Web3 Meta Limited - M&A Activity 2017

THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your shares in Odella Leather Holdings Limited, you should at once hand this Composite Document and the accompanying Form of Acceptance to the purchaser or the licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser(s).

This Composite Document should be read in conjunction with the accompanying Form of Acceptance, the contents of which form part of the terms of the Offer contained herein.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Composite Document and the Form of Acceptance, 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 Composite Document and the Form of Acceptance.

POWER VIEW GROUP LIMITED

ODELLA LEATHER HOLDINGS LIMITED

威景集團有限公司愛特麗皮革控股有限公司

(incorporated in the British Virgin Islands with limited liability)

(incorporated in the Cayman Islands with limited liability) (Stock Code: 8093)

COMPOSITE OFFER AND RESPONSE DOCUMENT RELATING TO MANDATORY UNCONDITIONAL CASH OFFER BY

==> picture [30 x 34] intentionally omitted <==

CHINA GOLDJOY SECURITIES LIMITED

ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

Joint Financial Advisers to the Offeror

==> picture [28 x 29] intentionally omitted <==

==> picture [6 x 29] intentionally omitted <==

==> picture [7 x 27] intentionally omitted <==

==> picture [21 x 21] intentionally omitted <==

Titan Financial Services Limited Dongxing Securities (Hong Kong) Company Limited

Independent Financial Adviser to the Independent Board Committee

and the Independent Shareholders

Asia Investment Management Limited

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed ‘‘Definitions’’ in this Composite Document.

A letter from Goldjoy Securities containing, among other things, details of the terms of the Offer is set out on pages 6 to 19 of this Composite Document.

A letter from the Board is set out on pages 20 to 24 of this Composite Document.

A letter from the Independent Board Committee is set out on pages 25 to 26 of this Composite Document.

A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 27 to 47 of this Composite Document.

The procedures for acceptance and settlement of the Offer and other related information are set out on pages I-1 to I-8 in Appendix I to this Composite Document and in the accompanying Form of Acceptance. Acceptance of the Offer should be received by the Registrar by no later than 4:00 p.m. on Friday, 17 March 2017 or such later time and/or the date as the Offeror may decide and announce in accordance with the requirements under the Takeovers Code.

Any persons including, without limitation, custodians, nominees and trustees, who would, or otherwise intend to, forward this Composite Document and/orparagraphthe accompanyingheaded ‘‘OverseasFormShareholdersof Acceptance’’ oftoAppendixany jurisdictionI to thisoutsideCompositeHong KongDocumentshouldbeforeread thetakingdetailsanyinaction.this regardIt is whichthe responsibilityare containedofineachthe Overseas Shareholder wishing to accept the Offer to satisfy himself, herself or itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents or any registration or filing which may be required and the compliance with other necessary formalities or legal requirements and payment of any transfer or other taxes due by such Overseas Shareholder in respect of such jurisdiction. Each Overseas Shareholder is advised to seek professional advice on deciding whether or not to accept the Offer.

The Composite Document will remain on the websites of the Stock Exchange at http://www.hkexnews.hk and the Company at www.odella.com as long as the Offer remains open.

For identification purposes only

24 February 2017

	Page
EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
IMPORTANT NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iv
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM GOLDJOY SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . . . . .	25
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . . .	27
APPENDIX I — FURTHER TERMS AND PROCEDURES FOR
ACCEPTANCE OF THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III — GENERAL INFORMATION OF THE OFFEROR . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV — GENERAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . .	IV-1
ACCOMPANYING DOCUMENT — FORM OF ACCEPTANCE

– i –

EXPECTED TIMETABLE

The expected timetable set out below is indicative only and may be subject to changes. Further announcement(s) will be made in the event of any changes to the timetable as and when appropriate.

All references to date and time contained in this Composite Document and the Form of Acceptance refer to Hong Kong date and time.

Event

Time & Date

Despatch date of this Composite Document and
the Form of Acceptance and the commencement of
the Offer (Notes 1 and 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 24 February 2017

Latest time and date for acceptance of

the Offer (Notes 2 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 17 March 2017

Closing Date of the Offer (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 17 March 2017

Announcement of the results of the Offer

(or its extension or revision, if any),

to be posted on the website of the

Stock Exchange (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . not later than 7:00 p.m. on Friday, 17 March 2017

Latest date for posting of remittance in respect of

valid acceptances received under the Offer (Notes 3 and 5) . . . . . . . . . . . Tuesday, 28 March 2017
Note 1: The Offer, which is unconditional, is made on the date of posting of this Composite Document, and is capable of being accepted on and from that date until the Closing Date.
Note 2: The latest time for acceptance of the Offer is 4:00 p.m. on Friday, 17 March 2017 unless the Offeror revises or extends the Offer in accordance with the Takeovers Code. The Offeror and the Company will jointly issue an announcement through the website of the Stock Exchange no later than 7:00 p.m. on Friday, 17 March 2017 stating whether the Offer has been extended, revised or has closed for acceptance. In the event that the Offeror decides to extend the Offer, at least 14 days’ notice by way of an announcement will be given before the Offer is closed to those Independent Shareholders who have not accepted the Offer.
Note 3: Remittances in respect of the cash consideration (after deducting the seller’s ad valorem stamp duty) payable for the Shares tendered under the Offer will be despatched to the Independent Shareholders accepting the Offer by ordinary post at their own risk as soon as possible, but in any event within seven business days (as defined in the Takeovers Code) after the date of receipt by the Registrar of a duly completed Form of Acceptance and all the relevant documents of title in accordance with the Takeovers Code.
Note 4: Acceptance of the Offer shall be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code. Please refer to paragraph headed ‘‘6. Right of withdrawal’’ in Appendix I to this Composite Document for further information on the circumstances where acceptances maybe withdrawn.

– ii –

EXPECTED TIMETABLE

Notes 5: If there is a tropical cyclone warning signal number 8 or above, or a black rainstorm warning:
(a) in force in Hong Kong at any local time before 12:00 noon but no longer in force after 12:00 noon on the latest date for acceptance of the Offer, and the latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances, the latest time for acceptance of the Offer and the posting of remittances will remain at 4:00 p.m. on the same Business Day; or
(b) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the latest date for acceptance of the Offer, and the latest date for posting of remittances for the amounts due under the Offer in respect of valid acceptances, the latest time for acceptance of the Offer and the posting of remittances will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

Save as mentioned above, if the latest time for the acceptance of the Offer and posting of remittances do not take effect on the date and time as stated above, the other dates mentioned above may be affected. The Offeror and the Company will notify the Shareholders by way of announcement(s) on any change to the expected timetable as soon as practicable.

– iii –

IMPORTANT NOTICE

NOTICE TO OVERSEAS SHAREHOLDERS

The making of the Offer to persons with a registered address in jurisdictions outside Hong Kong may be prohibited or affected by the laws of the relevant jurisdictions. Overseas Shareholders who are citizens or residents or nationals of jurisdictions outside Hong Kong should inform themselves about and observe any applicable legal requirements. It is the responsibility of any such person who wishes to accept the Offer to satisfy himself/herself/itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental, exchange control or other consents which may be required or the compliance with other necessary formalities or legal requirements and the payment of any transfer or other taxes or other required payments due in respect of such jurisdiction. The Offeror, parties acting in concert with the Offeror, the Company, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong), the Registrar or any of their respective ultimate beneficial owners, directors, officers, agents or associates or professional advisers or any other person involved in the Offer shall be entitled to be fully indemnified and held harmless by such person for any taxes as such person may be required to pay. Please see the paragraph headed ‘‘Overseas Shareholders’’ in the ‘‘Letter from Goldjoy Securities’’ as set out in this Composite Document.

– iv –

DEFINITIONS

In this Composite Document, unless otherwise defined or the context otherwise requires, the following expressions shall have the following meanings. Also, where terms are defined and used in only one section of this Composite Document, those defined terms are not included in the table below:

‘‘acting in concert’’ has the same meaning ascribed to it under the Takeovers Code ‘‘associate(s)’’ has the same meaning ascribed to it under the Takeovers Code
‘‘Board’’ the board of Directors

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

‘‘CCASS’’ the Central Clearing and Settlement System established and operated by HKSCC
‘‘Closing Date’’

Friday, 17 March 2017, the closing date of the Offer, or if the Offer is extended, any subsequent closing date as may be determined and announced jointly by the Offeror and the Company, with consent of the Executive, in accordance with the Takeovers Code

‘‘Company’’ Odella Leather Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the GEM (Stock Code: 8093)

‘‘Completion’’

completion of the sale and purchase of the Sale Shares pursuant to the Sale and Purchase Agreement

‘‘Composite Document’’

this composite offer document jointly issued by the Offeror and the Company to the Shareholders (other than the Offeror) in connection with the Offer in accordance with the Takeovers Code in respect of the Offer containing, among other things, the terms and conditions of the Offer (accompanied by the Form of Acceptance) and the respective letters of advice from the Independent Board Committee and the Independent Financial Adviser

– 1 –

DEFINITIONS

‘‘connected person(s)’’

has the meaning ascribed thereto under the GEM Listing Rules

‘‘Directors’’

the director(s) of the Company

‘‘Dongxing Securities Dongxing Securities (Hong Kong) Company Limited, a (Hong Kong)’’ licensed corporation permitted to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and one of the joint financial advisers to the Offeror in respect of the Offer
‘‘Encumbrance’’
means any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law), hypothecation or other encumbrance, priority or security interest or other third party right, deferred purchase, title retention, leasing, sale-andrepurchase or sale-and-leaseback or trust arrangement whatsoever over or in any property, assets or rights of whatsoever nature and includes any agreement for any of the same and ‘‘Encumber’’ shall be construed accordingly
‘‘Executive’’
the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
‘‘Form of Acceptance’’
the form of acceptance and transfer of the Shares and in respect of the Offer accompanying this Composite Document
‘‘GEM’’
the Growth Enterprise Market of the Stock Exchange
‘‘GEM Listing Rules’’
Rule Governing the Listing of Securities on GEM
‘‘Goldjoy Securities’’
China Goldjoy Securities Limited, a licensed corporation permitted to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO
‘‘Group’’ the Company and its subsidiaries
‘‘Guarantors’’
Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man, being the sole shareholder of Quality Century Limited, Design Vanguard Limited and Olson Global Limited, respectively
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong
‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited

– 2 –

DEFINITIONS

‘‘Hong Kong’’
‘‘Independent Board Committee’’
‘‘Independent Financial Adviser’’ or ‘‘AIM’’
‘‘Independent Shareholders’’
‘‘Joint Announcement’’
‘‘Last Trading Day’’
‘‘Latest Practicable Date’’
‘‘Offer’’
‘‘Offer Period’’
‘‘Offer Price’’
the Hong Kong Special Administrative Region of the PRC
an independent committee of the Board, comprising all the non-executive Directors, namely Ms. Ng Lai Hung, Dr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker, formed to advise the Independent Shareholders in respect of the Offer
Asia Investment Management Limited, a licensed corporation permitted to carry on Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Offer
in respect of the Offer, Shareholders other than the Offeror
the joint announcement issued by the Offeror and the Company dated 18 January 2017 in relation to, among other things, the Sale and Purchase Agreement and the Offer
12 January 2017, being the last trading day immediately prior to the suspension of trading in the Shares pending the release of the Joint Announcement
21 February 2017, being the latest practicable date prior to the printing of this Composite Document for ascertaining certain information contained in this Composite Document
the mandatory unconditional cash offer made by Goldjoy Securities on behalf of the Offeror for all the issued Shares of the Company (other than those already owned and/or agreed to be acquired by the Offeror) pursuant to Rule 26.1 of the Takeovers Code
the period commencing from 12 December 2016, being the date of the first of the Rule 3.7 Announcements and ending on the date of the close of the Offer in accordance with the Takeovers Code
the price at which the Offer will be made, being HK$1.1692 per Offer Share

– 3 –

DEFINITIONS

‘‘Offer Share(s)’’

any and all of the Share(s), other than those already owned and/or agreed to be acquired by the Offeror

‘‘Offeror’’
Power View Group Limited (威景集團有限公司), a company incorporated in the British Virgin Islands with limited liability on 23 April 2014
‘‘Overseas Shareholder(s)’’ Independent Shareholder(s) whose addresses, as shown on the register of members of the Company, are outside Hong Kong
‘‘PRC’’
the People’s Republic of China (excluding Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan) for the purpose of this Composite Document
‘‘Registrar’’ Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong
‘‘Relevant Period’’
the period from 12 June 2016, being the date falling six months prior to the date of the commencement of the Offer Period and up to and including the Latest Practicable Date
‘‘Rule 3.7 Announcements’’
the announcements issued by the Company dated 12 December 2016 and 11 January 2017, in relation to the possible sale by the Vendors of their shareholding interest in the Company
‘‘Sale and Purchase Agreement’’ the sale and purchase agreement dated 12 January 2017 entered into among the Vendors, the Offeror and the Guarantors in respect of the sale and purchase of the Sale Shares
‘‘Sale Share(s)’’
an aggregate of 300,000,000 Shares, legally and beneficially owned by the Vendors as at the date of the Sale and Purchase Agreement and immediately before Completion, representing 75% of the entire issued share capital of the Company as at the Latest Practicable Date
‘‘SFC’’
the Securities and Futures Commission of Hong Kong
‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Share(s)’’
ordinary share(s) of HK$0.01 each in the share capital of the Company
‘‘Shareholder(s)’’
holder(s) of Share(s)

– 4 –

DEFINITIONS

‘‘Standby Loan Facility’’ a loan facility of up to HK$117,000,000 granted by China Goldjoy Credit Limited to the Offeror to finance the amount payable by the Offeror upon acceptance of the Offer

‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Takeovers Code’’ the Codes on Takeovers and Mergers and Share Buy-backs
‘‘Titan Financial Services’’ Titan Financial Services Limited, a licensed corporation permitted to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and one of the joint financial advisers to the Offeror in respect of the Offer
‘‘Vendors’’ Quality Century Limited, Design Vanguard Limited and Olson Global Limited
‘‘%’’ per cent

– 5 –

LETTER FROM GOLDJOY SECURITIES

==> picture [49 x 55] intentionally omitted <==

==> picture [228 x 42] intentionally omitted <==

24 February 2017

To the Independent Shareholders,

Dear Sir/Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

On 12 January 2017 (after trading hours), the Offeror (as purchaser) entered into the Sale and Purchase Agreement with the Vendors and the Guarantors, pursuant to which the Offeror conditionally agreed to acquire and the Vendors conditionally agreed to sell the Sale Shares, being 300,000,000 Shares, representing 75% of the entire issued share capital of the Company as at the Latest Practicable Date for a total consideration of HK$350,760,000, equivalent to HK$1.1692 per Sale Share, which was agreed between the Offeror and the Vendors after arm’s length negotiations. Completion took place on 23 January 2017.

Immediately following the Completion and as at the Latest Practicable Date, the Offeror and parties acting in concert with it were interested in 300,000,000 Shares, representing 75% of the entire issued share capital of the Company. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror and parties acting in concert with it are required to make a mandatory unconditional cash offer for all the issued Shares (other than those Shares already owned or agreed to be acquired by the Offeror).

This letter sets out, among other things, the principal terms of the Offer, together with the information on the Offeror and the Offeror’s intention regarding the Group. Further details of the terms of the Offer and procedures for acceptance of the Offer are set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

– 6 –

LETTER FROM GOLDJOY SECURITIES

MANDATORY UNCONDITIONAL CASH OFFER

As at the Latest Practicable Date, there were 400,000,000 Shares in issue. The Company did not have any outstanding options, derivatives, warrants or securities which are convertible or exchangeable into Shares and had not entered into any agreement for the issue of such options, derivatives, warrants or securities which are convertible or exchangeable into Shares as at the Latest Practicable Date.

Principal terms of the Offer

Goldjoy Securities, on behalf of the Offeror, hereby makes the Offer on the terms set out in this Composite Document in accordance with the Takeovers Code on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.1692 in cash

The Offer Price of HK$1.1692 per Offer Share is equal to the purchase price per Sale Share paid by the Offeror under the Sale and Purchase Agreement, which was agreed between the Offeror and the Vendors after arm’s length negotiations.

The Offer Shares to be acquired under the Offer shall be free from all Encumbrances and shall be acquired together with all rights attaching to them, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document. The Offer is extended to all Independent Shareholders in accordance with the Takeovers Code.

The Offer is unconditional in all respects.

Comparisons of value

The Offer Price of HK$1.1692 per Offer Share represents:

(a) a premium of approximately 2.56% over the closing price of HK$1.14 per Share as quoted on the Stock Exchange on 12 January 2017, being the Last Trading Day;
(b) a premium of approximately 11.78% over the average closing price of approximately HK$1.0460 per Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
(c) a premium of approximately 15.76% over the average closing price of approximately HK$1.0100 per Share as quoted on the Stock Exchange for the 10 consecutive trading days immediately prior to and including the Last Trading Day;

– 7 –

LETTER FROM GOLDJOY SECURITIES

(d) a premium of approximately 43.46% over the average closing price of approximately HK$0.8150 per Share as quoted on the Stock Exchange for the 30 consecutive trading days immediately prior to and including the Last Trading Day;
(e) a premium of approximately 55.89% over the closing price of HK$0.75 per Share as quoted on the Stock Exchange on 9 December 2016, being the last trading day prior to the commencement of the Offer Period;
(f) a discount of approximately 6.46% to the closing price of approximately HK$1.25 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(g) a premium of approximately 655.79% over the audited consolidated net asset value attributable to Shareholders of approximately HK$0.1547 per Share as at 30 June 2016, the date to which the latest audited financial results of the Group were made up.

Highest and lowest Share prices

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$1.45 per Share on 9 February 2017 and HK$0.49 per Share on 17 November 2016, respectively.

Value of the Offer

As at the Latest Practicable Date, there were 400,000,000 Shares in issue. Based on the Offer Price of HK$1.1692 per Offer Share, the entire issued share capital of the Company is valued at HK$467,680,000. As the Offeror and parties acting in concert with it were interested in an aggregate of 300,000,000 Shares immediately after Completion, 100,000,000 Shares will be subject to the Offer. Based on the Offer Price of HK$1.1692 per Offer Share, the total consideration of the Offer would be HK$116,920,000 (assuming full acceptance of the Offer).

Financial resources available to the Offeror

The Offeror intends to finance the consideration payable under the Offer with the Standby Loan Facility. The Offeror has charged the Sale Shares legally and beneficially owned by it immediately following Completion in favour of China Goldjoy Credit Limited as security of the Standby Loan Facility. The Offeror has no intention that the payment of interest on, repayment of, or security for any liability (contingent or otherwise) for, the Standby Loan Facility will depend to any significant extent on the business of the Group.

Titan Financial Services and Dongxing Securities (Hong Kong) have been appointed as the joint financial advisers to the Offeror in respect of the Offer. They are satisfied that sufficient financial resources are, and will remain, available to the Offeror to satisfy the amount of funds required for the full acceptance of the Offer.

– 8 –

LETTER FROM GOLDJOY SECURITIES

Effect of accepting the Offer

By accepting the Offer, the accepting Shareholders will sell their Shares to the Offeror free from all Encumbrances and together with all rights attaching to them, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document.

Acceptance of the Offer by any Shareholder will be deemed to constitute a warranty by such person that all Shares sold by such person under the Offer are free from all liens, charges, options, claims, equities, adverse interests, third-party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto, including, without limitation, the right to receive dividends and distributions recommended, declared, made or paid, if any, on or after the date of despatch of this Composite Document. Acceptances of the Offer shall be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code.

Hong Kong stamp duty

The seller’s Hong Kong ad valorem stamp duty on acceptances of the Offer at a rate of 0.1% of the consideration payable in respect of the relevant acceptances by the Independent Shareholders or if higher, the market value of the Offer Shares as determined by the Collector of Stamp Revenue under the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong), will be deducted from the amount payable to the Independent Shareholders who accept the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the relevant Independent Shareholders who accept the Offer. The Offeror will bear buyer’s ad valorem stamp duty.

Payment

Payment in cash in respect of acceptances of the Offer will be made as soon as possible but in any event within seven (7) business days (as defined in the Takeovers Code) of the date on which the duly completed acceptances of the Offer and the relevant documents of title in respect of such acceptances are received by the Offeror (or its agent) to render each such acceptance complete and valid.

Taxation advice

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. None of the Offeror, parties acting in concert with the Offeror, the Company, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong), the Registrar or any of their respective ultimate beneficial owners, directors, officers, agents or associates or professional advisers or any other person involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offer.

– 9 –

LETTER FROM GOLDJOY SECURITIES

Overseas Shareholders

The Offeror intends to make the Offer available to all Independent Shareholders, including those who are not resident in Hong Kong. The availability of the Offer to any Overseas Shareholders may be subject to, or limited by the applicable laws and regulations of their relevant jurisdictions of residence. Overseas Shareholders should observe any applicable legal and regulatory requirements and, where necessary, consult their own professional advisers. It is the responsibilities of the Overseas Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due by such Overseas Shareholders in respect of such jurisdictions).

Any acceptance of the Offer by any Overseas Shareholders will be deemed to constitute a representation and warranty from such Overseas Shareholders to the Offeror that the applicable local laws and requirements have been complied with. The Overseas Shareholders should consult their professional advisers if in doubt.

SHAREHOLDING STRUCTURE OF THE COMPANY

The following table sets out the shareholding structure of the Company (i) immediately before Completion; and (ii) immediately following Completion and as at the Latest Practicable Date:

Shareholders Quality Century Limited Design Vanguard Limited Olson Global Limited The Offeror and/or parties acting in concert with it Public Shareholders Total	Immediately before Completion Number of Shares Approximate % 204,000,000 51.00 51,000,000 12.75 45,000,000 11.25 — — 100,000,000 25.00 400,000,000 100.00	Immediately following Completion and as at the Latest Practicable Date Number of Shares Approximate % — — — — — — 300,000,000 75.00 100,000,000 25.00 400,000,000 100.00	Immediately following Completion and as at the Latest Practicable Date Number of Shares Approximate % — — — — — — 300,000,000 75.00 100,000,000 25.00 400,000,000 100.00
			100.00

– 10 –

LETTER FROM GOLDJOY SECURITIES

INFORMATION ON THE GROUP

Your attention is drawn to the details of the information of the Group as set out under the section headed ‘‘Information on the Group’’ in the ‘‘Letter from the Board’’ and in Appendices II and IV to this Composite Document.

INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the British Virgin Islands on 23 April 2014 with limited liability. It is principally engaged in investment holding. The Offeror is owned as to 70% by United Conquer Limited and 30% by Mr. Zhu Yongjun (朱勇軍) (‘‘Mr. Zhu’’). Ms. Tian Yuan (田園) (‘‘Ms. Tian’’) and Mr. Zhu are the directors of the Offeror. United Conquer Limited is a company incorporated in the Republic of Seychelles on 28 July 2016 with limited liability and is principally engaged in investment holding. It is wholly-owned by 上海胡桐投資中心(有限合夥) (Shanghai Hutong Investment Centre (Limited Partnership)*) (‘‘SHIC’’). Ms. Tian is the sole director of United Conquer Limited.

SHIC is a limited partnership established under the laws of the PRC on 5 April 2016. It is principally engaged in investment in private companies and investment management and advisory. The contribution comprises capital commitment of approximately (i) 1% by 上海昂巨資產管理有限公司 (Shanghai Angell Asset Management Co. Ltd) (‘‘Shanghai Angell’’) through general partnership; and (ii) 29.7% by 吉林省投資集團有限公司 (Jilin Province Investment Group Company Limited) (‘‘JIGC’’), 49.5% by 中天城投集團上海股權投資基金合夥企業(有限合夥) (Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)*) and 19.8% by Mr. Xiang Yongcheng (相永成) (‘‘Mr. Xiang’’) all through limited partnership. Mr. Zhang Xian is the authorised representative of SHIC.

Shanghai Angell is a company established under the laws of the PRC on 7 March 2016 with limited liability. It is principally engaged in asset and investment management, enterprise investment and investment advisory. It is owned as to 38% by 上海虎鉑股權投資基金管理合夥企業(有限合夥) (Shanghai Tiger Platinum Equity Investment Fund Management Partnership (Limited Partnership)) (‘‘Shanghai Tiger’’), 32% by JIGC, 20% by 深圳市君尚厚德投資中心合夥企業(有限合夥) (Shenzhen Junshang Houde Investment Centre Partnership Corporation (Limited Partnership)) and 10% by Mr. Yao Ligang. Ms. Tian, Mr. Shi Weiguo, Mr. Yao Ligang, Mr. Zhang Xian and Mr. Liu Baowei are the directors of Shanghai Angell.

JIGC is a state-owned enterprise and is wholly-owned by 吉林省人民政府國有資產監督管理委員會 (State-owned Assets Supervision & Administration Commission of the People’s Government of Jilin Province*) established under the laws of the PRC on 23 March 2007 with limited liability. It is principally engaged in high-technology investment, property development and asset management.

– 11 –

LETTER FROM GOLDJOY SECURITIES

中天城投集團上海股權投資基金合夥企業(有限合夥) (Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)) is a limited partnership established under the laws of the PRC on 17 February 2015. It is principally engaged in investment in equity and/or enterprises. The contribution comprises capital commitment of approximately 0.05% by Shanghai Tiger through general partnership and 99.95% by 中天城投集團股份有限公司 (Zhongtian Urban Development Group Company Limited) (‘‘Zhongtian Urban Development’’) through limited partnership. Mr. Shi Weiguo is the authorised representative of 中天城投集團上海股權投資基金合夥企業(有限合夥) (Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)*).

Shanghai Tiger is a limited partnership established under the laws of the PRC on 17 February 2015. It is principally engaged in equity management, investment and investment advisory. The contribution comprises capital commitment of approximately (i) 6.37% by Mr. Shi Weiguo, 1.73% by Mr. Li Jun, 1.73% by Mr. He Zhiliang, 3.1% by Mr. Li Hongxin, 3.97% by Mr. Zhang Xian and 3.1% by Mr. Feng Yuming through general partnership; and (ii) 80% by 貴陽金融控股有限公司 (Guiyang Jinrong Investment Company Limited*) through limited partnership. Mr. Zhang Xian is the authorised representative of Shanghai Tiger.

貴陽金融控股有限公司 (Guiyang Jinrong Investment Company Limited*) is a company established under the laws of the PRC on 11 December 2008. It is principally engaged in financial investment and asset management and is wholly-owned by Zhongtian Urban Development.

Zhongtian Urban Development is a company established under the laws of the PRC on 8 January 1994 with limited liability and listed on Shenzhen Stock Exchange, the PRC (Stock Code: 000540). It is principally engaged in property development. It is owned as to approximately 44.87% by Kingsbury International Holdings Co., Ltd. (金世旗國際控股股份有限公司) which in turn is owned by Mr. Luo Yuping by approximately 74.8%.

The Offeror is ultimately and indirectly collectively controlled by the general partners, namely Mr. Shi Weiguo, Mr. Li Jun, Mr. He Zhiliang, Mr. Li Hongxin, Mr. Zhang Xian and Mr. Feng Yuming of Shanghai Tiger.

– 12 –

LETTER FROM GOLDJOY SECURITIES

The following diagram shows the shareholding and corporate structure of the Offeror:

==> picture [437 x 478] intentionally omitted <==

Notes:

Shanghai Angell is the general partner of SHIC. Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)*, Mr. Xiang and JIGC are the limited partners of SHIC.
Shanghai Tiger is the general partner of Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership). Zhongtian Urban Development is the limited partner of Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership).
Shi Weiguo, Zhang Xian, Feng Yuming, Li Hongxin, Li Jun and He Zhiliang are the general partners of Shanghai Tiger. Guiyang Jinrong Investment Company Limited* is the limited partner of Shanghai Tiger.

– 13 –

LETTER FROM GOLDJOY SECURITIES

Brief background of each of Mr. Zhu, Mr. Xiang and Ms. Tian is set out below:

Mr. Zhu Yongjun (朱勇軍), aged 36, has experience in investment management. Mr. Zhu has been the founder, chairman and chief executive officer of 上海尋投金融信息服務有限公司 (Shanghai Financial Investment Information Services Company Limited) since 2014 and was the founder of 泰州四方網絡有限公司 (Taizhou Sifang Network Company Limited) in 2005. He was the general manager of the network department of 中國電信泰州實業公司 (China Telecommunications Taizhou Industrial Corporation) from 2004 to 2005. Mr. Zhu holds a bachelor’s degree in economic information management from Jiangnan University. Mr. Xiang Yongcheng (相永成), aged 52, joined 臨江嘉合康寧矽業有限公司(Linjiang Jiahe Kangning Silicon Industry Company Limited) in 1998 and is currently the general manager of the company. He previously attended 吉林省經濟管理幹部學院 (Jilin Province Economic Management Cadre College*).

Ms. Tian Yuan (田園), aged 42, obtained her bachelor’s degree in economics from the University of California, Los Angeles and her master of science in financial engineering degree from the University of Michigan Ann Arbor. She was one of the earliest recruited innovative talents in the finance area by the ‘‘The Thousand Talents Plan’’ (‘‘吉林省千人計劃’’), which was held by the government of Jilin Province. Ms. Tian previously worked for US I.B. Fund Management Limited, Societe Generale Securities Hong Kong, Ltd, the Private Wealth Management Department of Morgan Stanley, Los Angeles, the Investment Management Department of Legend Holdings Ltd and other financial enterprises. She is experienced in technical analysis of foreign exchange, foreign exchange trading, derivatives development, trading and sales, financial product investment, the establishment and operation of investment funds, private equity, capital market investment, financing etc. Ms. Tian is now the general manager of Shanghai Angell, the deputy general manager of JIGC; and the director and deputy general manager of 海通吉禾股權投資基金管理有限公司 (Haitong Jihe Equity Investment Fund Management Co., Ltd.). She is also the member of the Investment Committee of 吉林省現代農業和新興產業投資基金有限公司 (Jilin Province Modern Agriculture and New Industrial Investment Fund Limited Company) and 吉林省國家新能源創業投資基金合夥企業（有限合夥）投委會 (Jilin Province National New Energy Venture Investment Fund (Limited Partnership)), and the director of the Investment Committee of 吉林省養老服務產業基金合夥企業（有限合夥）(Jilin Province Ageing Service Industry Fund (Limited Partnership)*).

Prior to Completion, the Offeror and parties acting in concert with it did not own any Shares, convertible securities, options, warrants or derivatives in the Company or any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company and were third parties independent of the Group and its connected persons.

– 14 –

LETTER FROM GOLDJOY SECURITIES

FUTURE INTENTION OF THE OFFEROR REGARDING THE GROUP

Following the close of the Offer, the Offeror intends to continue the existing principal businesses of the Group. The existing principal business of the Group includes the manufacture and sales of private label leather garments for its customers on original equipment manufacturer basis. The Offeror will conduct a review on the existing principal businesses and the financial position of the Group for the purpose of formulating business plans and strategies for the future business development of the Group. In this regard, the Offeror may look into business opportunities and consider whether any asset disposals, asset acquisitions, business rationalisation, business divestment, fund raising, restructuring of the business and/or business diversification will be appropriate in order to enhance the long-term growth potential of the Company. Should such corporate actions materialise, further announcement(s) will be made in accordance with the GEM Listing Rules.

Save as the Offeror’s intention regarding the Group as set out above and the potential changes to the members of the board of directors of the Company as set out below, the Offeror has no intention to (i) discontinue the employment of any employees of the Group; or (ii) redeploy the fixed assets of the Company other than those in its ordinary and usual course of business.

PROPOSED CHANGE OF BOARD COMPOSITION

As at the Latest Practicable Date, the Board comprised Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man as executive Directors, Ms. Ng Lai Hung as non-executive Director, and Dr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker as independent non-executive Directors.

Certified true copies of the letters of resignation of all existing executive Directors and nonexecutive Directors, to be effective from the earliest time as permitted under the Takeovers Code and the GEM Listing Rules, being the date after the close of the Offer which is expected to be 17 March 2017, were delivered to the Offeror upon Completion.

At such time as may be notified by the Offeror to the Vendors, the Vendors shall use their reasonable endeavours to persuade the independent non-executive Directors to give notice to resign as Directors at the earliest time permitted under the Takeovers Code and the GEM Listing Rules.

The Offeror proposes to nominate new Directors to the Board subject to compliance with all the applicable regulatory requirements, including the Takeovers Code and the GEM Listing Rules. It is proposed that Mr. Zhu and Mr. Tang Yau Sing will be appointed as executive Directors, Mr. Shao Zuosheng will be appointed as non-executive Director and Mr. Cheung Kam Tong Antonio, Mr. Chui Man Lung Everett and Mr. Han Chu will be appointed as independent non-executive Directors.

– 15 –

LETTER FROM GOLDJOY SECURITIES

Set out below are the biographic details of the above-mentioned nominees for appointment as executive Directors and independent non-executive Directors. Further details required by Rule 17.50(2) of the GEM Listing Rules will be announced after the appointment takes effect:

Proposed executive Directors

Mr. Zhu Yongjun (朱勇軍)

Mr. Zhu, aged 36, be appointed as an executive Director of the Company. Mr. Zhu has experience in investment management. Mr. Zhu has been the founder, chairman and chief executive officer of 上海尋投金融信息服務有限公司 (Shanghai Financial Investment Information Services Company Limited) since 2014 and was the founder of 泰州四方網絡有限公司 (Taizhou Sifang Network Company Limited) in 2005. He was the general manager of the network department of 中國電信泰州實業公司 (China Telecommunications Taizhou Industrial Corporation*) from 2004 to 2005. Mr. Zhu holds a bachelor’s degree in economic information management from Jiangnan University.

Mr. Tang Yau Sing (鄧有聲)

Mr. Tang, aged 54, be appointed as an executive Director of the Company. Mr. Tang holds a bachelor of social sciences (honours) degree from the University of Hong Kong. He is a fellow member of the Hong Kong Institute of Certified Public Accountants, a fellow member of the Association of Chartered Certified Accountants in the United Kingdom, a member of the Taxation Institute of Hong Kong and the Hong Kong Institute of Directors. He has over 25 years of accounting, auditing and financial advisory experience and held key management position in numerous listed companies in Hong Kong and the United States.

Mr. Tang has been the executive director of Pearl Oriental Oil Limited (stock code: 632) since October 2016 and was the chairman and executive director of Greens Holdings Limited (stock code: 1318) for the period from December 2014 to November 2015. He was the executive director and company secretary of Changgang Dunxin Enterprise Company Limited (stock code: 2229) for the period from February 2016 to June 2016, the executive director and chief financial officer of New Sports Group Limited (stock code: 299) for the period from November 2013 to May 2016, the vice president and company secretary of China Environmental Technology Holdings Limited (stock code: 646) for the period from March 2014 to April 2016. Mr. Tang was also the chief financial officer of China Agritech Inc. (previously listed on NASDAQ) for the period from October 2008 to January 2012.

– 16 –

LETTER FROM GOLDJOY SECURITIES

Proposed non-executive Director

Mr. Shao Zuosheng (邵作生)

Mr. Shao, aged 53, be appointed as the non-executive Director of the Company. He has over 20 years of securities (financial) experience. He is currently the executive director of China Goldjoy Group Limited (Stock Code: 1282). He previously held various positions at China Merchants Bank group from 1998 to 2016 including acting as the chief executive officer of CMB International Capital Corporation Limited, vice president of the Shenzhen branch of China Merchants Bank and deputy president of CMB Financial Leasing Co. Ltd..

Mr. Shao holds a bachelor of economics degree in economics and management from the School of Economics of Heilongjiang University and a master degree in economics from Yokohama National University, Japan.

Proposed independent non-executive Directors

Mr. Cheung Kam Tong Antonio (張金棠)

Mr. Cheung, aged 55, be appointed as the independent non-executive Director of the Company. Mr. Cheung was the country manager of Dell Hong Kong Limited from 2004 to 2005 and CA (Hong Kong) Limited from 2005 to 2007. He was the general manager of International SOS (HK) Ltd. from 2008 to 2010. He was the founder of Integrated Credit Solutions Group Limited and Top Stand Corporation Limited and is now the chief executive officer of Top Stand Corporation Limited. Mr. Cheung holds a bachelor of social sciences degree from the University of Hong Kong.

Mr. Chui Man Lung Everett (徐文龍)

Mr. Chui, aged 52, be appointed as an independent non-executive Director of the Company. Mr. Chui is a fellow member of both the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants. Mr. Chui is also a member of the Institute of Chartered Accountants in England and Wales. Mr. Chui became a qualified professional accountant in 1990 when he worked in the audit department of KPMG Hong Kong. Mr. Chui is the founding director and shareholder of Cen-1 Partners Limited, an independent consultancy company specialised in financial engineering and corporate structuring.

Mr. Chui has served as an independent non-executive director of China Ocean Fishing Holdings Limited (stock code: 8047) since 20 May 2015, New Sports Group Limited (stock code: 299) since 10 September 2013, Taung Gold International Limited (stock code: 621) since 20 April 2010 and Up Energy Development Group Limited (stock code: 307) since 30 June 2016. He was also the independent non-executive director of Mingyuan Medicare Development Company Limited (stock code: 233) from 23 September 2015 to 20 May 2016.

Mr. Chui holds a bachelor of social sciences (honours) degree in business economics & accounting awarded by the University of Southampton in the United Kingdom.

– 17 –

LETTER FROM GOLDJOY SECURITIES

Mr. Han Chu (韓楚)

Mr. Han, aged 43, be appointed as an independent non-executive Director of the Company. Mr. Han holds a bachelor’s degree in management studies from Nanjing University and a master’s degree in economics from Peking University. Mr. Han has been a director and deputy general manager of 華泰瑞聯基金管理有限公司 (Huatai Ruilian Fund Management Company Limited) since 2013. He served as an executive director in the investment banking division of 華泰聯合證券有限責任公司 (Huatai United Securities Company Limited) for more than six years. Mr. Han has over ten years of experience in investment management and advisory.

Mr. Han was an independent non-executive director of New Sports Group Limited (stock code: 299) from 17 December 2014 to 30 May 2016.

PUBLIC FLOAT AND MAINTAINING THE LISTING STATUS OF THE COMPANY

The Offeror intends to maintain the listing of the Shares on the GEM after the close of the Offer.

If, upon closing of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25%, of the Shares are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, the Stock Exchange may exercise its discretion to suspend trading in the Shares.

In this connection, it should be noted that following the close of the Offer, there may be insufficient public float of the Shares and therefore, trading in the Shares may be suspended until sufficient public float exists in the Shares. The Offeror and the proposed new executive Directors have jointly and severally undertaken to the Stock Exchange to take appropriate steps following the close of the Offer to ensure that sufficient public float exists in the Shares such as the engagement of a placing agent to place such number of Shares to other independent third parties not connected with the Company or any of its connected persons and not parties acting in concert with the Offeror.

PROCEDURES FOR ACCEPTANCE AND SETTLEMENT

Your attention is drawn to the further details regarding the procedures for acceptance and settlement and the acceptance period as set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

COMPULSORY ACQUISITION

The Offeror does not intend to avail itself of any power of compulsory acquisition.

– 18 –

LETTER FROM GOLDJOY SECURITIES

GENERAL

To ensure equality of treatment of all Independent Shareholders, those registered Independent Shareholders who hold the Shares as nominees for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. It is essential for the beneficial owners of the Offer Shares whose investments are registered in the names of nominees to provide instructions to their nominees of their intentions with regard to the Offer.

All documents and remittances to the Independent Shareholders will be sent by ordinary post at their own risk. Such documents and remittances will be sent to the Independent Shareholders at their respective addresses as they appear in the register of members or, in the case of joint Independent Shareholders, to the Independent Shareholder whose name appears first in the register of members. None of the Offeror and parties acting in concert with it, the Company, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong), the Registrar or any of their respective ultimate beneficial owners, directors, officers, agents or associates or professional advisers or any other party involved in the Offer will be responsible for any loss or delay in transmission or any other liabilities that may arise as a result thereof.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Appendices to this Composite Document which form part of this Composite Document. You are reminded to read carefully the ‘‘Letter from the Board’’, the ‘‘Letter from the Independent Board Committee’’, the ‘‘Letter from the Independent Financial Adviser’’ and other information about the Group which are set out in this Composite Document before deciding whether or not to accept the Offer.

Yours faithfully, For and on behalf of China Goldjoy Securities Limited Hanson Ho

Director

– 19 –

LETTER FROM THE BOARD

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

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 08093)

Executive Directors: Cheung Woon Yiu (Chairman) Lam Wai Si Grace (Chief Executive Officer) Ching Wai Man

Non-executive Director: Ng Lai Hung

Independent non-executive Directors: Wong Wai Kong How Sze Ming Philip David Thacker

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

Head office and principal place of business: Unit 1701 Treasure Centre 42 Hung To Road Kwun Tong, Kowloon Hong Kong

24 February 2017

To the Independent Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

Reference is made to the Joint Announcement and the announcement of the Company dated 23 January 2017 in relation to the completion of the Sale and Purchase Agreement. Terms used in this letter shall have the same meanings as defined in this Composite Document unless the context otherwise requires.

On 12 January 2017, the Offeror entered into the Sale and Purchase Agreement with the Vendors and the Guarantors, pursuant to which the Offeror conditionally agreed to acquire and the Vendors conditionally agreed to sell the Sale Shares, representing 75% of the entire issued share capital of the Company as at the Latest Practicable Date for a total consideration of HK$350,760,000, equivalent to HK$ 1.1692 per Sale Share (being the Offer Price).

– 20 –

LETTER FROM THE BOARD

Completion took place on 23 January 2017. Immediately after Completion, the Offeror and parties acting in concert with it were interested in a total of 300,000,000 Shares, representing approximately 75% of the entire issued share capital of the Company as at the Latest Practicable Date.

Pursuant to Rules 26.1 of the Takeovers Code, immediately following the Completion, the Offeror and parties acting in concert with it are required to make an mandatory unconditional cash offer for all the issued Shares (other than those Shares already owned and/or agreed to be acquired by the Offeror). Goldjoy Securities, on behalf of the Offeror, is making the Offer.

Pursuant to Rules 2.1 and 2.8 of the Takeovers Code, on 17 January 2017, the Board established the Independent Board Committee comprising all the non-executive Directors, namely Ms. Ng Lai Hung, Dr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker, to make a recommendation to the Independent Shareholders in respect of the Offer, in particular as to whether the terms of the Offer are fair and reasonable and as to the acceptance of the Offer.

Pursuant to Rule 2.1 of the Takeovers Code, on 24 January 2017, AIM was appointed as the Independent Financial Adviser with the approval of the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in respect of the Offer, and in particular as to whether the terms of the Offer are fair and reasonable and as to the acceptance of the Offer.

The purpose of this Composite Document is to provide you with, among other things, information relating to the Group, the Offeror and the Offer as well as setting out the letter from the Independent Board Committee containing its recommendation to the Independent Shareholders in respect of the terms of the Offer and as to acceptance of the Offer, and the letter from AIM containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Offer and as to acceptance of the Offer.

MANDATORY UNCONDITIONAL CASH OFFER

As at the Latest Practicable Date, the Company had 400,000,000 Shares in issue, and the Company did not have any outstanding options, derivatives, warrants or securities which are convertible or exchangeable into Shares and has not entered into any agreement for the issue of such options, derivatives, warrants or securities of the Company which are convertible or exchangeable into Shares.

– 21 –

LETTER FROM THE BOARD

Principal terms of the Offer

As mentioned in the ‘‘Letter from Goldjoy Securities’’ on pages 7 to 8 of this Composite Document, Goldjoy Securities is making the Offer for and on behalf of the Offeror to all the Independent Shareholders for all the issued Shares (other than those Shares already owned and/or agreed to be acquired by the Offeror) in compliance with Rules 26.1 of the Takeovers Code on the following basis:

The Offer

for each Offer Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.1692 in cash

The Offer Price of HK$1.1692 per Offer Share is is equal to the purchase price per Sale Share under the Sale and Purchase Agreement.

Further details of the Offer, including terms and procedures for acceptance and settlement of the Offer, are contained in the ‘‘Letter from Goldjoy Securities’’ as set out on pages 6 to 19 of, and Appendix I to, this Composite Document and the accompanying Forms of Acceptance.

INFORMATION ON THE GROUP

The Group is specialised in the manufacture and sales of private label leather garments for its customers on original equipment manufacturer basis. The subsidiaries of the Group are principally engaged in manufacturing and sales of leather garment products to renowned customers based in the United States of America, Australia, Malaysia, Hong Kong and the PRC. Its major customers are mostly fashion brands with price range of leather garments fall under the high-end and middle-end categories.

Set out below is the audited revenue, profit before taxation and profit attributable to the owners of the Company for each of the two financial years ended 30 June 2015 and 30 June 2016:

	Year ended	Year ended
	30 June 2015	30 June 2016
	(HK$’000)	(HK$’000)
	(audited)	(audited)
Revenue	81,947	55,847
Profit before taxation	3,759	4,188
Profit for the year	116	3,827

– 22 –

LETTER FROM THE BOARD

	As at	As at
	30 June 2015	30 June 2016
	(HK$’000)	(HK$’000)
	(audited)	(audited)
Consolidated net asset value attributable to
owners of the Company	57,953	61,872

Further details of the Group are set out in Appendices II and IV to this Composite Document.

INFORMATION ON THE OFFEROR

Your attention is drawn to the section headed ‘‘Information on the Offeror’’ in the ‘‘Letter from Goldjoy Securities’’ as set out on pages 11 to 14 of this Composite Document, and Appendix III to this Composite Document.

FUTURE INTENTION OF THE OFFEROR REGARDING THE GROUP

Your attention is drawn to the sections headed ‘‘Information on the Offeror’’ and ‘‘Future Intention of the Offeror regarding the Group’’ in the ‘‘Letter from Goldjoy Securities’’ as set out on pages 11 to 15 of this Composite Document. The Board is aware of the Offeror’s intention in respect of the Group and the employees of the Group and is willing to co-operate with the Offeror in the interests of the Group and the Shareholders as a whole.

MAINTAINING THE LISTING STATUS OF THE COMPANY

It is stated in the ‘‘Letter from Goldjoy Securities’’ on page 18 of this Composite Document that the Offeror intends to maintain the listing of the Shares on the GEM following the close of the Offer.

The Stock Exchange stated that if, at the closing of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that:

(a) a false market exists or may exist in the trading of the Shares; or
(b) there are insufficient Shares in public hands to maintain an orderly market,

it would consider exercising its discretion to suspend dealings in the Shares.

– 23 –

LETTER FROM THE BOARD

of a placing agent to place such number of Shares to other independent third parties not connected with the Company or any of its connected persons and not parties acting in concert with the Offeror.

RECOMMENDATION

Your attention is drawn to (i) the ‘‘Letter from the Independent Board Committee’’ on pages 25 to 26 of this Composite Document, which sets out its recommendation to the Independent Shareholders as to whether the terms of the Offer are, or are not, fair and reasonable so far as the Independent Shareholders are concerned, and as to acceptance thereof; and (ii) the ‘‘Letter from the Independent Financial Adviser’’ on pages 27 to 47 of this Composite Document, which sets out its advice and recommendation to the Independent Board Committee and the Independent Shareholders as to whether the terms of the Offer are, or are not, fair and reasonable so far as the Independent Shareholders are concerned, and as to acceptance thereof, and the principal factors considered by it in arriving at its advice and recommendation.

The Independent Shareholders are urged to read those letters carefully before taking any action in respect of the Offer.

ADDITIONAL INFORMATION

You are advised to read this Composite Document together with the accompanying Forms of Acceptance in respect of the acceptance and settlement procedures of the Offer. Your attention is also drawn to the additional information contained in the appendices to this Composite Document.

In considering what action to take in connection with the Offer, you should also consider your own tax positions, if any, and in case of any doubt, consult your professional advisers.

Yours faithfully, By Order of the Board Odella Leather Holdings Limited Cheung Woon Yiu Chairman

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Set out below is the text of the letter of recommendation from the Independent Board Committee in respect of the Offer.

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

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 08093)

24 February 2017

To the Independent Shareholders

Dear Sir or Madam,

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

We refer to the composite offer and response document dated 24 February 2017 jointly issued by the Offeror and the Company (the ‘‘Composite Document’’) of which this letter forms part. Capitalised terms used in this letter have the same meanings as defined in this Composite Document, unless the context requires otherwise.

We have been appointed by the Board to form the Independent Board Committee to consider the terms of the Offer and to make a recommendation to you as to whether, in our opinion, the terms of the Offer are, or are not, fair and reasonable so far as the Independent Shareholders are concerned, and as to acceptance thereof.

AIM has been appointed as the independent financial adviser to advise us in respect of the terms of the Offer and as to acceptance thereof. Details of its advice and the principal factors considered by it in arriving at its advice and recommendation are set out in the ‘‘Letter from the Independent Financial Adviser’’ on pages 27 to 47 of this Composite Document.

We also wish to draw your attention to the ‘‘Letter from the Board’’, the ‘‘Letter from Goldjoy Securities’’ and the additional information set out in the appendices to this Composite Document.

– 25 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Taking into account the terms of the Offer and the independent advice from AIM, and the principal factors and reasons taken into account in arriving at its recommendation, we consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to accept the Offer.

However, for those Independent Shareholders who are considering to realise all or part of their holdings in the Shares, they should monitor the Share price movement until near the end of the Offer Period. If the market price of the Shares exceeds the Offer Price and the sale proceeds net of all transaction costs exceed the net proceeds receivable under the Offer, the Independent Shareholders should consider selling their Shares in the open market instead of accepting the Offer.

Independent Shareholders are recommended to read the full text of the ‘‘Letter from the Independent Financial Adviser’’ on pages 27 to 47 of this Composite Document.

Notwithstanding our recommendation, the Independent Shareholders should consider carefully the terms and conditions of the Offer.

Yours faithfully,

For and on behalf of the

Independent Board Committee

Ms. NG Lai Hung Dr. WONG Wai Kong

Non-executive Director

Independent Non-executive Director

Mr. HOW Sze Ming

Independent Non-executive Director

Mr. Philip David THACKER Independent Non-executive Director

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the letter of advice received from AIM, the Independent Financial Adviser to the Independent Board Committee dated 24 February 2017 regarding the Offer, for the purpose of incorporation in this Composite Document.

Asia Investment Management Limited 14th Floor, Vulcan House, 21–23 Leighton Road, Causeway Bay, Hong Kong

24 February 2017

To the Independent Board Committee and the Independent Shareholders of Odella Leather Holdings Limited

Dear Sirs,

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED

ON BEHALF OF THE OFFEROR

TO ACQUIRE ALL THE ISSUED SHARES OF

ODELLA LEATHER HOLDINGS LIMITED

(OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

We refer to our engagement as the independent financial adviser to make recommendations to the independent board committee (the ‘‘Independent Board Committee’’) and the independent shareholders (the ‘‘Independent Shareholders’’) of Odella Leather Holdings Limited (the ‘‘Company’’, together with its subsidiaries, the ‘‘Group’’) in relation to the mandatory unconditional cash offer (the ‘‘Offer’’) made by China Goldjoy Securities Limited (‘‘Goldjoy Securities’’) on behalf of Power View Group Limited (the ‘‘Offeror’’) to acquire all the issued shares of Company (other than those already owned and/or agreed to be acquired by the Offeror) pursuant to Rule 26.1 of the Codes on Takeovers and Mergers and Share Buy-backs (the ‘‘Takeovers Code’’). Details of the Offer are disclosed in the composite offer and response document in respect of the Offer jointly issued by the Offeror and the Company dated 24 February 2017 (the ‘‘Composite Document’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Composite Document unless the context otherwise requires.

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

THE INDEPENDENT BOARD COMMITTEE

Pursuant to Rule 2.1 and Rule 2.8 of the Takeovers Code, the Independent Board Committee, comprising all non-executive Directors, namely Ms. Ng Lai Hung, Dr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker, has been formed to advise the Independent Shareholders as to whether the terms of the Offer are fair and reasonable and as to the acceptance of the Offer. We, Asia Investment Management Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. Our appointment has been approved by the Independent Board Committee in accordance with Rule 2.1 of the Takeovers Code.

We are not connected with the Company, the Vendors or the Offeror, or any of their respective substantial shareholders, directors or chief executives, or any of their respective associates, or any party acting, or presumed to be acting, in concert with any of them and accordingly, are considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders in respect of the Offer. Apart from the normal professional fees payable to us in connection with this appointment, no arrangement exists whereby we will receive any fees or benefits from the Company, the Vendors or the Offeror, or any of their respective substantial shareholders, directors or chief executives, or any of their respective associates, or any party acting, or presumed to be acting, in concert with any of them.

BASIS OF OUR OPINION

In formulating our opinion and recommendations, we have reviewed, amongst others, the Rule 3.7 Announcements, the Joint Announcement, the profit warning announcement of the Company dated 26 January 2017 (the ‘‘Profit Warning Announcement’’), the annual reports of the Company for the two years ended 30 June 2015 and 30 June 2016 (the ‘‘2015 Annual Report’’ and the ‘‘2016 Annual Report’’, respectively), the interim report of the Company for the six months ended 31 December 2016 (the ‘‘2017 Interim Report’’), and the information contained in the Composite Document. We have also discussed with, and reviewed the information provided by the management of the Group (the ‘‘Management’’) regarding the business and outlook of the Group.

We have relied on the information and facts provided, and the opinions expressed, by the Directors and the Management, which we have assumed to be true, accurate, complete and not misleading in all material aspects as at the Latest Practicable Date and the Shareholders will be notified of any material changes to such representations as soon as possible in accordance with Rule 9.1 of the Takeovers Code. We have sought and received confirmation from the Directors and the Management that no material facts have been omitted from the information provided and opinions expressed by them to us. We consider that the information which we have received is sufficient for us to reach our opinion and recommendations as set out in this letter and to justify our reliance on such information. We have no reason to doubt the truth, accuracy or completeness of the information provided to us or to believe that any material information has been omitted or withheld. We have not, however, conducted any independent investigation into the business and affairs of the Group nor have we carried out any independent verification of the information provided.

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have not considered the tax and regulatory implications on the Independent Shareholders of their acceptances or non-acceptances of the Offer since these are particular to their own individual circumstances. In particular, the Independent Shareholders who are resident outside Hong Kong or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions with regard to the Offer and, if in any doubt, should consult their own professional advisers.

Unless otherwise specified in this letter, amounts denominated in RMB have been converted to HK$ at a rate of RMB1.00000 to HK$1.13636.

PRINCIPAL TERMS OF THE OFFER

Goldjoy Securities, on behalf of the Offeror, hereby makes the Offer on the terms set out in the Composite Document in accordance with the Takeovers Code on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$1.1692 in cash

The Offer Shares to be acquired under the Offer shall be free from all Encumbrances and shall be acquired together with all rights attaching to them, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of the Composite Document. The Offer is extended to all Independent Shareholders in accordance with the Takeovers Code.

The Offer is unconditional in all respects.

Value of the Offer

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation in respect of the terms of the Offer, we have considered the following principal factors and reasons:

1. Business, financial performance and prospects of the Group

A. Business of the Group

The Company was incorporated in the Cayman Islands with limited liability, the Shares of which have been listed on the GEM since 12 February 2015. As stated in the ‘‘Letter from the Board’’ contained in the Composite Document, the Group is specialised in the manufacture and sales of private label leather garments for its customers on original equipment manufacturer basis. The subsidiaries of the Group are principally engaged in manufacturing and sales of leather garment products to renowned customers based in the United States of America, Australia, Malaysia, Hong Kong and the PRC. Its major customers are mostly fashion brands with price range of leather garments fall under the high-end and middle-end categories.

The leather garment products are made according to the customers’ specifications and under their brands or labels. The customers’ orders, including the types, specification and design of the products, are made based on consumer preference, market trend, seasonality and their fashion style for a particular season. In offering the manufacturing services, the Group often also provides to certain of its customers (i) pre-production product development services; and (ii) post-production logistical services depending on the needs and requirements for individual orders.

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. Financial performance of the Group

Set forth below are (i) the audited consolidated financial information of the Group for the three years ended 30 June 2014, 30 June 2015 and 30 June 2016 (‘‘FY2014’’, ‘‘FY2015’’ and ‘‘FY2016’’, respectively) as extracted from the 2015 Annual Report and the 2016 Annual Report; and (ii) the unaudited consolidated financial information of the Group for the six months ended 31 December 2015 and 31 December 2016 (‘‘PE2016’’ and ‘‘PE2017’’, respectively) as extracted from the 2017 Interim Report:

Table 1: Financial highlights of the Group

	FY2014	FY2015	FY2016	PE2016	PE2016	PE2017
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
	(audited)	(audited)	(audited)	(unaudited)		(unaudited)
Revenue	80,586	81,947	55,847	30,116		24,065
Gross profit	27,369	36,590	20,717	12,486		8,490
Listing expenses	—	(18,422)	—		—	—
Profit before taxation	15,692	3,759	4,188	5,712		1,947
Profit attributable to owners of the
Company for the year/period	12,896	116	3,827	4,767		1,538
						As at
		As at 30 June				31 December
	2014		2015	2016		2016
	HK$’000	HK$’000		HK$’000		HK$’000
	(audited)	(audited)		(audited)		(unaudited)
Non-current assets	287		303	498		417
Current assets	33,606		71,605	69,268		72,514
Current liabilities	(16,543)	(13,949)		(7,872)		(9,445)
Net current assets	17,063		57,656	61,396		63,069
Total assets	33,893		71,908	69,766		72,931
Equity attributable to owners
of the Company	17,350		57,953	61,872		63,464

Source: the annual reports and interim report of the Company

(i) For the year ended 30 June 2015 (i.e. FY2015)

In FY2015, the Group recorded revenue of approximately HK$81.9 million, representing an increase of approximately 1.7% as compared to that in FY2014. Gross profit margin in FY2015 was approximately 44.7% which represented an increase of approximately 10.7% from that of FY2014. Although the quantity of leather garments shipped during FY2015 only grew mildly comparing to FY2014, orders received in FY2015 consisted of a substantial amount of leather garments involving more

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

sophisticated designs or made of high value materials which needed exceptional extent of experienced craftsmanship. Accordingly, the Group was able to charge higher prices with higher gross margins.

The Group recorded growth in operating profit after tax (excluding listing expenses) of approximately 43.8% from approximately HK$12.9 million in FY2014 to approximately HK$18.5 million in FY2015, primarily attributable to the improvement in gross profit. However, profit attributable to owners of the Company decreased substantially to approximately HK$0.1 million in FY2015 mainly as a result of the oneoff listing expenses of approximately HK$18.4 million incurred in FY2015.

As at 30 June 2015, the Group’s net current assets, total assets and equity attributable to owners of the Company amounted to approximately HK$57.7 million, approximately HK$71.9 million and approximately HK$58.0 million, respectively.

(ii) For the year ended 30 June 2016 (i.e. FY2016)

In FY2016, the revenue decreased significantly by approximately 31.8% from approximately HK$81.9 million in FY2015 to approximately HK$55.8 million in FY2016. Such decrease was due to the fact that the customers became more conservative in the trends of the global fashion market. Gross profit margin in FY2016 was approximately 37.1%, representing a drop of approximately 7.6% from the gross profit margin in FY2015 of approximately 44.7%. This was mainly attributable to a higher overhead per unit as a result of lower total quantity of production in FY2016.

The Group recorded profit attributable to owners of the Company of approximately HK$3.8 million, representing an increase of approximately HK$3.7 million as compared with that in FY2015. This was mainly attributable to the one-off listing expenses of approximately HK$18.4 million incurred in FY2015 in connection with the preparation for listing of the Shares on the GEM on 12 February 2015.

As at 30 June 2016, the Group’s net current assets, total assets and equity attributable to owners of the Company amounted to approximately HK$61.4 million, approximately HK$69.8 million and approximately HK$61.9 million, respectively.

(iii) For the six months ended 31 December 2016 (i.e. PE2017)

In PE2017, the Group’s unaudited revenue decreased by approximately 20.1% from approximately HK$30.1 million in PE2016 to approximately HK$24.1 million in PE2017. Such decrease was mainly due to delays in placements of orders from Australian customers because of their anticipation of delay in winter season and deterioration of the business in some international brands in the first quarter ended 30 September 2016. Gross profit margin dropped from approximately 41.5% in PE2016 to approximately 35.3% in PE2017. This was mainly due to lowered revenue but relatively stable fixed overhead costs. As a result of the decrease in revenue and gross profit

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

margin, the unaudited profit attributable to owners of the Company decreased substantially by approximately 67.7% from approximately HK$4.8 million in PE2016 to approximately HK$1.5 million in PE2017.

C. Business prospects of the Group

The majority of the Group’s revenue is derived from the export sale. As disclosed in the 2017 Interim Report, approximately 41.5% and 29.1% of the Group’s revenue in PE2017 was derived from the United States of America (the ‘‘US’’) and Australia, respectively. The Group’s performance is directly affected by the global economy.

As advised by the Management, due to (i) the slowdown of global retail market for mid to high-end fashion; (ii) the deterioration of the business in some international brands; (iii) the delays in orders until the second quarter from some brands in Australia; and (iv) the customers becoming more conservative and have ordered smaller quantity for the coming seasons, the revenue of the Group in FY2016 and PE2017 recorded significant decrease by approximately 31.8% and approximately 20.1% as compared with the revenue in FY2015 and PE2016, respectively. Both the US and the Australian markets remain the largest markets of the Group. It is for these reasons that we consider that revenue attributable to both of these geographical markets will remain gloomy in the short term.

We have conducted research from public domains in relation to the leather market. According to the statistics released by China Leather Industry Association (中國皮革協會), which is a chamber of leather and one of the most representative industrial associations with over 1,300 member companies in the PRC, the export value of the major leather products in China for the eleven months ended 30 November 2016 amounted to approximately US$37.7 billion, representing a decrease of approximately 12.9% as compared to the corresponding period in the previous year. We have also noted that, according to the statistics released by the Census and Statistics Department of Hong Kong, the total export value (including domestic exports and re-exports) of leather in Hong Kong for the eleven months ended 30 November 2016 amounted to HK$11.2 billion, representing a decrease of approximately 21.7% as compared to the corresponding period in the previous year. Both these indicators pointed to a general slowdown of the leather export businesses in Hong Kong and China and it reinforces our view that there may be uncertainties to the Group’s business operation and financial performance in the short and near term.

Taking into consideration the factors as mentioned above, we are of the opinion that there are likely uncertainties in the future performance of the Group.

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Principal terms of the Offer

The Offer Price of HK$1.1692 per Offer Share represents:

(i) a premium of approximately 2.56% over the closing price of HK$1.14 per Share as quoted on the Stock Exchange on 12 January 2017, being the Last Trading Day;
(ii) a premium of approximately 11.78% over the average closing price of approximately HK$1.0460 per Share as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
(iii) a premium of approximately 15.76% over the average closing price of approximately HK$1.0100 per Share as quoted on the Stock Exchange for the 10 consecutive trading days immediately prior to and including the Last Trading Day;
(iv) a premium of approximately 43.46% over the average closing price of approximately HK$0.8150 per Share as quoted on the Stock Exchange for the 30 consecutive trading days immediately prior to and including the Last Trading Day;
(v) a premium of approximately 55.89% over the closing price of HK$0.75 per Share as quoted on the Stock Exchange on 9 December 2016, being the last trading day prior to the commencement of the Offer Period;
(vi) a discount of approximately 6.46% to the closing price of HK$1.25 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(vii) a premium of approximately 655.79% over the audited consolidated net asset value attributable to Shareholders of approximately HK$0.1547 per Share as at 30 June 2016, the date to which the latest audited financial results of the Group were made up.

– 34 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

A. Historical price performance of the Shares

Set out below is the chart showing the daily closing price of the Shares as quoted on the Stock Exchange during the period commencing from 13 January 2016, being the twelve-month period prior to the Last Trading Day, up to and including the Latest Practicable Date (the ‘‘Review Period’’):

Chart 1: Share price performance during the Review Period

==> picture [391 x 246] intentionally omitted <==

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

Note: During the Review Period, trading in the Shares was suspended on 12 December 2016 and from 13 January 2017 to 18 January 2017 (both days inclusive), respectively.

As illustrated in the chart above, during the Review Period, the closing price of the Shares ranged from the lowest closing price of HK$0.43 recorded on 15 January 2016 and 2 February 2016 to the highest closing price of HK$1.45 recorded on 9 February 2017, with an average of approximately HK$0.661. The Offer Price represents a premium of approximately 171.9% over the lowest closing price of the Shares and a discount of approximately 19.4% to the highest closing price of the Shares during the Review Period. During the period under review from 13 January 2016 to 12 January 2017 (the ‘‘Pre-Announcement Period’’), the Shares were traded below the Offer Price of HK$1.1692.

On 9 December 2016, the Board noted the increases in price and trading volume of the Shares, and had, therefore, requested for a suspension of trading in the Shares with effect from 2:39 p.m. on the same day pending the publication of the announcement issued by the Company dated 12 December 2016 in relation to the possible sale by the Vendors of their

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

shareholding in the Company (the ‘‘Possible Sale Announcement’’). Subsequent to the issue of the Possible Sale Announcement, the closing price of the Shares increased by 16.0% to HK$0.87 on 13 December 2016 (being the first trading day after the publication of the Possible Sale Announcement) as compared to that of HK$0.75 on 9 December 2016 (being the last trading day before the publication of the Possible Sale Announcement). Trading in the Shares was again suspended from 13 January 2017 to 18 January 2017 (both days inclusive) pending the publication of the Joint Announcement. On the trading day immediately prior to the publication of the Joint Announcement, being the Last Trading Day, the closing price of the Share surged to HK$1.14. Immediately after the publication of the Joint Announcement, the closing price of the Shares moved up and subsequently hit the highest point of HK$1.45 per Share on 9 February 2017. We consider that such rise in the closing price of the Shares may be associated with the proposed Offer as the Offer Price represents a premium over the closing price of the Share throughout the Pre-Announcement Period. As at the Latest Practicable Date, the closing price of the Shares was HK$1.25.

Independent Shareholders should note that the information set out above is not an indicator of the future performance of the Shares and that the price of the Shares may increase or decrease from its closing price after the Latest Practicable Date.

B. Historical trading volume of the Shares

The following table sets out the trading volume of the Shares during the Review Period:

Table 2: Trading volume of the Shares during the Review Period

				Percentage of	Percentage of the
				the average	average daily
				daily trading	trading volume to
		No. of		volume to the	the number of
	Total trading	trading	Average daily	total number of	Shares held by
Month/period	volume	days	trading volume	Shares in issue	public Shareholders
	(No. of Shares)		(No. of Shares)	(Note 2)	(Note 3)
January 2016 (from 13	4,215,000	13	324,231	0.081%	0.324%
January 2016)
February 2016	2,785,000	18	154,722	0.039%	0.155%
March 2016	4,805,000	21	228,810	0.057%	0.229%
April 2016	24,455,000	20	1,222,750	0.306%	1.223%
May 2016	32,390,400	21	1,542,400	0.386%	1.542%
June 2016	5,495,000	21	261,667	0.065%	0.262%
July 2016	2,290,000	20	114,500	0.029%	0.115%
August 2016	2,040,000	22	92,727	0.023%	0.093%
September 2016	2,710,000	21	129,048	0.032%	0.129%
October 2016	5,560,000	19	292,632	0.073%	0.293%
November 2016	2,370,000	22	107,727	0.027%	0.108%
December 2016 (Note 1)	48,346,000	19	2,544,526	0.636%	2.545%
January 2017 (Note 1)	38,080,000	15	2,538,667	0.635%	2.539%
February 2017 (up to the	17,322,800	15	1,154,853	0.289%	1.155%
Latest Practicable Date)

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

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

Trading in the Shares was suspended on 12 December 2016 and from 13 January 2017 to 18 January 2017 (both days inclusive), respectively.
The calculation is based on the average daily trading volume of the Shares divided by the total issued share capital of the Company as at the Latest Practicable Date (i.e. 400,000,000 Shares).
The calculation is based on the average daily trading volume of the Shares divided by the number of Shares held by public Shareholders as at the Latest Practicable Date (i.e. 100,000,000 Shares). In the content of this section, the number of Shares held by public Shareholders means the total issued share capital of the Company less the Shares held by the Vendors.

As illustrated in the table above, the average daily trading volume for the respective month/period during the Review Period ranged from approximately 92,727 Shares to approximately 2,544,526 Shares, representing approximately 0.023% to approximately 0.636% of the total number of the Shares in issue as at the Latest Practicable Date, or approximately 0.093% to approximately 2.545% of the total number of Shares held by public Shareholders as at the Latest Practicable Date.

Notwithstanding that the historical daily trading volume of the Shares is relatively thin, it is noted that the trading volume of the Shares was relatively higher recently from 9 December 2016 to the Latest Practicable Date, we believe that it might be primarily due to the market reaction to the publication of the Rule 3.7 Announcements and the Joint Announcement. However, the sustainability of the recent growth in the trading volume would be uncertain. We also have enquired with the Management and were advised that save for the aforesaid reason and the publication of the Profit Warning Announcement, the Company did not issue any other announcement which is of price-sensitive nature during the respective period and the Management is not aware of any other particular reason for the relatively higher trading volume. In respect of the publication of the Possible Sale Announcement, the average daily trading volume from 9 December 2016 (being the last trading day before the publication of the Possible Sale Announcement) up to, and including, the Last Trading Day represents approximately 0.781% and 3.124% of the total number of Shares in issue and the total number of Shares held by public Shareholders, respectively. The average daily trading volume for the period commencing from 19 January 2017 (being the first trading day immediately following the publication of the Joint Announcement) to the Latest Practicable Date was 3,798,780 Shares, representing approximately 0.950% and 3.799% of the total number of Shares in issue and the total number of Shares held by public Shareholders, respectively.

The trading volume of the Shares has been active since 9 December 2016 (being the last trading day before the publication of the Possible Sale Announcement), however, it is still uncertain as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of the Shares in the open market without depressing the Share price. Accordingly, the market price of the Shares may not necessarily reflect the proceeds that the Independent Shareholders can receive by the disposal of their Shares in the open market. Therefore, we are of the view that the Offer represents an opportunity for the Independent Shareholders, particularly for those who hold a large volume of the Shares, to dispose of part or all of their Shares at the Offer Price if they so wish to.

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

C. Comparable analysis

In order to further evaluate the fairness and reasonableness of the Offer Price, we have considered both the price-to-earnings ratio (the ‘‘PE Ratio’’) and price-to-book ratio (the ‘‘PB Ratio’’) approaches in our analysis, being two of the most commonly adopted valuation ratios. However, given that the business model of the Company is asset-light and the PB Ratio should only be applied for the evaluation of companies engaging in capital-intensive business, we consider that, under the circumstances, it may not be appropriate or indicative to use the PB Ratio to evalue the Offer Price. It is for this same reason that we adopted the PE Ratio to evaluate the Offer Price.

Our initial attempt was to identify comparable companies which (i) are listed on the Stock Exchange; (ii) are engaged in both the manufacture and sale of private label leather garments for customers; and (iii) were of market capitalisation of less than HK$1 billion as at the Latest Practicable Date. However, we cannot identify any comparable company which can meet the above criteria.

It follows, therefore, that we have extended the selection criteria of the comparable companies to those which (i) derived over 80% of their revenue from manufacture and/or sale of garments for their respective latest financial year according to their respective latest published annual report; and (ii) were of market capitalisation less than HK$1 billion as at the Latest Practicable Date. Within this parameter, we have identified a list of 21 companies (the ‘‘Comparable Companies’’). We consider that the selection of the Comparable Companies can reflect the general business performance and value similar to those of the Company although the analysis of which is for reference only due to the different size, financial performance, financial position and market capitalisation of the Comparable Companies when assessing the fairness and reasonableness of the Offer Price. The relevant details of the Comparable Companies are set forth in the following table:

Table 3: Details of the Comparable Companies

			Market
			Capitalisation as at
	Stock		the Latest
Company name	code	Principal activities	Practicable Date	PE Ratio
			(Note 1)	(Note 2)
			Approximately	times
			HK$ million
Far East Holdings	36	Manufacturing and sale of garments, short	903.97	13.08
International Limited		term securities investment and property
		investment
Moiselle International	130	Design, manufacture, retail and wholesale of	382.95	N/A
Holdings Limited		fashion apparel and accessories		(Note 3)

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market
			Capitalisation as at
	Stock		the Latest
Company name	code	Principal activities	Practicable Date	PE Ratio
			(Note 1)	(Note 2)
			Approximately	times
			HK$ million
Ascent International	264	Manufacture and distribution of leather	400.09	N/A
Holdings Limited		products; retail of fashion apparel, footwear		(Note 3)
		and leather accessories
Yangtzekiang Garment	294	Manufacture and sale of garments and textiles,	587.16	133.52
Limited		the provision of processing services and the
		rental of properties
Top Form International	333	Design, manufacture and distribution of ladies’	382.77	11.85
Limited		intimate apparel, principally brassieres
Tristate Holdings Limited	458	Garment manufacturing; branded product	502.47	N/A
		distribution, retail and trading		(Note 3)
Bauhaus International	483	Manufacture and trading of garments and	492.29	9.30
(Holdings) Limited		accessories
Tungtex (Holdings)	518	Manufacture & sale of garments	396.75	N/A
Company Limited				(Note3)
Speedy Global Holdings	540	Apparel supply chain servicing business,	810.00	32.62
Limited		apparel retail business, property investment
		and development
High Fashion	608	Manufacture, trading and retailing of garments	614.29	13.23
International Limited
U-RIGHT International	627	Wholesale and retail of fashion garments,	753.36	N/A
Holdings Limited		trading of construction materials and		(Note 3)
		property investment
Carry Wealth Holdings	643	Garment manufacturing and trading, securities	556.27	N/A
Limited		investment		(Note 3)
Grand Concord	844	Manufacturing of knitted fabrics and innerwear	436.66	N/A
International Holdings				(Note 3)
Limited
Takson Holdings Limited	918	Sourcing, subcontracting, marketing and	620.32	N/A
		selling of garments and sportswear		(Note 3)
		products, and property investment
Mainland Headwear	1100	Manufacturing, trading and retailing of	688.52	13.10
Holdings Limited		headwear products, and retailing of licensed
		products

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Market
			Capitalisation as at
	Stock		the Latest
Company name	code	Principal activities	Practicable Date	PE Ratio
			(Note 1)	(Note 2)
			Approximately	times
			HK$ million
Hanbo Enterprises	1367	Trading of apparel products and provision of	969.60	N/A
Holdings Limited		apparel supply chain management services		(Note 3)
Runway Global Holdings	1520	Designing, manufacturing and trading of	971.10	61.73
Company Limited		apparels
Highlight China IoT	1682	Trading and manufacturing of garment	774.47	N/A
International Limited		products and provision of quality inspection		(Note 3)
		services
Pak Tak International	2668	Manufacture of and trading in knit-to-shape	990.50	N/A
Limited		garments		(Note 3)
Luxey International	8041	Manufacturing and trading of high-end	695.86	N/A
(Holdings) Limited		swimwear and related garment products and		(Note 3)
		provision of on-line shopping, advertising
		and media related services
L & A International	8195	Manufacturing and selling of pure cashmere	281.60	N/A
Holdings Limited		apparel and other apparel products		(Note 3)
			Maximum:	133.05
			Minimum:	9.30
			Average:	36.00
			Median:	13.17
The Company			467.68	122.21
			(Note 4)	(Note 5)

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

Notes:

The market capitalisation of the Comparable Companies is calculated based on their respective closing share prices and number of issued shares as at the Latest Practicable Date.
The PE Ratios of the Comparable Companies are calculated based on their respective market capitalisation as at the Latest Practicable Date divided by the latest published profit for the period attributable to the owners of the respective Comparable Companies as extracted from their respective latest published annual report.
The PE Ratios of the several Comparable Companies are not applicable due to their net loss for the year as obtained from their respective latest published annual report.
The market capitalisation of the Company is computed based on the Offer Price and the total number of the issued Shares as at the Latest Practicable Date.

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The PE Ratio of the Company implied by the Offer Price is calculated by dividing the multiple of the Offer Price and the total number of the issued Share as at the Latest Practicable Date by the latest published consolidated net profit for the year attributable to owners of the Company (i.e. FY2016).

As illustrated in Table 3 above, the PE Ratios of the Comparable Companies ranged from approximately 9.30 times to approximately 133.05 times, with an average of approximately 36.00 times and a median of approximately 13.17 times. The PE Ratio of the Company implied by the Offer Price (based on the latest published consolidated net profit for the year attributable to owners of the Company) is approximately 122.21 times.

As the PE Ratio of the Company is approximately 122.21 times over the implied value of the Offer Price and is much higher than both the average and median of the PE Ratio of the Comparable Companies, we are of the view that the Offer Price is fair and reasonable to the Independent Shareholders.

D. Conclusion

Having considered the facts that:

(i) the Shares were traded below the Offer Price of HK$1.1692 per Offer Share throughout the Pre-Announcement Period;
(ii) the PE Ratio implied by the Offer Price is higher than the average and median of the PE Ratio of the Comparable Companies; and
(iii) there are likely uncertainties in the future performance of the Group as discussed in the sub-paragraph headed ‘‘C. Business prospects of the Group’’ above,

we are of the view that the Offer Price is fair and reasonable.

3. Information on the Offeror and the intention of the Offeror in relation to the Group

A. Information on the Offeror

As stated in the ‘‘Letter from Goldjoy Securities’’ contained in the Composite Document, the Offeror is a company incorporated in the British Virgin Islands on 23 April 2014 with limited liability. It is principally engaged in investment holding. The Offeror is owned as to 70% by United Conquer Limited and 30% by Mr. Zhu Yongjun (朱勇軍) (‘‘Mr. Zhu’’). Ms. Tian Yuan (田園) (‘‘Ms. Tian’’) and Mr. Zhu are the directors of the Offeror.

United Conquer Limited is a company incorporated in the Republic of Seychelles on 28 July 2016 with limited liability and is principally engaged in investment holding. It is whollyowned by 上海胡桐投資中心(有限合夥) (Shanghai Hutong Investment Centre (Limited Partnership)*) (‘‘SHIC’’). Ms. Tian is the sole director of United Conquer Limited.

– 41 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

SHIC is a limited partnership established under the laws of the PRC on 5 April 2016. It is principally engaged in investment in private companies and investment management and advisory. The contribution comprises capital commitment of approximately (i) 1% by 上海昂巨資產管理有限公司 (Shanghai Angell Asset Management Co. Ltd) (‘‘Shanghai Angell’’) through general partnership; and (ii) 29.7% by 吉林省投資集團有限公司 (Jilin Province Investment Group Company Limited) (‘‘JIGC’’), 49.5% by 中天城投集團上海股權投資基金合夥企業 (有限合夥) (Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)*) and 19.8% by Mr. Xiang Yongcheng (相永成) (‘‘Mr. Xiang’’) all through limited partnership. Mr. Zhang Xian is the authorised representative of SHIC.

Shanghai Angell is a company established under the laws of the PRC on 7 March 2016 with limited liability. It is principally engaged in asset and investment management, enterprise investment and investment advisory. It is owned as to 38% by 上海虎鉑股權投資基金管理合夥企業(有限合夥) (Shanghai Tiger Platinum Equity Investment Fund Management Partnership (Limited Partnership)) (‘‘Shanghai Tiger’’), 32% by JIGC, 20% by 深圳市君尚厚德投資中心合夥企業 (有限合夥) (Shenzhen Junshang Houde Investment Centre Partnership Corporation (Limited Partnership)) and 10% by Mr. Yao Ligang. Ms. Tian, Mr. Shi Weiguo, Mr. Yao Ligang, Mr Zhang Xian and Mr. Liu Baowei are the directors of Shanghai Angell.

中天城投集團上海股權投資基金合夥企業(有限合夥) (Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)) is a limited partnership established under the laws of the PRC on 17 February 2015. It is principally engaged in investment in equity and/or enterprises. The contribution comprises capital commitment of approximately 0.05% by Shanghai Tiger through general partnership and 99.95% by 中天城投集團股份有限公司 (Zhongtian Urban Development Group Company Limited) (‘‘Zhongtian Urban Development’’) through limited partnership. Mr. Shi Weiguo is the authorised representative of 中天城投集團上海股權投資基金合夥企業 (有限合夥) (Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)*).

– 42 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following diagram shows the shareholding and corporate structure of the Offeror:

==> picture [367 x 407] intentionally omitted <==

– 43 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

Shanghai Angell is the general partner of SHIC. Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership)*, Mr. Xiang and JIGC are the limited partners of SHIC.
Shanghai Tiger is the general partner of Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership). Zhongtian Urban Development is the limited partner of Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership).
Shi Weiguo, Zhang Xian, Feng Yuming, Li Hongxin, Li Jun and He Zhiliang are the general partners of Shanghai Tiger. Guiyang Jinrong Investment Company Limited* is the limited partner of Shanghai Tiger.

Brief background of each of Mr. Zhu, Mr. Xiang and Ms. Tian is set out below:

Mr. Xiang Yongcheng (相永成), aged 52, joined 臨江嘉合康寧矽業有限公司 (Linjiang Jiahe Kangning Silicon Industry Company Limited) in 1998 and is currently the general manager of the company. He previously attended 吉林省經濟管理幹部學院 (Jilin Province Economic Management Cadre College).

Ms. Tian Yuan (田園), aged 42, obtained her bachelor’s degree in economics from the University of California, Los Angeles and her master of science in financial engineering degree from the University of Michigan Ann Arbor. She was one of the earliest recruited innovative talents in the finance area by 吉林省千人計劃 (The Thousand Talents Plan), which was held by the government of Jilin Province. Ms. Tian previously worked for US I.B. Fund Management Limited, Societe Generale Securities Hong Kong, Ltd, the Private Wealth Management Department of Morgan Stanley, Los Angeles, the Investment Management Department of Legend Holdings Ltd and other financial enterprises. She is experienced in technical analysis of foreign exchange, foreign exchange trading, derivatives development, trading and sales, financial product investment, the establishment and operation of investment funds, private equity, capital market investment, financing etc. Ms. Tian is now the general manager of Shanghai Angell, the deputy general manager of JIGC; and the director and deputy general manager of 海通吉禾股權投資基金管理有限公司 (Haitong Jihe Equity Investment Fund Management Co., Ltd.). She is also the member of the Investment Committee of 吉林省現代農業和新興產業投資基金有限公司 (Jilin Province Modern Agriculture and New Industrial Investment Fund Limited Company*) and 吉林省國家新能源創業投資基金合夥企

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

業（有限合夥）投委會 (Jilin Province National New Energy Venture Investment Fund (Limited Partnership)), and the director of the Investment Committee of 吉林省養老服務產業基金合夥企業（有限合夥）(Jilin Province Ageing Service Industry Fund (Limited Partnership)).

The Management has confirmed to us that, prior to Completion, the Offeror and parties acting in concert with it did not own any Shares, convertible securities, options, warrants or derivatives in the Company or any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company and were third parties independent of the Group and its connected persons.

B. Future Intention of the Offeror regarding the Group

As stated in the paragraph headed ‘‘Future Intention of the Offeror regarding the Group’’ in the ‘‘Letter from Goldjoy Securities’’ contained in the Composite Document, the Offeror intends to continue the existing businesses of the Group following the close of the Offer. The existing principal business of the Group includes the manufacture and sales of private label leather garments for its customers on original equipment manufacturer basis. The Offeror will conduct a review on the existing principal businesses and the financial position of the Group for the purpose of formulating business plans and strategies for the future business development of the Group. In this regard, the Offeror may look into business opportunities and consider whether any asset disposals, asset acquisitions, business rationalisation, business divestment, fund raising, restructuring of the business and/or business diversification will be appropriate in order to enhance the long-term growth potential of the Company. Should such corporate actions materialise, further announcement(s) will be made in accordance with the GEM Listing Rules.

We have discussed with the Management and was advised that, save as the Offeror’s intention regarding the Group as set out above and the potential changes to the members of the board of Directors of the Company as set out below, the Offeror has no intention to (i) discontinue the employment of any employees of the Group; or (ii) redeploy the fixed assets of the Company other than those in its ordinary and usual course of business.

C. Proposed Change of Composition of the Board

As stated in the ‘‘Letter from Goldjoy Securities’’ contained in the Composite Document, certified true copies of the letters of resignation of all existing executive Directors and nonexecutive Directors, to be effective from the earliest time as permitted under the Takeovers Code and the GEM Listing Rules, being the date after the close of the Offer which is expected to be 17 March 2017, were delivered to the Offeror upon Completion.

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand from the Management that since the Offeror intends to continue the existing business of the Group and has no intention to (i) discontinue the employment of any employees of the Group; or (ii) redeploy the fixed assets of the Company other than those in its ordinary and usual course of business, the Offeror will conduct a review on the existing principal businesses and the financial position of the Group for the purpose of formulating business plans and strategies for the future business development of the Group. In this regard, the Offeror may look into business opportunities and consider whether any asset disposals, asset acquisitions, business rationalisation, business divestment, fund raising, restructuring of the business and/or business diversification will be appropriate in order to enhance the longterm growth potential of the Company.

We are of the view that the future business performance and development of the Group will depend on the contribution from, and the decision of, the new Board on the overall strategic planning of the Group. Despite the fact that the proposed Directors nominated to the Board by the Offeror has extensive management experience in various industries, there is a likelihood that they do not have the direct experience in the business of the manufacture and sale of private label leather garments for its customers on original equipment manufacturer basis, in which the Group is engaged. Independent Shareholders should note that the future perspective of the Group under the new controlling Shareholders (i.e. the Offeror) is yet to be ascertained.

D. Public float and maintaining the listing status of the Company

As stated in the ‘‘Letter from Goldjoy Securities’’ contained in the Composite Document, the Offeror intends to maintain the listing of the Shares on the GEM after the close of the Offer.

The Stock Exchange has stated that if, upon completion of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25%, of the issued Shares, are held by the public or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the Shares.

– 46 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

steps following the close of the Offer to ensure that sufficient public float exists in the Shares such as the engagement of a placing agent to place such number of Shares to other independent third parties not connected with the Company or any of its connected persons and not parties acting in concert with the Offeror.

OPINION AND RECOMMENDATION

On the basis of the above, we consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to accept the Offer. In view of the volatility of market conditions, those Independent Shareholders who intend to accept the Offer are strongly reminded to closely monitor the market price and the liquidity of the Shares during the Offer Period and should consider selling their Shares in the open market, instead of accepting the Offer, if the net proceeds from the sale of such Shares in the open market would exceed the net proceeds receivable under the Offer after having regard to the market price and the liquidity of the Shares.

For those Independent Shareholders who are attracted by and confident in the future prospects of the Group, given the background and future intention of the Offeror as detailed in the ‘‘Letter from Goldjoy Securities’’ contained in the Composite Document and, notwithstanding that no detailed business plan has been set forth by the Offeror, they may consider to retain their Shares in full or in part. We would like to remind the Independent Shareholders that if they consider retaining their Shares or tendering less than all their Shares under the Offer, they should carefully consider the potential difficulties they may encounter in disposing of their investments in the Shares after the close of the Offer in view of the historical low liquidity of the Shares and note that there is no guarantee that the prevailing level of the Share price will sustain during, and after, the Offer Period.

The Independent Shareholders are strongly advised that the decision to realise or to continue to hold their investments in the Shares is subject to individual circumstances and investment objectives. The Independent Shareholders are also reminded to read carefully the procedures for accepting the Offer, details of which are set out in Appendix I to the Composite Document and the accompanying Form of Acceptance, if they wish to accept the Offer.

Yours faithfully, For and on behalf of

Asia Investment Management Limited Alice Kan

Managing Director

Note: Ms. Alice Kan is a licensed person registered with the SFC to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and has over 16 years of experience in corporate finance.

For identification purposes only

– 47 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

1. PROCEDURES FOR ACCEPTANCE OF THE OFFER

To accept the Offer, you should complete and sign the accompanying Form of Acceptance in accordance with the instructions printed thereon, which form part of the terms of the Offer.

(a) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Share(s) is/are in your name, and you wish to accept the Offer, you must send the duly completed and signed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for not less than the number of Share(s) in respect of which you intend to accept the Offer, by post or by hand, to the Registrar, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong in any event no later than 4:00 p.m. on the Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code.
(b) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Share(s) is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer in respect of your holding of Share(s) (whether in full or in part), you must either:
(i) lodge your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) with the nominee company, or other nominee, with instructions authorising it to accept the Offer on your behalf and requesting it to deliver the duly completed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or
(ii) arrange for the Share(s) to be registered in your name by the Company through the Registrar, and deliver the duly completed and signed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereat) to the Registrar; or
(iii) if your Share(s) has/have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorise HKSCC Nominees Limited to accept the Offer on your behalf on or before the deadline set by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer/

– I-1 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

registered institution in securities/custodian bank for the timing on the processing of your instruction, and submit your instruction to your licensed securities dealer/ registered institution in securities/custodian bank as required by them; or

(iv) if your Share(s) has/have been lodged with your investor participant’s account maintained with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set out by HKSCC Nominees Limited.
(c) If the Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/ or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Share(s) is/are not readily available and/or is/are lost, as the case may be, and you wish to accept the Offer in respect of your Share(s), the Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your Share certificate(s) and/or transfer receipt(s) and/ or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, it/they should be forwarded to the Registrar as soon as possible thereafter. If you have lost your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title, you should also write to the Registrar a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.
(d) If you have lodged transfer(s) of any of your Share(s) for registration in your name and have not yet received your Share certificate(s), and you wish to accept the Offer in respect of your Share(s), you should nevertheless complete and sign the Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to the Offeror and/or Goldjoy Securities or their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant Share certificate(s) when issued and to deliver such Share certificate(s) to the Registrar on your behalf and to authorise and instruct the Registrar to hold such Share certificate(s), subject to the terms and conditions of the Offer, as if it was/they were delivered to the Registrar with the Form of Acceptance.
(e) Acceptance of the Offer will be treated as valid only if the completed Form of Acceptance is received by the Registrar by no later than 4:00 p.m. on the Closing Date (or such later time and/or date as the Offeror may determine and announce with the consent of the Executive in accordance with the Takeovers Code) and in compliance with

– I-2 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

Note 1 to Rule 30.2 of the Takeovers Code, and the Registrar has recorded the acceptance and any relevant documents required by the Takeovers Code have been so received, and is:

(i) accompanied by the relevant Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if those Share certificate(s) is/are not in your name, such other documents (e.g. a duly stamped transfer of the relevant Share(s) in blank or in favour of the acceptor executed by the registered holder) in order to establish your right to become the registered holder of the relevant Share(s); or
(ii) from a registered Shareholder or his personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to Share(s) which is/are not taken into account under another sub-paragraph of this paragraph (e)); or
(iii) inserted in the Form of Acceptance, the total number of Shares equal to that represented by the certificates for Shares tendered for acceptance of the Offer. If no number is inserted or a number inserted in excess or smaller than that represented by the certificates for Shares tendered for acceptance of the Offer, the Form of Acceptance will be returned to you for correction and resubmission. Any corrected Form of Acceptance must be resubmitted and received by the Registrar on or before the latest time of acceptance of the Offer; or
(iv) certified by the Registrar or the Stock Exchange. If the Form of Acceptance is executed by a person other than the registered Shareholder, appropriate documentary evidence of authority (e.g. grant of probate or certified copy of a power of attorney) to the satisfaction of the Registrar must be produced.
(f) No acknowledgement of receipt of any Form of Acceptance. Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

2. SETTLEMENT OF THE OFFER

Provided that a valid Form of Acceptance and the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of the relevant Shares as required by Note 1 to Rule 30.2 of the Takeovers Code are complete and in good order and in all respects and have been received by the Registrar before the close of the Offer, a cheque for the amount due to each of the Shareholders who accept the Offer less seller’s ad valorem stamp duty in respect of the Offer Shares tendered by him/her/it under the Offer will be despatched to such Shareholder by ordinary post at his/her/its own risk as soon as possible but in any event within seven (7) business days (as defined in the

– I-3 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

Takeovers Code) of the date on which the duly completed acceptances of the Offer and the relevant documents of title in respect of such acceptances are received by the Registrar to render each such acceptance complete and valid.

Settlement of the consideration to which any accepting Independent Shareholders is entitled under the Offer will be implemented in full in accordance with the terms of the Offer (save with respect to the payment of seller’s ad valorem stamp duty), without regard to any lien, right of setoff, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such accepting Independent Shareholders.

3. ACCEPTANCE PERIOD AND REVISIONS

(a) Unless the Offer has previously been revised or extended with the consent of the Executive in accordance with the Takeovers Code, the Form of Acceptance must be received by the Registrar in accordance with the instructions printed thereon by 4:00 p.m. on the Closing Date.
(b) The Offeror and the Company will jointly issue an announcement through the website of the Stock Exchange no later than 7:00 p.m. on the Closing Date stating whether the Offer has been revised or extended.
(c) If the Offeror revises the terms of the Offer (in accordance with the relevant requirements under the Takeovers Code), all the Independent Shareholders, whether or not they have already accepted the Offer, will be entitled to accept the revised Offer under the revised terms.
(d) If the Offer is extended or revised, the announcement of such extension or revision will state the next closing date or, if the Offer has become unconditional as to acceptances, include a statement that the Offer will remain open until further notice. In the latter case, at least 14 days’ notice in writing will be given before the Offer is closed to the Independent Shareholders who have not accepted the Offer, and an announcement will be released. The revised Offer will be kept open for at least 14 days thereafter.
(e) If the Closing Date of the Offer is extended, any reference in this Composite Document and in the Form of Acceptance to the Closing Date shall, except where the context otherwise requires, be deemed to refer to the closing date of the Offer as so extended.
(f) Any acceptance of the relevant revised Offer shall be irrevocable unless and until the Independent Shareholder who accepted the Offer becomes entitled to withdraw their acceptance under the paragraph headed ‘‘6. Right of Withdrawal’’ below duly do so.

– I-4 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

4. NOMINEE REGISTRATION

To ensure equality of treatment of all Shareholders, those Shareholders who hold Shares as nominee on behalf of more than one beneficial owner should, as far as practicable, treat the holding of such beneficial owner separately. It is essential for the beneficial owners of the Shares whose investments are registered in the names of nominees to provide instructions to their nominees of their intentions with regard to the Offer.

5. ANNOUNCEMENTS

(a) By 6:00 p.m. on the Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of their decision in relation to the revision or extension of the Offer. The Offeror must post an announcement on the Stock Exchange’s website by 7:00 p.m. on the Closing Date stating, amongst other information required under Rule 19.1 of the Takeovers Code, whether the Offer has been revised or extended. The announcement will state the total number of Shares:
(i) for which acceptances of the Offer has been received;
(ii) held, controlled or directed by the Offeror or persons acting in concert with any of them before the Offer Period; and
(iii) acquired or agreed to be acquired during the Offer Period by the Offeror and persons acting in concert with it.

The announcement must include details of any relevant securities (as defined in the Takeovers Code) in the Company which the Offeror or any person acting in concert with it has borrowed or lent, save for any borrowed shares which have been either on-lent or sold. The announcement must also specify the percentages of the issued share capital of the Company and the percentages of voting rights of the Company represented by these numbers of Shares.

(b) In computing the total number of Shares represented by acceptances, only valid acceptances that are complete and in good order and satisfy the acceptance conditions set out in paragraph 1 of this Appendix and which have been received by the Registrar or the Company (as the case may be) no later than 4:00 p.m. on the Closing Date, being the latest time and date for acceptance of the Offer, shall be included.
(c) As required under the Takeovers Code, all announcements in respect of listed companies must be made in accordance with the requirement of the GEM Listing Rules and will be published on the website of the Stock Exchange at www.hkexnews.hk and the website of the Company at www.odella.com.

– I-5 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

6. RIGHT OF WITHDRAWAL

(a) Acceptance of the Offer tendered by the Independent Shareholders shall be irrevocable and cannot be withdrawn, except in the circumstances set out in (b) below.
(b) If the Offeror is unable to comply with the requirements set out in the paragraph 5 headed ‘‘Announcements’’ above, the Executive may require that the Independent Shareholders, who have tendered acceptances to the Offer to be granted a right of withdrawal on terms that are acceptable to the Executive until the requirements set out in that paragraph are met.

In such case, when the Independent Shareholder(s) withdraw(s) the acceptances, the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title lodged with the Form of Acceptance to the relevant Independent Shareholders at their own risks.

7. OVERSEAS SHAREHOLDERS

The Offer will be made available to all the Independent Shareholders, including the Overseas Shareholders. The availability of the Offer to any Overseas Shareholders may be affected by the applicable laws and regulations of their relevant jurisdictions of residence. Overseas Shareholders should observe any applicable legal and regulatory requirements and, where necessary, consult their own professional advisers. It is the responsibilities of the Overseas Shareholders who wish to accept the Offer to satisfy itself as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due by such Overseas Shareholders in respect of such jurisdictions).

8. STAMP DUTY AND OTHER FEES

The seller’s Hong Kong ad valorem stamp duty on acceptances of the Offer (or part thereof) at a rate of 0.1% of the consideration payable in respect of the relevant acceptances by the Shareholders, or if higher, the market value of the Offer Shares subject to such acceptance, will be deducted from the amount payable to those relevant Shareholders who accept the Offer.

The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the relevant Shareholders who accept the Offer and the Offeror will bear its own portion of the buyer’s Hong Kong ad valorem stamp duty in connection with the acceptances of the Offer and the transfers of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

– I-6 –

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

APPENDIX I

9. TAX IMPLICATIONS

Independent Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. None of the Offeror, parties acting in concert with the Offeror, the Company, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong), the Registrar and their respective ultimate beneficial owners, directors, officers, agents or associates or professional advisers or any other person involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offer.

10. GENERAL

(a) All communications, notices, Form of Acceptance, Share certificate(s), transfer receipt(s), other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to settle the consideration payable under the Offer to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their designated agents, by ordinary post at their own risk, and none of the Offeror, parties acting in concert with the Offeror, the Company, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong), the Registrar and their respective ultimate beneficial owners, directors, officers, agents or associates or professional advisers or any other person involved in the Offer or any of their respective agents accepts any liability for any loss in postage or any other liabilities that may arise as a result thereof.
(b) The provisions set out in the Form of Acceptance form part of the terms and conditions of the Offer.
(c) The accidental omission to despatch this Composite Document and/or Form of Acceptance or any of them to any person to whom the Offer are made will not invalidate the Offer in any way.
(d) The Offer is, and all acceptances will be, governed by and construed in accordance with the laws of Hong Kong.
(e) Due execution of the Forms of Acceptance will constitute an authority to the Offeror, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong) or such person or persons as the Offeror may direct to complete, amend and execute any document on behalf of the person or persons accepting the Offer and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as it may direct, the Shares in respect of which such person or persons has/have accepted the Offer.

– I-7 –

APPENDIX I

FURTHER TERMS AND PROCEDURES FOR ACCEPTANCE OF THE OFFER

(f) By accepting the Offer, the Independent Shareholders will sell their Shares to the Offeror free from all Encumbrances and together with all rights attaching or accruing thereto, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document. The making of the Offer to a person with a registered address in a jurisdiction outside Hong Kong may be affected by the applicable laws of the relevant jurisdiction. Overseas Shareholders with registered addresses in jurisdictions outside Hong Kong should inform themselves about and observe any applicable legal requirements in their own jurisdictions.
(g) Acceptance of the Offer by any nominee will be deemed to constitute a warranty by such nominee to the Offeror that the number of Shares in respect of which it is indicated in the Form of Acceptance is the aggregate number of Shares held by such nominee for such beneficial owner who is accepting the Offer.
(h) Reference to the Offer in this Composite Document and in the Form of Acceptance shall include any extension or revision thereof.
(i) All acceptances, instructions, authorities and undertakings given by the Independent Shareholders in the Form of Acceptance shall be irrevocable except as permitted under the Takeovers Code.
(j) In making their decision, the Independent Shareholders, in addition to considering the information contained in the ‘‘Letter from Goldjoy Securities’’, ‘‘Letter from the Board’’, ‘‘Letter from the Independent Board Committee’’ and ‘‘Letter from the Independent Financial Adviser’’ as set out in this Composite Document, must rely on their own examination of the Offeror, the Group and the terms of the Offer, including the merits and risks involved. The contents of this Composite Document, including any general advice or recommendation contained herein together with the Form of Acceptance, shall not be construed as any legal or business advice on the part of the Offeror, the Company, Goldjoy Securities, Titan Financial Services, Dongxing Securities (Hong Kong), the Registrar or their respective professional advisers. The Independent Shareholders should consult their own professional advisers for professional advice.
(k) The English text of this Composite Document and the Form of Acceptance shall prevail over their respective Chinese text for the purpose of interpretation.

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

I. FINANCIAL SUMMARY

The following is a summary of the audited financial results of the Group for each of the three financial years ended 30 June 2014, 2015 and 2016 as extracted from the published financial statements of the Group for the relevant years.

The consolidated financial statement of the Group for each of the years ended 30 June 2014, 2015 and 2016 were audited by HLB Hodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong and did not contain any qualifications. For each of the years ended 30 June 2014, 2015 and 2016, no dividend was declared or paid except for dividend set out below. The Group had no exceptional items because of size, nature or incidence for each of the years ended 30 June 2014, 2015 and 2016.

Revenue Cost of sales Gross profit Other revenue and other income Selling and distribution expenses Administrative expenses Finance costs Listing expenses Profit before taxation Taxation Profit for the year attributable to owners of the Company Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Other comprehensive income for the year Total comprehensive income for the year attributable to owners of the Company	For the 2016 HK$’000 (audited) 55,847 (35,130) 20,717 289 (2,379) (14,439) — — 4,188 (361) 3,827 92 92 3,919	year ended 30 June 2015 2014 HK$’000 HK$’000 (audited) (audited) 81,947 80,586 (45,357) (53,217) 36,590 27,369 154 110 (2,676) (2,478) (11,875) (9,295) (12) (14) (18,422) — 3,759 15,692 (3,643) (2,796) 116 12,896 5 8 5 8 121 12,904

– II-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Earnings per share attributable to owners of the Company Basic and diluted (HK cents)	For the 2016 HK$’000 (audited) 0.96	year ended 30 June 2015 2014 HK$’000 HK$’000 (audited) (audited) 0.03 4.30

Details of the dividend are disclosed in note below:

Note: Prior to the completion of the group reorganisation taken out for the preparation of the listing of the Shares in December 2014, Perline Company Limited (‘‘Perline’’), a subsidiary of the Company, declared a dividend of HK$3,200,000 to its then shareholders in October 2014. Such dividend was fully paid by way of cash in December 2014. The dividend declared for the years are as follows:

Dividend of Perline to the then shareholders of Perline of nil (2015: HK$16) Perline’s share	2016 HK$’000 —	2015 HK$’000 3,200

– II-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

II. AUDITED RESULTS FOR THE LAST FINANCIAL YEAR ENDED 30 JUNE 2016

Set out below is the full text of the audited consolidated financial statements of the Company for the year ended 30 June 2016 as extracted from the annual report of the Company for the year ended 30 June 2016.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2016

Notes Revenue 6 Cost of sales Gross profit Other revenue and other income 7 Selling and distribution expenses Administrative expenses Finance costs 8 Listing expenses Profit before taxation 9 Taxation 10 Profit for the year attributable to owners of the Company Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign operations Other comprehensive income for the year Total comprehensive income for the year attributable to owners of the Company Earnings per share attributable to owners of the Company 13 Basic and diluted (HK cents)	2016 HK$’000 55,847 (35,130) 20,717 289 (2,379) (14,439) — — 4,188 (361) 3,827 92 92 3,919 0.96	2015 HK$’000 81,947 (45,357) 36,590 154 (2,676) (11,875) (12) (18,422) 3,759 (3,643) 116 5 5 121 0.03

The accompanying notes form an integral part of these consolidated financial statements.

– II-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2016

Notes Non-current assets Property, plant and equipment 14 Total non-current assets Current assets Inventories 16 Trade receivables 17 Deposits, prepayments and other receivables 18 Cash and cash equivalents 19 Pledged bank deposits 19 Total current assets Current liabilities Trade payables 20 Accruals, other payables and trade deposits received 21 Tax payable Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities 15 Net assets	2016 HK$’000 498 498 6,202 9,476 1,571 48,988 3,031 69,268 1,496 5,179 1,197 7,872 61,396 61,894 22 61,872	2015 HK$’000 303
		303
		2,243 26,848 2,778 36,388 3,348
		71,605
		1,328 7,901 4,720
		13,949
		57,656
		57,959
		6
		57,953

– II-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note Equity Capital and reserves attributable to owners of the Company Share capital 22 Reserves Total equity	2016 HK$’000 4,000 57,872 61,872	2015 HK$’000 4,000 53,953
		57,953

The consolidated financial statements were approved and authorised for issue by the board of directors on 21 September 2016 and are signed on its behalf by:

Cheung Woon Yiu Lam Wai Si Grace Director Director

The accompanying notes form an integral part of these consolidated financial statements.

– II-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2016

Share capital HK$’000 200		Attributable to own	Attributable to own	ers of the Company	ers of the Company	Reserves sub-total HK$’000 17,150	Total HK$’000 17,350
	Share premium HK$’000 —	Statutory reserve HK$’000 (note i) 48	Exchange fluctuation reserve HK$’000 (note ii) 179	Other reserve HK$’000 (note iii) —	Retained earnings HK$’000 16,923
— —	— —	— —	— 5	— —	116 —	116 5	116 5
— — — (200) 100 2,900 1,000 — 4,000	— — — — — (2,900) 54,000 (11,318) 39,782	— 160 — — — — — — 208	5 — — — — — — — 184	— — — 200 (100) — — — 100	116 (160) (3,200) — — — — — 13,679	121 — (3,200) 200 (100) (2,900) 54,000 (11,318) 53,953	121 — (3,200 — — — 55,000 (11,318
							57,953
— —	— —	— —	— 92	— —	3,827 —	3,827 92	3,827 92
— 4,000	— 39,782	— 208	92 276	— 100	3,827 17,506	3,919 57,872	3,919
							61,872

Notes:

(i) Statutory reserve

Pursuant to the relevant laws and regulations for business enterprises in the People’s Republic of China (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 a minimum 25% of capital after such usage.

– II-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) Exchange fluctuation reserve

Exchange fluctuation reserve represents exchange differences relating to the translation of the net assets of the foreign operations of the Group (as defined later) from their functional currencies to the Group’s presentation currency (i.e. Hong Kong dollars) that 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 profit or loss on the disposal of the foreign operations.

(iii) Other reserve

Other reserve represents the difference between the nominal value of the Shares (as defined below) issued by the Company in exchange for the nominal value of the share capital of its subsidiary arising from the Reorganisation (as defined below).

(iv) Reorganisation

The share capital as at 1 July 2014 represented the share capital of Perline Company Limited (‘‘Perline’’), the then holding company, amounted to HK$200,000.

In preparation for the listing (the ‘‘Listing’’) of the ordinary shares of the Company (‘‘Shares’’) on Growth Enterprise Market (‘‘GEM’’) of The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’), the Group underwent a corporate reorganisation (the ‘‘Reorganisation’’) as below. Further details of the Reorganisation are set out in note 1 to the consolidated financial statements.

On 3 September 2014, the Company was incorporated in the Cayman Islands with one subscriber Share issued at nil paid. On the same date, the subscriber Share was transferred to Quality Century Limited (‘‘QCL’’) and 999,999 Shares were further allotted at nil paid to QCL, Design Vanguard Limited (‘‘DVL’’) and Olson Global Limited (‘‘OGL’’), companies solely owned by each of the then shareholders of Perline.

On 4 December 2014, Odella International Limited (‘‘Odella BVI’’), a wholly owned subsidiary of the Company, (as a purchaser) acquired from the then shareholders of Perline (as the vendors) the entire share capital of Perline. In consideration, the Company credited as fully paid the 1,000,000 nil-paid Shares and issued to QCL, DVL, OGL (as nominated by the vendors) 9,000,000 new Shares, all credited as fully paid. Since then, Odella BVI became the sole shareholder of Perline, and the number of issued Shares in the Company was increased to 10,000,000.

(v) Capitalisation issue

On 11 February 2015, the Company issued and allotted a total of 290,000,000 Shares of HK$0.01 each to the Company’s shareholders (‘‘Shareholders’’) whose names appeared on the Company’s register of members on 28 January 2015 by capitalising an amount of HK$2,900,000 standing to the credit of the Company’s share premium account which was created pursuant to the Placing (as defined below) (the ‘‘Capitalisation Issue’’).

(vi) Placing

On 11 February 2015, the Company issued a total of 100,000,000 new Shares of HK$0.01 each at a placing price of HK$0.55 per Share pursuant to the prospectus of the Company dated 5 February 2015 (the ‘‘Prospectus’’). The gross listing proceeds were HK$55,000,000.

The accompanying notes form an integral part of these consolidated financial statements.

– II-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2016

Notes Cash flows from operating activities Profit before taxation Adjustments for: Interest income 7 Interest expense 8 Depreciation of property, plant and equipment 9, 14 Loss on disposal of items of property, plant and equipment 9 Impairment loss on trade receivables 9 Cash inflow from operations before working capital changes (Increase)/decrease in inventories Decrease/(increase) in trade receivables Decrease/(increase) in deposits, prepayments and other receivables Increase/(decrease) in trade payables (Decrease)/increase in accruals, other payables and trade deposits received Cash generated from/(used in) operations Interest received Net income tax paid Net cash generated from/(used in) operating activities Cash flow from investing activity Purchases of items of property, plant and equipment 14 Net cash used in investing activity	2016 HK$’000 4,188 (226) — 125 11 89 4,187 (3,997) 17,231 1,168 200 (2,475) 16,314 226 (3,855) 12,685 (336) (336)	2015 HK$’000 3,759 (127) 12 130 — — 3,774 5,995 (17,051) (2,348) (482) 1,998 (8,114) 127 (2,903) (10,890) (151) (151)

– II-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Cash flows from financing activities Decrease/(increase) in pledged bank deposits New bank borrowings Repayment of bank borrowings Decrease in amounts due to directors Dividend paid to then shareholders of Perline Proceeds from issuance of Shares Transaction cost attributable to issuance of Shares Interest paid Net cash generated from financing activities Net increase in cash and cash equivalents Effect of foreign exchange rate changes, net Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Cash and cash equivalents as stated in the consolidated statement of financial position	2016 HK$’000 317 — — — — — — — 317 12,666 (66) 36,388 48,988 48,988	2015 HK$’000 (3,348) 3,389 (3,389) (4,824) (3,200) 55,000 (11,318) (12) 32,298 21,257 (2) 15,133 36,388 36,388

The accompanying notes form an integral part of these consolidated financial statements.

– II-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 30 June 2016

1. CORPORATE INFORMATION OF THE GROUP AND REORGANISATION

General information of the Group

Odella Leather Holdings Limited (the ‘‘Company‘‘, together with its subsidiaries known as the ‘‘Group‘‘) was incorporated in the Cayman Islands on 3 September 2014 as an exempted company with limited liability under the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The address of the registered office is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The principal place of business of the Company is Unit 1701, Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon, Hong Kong. The directors of the Company (the ‘‘Directors‘‘) consider the ultimate holding company is QCL, which is incorporated in the British Virgin Islands.

The Company is an investment holding company and its subsidiaries are principally engaged in the manufacturing and sales of leather products.

The Company’s Shares are listed on GEM on 12 February 2015.

Reorganisation

The principal business of the Group was previously carried out by Perline, an indirect wholly owned subsidiary of the Company incorporated in Hong Kong with limited liability. Perline was then 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 Listing, the Group underwent the Reorganisation in 2014, details of which are set out below.

(i) 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. Upon incorporation, one Share of HK$0.01 was allotted and issued at nil paid to the subscriber (being an officer of Codan Trust Company (Cayman) Limited, the provider of registered office of the Company). On the same date, the subscriber Share was transferred to QCL (a company solely owned by Ms. Cheung Woon Yiu) and the Company further allotted and issued 999,999 Shares at nil paid, to QCL, DVL (a company solely owned by Ms. Lam Wai Si Grace) and OGL (a company solely owned by Mr. Ching Wai Man).
(ii) On 11 September 2014, Odella BVI was incorporated in the British Virgin Islands (the ‘‘BVI’’) with an authorised share capital of US$50,000 divided into 50,000 shares of US$1 each. Upon incorporation, 100 shares in Odella BVI of US$1 each were issued to the Company at par value.
(iii) By an agreement dated 4 December 2014, Odella BVI (as a purchaser) acquired from the then shareholders of Perline (as vendors) 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 QCL, DVL and OGL (as nominated by the vendors) 9,000,000 new Shares 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 QCL, DVL and OGL in the Company remained the same immediately before and after the completion of the above agreement.

– II-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. BASIS OF PRESENTATION AND BASIS OF PREPARATION

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 direct wholly owned subsidiary, 佛山市南海盛麗皮衣有限公司 (Foshan Nanhai Shengli Leather Garment Co. Ltd., being an English name for identification purpose only). Perline was directly owned by Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man immediately prior to the Reorganisation. Pursuant to the Reorganisation, the Company became the holding company of the companies now comprising the Group on 4 December 2014. The Reorganisation was 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, the consolidated financial statements for the year ended 30 June 2015 have been prepared by applying the principles of merger accounting as if the Company had been the holding company of the Group throughout the year ended 30 June 2015.

The 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 years ended 30 June 2016 and 2015 include the results and cash flows of all companies now comprising the Group, or since the date when the subsidiaries first came under the common control, where this is a shorter period.

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

Statement of Compliance

The consolidated financial statements have been prepared 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 (‘‘HKICPA’’), accounting principles generally accepted in Hong Kong. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the GEM (the ‘‘GEM Listing Rules’’) and the disclosure requirements of the Hong Kong Companies Ordinance (Cap. 622) (the ‘‘New CO’’).

The disclosure requirements set out in the GEM Listing Rules regarding annual consolidated financial statements have been amended with reference to the New CO and to streamline with HKFRSs. Accordingly, the presentation and disclosure of information in the consolidated financial statements for the financial year ended 30 June 2016 have been changed to comply with these new requirements. Comparative information in respect of the financial year ended 30 June 2015 are presented or disclosed in these consolidated financial statements based on the new requirements. Information previously required to be disclosed under the predecessor Hong Kong Companies Ordinance (Cap. 32) or the original GEM Listing Rules, but not under the New CO or the enacting GEM Listing Rules are not disclosed in these consolidated financial statements. A summary of the significant accounting policies adopted by the Group is set out in note 4 to the consolidated financial statements.

– II-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Basis of Preparation

These consolidated financial statements have been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristic of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the consolidated financial statements is determined on such a basis, except for sharebased payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets.

In addition, for financial reporting purpose, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.

The consolidated financial statements are presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (‘‘HK$’000’’) except when otherwise indicated.

– II-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. APPLICATION OF NEW OR REVISED HONG KONG FINANCIAL REPORTING STANDARDS

The preparation of the consolidated financial statements 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 these consolidated financial statements are disclosed in note 5 to the consolidated financial statements.

HKICPA has issued a number of new or revised HKFRS (including their subsequent amendments) which are not yet effective during the year. The Group has not applied or early adopted these new or revised HKFRS in these consolidated financial statements. The name, principle nature and effective date of these pronouncements which may relevant to the Group’s operations are set out below.

Amendments to HKAS 1	Disclosure Initiative1
Amendments to HKAS 7	Disclosure Initiative2
Amendments to HKAS 12	Recognition of Deferred Tax Assets for Unrealised Losses2
Amendments to HKAS 16 and HKAS 38	Clarification of Acceptable Methods of Depreciation and
	Amortisation1
Amendments to HKAS 27	Equity Method in Separate Financial Statements1
Amendments to HKFRS 10 and HKAS 28	Sale or Contribution of Assets between an Investor and its
	Associate or Joint Venture5
Amendments to HKFRS 10, HKFRS 12 and HKAS 28	Investment Entities: Applying the Consolidation
	Exception1
Amendments to HKFRS 2	Classification and Measurement of Share-based Payment
	Transactions3
Amendments to HKFRS 15	Clarification to HKFRS 15 Revenue from Contracts with
	Customers3
HKFRS 9	Financial Instruments3
HKFRS 15	Revenue from Contracts with Customers3
HKFRS 16	Leases4
Amendments to HKFRSs	Annual Improvements to HKFRSs 2012–2014 Cycle1

1 Effective for annual periods beginning on or after 1 January 2016.

2 Effective for annual periods beginning on or after 1 January 2017.

3 Effective for annual periods beginning on or after 1 January 2018.

4 Effective for annual periods beginning on or after 1 January 2019.

5 Effective for annual periods beginning on or after a date to be determined.

– II-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Further information about these HKFRSs that are expected to applicable to the Group is as follows:

HKAS 7 (Amendments) Disclosure Initiative

The amendments to HKAS 7 require entities to provide disclosure that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

To satisfy such requirements, an entity shall disclose (to the extent necessary) the changes in liabilities arising from financing activities including changes from financing cash flows, changes arising from obtaining or losing control of subsidiaries or other businesses, the effect of changes in foreign exchange rates, changes in fair values and other changes.

Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be, classified in the consolidated statement of cash flows as cash flows from financing activities. In addition, the disclosure requirement also applies to changes in financial assets (for example, assets that hedge liabilities arising from financing activities) if cash flows from those financial assets were, or future cash flows will be, included in cash flows from financing activities.

The amendments state that one way to fulfil the new disclosure requirement is to provide reconciliation between the opening and closing balances in the consolidated statement of financial position for liabilities arising from financing activities.

Finally, the amendments also state that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.

The Directors anticipate that the application of Amendments to HKAS 7 in the future may have a material impact on the consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review has been completed.

Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to HKAS 28:

. The requirements on gains and losses resulting from transactions between an entity and its associate or joint venture have been amended to relate only to assets that do not constitute a business.
. A new requirement has been introduced that gains or losses from downstream transactions involving assets that constitute a business between an entity and its associate or joint venture must be recognised in full in the investor’s financial statements.
. A requirement has been added that an entity needs to consider whether assets that are sold or contributed in separate transactions constitute a business and should be accounted for as a single transaction.

– II-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Amendments to HKFRS 10:

. An exception from the general requirement of full gain or loss recognition has been introduced into HKFRS 10 for the loss control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method.
. New guidance has been introduced requiring that gains or losses resulting from those transactions are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement at fair value of investments retained in any former subsidiary that has become an associate or a joint venture that is accounted for using the equity method are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture.

The Directors do not anticipate that the application of these amendments to HKFRS 10 and HKFRS 28 will have a material impact on the Group’s consolidated financial statements.

HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for general hedge accounting. Another revised version of HKFRS 9 was issued in 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a ‘‘fair value through other comprehensive income’’ (‘‘FVTOCI’’) measurement category for certain simple debt instruments.

Key requirements of HKFRS 9 are described below:

. All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent reporting periods. Debt instruments that are held with a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

– II-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.
. In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
. The new general hedge accounting requirements retain the three types of hedge accounting. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the type of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an ’economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

The Directors anticipate that the application of HKFRS 9 in the future may impact the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review has been completed.

HKFRS 15 Revenue from Contracts with Customers

In July 2014, HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:

. Step 1: Identify the contract(s) with a customer
. Step 2: Identify the performance obligations in the contract
. Step 3: Determine the transaction price
. Step 4: Allocate the transaction price to the performance obligations in the contract
. Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

– II-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ’control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15.

The Directors anticipate that the application of HKFRS 15 in the future may have a material impact on the amounts reported an disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review has been completed.

HKFRS 16 Leases

HKFRS 16 was issued on 13 January 2016 and is effective for annual periods beginning on or after 1 January 2019. HKFRS 16 replaces all existing lease accounting requirements and represents a significant change in the accounting and reporting of leases, with more assets and liabilities to be reported on the consolidated statement of financial position and a different recognition of lease costs.

HKFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Subject to limited exceptions for short-term leases and low value assets, distinctions of operating and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees.

Application of HKFRS 16 will result in the Group’s recognition of right-of-use assets and corresponding liabilities in respect of many of the Group’s lease arrangements. These assets and liabilities are currently not required to be recognised but certain relevant information is disclosed as commitments in these consolidated financial statements in note 26 to the consolidated financial statements.

The Directors anticipate that the application of HKRFS 16 in the future may impact the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review has been completed.

The Directors do not anticipate that the application of other new or revised HKFRSs will have a material effect on the Group’s consolidated financial statements.

The Directors anticipated that all of the pronouncements will be adopted by the Group in its accounting policies when they first become effective.

– II-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The statement of compliance and basis of measurement adopted are set out in note 2 to the consolidated financial statements.

The principal accounting policies adopted are as follows:

4.1 Subsidiaries

4.1.1 Consolidation

These consolidated financial statements include the consolidated financial statements of the Company and its subsidiaries now comprising the Group for the periods covered.

As explained in note 2 to the consolidated financial statements, 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 combining subsidiaries in which the common control combination occurs as if they had been consolidated from the date when the combining 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 and other comprehensive income include the results of each of the combining subsidiaries from the earliest date presented or since the date when the combining 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 combination.

For the purpose of these consolidated financial statements, 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.

– II-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4.1.2 Investments in subsidiaries

A subsidiary is an entity, directly or indirectly, controlled by the Company.

Control is achieved when the Group:

(a) has power over the investee;
(b) is exposed, or has rights, to variable returns from its involvement with the investee; and
(c) has the ability to used its power to affect its return.

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 size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
(b) potential voting rights held by the Group, other vote holders or other parties;
(c) rights arising from other contractual arrangements; and
(d) any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

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 make strategic decisions.

4.3 Foreign Currency Translation

4.3.1 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 same as the functional currency of the Company.

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.

4.3.2 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-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(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 of the transactions); and
(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.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the year in which the item is derecognised.

– II-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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 its 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.

4.6 Financial Assets and Financial Liabilities

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

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

4.6.1 Financial assets

(a) 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, cash and cash equivalents and pledged bank deposits in the consolidated statement of financial position.

(b) 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.

– II-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

. the rights to receive cash flows from the asset have expired; or
. the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘‘pass-through’’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

(d) 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.

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, the Group 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.

– II-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4.6.2 Financial liabilities

(a) 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 and refundable trade deposits received in the consolidated statement of financial position.

(b) 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 consolidated 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 consolidated statement of profit or loss.

(c) 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.

(d) 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.

– II-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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.

4.8 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.

4.9 Cash and Cash Equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statements of financial position, cash and cash equivalents includes cash on hand and in banks. Restricted bank deposits are excluded from cash and cash equivalents.

4.10 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.

4.11 Current and Deferred Tax

The income tax expense for the year comprises current and deferred tax.

4.11.1 Current tax

The current 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.

– II-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4.11.2 Deferred tax

Deferred 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 tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred 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 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 tax asset is realised or the deferred tax liability is settled.

Deferred 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 tax is provided on temporary differences arising on investments in subsidiaries, except for deferred 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.

The carrying amount of deferred tax asset is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax asset is reassessed at the end of each reporting period and is recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax asset and liability are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

4.11.3 Offsetting

Deferred 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 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.

– II-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4.12 Employee Benefits

4.12.1 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.

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.

4.12.2 Share Option Scheme

The Company operates a share option scheme for the purpose to attract, retain and reward the eligible persons and to provide the eligible persons an incentive or reward for their contribution to the Group.

For grants of share options that are conditional upon satisfying specified vesting conditions, the fair value of services received is determined by reference to the fair value of share options granted at the grant date and is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve).

At the end of the reporting period, the Company revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share options reserve.

For share options that vest immediately at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss. When share options are exercised, the amount previously recognised in share options reserve will be transferred to share premium. When share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to retained earnings.

– II-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4.13 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.

4.14 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.

4.14.1 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, who is usually when the Group has delivered the products to the customer, the collectability of the related receivables is reasonably assured and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold.

4.14.2 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.

4.15 Leasing

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

The Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. Benefits received and receivables as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

– II-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4.16 Dividend Distribution

Dividend distribution to the owners is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the owners.

4.17 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.
(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 venture 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);
(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); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

(a) that person’s children and spouse or domestic partner;
(b) children of that person’s spouse or domestic partner; and
(c) dependants of that person or that person’s spouse or domestic partner.

– II-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES UNCERTAINTY

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.

Estimation Uncertainty

The Group makes estimates and assumptions concerning the future. 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.

(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 and deferred 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 tax assets and liabilities are determined using income tax rates that are expected to apply when the related deferred tax assets are realised or the deferred 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.

– II-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

6. REVENUE AND OPERATING SEGMENT INFORMATION

Revenue represents the aggregate of the net invoiced value of leather products sold, after allowances for returns.

The Group has only one single operating segment as the Group is principally engaged in the manufacturing and sales of leather products which is the basis to allocate resources and assess performance.

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 periods. 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.

(a) Information about major customers

Revenues from external customers contributing over 10% of the total revenue of the Group during the years are as follows:

		2016	2015
		HK$’000	HK$’000
Customer	A	10,012	22,319
Customer	B	6,521	*

The corresponding revenue did not contribute over 10% of the total revenue of the Group for the respective year.

– II-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Geographical information

The following tables set out information about geographical location of (i) the Group’s revenue from external customers and (ii) the Group’s non-current assets excluding deferred tax assets. The geographical location of customers is based on the location to which the goods are delivered. The geographical location of non-current assets excluding deferred tax assets is based on the physical location of the assets.

Revenue from external customers

Australia United States of America Malaysia Hong Kong Japan South Africa PRC Netherlands Others (Note)	2016 HK$’000 20,909 20,340 6,429 6,032 932 708 150 — 347 55,847	2015 HK$’000 13,328 33,441 5,187 14,053 3,560 1,648 7,663 1,150 1,917
		81,947

Note: Other countries mainly included Canada, France, United Kingdom, Italy, Indonesia, South Korea, Singapore, New Zealand and Brazil.

Non-current assets excluding deferred tax assets

Hong Kong PRC	2016 HK$’000 206 292 498	2015 HK$’000 63 240
		303

– II-31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

7. OTHER REVENUE AND OTHER INCOME

Interest income Sales of scrap materials Sundry income FINANCE COSTS Interests on: Bank borrowings PROFIT BEFORE TAXATION The Group’s profit before taxation is arrived at after charging: Auditors’ remuneration Depreciation of property, plant and equipment Cost of inventories recognised as expenses (included in cost of sales) Exchange losses, net Operating lease rentals in respect of properties Listing expenses Staff costs (including directors’ remuneration): — Salaries and bonus — Pension scheme contributions Loss on disposal of items of property, plant and equipment Impairment loss on trade receivables	2016 HK$’000 226 63 — 289 2016 HK$’000 — 2016 HK$’000 560 125 27,916 49 1,451 —	2015 HK$’000 127 10 17	2015 HK$’000 127 10 17
		154
		2015 HK$’000 12
		2015 HK$’000 550 130 38,426 9 1,153 18,422
	13,857 1,484	13,096 1,602
	15,341 11 89	14,698 — —

8. FINANCE COSTS

9. PROFIT BEFORE TAXATION

Included in cost of sales for the years ended 30 June 2016 and 2015 were depreciation charge of approximately HK$53,000 and HK$43,000 respectively and staff costs of approximately HK$6,176,000 and HK$6,017,000 respectively.

– II-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

10. TAXATION

Hong Kong Profits Tax is calculated at the rate of 16.5% (2015: 16.5%) on the estimated assessable profit for the years. The rate of the PRC Corporate Income Tax of the Group’s subsidiary operating in the PRC during the year was 25% (2015: 25%) on its assessable profits. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries on jurisdictions in which the Group operates.

Current income tax: Hong Kong Profits Tax PRC Corporate Income Tax Over-provision in prior years: Hong Kong Profits tax Deferred tax (note 15) Income tax expenses for the year	2016 HK$’000 808 27 835 (490) 16 361	2015 HK$’000 3,444 211 3,655 (22) 10 3,643

The income tax expenses for the years can be reconciled to the profit before taxation as set out in the consolidated statement of profit or loss as follows:

Profit before taxation 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 Over-provision for prior years Tax effect of temporary differences Income tax expenses for the year	2016 HK$’000 4,188 664 226 (55) (490) 16 361	2015 HK$’000 3,759 675 2,999 (19) (22) 10 3,643

– II-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11. DIRECTORS’, EMPLOYEES’ REMUNERATION AND SENIOR MANAGEMENT’S EMOLUMENTS

Directors

Directors’ remuneration as a Director and/or director of the subsidiaries for the years disclosed pursuant to the GEM Listing Rules are as follows:

Year ended 30 June 2016

Name of Directors Executive Directors Ms. Cheung Woon Yiu Ms. Lam Wai Si Grace Mr. Ching Wai Man Non-executive Director Ms. Ng Lai Hung Independent non-executive Directors Dr. Wong Wai Kong Mr. How Sze Ming Mr. Philip David Thacker	Directors’ fee HK$’000 — — — — 120 120 120 360	Salaries, allowances and benefits in kind HK$’000 500 679 679 130 — — — 1,988	Pension scheme contributions HK$’000 18 18 18 6 — — — 60	Total HK$’000 518 697 697 136 120 120 120
				2,408

– II-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Year ended 30 June 2015

Name of Directors Executive Directors Ms. Cheung Woon Yiu (note i) Ms. Lam Wai Si Grace (notes i, ii) Mr. Ching Wai Man (note i) Non-executive Director Ms. Ng Lai Hung (note iii) Independent non-executive Directors Dr. Wong Wai Kong (note iv) Mr. How Sze Ming (note iv) Mr. Philip David Thacker (note iv)	Directors’ fee HK$’000 — — — — 50 50 50 150	Salaries, allowances and benefits in kind HK$’000 500 679 679 125 — — — 1,983	Pension scheme contributions HK$’000 18 18 18 6 — — — 60	Total HK$’000 518 697 697 131 50 50 50
				2,193

Notes:

(i) Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man were appointed as Directors on 3 September 2014.
(ii) Ms. Lam Wai Si Grace is also the Chief Executive Officer of the Group and her emoluments disclosed above include those for services rendered by her as the Chief Executive Officer for the years.
(iii) Ms. Ng Lai Hung was appointed as a Director on 3 September 2014.
(iv) Dr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker were appointed as Directors on 28 January 2015.

During the 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.

– II-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Five Highest Paid Employees and Senior Management

The five highest paid employees of the Group for the year ended 30 June 2016 included three (2015: three) Directors, details of whose remuneration are disclosed above. The remuneration of the remaining two (2015: two) non-director, five highest paid employees for the years ended 30 June 2016 and 2015 are disclosed as follows:

Salaries, allowances and benefits in kind Pension scheme contributions	2016 HK$’000 842 36 878	2015 HK$’000 895 35
		930

The remuneration fell within the following band:

Nil – HK$1,000,000	2016 Number of employees 2	2015 Number of employees 2

Senior Management of the Group

The remuneration of the senior management of the Group are within the following band:

Nil – HK$1,000,000	2016 Number of employees 5	2015 Number of employees 5

During the years, no remuneration was paid by the Group to any of the five highest paid employees and senior management as an inducement to join or upon joining the Group or as compensation for loss of office.

12. DIVIDENDS

The Directors do not recommend any dividend for the years ended 30 June 2016 and 2015. The Company has not declared any dividends since its incorporation.

Prior to the completion of the Reorganisation in December 2014, Perline, an indirect wholly owned subsidiary of the Company, declared a dividend of HK$3,200,000 to its then shareholders in October 2014. Such dividend was fully paid by way of cash in December 2014. The dividend declared for the years are as follows:

Dividend of Perline to the then shareholders of Perline of nil (2015: HK$16) per Perline’s share	2016 HK$’000 —	2015 HK$’000 3,200

– II-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

13. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY

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 of approximately HK$3,827,000 (2015: HK$116,000) and (ii) the number of 400,000,000 Shares (2015: weighted average number of 338,356,164 Shares) in issue during the year.

The diluted earnings per Share is equal to the basic earnings per Share as there were no diluted potential ordinary Shares in issue during the years.

14. PROPERTY, PLANT AND EQUIPMENT

Cost As at 1 July 2014 Additions Exchange alignments As at 30 June 2015 and 1 July 2015 Additions Disposals Exchange alignments As at 30 June 2016 Accumulated depreciation As at 1 July 2014 Charge for the year Exchange alignments As at 30 June 2015 and 1 July 2015 Charge for the year Disposals Exchange alignments As at 30 June 2016 Carrying amounts As at 30 June 2016 As at 30 June 2015	Motor vehicles HK$’000 241 — — 241 93 (109) (9) 216 190 36 — 226 9 (98) (8) 129 87 15	Furniture, fixtures and office equipment HK$’000 948 59 (2) 1,005 203 — (16) 1,192 888 36 (1) 923 56 — (15) 964 228 82	Machinery and equipment HK$’000 396 92 — 488 40 — (20) 508 246 43 — 289 53 — (17) 325 183 199	Leasehold improvements HK$’000 308 — — 308 — — — 308 286 15 — 301 7 — — 308 — 7	Total HK$’000 1,893 151 (2) 2,042 336 (109) (45) 2,224 1,610 130 (1) 1,739 125 (98) (40) 1,726 498 303

– II-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

15. DEFERRED TAX

The table sets out the major components of deferred tax assets and liabilities recognised in the consolidated statement of financial position and their movements during the years.

As at 1 July 2014 Recognised in the consolidated statement of profit or loss (note 10) As at 30 June 2015 and 1 July 2015 Recognised in the consolidated statement of profit or loss (note 10) As at 30 June 2016	Decelerated depreciation allowances HK$’000 22 (10) 12 9 21	Accelerated depreciation allowances HK$’000 (18) — (18) (25) (43)	Total HK$’000 4 (10
			(6 (16
			(22

The above deferred tax assets and liabilities have been offset for presentation purpose in the consolidated statement of financial position.

16. INVENTORIES

Raw materials Work in progress Finished goods 17. TRADE RECEIVABLES Trade receivables	2016 HK$’000 4,143 664 1,395 6,202 2016 HK$’000 9,476	2015 HK$’000 1,609 403 231
		2,243
		2015 HK$’000 26,848

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 mainly ranging from 10 to 45 days (2015: 10 to 45 days). The Group does not hold any collateral over these balances.

– II-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Aging analysis

The following table sets out 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	2016 HK$’000 8,437 543 141 355 9,476	2015 HK$’000 17,890 884 124 7,950
		26,848

Aging analysis of trade receivables which are past due but not impaired

The following table sets out 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	2016 HK$’000 1,695 59 141 355 2,250	2015 HK$’000 1,836 740 1,158 885
		4,619

During the year ended 30 June 2016, the trade receivables of HK$89,000 (2015: nil) was considered uncollectible. The amount was written off and charged to profit or loss.

18. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

Deposits Prepayments Other receivables	2016 HK$’000 630 386 555 1,571	2015 HK$’000 2,376 389 13
		2,778

Deposits and other receivables from independent third parties for whom there are no recent history of default.

– II-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

19. CASH AND CASH EQUIVALENTS AND PLEDGED BANK DEPOSITS

Cash and bank balances Less: Pledged deposits for banking facilities Cash and cash equivalents	2016 HK$’000 52,019 (3,031) 48,988	2015 HK$’000 39,736 (3,348
		36,388

Cash and cash equivalents are denominated in the following currencies:

United States dollars (‘‘USD’’) Hong Kong dollars Renminbi (‘‘RMB’’) Australian dollars Euro	2016 HK$’000 20,683 27,563 706 35 1 48,988	2015 HK$’000 3,582 30,871 1,888 46 1
		36,388

RMB is not a freely convertible currency 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, they are not subject to the foreign exchange control. Approximately HK$101,000 (2015: HK$1,213,000) of cash and bank balances denominated in RMB and located in the PRC were subject to the foreign exchange control.

Pledged bank deposits represent deposits pledged to a bank to secure bank facilities granted to the Group. The pledged bank deposits carry fixed interest rate of 0.35% (2015: 0.35%) per annum. 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. As at 30 June 2016 and 2015, all pledged bank deposits were denominated in USD.

20. TRADE PAYABLES

Trade payables	2016 HK$’000 1,496	2015 HK$’000 1,328

The following table sets out an aging analysis of the trade payables of the Group, presented based on invoice date:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	2016 HK$’000 94 1,202 21 179 1,496	2015 HK$’000 672 308 105 243
		1,328

– II-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

21. ACCRUALS, OTHER PAYABLES AND TRADE DEPOSITS RECEIVED

Accruals Other payables Trade deposits received	2016 HK$’000 3,548 112 1,519 5,179	2015 HK$’000 4,415 126 3,360
		7,901

As at 30 June 2015, included in trade deposits received was refundable deposit approximately HK$1,798,000. There was no such refundable deposit as at 30 June 2016. All trade deposits received are non-interest bearing.

22. SHARE CAPITAL

Movements of the Company’s share capital since the date of incorporation on 3 September 2014 are as follows:

Authorised: Ordinary Shares of HK$0.01 each as at 3 September 2014 (date of incorporation) (note i) Increase in authorised share capital (note ii) Ordinary Shares of HK$0.01 each as at 30 June 2015, 1 July 2015 and 30 June 2016 Issued and fully paid: Ordinary Shares of HK$0.01 as at 3 September 2014 (date of incorporation) (note i) Issuance of ordinary Shares of HK$0.01 pursuant to the Reorganisation (note iii) Nil paid Shares credited as fully paid (note iii) Capitalisation Issue (note iv) Issuance of Shares upon Placing (note v) Ordinary Shares of HK$0.01 each as at 30 June 2015, 1 July 2015 and 30 June 2016 Notes:	Number of shares ’000 100,000 3,900,000 4,000,000 Number of shares ’000 1,000 9,000 — 290,000 100,000 400,000	Share capital HK$’000 1,000 39,000
		40,000
		Share capital HK$’000 — 90 10 2,900 1,000
		4,000

(i) On 3 September 2014, the Company was incorporated in the Cayman Islands with one subscriber Share issued at nil paid. On the same date, the subscriber Share was transferred to QCL and 999,999 Shares were further allotted at nil paid to QCL, DVL and OGL, companies solely owned by each of the then shareholders of Perline.

– II-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(ii) On 28 January 2015, the authorised share capital of the Company was increased from HK$1,000,000 to HK$40,000,000 by the creation of additional 3,900,000,000 Shares of HK$0.01 each.
(iii) On 4 December 2014, Odella BVI, a wholly owned subsidiary of the Company, (as a purchaser) acquired from the then shareholders of Perline (as the vendors) the entire share capital of Perline. In consideration, the Company credited as fully paid the 1,000,000 nil-paid Shares issued on 3 September 2014, and issued to QCL, DVL and OGL (as nominated by the vendors) 9,000,000 new Shares, 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.
(iv) On 11 February 2015, the Company issued and allotted a total of 290,000,000 Shares of HK$0.01 each to the Shareholders whose names appeared on the Company’s register of members on 28 January 2015 by capitalising an amount of HK$2,900,000 standing to the credit of the Company’s share premium account which was created pursuant to the Placing.
(v) On 11 February 2015, the Company issued a total of 100,000,000 new Shares of HK$0.01 each at a placing price of HK$0.55 per Share. The gross Listing proceeds were HK$55,000,000.

23. FINANCIAL RISK MANAGEMENT

Financial assets Loans and receivables Financial liabilities Amortised cost	2016 HK$’000 62,680 5,156	2015 HK$’000 68,973
		7,667

The Group’s financial assets comprise trade receivables, other receivables, cash and cash equivalents and pledged bank deposits; and the Group’s financial liabilities comprise trade payables, accruals, other payables and refundable trade deposits received.

The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and cash flow and fair value interest rate 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.

(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 rate fluctuation of HK$ against USD and RMB. The Group does not hedge its foreign exchange risk during the year.

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.

As at 30 June 2016 and 2015, if HK$ had reasonably strengthened/weakened by 5% against RMB with all other variables held constant, the profit before taxation for each of the years then ended would have changed mainly as a result of exchange gains/losses on translation to HK$ against the relevant foreign currencies.

– II-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Details of the changes are as follows:

Profit before taxation increase/(decrease): — HK$ strengthened 5% against RMB — HK$ weakened 5% against RMB	2016 HK$’000 (30) 30	2015 HK$’000 (36) 36

(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 deposited at banks and pledged bank deposits, the Group has no other significant interest-bearing assets or liabilities. Management does not anticipate significant impact on interest-bearing assets or liabilities resulted from the changes in interest rates because the interest rates of these interest-bearing financial assets are not expected to change significantly.

(b) Credit risk

Credit risk mainly arises from deposits at banks, trade receivables, deposits and other receivables. The carrying amounts of bank balances, trade receivables, deposits and other receivables included in the consolidated statements of financial position represent the Group’s maximum exposure to credit risk in relation to its financial assets.

As at 30 June 2016, all bank deposits 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. Deposits and other receivables are made with counterparties with no recent history of default. The Group performs ongoing credit evaluations of its counterparties’ financial conditions and has policies in place to ensure that receivables are followed up on a timely basis. Further quantitative data in respect of the Group’s exposure to credit risk arising from trade receivables are disclosed in note 17 to the consolidated financial statements. Save as those disclosed in note 17 to the consolidated financial statements, there are no other financial assets that are past due but not impaired. The financial assets included thereof relate to receivables for which there was no recent history of default.

(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 ratio targets.

The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period according to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows.

– II-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Non-derivative financial liabilities Trade payables Accruals, other payables and trade deposits received Non-derivative financial liabilities Trade payables Accruals, other payables and trade deposits received	On demand or within one year HK$’000 1,496 3,660 5,156 On demand or within one year HK$’000 1,328 6,339 7,667	2016 Total undiscounted cash flows HK$’000 1,496 3,660 5,156 2015 Total undiscounted cash flows HK$’000 1,328 6,339 7,667	Total carrying amount HK$’000 1,496 3,660
			5,156
			Total carrying amount HK$’000 1,328 6,339
			7,667

24. FAIR VALUE ESTIMATION

The fair values of the Group’s financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions. The Directors consider that the carrying amounts of the financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements are not materially different from their fair values as at 30 June 2016 and 2015.

The Group does not have any financial instrument that is measured subsequent to initial recognition at fair value.

25. 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 other companies in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. As at 30 June 2016 and 2015, the Group did not have any debt and thus no gearing ratio is presented.

The Group is not subject to externally imposed capital requirements.

– II-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

26. OPERATING LEASE COMMITMENTS

The Group as lessee

As at the end of the reporting periods, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year In the second to fifth years, inclusive	2016 HK$’000 966 765 1,731	2015 HK$’000 1,268 1,539
		2,807

Operating lease payments represent rentals payable by the Group for certain of its premises. Leases are negotiated at terms which ranged from one to five years. The Group does not have an option to purchase the leased premises at the expiry of the lease periods.

27. SHARE OPTION SCHEME

The Company administers a share option scheme (the ‘‘Share Option Scheme’’) which was adopted on 28 January 2015 by a Shareholders’ written resolution. The purpose of the Share Option Scheme is to enable the Group to grant options to selected participants as incentives and rewards for their contribution to the Group. It became effective for a period of 10 years commencing on the date on which the Share Option Scheme was adopted. Eligible participants of the Share Option Scheme include employees, directors, suppliers, customers, shareholders, advisers or consultants, research, development or other technological support personnel or entities of the Company, its subsidiaries or any entity (‘‘Invested Entity’’) in which any member of the Group holds an equity interest and other selected participants (the ‘‘Eligible Participants’’).

The total number of shares which may be issued and allotted upon the exercise of all options to be granted under the Share Option Scheme is 40,000,000 shares, representing 10% of the total number of issued shares as at the date of this annual report.

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 the Group must not in aggregate exceed 30% of the share capital of the Company in issue from time to time. 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 the Group) to be granted under the Share Option Scheme and any other share option scheme of the Group must not in aggregate exceed 10% of the Shares in issue on the date of Listing, subject to refreshment of such limit as approved by shareholders.

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 the 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 the Company for the time being. Any further grant of options in excess of such limit must be separately approved by the shareholders in general meeting. Where any grant of options to a substantial shareholder or an independent non-executive director 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: (i) representing in aggregate over 0.1% of the shares in issue; and (ii) 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.

– II-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Under the Share Option Scheme, the Directors may, at their discretion, grant to any Eligible Participants options to subscribe for shares at an subscription price per share being not 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; (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.

An option may be accepted by a participant within 21 days from the date of the offer for the grant of 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.

During the period from the effective date of the Share Option Scheme to 30 June 2016, no share option has been granted, expired, lapsed, exercised or cancelled.

28. CONTINGENT LIABILITIES

The Group had no significant contingent liabilities as at 30 June 2016 (2015: nil).

29. MATERIAL RELATED PARTY TRANSACTIONS

Save as disclosed elsewhere in the consolidated financial statements and the steps carried out in the Reorganisation and Placing, the Group has entered into the following transactions with related parties:

The remuneration of Directors during the years are disclosed as follows:

			2016	2015
			HK$’000	HK$’000
—	Salaries,	allowances and benefits in kind	2,348	2,133
—	Pension	scheme contributions	60	60

30. EVENTS AFTER THE REPORTING PERIOD

The Group did not have any material subsequent event after the reporting period.

– II-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

31. STATEMENT OF FINANCIAL POSITION AND RESERVES MOVEMENTS OF THE COMPANY

(a) Statement of Financial Position of the Company

Non-current asset Investment in a subsidiary Current assets Prepayments Amounts due from subsidiaries Cash and cash equivalents Total current assets Current liability Accruals Net current assets Total assets less current liability Net assets Equity Share capital Reserves Total equity	2016 HK$’000 1 90 47,575 2 47,667 100 47,567 47,568 47,568 4,000 43,568 47,568	2015 HK$’000 1
		50 48,346 2
		48,398
		100
		48,298
		48,299
		48,299
		4,000 44,299
		48,299

Approved and authorised for issue by the board of directors on 21 September 2016 and are signed on its behalf by:

Cheung Woon Yiu Director

Lam Wai Si Grace

Director

– II-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Reserves Movements of the Company

As at 3 September 2014 (date of incorporation) Issuance of Shares pursuant to the Reorganisation (note 22 (iii)) Shares issued pursuant to the Capitalisation Issue Placing of Shares Transaction cost attributable to issuance of Shares Loss for the period As at 30 June 2015 and 1 July 2015 Loss for the year As at 30 June 2016	Share premium HK$’000 — — (2,900) 54,000 (11,318) — 39,782 — 39,782	Other reserve HK$’000 — 19,570 — — — — 19,570 — 19,570	Accumulated losses HK$’000 — — — — — (15,053) (15,053) (731) (15,784)	Total HK$’000 — 19,570 (2,900) 54,000 (11,318) (15,053) 44,299 (731) 43,568

Note: Other reserve represents the different between the fair value of the shares of Perline acquired pursuant to the Reorganisation over the nominal value of the Company’s Shares issued in exchange therefore.

32. PRINCIPAL SUBSIDIARIES

As at 30 June 2015 and 2016, the Company had direct and indirect interests in the following subsidiaries:

			Proportion of
			ownership interest
	Place of		and voting rights
	incorporation/	Share capital/	held by the
Name of company	operation	registered capital	Company	Principal activities
(Note b)			(Note a)
Odella BVI	BVI	USD100 (Ordinary	100	Investment holdings
		share capital)
Perline	Hong Kong	HK$200,000	100	Sales, marketing and
		(Ordinary share		development of leather
		capital)		products
佛山市南海盛麗皮衣有限公	PRC	HK$1,500,000	100	Manufacture of various leathers
司(Foshan Nanhai Shengli		(Registered capital)		products, domestic and
Leather Garment Co. Ltd.)				foreign trading (restricted
(Note c)				items being subject to
				relevant approval)

– II-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

(a) Other than Odella BVI which is directly held by the Company, all subsidiaries are indirectly held by the Company.
(b) Except for Foshan Nanhai Shengli Leather Garment Co. Ltd. which is a wholly foreign-owned enterprise, all other subsidiaries are companies incorporated with limited liability.
(c) The English translation of the name is for identification purpose only.

33. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements were approved and authorised for issue by the Board on 21 September 2016.

– II-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

III. UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016

Set out below is the full text of the unaudited condensed consolidated financial statements of the Company for the six months ended 31 December 2016 as extracted from the interim report of the Company for the six months ended 31 December 2016.

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months and three months ended 31 December 2016

Six months ended 31 December Three months ended 31 December 2016 2015 2016 2015 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (unaudited) 24,065 30,116 13,546 10,520 (15,575) (17,630) (8,609) (6,890) 8,490 12,486 4,937 3,630 125 234 107 106 (865) (1,367) (361) (718) (5,803) (5,641) (2,952) (2,823) 1,947 5,712 1,731 195 (409) (945) (373) (38) 1,538 4,767 1,358 157 54 57 47 32 54 57 47 32 1,592 4,824 1,405 189 HK0.38 cent HK1.19 cents HK0.34 cent HK0.04 cent	Six months ended 31 December Three months ended 31 December 2016 2015 2016 2015 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (unaudited) 24,065 30,116 13,546 10,520 (15,575) (17,630) (8,609) (6,890) 8,490 12,486 4,937 3,630 125 234 107 106 (865) (1,367) (361) (718) (5,803) (5,641) (2,952) (2,823) 1,947 5,712 1,731 195 (409) (945) (373) (38) 1,538 4,767 1,358 157 54 57 47 32 54 57 47 32 1,592 4,824 1,405 189 HK0.38 cent HK1.19 cents HK0.34 cent HK0.04 cent	Six months ended 31 December Three months ended 31 December 2016 2015 2016 2015 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (unaudited) 24,065 30,116 13,546 10,520 (15,575) (17,630) (8,609) (6,890) 8,490 12,486 4,937 3,630 125 234 107 106 (865) (1,367) (361) (718) (5,803) (5,641) (2,952) (2,823) 1,947 5,712 1,731 195 (409) (945) (373) (38) 1,538 4,767 1,358 157 54 57 47 32 54 57 47 32 1,592 4,824 1,405 189 HK0.38 cent HK1.19 cents HK0.34 cent HK0.04 cent
1,947 (409)	5,712 (945)	1,731 (373)
1,538	4,767	1,358
54	57	47
54	57	47
1,592	4,824	1,405
HK0.38 cent	HK1.19 cents	HK0.34 cent

– II-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Financial Position

As at 31 December 2016

Notes Non-current assets Property, plant and equipment Current assets Inventories Trade receivables 9 Deposits, prepayments and other receivables Cash and cash equivalents Pledged deposits Tax receivable Total current assets Current liabilities Trade payables 10 Accruals, other payables and trade deposits received Tax payable Total current liabilities Net current assets Total assets less current liabilities Non-current liability Deferred tax liability Net assets Equity Capital and reserves attributable to owners of the Company Share capital Reserves Total equity	31 December 2016 HK$’000 (unaudited) 417 7,507 7,949 893 51,290 3,041 1,834 72,514 2,149 7,036 260 9,445 63,069 63,486 22 63,464 4,000 59,464 63,464	30 June 2016 HK$’000 (audited) 498
		6,202 9,476 1,571 48,988 3,031 —
		69,268
		1,496 5,179 1,197
		7,872
		61,396
		61,894
		22
		61,872
		4,000 57,872
		61,872

– II-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Changes in Equity

For the six months ended 31 December 2016

	Attributable to owners of	Attributable to owners of	Attributable to owners of	the Company	the Company		Total HK$’000 61,872
Share capital HK$’000 4,000	Share premium HK$’000 39,782	Statutory reserve HK$’000 (note i) 208	Exchange fluctuation reserve HK$’000 (note ii) 276	Other reserve HK$’000 (note iii) 100	Retained earnings HK$’000 17,506	Reserves Sub-total HK$’000 57,872
— —	— —	— —	— 54	— —	1,538 —	1,538 54	1,538 54
—	—	—	54	—	1,538	1,592	1,592 63,464 57,953
4,000	39,782	208	330	100	19,044	59,464
4,000	39,782	208	184	100	13,679	53,953
— —	— —	— —	— 57	— —	4,767 —	4,767 57	4,767 57
—	—	—	57	—	4,767	4,824	4,824 62,777
4,000	39,782	208	241	100	18,446	58,777

(i) Statutory reserve

(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) that 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 profit or loss on the disposal of the foreign operations.

(iii) Other reserve

Other reserve represents the difference between the nominal value of the shares issued by the Company in exchange for the nominal value of the share capital of its subsidiary arising from the reorganisation underwent for the preparation of the listing of the Company’s shares on GEM.

– II-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Cash Flows

Net cash generated from operating activities Net cash used in investing activities Net cash generated from financing activities Net increase in cash and cash equivalents Effect on foreign exchange rate changes, net Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period — represented by bank balances and cash other than pledged deposits	For the six months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 2,303 7,096 (4) (118) — 325 2,299 7,303 3 (93) 48,988 36,388 51,290 43,598

– II-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES

1. Group Reorganisation

The Company was incorporated in the Cayman Islands on 3 September 2014 as an exempted company with limited liability under the Companies Law (as revised from time to time) of the Cayman Islands. Its ordinary shares (the ‘‘Shares’’) were first listed on GEM on 12 February 2015 (the ‘‘Listing’’). The Directors consider that the Company’s ultimate holding company is Quality Century Limited (‘‘QCL’’), which is a company incorporated in the British Virgin Islands with limited liability.

The principal activity of the Group is the manufacturing and sales of leather products. Pursuant to a group reorganisation (the ‘‘Reorganisation’’) in preparation for the Listing, on 4 December 2014, the Company became the holding company of the subsidiaries now comprising the Group. Details of the Reorganisation are set out in the section headed ‘‘History, Development and Reorganisation’’ in the prospectus issued by the Company dated 5 February 2015 (the ‘‘Prospectus’’).

2. Basis of Presentation and Basis of Preparation

The unaudited condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows of the Group for the six months and three months ended 31 December 2016 and 2015 include the results and cash flows of all companies now comprising the Group, or since the date when the subsidiaries first came under the common control, where this is a shorter period.

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

These unaudited financial statements of the Company have been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘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. In addition, the unaudited financial statements include applicable disclosures required by the GEM Listing Rules. All HKFRSs effective for the accounting period commencing from 1 July 2016, together with the relevant transitional provisions, have been adopted by the Group in the preparation of these financial statements throughout the periods covered in these unaudited financial statements.

These financial statements have been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristic of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the unaudited consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets.

. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

– II-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

. Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
. Level 3 inputs are unobservable inputs for the asset or liability.

The unaudited financial information is presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (‘‘HK$000’’) except when otherwise indicated.

The accounting policies applied in the preparation of the unaudited condensed consolidated results are consistent with those adopted in the preparation of the annual consolidated financial statements of the Group for the year ended 30 June 2016, except that the Group has adopted a number of new or revised HKFRSs newly effective during the period under review. Out of these new or revised HKFRSs, those relevant to the Group’s operations affecting its significant accounting policies are set out below.

Amendments to HKAS 1 Disclosure Initiative Amendments to HKAS 16 and Clarification of Acceptable Methods of Depreciation and Amortisation HKAS 38 Amendments to HKFRSs Annual Improvements to HKFRSs 2012–2014 Cycle

The adoption of these new or revised HKFRSs had no change in significant accounting policies and no significant effect on the financial results of the current period. Also, no prior period adjustment is required.

HKICPA has issued a number of new or revised HKFRS (including their subsequent amendments) which are not yet effective during the period. The Group has not applied or early adopted these new or revised HKFRSs in the preparation of these unaudited condensed consolidated results. It is anticipated that all of the pronouncements will be adopted by the Group in its accounting policies when they first become effective. The Directors anticipate that the application of certain of these new or revised HKFRS in the future may impact the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect until a detailed review has been completed.

The unaudited condensed consolidated results have not been audited by the Company’s auditor and have been reviewed by the audit committee of the Board (‘‘Audit Committee’’).

3. Revenue and Operating Segment Information

Revenue represents the aggregate of the net invoiced value of leather products sold, after allowances for returns.

The Group has only one single operating segment as the Group is principally engaged in the manufacturing and sales of leather products which is the basis to allocate resources and assess performance.

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments that make strategic decisions, has been identified as the executive Directors. The chief operating decision-maker 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 periods. 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.

– II-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(a) Information about major customers

Revenues from customer contributing over 10% of the total revenue of the Group during the periods are as follows:

Customer A Customer B	Six months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 8,100 6,212 3,332 5,086	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 3,525 2,250 3,332 1,524

(b) 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.

Revenue from external customers

United States of America Australia Hong Kong Japan Malaysia South Africa PRC Others (note)	Six months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 9,977 12,789 6,995 10,101 2,952 2,475 2,013 752 1,642 1,679 382 1,993 — 188 104 139 24,065 30,116	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 4,840 3,779 5,767 5,973 722 538 382 — 1,353 — 382 211 — — 100 19 13,546 10,520	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 4,840 3,779 5,767 5,973 722 538 382 — 1,353 — 382 211 — — 100 19 13,546 10,520
			10,520

Note: Other countries included Canada, Switzerland, French, New Zealand and the United Kingdom.

Non-current assets

Hong Kong PRC	As at 31 December 2016 HK$’000 (unaudited) 95 322 417	As at 30 June 2016 HK$’000 (audited) 206 292
		498

– II-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

4. Other Revenue and Other Income

Interest income Sales of scrap materials Exchange gains, net	Six months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 17 146 11 57 97 31 125 234	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 10 75 — — 97 31 107 106	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 10 75 — — 97 31 107 106
			106

5. Profit Before Tax

The Group’s profit before tax is arrived at after charging:

Staff costs (including directors’ remuneration): — Salaries and bonus — Pension scheme contributions Total staff costs Cost of inventories sold Depreciation of property, plant and equipment	Six months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 7,598 6,021 496 548 8,094 6,569 12,122 13,834 82 56	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 4,229 2,555 197 247 4,426 2,802 7,148 5,503 41 26	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 4,229 2,555 197 247 4,426 2,802 7,148 5,503 41 26
			2,802
			5,503 26

6. Taxation

Hong Kong Profits Tax is calculated at the rate of 16.5% (2015: 16.5%) on the estimated assessable profit for the periods. The rate of the PRC Enterprise Income Tax of the Group’s subsidiary operating in the PRC during the periods was 25% (2015: 25%) on its assessable profits. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries or jurisdictions in which the Group operates for the periods.

Current income tax: Hong Kong Profits Tax PRC Enterprise Income Tax Income tax expense for the period	Six months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 330 937 79 8 409 945	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 294 30 79 8 373 38	Three months ended 31 December 2016 2015 HK$’000 HK$’000 (unaudited) (unaudited) 294 30 79 8 373 38
			38

7. Dividends

The Company has not declared any dividends since its incorporation.

– II-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

8. Earnings Per Share Attributable to Owners of the Company

The calculations of the basic earnings per Share attributable to owners of the Company were based on (i) the profit attributable to owners of the Company for the periods; and (ii) the number of 400,000,000 (2015: 400,000,000) Shares in issue during the periods.

The diluted earnings per Share for the six months and three months ended 31 December 2016 and 2015 are equal to the basic earnings per Share as there were no dilutive potential ordinary Shares in issue during the periods.

9. Trade Receivables

Trade receivables	As at 31 December 2016 HK$’000 (unaudited) 7,949	As at 30 June 2016 HK$’000 (audited) 9,476

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 (30 June 2016: 10 to 45 days).

Aging analysis

The following table sets out 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	As at 31 December 2016 HK$’000 (unaudited) 5,346 2,530 52 21 7,949	As at 30 June 2016 HK$’000 (audited) 8,437 543 141 355
		9,476

10. Trade Payables

The following table sets out an aging analysis of the trade payables of the Group, presented based on invoice date.

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	As at 31 December 2016 HK$’000 (unaudited) 1,737 173 — 239 2,149	As at 30 June 2016 HK$’000 (audited) 94 1,202 21 179
		1,496

– II-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

11. Lease Commitments

As at the end of the reporting periods, 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 years, inclusive	As at 31 December 2016 HK$’000 (unaudited) 1,122 370 1,492	As at 30 June 2016 HK$’000 (audited) 966 765
		1,731

12. Related Party Transactions

The Group has entered into the following transactions with related parties.

The remuneration of Directors, who are the key management of the Group, during the periods was disclosed as follows:

		Six months	ended	Three months ended	Three months ended
		31 December		31 December
		2016	2015	2016	2015
		HK$’000	HK$’000	HK$’000	HK$’000
		(unaudited)	(unaudited)	(unaudited)	(unaudited)
Salaries,	allowances and benefits in kind	1,142	1,082	601	541
Pension	scheme contributions	30	30	15	15

13. Events After the Reporting Period

On 12 January 2017, Power View Group Limited (the ‘‘Offeror’’) entered into a sale and purchase agreement (the ‘‘S&P Agreement’’) with, among others, Quality Century Limited (‘‘QCL’’), Design Vanguard Limited (‘‘DVL’’) and Olson Global Limited (‘‘OGL‘‘) (the ‘‘Vendors’’), pursuant to which the Offeror conditionally agreed to purchase and the Vendors conditionally agreed to sell the aggregate of 300,000,000 Shares (the ‘‘Sale Shares’’), representing 75% of the entire issued share capital of the Company as at the date of the S&P Agreement, for a total consideration of HK$350,760,000 (equivalent to HK$1.1692 per Sale Share). The completion of the sales and purchase of the Sale Shares took place on 23 January 2017, in accordance with the terms and provisions of the S&P Agreement. For details, please refer to the announcements jointly issued by the Company and the Offeror dated 18 January 2017 and 23 January 2017, respectively.

– II-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

IV. INDEBTEDNESS STATEMENT

Indebtedness

As at 31 December 2016, being the latest practicable date for the purpose of ascertaining certain information contained in this indebtedness statement prior to printing of this composite document, the Group had no outstanding borrowings.

As at 31 December 2016, the Group had total available banking facilities of approximately HK$3 million, of which were not utilised.

The Directors confirm that there is no material adverse change in our indebtedness position and contingent liabilities since 31 December 2016.

Contingent Liabilities

As at 31 December 2016, we had no significant contingent liabilities or outstanding litigation.

Working Capital

The Directors are of the opinion that, after taking into account the cash flows generated from the operating activities, the existing financial resources available to us including internally generated funds and the available banking facilities, we have sufficient working capital for our present requirements for at least the next 12 months from the date of this composite document.

Capital Commitments and Other Commitments

As at 31 December 2016, we had no significant capital commitment.

As at 31 December 2016, the Group had operating lease commitments of approximately HK$1.5 million in respect of office premises, and staff quarters under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.

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 31 December 2016, 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.

– II-60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

V. MATERIAL CHANGE

Save as disclosed below the Directors have confirmed that there were no material changes in the financial or trading position or outlook of the Group since 30 June 2016, being the date the latest audited consolidated financial statements of the Group to which was made up, and up to the Latest Practicable Date:

As disclosed in the interim report of the Company for the six months ended 31 December 2016, the unaudited profit attributable to owners of the Company decreased substantially by approximately 67.7% from approximately HK$4.8 million for the six months ended 31 December 2015 to approximately HK$1.5 million for the six months ended 31 December 2016, which was mainly due to the decrease in revenue and gross profit margin during the six months ended 31 December 2016.

– II-61 –

GENERAL INFORMATION OF THE OFFEROR

APPENDIX III

1. RESPONSIBILITY STATEMENT

This Composite Document includes particulars given in compliance with the Takeovers Code for the purposes of providing information to the Shareholders with regard to the Offeror and the Offer.

The directors of the Offeror and, collectively, the general partners of Shanghai Tiger jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Document (other than any information relating to the Group, its associates, and parties acting in concert with the Group) and confirm, having made all reasonable enquires, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Group, its associates and parties acting in concert with it) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

2. DEALING IN SECURITIES

The Offeror confirms that,

(a) save for the acquisition of the Sale Shares pursuant to the Sale and Purchase Agreement, none of the Offeror, its ultimate beneficial owners and directors, nor parties acting in concert with any of them has dealt in any Shares, options, derivatives, warrants or other securities convertible into Shares during the Relevant Period;
(b) save for the Sale Shares legally and beneficially owned by the Offeror immediately following Completion, the Offeror, its ultimate beneficial owners and directors and parties acting in concert with it do not hold, own or control any Shares, options, derivatives, warrants or other securities which may confer rights on the Offeror and parties acting in concert with it to subscribe for, convert or exchange into Shares as at the Latest Practicable Date;
(c) there was no arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in the third paragraph of Note 8 to Rule 22 of the Takeovers Code between the Offeror, or parties acting in concert with it or the Offeror’s associates, and any other person as at the Latest Practicable Date;
(d) no person owning or controlling any shareholding in the Company with whom the Offeror or any person acting in concert with the Offeror had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code as at the Latest Practicable Date, and no such person had dealt in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(e) none of the Offeror, its ultimate beneficial owners or parties acting in concert with any of them had borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company as at the Latest Practicable Date;

– III-1 –

GENERAL INFORMATION OF THE OFFEROR

APPENDIX III

(f) none of the Offeror, its ultimate beneficial owners or parties acting in concert with any of them had received any irrevocable commitment to accept or not to accept the Offer as at the Latest Practicable Date;
(g) other than the Sale and Purchase Agreement there was no agreement or arrangement to which the Offeror, its ultimate beneficial owners or parties acting in concert with any of them is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offer as at the Latest Practicable Date;
(h) no benefit (other than statutory compensation required under the applicable laws) had been or would be given to any Director as compensation for loss of office or otherwise in connection with the Offer; and
(i) save for the entering into of the Sale and Purchase Agreement, no agreement, arrangement or understanding (including any compensation arrangement) existed between the Offeror or any person acting in concert with it and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or was dependent upon the Offer.

The Offeror has charged the Sale Shares legally and beneficially owned by it immediately following Completion in favour of China Goldjoy Credit Limited as security of the Standby Loan Facility. There was no agreement, arrangement or understanding that any securities of the Company, acquired in pursuance of the Offer would be transferred, charged or pledged to any other persons.

3. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the names and the qualifications of the experts who have been named in this Composite Document or whose letters, opinions or advice are contained or referred to in this Composite Document:

Name

Qualification

Goldjoy Securities a licensed corporation permitted to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

Titan Financial Services a licensed corporation permitted to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

Dongxing Securities a licensed corporation permitted to carry on Type 1 (dealing in (Hong Kong) securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

– III-2 –

GENERAL INFORMATION OF THE OFFEROR

APPENDIX III

Each of Goldjoy Securities, Titan Financial Services and Dongxing Securities (Hong Kong) has given and has not withdrawn its written consent to the issue of this Composite Document with the inclusion of its opinions, advices, letters and references to its name in the form and context in which they appear.

4. GENERAL

As at the Latest Practicable Date,

(a) the correspondence address of the Offeror is 1103, 11/F, Tower II, Lippo Centre, 89 Queensway, Admiralty, Hong Kong;
(b) the correspondence address of United Conquer Limited is 1103, 11/F, Tower II, Lippo Centre, 89 Queensway, Admiralty, Hong Kong;
(c) the registered office of SHIC is Room 408H07, 373–381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(d) the registered office of Shanghai Angell is Rooms 2101–03, 155 Tianjin Road, Huangpu District, Shanghai, the PRC;
(e) the registered office of Shanghai Tiger is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(f) the Offeror is ultimately and indirectly collectively controlled by the general partners, namely Mr. Shi Weiguo, Mr. Li Jun, Mr. He Zhiliang, Mr. Li Hongxin, Mr. Zhang Xian and Mr. Feng Yuming, of Shanghai Tiger;
(g) Ms. Tian is one of the directors of the Offeror and Shanghai Angell. The correspondence address of Ms. Tian is 1103, 11/F, Tower II, Lippo Centre, 89 Queensway, Admiralty, Hong Kong;
(h) Mr. Zhu is one of the directors of the Offeror. The correspondence address of Mr. Zhu is 1103, 11/F, Tower II, Lippo Centre, 89 Queensway, Admiralty, Hong Kong;
(i) Mr. Shi Weiguo is one of the directors of Shanghai Angell and one of the general partners of Shanghai Tiger. The correspondence address of Mr. Shi Weiguo is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(j) Mr. Yao Ligang is one of the directors of Shanghai Angell. The correspondence address of Mr. Yao Ligang is Rooms 2101–03, 155 Tianjin Road, Huangpu District, Shanghai, the PRC;
(k) Mr. Zhang Xian is one of the directors of Shanghai Angell and one of the general partners of Shanghai Tiger. The correspondence address of Mr. Zhang Xian is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;

– III-3 –

GENERAL INFORMATION OF THE OFFEROR

APPENDIX III

(l) Mr. Liu Baowei is one of the directors of Shanghai Angell. The correspondence address of Mr. Liu Baowei is Rooms 2101–03, 155 Tianjin Road, Huangpu District, Shanghai, the PRC;
(m) Mr. Li Jun is one of the general partners of Shanghai Tiger. The correspondence address of Mr. Li Jun is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(n) Mr. He Zhiliang is one of the general partners of Shanghai Tiger. The correspondence address of Mr. He Zhiliang is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(o) Mr. Li Hongxin is one of the general partners of Shanghai Tiger. The correspondence address of Mr. Li Hongxin is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(p) Mr. Feng Yuming is one of the general partners of Shanghai Tiger. The correspondence address of Mr. Feng Yuming is Room 408D09, 381 South Suzhou Road, Huangpu District, Shanghai, the PRC;
(q) the registered office of Goldjoy Securities is Unit 1704–1706, 17/F, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong;
(r) the registered office of China Goldjoy Credit Limited is Unit 1704–1706, 17/F, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong;
(s) Mr. Zuo Jianzhong is one of the guarantors to the Standby Loan Facility. The correspondence address of Mr. Zuo Jiangzhong is 1103, 11/F, Tower II, Lippo Centre, 89 Queensway Admiralty, Hong Kong;
(t) Mr. Zhang Zipeng is one of the guarantors to the Standby Loan Facility. The correspondence address of Mr. Zhang Zipeng is 1103, 11/F, Tower II, Lippo Centre, 89 Queensway Admiralty, Hong Kong;
(u) the registered office of Titan Financial Services is Suite 3201–02, 32/F, COSCO Tower, 183 Queen’s Road Central, Hong Kong;
(v) the registered office of Dongxing Securities (Hong Kong) is 6805-6806A, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong; and
(w) the English text of this Composite Document and the Form of Acceptance shall prevail over the Chinese text, in case of any inconsistency.

– III-4 –

GENERAL INFORMATION OF THE OFFEROR

APPENDIX III

5. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection, during the period from 24 February 2017, being the date of this Composite Document for so long as the Offer remains open for acceptance, (i) on the website of the SFC (www.sfc.hk); (ii) during normal business hours from 9:00 a.m. to 6:00 p.m., from Monday to Friday, other than Hong Kong public holidays, at the office of Iu, Lai & Li, legal adviser to the Offeror in respect of the Offer, at Rooms 2201, 2201A & 2202, 22nd Floor, Tower I, Admiralty Centre, No. 18 Harcourt Road, Hong Kong:

(a) the memorandum and articles of association of the Offeror;
(b) the ‘‘Letter from Goldjoy Securities’’, the text of which is set out in this Composite Document;
(c) the written consents referred to in the paragraph headed ‘‘3. Qualifications and Consents of Experts’’ in this Appendix;
(d) this Composite Document; and
(e) the Standby Loan Facility letter dated 16 January 2017.

– III-5 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

1. RESPONSIBILITY STATEMENT

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Document (other than that relating to the Offeror, the directors of the Offeror, the proposed Directors nominated by the Offeror to the Board, their associates and parties acting in concert with any of them) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than opinions expressed by the Offeror, the directors of the Offeror, their associates and parties acting in concert with any of them) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement in this Composite Document misleading.

2. SHARE CAPITAL OF THE COMPANY

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

HK$

Authorised:

Authorised:
4,000,000,000 Shares of HK$0.01 each	40,000,000
Issued and fully paid:
400,000,000 Shares of HK$0.01 each	4,000,000

All of the Shares currently in issue rank pari passu in all respects with each other, including, in particular, as to rights in respect of capital, dividends and voting.

As at the Latest Practicable Date, the Company did not have any outstanding options, derivatives, warrants or other conversion rights affecting the Shares.

The number of Shares in issue at 30 June 2016, being the date to which the latest audited financial statements of the Company were made up, was 400,000,000. No Shares had been issued since that date until the Latest Practicable Date.

– IV-1 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

3. MARKET PRICES

The table below shows the closing prices of the Shares quoted on the Stock Exchange on (i) the last day on which trading took place in each of the calendar months during the Relevant Period; (ii) last trading day immediately preceding the date of the first of the Rule 3.7 Announcements (i.e. 9 December 2016); (iii) the Last Trading Day; and (iv) the Latest Practicable Date.

Date	Closing price per Share
	(HK$)
30 June 2016	0.65
29 July 2016	0.59
31 August 2016	0.64
30 September 2016	0.60
31 October 2016	0.50
30 November 2016	0.51
9 December 2016 (last trading day immediately preceding
the date of the first of the Rule 3.7 Announcements)	0.75
30 December 2016	1.01
12 January 2017 (Last Trading Day)	1.14
27 January 2017	1.21
21 February 2017 (Latest Practicable Date)	1.25

During the Relevant Period:

(i) the highest closing price of the Share as quoted on the Stock Exchange was HK$1.45 per Share on 9 February 2017; and
(ii) the lowest closing price of the Share as quoted on the Stock Exchange was HK$0.49 per Share on 17 November 2016.

– IV-2 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

4. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were (i) required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including any interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

(a) Interests and short positions of substantial shareholders in the shares and underlying shares of the Company

As at the Latest Practicable Date, the following Shareholders had interests or short positions in the Shares and underlying Shares as recorded in the register required to be kept by the Company under section 336 of the SFO:

			Approximate
			percentage of
			interests as at the
		Number of Shares	Latest Practicable
Name of substantial Shareholders	Capacity	held (Note 1)	Date
The Offeror	Beneficial owner	300,000,000 (L)	75.00%
		(Note 2)
United Conquer Limited	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 3)
SHIC	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 4)
Shanghai Angell	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 5)
Zhongtian Urban Development Group	Interest of controlled	300,000,000 (L)	75.00%
Shanghai Equity Investment Fund	corporation	(Note 6)
Partnership (Limited Partnership) (中天城投
集團上海股權投資基金合夥企業(有限合
夥))
Shanghai Tiger	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 7)
Guiyang Jinrong Konggu Company Limited	Interest of controlled	300,000,000 (L)	75.00%
(貴陽金融控股有限公司)	corporation	(Note 8)

– IV-3 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

			Approximate
			percentage of
			interests as at the
		Number of Shares	Latest Practicable
Name of substantial Shareholders	Capacity	held (Note 1)	Date
Zhongtian Urban Development	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 9)
Kingsbury International Holdings Co., Ltd	Interest of controlled	300,000,000 (L)	75.00%
(金世旗國際控股股份有限公司)	corporation	(Note 10)
China Goldjoy Credit Limited	Person having a	300,000,000 (L)	75.00%
	security interest in	(Note 11)
	shares
Stellar Result Limited	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 12)
Goldjoy Holding Limited	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 13)
Great Sphere Developments Limited	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 14)
China Goldjoy Group Limited	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 15)
Tinmark Development Limited	Interest of controlled	300,000,000 (L)	75.00%
	corporation	(Note 16)
Yao Jianhui	Interest of controlled	300,000,000 (L)	75.00%
	corporation

Notes:

The letter ‘‘L’’ represents the substantial Shareholder’s long position in the Shares.
The Shares are held by the Offeror, which is owned as to 70% by United Conquer Limited and 30% by Mr. Zhu.
United Conquer Limited is wholly-owned by SHIC.
SHIC’s contribution comprises capital commitment of approximately (i) 1% by Shanghai Angell through general partnership; and (ii) 29.7% by JIGC, 49.5% by Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership) (中天城投集團上海股權投資基金合夥企業 (有限合夥)) and 19.8% by Mr. Xiang all through limited partnership.

– IV-4 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

Shanghai Angell is owned as to 38% by Shanghai Tiger, 32% by吉林省投資集團有限公司 (Jilin Province Investment Group Company), 20% by深圳市君尚厚德投資中心合夥企業(有限合夥) (Shenzhen Junshang Houde Investment Centre Partnership Corporation (Limited Partnership)) and 10% by Mr. Yao Ligang.
Zhongtian Urban Development Group Shanghai Equity Investment Fund Partnership (Limited Partnership) (中天城投集團上海股權投資基金合夥企業(有限合夥))’s contribution comprises capital commitment of approximately 0.05% by Shanghai Tiger through general partnership and 99.95% by Zhongtian Urban Development through limited partnership.
Shanghai Tiger’s contribution comprises capital commitment of approximately (i) 6.37% by Mr. Shi Weiguo, 1.73% by Mr. Li Jun, 1.73% by Mr. He Zhiliang, 3.1% by Mr. Li Hongxin, 3.97% by Mr. Zhang Xian and 3.1% by Mr. Feng Yuming through general partnership; and (ii) 80% by Guiyang Jinrong Konggu Company Limited (貴陽金融控股有限公司) through limited partnership.
Guiyang Jinrong Konggu Company Limited (貴陽金融控股有限公司) is wholly-owned by Zhongtian Urban Development.
Zhongtian Urban Development is owned as to approximately 44.87% by Kingsbury International Holdings Co., Ltd (金世旗國際控股股份有限公司).
Kingsbury International Holdings Co., Ltd (金世旗國際控股股份有限公司) is owned as to Mr. Luo Yuping by approximately 74.8%.
China Goldjoy Credit Limited is wholly-owned by Stellar Result Limited.
Stellar Result Limited is wholly-owned by Goldjoy Holding Limited.
Goldjoy Holding Limited is owned as to 80% by Great Sphere Developments Limited.
Great Sphere Developments Limited is wholly-owned by China Goldjoy Group Limited.
China Goldjoy Group Limited is owned as to 48.86% by Tinmark Development Limited.
Tinmark Development Limited is wholly-owned by Mr. Yao Jianhui.

Save as disclosed above, as at the Latest Practicable Date, the Company had not been notified of any interests or short positions in the Shares and underlying Shares which are required to be recorded in the register required to be kept by the Company under section 336 of the SFO.

5. DEALINGS IN SECURITIES

(a) As at the Latest Practicable Date, the Company was not interested in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Offeror, and had not dealt in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Offeror during the Relevant Period.
(b) As at the Latest Practicable Date, none of the Directors were interested in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company or the Offeror. Save as the sale of the Sale Shares pursuant to the Sale and Purchase

– IV-5 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

Agreement, none of the Directors had dealt in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company or the Offeror during the Relevant Period.

(c) As at the Latest Practicable Date, none of the subsidiaries of the Company, the pension fund of the Company or its subsidiaries, or the adviser to the Company as specified in class (2) of the definition of ‘‘associate’’ under the Takeovers Code owned or controlled any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company, or had dealt in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company during the Relevant Period.
(d) As at the Latest Practicable Date, there was no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code between any person and the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of ‘‘associate’’ under the Takeovers Code.
(e) As at the Latest Practicable Date, there were no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which were managed on a discretionary basis by fund managers connected with the Company, and none of them had dealt in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company during the Relevant Period.
(f) As at the Latest Practicable Date, none of the Directors held any beneficial shareholdings in the Company which would otherwise entitle them to accept or reject the Offer.
(g) As at the Latest Practicable Date, none of the Company or the Directors had borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

6. ARRANGEMENTS AFFECTING AND RELATING TO DIRECTORS

(a) As at Latest Practicable Date, no benefit had been or would be given to any Director as compensation for loss of office or otherwise in connection with the Offer.
(b) As at the Latest Practicable Date, there was no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer.
(c) As at the Latest Practicable Date, save for the Sale and Purchase Agreement to which each of Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man is a party, the Offeror had not entered into any material contract in which any Director has a material personal interest.

– IV-6 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

7. SERVICE CONTRACTS OF DIRECTORS

The Company has entered into a service contract or letter of appointment with the following Directors either (i) which was entered into/amended within six months before the commencement of the Offer Period or (ii) for a fixed term of more than 12 months irrespective of notice period (in which case, the appointment shall be subject to the provision for retirement by rotation in the articles of association of the Company). Details of such service contracts and letters of appointment are set out below:

	Commencement	Expiry date of
	date of service	service contract/
	contract/letter	letter of	Fixed fee
Name of Directors	of appointment	appointment	per annum	Variable remuneration
Ms. CHEUNG Woon Yiu	1 January 2015	31 December 2017	HK$500,000	discretionary management
			(subject to	bonus (note 2) and other
			increase of not	non-cash benefits as
			exceeding 10% as	may be determined by
			may be determined	the Board
			by the Board)
Ms. LAM Wai Si Grace	1 January 2015	31 December 2017	HK$679,400	discretionary management
			(subject to	bonus (note 2) and other
			increase of not	non-cash benefits as
			exceeding 10% as	may be determined by
			may be determined	the Board
			by the Board)
Mr. CHING Wai Man	1 January 2015	31 December 2017	HK$679,400	discretionary management
			(subject to	bonus (note 2) and other
			increase of not	non-cash benefits as
			exceeding 10% as	may be determined by
			may be determined	the Board
			by the Board)
Ms. NG Lai Hung	28 January 2015	27 January 2018	HK$150,000	N/A
			(note 1)
Dr. WONG Wai Kong	28 January 2015	27 January 2018	HK$150,000	N/A
			(note 1)
Mr. HOW Sze Ming	28 January 2015	27 January 2018	HK$150,000	N/A
			(note 1)
Mr. Philip David	28 January 2015	27 January 2018	HK$150,000	N/A
THACKER			(note 1)

Notes:

Each of the non-executive Directors, i.e. Ms. Ng Lai Hung, Dr. Wong Wai Kong, Mr. How Sze Ming and Mr. Philip David Thacker, is entitled to a director’s fee of HK$120,000 per annual under the respective letter of appointment. On 7 November 2016, the remuneration committee of the Board passed a resolution to increase the respective director’s fee of each of the non-executive Directors to HK$150,000 with effect from 1 July 2016.

– IV-7 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

Each of Ms. Cheung Woon Yiu, Ms. Lam Wai Si Grace and Mr. Ching Wai Man is entitled to a discretionary management bonus in respect of each financial year of the Company, during the term of their respective service contracts, in an amount to be determined by the Board in its absolute discretion. The discretionary management bonus is to be paid at the discretion of the Board without the need to make reference to or calculate pursuant to any formula.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any service contracts with the Company or any of its subsidiaries or associated companies in force which:

(a) (including both continuous and fixed term contracts) had been entered into or amended within six months before the commencement of the Offer Period;
(b) were continuous contracts with a notice period of twelve months or more; or
(c) were fixed term contracts with more than 12 months to run irrespective of the notice period.

None of the Directors had entered into any service contract or had an unexpired service contract with the Company which is not determinable by the Company within one year without payment of compensation (other than statutory compensation) as at the Latest Practicable Date.

8. MATERIAL CONTRACTS

There had been no other contract, not being a contract entered into in the ordinary course of business carried on or intended to be carried on by members of the Group, entered into by members of the Group after the date falling two years prior to 12 December 2016, being the date of commencement of the Offer Period, and up to the Latest Practicable Date which is or may be material.

9. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

– IV-8 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

10. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who have given its report, opinion or advice which are contained in this Composite Document:

Name Qualifications

AIM

A corporation licensed by the SFC to conduct, among others, Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

AIM has given and has not withdrawn its written consent to the issue of this Composite Document with the inclusion herein of its letter, report and references to its name, in the form and context in which they are included.

As at the Latest Practicable Date, the above expert did not have any shareholding, direct or indirect, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did it have any direct or indirect interest in any assets which had been, since 30 June 2016, being the date of the latest published audited consolidated financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

11. MISCELLANEOUS

(a) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. Its head office and principal place of business in Hong Kong is Unit 1701, Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon, Hong Kong.
(b) The registered office of AIM is at Unit B, 14/F, Vulcan House, 21–23 Leighton Road, Causeway Bay, Hong Kong.
(c) The English text of this Composite Document and the Form of Acceptance shall prevail over the Chinese translation in the case of inconsistency.

– IV-9 –

GENERAL INFORMATION OF THE GROUP

APPENDIX IV

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection (i) during normal business hours from 9:00 a.m. to 5:00 p.m. (other than Saturdays, Sundays and public holidays) at the principal place of business of the Company in Hong Kong at Unit 1701, Treasure Centre, 42 Hung To Road, Kwun Tong, Kowloon, Hong Kong; (ii) on the website of the SFC (www.sfc.hk); and (iii) on the website of the Company (http://www.odella.com) during the period from the date of this Composite Document onwards for as long as the Offer remain open for acceptance:

(a) the memorandum and articles of association of the Company;
(b) the annual report of the Group for each of the two financial years ended 30 June 2016;
(c) a copy of this Composite Document;
(d) the interim report of the Group for the six months ended 31 December 2016;
(e) the ‘‘Letter from the Board’’, the text of which is as set out on pages 20 to 24 of this Composite Document;
(f) the ‘‘Letter from the Independent Board Committee’’, the text of which is as set out on pages 25 to 26 of this Composite Document;
(g) the ‘‘Letter from the Independent Financial Adviser’’, the text of which is set out on pages 27 to 47 of this Composite Document;
(h) each of the Directors’ service agreement or letter of appointment referred to under the paragraph headed ‘‘7. Service Contracts of Directors’’ in this Appendix; and
(i) the letter of consent from AIM referred to under the paragraph headed ‘‘10. Qualification and Consent of Expert’’ in this Appendix.

– IV-10 –

AI assistant

Web3 Meta Limited — M&A Activity 2017

51265_rns_2017-02-23_31556971-7295-445a-bc37-3ef28ccbc21d.pdf

POWER VIEW GROUP LIMITED

ODELLA LEATHER HOLDINGS LIMITED

COMPOSITE OFFER AND RESPONSE DOCUMENT RELATING TO MANDATORY UNCONDITIONAL CASH OFFER BY

CHINA GOLDJOY SECURITIES LIMITED

ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

Independent Financial Adviser to the Independent Board Committee

Asia Investment Management Limited

CONTENTS

EXPECTED TIMETABLE

Event

Latest time and date for acceptance of

Announcement of the results of the Offer

Latest date for posting of remittance in respect of

NOTICE TO OVERSEAS SHAREHOLDERS

DEFINITIONS

DEFINITIONS

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

MANDATORY UNCONDITIONAL CASH OFFER

Principal terms of the Offer

Comparisons of value

Highest and lowest Share prices

Value of the Offer

Financial resources available to the Offeror

LETTER FROM GOLDJOY SECURITIES

Effect of accepting the Offer

Hong Kong stamp duty

Payment

Taxation advice

LETTER FROM GOLDJOY SECURITIES

Overseas Shareholders

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM GOLDJOY SECURITIES

INFORMATION ON THE GROUP

INFORMATION ON THE OFFEROR

LETTER FROM GOLDJOY SECURITIES

LETTER FROM GOLDJOY SECURITIES

LETTER FROM GOLDJOY SECURITIES

FUTURE INTENTION OF THE OFFEROR REGARDING THE GROUP

PROPOSED CHANGE OF BOARD COMPOSITION

LETTER FROM GOLDJOY SECURITIES

Proposed executive Directors

Mr. Zhu Yongjun (朱勇軍)

Mr. Tang Yau Sing (鄧有聲)

LETTER FROM GOLDJOY SECURITIES

Proposed non-executive Director

Mr. Shao Zuosheng (邵作生)

Proposed independent non-executive Directors

Mr. Cheung Kam Tong Antonio (張金棠)

Mr. Chui Man Lung Everett (徐文龍)

LETTER FROM GOLDJOY SECURITIES

Mr. Han Chu (韓楚)

PUBLIC FLOAT AND MAINTAINING THE LISTING STATUS OF THE COMPANY

PROCEDURES FOR ACCEPTANCE AND SETTLEMENT

COMPULSORY ACQUISITION

LETTER FROM GOLDJOY SECURITIES

GENERAL

ADDITIONAL INFORMATION

ODELLA LEATHER HOLDINGS LIMITED 愛 特 麗 皮 革 控 股 有 限 公 司

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

LETTER FROM THE BOARD

MANDATORY UNCONDITIONAL CASH OFFER

LETTER FROM THE BOARD

Principal terms of the Offer

The Offer

INFORMATION ON THE GROUP

INFORMATION ON THE OFFEROR

FUTURE INTENTION OF THE OFFEROR REGARDING THE GROUP

MAINTAINING THE LISTING STATUS OF THE COMPANY

it would consider exercising its discretion to suspend dealings in the Shares.

RECOMMENDATION

ADDITIONAL INFORMATION

ODELLA LEATHER HOLDINGS LIMITED 愛 特 麗 皮 革 控 股 有 限 公 司

MANDATORY UNCONDITIONAL CASH OFFER BY CHINA GOLDJOY SECURITIES LIMITED ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF ODELLA LEATHER HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED AND/OR AGREED TO BE ACQUIRED BY THE OFFEROR)

INTRODUCTION

RECOMMENDATION

Web3 Meta Limited M&A Activity 2017

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

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