and Mr. Lam Shiu Ming, Daneil. The claim made against ULV has been agreed with KPE and settled by ULV and appropriate legal cost provision was recognised accordingly in the consolidated financial statements for the year ended 30th June 2012.

No additional provision has been made in the unaudited condensed consolidated interim financial information for the Period. Based on the consultation with legal counsel, no further material outflow of economic benefits will be incurred for ULV.

• (d) Universe Artiste Management Limited (‘‘UAM’’) commenced Court of First Instance Action against Kwong Ling and Oriental Prosperous Int’l Entertainments Limited (collectively the ‘‘Defendants’’) on 30th June 2014 claiming inter alia for a declaration that UAM is entitled to extend/renew the term of the Artist Management Contract of the Defendants with UAM (the ‘‘Artist Management Contract’’) for 5 years as from 3rd May 2014 to 2nd May 2019.

The Defendants filed their defence and counterclaim on 29th September 2014. By such counterclaim, the Defendants claiming against UAM inter alia for a declaration that the Artist Management Contract was void and unenforceable, the Artist Management Contract to be rescinded, damages for breach of the Artist Management Contract and for breach of fiduciary duties, a declaration that UAM is liable to account to the Defendants and an order for payment of all sums found to be due by UAM to the Defendants.

In the opinion of legal counsel, it is premature to predict the outcome of the said claim against UAM. The Board considers that the amounts of counterclaim by the Defendants against UAM is insignificant to the Group as a whole.

Save as disclosed above, as at the Latest Practicable Date, no member of the Enlarged 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 Enlarged Group.

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9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the Company’s head office at 18th Floor, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong during 9:30 a.m. to 5:00 p.m. on any day (not being a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are open for general banking business from the date of this circular up to and including the date of SGM:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the annual reports of the Company for the financial years ended 30 June 2013 and 2014;

• (c) the accountants’ report on the Target Company from Focus Asia CPA Limited as set out in Appendix II to this circular;

• (d) the report from PricewaterhouseCoopers on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (e) the written consents referred to in the paragraph headed ‘‘Qualification of Experts, Consents and Their Interests in Assets’’ to this Appendix;

• (f) the material contracts referred to in the paragraph headed ‘‘Material Contracts’’ to this Appendix; and

• (g) this circular.

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NOTICE OF SPECIAL GENERAL MEETING

UNIVERSE INTERNATIONAL HOLDINGS LIMITED 寰宇國際控股有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1046)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘Meeting’’) of Universe International Holdings Limited (the ‘‘Company’’) will be held at 18/F, Wyler Centre Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, N.T., Hong Kong on Wednesday, 15 July 2015 at 12:00 noon for the purposes of considering and, if thought fit, passing with or without modifications, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘THAT:

• (A) the acquisition as contemplated under sale and purchase agreement dated 7 May 2015 and entered into between Fragrant River Entertainment Culture (Holdings) Limited (a wholly-owned subsidiary of the Company) as purchaser, Victor Meg Limited, Ng Tang and Most Profitable Investment Ltd. as vendors and Ng Tang and Lo Lai Kuen as guarantors for the vendors in relation to the Acquisition (as defined in the circular of the Company dated 26 June 2015 (‘‘Circular’’), a copy of which is marked ‘‘A’’ and signed by the chairman of this meeting for identification purpose, and has been tabled at this meeting) (‘‘SP Agreement’’) (a copy of the SP Agreement marked ‘‘B’’ and signed by the chairman of this meeting for identification purpose has been tabled at this meeting) be and is hereby approved, confirmed and ratified;

• (B) subject to completion of the Acquisition and subject also to the grant of the listing of, and permission to deal in, the Conversion Shares (as defined below) by The Stock Exchange of Hong Kong Limited, the creation and issue of the Convertible Notes (as defined and described in the Circular) on and subject to the terms and conditions of the SP Agreement be and are hereby approved and the Directors be and are hereby specifically authorised to allot and issue, credited as fully paid, such number of shares of the Company (each, a ‘‘Conversion Share’’) in accordance with the instrument constituting the Convertible Notes (‘‘Instrument’’, a draft of which marked ‘‘C’’ and signed by the chairman of this meeting for identification purpose has been tabled at this meeting) upon the exercise of the conversion rights attaching to the Convertible Notes in accordance with the terms and conditions of the Instrument; and

SGM – 1

NOTICE OF SPECIAL GENERAL MEETING

• (C) all other transactions contemplated under the SP Agreement be and are hereby approved and the Directors or a duly authorised committee of the board of Directors be and are/is authorised to do all such acts and things, to sign and execute such documents or agreements or deed on behalf of the Company and to do such other things and to take all such actions as they consider necessary, appropriate, desirable or expedient for the purposes of giving effect to or in connection with the SP Agreement, the creation and issue of the Convertible Notes and the allotment and issue of the Conversion Shares upon the exercise of the conversion rights attaching to the Convertible Notes in accordance with terms and conditions of the Instrument, and to agree to such variation, amendments or waiver or matters relating thereto (including any variation, amendments or waiver of such documents or any terms thereof, which are not fundamentally different from those as provided for in the SP Agreement) as are, in the opinion of the Directors or a duly authorised committee, in the interest of the Company and its shareholders as a whole.’’

On behalf of the Board Universe International Holdings Limited Lam Shiu Ming, Daneil Chairman and Executive Director

Hong Kong, 26 June 2015

Registered office: Head office and principal place of Clarendon House business in Hong Kong: 2 Church Street 18th Floor Hamilton HM 11 Wyler Centre Phase II Bermuda 192-200 Tai Lin Pai Road Kwai Chung New Territories Hong Kong

SGM – 2

NOTICE OF SPECIAL GENERAL MEETING

Notes:

1. A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxy to attend and, subject to the provisions of the bye-laws of the Company, to vote on his/her/its behalf. A proxy need not be a member of the Company but must be present in person at the Meeting to represent the member.

2. In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, at the Company’s Hong Kong branch share registrar and transfer office, Tricor Abacus Limited at Level 22, 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 the Meeting or any adjournment thereof. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the Meeting or any adjournment thereof, should he/she/it so wish and in such event, the form of proxy shall be deemed to be revoked.

3. In the case of joint holders of shares, any one of such holders may vote at the Meeting, either personally or by proxy, in respect of such share(s) as if he/she/it was solely entitled thereto, but if more than one of such joint holders are present at the Meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share(s) shall alone be entitled to vote in respect thereof.

As at the date of this notice, the Directors are as follows:

Executive Directors:

Mr Lam Siu Ming, Daneil (Chairman) Mr Hung Cho Sing Mr Yeung Kim Piu Mr Lam Kit Sun

Non-Executive Director:

Mr Chan Shiu Kwong Stephen

Independent Non-executive Directors:

Mr Lam Wing Tai Mr Lam Chi Keung Mr Choi Wing Koon

SGM – 3