Web3 Meta Limited - Capital/Financing Update 2014

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, 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 Application Proof.

Application Proof of

ODELLA LEATHER HOLDINGS LIMITED 愛特麗皮革控股有限公司

(Incorporated in the Cayman Islands with limited liability)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the ‘‘Exchange’’) and the Securities and Futures Commission (the ‘‘Commission’’) solely for the purpose of providing information to the public in Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisers or members of the underwriting syndicate that:

(a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document;
(b) the publication of this document or supplemental, revised or replacement pages on the Exchange’s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering;
(c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document;
(d) the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the GEM Listing Rules;
(e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities;
(f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended;
(g) neither the Company nor any of its affiliates, advisers or members of the underwriting syndicate is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document;
(h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted;
(i) the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States;
(j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and
(k) the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period.

THIS APPLICATION PROOF IS IN DRAFT FORM. The information contained herein is incomplete and is subject to change. This Application Proof must be read in conjunction with the section headed ‘‘Warning’’ on the cover of this Application Proof.

IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this [REDACTED], you should obtain independent professional advice.

ODELLA LEATHER HOLDINGS LIMITED

愛特麗皮革控股有限公司

(Incorporated in the Cayman Islands with limited liability)

[REDACTED]

Nominal value : HK$0.01 per Share [REDACTED]

Sole Sponsor

Halcyon Capital Limited

[REDACTED]

CHARACTERISTICS OF GEM

[REDACTED]

– i –

EXPECTED TIMETABLE

[REDACTED]

– ii –

You should rely only on the information contained in this [REDACTED] to make your investment decision.

This [REDACTED] is issued by our Company solely in connection with the [REDACTED] and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] Shares offered by this [REDACTED]. This [REDACTED] may not be used for the purpose of and does not constitute an offer to sell or a solicitation of an offer in any other jurisdiction or in any other circumstances.

Our Company, the Sponsor, the [REDACTED], the [REDACTED] and the [REDACTED] have not authorised anyone to provide you with information that is different from what is contained in this [REDACTED].

Any information or representation not made in this [REDACTED] must not be relied on by you as having been authorised by our Company, the Sponsor, the [REDACTED], the [REDACTED], the [REDACTED], any of their respective directors, officers, employees, agents or representatives or any other party involved in the [REDACTED].

The contents on the website at www.odella.com which is the official website of our Company do not form part of this [REDACTED].

	Page
Characteristics of GEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iii
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Information about this [REDACTED] and the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . .	42
Directors and Parties Involved in the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46

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	Page
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	64
History, Development and Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	76
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
Relationship with Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	143
Directors, Senior Management and Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	150
Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	166
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	169
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	173
Future Plans and [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	206
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	212
Structure and Conditions of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	219
Appendix I — Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II — Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III — Summary of the Constitution of
the Company and Cayman Islands Company Law . . . . . . . . . . . . . . .	III-1
Appendix IV — Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V — Documents Delivered to the Registrar of
Companies and Available for Inspection . . . . . . . . . . . . . . . . . . . . . . . .	V-1

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SUMMARY

This summary aims to give you an overview of the information contained in this [REDACTED] and should be read in conjunction with the full text of this [REDACTED]. Since this is a summary, it does not contain all the information that may be important to you. You should read the whole [REDACTED], including our financial statements and the accompanying notes, before you decide to invest in the [REDACTED].

There are risks associated with any investment. Some of the particular risks of investing in the [REDACTED] Shares are set forth in the section headed ‘‘Risk Factors’’ of this [REDACTED]. You should read that section carefully before you decide to invest in the [REDACTED]. Various expressions used in this summary are defined in the section headed ‘‘Definitions’’ in this [REDACTED].

We specialise in the manufacture and sale of private label leather garments. During the Track Record Period, our major customers are mostly fashion brands. We have an operation history of more than 20 years in the leather garment industry, and we pride ourselves on our possession of indepth knowledge in the production process of leather garment products. Headquartered in Hong Kong, we operate one manufacturing base (namely, the Foshan Factory), which is located in Foshan, Guangdong Province, the PRC.

We strategically focus on:

. customers who include international and regional fashion brands, most of whom offer a broad spectrum of apparel and accessories under their own brands, and leather apparel forms only a minor portion of their product portfolio;
. offering our customers not only with our manufacturing services to produce leather apparel products, but also a range of ancillary pre-production product development services and post-production logistical services; and
. providing flexibility in the production scale for each purchase order by our customers, aiming to cater for their business needs and requirements in each case.

BUSINESS MODEL

In offering our manufacturing services, we often also provide to certain of our customers preproduction product development services and post-production logistical services depending on the needs and requirements for individual orders.

Manufacturing services

Pre-production product development services

We participate at the early stage of certain of our customers’ pre-production product development and often offer such customers various pre-production product development services, including but not limited to sharing with our customers market intelligence on leather fashion trend

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SUMMARY

and production knowhow, providing recommendations to our customers on raw material selection, giving suggestions to assist our customers in finetuning or adjusting their original designs, producing and revising mock-up products for our customers’ consideration, sourcing leather and other raw materials selected by our customers in producing their products and producing sample products in accordance with the customers’ requirements and designs before they decide on placing purchase orders with us.

Post-production logistical services

We also offer post-production logistical services such as packaging and delivery services. All finished products will be packed carefully in accordance with our customers’ specifications and requirements. Products produced at the Foshan Factory are usually delivered to Hong Kong before they are shipped or transferred to the designated locations of our customers.

Pricing policy

We adopt a cost-plus pricing model. When determining the appropriate mark-up, we take into account the customer’s acceptable range of product price based on our past dealings with the customer and a number of other factors such as the cost of raw materials and the size of the order. Our gross profit margin during the Track Record Period amounted to approximately 35.3% and 34.0% for each of the two years ended 30 June 2013 and 2014, respectively.

Geographical coverage of the sale of our products

During the Track Record Period, the United States, Australia and Hong Kong were our major markets with reference to the destination of our product delivery as stipulated in our customers’ purchase orders, which in aggregate accounted for over 80% of our revenue during the Track Record Period. Nevertheless, depending on our customers’ sales network and needs, our products may be further forwarded to other countries by our customers. Please refer to ‘‘Financial Information — Results of operations of our Group — Revenue — Geographical coverage’’ in this [REDACTED] on pages 180 to 181 for the breakdown of our revenue during the Track Record Period with respect to geographical areas.

Our products are mainly sold by Perline, our wholly-owned subsidiary, to customers outside China. Apart from effecting sales through Perline, during the Track Record Period, our PRC wholly-owned subsidiary, Foshan Shengli also sold products directly to customers within China. The direct sales from Foshan Shengli to customers within China represented an insignificant portion of our total sales during the Track Record Period. Please refer to the section headed ‘‘Business — Sales and marketing’’ on pages 101 to 102 in this [REDACTED] for further details.

We conduct business with our customers both directly and through their representatives or sourcing agents. Our business model does not involve any distributorship, franchising or consignment.

OUR CUSTOMERS

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SUMMARY

business relationship with our major customers who are our top five customers in terms of revenue during the Track Record Period ranging from 3 years to over 10 years. Notwithstanding that we have maintained established business relationship with our customers, their level of demand for our leather garment products may fluctuate significantly from period to period. As such, the purchase orders we receive from our customers may be volatile and fluctuate considerably from time to time.

Our sales to our top five customers for each of the two years ended 30 June 2013 and 2014 amounted to approximately HK$29,446,000 and HK$52,610,000 respectively, which contributed approximately 54.9% and 65.3% of our total turnover for the respective periods. Our sales to our largest customer for each of the two years ended 30 June 2013 and 2014 amounted to approximately HK$9,791,000 and HK$18,267,000 respectively, which accounted approximately 18.3% and 22.7% of our total turnover for the respective periods.

OUR SUPPLIERS

We place great emphasis on the quality of leather as leather is the most important component of our garment products. Depending on our customers’ preferences and specifications, the types of animal hides and skins used for our leather products are mainly those from lambs, goats, sheep, cows and pigs. We maintain an extensive list of leather suppliers located in different parts of the world including Pakistan, China, France, Turkey, India and Italy, which enable us to source various sorts of leather and produce leather garments that conform to different needs of our customers. Other materials like textiles and fabrics may be blended with our leather garments. These materials are usually sourced in Hong Kong.

We do not enter into long term contracts with our suppliers. We select our suppliers based on criteria like quality, pricing, availability of products and reliability of the supplier. Nevertheless, we maintain close relationship with our suppliers. Purchases from our five largest suppliers of leather amounted to approximately HK$20,198,000 and HK$18,938,000 for each of the two years ended 30 June 2013 and 2014 respectively, which accounted for about 56.6% and 43.9% of our total purchase of raw materials for the respective periods. Purchases from our largest supplier of leather amounted to approximately HK$7,905,000 and HK$5,777,000 for each of the two years ended 30 June 2013 and 2014 respectively, which accounted for about 22.1% and 13.4% of our total purchase of raw materials for the respective periods.

OUR COMPETITIVE STRENGTHS

We believe the following competitive strengths allow us to achieve sustainable growth:

. we are able to serve international and well-known customers;
. we are able to offer a range of product development supports to our customers and provide flexibility in the production scale to meet our customers’ business needs;
. we maintain close business relationships with a wide list of leather suppliers; and
. we possess an experienced management team and experienced production workforce.

Please refer to the section headed ‘‘Business — Our competitive strengths’’ on pages 89 to 91 in this [REDACTED] for further details.

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SUMMARY

OUR BUSINESS STRATEGIES

With the aim of further developing our business and continuing our growth, we plan to pursue the following principal business strategies:

. strengthening our business development capability;
. enhancing our manufacturing facilities;
. further expansion of our Group’s pre-production product development function; and
. expansion of our sourcing capability.

Please refer to the section headed ‘‘Business — Our business strategies’’ on pages 91 to 93 in this [REDACTED] for further details.

COMPETITIVE LANDSCAPE

According to the Industry Report, the leather garment industry is fragmented and highly competitive. Our Directors are of the view that the business of leather garment manufacturing normally does not require substantial capital investments and advanced technology and, accordingly, has a relatively low entry barrier in terms of capital. However, our Directors believe that we have earned our reputation and compete favourably with our competitors as we can produce products which conform to our customers’ stringent product design specifications and aesthetic requirements and we can also offer pre-production product development services and have high flexibility and strong reliability.

SHAREHOLDERS

Immediately after the Reorganisation and before the [REDACTED] and the [REDACTED], our Company is owned (i) as to 68% by Quality Century Limited (‘‘BVI-Cheung’’), which is an investment holding company wholly and beneficially owned by Ms. Idy Cheung; (ii) as to 17% by Design Vanguard Limited (‘‘BVI-Lam’’), which is an investment holding company wholly and beneficially owned by Ms. Grace Lam; and (iii) as to 15% by Olson Global Limited (‘‘BVIChing’’), which is an investment holding company wholly and beneficially owned by Mr. Ramond Ching.

Ms. Idy Cheung is the chairman of the Board and an executive Director. Ms. Grace Lam is our chief executive officer and an executive Director. Ms. Grace Lam is also a cousin of Ms. Idy Cheung’s spouse. Mr. Ramond Ching is an executive Director. For details of the background of Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching, please refer to the section headed ‘‘Directors, senior management and staff — Directors — Executive Directors’’ on pages 152 to 154 in this [REDACTED].

KEY OPERATIONAL AND FINANCIAL DATA

The summary of the consolidated financial information of our Group for each of the two years ended 30 June 2013 and 2014 set forth below is derived from the Accountants’ Report set forth in Appendix I to this [REDACTED] and should be read in conjunction with the Accountants’ Report.

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SUMMARY

Highlight of Consolidated Statement of Profit or Loss

Revenue Gross profit Net profit for the year	Year ended 30 June	Year ended 30 June
	2013 HK$’000 53,607 18,907 7,128	2014
		HK$’000 80,586 27,369 12,896

Highlight of Consolidated Statement of Financial Position

Total non-current assets Total current assets Total current liabilities Net assets	Year ended 30 June	Year ended 30 June
	2013 HK$’000 286 27,625 23,465 4,446	2014
		HK$’000 287 33,606 16,543 17,350

Key financial ratios and data

Gross profit margin Net profit margin Current ratio (as at the respective year end) (times) Return on equity Return on total assets Gearing ratio (as at the respective year end) Trade receivable turnover days Trade payable turnover days Inventory turnover days	Year ended 30 June	Year ended 30 June
	2013 35.3% 13.3% 1.2 160.3% 25.5% 246.9% 50.5 57.5 76.1	2014
		34.0% 16.0% 2.0 74.3% 38.1% 27.8% 45.4 26.9 65.1

For further details of an analysis to some of our key financial ratios during the Track Record Period, please refer to the section headed ‘‘Financial information — Key financial ratios’’ on pages 191 to 194 in this [REDACTED].

Key operating data

Sales volume

Sales volume of leather garment products	Year ended 30 June	Year ended 30 June
	2013 Units 40,788	2014
		Units 57,179

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SUMMARY

Average selling prices and price ranges

We set out below the average selling prices and price ranges of our leather garment product types during the Track Record Period.

	For the year ended 30 June	For the year ended 30 June
2013	Average selling price (Note 1) HK$ 1,323 1,460 827 899 920 1,365 1,316	2014
Price range HK$ 449 to 11,416 381 to 4,479 464 to 3,557 489 to 6,240 100 to 4,847 776 to 9,126 250 to 4,130		Price range HK$ 436 to 6,144 200 to 4,349 283 to 7,159 101 to 7,550 300 to 7,713 762 to 14,711 1,112 to 10,415	Average selling price (Note 1)
			HK$ 1,450 1,606 1,043 939 1,104 1,570 1,224

Notes:

The average selling price represented the selling price of our products to our customers and not the retail price of our products sold by our customers.
During the Track Record Period, other products for women included dress and shorts, and other products for men included pants, blazer and vest.

Production capacity and utilisation rates

The table below sets out our estimated annual production capacity and approximate utilisation rates of our production facilities during the Track Record Period.

Estimated annual production capacity (in terms of number of pieces of leather garments) Actual output volume (number of pieces of leather garments manufactured) Approximate utilisation rate	Year ended 30 June	Year ended 30 June
	2013 103,000 40,788 40%	2014
		103,000 57,179 56%

Please see ‘‘Business — Production — Production capacity and utilisation rates’’ of this [REDACTED] on pages 108 to 109 for more details of the production capacity and utilisation rates.

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SUMMARY

HISTORICAL NON-COMPLIANCE INCIDENTS

During the Track Record Period and up to the Latest Practicable Date, we have failed to comply with certain laws, rules and regulations applicable to us. These include: (a) non-compliance with section 122 of the Predecessor Companies Ordinance and/or section 429 of the Companies Ordinance; (b) non-compliance incidents in relation to the timely lodgment of textile notifications under TTRS (hence not being exempted from obtaining prior licences) for import of textiles from the PRC into Hong Kong; (c) non-compliance arising from late lodgment of declarations for importations into or exportations from Hong Kong under the IAE Ordinance; and (d) noncompliance with the requisite contribution requirements of social insurance and housing provident fund for certain of our PRC employees. Please refer to the section headed ‘‘Business — Legal proceedings and non-compliance’’ on pages 125 to 136 in this [REDACTED] for further details.

RECENT DEVELOPMENTS SUBSEQUENT TO THE TRACK RECORD PERIOD

According to the unaudited accounts of our Group for the three months ended 30 September 2014 and 2013 prepared by our Directors, our revenue was approximately HK$22 million for the three months ended 30 September 2014 as compared to approximately HK$25 million for the same period in 2013, representing a decrease of approximately 12.7%. The decrease was primarily due to a considerable drop in orders placed by three of our top five customers of the year ended 30 June 2014, which have reduced their purchase orders placed with us by more than 50% in terms of sales value when compared with their respective purchase value in the corresponding three-month period in 2013. However, the unaudited gross profit of our Group for the three months ended 30 September 2014 was approximately HK$9.9 million as compared to approximately HK$8.6 million for the same period in 2013, representing an increase of approximately 15.1%. Furthermore, our gross profit margin for the three months ended 30 September 2014 was approximately 44.6% as compared to approximately 33.9% for the same period in 2013, and such increase in gross profit margin was mainly because the products of some of our customers sold for the three months ended 30 September 2014 were of more sophisticated designs or materials which required more complex craftsmanship. Our Directors believe that products with more sophisticated designs or materials which require more complex craftsmanship could usually command a higher profit margin as more complicated production process will be involved.

Notwithstanding such considerable drop in sales value attributable to three of our top five customers for the year ended 30 June 2014 as compared to the corresponding period, as we have maintained a diverse customer base and our Group is expected to secure purchase orders from new and existing customers, our Directors expect that the total revenue for the six months ending 31 December 2014 will remain at a similar level to that for the same period in 2013.

Our Group’s unaudited accounts for the three months ended 30 September 2014 and 2013 have been reviewed by our Group’s reporting accountants, HLB Hodgson Impey Cheng Limited, in accordance with the Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by HKICPA.

[REDACTED]

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SUMMARY

MATERIAL ADVERSE CHANGE AND PROFIT WARNING

Our Directors confirm that the impact of the [REDACTED] on our consolidated statement of profit or loss as disclosed in the paragraph headed [REDACTED] above in this section has primarily resulted in a material adverse change in the financial or trading position or prospects of our Group since 30 June 2014, being the date of which our Group’s latest audited consolidated financial statements were made up as set out in the Accountants’ Report in Appendix I to this [REDACTED], and up to the date of this [REDACTED].

Our Company may issue a profit warning after [REDACTED] in respect of our Group’s substantial reduction in the financial results for the six months ending 31 December 2014 and the nine months ending 31 March 2015, and accordingly the year ending 30 June 2015. It is preliminarily reviewed and estimated by our Board that there will be a substantial reduction in the profit of our Group and may even be in a loss position for the six months ending 31 December 2014, nine months ending 31 March 2015 and the year ending 30 June 2015 as a result of the [REDACTED], which are one-off non-recurring expenses and currently estimated to be approximately HK$11.3 million for the six months ending 31 December 2014 and the remaining balance of approximately HK$5.4 million will be recorded as expense upon [REDACTED], and to a lesser extent, by the expected increase in administrative expenses such as Directors’ remuneration and other expenses relating to the expansion of marketing department, design team and sourcing team based on our expansion plans set out in the section headed ‘‘Future plans and [REDACTED]’’ on pages 206 to 211 of this [REDACTED]. Such [REDACTED] are current estimates for reference only and the final amount to be charged to the profit and loss account of our Group for the six months ending 31 December 2014, the nine months ending 31 March 2015 and the year ending 30 June 2015 is subject to change. Furthermore, our financial results for the year ending 30 June 2015 may also be adversely affected by any considerable drop in orders from our major customers. Reduction in orders from our major customers of the Track Record Period happened in the first quarter of the financial year ending 30 June 2015. Please refer to the paragraph headed ‘‘Recent developments subsequent to the Track Record Period’’ in this section for more details. In the event that we experience any such reduction in orders by any major customers and we are unable to timely secure substitute orders from other customers with acceptable profit margins, our financial results for the full year ending 30 June 2015 may be adversely affected. Please also refer to the section headed ‘‘Risk Factors — Risks relating to our business — We do not have long-term purchase commitments from our customers and we may be exposed to potential volatility in our turnover’’ on page 24 of this [REDACTED].

[REDACTED]

[REDACTED]. Our Directors presently intend to apply the [REDACTED] as follows:

(a) approximately [REDACTED], or approximately [REDACTED], of the [REDACTED] for strengthening our business development capability by expanding our marketing team to enhance our relations with our existing customers and expand our customer base,

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SUMMARY

participating in more trade fairs and fashion shows to increase the market presence of our Group, expanding our business to the North America market and strengthening our marketing coverage in the PRC market;

(b) approximately [REDACTED], or approximately [REDACTED], of the [REDACTED] for enhancing our manufacturing facilities through purchasing new production equipment and machineries to meet the increasing demand for our production capability;
(c) approximately [REDACTED], or approximately [REDACTED] million, of the [REDACTED] for expansion of our Group’s pre-production product development function by recruiting more staff for our design and development team;
(d) approximately [REDACTED], or approximately [REDACTED] million, of the [REDACTED] for expansion of our sourcing capability by recruiting more staff or agent to expand our geographical coverage of suppliers and make more frequent supplier visits to strengthen our quality control on leather raw materials; and
(e) the remaining amount of approximate [REDACTED], or approximately [REDACTED], of the [REDACTED] will be used to provide funding for our working capital and other general corporate purposes.

If the [REDACTED] is not fixed at the mid-point of the [REDACTED] range resulting in any increase or decrease of the estimated [REDACTED] received, such [REDACTED] will be used in the same proportions as disclosed above, save for the amount of [REDACTED] planned to be used to enhance our Group’s manufacturing facilities which will remain substantially constant.

Expected timing of [REDACTED]

Strengthening our business development capability Enhancing our manufacturing facilities Expansion of our Group’s pre-production development function Expansion of our sourcing capability	From the Latest Practicable Date to 30 June 2015	For the period from 1 July 2015 to 31 December 2015	For the period from 1 January 2016 to 30 June 2016	For the period from 1 July 2016 to 31 December 2016	For the period from 1 January 2017 to 30 June 2017	Total
	HK$ million	HK$ million			HK$ million	HK$ million

For more details, please refer to the section headed ‘‘Future plans and [REDACTED]’’ on pages 206 to 211 in this [REDACTED].

DIVIDENDS

Our Company has not declared or paid any dividend since the date of incorporation up to the Latest Practicable Date. Perline, a subsidiary of our Company, declared dividends of approximately HK$6.0 million and HK$3.2 million to its then shareholders for the two years ended 30 June 2014 respectively. The dividend of HK$6.0 million for the year ended 30 June 2013 was fully paid in 2014. For the year ended 30 June 2014, pursuant to the resolution passed in October 2014, declaration by Perline of dividends of HK$3.2 million attributable to the year ended 30 June 2014 was approved.

The historical dividend payments may not be used as a reference or basis to determine the level of dividends that may be declared or paid by us in the future. Our Group has not formulated any dividend policy and does not have any predetermined dividend payout ratio. The determination

– 9 –

SUMMARY

to pay dividends will be made at the discretion of the Board. The declaration, payment and amount of any future dividends will depend on our financial condition, results of operation, level of cash, statutory and regulatory restrictions in relation thereto, future prospects, and other factors that our Directors may consider relevant. There can be no assurance that we will be able to declare or distribute any dividend in the amount set out in any of its plans or at all.

RISK FACTORS

There are risks associated with your investment in the [REDACTED], among which, the relatively material risks are:

. we do not have long-term purchase commitments from our customers and we may be exposed to potential volatility in our turnover;
. during the Track Record Period, we derived a significant portion of our revenue from a small number of customers and therefore any significant decrease in sales to any of our major customers may adversely and materially affect our Group’s business, financial condition and results of operations;
. significant growth in revenue and net profit for the year ended 30 June 2014 is not indicative of our future financial performance and our operating results may fluctuate significantly; and
. we may experience a material adverse change in our financial results for the six months ending 31 December 2014, the nine months ending 31 March 2015 and accordingly the year ending 30 June 2015 which is mainly attributable to the [REDACTED] incurred in relation to the [REDACTED].

You should read the entire section headed ‘‘Risk Factors’’ in this [REDACTED] carefully before you decide to invest in the [REDACTED].

[REDACTED]

– 10 –

DEFINITIONS

Unless the context otherwise requires, the following expressions have the following meanings in this [REDACTED].

‘‘Articles’’ or ‘‘Articles of the articles of association of our Company adopted on [.] Association’’ 2014, which will become effective upon the [REDACTED], as amended from time to time, a summary of which is set out in Appendix III to this [REDACTED]
‘‘associate(s)’’ has the meaning ascribed to it under the [REDACTED]
‘‘Audit Committee’’ the audit committee of the Board
‘‘Board of Directors’’ or ‘‘Board’’ the board of Directors
‘‘Business Day’’

a day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for normal banking business

‘‘BVI’’ the British Virgin Islands

‘‘BVI-Cheung’’ Quality Century Limited, a company incorporated on 2 July 2014 in BVI with limited liability and a Controlling Shareholder, solely owned by Ms. Idy Cheung (a Controlling Shareholder and an executive Director) as at the Latest Practicable Date

‘‘BVI-Ching’’ Olson Global Limited, a company incorporated on 27 May 2014 in BVI with limited liability and which, as at the Latest Practicable Date, held 15% of the issued share capital of the Company, and was solely owned by Mr. Ramond Ching (an executive Director)
‘‘BVI-Lam’’ Design Vanguard Limited, a company incorporated on 3 July 2014 in BVI with limited liability and which, as at the Latest Practicable Date, held 17% of the issued share capital of the Company, and was solely owned by Ms. Grace Lam (an executive Director)
‘‘BVI Inv Vehicles’’ collectively, BVI-Cheung, BVI-Lam and BVI-Ching
‘‘CAGR’’ compounded annual growth rate

– 11 –

DEFINITIONS

[REDACTED]

‘‘close associates(s)’’
‘‘Commerce Authority’’
‘‘Companies Law’’
‘‘Companies Ordinance’’
‘‘Companies WUMP Ordinance’’

has the meaning ascribed to it under the [REDACTED]

the Commerce Department (商務部門) in the PRC or, where the context so requires, MOFCOM or its delegated authority at provincial, municipal or other local level

the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands, as amended, supplemented or otherwise modified from time to time

the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

– 12 –

DEFINITIONS

‘‘Company’’ Odella Leather Holdings Limited (愛特麗皮革控股有限公司), a company incorporated on 3 September 2014 in the Cayman Islands with limited liability under the laws of the Cayman Islands
‘‘connected person(s)’’ has the meaning ascribed to it under the [REDACTED]
‘‘Controlling Shareholder(s)’’

has the meaning ascribed to it in the [REDACTED] and unless the context requires otherwise, refers to BVI-Cheung and Ms. Idy Cheung collectively

‘‘Corporate Governance the corporate governance committee of the Board Committee’’
‘‘CSRC’’ China Securities Regulatory Commission (中國證券監督管理委員會)
‘‘Director(s)’’ the director(s) of our Company
‘‘EIT’’ Enterprise Income Tax of the PRC
‘‘EIT Law’’ Enterprise Income Tax Law of the PRC (中華人民共和國企業所得稅法) adopted by the Tenth NPC on 16 March 2007, and effective on 1 January 2008
‘‘Employees Compensation Employees’ Compensation Ordinance (Chapter 282 of the Ordinance’’ Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
‘‘Employment Ordinance’’ Employment Ordinance (Chapter 57 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time
‘‘Foshan Factory’’ our production base which is located at 3/F, Block A1, Hantian Electronics City, Dong Ping Road, Gweicheng, Nanhai, Foshan, Guangdong Province, the PRC (中國廣東省佛山市南海桂城瀚天科技城A1座三樓), which is operated by Foshan Shengli
‘‘Foshan Shengli’’ or ‘‘WFOE’’ Foshan Nanhai Shengli Leather Garment Co., Ltd. (佛山市南海盛麗皮衣有限公司), a wholly foreign owned enterprise established in the PRC on 21 June 2004 and an indirect wholly-owned subsidiary of the Company
‘‘GDP’’

gross domestic product

– 13 –

DEFINITIONS

[REDACTED]

‘‘[REDACTED] Website’’ the internet website at [REDACTED] operated by the [REDACTED] for the purposes of [REDACTED]
‘‘Group’’, ‘‘our Group’’, ‘‘we’’, our Company and its subsidiaries at the relevant time or, ‘‘our’’ and ‘‘us’’ where the context so requires in respect of the period before our Company became the holding company of our present subsidiaries, the present subsidiaries of our Company and the businesses carried on by such subsidiaries or (as the case may be) their predecessors
‘‘HKAS’’ the Hong Kong Accounting Standards ‘‘HK Customs’’ Customs and Excise Department of Hong Kong ‘‘HKFRS’’ the Hong Kong Financial Reporting Standards issued by HKICPA
‘‘HKICPA’’ the Hong Kong Institute of Certified Public Accountants ‘‘HKSCC’’ the Hong Kong Securities Clearing Company Limited ‘‘HKSCC Nominees’’ the HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC
‘‘HK-TID’’ Trade and Industry Department of Hong Kong ‘‘HK$’’ or ‘‘Hong Kong dollars’’ Hong Kong dollars and cents respectively, the lawful currency of Hong Kong
‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC [REDACTED]
‘‘Hong Kong Legal Advisers’’ Chiu & Partners, our legal advisers as to Hong Kong laws ‘‘IAE Ordinance’’ Import and Export Ordinance (Chapter 60 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

– 14 –

DEFINITIONS

‘‘IAE General Regulations’’
Import and Export (General) Regulations (Chapter 60A of the Laws of Hong Kong, a subsidiary legislation of the IAE Ordinance), as amended, supplemented or otherwise modified from time to time
‘‘IAE Registration Regulations’’ Import and Export (Registration) Registrations (Chapter 60E of the Laws of Hong Kong, a subsidiary legislation of IAE Ordinance), as amended, supplemented or otherwise modified from time to time
‘‘IndependentIndependent Third Party(ies)’’’’
‘‘IndependentIndependent Third Party(ies)’’’’ an individual(s) or a company(ies) who or which is/are independent of and not connected with (within the meaning of the [REDACTED]) our Company or its connected persons
‘‘Individual Owners’’ collectively, Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching, who were the indirect ultimate beneficial owners of 68%, 17% and 15% of the issued share capital in the Company as at the Latest Practicable Date
‘‘Industry Report’’ a market research report entitled ‘‘Market Landscape and Competitive Analysis for Leather Garment Manufacturing Industry’’ commissioned by us and prepared by Ipsos
‘‘INED(s)’’ independent non-executive director(s) or, in the context of our Company, our independent non-executive Director(s)
‘‘Ipsos’’ IPSOS Hong Kong Limited, a market research and consulting company, an Independent Third Party
‘‘IRD’’ Inland Revenue Department of Hong Kong
‘‘IRO’’ or ‘‘Inland Revenue Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Ordinance’’ Kong), as amended, supplemented or otherwise modified from time to time
‘‘Issuing Mandate’’ a general and unconditional mandate granted to our Directors by the passing by our Shareholders of resolutions referred to in ‘‘Appendix IV — Statutory and general information — 1.3 Resolutions in writing of our Shareholders passed on [.]’’ in this [REDACTED], pursuant to which our Directors may exercise the power of the Company to allot, issue or otherwise deal in new Shares up to a maximum of 20% of the aggregate nominal amount of the share capital of the Company as at the [REDACTED] (but without taking into account any Shares which may be issued upon the exercise of the [REDACTED])

– 15 –

DEFINITIONS

‘‘Latest Practicable Date’’

[24 October] 2014, being the latest practicable date for the purpose of ascertaining certain information contained in this [REDACTED]

‘‘Lead Manager’’ or [REDACTED]
‘‘Bookrunner’’

[REDACTED]

‘‘Main Board’’ the Main Board operated by the Stock Exchange
‘‘Memorandum of Association’’ the memorandum of association of our Company (as amended from time to time), adopted at its incorporation on 3 September 2014, a summary of which is set out in Appendix III to this [REDACTED]
‘‘Minimum Wage Ordinance’’ Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
‘‘MOFCOM’’ the Ministry of Commerce of the PRC (中華人民共和國商務部) or its predecessor, the Ministry of Foreign Trade and Economic Cooperation of the PRC (中華人民共和國對外經濟貿易部)
‘‘MPF Ordinance’’ Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time
‘‘Mr. Ramond Ching’’ Mr. CHING Wai Man (程偉文先生), an executive Director and a Substantial Shareholder
‘‘Ms. Grace Lam’’ Ms. LAM Wai Si Grace (林慧思女士), an executive Director, the Chief Executive Officer and a Substantial Shareholder

– 16 –

DEFINITIONS

‘‘Ms. Idy Cheung’’ or Ms. CHEUNG Woon Yiu (張煥瑤女士, alias Idy Cheung), one ‘‘Chairman’’ of our Controlling Shareholders, an executive Director and the chairman of the Board ‘‘Nomination Committee’’ the nomination committee of the Board ‘‘NPC’’ the National People’s Congress of the PRC (中華人民共和國全國人民代表大會)

[REDACTED]

‘‘Odella BVI’’ Odella International Limited, a company incorporated on 11 September 2014 in BVI, which was a direct wholly-owned subsidiary of the Company as at the Latest Practicable Date ‘‘Old FIE’’ or ‘‘Old Processing Foshan Xinyi Leather Garment Co., Ltd. (佛山市新藝皮衣廠 Entity’’ 有限公司), a foreign-invested enterprise which was established in the PRC on 5 June 1990 and deregistered on 4 April 2007 and which rendered leather garment manufacturing services to our Group before the establishment of Foshan Shengli ‘‘PBOC’’ the People’s Bank of China (中國人民銀行) ‘‘Perline’’ Perline Company Limited (柏麗發展有限公司), a company incorporated on 15 March 1988 in Hong Kong, which was an indirect wholly-owned subsidiary of the Company as at the Latest Practicable Date

[REDACTED]

– 17 –

DEFINITIONS

[REDACTED]

‘‘PRC’’ or ‘‘China’’
the People’s Republic of China, which for the purpose of this [REDACTED] and for geographical reference only, excludes Hong Kong, Macau and Taiwan
‘‘PRC Company Law’’ the Company Law of the PRC (中華人民共和國公司法), as amended at the Sixth Session of the Standing Committee of the Twelfth NPC on 28 December 2013, effective from 1 March 2014 (2013 Amendment), as amended, supplemented or otherwise modified from time to time
‘‘PRC Government’’ the government of the PRC including all governmental subdivisions (including provincial, municipal and other regional or local government entities) and governmental organisation
‘‘PRC Legal Advisers’’ GFE Law Office (廣東恒益律師事務所), our legal advisers as to PRC laws
‘‘Predecessor Companies Ordinance’’
Companies Ordinance (then Chapter 32 of the Laws of Hong Kong), which was in force before 3 March 2014 and was repealed after the Companies Ordinance having commenced operation on 3 March 2014

[REDACTED]

‘‘Processing Agreements’’ the four currently subsisting processing agreements (對外來料加工(裝配)合同) dated 2 January 2014, 10 March 2014, 28 May 2014 and 3 September 2014 respectively entered into between Perline and Foshan Shengli
‘‘Province’’ or ‘‘province’’ each being a province or, where the context requires, a provincial level autonomous region or a provincial level city under the direct supervision of the central government of the PRC

– 18 –

DEFINITIONS

‘‘Remuneration Committee’’	the remuneration committee of the Board
‘‘Reorganisation’’	the corporate reorganisation of the Group in preparation for
	the [REDACTED], details of which are set out in the section
	‘‘History, Development and Reorganisation — Reorganisation’’
	of this [REDACTED]
‘‘Repurchase Mandate’’	a general and unconditional mandate granted to our Directors
	by the passing by our Shareholders of resolutions referred to in
	‘‘Appendix IV Statutory and general information — 1.3
	Resolutions in writing of our Shareholders passed on [.]
	2014’’ in this [REDACTED], pursuant to which our Directors
	may exercise the power of the Company to repurchase Shares
	the aggregate nominal amount of which shall not exceed 10%
	of the aggregate nominal amount of the share capital of the
	Company in issue as at the [REDACTED] (but without taking
	into account any Shares which may be issued upon the
	exercise of the [REDACTED])
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘SAFE’’	the State Administration of Foreign Exchange of the PRC (中
	華人民共和國國家外匯管理局)
‘‘SAIC’’	the State Administration for Industry and Commerce of the
	PRC (中華人民共和國國家工商行政管理總局)
‘‘SASAC’’	the State-owned Assets Supervision and Administration
	Commission of the State Council (國務院國有資產監督管理
	委員會)
‘‘SAT’’	the State Administration of Taxation of the PRC (中華人民共
	和國國家稅務總局)
‘‘SFC’’	the Securities and Futures Commission of Hong Kong
‘‘SFO’’ or ‘‘Securities and Futures	the Securities and Futures Ordinance (Chapter 571 of the Laws
Ordinance’’	of Hong Kong), as amended, supplemented or otherwise
	modified from time to time
‘‘Share(s)’’	ordinary share(s) having a par value of HK$0.01 each in the
	capital of the Company
‘‘Share Option Scheme’’	the share option scheme conditionally adopted by our
	Company on [.] 2014, the principal terms of which are
	summarised in the paragraph headed ‘‘Share Option Scheme’’
	in Appendix IV to this [REDACTED]

– 19 –

DEFINITIONS

‘‘Shareholder(s)’’ holder(s) of Shares
‘‘sq.ft’’ square foot (feet)
‘‘sq.m’’ square metre(s)
‘‘State Council’’ State Council of the PRC (中華人民共和國國務院)
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Sponsor’’ Halcyon Capital Limited (鎧盛資本有限公司), a licensed corporation under the SFO permitted to carry out type 6 (advising on corporate finance) regulated activity (as defined under the SFO), being the sponsor to the [REDACTED]
‘‘subsidiary(ies)’’ has the meaning ascribed to it under the [REDACTED], unless the context otherwise requires
‘‘Substantial Shareholder(s)’’ has the meaning ascribed to it in the [REDACTED] and details of our Substantial Shareholders are set out in the section ‘‘Substantial Shareholders’’ in this [REDACTED]

[REDACTED]

‘‘Track Record Period’’ the financial period comprising the two financial years ended 30 June 2014
‘‘TTRS’’
Textiles Trader Registration Scheme, brief details of which are set out in the section ‘‘Regulations — Hong Kong — Import and Export Ordinance’’

[REDACTED]

‘‘United States’’, ‘‘USA’’ or the United States of America ‘‘US’’
‘‘US$’’ or ‘‘US dollars’’

United States dollars, the lawful currency of the United States

– 20 –

DEFINITIONS

‘‘%’’ per cent.

The English names of the PRC laws, rules, regulations, nationals, entities, governmental authorities, institutions, facilities, certificates and titles etc. mentioned in this [REDACTED] are translations from their Chinese names and are for identification purpose only. If there is any inconsistency between the Chinese names and their English translations, the Chinese names shall prevail.

Certain amounts and percentage figures included in this [REDACTED] have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them.

Unless otherwise specified, all times refer to Hong Kong time and references to years in this [REDACTED] are to calendar years.

– 21 –

FORWARD-LOOKING STATEMENTS

This [REDACTED] contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties, including the risk factors described in this [REDACTED]. Forward-looking statements can be identified by words such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘would,’’ ‘‘could,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘continue,’’ ‘‘seek,’’ ‘‘estimate’’ or the negative of these terms or other comparable terminology. Examples of forwardlooking statements include, but are not limited to, statements we make regarding our projections, business strategy and development activities as well as other capital spending, financing sources, the effects of regulation, expectations concerning future operations, margins, profitability and competition. The foregoing is not an exclusive list of all forward-looking statements we make.

Forward-looking statements are based on our current expectation and assumptions regarding our business, the economy and other future conditions. We can give no assurance that these expectations and assumptions will prove to have been correct. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political economic, business, competitive, market and regulatory conditions and the following:

. our ability to stay abreast of market trends and maintain commercially reasonable relationships with our customers and suppliers;
. our ability to retain core team members and recruit qualified and experienced new team members;
. our ability to maintain an effective control system;
. our operation and business prospect;
. our ability to maintain and strengthen our market position;
. our prospective financial information;
. developments in, or changes to, laws, regulations, governmental policies, taxation or accounting standards or practices affecting our operations, especially those related to the PRC;
. general political and global economic conditions, especially those related to the PRC, and macro-economic measures taken by the PRC Government to manage economic growth;
. fluctuations in inflation, interest rates and exchange rates;
. changes in the availability of, or new requirements for financing;

– 22 –

FORWARD-LOOKING STATEMENTS

. our ability to successfully implement any of our business strategies, plans, objectives and goals;
. our ability to expand and manage our business;
. changes in restrictions on foreign currency convertibility and remittance aboard;
. changes to our expansion plans and estimated capital expenditure;
. our dividend policy;
. our success in accurately identifying future risks to our business and managing the risks of the aforementioned factors;
. other factors discussed in sections headed ‘‘Summary’’, ‘‘Risk Factors’’, ‘‘Industry Overview’’, ‘‘Business’’ and ‘‘Financial Information’’; and
. other statements in this [REDACTED] that are not historical facts.

Any forward-looking statement made by us in this [REDACTED] speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Subject to the requirements of applicable laws, rules and regulations, we undertake no obligation to publicly update any forwardlooking statement, whether as a result of new information, future developments or otherwise. All forward-looking statements contained in this [REDACTED] are qualified by reference to this cautionary statement.

– 23 –

RISK FACTORS

You should carefully consider all of the information in this [REDACTED] including the risks and uncertainties described below before making an investment in the [REDACTED]. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of our Shares could decline due to any of these risks, and you may lose all or part of your investment.

RISKS RELATING TO OUR BUSINESS

We do not have long-term purchase commitments from our customers and we are exposed to potential volatility in our turnover

We do not have long-term purchase commitments from our customers. Our business with our customers has been, and we expect it will continue to be, conducted on the basis of actual purchase orders received from time to time. Our customers are not obligated in any way to continue placing orders with us at the same or increased levels or at all. They typically offer a spectrum of apparel and accessories under their own brands and leather apparel forms only a minor portion of their product portfolio. Their level of demand for our leather garment products may fluctuate significantly from period to period. Such fluctuation is attributable to a number of factors, including changes in our customers’ business strategies or plans, our customers’ business needs or the direction of our customers’ product emphasis, and our customers’ preference and fashion trends.

We cannot assure you that our customers will continue to place purchase orders with us at the same volume or same margin, as compared to prior periods, or at all. We may not be able to locate alternative customers to replace purchase orders or sales. As a result, our business, financial condition and results of operations may vary from period to period and may fluctuate significantly in the future.

– 24 –

RISK FACTORS

During the Track Record Period, we derived a significant portion of our revenue from a small number of customers and therefore any significant decrease in sales to any of our major customers may adversely and materially affect our Group’s business, financial condition and results of operations

The sales to our top five customers for each of the two years ended 30 June 2014 amounted to approximately HK$29,446,000 and HK$52,610,000 respectively, which accounted for about 54.9% and 65.3% of our total turnover for such periods, respectively. Our sales attributable to our largest customer for each of the two years ended 30 June 2014 amounted to approximately HK$9,791,000 and HK$18,267,000 respectively, which represent about 18.3% and 22.7% of our total turnover for such periods, respectively.

As there was a significant decrease in the sales value derived from some of our major customers after the Track Record Period, there is no assurance that we would be successful in reducing our reliance on a small number of customers to generate a significant portion of our revenue and preventing the adverse effect on our Group’s business, financial condition and results of operations due to any significant decrease in sales to any of our major customers. For further details, please refer to the paragraphs headed ‘‘Recent developments subsequent to the Track Record Period’’ and ‘‘Material adverse change and profit warning’’ in the Summary section of this [REDACTED].

Significant growth in revenue and net profit for the year ended 30 June 2014 is not indicative of our future financial performance and our operating results may fluctuate significantly

We have experienced a significant growth in revenue and net profit for the year ended 30 June 2014. Our revenue derived from the sales of leather products increased by approximately 50.3% from approximately HK$53.6 million for the year ended 30 June 2013 to approximately HK$80.6 million for the year ended 30 June 2014. Our gross profit increased by approximately 44.8% from approximately HK$18.9 million for the year ended 30 June 2013 to HK$27.4 million for the year ended 30 June 2014. The increase was mainly due to the increase in the quantity of leather garment products sold by approximately 40.2% and the increase in the average selling price of our leather garment products by about 7.9%. Our net profit also increased by approximately 80.9% from approximately HK$7.1 million for the year ended 30 June 2013 to approximately HK$12.9 million for the year ended 30 June 2014. For further information, please refer to the section headed ‘‘Financial information — Results of operations of our Group’’ in this [REDACTED].

While our revenue and net profit have increased significantly for the year ended 30 June 2014, the improved financial results are not indicative of our future financial performance. The sustainability of our growth depends on a number of factors, including but not limited to the market trend and demand of leather garments, our business relationship with our customers, the implementation of our business strategies, the competitive landscape of the leather garment manufacturing industry as well as the general economic conditions in the PRC, Hong Kong and elsewhere in the world. Historical figures or past results should not be relied on as indicators of our performance. We cannot assure you that our growth will continue in the near future.

– 25 –

RISK FACTORS

We may experience a material adverse change in our financial results for the six months ending 31 December 2014, the nine months ending 31 March 2015 and accordingly the year ending 30 June 2015 which is mainly attributable to the [REDACTED] incurred in relation to the [REDACTED]

Our Company may issue a profit warning after [REDACTED] in respect of our Group’s substantial reduction in the financial results for the six months ending 31 December 2014, the nine months ending 31 March 2015 and accordingly the year ending 30 June 2015 which is mainly attributable to the [REDACTED] incurred in relation to the [REDACTED]. It is preliminarily reviewed and estimated by our Board that there will be a substantial reduction in the profit of our Group and we may be in a loss position for the six months ending 31 December 2014, nine months ending 31 March 2015 and accordingly the year ending 30 June 2015 mainly as a result of the [REDACTED], which are one-off non-recurring expenses and currently estimated to be approximately HK$11.3 million for the six months ending 31 December 2014 and the remaining balance of approximately HK$5.4 million will be expensed upon [REDACTED]. Such [REDACTED] are current estimates for reference only and the final amount to be charged to the profit and loss account of our Group for the six months ending 31 December 2014, the nine months ending 31 March 2015 and the year ending 30 June 2015 is subject to change. Please refer to the paragraph headed ‘‘Material adverse change and profit warning’’ in the Summary section of this [REDACTED] for further details.

Our performance may be affected by consumers’ preference, consumer spending level, general economic conditions and unexpected and abnormal changes in climate in the countries in which our customers sell our products

Our major customers are mainly based in the United States of America and Australia with retail operations in different countries. As such, our results of operations are largely affected by the consumers’ preference and the level of demand for leather garments in the markets to which our customers sell our leather garment products. Even if leather garments continue to suit the customers’ tastes and preference, demand for our products may still be influenced by a number of factors some of which are beyond our control, including, amongst others, the consumer spending level, general economic conditions, as well as unexpected and abnormal changes in climate in the countries in which our customers sell our products. The consumer spending level is affected by many factors including interest rates, level of disposable income, political uncertainty, taxation, unemployment level and general consumer confidence. Unfavourable changes in climate like a warm winter in the United States or Australia may affect the purchase orders we receive from our customers with retail operations in the United States or Australia for the coming seasons.

Thus, the consumers’ preference, consumer spending level, general economic conditions and unfavourable changes in climate in the countries in which our products are sold may have material and adverse effect on our Group’s business, results of operations and financial condition.

– 26 –

RISK FACTORS

We rely on raw material suppliers to supply us with suitable leather and if we cannot source such leather with sufficient amount, it may have an adverse impact on our reputation and business operation

We rely on raw material suppliers to supply us with leather. Our ability to provide preproduction product development services, gain businesses from our customers and manufacture leather garments conforming to our customers’ aesthetic requirements and product specifications depends to a large extent on our ability to source sufficient amount of various sorts of leather from our suppliers. Our Group’s top five suppliers together accounted for approximately 56.6% and 43.9% respectively of our total purchase of raw materials for each of the two years ended 30 June 2014. We do not have long-term supply contracts with our raw material suppliers, but instead work on an order-to-order basis. Although we maintain close business relationships with our suppliers, if any of our leather suppliers are unable or unwilling to supply suitable leather with sufficient amount to us, there is no assurance that we will be able to locate alternative suppliers who could supply the same suitable raw materials with sufficient amount to us in a timely fashion and at comparable commercial terms. If we are unable to do so, it could adversely impact our ability to gain purchase orders from our customers and also to manufacture products for and deliver products to our customers in a timely manner.

Furthermore, the quality of the leather used is crucial to the production of a leather garment and if there are unfavourable fluctuations in the quality of the leather raw materials, we may incur additional costs to acquire sufficient suitable leather to maintain our production schedules and commitment to our customers. In addition, there is no assurance that we will be able to identify alternative sources of suitable leather.

If we are unable to source suitable leather in a timely fashion and in turn unable to fulfil our commitments to our customers, it may harm our reputation, business, financial condition, results of operations and prospects.

Our Group’s success significantly depends on our key personnel, Ms. Grace Lam and Mr. Ramond Ching and our ability to recruit additional qualified personnel, our business operation may be adversely affected if we lose their services or are unable to attract competent personnel

Our Directors believe that our success, to a large extent, is attributable to, amongst other things, the contribution of our key personnel, Ms. Grace Lam and Mr. Ramond Ching. Ms. Grace Lam, our Chief Executive Officer and an executive Director, is primarily responsible for the marketing function of our Group and also overseeing and directing the daily operations. She has in depth knowledge in leather and the production of leather garments and has extensive experience in the leather garment manufacturing industry. She also maintains good business relationships with our customers. Mr. Ramond Ching, an executive Director, is primarily responsible for the production function of our Group and has over 10 years experience in the leather garment manufacturing industry. Please refer to the section headed ‘‘Directors, senior management and staff’’ in this [REDACTED] for details of Ms. Grace Lam’s and Mr. Ramond Ching’s experience.

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RISK FACTORS

If we lose the services of Ms. Grace Lam or Mr. Ramond Ching and we are unable to recruit qualified and experienced personnel to replace her or him, it could have material adverse effect on our business, financial condition, results of operations and prospects.

Furthermore, our success and ability to expand our operations also depend upon our ability to attract and recruit a sufficient number of qualified personnel. If we are unable to hire such personnel capable of consistently providing a high level of services, our ability to expand may be impaired and the performance of our business could be adversely affected.

Our abilities to retain our skilled and experienced workers, especially sewing workers and cutter workers and recruit sufficient qualified workers are critical to our success and our business operation may be adversely affected if we lose their services or are unable to attract competent workers

Due to the nature of leather garment manufacturing, our Directors regard our production workforce an essential element in our production process, as our production process relies on the skills and craftsmanship of our experienced workers, including sewing workers and cutter workers, to manufacture leather apparel products which can meet our customers’ specifications and aesthetic requirements. There is no assurance that we will not experience labour shortages, especially during peak seasons. If we lose the services of our skilled and experienced workers in our business operations without timely and suitable replacement or if we are not able to recruit sufficient skilled workers, we may not be able to maintain our production volumes or quality level or we may fail to fulfil our obligations under the purchase orders with our customers. This may adversely affect our business operations, financial condition, results of operations and reputation.

A material disruption of our operations could adversely affect our business

The Foshan Factory is our only manufacturing base. It is subject to operation risks, such as the breakdown or failure of our major equipment, power supply or maintenance, natural disasters (including but not limited to earthquake, fire, flood and storm), industrial accidents and the need to comply with the directives of relevant government authorities, which could therefore lead to temporary, permanent, partial or complete shut-downs in operations. Our business, financial condition, results of operations and business prospects may be adversely affected by any disruption of operations at the Foshan Factory whether caused by any of the factors mentioned above or otherwise.

The Foshan Factory is operated on leased property and if we fail to renew the lease or secure a lease for our production base in suitable location, our business operation may be adversely affected

The Foshan Factory is operated on leased property. The current lease of the Foshan Factory is due to expire on 30 April 2015. It is crucial for us to renew the lease of the Foshan Factory or secure a lease for our production base in suitable location. There is no assurance that we can renew

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RISK FACTORS

our lease. Furthermore, we cannot assure you that we can relocate our production base to a suitable factory premises at acceptable rent level or on a timely basis for our operations. If we fail to do so, our business operations may be adversely affected.

Our business is susceptible to seasonal fluctuations and if we cannot balance out our production schedule and secure some purchase orders for our low season, our results of operations may be adversely affected

Our business may be impacted by seasonality. Based on our experience, we have a relatively higher level of sales from March to August, while September to February are generally the slack season of our sales. For further details, please refer to the paragraph headed ‘‘Business — Seasonality’’ in this [REDACTED]. To avoid high volatility of the purchase orders received during certain periods and balance out our production schedule, we try to plan ahead in each year our production schedule and secure some purchase orders from some of our customers for our low season. If we cannot balance out our production schedule and secure some purchase orders for our low season, our results of operations may be adversely affected.

Any increase in cost of labour may adversely affect our profitability and competitiveness

Our labour force is mainly made up of workers working in the Foshan Factory. If labour costs increase in the PRC, our cost of sales will also increase. If we are not able to control our labour costs or pass on the increase in labour costs to our customers, it will have an adverse effect on our business, financial condition and results of operations.

We recorded net cash used in operating activities of approximately HK$2.6 million for the year ended 30 June 2013. If we record net cash outflow from operating activities in the future, our liquidity and financial condition may be materially and adversely affected

We recorded net cash used in operating activities of approximately HK$2.6 million for the year ended 30 June 2013, which was principally attributable to the increase in inventories of approximately HK$7.0 million and increase in trade receivables of approximately HK$5.7 million and partially offset by the profit before tax of approximately HK$8.7 million and increase in accruals, other payables and trade deposits received of approximately HK$2.0 million. Please refer to the section headed ‘‘Financial Information — Liquidity, financial resources and capital resources’’ for further details.

In the event that we are unable to generate sufficient cash flow for our operations or otherwise unable to obtain sufficient funds to finance our business, our liquidity and financial condition may be materially and adversely affected. We can give no assurance that we will have sufficient cash from other sources to fund our operations. If we resort to other financing activities to generate additional cash, we will incur additional financing costs, and we cannot guarantee that we will be able to obtain the financing on terms acceptable to us, or at all.

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RISK FACTORS

Our future expansion plans may not be successful and our business may be adversely affected

Our future expansion plans are set out in the section headed ‘‘Future plans and [REDACTED]’’ in this [REDACTED]. There is no assurance that our future expansion plans can be successfully implemented. Some future uncertain events which are beyond our control may affect the smooth running of the expansion plans such as unfavourable economic conditions, changes in the government policies, laws and regulations and delays in obtaining the necessary licences and approvals from the government.

Our business may be adversely affected if we fail to project accurately the time, labour and costs required for the implementation of our expansion plans, or if we fail to secure sufficient amount of purchase orders or at all after the expansion.

The current uses of our Hong Kong headquarters and warehouse may contravene their permitted uses and we could be ordered or requested by the relevant government authorities, the manager of the building or our landlord to discontinue the current uses of the properties and if we fail to find suitable premises, our business operation may be adversely affected

The current uses of our current headquarters and warehouse may contravene their permitted uses under the Conditions of Sale (‘‘Government Lease’’), the Deed of Mutual Covenant and Management Agreement (‘‘DMC’’) and the Occupation Permit (‘‘OP’’). Please refer to the section headed ‘‘Business — Properties’’ in this [REDACTED] for further details.

If any relevant government authority takes the view that the current uses of the two properties are not principally industrial activities, the current uses will not be in line with that permitted under the Government Lease, the DMC and/or the OP. In the event that the current uses of the properties contravene their permitted uses, we may have to relocate to other premises. There is no assurance that we can relocate our current headquarters and warehouse to suitable premises at similar rent level or on a timely basis for our operations. If we are unable to do so, we may experience interruption to our business operations.

We are exposed to foreign exchange risk arising from our business operations

Our sales are predominantly denominated in US$, while our costs for raw materials such as leather are mainly denominated in US$, HK$ and EUR. Some of our costs, including wages of our PRC workers and salaries of our staff are denominated in RMB and HK$. There were fluctuations in the exchange rate between HK$ and other currencies due to changes in the international political and economic conditions and changes in the PRC Government’s policies. Accordingly, we are exposed to exchange rate risk. Furthermore, we are exposed to the risks associated with the exchange rate and currency conversion system in the PRC.

We did not hedge our foreign exchange risk during the Track Record Period. Please refer to note 5 (Financial instruments) of the Accountants’ Report set out in Appendix I to this [REDACTED] for a sensitivity analysis on our profit during the Track Record Period in the event HK$ had reasonably strengthened or weakened by 5% against RMB and EUR.

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RISK FACTORS

We are exposed to credit risks of our customers and if the financial position or creditworthiness of our customers deteriorates, we may not receive in time or at all the trade debts due from our customers and this may adversely affect our operation and financial position

We will grant credit period to some of our customers based on factors such as our years of relationship with them and their payment record, while in some cases, we require our customers to pay a deposit of 30% and settle the remaining balance after receiving our invoice. The complete financial and operational condition of our customers is not always available to us, and we may not be in any position to obtain such information. As a result, if any of our major customers experience any financial difficulty or the creditworthiness of our customers deteriorates, we may not receive in time or at all the trade debts due from our customers and our operation and financial position may be adversely affected.

Some of our customers are sensitive to social responsibility standards and if we have failed or are perceived to have failed to comply with these standards, these customers may choose not to continue their businesses with us

Brand owners and retailers are facing increasing pressure to ensure that labour practices and factory conditions in relation to their products meet certain social responsibility standards. Accordingly, a number of such brand owners and retailers, who are our customers, require their suppliers such as our Group to fulfil certain corporate social responsibility standards. Should we fail to fulfil such standards required or otherwise be publicly associated with poor social responsibility standards, these customers may discontinue their businesses with us and our financial results and business operations may be adversely and materially affected.

We may be subject to liability in connection with industrial accidents at our manufacturing facilities and this may have a negative impact on our business

Due to the nature of our operations, we are subject to the risks of our employees being exposed to industrial-related accidents. We cannot assure that industrial accidents, whether due to malfunctions of machinery or other reasons, will not occur in the future at our production facilities. Under such circumstances, our business and financial performance will be adversely affected. In such an event, we may be liable for loss of life and property, medical expenses, medical leave payments and fines and penalties for violation of applicable PRC laws and regulations. In addition, we may experience interruptions in our operations and may be required to change the manner in which we operate as a result of governmental investigations or the implementation of safety measures to prevent accidents. Any of the foregoing could adversely affect our business, financial condition and results of operations.

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Our insurance coverage may not be sufficient to cover the risks relating to our operations and potential losses and any losses or liabilities that are not covered may have a material adverse impact on our business and financial condition

Our operations are subject to hazards and risks that are typically associated with manufacturing operations which may cause significant injury or damage to person or property. We carry insurance to protect ourselves from a range of contingencies including, among others, risk of loss, theft of, and damage to, among others, property, plant and equipment in our production facilities. However, no assurance can be given that our insurance coverage will be able to cover all types of, or be sufficient to cover the full extent of any loss, theft, damage or injury to person or property for which we may be held liable.

We source raw materials and manufacture leather garment products according to the specifications of our customers and we have put in place quality control procedures in our production process. Nevertheless, there is no assurance that there will not be any product liability claim taken out against us. In the event that we are found to be liable for a product liability claim, our Group may incur significant costs and expenses to defend against such claims and to pay monetary damages. We may also be fined or sanctioned.

Any events and any losses or liabilities that are not covered by our current insurance policies may have a material adverse impact on our business, financial condition, results of operations and prospects.

Our Group may be ordered to make up any unpaid contributions to the social security insurance schemes and housing provident fund and may be subject to penalties which in turn may adversely affect our financial condition and reputation

As advised by our PRC Legal Advisers, under the applicable PRC laws and regulations, our PRC subsidiary, Foshan Shengli, is required to apply for social insurance registration and housing provident fund registration and make mandatory contributions to the social insurance schemes and housing provident fund for its employees.

However, Foshan Shengli has not fully contributed towards social insurance for its employees. It is estimated that the outstanding social insurance contributions which amounted to approximately RMB750,000 for the Track Record Period. Since September 2014 and up to the Latest Practicable Date, we have made social insurance contributions for our employees in compliance with the relevant PRC laws and regulations.

As advised by our PRC Legal Advisers, pursuant to the relevant PRC laws and regulations, Foshan Shengli may be ordered to pay the unpaid social insurance amount accumulated from 1 July 2011 within a prescribed time limit and a daily default fine of 0.05% on any unpaid amount. In addition, a fine equivalent to one time to three times of the unpaid social insurance payment may be imposed on Foshan Shengli if it fails to make such payment within the prescribed time limit. For the outstanding social insurance contributions accumulated during the period from the establishment of Foshan Shengli up to 1 July 2011, Foshan Shengli may be ordered to pay the unpaid social

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RISK FACTORS

insurance amounts within a prescribed time limit. If payment is not made within the prescribed time limit, there will be a daily default fine of 0.2% on any unpaid payment. In addition, if it refuses to make such payment and default fine within the prescribed time limit, the relevant PRC authorities may apply to People’s Courts for mandatory enforcement of the collection.

Apart from the failure to make social insurance contributions, Foshan Shengli has not fully contributed towards the housing provident fund for all its employees. It is estimated that the outstanding housing provident fund contributions for the Track Record Period amounted to approximately RMB463,000. Since September 2014 and up to the Latest Practicable Date, we have made housing provident fund contributions for the employees of Foshan Shengli in compliance with the relevant PRC laws and regulations.

As advised by our PRC Legal Advisers, pursuant to the relevant PRC laws and regulations, Foshan Shengli may be ordered to pay a penalty between RMB10,000 and RMB50,000 if it fails to open housing provident fund accounts for its employees within the prescribed time limit and may be ordered to pay the unpaid housing provident fund contributions within a prescribed time limit.

Furthermore, relevant employees may take legal actions such as filing reports or complaints, against us in future in respect of our failure to make contributions to the social insurance and housing provident fund for such employees.

Please refer to the section headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED] for further details.

In the event that the aforementioned penalties are imposed on our Group, or other administrative sanction is ordered by the relevant PRC authorities against us, for our previous failure to make full contributions to social insurance and/or housing provident fund for our employees, such penalties or administration sanction could adversely affect our financial condition and reputation.

There were two non-compliance incidents arising from the late lodgment of textile notifications for the import of textiles from the PRC into Hong Kong and if legal or administrative actions are taken against us, our financial condition and reputation may be adversely affected

During the Track Record Period, there were two non-compliance incidents where Perline failed to timely lodge textile notifications for the import of textiles from the PRC into Hong Kong. For further details of the two incidents, please refer to the section headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED]. In connection with such non-compliance incidents, HK-TID issued two warning letters respectively to Perline. As at the Latest Practicable Date, Perline has not been subject to any legal or administrative proceedings in respect of such noncompliance incidents. Nevertheless, if legal action had been taken by HK-TID, Perline would have been liable on conviction to a maximum fine of $500,000 and to imprisonment for no more than 2 years in addition to administrative actions that may be taken by HK-TID and our financial condition and reputation may be adversely affected.

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There were some instances of non-compliance arising from the late lodgment of import or export declarations for the importations into or exportations from Hong Kong under the IAE Registration Regulations and if legal or administrative actions are taken against us, our financial condition may be adversely affected

During the Track Record Period, approximately 495 out of about 1,000 import or export declarations were lodged by Perline beyond the prescribed period under the IAE Registration Regulations. Penalties in the sum of about HK$19,500 were accrued and duly paid for such late lodgments. For further details, please refer to the section headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED].

Under the IAE Registration Regulations, if Perline did not have reasonable excuse for the failure to lodge the import or export declarations within the prescribed period and HK Customs brings proceedings against Perline, Perline may be guilty of an offence and liable to a fine of $1,000 and, commencing on the day following the date of conviction, to a daily fine of HK$100 for the period during which the non-compliance continues, for each declaration. If such proceedings are brought and Perline is convicted, our financial condition may be adversely affected.

We failed to comply with section 122 of the Predecessor Companies Ordinance and/or section 429 of the Companies Ordinance and if legal or administrative actions are taken against us, our financial condition may be adversely affected

There were some instances of non-compliance with section 122 of the Predecessor Companies Ordinance and/or section 429 of the Companies Ordinance where Perline failed to lay the annual accounts at the annual general meetings or within the prescribed period (i.e. no more than nine months from the closing date of a financial year) for the financial years ended 30 June 2002 to 30 June 2013 (except for the financial year ended 30 June 2009). For further details, please refer to the section headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED].

There is no assurance that the relevant authorities would not take any legal or administrative actions against Perline and/or its respective directors and officers in relation to the noncompliances. In the event that such legal or administrative actions are taken, they may be liable to maximum fines of HK$300,000 and 12-month imprisonment (if the offence was committed willfully) and accordingly, our financial condition may be adversely affected.

If we fail to properly protect the intellectual property rights of our customers, we may be held liable for the infringements and this may adversely affect our financial condition, reputation and results of operations

Pursuant to the terms of the agreements between our customers and us, our customers retain exclusive ownership of all rights, title and interests in the intellectual properties of the products produced for them. We have obligations not to infringe their intellectual property rights and will be subject to liability if we are in breach of our obligations. Please refer to the section headed ‘‘Business — Intellectual Property’’ in this [REDACTED] for further details.

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RISK FACTORS

Nevertheless, there is no assurance that our internal control measures can adequately protect the intellectual property rights of our customers. If we fail to or are alleged to have failed to properly protect or have infringed the intellectual property rights of our customers, our reputation, business operations, financial condition and results of operations will be adversely affected.

RISKS RELATING TO OUR INDUSTRY

We operate in a highly competitive industry and failure to maintain our competitive position may adversely affect our business

According to the Industry Report, the leather garment manufacturing industry in China in which we operate is fragmented and at a developing stage.

We face competition in terms of price, quality, reliability of timely delivery and ability to source various sorts of leather and manufacture products that meet their specific requirements. According to the Industry Report, leather garment manufacturers that supply to global leather garment retailers possess more advanced processing machineries, more skilful craftsmanship and have more stringent quality control procedures in place. In particular, this type of leather garment manufacturers with experience in providing leather processing services for global retailers is the most competitive. Our manufacturing process does not involve any machine-based automation, and we rely on our skilled and experienced workers to produce leather garment products for our customers. As such, we may not have enough production capacity to accept large purchase orders. There is no assurance that we can maintain our competitive edges over our competitors. Furthermore, any increase in the level of competition may further dilute the market share of our Group. Failure to maintain our competitive position may materially and adversely affect our business, financial condition, results of operations and prospects.

The exports of leather garment from China to the rest of the world are experiencing a downward trend, if the trend continues and the external demand for our leather garment products declines, our business, financial conditions, results of operations and prospects may be adversely affected

Our leather garment products are mainly exported to other countries. According to the Industry Report, the exports of leather garments from China to the rest of the world are experiencing a downward trend. The total export value of leather garments from China to the rest of the world from 2009 to 2013 declined at a CAGR of about 7.6%, from about RMB5.3 billion in 2009 to about RMB3.9 billion in 2013. For further information, please refer to the section headed ‘‘Industry overview’’ in this [REDACTED]. If this decreasing trend continues and the external demand for our leather garment products declines, our business, financial conditions, results of operations and prospects may be materially and adversely affected.

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RISK FACTORS

Tighter import and export controls and additional trade restrictions could increase our operating costs and cause disruption to and may adversely affect our business

Import and export of apparel products are subject to certain import and export controls, including customs inspection and related procedures in countries of origin and destination as well as at transhipment points. Such inspection procedures can result in the seizure of apparel, delay in transhipment or delivery of products and the levying of customs duties, fines or other penalties against exporters or importers. If inspection procedures or other controls are further tightened, we may incur further costs and delays and it may adversely affect our business, financial condition and results of operations.

There is no assurance that we will not be subject to additional trade restrictions. Any increase in tariffs or quotas, embargoes and customs restrictions against apparel items could have an adverse effect on our business, financial condition and results of operations.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

Changes in China’s economic, political and social conditions could adversely affect our business, financial condition and results of operations

Our manufacturing process is conducted in China. Accordingly, our business, financial condition, results of operations and prospects are, to a significant degree, subject to the economic, political and social developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Since the late 1970s, the PRC Government has implemented economic reforms and measures emphasising on the utilisation of market forces in the development of the PRC economy, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises. Nevertheless, the PRC Government continues to play a significant role in regulating industrial development, allocation of natural resources, controlling payment of foreign currency denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Our business, financial conditions and results of operations may be adversely affected by the PRC Government’s economic, political and social policies and regulations.

The legal system in China is not fully developed and has inherent uncertainties that could limit the legal protections available to our Shareholders

Our manufacturing process is principally conducted in China and is governed by PRC law, rules and regulations. Our PRC subsidiary (i.e. WFOE) is generally subject to laws, rules, and regulations applicable to foreign investments in China. The PRC legal system is based on the Constitution of the PRC and is made up of written laws, regulations, directives and local laws and regulations. Prior court decisions may be cited for reference but have limited weight as precedents. Since the late 1970s, the PRC Government has significantly enhanced PRC legislation and

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RISK FACTORS

regulations to provide protection to various forms of foreign investments in China. However, China has not developed a fully-integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activity in China. As many of these laws, rules and regulations are relatively new, and because of the limited volume of published decisions, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and may not be as consistent and predictable as in other jurisdictions. In addition, the PRC legal system is based in part on government policies and administrative rules that may have a retroactive effect. As a result, we may not be aware of our violations of these policies and rules until some time after the violation. Furthermore, the legal protection available to us under these laws, rules and regulations may be limited. Any litigation or regulatory enforcement action in China may be protracted and may result in substantial costs and the diversion of resources and management attention.

PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit us from using the proceeds of the [REDACTED] to make additional capital contributions or loans to our PRC subsidiary

Although leather garment manufacturing industry is a light industry and accordingly requires a relatively small capital base, any capital contributions or loans that we, as an offshore entity, would like to make to our PRC subsidiary, including from the proceeds of the [REDACTED], are subject to PRC regulations. For example, any of our loans to our PRC subsidiary cannot exceed the difference between the total amount of investment of which our PRC subsidiary is approved to make under relevant PRC laws and the registered capital of our PRC subsidiary, and such loans must be registered with the local branch of the SAFE. Furthermore, our capital contributions to our PRC subsidiary must be approved by the Commerce Authorities. There is no assurance that we will be able to obtain these approvals and registrations. If we fail to obtain such approvals and registrations, we may not be able to make equity contributions or provide loans to our PRC subsidiary, which may adversely affect our PRC subsidiary’s liquidity and ability to fund their working capital and expansion projects and meet their obligations and commitments.

Our ability to pay dividends and utilise cash resources in our subsidiaries is dependent upon our subsidiaries’ earnings and distributions and subject to the restrictions under the applicable PRC laws

Our Company is a holding company. Our turnover is generated from our business operations conducted through our subsidiaries. Our Company’s ability to make dividend payments and other distributions in cash, pay expenses, service any debts incurred, and finance the needs of other subsidiaries, depends upon the receipt of dividends, distributions or advances from our subsidiaries. The ability of our subsidiaries to pay dividends or other distributions may be subject to their earnings, financial positions, cash requirements and availability, applicable laws, rules and regulations, and restrictions on making payments to our Company contained in financing or other agreements. These restrictions could reduce the amount of dividends or other distributions that our Company receives from our subsidiaries, which could in turn restrict our ability to fund our

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RISK FACTORS

business operations and to pay dividends to our Shareholders. Our Company’s future declaration of dividends may not reflect our historical declarations of dividends and will be at the absolute discretion of our Board.

Furthermore, our PRC subsidiary is required to set aside a certain percentage of their after-tax profit based on PRC accounting standards each year to their respective reserve funds in accordance with the requirements of relevant PRC laws and provisions in their respective articles of associations. Our PRC subsidiary is thus restricted in their ability to transfer a portion of their net income to us in the form of dividends, even though our PRC subsidiary is not our main source of dividends. Distributions by our PRC subsidiary to our Company in forms other than dividends may be subject to government approval and taxes. These limitations on the flow of funds between and amongst us and our PRC subsidiary could restrict our ability to respond to changing market conditions or appropriately allocate funds to our PRC subsidiary in a timely manner, or at all.

PRC Government control over currency conversion may negatively affect the business operations of our Group

RMB is currently not a freely convertible currency. Both the conversion of RMB into any other currencies and the conversion of foreign currencies into RMB for use in the PRC are regulated by the PRC Government. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade related transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from SAFE or its local branch is required where RMB is to be converted into foreign currency and remitted out of PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC Government may also at its discretion restrict access in the future to foreign currencies for current account transactions.

Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency-denominated obligations.

Negative publicity on PRC products may materially and adversely affect our business and reputation

Our manufacturing activities are located and carried out in the PRC. There have been incidents in the past which involved serious allegations of China-made products containing harmful types or levels of chemicals. If similar incidents occur again, their associated negative publicity may have an adverse impact on the general manufacturing sector in the PRC and may indirectly create an adverse impact on our business. This may negatively impact on our profitability. Our business, financial condition, results of operations and growth prospects may also be materially and adversely affected.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

[REDACTED]

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS Name Executive Directors Ms. CHEUNG Woon Yiu (張煥瑤 alias Idy Cheung) Ms. LAM Wai Si Grace (林慧思) Mr. CHING Wai Man (程偉文 alias Ramond Ching) Non-executive Director Ms. NG Lai Hung (吳麗虹) Independent non-executive Directors [Mr. WONG Wai Kong (黃偉桄)] [Mr. HOW Sze Ming (侯思明)] [Mr. Philip David THACKER]	Residential Address 10th Floor 112 Tin Hau Temple Road Hong Kong 12 Belleview Drive Repulse Bay Hong Kong Flat A, 6th Floor, Tower 3 2 Po On Road, Cronin Garden Sham Shui Po, Kowloon Hong Kong Flat 12G, Block 7 Whampoa Garden, Site 12 Hunghom, Kowloon Hong Kong [Flat A, 21/F, Tower 6 33 Tsing King Road, Phase 1 Tierra Verde Tsing Yi, New Territories Hong Kong] [Flat D, 50/F, Tower 3 Metro Town Tseung Kwan O, New Territories Hong Kong] [Ryoka Yoyogi Building, 7F Sendagaya 4-2-12 Tokyo 151-0051 Japan]	Nationality
		Chinese Canadian Chinese Chinese [Chinese] [Chinese] [British]

Further information of our Directors are disclosed in the section headed ‘‘Directors, senior management and staff’’ of this [REDACTED].

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

PARTIES INVOLVED IN THE [REDACTED]

Sponsor Halcyon Capital Limited 11/F, 8 Wyndham Street Central Hong Kong [REDACTED] [REDACTED] Legal adviser to our Company Chiu & Partners as to Hong Kong law 40/F, Jardine House 1 Connaught Place Central Hong Kong Legal adviser to our Company GFE Law Office as to PRC law 18/F, Guangdong Holdings Tower No. 555, Dongfeng East Road Guangzhou PRC Legal adviser to our Company Conyers Dill & Pearman (Cayman) Limited as to Cayman Islands law Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands Legal adviser to the Sponsor Deacons [REDACTED] 5/F as to Hong Kong law Alexandra House 18 Chater Road Central Hong Kong

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Legal adviser to the Sponsor and Global Law Office [REDACTED] 30/F as to PRC law Shanghai Square No. 138, Middle Huai Hai Road Shanghai 200021 PRC Auditors and reporting accountants HLB Hodgson Impey Cheng Limited Certified Public Accountants 31/F, Gloucester Tower The Landmark, 11 Pedder Street Central Hong Kong Compliance adviser Halcyon Capital Limited 11/F, 8 Wyndham Street Central, Hong Kong

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CORPORATE INFORMATION

Registered office
Head office and principal place of
business in Hong Kong
Company’s website
Company secretary
Authorised representatives
Audit committee
Remuneration committee

Cricket Square
Hutchins Drive, PO Box 2681
Grand Cayman, KY1-1111
Cayman Islands
Unit 1701 Treasure Centre
42 Hung To Road
Kwun Tong, Kowloon
Hong Kong
www.odella.com
(Note: information on this website dos not form part
of this [REDACTED])
Mr. CHAN Hing Yik (CPA)
Flat D, 33/F
Block 2
Beverly Garden
Tseung Kwan O
New Territories
Hong Kong
Ms. CHEUNG Woon Yiu
10/F
112 Tin Hau Temple Road
Hong Kong
Mr. CHAN Hing Yik (CPA)
Flat D, 33/F
Block 2
Beverly Garden
Tseung Kwan O
New Territories
Hong Kong
[Mr. WONG Wai Kong] (Chairman)
[Mr. HOW Sze Ming]
[Mr. Philip David THACKER]
[Ms. LAM Wai Si Grace] (Chairman)
[Mr. WONG Wai Kong]
[Mr. HOW Sze Ming]

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CORPORATE INFORMATION

Nomination committee [Ms. CHEUNG Woon Yiu] (Chairman) [Mr. WONG Wai Kong] [Mr. HOW Sze Ming] Corporate governance committee [Ms. NG Lai Hung] (Chairman) [Mr. WONG Wai Kong] [Mr. HOW Sze Ming] [Mr. Philip David THACKER] Principal share registrar and transfer [REDACTED] office Hong Kong branch share registrar and [REDACTED] transfer office Principal banker Chong Hing Bank Limited Ground Floor, Chong Hing Bank Centre 24 Des Voeux Road Central Hong Kong

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REGULATIONS

This section sets forth summaries of the most significant laws and regulations applicable to our operations and businesses in Hong Kong and the PRC.

HONG KONG

Import and Export Ordinance

The IAE Ordinance came into effect in 1972. It is a statute which provides for the regulation and control of, among other things, the import and export of articles into or out of Hong Kong.

General — lodging of import or export declarations with HK Customs

Under the IAE Ordinance, import and export of “prohibited articles” (as defined under the IAE Ordinance) require permission licences issued by HK-TID. Leather and leather products are currently not ‘‘prohibited articles’’ under the provisions of the IAE Ordinance or its subsidiary legislations. Accordingly, import and export of leather as raw materials and leather products generally do not require a permission licence to be issued by HK-TID under the IAE Ordinance, where import or export of textiles to or from particulars countries and subject to a licensing regime as mentioned in the sub-paragraph headed ‘‘Licensing regime for import and export of textiles’’ below.

Under the IAE Registration Regulations, an importer of leather, leather products or textiles is under an obligation to lodge with HK Customs an accurate and complete import declaration through a specified provider of ‘‘Government Electronic Trading Services’’. A similar obligation is imposed on an exporter of leather, leather products or textiles by the IAE Registration Regulations. In such connection, our Group is obliged to lodge import and export declarations with HK Customs under the IAE Registration Regulations in connection with the import and export of leather, leather products or textiles.

In our business operation, we are generally required to lodge import (or, as the case may be, export) declarations for (a) import of leather from overseas to Hong Kong as raw materials; (b) export of (among other raw materials) such leather from Hong Kong to Foshan Factory for processing; (c) import of the processed leather garments from Foshan Factory to Hong Kong; and (d) export of the finished leather garments from Hong Kong to overseas.

Licensing regime for import and export of textiles

In general, (i) imports and exports of textiles (which do not include leather products) from or to the PRC and (ii) exports of textiles to the US are subject to the licensing requirements under the IAE Ordinance. Such licences are currently administered by HK-TID. For clarity purpose, no licences are required for textiles imports from places other than the PRC, nor are any licences required for textiles exports to places other than the PRC and the US.

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In our business operation, we may import textiles or leather garments with high textiles components from the PRC. We may also export leather garments with high textile components to the US. In addition, the leather garments manufactured by the Group in the PRC and imported back to Hong Kong may have textile components, and the raw materials of such textile components may sometimes be exported from Hong Kong to the Group’s factory in the PRC. In such cases, Perline is generally subject to the said textiles licensing requirements. For the avoidance of doubt, leather and leather garments which do not have textile components or merely have low textile components are generally not subject to the said textiles licensing requirements.

Textiles Trader Registration Scheme (or TTRS) is a scheme whereby traders registered as a ‘‘textiles trader’’ under it and during the validity period of such registration, are (subject to their compliance with certain prescribed conditions) exempted from the textiles licensing requirements of the IAE Ordinance in respect of textiles which fall within the scope of TTRS. It has been in operation since July 1993. When a registered textiles trader relies on the exemption granted to him under TTRS to import or export such textiles, he is simply required to cover such imports and exports with self-completed notifications setting out particulars of the consignments. Traders who do not wish to participate in TTRS may continue to make use of the licensing service provided by HK-TID. From the commencement of TTRS up to 31 December 2004, it generally covered (among others) (a) import of textiles from any country or place and (b) export of textiles that were not entitled to a certificate of Hong Kong origin to any country or place. From 1 January 2005 up to 19 May 2011, TTRS generally covered (among others) (a) import and export of textiles from or to the Mainland and (b) exports of textiles to those economies which invoked safeguard measures against textiles and clothing products of the Mainland. Starting from 20 May 2011, TTRS covers (a) imports of textiles from the PRC; (b) exports of textiles to the PRC; and (c) exports of textiles to the US. Registration under TTRS is valid for 12 months and is renewable.

Perline has since 1993 been registered as a textiles trader under TTRS under the IAE General Regulations. It hence is exempted from the textiles licensing requirements under the IAE Ordinance and for import or export of textiles to the designated countries as mentioned above in accordance with the IAE General Regulations. Such exemption is valid to the extent of (and subject to the compliance with) the conditions of exemption under the IAE General Regulations, TTRS and such other conditions as set out on any textiles notifications. The exemption conditions may also be altered by the circulars which may be issued by HK-TID from time to time.

In connection with our business operation and as one of the conditions of exemption under TTRS, we are generally required to lodge notifications when importing textiles from Foshan Factory to Hong Kong and exporting textiles from Hong Kong to Foshan Factory for processing.

Enquires with HK Customs and HK-TID

In September 2014, we made enquiries with HK Customs and HK-TID, and their replies indicated that, there was no record of any criminal prosecutions instituted or administrative actions (save for the two warning letters given by HK-TID to Perline as mentioned in the paragraph headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED]) taken against Perline

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or its directors, which fell under the purview of HK Customs or HK-TID. HK-TID further indicated that its reply was based on its available records in respect of textiles import or export licensing and TTRS in the past two years.

Our Directors confirm that during the Track Record Period and save as disclosed in the section headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED], our Group complied with the relevant provisions under the IAE Ordinance and its subsidiary legislations.

Employment and labour legislation

The principal employment and labour statutes in Hong Kong include the Employment Ordinance, the Employees Compensation Ordinance, the MPF Ordinance and the Minimum Wage Ordinance.

The Employment Ordinance is an ordinance enacted for, among other things, the protection of the wages of employees and the regulation of the general conditions of employment and employment agencies. Under the Employment Ordinance, an employee is generally entitled to, among other things, notice of termination of his or her employment contract; payment in lieu of notice; maternity protection in the case of a pregnant employee; not less than one rest day in every period of seven days; severance payments or long service payments; sickness allowance; statutory holidays or alternative holidays; and paid annual leave of up to 14 days depending on the period of employment. Our Directors confirm that no legal proceedings (whether criminal or civil) have been instituted, brought or continued against us for violation or non-compliance of the Employment Ordinance up to the Latest Practicable Date.

The Employees Compensation Ordinance is an ordinance enacted for the purpose of providing for the payment of compensation to employees injured in the course of employment. As stipulated by the Employees Compensation Ordinance, an employer is required to take out an insurance policy to insure against the injury risk of his or her employees. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction to a fine and imprisonment. An employer who has taken out an insurance policy under the Employees Compensation Ordinance is required to display a prescribed notice of insurance in a conspicuous place on each of its premises where any employee is employed. Our Directors confirm that at all times during the Track Record Period, Perline has been the employer of all of our Group’s staff in Hong Kong and has maintained an insurance policy under the Employees Compensation Ordinance, with the requisite notice of insurance.

The MPF Ordinance is an ordinance enacted for the purposes of providing for the establishment of non-governmental mandatory provident fund schemes (‘‘MPF Schemes’’). Under the MPF Ordinance, every employer of an employee of 18 years of age or above (but below the retirement age) is required to take all practical steps to ensure that the employee becomes a member of a registered MPF Scheme. Any employer who contravenes this requirement commits a criminal offence and is liable on conviction to a fine and imprisonment. If an employer has complied with such requirement to the satisfaction of the Mandatory Provident Fund Schemes Authority, a

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certificate will be issued to the employer, certifying that the employer is a participating employer in the specified MPF Scheme. At all times during the Track Record Period, Perline has been a certified participating employer in a registered MPF Scheme known as ‘‘Manulife Global Select ’’ (MPF) Scheme .

The Minimum Wage Ordinance is a statute enacted for the purposes of providing for a minimum wage at an hourly rate for most employees. It came into effect on 1 May 2011. For the period commencing 1 May 2011 and ended 30 April 2013, the minimum hourly wage rate for an employee (other than an employee with disability) was HK$28 per hour. It has been increased to HK$30 per hour since 1 May 2013.

During the Track Record Period, our Group was in compliance with the relevant provisions of the above employment and labour legislations.

Protection of Endangered Species of Animals and Plants Ordinance

Both PRC and Hong Kong are parties to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). The Protection of Endangered Species of Animals and Plants Ordinance (Chapter 586 of the Laws of Hong Kong, “PESAP Ordinance”) came into effect on 1 December 2006 to give effect to the CITES in Hong Kong. The importation, introduction from the sea, exportation, re-exportation and possession or control of specified endangered species of animals and plants, whether alive, dead, its parts or derivatives (including medicines) of those species, are thus regulated under the PESAP Ordinance. Schedule 1 to the PESAP Ordinance sets out a list of species and categorises them into different appendices which are regulated with varying degrees of control under the PESAP Ordinance.

Leathers currently imported and used by us (namely, sheepskin, goatskin, lambskin, lambswool shearling, cowhide and pigskin) in the manufacture of leather garments do not fall under Schedule 1 to the PESAP Ordinance.

Compliance with Hong Kong laws and regulations

Save as disclosed in the paragraph headed ‘‘Business — Legal proceedings and noncompliance’’ in this [REDACTED], we have obtained all licenses, permits or certificates necessary to conduct our operations from the relevant governmental bodies in Hong Kong, and Perline in conducting its business has since the commencement of the Track Record Period and up to the Latest Practicable Date been in compliance with all relevant laws and regulations in Hong Kong in all material respects.

THE PRC

Categories of Foreign Investment

Investment in the PRC conducted by foreign investors and foreign investment enterprises shall comply with the Guidance Catalogue of Industries for Foreign Investment (外商投資產業指導目錄) (the ‘‘Catalogue’’), which was amended and promulgated by MOFCOM and the National

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Development and Reform Commission (國家發展和改革委員會) on 24 December 2011. The Catalogue, as amended, became effective on 30 January 2012 and contains specific provisions guiding market access of foreign capital, stipulating in detail the areas of entry pertaining to the categories of encouraged foreign-invested industries, restricted foreign-invested industries and prohibited foreign investment. Any industry not listed in the Catalogue is a permitted industry.

Dividend Distribution

The principal laws governing dividend distributions by Foshan Shengli include the PRC Company Law, the PRC Wholly Foreign Owned Enterprise Law (中華人民共和國外資企業法) and Rules for the Implementation of the PRC Wholly Foreign Owned Enterprise Law (中華人民共和國外資企業法實施細則). Under these laws and regulations, PRC companies, including domestic companies and Wholly Foreign-Owned Enterprises (the ‘‘WFOEs’’), are required to set aside each year at least 10% of their after-tax profit based on PRC accounting principles to their statutory surplus reserve until the cumulative amount of such reserve reaches 50% of their registered capital. Furthermore, WFOEs may also be required to set aside funds for employee bonus and welfare, at the discretion of such PRC companies and as stipulated in their articles of association. WFOEs shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Violation of the abovementioned laws, regulations or rules may result in orders to make full allocation of required funds, and imposition of fines.

Processing Trade

According to Administration of the Examination and Approval of Processing Trade Tentative Procedures (加工貿易審批管理暫行辦法) promulgated by MOFCOM on 27 May 1999 and effective as from 1 June 1999, the import and export enterprises, foreign investment enterprises, and export processing and assembling service companies (collectively ‘‘operating enterprises’’) which have been approved of can engage in processing trade business (including Processing of Supplied Materials (來料加工) and Processing of Purchased Materials (進料加工)) upon approval of relevant competent authority of foreign trade and economy. The State classifies processing trade import merchandise into prohibited category, restricted category and permitted category, and prohibits processing trade business involving imported materials and parts belonging to the prohibited merchandise category. An operating enterprise must process and export in accordance with Processing Trade Business Approval Certificate (加工貿易業務批准證). If it is necessary to change some of the particulars of the project due to objective factors, the operating enterprise must report to the original examination and approval authority for its approval before the deadline specified in Processing Trade Business Approval Certificate, and go through change-related formalities with the Customs.

Pursuant to the Notice of the State Council on the Implementation of Decision of the Standing Committee of the NPC on Authorizing the State Council to Temporarily Adjust Certain Administrative Approval Items Prescribed in Laws in Guangdong Province (國務院關於執行《全

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國人民代表大會常務委員會關於授權國務院在廣東省暫時調整部分法律規定的行政審批的決定》的通知) promulgated by the State Council on 13 January 2013, the approvals of both the processing trade business and the domestic sales of the bonded imported materials or the exported-oriented manufactured goods of the processing trade business are ceased temporarily in Guangdong Province with a trial period of three years. To this end, the Bureau of Foreign Trade and Economic Cooperation of Guangdong Province (廣東省對外貿易經濟合作廳) and Guangdong SubAdministration of General Administration of Customs of the PRC (海關總署廣東分署) promulgated the Notice of the Bureau of Foreign Trade and Economic Cooperation of Guangdong Province and Guangdong Sub-Administration of General Administration of Customs of the PRC on the Implementation of the Relevant Works of Ministry of Commerce of the PRC and General Administration of Customs of the PRC on the Reformation of the Approval of Processing Trade in Guangdong Province (廣東省外經貿廳海關總署廣東分署貫徹落實商務部海關總署關於廣東省加工貿易審批改革有關工作的通知) on 8 August 2013, proposing that enterprises in Guangdong Province should conduct the cargo filing procedure of processing trade business in customs with the Certificate of State of Operation and Production Capacity of the Trade Processing Enterprise (加工貿易企業經營狀況及生產能力證明) issued by the competent foreign trade and economy authority and relevant documents required by customs.

Customs

Pursuant to the Customs Law of the PRC (中華人民共和國海關法), promulgated by the Standing Committee of NPC on 22 January 1987 and revised on 28 December 2013, all import goods throughout the period from entering the territory to Customs clearance, and all export goods throughout the period from declaration to departure from the territory shall be subject to Customs control. Each of the consignee of import goods and the consigner of export goods shall make a truthful declaration and submit the import or export licence and relevant papers to the customs office for inspection. Enterprises or individuals engaged in customs declarations without registration or qualification shall be subject to fines, with their illegal income confiscated. The Customs Law also stipulates that enterprises engaging in processing trade shall file to the Customs with the relevant approval documents and processing trade contract; manufactured goods from the processing trade shall be re-exported within the prescribed period; if bonded imported materials or manufactured goods from the processing trade are transferred for domestic sales for some reason, the Customs shall collect duties for the bonded imported materials according to the law with the domestic sales approval documentation.

According to the Administrative Provisions of the PRC on Registration of the Customs Declaring Entities (中華人民共和國海關報關單位註冊登記管理規定) promulgated by the General Administration of Customs of the PRC on 13 March 2014, a declaring entity shall go through the registration procedures at the customs in accordance with these provisions. Registration of declaring entities shall be divided into the registration of declaring enterprises and the registration of consignees or consignors of imported or exported goods.

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Foreign Exchange Regulation

The principal regulations governing foreign currency exchange in the PRC are the Foreign Exchange Administration Regulations of the PRC (中華人民共和國外匯管理條例) which was promulgated by the State Council on 29 January 1996, became effective on 1 April 1996 and was subsequently amended on 14 January 1997 and 1 August 2008, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment (結匯、售匯及付匯管理規定), which was promulgated by PBOC on 20 June 1996 and became effective on 1 July 1996. Under these rules and other PRC rules and regulations on currency conversion, Renminbi is freely convertible for payments of current account items, such as trade and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as direct investment, loan or investment in securities outside the PRC unless prior approval of SAFE or its local counterpart is obtained. Foreign-invested enterprises in the PRC may purchase foreign exchange without the approval of SAFE for paying dividends by providing certain supporting documents (such as board resolutions), or for trade and services-related foreign exchange transactions by providing commercial documents evidencing such transactions. They are also allowed to retain their current exchange earnings derived from current account transactions below the ceiling prescribed by SAFE. Foreign exchange transactions in respect of capital account items, such as direct investment, loans, securities investment and repatriation of investment, remain subject to the approval of SAFE.

According to the Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises (國家外匯管理局綜合司關於完善外商投資企業外匯資本金支付結匯管理有關業務操作問題的通知) promulgated by SAFE on 29 August 2008, the RMB fund from the settlement of foreign currency capital of a foreign-invested enterprise shall be used within the business scope as approved by relevant governmental authorities, and shall not be used for equity investment unless otherwise specifically provided for. Except foreign-invested real estate enterprises, no foreigninvested enterprise shall use the RMB fund from the settlement of foreign currency capital to purchase domestic real estate for any purpose other than its own use. When using the RMB fund from the settlement of foreign currency capital for any securities investment, a foreign-invested enterprise shall follow relevant provisions of the State. Further, it cannot be used to repay RMB loans if the proceeds of such loans have not yet been used.

Taxation

Enterprise Income Tax

According to the EIT Law, and the Regulation on the Implementation of the Enterprise Income Tax Law of the PRC (中華人民共和國企業所得稅法實施條例), which was promulgated by the State Council on 6 December 2007 and became effective on 1 January 2008, enterprises are divided into resident enterprises and non-resident enterprises. A resident enterprise shall pay enterprise income tax on its income deriving from both inside and outside the PRC at the rate of enterprise income tax of 25%. A non-resident enterprise that has an establishment or place of

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business in the PRC shall pay enterprise income tax on its income deriving from the PRC and obtained by such establishment or place of business, as well as on its income generated from outside the PRC but has actual relationship with such establishment or place of business, at the rate of enterprise income tax of 25%. A non-resident enterprise that does not have an establishment or place of business in the PRC, or has an establishment or place of business in the PRC but the income has no actual relationship with such establishment or place of business, shall pay enterprise income tax on its income deriving from the PRC at a reduced rate of enterprise income tax of 10%.

The EIT Law stipulates that, with regard to business transactions between an enterprise and its related parties which are not in conformity with the principle of independent transaction and result in reduction of the amount of taxable income or income of such enterprise or its related parties, the tax authority shall have the right to make reasonable adjustments thereto. The EIT Law further requires the enterprise to attach an annual report on related party transactions (if any) between the enterprise and its related parties when submitting its annual enterprise income tax return to the tax authority.

According to the Arrangement between the Mainland and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排) and the Notice of the State Administration of Taxation on the Issues relating to the Administration of the Dividend Provision in Tax Treaties (國家稅務總局關於執行稅收協定股息條款有關問題的通知), the withholding tax on dividends paid by a PRC company to the beneficial owner which is a Hong Kong resident is no more than 5% of the gross amount of the dividends, provided that such Hong Kong resident directly holds at least 25% of the equity interests in the PRC company at all times within the 12-month period immediately prior to distribution of the dividends. In any other case, the tax so charged shall not exceed 10% of the gross amount of the dividends. In according with the Notice on How to Understand and Define the ‘‘Beneficial Owner’’ Stipulated in the Tax Arrangements (關於如何理解和認定稅收協定中「受益所有人」的通知) promulgated by the SAT on 27 October 2009, the ‘‘beneficial owner’’ shall be the person entitled to be the ownership and control of the income or rights and property incurred from the income. The agent, tube company shall be excluded from ‘‘the beneficial owner’’. The Notice further stipulated, the tube company means the company established for the purpose of avoiding or reducing tax, transfer or accumulation of profit. Such company is only registered in the country of domicile to satisfy the organizational form as required by law, but it does not engage in such substantial business operations as manufacturing, distribution and management.

According to the Circular of State Administration of Taxation on Printing and Issuing the Administrative Measures for Non-residents to Enjoy the Treatment Under Taxation Treaties (for Trial implementation) (國家稅務總局關於印發《非居民享受稅收協定待遇管理辦法(試行)》的通知), where a non-resident enterprise (as defined under the PRC tax laws) that receives dividends from a PRC resident enterprise wishes to enjoy the favorable tax benefits under the tax arrangements, it shall submit an application for approval to the competent tax authority. Without being approved, the non-resident enterprise may not enjoy the favorable tax treatments provided in the tax agreements.

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The Circular of State Administration of Taxation on Strengthening Enterprise Income Tax Management on Non-resident Enterprises Equity Transfer Income (國家稅務總局關於加強非居民企業股權轉讓所得企業所得稅管理的通知), which was issued by SAT on 10 December 2009 and became effective on 1 January 2008, provides that except for the purchase and sale of equity through a public securities market, where a foreign corporate investor indirectly transfers the equity of a PRC resident enterprise by disposing the equity of an overseas holding company (‘‘Indirect Transfer’’) located in a tax jurisdiction that (i) has an effective tax rate of less than 12.5%; or (ii) does not tax its residents on their foreign income, the foreign corporate investor shall report the Indirect Transfer to the competent PRC tax authority within 30 days from the date when the equity transfer agreement was made. In this case, the PRC tax authority will examine the true nature of the Indirect Transfer. Should it deem the foreign investor to have made the Indirect Transfer without reasonable commercial purpose and in order to avoid the PRC tax, the PRC tax authority may disregard the existence of the overseas holding company that is used for tax planning purpose and re-characterize the Indirect Transfer. As a result, gains derived from such Indirect Transfer by the foreign investor may be subject to the EIT.

Value-Added Tax

Pursuant to the Provisional Regulations of the PRC on Value-Added Tax (中華人民共和國增值稅暫行條例), which was amended by the State Council on 5 November 2008 and became effective on 1 January 2009, and the Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-Added Tax (中華人民共和國增值稅暫行條例實施細則), which was amended by the Ministry of Finance of the PRC (中華人民共和國財政部) and SAT on 28 October 2011, entities or individuals engaging in sale of goods, provision of processing services, repairs and replacement services and importation of goods within the territory of the PRC shall pay value-added tax. Unless provided otherwise, the rate of value-added tax is 17%.

Environmental Protection

The Environmental Protection Law of the PRC (中華人民共和國環境保護法), which was promulgated by the Standing Committee of the NPC and became effective on 26 December 1989, and whose amendments were made on 24 April 2014 and will take effect on 1 January 2015, establishes the legal framework for environmental protection in the PRC. The environmental protection department of the State Council supervises and administers the environmental protection work in the PRC, and establishes national standards for the environmental quality and discharge of pollutants. Local environmental protection bureaus are in turn responsible for the environmental protection work within their respective jurisdictions.

Construction Project Environmental Protection

The Environmental Impact Appraisal Law of the PRC (中華人民共和國環境影響評價法), which was promulgated by the Standing Committee of the NPC on 28 October 2002 and became effective on 1 September 2003, the Administration Rules on Environmental Protection of Construction Projects (建設項目環境保護管理條例), which was promulgated by the State Council and became effective on 29 November 1998, and the Measures for the Administration of

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Examination and Approval of Environmental Protection Facilities of Construction Projects (建設項目竣工環境保護驗收管理辦法), which was promulgated by the State Environmental Protection Administration of the PRC (中華人民共和國國家環境保護總局) on 27 December 2001 and amended on 22 December 2010, require enterprises planning construction projects to engage qualified professional institution to provide assessment reports on the environmental impact of such projects. The assessment report must be approved by the competent environmental protection authorities prior to commencement of any construction work. Enterprises shall file an application for examination and acceptance of the environmental protection facilities upon the completion of the construction project. Installations for the prevention and control of pollution at a construction project must be designed, built and commissioned together with the principal part of the construction project. A construction project may be formally put into production or use only if the corresponding environmental protection facilities have passed the acceptance examination.

Prevention and Control of Pollutions

The Law of the PRC on Prevention and Control of Water Pollution (中華人民共和國水污染防治法), which was amended by the Standing Committee of the NPC on 28 February 2008, the Law of the PRC on Prevention and Control of Atmospheric Pollution (中華人民共和國大氣污染防治法), which was amended by the Standing Committee of the NPC on 29 April 2000, and the Law of the PRC on Prevention and Control of Environmental Noise Pollution (中華人民共和國環境噪聲污染防治法), which was promulgated by the Standing Committee of the NPC on 29 October 1996 and became effective on 1 March 1997, as well as the Law of the PRC on the Prevention and Control of Environmental Pollution by Solid Waste (中華人民共和國固體廢物污染環境防治法), which was amended by the Standing Committee of the NPC on 29 June 2013, respectively prescribes the details for the prevention and control of water pollution, atmospheric pollution, noise pollution and solid waste pollution.

With regard to enterprises violating the aforesaid laws, the relevant environmental protection authorities may impose administrative penalties on them in accordance with laws and regulations. Any enterprise that has caused an environmental pollution hazard shall be responsible for eliminating it and compensating the entities or individuals directly damaged.

Labour

The Labour Law of the PRC (中華人民共和國勞動法) (‘‘Labour Law’’) promulgated by the Standing Committee of the NPC came into effect on 1 January 1995 and other relevant laws establish the legal framework for regulation of the relationship between employers and employees in the PRC. According to the Labour Law, the policies that the wages shall be paid according to the performance, equal pay for equal work, lowest wage protection and special labour protection for female worker and juvenile workers shall be implemented. The Labour Law also requires the employer to establish and perfect a safety and healthy system, and enter into employment agreement with its employees.

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According to the Labour Contract Law of the PRC (中華人民共和國勞動合同法) (‘‘Labour Contract Law’’) which was promulgated by the Standing Committee of the NPC on 29 June 2007 and amended on 28 December 2012 and its regulations for the implementation, enterprises established in PRC shall enter into employment agreements with its employees, in which the term of the employment agreement, job duties, working hours, rest and leave, social insurance, labour compensation, labour protection, working conditions and protection against occupational hazards shall be provided for. Both employer and employee shall duly perform their duties. Meanwhile, the Labour Contract Law also provides for the scenario of rescission and termination, except the situation explicitly stipulated in the Labour Contract Law which will not subject to economic compensation, the economic compensation shall be paid to the employee by the employer for the illegally rescission or termination of the employment agreement.

Further, under the Regulations on Paid Annual Leave for Employees (職工帶薪年休假條例), which was promulgated by the State Council on 14 December 2007, became effective on 1 January 2008, employees who have served more than one year with an employer are entitled to a paid vacation ranging from 5 to 15 days, depending on their length of service. Employees who waive such vacation time at the request of employers shall be compensated at three times their normal salaries for each waived vacation day.

The Production Safety Law of the PRC (中華人民共和國安全生產法) (‘‘Production Safety Law’’), which was promulgated by the Standing Committee of the NPC on 29 June 2002 and amended on 31 August 2014 and will take effect on 1 December 2014, is the principal law governing the supervision and administration of production safety in the PRC. Production Safety Law requires production entities to meet the relevant legal requirements, such as providing its staff with training on production safety and providing safe working conditions in compliance with relevant laws, rules and regulations. Any production entities unable to provide the required safe working conditions may not engage in production activities. Violation of the Production Safety Law may result in imposition of fines and penalties, suspension of operations, an order to cease operations, or even criminal liability in severe cases.

According to the Interim Regulations Concerning the Levy of Social Insurance Fees (社會保險費徵繳暫行條例) which was promulgated and implemented on 22 January 1999 by the State Council and other relevant regulations, employing entities shall participate in social insurance schemes and shall make contribution to social insurance for its employees. In case an enterprise fails to make full contributions to social insurance for its employees, the relevant PRC authorities may order the enterprise to rectify the non-compliance within a prescribed time limit. If the enterprise still fails to make the payment within the time limit, in addition to the unpaid social insurance premiums, a surcharge for overdue payment equal to 0.2% per day of the overdue payment counting from the date when the amount becomes overdue will be imposed. If the enterprise refuses to pay the social insurance premiums and the surcharge within the time limit, the relevant PRC authorities may apply to people’s courts for mandatory enforcement of the collection.

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Pursuant to the Social Insurance Law of the PRC (中華人民共和國社會保險法) promulgated by the Standing Committee of the PRC on 28 October 2010 and became effective on 1 July 2011 and the Provisions on Implementing the Social Insurance Law of the PRC (實施《中華人民共和國社會保險法》若干規定) promulgated by the Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) on 29 June 2011 which became effective on 1 July 2011, the State establishes social insurance systems such as basic pension insurance, basic medical insurance, work related injury insurance, unemployment insurance and maternity insurance so as to protect the right of citizens in receiving material assistance from the State and the society in accordance with the law when getting old, sick, injured at work, unemployed and giving birth.

Employers are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, work-related injury insurance and maternity insurance. If an employer does not pay the full amount of social insurance premiums as scheduled after 1 July 2011, the social insurance premium collection institution shall order it to make the payment or make up the difference within the stipulated period and impose a daily surcharge equivalent to 0.05% of the overdue payment from the date on which the payment is overdue. If payment is not made within the stipulated period, the relevant administration department shall impose a fine from one to three times the amount of overdue payment. Employers shall not require employees to pay for the said surcharge.

Pursuant to the Regulations on the Administration of Housing Provident Funds (住房公積金管理條例) promulgated by the State Council on 3 April 1999 and became effective on 3 April 1999 and as amended on 24 March 2002, employers shall go through housing provident funds registration with the local housing fund administration center and open housing fund accounts for their employees in the bank. Failure to handle abovementioned registration and accounts opening, an employer may be subject to being ordered to handling within a time limit. If the employer fails to handle within the prescribed time limit, it shall be imposed the penalty ranging from RMB 10,000 to RMB50,000. Where an employer fails to pay up housing provident funds within the prescribed time limit, the housing fund administration center shall order it to make payment within a certain period of time. If the employer still fails to do so, the housing fund administration center may apply to the court for enforcement of the unpaid amount.

Product Liabilities

Manufacturers and sellers of defective products in the PRC may incur liability for loss and injury caused by such products. Under the General Principles of the Civil Laws of the PRC (中華人民共和國民法通則), which became effective on 1 January 1987 and amended on 27 August 2009, a defective product which causes property damage or physical injury to any person could subject the manufacturer or sellers of such product to civil liability for such damage or injury.

Pursuant to the Product Quality Law of the PRC (中華人民共和國產品質量法) (as promulgated on 22 February 1993, implemented on 1 September 1993 and amended in 2000, 2009 and 2013), the Law of the PRC on the Protection of the Rights and Interests of Consumers (中華人民共和國消費者權益保護法) (as promulgated on 31 October 1993 and amended on 25 October 2013) and the Tort Law of the PRC (中華人民共和國侵權責任法) (as promulgated on 26

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December 2009 and implemented on 1 July 2010), a manufacturer shall be responsible for the quality of the products it produced. Where any harm is caused by a defective product, the victim may require compensation to be made by the manufacturer of the product or the seller of the product. If the defect of the product is caused by the manufacturer and the seller has made the compensation for the defect, the seller shall be entitled to be reimbursed by the manufacturer. If the defect of the product is caused by the fault of the seller and the manufacturer has made the compensation for the defect, the manufacturer shall be entitled to be reimbursed by the seller.

M&A Provisions

The Promulgation of the Provisions on Merger and Acquisition of a Domestic Enterprise by Foreign Investors (關於外國投資者並購境內企業的規定) (the ‘‘M&A Provisions’’) was promulgated by MOFCOM, SASAC, SAT, SAIC, CSRC and SAFE on 8 August 2006 and became effective on 8 September 2006 whose amendments were made by MOFCOM and became effective on 22 June 2009.

The M&A Provisions require that an application shall be made to the MOFCOM for examination and approval of the acquisition of any company inside the PRC affiliated with a domestic company, enterprise or natural person, which is made in the name of an overseas company lawfully established or controlled by such domestic company, enterprise or natural person. The M&A Provisions also provide that the overseas listing of a special purpose company controlled directly or indirectly by PRC companies or individuals on an overseas stock market must be approved by the CSRC.

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INDUSTRY OVERVIEW

Investors should note that Ipsos has been engaged by our Company to prepare the Industry Report to provide an overview of the development of the leather garment manufacturing industry, which will be used for use in whole or in part in this [REDACTED].

Ipsos is a market research and consulting company, and the views contained in the Industry Report are solely those of Ipsos. The information and statistics set out in this section have been extracted from the Industry Report compiled by Ipsos. Such information and statistics extracted from the Ipsos Report reflects an estimate of market conditions based on Ipsos’s research and analysis. Ipsos and our Directors believe that the sources of this information are appropriate sources for such information and have taken reasonable care in extracting and reproducing such information. Ipsos and our Directors have no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading.

No independent verification has been carried out on such information and statistics by us, the Sponsor, the Lead Manager, the [REDACTED], their respective affiliates, directors and advisers or any other parties involved in the [REDACTED], and none of them makes any representation as to the accuracy or completeness of such information.

SOURCE OF INFORMATION

Industry Report

We commissioned Ipsos, an Independent Third Party, to conduct an industry analysis of and produce the Industry Report. This [REDACTED] contained information extracted from the Industry Report. The sources cited in this ‘‘Industry overview’’ section are in the form provided in the Industry Report, unless otherwise noted.

Our Directors confirm that Ipsos, including all of its subsidiaries, divisions and units, is independent of and not connected with us in any way. Ipsos has given its consent for us to quote from the Industry Report and to use information contained in the Industry Report in this [REDACTED].

Ipsos is the subsidiary of Ipsos S.A., a global market research company headquartered in Paris, France and was listed on the Paris Stock Exchange. According to the business consulting unit of Ipsos, Ipsos S.A. group mainly offers market research and consulting services to corporate clients.

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INDUSTRY OVERVIEW

The following assumptions are used in the Industry Report:

. The supply and demand of products and services provided by leather garment manufacturing industry in the global market are assumed to be stable and without shortage over the forecast period
. It is assumed that there is no external shock such as financial crisis or natural disasters in the global market to affect the demand and supply for the products and service of leather garment manufacturing industry in China over the forecast period

The following parameters are considered in the marketing sizing and forecast model of the Industry Report:

. GDP growth rates in the global economy and China from 2009 to 2013
. Average annual household disposable income and consumption expenditure in the global economy and China from 2009 to 2018
. Total export value of leather garment from China to the rest of the world from 2009 to 2013

We have paid Ipsos a total of approximately HK$438,000 in fees for the preparation of the Industry Report. We believe that the fees are reasonable for the preparation of an industry report by an independent third-party consultant.

MARKET OVERVIEW OF LEATHER GARMENT DEMAND IN GLOBAL MARKET

Demand for leather garments in the global market

Leather garment consumption is closely related to living standards. Developed countries are the major consumers of leather products in the global market, while demand for leather goods has been increasing in developing countries in recent years. Considerable amounts of leather articles are purchased by the Japanese, Chinese, and Indian tourists from luxury shops in European countries. Please refer to the paragraph headed ‘‘Main categories of leather garments according to their quality of production’’ in this section below for the retail price range per leather garment.

Retail Sales Value of Garments and Leather Garments in Global Market

The total retail sales value of garments in global market grew at a CAGR of about 5.7% from 2009 to 2013. The total retail sales value of leather garments in global market grew at a CAGR of about 6.0%, from about US$100.4 billion in 2009 to about US$126.8 billion in 2013. The improvement of global economy increased the purchasing power and desire for garments.

As illustrated by the chart under the paragraph headed ‘‘Import value of leather garments in global market’’, despite the decline of the import value of leather garments in the global market from 2011 to 2013, the total retail sales value of leather garments in the global market continues to

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increase steadily. This can be explained by the increase in the level of domestic production and domestic consumption of leather garment products in some of the countries. For example, the PRC Government has introduced a series of policies that stimulate domestic demand, such as further implementation of urbanisation, improve rural family income, etc. This series of policies have promoted a steady growth of domestic consumption in China.

The total retail sales value of garments in global market is expected to grow at a CAGR of about 5.1%, from about US$1,325.1 billion in 2014 to about US$1,617.2 billion in 2018. The total retail sales value of leather garments in global market grew at a CAGR of about 5.6%, from about US$130.4 billion in 2014 to about US$162.3 billion in 2018. As the global financial climate is going to recover gradually from the economic crisis, the global demand for the garments and leather garments are expected to improve gradually, with expansion of demand from Latin American countries, such as Brazil and Argentina etc. All these bring positive impact to the growth of global garments retail sale in the future.

The chart below illustrates the total retail sales value of garments and leather garments in the global market from 2009 to 2018:

==> picture [359 x 203] intentionally omitted <==

Source: The Industry Report

Import Value of Leather Garments in Global Market

Notwithstanding that the total import value of leather garments in global market declined from about US$3,811.0 million in 2011 to about US$3,491.9 million in 2013, the total import value grew at a CAGR of about 2.0%, from about US$3,277.4 million in 2009 to about US$3,491.9 million in 2013. In particular, the import value of leather garments in North America and Asia from 2009 to 2014 recorded a CAGR of about 6.8% and 6.4% respectively from 2009 to 2013. In general, during these years, consumers in Europe switched from high-end leather products to cheaper ones which were made with artificial leather, which recorded a negative CAGR of about -2.1% from 2009 to 2013.

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INDUSTRY OVERVIEW

==> picture [64 x 163] intentionally omitted <==

==> picture [77 x 157] intentionally omitted <==

Source: The Industry Report

Asia and North America enjoyed higher CAGRs in import value of leather garments from 2009 to first half of 2014.

The table below illustrates the import value of leather garments in global market by region from 2009 to first half of 2014:

Year	Asia Import value Percentage to total	Asia Import value Percentage to total	North America	North America	Europe	Europe	Rest of the World	Rest of the World	Global	Global
		Percentage to total	Import value	Percentage to total Import value		Percentage to total	Import value	Percentage to total	Import value	Percentage to total
2009 2010 2011 2012 2013 First Half of 2014 CAGR 2009–2013 (%)	(US$ million) (%) (US$ million) (%) (US$ million) 225.8 6.9% 509.4 15.5% 1,282.9 274.8 7.9% 568.2 16.3% 1,250.0 298.1 7.8% 563.8 14.8% 1,341.7 310.5 8.7% 571.8 16.1% 1,120.6 289.7 8.2% 662.8 18.7% 1,180.3 119.4 6.2% 220.7 11.5% 559.3 6.4% 6.8% –2.1%					(%) (US$ million) 39.1% 1,259.3 35.9% 1,392.0 35.2% 1,607.4 31.6% 1,547.0 33.8% 1,417.1 29.1% 1021.5 3.0%		(%) (US$ million) (%) 38.4% 3,277.4 100.0% 39.9% 3,485.0 100.0% 42.2% 3,811.0 100.0% 43.6% 3,549.9 100.0% 39.9% 3,491.9 100.0% 53.2% 1921.0 100.00% 2.0%

Source: The Industry Report

The grading system of leather is not standardized with the lack of industry-wide standard to follow

There is no industry-wide standard grading system for leather. Until a standard system is set in place, those in the industry must rely on commonly accepted grading systems derived from the quality grading characteristics of leather — appearance, texture, types of leather, cleanliness, tanning technology and tanning method.

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INDUSTRY OVERVIEW

OVERVIEW OF LEATHER GARMENT MANUFACTURING INDUSTRY IN CHINA

There were about 5,122 leather garment manufacturers in China in 2013. The leather garment manufacturing industry production value was about RMB60.8 billion. The manufacturers shifted their focus from producing for international export to local consumption. The export share decreased from about 28.0% in 2009 to about 16.0% in 2013 as the global economy and external retail sales activity was not as strong as local economy and local retail sales activity in China. In 2013, the volume of leather garment manufacturing industry in China ranked first globally with about 62.3 million units, with about 49.9% of those as middle-end leather garments.

Main categories of leather garments according to their quality of production

The leather garments were divided into four main categories according to their quality of production.

Categories Luxury High-end Middle-end Mass market	Description Luxury leather garments were mainly manufactured with fine- grained, no dirt, appearance with luster and without defects leather material. High-end leather garments were mainly manufactured with fine- grained, little dirt, appearance with luster and minor defects leather material. Middle-end leather garments were mainly manufactured with fine, clean, and some defects leather material. Mass market leather garments were mainly manufactured with lower quality leather, such leather contains dirt, dull appearance, and average to major defects.	Target Customers High income consumers with high purchasing power, and are brand- seeking, mainly from USA, Australia, EU countries, China and India High income consumers with fashion preference, mainly from USA, Australia, EU countries, Japan, Korea and China. Middle class consumers with some fashion sense, and relatively price sensitive. Low income consumers with preference on leather garments, and highly price sensitive	Retail Price Range (US$) per leather garment More than 2,400 800–2,400 480–800 Less than 480	Manufacturing price (US$) per leather garment
				More than 480 200–480 100–200 Less than 100

Source: The Industry Report

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INDUSTRY OVERVIEW

The key features of leather garment manufacturing industry in China include highly concentrated production, labour intensive with low cost, lack of brand establishment

Highly concentrated production: The production of leather garment manufacturing industry was highly concentrated in some regions in China, mainly in Zhejiang and Hebei provinces. In 2013, the production volume of leather garment in Zhejiang and Hebei provinces accounted for about 30.5% and about 28.9% of its total production volume respectively. Please refer to the paragraph headed ‘‘Revenue of leather garment manufacturing industry in China’’ in this section below for details of the production volume and revenue generated for the leather garment manufacturing industry in China.

Labour intensive with low costs: China’s leather garment manufacturing industry remains competitive with its low-cost labourers. This made China as the one of larger manufacturing leather garment manufacturing countries in the global market.

Lack of brand establishment: Most leather garment manufacturers in China do not build its own brand but work as an Original Equipment Manufacturer (OEM) for foreign brands.

Number of Leather Garment Manufacturers in China

The total number of leather garment manufacturers in China from 2009 to 2013 was generally increased to approximately 5,000 units (with two years less and three years more). During the period, the leather garment industry in the PRC has experienced the impact of a constant rise in production costs and RMB appreciation, decrease in the export volume of leather garments and the implementation of series of policies by the government to boost both export and domestic sales. In 2013, the number of leather garment manufacturers in China reached 5,122.

Revenue of Leather Garment Manufacturing Industry in China

According to the Industry Report, the total revenue of leather garment manufacturing industry in China is expected to increase with increasing local retail activity and consumer’s confidence. The total revenue of leather garment manufacturing industry in China grew at a CAGR of about 13.2%, from about RMB36,944.0 million in 2009 to about RMB60,762.0 million in 2013.

The following chart illustrates the growth of the total revenue of leather garment industry in China from 2009 to 2018:

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Source: The Industry Report

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INDUSTRY OVERVIEW

Revenue of Leather Garment Manufacturing Industry in China by Market Level from 2009 to 2018

Year		Luxury and High-end	Luxury and High-end			Middle-end	Middle-end
	Revenue	Percentage to total	Volume	Percentage to total	Revenue	Percentage to total	Volume	Percentage to total
2009 2010 2011 2012 2013 CAGR 2009–2013 (%) 2014F 2015F 2016F 2017F 2018F CAGR 2014F–2018F (%) CAGR 2009–2018F (%) Year	(RMB million) 4,736.0 6,008.0 7,331.0 8,751.0 9,292.0 18.4% 10,704.0 12,323.0 14,497.0 17,054.0 20,062.0 17.0% 17.4%			(%) 2.7% 2.9% 3.3% 4.2% 4.0% 4.2% 4.6% 5.0% 5.5% 6.0%	(RMB million) 17,061.0 20,727.0 24,376.0 28,154.0 30,330.0 15.5% 35,668.0 40,702.0 46,446.0 53,000.0 60,479.0 14.1% 15.1%			(%) 26.0% 27.2% 29.7% 37.2% 36.0% 38.6% 41.4% 44.5% 47.6% 50.8%
	Revenue	Percentage to total	Volume	Percentage to total	Revenue	Percentage to total	Volume	Percentage to total
2009 2010 2011 2012 2013 CAGR 2009–2013 (%) 2014F 2015F 2016F 2017F 2018F CAGR 2014F–2018F (%) CAGR 2009–2018F (%)	(RMB million) 15,147.0 16,824.0 18,244.0 19,497.0 21,139.0 8.7% 24,111.0 26,340.0 28,422.0 30,570.0 32,761.0 8.0% 8.9%	(%) 41.0% 38.6% 36.5% 34.6% 34.8% 34.2% 33.2% 31.8% 30.4% 28.9%	(unit in million) 39.1 43.2 43.1 33.9 37.3 –1.1% 38.0 37.1 35.7 34.3 32.8 –3.6% –1.9%	(%) 71.3% 69.9% 67.0% 58.6% 59.9% 57.2% 54.0% 50.5% 46.9% 43.2%	(RMB million) 36,944.0 43,559.0 49,951.0 56,402.0 60,761.0 13.2% 70,483.0 79,365.0 89,365.0 100,624.0 113,302.0 12.6% 13.3%	(%) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%	(unit in million) 54.8 61.8 64.4 57.8 62.3 3.3% 66.5 68.6 70.7 73.2 76.0 3.4% 3.7%	(%) 100.0% 100.0% 100.0% 100.0% 99.9% 100.0% 100.0% 100.0% 100.0% 100.0%

As shown in the table above, in 2013, the luxury and high-end product category and the middle-end product category constituted about 15.3% and 49.9% of the total revenue of leather garment manufacturing industry in China, respectively. In terms of growth, the revenue of leather garment manufacturing industry in China increased significantly for the luxury and high-end product category with a CAGR of about 18.4% from 2009 to 2013, whereas the middle-end product category recorded a CAGR of about 15.5% from 2009 to 2013. It is estimated that growth

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momentum for these two product categories will continue. According to the Industry Report, it is estimated that by 2018 the revenue of leather garment manufacturing industry in China will continue to increase for the luxury and high-end product category and the middle-end product category, and is expected to account for about 17.7% and 53.4% of the total revenue of leather garment manufacturing industry in China, respectively.

Average price of leather jackets in China

The average price of leather jacket per piece (at manufacturer level) in China grew at a CAGR of about 9.4% from about RMB738 per piece in 2009 to about RMB1,079 per piece in first half of 2014. According to the Industry Report, nearly 75% of garment manufacturing companies in China have been facing pressure on the increase in labour cost. While total wage grew at approximately 10.6%, the supply of labour in leather garment industry decreased. Along with a general increase in raw material price, this resulted in the increase in production cost of leather garment, which pushed up the average price of leather jacket per piece (at manufacturer level) in China.

The following chart illustrates the average price of leather jacket per piece (at manufacturer level) in China from 2009 to first half of 2014:

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Source: The Industry Report

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INDUSTRY OVERVIEW

Export Value of Leather Garments from China

The following chart illustrates the total export value of leather garments from China to the rest of the world from 2009 to first half of 2014, which shows a decline at a CAGR of about –7.6%, from about RMB5.3 billion in 2009 to about RMB3.9 billion in 2013.

==> picture [287 x 166] intentionally omitted <==

Source: The Industry Report

Total export value of leather garments from China in first half of the year accounts for about 35.9% of the whole year export on average from 2009 to 2013. Year on year change has been picking up since 2012, and is experiencing a moderate growth in 2014, of about 0.9%. Such phenomenon can be explained by the seasonal production of leather garments, which reaches its peak at second half of the year for northern hemisphere, for the winter season.

Moreover, the moderate decline of leather garment export from China from 2009 to 2013 could be attributed to the rising competitions from its neighbor countries, such as Pakistan and India, both countries experienced at about 2.6% and about 10.1% growth in CAGR of export value of leather garments from 2009 to 2013, respectively. With labor issues and increased wages driving up manufacturing costs at China’s leather garment manufacturing industry, leather garment brand owners in developed countries are looking to source their leather garment manufacturing from India. One of the reasons is that Indian leather garments manufacturers enjoy a relatively cheaper labour, with the average annual wage at about RMB49,524 in 2013, about 3.8% lower than the average annual wage in China.

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INDUSTRY OVERVIEW

Average price of key raw materials for leather garment manufacturing

As shown in the table below, there has been a general increase in the average price of sheepskin and goatskin per piece (at manufacturer level) imported into China from France, Italy, Pakistan and Turkey from 2009 to first half of 2014:

US$/sq. ft

Year 2009 2010 2011 2012 2013 First Half of 2014 CAGR 2009–2013 (%)	Sheepskin (include both sheepskin and lambskin) France Italy Pakistan Turkey 1.8 2.2 2.0 1.2 1.7 2.5 2.6 1.4 2.0 3.0 2.9 1.7 4.6 3.2 4.5 2.4 2.8 3.7 3.6 3.7 2.0 3.3 3.5 2.5 11.7% 13.9% 15.8% 32.5%	Sheepskin (include both sheepskin and lambskin) France Italy Pakistan Turkey 1.8 2.2 2.0 1.2 1.7 2.5 2.6 1.4 2.0 3.0 2.9 1.7 4.6 3.2 4.5 2.4 2.8 3.7 3.6 3.7 2.0 3.3 3.5 2.5 11.7% 13.9% 15.8% 32.5%	Sheepskin (include both sheepskin and lambskin) France Italy Pakistan Turkey 1.8 2.2 2.0 1.2 1.7 2.5 2.6 1.4 2.0 3.0 2.9 1.7 4.6 3.2 4.5 2.4 2.8 3.7 3.6 3.7 2.0 3.3 3.5 2.5 11.7% 13.9% 15.8% 32.5%	Goatskin	Goatskin
	France 1.8 1.7 2.0 4.6 2.8 2.0 11.7%	Italy 2.2 2.5 3.0 3.2 3.7 3.3 13.9%	Pakistan 2.0 2.6 2.9 4.5 3.6 3.5 15.8%	France Nil 4.4 5.0 3.2 5.1 Nil 5.0% (CAGR from 2010 to 2013)	Italy 2.3 2.0 2.3 3.5 2.1 1.8 –2.2%	Pakistan
						1.1 1.4 1.8 1.7 1.0 0.7 –2.4%

Note: Nil indicates data is unavailable due to lack of publication. Data of goatskin in Turkey is unavailable due to lack of publication.

Source: The Industry Report

COMPETITIVE LANDSCAPE OF LEATHER GARMENT MANUFACTURING INDUSTRY IN CHINA

According to the Industry Report, the leather garment manufacturing industry in China is fragmented and at a developing stage. There were about 5,122 manufacturers in the leather garment manufacturing industry in China with the top 10 manufacturers made up about 3.4% of total industry revenue in 2013. According to the Industry Report, the Company’s market share in the leather garment manufacturing industry in China constituted approximately 0.1% of the total industry revenue in 2013 and was ranked beyond top 20 of the leather garment manufacturers in China in 2013.

Factors of Competition

Superior manufacturing capabilities of manufacturers who supply global retailers

Leather garment manufacturers that supply to global leather garment retailers possess more advanced processing machineries, more skillful craftsmanship and have more stringent quality control procedures in place. In particular, this type of leather garment manufacturers with experience in providing leather processing services for global retailers is the most competitive.

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INDUSTRY OVERVIEW

Infiltration of low quality leather

As the barriers to the leather garment manufacturing industry in China are low, there has been a significant number of small family manufacturing workshops in the market. This has led to an infiltration of low quality and cheap leather into the retail market.

Below average labour cost in certain regions in China

In a labour intensive industry such as the leather garment manufacturing industry, there are certain regions within China that possess advantage in lower labour. In 2013, the average annual wage in China was about RMB51,474. In comparison, labour wages are about RMB58,563 per year in Eastern China, RMB50,291 per year in Southern China, RMB46,966 per year in Western China, RMB43,438 per year in Northeast China and RMB42,767 per year in Central China. Therefore, manufacturers based in Southern, Western, Northeast and Central China have cost advantage over those in the East.

Entry Barriers of Leather Garment Manufacturing Industry in China

Establishing a procurement channel with stable supply of raw materials can be an entry barrier of leather garment manufacturing industry in China

A constant supply of high quality leather raw materials is crucial for manufacturing of good quality leather garments. However, the technology in leather garment manufacturing industry in China is not advanced enough to meet the consumers’ needs since the leather raw materials in China are not of top quality. The manufacturers have to import good quality leather raw materials and accessories from other countries. New manufacturers cannot easily establish good raw materials procurement channels with the suppliers abroad and such is a significant entry barrier for the new entrants to overcome.

Finding a good overseas distributor can be an entry barrier of leather garment manufacturing industry in China

It is important for the manufacturers to develop a long-term stable cooperative relationship with the downstream distributors to ensure the sales of the leather garments. A reliable distributor is required for international brands to recognize the leather garment manufacturers in China and select them as their leather garment suppliers. It will be difficult for new manufacturers to locate a reliable overseas distributor and be recognized and promote their products to large overseas international brand owners.

Opportunity for Leather Garment Manufacturing Industry in China

PRC Government’s policy support on leather garment manufacturing industry

The PRC Government has been offering policy support to the growth of leather garment industry in China. In 2012, the State Council announced the policy ‘‘Light industry twelfth 5-year plan’’《輕工業‘‘十二五’’發展規劃》, which acted as the action plan for the integrated responsive

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measures to be run in the light industry between 2011 and 2015, focusing on restructuring and revitalization of 10 light industries including leather garment manufacturing industry. For example, the policy included speeding up of construction of specialized wholesale market and industrial parks for leather garment and creating platform for exchange of leather garment technology. This will give more room for development in the leather garment industry.

Tax benefits for leather garment manufacturing industry

The leather garment manufacturing industry is associated to agricultural industry as it utilizes hides from farm animals, such as pigs, lambs and cattle. As the agricultural industry is one of the policy development focuses for PRC Government, agricultural industry and its associated industries also enjoy preferential tax benefit such as national export tax rebate of about 13% for leather garments. Thus, this offers growth opportunities to leather garment industry in China.

Competitive Advantages of the Company in Leather Garment Manufacturing Industry in China

According to the Industry Report, the competitive advantages of the Company include the following:

Reliable and stable leather procurement capacity

The Company has established reliable and stable procurement channels worldwide. With such capability, it enhances the Company’s procurement efficiency as well as lowering the procurement costs. All these help strengthen the Company’s order taking ability.

Involvement in product development process with their customers

The Company has involved in the pre-production and product development process with its customers, such as giving advice on market trend and the designs of leather garment products. These value-added services differentiate the Company from the general leather garment manufacturers. It is expected that these services can attract and develop a long term business relationship with customers, therefore created a stable increment of the product demand in the future.

Passing on cost of raw materials to customers when average price of raw materials fluctuates

As the average import price of sheepskin and goatskin from the Company’s major importers such as those in France, Italy, Pakistan and Turkey, has been increasing from 2009 to 2013 on an average CAGR of about 11.6%. The Company, however, is able to pass on the increased costs of raw materials to their customers as they operate a made-to-order basis.

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HISTORY, DEVELOPMENT AND REORGANISATION

GENERAL

The main operating subsidiaries of our Group are Perline and Foshan Shengli. Presently, Perline takes charge mainly of our sales, marketing and product development functions, while Foshan Shengli is our manufacturing base.

Perline was first established in 1988. To develop the leather garment production functions of its business, in 1990, Perline and a PRC collectively owned (集體所有制) enterprise (‘‘First PRCJV Partner’’, which is an Independent Third Party) formed the Old FIE in Foshan, Guangdong to engage in manufacturing of leather garments. The Old FIE was initially formed as a sino-foreign equity joint venture enterprise with a joint venture period of 10 years which expired in June 2000. In 2000, the expiry date of joint-venture period was further extended to June 2005. When the Old FIE was first established, Perline owned 25% equity capital in the Old FIE, while the First PRC-JV Partner owned the remaining 75% equity capital. In around June 2002, the First PRC-JV Partner completed transfer of its equity interests in the old FIE to another PRC enterprise (‘‘Second PRCJV Partner’’, which is an Independent Third Party). The Second PRC-JV Partner sold its equity interest in the Old FIE to Perline by stages in 2002 and 2004. Through such purchases, Perline’s equity interest in the Old FIE was increased to 85% in 2002, and to 100% in 2004. The Old FIE has an extended approved term of operation of 15 years, which expired in June 2005. Following the taking of the necessary dissolution steps and applications to relevant governmental authorities, it was formally dissolved in April 2007 by way of winding up by the passing of equity-holders’ resolutions. The PRC Legal Advisers are of the view that the Old FIE was dissolved properly and legally.

During the joint-venture period, Perline and its management gained leather garments related experience in the leather garment industry. Because of the uncertainty in further extending the joint venture period of the Old FIE and also having regard to the possible tax holidays that may be enjoyed by establishing a new foreign investment entity, in June 2004, Perline established Foshan Shengli as its wholly owned subsidiary. Since then, Foshan Shengli has become our Group’s production base.

Our Group was founded in 1988 by Mr. Lam Hon Keung (“Mr. HK Lam”) and Mr. Lam Hon Team, Anthony (“Mr. Anthony Lam”), who were brothers. Before founding our Group, Mr. HK Lam started to carry out leather garment trading business in 1979 through setting up (together with his wife) a company in Hong Kong (i.e. Odella Company Limited (‘‘OCL’’)). Subsequently, as Mr. HK Lam wanted to form a family business with his brother Mr. Anthony Lam, the brothers used their own personal savings to form Perline in 1988. They together held at least 70% of the issued shares in Perline during the period between 1988 and 1995. Mr. Wong Fai Ming (“Mr. FM Wong”) was a member of the senior management of Perline and he held a minority interest in Perline when it was incorporated. In 1995, Mr. Anthony Lam retired from our Group. During the period between 1995 and 2010, Mr. HK Lam held 60% of the issued shares in Perline. In 2010, Mr. HK Lam and the other two shareholders of Perline retired from our Group. In April 2010, the ownership and management of Perline were passed to Ms. Grace Lam (a daughter of Mr. HK Lam), Ms. Idy Cheung (daughter-in-law of Mr. Anthony Lam) and Mr. Ramond Ching. Please refer to the section headed ‘‘History, Development and Reorganisation — Corporate History — Establishment and major shareholding changes of our Group companies — Perline’’ of the this [REDACTED] for further information of the historical share transfers in Perline.

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HISTORY, DEVELOPMENT AND REORGANISATION

Following such transfers, the new management of our Group (i.e. Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching) examined the positioning of our Group in the garment-manufacturing industry, and started to focus on production and sale of leather garments to international and regional fashion brand owners. In addition, our business model was also geared toward higher-end fashions and provision of value-added services, in particular, our Group put more emphasis on:

. customers who include international and regional fashion brands, and most of whom offer a broad spectrum of apparel and accessories under their own brands, and leather apparel forms only a minor portion of their product portfolio;
. offering our customers not only with our manufacturing services to produce leather apparel products, but also a range of ancillary pre-production product development services and post-production logistical services; and
. providing flexibility in the production scale for each purchase order by our customers, aiming to cater for their business needs and requirements in each case.

Please refer to the section headed “Business” in this [REDACTED] for further details of our business model.

BUSINESS HISTORY AND MILESTONES

Year 1990 2004 2010 2011 2013	Key milestone
	The Old FIE (in which our Group owned 25% equity interest) was established to engage in manufacturing of leather garments Foshan Shengli (a wholly owned subsidiary of Perline) was established and has become our production base Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching became shareholders and management of the Group and determined to focus on sale of leather garments to international and regional fashion brands Our pre-production product development team headed by Ms. Grace Lam was established, which strengthened our pre-production product development services A domestic sales team was established in the PRC, which targeted to expand our Group’s marketing operations and to develop the PRC domestic market

Year
1990
2004
2010
2011
2013

Key milestone

The Old FIE (in which our Group owned 25% equity interest) was
established to engage in manufacturing of leather garments
Foshan Shengli (a wholly owned subsidiary of Perline) was established and
has become our production base
Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching became
shareholders and management of the Group and determined to focus on sale
of leather garments to international and regional fashion brands
Our pre-production product development team headed by Ms. Grace Lam
was established, which strengthened our pre-production product
development services
A domestic sales team was established in the PRC, which targeted to
expand our Group’s marketing operations and to develop the PRC domestic
market

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HISTORY, DEVELOPMENT AND REORGANISATION

CORPORATE HISTORY

Our Group, comprising our Company and its subsidiaries

Upon completion of the Reorganisation, our Group comprised four companies: our Company, Odella BVI, Perline and Foshan Shengli. Among these entities, Perline and Foshan Shengli are our principal operating subsidiaries during the Track Record Period. The following table contains some information of our Company and its subsidiaries as of the Latest Practicable Date:

Name of Group member Our Company Odella BVI Perline Foshan Shengli	Date of incorporation/Date of commencement of business (if different) 3 September 2014 11 September 2014 15 March 1988 21 June 2004	Place of incorporation Cayman Islands BVI Hong Kong PRC	Principal activities
			Investment holding Investment holding Sales, marketing and development of leather products Manufacture of various leather products, domestic and foreign trading (restricted items being subject to relevant approval)

See ‘‘History, Development and Reorganisation — Corporate Structure’’ of this [REDACTED] for the chart showing the shareholding and corporate structure of our Group immediately after the Reorganisation.

Establishment and major shareholding changes of our Group companies

Our Company

Our Company was incorporated on 3 September 2014 with an authorised share capital of HK$1 million divided into 100 million shares of HK$0.01 each. It was incorporated for the purpose of implementing the Reorganisation.

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HISTORY, DEVELOPMENT AND REORGANISATION

On 3 September 2014, one share of HK$0.01 was allotted and issued, nil paid, to Sharon Pierson (an officer of Codan Trust Company (Cayman) Limited, the provider of registered office of the Company), which was transferred to BVI-Cheung on the same date. On the same date (i.e. 3 September 2014), our Company further allotted and issued 999,999 Shares, nil paid, to BVICheung, BVI-Lam and BVI-Ching. Brief details of the shareholders of the Company immediately following such transfer and subscriptions are shown below:

Subscriber BVI-Cheung BVI-Lam BVI-Ching Total:	No. of Shares subscribed and held 680,000 (Note) 170,000 150,000 1,000,000	Shareholding percentage (%)
		68% 17% 15%
		100%

Note: Inclusive of one subscriber share transferred from Sharon Pierson (an officer of Codan Trust Company (Cayman) Limited, the provider of registered office of our Company).

By an agreement (‘‘Share Swap Agreement’’) dated [.] 2014 and made between, among others, (i) Odella BVI as purchaser; (ii) the Company (as holding company of Odella BVI); and (iii) the Individual Owners as sellers and warrantors, Odella BVI agreed to acquire from the Individual Owners the entire issued share capital in Perline. In consideration of and in exchange for such acquisition, the Company:

(i) credited as fully paid the 1 million nil-paid Shares which were first issued on 3 September 2014 (as mentioned above), and
(ii) issued to the BVI Inv Vehicles 9 million new Shares (and such new Shares were issued to BVI-Cheung, BVI-Lam and BVI-Ching (as nominated by the Individual Owners) in the proportion of 68%, 17% and 15% respectively), all credited as fully paid. Brief details of the shareholders of the Company immediately following completion of the Share Swap Agreement are shown below:

Subscriber BVI-Cheung BVI-Lam BVI-Ching Total:	No. of Shares held 6,800,000 1,700,000 1,500,000 10,000,000	Shareholding percentage (%)
		68% 17% 15%
		100%

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HISTORY, DEVELOPMENT AND REORGANISATION

Odella BVI

Odella BVI was incorporated in BVI on 11 September 2014. It was incorporated for the purpose of implementing the Reorganisation.

Its initial authorised share capital is US$50,000 divided into 50,000 shares of US$1 each. On 11 September 2014, 100 shares in Odella BVI were issued to the Company, and the subscription price of each share was US$1 (i.e. the par value of such share).

Perline

Perline was incorporated in Hong Kong on 15 March 1988. Its initial authorised share capital was HK$200,000 divided into 200,000 shares of HK$1 each. Following the coming into effect of the new Companies Ordinance (Chapter 622 of the Laws of Hong Kong) on 3 March 2014, the nominal value of the shares in Perline was abolished pursuant to section 135 of the new Companies Ordinance.

On 15 March 1988, two shares of HK$1 each were allotted and issued, fully paid at par, to Mr. HK Lam and Mr. FM Wong respectively. On 18 March 1988, Perline further allotted and issued 199,998 shares, fully paid at par, to Mr. HK Lam, Mr. Anthony Lam and Mr. FM Wong. The total number of issued shares in Perline has remained 200,000 up to the Latest Practicable Date.

The following table summaries the changes in shareholders and shareholdings of Perline from 15 March 1988 up to 12 April 2010:

Date (year- month-date) 1988-3-15 1988-3-18 1990-3-17 1995-10-13 2010-4-12	Mr. HK Lam — 120,000 100,000 120,000 —	Mr. Anthony Lam 1 40,000 40,000 — —	Mr. FM Wong 1 40,000 40,000 60,000 —	Mr. Chan Kwok Hung — — 20,000 20,000 —	Ms. Grace Lam — — — — 34,000	Ms. Idy Cheung — — — — 136,000	Mr. Ramond Ching — — — — 30,000	Remarks
								See Note a See Note b See Note c

Notes:

(a) On 17 March 1990, 20,000 shares in Perline were transferred by Mr. HK Lam to Mr. Chan Kwok Hung (then an employee of the Group) at a consideration of HK$20,000. The transfer was made as part of employee incentive to retain Mr. Chan for rendering continuing services to our Group, who further became a technical adviser of the Old FIE. The consideration was determined based on the par value of the shares. Such transfer was properly and legally completed.
(b) In connection with Mr. Anthony Lam’s retirement from our Group in 1995, by two instruments of transfer (and the related bought and sold notes) all dated 13 October 1995, Mr. Anthony Lam transferred (i) 20,000 shares in Perline to Mr. HK Lam at the consideration of HK$315,000, and (ii) 20,000 shares in Perline to Mr. FM Wong at the consideration of HK$315,000. The consideration was determined having regard to the net asset value of Perline at such time. The transfers were properly and legally completed.

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HISTORY, DEVELOPMENT AND REORGANISATION

(c) In connection with the retirement of Mr. HK Lam, Mr. FM Wong and Mr. Chan Kwok Hung from our Group, the following transfers were effected by five instruments of transfer (and the related bought and sold notes) all dated 12 April 2010:

Transferor Mr. HK Lam Mr. FM Wong Mr. FM Wong Mr. FM Wong Mr. Chan Kwok Hung	Transferee Ms. Idy Cheung Ms. Idy Cheung Ms. Grace Lam Mr. Ramond Ching Mr. Ramond Ching	No. of Shares in Perline transferred 120,000 16,000 34,000 10,000 20,000 Total:	Purchase price (HK$)
			120,000 16,000 34,000 10,000 20,000
			200,000

The purchase price of each share in Perline being transferred was determined based on the nominal value of such share and the financial position of Perline. Before such transfers, an interim dividend which represented substantially all the then retained earnings was declared by Perline. The purchase prices as set out in the table above were settled by Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching respectively with their own funds accumulated from their salaries and savings. The transfers were properly and legally completed.

By a shareholders’ agreement (‘‘Perline Shareholders Agreement’’) dated 20 February 2010 and made between the Individual Owners (i.e. Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching), in addition to the HK$200,000 which they paid as purchase price for acquiring the entire equity interest in Perline, they agreed to further inject HK$4.8 million into Perline in the form of shareholders’ loan (the ‘‘Shareholders Loan’’), and the amount to be lent by each Individual Owner was agreed to be in proportion to their respective shareholdings in Perline. Under the Perline Shareholders Agreement, it was also agreed that Ms. Idy Cheung would advance certain sums to Ms. Grace Lam and Mr. Ramond Ching to pay the Shareholders Loan. All such advances owing from Ms. Grace Lam and Mr. Ramond Ching to Ms. Idy Cheung were repaid by February 2014. The Shareholders Loan was used by Perline as working capital. The Perline Shareholders Agreement was formally terminated by the Individual Owners in October 2014. The Shareholders Loan was repaid by Perline to the Individual Owners in [.] 2014.

As part of the Reorganisation, the entire issued share capital in Perline was transferred by the Individual Owners to Odella BVI on [.] 2014 pursuant to the Share Swap Agreement. [The transfers were properly and legally completed.]

Foshan Shengli (WFOE)

Foshan Shengli was established in the PRC on 21 June 2004 as a wholly foreign owned enterprise. Since its establishment and up to the Latest Practicable Date, its sole beneficial owner was Perline and its registered capital amounted to HK$1.5 million. Its registered capital was fully paid up on 14 April 2005. Such registered capital has remained HK$1.5 million up to the Latest Practicable Date.

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HISTORY, DEVELOPMENT AND REORGANISATION

REORGANISATION

Prior to the Reorganisation which started in July 2014, the corporate structure of our Group is as follows:

==> picture [344 x 158] intentionally omitted <==

Steps of Reorganisation

In preparation for the [REDACTED] and the [REDACTED], our Group implemented the Reorganisation which involves the following principal steps:

Each Individual Owner acquired and activated and solely owned a BVI investment vehicle (i.e. the BVI Inv Vehicles) as follows:

Name of BVI Inv Vehicle Quality Century Limited (i.e. BVI-Cheung) Design Vanguard Limited (i.e. BVI-Lam) Olson Global Limited (i.e. BVI-Ching)	Sole shareholder of such BVI Inv Vehicle
	Ms. Idy Cheung Ms. Grace Lam Mr. Ramond Ching

On 3 September 2014, our Company was incorporated in the Cayman Islands as an exempted company. On 3 September 2014, one share of HK$0.01 was allotted and issued, nil paid, to Sharon Pierson, and such share was transferred to BVI-Cheung on the same date.

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HISTORY, DEVELOPMENT AND REORGANISATION

On 3 September 2014, our Company further allotted and issued 999,999 Shares, nil paid, to BVI-Cheung, BVI-Lam and BVI-Ching. Brief details of the shareholders of our Company immediately following such transfer and subscriptions are shown below:

Subscriber BVI-Cheung BVI-Lam BVI-Ching Total:	No. of Shares subscribed and held 680,000 (Note) 170,000 150,000 1,000,000	Shareholding percentage (%)
		68% 17% 15%
		100%

Note: Inclusive of one subscriber share transferred from Sharon Pierson.

Odella BVI was incorporated in BVI on 11 September 2014. On 11 September 2014, 100 shares in Odella BVI were issued to our Company at the aggregate subscription price of US$100 (representing the aggregate par values of such shares).
On [.] 2014, pursuant to the Share Swap Agreement, Odella BVI became the sole shareholder of Perline, and the number of issued Shares in our Company was increased to 10 million. The shareholding percentage of BVI-Cheung, BVI-Lam and BVI-Ching in our Company remained the same immediately before and immediately after the completion of the Share Swap Agreement.

General

As advised by our PRC Legal Advisers, all necessary approvals, permits and licenses as required under the PRC law in relation our Reorganisation have been obtained by our Group.

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HISTORY, DEVELOPMENT AND REORGANISATION

CORPORATE STRUCTURE

The following chart depicts the shareholding and corporate structure of our Group immediately after the Reorganisation:

==> picture [344 x 339] intentionally omitted <==

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HISTORY, DEVELOPMENT AND REORGANISATION

The following chart depicts the shareholding and corporate structure of our Group immediately after the completion of the [REDACTED] (assuming that the [REDACTED] is not exercised at all):

==> picture [434 x 306] intentionally omitted <==

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BUSINESS

OVERVIEW

We strategically focus on:

. customers who include international and regional fashion brands, most of whom offer a broad spectrum of apparel and accessories under their own brands, and leather apparel forms only a minor portion of their product portfolio;
. offering our customers not only with our manufacturing services to produce leather apparel products, but also a range of ancillary pre-production product development services and post-production logistical services; and
. providing flexibility in the production scale for each purchase order by our customers, aiming to cater for their business needs and requirements in each case.

Headquartered in Hong Kong, we operate one manufacturing base (namely, the Foshan Factory), which is located in Foshan, Guangdong Province, the PRC.

Leather as our principal raw material

In contrast to general garment manufacturers using textile or fabric materials for producing clothing, we specialise in using leather as the principal raw materials in manufacturing private label leather apparel products for our customers. Depending on our customers’ preferences and specifications, the types of animal hides and skins used for our leather products are mainly those from lambs, goats, sheep, cows and pigs. We consider that, as compared to textile garment manufacturing, leather garment manufacturing demands special craftsmanship and familiarity in the handling of the principal raw material, leather. Due to the nature of leather garment manufacturing, our Directors regard our production workforce an essential element in our production process, as our business model relies on the skills and craftsmanship of our experienced workers to manufacture leather apparel products which can meet our customers’ specifications and aesthetic requirements. Please see ‘‘Industry Overview — Market Overview of Leather Garment Demand in Global Market’’ for further information on the leather and the leather garment industry.

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BUSINESS

Our business model

We are principally engaged in the manufacture and sale of leather apparel products which conform to the specifications and requirements prescribed by our customers, and our major customers consist mainly of fashion brands. In offering our manufacturing services, we often also provide to certain of our customers pre-production product development services and postproduction logistical services depending on the needs and requirements for individual orders.

Manufacturing services

We produce leather garments, which include jackets, coats, pants, skirts, tops and vests, and for both women’s and men’s apparels, for our customers according to the specifications prescribed by our customers. During the Track Record Period, we have produced close to 98,000 pieces of leather garments for our customers, and a majority of them are leather jackets and coats. We charge our customers based on the number of units per purchase order, and we primarily make to order after the designs, specifications and sample products are confirmed and agreed. The production time, meaning from the placement of orders by our customers to the completion of final quality inspections of the finished products, varies for different orders but will generally take about 3 months, which will include approximately 2 months for ordering of the raw materials and approximately 1 month for the actual manufacturing process.

Pre-production product development services

We strategically focus on customers which include international and regional fashion brands, and which offer a broad spectrum of apparel and accessories under their own brands. We participate at the early stage of certain of our customers’ pre-production product development and often offer such customers various pre-production product development services, including:

sharing with our customers market intelligence on leather fashion trend and production knowhow
providing samples of leather and offering recommendations to our customers on raw material selection
giving suggestions to assist our customers in finetuning or adjusting their original designs so as to improve the efficiency of the production process
producing mock-up products for our customers’ consideration
sourcing leather and other raw materials selected by our customers in producing their products
producing sample products in accordance with the customers’ requirements and designs before they decide on placing purchase orders with us

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BUSINESS

As part of our overall service offerings, except for the charge on sample products, in general we do not charge our customers separately for providing our pre-production product development services, and the sample products will be charged at a specified rate and such rate usually depends on whether the customers will proceed to place production orders with us after receiving our sample products.

Post-production logistical services

Apart from providing manufacturing services and pre-production product development services, we also offer post-production logistical services such as packaging and delivery services. All finished products will be packed carefully in accordance with our customers’ specifications and requirements. Products produced at the Foshan Factory are usually delivered to Hong Kong before they are shipped or transferred to the designated locations of our customers.

Production on a made-to-order basis

As we produce leather garments according to our customers’ specific requirements which may vary in each purchase order, our business operates primarily on a made-to-order basis and we normally will not stock up raw materials for our production. After a purchase order is confirmed by our customers, we will then place orders with our suppliers to purchase raw materials.

Pricing policy

Sale of products domestically within China

Our products are mainly sold by Perline, our wholly-owned subsidiary, to customers outside China. Apart from effecting sales through Perline, during the Track Record Period, our Foshan Shengli also sold products directly to customers within China. The direct sales from Foshan Shengli to customers within China represented an insignificant portion of our total sales during the Track Record Period. Please see “Business — Sales and marketing” below.

For further details on our business model, please refer to ‘‘Business — Business model’’ below.

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BUSINESS

Our financial performance

During the Track Record Period, our turnover is primarily derived from sale of leather garment products that we manufactured. Our sales of leather garment products for each of the two years ended 30 June 2013 and 2014 amounted to approximately HK$51,636,000 and HK$78,134,000, which accounted for approximately 96% and 97% of our total turnover for each of the years ended 30 June 2013 and 2014, respectively. Apart from sale of leather garments, we also sold leather and accessories such as hangtags and linings, which comprise an insignificant portion of our revenue, representing approximately 4% and 3% of our total turnover for each of the years ended 30 June 2013 and 2014, respectively. The following table sets forth our selected financial information for the Track Record Period: For the year ended 30 June 2013 2014 HK$’000 HK$’000 Turnover 53,607 80,586 Gross profit 18,907 27,369 Profit attributable to owners of our Company 7,128 12,896 Units Units Sales volume of leather garment products 40,788 57,179

Please refer to the Accountants’ Report and notes thereto set forth in Appendix I to this [REDACTED] for further details of our financial results during the Track Record Period. Please also refer to section headed ‘‘Summary — Recent developments subsequent to the Track Record Period’’ in this [REDACTED] for our recent developments subsequent to the Track Record Period and financial performance of our Group for the three months ended 30 September 2014.

OUR COMPETITIVE STRENGTHS

We believe our success and potential future growth are attributable to the following principal competitive strengths:

We are able to serve international and well-known customers

While we have built up a diverse customer portfolio ranging from international renowned fashion brands to regional apparel brands throughout our more than 20 years of history, we are able to serve some international and well-known brand owners based in the United States and Australia and who are generally recognised for their fashionable apparels. We believe that such international and well-known brand customers generally demand high standard products and services from their suppliers. Leather is a raw material with a very diverse spectrum of textures, colours, hand-feel and other qualities, requiring craftsmanship and experience to select, process, manufacture and make into quality leather garments with desired looks. We

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BUSINESS

believe that our craftsmanship in leather garment manufacturing is a principal factor enabling us to keep serving these customers, to meet their stringent quality requirements, and to maintain established relationships with them. Please see ‘‘Business — Customers’’ below for further details of our major customers.

We are able to offer a range of product development supports to our customers and provide flexibility in the production scale to meet our customers’ business needs

Most of our customers generally offer a broad collection of apparel and accessories in their own brands, and leather apparel forms only a minor portion of their product portfolio. We believe these customers, who are not specialised in offering leather apparel products, will rely on their approved leather manufacturers to provide certain product development supports to them. We are able to offer various product development supports to these customers ranging from sharing of market intelligence and trends on leather apparel, leather raw material sourcing and recommendations, to latest production knowhow. (please see ‘‘Business — Overview — Pre-production product development services’’ for details of these services). Furthermore, we offer recommendations to our customers on raw material selection that meet the required aesthetics. Moreover, as some of our customers experiment with us by placing small orders and do not place bulk orders for leather garment products, our Directors believe that our flexible approach on product quantity per order is able to cater for the business needs of some of our customers. Please refer to the paragraph headed ‘‘Business model’’ in this section below for further details.

We maintain close business relationships with a wide list of leather suppliers

With our long operating history, we have established close and stable business relationships with a wide list of leather suppliers in Pakistan, China, Turkey, France, India, Italy and other countries, which we believe is vital to the success of our business. During the Track Record Period, we have maintained business relationships with approximately 40 leather suppliers. Our ability to provide pre-production development services and manufacture leather garments which conform to our customers’ specifications depends to a large extent on our ability to source various types of leather from a wide list of leather suppliers. Our close business relationships with our suppliers also keep us abreast of new development in the leather industry and enable us to introduce new leather types and provide new product development ideas to our customers.

We possess an experienced management team and experienced production workforce

Our management team is experienced and is focused on developing our business to meet the competition of the leather garment manufacturing industry, which we believe is a specialised industry. Ms Grace Lam, our executive Director and Chief Executive Officer who is primarily responsible for the marketing function of our Group and also overseeing and directing the daily operations, has more than 15 years of experience in the leather garment manufacturing industry. Mr. Ramond Ching, our executive Director who is primarily

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BUSINESS

responsible for the production function of our Group, has more than 10 years of experience in the garment and fine leather industry. Please refer to the section headed ‘‘Directors, senior management and staff’’ in this [REDACTED] for details of their relevant experience.

Our Directors believe that the experience in sourcing, manufacturing and marketing of our management team in the leather garment manufacturing industry has been essential to our growth, and will be critical to our continued success and the implementation of our key strategies in the future.

Furthermore, we also possess a stable production workforce. As at the Latest Practicable Date, out of a total of 76 production workers (excluding quality control staff), we have 17 experienced sewing workers and cutter workers who have been with us for more than 5 years. Due to the nature of leather garment manufacturing, our Directors regard our production workforce an important factor to our growth.

OUR BUSINESS STRATEGIES

Our principal business objectives are to develop our business and achieve sustainable growth of our Group. We intend to achieve our business objectives by pursuing the following strategies:

Strengthening our business development capability

We intend to further strengthen our business development capability by expanding our marketing team to enhance our relations with our existing customers and expand our customer base, through our plans:

. to proactively approach and pay more visits to our existing customers and target potential customers by contacting them through business referrals and our business network, and share with them information on the leather fashion trends and provide them with information on new production techniques and materials. Through this approach, we aim to get a more comprehensive understanding on our individual target-customers or potential customers in terms of their respective preferences, needs, constraints and strategies. With these insights, our Directors believe that we can develop a closer relationship with our customers;
. to participate in more trade fairs and fashion shows to increase the market presence of our Group and explore new business opportunities; and
. to strengthen our marketing coverage in and tap into the business potentials of the PRC market, by targeting specifically PRC mid-to-high end local fashion brands which, similar to our existing international customers, offer a range of ready-towear garments and accessories under their own brands, and leather apparel forms only a minor portion of their product portfolio, so as to maintain a more diversified customer base.

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BUSINESS

Though we have not entered into any long-term contracts with our customers, our Directors further believe that our marketing capability is crucial to maintaining and strengthening our customer base.

Enhancing our manufacturing facilities

We plan to examine and expand our production facilities to enhance our technical ability. While our business model does not purely depend on machine-based mass production, our Directors believe that enhancing our manufacturing facilities is important in upgrading our production capability. To this end, we intend to purchase new production equipment and machineries such as automatic flat press machine, sewing machines with special functions, computerised pattern cutting machine and automated button-attaching machines to enhance existing production facilities. The installation of more automated machineries is expected to increase our production efficiency. As our business further develops, our Directors believe that enhancing our production facilities allows us to meet the increasing demand for our production capability.

Further expansion of our Group’s pre-production product development function

Our Directors consider that our product development support is one of the critical factors to our continuing success. With an aim to providing more pre-production development services, we intend to strengthen our design and development team and recruit more experienced product development staff to strengthen our pre-production development support to our customers. We also intend to provide the team with systematic trainings on selection of leather, fashion industry trends and new production techniques and materials. We will continue to develop and create more pre-production product development ideas to enhance our product development support.

Our Directors believe that by enhancing our pre-production product development support, we can better serve a more diversified base of customers with constant demand for new fashion ideas and innovation in apparel designs and styles.

Expansion of our sourcing capability

We will strengthen our sourcing capability by recruiting more staff or agent to expand our geographical coverage of suppliers and source more variety of leather raw materials to provide more choices of leather and product ideas to our customers. As the quality of our products depends on the quality of our principal raw materials used, we also plan to make more supplier visits to examine their production process and strengthen our quality control on leather raw materials.

Our Directors believe that by expanding our sourcing capability, we can have a wider source of raw materials and have better quality assurance on our products.

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BUSINESS

Implementation of the business strategies

As at the Latest Practicable Date, our Group did not have any acquisition plan.

For further details on the implementation of the above-mentioned business strategies of the Group, please refer to the section headed ‘‘Future plans and [REDACTED]’’ in this [REDACTED].

BUSINESS MODEL

Our business model is illustrated in the following diagram:

==> picture [101 x 44] intentionally omitted <==

==> picture [100 x 44] intentionally omitted <==

Pre-production product development services

As part of our marketing efforts, we participate at the early stage of certain of our customers’ pre-production product development and often offer them various pre-product development services.

We keep close contact with our leather suppliers and regularly attend leather trade fairs to keep us abreast of new development in the leather industry. Our leather suppliers provide us with a variety of samples of leather. We will then share with certain of our customers market intelligence on leather fashion trend and production knowhow as well as providing samples of leather and recommendations to our customers for their consideration. We will produce mock-up products which are parts of a garment product for demonstration of the product design or features for our customers’ consideration. We will also give suggestions to assist our customers in finetuning or adjusting their original designs so as to improve the efficiency of the production process and to give the desired effect of their designs. We are flexible in trying new types of leather with different textures, colour and hand-feel, and we will collaborate with our suppliers in offering our customers with leather raw materials processed in the ways which satisfy their preference. In doing so, various treatments such as drumming and milling or enzyme washing will be used. To better serve our customers’ needs and requirements and at their request, we also produce and revise sample products for our customers’ consideration after receiving the product designs from them but before they place bulk purchase orders with us.

Except for the charge on sample products, in general, we do not charge our customers separately for offering pre-production product development services, and the sample products will be charged at a specified rate, which will usually be charged with a mark-up ranging from 50% to 100%, if the customers do not proceed to place production orders with us after receiving our sample products. In the event that the customers proceed to place production orders with us, we do not charge our customers separately for the service of producing sample products, as such service was taken into account when we prepare our pricing for the manufacturing services.

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We believe the provision of pre-production product development services as part of our business model helps us better understand the needs of our customers, which enables us to satisfy their stringent requirements, develop solid relationships with our customers and has the chance to capture potential business opportunities with them.

Manufacturing services

The provision of manufacturing services is our primary business and we produce all the leather garment products according to our customers’ specifications and under their brands or labels. We adopt a cost-plus pricing model and charge our customers based on the number of units per purchase order, and in most occasions we make to order after the designs, specifications and sample samples are confirmed and agreed.

We provide flexibility in the production scale for each purchase order by our customers. During the Track Record Period, our production scale for each purchase order (excluding orders for sample products) ranges from about 100 to over 3,000 pieces. As some of our customers do not usually place bulk orders for leather garment products, our Directors believe that our flexible approach on product quantity per order is able to cater for the business needs of these customers. Our Directors believe that customers highly appreciate this agile approach which suits our customers’ business requirements.

After our customers confirm their product designs and place orders with us, we will proceed to purchase the raw materials from our suppliers and manufacture the garment products at the Foshan Factory. Our business operates primarily on a made-to-order basis and we normally will not stock up raw materials for our production, and we place purchase orders with our suppliers after the customers’ orders are confirmed. Our suppliers of leather are tanneries located in different parts of the world including Pakistan, China, France, Turkey, India and Italy. We place great emphasis on the quality of our products and our employees monitor the major stages of the production process from raw material procurement to final delivery to ensure that the finished products comply strictly with our customers’ specifications and requirements.

The production time, meaning from the placement of orders by our customers to the completion of final quality inspections of the finished products, varies for different orders but will generally take about 3 months, which will include approximately 2 months for ordering the raw materials and approximately 1 month for the actual manufacturing process.

For further details of our production process, please refer to ‘‘Production process’’ below.

Post-production logistical services

Apart from providing manufacturing services and pre-production product development services, we also offer post-production logistical services such as packaging and delivery services. We do not charge our customers separately for offering these post-production logistical services, as these services were taken into account when we prepare our pricing for the manufacturing services.

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After manufacturing our products at the Foshan Factory and our customers has conducted physical inspection and testing of all the finished products, we will proceed to packaging and delivery of the products.

All finished products are packed carefully in accordance with our customers’ specifications and requirements. Products produced at the Foshan Factory are usually delivered to Hong Kong before they are shipped or transferred to the designated locations of our customers.

Production on a made-to-order basis

CUSTOMERS

We have a diverse customer base. We have approximately 50 customers who placed orders with us during the Track Record Period. These customers include international and well-known fashion brand owners based in the United States and Australia, their representatives or sourcing agents in Asia, and other apparel brand owners. Given that most of these international fashion houses and other apparel brand owners generally offer a broad spectrum of ready-to-wear apparel and accessories under their own brands, and leather apparel forms only a minor portion of their product portfolio, our Directors believe that these customers may place greater reliance on the expertise and experience of leather garments suppliers than those of their mainstream products. Thus, our Directors believe that our experience in the production process of leather apparel, our offers of pre-production product development services and post-production logistics services, as well as our flexible production scale are valuable to and highly appreciated by our customers.

We have various modes of communication to secure our orders with our customers, including communicating directly with our customers’ headquarters overseas; and working closely with our customers’ merchandising arms or sourcing agents in Hong Kong.

Although we do not have long-term purchase commitments with our customers, we have been maintaining business relationship with our major customers who are our top five customers in terms of revenue during the Track Record Period ranging from 3 years to over 10 years. Furthermore, our customers have not imposed any restriction on us to trade with any other customers. In terms of production capacity, we are a small-scale manufacturer of leather apparels. Please refer to the paragraph headed ‘‘Production capacity and utilisation rates’’ in this section below for further details. We are able to offer our customers flexibility in the production scale for each purchase order. Despite having been in business for over 20 years, we maintain a relatively small customer base. In respect only of the two years of our Track Record Period, three of our top five customers have remained the same, and they accounted for approximately 36.0% and 42.1% of our turnover during these two years.

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Our Directors believe that based on our actual experience, the volume of business with each of our regular customers, namely, those with whom we have had a business history of at least three years, the ranking of their business volume with us vary from time to time. Furthermore, some of our customers in a given year did not place any orders with us in the following year. Our Directors believe that the reason for such change in the ranking of their business volume with us and any variation in order size from our customers are attributable to a number of factors, including but not limited to the following:

. these customers do not have any long-term purchase commitments with us which resulted in uncertainty of the volume of purchaser orders which our customers may place with us from time to time;
. changes in our customers’ business strategies or plans, our customers’ business needs or the direction of our customers’ product emphasis;
. consumers’ preference and fashion trends;

In light of the above factors, a top ten customer of our Group for any given year may, in the following year fall outside the top ten list, but return to the top ten list later, or not at all. The sales volume previously undertaken for that customer would then be filled by another customer, usually another existing customer. Despite the variation of order size and patterns from our top customers, we have been able to maintain a rising turnover during the Track Record Period because our sales orders and our customer base are diverse. Our Directors believe that we are able to allocate resources to develop business with our other customers, and from new customers. For new customers, we target to develop a business relationship with only customers who have a recognizable brand name. In our experience, branded customers are more able to command higher prices for their products, and are thus able to order high value items of leather apparels from us.

We expect to experience for the first half of our current financial year ending 30 June 2015 a fall in the sales value derived from three of our top five customers for the year ended 30 June 2014 as compared to the sales value derived from them in the same period in 2014. The principal reason for a considerable drop in their sales value is due to a fall in the number of units of leather apparel ordered. However, our Group is expected to secure purchase orders from new and existing customers. Based, however, on current confirmed orders for the first half of the current financial year, we expect that we should be able to maintain the same level of turnover as that for the corresponding first half of our last completed financial year ended 30 June 2014. Please also refer to section headed ‘‘Summary — Recent developments subsequent to the Track Record Period’’ in this [REDACTED] for our recent developments subsequent to the Track Record Period and financial performance of our Group for the three months ended 30 September 2014.

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Top five customers

Our sales to our top five customers for each of the two years ended 30 June 2013 and 2014 amounted to approximately HK$29,446,000 and HK$52,610,000 respectively, which attributed to approximately 54.9% and 65.3% of our total turnover for the respective years. Our sales to our largest customer for each of the two years ended 30 June 2013 and 2014 amounted to approximately HK$9,791,000 and HK$18,267,000 respectively, which accounted approximately 18.3% and 22.7% of our total turnover for the respective years.

The table below is a breakdown of our turnover by our top five customers during the Track Record Period:

For the year ended 30 June 2014:

Customers Largest: Customer A 2nd largest: Customer B 3rd largest: Customer C 4th largest: Customer D 5th largest: Customer E Total turnover derived from our five largest customers All other customers Total	Sales (approximately)	Sales (approximately)
	HK$’000 18,267 13,099 10,289 5,619 5,336 52,610 27,976 80,586	% (to our Group’s total turnover) 22.7 16.2 12.8 7.0 6.6
		65.3 34.7
		100.0

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For the year ended 30 June 2013:

Customers Largest: Customer A 2nd largest: Customer F 3rd largest: Customer G 4th largest: Customer E 5th largest: Customer C Total turnover derived from our five largest customers All other customers Total	Sales (approximately)	Sales (approximately)
	HK$’000 9,791 5,097 5,030 4,998 4,530 29,446 24,161 53,607	% (to our Group’s total turnover) 18.3 9.5 9.4 9.3 8.4
		54.9 45.1
		100.0

The following table sets out the information about the above customers:

Customers Customer A Customer B	Basic Background (Note 1) It is an international brand based in the United States. Its collection includes ready-to-wear, shoes, handbags and accessories. Based in the United States, it is a global accessories, footwear and apparel company.	Usual payment methods Payment of a deposit of 30% of the order amount and settlement of the remaining balance after receiving our invoice and before shipment. Payment by telegraphic transfers No credit term is offered Full payment after shipment Payment by telegraphic transfer A credit period of 20 days is given	Years of Relationship with our Group
			3 years 10 years

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Customers Customer C Customer D Customer E Customer F Customer G	Basic Background (Note 1) Founded in the United States, it is an international fashion brand primarily produces apparel. It has stores in several countries including Japan and the United States It engages in sourcing and selling one of the internationally renowned fashion brands of apparel products. It is a national retailer of clothing in Australia. It is an international, multi-channel retailer selling a wide range of products including sportswear, fine gifts, luggage and travel accessories. It has stores in the United States and the United Kingdom. It is an Asia purveyor of luxury fashion and has managed several brands worldwide.	Usual payment methods Payment by letter of credit No credit term is offered Payment of a deposit of 30% of the order amount and settlement of the remaining balance after receiving our invoice and before shipment. Payment by telegraphic transfers No credit term is offered Payment of a deposit of 30% of the order amount and settlement of the remaining balance after receiving our invoice and after shipment. A credit period of 2 weeks is given Payment by letter of credit No credit term is offered Payment by letter of credit No credit term is offered	Years of Relationship with our Group
			3 years 10 years 3 years 7 years 5 years

Notes:

The source of information relating to the above basic background of the major customers is primarily based on the information on their respective websites.
While this customer is a purveyor of various brands, it sourced products for a particular brand from us and we also supplied products of the same brand to another top customer during the Track Record Period (namely Customer D).

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In respect of one of our largest customer of the Track Record Period, we purchased from it some raw material accessories such as fabrics, linings, buttons, labels and tags for the production of its own products in accordance with its specifications and requirements. The sales attributable to this largest customer for each of the two years ended 30 June 2014 amounted to approximately HK$9,791,000 and HK$18,267,000 respectively, which represent about 18.3% and 22.7% of our total turnover for such periods, respectively. The purchase of raw material accessories from this customer amounted to HK$41,000 and HK$261,000 for each of the two years ended 30 June 2014 respectively, which represent about 0.1% and 0.6% of our total purchase of raw materials for such periods, respectively.

None of our Directors, their associates, or any Shareholders who owned more than 5% of the share capital of the Company as at the Latest Practicable Date had any interest in any of the five largest customers of our Group during the Track Record Period.

Salient features of a typical sales transaction

We have not entered into any long term contractual arrangements with our customers, which our Directors believe is in line with the normal practice in the leather garment industry. Nevertheless, we have maintained established business relationships with many of our major customers for 3 years to 10 years.

For each transaction, our customer places a purchase order with us and we confirm the purchase by issuing a sales confirmation to our customer. The salient terms of a sales transaction are set out below:

. Product description: including the product designs and specifications, materials to be used and sizes, and for each purchase order, the sizing measurements may be different;
. Quantity of the order: the number of leather garments to be manufactured for each size and the total number to be manufactured;
. Unit price and total amount of the order;
. Payment terms: We will grant credit period to some of our customers based on factors such as the number of years of our business relationship with them and their payment record, while in some other cases, we require our customers to pay a deposit of 30% of the order amount and settle the remaining balance after receiving our invoices. Payments are usually settled through telegraphic transfers, or by letter of credit at sight; and
. Delivery terms: The usual logistic terms are free on board (‘‘FOB’’). We are responsible for the transportation of the goods to the port of shipment and loading costs whilst our customers pay for the marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination. The risk in and title to the products are passed to our customers upon the arrival and unloading of the product at the shipment port.

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SALES AND MARKETING

Our sales and marketing department is primarily responsible for the sales and marketing of our Group. Its duties mainly include identifying and approaching potential customers, communicating with existing customers and providing sales support. Ms. Grace Lam is in charge of our sales and marketing and she has over 15 years of experience in the leather garment industry, thorough understanding of our products and has good working relationships with our customers. We plan to expand our sales and marketing team to assist in broadening our customer base.

We generally conduct business with our customers both directly and in some other cases through their representatives or sourcing agents. Our Directors believe that it enables us to have flexible production schedules and to provide tailor-made personalised services to our customers while avoiding additional costs incurred by selling through intermediaries.

Our Directors consider that it is important for us to maintain a diverse customer base so as to reduce the risk of concentration on a few major customers. To this end, we aim to diversify and expand our customer base. We proactively approach potential customers for business opportunities by contacting them through business referrals and our business network. To achieve a more diversified geographical coverage, we also intend to strengthen our marketing efforts in and tap into the business potentials of the PRC market by targeting specifically PRC mid-to-high end local fashion brands. Our marketing efforts mainly include paying visits to our customers and potential customers, sharing with them market intelligence on leather fashion trend and production knowhow, providing samples of leather and recommendations to them on raw material selection. To further promote our Group, we also participate in trade fairs, such as some international exhibitions for apparel held in Beijing and Shenzhen.

Our business model does not involve any distributorship, franchising or consignment. We manufacture products according to the product specifications in the purchase orders provided by our customers, and in turn our customers will sell the products under their own brand names to their retailers or distributors mostly outside China in overseas markets.

Our products are mainly sold by Perline to customers outside China. Apart from effecting sales in Hong Kong through Perline, during the Track Record Period, we, through our Foshan Shengli, have also sold products directly to customers within the PRC, in the following occasions:

. during the Track Record Period, a minor portion of the leather garment products manufactured by Foshan Shengli at the Foshan Factory were made from raw materials sourced within China. As a result of the domestic sourcing arrangements, the garment products made from these domestic raw materials were sold by Foshan Shengli to a import and export company in China, which is an Independent Third Party, for re-selling to Perline. This sale and re-sale arrangement was made to facilitate customs declaration as the leather raw materials were sourced domestically in China. The sales to this import and export company amounted to approximately HK$1,140,000 and HK$2,338,000 for the financial year ended 30 June 2013 and 2014; and

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. during the financial year ended 30 June 2014, Foshan Shengli also sold garment products to one single domestic customer in China, which is an Independent Third Party, for an insignificant sales amount of approximately HK$238,000.

Other than the above sales transactions, our Group did not effect any direct domestic sales in the PRC during the Track Record Period. Our PRC Legal Advisers are of the view that Foshan Shengli as a wholly foreign owned enterprise which is permitted to sell products made by itself both within and outside China, and to source raw materials within China.

During the Track Record Period, the United States, Australia and Hong Kong were our major markets with reference to the destination of our product delivery as stipulated in our customers’ purchase orders, which in aggregate contributed approximately 88% and 80% of our revenue for the years ended 30 June 2013 and 2014 respectively. Nevertheless, depending on our customers’ sales network and needs, our products may be further forwarded to other countries by our customers. Please refer to section headed ‘‘Financial Information — Results of operations of our Group — Geographical coverage’’ in this [REDACTED] for the breakdown of our revenue during the Track Record Period with respect to geographical areas.

Pricing policy

We adopt a cost-plus pricing model which takes into account a range of factors when determining the price of our products. The factors include the cost of sales such as the cost of raw materials, labour costs, the size of the order, the complexity of the product design and the manufacturing process, the packaging and transportation costs, the customer’s relationship with our Group, the customer’s approximate retail price of the products, and mark-up.

When determining the appropriate mark-up, we also consider the customer’s acceptable range of product price based on our past dealings with the customer. Our gross profit margin during the Track Record Period amounted to approximately 35.3% and 34.0% for each of the two years ended 30 June 2013 and 2014, respectively.

PRODUCTS AND SERVICES

Apart from offering our manufacturing services which is our primary business, we often also provide to our customers certain pre-production product development services and post-production logistical services depending on the needs and requirements for individual orders. Please refer to ‘‘Business model’’ above for further details of the services offered by us.

Products

We manufacture a wide variety of leather garments, including jackets, pants, skirts, tops and vests, dresses, and coats. Our products are manufactured according to our customers’ specifications and under private labels owned or specified by our customers. The raw materials of our leather products are mainly animal hides and skins from lambs, goats, sheep, cows and pigs. The specific

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materials used to produce the products depend on our customers’ preferences and specifications. Apart from garments made of purely leather, some products also blended with wool and fabric materials.

Set out below are some products manufactured by us.

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For each of the two years ended 30 June 2013 and 2014, our sales volume of leather garment products was 40,788 units and 57,179 units respectively, and our major products are leather jackets and coats. Please refer to section headed ‘‘Financial Information — Results of operations of our Group — Revenue’’ in this [REDACTED] for the breakdown of our leather products by type during the Track Record Period.

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We set out below the price ranges by our leather garment product types and their average selling prices during the Track Record Period.

	For the year ended 30 June	For the year ended 30 June
2013	Average selling price (Note 1) HK$ 1,323 1,460 827 899 920 1,365 1,316	2014
Price range HK$ 449 to 11,416 381 to 4,479 464 to 3,557 489 to 6,240 100 to 4,847 776 to 9,126 250 to 4,130		Price range HK$ 436 to 6,144 200 to 4,349 283 to 7,159 101 to 7,550 300 to 7,713 762 to 14,711 1,112 to 10,415	Average selling price (Note 1)
			HK$ 1,450 1,606 1,043 939 1,104 1,570 1,224

Notes:

The average selling price represented the selling price of our products to our customers and not the retail price of our products sold by our customers.
During the Track Record Period, other products for women included dress and shorts, and other products for men included pants, blazer and vest.

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SEASONALITY

Our business is impacted by seasonality in the leather garment market and changes in the leather garment trends, especially those in the United States and Australia.

Based on our experience, for our customers from the northern hemisphere (i.e. mainly from the United States), we will generally deliver the products to them from March to August, which is the usual delivery time for products of their winter season’s collection. For our customers from the southern hemisphere (i.e. mainly from Australia), we will generally deliver the products to them from December to January. Since our sales to our customers from the United States are generally more than that to our customers from Australia, the overall effect is that we have a relatively higher level of sales from March to August, while September to February are generally the slack season of our sales.

During each of the two years ended 30 June 2014, the seasonality effect on our business is not very significant. To avoid high volatility of the purchase orders received during certain periods and balance out our production schedule, we try to plan ahead in each year our production schedule and secure some purchase orders from some of our customers for our low season. Our turnover recognised during the period from July and August 2012 and from March to June 2013 accounted for approximately 60% of our annual turnover for the year ended 30 June 2013, whereas our turnover recognised during the period from July and August 2013 and from March to June 2014 accounted for approximately 57% of our annual turnover for the year ended 30 June 2014.

PRODUCTION

Production facilities

Our production base is the Foshan Factory. Please refer to the table below which summarises the information of the Foshan Factory as at the Latest Practicable Date:

Production base Foshan Factory	Location 3/F, Block A1, Hantian Electronics City, Dong Ping Road, Gweicheng, Nanhai, Foshan, Guangdong, China (中國廣東佛山市南海桂城瀚天科技城A1座三樓) (formerly known as 3/F, Block 1, Beiyue Industrial Zone, Guicheng Electronics City, Foshan, Guangdong, China (中國廣東省佛山市桂城科技園北約工業區1座廠房第三層))	Total gross floor area (approximately) 3,168 sq.m.	Year of commencement of manufacturing operation 2004	Workforce as at Latest Practicable Date (approximately)
				100

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Our products made for the production orders received by Perline are manufactured by Foshan Shengli pursuant to a processing arrangement with Perline. Please refer to the paragraphs headed ‘‘Processing arrangement’’ below for further details.

Foshan Shengli is a wholly foreign owned enterprise and has obtained the requisite approval to perform processing work and carry out domestic sales in China. It has been providing processing services for Perline since 2004. Apart from providing processing services to Perline, Foshan Shengli has also sourced raw materials domestically within China and sold products directly to customers in China. Please refer to the sub-section ‘‘Sales and marketing’’ below for further details.

Processing Arrangement

As mentioned above, our products are manufactured by the Foshan Factory pursuant to the processing arrangement made between our two wholly-owned subsidiaries, Foshan Shengli and Perline.

Perline placed production orders to Foshan Shengli, which provided processing services to Perline and manufactured the products in accordance with the specifications provided by Perline.

Our processing arrangements should be distinguished from the compensation trade (三來一補) processing arrangements commonly seen in some areas in China, as Foshan Shengli is a wholly foreign owned enterprise which may perform processing work as well as carry out domestic sales in China on its own. Furthermore:

the production equipment in the Foshan Factory was owned by Foshan Shengli and not supplied by Perline pursuant to a compensation trade arrangement, and the wages of the workers in the Foshan Factory are not paid or reimbursed by Perline to Foshan Shengli;
there is no fixed and long term processing agreement between Perline and Foshan Shengli which is approved by the relevant local authorities. Instead, Perline places individual production orders with specified quantity and product types to Foshan Shengli by way of individual processing agreements. At any given time, there could exist a number of processing agreements between Perline and Foshan Shengli for different batches of orders; and
both Perline and Foshan Shengli are wholly-owned subsidiaries of our Company.

Foshan Shengli has been providing processing services to Perline since 2004 and had entered into processing agreements with Perline from time to time. The salient features of a typical processing agreement are summarised below:

Term and Quantity

Each of the processing agreements usually has a duration of around one year, and covers the processing services required to be performed by Foshan Shengli for that duration based on the customers’ orders and our estimated production schedule for the period concerned. If the quantity

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of raw materials provided by Perline pursuant to the processing agreement is in excess of the quantity required for production purpose upon expiry of the term of the agreement, the remaining raw materials under the processing agreement will be subject to settlement for customs clearance purpose.

Primary responsibilities

The following common terms which govern the primary responsibilities of the parties are contained in the Processing Agreements:

(a) Foshan Shengli shall provide processing services to Perline;
(b) Perline shall provide leather raw materials, ancillary materials and packaging materials to Foshan Shengli by batches from the commencement period of the agreement and shall also pay processing fees;
(c) Perline shall pay Foshan Shengli the processing fees by telegraphic transfer;
(d) Foshan Shengli shall deliver the finished products to Perline on FOB terms (i.e free on board) by batches during the term of the agreement; and
(e) Foshan Shengli shall take out insurance of the assets of Perline on behalf of Perline, and Perline shall be responsible for payment of the insurance premium.

Processing fees

For each of the two years ended 30 June 2013 and 2014, the annual processing fee paid by Perline to Foshan Shengli amounted to approximately HK$6,160,000 and HK$8,600,000 respectively. The processing fees were determined based on the costs and the complexity of the work done.

Our PRC Legal Advisers have advised us that the terms of the Processing Agreements are in compliance with the applicable laws and regulations of the PRC, legally valid and enforceable. Our PRC Legal Advisers have further confirmed that the Processing Agreements been filed with the relevant customs authority.

Production workforce

We consider that, as compared to textile garment manufacturing, leather garment manufacturing demands special craftsmanship and familiarity in the handling of the principal raw material, leather. Due to the nature of leather garment manufacturing, our Directors regard our production workforce an essential element in our production process, as our production process relies on the skills and craftsmanship of our experienced workers, including sewing workers and cutter workers, to manufacture leather apparel products which can meet our customers’ specifications and aesthetic requirements.

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Among these production staff, sewing workers and cutter workers are an important production force, and we depend on skilful and experienced workers for the sewing work and cutting of leather materials. As at 30 June 2013, 30 June 2014 and the Latest Practicable Date, we maintained a total number of 58, 54 and 54 workers respectively for performing the sewing work and leather cutting. Furthermore, out of these workers, we possess a stable production workforce of more than 17 experienced sewing workers and cutter workers who have been with us for more than 5 years.

Production capacity and utilisation rates

As at the Latest Practicable Date, we had approximately 153 sets of machinery and equipment such as sewing machines, zig-zag machines, leather trimming machines, leather skiving machines and rivet tacking machines. All production machinery and equipment are owned by us.

In general, our production machinery and equipment have an estimated useable life ranging from 5 to 10 years. The following table sets out the age of our production machinery and equipment:

5 years or below More than 5 years (Note)	Number of sets of production machinery and equipment
	7 146

Note: The majority of the 146 sets of production machinery and equipment that are aged more than 5 years are sewing machines.

We conduct regular maintenance on our production machinery and equipment. Such regular maintenance works are mainly performed by our own in-house technicians. It is not necessary to suspend the operation of the Foshan Factory in order to carry out regular maintenance and as such, we had not experienced any disruption in our production due to regular maintenance during the Track Record Period and up to the Latest Practicable Date.

In order to enhancing and upgrading our manufacturing facilities, we intend to purchase new production equipment and machinery, mainly including purchase of automatic flat press machine and sewing machines with special functions. Please refer to the section headed ‘‘Future plans and [REDACTED] — Implementation plans’’ in this [REDACTED] for further details.

During the Track Record Period and up to the Latest Practicable Date, we have maintained sufficient production capacity to handle our customers’ orders. During the Track Record Period and up to the Latest Practicable Date, we had not experienced any material delays in product deliveries.

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The table below sets out our estimated annual production capacity and approximate utilisation rates of our production facilities during the Track Record Period.

Estimated annual production capacity (in terms of pieces of leather garments) (Note 1) Actual output volume (pieces of leather garments manufactured) Approximate utilisation rate (Note 2) Notes:	Year ended 30 June	Year ended 30 June
	2013 103,000 40,788 40%	2014
		103,000 57,179 56%

Our estimated annual production capacity is computed on the basis of the average of the two production months in which we recorded the highest production volume during the Track Record Period (i.e., June 2013 and July 2013) multiplied by the total working months for the year (i.e., approximately 11.5 months), assuming the same production volume would be achieved in every month during the relevant year of the Track Record Period.

However, unlike manufacturing facilities that have standard production requirements and production times for particular products, our Directors consider that our estimated annual production capacity cannot be estimated with reasonable accuracy, due to varying designs and production complexity involved. In addition, we may receive orders for the production of complex products with lower production volumes, as well as less complex products with higher production volumes. As a result, our estimated annual production capacity and approximate utilisation rate may not be an accurate indication of the use of our production capacity or meaningful in estimating our profitability.

The approximate utilisation rates are calculated by dividing the actual annual output volume by the estimated annual production capacity.

The utilisation rate of the Foshan Factory increased from approximately 40% for the year ended 30 June 2013 to approximately 56% for the year ended 30 June 2014, which was generally in line with our Group’s growth in business during the period.

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PRODUCTION PROCESS

Our production process involves various stages including pre-production product development, manufacturing process and post-production services. The flow chart below summarises the key stages of a typical production process.

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Step 1 — Product development and production of mock-up

At the early stage of product development, we utilise our knowledge and expertise in leather materials to help our customers in choosing the suitable types of leather that can achieve the desired effect and quality. We will provide samples of leather and recommendations to our customers on raw material selection. We will also produce mock-up products which are parts of a garment product for demonstration of the product design or features and give suggestions to assist our customers in finetuning or adjusting their original designs so as to improve the efficiency of the production process.

Step 2 — Obtaining quotations for raw materials and product pricing

We obtain quotations of the raw materials from our suppliers and provide a quotation on the product production to our customers on a cost-plus basis. Our pricing depends on a range of factors, including the costs of the raw materials and the complexity of the product development and manufacturing process.

Step 3 — Production of samples

Customers will provide their initial designs and technical specifications to us for producing the sample products. We will then produce sample products to our customers for their inspections to ensure our products accord with the product designs and our customers’ specifications. The samples will be modified and re-submitted to our customers upon their requests until they are satisfied with every detail of the samples.

Step 4 — Order placement by customer

We will discuss the details of the purchase orders with our customers, including the price, quantity, product specifications, other specific requirements and delivery date. After confirming all details of the purchase orders, our customers will place a purchase order with us.

Step 5 — Procurement and inspections of raw materials

As we primarily operate on a made-to-order basis, we will place purchase orders with our suppliers to purchase the raw materials only after our customers’ orders are confirmed. In general, it takes about 2 months to receive the raw materials ordered.

Every piece of leather as the primary raw material will be subject to quality control inspection upon receipt to ensure its quality is up to standard. Our quality control team will examine if there are any defects such as colour variations, stains, marks and damage. We will also deliver sample leather to our customers for their approval.

As different pieces of leather have their own natural markings and grains and different degrees of tanning and dyeing, those of the same colour and grains are matched and used to produce the same piece of garment to ensure consistency of colour and grains in the finished products.

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Step 6 — Pattern cutting

The shape of each component of the leather garment is outlined meticulously to ensure optimal use of the valuable leather, thereby increasing our cost efficiency.

Step 7 — Leather cutting

The leather will be cut according to the product specifications. The quality of the cutting is crucial for producing leather garments which meet our customers’ specifications and requirements. It is a manual process placing a high demand on time and craftsmanship as the cutting must perfectly match the design patterns. Accurate cutting is essential for the garment to be assembled correctly and to fit well. Although modern techniques make mechanical cut of multiple layers of leather possible, we manually cut one layer at a time in order to ensure quality of our products.

This process is also the key to cost control as leather constitutes a substantial amount of our production costs. Our experienced craftsmen strive to optimise the use of each piece of leather to minimise the waste of small pieces left over after cutting.

Wool and fabrics are the raw materials commonly used to be blended with leather.

All parts for a finished product are subject to quality control and accepted items are assigned with a unique tag.

Step 8 — Sewing and assembling

We will provide a production technical package for manufacturing purpose to the manufacturing staff providing every detail with respect to the sewing and assembling of the product. Different parts are then sewed into one piece of garment. Depending on the product design, accessories and trims like buttons and zippers are sewed onto the garments and pockets and buttonholes will also be made.

Step 9 — Quality control of finished products and customers’ acceptance

We adopt total quality control on our finished products. Thus, upon completion of the production process, the finished garments are inspected by our experienced quality control staff to ensure they match our customers’ designs and specifications. Most of our customers will conduct physical inspection and testing of all the finished products before packaging and delivery. If defects are found in the finished products, the finished products will be reprocessed.

Step 10 — Packaging and delivery

All finished products will be packed carefully in accordance with our customers’ specifications and requirements.

Products produced at the Foshan Factory are usually delivered to Hong Kong before they are shipped or transferred to the designated locations of our customers.

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Production time

The production time, meaning from the placement of orders by our customers (step 4) to the completion of final quality inspections (step 9), of different orders varies for different products but will generally take about three months, which will cover the time of approximately two months for order of raw materials and the time of approximately one month for the actual manufacturing process. The actual production time depends on a variety of factors, including the availability and delivery time of the raw materials, the complexity of the product designs and manufacturing process and size of the orders.

Quality control of production process

We recognise the importance of quality control of our products and our quality control team is involved in the major stages of the production process. For details of our quality control measures, please refer to the paragraph headed ‘‘Quality control’’ below.

Subcontracting arrangements

The Foshan Factory focuses on the core manufacturing procedures such as leather cutting and sewing while some minor auxiliary procedures in respect of some of our products are outsourced to subcontractors as we do not possess the relevant facilities to complete those procedures. The procedures that are subcontracted are laser cutting and hole-punching. Such subcontracting work accounted for a very insignificant portion of our cost of sales. For each of the two years ended 30 June 2013 and 2014, the subcontracting fees were insignificant, which amounted to approximately HK$24,000 and approximately HK$63,000.

We select our subcontractors having regard to a number of factors, including the quality of their work, their production capacities, their track records, the processing fee and their abilities to meet the production deadlines. Based on these criteria, we have been working with some subcontractors years of business relationship ranging from 1 year to 4 years. For each of the two years ended 30 June 2013 and 2014, we engaged 1 and 8 subcontractors respectively. The subcontractors engaged by us are typically factories located in Foshan, Dongguan, Shenzhen and Zhongshan. All of our subcontractors are Independent Third Parties and none of our Directors, their associates, or any Shareholders who owned more than 5% of the share capital of the Company as at the Latest Practicable Date had any interest in any of the subcontractors of our Group during the Track Record Period.

We do not enter into any written agreements with our subcontractors as the subcontracting work involves some minor auxiliary procedures of the production process of some of our products and the subcontracting fees constitute a very insignificant portion of our cost of sales. A typical subcontracting transaction includes the following arrangement: processing work required, the quantity and the price per unit of the products, and the payment terms, which will usually be paid upon delivery or by month-end settlement. As we only engage the subcontractors as and when our customers’ orders require such auxiliary procedures, the subcontracting work is done only on a case by case basis. The subcontracting fees were typically determined based on the complexity of the

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work involved, the quotation from our subcontractors and arm’s length negotiation between us and the subcontractors. The processed work is subject to our checking before acceptance so as to ensure that the work is in compliance with our requirements. All of the leather materials involved in subcontracted production processes are directly sourced by our Group. We generally have discretion in outsourcing some auxiliary production procedures to subcontractors and do not need to obtain our customers’ approvals.

RAW MATERIALS

Leather is the primary raw materials of our garment products. Depending on our customers’ specifications, some products are blended with wool and fabric materials. The leather raw materials used are usually animal hides and skins from lambs, sheep, goats, cows and pigs. Leather is dyed to the specific colour and processed in different ways according to our requirements before it is delivered by the suppliers to us. We maintain close contact with our suppliers and regularly attend leather trade fairs to obtain samples of leather raw materials supplied by different suppliers and to keep us abreast of new development in the leather industry and new leather types.

The total cost of raw materials for our goods sold for each of the two years ended 30 June 2013 and 2014 amounted to about HK$28,742,000 and HK$45,597,000 respectively, which accounted for about 82.8% and 85.7% of our cost of sales for each of the years ended 30 June 2013 and 2014, respectively.

The following table sets out the amount of each type of raw materials purchased by us and their approximate percentages of our total purchase of raw materials during the Track Record Period:

Year ended 30 June	Year ended 30 June	Year ended 30 June
2013 Approximately HK$’000 % 29,833 83.5 1,130 3.2 503 1.4 4,262 11.9 35,728 100	2014
	Approximately HK$’000 % 34,613 80.3 2,113 4.9 129 0.3 6,243 14.5 43,098 100
		100

Note: Others include major accessories such as zippers, fabrics, lining, buttons and labels.

To the best knowledge of our Directors, we are not aware of any illegality of the sources of raw materials used by us during the Track Record Period and up to the Latest Practicable Date.

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Shortage or delay in supply of raw materials

We will usually ascertain that there is adequate supply of the relevant raw materials before providing quotation to our customers. As such, generally there is no shortage in the supply of raw materials. During the Track Record Period and up to the Latest Practicable Date, we have not experienced any material shortage of raw materials.

Fluctuations in cost of raw materials

For the two years ended 30 June 2014, the average costs of leather per square foot purchased by us, calculated with reference to the cost of different types of leather and the total number of square feet of leather being deployed by the Group during the Track Record Period, amounted to approximately US$2.66 and US$3.43, respectively. We are able to pass on any increases in the cost of raw materials to our customers as we primarily operate on a made-to-order basis. We generally first obtain quotations of the raw materials from the suppliers which set out the price of the raw materials to be purchased. The price quoted will be valid for a certain period of time ranging from two months to three months (‘‘lock-up period’’) which may vary on an individual case basis. We adopt a cost-plus pricing model and thus the quotation we give to our customers would take account of the market price of the raw materials. If the lock-up period has passed and the price of leather has increased, we will in turn revise our quotation to our customers. The cost of leather has increased in recent years and this has led to the increases in our cost of sales. Nevertheless, our gross profit margin remained relatively stable during the Track Record Period, which amounted to approximately 35.3% and 34.0% for each of the two years ended 30 June 2013 and 2014, respectively. This indicates that we are able to pass on any increases in the cost of raw materials to our customers and any such increases would not have material effect on our profitability. Hence, we can effectively manage our risk as to fluctuations in the raw material price.

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Sensitivity analysis

While we are able to pass on any increases in the cost of raw materials to our customers and any such increases would not have material effect on our profitability, the following sensitivity analysis illustrates the impact of hypothetical fluctuations in our raw materials on our operating profit and net profits after tax during the Track Record Period, assuming that the cost of the raw materials increase by 1%, 5% and 10%.

Purchases Cost of goods sold of raw materials Operating profit 1% increase in raw material costs 5% increase in raw material costs 10% increase in raw material costs Net profit after tax 1% increase in raw material costs 5% increase in raw material costs 10% increase in raw material costs	Year ended 30 June 2013 approximately HK$’000 35,728 28,742 8,739 8,452 7,302 5,865 7,128 6,888 5,928 4,728	Year ended 30 June 2014
		approximately HK$’000 43,098 45,597 15,692 15,236 13,412 11,132 12,896 12,515 10,992 9,089

Prospective investors should note that the above analysis on the historical financials is based on assumptions and is for reference only and should not be viewed as actual effect. Such information by no means reflects our historical experience, financial results and normal course of conducting business. Prospective investors should not place undue reliance on such information, and the sensitivity analysis above only has one variable factor and assumes holding all other financial factors constant.

SUPPLIERS

As leather is the most important component of our garment products, we place great emphasis on the quality of leather. We maintain an extensive list of leather suppliers located in different parts of the world including Pakistan, China, Turkey, France, India and Italy, which enable us to source various sorts of leather and produce leather garments which conform to different needs of our customers. In most cases, our headquarters in Hong Kong will place purchase orders for purchase of leather raw materials. Our Directors believe that our ability in offering different types of leather sourced from our extensive list of suppliers is a critical factor for our customers in selecting and purchasing our products.

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Other materials like textiles and fabrics may be blended with our leather garments. These materials are usually sourced in Hong Kong.

We have not entered into any long term supply contracts with our suppliers, as we primarily adopt a made-to-order system and the leather garment trend changes rapidly. We generally have discretion in sourcing raw materials from suppliers selected by us, while some of our customers may recommend their preferred suppliers to us for our consideration. However, we are not obliged to follow their recommendation. Usually for each type of raw materials used for a purchase order, we only source from one leather supplier to ensure quality and colour consistency in the raw materials used to produce the leather garments for that purchase order. We select our suppliers based on criteria like quality, pricing, availability of products and reliability of suppliers. We have maintained close relationship with our suppliers and up to the Latest Practicable Date, we have not experienced any material problems in sourcing raw materials we needed.

Locations of suppliers

Our main suppliers of leather materials are mainly tanneries located in Pakistan, China, France, Turkey, India and Italy, while our suppliers of accessories such as zippers, fabrics, lining, buttons and labels are mainly from China and Hong Kong. Set out below is a breakdown of our purchases of leather raw materials and accessories by suppliers’ locations during the Track Record Period.

Year ended 30 June	Year ended 30 June	Year ended 30 June
2013 Approximately HK$’000 % 19,215 54 1,813 5 1,335 4 3,648 10 2,934 8 825 2 3,925 11 2,033 6 35,728 100	2014
	Approximately HK$’000 % 15,593 36 6,832 16 5,588 13 3,948 9 3,509 8 3,506 8 2,205 5 1,917 5 43,098 100
		100

Note: Others include South Korea, United States of America, Japan and Taiwan.

Different suppliers supply different types of leather with different specifications. Thus, depending on our customers’ specifications, raw materials are sourced from different suppliers located in different countries.

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Major suppliers

Our purchases from our five largest suppliers of leather amounted to approximately HK$20,198,000 and HK$18,938,000 for each of the two years ended 30 June 2013 and 2014 respectively, which accounted for about 56.6% and 43.9% of our total purchase of raw materials for each of the two years ended 30 June 2013 and 2014 respectively. Our purchases from our largest supplier of leather amounted to approximately HK$7,905,000 and HK$5,777,000 for each of the two years ended 30 June 2013 and 2014 respectively, which attributed to about 22.1% and 13.4% of our total purchase of raw materials for each of the two years ended 30 June 2013 and 2014 respectively.

The table below is a breakdown of our purchases of raw materials from our top five suppliers during the Track Record Period:

For the year ended 30 June 2014:

Suppliers Largest: Supplier A 2nd largest: Supplier B 3rd largest: Supplier C 4th largest: Supplier D 5th largest: Supplier E Total purchase from five largest suppliers All other suppliers Total	Amount of purchases from supplier	Amount of purchases from supplier
	Approximately HK$’000 % (to our Group’s total purchase of raw materials) 5,777 13.4 4,214 9.8 3,410 7.9 3,112 7.2 2,425 5.6 18,938 43.9 24,160 56.1 43,098 100.0
		43.9
		56.1
		100.0

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For the year ended 30 June 2013:

Suppliers Largest: Supplier A 2nd largest: Supplier F 3rd largest: Supplier G 4th largest: Supplier C 5th largest: Supplier B Total purchase from five largest suppliers All other suppliers Total	Amount of purchases from supplier	Amount of purchases from supplier
	Approximately HK$’000 % (to our Group’s total purchase of raw materials) 7,905 22.1 3,400 9.5 3,202 9.0 3,098 8.7 2,593 7.3 20,198 56.6 15,530 43.4 35,728 100.0
		56.6
		43.4
		100.0

The following table sets out the information about the above suppliers:

Suppliers Supplier A Supplier B	Location of the supplier Pakistan Pakistan	Major types of leather supplied to our Group Sheepskin and lambskins Lambskin, goatskin and cowhides	Usual payment methods Documents against payment No credit term is offered Documents against payment No credit term is offered	Years of Relationship with our Group
				8 10

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Suppliers Supplier C Supplier D Supplier E Supplier F Supplier G	Location of the supplier France Turkey Turkey Pakistan Pakistan	Major types of leather supplied to our Group Lambskins Lambskin and calfskin Cowskin and calfskin Sheepskin Sheepskin, goatskin and cowhides	Usual payment methods Documents against payment No credit term is offered By telegraphic transfer No credit term is offered By telegraphic transfer No credit term is offered Documents against payment No credit term is offered Documents against payment No credit term is offered	Years of Relationship with our Group
				8 2 2 3 10

None of our Directors, their associates, or any Shareholders who owned more than 5% of the share capital of the Company as at the Latest Practicable Date had any interest in any of the five largest suppliers of our Group during the Track Record Period.

Salient features of a typical purchase transaction

We have not entered into any long term contractual arrangements with our suppliers, which our Directors believe is in line with the normal practice in the leather garment industry. In a typical purchase transaction for leather, we will normally issue a purchase order to the supplier and the following salient terms are contained:

. Product description: the types of raw materials, including the colour, skin origin, skin size and skin thickness;
. Quantity of the order: the quantity of the leather in square feet;
. Unit price and total amount of the order;
. Payment terms: Payments are usually settled through telegraphic transfers, or document against payment (D/P) at sight;
. Delivery terms: the date of delivery; and

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. Testing standards and requirements: the requirements for testing of the leather include dimensional stability and appearance test, physical test (namely, tear strength and finish adhesion), colour fastness test.

INVENTORY

We primarily adopt a made-to-order strategy and make procurements of raw materials with our suppliers after our customers confirm their orders.

Leather raw materials will usually be purchased by our headquarters in Hong Kong before delivery to the Foshan Factory for production. After producing the products, the Foshan Factory will arrange for the finished products to be delivered to Hong Kong before shipping the products to the designated locations of our customers. We have two warehouses to store our inventory and finished products. One is situated in Hong Kong and the other is inside the Foshan Factory.

For each production order, we will usually purchase a small quantity of leather raw materials of approximately 5% on top of the required quantity to cater for wastage which may arise during the production process. Any excess quantity of leather which has not been used for the production will be kept for other usage. Nevertheless, we are able to maintain effective control of our inventory level and avoid excessive accumulation of raw materials.

We maintain a leather order progress report and an in-and-out log book to monitor the receipt of inventory from our suppliers and the usage of raw materials in the production process.

For the two years ended 30 June 2014, our Group’s inventory turnover days were approximately 76.1 days and 65.1 days, respectively. For a detailed inventory analysis, please refer to the section headed ‘‘Financial Information — Key financial ratios — Inventory turnover days’’ in this [REDACTED].

QUALITY CONTROL

We place great emphasis on the quality of our products and believe our commitment to the high standard for quality control of our products is one of the key factors contributing to our success. We have implemented a comprehensive quality control system in all essential stages of the production process to ensure quality of our products and our customers’ requirements are fully satisfied.

Our quality control team is led by Mr. Ng Lai Wing who has over 20 years of experience in garment production. Mr. Ng is the quality assurance and factory operation manager and is responsible for overseeing the operations of the factory by formulating, implementing, managing and evaluating various processes to enhance the production effectiveness and efficiency and quality control. During the Track Record Period, other than Mr. Ng, our quality control team consists of 6 and 6 staff for each of the two years ended 30 June 2013 and 2014, respectively, and 3 of them have more than 10 years of relevant working experience.

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All leather purchased is subject to quality inspections by our quality control team. Some customers may request us to perform laboratory tests and produce sample leather for their inspection. These are to ensure that the raw materials of our products meet the prescribed quality standards and conform to our customers’ requirements. If there is any substandard or defective leather, we will request the suppliers to provide us with the leather which meets our requirements for replacement. During the production process, we monitor the major stages of the production and the products are subject to quality control checking. Thus, upon completion of the production process, the finished garments are subject to our sample checking by our experienced quality control staff to ensure they match our customers’ designs and specifications. If defects are found in the finished products, the finished products will be reprocessed. Most of our customers will check the finished products before packaging and delivery.

During the Track Record Period and up to the Latest Practicable Date, we have not experienced any material product quality issue in relation to the leather we purchased from our suppliers and finished goods we sold to our customers.

PRODUCT RETURNS AND WARRANTY

Under our total quality control system, our finished products are subject to sample checking by our quality control staff to ensure the finished products comply with our customers’ requirements. We do not have a formal product return or warranty policy. Nevertheless, as a responsible manufacturer and in order to maintain our goodwill and our business relationships with our customers, we would investigate every incident and satisfy our customers’ requests to the best of our ability.

During the Track Record Period, we have not experienced any material case of product returns from our customers in relation to the quality of our products. We had two separate product returns which amounted to approximately US$15,700 and US$16,300 in September 2013 and June 2014 respectively, involving minor defects in our products reported by our two customers respectively. Despite both customers had inspected the finished products before delivery, in order to maintain good business relationships and to strengthen our customers’ confidence in us, we refunded the entire purchase amounts of the products involved in both cases. We maintain good business relationships with them and the two customers continued to place orders with us since the incidents.

MARKET AND COMPETITION

According to the Industry Report, the leather garment industry is fragmented and there were over 5,000 manufacturers in the leather garment manufacturing industry in China with the top 10 manufacturers made up about 1.3% of total industry revenue in 2013. As such, we operate in a highly competitive environment.

Our Directors are of the view that the business of leather garment manufacturing normally does not require substantial capital investments and advanced technology and, accordingly, has a relatively low entry barrier in terms of capital. However, our Directors believe that a successful

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company in the business will require production skills, experience and craftsmanship, building of strong relationships with quality suppliers and customers which our Group has possessed after more than 20 years of operating history.

In terms of market trend and prospect, according to the Industry Report, the total revenue of leather garment manufacturing industry in China is expected to increase with increasing local retail activity and consumer’s confidence. To tap into the business potentials of the PRC market, we intend to further strengthen our marketing coverage in the PRC market by targeting specifically PRC mid-to-high end local fashion brands.

Our Directors believe that we have earned our reputation and compete favourably with our competitors as we can produce products which conform to our customers’ stringent product design specifications and aesthetic requirements and we can also offer pre-production product development services and have high flexibility and strong reliability.

EMPLOYEES

As at 30 June 2013, 30 June 2014 and the Latest Practicable Date, we had a total of 119, 114 and 115 permanent full-time employees, respectively.

Set out below is the number of employees of our Group by areas of responsibility and geographical locations as at 30 June 2013 and 2014 and as at the Latest Practicable Date:

As at 30 June 2013 HK PRC 4 — 1 9 1 2 1 3 — 82 1 5 2 5 2 1 12 107	As at 30 June 2014 HK PRC 4 — 1 8 1 2 1 3 — 76 1 5 2 7 2 1 12 102	As at the Latest Practicable Date	As at the Latest Practicable Date
HK 4 1 1 1 — 1 2 2 12	HK 4 1 1 1 — 1 2 2 12	HK 4 3 2 1 — 1 2 2 15	PRC
			— 8 2 3 76 5 5 1
			100

Our Directors believe that we maintain good working relationship with our employees. During the Track Record Period and up to the Latest Practicable Date, we have not experienced any material dispute with our employees or disruption to our operations due to labour dispute and we

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have not experienced any difficulties in the recruitment and retention of experienced staff or skilled personnel. During the Track Record Period and up to the Latest Practicable Date, there was no labour union established by our Group’s employees.

We provide various training to our employees to enhance their technical skills and knowledge relevant to the employees’ responsibilities. We also provide our employees with quality control standards and work safety standards training to enhance their safety awareness.

We intend to use our best effort to recruit and retain appropriate and suitable personnel to serve our Group. We will assess our human resources periodically and will determine whether additional manpower is required to cope with our business development.

We have complied with the applicable labour laws and regulations in the PRC and Hong Kong, save for the matters as disclosed in paragraph headed “Legal proceedings and noncompliance” below. We make contributions to the social security scheme and the housing provident fund for our employees in the PRC. As advised by our PRC Legal Advisers, we received confirmation from the relevant authorities confirming that we have not been punished for any violation of the applicable labour laws in the PRC in all material respects during the Track Record Period.

For each of the years ended 30 June 2013 and 2014, our total staff costs were approximately HK$11.6 million and HK$13.6 million respectively.

ENVIRONMENTAL PROTECTION

Our operation in Foshan is subject to environmental obligations under the PRC environmental protection law. Please refer to the paragraph headed ‘‘Environmental protection’’ under the section headed ‘‘Regulations’’ for further details.

Our production process generally does not produce much industrial waste and accordingly incurs minimal cost of compliance with applicable environmental protection rules and regulations in the PRC.

As advised by our PRC Legal Advisers, we received confirmation from the relevant environmental authorities that Foshan Shengli has not been punished for any violation of the applicable environmental protection laws and regulations in all material respects during the Track Record Period.

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During the Track Record Period and up to the Latest Practicable Date, our Group inadvertently failed to comply with certain regulatory	requirements under the laws of Hong Kong and the PRC. All such incidents fall in the category of systemic non-compliance. Details of them	are summarised below:	1. Perline failed to comply with section 122 of the Predecessor Companies Ordinance and/or section 429 of the Companies Ordinance	Internal control measures	Identity and position of Potential operational and taken to prevent recurrence	Nature and extent of Reason(s) for the non- senior management of our Possible legal consequences financial impact on our Remedial and responsible person(s)	non-compliance events compliance Group involved and maximum penalty Group (where applicable) actions taken for such measures	Non-compliance in relation The then auditors of Perline Our accounting staff was Perline and its respective No potential operational and With respect to the non- We have assigned Mr. Chan	to late presenting with customarily completed audit responsible for ensuring directors and officers who financial impact, as remedial compliances within the past Hing Yik (our company	shareholders of annual of Perline’s financial compliance of this aspect. fail to take all reasonable actions disclosed below have three years, an application secretary) to monitor the	accounts at annual general statements for the relevant steps to comply with the been taken and in case of was made by Perline (HCMP annual filings and accounts	meetings within the financial year (with year-end relevant requirement are conviction, the likelihood of 2626/2014) to the High Court requirements pursuant to the	prescribed period (i.e. no of 30 June) in around April liable to maximum fines of imposition of the maximum seeking relief under the Companies Ordinance and	more than 9 months from the next year (i.e. 10 months HK$300,000 and 12-month sentence on Perline and its Predecessor Companies will seek assistance from	closing date of a financial from the closing date of a imprisonment (if the offence respective directors and Ordinance and/or section 429 external legal advisers if	year) in respect of the financial year), so that such was committed wilfully) officers would be remote as of the Companies Ordinance. necessary to ensure	financial years ended 30 June audited financial statements under section 122 of the the non-compliances were not The hearing is set down on 4 compliance with the statutory	2002 to 30 June 2013 (except may be sent to the Inland Predecessor Companies committed wilfully. December 2014. requirements.	for the financial year ended Revenue Department during Ordinance.	30 June 2009) that month. The directors of No provisions have been In respect of the non- Please refer to the section	Perline were under the made because the non- compliances which took headed ‘‘Directors, senior	misconception that Perline compliances were not place more than three years management and staff’’ in	was only required to hold an committed wilfully and the before, please see ‘‘note 1’’ this [REDACTED] for his	annual general meeting imposition of the maximum below at the bottom of this qualifications and experience	within 9 months after the fine is unlikely. table.	financial year end (without	presenting the audited	financial statements for the	relevant financial year), and	the audited financial	statements would be allowed	to be tabled and received at	an adjourned general meeting	(which was customarily held	in around April or May of	the same year).	Notes:	1. Pursuant to section 351A of the Predecessor Companies Ordinance, notwithstanding section 26 of the Magistrates Ordinance (Chapter 227 of the Laws of Hong Kong), an information or	complaint relating to the offence may be tried if it is laid or made, as the case may be, at any time within 3 years after the commission of the offence and within 12 months after the date	on which evidence sufficient in the opinion of the Secretary for Justice to justify the proceedings comes to his knowledge. Section 900 of the Companies Ordinance has similar provisions	as the said section 351A of the Predecessor Companies Ordinance. Accordingly, the non-compliance incidents committed by Perline which occurred before the date falling three years prior	to the Latest Practicable Date are effectively time-barred and Perline would not be subject to any liability in connection with such non-compliance incidents.	2. Prior to the date falling three years prior to the Latest Practicable Date, Perline had a few incidents of failure to file prescribed returns within the prescribed time under the Predecessor	Companies Ordinance. For the reasons set out in note 1, such non-compliance incidents committed by Perline are effectively time-barred and Perline is unlikely to be subject to any liability	in connection with such non-compliance incidents.

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2. Non-compliance arising from late lodgment of textile notifications under TTRS (hence not being exempted from obtaining prior	licenses) for import of textiles from the PRC into Hong Kong	Internal control measures	Identity and position of Potential operational and taken to prevent recurrence	Nature and extent of non- Reason(s) for the non- senior management of our Possible legal consequences financial impact on our and responsible person(s)	compliance incidents compliance Group involved and maximum penalty Group (where applicable) Remedial actions taken for such measures	During the Track Record Under the IAE Ordinance Our shipping clerk was If legal action had been In connection with such non- For both non-compliance To prevent the occurrence of	Period, Perline failed to and its subsidiary delegated to observe the taken by HK-TID, Perline compliance incidents, HK- incidents, applications were any non-compliance in the	timely lodge textile legislations, no person shall lodgment/licensing would have been liable on TID issued two warning made by Perline for import future, we have established	notifications by TTRS for import textiles from the PRC requirements in connection conviction to a maximum letters respectively to Perline licences shortly after guidelines for handling	import from the PRC into to Hong Kong without a with textiles import and fine of $500,000 and to on a without prejudice basis. receiving the relevant lodgment of textiles	Hong Kong of (i) 97% valid import licence. export. imprisonment for no more Our Directors believe, and invoices, packing lists and notifications and issued an	polyester 3% spandex woven However, under the TTRS, a than 2 years under section our Hong Kong Legal bills of lading from the PRC internal memorandum to the	fabrics on 8 April 2013, and registered textiles trader may 6C(2) of the IAE Ordinance, Advisers concur, that as suppliers and within 7 days relevant staff to raise	(ii) polyester woven fabrics rely on the exemption from in addition to administrative retrospective licences were after the importations. Such awareness on the	on 20 September 2013 the textiles licensing actions that may be taken by given by HK-TID and textiles licences were granted requirements of timely	respectively. requirements by, among other HK-TID. Under section 37 of warning letters were issued, retrospectively by HK-TID. lodgment of textiles	conditions, covering imports the IAE Ordinance, any such it is unlikely for any legal or notifications. We have	of textiles with self- complaint shall be made or administrative action to be assigned Mr. Ramond Ching	completed notifications an information shall be laid brought against Perline. (an executive Director) to	setting out particulars of the in respect of an offence Accordingly, no provisions monitor our compliance with	consignments. A registered under the IAE Ordinance have been made and there is the requirements under the	textiles trader should deliver within 2 years from the time no potential operational and IAE Ordinance. Please refer	its textiles notifications to when the matter of such financial impact on our to the section headed	HK-TID before import or complaint or information Group. To the best ‘‘Directors, senior	export of textiles. For more respectively arose. As at the information, knowledge and management and staff’’ in	details of the TTRS, please Latest Practicable Date, belief of our Directors, save this [REDACTED] for his	refer to the section headed Perline has not been subject as mentioned above, there qualifications and experience.	‘‘Regulations — Hong Kong to any legal or administrative was no other non-compliance	— Import and Export proceedings in respect of in relation to the timely	Ordinance — Licensing such non-compliance lodgment of textile	regime for import and export incidents. notifications under TTRS	of textiles’’ in this within the Track Record	[REDACTED]. Period.	Perline has since 1993 been	registered as a textiles trader	under the TTRS, hence is	exempted from the textiles	licensing requirements under	the IAE Ordinance by	complying with the said	conditions of exemption	under the TTRS.

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taken to prevent recurrence	and responsible person(s)	for such measures	We have assigned Mr.	Ramond Ching (an executive	Director) to oversee our	compliance with the	requirements in relation to	lodgment of import and	export declarations under the	IAE Ordinance. We will also	seek legal advice on the	relevant compliance matters	in the future, as and when	necessary, to ensure our	continuous compliance with	the relevant laws and	regulations.		Please refer to the section	headed ‘‘Directors, senior	management and staff’’ in	this [REDACTED] for his	qualifications and experience.
		Remedial actions taken	In October 2014, we started	to implement internal control	improvement measures to	ensure all import or export	declarations be lodged within	the prescribed 14-day period.	Since early October 2014, all	import or export declarations	lodged by us were lodged	within the prescribed 14-day	period.
Potential operational and	financial impact on our	Group (where applicable)	We settled all relevant	penalties payable under	Regulation 7 of the IAE	Registration Regulations	within 7 days after lodgment	(though late) of import and	export declarations. (See note	at the bottom of this table.)		The total amount of such	penalties paid by us during	the Track Record Period is	about HK$19,500.		Further, our Directors	consider, and our Hong Kong	Legal Advisers concur that, it	is unlikely for Perline to be	fined under Regulation 4 or 5	of the IAE Registration	Regulations. As such, our	Directors believe that the	non-compliance incidents	have no material adverse	operational and financial	impact on our Group.		For the same reasons,	provisions have not been	made.
	Possible legal consequences	and maximum penalty	Under Regulation 4 and 5 of	the IAE Registration	Regulations, if the person	who is required to lodge a	declaration under such	regulations fails or neglects,	without reasonable excuse, to	do so within the prescribed	14-day period (or, where	applicable, such person has a	reasonable excuse but fails to	neglects to lodge such	declaration in the prescribed	manner as soon as is	practicable after the cessation	of such excuse), such person	shall be guilty of an offence	and shall be liable on	summary conviction to a fine	of HK$1,000 and,	commencing on the day	following the date of	conviction, to a fine of	HK$100 in respect of every	day during which his failure	or neglect to lodge the	declaration in that manner	continues.
Identity and position of	senior management of our	Group involved	Our shipping clerk was	delegated to observe the	lodgment timing	requirements.
	Reason(s) for the non-	compliance	When importing or exporting	leather raw materials or	garments, the declarations	made by logistics agents	companies with HK Customs	are generally simple, but	declarations lodged by	Perline with HK Customs	have to be exact, complete	and accurate (in terms of	both description and	quantity). There were times	that Perline may have to seek	re-confirmations and/or	clarifications from suppliers	(or, where appropriate, the	customs-clearance agents	appointed by suppliers or	Foshan Shengli).		As the above clarification	and/or re-confirmation	process with third parties	may take longer than 14	days, Perline sometimes filed	the declarations concerned	beyond the 14-day prescribed	period.
	Nature and extent of non-	compliance	During the Track Record	Period, about 1,000 import or	export declarations were	lodged by Perline, of which	about 495 import or export	declarations were lodged	beyond the prescribed period	under Regulation 4 and 5 of	the IAE Registration	Regulations (i.e. 14 days	after the importation or	exportation), while the	remaining declarations were	made within the prescribed	period.		Among such 495	declarations,		(i) about 477 declarations	were filed within 1	month and 14 days after	the importation or	exportation;		(ii) about 16 declarations	were filed after 1 month	and 14 days but within	2 months and 14 days	after the importation or	exportation;	(iii) about 2 declarations	were filed after 2	months and 14 days	after the importation or	exportation.

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Internal control measures	Identity and position of Potential operational and taken to prevent recurrence	Nature and extent of non- Reason(s) for the non- senior management of our Possible legal consequences financial impact on our and responsible person(s)	compliance compliance Group involved and maximum penalty Group (where applicable) Remedial actions taken for such measures	Under Section 37 of the IAE	Ordinance, any such	complaint shall be made or	an information shall be laid	in respect of such offence	within 2 years from the time	when the matter of such	complaint or information	respectively arose.	Note: Under Regulation 7 of the IAE Registration Regulations, if a person fails to submit a declaration within the 14-day period as prescribed under Regulation 4 or 5 of the IAE Registration	Regulations, such person shall be liable, in addition to any other penalty or charge, to pay a penalty in respect of each such failure. Such penalty for each failure ranges from HK$20 to	HK$200 depending on the length of time of the late lodgment and the total value of the articles specified in the declarations which is accrued at time of lodgment of declaration. All	such penalties were paid within 7 days after any late declarations were lodged.

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taken to prevent recurrence	and responsible person(s)	for such measures	We have assigned Ms. Idy	Cheung (an executive	Director), and Mr. Ramond	Ching (an executive Director)	to periodically review the	contribution payments and	report any discrepancies	found to ensure that	contributions are properly	monitored and carried out in	accordance with the	requirements of the relevant	regulations, and to report to	the Corporate Governance	Committee about the findings	and results regularly. We will	also seek legal advice on the	relevant requirement in the	future, as and when	necessary, to ensure our	continuous compliance with	the relevant laws and	regulations.		Please refer to the section	headed ‘‘Directors, senior	management and staff’’ in	this [REDACTED] for their	respective qualifications and	experience.
		Remedial actions taken	We have sought legal advice	from our PRC Legal Adviser	regarding the relevant legal	requirements relating to	social insurance. Our	Directors consider, and our	PRC Legal Advisers concur,	since September 2014, we	have contributed social	insurance on the ratio and	timeline prescribed by law	for all eligible PRC	employees.
Potential operational and	financial impact on our	Group (where applicable)	As of the Latest Practicable	Date, we were not subject to	any surcharge or penalty in	respect of such non-	compliance incidents and we	did not receive any	notification from the relevant	authorities alleging that we	did not make adequate social	insurance contributions for	our PRC employees and	demanding payment of the	outstanding amount of social	insurance contributions.	Upon receipt of the request	from the relevant authorities,	if any, we intend to	immediately pay the	outstanding social insurance	contributions and/or any	surcharge imposed by the	relevant authorities	accordingly. We are advised	by our PRC Legal Advisers	that in the event that we pay	the outstanding social	insurance contributions and/	or any such surcharge within	the prescribed period upon	request of the relevant PRC	authorities, it is unlikely that	a fine from one to three	times the amount of overdue	payment would be imposed	upon us in connection with	our non-compliance.
	Possible legal consequences	and maximum penalty	Under the Interim	Regulations Concerning the	Levy of Social Insurance	Fees (社會保險費徵繳暫行條	例), with regard to the failure	to make full contributions to	social insurance for its	employees before 1 July	2011, the relevant PRC	authorities may order the	enterprise to rectify the non-	compliance within a	prescribed time limit. If the	enterprise still fails to make	the payment within the time	limit, in addition to the	unpaid social insurance	premiums, a surcharge for	overdue payment equal to	0.2% per day of the overdue	payment counting from the	date when the amount	becomes overdue will be	imposed. If the enterprise	refuses to pay the social	insurance premiums and the	surcharge within the time	limit, the relevant PRC	authorities may apply to	People’s Courts for	mandatory enforcement of	the collection.
Identity and position of	senior management of our	Group involved	Head of Human Resources of	Foshan Shengli
	Reason(s) for the non-	compliance	Certain of our PRC	employees were reluctant to	cooperate with Foshan	Shengli for Foshan Shengli	making contribution for	social insurance for such	employees.
	Nature and extent of non-	compliance	During the Track Record	Period, we only made social	insurance contributions for	our PRC employees based on	the minimum salary as	required by the relevant PRC	authorities in Foshan. We	estimate the total outstanding	amount of social insurance	contribution during the Track	Record Period would be	about RMB750,000.

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taken to prevent recurrence	and responsible person(s)	for such measures
		Remedial actions taken
Potential operational and	financial impact on our	Group (where applicable)	Further, Foshan Shengli has	contributed social insurance	on the basis prescribed by	law for all our eligible PRC	employees since September	2014.		Appropriate provisions in the	sum of about RMB476,000	and RMB274,000 have been	made in respect of such non-	compliance events for each	of the two years ended 30	June 2013 and 2014.		Besides, our Controlling	Shareholders [have agreed] to	indemnify us for all amount	and/or penalty or any costs,	expenses and losses in	connection with such amount	and/or penalty, due to our	non-compliance with laws	and regulations related to	social insurance.		Based on the above, the	Directors consider that the	non-compliance has no	material adverse operational	and financial impact on our	Group.
	Possible legal consequences	and maximum penalty	Pursuant to the Social	Insurance Law of the PRC	(中華人民共和國社會保險	法), with regard to the failure	to pay the full amount of	social insurance premiums as	scheduled after 1 July 2011,	the relevant PRC authorities	shall order the employer to	make the payment or make	up the difference within the	stipulated period and impose	a daily surcharge equivalent	to 0.05% of the overdue	payment from the date on	which the payment is	overdue. If payment is not	made within the stipulated	period, the relevant PRC	authorities shall impose a	fine from one to three times	the amount of overdue	payment.		According to the Regulation	on Labour and Social	Security Supervision(勞動保	障監察條例), if the violation	to labour and social security	laws, regulations or rules is	continuous or continuing, but	it had not come to the	attention of the relevant	labour administrative	departments after two years	since the date of the	violation’s cessation, nor had	it been reported or	complained about, the labour	administrative departments	no longer investigate or	impose punishments.
Identity and position of	senior management of our	Group involved
	Reason(s) for the non-	compliance
	Nature and extent of non-	compliance

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of our PRC employees	Internal control measures	Identity and position of Potential operational and taken to prevent recurrence	Nature and extent of non- Reason(s) for the non- senior management of our Possible legal consequences financial impact on our and responsible person(s)	compliance events compliance Group involved and maximum penalty Group (where applicable) Remedial actions taken for such measures	We did not strictly comply Some of our PRC employees Head of Human Resources Under the Regulations on the Foshan Shengli has We have sought legal advice We have assigned Ms. Idy	with the requisite were reluctant to cooperate of Foshan Shengli Administration of Housing contributed housing from our PRC Legal Cheung (an executive	contribution requirements of with Foshan Shengli for Provident Funds (住房公積 provident fund on the ratio Advisers regarding the Director), and Mr. Ramond	housing provident fund Foshan Shengli making 金管理條例), where an prescribed by law for all our relevant legal requirements Ching (an executive	during the Track Record contribution for housing employer fails to pay up eligible PRC employees relating to housing provident Director) to periodically	Period. provident fund for such housing provident fund since September 2014. As of fund. Our Directors consider, review the contribution	employees. within the prescribed time the Latest Practicable Date, and our PRC Legal Advisers payments and report any	We estimate the total limit, the housing fund we were not subject to any concur, we have contributed discrepancies found to ensure	outstanding amount of administration center may penalty in respect of such housing provident fund on that contributions are	housing provident fund order it to make payment non-compliance incidents the ratio and timeline properly monitored and	contribution during the Track within a certain period of and we have not received prescribed by law for all our carried out in accordance	Record Period would be time; if the employer still any notifications having an eligible PRC employees of with the requirements of the	about RMB463,000. fails to do so, the housing effect of instructing us to Foshan Shengli since relevant regulations, and to	fund administration centre make a supplemental September 2014. report to the Corporate	may apply to the court for payment of housing Governance Committee about	enforcement of the unpaid provident fund and imposing the finding and results	amount. The housing fund administrative penalties regularly. We will also seek	administration center may issued by the relevant legal advice on the relevant	also impose a penalty of not housing fund administration requirement in the future, as	more than RMB50,000 for centre. We are advised by and when necessary, to	failure to comply with the our PRC Legal Advisers that ensure our continuous	necessary registration in the event that we make compliance with the relevant	procedures within the time the housing provident fund laws and regulations.	limit. contributions within the	prescribed period upon Please refer to the section	request of the relevant headed ‘‘Directors, senior	housing fund administration management and staff’’ in	centre, it is unlikely that this [REDACTED] for their	administrative penalties qualifications and	would be imposed upon us experience.	by the relevant housing fund	administration centre in	connection with our non-	compliance.

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taken to prevent recurrence	and responsible person(s)	for such measures
		Remedial actions taken
Potential operational and	financial impact on our	Group (where applicable)	Appropriate provisions in the	amount of about	RMB223,000 and	RMB240,000 have been	made in respect of the non-	compliance events for each	of the two years ended 30	June 2013 and 2014.	Besides, our Controlling	Shareholders [have agreed]	to indemnify us for all	amount and/or penalty or any	costs, expenses and losses in	connection with such amount	and/or penalty, due to our	non-compliance with laws	and regulations related to	housing provident fund.	Based on the above, our	Directors consider that the	non-compliance has no	material adverse operational	and financial impact on our	Group.
	Possible legal consequences	and maximum penalty
Identity and position of	senior management of our	Group involved
	Reason(s) for the non-	compliance
	Nature and extent of non-	compliance events

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Our Controlling Shareholders will enter into the Deed of Indemnity in favour of our Group whereby the Controlling Shareholders will agree to indemnify our Group, subject to the terms and conditions of the Deed of Indemnity, in respect of any liabilities which may arise as a result of any legal proceedings and/or non-compliance of our Group on or before the date on which the [REDACTED] becomes unconditional. Further details of the Deed of Indemnity are set out in the paragraph headed ‘‘5. Estate duty, tax and other indemnities’’ in Appendix IV to this [REDACTED]. Our Directors consider that the non-compliance events disclosed above will not have any material adverse impact on the operation or financial position or business of our Group.

Internal control measures to prevent recurrence of non-compliance incidents

In addition to the internal control measures taken to prevent recurrence of the non-compliance incidents mentioned in the above tables, in order to continuously improve our corporate governance and to prevent recurrence of the non-compliance incidents, we will adopt and/or have adopted the following measures:

(a) we will appoint legal advisers as to the laws of Hong Kong and the PRC, respectively, to advise our Group on the laws and regulations of Hong Kong and the PRC;
(b) we have appointed Halcyon Capital Limited as our compliance adviser upon [REDACTED] to advise our Group on compliance matters in accordance with the [REDACTED];
(c) our Board has established or will establish the Corporate Governance Committee on [.] 2014 which consists of Ms. Ng Lai Hung, our non-executive Director and our three INEDs. For the duties of the Corporate Governance Committee, please refer to ‘‘Directors, senior management and staff — Board committees — Corporate Governance Committee’’ of this [REDACTED];
(d) our senior management personnel have been briefed by the executive Directors on the importance of regulatory matters and will continue to monitor our compliance with relevant regulations and our senior management personnel will work closely with our staff to implement actions required to ensure our compliance with relevant regulations;
(e) we will continue to arrange various training programmes to be provided by the Hong Kong legal adviser and the PRC legal adviser engaged by us and/or any appropriate accredited institution to update our Directors, senior management and relevant employees on the relevant laws and regulations; and
(f) our Group has improved the existing internal control framework by adopting a set of internal control manual and policies in October 2014, including the corporate governance manual, which covers corporate governance, risk management, operations, legal matters, finance and audit.

In September 2014, we have engaged HLB Hodgson Impey Cheng Risk Advisory Services Limited, an independent internal control adviser (the ‘‘Internal Control Adviser’’) to review the internal control system of our Group. The Internal Control Adviser has reviewed the internal

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control system of our Group according to the agreed scope which covers (i) overall management control which includes code of conduct, conflict of interests, risk assessment, legal and regulatory compliance and report of control deficiency; (ii) financial budgeting and forecasts; (iii) treasury functions; (iv) financial reporting and disclosure control; (v) management accounting information system; (vi) human resources and payroll cycle; (vii) sales, receivables and collection cycle; (viii) purchases, payables, expenses and payments; (ix) inventory cycle; and (x) production and costing. The Internal Control Adviser’s review focuses on the status of implementation of the recommended remedial actions in areas where deficiencies and weaknesses were identified, the effectiveness of our procedures, systems and controls, and the standards and effectiveness of our corporate governance practice to ensure our compliance with the [REDACTED] and the applicable Hong Kong laws and regulations.

As at the Latest Practicable Date, we implemented the recommendations from the Internal Control Adviser. The Internal Control Adviser performed follow-up review in October 2014 on our internal control measures implemented for verifying the implementation status of the system improvement recommendations and is satisfied with the adequacy and effectiveness of such measures. The Internal Control Adviser also reviewed the implementation status of the internal control measures taken to prevent recurrence of the non-compliance incidents. Based on the findings, recommendations and follow-up results performed by the Internal Control Adviser, it is considered that such remedial actions have been implemented and are adequate and effective.

Views of our Directors and the Sponsor regarding the corporate governance

As set out in the paragraph headed ‘‘Business — Legal proceedings and non-compliance — Internal control measures to prevent recurrence of non-compliance incidents’’ in this section of [REDACTED], our Group has adopted and implemented the corporate governance and internal control measures to enhance the internal control systems and to ensure compliance of various applicable rules and regulations to prevent the occurrence of any non-compliance in the future. Our Directors believe that the corporate governance and internal control measures are adequate and effective which will ensure a proper internal control system and maintain good corporate governance practices of our Group.

Having taken into account the fact that (i) our Group has taken remedial measures and the abovementioned non-compliance incidents have been rectified to the extent practicable; (ii) our Group has implemented the abovementioned additional measures to avoid recurrence of the noncompliance incidents; and (iii) the non-compliance incidents were unintentional, did not involve any fraudulent act on the part of our Directors or cast doubt on their integrity, our Directors consider that the abovementioned non-compliance incidents do not have any material impact on the suitability of our Directors under Rules 5.01 and 5.02 of the [REDACTED] or on our suitability for [REDACTED] under Rule 11.06 of the [REDACTED] and our Group’s enhanced internal control measures are adequate and effective.

The Sponsor, after considering the above and having reviewed the internal control measures and the findings and recommendations of the Internal Control Adviser, and having considered the above remedial actions taken by our Group and its business nature and current operating scale,

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concurs with our Director’s view that the non-compliance incidents do not have any material impact on the suitability of our Directors under Rules 5.01 and 5.02 of the [REDACTED] and our Company’s suitability for [REDACTED] under Rule 11.06 of the [REDACTED] and our Group’s enhanced internal control measures are adequate and effective.

INTELLECTUAL PROPERTY

We have developed policies and procedures to protect the intellectual properties of our customers. Our employees are forbidden to reproduce or distribute any information related to the product designs of our customers. If they discover any suspected infringement of our customers’ intellectual properties, they have to report to their respective department heads as soon as possible. Furthermore, upon the receipt of third party complaints, we will investigate and take any necessary remedial measures to efficiently settle or resolve the disputes.

During the Track Record Period and up to the Latest Practicable Date, to the best knowledge of our Directors, we are not aware of any infringement or potential infringement by any member of our Group of the intellectual property rights owned by any third parties, and no material complaint has been received and no claim has been made against us by our customers in relation to infringement of their intellectual property rights.

As at the Latest Practicable Date, we have not registered or sought to make any applications for registration of trademarks or patents.

CORPORATE GOVERNANCE AND INTERNAL CONTROL MEASURES

We maintain corporate governance and internal control measures to ensure effective and efficient management and operation of our business and to safeguard the interests of the Shareholders. We have implemented a corporate governance and internal control system, which includes:

. Policies and measures to protect the confidentiality of sensitive business information and regulate any information disclosure;
. Procedures to enhance communication between our management and our employees;
. Policies and procedures to identify and disclose connected transactions to ensure compliance with the [REDACTED];
. Procedures and policies to report and communicate material information to our management;
. Disaster Recovery Plan;

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. Computer information management system;
. Measures to ensure compliance with applicable laws and regulations; and
. Policies and measures to facilitate production safety.

Up to the Latest Practicable Date, save for the historical non-compliance incidents disclosed above, our Directors have not identified any material internal control weaknesses or failures.

HEALTH AND WORK SAFETY

We recognise the importance of maintaining a safe working environment, especially in relation to our operation in the Foshan Factory. We developed comprehensive occupational safety measures to mitigate or prevent the risks of industrial incidents including accidents in production, fire accidents and material operation disruption.

We developed operational manuals covering different areas of production, including prototyping, tailoring, sewing, ironing, machine operation, packaging and storage. We also provide regular training to our employees to familiarise them with our safety measures.

Mr. Ng Lai Wing is the quality assurance and factory operation manager of the Foshan Factory and is responsible for the development, implementation and monitoring of all control measures. Mr. Ng has also been assigned to develop and implement contingency and responsive plans and to deal with any accidents in production.

During the Track Record Period and up to the Latest Practicable Date, we have not experienced any material industrial accidents and no claims for personal or property damages were made against us.

RISK MANAGEMENT

We have adopted and implemented risk management policies in various aspects of our business operations such as financial reporting and human resources management.

Financial Reporting Risk Management

We have adopted comprehensive accounting policies in connection with our financial reporting risk management. Our overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on our financial performance.

Human Resource Risk Management

We have established internal control policies covering various aspects of human resource management such as recruiting, training, work ethics and legal compliance. Our employee handbook contains internal rule and guidelines regarding work ethics and the prevention of fraud and corruption.

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Ongoing Measures to Monitor the Implementation of Risk Management Policies

Our corporate governance committee, audit committee and senior management will monitor the implementation of our risk management policies across the Company on an ongoing basis to ensure that our internal control system is effective in identifying, managing and mitigating risks involved in our operations.

INSURANCE

We believe our insurance coverage is generally adequate to insure against the risks relating to our operations taking into account the size and type of our business. Our Directors also believe that our insurance coverage is generally in line with the standard commercial practice in the leather garment industry. Our insurance coverage includes employee compensation, personal accident, burglary, fire, any loss or damage to the inventory, plant and equipment, office and transit within Hong Kong and the PRC. Sometimes, we will purchase insurance for the delivery of leather from our suppliers to us. Our Directors confirm that payments under all existing insurance policies have been duly and promptly paid.

We do not maintain product liability insurance for our products. Our practice of not having product liability insurance is also generally in line with the garment industry practice. However, we have complied with our customers’ requirements in relation to product safety during the Track Record Period. During the Track Record Period and up to the Latest Practicable Date, no material complaint or claim was made against us from any third parties in relation to the products we manufactured.

RESEARCH AND DEVELOPMENT

We have not engaged in any research and development activity during the Track Record Period.

AWARD AND RECOGNITION

In recognition of our Group’s work safety standard and measures implemented in our production process, our Foshan Shengli has been awarded the Work Safety Standardisation Third Level Enterprise (Industrial Trading Enterprise) (安全生產標準化三級企業) by the Foshan City Work Safety Management Association (佛山市安全生產管理協會) in December 2012.

PROPERTIES

We have not owned any properties during the Track Record Period and as at the Latest Practicable Date.

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Leased properties

As at the Latest Practicable Date, we leased the following properties in Hong Kong and the PRC from Independent Third Parties:

Location Hong Kong Unit 1 & 2, 17/F, Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon (‘‘Current Headquarters’’) Unit 7, 17/F, Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon (‘‘HK Warehouse’’) The PRC 3/F, Block A1, Hantian Electronics City, Dong Ping Road, Gweicheng, Nanhai, Foshan, Guangdong, China (中國廣東佛山市南海桂城瀚天科技城A1座三樓) (formerly known as 3/F, Block 1, Beiyue Industrial Zone, Guicheng Electronics City, Foshan, Guangdong, China (中國廣東省佛山市桂城科技園北約工業區1座廠房第三層))	Lettable area 1,383 square feet 539 square feet 3,168 sq.m.	Key terms of the tenancy The lease is for a period from 1 July 2014 to 30 June 2016 at a monthly rent of HK$20,000 as at the Latest Practicable Date. The lease is for a period from 1 November 2013 to 31 October 2015 at a monthly rent of HK$10,000 as at the Latest Practicable Date. The lease is for a period from 1 May 2010 to 30 April 2015 at a monthly rent of RMB33,105.6 as at the Latest Practicable Date. We are currently in the process of renewing the lease with the landlord for another six years till 30 April 2021. We have also developed a contingency plan to relocate our manufacturing base in case we fail to renew the lease.	Current use of the property
			Headquarters, inspection and quality control of raw materials, office and display room of leather products, ironing and sewing of leather products Warehouse for storage, inspection and quality control of raw materials and finished leather products, and ironing and sewing of leather products Manufacturing base

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Location Suite 1811, 8/F, Block 1, suite 3509, 5/F, suites 3608 and 3609, 6/F and suite 3708, 7/F, Block 3, Living District,,Hantian Electronics City,17 Shen Hai Road, Gweicheng, Nanhai, Foshan, Guangdong, China (中國廣東省佛山市南海區桂城街道深海路17號瀚天科技城生活配套區一棟八層套房1811，三棟五層套房 3509，六層套房3608、 3609，七層套房3708) Dormitory 5202, 2/F and dormitories 5401-5408, 4/F, Block 5, Living District, Hantian Electronics City,17 Shen Hai Road, Gweicheng, Nanhai, Foshan, Guangdong, China (中國廣東省佛山市南海區桂城街道深海路17號瀚天科技城生活配套區五棟二層集體宿舍 5202，五棟四層集體宿舍 5401–5408)	Lettable area 292.35 sq.m. 374.76 sq.m.	Key terms of the tenancy The lease is for a period from 1 January 2014 to 31 December 2014 at a monthly rent of RMB3,900, monthly management fee of RMB1,300 and electric power facilities maintenance fee of RMB1,300 as at the Latest Practicable Date. The lease is for a period from 1 January 2014 to 31 December 2014 at a monthly rent of RMB3,510, monthly management fee of RMB1,170 and electric power facilities maintenance fee of RMB1,170 as at the Latest Practicable Date.	Current use of the property
			Staff quarters Staff quarters

Our lease for the Current Headquarters will expire on 30 June 2016 and the lease of the HK Warehouse will expire on 31 October 2015. Our lease of the Foshan Factory will also expire on 30 April 2015. Nevertheless, for the Foshan Factory, we are currently in the process of renewing the lease with the landlord for another six years till 30 April 2021. We have also developed a contingency plan to relocate our manufacturing base in case we fail to renew the lease.

Uses of our Current Headquarters and HK Warehouse

Under the Conditions of Sale (‘‘Government Lease’’), the Deed of Mutual Covenant and Management Agreement (‘‘DMC’’) and the Occupation Permit (‘‘OP’’), our Current Headquarters and HK Warehouse have to be used, in essence, for industrial purposes.

The building of which our Current Headquarters and HK Warehouse are located in is a factory building. As advised by our Hong Kong Legal Advisers, ‘‘industrial’’ use in the context of a factory building must involve some process of manufacturing and may include uses which are genuinely ‘‘ancillary to’’ such industrial use.

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Our Current Headquarters and HK Warehouse are currently put to use for inspection and quality control of raw materials, ironing and sewing of our leather products, warehouse for storage of raw materials and finished leather products, office, showroom and display room of finished leather products.

Our Directors are of the view (and our Hong Kong Legal Advisers concur) that such activities fall under the category of industrial activities which are in compliance with the permitted users as specified under the tenancy agreements, the Government Lease, the OP and the DMC. If however any relevant government authority takes a different view that such activities are not industrial activities on the grounds that there is a lack of manufacturing element pertaining to such uses or otherwise, the current uses of the two properties will not be in line with that permitted under the Government Lease, the DMC, the OP and/or the tenancy agreements. Accordingly, we could be ordered or requested by the relevant government authority, the manager of the building appointed under the DMC or our landlords to discontinue the current uses of the two properties under the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong), the terms of the Government Lease, the DMC or the tenancy agreements.

As at the Latest Practicable Date, we have not received any notice, demand or order from the relevant government authorities, the manager of the building appointed under the DMC or our landlords to discontinue the current uses of the two properties.

Nevertheless, any discontinuance of the current uses of the two properties and relocation to other premises are not expected to have a material adverse impact on the operation of our Group as the relocation cost is not expected to be material and we do not expect to have undue difficulty in finding and relocating to other suitable premises at acceptable rent level and on a timely basis for our operation. Thus, our Directors believe that there will be no material interruption to the operation of our Group.

LITIGATION

During the Track Record Period and as at the Latest Practicable Date, no member of our Group was engaged in any litigation, claim or arbitration of material importance and no litigation, claim or arbitration of material importance is known to the Directors to be pending or threatened against any member of our Group.

HEDGING

We did not enter into any hedging activity during the Track Record Period.

LICENCE & PERMITS

Save as disclosed in the section headed ‘‘Regulations’’ of this [REDACTED], there is no specific licensing requirement for conducting our Group’s business in Hong Kong and the PRC in addition to what is generally required for carrying on businesses in these places. Pursuant to the

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BUSINESS

advice of the Hong Kong Legal Advisers and the PRC Legal Advisers, the Group has obtained all material licenses, permits and certificates which are necessary for its operations in Hong Kong and the PRC respectively.

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OUR CONTROLLING SHAREHOLDERS

Immediately following completion of the [REDACTED] and [REDACTED] (and taking no account of any Shares which may be allotted and issued upon the exercise of the [REDACTED] [REDACTED] and any options which may be granted under the Share Option Scheme), BVICheung will directly hold approximately [REDACTED]% of the issued share capital of our Company. BVI-Cheung is an investment holding company incorporated on 2 July 2014 in the BVI. The entire issued share capital of BVI-Cheung is owned by Ms. Idy Cheung. Details of the background of Ms. Idy Cheung are set out in the section headed ‘‘Directors, senior management and staff’’ in this [REDACTED].

For the purpose of the [REDACTED], Ms. Idy Cheung and BVI-Cheung are deemed as the Controlling Shareholders of our Company as at the Latest Practicable Date.

Information on other companies owned by our Controlling Shareholders

As at the Latest Practicable Date, other than the business carried out by our Group, our Controlling Shareholders also had controlling interest in certain companies, some of which are dormant and the others relate to provision of accounting services or for effecting life insurance policies (collectively, the ‘‘Excluded Business’’). These companies are principally engaged in businesses of sectors different from that of our Group.

Our Directors have considered that it is either unnecessary or not in the best interest of our Group to include the Excluded Business in our Group for the purpose of [REDACTED] as the Excluded Business are not relevant to our principal business. As at the Latest Practicable Date, none of our Controlling Shareholders controls any business which competes, or is likely to compete, either directly or indirectly, with our business.

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INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Our Directors do not expect that there will be any significant transactions between our Group and our Controlling Shareholders upon or shortly after the [REDACTED].

Our Group is capable of carrying on our business independently from and does not place undue reliance on our Controlling Shareholders, taking into consideration the following factors:

Management independence

Our Board comprises three executive Directors, one non-executive Director and three INEDs. Ms. Idy Cheung, who is a director of BVI-Cheung, is only one of our executive Director and a Controlling Shareholder.

Each of our Directors is aware of his/her fiduciary duties as a Director which require, among other things, that he/she acts for the benefit and in the best interests of our Company and does not allow any conflict between his/her duties as a Director and his/her personal interest. In the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and our Directors or their respective close associates, the interested Director(s) shall abstain from voting at the relevant board meetings of our Company in respect of such transactions and shall not be counted in the quorum.

We have an independent management team to carry out the business decisions of our Group independently and to perform all essential management functions (such as operating our principal businesses, invoicing and billing, and human resources and information technology) without unduly requiring the support of our Controlling Shareholders. Our INEDs have sufficient and competent industry knowledge and experience, and will bring independent judgment to the decision making process of our Board, taking into account the advice of the senior management of our Group.

Our Directors are satisfied that our senior management team (including Ms. Grace Lam and Mr. Ramond Ching) is able to perform their roles in our Company independently, and our Directors are of the view that we are capable of managing our business independently from our Controlling Shareholders after the [REDACTED].

Business independence

There were no material business dealings between our Group and the Controlling Shareholders during the Track Record Period.

During the Track Record Period and up to the Latest Practicable Date, our Group and our Controlling Shareholders did not have any common or shared facilities or resources. Our Group has independent access to the sources of supplies for the manufacture of our leather products. Neither our Controlling Shareholders nor any of their respective close associates is a supplier or an intermediary for our Group’s supplies. We have independent access to our

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customers. Our Directors believe that our Group has not unduly relied on the Controlling Shareholders or their respective close associates to carry on our business during the Track Record Period.

Financial independence

During the Track Record Period, we principally financed our operations through a combination of (i) cash generated from our operations; (ii) borrowings from banks; as well as (iii) borrowings from our Controlling Shareholders. As at 30 June 2013 and 30 June 2014:

(a) in respect of borrowings (‘‘Shareholders Loan’’) by our Group from the Individual Owners (including the Controlling Shareholders) made in 2010, approximately HK$3.4 million and HK$3.3 million respectively remained outstanding and payable to our Controlling Shareholders, and no interest was carried in connection with such borrowings (Note 1); and
(b) our loans and borrowings of HK$2.1 million and nil were secured by guarantees given by (among other persons) our Controlling Shareholders (Note 2).

Notes:

The Shareholders Loan was repaid in full by us to the Individual Owners (including our Controlling Shareholders) in [.] 2014.
A bank facility of HK$2 million provided to the Group was jointly guaranteed by Ms. Idy Cheung (a Controlling Shareholder) and Ms. Grace Lam.

Pursuant to a resolution passed by Perline’s shareholders in October 2014, dividends in the amount of HK$3.2 million attributable to the year ended 30 June 2014 were approved and declared. As at the Latest Practicable Date, the said dividends have not been paid by us to the Individual Owners. We expect that the said dividends will be fully paid shortly after [REDACTED]. Such dividends payable which remain outstanding after [REDACTED] will constitute a continuing connected transaction for our Company. Under Rule 20.88 of the [REDACTED], since the financial assistance is provided by the Individual Owners (being our Directors and hence connected persons) for the benefit of our Company on normal commercial terms (or better to our Group) and no security has been created over the assets of our Group in respect of the financial assistance, such connected transaction is exempt from the reporting, announcement and independent shareholders’ approval requirements.

As of the Latest Practicable Date, save for the dividends payable as mentioned above, all loans [(including the Shareholders Loans)], advances and balances due to and from our Controlling Shareholders have been fully settled. All security and guarantees provided by them in connection with our Group’s borrowings have been fully released.

Save as mentioned above, our source of funding is independent from our Controlling Shareholders, and none of our Controlling Shareholders or their respective close associates financed our operations during the Track Record Period.

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During the Track Record Period and up to the Latest Practicable Date, we had independent financial and accounting and internal control systems, independent treasury function for receiving cash and making payments, and we had independent access to third party financing. Our Group is capable of making financial decisions according to our own business needs. Our Directors also believe that we are able to obtain financing independent from our Controlling Shareholders and their respective close associates after [REDACTED].

Save as aforesaid, our Group does not rely on our Controlling Shareholders and/or their respective close associates by virtue of their provision of financial assistance.

Operational independence

While our Board has full rights to make decisions on the overall strategic development and management and operational aspects of our Group, all of the essential operational functions including business development, marketing and sales operations, have been and will be overseen by our management team separately and independently from the Controlling Shareholders. Our Group does not rely on referral of business opportunities from the Controlling Shareholders. The management team of our Group has been and will be able to seek business opportunities for our Group. The capability of our Group to operate independently from the Controlling Shareholders is not considered to be a concern.

COMPETITION AND CONFLICT OF INTERESTS

Undertakings given by Controlling Shareholders

Each of our Controlling Shareholders has confirmed that none of them or their respective close associates is engaged in, or interested in any business (other than that of our Group) which, directly or indirectly, competes or may compete with our business or has or may have any conflict of interests with our Group. To protect our Group from any potential competition, the Controlling Shareholders (collectively, the ‘‘Covenantors’’) have given non-compete undertakings (the ‘‘NonCompete Undertakings’’) in favour of our Company which are contained in the share purchase agreement (in respect of the entire issued shares in Perline) dated [.] 2014, pursuant to which each of the Covenantors has, among other matters, irrevocably undertaken to us on a joint and several basis that at any time during the Relevant Period (as defined below), each of the Covenantors shall, and shall procure that their respective close associates and/or companies controlled by them (other than our Group) shall:

(i) not, directly or indirectly, be interested or involved or engaged in or acquire or hold any right or interest (in each case whether as a shareholder, partner, agent or otherwise and whether for profit, reward or otherwise) in any business which is or is about to be engaged in any business which competes or is likely to compete directly or indirectly with the business currently and from time to time engaged by our Group (including but not limited to manufacture and sale of leather garments in Hong Kong and/or the PRC or

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any other country or jurisdiction to which our Group provides such services and/or in which any member of our Group carries on business mentioned above from time to time (the ‘‘Restricted Activity’’);

(ii) not solicit any then existing employee of our Group for employment by it/her or its/her close associates (excluding our Group);
(iii) not, without the consent from our Company, make use of any information pertaining to the business of our Group which may have come to its/her knowledge in its/her capacity as our Controlling Shareholder for any purpose of engaging, investing or participating in any Restricted Activity;
(iv) if there is any project or new business opportunity that relates to the Restricted Activity, refer such project or new business opportunity to our Group for consideration;
(v) not invest or participate in any Restricted Activity; and
(vi) procure its/her close associates (excluding our Group) not to invest or participate in any project or business opportunity of the Restricted Activity.

The above undertakings (i) and (vi) are subject to the exception that any of the close associates of the Covenantors (excluding our Group) are entitled to invest, participate and be engaged in any Restricted Activity or any project or business opportunity, regardless of value, which has been offered or made available to our Group, provided always that information about the principal terms thereof has been disclosed to our Company and our Directors, and our Company shall have, after review and approval by our Directors (including our INEDs without the attendance by any Director with beneficial interest in such project or business opportunities at the meeting, in which resolutions have been duly passed by the majority of the INEDs), confirmed its rejection to be involved or engaged, or to participate, in the relevant Restricted Activity and provided also that the principal terms on which that relevant close associate of the Covenantor(s) invests, participates or engages in the Restricted Activity are substantially the same as or not more favourable than those disclosed to our Company. Subject to the above, if the relevant close associate of the Covenantor(s) decides to be involved, engaged, or participate in the relevant Restricted Activity, whether directly or indirectly, the terms of such involvement, engagement or participation must be disclosed to our Company and our Directors as soon as practicable.

The Non-Compete Undertakings will become effective conditional on (i) the Stock Exchange granting [REDACTED] of, and permission to [REDACTED], all our Shares in issue and to be issued under the [REDACTED]; and (ii) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional (including, if relevant as a result of the waiver of any condition(s) by the [REDACTED]) and that the [REDACTED] not being terminated in accordance with its terms or otherwise. For the above purpose, the ‘‘Relevant Period’’ means the period commencing from the [REDACTED] and shall expire on the earlier of the dates below:

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(a) the date on which the Covenantors and their close associates (individually or taken as a whole) ceases to own 30% of the then issued share capital of our Company directly or indirectly or cease to be the Controlling Shareholders for the purpose of the [REDACTED] and do not have power to control our Board; and
(b) the date on which our Shares cease to be [REDACTED].

Each of the Covenantors [has undertaken] under the Non-Compete Undertakings that she or it shall provide to us and our Directors (including our INEDs) from time to time all information necessary for the annual review by our INEDs with regard to compliance with the terms of the Non-Compete Undertakings by the Covenantors. Each of the Covenantors has also undertaken to make an annual declaration as to compliance with the terms of the Non-Compete Undertakings in our annual report.

Confirmation given by Directors

Each Director confirms that he/she does not have any competing business with our Group.

Corporate governance

In order to properly manage any potential or actual conflict of interests between us and our Controlling Shareholders in relation to compliance and enforcement of the Non-Compete Undertakings, we have adopted the following corporate governance measures:

(a) the INEDs would review, at least on an annual basis, the compliance with and enforcement of the terms of the Non-Compete Undertakings by our Controlling Shareholders and if any, the options, pre-emptive rights or first rights of refusals provided by our Controlling Shareholders and/or their respective close associates on their existing or future competing businesses. Such options, pre-emptive rights or first rights of refusals relate to business which our Group may engage in the future (and, in such context, does not mean the business currently engaged by our Group);
(b) our Company shall disclose decisions with basis on matters reviewed by the INEDs relating to non-compliance and enforcement of the Non-Compete Undertakings (including whether to take up the options, pre-emptive rights or first rights of refusals) either through annual report, or by way of announcement and/or other documents issued or published by our Company as required under the [REDACTED];
(c) our Company shall disclose in the corporate governance report of the annual reports on how the terms of the Non-Compete Undertakings are complied with and enforced;
(d) our Controlling Shareholders [have undertaken] to provide all information necessary to our Company for the annual review by our INEDs and the enforcement of the NonCompete Undertakings;

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RELATIONSHIP WITH CONTROLLING SHAREHOLDERS

(e) our Controlling Shareholders [have undertaken] to provide a written confirmation to our Company upon written request by our Company in respect of the compliance with the terms of the Non-Compete Undertakings by our Controlling Shareholders and her/its close associates;
(f) in the event that any of our Directors and/or their respective close associates has material interest in any matter to be deliberated by our Board in relation to compliance and enforcement of the Non-Compete Undertakings or other proposed transactions in which such Directors and/or their respective close associates have material interest, he/she/they may not vote on the resolutions of our Board considering and approving the matter and shall not be counted towards the quorum for the voting pursuant to the applicable provisions in the Articles; and
(g) where the advice from independent professional, such as that from financial adviser, is reasonably requested by our Directors (including the INEDs), the appointment of such independent professional will be made at our Company’s expenses.

Our Directors consider that the above corporate governance measures are sufficient to manage any potential conflict of interests between our Controlling Shareholders and their respective close associates and our Group and to protect the interests of our Shareholders, in particular, the minority Shareholders.

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

BRIEF INFORMATION OF DIRECTORS AND SENIOR MANAGEMENT

Our Board consists of three executive Directors, one non-executive Director and three INEDs. It is responsible for and has general powers for the management and conduct of our business.

The day-to-day operations of our Group are supervised and carried out by our executive Directors with the assistance of our senior management.

The following table sets out some information in respect of our Directors:

Name Ms. CHEUNG Woon Yiu (張煥瑤) Ms. LAM Wai Si Grace (林慧思) Mr. CHING Wai Man (程偉文) Ms. NG Lai Hung (吳麗虹) [Mr. WONG Wai Kong (黃偉桄)] [Mr. HOW Sze Ming (侯思明)] [Mr. Philip David THACKER]	Age 50 43 51 [46] [48] 37 52	Position Executive Director and Chairman Executive Director and Chief Executive Officer of our Group Executive Director Non-executive Director INED INED INED	Date of joining our Group 31 March 2010 1 November 1999 1 March 2010 31 March 2010 [.] 2014 [.] 2014 [.] 2014	Date of appointment as a Director 3 September 2014 3 September 2014 3 September 2014 3 September 2014 [.] 2014 [.] 2014 [.] 2014	Main roles and responsibilities Responsible for corporate strategic formulation and goal setting, and overseeing the finance and secretarial functions Responsible for the marketing function of our Group and also overseeing and directing the daily operations Responsible for the production function of our Group Responsible for providing advice on corporate governance and internal control matters See note below See note below See note below	Relationship with other Directors and senior management (other than that through or relating to the Group)
						Spouse to Ms. Grace Lam’s cousin Cousin of Ms. Idy Cheung’s spouse N.A. N.A. N.A. N.A. N.A.

Note: Participating in meetings of the Board to bring an independent judgment to bear on issues of strategy, performance, accountability, resources, key appointments and standards of conduct and transactions which are material to our Group as and when required; taking the lead where potential conflicts of interest arise and serving on our Audit Committee, Remuneration Committee, Nomination Committee and Corporate Governance Committee (as the case may be)

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The following table sets out some information in respect of our senior management (other than those of our executive Directors):

Senior Management

Name Ms. FA Pik Hoi (花碧海) Mr. NG Lai Wing (吳麗榮) Mr. LEUNG Hoi Keung (梁海強) Ms. HO Fung Yee (何鳳儀)	Age 55 59 45 47	Position Merchandising manager Quality assurance and factory operation manager Sourcing manager Administrative and credit management manager	Date of joining our Group 6 December 2004 (left on 15 February 2010 and re-joined on 1 January 2011) 20 August 2012 1 April 2014 1 June 1988	Major role and responsibilities Responsible for monitoring our Group’s marketing programs, product design and development, maintaining relationships with customers, and preparing client presentations Responsible for quality control and overseeing the operations of the Foshan Factory by formulating, implementing, managing and evaluating various processes to enhance the production effectiveness and efficiency and quality control Responsible for strategic sourcing management and collaborating with suppliers to develop effective solutions in sourcing and vendor sourcing and evaluation, overseeing order placement process and negotiation with vendors Responsible for credit management, administrative and treasury function of our Group and assisting the Board in monitoring our Group’s financial position	Relationship with other Directors and senior management (other than that through or relating to the Group)
					N.A. N.A. N.A. N.A.

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Name Mr. CHAN Hing Yik (陳慶益)	Age 30	Position Company secretary	Date of joining our Group 1 July 2014	Major role and responsibilities Responsible for the accounting and company secretarial matters of our Group	Relationship with other Directors and senior management (other than that through or relating to the Group)
					Employee of Idy Cheung & Co (an accounting firm operated by Ms. Idy Cheung as sole proprietor)

DIRECTORS

Executive Directors

Ms. CHEUNG Woon Yiu (張煥瑤, alias Idy Cheung), aged 50, is our Chairman and an executive Director. She joined our Group in March 2010 when she was appointed a director of Perline. She was appointed a director of Foshan Shengli in April 2010. In September 2014, she was appointed as a director of our Company and also of Odella BVI. She is responsible for our Group’s corporate strategic formulation and goal setting, and overseeing the finance and secretarial functions.

Ms. Cheung was awarded a Bachelor of Economics degree by the University of Sydney, Australia in June 1993. She is a practising member of HKICPA and a member of the Australian Society of Certified Practising Accountants. She has extensive experience in accounting, auditing and corporate finance. She worked in an international accounting firm for four years and since April 1998, she has been the sole proprietor of a firm of certified public accountants in Hong Kong, namely Idy Cheung & Co.. She currently expects to devote 70% of her time to her position in our Group and 30% to that of Idy Cheung & Co. Ms. Idy Cheung and Ms. Grace Lam are family relatives, namely, Ms. Idy Cheung’s husband is a cousin of Ms. Grace Lam.

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Prior to joining our Group, Ms. Idy Cheung worked or assumed offices (as the case may be) in various companies or entities, including the following:

Period of services January 1993 to July 1997 Since April 1998 January 2002 to November 2011 April 2003 to May 2014	Name of entity Ernst & Young Idy Cheung & Co. Messis Capital Limited (formerly known as Menlo Capital Limited) Messis Capital Limited (formerly known as Menlo Capital Limited)	Principal business activities Certified public accountants Certified public accountants Financial advisory Financial advisory	Major office and responsibilities
			Senior II, performing audit works Sole proprietor, overseeing general operation Director, overseeing general operation Responsible officer for type 6 (advising on corporate finance) regulated activities

Ms. Idy Cheung is the sole shareholder of BVI-Cheung which is a Controlling Shareholder. BVI-Cheung will hold approximately [REDACTED]% of the issued share capital in our Company immediately following completion of the [REDACTED] and the [REDACTED] (taking no account of any Shares which may be allotted and issued upon the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme).

During the period from June 1997 up to September 2000, Ms. Cheung was a director of Ip, Woo & Cheung Limited (‘‘IWC Limited’’), being a private company incorporated in Hong Kong. IWC Limited was dissolved in September 2000 by deregistration by its own application pursuant to section 291AA of the Predecessor Companies Ordinance. IWC Limited has never commenced business operation and had no outstanding liabilities immediately before deregistration.

Ms. LAM Wai Si Grace (林慧思), aged 43, is our Chief Executive Officer and an executive Director. She is primarily responsible for the marketing function of our Group and also overseeing and directing the daily operations. She joined our Group in November 1999 as a sales manager, and was appointed a director of Perline in March 2010. She was appointed a director of Foshan Shengli in April 2010. In September 2014, she was appointed as a director of our Company and also of Odella BVI.

Ms. Grace Lam was awarded a Bachelor of Mathematics degree (with honours) from the University of Waterloo, Ontario, Canada in May 1995. She is a certified management accountant of The Society of Management Accountants of Ontario and a certified public accountant in the state of Illinois, the USA. Ms. Grace Lam is a cousin of Ms. Idy Cheung’s husband.

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Ms. Grace Lam has over 15 years of experience in the marketing of garment and management function. Before joining our Group, she worked or assumed offices (as the case may be) in various companies or entities, including the following:

Period of services 1998 to 1999	Name of entity Sears Canada Inc.	Principal business activities Manufacture and trading of garment	Major office and responsibilities
			Merchandiser, performing merchandising functions

Ms. Grace Lam is the sole shareholder of BVI-Lam which is a Substantial Shareholder. BVILam will hold approximately [REDACTED]% of the issued share capital in our Company immediately following completion of the [REDACTED] and the [REDACTED] (taking no account of any Shares which may be allotted and issued upon the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme).

Mr. CHING Wai Man (程偉文, alias Ramond Ching), aged 51, is an executive Director. He is primarily responsible for the production function of our Group. He worked in Odella Company Limited (‘‘OCL’’, a company which was principally engaged in trading of leather garments, and which was owned by Mr. HK Lam and his spouse. OCL was deregistered in 2012) as a merchandiser for over 20 years. He joined our Group in March 2010 when he was appointed a director of Perline. He was appointed a director of Foshan Shengli in April 2010. In September 2014, he was appointed as a director of our Company and also of Odella BVI. Mr. Ramond Ching obtained a diploma in knitting technology from The Hong Kong Polytechnic (now known as The Hong Kong Polytechnic University) in November 1983.

Mr. Ramond Ching has above 27 years’ experience in the garment and leather industry. Prior to joining our Group, Mr. Ramond Ching worked or assumed offices (as the case may be) in various companies or entities including the following:

Period of services May 1987 to May 1989 July 1989 to February 2010	Name of entity Mountain Rose Company, Ltd. OCL	Principal business activities General trading and export Trading of leather garments	Major office and responsibilities
			Assistant merchandiser, performing merchandising functions Merchandiser, performing merchandising functions

Mr. Ramond Ching is the sole shareholder of BVI-Ching which is a Substantial Shareholder. BVI-Ching will hold approximately [REDACTED]% of the issued share capital in our Company immediately following completion of the [REDACTED] and the [REDACTED] (taking no account of any Shares which may be allotted and issued upon the exercise of the [REDACTED] and any options which may be granted under the Share Option Scheme).

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

Ms. NG Lai Hung (吳麗虹), aged [46], is a non-executive Director. She is primarily responsible for providing advice in corporate governance and internal control matters. She joined our Group as a director of Perline in March 2010. In September 2014, she was appointed as a director of our Company and also of Odella BVI. She was awarded a Bachelor Degree of Arts in Accountancy (with honours) from The City Polytechnic of Hong Kong (now known as The City University of Hong Kong) in November 1991. She is a practicing member of HKICPA and an associate member of The Institute of Chartered Accountants in England and Wales.

Ms. Ng has over 20 years of experience in professional accounting service, corporate finance and merger and acquisitions in Hong Kong, PRC and North America. She served in one of the Big Four international accounting firms in the past decade and worked as a Senior Manager before joining the private sector. She worked as a senior executive in a US private equity fund for about one year. She has experience in accounting services, internal control review and advisory, corporate finance and mergers and acquisitions. Ms. Ng also worked or assumed offices (as the case may be) in various companies or entities including the following:

Period of services July 1991 to October 1992 October 1992 to December 1994 January 1995 to November 1997 November 1997 to January 2006 January 2006 to October 2007	Name of entity Moores Rowland Ernst & Young Land Development Corporation Ernst & Young Grand Toys International Limited (which American Depositary Shares were then listed on The Nasdaq Stock Market, and were delisted on 17 July 2008)	Principal business activities Certified public accountants Certified public accountants Statutory body in Hong Kong responsible for accelerating urban redevelopment Certified public accountants Development and distribution of toy and toy related products	Major office and responsibilities
			Audit Intermediate, performing audit works Senior I, performing audit works Assistant Finance Manager (General Accounting), responsible for maintaining accounting records, assisting in preparation of financial statements Senior Manager, providing assurance and advisory business services Group Financial Controller, responsible for financial functions

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

Period of services November 2007 to November 2008 Since February 2009 Since August 2010 Since June 2012	Name of entity Lotus Capital Management, Limited Cosmos CPA Limited Corporate Risk Advisory Services Limited DGC HK CPA Limited	Principal business activities Private equity fund Certified public accountants Provision of professional services Certified public accountants	Major office and responsibilities
			Vice President, responsible for identifying, assessing and evaluating the investment opportunities offered to Lotus China Funds, private equity funds, and liaising with relevant parties to carry out deal execution, proposed initial public offerings and merger and acquisitions Director, providing audit and assurance services Director, providing risk advisory services Director, providing audit and assurance services

During the period from February 1997 up to September 2007, Ms. Ng was a director of Dragon Man Limited, being a private company incorporated in Hong Kong. Dragon Man Limited was dissolved in September 2007 by deregistration by its own application pursuant to section 291AA of the Predecessor Companies Ordinance. Dragon Man Limited was a property holding company prior to being dissolved by deregistration and it had no outstanding liabilities immediately before deregistration.

INEDs

[Mr. WONG Wai Kong, (黃偉桄, formerly known as 黃偉光), aged [48], was appointed as an INED with effect from [.] 2014. Mr. Wong obtained a Bachelor of Business Administration degree from the Hong Kong Baptist University in Hong Kong in November 1990, a Master of Business Administration degree from the University of Sheffield in the United Kingdom in May 1995 and a Master of Science degree majoring in Business Information Technology from the Middlesex University in the United Kingdom in January 2003. Mr. Wong is a certified public accountant (practising) in Hong Kong and a fellow member of the HKICPA and a fellow member of the Association of Chartered Certified Accountants in the United Kingdom. Mr. Wong has over 15 years of experience in corporate finance, financial advisory and management, professional accounting and auditing. Mr. Wong has worked as an auditor in two international accounting firms for 5 years. He worked as the chief financial officer from December 2002 to September 2008 and has since October 2008 been an executive director of Kam Hing International Holdings Limited

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(stock code: 2307), a company listed on the Stock Exchange. He has also been an INED of Koradior Holdings Limited (stock code: 3709), a company listed on the Stock Exchange since 6 June 2014.

Mr. Wong also worked or assumed offices (as the case may be) in various companies or entities including the following:

Period of services October 1997 to December 1999 December 1999 to December 2002 December 2002 to September 2008 Since October 2008	Name of entity Ernst & Young Shun Tak — China Travel Ship Management Limited Kam Hing International Holdings Limited (stock code: 2307) Kam Hing International Holdings Limited (stock code: 2307)	Principal business activities Certified public accountants Ship management Production and sale of garment and textile Production and sale of garment and textiles	Major office and responsibilities
			Audit Senior, performing audit works Finance Manager, responsible for finance functions Chief financial officer and company secretary, responsible for finance and company secretarial functions Executive director, responsible for the strategic planning and corporate development of the group

As at the Latest Practicable Date and in the three years preceding that date, in addition to his directorship in Kam Hing International Holdings Limited as disclosed above, Mr. Wong also held directorship in the following listed company:

Name of listed issuer Koradior Holdings Limited	Place of listing and stock code Hong Kong, 3709	Major office and responsibilities (if an executive)
		INED

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Mr. HOW Sze Ming (侯思明), aged 37, was appointed as an INED with effect from [.] 2014. He graduated from The Chinese University of Hong Kong with a Bachelor of Business Administration Degree (first class honour, majoring in professional accountancy) in December 1999. By profession, he is a fellow member of the Association of Chartered Certified Accountants and an associate member of HKICPA. Mr. How is the managing director of the investment banking department of CMB International Capital Corporation Limited and an INED of QPL International Holdings Limited (stock code: 243).

Mr. How has over 15 years of experience in investment banking and business assurance industries. He also worked or assumed offices (as the case may be) in various companies or entities including the following:

Period of services September 1999 to July 2002 July 2002 to June 2003 July 2003 to December 2004 December 2004 to May 2006 June 2006 to March 2009 April 2009 to February 2010 Since February 2010	Name of entity PricewaterhouseCoopers Tai Fook Securities Company Limited (now known as Haitong International Securities Company Limited) Tai Fook Capital Limited (now known as Haitong International Capital Limited) CCB International Capital Limited ICEA Capital Limited ICBC International Holdings Limited CMB International Capital Corporation Limited	Principal business activities Certified public accountants Securities broking, securities dealing and leveraged foreign exchange trading Corporate finance advisory Securities advisory, securities dealing and corporate finance advisory Dealing in securities and corporate finance advisory Investment banking Investment banking, securities brokerage and asset management	Major office and responsibilities
			Senior Associate of Assurance and Business Advisory Department, performing assurance and business advisory works Corporate Finance Executive, responsible for corporate finance advisory Assistant Manager, responsible for corporate finance advisory Assistant Vice President, responsible for corporate finance advisory Assistant Vice President – Investment Banking Division, responsible for corporate finance advisory Assistant Vice President – Investment Banking Division, responsible for corporate finance advisory Managing Director of Investment Banking Department, responsible for corporate finance advisory

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

As at the Latest Practicable Date and in the three years preceding that date, Mr. How held directorship in the following listed company:

Name of listed issuer QPL International Holdings Limited	Place of listing and stock code Hong Kong, 243	Major office and responsibilities (if an executive)
		INED

Mr. Philip David THACKER, aged 52, was appointed as an INED with effect from [.] 2014. He was awarded a Bachelor of Arts degree in classical studies from the University of Leicester in the United Kingdom in July 1984 and obtained a Master of Business Administration degree from The Open University in the United Kingdom through long distance learning in December 1992. He completed a course named ‘‘The 15th Executive Training Programme in Japan (ETP15)’’ organised by the European Commission in November 1996. He has been a senior adviser to Pentland Brands plc since January 2002 and an executive director of Berghaus Japan Co., Ltd during July to October 2009 and since August 2012.

Mr. Thacker also worked or assumed offices (as the case may be) in various companies or entities including the following:

Period of services October 1999 to October 2002 March 2000 to April 2001 Since January 2002 July to October 2009 and since August 2012	Name of entity On-Line plc (London Stock Exchange stock code: ONL) ADVFN.com plc (London Stock Exchange stock code: AFN) Pentland Brands plc Berghaus Japan Co., Ltd	Principal business activities Developer and publisher of internet content Development and provision of financial information Brand management and retail of footwear, clothing and related accessories in the sports, outdoor and fashion sectors Brand management	Major office and responsibilities
			Non-executive director Director Senior adviser, advising on brand management in the Asia Pacific and develop general business strategies Executive director, responsible for brand management in the Asia Pacific region and developing Asia Pacific and general business strategies

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

As at the Latest Practicable Date and in the three years preceding that date, Mr. Thacker did not hold directorship in any listed companies.]

General

Save as disclosed above, there is no other information relating to our Directors that needs to be disclosed under the requirements under Rule 17.50(2) of the [REDACTED].

Save as disclosed above, none of our Directors:

(i) held any other positions in our Company or other members of our Group as at the Latest Practicable Date;
(ii) had any other relationship with any Directors, senior management or Substantial Shareholders or Controlling Shareholders of our Company as at the Latest Practicable Date; and
(iii) held any other directorships in listed public companies in the three years prior to the Latest Practicable Date.

Except for such interests of Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching in the Shares which are disclosed above, none of our Directors has any interest in the Shares within the meaning of Part XV of the SFO or is a director or an employee of a company which has an interest or short position in the Shares and underlying Shares of our Company. Each of our Directors has confirmed that none of them or their respective close associates is engaged in, or interested in any business (other than that of our Group) which, directly or indirectly, competes or may compete with our business or has or may have any conflict of interests with our Group.

Save as disclosed above, to the best of the knowledge, information and belief of our Directors after having made all reasonable enquiries, there was no other matter with respect to the appointment of our Directors that needs to be brought to the attention of our Shareholders and there was no information relating to our Directors that is required to be disclosed pursuant to Rule 17.50(2)(h) to (v) of the [REDACTED] as at the Latest Practicable Date.

SENIOR MANAGEMENT

Ms. FA Pik Hoi (花碧海), aged 55, is the merchandising manager of our Group. She joined the marketing department of our Group in December 2004, left in February 2010 and re-joined in January 2011. She is responsible for monitoring our Group’s marketing programs, product design and development, maintaining relationships with customers, and preparing client presentations. She completed a training course in quality control in Clothing Industry Training Authority in Hong Kong in May 1980 and obtained a certificate on flat pattern stylist from Hong Kong Institute of Fashion Design in September 1984.

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

Ms. Fa has about 23 years of experience in the marketing of garments. Prior to joining our Group, Ms. Fa also worked or assumed offices (as the case may be) in various companies or entities, including the following:

Period of services February 1991 to June 1997 July 1997 to January 1998 March 1998 to March 2001 July 2001 to November 2004	Name of entity Novita Sport Ltd. Mutual Bond International Limited Truswin Company Limited Degas Investments Ltd.	Principal business activities Garment merchandising Trading and consultancy Store Import, export and commission agents	Major office and responsibilities
			Assistant merchandising manager, handling all garment orders for overseas buyers Executive senior merchandiser, managing clients’ accounts Merchandising manager in the apparel department, managing clients’ accounts Team Head of Woven Department, supervising merchandising functions including samples development and orders follow up

Mr. NG Lai Wing (吳麗榮), aged 59, joined our Group in August 2012 as quality assurance and factory operation manager and is responsible for quality control and overseeing the operations of the Foshan Factory by formulating, implementing, managing and evaluating various processes to enhance the production effectiveness and efficiency and quality control.

He has over 20 years of experience in local garment industry and has extensive experience in factory management. Prior to joining our Group, Mr. Ng worked in Lana Fashion Wear Co., Ltd., a local fashion wear company, as quality assurance manager for over 18 years and has gained solid experience in quality assurance of garments and factory management.

Mr. LEUNG Hoi Keung (梁海強), aged 45, joined the sourcing department of our Group in April 2014 and is our sourcing manager responsible for strategic sourcing management and collaborating with suppliers to develop effective solutions in sourcing. He is also responsible for vendor sourcing and evaluation, overseeing order placement process and negotiation with vendors.

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

Mr. Leung completed his secondary education in 1986. He has over 17 years of experience in material sourcing. Prior to joining our Group, Mr. Leung worked or assumed offices (as the case may be) in various companies or entities including the following:

Period of services December 1998 to July 1999 February 2001 to March 2010 March 2011 to November 2012 March 2013 to January 2014	Name of entity Chesford Industries Ltd. Li & Fung (Trading) Ltd. Promotional Partners Group Ltd. Kwong Wing & Co (China) Ltd.	Principal business activities Trading Export trading and investment holding Promotional marketing agency Trading	Major office and responsibilities
			Merchandiser, performing merchandising functions Senior merchandiser, performing merchandising functions Senior merchandiser, performing merchandising functions Merchandising manager, performing merchandising functions

Ms. HO Fung Yee (何鳳儀), aged 47, is our administrative and credit management manager and responsible for credit management, administrative and treasury function of our Group and assisting the Board in monitoring our Group’s financial position. She obtained a Bachelor of Arts in Business Administration degree from the University of Portsmouth in the United Kingdom through long distance learning in February 2007.

Ms. Ho joined our Group in June 1988 as a merchandiser and has about 26 years of experience in the leather garment manufacturing industry.

For the background of Mr. Chan Hing Yik, our company secretary and senior management, please refer to the paragraph headed “Directors, senior management and staff — Company secretary” in this [REDACTED].

COMPANY SECRETARY

Mr. CHAN Hing Yik (陳慶益), aged 30, was appointed as our company secretary on 22 September 2014. He joined our Group in July 2014 as accounting manager. He is responsible for the accounting and company secretarial matters of our Group.

Mr. Chan was awarded a Bachelor of Business Administration degree (majoring in accountancy) from The Hong Kong Polytechnic University in October 2008. By profession, he is a member of HKICPA.

Mr. Chan has also worked in the assurance services department of Idy Cheung & Co. (a local accounting firm solely owned by Ms. Idy Cheung, who is an executive Director and Chairman of our Company) since June 2008.

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

COMPLIANCE OFFICER

Ms. Idy Cheung serves as the compliance officer of our Company for the purpose of the [REDACTED]. For details of Ms. Idy Cheung’s background, please refer to the paragraph headed ‘‘Executive Directors’’ in this section.

REMUNERATION POLICY

The aggregate amounts of remuneration of our Directors for the two years ended 30 June 2014 were approximately HK$1.3 million and HK$1.9 million respectively. Details of the arrangement for remuneration are set out in note 12 to the Accountants’ Report in Appendix I to this [REDACTED]. Under such arrangement and pursuant to our Directors’ service contracts and letters of appointment referred to in the paragraph headed ‘‘Appendix IV Statutory and General Information — 3.2 Directors’ service contracts and letters of appointment’’ in this [REDACTED], the aggregate amount of Directors’ fee and other emoluments payable to our Directors (excluding any discretionary bonuses) for the year ending 30 June 2015 is estimated to be approximately HK$2.2 million.

Our Group’s principal policies concerning remuneration of Directors or staff of high caliber are determined based on the relevant Director’s or staff’s duties, responsibilities, experience and skills. Our Directors and senior management receive compensation in the form of salaries, benefits in kind and/or discretionary bonuses relating to the performance of our Group. Our Company also reimburses them for expenses which are necessarily and reasonably incurred for providing services to our Company or executing their functions in relation to our operations. Our Company regularly reviews and determines the remuneration and compensation packages of our Directors and senior management. Our Company regularly provides discretionary bonuses to our senior management and key employees as incentive.

Our Company has conditionally adopted the Share Option Scheme on [.] 2014 to enable our Group to grant options to selected participants as incentives or rewards for their contribution to our Group. Please see the section headed ‘‘4. Share Option Scheme’’ in Appendix IV to the [REDACTED] for further details of the Share Option Scheme.

After [REDACTED], our Remuneration Committee will review and determine the remuneration and compensation packages of our Directors and senior management with reference to salaries paid by comparable companies, time commitment and responsibilities of our Directors and performance of our Group.

During the Track Record Period, no remuneration was paid by our Company to, or received by, our Directors as an inducement to join or upon joining our Company.

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

BOARD COMMITTEES

The Audit Committee, Remuneration Committee, Nomination Committee and Corporate Governance Committee of our Company were approved to be established by resolutions passed by our Board on [.] 2014. The membership of such committees are as follows:

Name of Director Executive Directors Ms. CHEUNG Woon Yiu Ms. LAM Wai Si Grace Mr. CHING Wai Man Non-executive Director Ms. NG Lai Hung INEDs [Mr. WONG Wai Kong] [Mr. HOW Sze Ming] [Mr. Philip David THACKER]	Audit Committee N.A. N.A. N.A. N.A. [Chairman] [Member] [Member]	Remuneration Committee N.A. [Chairman] N.A. N.A. [Member] [Member] [N.A.]	Nomination Committee [Chairman] N.A. N.A. N.A. [Member] [Member] [N.A.]	Corporate Governance Committee
				N.A. N.A. N.A. [Chairman] [Member] [Member] [Member]

Each of the above four committees has written terms of reference. The functions of the above four committees are summarised as follows:

Audit Committee

Our Audit Committee has written terms of reference in compliance with Rule 5.28 of the [REDACTED] and the Corporate Governance Code and Corporate Governance Report (‘‘CG Code’’) as set out in Appendix 15 to the [REDACTED]. The primary duties of our Audit Committee are mainly to make recommendations to the Board on the appointment and dismissal of the external auditor, review the financial statements and information and provide advice in respect of financial reporting and oversee the internal control procedures of our Company.

Remuneration Committee

Our Remuneration Committee has written terms of reference in compliance with Rule 5.34 of the [REDACTED] and the CG Code. The primary functions of our Remuneration Committee are to make recommendations to the Board on the overall remuneration policy and the structure relating to all Directors and senior management of our Group, review performance-based remuneration and ensure none of our Directors determine their own remuneration.

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DIRECTORS, SENIOR MANAGEMENT AND STAFF

Nomination Committee

Our Nomination Committee has written terms of reference in compliance with the CG Code. The primary functions of our Nomination Committee are to review the structure, size and composition (including the skills, knowledge and experience) of the Board at least annually and make recommendations to the Board on any proposed changes to the Board to complement our Company’s corporate strategy; identify individuals suitably qualified as potential Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships; to assess the independence of INEDs; and make recommendations to the Board on the appointment or reappointment of Directors and succession planning of Directors, in particular that of our Chairman and the Chief Executive Officer.

Corporate Governance Committee

Our Corporate Governance Committee has written terms of reference in compliance with the CG Code. The primary functions of our Corporate Governance Committee are (i) to develop and review our Group’s policies and practices on corporate governance and make recommendations to the Board; (ii) to review and monitor the training and continuous professional development of our Directors and senior management; (iii) to review and monitor our Group’s policies and practices on compliance with legal and regulatory requirements; (iv) to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors; and (v) to review our Company’s compliance with the CG Code and disclosure in the corporate governance report.

COMPLIANCE ADVISER

We have appointed Halcyon Capital Limited as our compliance adviser pursuant to Rule 6A.19 of the [REDACTED]. Pursuant to Rule 6A.23 of the [REDACTED], the compliance adviser will advise us on, among other matters, the following:

(i) (before its publication) any regulatory announcement, circular or financial report;
(ii) a transaction, which might be a notifiable or connected transaction or will involve share issues and share repurchases;
(iii) where our Company proposes to use the [REDACTED] of the [REDACTED] in a manner different from that set out in this [REDACTED] or where our business activities, developments or results deviate from any forecast, estimate, or other information in this [REDACTED]; and
(iv) where the Stock Exchange makes any inquiry of us under Rule 17.11 of the [REDACTED].

The term of appointment of our compliance adviser will commence on the [REDACTED] and will end on the date of despatch of our annual report in respect of our financial results for the second full financial year commencing after the [REDACTED]. Such appointment may be subject to extension by mutual agreement.

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SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following persons were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote at general meetings of our Company:

BVI-Cheung (Note 2) Ms. Idy Cheung (Note 2) BVI-Lam (Note 3) Ms. Grace Lam (Note 3) BVI-Ching (Note 4) Mr. Ramond Ching (Note 4)	Number of Shares directly or indirectly held (Note 1) 680,000 680,000 170,000 170,000 150,000 150,000	Approximately percentage of shareholding in our Company (%)
		68% 68% 17% 17% 15% 15%

Notes:

As at the Latest Practicable Date, our Company had 1 million Shares in issue.
The entired issued share capital in BVI-Cheung is solely owned by Ms. Idy Cheung.
The entired issued share capital in BVI-Lam is solely owned by Ms. Grace Lam.
The entired issued share capital in BVI-Ching is solely owned by Mr. Ramond Ching.

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SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, immediately following completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED], and the options which may be granted under the Share Option Scheme), the following persons will have interests or short positions in our Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be 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 our Group:

Immediately after completion of the [REDACTED] and [REDACTED]

Name BVI-Cheung (2) Ms. Idy Cheung (2) Mr. Lam Andrew Hung Yun (2) BVI-Lam (3) Ms. Grace Lam (3) Mr. Lee Ben (3) BVI-Ching (4) Mr. Ramond Ching (4)	Number of Shares [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Approximate percentage of shareholding [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Capacity/Nature of interest
			Beneficial owner Interest in a controlled corporation Interest of spouse (spouse of Ms. Idy Cheung) Beneficial owner Interest in a controlled corporation Interest of spouse (spouse of Ms. Grace Lam) Beneficial owner Interest in a controlled corporation

Notes:

(1) The letter ‘‘L’’ denotes the person’s long position in the Shares.

(2) The entire issued share capital in BVI-Cheung is solely owned by Ms. Idy Cheung. The spouse of Ms. Idy Cheung is Mr. Lam Andrew Hung Yun, and he is deemed to be interested in such [REDACTED] Shares by virtue of the SFO.

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SUBSTANTIAL SHAREHOLDERS

(3) The entire issued share capital of BVI-Lam is solely owned by Ms. Grace Lam. The spouse of Ms. Grace Lam is Mr. Lee Ben, and he is deemed to be interested in such [REDACTED] Shares by virtue of the SFO.
(4) The entire issued share capital of BVI-Ching is solely owned by Mr. Ramond Ching. Under the SFO, Mr. Ramond Ching is deemed to be interested in [REDACTED] Shares registered in the name of BVI-Ching.

Save as disclosed above, our Directors are not aware of any other persons who will, immediately following completion of the [REDACTED] and the [REDACTED] (without taking into account any Shares which may be issued upon the exercise of the [REDACTED], and the options which may be granted under the Share Option Scheme), have interests or short positions in our Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who will be 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 our Company or any of our subsidiaries.

None of our Substantial Shareholders or their respective close associates has any business or interest (other than that of our Group) which, directly or indirectly, competes or may compete with our business, or has or may have any conflict of interests with our Group.

UNDERTAKINGS

Each of the Controlling Shareholders has given certain undertakings in respect of the Shares held by them to our Company, the [REDACTED], the [REDACTED] (for itself and on behalf of the [REDACTED]) and the Stock Exchange. Our Controlling Shareholders have also given undertakings to our Company and the Stock Exchange as required by Rule 13.19 of the [REDACTED] and are bound by the non-disposal restrictions as imposed by Rule 13.19 of the [REDACTED]. Further details of such undertaking are set out under the section headed ‘‘Underwriting — [REDACTED]’’ in this [REDACTED].

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SHARE CAPITAL

The following is a summary of the authorised and issued share capital of our Company as at the date of this [REDACTED] and immediately after completion of the [REDACTED] and the [REDACTED]:

Total:	Number Authorised share capital: 2,000,000,000 Shares Issued and to be issued, fully paid or credited as fully paid: 1,000,000 Shares in issue at the date of this [REDACTED] [REDACTED] Shares to be issued pursuant to the [REDACTED] [REDACTED] [REDACTED] Shares to be issued under the [REDACTED] [REDACTED] Shares (Note)	Aggregate par values (HK$)
		20,000,000 10,000 [REDACTED] [REDACTED]
		[REDACTED]

Assumptions

The above table assumes the [REDACTED] and the [REDACTED] become unconditional and the issue of Shares pursuant thereto are made as described above. It does not take into account any Shares which may be issued upon the exercise of options which may be granted under the Share Option Scheme or the [REDACTED] or of any Shares which may be allotted and issued or repurchased by our Company under the general mandates for the allotment and issue or repurchase of Shares granted to our Directors as referred to below or otherwise.

Note: The share capital of our Company will be enlarged by up to an additional [REDACTED] Shares in the event that the [REDACTED] is exercised in full.

MINIMUM PUBLIC FLOAT

Pursuant to Rule 11.23(7) of the [REDACTED], at the time of [REDACTED] and at all times thereafter, our Company must maintain the minimum prescribed percentage of [REDACTED]% of the total issued share capital of our Company in the hands of the public (as defined in the [REDACTED]).

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SHARE CAPITAL

RANKING

The [REDACTED] and the Shares which may be issued under the [REDACTED] or upon the exercise of any options which may be granted under the Share Option Scheme will rank equally with all of the Shares now in issue or to be issued, and will qualify for all dividends or other distributions declared, made or paid on the Shares after the date of this [REDACTED], except for entitlement under the [REDACTED].

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme. See the paragraph headed ‘‘Appendix IV Statutory and General Information — 4. Share Option Scheme’’ in this [REDACTED] for the summary of the principal terms of the Share Option Scheme.

ISSUING MANDATE

Subject to the [REDACTED] becoming unconditional, our Directors have been granted a general unconditional mandate to allot, issue and deal in unissued Shares with an aggregate nominal value of not exceeding the sum of:

(i) 20% of the aggregate nominal value of our share capital in issue immediately following completion of the [REDACTED] and the [REDACTED], but excluding any Shares which may be issued upon the exercise of the [REDACTED] or any option that may be granted under the Share Option Scheme; and
(ii) the aggregate nominal amount of our share capital repurchased by our Company (if any) pursuant to the Repurchase Mandate (as mentioned below).

The Issuing Mandate does not apply to situations where our Directors allot, issue or deal in Shares by way of a rights issue, scrip dividend schemes or similar arrangements providing for the allotment and issue of Shares in lieu of the whole or in part of any dividend in accordance with the Articles, or pursuant to the exercise of any subscription or conversion rights attaching to any warrants or any securities which are convertible into Shares, or pursuant to the exercise of any options that may be granted under the Share Option Scheme, or under the [REDACTED] or the [REDACTED] or upon the exercise of the [REDACTED]. Our Directors may, in addition to the Shares which they are authorised to issue under the Issuing Mandate, allot, issue and deal in Shares pursuant to a rights issue, the exercise of subscription rights attaching to any warrants of our Company, scrip dividends or similar arrangements or the exercise of any options that may be granted under the Share Option Scheme or any other option scheme or similar arrangement for the time being adopted.

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SHARE CAPITAL

The Issuing Mandate will expire upon the earliest occurrence of any of the following:

. at the conclusion of our next annual general meeting;
. on the date by which our next annual general meeting is required by the Articles or any applicable laws to be held; or
. when the authority given to our Directors is revoked or varied by an ordinary resolution passed by our Shareholders in general meeting.

For further details of the Issuing mandate, see the paragraph headed ‘‘Appendix IV Statutory and General Information — 1.3 Resolutions in writing of our Shareholders passed on [.]’’ in this [REDACTED].

REPURCHASE MANDATE

Subject to the [REDACTED] becoming unconditional, our Directors have been granted a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with a total nominal amount of not more than 10% of the total nominal amount of the our share capital in issue immediately following completion of the [REDACTED] and the [REDACTED], but excluding any Shares that may be issued upon the exercise of the [REDACTED] and any option that may be granted under the Share Option Scheme. The Repurchase Mandate only relates to repurchases made on the Stock Exchange, or on any other stock exchange on which the Shares are listed (and which is recognised by the SFC and the Stock Exchange for this purpose), and which are made in accordance with the [REDACTED]. Please see the paragraph headed ‘‘Appendix IV Statutory and General Information — 1.6 Repurchases by our Company of our own securities’’ in this [REDACTED] for the summary of the relevant requirements under the [REDACTED].

The Repurchase Mandate will expire upon the earliest occurrence of any of the following:

. at the conclusion of our next annual general meeting;
. on the date by which our next annual general meeting is required by the Articles or any applicable laws to be held; or
. when the authority given to our Directors is revoked or varied by an ordinary resolution passed by our Shareholders in general meeting.

For further details of the Repurchase Mandate, see the paragraph headed ‘‘Appendix IV Statutory and General Information — 1.3 Resolutions in writing of our Shareholders passed on [.]’’ in this [REDACTED].

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SHARE CAPITAL

CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED

Pursuant to the Companies Law and the terms of the Articles, the Company may from time to time by ordinary resolution of shareholders, among other things, (i) increase its share capital; (ii) consolidate or divide its share capital into shares of larger or smaller amount; (iii) divide its shares into several classes; (iv) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled; (v) sub-divide its shares or any of them into shares of smaller amount; (vi) change the currency of denomination of its share capital and (vii) make provision for the issue and allotment of shares which do not carry any voting rights. In addition, the Company may by special resolution reduce its issued share capital, any capital redemption reserve fund or other undistributable reserve in any manner authorised and subject to any conditions prescribed by law. For details, please refer to the paragraph headed ‘‘2. Articles of Association — (c) Alterations of capital’’ in Appendix III to this [REDACTED].

Pursuant to the Companies Law and the terms of the Memorandum and the Articles, if at any time the capital of the Company is divided into different classes of shares, all or any of the special rights (unless otherwise provided for by the terms of issue of that class) attached to any class may, subject to the provisions of the Companies Law, be varied or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. For details, please refer to the paragraph headed ‘‘2. Articles of Association — (d) Variation of rights of existing shares or classes of shares’’ in Appendix III to this [REDACTED].

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FINANCIAL INFORMATION

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements of our Company for the two financial years ended 30 June 2014, together with related notes thereto. The consolidated financial statements of our Company have been prepared in accordance with HKFRSs, which differ in certain significant respects from generally accepted accounting principles in certain other countries. For further information, see ‘‘Appendix I — Accountants’ Report’’. Any discrepancies in any table or elsewhere in this [REDACTED] between totals and sums of amounts listed herein are due to rounding.

This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Factors that might cause future results to differ significantly from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this [REDACTED], particularly in the section headed ‘‘Risk factors’’ in this [REDACTED].

OVERVIEW

We strategically focus on:

. customers who include international and regional fashion brands, most of whom offer a broad spectrum of apparel and accessories under their own brands, and leather apparel forms only a minor portion of their product portfolio;
. offering our customers not only with our manufacturing services to produce leather apparel products, but also a range of ancillary pre-production product development services and post-production logistical services; and
. providing flexibility in the production scale for each purchase order by our customers, aiming to cater for their business needs and requirements in each case.

Our revenue, which principally represented the income derived from the sales of leather garment products and accessories, was approximately HK$53.6 million and HK$80.6 million for each of the two years ended 30 June 2014, respectively. During the Track Record Period, United States, Australia and Hong Kong were our major markets with reference to the destination of our product delivery as stipulated in our customers’ purchase orders, which in aggregate accounted for

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FINANCIAL INFORMATION

over 80% of our revenue during the Track Record Period. In respect of our products delivered to our customers in Hong Kong, our Directors believe that some of our customers have subsequently delivered or sold these products to other places in the world.

Our net profit attributable to our equity holders was approximately HK$7.1 million and HK$12.9 million for each of the two years ended 30 June 2014, respectively.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Ability of our Group to stay competitive in the market

We provide our customers not only with our manufacturing services to produce leather apparel products, but also a wide range of ancillary pre-production product development services and postproduction logistical services. The sustainability of our revenue and net profit will depend upon our ability to remain competitive in providing our manufacturing services and the ancillary preproduction product development services and post-production logistical services.

Customers’ preference

Our major products are leather garment products and most of our major customers are headquartered in the United States and Australia with retail operations in different countries. The consumers’ preference, consumer spending level and general economic conditions in the countries in which our products are sold have a material effect on our Group’s business and profitability.

Depending on factors like consumer preference, market trend, our customers’ fashion style for a particular season, the demand and product portfolio of our customers on leather garment may fluctuate significantly.

Quality of our products

Our major customers include international and well-known fashion brand, owners who normally have a network of manufacturers. Although we have stringent quality control policies from raw material procurement to packing, if our customers are not satisfied with the quality of our products, our future orders and our results would be adversely affected.

Raw materials and ability to transfer changes in raw material cost to our customers

Our cost of raw materials represented the largest component of our cost of goods sold during the Track Record Period. Leather is our most important raw material. As we have not entered into any long term supply contract with any of our leather suppliers in order to enhance flexibility and reduce reliance on certain suppliers, any material increase in or fluctuation of the market price of leather which we are unable to transfer to our customers, our results may be materially affected.

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FINANCIAL INFORMATION

BASIS OF PRESENTATION

Our audited consolidated financial information set forth in Appendix I to this [REDACTED] has been prepared in accordance with HKFRSs under the historical cost convention.

Immediately prior to and after the Reorganisation, our principal business remained under the control of the Individual Owners. Our principal business is conducted through Perline including its subsidiary, Foshan Shengli. Perline was directly owned by the Individual Owners previously. The Company has not been involved in any business prior to the Reorganisation. Pursuant to the Reorganisation, the Company became the holding company of the companies now comprising the Group subsequent to the end of the Track Record Period on [. 2014]. The Reorganisation were merely reorganisations of our principal business with no change in management of such business and the ultimate owners of the business. Accordingly, the financial information of the Group has been prepared by applying the principles of merger accounting as if the Reorganisation had been completed at the beginning of the Track Record Period.

The consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the Track Record Period include the results and cash flows of all companies now comprising the Group from the earliest date presented or since the date when the subsidiaries first came under the common control, where this is a shorter period. The consolidated statement of financial position of the Group’s subsidiaries as at 30 June 2013 and 2014 have been prepared to present the assets and liabilities of the subsidiaries using the existing carrying values of the principal business of the Group for the Track Record Period presented. No adjustments are made to reflect fair values, or recognise any new assets or liabilities as a result of the Reorganisation.

All intra-group transactions and balances have been eliminated on consolidation in full.

For more information on the basis of presentation of our financial information included herein, see Note 2.1 of the Accountants’ Report included in Appendix I to this [REDACTED].

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements have been prepared in accordance with the HKFRSs. The accounting policies and critical accounting estimates and judgments are set out in notes 4 and 6 to the Accountants’ Report contained in Appendix I to this [REDACTED]. The following paragraphs discuss those that are most critical in preparing our financial statements.

Accounting policies

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, after allowances for returns. We recognise

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FINANCIAL INFORMATION

revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of our activities, as described below.

Revenue from the sales of goods is recognised when the risk and reward of the goods has been transferred to the customer, which is usually when we have delivered the products to the customer, the collectability of the related receivables is reasonably assumed and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to us 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.

Financial assets

We classify our financial assets under the category of loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. Our loans and receivables comprise trade receivables, deposits and other receivables and cash and cash equivalents in the consolidated statement of financial position.

Regular way purchases and sales of financial assets are recognised on the trade-date – the date on which we commit to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and we have transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Impairment of financial assets

We assess at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘‘loss event’’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

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FINANCIAL INFORMATION

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, we may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in first-out method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling costs.

Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold in the ordinary course of business. If collection of trade and other receivables is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Accounting estimates

Impairment of trade and other receivables

Our management estimates the provision of impairment of trade and other receivables by assessing their recoverability. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible and require the use of estimates. Where the expectation is different from the original estimate, such difference will impact carrying value of trade and other receivables and impairment charge in the period in which such estimate has been changed.

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FINANCIAL INFORMATION

During the Track Record Period, we had written off bad debt of approximately HK$0.1 million and had not reversed the written off of such bad debt, and no other impairment of trade and other receivables had been made.

RESULTS OF OPERATIONS OF OUR GROUP

The following table sets forth our consolidated statement of profit or loss and other selected financial information for the two years ended 30 June 2014 as extracted from the Accountants’ Report set out in Appendix I to this [REDACTED].

Revenue Cost of goods sold Gross profit Other revenue and other income Selling and distribution expenses General and administrative expenses Finance costs Profit before taxation Income tax expense Profit for the year attributable to owners of the Company	For the year ended 30 June 2013 2014 HK$’000 HK$’000 53,607 80,586 (34,700) (53,217) 18,907 27,369 139 110 (1,899) (2,478) (8,398) (9,295) (10) (14) 8,739 15,692 (1,611) (2,796) 7,128 12,896
	2013 HK$’000 53,607 (34,700) 18,907 139 (1,899) (8,398) (10) 8,739 (1,611) 7,128

Revenue

We produce all the leather garment products according to our customers’ specifications and under their brands or labels. We believe that our customers’ orders, including the types, specification and design of the products, were made based on consumer preference, market trend, seasonality and their fashion style for a particular season, and we discuss the price of each order with our customers with reference to the cost of sales such as the cost of raw materials, labour costs, the size of the order, the complexity of the product design and the manufacturing process, the packaging and transportation costs, the customer’s relationship with our Group, the customer’s approximate retail price of the products, and mark-up.

All of our revenue is derived from the sale of leather products, which principally comprising leather garment products, during the Track Record Period. Our leather garment products include (i) for women: jacket and coat, pants, shirt, top and vest, dress and shorts; and (ii) for men: jacket and coat, pants, blazer and vest. Such leather garment products accounted for over 96% of our revenue

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FINANCIAL INFORMATION

during the Track Record Period, and among our leather garment products, (i) women’s leather garment accounted for about 59.4% and 65.8%; and (ii) jackets and coats (for both women and men in aggregate) accounted for about 73.3% and 66.5% of our revenue derived from our leather garment products for the two years ended 30 June 2014, respectively. Set out below is the breakdown of our leather products by type (including the quantity and average prices of our leather garment products) during the Track Record Period:

	For the year ended 30 June	For the year ended 30 June	For the year ended 30 June
	2013	Subtotal HK$’000 20,203 4,295 3,042 1,339 1,800 30,679 17,660 3,297 20,957 51,636 1,971 53,607		2014
Quantity Units 15,276 2,942 3,678 1,489 1,957 25,342 12,941 2,505 15,446 40,788 40,788	Average selling price HK$ (Note 1) 1,323 1,460 827 899 920 1,211 1,365 1,316 1,357 1,266		Quantity Units 18,973 4,512 6,206 5,601 4,468 39,760 15,569 1,850 17,419 57,179 57,179	Average selling price HK$ (Note 1) 1,450 1,606 1,043 939 1,104 1,293 1,570 1,224 1,533 1,366	Subtotal
					HK$’000 27,518 7,246 6,471 5,260 4,933
					51,428 24,442 2,264
					26,706 78,134 2,452
					80,586

Notes:

The average selling price represented the selling price of our products to our customers and not the retail price of our products sold by our customers.
During the Track Record Period, other products for women included dress and shorts, and other products for men included pants, blazer and vest.

Major product types

Jackets and coats are the major leather garments manufactured by us during the Track Record Period. For women’s leather jackets and coats, the sale of which accounted for approximately 37.7% and 34.1% of our total revenue for the two years ended 30 June 2014, respectively, and the average selling price of which was approximately HK$1,323 per unit and HK$1,450 per unit for the two years ended 30 June 2014, respectively. For men, the sales of leather jackets and coats

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FINANCIAL INFORMATION

accounted for approximately 32.9% and 30.3% of our total revenue for the two years ended 30 June 2014, respectively, the average selling price of which was approximately HK$1,365 per unit and HK$1,570 per unit for the two years ended 30 June 2014, respectively.

Apart from jackets and coats, our leather garment products include pants, skirt, dress, shorts, blazer, top and vest. The revenue of such leather garments accounted for approximately 25.7% and 32.6% of our total revenue for the two years ended 30 June 2014, respectively. The remaining revenue generated by us during the Track Record Period represents the sales of other leather items and accessories, which accounted for approximately 3.7% and 3.0% of our total revenue for the two years ended 30 June 2014, respectively.

During the Track Record Period, most of our major customers (which include international and well-known fashion brand owners) offer both men and women apparel series. Our revenue generated from the sale of women and men leather garment products accounted for approximately 57.2% and 39.1%, and approximately 63.8% and 33.1%, respectively, for the two years ended 30 June 2014. The split between our women’s and men’s leather garment products was determined by the orders from our customers.

Geographical coverage

During the Track Record Period, the United States, Australia and Hong Kong were our major markets (with reference to the destination of our product delivery as stipulated in our customers’ purchase orders), which in aggregate contributed to over 80% of our revenue during the Track Record Period. Nevertheless, depending on our customers’ sales network and needs, our products may be further forwarded to other countries by our customers. The following table illustrates the breakdown of our revenue during the Track Record Period (with reference to the destination of our product delivery as stipulated in our customers’ purchase orders):

For the year ended 30 June	For the year ended 30 June	For the year ended 30 June
2013 Revenue Percentage of total HK$’000 % 17,282 32.2 14,333 26.7 15,378 28.7 2,204 4.1 2,224 4.2 1,213 2.3 973 1.8 53,607 100.0	2014
Revenue HK$’000 17,282 14,333 15,378 2,204 2,224 1,213 973 53,607	Revenue HK$’000 36,670 14,713 13,424 6,477 4,420 2,627 2,255 80,586	Percentage of total
		% 45.5 18.2 16.7 8.0 5.5 3.3 2.8
		100.0

Note: During the Track Record Period, other countries included the PRC, Canada, Switzerland, United Kingdom, Italy, South Korea, Mexico, Germany, Singapore, South Africa, New Zealand and Cambodia.

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FINANCIAL INFORMATION

Most of our five largest customers during the Track Record Period are headquartered in the United States or Australia with retail operations in different countries. Foreseeing the growing in demand for quality leather garment products with international design and style in the PRC, we plan to devote more resources in exploring the PRC market and PRC based customers. On the other hand, we will continue to devote resources in product development and marketing with a view to enhancing our capacity in competing in the market, securing orders from our existing customers and to broaden our customer base.

Cost of goods sold

The following table illustrates the breakdown of our cost of sales during the Track Record Period:

For the year ended 30 June	For the year ended 30 June	For the year ended 30 June
2013 Percentage of total HK$’000 % 24,538 70.7 4,204 12.1 5,173 14.9 785 2.3 34,700 100.0	2014
HK$’000 24,538 4,204 5,173 785 34,700	HK$’000 39,204 6,393 6,679 941 53,217	Percentage of total
		% 73.7 12.0 12.5 1.8
		100.0

During the Track Record Period, raw material costs accounted for over 80% of our cost of goods sold and leather was our major raw material and accounted for approximately 70.7% and 73.7% of our cost of goods sold, respectively. Our leather raw materials used are usually animal hides and skins from lambs, sheep, goats, cows and pigs. As we manufacture our leather garment products on a made-to-order basis, and we adopt a cost-plus pricing model, leather cost has always been one of the key factors in the price determination of each of our products. During the Track Record Period, the majority of our leather raw materials purchased were sheepskin, goatskin, lambskin and lambswool shearling. Other raw materials mainly include zippers, fabrics, lining, padding, shoulder pads, buckles, buttons, labels and sewing threads.

We did not record impairment of inventories during each of the two years ended 30 June 2014 as we manufacture leather garments primarily on a made-to-order basis, we place order on leather with our suppliers for production only after we have confirmed purchase orders with our customers and we have strict inventory control procedures to minimize the risk of stock damage.

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FINANCIAL INFORMATION

Other revenue and other income

Our other revenue and other income during the Track Record Period principally represented sundry incomes which are incidental to our business principally including insurance and compensation, and exchange differences.

Selling and distribution expenses

The following table sets forth a breakdown of our selling and distribution expenses during the Track Record Period:

For the year ended 30 June	For the year ended 30 June	For the year ended 30 June
2013 Percentage of total HK$’000 % 1,100 57.9 799 42.1 1,899 100.0	2014
HK$’000 1,100 799 1,899	HK$’000 1,556 922 2,478	Percentage of total
		% 62.8 37.2
		100.0

Our selling and distribution expenses principally represented logistics expenses in relation to our products, which accounted for 57.9% and 62.8% of the total selling and distribution expenses for each of the two years ended 30 June 2014, respectively, and our marketing expenses accounted for the remaining approximately 42.1% and 37.2% of the selling and distribution expenses for the two years ended 30 June 2014, respectively.

General and administrative expenses

The following table sets forth a breakdown of our general and administrative expenses during the Track Record Period:

For the year ended 30 June	For the year ended 30 June	For the year ended 30 June
2013 Percentage of total HK$’000 % 6,433 76.6 1,017 12.1 319 3.8 310 3.7 319 3.8 8,398 100.0	2014
HK$’000 6,433 1,017 319 310 319 8,398	HK$’000 6,905 1,359 459 379 193 9,295	Percentage of total
		% 74.3 14.6 4.9 4.1 2.1
		100.0

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FINANCIAL INFORMATION

Our general and administrative expenses principally represented staff costs and benefits, and office expenses and utilities during the Track Record Period. Our staff costs and benefits accounted for approximately 76.6% and 74.3% of our general and administrative expenses, and our office expenses and utilities accounted for approximately 12.1% and 14.6% of our general and administrative expenses for the two years ended 30 June 2014, respectively.

Finance costs

Our finance costs represented the interests in relation to our trust receipt loans for the purchase of raw materials.

Income tax expense

Our income tax expense comprises both Hong Kong profits tax and PRC Enterprise Income Tax.

Net profit

Our net profit principally represented the net profit from our business operation and we did not record extraordinary gain or loss during the Track Record Period. We recorded net profits attributable to equity holders of the Company of approximately HK$7.1 million and approximately HK$12.9 million for the years ended 30 June 2013 and 2014, respectively.

Review of historical operating results

Year ended 30 June 2014 compared to year ended 30 June 2013

Revenue

Our revenue derived from the sales of leather products increased by approximately HK$27.0 million, or approximately 50.3%, from approximately HK$53.6 million for the year ended 30 June 2013 to approximately HK$80.6 million for the year ended 30 June 2014. The increase was mainly due to the increase in quantity of our leather garment products sold by approximately 40.2% and the increase in average selling price of our leather garment products by about 7.9%. Of the HK$27.0 million increase in revenue for the year ended 30 June 2014, approximately HK$9.5 million, HK$8.5 million and HK$5.8 million were contributed by the increase in our sales to Customer B, Customer A and Customer C, respectively. We have business relationship with these three customers ranging from approximately 3 years to 10 years. In terms of leather garment product categories, the increase in revenue for the year ended 30 June 2014 was mainly contributed as to approximately HK$7.3 million (or approximately 27.0%), and HK$6.8 million (or approximately 25.2%), by women’s leather jackets and coats and men’s leather jackets and coats, respectively. Leather jackets and coats were the major leather garment products sold by us during the Track Record Period.

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FINANCIAL INFORMATION

Meanwhile, the general increase in orders of our leather garment products was considered to be the recognition of our marketing effort, and the good and reliable quality of our deliverables by our existing customers, and the expansion of our customer base. The increase in average selling price was mainly attributable to the increase in complexity of designs of our customers for which more meticulous craftsmanship is required, and our bargaining power in price negotiation was enhanced when we offer such customers various pre-production product development services, including but not limited to sharing with our customers market intelligence on leather fashion trend and production knowhow, providing recommendations to our customers on raw material selection, giving suggestions to assist our customers in finetuning or adjusting their original designs, producing and revising mock-up products for our customers’ consideration before they place purchase orders with us, for which our customers are willing to accept higher unit prices, which, on the other hand, illustrated our ability to transfer the increase in our production costs to our customers.

Gross profit and gross profit margin

Our gross profit increased by approximately 44.8% from approximately HK$18.9 million to HK$27.4 million. The increase was in line with the increase in our revenue as we were able to maintain our overall gross profit margin at over 30% at each of the two financial year ended 30 June 2014. Set out below is the breakdown of our gross profit by our products during the Track Record Period:

For the year ended 30 June	For the year ended 30 June	For the year ended 30 June
2013 Gross profit Gross profit margin HK$’000 Approximate % 7,339 36.3 961 22.4 880 28.9 513 38.4 654 36.3 10,347 33.7 6,673 37.8 1,391 42.2 8,064 38.5 18,411 35.7 496 25.2 18,907 35.3	2014
Gross profit HK$’000 7,339 961 880 513 654 10,347 6,673 1,391 8,064 18,411 496 18,907	Gross profit HK$’000 9,252 1,828 2,094 2,010 2,337 17,521 8,455 769 9,224 26,745 624 27,369	Gross profit margin
		Approximate % 33.6 25.2 32.4 38.2 47.4
		34.2 34.6 33.9
		34.5 34.2 25.5
		34.0

Note: During the Track Record Period, other products for women included dress and shorts, and other products for men included pants, blazer and vest.

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FINANCIAL INFORMATION

We recorded increase in cost of goods sold of approximately HK$18.5 million, or approximately 53.4%, as compared to the increase of revenue of approximately HK$27.0 million, or approximately 50.3%. The increase in cost of goods sold for the year ended 30 June 2014 was mainly due to the increase in cost of raw materials consumed of approximately HK$16.9 million as a result of (i) the increase in quantity of our leather garment products sold; (ii) and the increase in average cost of our leather garment products, which were generally in line with the increase in our revenue, units of leather garment products sold and the increase in average selling price of our leather garment products for the year ended 30 June 2014 as compared to the year ended 30 June 2013. On the other hand, the increase in the average wages of our production staff also brought an increase in our cost of goods sold by approximately HK$1.5 million for the year ended 30 June 2014.

In terms of product series, the growth in our gross profit was mainly driven by our women leather garment products, which increased from approximately HK$10.3 million to HK$17.5 million, representing an increase of approximately 69.9%, which was in line with the overall increases in orders and average selling prices for women leather garment products.

Our gross profit margins differ across different products depending on, among other things, complexity of craftsmanship, design and types of leather, and we generally negotiate the pricing of our products with our customers for each order. The gross profit margin slightly dropped from approximately 35.3% for the year ended 30 June 2013 to approximately 34.0% for the year ended 30 June 2014. The slight drop in gross profit margin was mainly attributable to the increase in cost of materials of approximately 58.6%, which exceeded the turnover growth of approximately 50.3%, when we experienced increase in average cost of our products and quantities sold.

Other revenue and other income

Our other revenue and other income slightly decreased from approximately HK$139,000 for the year ended 30 June 2013 to approximately HK$110,000 when we did not record net exchange gain during the year ended 30 June 2014.

Selling and distribution expenses

Our selling and distribution expenses increased by approximately 31.6% from approximately HK$1.9 million for the year ended 30 June 2013 to approximately HK$2.5 million for the year ended 30 June 2014. The increase in selling and distribution expenses was principally attributable to the increase in logistic expenses in relation to our products as the quantity of our leather garment products sold increased by approximately 40.2% from 40,788 units for the year ended 30 June 2013 to 57,179 units for the year ended 30 June 2014. On the other hand, as a result of our continuous effort in product development and marketing activities, our marketing expenses also increased by approximately HK$0.1 million.

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FINANCIAL INFORMATION

General and administrative expenses

Our general and administrative expenses increased by approximately 10.7% from approximately HK$8.4 million for the year ended 30 June 2013 to HK$9.3 million for the year ended 30 June 2014. The increase in general and administrative expenses was principally due to increase in our staff costs and benefits as a result of the increase in directors’ remuneration of approximately HK$0.6 million.

Finance costs

Our finance costs increased from approximately HK$10,000 for the year ended 30 June 2013 to approximately HK$14,000 for the year ended 30 June 2014 which was mainly resulted from our trust receipt loans utilised for the purchase of raw materials.

Income tax expense

We are carrying on our business in Hong Kong and the PRC and are subject to Hong Kong Profits Tax and PRC Enterprise Income Tax in respect of its profits arising in or derived from Hong Kong and the PRC from such business.

Hong Kong Profits Tax has been provided for at the rate of 16.5% for the two years ended 30 June 2014 on the estimated assessable profits arising in or derived from Hong Kong. The subsidiary in the PRC is subject to PRC Enterprise Income Tax at the rate of 25% for the two years ended 30 June 2014.

Our income tax expense for the year ended 30 June 2014 increased by approximately 75.0% from approximately HK$1.6 million to approximately HK$2.8 million. The increase was mainly attributable to the increase in our assessable income which is in line with our result.

During the Track Record Period, the Group has paid the relevant tax in accordance with the relevant tax and regulations.

Net profit

Our net profit attributable to equity holders of the Company recorded an increase of approximately 80.9% and the net profit margin increased from approximately 13.3% to 16.0%.

Although our gross profit margin decreased from approximately 35.3% to approximately 34.0%, we still recorded improvement in net profit margin as we have been cautious in monitoring our costs and expenses associated with the expansion in sales with a view to maximizing the return to our shareholders during the Track Record Period. Meanwhile, we also recorded increase in net profit which was mainly due to (i) the increase in our revenue while we still able to maintain an overall gross profit margin of over 30%; and (ii) as a result of our cost control measures, the general and administrative expenses only increased by approximately 10.7% as compared to the

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FINANCIAL INFORMATION

increase in revenue of approximately 50.3% for the year ended 30 June 2014, while the improvement in our result was partially offset by the increase in income tax expense as a result of the increase in our assessable income in Hong Kong for the year ended 30 June 2014.

Discussion of major balance sheet components

Inventories

The following table sets forth a breakdown of our inventories during the Track Record Period:

As at 30 June	As at 30 June	As at 30 June
2013 Percentage of total HK$’000 % 3,042 28.3 7,693 71.7 — — 10,735 100.0	2014
HK$’000 3,042 7,693 — 10,735	HK$’000 2,941 2,977 2,318 8,236	Percentage of total
		% 35.7 36.2 28.1
		100.0

We manufacture our leather garments primarily on a made-to-order basis and place order on leather with our suppliers for production only after we have confirmed purchase orders with our customers. Our production time, from placing of orders by our customers to the completion of final quality inspection, generally takes about three months, covering the time of approximately two months for order of raw materials and the time of approximately one month for the actual manufacturing process. Our inventory level was also affected by the status and progress of the relevant orders being processed by us as at the respective reporting date.

Our inventory level amounted to approximately HK$10.7 million as at 30 June 2013, and approximately 71.7% of which was attributable to our work in progress. Our inventory level decreased to approximately HK$8.2 million as at 30 June 2014, and approximately 36.2% and 28.1% of which was attributable to our work in progress and our finished goods, respectively. The decrease in inventory level was principally due to higher level of inventories were ordered and being processed based on our production schedule as at 30 June 2013, as compared to 30 June 2014, to cater for orders placed with us prior, and goods to be delivered in the months following.

As we usually place orders on leathers only after the order for production is confirmed or placed, we do not maintain material inventory of leathers to cater for future potential orders nor do we keep inventory of finished goods to cater for potential orders. Accordingly, in general, we are not subject to significant inventory obsolescence and we did not record any impairment in inventories during the Track Record Period.

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FINANCIAL INFORMATION

As at 30 June 2014, approximately 90.0% of our inventories were aged within three months. As at 24 October 2014, all of the finished goods and work in progress as at 30 June 2014 were subsequently sold and over 90% of the raw material as at 30 June 2014 were subsequently utilised.

Trade receivables

Trades receivables constitute another major component of our current assets throughout the Track Record Period. Our trade receivables slightly decreased from approximately HK$10.2 million as at 30 June 2013 to approximately HK$9.8 million as at 30 June 2014 as a result of the settlement by our customers before 30 June 2014.

The following table sets out the aging analysis of our trade receivables as at 30 June 2013 and 2014, respectively, based on the relevant invoice dates:

As at 30 June	As at 30 June	As at 30 June
2013 Percentage of total HK$’000 % 8,746 85.5 903 8.8 240 2.4 341 3.3 10,230 100.0	2014
HK$’000 8,746 903 240 341 10,230	HK$’000 8,329 1,197 70 210 9,806	Percentage of total
		% 84.9 12.2 0.7 2.2
		100.0

As at 30 June 2013 and 2014, majority of our trade receivables were within 30 days, principally due to the time required by our customers to process their payment after receiving our invoice. We generally do not grant any credit terms but for certain customers, we will grant credit period of no more than 45 days based on factors such as our years of relationship with them and their payment record. Also, in some cases, we required our customers to pay a deposit of 30% and settle the remaining balance after receiving the invoice.

It is our policy to review overdue balances and our receivable balances on an ongoing basis and appropriate assessment is made by our management team to determine whether or not provision for impairment of trade receivables should be made.

We did not experience any material payment defaults from our customers during the Track Record Period. Nevertheless, we have written off bad debts of approximately HK$0.1 million for the year ended 30 June 2013 due to the financial difficulty of the relevant customer. No impairment of trade receivable or written off bad debts was recognised for the year ended 30 June 2014.

As at 24 October 2014, over 98% of the trade receivables as at 30 June 2014 have been subsequently settled.

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FINANCIAL INFORMATION

Trade payables, trust receipt loans and other payable

The following table sets forth a breakdown of our trade payables, trust receipt loans and other payables as of the dates indicated:

As at 30 June	As at 30 June	As at 30 June
2013 Percentage of total HK$’000 % 3,978 37.3 2,066 19.3 3,251 30.5 1,369 12.8 12 0.1 10,676 100.0	2014
HK$’000 3,978 2,066 3,251 1,369 12 10,676	HK$’000 1,811 — 2,884 2,793 241 7,729	Percentage of total
		% 23.4 — 37.3 36.2 3.1
		100.0

Trade payables and trust receipt loans were primarily related to the purchase of raw materials. The aggregate trade payable and trust receipt loan balance decreased from approximately HK$6.0 million as at 30 June 2013 to approximately HK$1.8 million as at 30 June 2014, principally due to the settlement of the amounts by our internal resources prior to 30 June 2014. We mainly utilise our internal resources and our trust receipt loan to finance our purchases and we were usually not granted any credit period by our suppliers. The settlement term of the trust receipt loans is generally 90 days.

As at [24 October] 2014, over 98% of the outstanding trade payables and trust receipt loans as at 30 June 2014 had been settled.

Our trade deposit received amounted to approximately HK$3.3 million and HK$2.9 million as at 30 June 2013 and 2014, respectively. We require our customers to pay deposit upfront of 30% of the order amount in some cases.

Our accruals increased from approximately HK$1.4 million as at 30 June 2013 to approximately HK$2.8 million as at 30 June 2014. The increase was principally attributable to the increase in staff cost payable of approximately HK$0.6 million, increase in accrued social insurance expenses of approximately HK$0.3 million and increase in accrued housing provident fund of approximately HK$0.3 million.

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FINANCIAL INFORMATION

Borrowings

Our borrowings represented trust receipt loans from banks which were repayable within one year during the Track Record Period. The decrease in trust receipt loans of approximately HK$2.1 million was mainly attributable to the settlement of the outstanding balance of trust receipt loan prior to 30 June 2014. The banking facilities bear no material covenants, and there has been no default or delay in repayment of banking facilities or borrowings by us during the Track Record Period.

Set out below the summary of our trust receipt loans as at 30 June 2013 and 2014:

As at 30 June	As at 30 June	As at 30 June
2013 Outstanding balance Effective interest rate HK$’000 1,906 3.25% 160 1% 2,066	2014
Outstanding balance HK$’000 1,906 160 2,066	Outstanding balance HK$’000 — — —	Effective interest rate
		Not applicable Not applicable

Amounts due to Directors

The amounts due to Directors mainly represented the advances to us by the Directors and amounted to approximately HK$5.0 million and HK$4.8 million as at 30 June 2013 and 2014, respectively. [The amounts have been fully repaid by the Group before the [REDACTED].]

Working capital management policy

We actively and regularly review and manage our capital structure to ensure our healthy financial position. Given the turnover of our trade receivables and inventories is slower than the turnover of our trade payables, our management will review our liquidity positions and available bank facilities from time to time to ensure that we have sufficient financial resources for our operation. Nevertheless, as at the Latest Practicable Date and except for the existing banking facilities available, we did not have any material external financing plan.

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FINANCIAL INFORMATION

KEY FINANCIAL RATIOS

The following table sets out our key financial ratios during the Track Record Period:

Trade receivable turnover1 (days) Trade payable turnover2 (days) Inventory turnover3 (days) Current ratio4 (times) Return on equity5 (%) Return on total assets6 (%) Gearing ratio7 (%)	As at/for the year ended 30 June	As at/for the year ended 30 June
	2013 50.5 57.5 76.1 1.2 160.3 25.5 246.9	2014
		45.4 26.9 65.1 2.0 74.3 38.1 27.8

Notes:

Trade receivables turnover days for the two years ended 30 June 2014 are computed by the average of the beginning and ending trade receivable balances for each of the two years ended 30 June 2014 divided by the invoiced amount for the corresponding year and multiplied by 365 days.
Trade payables turnover days for the two years ended 30 June 2014 are computed by the average of the beginning and ending trade payable and trust receipt loans balances for each of the two years ended 30 June 2014 divided by the cost of sales incurred for the corresponding year and multiplied by 365 days.
Inventory turnover days for the two years ended 30 June 2014 are computed by the average of the beginning and ending inventory balances for each of the two years ended 30 June 2014 divided by the cost of sales incurred for the corresponding year and multiplied by 365 days.
Current ratio is calculated by dividing current assets by current liabilities as at the end of the respective year.
Return on equity is calculated by dividing net profit for the year by total equity at the end of the respective year.
Return on total assets is calculated by dividing the net profit for the year by total assets at the end of the respective year.
Gearing ratio is calculated by dividing the payables incurred not in the ordinary course of business divided by total equity at the end of the respective year.

Trade receivable turnover days

Our debtors’ turnover days slightly decreased from approximately 50.5 days for the year ended 30 June 2013 to approximately 45.4 days for the year ended 30 June 2014. The slight decrease in our debtors’ turnover days was mainly attributable to the increase in revenue by approximately 50.3% as a result of the increase in both quantity and average selling prices of our products sold, while the average debtors balance, being the average of beginning and ending balances of trade receivables of the relevant financial year, only increased by approximately 35.0%. The increase in average debtors balance was principally attributable to the relatively lower level of

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FINANCIAL INFORMATION

trade receivable balance as at 1 July 2012. The trade receivable balance as at 30 June 2013 and 2014 (which were principally attributable to our sales in June of the respective year to our major customers) were higher that of 1 July 2012 and in line with the increase in our sales in the respective year. We generally do not grant credit terms but for some customers, we will offer credit period of no more than 45 days and majority of our trade receivables as at 30 June 2013 and 2014 were aged within 30 days, which was principally due to administrative time required by our customers to process their payment after receiving our invoice.

Trade payable turnover days

Our creditors’ turnover days reduced from approximately 57.5 days for the year ended 30 June 2013 to approximately 26.9 days for the year ended 30 June 2014. The decrease in our creditors’ turnover days was principally due to the fact that (i) there was no outstanding trust receipt loan balance as at 30 June 2014, while there were outstanding trust receipt loan balances of approximately HK$2.1 million as at 30 June 2013 and approximately HK$0.3 million as at 30 June 2012; and (ii) the Group only had approximately HK$1.8 million of trade payable balance as at 30 June 2014, while the trade payable balance as at 30 June 2013 was approximately HK$4.0 million. In general, no credit period was granted by our suppliers but we usually take same administrative time to arrange and process the payment to our suppliers. As part of our working capital management, we had utilized trust receipt loans to finance the purchase of raw materials during the Track Record Period. The decrease in trade payable balance and trust receipt loan balance were principally due to our settlement in June 2014 by our internal resources in view of our improvement in cash position.

Inventory turnover days

Our stock turnover days decreased from approximately 76.1 days for the year ended 30 June 2013 to approximately 65.1 days for the year ended 30 June 2014. The decrease in our stock turnover days was principally attributable to the increase in our cost of goods sold by approximately 53.4% as mainly brought by the increase in quantity of our products sold of approximately 40.2%, while the increase in average inventory level, being the average of beginning and ending balances of inventory of the relevant financial year, as primarily driven by the increase in our orders, was only approximately 31.0% for the year ended 30 June 2014 as compared to the year ended 30 June 2013. Our inventory level is also affected by the status and progress of customers’ orders being processed by us as at the relevant reporting date. Moreover, products with higher inventory costs were being processed in accordance with on our production schedule as at 30 June 2013, as compared to 30 June 2014, to cater for orders placed with us and goods to be delivered in the months following.

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FINANCIAL INFORMATION

Current ratio

Our current ratio improved from approximately 1.2 as at 30 June 2013 to approximately 2.0 as at 30 June 2014. We recorded improvement in current assets of approximately HK$6.0 million, which was principally attributable to the increase in cash and cash equivalents of approximately HK$9.4 million primarily arouse from cash inflow from our operation and partially offset by the decrease in inventories of approximately HK$2.5 million as a lower level of inventories were ordered and being processed based on our production schedule as at 30 June 2014, as compared to 30 June 2013, to cater for orders placed with us and goods to be delivered in the months following.

On the other hand, we recorded decrease in current liabilities of approximately HK$6.9 million, which was principally attributable to the decrease in dividend payable of HK$6.0 million as we did not declare any interim dividend during the year ended 30 June 2014 and the dividend payable in respect of the year ended 30 June 2013 was settled during the year ended 30 June 2014, decrease in trade payable of approximately HK$2.2 million due to our settlement before 30 June 2014 by our internal resources and decrease in bank borrowing of approximately HK$2.1 million due to our settlement before 30 June 2014 by our internal resources, and partially offset by the increase in tax payable of approximately HK$2.2 million and accruals of approximately HK$1.4 million principally attributable to the increase in staff cost payable, increase in accrued social insurance expenses and increase in accrued housing provident fund.

Combining the aforesaid effects, we recorded an improvement in current ratio as at 30 June 2014 as compared to 30 June 2013.

Return on equity

We recorded a decrease in return on equity from approximately 160.3% for the year ended 30 June 2013 to approximately 74.3% for the year ended 30 June 2014. As a private company, our equity principally represented our retained earnings, which only amounted to approximately HK$2.9 million at the commencement of the Track Record Period.

The decrease in our return on equity was principally attributable to the enhancement in our equity as a result of the accumulation of profit recorded by us during the Track Record Period, and is partially offset by the increase in our net profit during the Track Record Period.

Return on total assets

We recorded increase in return on total assets from approximately 25.5% for the year ended 30 June 2013 to approximately 38.1% for the year ended 30 June 2014. We did not have fixed assets in material amount during the Track Record Period and our assets principally represented cash and cash equivalents, trade receivables and our inventories. The increase in return on total assets was principally attributable to the improvement in our net profit from approximately HK$7.1 million for the year ended 30 June 2013 to approximately HK$12.9 million for the year ended 30 June 2014, and partially offset by the improvement in asset base and cash position mainly due to the accumulation of profit generated from our operation during the Track Record Period.

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FINANCIAL INFORMATION

Gearing ratio

Our gearing ratio reduced from approximately 246.9% for the year ended 30 June 2013 to approximately 27.8% for the year ended 30 June 2014. The reduction in gearing ratio was principally attributable to the decrease in dividend payable as we did not declare any interim dividend during the year ended 30 June 2014 and the dividend payable in respect of the year ended 30 June 2013 was settled during the year ended 30 June 2014, and the increase in our equity base mainly due to the accumulation of profits recorded by us during the Track Record Period.

TAXATION

We are incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law and, accordingly, are exempted from the payment of the Cayman Islands income tax. For our subsidiary incorporated in the BVI, it is registered as BVI business companies under the BVI Business Companies Act, 2004 and are exempted from payment of income tax of BVI.

For our subsidiaries incorporated in Hong Kong and the PRC, Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit for the Track Record Period, while the PRC Enterprise Income Tax (‘‘EIT’’) has been provided at the applicable rates in accordance with the income tax laws of the PRC.

On 16 March 2007, the new Law on EIT was passed by the National People’s Congress of the PRC, the income tax rate for both domestic and foreign-investment enterprise was unified at 25% effective from 1 January 2008.

INDEBTEDNESS

As at the close of business on 30 September 2014, being the latest practicable date for the purpose of ascertaining certain information contained in this indebtedness statement prior to printing of this [REDACTED], the Group had outstanding borrowing of approximately HK$4,824,000, which were amounts due to Directors, interest free, unsecured and had no fixed terms of repayment.

Save for the aforesaid or otherwise disclosed herein and apart from the intra-group liabilities, we did not have, at the close of business on 30 September 2014, any debt securities, or term loans or bank overdrafts, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, obligation under hire purchase contracts or finance leases, guarantees, or other material contingent liabilities.

SUBSEQUENT CHANGES

The Directors confirm that there is no material adverse change in our indebtedness position and contingent liabilities since 30 September 2014.

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FINANCIAL INFORMATION

The Directors further confirm that they are not aware of any cancellation of orders, any material default in payment by our customers or significant drop in average selling prices of our products, from 30 June 2014 up to the Latest Practicable Date.

RELATED PARTY TRANSACTIONS

During the Track Record Period, two of our Directors provided personal guarantees in respect of our banking facilities, which have been terminated by us. We have obtained new banking facilities under which no personal guarantee from any of our Directors is required.

With respect to the related party transactions set out above and other related party transactions set out in the Accountants’ Report set out in Appendix I to this [REDACTED], our Directors confirm that these transactions were conducted on normal commercial terms and on arm’s length basis.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL RESOURCES

Overview

During the Track Record Period and up to the Latest Practicable Date, we have been generally financing our operations through a combination of, internally generated cash flows and bank borrowings. Following completion of the [REDACTED], we expect our capital and operating cash flow requirements will be funded principally through internally generated cash flows, the [REDACTED] from the [REDACTED], and bank borrowings. Our Directors believe that in long term, our operation will be funded by internally generated cash flows and, if necessary, additional equity financing or bank borrowings. Our ability to fund our working capital needs, repay our indebtedness and finance other obligations depend on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions, the level of spending by our customers and other factors, many of which are beyond our control. Any future significant acquisition or expansion may require additional capital, and we cannot assure you that such capital will be available to us on acceptable terms, if at all. In general, we have the ability to generate adequate cash from our operations to fund our ongoing operating cash needs. We may use shortterm bank borrowings to finance operations and repay bank borrowings once our funding position is in surplus. We have not experienced and do not expect to experience any difficulties meeting our obligations as they become due.

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FINANCIAL INFORMATION

Cash flows

The table below sets out a summary of the cash flows information of our Group during the Track Record Period:

Inflow from operation before working capital changes Working capital changes, interest received and net income tax refund/(paid) Net cash (used in) generated from operating activities Net cash used in investing activities Net cash generated from (used in) financing activities Net (decrease) increase in cash and cash equivalents	For the year ended 30 June 2013 2014 HK$’000 HK$’000 8,972 15,824 (11,537) 1,977 (2,565) 17,801 (81) (124) 1,943 (8,234) (703) 9,443
	2013 HK$’000 8,972 (11,537) (2,565) (81) 1,943 (703)

Operating activities

Our operating cash inflows are principally derived from the receipt of payments for the sales of our products while our operating cash outflows are principally for the purchase of raw materials and other operating costs such as staff costs, utilities and office expenses.

Inflow from operation before working capital changes

Our inflow from operation before working capital changes was principally attributable to our profit before tax which amounted to approximately HK$8.7 million and HK$15.7 million for the two years ended 30 June 2013 and 2014, respectively.

Working capital changes, interest received and net income tax refund/(paid)

We recorded working capital changes, interest received and net income tax refund of approximately HK$11.5 million for the year ended 30 June 2013, which was principally attributable to the increase in inventories of approximately HK$7.0 million to cater for the increase in orders received and products to be delivered in the months following 30 June 2013 and increase in trade receivables of approximately HK$5.7 million principally attributable to the trade receivables from Customer A, Customer C and Customer G and partially offset by the increase in accruals, other payables and trade deposits received of approximately HK$2.0 million.

We recorded working capital changes, interest received and net income tax paid of approximately HK$2.0 million for the year ended 30 June 2014, which was principally attributable to the decrease in inventories of approximately HK$2.5 million as a lower level of inventories were ordered and being processed based on our production schedule as at 30 June 2014, as compared to

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FINANCIAL INFORMATION

30 June 2013, to cater for orders placed with us and goods to be delivered in the months following thereto and increase in accruals, other payables and trade deposits received of approximately HK$1.3 million principally attributable to the increase in staff cost payable, increase in accrued social insurance expenses and increase in accrued housing provident fund and partially offset by the decrease in trade payables of approximately HK$2.2 million principally due to our settlement in June 2014 with our internal resources in view of our improvement in cash position.

The negative operating cashflow incurred for the year ended 30 June 2013 was mainly due to the increase in our inventory level in accordance with our production schedule to cater for orders placed with us prior to June 2013 and goods to be delivered in the months following, and the increase in our trade receivable as a result of increase in our revenue, which, in aggregate, led to cash used in operating activities of approximately HK$12.7 million. On the other hand, we recorded cash generated in operating activities of approximately HK$17.8 million for the year ended 30 June 2014 and had no borrowing as at 30 June 2014.

Investing activities

During the Track Record Period, our cash flows from investing activities were principally used in purchases of items of property, plant and equipment.

Net cash used in investing activities amounted to approximately HK$81,000 for the year ended 30 June 2013 and HK$124,000 for the year ended 30 June 2014, which mainly represented purchases of items of property, plant and equipment of approximately HK$83,000 for the year ended 30 June 2013 and approximately HK$124,000 for the year ended 30 June 2014.

Financing activities

During the Track Record Period our financing cash flow were principally generated from the utilisation of our banking facilities and drawdown of bank borrowings, the repayment of such bank borrowing and the interest accrued thereof, payment of dividend to our shareholders and changes in amounts due to Directors.

We recorded net cash generated from financing activities amounted to approximately HK$1.9 million for the year ended 30 June 2013 and net cash used in financing activities of approximately HK$8.2 million for the year ended 30 June 2014. The net cash generated from financing activities for the year ended 30 June 2013 was mainly arisen from the net proceeds, being the net of drawdown and repayment, received from our bank borrowing in financing our raw material purchases of approximately HK$1.7 million. The net cash used in financing activities for the year ended 30 June 2014 was mainly due to the payment of dividend of HK$6.0 million and the net proceeds paid in our banking borrowing of approximately HK$2.0 million.

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FINANCIAL INFORMATION

Capital structure

Based on our unaudited management account as at [30 September 2014], we had net assets of approximately HK$[19.8] million, comprising non-current assets of approximately HK$[0.2] million (mainly comprising of property, plant and equipment) and net current assets of approximately HK$[19.6] million with breakdown as set out below.

Net current assets

Current assets Inventory Trade receivables Deposit, prepayment and other receivables Cash and cash equivalents Current liabilities Trade payables Accruals, other payables and receipts in advance Amounts due to directors Dividend payable Bank borrowings Tax payable Net current assets	As at 30 June 2013 2014 HK$’000 HK$’000 10,735 8,236 10,230 9,806 958 431 5,702 15,133 27,625 33,606 3,978 1,811 4,632 5,918 4,978 4,824 6,000 — 2,066 — 1,811 3,990 23,465 16,543 4,160 17,063	As at 30 September 2014
	2013 HK$’000 10,735 10,230 958 5,702 27,625 3,978 4,632 4,978 6,000 2,066 1,811 23,465 4,160
		HK$’000 [3,555] [6,309] [474] [24,008]
		[34,346]
		[272] [5,550] [4,824] [—] [—] [4,116]
		[14,762]
		[19,584]

Our net current assets position improved from approximately HK$4.2 million as at 30 June 2013 to approximately HK$17.1 million as at 30 June 2014. We experienced improvement in net current assets position during the Track Record Period mainly due to the accumulation of assets generated from our profitable operations.

As at [30 September 2014], our Group had a net current asset position of approximately HK$[19.6] million. The further improvement in net current asset position was primarily due to the combined effect on (i) improvement in our cash position of approximately HK$[8.9] million principally generated from our operation; and (ii) decrease in trade payable of approximately

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FINANCIAL INFORMATION

HK$[1.5] million due to the settlement thereof, and partially offset by (i) decrease in inventory of approximately HK$[4.7] million due to our products sold subsequent to 30 June 2014; and (ii) decrease in trade receivables of approximately HK$[3.5] million as most of the trade receivables as at 30 June 2014 had been settled as at [30 September 2014].

Loan and banking facilities

Our borrowings during the Track Record Period were denominated in HK$ and repayable within 90 days.

Our total outstanding borrowings amounted to approximately HK$2.1 million and nil as of 30 June 2013 and 2014, respectively. Our borrowings, representing trust receipt loans, bear annual interest rate of prime rate. Our trust receipt loan was not less than 80% guaranteed by the Government of Hong Kong Special Administrative Region and 100% personally guaranteed by two executive Directors. Subsequent to 30 June 2014, we have terminated such banking facilities and obtained new banking facilities which no personal guarantee from any of our Directors is required.

We have not breached any loan covenants during the Track Record Period and up to the Latest Practicable Date and we expect that we will still be able to meet those covenants.

Capital expenditure

During the Track Record Period, we have incurred capital expenditure mainly for the purchase of property, plant and equipment amounting to approximately HK$83,000 and HK$124,000, respectively. We currently plan to use approximately HK$0.2 million, approximately HK$0.3 million and nil during each of the years ending 30 June 2017, respectively, to purchase manufacturing facilities, such as automatic flat press machine, sewing machines with special functions, computerised pattern cutting machine and automated button-attaching machines, after [REDACTED], which will be entirely financed by the [REDACTED] from the [REDACTED]. Our directors believe that such capital expenditure budget will be sufficient for our expected expenditure for the year ending 30 June 2015.

We anticipate that the funds required for such capital expenditure will be financed by cash generated from operations, bank borrowings and the [REDACTED] from the [REDACTED]. It should be noted that the current plan with respect to future capital expenditure may be subject to change based on the implementation of our business plan, including, but not limited to, potential acquisitions, the progress of our capital projects, market conditions, the outlook of our future business conditions and potential acquisitions. As we will continue to expand, additional capital expenditure may be incurred and we may consider raising additional funds as and when appropriate. Our ability in obtaining additional funding in the future is subject to a variety of uncertainties including, but not limited to, our further operation results, financial condition and cash flows, economic, political and other conditions in the PRC, Hong Kong and other countries which our customers operate in.

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FINANCIAL INFORMATION

Capital commitments

As at 30 June 2013 and 2014, we had no significant capital commitment.

Contingent liabilities

As at 30 June 2013 and 2014, we had no significant contingent liabilities or outstanding litigation.

Operating lease commitment

We lease warehouse and production plant in the PRC and our office in Hong Kong under noncancellable operating lease agreement. Leases are negotiated at term which range from 1 to 5 years.

The following table sets forth our future minimum lease payment under non-cancellable operating leases as of the end of the relevant reporting periods.

Within one year In the second to fifth year, inclusive	For the year ended 30 June	For the year ended 30 June
	2013 HK$’000 1,221 — 1,221	2014
		HK$’000 653 40
		693

Quantitative and qualitative information about market risks

Foreign current risk

We are mainly exposed to foreign exchange risk arising from future commercial transactions, and from recognised assets and liabilities. We are mainly exposed to foreign exchange risk in respect of exchange fluctuation of HK$ against USD, RMB, AUD and EUR. We do not hedge its foreign exchange risk during the Track Record Period.

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FINANCIAL INFORMATION

Our cash and cash equivalents as at 30 June 2013 and 2014 are denominated in the following currencies:

USD HKD RMB AUD EUR	As at 30 June	As at 30 June
	2013 HK$’000 5,352 152 141 57 — 5,702	2014
		HK$’000 12,061 465 1,438 54 1,115
		15,133

As HK$ is pegged to USD, it is assumed that there would be no material foreign exchange risk exposure between USD and HK$ and therefore USD is excluded from the analysis below.

For the years ended 30 June 2013 and 2014, if HK$ had reasonably strengthened/weakened by 5% against RMB, AUD and EUR with all other variables held constant, the profit before tax for each of the years then ended would have changed mainly as a result of foreign exchange gains/ losses on translation of HK$ denominated monetary assets and liabilities.

Details of the changes are as follows:

Profit before tax increase/(decrease): — HK$ strengthened 5% against RMB — HK$ weakened 5% against RMB — HK$ strengthened 5% against AUD — HK$ weakened 5% against AUD — HK$ strengthened 5% against EUR — HK$ weakened 5% against EUR	For the year ended 30 June	For the year ended 30 June
	2013 HK$’000 138 (138) (3) 3 6 (6)	2014
		HK$’000 (32) 32 (3) 3 (55) 55

Our Directors consider that we will have sufficient foreign exchange, primarily from our existing foreign currency balances, and the conversion of HK dollars and foreign currencies generated from our operations, to meet our foreign exchange liabilities as they become due.

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FINANCIAL INFORMATION

Cashflow and fair value interest rate risk

Our income and operating cash flows are substantially independent of changes in market interest rates. Except for cash and cash equivalents, we have no other significant interest-bearing assets. Management does not anticipate significant impact on interest-bearing assets resulted from the changes in interest rates because the interest rates of cash and cash equivalents are not expected to change significantly.

Our interest-rate risk arises from borrowing. Borrowing obtained at variable rates expose us to cash flow interest rate risk. Borrowing obtained at fixed rates expose us to fair value interest-rate risk. We do not hedge its cash flow and fair value interest rate risk.

For variable rate borrowing, details of the changes are as follows:

Profit before tax increase/(decrease): — 50 basis point decrease in interest rate — 50 basis point increase in interest rate	For the year ended 30 June	For the year ended 30 June
	2013 HK$’000 10 (10)	2014
		HK$’000 — —

Credit risk

We have no significant concentrations of credit risk due to the customers’ base being large and unrelated. The carrying amounts of cash and cash equivalents and trade receivables included in the consolidated financial statements represent our maximum exposure to credit risk in relation to our financial assets. As at 30 June 2013 and 2014, all cash and cash equivalents were deposited into highly reputable and sizable banks and financial institutions without significant credit risk. Majority of our sales are based on letters of credit and advances before delivery and the remaining sales are made with credit terms. Credit will only be granted to selected customers with long-term relationship and good credit history. We perform ongoing credit evaluations of its customers’ financial conditions and has policies in place to ensure that trade receivables are followed up on a timely basis.

Liquidity risk

Cash flow is managed at group level by our Management. The Management monitors our liquidity requirements to ensure that it has sufficient cash to meet operational needs at all times and does not breach borrowing limits or covenants on any of its borrowing facilities. The Management usually takes into consideration our debt financing plans, covenant compliance and compliance with internal balance sheet ratio targets.

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FINANCIAL INFORMATION

DISTRIBUTABLE RESERVE

Our Company was incorporated on 3 September 2014 and did not have any distributable reserve available for distribution to its shareholders as at 30 June 2014.

WORKING CAPITAL

[The Directors are of the opinion that, after taking into account the cash flow generated from the operating activities, the existing financial resources available to us including internally generated funds, the available banking facilities and the estimated [REDACTED] from the [REDACTED], we have sufficient working capital for our present requirements for at least the next 12 months from the date of this [REDACTED].]

MATERIAL ADVERSE CHANGE AND PROFIT WARNING

Our Directors confirm that the impact of the [REDACTED] expenses on our consolidated statement of profit or loss as disclosed in the paragraph headed ‘‘[REDACTED] expenses’’ above in this section has primarily resulted in a material adverse change in the financial or trading position or prospects of our Group since 30 June 2014, being the date of which our Group’s latest audited consolidated financial statements were made up as set out in the Accountants’ Report in Appendix I to this [REDACTED], and up to the date of this [REDACTED].

Our Company may issue a profit warning after [REDACTED] in respect of our Group’s substantial reduction in the financial results for the six months ending 31 December 2014 and the nine months ending 31 March 2015, and accordingly the year ending 30 June 2015. It is preliminarily reviewed and estimated by our Board that there will be a substantial reduction in the profit of our Group and may even be in a loss position for the six months ending 31 December 2014, nine months ending 31 March 2015 and the year ending 30 June 2015 as a result of the [REDACTED] expenses, which are one-off non-recurring expenses and currently estimated to be approximately HK$11.3 million for the six months ending 31 December 2014 and the remaining balance of approximately HK$5.4 million will be recorded as expense upon [REDACTED], and to a lesser extent, by the expected increase in administrative expenses such as Directors’ remuneration and other expenses relating to the expansion of marketing department, design team and sourcing team based on our expansion plans set out in the section headed ‘‘Future plans and [REDACTED]’’ in this [REDACTED]. Such [REDACTED] expenses are current estimates for reference only and the final amount to be charged to the profit and loss account of our Group for the six months ending 31 December 2014, the nine months ending 31 March 2015 and the year ending 30 June 2015 is subject to change. Furthermore, our financial results for the year ending 30 June 2015 may also be adversely affected by any considerable drop in orders from our major customers. Such reduction in orders from our major customers of the Track Record Period happened in the first quarter of the financial year ending 30 June 2015. Please refer to the paragraph headed ‘‘Recent developments subsequent to the Track Record Period’’ in this section for more details. In the event that we experience any such reduction in orders by any major customers and we are unable to timely secure substitute orders from other customers with acceptable profit margins, our financial results for the full year ending 30 June 2015 may be adversely affected. Please also refer to the

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FINANCIAL INFORMATION

section headed ‘‘Risk Factors — Risks relating to our business — We do not have long-term purchase commitments from our customers and we may be exposed to potential volatility in our turnover’’ on page [.] of this [REDACTED].

DIVIDENDS

We may declare dividends after taking into account, among other things, our results, cash flows and financial condition and position, operating and capital requirements. The amount of distributable profits is based on HKFRSs, the memorandum and articles of association of the Company, the Companies Law, applicable laws and regulations and other factors that are relevant to us.

We have declared dividend of HK$6.0 million and approximately HK$3.2 million for the two years ended 30 June 2014, respectively. However, as we have not formulated any dividend policy, this should not be used as a reference or basis to determine the level of dividends that may be declared or paid by us in the future.

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The following is an illustrative unaudited pro forma statement of adjusted net tangible assets of our Group prepared on the basis of the notes set out below for the purpose of illustrating the effect of the [REDACTED] on the net tangible assets of our Group attributable to equity holders of our Company as if the [REDACTED] had taken place on 30 June 2014 assuming that the [REDACTED] is not exercised. This unaudited pro forma statement of adjusted net tangible assets has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the consolidated net tangible assets of our Group as at 30 June 2014 or any future dates following the [REDACTED].

Audited consolidated net tangible assets of our Group attributable to equity holders of our Company as at 30 June 2014 (Note 1) HK$’000	Add: Estimated [REDACTED] from the [REDACTED] (Note 2) HK$’000	Unaudited pro forma adjusted net tangible assets HK$’000	Unaudited pro forma adjusted net tangible assets per Share (Note 3)
			HK$

Based on an [REDACTED] of

HK$[REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED] Based on an [REDACTED] of HK$[REDACTED] per Share [REDACTED] [REDACTED] [REDACTED] [REDACTED]

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FINANCIAL INFORMATION

Notes:

The audited consolidated net tangible assets of our Group attributable to equity holders of our Company as at 30 June 2014 is extracted from the Accountants’ Report set out in Appendix I to this [REDACTED], which is based on the audited consolidated net assets attributable to equity holders of our Company as at 30 June 2014 of approximately HK$17,350,000 with an adjustment for the deferred tax assets of approximately HK$4,000.
The estimated [REDACTED] from the [REDACTED] are based on the minimum and maximum [REDACTED] of HK$[REDACTED] and HK$[REDACTED] per Share respectively, after deduction of relevant estimated [REDACTED] and other related fees and expenses but without taking into account any Shares which may fall to be allotted and issued upon of the [REDACTED].
The unaudited pro forma adjusted net tangible assets per Share are determined after the adjustments as described in Notes 1 and 2 above and on the basis that [REDACTED] Shares are issued and outstanding as set out in the section headed ‘‘Share Capital’’ in this [REDACTED], but takes no account of any Shares which may fall to be allotted and issued upon exercise of the [REDACTED].
The unaudited pro forma financial information presented above does not take account of any trading or other transactions subsequent to the date of the financial statements included in the unaudited pro forma financial information (i.e. 30 June 2014). In particular, in October 2014, dividend of HK$3,200,000 was approved to be appropriated to the then shareholders of Perline. The unaudited pro forma adjusted net tangible assets had not taken into account of the above transaction.

DISCLOSURE UNDER CHAPTER 17 OF THE [REDACTED]

The Directors have confirmed that, save as disclosed above, as at the Latest Practicable Date, they were not aware of any circumstances which would give rise to a disclosure requirement under Rules 17.15 to 17.21 of the [REDACTED].

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FUTURE PLANS AND [REDACTED]

FUTURE PLANS, BUSINESS OBJECTIVES AND STRATEGIES

Please see the section headed ‘‘Business — Our Business strategies’’ of this [REDACTED] for our Group’s business objectives and strategies.

REASONS FOR THE [REDACTED]

Our Directors believe that the [REDACTED] will enhance our profile, strengthen our financial position and competitiveness, and provide us with additional capital to implement our future plans set out in the paragraph headed ‘‘Implementation plans’’ below.

In addition, our Directors expect the [REDACTED] will bring the following additional benefits to our Group and our shareholders:

access to the capital market for future growth of our Group;
assist us in positioning ourselves as a reliable partner for international and regional fashion brand owners in providing them with pre-production product development services, manufacturing services and logistical services; and
enhance the transparency of our Group’s operation.

[REDACTED]

– 206 –

FUTURE PLANS AND [REDACTED]

[REDACTED]

IMPLEMENTATION PLANS

Our Group’s implementation plans are set forth below for each of the six-month periods until 30 June 2017. Investors should note that the implementation plans and their scheduled times for attainment are formulated on the bases and assumptions referred to in the sub-paragraph headed ‘‘Bases and key assumptions’’ below. These bases and assumptions are inherently subject to many uncertainties, variables and unpredictable factors, in particular the risk factors set out in the section headed ‘‘Risk factors’’ in this [REDACTED]. Our Group’s actual course of business may vary from the business objectives set out in this [REDACTED]. There can be no assurance that the plans of

– 207 –

FUTURE PLANS AND [REDACTED]

our Group will materialise in accordance with the expected time frame or that the objectives of our Group will be accomplished at all. Based on our Group’s business objectives, our Directors intend to carry out the following implementation plans:

From the Latest Practicable Date to 30 June 2015

Business strategy
Use of
[REDACTED]
Strengthening our business
development capability
[REDACTED]
Enhancing our Group’s manufacturing
facilities
[REDACTED]
Expansion of our Group’s pre-
production development function
[REDACTED]
Expansion of our sourcing capability
[REDACTED]
For the six months ending 31 December 2015
Business strategy
Use of
[REDACTED]
Strengthening our business
development capability
[REDACTED]
Enhancing our Group’s manufacturing
facilities
[REDACTED]
Expansion of our Group’s pre-
production development function
[REDACTED]

Implementation plan

Increase marketing team with about 1 to 2 additional staff
to visit, make presentations to, and develop relationship
with existing and potential customers of our Group
Participate in more trade fairs and fashion shows to
increase the market presence of our Group
Develop marketing plan for further expansion of North
America market
Making deposit payment for the purchase of automatic
flat press machine, sewing machines with special
functions, computerised pattern cutting machine and
automated button-attaching machines
Examine the state and condition of the existing production
facilities to ascertain and develop time schedule for
replacement
Recruit about 1 to 2 staff to strengthen the design and
development team
Recruit about 1 to 2 staff/agent to expand our
geographical coverage of suppliers and make more
frequent supplier visits to strengthen our quality control
Implementation plan

Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy.
Continue to participate in more trade fairs and fashion
shows to increase the market presence of our Group
Recruit about 1 to 2 staff to continue the development of
sales in the PRC market
Payment for the remaining balance of the purchase price
of the equipment and machinery ordered
Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy
Develop and create more samples for presentation to
existing and potential customers

– 208 –

FUTURE PLANS AND [REDACTED]

Business strategy
Use of
[REDACTED]
Expansion of our sourcing capability
[REDACTED]
For the six months ending 30 June 2016
Business strategy
Use of
[REDACTED]
Strengthening our business
development capability
[REDACTED]
Expansion of our Group’s pre-
production development function
[REDACTED]
Expansion of our sourcing capability
[REDACTED]

Implementation plan

Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy
Implementation plan

Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy
Strengthening our marketing coverage in the PRC market
Continue to participate in more trade fairs and fashion
shows to increase the market presence of our Group
Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy
Continue to develop and create more samples for
presentation to existing and potential customers
Plan for developing a database with comprehensive and
updated data and information of different leather,
accessories, fashion samples, fashion design photos and
other historical information related to leather garments
Cost will be incurred as remuneration payable to the 2 to
4 additional staff recruited for this business strategy

For the six months ending 31 December 2016

Business strategy Strengthening our business development capability Expansion of the Group’s pre- production development function	Use of [REDACTED] [REDACTED] [REDACTED]	Implementation plan
		Cost will be incurred as remuneration payable to the 1 to 2 additional staff recruited for this business strategy Cost will be incurred as remuneration payable to the 1 to 2 additional staff recruited for this business strategy Continue to expand and strengthen the design team and to develop and create more samples for presentation to existing and potential customers Commence the development of a database with comprehensive and updated data and information of different leather, accessories, fashion samples, fashion design photos and other historical information related to leather garments

– 209 –

FUTURE PLANS AND [REDACTED]

Business strategy
Use of
[REDACTED]
Expansion of our sourcing capability
[REDACTED]
For the six months ending 30 June 2017
Business strategy
Use of
[REDACTED]
Strengthening our business
development capability
[REDACTED]
Expansion of our Group’s pre-
production development function
[REDACTED]
Expansion of our sourcing capability
[REDACTED]

Implementation plan

Cost will be incurred as remuneration payable to the 2 to
4 additional staff recruited for this business strategy
Make more frequent supplier visits to strengthen our
quality control
Implementation plan

Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy
Continue to participate in more trade fairs and fashion
shows to increase the market presence of our Group
Cost will be incurred as remuneration payable to the 1 to
2 additional staff recruited for this business strategy
Continue to expand and strengthen the design and
development team.
Continue to develop and create more samples for
presentation to existing and potential customers
Launch the database with comprehensive and updated data
and information of different leather, accessories, fashion
samples, fashion design photos and other historical
information related to leather garments
Cost will be incurred as remuneration payable to the 2 to
4 additional staff recruited for this business strategy
Make more frequent supplier visits to strengthen our
quality control.

Note: Save for the purpose of enhancing our Group’s manufacturing facilities, the [REDACTED] for the above business strategies will involve incurring cost for allowances for staff costs and overseas trips and overheads of additional headcount.

Bases and key assumptions

The business objectives set out by our Directors are based on the following bases and assumptions:

. our Group will have sufficient financial resources to meet the planned capital expenditure and business development requirements during the period to which our Group’s future plans relate;
. there will be no change in the funding requirement for each of our Group’s future plans described in this [REDACTED] from the amount as estimated by our Directors;

– 210 –

FUTURE PLANS AND [REDACTED]

. there will be no material changes in existing laws and regulations, or other governmental policies relating to our Group, or in the political, economic or market conditions in which our Group operates;
. there will be no material changes in the bases or rates of taxation applicable to the activities of our Group;
. the [REDACTED] will be completed in accordance with and as described in the section headed [REDACTED] in this [REDACTED];
. our Group is able to maintain its customers;
. our Group will be able to retain key staff in the management and the main operational departments;
. our Group will be able to continue its operation in substantially the same manner as our Group has been operating during the Track Record Period and our Group will also be able to carry out its development plans without disruptions adversely affecting its operations or business objectives in any way;
. there will be no disasters, natural, political or otherwise, which would materially disrupt the businesses or operations of our Group; and
. our Group will not be materially affected by the risk factors as set out under the section headed ‘‘Risk factors’’ in this [REDACTED].

[REDACTED]

– 211 –

UNDERWRITING

UNDERWRITER

[REDACTED]

[.]

UNDERWRITING ARRANGEMENTS

[REDACTED]

– 212 –

UNDERWRITING

[REDACTED]

– 213 –

UNDERWRITING

[REDACTED]

– 214 –

UNDERWRITING

[REDACTED]

UNDERTAKINGS PURSUANT TO [REDACTED]

[REDACTED]

– 215 –

UNDERWRITING

[REDACTED]

– 216 –

UNDERWRITING

[REDACTED]

COMMISSION AND EXPENSES

[REDACTED]

– 217 –

UNDERWRITING

SPONSOR’S, LEAD MANAGER AND [REDACTED]’S INTERESTS IN OUR COMPANY

The Sponsor will receive a sponsorship fee. The Lead Manager (for itself and on behalf of the [REDACTED]) will receive an underwriting commission. Particulars of these underwriting commission and expenses are set forth under the sub-paragraph headed ‘‘Commission and expenses’’ of this section.

Our Company will appoint the Sponsor as its compliance adviser pursuant to Rule 6A.19 of the [REDACTED] for the period commencing on the [REDACTED] and ending on the date on which our Company complies with Rule 18.03 of the [REDACTED] in respect of its financial results for the second full financial year commencing after the [REDACTED], or until the compliance adviser agreement is otherwise terminated in accordance with its terms and conditions.

Save for the obligations and the interests under the [REDACTED] as disclosed above, none of the Sponsor, the Lead Manager nor the [REDACTED] has any shareholding in any member of our Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group.

Following the completion of the [REDACTED], the [REDACTED] and its affiliated companies may hold a certain portion of the Shares as a result of fulfilling its obligations under the [REDACTED].

STAMP TAXES

Buyers of [REDACTED] Shares sold by the [REDACTED] may be required to pay stamp taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the [REDACTED].

INDEMNITY

Our Company and the Controlling Shareholders [have agreed] to severally indemnify the [REDACTED] against certain losses which they may suffer, including losses arising from their performance of their obligations under the [REDACTED] and any breach by us or the Controlling Shareholders of the [REDACTED] as the case may be.

SPONSOR’S INDEPENDENCE

The Sponsor satisfies the independence criteria applicable to sponsors as set out in Rule 6A.07 of the [REDACTED].

– 218 –

STRUCTURE AND CONDITIONS OF THE [REDACTED]

[REDACTED]

– 219 –

STRUCTURE AND CONDITIONS OF THE [REDACTED]

[REDACTED]

– 220 –

STRUCTURE AND CONDITIONS OF THE [REDACTED]

[REDACTED]

– 221 –

STRUCTURE AND CONDITIONS OF THE [REDACTED]

[REDACTED]

– 222 –

APPENDIX I

ACCOUNTANTS’ REPORT

==> picture [193 x 49] intentionally omitted <==

有限公司

31st Floor Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong [REDACTED]

The Directors Odella Leather Holdings Limited Halcyon Capital Limited

Dear Sirs,

We report on the financial information of Odella Leather Holdings Limited (the ‘‘Company’’) and its subsidiaries (together, the ‘‘Group’’), which comprises the consolidated statement of financial position as at 30 June 2013 and 2014 and the consolidated statement of profit or loss, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for each of the years ended 30 June 2013 and 2014 (the ‘‘Relevant Years’’), and a summary of significant accounting policies and other explanatory information (the ‘‘Financial Information’’). This Financial Information has been prepared by the directors of the Company and is set out in Sections I to III below for inclusion in Appendix I to the [REDACTED] of the Company dated [REDACTED] 2014 (the ‘‘[REDACTED]’’) in connection with [REDACTED].

The Company was incorporated in the Cayman Islands on 3 September 2014 as an exempted company with limited liability. Pursuant to a group reorganisation as described in note 1 of Section II headed ‘‘Reorganisation’’ below, which was completed on [.] 2014, the Company became the holding company of the subsidiaries now comprising the Group (the ‘‘Reorganisation’’).

As at the date of this report, the Company has direct and indirect interests in the subsidiaries as set out in note 1 of Section II below. All of these companies are private companies or, if incorporated or established outside Hong Kong, have substantially the same characteristics as a Hong Kong incorporated private company.

No audited financial statements have been prepared by the Company as it is newly incorporated and has not involved in any significant business transactions since its date of incorporation, other than the Reorganisation. The audited financial statements of the other companies now comprising the Group as at the date of this report for which there are statutory audit requirements have been prepared in accordance with the relevant accounting principles generally accepted in their place of incorporation. The details of the statutory auditors of these companies are set out in note 1 of Section II.

– I-1 –

APPENDIX I

ACCOUNTANTS’ REPORT

The directors of the Company have prepared the consolidated financial statements of the Company and its subsidiaries now comprising the Group for the Relevant Years, in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’), which include all individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’) (the ‘‘Underlying Financial Statements’’). The directors of the Company are responsible for the preparation of the Underlying Financial Statements that gives a true and fair view in accordance with HKFRSs. We have audited the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

The Financial Information has been prepared based on the Underlying Financial Statements, with no adjustment made thereon.

Directors’ responsibility for the Financial Information

The directors of the Company are responsible for the preparation of the Financial Information that give a true and fair view in accordance with HKFRSs, and for such internal control as the directors determine is necessary to enable the preparation of Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Financial Information and to report our opinion to you. We carried out our procedures in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ issued by the HKICPA.

Opinion in respect of the Financial Information

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Group as at 30 June 2013 and 2014 and of the Group’s results and cash flows for the Relevant Years then ended.

– I-2 –

ACCOUNTANTS’ REPORT

APPENDIX I

I. FINANCIAL INFORMATION OF THE GROUP

The following is the Financial Information of the Group prepared by the directors of the Company for each of the years ended 30 June 2013 and 2014 and as at 30 June 2013 and 2014.

(a) Consolidated Statement of Profit or Loss

Section II Notes Revenue 7 Cost of sales Gross profit Other revenue and other income 8 Selling and distribution expenses Administration expenses Finance costs 10 Profit before tax 9 Income tax expense 11 Profit for the year Profit for the year attributable to owners of the Company Earnings per share attributable to owners of the Company Basic and diluted earnings per share (HK cents) 14	Year ended 30 June 2013 2014 HK$’000 HK$’000 53,607 80,586 (34,700) (53,217) 18,907 27,369 139 110 (1,899) (2,478) (8,398) (9,295) (10) (14) 8,739 15,692 (1,611) (2,796) 7,128 12,896 7,128 12,896 4.75 8.60
	2013 HK$’000 53,607 (34,700) 18,907 139 (1,899) (8,398) (10) 8,739 (1,611) 7,128 7,128 4.75

Details of the dividends are set out in note 13 of Section II below.

– I-3 –

APPENDIX I

ACCOUNTANTS’ REPORT

(b) Consolidated Statement of Profit or Loss and Other Comprehensive Income

Profit for the year Other comprehensive income Items that may be reclassified subsequently to consolidated statement of profit or loss: Exchange differences on translation of foreign operations Other comprehensive (expenses)/income for the year Total comprehensive income for the year Total comprehensive income for the year attributable to owners of the Company	Year ended 30 June	Year ended 30 June
	2013 HK$’000 7,128 (1) (1) 7,127 7,127	2014
		HK$’000 12,896 8
		8
		12,904
		12,904

– I-4 –

APPENDIX I

ACCOUNTANTS’ REPORT

(c) Consolidated Statement of Financial Position

Non-current assets Property, plant and equipment 15 Deferred tax assets 16 Current assets Inventories 17 Trade receivables 18 Deposits, prepayments and other receivables 19 Cash and cash equivalents 20 Current liabilities Trade payables 21 Accruals, other payables and trade deposits received 22 Amounts due to directors 23 Dividend payable 13 Bank borrowing 24 Tax payable Net current assets Total assets less current liabilities Net assets Equity Capital and reserves attributable to owners of the Company Share capital 25 Reserves 26 Total equity	At 30 June	At 30 June
	2013 HK$’000 281 5 286 10,735 10,230 958 5,702 27,625 3,978 4,632 4,978 6,000 2,066 1,811 23,465 4,160 4,446 4,446 200 4,246 4,446	2014
		HK$’000 283 4
		287
		8,236 9,806 431 15,133
		33,606
		1,811 5,918 4,824 — — 3,990
		16,543
		17,063
		17,350
		17,350
		200 17,150
		17,350

– I-5 –

APPENDIX I

ACCOUNTANTS’ REPORT

(d) Consolidated Statement of Changes in Equity

	Attributable to own	Attributable to own	ers of the Company	ers of the Company	Total HK$’000 3,319
Share capital HK$’000 200	Statutory reserve HK$’000 (note 26i) 33	Exchange fluctuation reserve HK$’000 (note 26ii) 172	Retained earnings HK$’000 2,914	Reserves Sub-total HK$’000 3,119
— —	— —	— (1)	7,128 —	7,128 (1)	7,128 (1)
— — — 200	— 3 — 36	(1) — — 171	7,128 (3) (6,000) 4,039	7,127 — (6,000) 4,246	7,127 — (6,000) 4,446
— —	— —	— 8	12,896 —	12,896 8	12,896 8
— — 200	— 12 48	8 — 179	12,896 (12) 16,923	12,904 — 17,150	12,904 — 17,350

– I-6 –

APPENDIX I

ACCOUNTANTS’ REPORT

(e) Consolidated Statement of Cash Flows

Cash flows from operating activities
Profit before tax
Adjustments for:
Interest income
Interest expenses
Depreciation
Gain on disposal of items of property, plant and
equipment
Written off of trade receivables
Inflow from operation before working capital changes
(Increase)/decrease in inventories
(Increase)/decrease in trade receivables
(Increase)/decrease in deposits, prepayments and
other receivables
Decrease in trade payables
Increase in accruals, other payables and
trade deposits received
Cash (used in)/generated from operations
Interest received
Net income tax refund/(paid)
Net cash flows (used in)/generated from operating
activities
Cash flows from investing activities
Purchases of items of property, plant and equipment
Proceed from disposal of item of property, plant and
equipment
Net cash flows used in investing activities

Year ended 30 June
2013
2014
HK$’000
HK$’000
8,739
15,692
(2)
(4)
10
14
115
122
(1)
—
111
—
8,972
15,824
(6,987)
2,497
(5,728)
424
(256)
525
(584)
(2,166)
1,987
1,308
(2,596)
18,412
2
4
29
(615)
(2,565)
17,801
(83)
(124)
2
—
(81)
(124)

2013
HK$’000
8,739
(2)
10
115
(1)
111
8,972
(6,987)
(5,728)
(256)
(584)
1,987
(2,596)
2
29
(2,565)
(83)
2
(81)

– I-7 –

APPENDIX I

ACCOUNTANTS’ REPORT

Cash flows from financing activities
Proceeds from bank borrowings
Repayment of bank borrowings
Increase/(decrease) in amounts due to directors
Dividend paid
Interest paid
Net cash flows generated from/(used in)
financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes, net
Cash and cash equivalents at the end of the year
Cash and cash equivalents as stated in the
consolidated statement of financial position

Year ended 30 June
2013
2014
HK$’000
HK$’000
7,088
2,593
(5,354)
(4,659)
219
(154)
—
(6,000)
(10)
(14)
1,943
(8,234)
(703)
9,443
6,402
5,702
3
(12)
5,702
15,133
5,702
15,133

2013
HK$’000
7,088
(5,354)
219
—
(10)
1,943
(703)
6,402
3
5,702
5,702

– I-8 –

APPENDIX I

ACCOUNTANTS’ REPORT

II. NOTES TO FINANCIAL INFORMATION

1. CORPORATE INFORMATION OF THE GROUP AND REORGANISATION

(a) General information of the Group

The Company was incorporated in the Cayman Islands on 3 September 2014 as an exempted company with limited liability. The address of the Company’s registered office is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The principal place of business of the Company in Hong Kong is Unit 1701, Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon, Hong Kong.

The Company is an investment holding company and its subsidiaries are principally engaged in the manufacturing and sales of leather products.

(b) Reorganisation

The principal business of the Group was previously carried out by Perline Company Limited (‘‘Perline’’), a subsidiary of the Company in Hong Kong. Perline was owned by Ms. Cheung Woon Yiu as to 68%, Ms. Lam Wai Si Grace as to 17% and Mr. Ching Wai Man as to 15%. In preparation for the [REDACTED], the Group underwent a reorganisation (the ‘‘Reorganisation’’) in 2014 as set out below.

(i) Quality Century Limited (‘‘BVI-Cheung’’), Design Vanguard Limited (‘‘BVI-Lam’’) and Olson Global Limited (‘‘BVI-Ching’’) (collectively referred as the ‘‘BVI Inv Vehicles’’) were incorporated in the British Virgin Islands (‘‘BVI’’) on 2 July 2014, 3 July 2014 and 27 May 2014 respectively are solely owned by Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man (the ‘‘Individual Owners’’) respectively.
(ii) On 3 September 2014, the Company was incorporated in the Cayman Islands as an exempted company with limited liability, with an authorised share capital of HK$1,000,000 divided into 100,000,000 shares of HK$0.01 each. On 3 September 2014, one share of HK$0.01 was allotted and issued, nil paid, to Sharon Pierson (an officer of Codan Trust Company (Cayman) Limited, the provider of registered office of the Company), which was transferred to BVI-Cheung on the same date. On 3 September 2014, the Company further allotted and issued 999,999 shares, nil paid, to BVI-Cheung, BVI-Lam and BVIChing.
(iii) On 11 September 2014, Odella International Limited (‘‘Odella BVI’’) was incorporated in BVI with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each. On 11 September 2014, 100 shares in Odella BVI were issued to the Company, and the subscription price of each share was US$1 (i.e. the par value of such share).
(iv) By an agreement (the ‘‘Share Swap Agreement’’) dated [.] 2014 and made between, among others, (i) Odella BVI as purchaser; (ii) the Company (as holding company of Odella BVI); (iii) the Individual Owners as sellers and warrantors; and (iv) the BVI Inv Vehicles as nominees of the respective Individual Owners to hold the consideration shares, Odella BVI agreed to acquire from the Individual Owners the entire issued share capital in Perline. [In consideration of and in exchange for such acquisition, the Company credited as fully paid the 1,000,000 nil-paid shares which were first issued on 3 September 2014, and issued to the BVI Inv Vehicles 9,000,000 new shares (and such new shares were issued to BVI-Cheung,BVI-Lam and BVI-Ching (as nominated by the Individual Owners) in the proportion of 68%, 17% and 15% respectively), all credited as fully paid. On completion, Odella BVI became the sole shareholder of Perline, and the number of issued shares in the Company was increased to 10,000,000.] The shareholding percentage of BVI-Cheung, BVI-Lam and BVI-Ching in the Company remained the same immediately before and immediately after the completion of the Share Swap Agreement.

– I-9 –

APPENDIX I

ACCOUNTANTS’ REPORT

As at the date of this report, the Company had direct and indirect interests in the following subsidiaries:

Name of company	Country/ place of incorporation/ operation	Class of share/ registered capital held	Issued and fully paid share capital/ registered or paid-up capital	Proportion of ownership interest and voting rights held by the Company Directly Indirectly % % 100 — — 100 — 100	Principal activities
				Directly
Odella BVI(a) Perline Company Limited(b) 佛山市南海盛麗皮衣有限公司 (Foshan Nanhai Shengli Leather Garment Co. Ltd.)(c) and (d)	British Virgin Islands Hong Kong PRC	Ordinary Ordinary Registered	USD50,000 HK$200,000 HK$1,500,000	% 100 — —	Investment holding Sales, marketing and development of leather products Manufacture of various leather products, domestic and foreign trading (restricted items being subject to relevant approval)

Notes:

(a) No audited financial statements were issued as it is newly incorporated and not required to issue audited financial statements under the statutory requirements of its place of incorporation.
(b) The statutory financial statements of Perline Company Limited for the year ended 30 June 2013 was prepared in accordance with Hong Kong Financial Reporting Standard for Private Entities issued by Hong Kong Institute of Certified Public Accountants and audited by Elsie Wong & Co., Certified Public Accountants (Practising).
(c) The statutory financial statements of 佛山市南海盛麗皮衣有限公司 (Foshan Nanhai Shengli Leather Garment Co. Ltd.) for each of the years ended 31 December 2012 and 2013 were prepared in accordance with 企業會計制度 (Accounting System for Business Enterprises) applicable to the enterprises in the People’s Republic of China (the ‘‘PRC’’ or the ‘‘Mainland China’’). The statutory financial statements for each of the years ended 31 December 2012 and 2013 were audited by 佛山市卓信會計師事務所有限公司 (Foshan Zhuoxin Certified Public Accountants Co., Limited).
(d) Wholly foreign-owned enterprise.
For identification only

2.1 BASIS OF PRESENTATION

Immediately prior to and after the Reorganisation, the principal business of the Group remained under the control of Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man. The principal business of the Group is conducted through Perline including its subsidiary, 佛山市南海盛麗皮衣有限公司 (Foshan Nanhai Shengli Leather Garment Co. Ltd.). Perline was directly owned by Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man immediately prior to the Reorganisation. The Company has not been involved in any business prior to the Reorganisation. Pursuant to the Reorganisation, the Company became the holding company of the companies now comprising the Group subsequent to the end of the Relevant Years on [. 2014]. The Reorganisation were merely reorganisations of the principal business of the Group with no change in management of such business and the ultimate owners of the business. Accordingly for the purpose of this report, the Financial Information has been prepared by applying the principles of merger accounting as if the Reorganisation had been completed at the beginning of the Relevant Years.

– I-10 –

APPENDIX I

ACCOUNTANTS’ REPORT

The consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the Relevant Years include the results and cash flows of all companies now comprising the Group from the earliest date presented or since the date when the subsidiaries first came under the common control, where this is a shorter period. The consolidated statement of financial position of the Group’s subsidiaries as at 30 June 2013 and 2014 have been prepared to present the assets and liabilities of the subsidiaries using the existing carrying values of the principal business of the Group for all Relevant Years presented. No adjustments are made to reflect fair values, or recognise any new assets or liabilities as a result of the Reorganisation.

All intra-group transactions and balances have been eliminated on consolidation in full.

2.2 BASIS OF PREPARATION

The Financial Information of the Company has been prepared in accordance with HKFRSs which include all individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretation issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’) and accounting principles generally accepted in Hong Kong. All HKFRSs effective for the accounting period commencing from 1 July 2013, together with the relevant transitional provisions, have been early adopted by the Group in the preparation of the Financial Information throughout the Relevant Years. The Financial Information has been prepared under the historical cost convention. The Financial Information is presented in Hong Kong dollars (‘‘HK$’’ or ‘‘HKD’’) and all values are rounded to the nearest thousand (‘‘HK$000’’) except when otherwise indicated.

The preparation of Financial Information in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information, are disclosed in note 6 below.

3. ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

HKAS 16 and HKAS 38 (Amendments)	Clarification of Acceptable Methods of Depreciation and Amortisation4
HKAS27 (Amendments)	Agriculture: Bearer Plants4
HKAS 19 (Amendments)	Defined Benefit Plans: Employee Contributions2
HKAS 16 and HKAS 41 (Amendments)	Equity Method in Separate Financial Statements4
HKAS 32 (Amendments)	Offsetting Financial Assets and Financial Liabilities1
HKAS 36 (Amendments)	Recoverable Amount Disclosures for Non-Financial Assets1
HKAS 39 (Amendments)	Novation of Derivatives and Continuation of Hedge Accounting1
HKFRSs (Amendments)	Annual Improvements to HKFRSs 2010–2012 Cycle3
HKFRSs (Amendments)	Annual Improvements to HKFRSs 2011–2013 Cycle2
HKFRS 9	Financial Instruments7
HKFRS 10, HKFRS 12 and HKAS 27	Investment Entities1
(Amendments)
HKFRS 11 (Amendments)	Accounting for Acquisitions of Interest in Joint Operations4
HKFRS 14	Regulatory Deferral Accounts5
HKFRS 15	Revenue from Contracts with Customers6
HK(IFRIC)-Int 21 (Amendments)	Levies1

1 Effective for annual periods beginning on or after 1 January 2014.
2 Effective for annual periods beginning on or after 1 July 2014.
3 Effective for annual periods beginning on or after 1 July 2014 with limited exceptions.
4 Effective for annual periods beginning on or after 1 January 2016.
5 Effective for first annual HKFRS financial statements beginning on or after 1 January 2016.
6 Effective for annual periods beginning on or after 1 January 2017.
7 Effective for annual periods beginning on or after 1 January 2018.

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APPENDIX I

ACCOUNTANTS’ REPORT

Management is in the process of making an assessment of the impact of these new standards, amendments to existing standards and interpretations on the financial statements of the Group upon the initial application. The adoption of above is not expected to have a material effect on the Group’s operating results or financial position.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the Financial Information are set out below. These policies have been consistently applied to the Relevant Years presented.

4.1 Subsidiaries

4.1.1 Consolidation

This Financial Information includes the financial statements of the Company and its subsidiaries now comprising the Group for the Relevant Years. As explained in note 2.1 of Section II above, the acquisition of subsidiaries under common control has been accounted for using the merger accounting.

The merger method of accounting involves incorporating the financial statement items of the consolidating subsidiaries in which the common control combination occurs as if they had been consolidated from the date when the consolidating subsidiaries first came under the control of the controlling party.

No amount is recognised in respect of goodwill or the excess of the acquirers’ interest in the net fair value of acquirees’ identifiable assets, liabilities and contingent liabilities over the cost of investment at the time of common control combination.

The consolidated statement of profit or loss include the results of each of the consolidating subsidiaries from the earliest date presented or since the date when the consolidating subsidiaries first came under common control, where this is a shorter period, regardless of the date of the common control combination. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group. All significant intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies.

The 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 described in the accounting policy for subsidiaries below. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

– I-12 –

ACCOUNTANTS’ REPORT

APPENDIX I

4.1.2 Investments in subsidiaries

A subsidiary is an entity, directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current liabilities to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual agreement with the other vote holders of the investee;
(b) rights arising from other contractual agreement; and
(c) the Group’s voting rights and potential voting rights.

4.2 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors, Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man (the ‘‘Management’’) that makes strategic decisions.

4.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘‘functional currency’’). These consolidated financial statements are presented in HK$, which is the Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

(c) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rates on the dates the transactions); and

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APPENDIX I

ACCOUNTANTS’ REPORT

(iii) all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, corresponding exchange differences that are recorded in other comprehensive income are recognised in the profit or loss as part of the gains or losses on sale.

4.4 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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

Depreciation on assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Machinery and equipment	10%–20%
Furniture, fixtures and office equipment	20%–50%
Motor vehicles	10%–30%
Leasehold improvements	50% or over the lease term, whichever is shorter

The assets’ depreciation method, residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the profit or loss.

4.5 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of an impairment at each reporting date.

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APPENDIX I

ACCOUNTANTS’ REPORT

4.6 Financial assets and financial liabilities

4.6.1 Financial assets

(i) Classification

The Group classifies its financial assets under the category of loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise trade receivables, deposits and other receivables and cash and cash equivalents in the consolidated statement of financial position.

(ii) Recognition and measurement

Regular way purchases and sales of financial assets are recognised on the trade-date-the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

(iii) Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

– I-15 –

APPENDIX I

ACCOUNTANTS’ REPORT

4.6.2 Financial liabilities

(i) Classification

The Group classifies its financial liabilities under the category of loans and borrowing. The classification depends on the substance of the contractual arrangements and the definitions of a financial liability. Management determines the classification of its financial liabilities at initial recognition.

Loans and borrowing are non-derivative financial liabilities. They are included in current liabilities, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current liabilities. The Group’s loans and borrowing comprise trade payables, accruals and other payables, amounts due to directors and bank borrowing in the consolidated statement of financial position.

(ii) Subsequent measurement

Loans and borrowing

After initial recognition, interest-bearing loans and borrowing are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is recognised in the statement of profit or loss.

(iii) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

(iv) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

4.7 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in firstout method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling costs.

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APPENDIX I

ACCOUNTANTS’ REPORT

4.8 Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

4.9 Cash and cash equivalents

Cash and cash equivalents includes cash on hand and in banks. Restricted bank deposits are excluded from cash and cash equivalents.

4.10 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

4.11 Trade and other payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

4.12 Borrowing

Borrowing is recognised initially at fair value, net of transaction costs incurred. Borrowing is subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit or loss over the period of the borrowing using the effective interest method.

Borrowing is classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

4.13 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

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

– I-17 –

APPENDIX I

ACCOUNTANTS’ REPORT

4.14 Current and deferred income tax

The income tax expense for the year comprises current and deferred income tax.

(a) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(b) Deferred income tax assets

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business consolidation that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

(c) Offsetting

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income tax levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

4.15 Employee benefits

(a) Pension Schemes

The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the ‘‘MPF Scheme’’) in Hong Kong under the Mandatory Provident Fund Schemes Ordinance for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the statement of profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The Group entity in the Mainland China participates in defined contribution retirement benefit plans (including Housing Provident Fund) organised by relevant government authorities for its employees in the Mainland China and contribute to these plans based on certain percentage of the salaries of the employees on a monthly basis, up to a maximum fixed monetary amount, as stipulated by the relevant government authorities. The government authorities undertake to assume the retirement benefit obligations payable to all existing and future retired employees under these plans.

– I-18 –

APPENDIX I

ACCOUNTANTS’ REPORT

The Group has no further obligation for post-employment benefits beyond the contributions made. The Group’s contributions to these plans are charged to the consolidated statement of profit or loss as incurred.

4.16 Provision

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliability.

4.17 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, after allowances for returns. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below.

(a) Sales of goods

Revenue from the sales of goods is recognised when the risk and reward of the goods has been transferred to the customer, which is usually when the Group has delivered the products to the customer, the collectability of the related receivables is reasonably assumed and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.

(b) Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the 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.

4.18 Leases

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of profit or loss on a straight-line basis over the period of the lease.

4.19 Dividend distribution

Dividend distribution to the owners is recognised as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the owners.

– I-19 –

APPENDIX I

ACCOUNTANTS’ REPORT

4.20 Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint ventures of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a); and
(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).

5. FINANCIAL INSTRUMENTS

5.1 Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	At 30 June	At 30 June
	2013 HK$’000 16,132 12,403	2014
		HK$’000 25,248
		9,669

5.2 Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

– I-20 –

APPENDIX I

ACCOUNTANTS’ REPORT

(a) Market risk

(i) Foreign currency risk

The Group is mainly exposed to foreign exchange risk arising from future commercial transactions, and from recognised assets and liabilities. The Group is mainly exposed to foreign exchange risk in respect of exchange fluctuation of HK$ against United States dollars (‘‘USD’’), Renminbi (‘‘RMB’’), Australian dollars (‘‘AUD’’) and Euro (‘‘EUR’’). The Group does not hedge its foreign exchange risk during the Relevant Years.

As HK$ is pegged to USD, it is assumed that there would be no material foreign exchange risk exposure between USD and HK$ and therefore USD is excluded from the analysis below.

For the years ended 30 June 2013 and 2014, if HK$ had reasonably strengthened/weakened by 5% against RMB, AUD and EUR with all other variables held constant, the profit before tax for each of the years then ended would have changed mainly as a result of foreign exchange gains/losses on translation of HK$ denominated monetary assets and liabilities.

Details of the changes are as follows:

Profit before tax increase/(decrease): — HK$ strengthened 5% against RMB — HK$ weakened 5% against RMB — HK$ strengthened 5% against AUD — HK$ weakened 5% against AUD — HK$ strengthened 5% against EUR — HK$ weakened 5% against EUR	Year ended 30 June 2013 2014 HK$’000 HK$’000 138 (32) (138) 32 (3) (3) 3 3 6 (55) (6) 55
	2013 HK$’000 138 (138) (3) 3 6 (6)

(ii) Cash flow and fair value interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates. Except for cash and cash equivalents, the Group has no other significant interest-bearing assets. Management does not anticipate significant impact on interest-bearing assets resulted from the changes in interest rates because the interest rates of cash and cash equivalents are not expected to change significantly.

The Group’s interest-rate risk arises from borrowing. Borrowing obtained at variable rates expose the Group to cash flow interest rate risk. Borrowing obtained at fixed rates expose the Group to fair value interest-rate risk. The Group does not hedge its cash flow and fair value interest rate risk. The interest rates and terms of repayments of borrowing are disclosed in note 24.

– I-21 –

APPENDIX I

ACCOUNTANTS’ REPORT

For variable rate borrowing, details of the changes are as follows:

Profit before tax increase/(decrease): — 50 basis point decrease in interest rate — 50 basis point increase in interest rate	Year ended 30 June	Year ended 30 June
	2013 HK$’000 10 (10)	2014
		HK$’000 — —

(iii) Price risk

Leather is the main raw materials for the Group’s production. They account for a substantial portion of the Group’s costs of sales. The prices of leather is affected by various factors which are beyond the control of the Group, such as changes in government policies, the supply-demand relation and other unexpected events. The fluctuations of the price may have favourable or unfavourable impacts on the Group. The Group monitors the changes in the market price of leather. The Group did not enter into any hedging of its price risk during the Relevant Years.

(b) Credit risk

Credit risk mainly arises from cash and cash equivalents and trade receivables.

The Group has no significant concentrations of credit risk due to the customers’ base being large and unrelated. The carrying amounts of cash and cash equivalents and trade receivables included in the consolidated financial statements represent the Group’s maximum exposure to credit risk in relation to its financial assets. As at 30 June 2013 and 2014, all cash and cash equivalents were deposited into highly reputable and sizable banks without significant credit risk. Majority of the Group’s sales are based on letters of credit and advances before delivery, and the remaining sales are made with credit term. Credit will only be granted to selected customers with long-term relationship and good credit history. The Group performs ongoing credit evaluations of its customers’ financial conditions and has policies in place to ensure that trade receivables are followed up on a timely basis.

(c) Liquidity risk

Cash flow is managed at group level by the Management. The Management monitors the Group’s liquidity requirements to ensure that it has sufficient cash to meet operational needs at all times and does not breach borrowing limits or covenants on any of its borrowing facilities. The Management usually takes into consideration the Group’s debt financing plans, covenant compliance and compliance with internal balance sheet ratio targets.

– I-22 –

APPENDIX I

ACCOUNTANTS’ REPORT

The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of reporting period to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows.

		At 30 June 2013	At 30 June 2013
Effective interest rate	On demand or within 1 year	Within 2–5 years	Over 5 years	Total undiscounted cash flows	Total carrying amount
— — — —	HK$’000 3,978 1,381 2,066 4,978	HK$’000 — — — —	HK$’000 — — — —	HK$’000 3,978 1,381 2,066 4,978	HK$’000 3,978 1,381 2,066 4,978
—	12,403	—	—	12,403	12,403

		At 30 June 2014	At 30 June 2014
Effective interest rate	On demand or within 1 year	Within 2–5 years	Over 5 years	Total undiscounted cash flows	Total carrying amount
— — —	HK$’000 1,811 3,034 4,824	HK$’000 — — —	HK$’000 — — —	HK$’000 1,811 3,034 4,824	HK$’000 1,811 3,034 4,824
—	9,669	—	—	9,669	9,669

5.3 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for equity holders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to equity holder, return capital to equity holder or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by total equity. Total debt is calculated as bank borrowing and amounts due to directors.

– I-23 –

APPENDIX I

ACCOUNTANTS’ REPORT

The gearing ratios as at 30 June 2013 and 2014 were as follows:

Total borrowing (notes 23 and 24) Cash and cash equivalents Total debt (a) Total equity (b) Gearing ratio (a)/(b)	At 30 June 2013 2014 HK$’000 HK$’000 7,044 4,824 (5,702) (15,133) 1,342 (10,309) 4,446 17,350 30% N/A
	2013 HK$’000 7,044 (5,702) 1,342 4,446 30%

5.4 Fair value estimation

The carrying amount of the Group’s financial assets including trade receivables, deposits and other receivables and cash and cash equivalents and financial liabilities including trade payables, accruals and other payables, amounts due to directors and bank borrowing and borrowing are assumed to approximate their fair values due to their shortterm maturities or related liabilities being charged at interest rates approximately to that of market. The carrying values less any estimated credit adjustments for financial assets with a maturity of less than one year are a reasonable approximation of their fair values.

6. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Useful lives of property, plant and equipment

The Group’s Management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(b) Impairment of trade and other receivables

The Group’s Management estimates the provision of impairment of trade and other receivables by assessing their recoverability. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible and require the use of estimates. Where the expectation is different from the original estimate, such difference will impact carrying value of trade and other receivables and impairment charge in the period in which such estimate has been changed.

– I-24 –

APPENDIX I

ACCOUNTANTS’ REPORT

(c) Net realisable value of inventories

The Group’s Management estimates the provision of impairment of inventories by assessing their net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale. Provisions are applied to inventories where events or changes in circumstances indicate that the inventory cost may exceed the net realisable value and require the use of estimates. Where the expectation is different from the original estimate, such difference will impact carrying value of inventories and impairment charge in the period in which such estimate has been changed.

(d) Current income tax and deferred income tax

The Group is mainly subject to income tax in Hong Kong and the PRC. Significant judgement is required in determining the provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The 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 income tax and provisions in the year in which such determination is made.

Deferred income tax assets and liabilities are determined using income tax rates that are expected to apply when the related deferred income tax assets are realised or the deferred income tax liabilities are settled. The expected applicable income tax rate is determined based on the enacted tax laws and regulations and the actual situation of the Group. The Management will revise the expectation where the final income tax rate is different from the original expectation.

7. REVENUE AND SEGMENT INFORMATION

Revenue, which is also the Group’s turnover, represents the aggregate of the net invoiced value of leather products sold, after allowances for returns.

Sales of leather products	Year ended 30 June	Year ended 30 June
	2013 HK$’000 53,607	2014
		HK$’000 80,586

The chief operating decision-maker has been identified as the Management. The Management reviews the Group’s internal reporting in order to assess performance and allocate resources. The Group focuses primarily on manufacturing and sales of leather products during the Relevant Years. Information reported to the chief operating decision-marker, for the purpose of resources allocation and performance assessment, focuses on the operating results of the Group as a whole as the Group’s resources are integrated and no discrete operating segment financial information is available. Accordingly, no operating segment information is presented.

– I-25 –

APPENDIX I

ACCOUNTANTS’ REPORT

Information about major customers

Revenues from customer contributing over 10% of the total revenue of the Group during the Relevant Years are as follows:

Customer A Customer B Customer C	Year ended 30 June	Year ended 30 June
	2013 HK$’000 9,791	2014
		HK$’000 18,267 13,099 10,289

The corresponding revenue did not contribute over 10% of the total sales of the Group for the respective year.

Geographical information

The following table sets out information about geographical location of (i) the Group’s revenue from external customers and (ii) the Group’s non-current assets. The geographical location of customers is based on the location to which the goods are delivered. The geographical location of non-current assets is based on the physical location of the assets excluding deferred tax assets.

Revenue from external customers

United States of America Australia Hong Kong Netherlands Malaysia Japan Others (Note)	Year ended 30 June	Year ended 30 June
	2013 HK$’000 17,282 14,333 15,378 2,204 2,224 1,213 973 53,607	2014
		HK$’000 36,670 14,713 13,424 6,477 4,420 2,627 2,255
		80,586

Note: Other countries included the PRC, Canada, Switzerland, United Kingdom, Italy, South Korea, Mexico, Germany, Singapore, South Africa, New Zealand and Cambodia.

Non-current assets

Hong Kong PRC	At 30 June	At 30 June
	2013 HK$’000 38 243 281	2014
		HK$’000 54 229
		283

– I-26 –

APPENDIX I

ACCOUNTANTS’ REPORT

8. OTHER REVENUE AND OTHER INCOME

Interest income Gain on disposal of property, plant and equipment Sales of scrap materials Exchange gain Sundry income	Year ended 30 June	Year ended 30 June
	2013 HK$’000 2 1 8 40 88 139	2014
		HK$’000 4 — 13 — 93
		110

9. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

Auditors’ remuneration Cost of inventories sold Depreciation of property, plant and equipment Exchange (gain)/losses, net Written off of trade receivables Operating lease rental in respect of premises Staff costs (including directors’ remuneration): — Salaries and bonus — Pension scheme contributions	Year ended 30 June	Year ended 30 June	Year ended 30 June
	2013 HK$’000 30 34,700 115 (40) 111 813 10,300 1,306 11,606	2014
		HK$’000 100 53,217 122 34 — 993
		12,372 1,212
		13,584

Included in cost of inventories sold for the years ended 30 June 2013 and 2014 were depreciation charge of approximately HK$30,000 and HK$43,000 and staff costs of approximately HK$5,173,000 and HK$6,679,000, respectively.

Cost of inventories sold for the years ended 30 June 2013 and 2014 include cost of inventories recognised as expense of approximately HK$28,742,000 and HK$45,597,000 respectively.

10. FINANCE COSTS

Interests on: Bank borrowing wholly repayable within a year	Year ended 30 June	Year ended 30 June
	2013 HK$’000 10	2014
		HK$’000 14

– I-27 –

APPENDIX I

ACCOUNTANTS’ REPORT

11. INCOME TAX EXPENSE

The income tax expense is as follow:

Current income tax: Hong Kong Profits Tax The PRC Enterprise Income Tax Deferred income tax (note 16) Total income tax expense for the year	Year ended 30 June	Year ended 30 June
	2013 HK$’000 1,604 7 1,611 — 1,611	2014
		HK$’000 2,734 61
		2,795 1
		2,796

Hong Kong Profits Tax is calculated at 16.5% on the estimated assessable profit for the Relevant Years.

The PRC Enterprise Income Tax (the ‘‘EIT’’) is provided on the assessable income of entity of the Group incorporated in the PRC. Pursuant to the PRC Corporate Income Tax Law, the EIT is unified at 25% for all types of entities effective from 1 January 2008.

The income tax expense for the Relevant Years can be reconciled to the profit before tax per the consolidated statement of profit or loss as follows:

Profit before tax Tax calculated at the rates applicable to profit in the respective tax jurisdictions Tax effect of: Expenses not deductible for tax purpose Income not taxable for tax purpose Tax losses utilised from previous periods Reversal of previously recognised temporary difference Income tax expense for the year	Year ended 30 June	Year ended 30 June
	2013 HK$’000 8,739 1,353 275 — (17) — 1,611	2014
		HK$’000 15,692
		2,515 360 (80) — 1
		2,796

– I-28 –

APPENDIX I

ACCOUNTANTS’ REPORT

12. DIRECTORS’, CHIEF EXECUTIVE OFFICER’S AND EMPLOYEES’ REMUNERATION

Directors’ remuneration for each of the Relevant Years, disclosed pursuant to the [REDACTED] is as follows:

Name of directors Year ended 30 June 2013 Executive directors Ms. Cheung Woon Yiu Ms. Lam Wai Si Grace Mr. Ching Wai Man Non-executive director Ms. Ng Lai Hung Name of directors Year ended 30 June 2014 Executive directors Ms. Cheung Woon Yiu Ms. Lam Wai Si Grace Mr. Ching Wai Man Non-executive director Ms. Ng Lai Hung	Director fee HK$’000 — — — — — Director fee HK$’000 — — — — —	Salary HK$’000 — 520 520 — 1,040 Salary HK$’000 500 545 545 — 1,590	Other benefits HK$’000 — — — — — Other benefits HK$’000 — — — — —	Bonus HK$’000 — 99 99 — 198 Bonus HK$’000 — 134 134 — 268	Pension scheme contributions HK$’000 — 15 15 — 30 Pension scheme contributions HK$’000 2 15 15 — 32	Total
						HK$’000 — 634 634 —
						1,268
						Total
						HK$’000 502 694 694 —
						1,890

The Company did not have any independent non-executive director at any time during the Relevant Years.

Ms. Lam Wai Si Grace is also the Chief Executive Officer of the Company and her emoluments disclosed above include those for services rendered by her as the Chief Executive Officer for the Relevant Years.

There were no arrangements under which a director waived or agreed to waive any remuneration during the Relevant

Years.

During the Relevant Years, no remuneration was paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office.

– I-29 –

APPENDIX I

ACCOUNTANTS’ REPORT

Five highest paid employees

The five highest paid employees of the Group for the years ended 30 June 2013 and 2014 were included 2 and 3 directors respectively, details of whose remuneration are disclosed above. The remuneration of the remaining employees for the years ended 30 June 2013 and 2014 are 3 and 2 respectively and employees disclosed were as follows:

Salaries Bonus Pension scheme contributions	Year ended 30 June	Year ended 30 June
	2013 HK$’000 780 146 38 964	2014
		HK$’000 627 152 29
		808

The remuneration fell within the following band:

Nil – HK$500,000	Year ended 30 June	Year ended 30 June
	2013 Number of employees 3	2014
		Number of employees 2

During the Relevant Years, no remuneration was paid by the Group to any of the five highest paid employees as an inducement to join or upon joining the Group or as compensation for loss of office.

13. DIVIDENDS

The dividends declared by Perline to its then shareholders for the Relevant Years are as follows:

Interim dividend of HK$30 per share	Year ended 30 June	Year ended 30 June
	2013 HK$’000 6,000	2014
		HK$’000 —

Subsequent to the year ended 30 June 2014, in October 2014, dividend of HK$3,200,000 was approved to be appropriated to the then shareholders of Perline.

14. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

For the purpose of this report, the calculation of the basic earnings per share attributable to owners of the Company was based on (i) the profit attributable to owners of the Company for the Relevant Years and (ii) the weighted average number of [REDACTED] shares (comprising [REDACTED] shares in issue and [REDACTED] shares to be issued under the [REDACTED] as described in Appendix IV ‘‘Statutory and General Information’’ to the [REDACTED]) as if these [REDACTED] shares were outstanding throughout the Relevant Years.

The diluted earnings per share is equal to the basic earnings per share as there were no dilutive potential ordinary shares in issue during the Relevant Years.

– I-30 –

APPENDIX I

ACCOUNTANTS’ REPORT

15. PROPERTY, PLANT AND EQUIPMENT

Cost At 1 July 2012 Additions Disposals Exchange alignments At 30 June 2013 and at 1 July 2013 Additions Exchange alignments At 30 June 2014 Accumulated depreciation At 1 July 2012 Charge for the year Written back on disposals Exchange alignments At 30 June 2013 and at 1 July 2013 Charge for the year Exchange alignments At 30 June 2014 Carrying amounts At 30 June 2013 At 30 June 2014	Motor vehicles HK$’000 238 — — 4 242 — (1) 241 115 36 — 4 155 36 (1) 190 87 51	Furniture, fixtures and office equipment HK$’000 895 23 (5) 7 920 30 (2) 948 817 38 (4) 6 857 33 (2) 888 63 60	Machinery and equipment HK$’000 263 60 — 8 331 67 (2) 396 169 30 — 6 205 43 (2) 246 126 150	Leasehold improvements HK$’000 278 — — 4 282 27 (1) 308 262 11 — 4 277 10 (1) 286 5 22	Total HK$’000 1,674 83 (5) 23 1,775 124 (6) 1,893 1,363 115 (4) 20 1,494 122 (6) 1,610 281 283

16. DEFERRED TAXATION

The following is the major deferred income tax assets/(liabilities) recognised and movement during the Relevant Years.

At 1 July 2012, 30 June 2013 and 1 July 2013 Recognised in the consolidated statement of profit or loss (note 11) At 30 June 2014	Decelerated depreciation allowances HK$’000 23 (1) 22	Accelerated depreciation allowances HK$’000 (18) — (18)	Total HK$’000 5 (1) 4

The above deferred tax assets and liabilities have been offset for presentation purpose in the consolidated statement of financial position.

– I-31 –

APPENDIX I

ACCOUNTANTS’ REPORT

17. INVENTORIES

Raw materials Work in progress Finished goods TRADE RECEIVABLES Trade receivables	At 30 June	At 30 June
	2013 2014 HK$’000 HK$’000 3,042 2,941 7,693 2,977 — 2,318 10,735 8,236 At 30 June	2014
		HK$’000 2,941 2,977 2,318
		8,236
	2013 HK$’000 10,230	2014
		HK$’000 9,806

18. TRADE RECEIVABLES

Majority of the Group’s sales are based on letters of credit and advances before delivery, and the remaining sales are made with credit terms ranged from 10 to 45 days.

The Group’s approach to managing credit risk is disclosed in note 5.2(b).

(a) Aging analysis

The following is an aging analysis of trade receivables of the Group, presented based on the invoice date.

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	At 30 June	At 30 June
	2013 HK$’000 8,746 903 240 341 10,230	2014
		HK$’000 8,329 1,197 70 210
		9,806

(b) Aging analysis of trade receivables which are past due but not impaired

Trade receivables disclosed above include amounts (see below for aging analysis) which are past due at the end of the reporting period for which the Group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.

– I-32 –

APPENDIX I

ACCOUNTANTS’ REPORT

The following is an aging analysis of trade receivables of the Group which are past due but not impaired. These related to a number of independent customers for whom there is no recent history of default.

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	At 30 June	At 30 June
	2013 HK$’000 8,134 688 234 335 9,391	2014
		HK$’000 8,086 425 44 179
		8,734

19. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

Deposits Prepayments Other receivables	At 30 June	At 30 June
	2013 HK$’000 128 758 72 958	2014
		HK$’000 175 122 134
		431

20. CASH AND CASH EQUIVALENTS

Cash at bank and on hand	At 30 June	At 30 June
	2013 HK$’000 5,702	2014
		HK$’000 15,133

Cash and cash equivalents are denominated in the following currencies:

USD HKD RMB AUD EUR	At 30 June	At 30 June
	2013 HK$’000 5,352 152 141 57 — 5,702	2014
		HK$’000 12,061 465 1,438 54 1,115
		15,133

RMB is not a freely convertible currency in the PRC and the remittance of funds out of the PRC is subject to the rules and regulations of foreign exchange control promulgated by the PRC Government. For the Group’s cash and cash equivalents denominated in RMB located in Hong Kong are not subject to the foreign exchange control.

– I-33 –

APPENDIX I

ACCOUNTANTS’ REPORT

Bank balances earn interests at floating rate based on daily bank deposit rates and is placed with creditworthy banks with no recent history of default.

21. TRADE PAYABLES

Trade payables

At 30 June	At 30 June
2013 HK$’000 3,978	2014
	HK$’000 1,811

The following is an aging analysis of the trade payables, presented based on invoice date:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	At 30 June	At 30 June
	2013 HK$’000 1,172 40 16 2,750 3,978	2014
		HK$’000 1,740 35 7 29
		1,811

22. ACCRUALS, OTHER PAYABLES AND TRADE DEPOSITS RECEIVED

Accruals Other payables Trade deposits received	At 30 June	At 30 June
	2013 HK$’000 1,369 12 3,251 4,632	2014
		HK$’000 2,793 241 2,884
		5,918

Trade deposits received are non-interest-bearing.

23. AMOUNTS DUE TO DIRECTORS

At 30 June 2013 and 2014, amounts due to directors are interest-free, unsecured and have no fixed terms of repayment and [the amounts due to directors have been fully settled prior to the [REDACTED].]

24. BANK BORROWING

Trust receipt loan	At 30 June	At 30 June
	2013 HK$’000 2,066	2014
		HK$’000 —

– I-34 –

APPENDIX I

ACCOUNTANTS’ REPORT

At 30 June 2013, the Group had trust receipt loan of approximately HK$2,066,000 that supported by the Special Loan Guarantee Scheme of the Government of Hong Kong Special Administrative Region (‘‘HKSAR’’). The trust receipt loan was not less than 80% guaranteed by the Government of HKSAR and 100% personally guaranteed by an executive director of the Company. The trust receipt loan was interest bearing at prime rate ranged from 1% to 3.25% per annum for the year ended 30 June 2013 and repayable within 90 days from the first day of trust receipt loan utilised.

At 30 June 2014, the Group had trust receipt loans of approximately HK$ Nil that supported by the Special Loan Guarantee Scheme of the Government of HKSAR. The trust receipt loan was not less than 80% guaranteed by the government of HKSAR and 100% personally guaranteed by an executive director of the Company. The trust receipt loan was interest bearing at prime rate ranged from 0.4% to 3.25% per annum for the year ended 30 June 2014 and repayable within 90 days from the first day of trust receipt loan utilised. The trust receipt loan was fully settled during the year ended 30 June 2014.

[The aforesaid 100% personal guarantee by an executive director of the Company had been released prior to the [REDACTED].]

25. SHARE CAPITAL

For the purpose of the preparation of the consolidated statement of financial position, the balance of share capital as at 30 June 2013 and 2014 represents the issued share capital of subsidiary comprising the Group prior to the Reorganisation.

26. RESERVES

Group

The amounts of the Group’s reserves and the movements therein for each of the Relevant Years are presented in the consolidated statement of changes in equity of the Financial Information.

(i) Statutory reserve

Pursuant to the relevant laws and regulations for business enterprises in the PRC, a portion of the profits of the entities which are registered in the PRC has been transferred to the statutory reserve which is restricted as to use. When the balance of such reserve reaches 50% of the capital of that entity, any further appropriation is optional. The statutory reserve can be utilised, upon approval of the relevant authority, to offset prior years’ losses or to increase capital. However, the balance of the statutory reserve must be maintained at least 25% of capital after such usage.

(ii) Exchange fluctuation reserve

Exchange fluctuation reserve represents exchange differences relating to the translation of the net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e. Hong Kong dollars) are recognised directly in other comprehensive income and accumulated in the exchange fluctuation reserve. Such exchange differences accumulated in the exchange fluctuation reserve are reclassified to retained earnings on the disposal of the foreign operations.

– I-35 –

APPENDIX I

ACCOUNTANTS’ REPORT

27. LEASE COMMITMENTS

The Group as lessee

Minimum lease payments paid under operating leases during the Relevant Years: Premises	At 30 June	At 30 June
	2013 HK$’000 813	2014
		HK$’000 993

At the end of the reporting period, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of premises which fall due as follows:

Within one year In the second to fifth year inclusive	At 30 June	At 30 June
	2013 HK$’000 1,221 — 1,221	2014
		HK$’000 653 40
		693

Operating lease payments represent rentals payable by the Group for certain of its premises. Leases are negotiated at terms which range from 1 to 5 years. The Group does not have an option to purchase the leased premises at the expiry of the lease period.

28. CONTINGENT LIABILITIES

The Group had no significant contingent liabilities at the end of each of the Relevant Years.

29. MATERIAL RELATED PARTY TRANSACTIONS

Save as disclosed elsewhere in the consolidated financial statements, the Group entered into the following transactions with related parties on arm’s length basis:

(a) The remuneration of directors and other member of key management during the Relevant Years was disclosed as follows: — Salary and Bonus — Pension scheme contributions	Year ended 30 June	Year ended 30 June
	2013 HK$’000 1,238 30	2014
		HK$’000 1,858 32

(b) Details of the balances with related parties for the Relevant Years are set out in note 23 to Section II.
(c) Details of the banking facility which was 100% personally guaranteed by a director of the Company for the Relevant Years are set out in note 24 to Section II.

– I-36 –

APPENDIX I

ACCOUNTANTS’ REPORT

30. EVENTS AFTER THE REPORTING PERIOD

Save as disclosed in note 13 in the consolidated financial statements, the following significant events took place subsequent to 30 June 2014:

(a) On [.], the Reorganisation set out in note 1 of Section II headed ‘‘Reorganisation’’ completed.
(b) The Company adopted a share option scheme on [.], a summary of the terms and conditions of which are set out in the paragraph headed ‘‘Share Option Scheme’’ in Appendix IV ‘‘Statutory and General Information’’ to the [REDACTED].
(c) On [.], the authorised share capital of the Company was increased from HK$[1,000,000] to HK$[20,000,000] by the creation of an additional of 1,900,000,000 shares of HK$0.01 each.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of the companies now comprising the Group in respect of any period subsequent to 30 June 2014 and up to the date of this report.

Yours faithfully,

HLB Hodgson Impey Cheng Limited

Certified Public Accountants

Yu Chi Fat

Practising Certificate Number: P05467 Hong Kong

– I-37 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set out in this appendix does not form part of the Accountants’ Report prepared by HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, as set out in Appendix I to this [REDACTED], and is included in this [REDACTED] for information only.

The following unaudited pro forma financial information prepared in accordance with paragraph 7.31 of the [REDACTED] is for illustrative purposes only, and is set out here to provide investors with further information about how the proposed [REDACTED] might have affected the net tangible assets of our Group as if the [REDACTED] had occurred on 30 June 2014. Although reasonable care has been exercised in preparing the said information, prospective investors who read the information should bear in mind that these figures are inherently subject to adjustments and may not give a complete picture of our Group’s financial results and positions of the financial periods concerns.

A. UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The unaudited pro forma adjusted consolidated net tangible assets of the Group has been prepared, on the basis of the notes set forth below, for the purpose of illustrating the effect of the [REDACTED] as if it had taken place on 30 June 2014. It has been prepared for illustrative purpose only and, because of its hypothetical nature, may not give a true picture of the financial position of the Group after the [REDACTED] or at any future dates.

Based on the [REDACTED] Based on [REDACTED]	Audited consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 June 2014 HK$’000 (Note 1) [REDACTED] [REDACTED]	Add: Estimated [REDACTED] HK$’000 (Note 2) [REDACTED] [REDACTED]	Unaudited pro forma adjusted net tangible assets HK$’000 [REDACTED] [REDACTED]	Unaudited pro forma adjusted net tangible assets per Share
				HK$ (Note 3) [REDACTED]
				[REDACTED]

Notes:

(1) The audited consolidated net tangible assets of the Group attributable to owners of the Company as at 30 June 2014 is extracted from the Accountants’ Report set out in Appendix I to this [REDACTED], which is based on the audited consolidated net assets attributable to owners of the Company as at 30 June 2014 of approximately HK$17,350,000 with an adjustment for the deferred tax assets of approximately HK$4,000.

– II-1 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

(2) The estimated [REDACTED] from the [REDACTED] are based on the minimum and maximum [REDACTED] of HK$[REDACTED] and HK$[REDACTED] per Share respectively, after deduction of relevant estimated [REDACTED] and other related fees and expenses but without taking into account any Shares which may fall to be allotted and issued upon exercise of the [REDACTED].
(3) The unaudited pro forma adjusted net tangible assets per Share are determined after the adjustments as described in Notes 1 and 2 above and on the basis that [REDACTED] Shares are issued and outstanding as set out in the section headed ‘‘Share Capital’’ in this [REDACTED], but takes no account of any Shares which may fall to be allotted and issued upon exercise of the [REDACTED].
(4) The unaudited pro forma financial information presented above does not take account of any trading or other transactions subsequent to the date of the financial statements included in the unaudited pro forma financial information (i.e. 30 June 2014). In particular, in October 2014, dividend of HK$3,200,000 was approved to be appropriated to the then shareholders of Perline Company Limited (which is now an indirect wholly-owned subsidiary of the Company). The unaudited pro forma adjusted net tangible assets had not taken into account of the above transaction.

– II-2 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

– II-3 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

– II-4 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

[REDACTED]

– II-5 –

APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Set out below is a summary of certain provisions of the memorandum and articles of association of the Company and of certain aspects of Cayman Islands company law.

1. MEMORANDUM OF ASSOCIATION

The memorandum of association provides that the Company’s objects are unrestricted. The objects of the Company are set out in Clause 3 of the memorandum of association which is available for inspection at the address and during the period specified in the paragraph headed ‘‘Documents available for inspection’’ specified in appendix V to this [REDACTED]. As an exempted company, the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands.

2. ARTICLES OF ASSOCIATION

The articles of association of the Company (the ‘‘Articles’’) were adopted on [.]. The following is a summary of certain provisions of the Articles.

(a) Directors

(i) Power to allot and issue shares

Without prejudice to any special rights or restrictions for the time being attaching to any shares or any class of shares, any share may be issued upon such terms and conditions and with such preferred, deferred or other special rights, or such restrictions, whether as regards dividend, voting, return of capital or otherwise, as the Company may from time to time by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Directors may determine) and any preference shares may be issued on terms that they are liable to be redeemed upon the happening of a specified event or upon a given date and either at the option of the Company or at the option of the holder. The Directors may issue warrants to subscribe for any class of shares or securities of the Company on such terms as they may from time to time determine.

All unissued shares in the Company shall be at the disposal of the Directors, who may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and generally on such terms they shall in their absolute discretion think fit, but so that no shares shall be issued at a discount.

(ii) Power to dispose of the assets of the Company or any subsidiary

There are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries although the Directors may exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or relevant statutes of the Cayman Islands to be exercised or done by the Company in general meeting.

– III-1 –

APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(iii) Compensation or payments for loss of office

Payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by the Company in general meeting.

(iv) Loans and the giving of security for loans to Directors

Where the shares of the Company remain listed on the Stock Exchange or on a stock exchange in such other territory as the Directors may from time to time decide, the Company may not make, without the approval of, or ratification by, the Company in general meeting, any loans to, or provide any guarantee, indemnity or security in respect of any loan to a Director or any of his associates, provided that the Articles do not prohibit the granting of any loan or the provision of any guarantee, indemnity or security (i) to be applied for, or in respect of a liability incurred for any business of the Company, (ii) for the purchase by a Director (or the repayment of a loan for his purchase) of a residence where the amount of the loan, the liability under the guarantee or indemnity or the value of the security does not exceed 80 per cent. of the fair market value of such residence nor 5 per cent. of the consolidated net asset value of the Company as shown in its latest audited accounts; provided that any such loan is on normal commercial terms and is secured by a legal charge over the residence; or, (iii) of any amount to, or in respect of a liability of, a company in which the Company has an equity interest, and the amount of such loan, or the liability assumed by the Company under such guarantee, indemnity or security, does not exceed its proportional interest in such company.

(v) Financial assistance to purchase shares of the Company or its holding company

There are no provisions in the Articles relating to the giving by the Company of financial assistance for the purchase, subscription or other acquisition of shares of the Company or of its holding company. The law on this area is summarised in paragraph 4(b) below.

(vi) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may hold any other office or place of profit with the Company (except that of an auditor) in conjunction with his office of Director for such period and upon such terms as the Directors may determine, and may be paid such extra remuneration therefor (whether by way of salary, commission, participation in profits or otherwise) as the Directors may determine. A Director may be or become a director or other officer of, or be otherwise interested in, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profit or other benefit received by

– III-2 –

APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

him as a director or officer of or from his interest in such other company. The Directors may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as they think fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company. A Director shall not vote or be counted in the quorum on any resolution of the Directors concerning his own appointment or the appointment of any of his close associates as the holder of any office or place of profit with the Company or any other company in which the Company is interested (including the arrangement or variation of the terms thereof, or the termination thereof).

Subject to the provisions of the Articles, no Director or proposed or intended Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor will any contract with regard thereto or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. If to the knowledge of a Director, he or any of his close associates, is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company, he must declare the nature of his or, as the case may be, his close associate(s)’ interest at the meeting of the Directors at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest or that of his close associates then exists, or in any other case at the first meeting of the Directors after he knows that he or his close associate(s) is or has become so interested.

Save as otherwise provided by the Articles, a Director may not vote (nor be counted in the quorum for the voting) on any resolution of the Directors approving any contract or arrangement in which he or any of his close associate(s) (as defined in the Articles) is materially interested, and if he does so his vote will not be counted, but this prohibition will not apply to any of the following matters, namely:

(i) any contract or arrangement for the giving to such Director or his close associate(s) any security or indemnity in respect of money lent by him or any of his close associate(s) or obligations incurred or undertaken by him or any of his close associate(s) at the request of or for the benefit of the Company or any of its subsidiaries;

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(ii) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his close associate(s) has himself/ themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;
(iii) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;
(iv) any contract or arrangement in which the Director or his close associate(s) is/ are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company; or
(v) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death or disability benefits scheme or other arrangement which relates both to Directors or his close associate(s) and to employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his close associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(vii) Remuneration

The Directors shall be entitled to receive by way of ordinary remuneration for their services such sum as is from time to time determined by the Company in general meeting, such sum (unless otherwise directed by the resolution by which it is voted) to be divided amongst the Directors in such proportions and in such manner as they may agree, or failing agreement, equally, except that in such event any Director holding office for less than the whole of the relevant period in respect of which the remuneration is paid shall only rank in such division in proportion to the time during such period for which he has held office. The foregoing provisions shall not apply to a Director who holds any salaried employment or office in the Company except in the case of sums paid in respect of Directors’ fees. The Directors shall also be entitled to be repaid all travelling, hotel and other expenses reasonably incurred by them respectively in or about the performance of their duties as Directors, including their expenses of travelling to and from Directors’ meetings, committee meetings or general meetings, or otherwise incurred whilst engaged on the business of the Company or in the discharge of their duties as Directors.

The Directors may grant special remuneration to any Director who performs any special or extra services to or at the request of the Company. Such special remuneration may be made payable to such Director in addition to or in substitution for his ordinary remuneration as a Director, and may be made payable by way of salary, commission or participation in profits or otherwise as may be arranged. Notwithstanding the foregoing the remuneration of the managing director, joint managing director, deputy managing director or an executive Director or a Director appointed to any other office in the management of the Company may be fixed from time to time by the Directors and may be by way of salary, commission or participation in profits or otherwise or by all or any of those modes and with such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the Directors may from time to time decide. Such remuneration is in addition to his ordinary remuneration as a Director.

The Directors also have power to establish and maintain or procure the establishment and maintenance of any contributory or non contributory pension or superannuation funds for the benefit of, or to give or procure the giving of donations, gratuities, pensions, allowances or emoluments to, any persons who are or were at any time in the employment or service of the Company, or of any company which is a subsidiary of the Company, or is allied or associated with the Company or with any such subsidiary company, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid, and holding or who have held any salaried

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employment or office in the Company or such other company, and the spouses, widows, widowers, families and dependants of any such persons and may make payments for or towards the insurance of any such persons. Any Director holding any such employment or office is entitled to participate in and retain for his own benefit any such donation, gratuity, pension, allowance or emolument.

(viii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not three or a multiple of three, then the number nearest to but not less than one third) shall retire from office by rotation provided that every Director shall be subject to retirement at least once every three years. The Directors to retire by rotation shall include any Director who wishes to retire and not offer himself for re-election. Any further Directors so to retire shall be those who have been longest in office since their last election but as between persons who became Directors on the same day those to retire shall (unless they otherwise agree between themselves) be determined by lot.

A Director is not required to retire upon reaching any particular age.

The Directors are entitled to attend and speak at all general meetings.

The number of Directors shall not be fewer than one. A Director may be removed by an ordinary resolution of the Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for breach of any contract of service between him and the Company). Subject to the statutes and the provisions of the Articles, the Company may from time to time in general meeting by ordinary resolution elect any person to be a Director either to fill a casual vacancy or as an additional Director. In addition, the Directors may appoint any person to be a Director either to fill a casual vacancy or as an additional Director but so that the number of Directors so appointed shall not exceed the maximum number determined from time to time by the members in general meeting. Any Director so appointed shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re election at the meeting.

The Directors may from time to time entrust to and confer upon the chairman, deputy chairman, managing director, joint managing director, deputy managing director or executive director of the Company all or any of the powers of the Directors that they may think fit, provided that the exercise of all powers by such Director shall be subject to such regulations and restrictions as the Directors may from time to time make and impose. The Directors may delegate any of their powers to committees consisting of such member or members of their body and such other persons as they think fit, and they may from time to time revoke such delegation or revoke the appointment of and discharge any

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such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall in the exercise of the powers so delegated conform to any regulations that may from time to time be imposed upon it by the Directors.

(ix) Borrowing powers

The Directors may from time to time at their discretion exercise all the powers of the Company to raise or borrow or to secure the payment of any sum or sums of money for the purposes of the Company and to mortgage or charge its undertaking, property and uncalled capital or any part thereof. The Directors may raise or secure the payment or repayment of such sum or sums in such manner and upon such terms and conditions in all respects as they think fit and in particular, but subject to the provisions of the Companies Law, by the issue of debentures, debenture stock, bonds or other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Note: The provisions summarised above, in common with the Articles in general, may be varied with the sanction of a special resolution of the Company.

(x) Qualification shares

Directors of the Company are not required under the Articles to hold any qualification shares.

(xi) Indemnity to Directors

The Articles contain provisions that provide indemnity to, among other persons, the Directors from and against all actions, costs, charges, losses, damages and expenses which they or any of them may incur or sustain by reason of any act done, concurred in or omitted in or about the execution of their duty or supposed duty in their respective offices or trusts, except such (if any) as they shall incur or sustain through their own fraud or dishonesty.

(b) Alterations to constitutive documents

The memorandum of association of the Company may be altered by the Company in general meeting. The Articles may also be amended by the Company in general meeting. As more fully described in paragraph 3 below, the Articles provide that, subject to certain exceptions, a special resolution is required to alter the memorandum of association, to approve any alteration to the Articles and to change the name of the Company.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(c) Alterations of capital

The Company may from time to time by ordinary resolution:

(i) increase its share capital;
(ii) consolidate or divide all or any of its share capital into shares of larger or smaller amount than its existing shares; on any consolidation of fully paid shares into shares of larger amount, the Board may settle any difficulty which may arise as it thinks expedient and in particular (but without prejudice to the generality of the foregoing) may, as between the holders of the shares to be consolidated, determine which particular shares are to be consolidated into a consolidated share, and if it shall happen that any person shall become entitled to fractions of a consolidated share or shares, such fractions may be sold by some person appointed by the Directors for that purpose and the person so appointed may transfer the shares so sold to the purchaser thereof and the validity of such transfer shall not be questioned, and so that the net proceeds of such sale (after deduction of the expenses of such sale) may either be distributed among the persons who would otherwise be entitled to a fraction or fractions of a consolidated share or shares rateably in accordance with their rights and interests or may be paid to the Company for the Company’s benefit;
(iii) divide its shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions;
(iv) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled;
(v) sub divide its shares or any of them into shares of smaller amount than is fixed by the memorandum of association, subject nevertheless to the Companies Law, and so that the resolution whereby any shares are sub divided may determine that, as between the holders of the shares resulting from such sub division, one or more of the shares may have any such preferred or other special rights over, or may have such deferred rights or be subject to any such restrictions as compared with the others as the Company has power to attach to unissued or new shares;
(vi) change the currency of denomination of its share capital; and
(vii) make provision for the issue and allotment of shares which do not carry any voting rights.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

The Company may by special resolution reduce its issued share capital, any capital redemption reserve fund or other undistributable reserve in any manner authorised and subject to any conditions prescribed by law. The Company may apply its share premium account in any manner permitted by law.

(d) Variation of rights of existing shares or classes of shares

If at any time the capital is divided into different classes of shares, all or any of the special rights (unless otherwise provided for by the terms of issue of that class) attached to any class may, subject to the provisions of the Companies Law, be varied or abrogated either with the consent in writing of the holders of not less than three fourths in nominal value of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Articles relating to general meetings will mutatis mutandis apply, save as to the provisions regarding the quorum of meetings, as to which see paragraph 2(s) below.

(e) Special resolutions — majority required

For so long as any part of the issued capital of the Company remains listed on the Stock Exchange, a special resolution of the Company must be passed by a majority of not less than three fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their respective duly authorised representatives, or by proxy, at a general meeting of which notice of not less than 21 clear days’ and not less than ten (10) clear business days, specifying the intention to propose the resolution as a special resolution, has been duly given. However, at all times while any part of the issued capital of the Company remains listed on the Stock Exchange, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right, (or, in the case of an annual general meeting, by all members) a resolution may be proposed and passed as a special resolution at a meeting of which notice of not less than 21 clear days’ and not less than ten (10) clear business days has been given.

(f) Voting rights

Subject to any special rights, privileges or restrictions as to voting for the time being attached to any class or classes of shares, at any general meeting on a poll every member present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy shall have one vote for every share of which he is the holder which is fully paid or credited as fully paid (but so that no amount paid or credited as paid on a share in advance of calls or instalments is treated for the foregoing purposes as paid on the share). So long as the shares are listed on the [REDACTED], where any member is, under the [REDACTED] (as defined in the Articles), required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

cast by or on behalf of such member (whether by way of proxy or, as the case may be, corporate representative) in contravention of such requirement or restriction shall not be counted. On a poll, a member entitled to more than one vote need not use all his votes or cast all his votes in the same way.

At any general meeting a resolution put to the vote of the meeting shall be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every member present in person (or being a corporation, is present by a duly authorized representative), or by proxy(ies) shall have one vote provided that where more than one proxy is appointed by a member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands.

Where a shareholder is a clearing house (as defined in the Articles) or a nominee of a clearing house, it may authorise such persons as it thinks fit to act as its representatives at any meeting of the Company or at any meeting of any class of shareholders provided that the authorisation shall specify the number and class of shares in respect of which each such representative is so authorised. Each person so authorised under the provisions of the Articles shall be entitled to exercise the same rights and powers as if such person was the registered holder of the shares of the Company held by the clearing house (or its nominees) in respect of the number and class of shares specified in the relevant authorisation including, where a show of hands is allowed, the right to vote individually on a show of hands.

(g) Requirements for annual general meetings

For so long as any part of the issued capital of the Company remains listed on the Stock Exchange, an annual general meeting must be held once in every year and within not more than 15 months after the last preceding annual general meeting or such longer period as is permissible or not prohibited under the rules of the Stock Exchange on which any securities of the Company are listed with the permission of the Company.

(h) Accounts and audit

The Directors shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipts and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by law or are necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions.

The books of accounts are to be kept at the principal office of the Company or at such other place as the Directors think fit and shall always be open to the inspection of the Directors. No member (not being a Director) or other person has any right to inspect any account or book or document of the Company except as conferred by the Companies Law or ordered by a court of competent jurisdiction or authorised by the Directors or by the Company

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in general meeting. However, an exempted company shall make available at its registered office in electronic form or any other medium, copies of its books of account or parts thereof as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision) of the Cayman Islands.

The Directors shall from time to time cause to be prepared and laid before the Company at its annual general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports and so long as any shares in the Company are listed on the Stock Exchange, the accounts of the Company shall be prepared and audited based on the generally accepted accounting principles of Hong Kong or the International Financial Reporting Standards or such other standards as the Stock Exchange may permit. Every balance sheet of the Company shall be signed on behalf of the Directors by two Directors and a copy of every balance sheet (including every document required by law to be comprised therein or attached or annexed thereto) and profit and loss account which is to be laid before the Company at its annual general meeting, together with a copy of the Directors’ report and a copy of the auditors’ report, shall not less than 21 days before the date of the meeting, be delivered or sent by post to the registered address of every member of, and every holder of debentures of, the Company and every other person entitled to receive notices of general meetings of the Company under the Companies Law or of the Articles. Subject to due compliance with the Companies Law and the rules of the Stock Exchange, and to obtaining all necessary consents, if any, required thereunder and such consents being in full force and effect, such requirements shall be deemed satisfied in relation to any person by sending to the person in any manner not prohibited by the Companies Law and instead of such copies, a summary financial statement derived from the Company’s annual financial statements and the directors’ report thereon, which shall be in the form and containing the information required by applicable laws and regulation, provided that any person who is otherwise entitled to the annual financial statements of the Company and the directors’ report thereon may, if he so requires by notice in writing served on the Company, demand that the Company sends to him, in addition to a summary financial statement, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon. If all or any of the shares or debentures of the Company are for the time being (with the consent of the Company) listed or dealt in on any stock exchange, there shall be forwarded to such stock exchange such number of copies of such documents as may for the time being be required under its regulations or practice.

Auditors shall be appointed and their duties regulated in accordance with the Articles. Save as otherwise provided by such provisions the remuneration of the auditors shall be fixed by or on the authority of the Company at each annual general meeting, but in respect of any particular year, the Company in general meeting may delegate the fixing of such remuneration to the Directors.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(i) Notices of meetings and business to be conducted thereat

For so long as any part of the issued capital of the Company remains listed on the Stock Exchange, an annual general meeting shall be called by notice of not less than twenty-one (21) clear days and not less than twenty (20) clear business days and any extraordinary general meeting at which the passing of a special resolution is to be considered shall be called by notice of not less than twenty one (21) clear days and not less than ten (10) clear business days. All other extraordinary general meetings may be called by notice of not less than fourteen (14) clear days and not less than ten (10) clear business days. The notice shall specify the place, the day and the hour of meeting and particulars of resolutions to be considered at the meeting and, in case of special business, the general nature of that business.

(j) Transfer of shares

All transfers of shares must be effected by transfer in writing in the usual or common form or so long as any shares in the Company are listed on the Stock Exchange, such standard form prescribed by the Stock Exchange or in any other form acceptable to the Board and may be under hand only or, if the transferor or transferee is a clearing house or its nominee(s), by hand, by machine imprinted signature or by such other means of execution as the Directors may approve from time to time; and an instrument of transfer must be executed by or on behalf of the transferor and by or on behalf of the transferee and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof, provided that the Directors may in their absolute discretion dispense with the requirement for the production of a transfer in writing before registering a transfer of a share, and may accept mechanically executed transfers in any case.

The Directors may, in their absolute discretion, at any time and from time to time transfer or agree to transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

Unless the Directors otherwise agree, no shares on the principal register shall be transferred to any branch register nor shall shares on any branch register be transferred to the principal register or any other register. All transfers and other documents of title must be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the transfer office for that register.

The Directors may in their absolute discretion and without assigning any reason therefor, refuse to register any transfer of any shares (not being fully paid shares) to a person of whom they do not approve and they may refuse to register the transfer of any shares (not being fully paid shares) on which the Company has a lien. The Directors may also refuse to register a transfer of shares (whether fully paid or not) in favour of more than four persons jointly or any share issued under any share option scheme for employees upon which a restriction on transfer imposed thereby shall subsist, or where the transfer is to an infant or a person of

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

unsound mind or under other legal disability. If the Directors refuse to register a transfer, they must within two months after the date on which the transfer was lodged with the Company send to the transferor and transferee notice of the refusal and (if the shares concerned are fully paid shares) the reasons(s) for such refusal.

The Directors may, if applicable, decline to recognise an instrument of transfer unless the instrument of transfer is properly stamped, is in respect of only one class of share and is lodged at the relevant registration or transfer office accompanied by the relevant share certificate(s) and such other evidence as they may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may, on giving notice by advertisement in one English and one Chinese newspaper circulating in Hong Kong, be suspended at such times and for such periods as the Directors may from time to time determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole 30 days in any year.

(k) Power for the Company to purchase its own shares

The Articles provide that the power of the Company to purchase or otherwise acquire its shares is exercisable by the Directors upon such terms and conditions as they think fit subject to the conditions prescribed by the Companies Law.

(l) Power of any subsidiary to own securities in the Company

There are no provisions in the Articles relating to ownership of securities in the Company by a subsidiary.

(m) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency but no dividend may exceed the amount recommended by the Directors. The Company may also make a distribution out of share premium account subject to the provisions of the Companies Law.

Unless and to the extent that the rights attached to any shares or the terms of issue thereof otherwise provide, all dividends will be apportioned and paid pro rata according to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid. No amount paid on a share in advance of calls will for this purpose be treated as paid on the shares. The Directors may retain any dividends or other moneys payable on or in respect of a share upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

which the lien exists. The Directors may deduct from any dividend or bonus payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise.

Whenever the Directors or the Company in general meeting have resolved that a dividend be paid or declared on the share capital of the Company, the Directors may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid, provided that the members entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid in lieu of the whole or such part of the dividend as the Directors may think fit.

The Company may also upon the recommendation of the Directors by an ordinary resolution resolve in respect of any particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid without offering any right to members to elect to receive such dividend in cash in lieu of such allotment.

Whenever the Directors or the Company in general meeting have resolved that a dividend be paid or declared the Directors may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends, bonuses or other distributions or the proceeds of the realisation of any of the foregoing unclaimed for one year after having been declared may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends, bonuses or other distributions or proceeds as aforesaid unclaimed for six years after having been declared may be forfeited by the Directors and, upon such forfeiture, shall revert to the Company and, in the case where any of the same are securities in the Company, may be re-allotted or re-issued for such consideration as the Directors think fit.

(n) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company or a meeting of the holders of any class of shares in the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him to vote on his behalf at a general meeting of the Company or at a class meeting. At any general meeting, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy. Proxies need not be members of the Company.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

A proxy shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise as if it were an individual member.

(o) Corporate representatives

A corporate member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint any person or persons as its representative to attend and vote on its behalf. A corporate member represented by its representative is deemed to be present in person at the relevant meeting and its representative may vote on a poll on any resolution put at such meeting.

(p) Calls on shares and forfeiture of shares

The Directors may from time to time make such calls as it may think fit upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times. A call may be made payable either in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20 per cent. per annum as the Directors shall fix from the day appointed for the payment thereof to the time of actual payment, but the Directors may waive payment of such interest wholly or in part. The Directors may, if they think fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced the Company may pay interest at such rate (if any) not exceeding 20 per cent. per annum as the Directors may decide.

If a member fails to pay any call or instalment of a call on the day appointed for payment thereof, the Directors may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment. The notice will name a further day (not earlier than the expiration of fourteen days from the date of the notice) on or before which the payment required by the notice is to be made, and it will also name the place where payment is to be made. The notice shall also state that, in the event of non payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all moneys which, at the date of forfeiture, were payable by him to the Company in respect of the shares together with (if the Directors shall in their discretion so require) interest thereon from the date of forfeiture until payment at such rate not exceeding 20 per cent. per annum as the Board may prescribe.

(q) Inspection of register of members

For so long as any part of the share capital is listed on the Stock Exchange, any member may inspect the principal or branch register of the Company maintained in Hong Kong without charge and require the provision to him of copies or extracts thereof in all respect as if the Company were incorporated under and is subject to the Companies Ordinance (Cap. 622) of the laws of Hong Kong.

(r) Inspection of register of Directors

There are no provisions in the Articles relating to the inspection of the register of Directors and Officers of the Company, since the register is not open to inspection (as to which see paragraph 4(k) below).

(s) Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be two members present in person and entitled to vote (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting convened to sanction the modification of class rights, the necessary quorum shall not be less than two persons holding or representing by proxy one third in nominal value of the issued shares of that class and, where such meeting is adjourned for want of quorum, the quorum for the adjourned meeting shall be any two members present in person and entitled to vote or by proxy (whatever the number of shares held by them).

(t) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Articles relating to rights of minority members in relation to fraud or oppression. However, certain remedies are available to members of the Company under Cayman Islands company law as summarised in paragraph 4(e) below.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(u) Procedures on liquidation

A resolution for a court or voluntary winding up of the Company must be passed by way of a special resolution.

If the Company shall be wound up, the surplus assets remaining after payment to all creditors are to be divided among the members in proportion to the capital paid up on the shares held by them respectively, and if such surplus assets shall be insufficient to repay the whole of the paid up capital, they are to be distributed so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on the shares held by them respectively, all subject to the rights of any shares issued on special terms and conditions.

If the Company shall be wound up (whether the liquidation is voluntary or by the court), the liquidator may, with the sanction of a special resolution, divide among the members in specie or kind the whole or any part of the assets of the Company and whether the assets consist of property of one kind or properties of different kinds and the liquidator may, for such purposes, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division is to be carried out as between the members or different classes of members and the members within each class. The liquidator may, with the like sanction, vest any one or more class or classes of property and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like sanction, shall think fit, but so that no member shall be compelled to accept any shares or other assets upon which there is a liability.

(v) Untraceable members

The Company may sell the shares of any member if: (i) dividends or other distributions have been declared by the Company on at least three occasions during a period of 12 years and these dividends or distributions have been unclaimed on such shares; (ii) the Company has published an advertisement of its intention to sell such shares in English and in Chinese in one leading English and (unless unavailable) one leading Chinese newspaper circulating in the territory of the stock exchange on which the ordinary share capital of the Company is listed and a period of three months has elapsed since the date of the first publication of such notice; (iii) the Company has not at any time during the said periods of 12 years and three months received any indication of the existence of the member who is the holder of such shares or of a person entitled to such shares by death, bankruptcy or operations of law; and (iv) the Company has notified the stock exchange on which the ordinary share capital of the Company is listed of its intention to sell such shares. The net proceeds of any such sale will belong to the Company and upon the receipt of such net proceeds by the Company, the Company will become indebted to the former holder of such shares for an amount equal to the amount of such net proceeds.

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SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(w) Stock

The Company may by ordinary resolution convert any fully paid shares into stock, and may from time to time by like resolution reconvert any stock into fully paid shares of any denominations. The holders of stock may transfer the same or any part thereof in the same manner, and subject to the same regulations as and subject to which the shares from which the stock arose might prior to conversion have been transferred or as near thereto as circumstances admit, but the Directors may from time to time, if they think fit, fix the minimum amount of stock transferable and restrict or prohibit the transfer of fractions of that minimum, but so that such minimum shall not exceed the nominal amount of the shares from which the stock arose. No warrants to bearer shall be issued in respect of any stock. The holders of stock shall, according to the amount of the stock held by them, have the same rights, privileges and advantages as regards dividends, participation in assets on a winding up, voting at meetings, and other matters, as if they held the shares from which the stock arose, but no such privilege of the Company shall be conferred by an amount of stock which would not, if existing in shares, have conferred such privilege or advantage. All such of the provisions of the Articles as are applicable to paid up shares shall apply to stock, and the words ‘‘share’’ and ‘‘shareholder’’ and ‘‘member’’ therein shall include ‘‘stock’’ and ‘‘stockholder’’.

(x) Other provisions

The Articles provide that, to the extent that it is not prohibited by and is in compliance with the Companies Law, if any rights attaching to any warrants which the Company may issue after the date of this [REDACTED] shall remain exercisable and the Company does any act which would result in the subscription price under such warrants being reduced below the par value of a Share, a subscription right reserve shall be established and applied in paying up the shortfall between the subscription price and the par value of a Share on any exercise of the warrants.

3. VARIATION OF MEMORANDUM AND ARTICLES OF ASSOCIATION

Subject to the rights of the Company set out in paragraph 2(c) above to amend its capital by ordinary resolution, the memorandum of association of the Company may be altered by the Company by special resolution. The Articles state that a special resolution shall be required to alter the provisions of the memorandum of association (subject as provided above) or the Articles or to change the name of the Company. For these purposes, a resolution is a special resolution if it has been passed by a majority of not less than three-fourths of the votes cast by such members of the Company as, being entitled to do so, vote in person or, in the case of such members as are corporations, by their respective duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice of not less than 21 clear days and not less than ten (10) clear business days specifying the intention to propose the resolution as a special resolution has been duly given. Except in the case of an annual general meeting, the requirement of not less than 21 clear days’ notice and not less than ten (10) clear business days notice may be waived by a

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

majority in number of the members having the right to attend and vote at the relevant meeting, being a majority together holding not less than 95 per cent. in nominal value of the shares giving that right.

4. CAYMAN ISLANDS COMPANY LAW

The Company is incorporated in the Cayman Islands and, therefore, operates subject to Cayman Islands law. Set out below is a summary of certain provisions of the Cayman Islands company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Cayman Islands company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.

(a) Share capital

The Companies Law provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the ‘‘share premium account’’. The share premium account may be applied by a company subject to the provisions of its memorandum and articles of association in such manner as the company may from time to time determine including, but without limitation:

(i) in paying distributions or dividends to members;
(ii) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;
(iii) in redeeming or purchasing its shares as provided in the Companies Law; or
(iv) in writing off
(aa) the preliminary expenses of the company; or
(bb) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.

No dividend or distribution may be paid to members out of the share premium account unless immediately following the date of the proposed payment, the company is able to pay its debts as they fall due in the ordinary course of business.

A company may issue preference shares and redeemable preference shares.

The Companies Law does not contain any express provisions dealing with the variation of rights of holders of different classes of shares.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(b) Financial assistance to purchase shares of a company or its holding company

There is no statutory restriction in the Cayman Islands against the provision of financial assistance for the purchase, subscription or other acquisition of its shares, though on English common law principles, the directors have a duty to act in good faith for a proper purpose in the best interests of the company, and moreover, there are restrictions on any act which amounts to a reduction of capital. Accordingly, it may, depending on the circumstances be legitimate for the directors to authorise the provision by a company of financial assistance for the purchase, subscription or other acquisition of its own shares, or the shares of its holding company.

(c) Redemption and Purchase of shares and warrants by a company and its subsidiaries

A company may, if authorised by its articles of associations issue redeemable shares and, purchase its own shares, including any redeemable shares and the Companies Law expressly provides that it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. Purchases and redemptions may only be effected out of the profits of the company or the share premium account of the company or out of the proceeds of a fresh issue of shares made for the purpose, or, if so authorised by its articles of association and subject to the provisions of the Companies Law, out of capital. Any premium payable on a redemption or purchase over the par value of the shares to be purchased must be provided for out of profits of the company or out of the company’s share premium account, or, if so authorised by its articles of association and subject to the provisions of the Companies Law, out of capital. Any purchase by a company of its own shares may be authorised by its directors or otherwise by or in accordance with the provisions of its articles. A payment out of capital for a redemption or purchase of a company’s own shares is not lawful unless immediately following the date of the proposed payment the company is able to pay its debts as they fall due in the ordinary course of business. Shares purchased by a company shall be treated as cancelled unless, subject to the memorandum and articles of association of the company, the directors of the company resolve to hold such shares in the name of the company as treasury shares prior to the purchase. Where shares of a company are held as treasury shares, the company shall be entered in the register of members as holding those shares, however, notwithstanding the foregoing, the company shall not be treated as a member for any purpose and shall not exercise any right in respect of the treasury shares, and any purported exercise of such a right shall be void, and a treasury share shall not be voted, directly or indirectly, at any meeting of the company and shall not be counted in determining the total number of issued shares at any given time, whether for the purposes of the company’s articles of association or the Companies Law. Further, no dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of a treasury share.

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

A company is not prohibited from purchasing and may purchase its own subscription warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases.

Under Cayman Islands law, a subsidiary may hold shares in its holding company and in certain circumstances, may acquire such shares. A company, whether a subsidiary or a holding company, may only purchase its own shares for cancellation if it is authorised to do so in its articles of association.

(d) Dividends and distributions

A company may not pay a dividend, or make a distribution out of share premium account unless immediately following the date on which the payment is proposed to be made, the company is able to pay its debts as they fall due in the ordinary course of business.

(e) Protection of minorities

The Cayman Islands courts ordinarily would be expected to follow English case law precedents which permit a minority shareholder to commence a representative action against or derivative actions in the name of a company to challenge (a) an act which is ultra vires the company or illegal (b) an act which constitutes a fraud against the minority and the wrong doers are themselves in control of the company, or (c) an irregularity in the passing of a resolution which requires a qualified (or special) majority.

In the case of company (not being a bank) having a share capital divided into shares, the court may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine into the affairs of the company and to report thereon in such manner as the court shall direct.

Any shareholder of a company may petition the court which may make a winding up order if the court is of the opinion that it is just and equitable that the company shall be wound up.

Generally, claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as established by the memorandum and articles of association of the company.

(f) Management

The Companies Law contains no specific restrictions on the power of directors to dispose of assets of a company. However, as a matter of general law, every officer of a company, which includes a director, managing director and secretary is required, in exercising his

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(g) Accounting and auditing requirements

The Companies Law requires a company to cause proper records of accounts to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company. A company is required to keep such books of account as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

(h) Exchange control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

(i) Taxation

There are no income, corporation, capital gains or other taxes in effect in the Cayman Islands on the basis of the present legislation. As an exempted company, the Company has received from the Governor-in-Counsel of the Cayman Islands pursuant to the Tax Concessions Law (2011 Revision) of the Cayman Islands, an undertaking that in the event of any change to the foregoing, the Company, for a period of 20 years from the date of the grant of the undertaking, will not be chargeable to tax in the Cayman Islands on its income or its capital gains arising in the Cayman Islands or elsewhere and that dividends of the Company will be payable without deductions of Cayman Islands tax. No capital or stamp duties are levied in the Cayman Islands on the issue, transfer or redemption of Shares.

(j) Stamp duty

Certain documents (which do not include contract, notes for the sale and purchase of, or instruments of transfer of, shares in Cayman Islands companies) are subject to stamp duty which is generally calculated on an ad valorem basis.

(k) Inspection of corporate records

Neither the members of a company nor the general public have the right to inspect the register of directors and officers, the minutes, accounts or, in the case of any exempted company, the register of members. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of members, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Law (2009 Revision)

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

of the Cayman Islands. The register of mortgages and charges must be kept at the registered office of the company and must be open to inspection by any creditor or member at all reasonable times.

Members of the public have no right to inspect the constitutive documents of a company but the memorandum and articles of association must be forwarded to any member of the company upon request. If no articles of association have been registered with the Registrar of Companies, each member has the right to receive copies of special resolutions of members upon request upon payment of a nominal fee.

The location of the registered office of a company is available to the general public upon request to the Registrar of Companies.

(l) Winding up

A company may be wound up by the Cayman Islands court on application presented by the company itself, its creditors or its contributors. The Cayman Islands court also has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Cayman Islands court, just and equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general meeting, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum or articles of association expires, or the event occurs on the occurrence of which the memorandum or articles of association provides that the company is to be dissolved. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval.

Where a resolution has been passed for the voluntary winding up of a company, the court may make an order that the winding up should continue subject to the supervision of the court with such liberty to creditors, contributors or others to apply to the court as the court may think fit.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators for the purposes of winding up the affairs of the company and distributing its assets. If the liquidator at any time forms the opinion that such company will not be able to pay its debts in full, he is obliged to summon a meeting of creditors.

As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the

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APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting requires at least one month’s notice called by Public Notice in the Cayman Islands or otherwise as the Registrar of Companies may direct.

5. GENERAL

Conyers Dill & Pearman (Cayman) Limited, the Company’s legal advisers on Cayman Islands law, have sent to the Company a letter of advice summarising certain aspects of Cayman Islands company law. This letter, together with a copy of the Companies Law, is available for inspection as referred to in the paragraph headed ‘‘Documents delivered to the Registrars of Companies’’ in Appendix V. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

– III-24 –

STATUTORY AND GENERAL INFORMATION

APPENDIX IV

1. FURTHER INFORMATION ABOUT OUR GROUP

1.1 Incorporation of our Company in the Cayman Islands and registration of our Company under Part 16 of the Companies Ordinance

Our Company was incorporated in the Cayman Islands under the Companies Law as an exempted company with limited liability on 3 September 2014 with an authorised share capital of HK$1 million divided into 100 million Shares (having a par value of HK$0.01 each).

Our Company has established a principal place of business in Hong Kong at Unit 1701 Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon, Hong Kong. Our Company was registered with the Registrar of Companies in Hong Kong as a non-Hong Kong company under Part 16 of the Companies Ordinance on 8 October 2014. Ms. Idy Cheung (an executive Director) has been appointed as the authorised representative of our Company for the acceptance of service of process and notices on behalf of our Company in Hong Kong.

As our Company was incorporated in the Cayman Islands, we operate subject to the Companies Law and to the constitution comprising the Memorandum and Articles of Association. A summary of certain provisions of our Company’s constitution and relevant aspects of the Companies Law is set out in Appendix III to this [REDACTED].

1.2 Changes in the share capital of our Company

(a) Change in authorised and issued share capital

Our Company was incorporated on 3 September 2014 with an authorised share capital of HK$1 million divided into 100 million shares of HK$0.01 each.

On 3 September 2014, one share of HK$0.01 was allotted and issued, nil paid, to Sharon Pierson (an officer of Codan Trust Company (Cayman) Limited, the provider of registered office of our Company), which was transferred to BVI-Cheung on the same date. On 3 September 2014, our Company further allotted and issued 999,999 Shares, nil paid, to BVICheung, BVI-Lam and BVI-Ching.

By an agreement dated [.] 2014 and made between (i) Odella BVI as purchaser; (ii) the Company (as holding company of Odella BVI); (iii) the Individual Owners as sellers and warrantors; and (iv) the BVI Inv Vehicles as nominees of the respective Individual Owners to hold the consideration Shares, Odella BVI agreed to acquire from the Individual Owners the entire issued share capital in Perline. In consideration of and in exchange for such acquisition, the Company (i) credited (or will credit) as fully paid the 1 million nil-paid Shares in issue (as mentioned in paragraph 1.5 below), and (ii) issued to the BVI Inv Vehicles 9 million new Shares (and such new Shares will be issued to BVI-Cheung, BVI-Lam and BVI-Ching (as nominated by the Individual Owners) in the proportion of 68%, 17% and 15% respectively), all credited as fully paid.

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

On [.] 2014, our Company’s authorised share capital was increased to HK$20 million by the creation of 1,900 million Shares pursuant to a resolution passed by our Shareholders referred to in paragraph 1.3 below and subject to the conditions contained therein.

Saved as disclosed above and in the paragraph headed ‘‘History, development and reorganisation — Corporate history — Establishment and major changes concerning our group companies — Our Company’’, there has been no alteration in the share capital of our Company since its incorporation.

(b) Information as of the Latest Practicable Date and immediately after the [REDACTED]

The following is a description of the authorised and issued share capital of our Company in issue and to be issued as fully paid or credited as fully paid immediately prior to and following the completion of the [REDACTED] and the [REDACTED]:

Authorised share capital: 2,000,000,000 Shares (having a par value of HK$0.01 each) Issued and to be issued, fully paid or credited as fully paid: 10,000,000 Shares in issue as at the date of this [REDACTED] [REDACTED] Shares to be issued pursuant to the [REDACTED] [REDACTED] Shares to be issued under the [REDACTED] [REDACTED] Total	HK$
	20,000,000 100,000 [REDACTED] [REDACTED]
	[REDACTED]

Assumptions

The above table assumes that the [REDACTED] becomes unconditional and Shares are issued pursuant to the [REDACTED]. It takes no account of any Shares which may be issued upon the exercise of options which may be granted under the Share Option Scheme or the [REDACTED] or of any Shares which may be issued or repurchased by us pursuant to the Issuing Mandate or Repurchase Mandate granted to our Directors as described below.

As at the Latest Practicable Date, our Company had an authorised share capital of HK$[20 million], divided into [2,000 million] Shares, and an issued share capital of HK$[100,000], divided into [10 million] Shares, all fully paid or credited as fully paid.

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

Immediately following completion of the [REDACTED] and the [REDACTED] and assuming the exercise of the [REDACTED] in full (but taking no account of any Shares which may be allotted and issued pursuant to the exercise of the options which may be granted under the Share Option Scheme), the authorised share capital of our Company remains to be HK$20 million divided into 2,000 million Shares, of which [REDACTED] Shares will be issued fully paid or credited as fully paid, and [REDACTED] Shares will remain unissued.

(c) Founder shares

Our Company has no founder shares, management shares or deferred shares.

Other than pursuant to the exercise of the [REDACTED] and the exercise of any options which may be granted under the Share Option Scheme, there is no present intention to issue any of the authorised but unissued share capital of our Company and, without the prior approval of our Shareholders in general meeting, no issue of Shares will be made which would effectively alter the control of our Company.

Save as disclosed above and in the section headed ‘‘Resolutions in writing of our Shareholders passed on [.] 2014’’ below, there has been no alteration in the share capital of our Company since its incorporation.

1.3 Resolutions in writing of our Shareholders passed on [.] 2014

Pursuant to the written resolutions passed by all of our Shareholders on [.] 2014 among others:

(a) the Articles were approved and adopted;
(b) conditional on (A) the [REDACTED] of the Stock Exchange granting [REDACTED] of, and permission to [REDACTED], the Shares in issue and to be issued pursuant to the [REDACTED]; (B) the [REDACTED] having been determined; (C) the obligations of the [REDACTED] under the [REDACTED] becoming and remaining unconditional and not being terminated in accordance with the terms of the [REDACTED] or otherwise, in each case on or before the day falling 30 days after the date of this [REDACTED]:
(i) the authorised share capital of our Company was increased from HK$1 million to HK$20 million by the creation of further 1,900 million Shares;
(ii) the [REDACTED] and the grant of the [REDACTED] were approved and the Directors were authorised to allot and issue the [REDACTED] Shares pursuant to the [REDACTED] and such number of Shares as may be required to be allotted and issued upon the exercise of the [REDACTED];

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(iii) the rules of the Share Option Scheme (the principal terms of which are set forth in the paragraph headed ‘‘4. Share Option Scheme’’ of this appendix) were approved and adopted and the Directors were authorised to approve any amendments to the rules of the Share Option Scheme as may be acceptable or not objected to by the Stock Exchange, and at their absolute discretion to grant options to subscribe for Shares thereunder and to allot, issue and deal with Shares pursuant to the exercise of options which may be granted under the Share Option Scheme and to take all such steps as may be necessary, desirable or expedient to carry into effect the Share Option Scheme;
(iv) conditional on the share premium account of our Company being credited as a result of the issue of new Shares under the [REDACTED], the Directors were authorised to capitalise HK$[REDACTED] standing to the credit of the share premium account of our Company by applying such sum in paying up in full at par [REDACTED] Shares for allotment and issue to holders of Shares whose names appear on the register of members of our Company at the close of business on [.] 2014 (or as they may direct) in proportion (as nearly as possible without involving fractions so that no fraction of a share shall be allotted and issued) to their then existing holdings in our Company and so that the Shares to be allotted and issued pursuant to this resolution should rank pari passu in all respects with the then existing issued Shares and the Directors were authorised to give effect to such [REDACTED];
(v) a general unconditional mandate (‘‘Issuing Mandate’’) was given to the Directors to exercise all powers of our Company to allot, issue and deal with, otherwise than by way of rights issue, or scrip dividend schemes or similar arrangements providing for allotment of Shares in lieu of the whole or in part of any dividend in accordance with the Articles of Association, or pursuant to the exercise of any options which may be granted under the Share Option Scheme, or under the [REDACTED] or the [REDACTED], or issue of Shares upon exercise of rights of subscription or conversion attaching to any warrants of our Company or any securities which are convertible into Shares, Shares with an aggregate nominal amount of not exceeding the sum of (aa) 20% of the aggregate nominal amount of the share capital of our Company in issue and to be issued immediately following completion of the [REDACTED] and the [REDACTED] but excluding (where applicable) any Shares which may be issued pursuant to the exercise of the [REDACTED] of exercise of options that may be granted under the Share Option Scheme and (bb) the aggregate nominal amount of the share capital of our Company which may be purchased by our Company pursuant to the authority granted to the Directors as referred to in sub-paragraph (vi) below, until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our Company is required by the Articles of Association or any applicable Cayman Islands law to be held, or the passing of an ordinary resolution by our Shareholders revoking or varying the authority given to the Directors, whichever occurs first;

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(vi) a general unconditional mandate (‘‘Repurchase Mandate’’) was given to the Directors to exercise all powers of our Company to purchase Shares with an aggregate nominal amount of not exceeding 10% of the aggregate nominal amount of the share capital of our Company in issue and to be issued immediately following the completion of the [REDACTED] and the [REDACTED] but excluding (where applicable) any Shares which may be issued pursuant to the exercise of the [REDACTED] of exercise of options that may be granted under the Share Option Scheme until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our Company is required by the Articles of Association or any applicable Cayman Islands law to be held, or the passing of an ordinary resolution by our Shareholders revoking or varying the authority given to the Directors, whichever occurs first; and
(vii) the extension of the general mandate to allot, issue and deal with Shares to include the nominal amount of Shares which may be purchased or repurchased pursuant to paragraph (vi) above.

1.4 Further information about our Group’s subsidiaries

Our Group has one wholly-owned subsidiary incorporated in Hong Kong and one whollyowned subsidiary established in the PRC. A summary of the corporate information of these two companies as at the [Latest Practicable Date] is set out as follows:

(a) Subsidiary incorporated in Hong Kong

Full name of company Perline Company Limited (柏麗發展有限公司) Date of incorporation 15 March 1988 Registered office Unit 1701–02, 17/F., Treasure Centre, No. 42 Hung To Road, Kwun Tong, Kowloon, Hong Kong Issued share capital HK$200,000 Number of issued shares 200,000 Shareholder Odella BVI (100%) Principal business activity Sales, marketing and development of leather products

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(b) Subsidiary established in the PRC

Full name of company	Foshan Nanhai Shengli Leather Garment Co., Ltd.
	(佛山市南海盛麗皮衣有限公司)
Date of establishment	21 June 2004
Address	3rd Floor, Block 1, Beiyue Industrial Zone,
	Guicheng Science and Technology Park,
	Nanhai District, Foshan City, Guangdong Province,
	the PRC
Economic nature	Wholly foreign owned enterprise
Registered holder	Perline
Total investment amount	HK$2.13 million
Registered capital	HK$1.5 million
(fully paid up)
Percentage equity interest	100%
attributable to our Group
Term of operation (or, where	From 21 June 2004 to 20 June 2028
applicable, its expiry date)
Scope of permitted business	Manufacture of various leather products, domestic and
	foreign trading (restricted items being subject to
	relevant approval)

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APPENDIX IV

STATUTORY AND GENERAL INFORMATION

1.5 Reorganisation

The companies comprising our Group underwent the Reorganisation to rationalise our Group’s structure in preparation for the [REDACTED]. Please refer to the section headed ‘‘History, development and reorganisation — Reorganisation’’ of this [REDACTED] for further details.

(a) Incorporation of overseas companies by the shareholders of Perline

(i) Each Individual Owner acquired and activated a BVI investment vehicle (i.e. the BVI Inv Vehicles), brief particulars of which are set out below:

Name of BVI Inv Vehicle Quality Century Limited (‘‘BVI-Cheung’’) Design Vanguard Limited (‘‘BVI-Lam’’) Olson Global Limited (‘‘BVI-Ching’’)	Sole shareholder of BVI Inv Vehicle Ms. Idy Cheung Ms. Grace Lam Mr. Ramond Ching	(a) Date of incorporation (b) Date of activation (a) 2 July 2014 (b) 25 July 2014 (a) 3 July 2014 (b) 25 July 2014 (a) 27 May 2014 (b) 25 July 2014	Total no. of issued shares
			1 1 1

(ii) The subscription price of each issued share in each BVI Inv Vehicle is its par value (i.e. US$1). Each Individual Owner owned the entire issued shares in the respective BVI Inv Vehicle from the above date of activation and up to the Latest Practicable Date.

(b) Incorporation of our Company and Odella BVI

(i) On 3 September 2014, our Company was incorporated in the Cayman Islands as an exempted company. Its initial authorised share capital is HK$1 million divided into 100 million Shares of HK$0.01 each. On 3 September 2014, one Share was allotted and issued, nil paid, to Sharon Pierson, which was transferred to BVI-Cheung on the same date.

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(ii) On 3 September 2014, our Company further allotted and issued 999,999 Shares, all nil-paid, to BVI-Cheung, BVI-Lam and BVI-Ching. Brief details of the shareholders of our Company immediately following such transfer and subscriptions are shown below:

Subscriber BVI-Cheung BVI-Lam BVI-Ching Total:	No. of Shares subscribed and held 680,000 (Note) 170,000 150,000 1,000,000	Shareholding percentage (%)
		68% 17% 15%
		100%

Note: Inclusive of one subscriber share transferred from Sharon Pierson.

(iii) Odella BVI was incorporated in BVI on 11 September 2014. Its initial authorised share capital is US$50,000 divided into 50,000 shares of US$1 each. On 11 September 2014, 100 shares in Odella BVI were issued to our Company, and the aggregate subscription price was US$100 which was equal to the aggregate par value of the shares issued.

(c) Transferring the entire issued share capital in Perline to Odella BVI

By an agreement dated [.] 2014 and was made between (i) Odella BVI as purchaser; (ii) our Company (as holding company of Odella BVI); (iii) the Individual Owners as sellers and warrantors; and (iv) the BVI Inv Vehicles as nominees of the respective Individual Owners to hold the consideration Shares; Odella BVI [agreed to acquire from the Individual Owners the entire issued share capital in Perline. In consideration of and in exchange for such acquisition, our Company:

(i) credited as fully paid the 1 million nil-paid Shares in issue (as mentioned in subparagraph (b) above), and
(ii) issued to the BVI Inv Vehicles 9 million new Shares (and such new Shares were issued to BVI-Cheung, BVI-Lam and BVI-Ching (as nominated by the Individual Owners) in the proportion of 68%, 17% and 15% respectively), all credited as fully paid.]

[The transfer was properly and legally completed.]

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1.6 Changes in share capital of our subsidiaries

Our subsidiaries are listed in the Accountants’ Report set out in Appendix I to this [REDACTED].

Save for the alterations described in paragraphs 1.4 and 1.5 in this appendix, there was no alteration in the share capital of our subsidiaries which took place within two years immediately preceding the date of this [REDACTED].

1.7 Repurchases by our Company of our own securities

This section sets out information required by the [REDACTED] to be included in this [REDACTED] concerning the repurchase by our Company of our own securities.

(a) Provisions of the [REDACTED]

The [REDACTED] permit companies with a primary [REDACTED] on the Stock Exchange to repurchase their own securities on the [REDACTED] subject to certain restrictions, the more important of which are summarised below:

(i) Shareholders’ approval

All proposed repurchase of securities (which must be fully paid up in the case of shares) by a company with a primary [REDACTED] on the [REDACTED] must be approved in advance by an ordinary resolution of the shareholders, either by way of general mandate or by specific approval of a particular transaction.

(ii) Source of funds

Repurchases must be funded out of funds legally available for the purpose in accordance with the Memorandum and Articles of Association of our Company and the [REDACTED] and the applicable laws of the Cayman Islands. A listed company may not repurchase its own securities on the Stock Exchange for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange. Subject to the foregoing, under the Companies Law any repurchases by our Company may be made out of our Company’s profits, out of our Company’s share premium account, out of the proceeds of a new issue of Shares made for the purpose of the repurchase or, if authorised by the Articles and subject to the Companies Law, out of capital. Any amount of premium payable on the purchase over the par value of the Shares to be repurchased must be out of profits or from sums standing to the credit of our Company’s share premium account or, if authorised by the Articles, and subject to the Companies Law, out of capital.

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(iii) Trading Restrictions

The total number of shares which a listed company may repurchase on the [REDACTED] is the number of shares representing up to a maximum of 10% of the aggregate number of shares in issue. A company may not issue or announce a proposed issue of new securities for a period of 30 days immediately following a repurchase (other than an issue of securities pursuant to an exercise of warrants, share options or similar instruments requiring the company to issue securities which were outstanding prior to such repurchase) without the prior approval of the [REDACTED]. In addition, a listed company is prohibited from repurchasing its shares on the Stock Exchange if the purchase price is 5% or more than the average closing market price for the five preceding trading days on which its shares were traded on the Stock Exchange. The [REDACTED] also prohibit a listed company from repurchasing its securities which would result in the number of the listed securities which are in the hands of the public falling below the relevant prescribed minimum percentage as required by the [REDACTED]. A company is required to procure that the broker appointed by it to effect a repurchase of securities discloses to the Stock Exchange such information with respect to the repurchase as the Stock Exchange may require.

(iv) Status of repurchased shares

All repurchased securities (whether effected on the Stock Exchange or otherwise) will be automatically delisted and the certificates for those securities must be cancelled and destroyed.

(v) Suspension of repurchase

A listed company shall not make any repurchase of securities on the Stock Exchange at any time after inside information has come to its knowledge until the information is made publicly available. In particular, during the period of one month immediately preceding the earlier of (a) the date of the board meeting (as such date is first notified to the [REDACTED] in accordance with the [REDACTED]) for the approval of a listed company’s results for any year, half year, quarterly or any other interim period (whether or not required under the [REDACTED]) and (b) the deadline for publication of an announcement of a listed company’s results for any year or half-year under the [REDACTED], or quarterly or any other interim period (whether or not required under the [REDACTED]), and ending on the date of the results announcement, the listed company may not repurchase its shares on the [REDACTED] other than in exceptional circumstances. In addition, the [REDACTED] may prohibit a repurchase of securities on the [REDACTED] if a listed company has breached the [REDACTED].

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(vi) Reporting requirements

Certain information relating to repurchases of securities on the Stock Exchange or otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier of the commencement of the morning trading session or any pre-opening session on the following business day. In addition, a listed company’s annual report is required to disclose details regarding repurchases of securities made during the year, including a monthly analysis of the number of securities repurchased, the purchase price per share or the highest and lowest price paid for all such purchase, where relevant, and the aggregate prices paid.

(vii) Core connected persons

A listed company is prohibited from knowingly repurchasing securities on the Stock Exchange from a ‘‘core connected person’’, that is, a director, chief executive or Substantial Shareholder of the Company or any of its subsidiaries or their close associates and a core connected person is prohibited from knowingly selling his securities to the Company.

(b) Reasons for repurchases

Our Directors believe that the ability to repurchase Shares is in the interests of our Company and our Shareholders. Repurchases may, depending on the circumstances, result in an increase in the net assets and/or earnings per Share. Our Directors have sought the grant of a general mandate to repurchase Shares to give our Company the flexibility to do so if and when appropriate. The number of Shares to be repurchased on any occasion and the price and other terms upon which the same are repurchased will be decided by the Directors at the relevant time having regard to the circumstances then pertaining.

(c) Funding of repurchases and impact on working capital or gearing position

In repurchasing securities, our Company may only apply funds lawfully available for such purpose in accordance with its Memorandum and Articles of Association, [REDACTED] and the applicable laws of the Cayman Islands.

There could be a material adverse impact on the working capital or gearing position of our Company (as compared with the position disclosed in this [REDACTED]) in the event that the Repurchase Mandate were to be carried out in full at any time during the share repurchase period.

However, our Directors do not propose to exercise the general mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital requirements of our Company or the gearing levels which in the opinion of our Directors are from time to time appropriate for our Company.

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(d) General

The exercise in full of the Repurchase Mandate, on the basis of [REDACTED] Shares in issue immediately following the completion of the [REDACTED] and [REDACTED] but excluding (where applicable) any Shares which may be issued pursuant to the exercise of the [REDACTED] of exercise of options that may be granted under the Share Option Scheme, could accordingly result in up to approximately [REDACTED] Shares being repurchased by our Company during the period prior to the earliest occurrence of any of the following:

(i) the conclusion of our next annual general meeting; or
(ii) the end of the period within which we are required by any applicable law or the Articles of Association to hold our next annual general meeting; or
(iii) when varied or revoked by an ordinary resolution of our Shareholders in general meeting.

None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates currently intends to sell any Shares to our Company.

Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the [REDACTED] and the applicable laws of the Cayman Islands.

If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of our Company is increased, such increase will be treated as an acquisition for the purposes of the Takeovers Code.

Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain or consolidate control of our Company and become obliged to make a mandatory offer in accordance with Rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate. Any repurchase of Shares that results in the number of Shares held by the public being reduced to less than 25% of the Shares then in issue could only be implemented if the Stock Exchange agreed to waive the [REDACTED] requirements regarding the public shareholding. It is believed that a waiver of this provision would not normally be given other than in exceptional circumstances.

No connected person of our Company has notified our Company that he or she has a present intention to sell Shares to our Company, or has undertaken not to do so, if the Repurchase Mandate is exercised.

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STATUTORY AND GENERAL INFORMATION

2. FURTHER INFORMATION ABOUT OUR BUSINESS

2.1 Summary of material contracts

The following contracts (not being contracts entered into in the ordinary course of business) were entered into by our Company or our subsidiaries within the two years preceding the date of this [REDACTED] and are or may be material:

(a) an agreement dated [.] 2014 and entered into between (i) Odella BVI (as purchaser); (ii) our Company (as holding company of Odella BVI); (iii) Ms. Idy Cheung, Ms. Grace Lam and Mr. Ramond Ching (as vendors and warrantors); and (iv) the BVI Inv Vehicles as nominees of the respective Individual Owners to hold the consideration Shares, pursuant to which the Individual Owners agreed to sell the entire issued share capital in Perline to Odella BVI and were settled in the manner as mentioned in paragraph 1.5 of this appendix, and certain non-compete underwritings were also given by our Controlling Shareholders in favour of our Company;
(b) a deed of indemnity dated [.] 2014 executed by all the Individual Owners and BVI Inv Vehicles in favour of our Company (for ourselves and as trustee for our subsidiaries stated therein) containing the indemnities more particularly referred to in the paragraph entitled ‘‘5. Estate duty, tax and other indemnities’’ of this appendix; and
(c) the [REDACTED].

2.2 Intellectual property rights of our Group

As at the Latest Practicable Date, we had registered or had applied for the registration of the following intellectual property rights which are material in relation to our business.

(a) Trademarks

As at the Latest Practicable Date, no members of our Group had registered any trademarks.

(b) Domain Names

As at the Latest Practicable Date, members of our Group had registered the following domain names which are material to our business:

No. 1. 2.	Domain name www.perline.com.hk www.odella.com	Registrant Perline Perline	Date of registration 22 March 2000 9 June 2000	Expiry date
				Nil 9 June 2019

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STATUTORY AND GENERAL INFORMATION

3. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

3.1 Disclosure of Interests

(a) Interests and short positions of our Directors and the chief executive in the shares, underlying shares or debentures of our Company and our associated corporations

Immediately following the completion of the [REDACTED] and the [REDACTED] and without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] and the Share Option Scheme, the interests or short positions of the Directors and the chief executive of our Company in the shares, underlying shares and debentures of our Company or its associated corporations (within the meaning of Part XV of the SFO) which will be required to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to Section 352 of the SFO, to be entered in the register referred to in that section, or which will be required, pursuant to Rules 5.46 to 5.67 of the [REDACTED], to be notified to our Company and the Stock Exchange, once the Shares are listed on the Stock Exchange will be as follows:

Name of Director Ms. Idy Cheung Ms. Grace Lam Mr. Ramond Ching	Nature of interest/ Capacity Interest of a controlled corporation Interest of a controlled corporation Interest of a controlled corporation	Relevant company (including associated corporations) Our Company (Note 2) Our Company (Note 3) Our Company (Note 4)	Number of Shares (or, as the case may be, amount of registered capital) in the relevant company [REDACTED] [REDACTED] [REDACTED]	Approximate percentage of shareholding
				[REDACTED] [REDACTED] [REDACTED]

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Notes:

(1) The letter ‘‘L’’ denotes the person’s long position in the Shares.
(2) The entire issued share capital of BVI-Cheung is owned by Ms. Idy Cheung. Upon completion of the [REDACTED] and the [REDACTED], BVI-Cheung will directly hold [REDACTED] Shares. By virtue of the SFO, Ms. Idy Cheung is deemed to be interested in the Shares held by BVI-Cheung.
(3) The entire issued share capital of BVI-Lam is owned by Ms. Grace Lam. Upon completion of the [REDACTED] and the [REDACTED], BVI-Lam will directly hold [REDACTED] Shares. By virtue of the SFO, Ms. Grace Lam is deemed to be interested in the Shares held by BVI-Lam.
(4) The entire issued share capital of BVI-Ching is owned by Mr. Ramond Ching. Upon completion of the [REDACTED] and the [REDACTED], BVI-Ching will directly hold [REDACTED] Shares. By virtue of the SFO, Mr. Ramond Ching is deemed to be interested in the Shares held by BVI-Ching.

Save as disclosed in the sections headed ‘‘History, development and reorganisation’’ and ‘‘Relationship with Controlling Shareholders’’ and the paragraph headed ‘‘3.2. Directors’ service contracts and letters of appointment’’ in this appendix in this [REDACTED], none of our Directors or their close associates was engaged in any dealings with our Group during the two years preceding the date of this [REDACTED].

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(b) Interests of our Substantial Shareholders

So far as is known to any Director or chief executive of our Company, immediately following the completion of the [REDACTED] and the [REDACTED] and without taking into account any Shares which may be issued pursuant to the exercise of the [REDACTED] and the Share Option Scheme, the following persons will have an interest or short position in the Shares or the underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or are, 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 once the Shares are listed in the Stock Exchange:

Name BVI-Cheung(2) Ms. Idy Cheung(2) Mr. Lam Andrew Hung Yun(2) BVI-Lam(3) Ms. Grace Lam(3) Mr. Lee Ben(3) BVI-Ching(4) Mr. Ramond Ching(4)	Number of Shares(1) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Approximate percentage of shareholding [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]	Capacity/Nature of interest
			Beneficial owner Interest in a controlled corporation Interest of spouse (spouse of Ms. Idy Cheung) Beneficial owner Interest in a controlled corporation Interest of spouse (spouse of Ms. Grace Lam) Beneficial owner Interest in a controlled corporation

Notes:

(1) The letter ‘‘L’’ denotes the person’s long position in the Shares.
(2) The entire issued share capital of BVI-Cheung is wholly owned by Ms. Idy Cheung. The spouse of Ms. Idy Cheung is Mr. Lam Andrew Hung Yun, and he is deemed to be interested in such [REDACTED] Shares by virtue of the SFO.

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APPENDIX IV STATUTORY AND GENERAL INFORMATION

(3) The entire issued share capital of BVI-Lam is wholly owned by Ms. Grace Lam. The spouse of Ms. Grace Lam is Mr. Lee Ben, and he is deemed to be interested in such [REDACTED] Shares by virtue of the SFO.
(4) The entire issued share capital of BVI-Ching is wholly owned by Mr. Ramond Ching. Under the SFO, Mr. Ramond Ching is deemed to be interested in [REDACTED] Shares registered in the name of BVIChing.

3.2 Directors’ service contracts and letters of appointment

Executive Directors

Each of our executive Directors has entered into a service contract with our Company pursuant to which he/she agreed to act as an executive Director for an initial term of three years with effect from [.] 2014.

Each of our executive Directors is entitled to a basic salary as set out below (subject to an annual increment of not more than 10% of the annual salary immediately prior to such increase after [.] at the discretion of our Directors). In addition, each of the executive Directors is also entitled to a discretionary management bonus provided that the aggregate amount of the bonuses payable to all the executive Directors for any financial year of our Company may not exceed 10% of the audited consolidated net profit of our Group (after taxation, minority interests and payment of such bonuses but before extraordinary items) in respect of that financial year of our Company. An executive Director may not vote on any resolution of our Directors regarding the amount of the management bonus payable to him. The current basic annual salaries of our executive Directors are as follows:

Name Ms. Idy Cheung Ms. Grace Lam Mr. Ramond Ching	Annual salary
	(HK$) 500,000 679,400 679,400

Non-executive Director and INEDs

Each of our INEDs and Ms. Ng Lai Hung (a non-executive Director) has entered into a letter of appointment with our Company pursuant to which he/she has been appointed for an initial term of three years commencing from [.] 2014. Ms. Ng Lai Hung is entitled to a director’s fee of HK$120,000 per annum, and each INED is entitled to a director’s fee of HK$120,000 per annum. Save for the Directors’ fees, none of our non-executive Director and our INEDs is expected to receive any other remuneration for holding their office as an INED.

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3.3 Directors’ and senior management’s remuneration

(i) The aggregate emoluments paid and benefits in kind granted by our Group to the Directors in respect of the two financial years ended 30 June 2014 were approximately HK$1.3 million and HK$1.9 million respectively. The aggregate emoluments paid by our Group to our senior management in respect of the two financial years ended 30 June 2014 were approximately HK$0.9 million and HK$1 million respectively.
(ii) Under the arrangements currently in force, the aggregate emoluments (excluding discretionary bonus) payable by our Group to and benefits in kind receivable by our Directors (including our INEDs in their respective capacity as Directors) for the year ending 30 June 2015 are expected to be approximately HK$2.2 million.
(iii) None of the directors or any past directors of any member of our Group has been paid any sum of money for each of the two years ended 30 June 2014 (i) as an inducement to join or upon joining our Company or (ii) for loss of office as a director of any member of our Group or of any other office in connection with the management of the affairs of any member of our Group.
(iv) There has been no arrangement under which a Director has waived or agreed to waive any emoluments for each of the two years ended 30 June 2014.

3.4 Disclaimers

(a) Save as disclosed in the paragraph headed ‘‘3.1 Disclosure of interests — (a) Interests and short positions of our Directors and the chief executive in the shares, underlying shares or debentures of our Company and our associated corporations’’ in this appendix, none of the Directors or chief executive of our Company has any interests or short positions in the shares, underlying shares and debentures of our Company or its associated corporations (within the meaning of Part XV of the SFO) which will be required to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she is taken or deemed to have under such provisions of the SFO) or which will be required, pursuant to Section 352 of the SFO, to be entered in the register referred to in that section, or which will be required, pursuant to Rules 5.46 to 5.67 of the [REDACTED], to be notified to our Company and the Stock Exchange, once the Shares are listed on the Stock Exchange;
(b) save as disclosed in the paragraph headed ‘‘3.1 Disclosure of interests — (b) Interests of our Substantial Shareholders’’ in this appendix and in the section headed ‘‘Substantial Shareholders’’ above in this [REDACTED], so far as is known to any Director or chief executive of our Company, no person (other than a Director or chief executive of our Company) has an interest or short position in the Shares and underlying Shares which would fall to be disclosed to our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or is, directly or indirectly, interested in

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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 our Group once the Shares are listed on the Stock Exchange;

(c) save as disclosed in the sections headed ‘‘History, development and reorganisation’’ and ‘‘Relationship with Controlling Shareholders’’ and paragraph 1.5 of this appendix in this [REDACTED], none of our Directors nor any of the persons listed in ‘‘6.6. Qualifications of experts’’ below is interested in the promotion of, or in any assets which have been, within the two years immediately preceding the issue of this [REDACTED], acquired or disposed of by or leased to any member of our Group, or are proposed to be acquired or disposed of by or leased to any member of our Group;
(d) save as disclosed in the sections headed ‘‘History, development and reorganisation’’ and ‘‘Relationship with Controlling Shareholders’’ and paragraph 1.5 of this appendix in this [REDACTED], none of our Directors is materially interested in any contract or arrangement with our Group subsisting at the date of this [REDACTED] which is unusual in its nature or conditions or which is significant in relation to the business of our Group;
(e) save in connection with [REDACTED], none of the persons listed in the paragraph headed ‘‘6.6 Qualifications of experts’’ in this appendix has any shareholding in any member of our Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group;
(f) save for the [REDACTED], none of the persons listed in the paragraph headed ‘‘6.6 Qualifications of experts’’ in this appendix is materially interested in any contract or arrangement subsisting at the date of this [REDACTED] which is significant in relation to the business of our Group taken as a whole;
(g) save as disclosed in the paragraph headed ‘‘3.2 Directors’ service contracts and letters of appointment’’ in this appendix, none of our Directors has entered or has proposed to enter into any service agreements with our Company or any member of our Group (other than contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation);
(h) so far as is known to our Directors, none of our Directors or their close associates or any Shareholder (which to the knowledge of our Directors owns 5% or more of the issued share capital of our Company) has any interest in any of the five largest customers or the five largest suppliers of our Group during the Track Record Period; and
(i) none of our Directors are interested in any business apart from our Group’s business which competes or is likely to compete, directly or indirectly, with the business of our Group.

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4. SHARE OPTION SCHEME

4.1 Summary of terms

The following is a summary of the principal terms of the Share Option Scheme conditionally adopted by a resolution in writing passed by our then Shareholders on [.] 2014:

(i) Purposes of the scheme

The purpose of the Share Option Scheme is to enable our Group to grant options to selected participants as incentives or rewards for their contribution to our Group. The Directors consider the Share Option Scheme, with its broadened basis of participation, will enable our Group to reward the employees, the Directors and other selected participants for their contributions to our Group. Given that the Directors are entitled to determine any performance targets to be achieved as well as the minimum period that an option must be held before an option can be exercised on a case by case basis, and that the exercise price of an option cannot in any event fall below the price stipulated in the [REDACTED] or such higher price as may be fixed by the Directors, it is expected that grantees of an option will make an effort to contribute to the development of our Group so as to bring about an increased market price of the Shares in order to capitalise on the benefits of the options granted.

(ii) Who may join

The Directors may, at their absolute discretion, invite any person belonging to any of the following classes of participants, to take up options to subscribe for Shares:

(a) any employee (whether full-time or part-time including any executive director but excluding any non-executive director) of our Company, any of our subsidiaries or any entity (‘‘Invested Entity’’) in which any member of our Group holds an equity interest;
(b) any non-executive directors (including independent non-executive directors) of our Company, any of our subsidiaries or any Invested Entity;
(c) any supplier of goods or services to any member of our Group or any Invested Entity;
(d) any customer of any member of our Group or any Invested Entity;
(e) any person or entity that provides research, development or other technological support to any member of our Group or any Invested Entity;

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STATUTORY AND GENERAL INFORMATION

(f) any shareholder of any member of our Group or any Invested Entity or any holder of any securities issued by any member of our Group or any Invested Entity;
(g) any adviser (professional or otherwise) or consultant to any area of business or business development of any member of our Group or any Invested Entity;
(h) any other group or classes of participants who have contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of our Group;

and, for the purposes of the Share Option Scheme, the offer for the grant of option may be made to any company wholly owned by one or more persons belonging to any of the above classes of participants.

For avoidance of doubt, the grant of any options by our Company for the subscription of Shares or other securities of our Group to any person who falls within any of the above classes of participants shall not, by itself, unless the Directors otherwise determine, be construed as a grant of option under the Share Option Scheme.

The eligibility of any of the above class of participants to an offer for the grant of any option shall be determined by the Directors from time to time on the basis of the Directors’ opinion as to his contribution to the development and growth of our Group.

(iii) Maximum number of the Shares

(a) The maximum number of Shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme adopted by our Group must not in aggregate exceed 30% of the share capital of our Company in issue from time to time.
(b) The total number of the Shares which may be allotted and issued upon the exercise of all options (excluding, for this purpose, options which have lapsed in accordance with the terms of the Share Option Scheme and any other share option scheme of our Group) to be granted under the Share Option Scheme and any other share option scheme of our Group must not in aggregate exceed 10% of the Shares in issue on the [REDACTED] (‘‘General Scheme Limit’’).
(c) Subject to (a) above but without prejudice to (d) below, our Company may seek approval of the Shareholders in general meeting to refresh the General Scheme Limit provided that the total number of Shares which may be allotted and issued upon exercise of all options to be granted under the Share Option Scheme and any other share option scheme of our Group must not exceed 10% of the Shares in issue as at the date of approval of the limit and, for the purpose of calculating the limit, options (including those outstanding, cancelled, lapsed or exercised in accordance with the Share Option Scheme and any other share option scheme of our Group)

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previously granted under the Share Option Scheme and any other share option scheme of our Group will not be counted. The circular sent by our Company to the Shareholders shall contain, among other information, the information required under Rule 23.02(2)(d) of the [REDACTED] and the disclaimer required under Rule 23.02(4) of the [REDACTED].

(d) Subject to (a) above and without prejudice to (c) above, our Company may seek separate Shareholders’ approval in general meeting to grant options beyond the General Scheme Limit or, if applicable, the extended limit referred to in (c) above to participants specifically identified by our Company before such approval is sought. In such event, our Company must send a circular to the Shareholders containing a generic description of the specified participants, the number and terms of options to be granted, the purpose of granting options to the specified participants with an explanation as to how the terms of the options serve such purpose and such other information required under Rule 23.02(2)(d) of the [REDACTED] and the disclaimer required under Rule 23.02(4) of the [REDACTED].

(iv) Maximum entitlement of each participant

The total number of Shares issued and which may fall to be issued upon the exercise of the options granted under the Share Option Scheme and any other share option scheme of our Group (including both exercised or outstanding options) to each grantee in any 12-month period shall not exceed 1% of the issued share capital of our Company for the time being (‘‘Individual Limit’’). Any further grant of options in excess of the Individual Limit in any 12-month period up to and including the date of such further grant must be separately approved by the Shareholders in general meeting of our Company with such grantee and his close associates abstaining from voting. Our Company must send a circular to the Shareholders and the circular must disclose the identity of the participant, the number and terms of the options to be granted (and options previously granted to such participant), the information required under Rule 23.02(2)(d) of the [REDACTED] and the disclaimer required under Rule 23.02(4) of the [REDACTED]. The number and terms (including the exercise price) of options to be granted must be fixed before the approval of the Shareholders and the date of the Board meeting for proposing such further grant should be taken as the date of grant for the purpose of calculating the exercise price under note (1) to Rule 23.03(9) of the [REDACTED].

(v) Grant of options to the Directors, chief executive or Substantial Shareholders of our Company or their respective close associates
(a) Any grant of options under the Share Option Scheme to a Director, chief executive or Substantial Shareholder of our Company or any of their respective close associates must be approved by INEDs (excluding the INED(s) who or whose close associates is/are the proposed grantee(s) of the options).

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(b) Where any grant of options to a Substantial Shareholder or an INED or any of their respective close associates would result in the Shares issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:
(pp) representing in aggregate over 0.1% of the Shares in issue; and
(qq) having an aggregate value, based on the closing price of the Shares at the date of each offer for the grant, in excess of HK$5 million;

such further grant of options must be approved by Shareholders in general meeting. Our Company must send a circular to the Shareholders. All connected persons of our Company must abstain from voting in favour at such general meeting, except that any connected person may vote against the relevant resolution at the general meeting provided that his intention to do so has been stated in the circular. Any vote taken at the meeting to approve the grant of such options must be taken on a poll. Any change in the terms of options granted to a Substantial Shareholder or an INED or any of their respective close associates must be approved by the Shareholders in general meeting.

(vi) Time of acceptance and exercise of option

An option may be accepted by a participant within 21 days from the date of the offer of grant of the option.

An option may be exercised in accordance with the terms of the Share Option Scheme at any time during a period to be determined and notified by the Directors to each grantee, which period may commence from the date of the offer for the grant of options is made, but shall end in any event not later than 10 years from the date of grant of the option subject to the provisions for early termination thereof. Unless otherwise determined by the Directors and stated in the offer for the grant of options to a grantee, there is no minimum period required under the Share Option Scheme for the holding of an option before it can be exercised.

(vii) Performance targets

Unless the Directors otherwise determined and stated in the offer for the grant of options to a grantee, a grantee is not required to achieve any performance targets before any options granted under the Share Option Scheme can be exercised.

(viii) Subscription price for the Shares and consideration for the option

The subscription price for the Shares under the Share Option Scheme shall be a price determined by the Directors, but shall not be less than the highest of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet for trade in one or more board lots of the Shares on the date of the offer for the grant, which must be a business day;

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STATUTORY AND GENERAL INFORMATION

(ii) the average closing price of Shares as stated in the Stock Exchange’s daily quotations for the five business days immediately preceding the date of the offer for the grant; and (iii) the nominal value of a Share.

A nominal consideration of HK$1 is payable on acceptance of the grant of an option.

(ix) Ranking of the Shares

(aa) The Shares allotted and issued upon the exercise of an option will be subject to all the provisions of the Articles of Association of our Company for the time being in force and will rank pari passu in all respects with the fully paid Shares in issue on the date on which the option is duly exercised or, if that date falls on a day when the register of members of our Company is closed, the first day of the re-opening of the register of members (the ‘‘Exercise Date’’) and accordingly will entitle the holders thereof to participate in all dividends or other distributions paid or made on or after the Exercise Date other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor shall be before the Exercise Date. A Share allotted and issued upon the exercise of an option shall not carry voting rights until the name of the grantee has been entered on the register of members of our Company as the holder thereof.
(bb) Unless the context otherwise requires, references to ‘‘Shares’’ in this paragraph include references to shares in the ordinary equity share capital of our Company of such nominal amount as shall result from a subdivision, consolidation, reclassification or re-construction of the share capital of our Company from time to time.

(x) Restrictions on the time of the offer for the grant of options

No offer for grant of options shall be made after inside information has come to our Company’s knowledge until we have announced the information. In particular, during the period commencing one month immediately preceding the earlier of (aa) the date of the Board meeting (as such date is first notified to the Stock Exchange in accordance with the [REDACTED]) for the approval of our Company’s results for any year, half-year, quarterly or any other interim period (whether or not required under the [REDACTED]), and (bb) the deadline for our Company to publish an announcement of its results for any year, half-year, or quarterly or any other interim period (whether or not required under the [REDACTED]) and ending on the date of the results announcement, no option for the grant of options may be made.

The Directors may not make any offer for the grant of option to a participant who is a Director during the periods or times in which Directors are prohibited from dealing in Shares pursuant to Rules 5.46 to 5.67 of the [REDACTED] or any corresponding code or securities dealing restrictions adopted by our Company.

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STATUTORY AND GENERAL INFORMATION

(xi) Period of the Share Option Scheme

The Share Option Scheme will remain in force for a period of 10 years commencing on the date on which the Share Option Scheme is adopted.

(xii) Rights on ceasing employment

If the grantee of an option is an Eligible Employee and ceases to be an Eligible Employee for any reason other than death, ill-health or retirement in accordance with his contract of employment or the termination of his employment on one or more of the grounds referred to in sub-paragraph (xiv) below before exercising his option in full, the option (to the extent not already exercised) will lapse on the date of cessation and shall not be exercisable unless the Directors otherwise determine in which event the grantee may exercise the option (to the extent not already exercised) in whole or in part within such period as the Directors may determine following the date of such cessation, which will be taken to be the last day on which the grantee was at work with our Group or the Invested Entity whether salary is paid in lieu of notice or not.

‘‘Eligible Employee’’ means any employee (whether full time or part time employee, including any executive director but not any non-executive director) of our Company, any of our subsidiaries or any Invested Entity.

(xiii) Rights on death, ill-health or retirement

If the grantee of an option is an Eligible Employee and ceases to be an Eligible Employee by reason of his death, ill-health or retirement in accordance with his contract of employment before exercising the option in full, his personal representative(s), or, as appropriate, the grantee may exercise the option (to the extent not already exercised) in whole or in part within a period of 12 months following the date of cessation of employment which date shall be the last day on which the grantee was at work with our Group or the Invested Entity whether salary is paid in lieu of notice or not or such longer period as the Directors may determine.

(xiv) Rights on dismissal

If the grantee of an option is an Eligible Employee and ceases to be an Eligible Employee by reason of a termination of his employment on the grounds that he has been guilty of persistent or serious misconduct, or has committed any act of bankruptcy or has become insolvent or has made any arrangements or composition with his creditors generally, or has been convicted of any criminal offence (other than an offence which in the opinion of the Directors does not bring the grantee or our Group or the Invested Entity into disrepute), his option (to the extent not already exercised) will lapse automatically on the date of cessation to be an Eligible Employee.

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STATUTORY AND GENERAL INFORMATION

(xv) Rights on breach of contract

If the Directors shall at their absolute discretion determine that (aa) (1) the grantee of any option (other than an Eligible Employee) or his close associate has committed any breach of any contract entered into between the grantee or his close associate on the one part and our Group or any Invested Entity on the other part; or (2) that the grantee has committed any act of bankruptcy or has become insolvent or is subject to any winding-up, liquidation or analogous proceedings or has made any arrangement or composition with his creditors generally; or (3) the grantee could no longer make any contribution to the growth and development of our Group by reason of the cessation of its relations with our Group or by other reason whatsoever; and (bb) the option granted to the grantee under the Share Option Scheme shall lapse as a result of any event specified in sub-paragraph (1), (2) or (3) above, his option will lapse automatically on the date on which the Directors have so determined.

(xvi) Rights on a general offer, a compromise or arrangement

If a general or partial offer, whether by way of takeover offer, share repurchase offer, or scheme of arrangement or otherwise in like manner is made to all the holders of Shares, or all such holders other than the offeror and/or any person controlled by the offeror and/or any person acting in association or concert with the offeror, our Company shall use all reasonable endeavours to procure that such offer is extended to all the grantees on the same terms, mutatis mutandis, and assuming that they will become, by the exercise in full of the options granted to them, Shareholders. If such offer becomes or is declared unconditional or such scheme or arrangement is formally proposed to Shareholders of our Company, a grantee shall be entitled to exercise his option (to the extent not already exercised) to its full extent or to the extent specified in the grantee’s notice to our Company in exercise of his option at any time thereafter and up to the close of such offer (or any revised offer) or the record date for entitlements under such scheme of arrangement, as the case may be. Subject to the above, an option will lapse automatically (to the extent not exercised) on the date which such offer (or, as the case may be, revised offer) closed or the relevant date for entitlements under such scheme of arrangement, as the case may be.

(xvii) Rights on winding up

In the event of a resolution being proposed for the voluntary winding-up of our Company during the option period, the grantee may, subject to the provisions of all applicable laws, by notice in writing to our Company at any time not less than two business days before the date on which such resolution is to be considered and/or passed, exercise his option (to the extent not already exercised) either to its full extent or to the extent specified in such notice in accordance with the provisions of the Share Option Scheme and our Company shall allot and issue to the grantee the Shares in respect of which such grantee has exercised his option not less than one business day before the date on which such resolutions to be considered and/or passed whereupon he shall accordingly be entitled, in respect of the Shares allotted and issued to him in the aforesaid manner, to participate in the distribution of the assets of our Company

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STATUTORY AND GENERAL INFORMATION

available in liquidation pari passu with the holders of the Shares in issue on the day prior to the date of such resolution. Subject thereto, all options then outstanding shall lapse and determine on the commencement of the winding-up of our Company.

(xviii)Grantee being a company wholly owned by eligible participants

If the grantee is a company wholly owned by one or more eligible participants:

(aa) sub-paragraphs (xii), (xiii), (xiv) and (xv) shall apply to the grantee and to the options to such grantee, mutatis mutandis, as if such options had been granted to the relevant eligible participant, and such options shall accordingly lapse or fall to be exercisable after the event(s) referred to in sub-paragraphs (xii), (xiii), (xiv) and (xv) shall occur with respect to the relevant eligible participant; and
(bb) the options granted to the grantee shall lapse and determine on the date the grantee ceases to be wholly owned by the relevant eligible participant provided that the Directors may in their absolute discretion decide that such options or any part thereof shall not so lapse or determine subject to such conditions or limitations as they may impose.

(xix) Adjustments to the subscription price

In the event of a capitalisation issue, rights issue, subdivision or consolidation of Shares or reduction of capital of our Company whilst an option remains exercisable, such corresponding alterations (if any) certified by the auditors for the time being of or an independent financial adviser to our Company as fair and reasonable will be made to the number or nominal amount of Shares, the subject matter of the Share Option Scheme and the options so far as unexercised and/or the option price of the option concerned, provided that (i) any adjustments shall give a grantee the same proportion of the issued share capital to which he was entitled prior to such alteration; (ii) the issue of Shares or other securities of our Group as consideration in a transaction may not be regarded as a circumstance requiring adjustment; (iii) no alteration shall be made the effect of which would be to enable a Share to be issued at less than its nominal value; and (iv) notwithstanding (i) above, any adjustments as a result of an issue of securities with a price-dilutive element, such as a rights issue, open offer or capitalisation issue, should be based on a scrip factor similar to the one used in the accounting standards in adjusting the earnings per share figures and any such adjustment shall comply with the supplementary guidance on Rule 23.03(13) of the [REDACTED] as set out in the letter issued by the [REDACTED] dated 5 September 2005; and (v) any adjustment must be made in compliance with the [REDACTED] and such rules, codes and guidance notes of the [REDACTED] from time to time. In addition, in respect of any such adjustments, other than any adjustment made on a capitalisation issue, such auditors or independent financial adviser must confirm to the Directors in writing that the adjustments satisfy the requirements of the relevant provision of the [REDACTED].

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STATUTORY AND GENERAL INFORMATION

(xx) Cancellation of options

Any cancellation of options granted but not exercised must be subject to the prior written consent of the relevant grantee and the approval of the Directors.

When our Company cancels any option granted to a grantee but not exercised and issues new option(s) to the same grantee, the issue of such new option(s) may only be made with available unissued options (excluding the options so cancelled) within the General Scheme Limit or the new limits approved by the Shareholders pursuant sub-paragraphs (iii) (cc) and (dd) above.

(xxi) Termination of the Share Option Scheme

Our Company may by resolution in general meeting at any time terminate the Share Option Scheme and in such event no further options shall be offered but in all other respects the provisions of the Share Option Scheme shall remain in force to the extent necessary to give effect to the exercise of any options (to the extent not already exercised) granted prior to the termination or otherwise as may be required in accordance with the provisions of the Share Option Scheme Options (to the extent not already exercised) granted prior to such termination shall continue to be valid and exercisable in accordance with the Share Option Scheme.

(xxii) Rights are personal to the grantee

An option is personal to the grantee and shall not be transferable or assignable and no grantee shall in any way sell, transfer, charge, mortgage, encumber or otherwise dispose of or create any interest whatsoever in favour of any third party over or in relation to any option or enter into any agreements so to do.

(xxiii) Lapse of option

An option shall lapse automatically (to the extent not already exercised) on the earliest

of:

(a) the expiry of the option period in respect of such option;
(b) the expiry of the periods or dates referred to in paragraph (xii), (xiii), (xiv), (xv), (xvi), (xvii) and (xviii); and
(c) the date on which the Directors exercise our Company’s right to cancel the option by reason of a breach of paragraph (xxii) above by the grantee.

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STATUTORY AND GENERAL INFORMATION

(xxiv) Miscellaneous

(a) The Share Option Scheme is conditional on the [REDACTED] of the Stock Exchange granting the [REDACTED] of, and permission to deal in, such number of Shares to be allotted and issued pursuant to the exercise of any options which may be granted under the Share Option Scheme, such number being not less than that of the General Scheme Limit.
(b) The terms and conditions of the Share Option Scheme relating to the matters set out in Rule 23.03 of the [REDACTED] shall not be altered to the advantage of grantees of the options except with the approval of the Shareholders in general meeting.
(c) Any alterations to the terms and conditions of the Share Option Scheme which are of a material nature or any change to the terms of options granted must be approved by the Shareholders in general meeting, except where the alterations take effect automatically under the existing terms of the Share Option Scheme.
(d) The terms of the Share Option Scheme and any amended terms of the Share Option Scheme or the options shall comply with the relevant requirements of Chapter 23 of the [REDACTED].
(e) Any change to the authority of the Directors or the scheme administrators in relation to any alteration to the terms of the Share Option Scheme shall be approved by the shareholders of our Company in general meeting.

4.2 Present status of the Share Option Scheme

(i) Approval of the [REDACTED] required

The Share Option Scheme is conditional on the [REDACTED] of the Stock Exchange granting the [REDACTED] of, and permission to [REDACTED], such number of Shares to be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme, such number being not less than that of the General Scheme Limit.

(ii) Application for approval

Application has been made to the [REDACTED] of the Stock Exchange for the [REDACTED] of and permission to [REDACTED] the Shares to be issued within the General Scheme Limit pursuant to the exercise of any options which may be granted under the Share Option Scheme.

(iii) Grant of options

As at the date of this [REDACTED], no options have been granted or agreed to be granted under the Share Option Scheme.

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STATUTORY AND GENERAL INFORMATION

(iv) Value of options

The Directors consider it inappropriate to disclose the value of options which may be granted under the Share Option scheme as if they had been granted as at the Latest Practicable Date. Any such valuation will have to be made on the basis of certain option pricing model or other methodology, which depends on various assumptions including, the exercise price, the exercise period, interest rate, expected volatility and other variables. As no options have been granted, certain variables are not available for calculating the value of options. The Directors believe that any calculation of the value of options as at the Latest Practicable Date based on a number of speculative assumptions would not be meaningful and would be misleading to investors.

(v) Compliance with [REDACTED]

The Share Option Scheme complies with Chapter 23 of the [REDACTED].

5. ESTATE DUTY, TAX AND OTHER INDEMNITIES

All the Individual Owners and BVI Inv Vehicles (collectively, the ‘‘Indemnifiers’’) [have entered into] a deed of indemnity with and in favour of our Company (for itself and as trustee for each of its present subsidiaries) (being the material contract (b) referred to in the paragraph headed ‘‘2.1 Summary of material contracts’’ in this appendix) to provide indemnities on a joint and several basis, in respect of, among other matters:

(a) any liability for Hong Kong estate duty which might be incurred by any member of our Group by reason of any transfer of property (within the meaning of sections 35 and 43 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) or the equivalent thereof under the laws of any jurisdiction outside Hong Kong) to any member of our Group at any time on or before the [REDACTED]; and
(b) tax liabilities (including all actual fines, penalties, liabilities, costs, charges, expenses and interest relation to taxation) which might be payable by any member of our Group in respect of any income, profits or gains earned, accrued, received on or before the [REDACTED], or any event or transaction on or before the [REDACTED], whether alone or in conjunction with any other circumstances whenever occurring and whether or not the tax liabilities or taxation claim are chargeable against or attributable to any other person, firm or company.

The Indemnifiers are under no liability under the deed of indemnity in respect of any taxation:

(a) to the extent that provision or reserve has been made for such taxation in the audited accounts of any member of our Group for any accounting period up to 30 June 2014;
(b) to the extent that such taxation or liability for such taxation falling on any of the members of our Group in respect of their accounting periods commencing on 1 July 2014 and ending on the [REDACTED], where such taxation or liability would not have arisen

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STATUTORY AND GENERAL INFORMATION

but for some act or omission of, or transaction voluntarily affected by any member of our Group (whether alone or in conjunction with some other act, omission or transaction, whenever occurring) without the prior written consent or agreement of the Indemnifiers, other than any such act, omission or transaction:

(i) carried out or effected in the ordinary course of business or in the ordinary course of acquiring and disposing of capital assets after 1 July 2014; or
(ii) carried out, made or entered into pursuant to a legally binding commitment created on or before 30 June 2014 or pursuant to any statement of intention made in this [REDACTED]; or
(iii) pursuant to the Reorganisation carried out by our Group as set out in this [REDACTED]; or
(c) to the extent that such taxation claim arises or is incurred as a result of the imposition of taxation as a consequence of any retrospective change in the law, rules and regulations or the interpretation or practice thereof by the Hong Kong Inland Revenue Department or the taxation authority of the PRC, or any other relevant authority (whether in Hong Kong or PRC or any other part of the world) coming into force after the date of the deed of indemnity or to the extent such taxation claim arises or is increased by an increase in rates of taxation after the date of the deed of indemnity with retrospective effect; or
(d) to the extent that any provision or reserve made for taxation in the audited accounts of any member of our Group up to 30 June 2014 which is finally established to be an overprovision or an excessive reserve in which case the Indemnifiers’ liability (if any) in respect of such taxation shall be reduced by an amount not exceeding such provision or reserve, provided that the amount of any such provision or reserve applied referred to in this paragraph to reduce the Indemnifiers’ liability in respect of taxation shall not be available in respect of any such liability arising thereafter.

Under the deed of indemnity, each of the Indemnifiers [has also undertaken] to us that she/it will indemnify and at all times keep us fully indemnified, on a joint and several basis, from any depletion in or reduction in value of its assets or any loss (including all legal costs and suspension of operation), cost, expenses, damages or other liabilities which any member of our Group may incur or suffer arising from or in connection with the implementation of the Reorganisation.

Pursuant to the deed of indemnity, the Indemnifiers [have on a joint and several basis undertaken] to indemnify each member of our Group, among other indemnities against:

(a) any amount which any member of the Group may be required to pay and/or any penalty which may be imposed on any member of our Group, or any costs, expenses and losses which such company may suffer in connection with such amount and/or penalty, due to

– IV-31 –

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such company’s failure to observe laws, regulations or rules concerning social security funds, housing provident funds or any other laws and regulations in connection with the employee welfare and benefits in Hong Kong or the PRC;

(b) any penalty which may be imposed on any member of our Group, or any costs, expenses and losses which such company may suffer in connection with such penalty, due to such company’s failure to duly make all relevant filings or reports and supply all other information required to be supplied to any relevant Hong Kong or PRC Governmental authority, including but not limited to the relevant tax bureau and relevant administration of industry and commerce, or to observe any laws, regulations or rules in Hong Kong or PRC in this regard;
(c) any costs, claims, damages, expenses, losses, penalties, liabilities, actions and proceedings which any member of our Group may suffer from not having obtained all relevant approvals, permits, licences and/or certificates for conducting its businesses;
(d) any loss, liability, damages, claims, fines, penalties, orders, expenses and costs or loss of profits, benefits or other commercial advantages suffered by any member of our Group as a result of or in connection with
(i) the existing use of any premises demised by any of the properties leased by the Group in Hong Kong and the PRC and/or building(s) erected thereon being unlawful;
(ii) the relocation of any office or factory or other place of business on the properties leased by the Group in Hong Kong and the PRC by such member arising from or in connection with the existing use of any premises demised by any of the properties leased by the Group in Hong Kong and the PRC and/or building(s) erected thereon being unlawful or, if applicable the lessors’ registration default in relation to the lease agreement to the extent that damages, if any, recovered from the relevant lessor are inadequate to cover the related costs of such member; and
(iii) all breaches, non-compliance and/or violation of, by any member of our Group, any applicable laws, rules and/or regulations in Hong Kong and the PRC in relation to all the matters as referred to in the paragraph headed ‘‘Business — Legal proceedings and non-compliance’’ in this [REDACTED].

The provisions contained in the deed of indemnity are conditional on the conditions stated in the section headed ‘‘Structure and conditions of the [REDACTED] — Conditions of the [REDACTED]’’ in this [REDACTED] being fulfilled or, to the extent permitted, waived by the relevant party. If such conditions are not fulfilled or, to the extent permitted, waived on or before the date falling 30 days from the date of this [REDACTED], or such later date as the parties under the deed of indemnity may agree, the deed of indemnity shall become null and void and cease to have effect.

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APPENDIX IV STATUTORY AND GENERAL INFORMATION

Our Directors have been advised that no material liability for estate duty under the laws of the Cayman Islands or the BVI is likely to fall on our Group members.

6. OTHER INFORMATION

6.1 Sponsor

The Sponsor has made an application on behalf of our Company to the [REDACTED] of the Stock Exchange for the [REDACTED] of, and permission to [REDACTED], the Shares in issue and to be issued pursuant to the [REDACTED] and any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme. All necessary arrangements have been made to enable such Shares to be admitted into [REDACTED].

The Sponsor is independent from our Company pursuant to Rule 6A.07 of the [REDACTED]. The sponsor’s fees payable by us in respect of [REDACTED] services as sole sponsor for the [REDACTED] is HK$3,800,000 (excluding any disbursements).

6.2 Litigation

As of the Latest Practicable Date, no member of our Group is engaged in any litigation, arbitration or claim of material importance, and no litigation, arbitration or claim of material importance is known to our Directors to be pending or threatened by or against our Group member, that would have a material adverse effect on our results of operations or financial condition of our Group.

6.3 Preliminary expenses

The preliminary expenses of our Company are estimated to be approximately HK$55,000 and are payable by our Company.

6.4 Promoters

Our Company has no promoter for the purpose of the [REDACTED]. Within the two years immediately preceding the date of this [REDACTED], no cash, securities or other benefit has been paid, allotted or given nor are any proposed to be paid, allotted or given to any promoters in connection with the [REDACTED] and the related transactions described in this [REDACTED].

6.5 Agency fees or commissions received

Except as disclosed in the section headed ‘‘Underwriting — Commission and expenses’’ in this [REDACTED], no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of any member of our Group within the two years immediately preceding the date of this [REDACTED].

– IV-33 –

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APPENDIX IV

6.6 Qualifications of experts

The qualifications of the experts who have given opinions and/or whose names are included in this [REDACTED] are as follows:

Name Halcyon Capital Limited HLB Hodgson Impey Cheng Limited Conyers Dill & Pearman (Cayman) Limited Chiu & Partners GFE Law Office Ipsos Hong Kong Limited	Qualification
	a licensed corporation under the SFO to carry out Type 6 (advising on corporate finance) regulated activities (as defined in the SFO) Certified Public Accountants Cayman Islands attorneys-at-law Legal adviser to our Company as to Hong Kong law Qualified PRC lawyers Independent industry consultants

6.7 Consents of experts

Each of the experts referred to in the paragraph headed ‘‘6.6 Qualifications of experts’’ in this appendix, has given and has not withdrawn its consent to the issue of this [REDACTED] with the inclusion of its report and/or letter and/or legal opinion (as the case may be) and references to its name included in the form and context in which it respectively appears.

6.8 Binding effect

This [REDACTED] shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of Sections 44A and 44B of the Companies WUMP Ordinance insofar as applicable.

6.9 Taxation of holders of Shares

(a) Hong Kong

Dealings in Shares registered on our Company’s Hong Kong branch register of members will be subject to Hong Kong stamp duty. The sale, purchase and transfer of Shares are subject to Hong Kong stamp duty, the current rate of which is 0.2% of the consideration or, if higher, the value of the Shares being sold or transferred.

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APPENDIX IV STATUTORY AND GENERAL INFORMATION

Profits from dealings in the Shares arising in or derived from Hong Kong may also be subject to Hong Kong profits tax.

(b) Cayman Islands

Under the present Cayman Islands law, there is no stamp duty payable in the Cayman Islands on transfer of Shares.

(c) Consultation with professional advisers

Intending holders of Shares are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in Shares or exercising any rights attaching to them. It is emphasised that none of our Company, the Directors or the other parties involved in the [REDACTED] can accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting from their subscription for, purchase, holding or disposal of or dealing in Shares or exercising any rights attaching to them.

6.10 Miscellaneous

(a) Within the two years immediately preceding the date of this [REDACTED]:
(i) no share or loan capital of our Company or any of our subsidiaries has been issued or agreed to be issued fully or partly paid either for cash or for a consideration other than cash, save as disclosed in this appendix and the section headed ‘‘History, development and reorganisation’’ in this [REDACTED];
(ii) no share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option;
(iii) neither our Company nor any of our subsidiaries have issued or agreed to issue any founder shares, management shares or deferred shares;
(iv) no commission has been paid or payable (except commissions to the [REDACTED]) for subscription, agreeing to subscribe, procuring subscription or agreeing to procure subscription of any Shares or debentures of our Company;
(v) none of the equity and debt securities of our Company is listed or dealt with in any other stock exchange nor is any [REDACTED] or permission to deal being or proposed to be sought; and
(vi) our Company has no outstanding debentures convertible debt securities.

– IV-35 –

APPENDIX IV

STATUTORY AND GENERAL INFORMATION

(b) Our principal register of members will be maintained by our principal registrar, [REDACTED], in the Cayman Islands and our Hong Kong register of members will be maintained by our branch share registrar in Hong Kong, [REDACTED]. Unless our Directors otherwise agree, all transfer and other documents of title of Shares must be lodged for registration with and registered by the branch share registrar in Hong Kong and may not be lodged in the Cayman Islands. All necessary arrangements have been made to enable the Shares to be admitted to [REDACTED].
(c) The Directors confirm that up to the date of this [REDACTED], there has been no material adverse change in the financial or trading position or prospects of our Group since 30 June 2014 (being the date to which the latest audited consolidated financial statements of our Group were made up).
(d) No company within our Group is presently listed on any stock exchange or traded on any trading system.
(e) Our Directors have been advised that, under the Companies Law, the use of a Chinese name by our Company does not contravene the Companies Law.
(f) There has not been any interruption in the business of our Group which may have or has had a significant effect on the financial position of our Group in the 12 months preceding the date of this [REDACTED].

6.11 Bilingual [REDACTED]

The English language and Chinese language versions of this [REDACTED] are being published separately, in reliance upon the exemption provided by Section 4 of the Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong).

– IV-36 –

APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to a copy of this [REDACTED] and delivered to the Registrar of Companies in Hong Kong for registration were, among other documents:

(a) the written consents referred to under the paragraph headed ‘‘Appendix IV Statutory and General Information — 6.7 Consents of experts’’ in this [REDACTED], and
(b) copies of the material contracts referred to in the paragraph headed ‘‘Appendix IV Statutory and General Information — 2.1 Summary of material contracts’’ in this [REDACTED].

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the office of Chiu & Partners at 40/F, Jardine House, 1 Connaught Place, Central, Hong Kong, during normal business hours from 9:00 a.m. up to 5:00 p.m. up to and including [.] 2014, being the date which falls on 14 days from the date of this [REDACTED]:

(a) our Memorandum and Articles of Association;
(b) the Accountants’ Report prepared by HLB Hodgson Impey Cheng Limited in respect of the historical financial information of our Group for the two years ended 30 June 2014, the text of which is set out in Appendix I to this [REDACTED];
(c) the audited financial statements of the companies now comprising our Group for each of the two years ended 30 June 2014 (or for the period since their respective dates of incorporation, where it is shorter), if any;
(d) the report on the unaudited pro forma financial information of our Group prepared by HLB Hodgson Impey Cheng Limited, the text of which is set out in Appendix II to this [REDACTED];
(e) the Companies Law;
(f) the letter of advice prepared by Conyers Dill & Pearman (Cayman) Limited, summarising certain aspects of the Cayman Islands company law referred to in Appendix III to this [REDACTED];
(g) the legal opinion prepared by GFE Law Office in respect of certain aspects of our Group and the property interests of our Group in the PRC;
(h) the material contracts referred to in the paragraph headed ‘‘Appendix IV Statutory and General Information — 2.1 Summary of material contracts’’ in this [REDACTED];

– V-1 –

APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

(i) the written consents referred to in the paragraph headed ‘‘Appendix IV Statutory and General Information — 6.7 Consents of experts’’ in this [REDACTED];
(j) the rules of the Share Option Scheme; and
(k) the service contracts and appointment letters referred to in the paragraph headed ‘‘Appendix IV Statutory and General Information — 3.2 Directors’ service contracts and letters of appointment’’ in this [REDACTED].

– V-2 –

AI assistant

Web3 Meta Limited — Capital/Financing Update 2014

51265_rns_2014-10-31_9b128008-9637-4992-8d08-c255a139e8cc.pdf

Application Proof of

ODELLA LEATHER HOLDINGS LIMITED 愛 特 麗 皮 革 控 股 有 限 公 司

WARNING

IMPORTANT

ODELLA LEATHER HOLDINGS LIMITED

愛 特 麗 皮 革 控 股 有 限 公 司

Halcyon Capital Limited

CHARACTERISTICS OF GEM

EXPECTED TIMETABLE

CONTENTS

CONTENTS

SUMMARY

BUSINESS MODEL

Manufacturing services

Pre-production product development services

SUMMARY

Post-production logistical services

Pricing policy

Geographical coverage of the sale of our products

OUR CUSTOMERS

SUMMARY

OUR SUPPLIERS

OUR COMPETITIVE STRENGTHS

SUMMARY

OUR BUSINESS STRATEGIES

COMPETITIVE LANDSCAPE

SHAREHOLDERS

KEY OPERATIONAL AND FINANCIAL DATA

SUMMARY

Highlight of Consolidated Statement of Profit or Loss

Highlight of Consolidated Statement of Financial Position

Key financial ratios and data

Key operating data

Sales volume

SUMMARY

Average selling prices and price ranges

Production capacity and utilisation rates

SUMMARY

HISTORICAL NON-COMPLIANCE INCIDENTS

RECENT DEVELOPMENTS SUBSEQUENT TO THE TRACK RECORD PERIOD

SUMMARY

MATERIAL ADVERSE CHANGE AND PROFIT WARNING

[REDACTED]

SUMMARY

Expected timing of [REDACTED]

DIVIDENDS

SUMMARY

RISK FACTORS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

[REDACTED]

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

[REDACTED]

DEFINITIONS

DEFINITIONS

[REDACTED]

DEFINITIONS

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS

RISK FACTORS

RISKS RELATING TO OUR BUSINESS

We do not have long-term purchase commitments from our customers and we are exposed to potential volatility in our turnover

RISK FACTORS

Significant growth in revenue and net profit for the year ended 30 June 2014 is not indicative of our future financial performance and our operating results may fluctuate significantly

RISK FACTORS

Our performance may be affected by consumers’ preference, consumer spending level, general economic conditions and unexpected and abnormal changes in climate in the countries in which our customers sell our products

RISK FACTORS

We rely on raw material suppliers to supply us with suitable leather and if we cannot source such leather with sufficient amount, it may have an adverse impact on our reputation and business operation

RISK FACTORS

A material disruption of our operations could adversely affect our business

RISK FACTORS

Our business is susceptible to seasonal fluctuations and if we cannot balance out our production schedule and secure some purchase orders for our low season, our results of operations may be adversely affected

Web3 Meta Limited Capital/Financing Update 2014

ODELLA LEATHER HOLDINGS LIMITED 愛特麗皮革控股有限公司

愛特麗皮革控股有限公司