XIAMEN YAN PALACE BIOENGINEERING CO., LTD. - M&A Activity 2011

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of the Offer, this document or the action to be taken, 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 or transferred all your shares in Carry Wealth Holdings Limited, you should at once hand this Composite Offer Document and the accompanying Form(s) of Acceptance to the purchaser(s) or transferee(s) or to the bank or licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s). This Composite Offer Document should be read in conjunction with the accompanying Form(s) of Acceptance, the contents of which form part of the terms and conditions of the Offer contained herein.

The Stock Exchange of Hong Kong Limited and Hong Kong Exchanges and Clearing Limited take no responsibility for the contents of this Composite Offer Document and the accompanying Form(s) of Acceptance, make no representation as to their 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 Offer Document and the accompanying Form(s) of Acceptance.

Dragon Peace Limited

(Incorporated in the British Virgin Islands with limited liability)

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COMPOSITE OFFER DOCUMENT RELATING TO UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

Financial adviser to Dragon Peace Limited

SUN HUNG KAI INTERNATIONAL LIMITED

Independent Financial Adviser to the Independent Board Committee of Carry Wealth Holdings Limited

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

A letter from SHK is set out on pages 6 to 16 of this Composite Offer Document.

A letter from the Board is set out on pages 17 to 22 of this Composite Offer Document.

A letter from the Independent Board Committee containing its recommendation in respect of the Offer to the Independent Shareholders is set out on pages 23 to 24 of this Composite Offer Document.

A letter from the Independent Financial Adviser containing its advice on the Offer to the Independent Board Committee is set out on pages 25 to 46 of this Composite Offer Document.

The procedures for acceptance of the Offer and other related information are set out on pages 47 to 49 in Appendix I to this Composite Offer Document and in the accompanying Form(s) of Acceptance. Acceptances of the Offer should be received by the Registrar by no later than 4:00 p.m. on Tuesday, 28 June 2011, 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.

Persons including, without limitation, custodians, nominees and trustees, who would, or otherwise intend to, forward this Composite Offer Document and/or, the Form of Acceptance to any jurisdiction outside Hong Kong, should read the details in this regard which are contained in the sub-paragraph headed “Overseas Shareholders” under the paragraph headed “The Offer” in the “Letter from SHK” on page 7 of this Composite Offer Document and in paragraph 6 of Appendix I to this Composite Offer Document before taking any action. It is the responsibility of each 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 which may be required and the compliance with other necessary formalities or legal requirements. Overseas Shareholders are advised to seek professional advice on deciding whether to accept the Offer.

7 June 2011

	Pages
EXPECTED TIMETABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM SHK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . .	23
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . . . . . .	25
APPENDIX I – FURTHER TERMS OF THE OFFER. . . . . . . . . . . . . . . . . . . . . . . .	47
APPENDIX II – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . .	54
APPENDIX III – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	131
ACCOMPANYING DOCUMENT – FORM(S) OF ACCEPTANCE

– i –

EXPECTED TIMETABLE

The expected timetable set out below is indicative only and may be subject to change. Further announcement(s) will be made as and when appropriate.

2011

Despatch date of this Composite Offer Document and the accompany

Form(s) of Acceptance and commencement

date of the Offer (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 7 June Latest time and date for acceptance of the Offer (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Tuesday, 28 June Closing Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tuesday, 28 June

Announcement in respect of the results of the Offer

to be published on the website of the Stock Exchange (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .not later than 7:00 p.m. on Tuesday, 28 June

Latest date for posting of remittances in respect of

valid acceptances received under the Offer (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . Friday, 8 July

Notes:

The Offer, which is unconditional, is made on Tuesday, 7 June 2011, being the date of posting of this Composite Offer Document, and is capable of acceptance on and from that date until the Closing Date.
The Offer, which is unconditional, will be closed on the Closing Date. The latest time for acceptance is at 4:00 p.m. on Tuesday, 28 June 2011 unless the Offeror revises or extends the Offer in accordance with the Takeovers Code. An announcement will be published through the Stock Exchange website by 7:00 p.m. on Tuesday, 28 June 2011 stating whether the Offer has been revised or extended or has expired. In the event that the Offeror decides that the Offer will remain open until further notice, 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.
Remittances in respect of the cash consideration payable for the Shares tendered under the Offer will be despatched to the accepting Shareholders of Offer Shares by ordinary post at their own risk as soon as possible, but in any event within 10 days from the date of receipt by the Registrar of all the requisite documents, from the Independent Shareholders of Offer Shares accepting the Offer, of the valid requisite documents.

Acceptances of the Offer shall be irrevocable and not capable of being withdrawn, except in the circumstances as set out in the section headed “Right of withdrawal” in Appendix I to this Composite Offer Document.

All references to time and date contained in this Composite Offer Document refer to Hong Kong time and dates.

– ii –

DEFINITIONS

In this Composite Offer Document, unless the context otherwise requires, the following expressions have the following meanings:

“acting in concert”	has the meaning ascribed to it under the Takeovers Code
“associate(s)”	has the meaning ascribed to it under the Takeovers Code
“Board”	the board of Directors
“BVI”	the British Virgin Islands
“CCASS”	the Central Clearing and Settlement System established and
	operated by Hong Kong Securities Clearing Company Limited
“Closing Date”	28 June 2011, being the closing date of the Offer, which is 21
	days after the date on which this Composite Offer Document
	is posted, or if this Offer is extended, any subsequent closing
	date of the Offer as determined and announced by the Offeror
	with consent of the Executive in accordance with the Takeovers
	Code
“Company”	Carry Wealth Holdings Limited, a company incorporated in
	Bermuda with limited liability and the Shares of which are
	listed on the main board of the Stock Exchange
“Completion”	completion of the sale and purchase of the Sale Shares in
	accordance with the terms and conditions of the Sale and
	Purchase Agreement
“Completion Date”	5 May 2011, being the date of the Sale and Purchase
	Agreement on which Completion took place
“Composite Offer Document”	this composite offer and response document jointly issued by
	the Offeror and the Company, which sets out, among others,
	details of the Offer in accordance with the Takeovers Code
“Director(s)”	the director(s) of the Company from time to time
“Effective Date of	the earliest date permitted under the Takeovers Code in respect
Resignation”	of the resignation of Mr. Rusli and Mr. Cheung Kwok Ming, as
	Directors

– 1 –

DEFINITIONS

“Encumbrances”	includes, without any limitation, any mortgage, charge, pledge,
	lien, (otherwise than arising by statute or operation of law),
	equities, hypothecation or other encumbrance, priority or
	security interest, deferred purchase, title retention, leasing,
	sale-and-repurchase or sale-and-leaseback arrangement
	whatsoever over or in any property, assets or rights of
	whatsoever nature and includes any agreement for any of the
	same
“Executive”	the Executive Director of the Corporate Finance Division of
	the SFC and any delegate of the Executive Director
“Facility”	a standby margin facility of HK$85,000,000, which is secured
	by the Sale Shares, granted by Sun Hung Kai Investment
	Services Limited to the Offeror pursuant to a facility letter
	dated 6 May 2011
“Fifth Vendor” or “Mr. Tang”	Mr. Tang Chak Lam, being an executive Director
“First Vendor” or	Mr. Rusli Hendrawan, being the chairman of the Company and
“Mr. Rusli”	an executive Director
“Form(s) of Acceptance”	the form of acceptance and transfer of Shares in respect of the
	Offer which accompanies this Composite Offer Document
“Fourth Vendor” or	Mr. Susanto Susanto
“Mr. Susanto”
“Greatwood”	Greatwood Investment Trading Limited, a company incorporated
	in the BVI with limited liability which is beneficially owned by
	Mr. Susanto
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC

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DEFINITIONS

“Independent Board the independent board committee of the Board (comprising all Committee” independent non-executive Directors namely Messrs. Cheung Kwok Ming, Kwok Lam Kwong, Larry, B.B.S., J.P. and Lau Siu Ki, Kevin who have no direct or indirect interest in the Offer) which has been established to advise the Independent Shareholders in relation to the terms and conditions of the Offer.
“Independent Financial VC Capital Limited, a licensed corporation to carry out Type Adviser” 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed to advise the Independent Board Committee in relation to the Offer
“Independent Shareholders” Shareholders other than the Offeror, its ultimate beneficial owners and parties acting in concert with any one of them
“Independent Third person(s) or company(ies) who or which, to the best of the Party(ies)” Directors’ knowledge, information and belief and having made all reasonable enquiries, is/are independent of and not connected with the Directors, chief executive of the Company or substantial Shareholder, or any of their respective subsidiaries or associates
“Joint Announcement” the announcement jointly issued by the Company and the Offeror on 17 May 2011 in relation to (1) the acquisition of Sale Shares in the Company by the Offeror; and (2) the Offer
“Last Trading Day” 5 May 2011, being the last trading day of the Shares immediately prior to the suspension in trading of the Shares on the Stock Exchange at 1:30 p.m. on 5 May 2011 pending the release of the Joint Announcement
“Latest Practicable Date” 5 June 2011, being the latest practicable date prior to the printing of this Composite Offer Document for ascertaining certain information contained herein

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“NAV”

net asset value

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DEFINITIONS

“Offer”	the unconditional mandatory general cash offer by SHK for
	and on behalf of the Offeror for all the issued Shares (other
	than those already owned by the Offeror and parties acting in
	concert with it) pursuant to Rule 26.1 of the Takeovers Code
“Offer Price”	the price per Offer Share at which the Offer will be made in
	cash, being HK$0.60 per Offer Share
“Offer Share(s)”	issued Share(s) and Shares which may be issued by the
	Company following the date of the Joint Announcement, other
	than those already owned by the Offeror, its ultimate beneficial
	owners and parties acting in concert with any one of them
“Offeror”	Dragon Peace Limited, which is a company incorporated in the
	BVI with limited liability, and the entire issued share capital of
	which is legally and beneficially wholly owned by Mr. Li
“Offeror Guarantor” or	Mr. Li Haifeng, being the offeror guarantor who has agreed
“Mr. Li”	to guarantee the due and punctual performance by the Offeror
	of its obligations and liabilities under the Sale and Purchase
	Agreement
“Overseas Shareholder(s)”	Independent Shareholder(s) whose address(es) as shown on
	the register of members of the Company is(are) outside Hong
	Kong
“PRC”	the People’s Republic of China, which for the purpose of this
	Composite Offer Document, shall exclude Hong Kong, Macau
	Special Administrative Region of the PRC and Taiwan
“Registrar”	Tricor Abacus Limited, the branch share registrar and transfer
	agent of the Company in Hong Kong located at 26th Floor,
	Tesbury Centre, 28 Queen’s Road East, Hong Kong
“Relevant Period”	the period commencing six months immediately prior to 17
	May 2011, being the date of the Joint Announcement and up to
	and including the Latest Practicable Date
“RIL”	Respected International Limited, a limited company
	incorporated in the BVI, being beneficially owned as to
	46.03%, 46.03% and 7.94% by Mr. Rusli, Mr. Lee and Mr. Oey
	respectively

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DEFINITIONS

“Sale and Purchase	the sale and purchase agreement dated 5 May 2011 entered
Agreement”	into among the Offeror, the Offeror Guarantor and the Vendors
	in relation to the sale and purchase of the Sale Shares
“Sale Share(s)”	the 236,662,000 Shares acquired by the Offeror from the
	Vendors pursuant to the terms and conditions of the Sale and
	Purchase Agreement
“Second Vendor” or	Mr. Lee Sheng Kuang, being the managing and executive
“Mr. Lee”	Director
“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$0.10 each in the issued share capital
	of the Company
“Shareholder(s)”	the holder(s) of Share(s)
“SHK”	Sun Hung Kai International Limited, a licensed corporation to
	carry out Type 1 (dealing in securities) and Type 6 (advising on
	corporate finance) regulated activities under the SFO and the
	financial adviser to the Offeror in respect of the Offer
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“Third Vendor” or “Mr. Oey”	Mr. Oey Tjie Ho, being an executive Director
“Vendors”	collectively, the First Vendor, the Second Vendor, the Third
	Vendor, the Fourth Vendor and the Fifth Vendor
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

– 5 –

LETTER FROM SHK

42/F

SUN HUNG KAI INTERNATIONAL LIMITED

The Lee Gardens 33 Hysan Avenue Causeway Bay Hong Kong

7 June 2011

To the Independent Shareholders

Dear Sir or Madam,

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

On 17 May 2011, the Offeror and the Company jointly announced that, among others, the Offeror, the Offeror Guarantor and the Vendors entered into the Sale and Purchase Agreement on 5 May 2011 pursuant to which the Offeror agreed to acquire and the Vendors agreed to sell an aggregate of 236,662,000 Shares, representing approximately 63.64% of the entire issued share capital of the Company at an aggregate consideration of HK$141,997,200 (equivalent to HK$0.60 per Sale Share). Completion took place immediately upon signing of the Sale and Purchase Agreement on 5 May 2011.

Immediately following Completion, the Offeror and parties acting in concert with it are interested in 236,662,000 Shares, representing approximately 63.64% of the entire issued share capital of the Company as at the Latest Practicable Date.

Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make an unconditional mandatory general offer in cash for all the issued Shares other than those already owned by the Offeror and parties acting in concert with it.

– 6 –

LETTER FROM SHK

This letter sets out, among others, the details of the Offer, information on the Offeror and the intention of the Offeror regarding the Group. The terms and procedures of acceptance of the Offer are set out in this letter, Appendix I to this Composite Offer Document of which this letter forms part, and the accompanying Form(s) of Acceptance. Terms used in this letter shall have the same meanings as defined in this Composite Offer Document unless the context otherwise requires.

THE OFFER

SHK is making the Offer, for and on behalf of the Offeror, to acquire the Offer Shares pursuant to Rules 26.1 of the Takeovers Code, on the following basis:

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.60 in cash

The Offer is not conditional upon any minimum level of acceptances of the Offer and is unconditional. The Offer will close on Tuesday, 28 June 2011.

The Offer Price of HK$0.60 per Offer Share is the same as the price per Sale Share paid by the Offeror under the Sale and Purchase Agreement. The Offer Shares to be acquired under the Offer shall be fully paid and free from all liens, claims and Encumbrances and together with all rights attached to them as at the Completion Date, including but not limited to all rights to receive in full any dividend or other distribution paid, declared or made on or after the Completion Date.

As at the Latest Practicable Date, there are 371,874,000 Shares in issue. The Company does not have any outstanding Shares, options, derivatives or warrants or other securities which are convertible or exchangeable into the Shares and has not entered into any agreement for the issue of such Shares, options, derivatives or warrants or other securities of the Company.

The Offeror was beneficially interested in 236,662,000 Shares, representing approximately 63.64% of the entire issued share capital of the Company as at the Latest Practicable Date.

Comparison of value

The Offer Price of HK$0.60 per Offer Share is equal to the price per Sale Share paid by the Offeror under the Sale and Purchase Agreement and represents:

(a) a discount of approximately 42.86% to the closing price of HK$1.050 per Share as quoted on the Stock Exchange on the last trading day prior to the Latest Practicable Date;
(b) a premium of approximately 3.45% over the closing price of HK$0.580 per Share, as quoted on the Stock Exchange on the Last Trading Day;

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LETTER FROM SHK

(c) a premium of approximately 3.45% over the average closing price of HK$0.580 per Share, being the average closing price of the Shares for the 5 trading days immediately prior to and including the Last Trading Day;
(d) a premium of approximately 3.99% over the average closing price of HK$0.577 per Share, being the average closing price of the Shares for the 10 trading days immediately prior to and including the Last Trading Day;
(e) a premium of approximately 5.08% over the average closing price of approximately HK$0.571 per Share, being the average closing price of the Shares for the 30 trading days immediately prior to and including the Last Trading Day;
(f) a premium of approximately 3.45% over the average closing price of approximately HK$0.580 per Share for the 90 consecutive trading days immediately prior to and including the Last Trading Day; and
(g) a discount of approximately 5.51% to the Company’s audited NAV of approximately HK$0.635 per Share based on the Group’s audited consolidated NAV (excluding noncontrolling interests) of approximately HK$236,061,000 and 371,874,000 Shares in issue as at 31 December 2010.

Please refer to the section headed “Market prices” in Appendix III to this Composite Offer Document for further information on the market prices of the Shares.

Highest and lowest price

During the Relevant Period, the highest closing price of the Shares quoted on the Stock Exchange was HK$1.250 per Share on 24 May 2011 and the lowest closing price of the Shares quoted on the Stock Exchange was HK$0.455 per Share on 21 December 2010 respectively.

Total consideration

As at the Latest Practicable Date, there are 371,874,000 Shares in issue and the NAV per Share is approximately HK$0.650 based on the audited consolidated NAV (including noncontrolling interests) of approximately HK$241,738,000 of the Group as at 31 December 2010.

On the basis of the Offer Price of HK$0.60 per Offer Share and 371,874,000 Shares in issue as at the Latest Practicable Date, the entire issued share capital of the Company is valued at HK$223,124,400. Excluding the 236,662,000 Sale Shares which have been acquired by the Offeror pursuant to the Sale and Purchase Agreement, 135,212,000 Offer Shares will be the subject of the Offer. Assuming the Offer is accepted in full by the Independent Shareholders, the total amount of cash required to effect the Offer will be HK$81,127,200.

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LETTER FROM SHK

Financial resources

The financial resources of the Offeror to fund the Offer, amounting to HK$81,127,200 are financed by the Facility provided by Sun Hung Kai Investment Services Limited. The Sale Shares acquired through the Sale and Purchase Agreement and the Shares to be acquired through the Offer has been pledged to Sun Hung Kai Investment Services Limited for the Facility. Save for the aforesaid, the Offeror has not entered into any arrangement, agreement, understanding and has no intention to transfer, charge or pledge the securities to be acquired pursuant to the Offer. The payment of interest on, repayment of or security for any liability under the Facility will not depend on the business of the Group.

SHK has been appointed as the financial adviser to the Offeror in respect of the Offer and is satisfied that there are sufficient financial resources available to the Offeror to satisfy full acceptance of the Offer.

Dealing and interest in the Company’s securities

SHK and its ultimate beneficial owners are Independent Third Party with the Offeror or any of its connected persons save to the extent that, by virtue of the provision of the Facility to the Offer, SHK is presumed to be a party acting in concert with the Offeror under the Takeovers Code.

Save for the Sale Shares under the Sale and Purchase Agreement, none of the Offeror nor parties acting in concert with it has dealt in the Shares, options, derivatives, warrants or other securities convertible into Shares during the Relevant Period. As at the date of the Latest Practicable Date, the Offeror and parties acting in concert with it has not entered into any arrangements or contracts in relation to the derivatives in respect of securities in the Company nor have any of them borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company. As at the Latest Practicable Date, save for the Sale Shares under the Sale and Purchase Agreement, the Offeror and parties acting in concert with it do not hold, own or control any Shares, options, derivatives, warrants or other securities convertible into Shares. Please refer to the sections headed “3. Disclosure of interests” and “4. Dealing in securities” in Appendix III to this Composite Offer Document for further details.

Stamp duty

In Hong Kong, seller’s ad valorem stamp duty arising in connection with acceptances of the Offer will be payable by relevant Shareholders at a rate of 0.1% of (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, will be deducted from the cash amount payable by the Offeror to such person on acceptance of the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of relevant Independent Shareholders accepting the Offer and will pay the buyer’s ad valorem stamp duty in connection with the acceptances of the Offer and the transfer of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

– 9 –

LETTER FROM SHK

Effects of accepting the Offer

By accepting the Offer, the relevant Independent Shareholders will sell their Shares to the Offeror or its nominee free from all liens, claims and Encumbrances and together with all rights attached to them as at the Completion Date, including all rights to receive in full all dividends or other distributions paid, declared or made, if any, on or after the Completion Date.

Acceptance of the Offer shall be unconditional and irrevocable and shall not be capable of being withdrawn. The procedures for acceptance and further terms of the Offer are set out in Appendix I to this Composite Offer Document.

Payment

Payment in cash in respect of acceptances of the Offer will be made as soon as possible but in any event within 10 days from the date on which the relevant documents of title are received by the Offeror to render each such acceptance complete and valid.

Other arrangements

As at the Latest Practicable Date,

(i) there is no arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the shares of the Offeror or the Shares and which might be material to the Offer;
(ii) save for the Sale and Purchase Agreement, there was no agreement or arrangement to which the Offeror 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;
(iii) none of the Offeror nor parties acting in concert with it has received any irrevocable commitment to accept the Offer; and
(iv) none of the Offeror nor parties acting in concert with it has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

– 10 –

LETTER FROM SHK

Overseas Shareholders

The Offer will be in respect of securities of a company incorporated in Bermuda and will be subject to the procedural and disclosure requirements of Hong Kong, which may be different from other jurisdictions. The Shareholders who wish to participate in the Offer but with registered address outside Hong Kong will also be subject to, and may be limited by, the laws and regulations of their respective jurisdictions in connection with their participation in the Offer. The attention of the Independent Shareholders with a registered address in jurisdiction outside Hong Kong is drawn to the section headed “Overseas Shareholders” in Appendix I to this Composite Offer Document.

The Shareholders who have registered addresses outside Hong Kong and wish to accept the Offer should satisfy themselves as to the full observance of the applicable laws and regulations of the relevant jurisdiction in connection therewith (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 of other taxes due by such accepting Shareholders in respect of such jurisdiction).

Acceptance of the Offer by any such person will be deemed to constitute a warranty by such person that such person is permitted under all applicable laws and regulations to receive and accept the Offer, and any revision thereof, and such acceptance shall be valid and binding in accordance with all applicable laws and regulations. The Overseas Shareholders are recommended to seek professional advice on deciding whether or not to accept the Offer.

Compulsory acquisition

The Offeror does not intend to avail itself of any powers of compulsory acquisition of the Shares after the close of the Offer.

INFORMATION ON THE GROUP

The Group is principally engaged in the garment manufacturing and trading and has production facilities in Indonesia, the PRC and Lesotho. Please refer to the Letter from the Board contained in this Composite Offer Document for further information of the Group.

– 11 –

LETTER FROM SHK

INFORMATION ON THE OFFEROR

The Offeror is a company incorporated in the BVI on 8 January 2010 with limited liability and is principally engaged in investment activities. The sole ultimate beneficial owner and the sole director of the Offeror is Mr. Li. Save for entering into of the Sale and Purchase Agreement and obtaining a margin facility from Sun Hung Kai Investment Services Limited for financing the Offer, the Offeror has not conducted any other business since its incorporation. Immediately prior to the entering into of the Sale and Purchase Agreement, the Offeror and parties acting in concert with it are Independent Third Parties.

Mr. Li, aged 41, has extensive experience in information technology and waste water treatment industries. Mr. Li is currently an executive director and a vice president of Beijing Enterprises Water Group Limited (a company listed on the main board of the Stock Exchange) (“ BEWG ”) and the chairman of the Supervisory Committee of BEWG Environmental Group Co., Ltd (formerly known as Beijing Enterprises Z.K.C. Environmental Co., Ltd.), a 99.45% owned subsidiary of BEWG, and is mainly responsible for both the PRC and overseas water markets. In addition, Mr. Li is also an independent non-executive director of Simsen International Corporation Limited, a company listed on the main board of the Stock Exchange. Save as disclosed above, Mr. Li has not held any directorships in the last three years in any public company the securities of which are listed on the securities market in Hong Kong or overseas.

Mr. Li holds a Bachelor degree in Laws from the Faculty of Law in Peking University in 1992.

THE OFFEROR’S INTENTION ON THE GROUP

It is the intention of the Offeror that the Group will continue with its existing principal business. The Offeror does not intend to introduce any major changes to the existing operations and business of the Company immediately after the Offer and will neither redeploy nor dispose of any of the assets (including fixed assets) of the Group other than in the ordinary course of business. Any acquisition or disposal of the assets or business of the Group, if any, will be in compliance with the Listing Rules. The Offeror will conduct a more detailed review on the operations of the Group with a view to formulating a comprehensive business strategy for the Group (the “ Review ”) and subject to the result of the Review, the Offeror may explore other business opportunities and consider whether any assets and/or business acquisitions by the Group will be appropriate in order to enhance its growth. As at the Latest Practicable Date, the Offeror has no plan on entering into any agreement, arrangement, understanding or negotiation about any acquisition of assets (whether concluded or not) and has no assets injections agreed or under negotiation. Furthermore, the Offeror may introduce or employ relevant expertise in managing and overseeing the operation of the Group. However, no particular investment or business opportunities have been identified as at the Latest Practicable Date. In the event that any business opportunities materialise or the Offeror introduces any major changes to the existing operation and business of the Group after the Review, further announcement will be made by the Company as and when required under the Listing Rules. Save and except that Mr. Rusli and Mr. Cheung Kwok Ming will cease to be the Directors with effect from the Effective Date of Resignation and Mr. Oey will cease to be a Director with effect from 7 June 2011, the Offeror has no intention to discontinue the employment of the employees of the Company or the Group (save for a change in the composition of the Board).

– 12 –

LETTER FROM SHK

PROPOSED CHANGE OF THE BOARD COMPOSITION

The Board is currently made up of seven Directors, comprising four executive Directors and three independent non-executive Directors.

Mr. Oey shall resign as a Director with effect from 7 June 2011 as he considers himself physically unfit to carry out his duty as a Director due to his health condition, in respect of which the Executive has granted the consent under Rule 7 of the Takeovers Code. Mr. Rusli and Mr. Cheung Kwok Ming have tendered their resignations from their office with effect from the Effective Date of Resignation. Save for the foregoing, all of the other existing executive Directors and the independent non-executive Directors will retain in the Board.

The Offeror intends to nominate, and the Board intends to accept the nominations of, Mr. Li, Mr. Flynn Xuxian Huang and Mr. Xiao Yong（肖勇）as executive Directors and Mr. Zhang Feng （張峰）as an independent non-executive Director. Such appointments will take effect immediately after the date of posting of this Composite Offer Document pursuant to Rule 26.4 of the Takeovers Code.

Save for the brief biographical information of Mr. Li which has been disclosed in the section headed “Information on the Offeror”, the biographical details of the other three proposed Directors are set out below:

Executive Directors

Mr. Flynn Xuxian Huang (“Mr. Huang”), aged 41, has extensive experience in taxation, accounting and corporate finance. Mr. Huang is currently serving as an executive vice president of Paragon Lakewood Group, where he specializes in investment and business development. Mr. Huang also serves as a director of the board of First Choice Bank, which he is one of the co-founders. Mr. Huang is a member of the American Institute of Certified Public Accountants and Washington CPA Society. Mr. Huang formerly served as the chairman of the board and an executive director of Shang Hua Holdings Limited (currently known as Beijing Enterprises Water Group Limited), a company listed on the main board of the Stock Exchange. Mr. Huang has not held any directorships in the last three years in any public company where the securities of which are listed on the securities market in Hong Kong or overseas.

Mr. Huang graduated from University of Washington with a bachelor degree of arts in business administration/accounting. Mr. Huang also holds an International Master of Business Administration from the University of Chicago Booth School of Business.

– 13 –

LETTER FROM SHK

Mr. Xiao Yong（肖勇）(“Mr. Xiao”) , aged 42, has extensive experience in petrochemical and telecommunications industries. Mr. Xiao served as the chairman of Shanghai Ace Co., Ltd. (“ Shanghai Ace ”), a company listed on the Shanghai Stock Exchange, during the period from May 2008 to May 2011. Prior to joining Shanghai Ace, Mr. Xiao was a deputy general manager of 天天科技有限公司, a company principally engaged in research and development of electronics and telecommunications related products as well as network engineering investment management. Save as disclosed above, Mr. Xiao has not held any directorships in the last three years in any public company the securities of which are listed on the securities market in Hong Kong or overseas.

Mr. Xiao graduated from Shanghai University of Electric Power with a bachelor degree in business management in 1990. He also holds a master degree in business management from Zhejiang University.

Independent non-executive Director

Mr. Zhang Feng（張峰）(“Mr. Zhang”) , aged 43, is a businessman who has about 19 years of experience in hi-technology industry with areas covering satellite communications, system integrator and other related services and founded 北京海域天科發展有限公司（“ 海域天科 ”）in 1999 and Beijing HaiYuTianHua Communications Technology Co., Ltd.（北京海域天華通信技術有限公司）（“ 海域天華 ”）in 2004 respectively. Mr. Zhang has been serving as the chairman and general manager of 海域天科 and the chairman of 海域天華 since their incorporations. He acted as the vice chairman of Aircraft Owners and Pilots Association of China in 2010. Mr. Zhang has not held any directorships in the last three years in any public company the securities of which are listed on the securities market in Hong Kong or overseas.

Mr. Zhang graduated from Hohai University with double bachelor degrees in industrial automation and business management in 1992 and 1994 respectively.

– 14 –

LETTER FROM SHK

MAINTENANCE OF THE LISTING STATUS OF THE COMPANY

The Offeror intends to maintain the listing of the Shares on the main board of the Stock Exchange after the closing of the Offer. The sole director of the Offeror and the new Directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Shares.

TAX IMPLICATIONS

None of the Company, the Offeror, SHK, the Independent Financial Adviser, the Registrar or any of their respective directors or any other parties involved in the Offer is in a position to advise the Independent Shareholders on their individual tax implications. The Independent Shareholders are recommended to consult their own professional advisers as to the tax implications that may arise from accepting the Offer. None of the Company, the Offeror, SHK, the Independent Financial Adviser, the Registrar, the professional advisers to the Company and the Offeror or any of their respective directors or any other parties involved in the Offer accepts any responsibility for any tax effect on, or liabilities of, the Independent Shareholders.

ACCEPTANCE AND SETTLEMENT

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

– 15 –

LETTER FROM SHK

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.

The attention of the Overseas Shareholders is drawn to the section headed “6. Overseas Shareholders” in Appendix I to this Composite Offer Document.

All documents and remittances will be sent to the Independent Shareholders through ordinary post at their own risk. These documents and remittances will be sent to the Independent Shareholders at their respective addresses as appear in the register of members of the Company, or in the case of joint Independent Shareholders, to the Independent Shareholder whose name appears first in the said register of members of the Company. None of the Offeror, the Company, SHK, the Independent Financial Adviser, the Registrar, or any of their respective directors or professional advisers or any other parties 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.

The Independent Shareholders are strongly advised to consider carefully the information contained in the letter from the Board, the letter from the Independent Board Committee and the letter from the Independent Financial Adviser set out in this Composite Offer Document and to consult their professional advisers if in doubt. Your attention is drawn to the additional information set out in the appendices to this Composite Offer Document, which form part of this Composite Offer Document.

Yours faithfully,

for and on behalf of

Sun Hung Kai International Limited

Derek Chan

Managing Director and Head of Corporate Finance

– 16 –

LETTER FROM THE BOARD

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Executive Directors: Registered Office: Mr. Rusli Hendrawan (Chairman) Clarendon House Mr. Lee Sheng Kuang, James (Managing Director) 2 Church Street Mr. Oey Tjie Ho Hamilton HM 11 Mr. Tang Chak Lam, Charlie Bermuda

Independent non-executive Directors: Principal Place of Business: Mr. Cheung Kwok Ming 2701, 27th Floor Mr. Kwok Lam Kwong, Larry B.B.S., J.P. One Kowloon Mr. Lau Siu Ki, Kevin 1 Wang Yuen Street Kowloon Bay Hong Kong

7 June 2011

To the Shareholders

Dear Sir or Madam,

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

Reference is made to the Joint Announcement made by the Company and the Offeror dated 17 May 2011 in relation to, among other things, the acquisition of the Sale Shares in the Company by the Offeror and the Offer.

– 17 –

LETTER FROM THE BOARD

Immediately following the Completion, the Offeror and parties acting in concert with it were interested in 236,662,000 Shares, representing approximately 63.64% of the entire issued share capital of the Company. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make an unconditional mandatory general cash offer for all the issued Shares other than those already owned by the Offeror and parties acting in concert with it.

The Independent Board Committee comprising all independent non-executive Directors namely, Mr. Cheung Kwok Ming, Mr. Kwok Lam Kwong, Larry, B.B.S., J.P. and Mr. Lau Siu Ki, Kevin, has been constituted to advise the Independent Shareholders in relation to the Offer.

VC Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee in relation to the Offer, whose appointment has been approved by the Independent Board Committee.

The purpose of this Composite Offer Document is to provide you with, among other things, information relating to the Group, the Offeror and the Offer, the recommendation of the Independent Board Committee to the Independent Shareholders regarding the Offer, and the advice of the Independent Financial Adviser to the Independent Board Committee in relation to the Offer.

THE OFFER

SHK is making the Offer, for and on behalf of the Offeror, to acquire all the Offer Shares pursuant to Rule 26.1 of the Takeovers Code on the following basis:

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.60 in cash

The Offer Price is the same as the Consideration of HK$0.60 per Sale Share under the Sale and Purchase Agreement, and represents:

(a) a discount of approximately 42.86% to the closing price of HK$1.050 per Share as quoted on the Stock Exchange on 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date;
(b) a premium of approximately 3.45% over the closing price of HK$0.580 per Share, as quoted on the Stock Exchange on the Last Trading Day;
(c) a premium of approximately 3.45% over the average closing price of HK$0.580 per Share, being the average closing price of the Shares for the 5 trading days immediately prior to and including the Last Trading Day;

– 18 –

LETTER FROM THE BOARD

(d) a premium of approximately 3.99% over the average closing price of HK$0.577 per Share, being the average closing price of the Shares for the 10 trading days immediately prior to and including the Last Trading Day;
(e) a premium of approximately 5.08% over the average closing price of approximately HK$0.571 per Share, being the average closing price of the Shares for the 30 trading days immediately prior to and including the Last Trading Day;
(f) a premium of approximately 3.45% over the average closing price of approximately HK$0.580 per Share for the 90 consecutive trading days immediately prior to and including the Last Trading Day; and
(g) a discount of approximately 5.51% to the Company’s audited NAV of approximately HK$0.635 per Share based on the Group’s audited consolidated NAV (excluding noncontrolling interests) of approximately HK$236,061,000 and 371,874,000 Shares in issue as at 31 December 2010.

As at the Latest Practicable Date, there were 371,874,000 Shares in issue and the Company did not have any outstanding Shares, options, derivatives or warrants or other securities which are convertible or exchangeable into the Shares and has not entered into any agreement for the issue of such Shares, options, derivatives or warrants or other securities of the Company.

SHAREHOLDING STRUCTURE OF THE COMPANY

The shareholding structure of the Company immediately before and after the Completion and as at the Latest Practicable Date is as follows:

Immediately before Completion Immediately after Completion Shareholders Number of Shares Approximate % Number of Shares Approximate % Mr. Rusli (Note 1) 81,412,000 21.90 – – Mr. Lee (Note 2) 77,812,000 20.92 – – Mr. Oey (Note 3) 13,438,000 3.61 – – Mr. Susanto (Note 4) 62,000,000 16.67 – – Mr. Tang (Note 5) 2,000,000 0.54 – – Vendors 236,662,000 63.64 – – The Offeror and parties acting in concert with it – – 236,662,000 63.64 Public Shareholders 135,212,000 36.36 135,212,000 36.36 371,874,000 100.00 371,874,000 100.00	Immediately before Completion Immediately after Completion Shareholders Number of Shares Approximate % Number of Shares Approximate % Mr. Rusli (Note 1) 81,412,000 21.90 – – Mr. Lee (Note 2) 77,812,000 20.92 – – Mr. Oey (Note 3) 13,438,000 3.61 – – Mr. Susanto (Note 4) 62,000,000 16.67 – – Mr. Tang (Note 5) 2,000,000 0.54 – – Vendors 236,662,000 63.64 – – The Offeror and parties acting in concert with it – – 236,662,000 63.64 Public Shareholders 135,212,000 36.36 135,212,000 36.36 371,874,000 100.00 371,874,000 100.00	Immediately before Completion Immediately after Completion Shareholders Number of Shares Approximate % Number of Shares Approximate % Mr. Rusli (Note 1) 81,412,000 21.90 – – Mr. Lee (Note 2) 77,812,000 20.92 – – Mr. Oey (Note 3) 13,438,000 3.61 – – Mr. Susanto (Note 4) 62,000,000 16.67 – – Mr. Tang (Note 5) 2,000,000 0.54 – – Vendors 236,662,000 63.64 – – The Offeror and parties acting in concert with it – – 236,662,000 63.64 Public Shareholders 135,212,000 36.36 135,212,000 36.36 371,874,000 100.00 371,874,000 100.00	Immediately before Completion Immediately after Completion Shareholders Number of Shares Approximate % Number of Shares Approximate % Mr. Rusli (Note 1) 81,412,000 21.90 – – Mr. Lee (Note 2) 77,812,000 20.92 – – Mr. Oey (Note 3) 13,438,000 3.61 – – Mr. Susanto (Note 4) 62,000,000 16.67 – – Mr. Tang (Note 5) 2,000,000 0.54 – – Vendors 236,662,000 63.64 – – The Offeror and parties acting in concert with it – – 236,662,000 63.64 Public Shareholders 135,212,000 36.36 135,212,000 36.36 371,874,000 100.00 371,874,000 100.00	Immediately before Completion Immediately after Completion Shareholders Number of Shares Approximate % Number of Shares Approximate % Mr. Rusli (Note 1) 81,412,000 21.90 – – Mr. Lee (Note 2) 77,812,000 20.92 – – Mr. Oey (Note 3) 13,438,000 3.61 – – Mr. Susanto (Note 4) 62,000,000 16.67 – – Mr. Tang (Note 5) 2,000,000 0.54 – – Vendors 236,662,000 63.64 – – The Offeror and parties acting in concert with it – – 236,662,000 63.64 Public Shareholders 135,212,000 36.36 135,212,000 36.36 371,874,000 100.00 371,874,000 100.00
	81,412,000 77,812,000 13,438,000 62,000,000 2,000,000 236,662,000	21.90 20.92 3.61 16.67 0.54 63.64	– – – – – –	– – – – – –
	– 135,212,000 371,874,000	– 36.36 100.00	236,662,000 135,212,000 371,874,000	63.64 36.36 100.00

– 19 –

LETTER FROM THE BOARD

Notes:

The interests of Mr. Rusli (the chairman of the Company and an executive Director) included his personal interests of 3,600,000 Shares and 77,812,000 Shares held through RIL. The issued share capital of RIL is owned as to 46.03% by Mr. Rusli.
The interests of Mr. Lee (the managing and executive Director) were held through RIL. The issued share capital of RIL is owned as to 46.03% by Mr. Lee.
The interests of Mr. Oey (an executive Director) were held through RIL. The issued share capital of RIL is owned as to 7.94% by Mr. Oey.
The interests of Mr. Susanto were held through Greatwood. The entire issued share capital of Greatwood is solely owned by Mr. Susanto.
Mr. Tang (an executive Director) was personally interested in 2,000,000 Shares.

FURTHER INFORMATION OF THE OFFER

Please refer to the “Letter from SHK” and Appendix I to this Composite Offer Document and the accompanying Form of Acceptance for further information in relation to the Offer, the making of the Offer to the Overseas Shareholders residing in overseas countries, taxation, acceptance and settlement procedures of the Offer.

INFORMATION OF THE GROUP

The Group is principally engaged in the garment manufacturing and trading and has production facilities in Indonesia, the PRC and Lesotho.

INFORMATION OF THE OFFEROR

The Offeror is an investment holding company incorporated in BVI with limited liability. Please refer to the “Letter from SHK” contained in this Composite Offer Document for more information on it.

– 20 –

LETTER FROM THE BOARD

INTENTION OF THE OFFEROR REGARDING THE COMPANY

Your attention is drawn to the “Letter from SHK” contained in this Composite Offer Document which sets out the intention of the Offeror regarding the business of the Group and the biographical information of the proposed new Directors. Regarding the intention of the Offeror in respect of the Group, the Board is willing to render reasonable cooperation with the Offeror further which are of the interests of the Company and the Shareholders as a whole.

INTENTION OF THE BOARD REGARDING THE COMPANY

As at the Latest Practicable Date, the Board has no plan on entering into any agreement, arrangement, understanding or negotiation about any acquisition of assets (whether concluded or not) and has no assets injections agreed or under negotiation.

PROPOSED CHANGE OF BOARD COMPOSITION OF THE COMPANY

Please refer to the paragraph headed “Proposed Change of the Board Composition” in the “Letter from SHK” for further information in relation to proposed change of board composition of the Company. Mr. Oey shall resign as a Director with effect from 7 June 2011 as he considered himself physically unfit to carry out his duty as a Director due to his health condition, in respect of which the Executive has granted the consent under Rule 7 of the Takeovers Code. Mr. Rusli and Mr. Cheung Kwok Ming have tendered their resignations from their office with effect from the Effective Date of Resignation. Save for the foregoing, all of the other existing executive Directors and the independent non-executive Directors will retain in the Board. The Offeror intends to nominate and the Board intends to accept the nominations of Mr. Li, Mr. Flynn Xuxian Huang and Mr. Xiao Yong（肖勇）as executive Directors and Mr. Zhang Feng（張峰）as an independent nonexecutive Director and such appointments will take effect immediately after the date of posting of this Composite Offer Document pursuant to Rule 26.4 of the Takeovers Code.

MAINTAINING THE LISTING STATUS OF THE COMPANY

The Stock Exchange has stated that if, upon close 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,

then it will consider exercising its discretion to suspend trading in the Shares.

– 21 –

LETTER FROM THE BOARD

The Offeror intends to maintain the listing of the Shares on the Stock Exchange after the close of the Offer. Each of the Offeror and the Company will undertake to the Stock Exchange to take appropriate steps following the close of the Offer to ensure that sufficient public float exists.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee and the Independent Financial Adviser, respectively, which set out their recommendations and opinions in relation to the Offer and the principal factors considered by them before arriving at their recommendations. You are also advised to read the remainder of this Composite Offer Document and the accompanying Form of Acceptance in respect of the acceptance and settlement procedures of the Offer.

Yours faithfully,

By order of the Board Carry Wealth Holdings Limited Lee Sheng Kuang, James Managing Director

– 22 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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7 June 2011

To the Independent Shareholders

Dear Sir or Madam,

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

We refer to the Composite Offer Document dated 7 June 2011 jointly issued by the Company and the Offeror, of which this letter forms part. Terms used herein shall have the same meanings as those defined in the Composite Offer Document unless the context requires otherwise.

We have been appointed to form the Independent Board Committee to consider the terms of the Offer and to advise you as to whether, in our opinion, the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. VC Capital Limited has been appointed as the Independent Financial Adviser to advise us in this respect, details of its advice and the principal factors taken into consideration in arriving at its recommendation are set out in the “Letter from the Independent Financial Adviser” on pages 25 to 46 of the Composite Offer Document.

We also wish to draw your attention to the “Letter from the Board” and the “Letter from “SHK” in the Composite Offer Document and the additional information set out in the appendices to the Composite Offer Document.

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

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

Independent Shareholders who intend to accept the Offer are reminded to closely monitor the market price and liquidity of the Shares during the period when the Offer remains open for acceptance and shall, having regard to their own circumstances, consider selling the Shares (as the case may be) 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 amounts the Shareholders would be able to receive under the Offer.

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

Yours faithfully,

The Independent Board Committee of Carry Wealth Holdings Limited

Cheung Kwok Ming Kwok Lam Kwong, Larry Lau Siu Ki, Kevin Independent non-executive Independent non-executive Independent non-executive Director Director Director

– 24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice to the Independent Board Committee from VC Capital Limited in respect of the Offer prepared for the purpose of incorporation into the Composite Offer Document.

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7 June 2011

To the Independent Board Committee of Carry Wealth Holdings Limited

Dear Sir or Madam,

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee in respect of the Offer, details of which are set out in the composite offer document issued jointly by the Offeror and the Company dated 7 June 2011 (the “ Composite Offer Document ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Composite Offer Document unless the context otherwise requires.

On 17 May 2011, the Offeror and the Company jointly announced that the Offeror, the Offeror Guarantor and the Vendors entered into the Sale and Purchase Agreement on 5 May 2011, pursuant to which the Offeror agreed to acquire, and the Vendors agreed to sell, the Sale Shares, being 236,662,000 Shares, representing approximately 63.64% of the entire issued share capital of the Company as at the date of the Joint Announcement, at an aggregate consideration of HK$141,997,200 (equivalent to HK$0.60 per Sale Share). Immediately following Completion, which took place immediately upon the signing of the Sale and Purchase Agreement on 5 May 2011, the Offeror and parties acting in concert with it became interested in 236,662,000 Shares, representing approximately 63.64% of the entire issued share capital of the Company as at the Latest Practicable Date. Accordingly, pursuant to Rule 26.1 of the Takeovers Code, the Offeror is obliged to make an unconditional mandatory general offer in cash for all the issued Shares other than those already owned by the Offeror and parties acting in concert with it.

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, there were 371,874,000 Shares in issue. As stated in the “Letter from the Board” in this Composite Offer Document, the Company does not have any outstanding Shares, options, derivatives or warrants or other securities which are convertible or exchangeable into the Shares and has not entered into any agreement for the issue of such Shares, options, derivatives or warrants or other securities of the Company.

The Independent Board Committee, comprising Messrs. Cheung Kwok Ming, Kwok Lam Kwong, Larry, B.B.S., J.P. and Lau Siu Ki, Kevin, being all the independent non-executive Directors who has no direct or indirect interests in the Offer, has been established to advise the Independent Shareholders in respect of the Offer. Our appointment as the independent financial adviser to advise the Independent Board Committee in respect of the Offer has been approved by the Independent Board Committee.

In our capacity as the independent financial adviser to the Independent Board Committee, our role is to give an independent opinion as to whether the Offer is fair and reasonable so far as the Independent Shareholders are concerned, and whether the Independent Board Committee should advise the Independent Shareholders to accept the Offer.

VC Capital Limited (“ VC Capital ”) is not associated with the Company and its substantial Shareholders or any party acting, or presumed to be acting, in concert with any of them and, accordingly, is considered eligible to give independent advice on the Offer. Apart from normal professional fees payable to us in connection with this engagement, no arrangement exists whereby VC Capital will receive any fees or benefits from the Company or its substantial Shareholders or any party acting, or presumed to be acting, in concert with any of them.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the information and facts supplied and the opinions expressed by the executive Directors and the management of the Group. We have assumed that all information and representations provided by the executive Directors and the management of the Group, for which they are solely responsible, were true and accurate at the time they were prepared or made and will continue to be so up to the date of the Composite Offer Document. We have also assumed that the information and representations contained or referred to in the Composite Offer Document were true and accurate at the time they were prepared or made and will continue to be so up to the date of the Composite Offer Document. We have no reason to doubt the truth, accuracy and completeness of the information and representations made to us by the executive Directors and the management of the Group. We have sought confirmation from the executive Directors, and the executive Directors have confirmed to us, that no material facts have been omitted from the information supplied and opinions expressed. As such, we have no reason to suspect that any relevant information has been withheld or omitted from the information provided and referred to in the Composite Offer Document or the reasonableness of the opinions and representations provided by the executive Directors and the management of the Company to us, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading.

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Composite Offer Document and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business and affairs or the future prospects of the Group or the Offeror, nor have we carried out any independent verification of the information provided by the executive Directors and the management of the Group.

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

The sole director of the Offeror accepts full responsibility for the accuracy of the information contained in the Composite Offer Document (other than information relating to the Group, the Vendors and parties acting in concert with them) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in the Composite Offer Document have been arrived at after due and careful consideration and there are no other facts not contained in the Composite Offer Document, the omission of which would make any such statement contained in the Composite Offer Document misleading.

In formulating our opinion, we have not considered the taxation implications on the Independent Shareholders arising from acceptances or non-acceptances of the Offer as these are particular to their individual circumstances. We will not accept responsibility for any tax effect on or liability of any person resulting from his or her acceptance or non-acceptance of the Offer. In particular, those Independent Shareholders who are overseas residents or are subject to overseas taxation or Hong Kong taxation on securities dealings should consider their own tax positions and, if in any doubt, should consult their own professional advisers.

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL TERMS OF THE OFFER

SHK is making the Offer, for and on behalf of the Offeror, to acquire the Offer Shares pursuant to Rule 26.1 of the Takeovers Code on the following basis: –

For every Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.60 in cash

The Offer Price of HK$0.60 per Offer Share is the same as the price per Sale Share paid by the Offeror under the Sale and Purchase Agreement.

The Offer is not conditional upon any minimum level of acceptances of the Offer and is unconditional.

Details of the terms of the Offer are contained in the ‘‘Letter from SHK’’ and Appendix I to the Composite Offer Document. Independent Shareholders are urged to read the relevant sections in the Composite Offer Document in full.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In assessing the Offer and in making our recommendation to the Independent Board Committee in respect of the Offer, we have taken into account the following principal factors and reasons.

I. Information on the Group

The Group is principally engaged in the garment manufacturing and trading and has production facilities in Indonesia, the PRC and Lesotho. The issued Shares have been listed on the Stock Exchange since 13 March 2000.

(1) Historical financial performance of the Group

The following table summarises the key financial results of the Group for each of the three years ended 31 December 2010 and the financial positions of the Group as at 30 June 2010 and 31 December 2010.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table A: Summary of financial results of the Group

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2010	2009	2008
	(audited)	(audited)	(audited)
	HK$’000	HK$’000	HK$’000
		(Restated)
		(Note)
Revenues	734,931	733,046	880,114
Gross profit	98,171	138,102	172,899
Operating (loss)/profit	(57,636)	13,333	(34,609)
(Loss)/profit before income tax	(59,803)	6,233	(37,501)
(Loss)/profit for the year	(52,780)	381	(42,034)
Attributable to:
Equity holders of the Company	(48,829)	(952)	(40,681)
Non-controlling interests	(3,951)	1,333	(1,353)
Dividends	–	–	7,437

Source: The audited figures for the two years ended 31 December 2009 and 2010 were extracted from the published 2010 annual report of the Company, The audited figures for the year ended 31 December 2008 were extracted from the published 2009 annual report of the Company,

Note: The restatement of the audited figures for the year ended 31 December 2009 arose from the retrospective application of the Hong Kong Accounting Standard 17 (amendment) with effect from 1 January 2010. As a result of such application, the Group has reassessed the classification of certain unexpired leasehold land and land use rights and recognised certain leasehold land interests as finance leases retrospectively, which has led to an increase in administrative expenses. For details of the restatement, please refer to Note 2.1(a) to the financial information of the Group as set out in Appendix 2 to this Composite Offer Document.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table B: Summary of financial positions of the Group

Non-current assets Property, plant and equipment Leasehold land and land use rights Interest in associates Deferred income tax assets Current assets Inventories Trade and other receivables Financial assets at fair value through profit or loss Bank deposits Cash and cash equivalents Total assets Non-current liabilities Bank borrowings Deferred income tax liabilities Current liabilities Derivative financial instruments Trade and other payables Income tax payable Bank borrowings Total liabilities Net assets Out of which – Capital and reserves attributable to the Company’s equity holders Non-controlling interests NAV per Share (HK$) (excluding non-controlling interests)(Note)	As at 31 December 2010 (audited) HK$’000 140,558 15,282 42,880 5,010 203,730 106,173 125,213 6,180 31,099 74,554 343,219 546,949 – 10,943 10,943 147 146,817 2,740 144,564 294,268 305,211 241,738 236,061 5,677 0.635	As at 30 June 2010 (unaudited) HK$’000 145,432 13,937 42,432 4,486 206,287 87,906 130,769 17,542 11,625 60,146 307,988 514,275 16,333 8,895 25,228 656 138,260 10,052 74,750 223,718 248,946 265,329 256,291 9,038 0.689

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Source: The audited figures as at 31 December 2010 were extracted from the published 2010 annual report of the Company. The unaudited figures as at 30 June 2010 were extracted from the published 2010 interim report of the Company.

Note: The NAV per Share (excluding non-controlling interests) is calculated based on 371,874,000 Shares in issue as at 31 December 2010 and 30 June 2010.

It is noted that the Group recorded a loss attributable to equity holders of the Company for each of the three financial years ended 31 December 2010. It is further noted that no dividends were distributed by the Company for each of the two years ended 31 December 2010.

(a) Financial year ended 31 December 2008 versus financial year ended 31 December 2009

For the financial year ended 31 December 2009, the Group recorded revenue of approximately HK$733.0 million, representing a decrease of approximately 16.7% as compared to approximately HK$880.1 million for the year ended 31 December 2008. As stated in the 2009 annual report of the Company, the decrease in turnover was due to the global economic turmoil, which led to high unemployment and triggered a drop in consumer confidence and a slump in demand with the lack of a promising economic outlook, particularly in the United States of America (the “ US ”), the Group’s largest export market. The gross profit margin of the Group also suffered, falling from approximately 19.6% for the year ended 31 December 2008 to approximately 18.8% for the year ended 31 December 2009. Gross profit of the Group for the year ended 31 December 2009 was approximately HK$138.1 million, a 20.1% decrease compared with the gross profit of HK$172.9 million in the previous year. Nonetheless, through stringent cost control and streamlining measures, the Group managed to reduce its selling and administrative expenses, and hence reduced its loss attributable to equity holders of the Company from approximately HK$40.7 million to approximately HK$1.0 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Financial year ended 31 December 2009 versus financial year ended 31 December 2010

For the financial year ended 31 December 2010, the Group recorded revenue of approximately HK$734.9 million, representing a slight increase of approximately 0.3% as compared to approximately HK$733.0 million for the year ended 31 December 2009, notwithstanding a continuously sluggish US market. On the other hand, as stated in the 2010 annual report of the Company, the Group was faced with numerous challenges, including the upsurge in labour, transport and raw material costs, in particular soaring fabric prices driven by a global shortage of cotton. As a result of the rise in production costs and severe pricing pressure from customers, the gross profit margin of the Group fell from approximately 18.8% for the year ended 31 December 2009 to approximately 13.4% for the year ended 31 December 2010. Gross profit of the Group for the year ended 31 December 2010 was approximately HK$98.2 million, a 28.9% decrease as compared with the gross profit of HK$138.1 million of the previous year. The increase in selling and administrative expenses due to the incur of additional freight charges to meet timely delivery and setup costs for the Group’s new printing factory and office in Heshan, the PRC, worsened the Group’s loss situation. The loss attributable to equity holders of the Company increased from approximately HK$1.0 million for the year ended 31 December 2009 to approximately HK$48.8 million for the year ended 31 December 2010.

(c) Asset position of the Group

As at 31 December 2010, the Group’s total assets amounted to approximately HK$546.9 million, representing an increase of approximately 6.3% over the Group’s total assets of approximately HK$514.3 million as at 30 June 2010. Inventories and trade and other receivables together accounted for approximately 42.3% of the Group’s total assets.

As at 31 December 2010, the Group’s total liabilities amounted to approximately HK$305.2 million, representing an increase of approximately 22.6% over the Group’s total liabilities of approximately HK$248.9 million as at 30 June 2010. Trade and other payables and bank borrowings accounted for approximately 48.1% and approximately 47.4% of the Group’s total liabilities respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 31 December 2010, the Group’s net assets amounted to approximately HK$241.7 million, a decrease of approximately 8.9% as compared with approximately HK$265.3 million as at 30 June 2010. The net asset value per Share (excluding non-controlling interests) as at 31 December 2010 was approximately HK$0.635.

(2) Prospects and outlook of the Group

As stated in the 2010 annual report of the Company, the Group has been facing a difficult operating environment with a slower than expected economic recovery in the US, the Group’s largest export market, intense industry competition in the market, especially for basic fashion items which the Group produces, and surge in raw material costs. The Directors believe that the Group’s business will continue to be presented with challenges amidst the continuing uncertainty in US economic recovery and the rise in raw material costs.

(a) US consumer sentiment

According to statistics released by the Bureau of Labour Statistics, the US Department of Labour, the unemployment rate was between 9.5% and 9.8% from January to November 2010. Following the peak at 9.8% in November 2010, the unemployment rate dropped from 9.4% in December 2010 to 8.8% in March 2011. Nevertheless, the unemployment rate edged up from 8.8% in March 2011 to 9.0% in April 2011, and it continues to have an impact on consumer confidence. The Conference Board’s Consumer Confidence Index (the “ CCI ”), the most widely accepted index among the US media, businessmen and consumers which measures the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending, has been showing a rickety trend. During the period from January 2010 to April 2011, the CCI, which is benchmarked to Year 1985 = 100, experienced a low of 46.4 in February 2010, followed by improvement of three consecutive months to reach 62.7 in May 2010 before falling to 54.3 in June 2010. The declining trend more or less continued to October 2010, until the index rose again to 57.8 in November 2010 and further to 63.4 in December 2010. Consumer optimism reached a high of 72 in February 2011, but retracted to 63.8 in March 2011, only to be followed by a slight improvement of 65.4 in April 2011. The unstable trend indicates that consumer confidence remains fragile amidst the weak labour market conditions.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Cotton price

During the period from January 2010 to May 2011, cotton prices have shown a more or less consistently upward trend. According to statistics published by the National Cotton Council of America, the “A” Index, which represents offering prices of cotton based on CFR Far Eastern main ports terms and is a proxy for the world price of cotton, increased from US77.39 cent/pound in January 2010 to US105.56 cent/pound in July 2010, to peak at US229.67 cent/pound in March 2011. Cotton prices retracted in April and May 2011 due to a slowdown in demand but maintained at over US165 cent/ pound in those two months. It is uncertain whether the downward adjustment in cotton prices will continue and, if so, the extent of the price fall, given that the continuous growth in emerging markets may lead to an increase in cotton consumption and, on the other hand, cotton supply could be adversely affected with the adverse growing conditions (ranging from drought conditions in the southwestern part of the US and wet weather and flooding in the Delta) in the US cotton belt regions and the continuation of export restrictions imposed by India on raw cotton.

In view of the above, we concur with the Directors’ views that the Group’s operating environment will continue to be challenging in the midst of uncertain economic recovery in the US and high cotton costs.

II. Information on the Offeror and its intentions on the Group

(1) Information on the Offeror

As stated in the “Letter from SHK” in this Composite Offer Document, the Offeror is a company incorporated in the BVI on 8 January 2010 with limited liability and is principally engaged in investment activities. The sole ultimate beneficial owner and the sole director of the Offeror is Mr. Li. Save for entering into of the Sale and Purchase Agreement and obtaining a margin facility from Sun Hung Kai Investment Services Limited for financing the Offer, the Offeror has not conducted any other business since its incorporation.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Mr. Li, the sole ultimate beneficial owner and the sole director of the Offeror, has extensive experience in information technology and waste water treatment industries. He is currently an executive director and a vice president of Beijing Enterprises Water Group Limited (Stock code: 371) (“ BEWG ”), a company listed on the Main Board of the Stock Exchange, and the chairman of the Supervisory Committee of 北控中科成環保集團有限公司 (BEWG Environmental Group Co., Ltd., formerly known as Beijing Enterprises Z.K.C. Environmental Co., Ltd.), a 99.45% owned subsidiary of BEWG, and is mainly responsible for both the PRC and overseas water markets. In addition, Mr. Li is also an independent non-executive director of Simsen International Corporation Limited (Stock code: 993), a company listed on the Main Board of the Stock Exchange.

(2) Intentions of the Offeror on the business of the Group

As stated in the “Letter from SHK” in this Composite Offer Document, it is the intention of the Offeror that the Group will continue with its existing principal business. The Offeror does not intend to introduce any major changes to the existing operations and business of the Company immediately after the Offer and will neither redeploy nor dispose of any of the assets (including fixed assets) of the Group other than in the ordinary course of business. Any acquisition or disposal of the assets or business of the Group, if any, will be in compliance with the Listing Rules.

The Offeror will conduct a more detailed review on the operations of the Group with a view to formulating a comprehensive business strategy for the Group and subject to the results of such review, the Offeror may explore other business opportunities and consider whether any assets and/or business acquisitions by the Group will be appropriate in order to enhance its growth. Furthermore, the Offeror may introduce or employ relevant expertise in managing and overseeing the operation of the Group. However, no particular investment or business opportunities have been identified as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(3) Intentions of the Offeror on the Board and employees of the Group

The Board currently has four executive Directors and three independent nonexecutive Directors. As stated in the “Letter from SHK” in this Composite Offer Document, Mr. Oey shall resign as an executive Director with effect from 7 June 2011 as he considered himself physically unfit to carry out his duties as an executive Director due to his health condition, in respect of which the Executive has granted consent under Rule 7 of the Takeovers Code. In addition, Mr. Rusli and Mr. Cheung Kwok Ming have tendered their resignations from their office with effect from the Effective Date of Resignation. The Offeror intends to nominate, and the Board intends to accept the nominations of, Mr. Li, Mr. Flynn Xuxian Huang and Mr. Xiao Yong as executive Directors and Mr. Zhang Feng as an independent non-executive Director. The biographies of each of Mr. Li, Mr. Flynn Xuxian Huang, Mr. Xiao Yong and Mr. Zhang Feng are set out in the “Letter from SHK” in this Composite Offer Document. Such appointments will take effect immediately after the date of posting of this Composite Offer Document pursuant to Rule 26.4 of the Takeovers Code.

Save for the above, the Offeror has no intention to discontinue the employment of any employees of the Company or the Group.

We note that the experience of the incoming executive Directors, namely Mr. Li, Mr. Flynn Xuxian Huang and Mr. Xiao Yong, lies in information technology, waste water treatment, petrochemical and telecommunications industries and not in the existing garment manufacturing and trading business of the Group. Nevertheless, as Mr. Lee and Mr. Tang are expected to remain on the Board following the close of the Offer (with Mr. Lee being the founder of the Group, having more than 30 years of experience in the manufacture and distribution of apparel products, and Mr. Tang having been with the Group for more than 11 years responsible for the overall financial operation of the Group), and the Offeror has no intention to discontinue the employment of any employees of the Company or the Group, save for the changes in the Board as mentioned above, it could be expected that Mr. Lee, Mr. Tang and the existing employees of the Group would continue to run the existing businesses of the Group following the close of the Offer, while the Offeror conducts his detailed review on the operations of the Group and formulates a comprehensive business strategy for the Group .

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) Maintenance of the listing status of the Company

As stated in the “Letter from SHK” in this Composite Offer Document, the Offeror intends to maintain the listing of the Shares on the Main Board of the Stock Exchange after the closing of the Offer. Mr. Li, being the sole director of the Offeror, and the new Directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange that appropriate steps will be taken to ensure that sufficient public float exists in the Shares.

III. Evaluation of the Offer Price

(1) Basis of determining the Offer Price

The Offer Price of HK$0.60 per Offer Share is equal to the price per Sale Share paid by the Offeror under the Sale and Purchase Agreement and represents: –

(i) a discount of approximately 42.86% to the closing price of HK$1.05 per Share as quoted on the Stock Exchange on 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date;
(ii) a premium of approximately 3.45% over the closing price of HK$0.580 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a premium of approximately 3.45% over the average closing price of HK$0.580 per Share, being the average closing price of the Shares for the 5 trading days immediately prior to and including the Last Trading Day;
(iv) a premium of approximately 3.99% over the average closing price of HK$0.577 per Share, being the average closing price of the Shares for the 10 trading days immediately prior to and including the Last Trading Day;
(v) a premium of approximately 5.08% over the average closing price of approximately HK$0.571 per Share, being the average closing price of the Shares for the 30 trading days immediately prior to and including the Last Trading Day;
(vi) a premium of approximately 3.45% over the average closing price of approximately HK$0.580 per Share for the 90 consecutive trading days immediately prior to and including the Last Trading Day; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(vii) a discount of approximately 5.51% to the Company’s audited NAV of approximately HK$0.635 per Share based on the Group’s audited consolidated NAV (excluding non-controlling interests) of approximately HK$236,061,000 and 371,874,000 Shares in issue as at 31 December 2010.

(2) Historical price performance of the Shares

We have reviewed the movements in the closing prices of the Shares during the period from 3 May 2010 (approximately 12 months prior to the entering into of the Sale and Purchase Agreement) up to and including 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date. The closing prices of the Shares as quoted on the Stock Exchange during the aforesaid period are set out in Chart C below.

Chart C: Closing price of the Shares, 3 May 2010 to 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date

==> picture [327 x 262] intentionally omitted <==

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

1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
03/05/201001/06/201002/07/201002/08/201001/09/201004/10/201001/11/201001/12/201003/01/201101/02/201101/03/201101/04/201103/05/201101/06/2011
(HK$)
Closing price
----- End of picture text -----

Source: The website of Hong Kong Exchanges and Clearing Limited

Note: Trading in the Shares on the Stock Exchange was suspended on 6, 9, 11-13 and 16-17 May 2011

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As shown in Chart C above, for the period from 3 May 2010 up to and including the Last Trading Day before the signing of the Sale and Purchase Agreement, the closing prices of the Shares fluctuated in the range of between HK$0.365 (recorded on 20 May 2010) and HK$0.72 (recorded 2 February 2011) per Share. The Offer Price represents a premium of approximately 64.4% over the aforesaid lowest closing price per Share and a discount of approximately 16.7% to the aforesaid highest closing price per Share. It should be noted, however, that the closing price per Share was only above the Offer Price for 33 trading days out of 252 trading days during the period from 3 May 2010 to the Last Trading Day. The average and median closing price per Share from 3 May 2010 to the Last Trading Day are both HK$0.51 per Share. The Offer Price, when compared with the aforesaid average and median closing prices per Share, represents a premium of approximately 17.6% to such prices.

The closing prices of the Shares fluctuated in the range of between HK$0.365 (recorded on 20 May 2010) and HK$1.25 (recorded on 24 May 2011) per Share for the period from 3 May 2010 up to and including 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date. The Offer Price represents a premium of approximately 64.4% over the aforesaid lowest closing price per Share and a discount of approximately 52.0% to the aforesaid highest closing price per Share. It should be noted that the aforesaid highest closing price was recorded on 24 May 2011 following the publication of the Joint Announcement. In fact, following the publication of the Joint Announcement, the closing price per Share has surged by approximately 115.5 % from HK$0.58 per Share on the Last Trading Day to HK$1.25 per Share on 24 May 2011. The average and median closing price per Share during such period are approximately HK$0.54 per Share and HK$0.52 per Share respectively, and the Offer Price represents premiums of approximately 11.1% and 15.4% respectively to the aforesaid average and median closing price per Share. We have confirmed with the Directors that save for the information as contained in the Joint Announcement in respect of the Offer, they are not aware of any reasons for the price increase since 18 May 2011. We have also reviewed the announcements issued by the Company since the publication of the Joint Announcement and, save for the information as contained in the Joint Announcement, we are not aware of any other announcements made by the Company which contains information that was price sensitive in nature. We are therefore of the opinion that the surge in the Share price following publication of the Joint Announcement is more likely to be a result of market reaction to the change in control of the Company as disclosed in the Joint Announcement, rather than as a result of any change in the business performance of the Company. Accordingly, we consider that the recent Share price increase following the publication of the Joint Announcement may or may not be sustainable.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

On the basis that: –

(i) notwithstanding the fact that the Offer Price represents a discount of approximately 16.7% to the highest closing price per Share during the period from 3 May 2010 up to and including the Last Trading Day, the closing price per Share was only higher than the Offer Price for 33 trading days out of 252 trading days during the period from 3 May 2010 to the Last Trading Day;
(ii) the Offer Price represents premiums of approximately 64.4%, 17.6% and 17.6% respectively to the lowest, average and median closing prices of HK$0.365, HK$0.51 and HK$0.51 per Share during the period from 3 May 2010 up to and including the Last Trading Day;
(iii) the highest closing price of HK$1.25 per Share during the period from 3 May 2010 up to and including 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date was recorded on 24 May 2011 after the publication of the Joint Announcement in respect of the Offer. There are no other facts to lead us to believe that there were any other reasons for the recent Share price increase, and such price rally may or may not be sustainable; and
(iv) the Offer Price represents premiums of approximately 64.4%, 11.1% and 15.4% respectively to the lowest, average and median closing prices of HK$0.365, HK$0.54 and HK$0.52 per Share during the period from 3 May 2010 up to and including 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date,

we are of the view that the Offer Price is fair and reasonable to the Independent Shareholders as a whole.

We note that the Offer Price is at a discount of approximately 5.51% to the Company’s audited NAV (excluding non-controlling interests) of approximately HK$0.635 per Share. This will be further discussed in the section headed “Comparable analysis” below.

(3) Liquidity of the Shares

The table below sets out the average daily trading volume of the Shares during the period from 3 May 2010 up to and including 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date, and the percentages as represented by such average daily trading volume to the total number of Shares in issue as at each month/period end and the total number of Shares held by the Independent Shareholders as at 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table D: Trading volume of the Shares, 3 May 2010 to 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date

			Average daily
			volume as a
			percentage of
		Average daily	total number
		volume as a	of issued
		percentage of	Shares held
	Average	total number	by the
	daily	of issued	Independent
	trading	Shares	Shareholders
Month/Period	volume	(Note 1)	(Note 2)
2010
May	495,700	0.133%	0.367%
June	242,571	0.065%	0.179%
July	193,429	0.052%	0.143%
August	910,227	0.245%	0.673%
September	3,238,286	0.871%	2.395%
October	1,448,500	0.390%	1.071%
November	836,636	0.225%	0.619%
December	240,727	0.065%	0.178%
2011
January	796,952	0.214%	0.589%
February	1,642,000	0.442%	1.214%
March	633,913	0.170%	0.469%
April	375,722	0.101%	0.278%
May (Note 3)	28,148,154	7.569%	20.818%
June (up to and including 3
June 2011, being the last
trading day of the Shares
immediately prior to the
Latest Practicable Date)	6,738,667	1.812%	4.984%

Source: The website of Hong Kong Exchanges and Clearing Limited

Notes:

Calculated based on the total number of issued Shares as at the end of each month/period, being 371,874,000 Shares as at the end of each month/period.
Calculated based on the total number of 135,212,000 issued Shares held by the Independent Shareholders as at 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date, being the total number of issued Shares of 371,874,000 Shares less the total number of Sale Shares.
Trading in the Shares on the Stock Exchange was suspended on 6, 9, 11-13 and 16-17 May 2011.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As illustrated in Table D above, the average trading volume of the Shares in general has been thin for the period from 3 May 2010 to 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date. The average daily trading volume of the Shares per month ranged between approximately 0.052% and 0.871% of the total number of issued Shares as at the end of each month/ period from May 2010 to April 2011. When taking into account only those Shares held by the Independent Shareholders as at 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date, the average trading volume of the Shares was still low, ranging between 0.143% and 2.395% of the total issued Shares of the Independent Shareholders from May 2010 to April 2011. Save for the period since 18 May 2011 when trading of the Shares was resumed immediately following the publication of the Joint Announcement, the average daily trading volume of the Shares represents less than 1.0% of the total number of Shares in issue as at the end of each month/period.

Given the low liquidity of the Shares, we consider that Independent Shareholders who may wish to realise their investment in the Company, especially those with relatively sizeable shareholdings who may not be able to do so without having an adverse impact on the market price of the Shares, could consider accepting the Offer.

Nevertheless, in view of the recent fluctuation in Share price following the publication of the Joint Announcement, as discussed under the section headed “Historical price performance of the Shares” above, Independent Shareholders who intend to dispose of part or all of their Shares are reminded to closely monitor the market price and liquidity of the Shares during the period when the Offer remains open for acceptance and, having regard to their own circumstances, consider selling the Shares in the open market, instead of accepting the Offer, if the net proceeds from the disposal of such Shares in the open market would exceed the amounts the Shareholders would be able to receive under the Offer.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) Comparable analysis

In assessing the fairness and reasonableness of the Offer Price, it is a common practice to apply commonly used benchmarks for evaluating the value of companies. We have considered adopting the price-to-earnings approach, the price-to-book approach and the price-to-dividends approach in the evaluation of the Company. Nevertheless, as can be seen from Table A above, as (i) the Group has been making a loss attributable to equity holders of the Company for each of the three financial years ended 31 December 2010; and (ii) the Company did not declare or distribute any dividend for the two years ended 31 December 2010, we consider neither the price-toearnings approach nor the price-to-dividends approach to be applicable in assessing the fairness or reasonableness of the Offer Price. We therefore adopt the price-tobook approach in our evaluation of the Company, which is a widely adopted valuation approach in valuing companies, particularly loss-making companies.

The Group is principally engaged in garment manufacturing and trading. In forming our opinion on the Offer Price, we have identified and reviewed a total of 15 companies listed on the Stock Exchange which are principally engaged in the manufacturing and trading of garments, apparel and related accessories (and therefore are in a business/businesses similar in nature as the Company) and the shares of which have not been suspended for trading on 5 May 2011 (the “ Comparables ”). The list of the Comparables is an exhaustive list of companies identified by us based on the aforesaid criteria through our research of publicly available information. We have compared the valuation of the Group based on the Offer Price against the Comparables, the results of which are set forth in the table below.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Table E: Comparables

			Latest published
			net assets/
			(liabilities)
			excluding non-
			controlling
		Market	interests
	Closing share	capitalization	published on	Price-to-book
Company name	price as at	as at	or before	ratio as at
(Stock code)	5 May 2011	5 May 2011	5 May 2011	5 May 2011
	(Note 1)		(Note 2)
	HK$	HK$	HK$
Brilliance Worldwide	0.198	137.02 million	43.58 million	3.14
Holdings Limited (8312)
China Lilang Limited	10.70	12,845.91 million	2,192.54 million	5.86
(1234)
China Ting Group Holdings	1.10	2,307.05 million	2,580.70 million	0.89
Limited (3398)
Crocodile Garments	0.70	436.25 million	952.94 million	0.46
Limited (122)			(unaudited)
Eagle Nice (International)	2.18	1.089.30 million	959.06 million	1.14
Holdings Limited (2368)			(unaudited)
Ford Glory Group Holdings	1.15	503.70 million	228.04 million	2.21
Limited (1682)			(unaudited)
High Fashion International	3.25	984.68 million	1,853.58 million	0.53
Limited (608)
Jiangchen International	1.57	580.90 million	95.49 million	6.08
Holdings Limited (1069,
formerly 8305)
Luen Thai Holdings	0.80	794.13 million	2,151.12 million	0.37
Limited (311)
Mainland Headwear	1.03	410.54 million	485.29 million	0.85
Holdings Limited (1100)
Pak Tak International	0.48	113.47 million	180.51 million	0.63
Limited (2668)			(unaudited)
Tristate Holdings Limited	4.07	1,094.48 million	1,183.22 million	0.93
(458)
Tungtex (Holdings)	1.46	513.53 million	492.48 million	1.04
Company Limited (518)			(unaudited)
Win Hanverky Holdings	1.01	1,281.08 million	1,942.42 million	0.66
Limited (3322)
Yangtzekiang Garment	2.10	441.77 million	990.61 million	0.45
Limited (294)			(unaudited)
			Maximum	6.08
			Minimum	0.37
			Median	0.91
			Mean	1.64
	Offer Price
The Company	0.60	223.12 million	236.06 million	0.95

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Source: The website of Hong Kong Exchanges and Clearing Limited and respective published annual and interim reports of the companies

Notes:

5 May 2011 was chosen as the reference date for the closing price per share for the Comparables as the Offer Price is the same as the price paid per Sale Share, which was the subject of the Sale and Purchase Agreement dated 5 May 2011.
Unless otherwise stated, the latest published net assets/(liabilities) excluding noncontrolling interests of the Comparables published on or before 5 May 2011 were extracted from the latest published audited financial statements of the companies concerned.

The price-to-book ratio is represented by the current share price of a company divided by its latest published consolidated NAV per share attributable to equity holders of that company. As illustrated in Table E above, the price-to-book ratio of the Company based on the Offer Price was approximately 0.95 times, which is within the range of approximately 0.37 times and 6.08 times of the Comparables, and is higher than the median price-to-book ratio of the Comparables of 0.91 times.

On the basis of the above, we consider that the Offer Price is fair and reasonable so far as the Independent Shareholders are concerned.

RECOMMENDATION

Having considered that: –

(i) the Group has recorded a loss attributable to equity holders of the Company for the three financial years ended 31 December 2010;
(ii) the business of the Group is expected to continue to face challenges amidst soaring raw material prices, together with remaining uncertainty in the labour market and fragility in consumer confidence in the US, the Group’s largest export market;
(iii) no dividend has been distributed to equity holders of the Company for the last two financial years ended 31 December 2010, and that it is uncertain if any dividend will be paid in the foreseeable future;
(iv) the Offer Price represents a premium to the closing price per Share on the Last Trading Day as well as the 5-day, 10-day, 30-day and 90-day average closing price per Share up to and including the Last Trading Day;

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) the Offer Price also represents a premium to the average and median closing prices per Share during the period from 3 May 2010 up to and including the Last Trading Day as well as the period from 3 May 2010 up to and including 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date;
(vi) notwithstanding the fact that the Offer Price represents a discount of approximately 5.5% to the audited NAV (excluding non-controlling interests) per Share of HK$0.635, the price-book ratio as represented by the Offer Price falls within the range of the price-book ratios of the Comparables and is higher than the median price-book ratios of the Comparables; and
(vii) the low trading liquidity of the Shares for the one year before the Last Trading Day, and the uncertainty as to whether the liquidity of the Shares that has improved upon resumption of trading in the Shares following the publication of the Joint Announcement could be sustained throughout the period of the Offer to allow the Independent Shareholders to dispose of their holding in the Shares in the market at a price which is more favourable than the Offer Price,

we are of the opinion 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.

Independent Shareholders, in particular those who intend to accept the Offer, are reminded to note the recent fluctuation in the Share price. As at 3 June 2011, being the last trading day of the Shares immediately prior to the Latest Practicable Date, the closing price per Share was HK$1.05, which was higher than the Offer Price. There is no guarantee, however, that the current market price will or will not be sustained and it is uncertain whether the market price per Share will or will not be higher than the Offer Price during and after the close of the Offer. Independent Shareholders who intend to accept the Offer are reminded to closely monitor the market price and liquidity of the Shares during the period when the Offer remains open for acceptance and shall, having regard to their own circumstances, consider selling the Shares (as the case may be) 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 amount the Shareholders would be able to receive under the Offer.

Yours faithfully, For and on behalf of

VC Capital Limited Felicia Hui Director

– 46 –

FURTHER TERMS OF THE OFFER

APPENDIX I

1. PROCEDURES FOR ACCEPTANCE

To accept the Offer, you should complete and sign the Form of Acceptance in accordance with the instructions printed thereon, which instructions 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 Form of Acceptance together with 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) for not less than the number of Shares in respect of which you intend to accept the Offer by post or by hand to the Registrar marked ‘‘Carry Wealth Holdings Limited Offer’’ on the envelope 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.
(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 Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer whether in full or in part of your Shares, 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 authorizing it to accept the Offer on your behalf and requesting it to deliver the 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 Shares to be registered in your name by the Company through the Registrar, and send the 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 at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong, by no later than 4:00 p.m. on the Closing Date; or

– 47 –

FURTHER TERMS OF THE OFFER

APPENDIX I

(iii) if your Shares 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 authorize 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/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 Shares 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 Nominee 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 Shares is/are not readily available and/or is/are lost and you wish to accept the Offer, 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 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), you should also write to the Registrar for 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 Shares 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 Shares, you should nevertheless complete 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 SHK and/or the Offeror or their respective agent(s) to collect from the Registrar on your behalf the relevant share certificate(s) when issued and to deliver such certificate(s) to the Registrar as if it was/they were delivered to the Registrar with the Form(s) of Acceptance.

– 48 –

FURTHER TERMS OF THE OFFER

APPENDIX I

(e) Acceptance of the Offer will be treated as valid only if the duly completed Form of Acceptance is received by the Registrar by not later than 4:00 p.m. on the Closing Date or such later time and/or date as the Offeror may determine in compliance with the requirements of the Takeovers Code and announce, 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 in order to establish your right to become the registered holder of the relevant Shares; or
(ii) from a registered shareholder of Shares or his personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to Shares which are not taken into account under another sub-paragraph of this paragraph (e)); or
(iii) certified by the Registrar or the Stock Exchange.

If the Form of Acceptance is executed by a person other than the registered Independent Shareholders, appropriate documentary evidence of authority 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.
(g) The address of the Registrar, is at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong.

2. ACCEPTANCE PERIOD AND REVISIONS

Unless the Offer has previously been revised or extended, all Forms of Acceptance must be received by the Registrar by 4:00 p.m. on the Closing Date in accordance with the instructions printed thereon.

– 49 –

FURTHER TERMS OF THE OFFER

APPENDIX I

If the Offer is extended or revised, the announcement of such extension or revision will state the next Closing Date and the Offer will remain open for acceptance for a period of not less than 14 days from the posting of the written notification and/or announcement of the extension or revision to the Independent Shareholders and, unless previously extended or revised, shall be closed on the subsequent Closing Date. If the Offeror revises the terms of the Offer, all Independent Shareholders whether or not they have already accepted the Offer, will be entitled to accept the revised Offer under the revised terms.

If the Closing Date is extended, any reference in this Composite Offer 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.

3. ANNOUNCEMENTS

(a) By 6:00 p.m. (or such later time and/or date as the Executive agrees) on the Closing Date, the Offeror must inform the Executive and the Stock Exchange of its intention in relation to the revision, extension or expiry of the Offer. The Offeror must publish an announcement on the Stock Exchange’s website no later than 7:00 p.m. on the Closing Date stating whether the Offer has been revised, extended or has expired. The announcement must state the following:
(i) the total number of Shares and rights over Shares for which acceptances of the Offer have been received;
(ii) the total number of Shares and rights over Shares held, controlled or directed by the Offeror or parties acting in concert with it before the offer period (as defined under the Takeovers Code); and
(iii) the total number of Shares and rights over Shares acquired or agreed to be acquired during the offer period by the Offeror or parties acting in concert with it.

– 50 –

FURTHER TERMS OF THE OFFER

APPENDIX I

The announcement must include details of any relevant securities 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 relevant classes of share capital of the Company and the percentages of voting rights of the Company represented by these numbers.

(b) In computing the total number of Shares represented by acceptances, for announcement purposes, acceptances which are not in all respects in complete and good order or that are subject to verification may only be included where they could be counted towards fulfilling the conditions under paragraph 1(e) of this Appendix.
(c) As required under the Takeovers Code and the Listing Rules, any announcement in relation to the Offer, in respect of which the Executive and the Stock Exchange have confirmed that they have no further comments thereon, will be published on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (www.carrywealth.com).

4. RIGHT OF WITHDRAWAL

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

– 51 –

FURTHER TERMS OF THE OFFER

APPENDIX I

5. SETTLEMENT

(a) Provided that the Form of Acceptance and/or 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) are in complete and good order in all respects and have been received by the Registrar by no later than 4:00 p.m. on the Closing Date for the acceptance of the Offer, a cheque for the amount representing the cash consideration due to each accepting Shareholder in respect of the Shares tendered by him/her or his/her agent(s) under the Offer, less seller’s ad valorem stamp duty payable by him/her in the case for tendered Shares, will be despatched to each accepting Shareholder by ordinary post at his/her own risk as soon as possible but in any event within 10 days from the date of receipt of duly completed acceptances by the Registrar.
(b) Settlement of the consideration to which any Shareholder is entitled under the Offer will be implemented in full in accordance with the terms of the Offer, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Shareholder.

6. OVERSEAS SHAREHOLDERS

The making of the Offer or the acceptance thereof by persons not being a resident of Hong Kong or with a registered address in jurisdictions outside Hong Kong may be affected by the laws of the relevant jurisdictions. Independent Shareholders who are citizens or residents or nationals of jurisdictions outside Hong Kong should inform themselves about and observe any applicable legal requirements in their own jurisdictions.

It is the responsibility of any such persons who wish to accept the Offer to satisfy themselves as to the full observance of the laws of the relevant jurisdiction in connection therewith, 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 in respect of such jurisdiction. Any acceptance by any person will be deemed to constitute a representation and warranty from such person to the Offeror that the local laws and requirements have been fully complied with. Independent Shareholders should consult their professional adviser if in doubt.

– 52 –

FURTHER TERMS OF THE OFFER

APPENDIX I

7. GENERAL

(a) All communications, notices, Form of Acceptance, share certificate(s), transfer receipts, other documents 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 through post at their own risk, and none of the Company, the Offeror, SHK, the Independent Financial Adviser, the Registrar nor any of their respective directors or agents or other parties involved in the Offer 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 of the Offer.
(c) The accidental omission to despatch this Composite Offer Document and/or the Form of Acceptance or any of them to any person to whom the Offer is made will not invalidate the Offer in any way.
(d) The Offer and all acceptances will be governed by and construed in accordance with the laws of Hong Kong.
(e) Due execution of the Form of Acceptance will constitute an authority to any director of the Offeror, SHK or such person or persons as any of them may direct to complete and execute any document on behalf of the person 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 has accepted the Offer.
(f) Acceptance of the Offer by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror that the Shares acquired under the Offer are sold by any such person or persons free from all liens, claims and Encumbrances and with all rights attached to them as at the Completion Date, including but not limited to the right to receive in full all dividends or other distributions paid, declared or made, if any, on or after the Completion date.
(g) The Offeror does not intend to exercise any right which may be available to it to acquire compulsorily any Shares not acquired under the Offer after the Offer has closed.
(h) References to the Offer in this Composite Offer Document and in the Form of Acceptance shall include any extension and/or revision thereof.
(i) The English text of this Composite Offer Document and the Form of Acceptance shall prevail over their respective Chinese texts for the purpose of interpretation.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. THREE YEARS FINANCIAL SUMMARY

Set out below is a summary of the financial results of the Group for the three years ended 31st December, 2010.

The financial information for the years ended 31st December, 2010 and 2009 is extracted from the annual report of the Company for the year ended 31st December, 2010. The financial information for the year ended 31st December, 2009 has been restated as a result of the adoption of HKAS 17 “Leases” (“HKAS 17”). The financial information for the year ended 31st December, 2008 is extracted from the annual report of the Company for the year ended 31st December, 2008 and has not been restated for the adoption of HKAS 17.

The auditors’ reports issued by PricewaterhouseCoopers in respect of the Group’s audited consolidated financial statements for each of the three years ended 31st December, 2010 did not contain any qualifications.

CONSOLIDATED INCOME STATEMENT

Revenues Other (losses)/gains – net (Loss)/profit before income tax Income tax credit/(expense) (Loss)/profit for the year Attributable to: Equity holders of the Company Non-controlling interests Loss per share for loss attributable to the equity holders of the Company during the year – basic (HK cents) – diluted (HK cents) Dividends Dividends per share (HK cents)	For the year ended 2010 2009 2008 HK$’000 HK$’000 HK$’000 (Restated) 734,931 733,046 880,114 (2,403) 8,743 (58,201) (59,803) 6,233 (37,501) 7,023 (5,852) (4,533) (52,780) 381 (42,034) (48,829) (952) (40,681) (3,951) 1,333 (1,353) (52,780) 381 (42,034) (13.13) (0.25) (10.97) (13.13) (0.25) (10.97) – – 7,437 – – 2.0

The Group did not have any other extraordinary items or items which were exceptional because of its size, nature or incidence for each of the year ended 31st December 2010, 2009 and 2008.

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. FINANCIAL INFORMATION

Set out below are the audited financial statements together with relevant notes thereto as extracted from the annual report of the Company for the year ended 31st December 2010.

CONSOLIDATED INCOME STATEMENT

For the year ended 31st December, 2010

Note Revenues 5 Cost of sales 7 Gross profit Other (losses)/gains – net 6 Selling expenses 7 Administrative expenses 7 Operating (loss)/profit Finance income 8 Finance costs 9 Share of loss of associates (Loss)/profit before income tax Income tax credit/(expense) 10 (Loss)/profit for the year Attributable to: Equity holders of the Company 11 Non-controlling interests Loss per share for loss attributable to the equity holders of the Company during the year – basic (HK cents) 12 – diluted (HK cents) 12 Dividends 13	2010 HK$’000 734,931 (636,760) 98,171 (2,403) (36,061) (117,343) (57,636) 457 (2,292) (332) (59,803) 7,023 (52,780) (48,829) (3,951) (52,780) (13.13) (13.13) –	2009 HK$’000 (Restated) (Note 2.1(a)) 733,046 (594,944) 138,102 8,743 (27,986) (105,526) 13,333 979 (2,340) (5,739) 6,233 (5,852) 381 (952) 1,333 381 (0.25) (0.25) –

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31st December, 2010

(Loss)/profit for the year Other comprehensive income: Fair value gain, net of tax: – properties, plant and equipment Currency translation differences Other comprehensive income for the year, net of tax Total comprehensive (loss)/income for the year Attributable to: Equity holders of the Company Non-controlling interests	2010 HK$’000 (52,780) 5,014 3,443 8,457 (44,323) (40,410) (3,913) (44,323)	2009 HK$’000 (Restated) (Note 2.1(a)) 381 6,795 10,823
		17,618
		17,999

		16,559 1,440
		17,999

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED BALANCE SHEET

As at 31st December, 2010

Note ASSETS Non-current assets Properties, plant and equipment 16 Land use rights 17 Interests in associates 19 Deferred income tax assets 28 Financial assets at fair value through profit or loss Current assets Inventories 22 Trade and other receivables 23 Financial assets at fair value through profit or loss 20 Bank deposits 24 Cash and cash equivalents 25 Total assets EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 30 Other reserves 31 Retained earnings Non-controlling interests Total equity	As at 31st December, 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 140,558 152,699 15,282 11,147 42,880 43,212 5,010 3,820 – – 203,730 210,878 106,173 97,323 125,213 110,955 6,180 18,387 31,099 3,917 74,554 79,009 343,219 309,591 546,949 520,469 37,187 37,187 63,952 55,533 134,922 183,751 236,061 276,471 5,677 9,590 241,738 286,061	As at 1st January, 2009 HK$’000 (Restated) (Note 2.1(a)) 155,915 11,859 48,951 2,679 8,604 228,008 111,783 154,505 30,882 – 63,508 360,678 588,686 37,187 38,022 184,703 259,912 8,150 268,062

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note LIABILITIES Non-current liabilities Deferred income tax liabilities 28 Current liabilities Derivative financial instruments 26 Trade and other payables 29 Income tax payable Bank borrowings 27 Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at 31st December, 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 10,943 9,045 10,943 9,045 147 – 146,817 140,578 2,740 11,212 144,564 73,573 294,268 225,363 305,211 234,408 546,949 520,469 48,951 84,228 252,681 295,106	As at 1st January, 2009 HK$’000 (Restated) (Note 2.1(a)) 7,621 7,621 21,768 126,836 16,805 147,594 313,003 320,624 588,686 47,675 275,683

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

BALANCE SHEET

As at 31st December, 2010

Note ASSETS Non-current assets Investments in subsidiaries 18 Amounts due from subsidiaries 21 Current assets Other receivables 23 Cash and cash equivalents 25 Total assets EQUITY Capital and reserves attributable to the Company’s equity holders Share capital 30 Other reserves 31 Retained earnings Total equity LIABILITIES Current liabilities Other payables and accruals 29 Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	2010 HK$’000 126,220 104,049 230,269 601 523 1,124 231,393 37,187 191,216 1,992 230,395 998 998 231,393 126 230,395	2009 HK$’000 164,100 103,164
		267,264
		781 1,108
		1,889
		269,153

		37,187 191,216 39,872
		268,275

		878
		878

		269,153

		1,011

		268,275

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31st December, 2010

Attributable to	equity holders of	Total HK$’000 260,900 7,162
Share capital HK$’000 37,187 – 37,187 – – – – – 37,187 37,187 – 37,187 – – – – – 37,187	Other reserves HK$’000 30,829 7,193 38,022 – 6,433 11,078 17,511 17,511 55,533 44,873 10,660 55,533 – 4,888 3,531 8,419 8,419 63,952
		268,062 381 6,795 10,823
		17,618
		17,999
		286,061

		276,369 9,692
		286,061 (52,780) 5,014 3,443
		8,457
		(44,323)
		241,738

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31st December, 2010

Note Cash flows from operating activities Cash (used in)/generated from operations 32 Interest paid Hong Kong profits tax paid Overseas tax paid Net cash (used in)/generated from operating activities Cash flows from investing activities Increase in bank deposits Purchase of properties, plant and equipment Proceeds from disposal of properties, plant and equipment Payment for land use rights Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from bank borrowings Repayments of bank borrowings Net cash generated from/(used in) financing activities Effect of foreign exchange rate changes Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year	2010 HK$’000 (32,704) (2,292) (512) (2,149) (37,657) (27,182) (7,694) 1,447 (4,441) 457 (37,413) 406,610 (335,619) 70,991 (376) (4,455) 79,009 74,554	2009 HK$’000 119,197 (2,340) (6,482) (5,986) 104,389 (3,917) (6,825) 249 – 979 (9,514) 378,086 (452,107) (74,021) (5,353) 15,501 63,508 79,009

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

NOTES TO THE FINANCIAL STATEMENTS

1 General information

Carry Wealth Holdings Limited (the “Company”) and its subsidiaries (together the “Group”) manufacture and trade garment products. The Group has production facilities in Indonesia, Mainland China and Lesotho.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

The Company is listed on The Stock Exchange of Hong Kong Limited.

These consolidated financial statements are presented in units of Hong Kong dollars (HK$’000), unless otherwise stated.

These consolidated financial statements have been approved for issue by the Board of Directors on 25th March, 2011.

2 Basis of preparation and summary of significant accounting policies

The basis of preparation and the principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied for all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”). They have been prepared under the historical cost convention, as modified by the revaluation of land and buildings (Note 16), financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss (Notes 20 and 26).

The preparation of financial statements in conformity with HKFRS 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, and areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4.

– 62 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The Group incurred a loss of approximately HK$53 million for the year ended 31st December, 2010 and the cash outflow from operating activities for the year was approximately HK$38 million. The Group meets its day to day working capital requirements, capital expenditure and financial obligations through cash inflow from operating activities and the facilities obtained from banks.

The directors monitor closely the Group’s financial performance and liquidity position and have initiated measures to improve the Group’s profit and cash flows. These measures include proactive discussions with customers for better prices, in the light of increasing input prices and implementation of cost control and reduction measures.

In addition, the directors also expect that the existing bank facilities of the Group will continue to be available. The Group has not experienced any difficulties in renewing its banking facilities.

Based on the director’s review of the Group’s cash flow projection, taking account of reasonably possible changes in trading performance and the ongoing support from the bankers, the Group expects to be able to generate sufficient cash flows to cover its operating costs and meet its financial obligations as and when they fall due in the coming twelve months from the date of these financial statements. Accordingly, the directors are of the opinion that it is appropriate to prepare the consolidated financial statements on a going concern basis.

(a) Effect of adopting amendments and interpretations to existing standards

The following new standards, amendments to standards and interpretation are mandatory for the first time for the financial year beginning 1st January, 2010.

HKFRS 3 (revised), ‘Business combinations’, and consequential amendments to HKAS 27, ‘Consolidated and separate financial statements’, HKAS 28, ‘Investments in associates’, and HKAS 31, ‘Interests in joint ventures’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1st July, 2009.

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FINANCIAL INFORMATION OF THE GROUP

The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with HKFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently remeasured through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs are expensed. These amendments have had no impact on the Group’s results and financial position.

HKAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognized in income statement. HKAS 27 (revised) has had no impact on the current period, as there have been no transactions with noncontrolling interests.
HKAS 17 (amendment), ’Leases’, deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating leases using the general principles of HKAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, a land interest in which title was not expected to pass to the Group by the end of the lease term was classified as an operating lease under “Leasehold land and land use rights”, and any premium paid was amortised over the lease term.

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HKAS 17 (amendment) has been applied retrospectively with effect from 1st January, 2010 in accordance with the effective date and transitional provisions of the amendment. The Group has reassessed the classification of unexpired leasehold land and land use rights as at 1st January, 2010 on the basis of information existing at the inception of those leases, and recognised certain leasehold land interests as finance leases retrospectively. As a result of the reassessment, the Group has reclassified certain leasehold land interests from operating leases to finance leases.

The accounting for land interest classified as a finance lease is as below:

If the property interest is held for own use, that land interest is accounted for as property, plant and equipment (at fair value – note 2.5) and is depreciated from the date the land interest is available for its intended use over the shorter of the useful life of the asset and the lease term.

The effect of the adoption of this amendment is as below:

	As at 31st	December,	As at
	2010	2009	1st January,
	HK$’000	HK$’000	HK$’000
Decrease in leasehold land
and land use rights	849	906	1,183
Increase in properties,
plant and equipment	15,784	14,242	10,772
Increase in other reserve	13,218	10,660	7,193
Decrease in retained earnings	3,344	1,453	388
Increase in non-controlling
interests	520	485	357
Increase in deferred income
tax liabilities	4,541	3,644	2,427

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	For the year ended	For the year ended
	31st December,
	2010	2009
	HK$’000	HK$’000
Increase in administrative
expenses	1,992	1,120
Increase in basic loss
per share/decrease in
basic earnings per share
(HK cents per share)	0.51	0.28
Increase in diluted loss
per share/decrease in
diluted earnings per share
(HK cents per share)	0.51	0.28

A land interest classified as a finance lease is stated at fair value, as determined by directors based on valuations by external independent valuers which are performed on annual basis, less subsequent depreciation.

• HK-Interpretation 5, ‘Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause’, issued on 29th November, 2010 by HKICPA with immediate effect. The classification of a term loan in accordance with paragraph 69(d) of HKAS 1 shall depend on whether or not the borrower has an unconditional right to defer payment for at least twelve months after the reporting period. Consequently, amounts repayable under a loan agreement which includes a clause that gives the lender the unconditional right to call the loan at any time shall be classified by the borrower as current in its statement of financial position. This is because the borrower under such an agreement does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

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FINANCIAL INFORMATION OF THE GROUP

HK-Interpretation 5 has been applied retrospectively with effect from 1st January, 2010 in accordance with the effective date and transitional provisions of the interpretation. The Group has reassessed the classification of term loans as at 1st January, 2010, and recognized the term loan as a current liability retrospectively. As a result of the reassessment, the Group has reclassified the long term portion of term loans to current liabilities. The reclassification has no effect on reported profit or loss, total comprehensive income or equity for any period presented.

The effect of the adoption of this interpretation is as below:

	As at 31st	December,	As at
	2010	2009	1st January,
	HK$’000	HK$’000	HK$’000
Decrease in long term portion
of bank borrowings	(11,833)	(5,917)	(22,188)
Increase in current portion of
bank borrowings	11,833	5,917	22,188

(b) New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1st January, 2010 but not currently relevant to the Group (although they may affect the accounting for future transactions and events)
HK(IFRIC) 9, ‘Reassessment of embedded derivatives and HKAS 39, Financial instruments: Recognition and measurement’, effective for annual period beginning on or after 1st July, 2009.
HK(IFRIC) 16, ‘Hedges of a net investment in a foreign operation’, effective for annual period beginning on or after 1st July, 2009.
HK(IFRIC) 17, ‘Distribution of non-cash assets to owners’, effective for annual period beginning on or after 1st July, 2009.

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HK(IFRIC) 18, ‘Transfers of assets from customers’, effective for transfer of assets received on or after 1st July, 2009.
HKAS 1 (amendment), ‘Presentation of financial statements’, effective for annual period beginning on or after 1st January, 2010.
HKAS 36 (amendment), ‘Impairment of assets’, effective for annual period beginning on or after 1st January, 2010.
HKAS 39 (amendment), ‘Eligible hedge items’, effective for annual period beginning on or after 1st January, 2010.
HKFRS 1 (revised), ‘First-time adoption of HKFRSs’, effective for annual period beginning on or after 1st July, 2009 and HKFRS 1 (amendment), ‘Additional exemptions for first-time adopters’, effective for annual period beginning on or after 1st January, 2010.
HKFRS 2 (amendment), ‘Group cash-settled share-based payment transactions’, effective for annual period beginning on or after 1st January, 2010.
HKFRS 5 (amendment), ‘Non-current assets held for sale and discontinued operations’, effective for annual period beginning on or after 1st January, 2010.
Second improvements to HKFRS (2009) were issued in May 2009 by the HKICPA. All improvements are effective in the financial year of 2010.
(c) New standards, amendments and interpretations have been issued but are not effective for the financial year beginning 1st January, 2010 and have not been early adopted
HKFRS 9, ‘Financial instruments’, issued in November 2009. The standard is not applicable until 1st January, 2013 but is available for early adoption.

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HKAS 12 (amendment), ‘Deferred tax: recovery of underlying assets’, effective for annual period beginning on or after 1st January, 2012.
HKAS 24 (revised), ‘Related party disclosures’, issued in November 2009. HKAS 24 (revised) is mandatory for annual period beginning on or after 1st January, 2011. Earlier application, in whole or in part, is permitted.
HKAS 32 (amendment), ‘Classification of rights issues’, issued in October 2009. The amendment applies to annual period beginning on or after 1st February, 2010.
HKFRS 1 (amendment), ‘Limited exemption from comparative HKFRS 7 disclosures for first-time adopters’, effective for annual period beginning on or after 1st July, 2010.
HKFRS 1 (amendment), ‘Severe hyperinflation and removal of fixed dates for first-time adopter’, effective for annual period beginning on or after 1st July, 2010.
HK(IFRIC) – Int 19, ‘Extinguishing financial liabilities with equity instruments’, effective for annual period beginning on or after 1st July, 2010.
HK(IFRIC) – Int 14 (amendment), ‘Prepayments of a minimum funding requirement’, effective for annual period beginning on or after 1st January, 2011.
Third improvements to HKFRS (2010) were issued in May 2010 by the HKICPA. All improvements are effective in the financial year of 2011.

The Group is in the process of making an assessment of the impact of adoption of the above new standards, amendments and interpretations which have been issued but are not effective for the financial year beginning 1st January, 2010 and not been early adopted.

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2.2 Consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to 31st December.

(a) Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the aggregate fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet, investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

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(b) Transactions with non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from noncontrolling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

(c) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated income statement, and its share of postacquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

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Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates are recognised in the consolidated income statement.

2.3 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 collectively as the board of directors that makes strategic decisions.

2.4 Foreign currency translation

(a) Functional and presentation currency

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

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement.

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All foreign exchange gains and losses are presented in the consolidated income statement within ‘administrative expenses’.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss.

(c) Group companies

The results and financial positions of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each consolidated income statement are translated at average exchange rates; 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 operation, and of relevant borrowings, are taken to other comprehensive income. When a foreign operation is partially disposed or sold, exchange differences that were recorded in equity are recognised in the consolidated income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate.

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2.5 Properties, plant and equipment

Land and buildings, comprising mainly factories and offices, are shown at fair value, as determined by directors based on valuations by external independent valuers which are performed on an annual basis, less subsequent depreciation for land and buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other plant and equipment are stated at historical cost less accumulated depreciation and impairment losses.

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. All other repairs and maintenance are charged to the consolidated income statement during the financial year in which they are incurred.

Increases in the carrying amount arising on revaluation of land and buildings are credited to fixed asset revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against fixed asset revaluation reserve directly in equity and all other decreases are expensed in the consolidated income statement.

Properties, plant and equipment are depreciated at rates sufficient to write off their cost or valuation to their residual values over their estimated useful lives on a straight-line basis. The principal annual rates are as follow:

Leasehold land classified as finance lease Shorter of remaining lease term or useful life Buildings Lower of 5% and the estimated useful life Leasehold improvements Shorter of the lease term and the estimated useful life Plant and machinery 10% to 30% Furniture, office equipment and motor vehicles 10% to 40%

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administrative expense in the consolidated income statement.

2.6 Leasehold land and land use rights

The up-front prepayments made for leasehold land interests recognised as operating leases and land use rights are expensed in the consolidated income statement on a straight-line basis over the periods of the lease or the land use right. When there is impairment, the impairment is expensed in the consolidated income statement.

2.7 Impairment of investments in subsidiaries, associates and other long-term non-financial assets

Assets that have an indefinite useful life, for example, goodwill – are not subject to amortisation and are tested annually for impairment. In addition, all 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 to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.8 Financial assets

2.8.1 Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss and 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 and re-evaluates this designation at every reporting date.

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FINANCIAL INFORMATION OF THE GROUP

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current.

(b) Loans and receivables

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 currents assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as noncurrent assets. The Group’s loans and receivables comprise ‘trade and other receivables’, ‘bank deposits’ and ‘cash and cash equivalents’ in the balance sheet (Notes 2.11 and 2.12).

2.8.2 Recognition and measurement

Regular 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. Financial assets are derecognised when the rights to receive cash flows from the investment have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Investments are initially recognised at fair value plus transactions costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the consolidated income statement. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.

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APPENDIX II

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the consolidated income statement within ‘other (losses)/gains – net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the consolidated income statement as part of finance income when the Group’s right to receive payments is established.

2.9 Offsetting financial instruments

Financial assets and liabilities are offset with the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.10 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress comprises design costs, 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 expenses.

2.11 Trade and other receivables

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), 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.

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2.12 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with bank, other short-term highly liquid investments with original maturities of three months or less.

2.13 Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.14 Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). 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.

2.15 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest method.

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Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan. To the extent that it is probable that some or all of the facility will be drawn down, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

2.16 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries and associates 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.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

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APPENDIX II

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

2.17 Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

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

(ii) Pension obligations

The Group has defined contribution plans. A defined contribution plan is a pension plan under which the Group pays contributions to publicly or privately administered pension plans on a mandatory or contractual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due and if applicable, are reduced by contributions forfeited by those employees who leave the scheme or the plan prior to vesting fully in the contributions.

The Group also has defined benefit obligations, which define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit obligations is the present value of the obligations at the balance sheet date, together with adjustments for unrecognised past-service costs.

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(iii) Share-based compensation

The Group operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets) and non-vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision of original estimates, if any, in the consolidated income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

(iv) Termination benefits

Termination benefits are payable upon retirement, when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value.

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2.18 Provisions

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 not recognised for the future operating losses.

2.19 Revenue and other income

Revenue from the sale of goods is the fair value of consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities. It is recognised on the transfer of risks and rewards of ownership, which generally coincides with the time when shipment is made. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and using the effective interest method.

Rental income is recognised on a straight-line basis over the lease period.

Dividend income is recognised when the right to receive payment is established.

2.20 Leases (as the lessee)

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the consolidated income statement on a straight-line basis over the lease period.

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2.21 Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair values. Changes in the fair value of those derivative instruments that do not qualify for hedge accounting are recognized immediately in the consolidated income statement within ‘other gains/ (losses) – net’.

2.22 Financial guarantee contracts

A financial guarantee contract is a contract that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts are initially recognized at fair value on the date the guarantee is given. Subsequently, the liabilities under such guarantees are measured at the higher of the best estimate of the expenditure required to settle any financial obligation arising at the balance sheet date and the initial measurement, less amortization calculated to recognize in the income statement the fee income earned on straight-line basis over the life of the guarantee. These estimates are determined based on experience of similar transactions and debtor’s payment history, supplemented by the judgement of management of the Group.

2.23 Dividend distribution

Dividend distribution to the Company’s equity holders is recognised as a liability in the Group’s and Company’s financial statements in the year in which the dividends are approved by the Company’s shareholders.

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3 Financial risk management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

(a) Market risk

(i) Foreign exchange risk

The Group operates internationally and has factories and offices in Hong Kong, Indonesia, Lesotho and Mainland China. Operating expenses of the Group are primarily denominated in Hong Kong dollar, Indonesian Rupiah, South African Rand, Renminbi and some in United States dollar whereas the Group’s sales are principally denominated in United States dollar. Thus, the Group is exposed to foreign exchange risk arising from these currencies.

For South African Rand, at 31st December, 2010, if United States dollar had strengthened/weakened by 5% (2009: 5%) against this currency with all other variables held constant, the Group’s loss for the year would have been HK$58,000/HK$58,000 (2009: Group’s profit was HK$77,000/HK$77,000 higher/lower) lower/higher, mainly as a result of foreign exchange gains/losses on translation of monetary assets and liabilities denominated in this currency.

For Renminbi, at 31st December, 2010, if United States dollar had strengthened/weakened by 5% (2009: 5%) against this currency with all other variables held constant, the Group’s loss for the year would have been HK$273,000/HK$273,000 (2009: Group’s profit was HK$1,072,000/HK$1,072,000 lower/higher) higher/lower, mainly as a result of foreign exchange losses/gains on translation of monetary assets and liabilities denominated in this currency.

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FINANCIAL INFORMATION OF THE GROUP

For Indonesian Rupiah, at 31st December, 2010, if United States dollar had strengthened/weakened by 10% (2009: 15%) against this currency with all other variables held constant, the Group’s loss for the year would have been HK$204,000/HK$204,000 (2009: Group’s profit was HK$2,859,000/HK$2,859,000 higher/lower) lower/higher, mainly as a result of foreign exchange gains/losses on translation of monetary assets and liabilities denominated in this currency.

The Group has certain investment in foreign operations, whose net assets are exposed to foreign currency translation risks.

For South African Rand, at 31st December, 2010, if United States dollar had strengthened/weakened by 5% (2009: 5%) against this currency with all other variables held constant, the Group’s net assets at the year end would have been HK$135,000/HK$135,000 (2009: HK$70,000/HK$70,000) lower/higher, respectively, mainly as a result of foreign exchange differences on translation of the foreign operation in Lesotho.

For Renminbi, at 31st December, 2010, if United States dollar had strengthened/weakened by 5% (2009: 5%) against this currency with all other variables held constant, the Group’s net assets at the year end would have been HK$4,278,000/HK$4,278,000 (2009: HK$1,840,000/ HK$1,840,000) lower/higher, respectively, mainly as a result of foreign exchange differences on translation of the foreign operation in Mainland China.

For Indonesian Rupiah, at 31st December, 2010, if United States dollar had strengthened/weakened by 10% (2009: 15%) against this currency with all other variables held constant, the Group’s net assets at the year end would have been HK$8,996,000/HK$8,996,000 (2009: HK$11,735,000/HK$11,735,000) lower/higher, mainly as a result of foreign exchange differences on translation of the foreign operation in Indonesia.

The management closely monitors the fluctuations of these and other currencies and may consider entering into foreign forward exchange contracts from time to time so as to better manage these foreign exchange exposures, when required. Currently it does not do so.

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(ii) Price risk

The Group is exposed to equity price changes arising from its holdings of financial assets.

The Group’s equity investments are securities listed on the Stock Exchange of Hong Kong Limited. The management closely monitors the fluctuations of the prices of equity investments.

At 31st December, 2010, if there was an increase of 5% and a decrease of 5% in the market prices of the listed securities provided that all other variables including the volatility and time factor were held constant, the Group’s loss for the year would have decreased/increased by approximately HK$309,000/HK$309,000.

(iii) Interest rate risk

The Group has interest-bearing bank deposits. However, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. At 31st December, 2010, if interest rates on the interest-bearing bank deposits had been 10 basis points (2009: 10 basis points) higher/lower with all other variables held constant, the Group’s loss for the year would have been HK$11,000 (2009: Group’s profit was HK$2,000 higher/lower) lower/higher, respectively, mainly as a result of higher/lower interest incomes on floating rate bank deposits.

The Group’s interest-rate risk also arises from bank borrowings. At 31st December, 2010, borrowings were primarily at floating rates. The Group generally has not used interest rate swaps to hedge its exposure to interest rate risk. The Group regularly seeks out the most favorable interest rates available for its bank borrowings.

At 31st December, 2010, if interest rates on the foreign currency dollar-denominated borrowings had been 10 basis points (2009: 10 basis points) higher/lower with all other variables held constant, the Group’s loss for the year would have been HK$145,000 (2009: Group’s profit was HK$74,000 lower/higher) higher/lower, respectively, mainly as a result of higher/lower interest expenses on floating rate borrowings.

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(b) Credit risk

Credit risk of the Group mainly arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers such as trade receivables. The carrying amount of these balances in the balance sheet represents the Group’s maximum exposure to credit risk in relation to its financial assets.

The Group’s bank deposits are placed with banks and financial institutions which are highly reputable with multinational presences. Management does not expect any losses from non-performance by these banks and financial institutions as they have no default history in the past.

Debtors of the Group may be affected by the unfavorable economic conditions and the lower liquidity situation, which could in turn impact their ability to repay the amounts owed. Deteriorating operating conditions for debtors may also have an impact on management’s cash flow forecasts and assessment of the impairment of receivables. To the extent that information is available, management has properly reflected revised estimate of expected future cash flows in their impairment assessments.

The credit quality of the customers is assessed based on their financial position, past experience and other factors. The Group has policies in place to ensure that sales of products are made to customers with appropriate credit histories.

As at 31st December, 2010, the Group had a concentration of credit risk given that the top 5 customers accounted for 73% (2009: 73%) of the Group’s total year end trade receivable balance. However, the Group does not believe that the credit risk in relation to these customers is significant because they have no history of default in recent years.

The Group performs periodic credit evaluations of its customers. The Group’s historical experience in collection of trade and other receivables falls within the recorded allowances and management is of the opinion that provision for uncollectible receivables is not necessary.

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(c) Liquidity risk

The Group meets its day to day working capital requirements, capital expenditure and financial obligations through cash inflow from operating activities and the facilities obtained from banks.

The directors expect that the existing bank facilities of the Group will continue to be available. The Group has not experienced any difficulties in renewing its banking facilities. With reasonably possible changes in trading performance and the ongoing support from the bankers, the Group expects to be able to generate sufficient cash flows to cover its operating costs and meet its financial obligations as and when they fall due in the coming twelve months from the date of these consolidated financial statements.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant.

Specifically, for bank loans which contain a repayment on demand clause which can be exercised at the banks’ sole discretion, the analysis shows the cash outflow based on the earliest period in which the Group can be required to pay.

Trust receipt loans Bank borrowings Bank interest payables Trade and other payables At 31st December, 2010 Trust receipt loans Bank borrowings Bank interest payables Trade and other payables At 31st December, 2009	On demand HK$’000 – 51,535 1,447 – 52,982 – 21,638 677 – 22,315	Group Within 1 year HK$’000 73,279 19,750 – 146,817 239,846 44,135 7,800 – 140,578 192,513	Total HK$’000 73,279 71,285 1,447 146,817
			292,828

			44,135 29,438 677 140,578
			214,828

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Other payables and accruals, at 31st December, 2010 Other payables and accruals, at 31st December, 2009	Company Within 1 year Total HK$’000 HK$’000 998 998 878 878	Company Within 1 year Total HK$’000 HK$’000 998 998 878 878

		878

The table below summarises the maturity analysis of bank borrowings with a repayment on demand clause based on agreed scheduled repayments set out in the loan agreements, while interest payments are computed using contractual rates. Taking into account the Group’s financial position, the directors do not consider that it is probable that the banks will exercise their discretion to demand immediate repayment. The directors believe that such bank borrowings will be repaid in accordance with the scheduled repayment dates set out in the loan agreements.

Bank borrowings Bank interest payables At 31st December, 2010 Bank borrowings Bank interest payables At 31st December, 2009		Within 1 year HK$’000 59,452 1,271 60,723 23,521 631 24,152	Group Between 1 and 2 years Between 2 and 5 years HK$’000 HK$’000 9,000 2,833 157 19 9,157 2,852 5,917 – 46 – 5,963 –		Total HK$’000 71,285 1,447
					72,732

					29,438 677
					30,115

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APPENDIX II

3.2 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 shareholders and benefits for other stakeholders 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 shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is “capital and reserves attributable to the Company’s equity holders” as shown in the consolidated balance sheet.

The gearing ratios at 31st December, 2010 and 2009 were as follows:

Total borrowings Less: cash and cash equivalents Capital and reserves attributable to the Company’s equity holders Gearing ratio	2010 HK$’000 144,564 (74,554) 70,010 236,061 29.7%	2009 HK$’000 (Restated) (Note 2.1(a)) 73,573 (79,009) (5,436) 276,471 (2.0%)

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3.3 Fair value estimation

Effective 1st January, 2009, the Group adopted the amendment to HKFRS 7 for financial instruments that are measured in the balance sheet at fair value; this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)

Level 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)

The following table presents the Group’s assets and liabilities that are measured at fair value at 31st December, 2010.

ASSETS Financial assets at fair value through profit or loss – Securities listed on The Stock Exchange of Hong Kong Limited – Leveraged foreign forward exchange contracts	Level 1 HK$’000 6,180 – 6,180	Level 2 HK$’000 – (147) (147)	Total HK$’000 6,180 (147) 6,033

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The fair value of securities listed on The Stock Exchange of Hong Kong Limited is based on quoted market prices at the balance sheet date and it is included in level 1. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price.

The leveraged foreign forward exchange contract is not traded in an active market, the fair value of which is determined by using the quoted price provided by the counterparty financial institution at the balance sheet date. As all significant inputs required to measure the fair value of this instrument is observable, it is included in level 2.

4 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Fair values of financial assets and derivative financial instruments

The fair values of financial assets and derivative financial instruments that are traded in an active market are determined by the quoted market prices.

For the fair values of financial assets and derivative financial instruments not traded in an active market, the Group would use the quoted price provided by counterparty to estimate the fair values. The methodologies, models, assumptions used in valuing these financial assets and derivative financial instruments require judgement by management which are mainly based on market conditions existing at each balance sheet date.

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(b) Income taxes and deferred tax

The Group is subject to income taxes in a number of jurisdictions. Significant judgement is required in determining the provision for income taxes. 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 deferred tax provisions in the period in which such determination is made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised as the management of the Group considers it is probable that future taxable profits will be available against which temporary differences or tax losses can be utilised. Where the expectations are different from the original estimates, such differences will impact the recognition of deferred tax assets in the period in which such estimates have been changed.

(c) Estimated write-downs of inventories to net realisable value

The Group writes down inventories to net realisable value based on an assessment of the realisability of inventories. Write-downs on inventories are recorded where events or changes in circumstances indicate that the balances may not be realised. The identification of write-downs requires the use of judgment and estimates. Where the expectations are different from the original estimates, such differences will impact the carrying value of inventories in the period in which such estimates have been changed.

(d) Estimated impairment of receivables

The Group makes provision for impairment of receivables based on an assessment of the recoverability of the receivables. Provisions are applied to receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of impairment of receivables requires the use of judgment and estimate. Management uses the repayment history of the customers to assess the credit quality of the receivables. Where the expectations are different from the original estimates, such differences will impact the carrying value of receivables in the period in which such estimates have been changed.

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(e) Useful lives, residual values and depreciation of property, plant and equipment

The management of the Group determines the estimated useful lives, residual values 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. The management of the Group will increase the depreciation charge where useful lives are less than previously estimated lives, it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives; actual residual values may differ from estimated residual values. Periodic review could result in a change in depreciable lives and residual values and therefore depreciation expense in the future period.

(f) Estimated impairment of property, plant and equipment and land use rights

The Group assesses annually whether property, plant and equipment and land use rights have any indication of impairment. The recoverable amounts, if required, are determined based on value-in-use calculations or market valuations. These calculations require the use of judgment and estimates.

(g) Land and buildings in properties, plant and equipment carried at valuation

Land and buildings in properties, plant and equipment, comprise mainly of factories and offices, are shown at fair values determined by directors based on valuations performed by external independent valuers on an annual basis. In arriving at the valuations, significant judgement, assumptions and economic estimates have to be made.

5 Revenues and segment information

The Group is principally engaged in garment manufacturing and trading. Revenues recognised during the year are as follows:

Turnover Sale of garment products	2010 HK$’000 734,931 734,931	2009 HK$’000 733,046
		733,046

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APPENDIX II

Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions.

The Group’s management considers the business principally from a geographic perspective. Business reportable operating segments by location of the Group’s customers are identified in five main geographical areas namely the United States of America, Mainland China, Europe, Canada and rest of the world.

The Group’s management assesses the performance of the operating segments based on a measure of adjusted operating results. This measurement basis includes results of the operating segments before corporate administrative expenses, finance income, finance cost, share of results of associated companies and tax, but excludes material gain or loss which is capital in nature or non-recurring nature such as impairment.

An analysis of the Group’s segment information for the year by geographical segment is as follows:

Geographical segments by location of customers

United States of America Mainland China Europe Canada Rest of the world	Turnover 2010 2009 HK$’000 HK$’000 523,091 582,158 98,670 71,230 43,874 32,318 25,405 18,743 43,891 28,597 734,931 733,046	Adjusted operating results for reportable segments 2010 2009 HK$’000 HK$’000 9,681 54,385 (6,024) (7,026) 137 2,738 444 1,732 45 1,063 4,283 52,892

Revenues of approximately HK$243,367,000 (2009: HK$220,807,000), HK$122,110,000 (2009: HK$74,570,000), HK$74,428,000 (2009: HK$114,972,000) and HK$70,015,000 (2009: HK$88,105,000) were derived from the top four external customers respectively.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

A reconciliation of the segments’ adjusted operating results to (loss)/profit for the year is provided as follows:

Adjusted operating profits for reportable segments Other (losses)/gains – net Impairment of properties, plant and equipment Corporate administrative expenses Operating (loss)/profit Finance income Finance costs Share of loss of associates (Loss)/profit before income tax Income tax credit/(expense) (Loss)/profit for the year	2010 HK$’000 4,283 (2,403) (5,348) (54,168) (57,636) 457 (2,292) (332) (59,803) 7,023 (52,780)	2009 HK$’000 (Restated) (Note 2.1(a)) 52,892 8,743 – (48,302) 13,333 979 (2,340) (5,739) 6,233 (5,852) 381

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Reportable segment’s assets, which represent accounts receivable by geographical locations of customers, are reconciled to total assets as follows:

United States of America Mainland China Europe Canada Rest of the world Unallocated: Properties, plant and equipment Land use rights Interests in associates Deferred income tax assets Inventories Prepayments, deposits and other receivables Financial assets at fair value through profit or loss Bank deposits Cash and cash equivalents Total assets per balance sheet	Segment assets 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 52,434 65,631 27,928 10,175 1,523 6,515 1,723 1,847 12,157 4,918 95,765 89,086 140,558 152,699 15,282 11,147 42,880 43,212 5,010 3,820 106,173 97,323 29,448 21,869 6,180 18,387 31,099 3,917 74,554 79,009 546,949 520,469	Segment assets 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 52,434 65,631 27,928 10,175 1,523 6,515 1,723 1,847 12,157 4,918 95,765 89,086 140,558 152,699 15,282 11,147 42,880 43,212 5,010 3,820 106,173 97,323 29,448 21,869 6,180 18,387 31,099 3,917 74,554 79,009 546,949 520,469
		89,086 152,699 11,147 43,212 3,820 97,323 21,869 18,387 3,917 79,009
		520,469

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6 Other (losses)/gains – net Net fair value (losses)/gains on derivative financial instruments: Leveraged foreign forward exchange contracts – not yet matured – matured Market linked instrument with swap arrangements – matured Net fair value (losses)/gains on financial assets at fair value through profit or loss: Listed equity securities Foreign currency linked structured notes Market linked instrument with initial investments – matured Loss on disposal of listed equity securities Total other (losses)/gains – net	2010 HK$’000 (147) – – (147) (2,145) (111) – (2,256) – (2,403)	2009 HK$’000 838 924 2,720 4,482 2,235 1,188 3,689 7,112 (2,851) 8,743

– 98 –

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7 Expenses by nature

Operating (loss)/profit is stated after crediting and charging the following:

Raw materials used Changes in inventories of finished goods and work in progress Depreciation of properties, plant and equipment Impairment of properties, plant and equipment (Gain)/loss on disposal of properties, plant and equipment Amortisation of land use rights Employee benefit expense (excluding directors’ emoluments) (Note 14) Operating lease rentals – land and buildings Auditors’ remuneration Net exchange losses Others Total cost of sales, selling expenses and administrative expenses 8 Finance income Finance income on short-term bank deposits Dividend income on listed equity securities	2010 HK$’000 407,637 (12,101) 21,601 5,348 (345) 306 215,491 6,620 1,893 280 143,434 790,164 2010 HK$’000 409 48 457	2009 HK$’000 (Restated) (Note 2.1(a)) 359,825 4,705 21,121 – 18 712 181,245 6,481 1,682 1,051 151,616
		728,456

		2009 HK$’000 979 –
		979

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APPENDIX II

9 Finance costs

Interest expenses – bank borrowings – market linked instruments with swap arrangement	2010 HK$’000 2,292 – 2,292	2009 HK$’000 2,248 92
		2,340

Certain interest expenses were paid for bank borrowings wholly repayable within five years, which contain a repayment on demand clause, in accordance with the agreed scheduled repayments dates set out in the loan agreements.

10 Income tax (credit)/expense

Hong Kong profits tax has been provided at the rate of 16.5% (2009: 16.5%) on the estimated assessable profit for the year. Income taxes on profit derived from operations in Indonesia and Lesotho are provided at the rates of 25% (2009: 28%) and 15% (2009: 15%) respectively. The operation in Mainland China was granted a tax holiday of 2-year full exemption and 3-year 50% reduction and 2010 is the first year of 50% reduction.

The amount of income tax (credited)/charged to the income statement represents:

Current income tax – Hong Kong profits tax – Overseas income tax Over-provision in prior years Deferred income tax (Note 28)	2010 HK$’000 654 – (6,487) (1,190) (7,023)	2009 HK$’000 3,229 3,649 (43) (983)
		5,852

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APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The tax on the Group’s (loss)/profit before income tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities:

(Loss)/profit before income tax Tax calculated at domestic tax rates applicable to (loss)/profits in the respective countries Income not subject to tax Expenses not deductible for tax Unrecognised deferred tax assets Utilisation of previously unrecognized tax losses Over-provision in prior years Re-measurement of deferred tax – change in tax rate	2010 HK$’000 (59,803) (12,997) (1,065) 4,500 9,026 – (6,487) – (7,023)	2009 HK$’000 (Restated) (Note 2.1(a)) 6,233 903 (3,132) 2,939 8,831 (3,785) (43) 139 5,852

11 (Loss)/profit attributable to equity holders of the Company

The (loss)/profit attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of loss of approximately HK$37,880,000 (2009: Profit of HK$14,858,000).

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APPENDIX II

12 Loss per share

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year. As the Company has no dilutive potential ordinary shares during the years ended 31st December, 2010 and 2009, the diluted loss per share equals to the basic loss per share.

Loss attributable to equity holders of the Company Weighted average number of ordinary shares in issue (thousands) Basic and diluted loss per share (HK cents per share)	2010 HK$’000 (48,829) 371,874 (13.13)	2009 HK$’000 (Restated) (Note 2.1(a)) (952)

		371,874

		(0.25)

13 Dividends

The Company did not declare dividend for the years ended 31st December, 2010 and 31st December, 2009.

14 Employee benefit expense (excluding directors’ emoluments)

Wages and salaries Termination benefits Pension costs	2010 HK$’000 204,373 1,580 9,538 215,491	2009 HK$’000 171,262 963 9,020
		181,245

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APPENDIX II

Forfeited contributions to the mandatory provident fund scheme (the “MPF Scheme”) totaling HK$12,000 (2009: HK$88,000) were utilised during the year.

There is no contribution payable in relation to the MPF Scheme at the year end (2009:

Nil).

The Group operates/participates in the following pension and post retirement plans:

(i) The MPF Scheme for employees in Hong Kong, under which the Group and its employee each make a monthly contribution to the scheme at 5% of the qualifying earnings of the employee, subject to a monthly cap of HK$1,000.
(ii) The Group’s Indonesia subsidiaries do not operate any pension plan in Indonesia. However, according to the labor law in Indonesia, the employer is required to pay retirement benefits to the employees upon their retirement and the retirement benefits are calculated based on the final monthly basic salary and the years of service. The latest actuarial valuation of the resulting liabilities was performed by a professionally qualified independent actuarial firm, as at 31st December, 2010, using the “projected unit credit” method.
(iii) The Group’s branch in Lesotho does not operate any pension plan in Lesotho. However, according to the labor law in Lesotho, the employer is required to pay retirement benefits to the employees when employment is terminated by the employer before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits.
(iv) The Group’s subsidiaries in Mainland China contribute approximately 8% of the basic salaries of their employees to retirement schemes operated by municipal governments. Other than the mandatory contributions, the Group has no further obligations for the actual pension payments or any post retirement benefits. The retirement schemes are responsible for the entire pension obligations payable to retired employees. In addition, according to the labor law in Mainland China, the employer is required to pay retirement benefits to the employees when employment is terminated by the employer before the normal retirement date.

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15 Employee benefit expense – Directors’ and senior management’s emoluments

(a) Directors’ emoluments

The remuneration of every Director for the year ended 31st December, 2010 is set out below:

				Employer’s
				contribution
			Other	to the MPF
Name of Director	Fees	Salary	benefits	Scheme	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Mr. Rusli Hendrawan	100	3,103	83	–	3,286
Mr. Lee Sheng Kuang, James	100	1,498	2,802	12	4,412
Mr. Oey Tjie Ho	100	767	11	12	890
Mr. Tang Chak Lam, Charlie	100	1,346	33	12	1,491
Mr. Cheung Kwok Ming	168	–	–	–	168
Mr. Kwok Lam Kwong, Larry	198	–	–	–	198
Mr. Lau Siu Ki, Kevin	198	–	–	–	198

The remuneration of every Director for the year ended 31st December, 2009 is set out below:

				Employer’s
				contribution
			Other	to the MPF
Name of Director	Fees	Salary	benefits	Scheme	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Mr. Rusli Hendrawan	100	2,780	85	75	3,040
Mr. Lee Sheng Kuang, James	100	2,078	2,314	67	4,559
Mr. Oey Tjie Ho	100	786	16	32	934
Mr. Tang Chak Lam, Charlie	100	1,376	6	50	1,532
Mr. Cheung Kwok Ming	168	–	–	–	168
Mr. Kwok Lam Kwong, Larry	198	–	–	–	198
Mr. Lau Siu Ki, Kevin	198	–	–	–	198

Other benefits include leave pay and housing allowances.

During the year, no director has waived any emoluments (2009: Nil).

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(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group include three (2009: three) directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining two (2009: two) individuals during the year are as follows:

Basic salaries, housing allowances, other allowances and benefits-in-kind Contributions to the MPF Scheme	2010 HK$’000 2,182 48 2,230	2009 HK$’000 2,259 78
		2,337

The emoluments fell within the following bands:

	Number of individuals
	2010	2009
Emolument bands
HK$1,000,000 – HK$1,500,000	2	2

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APPENDIX II

16 Properties, plant and equipment

At 1st January, 2009 Cost or valuation, as previously reported Effect of adoption of HKAS 17 (Amendment) Cost or valuation, as restated Accumulated depreciation Net book amount, as restated Year ended 31st December, 2009 Opening net book amount, as previously reported Effect of adoption of HKAS 17 (Amendment) Opening net book amount, as restated Additions Disposals Depreciation Revaluation surplus Exchange differences Cost adjustment Closing net book amount, as restated At 31st December, 2009 Cost or valuation, as previously reported Effect of adoption of HKAS 17 (Amendment) Cost or valuation, as restated Accumulated depreciation, as previously reported Net book amount, as restated	Land and buildings HK$’000 64,765 10,772 75,537 – 75,537 64,765 10,772 75,537 498 – (5,594) 8,444 1,142 (667) 79,360 65,118 14,242 79,360 – 79,360	Leasehold improvements HK$’000 27,643 – 27,643 (4,229) 23,414 23,414 – 23,414 1,056 – (1,740) – – – 22,730 26,439 – 26,439 (3,709) 22,730	Group Plant and machinery HK$’000 59,745 – 59,745 (24,544) 35,201 35,201 – 35,201 3,246 – (5,889) – 1,775 – 34,333 56,966 – 56,966 (22,633) 34,333	Furniture, office equipment and motor vehicles HK$’000 51,484 – 51,484 (29,721) 21,763 21,763 – 21,763 2,025 (267) (7,898) – 653 – 16,276 51,565 – 51,565 (35,289) 16,276	Total HK$’000 203,637 10,772
					214,409 (58,494)
					155,915 145,143 10,772
					155,915 6,825 (267) (21,121) 8,444 3,570 (667)
					152,699 200,088 14,242
					214,330 (61,631)
					152,699

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APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

Year ended 31st December, 2010 Opening net book amount, as previously reported Effect of adoption of HKAS 17 (Amendment) Opening net book amount, as restated Additions Disposals Depreciation Revaluation surplus Exchange differences Impairment Closing net book amount At 31st December, 2010 Cost or valuation Accumulated depreciation Net book amount	Land and buildings HK$’000 65,118 14,242 79,360 – – (7,173) 7,063 526 (5,045) 74,731 74,731 – 74,731	Leasehold improvements HK$’000 22,730 – 22,730 37 – (1,903) – – – 20,864 26,476 (5,612) 20,864	Group Plant and machinery HK$’000 34,333 – 34,333 719 (2) (5,879) – 131 (235) 29,067 57,814 (28,747) 29,067	Furniture, office equipment and motor vehicles HK$’000 16,276 – 16,276 6,938 (1,100) (6,646) – 496 (68) 15,896 53,156 (37,260) 15,896	Total HK$’000 138,457 14,242
					152,699 7,694 (1,102) (21,601) 7,063 1,153 (5,348)
					140,558 212,177 (71,619)
					140,558

The Group’s land and buildings were revalued at 31st December, 2010. Valuations were made with reference to sales comparison approach, income capitalisation approach, cost approach or depreciated replacement cost approach. The valuations were carried out by:

(i) Vigers Appraisal and Consulting Limited, an independent qualified surveyor for the building held in Mainland China; and
(ii) KJPP Susan Widjojo & Partners, an independent qualified surveyor for the land and buildings held in Indonesia.

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APPENDIX II

The revaluation surplus net of applicable deferred income taxes was credited to fixed assets revaluation reserve in shareholders’ equity.

Depreciation of approximately HK$7,018,000 (2009: HK$6,075,000) has been expensed to cost of goods sold, approximately HK$1,255,000 (2009: HK$1,828,000) has been expensed to selling expenses; and HK$13,328,000 (2009: HK$13,218,000) has been expensed to administrative expenses.

If land and buildings were stated on the historical cost basis, the amounts would be as follows:

Cost Accumulated depreciation Net book amount	As at 31st December, 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 261,039 251,796 (200,203) (188,325) 60,836 63,471	As at 1st January, 2009 HK$’000 (Restated) (Note 2.1(a)) 227,785 (164,414)
		63,371

The analysis of the cost or valuation at 1st January, 2009 of the above assets is as follows:

At cost At 2008 valuation	Land and buildings Leasehold improvements HK$’000 HK$’000 – 27,643 75,537 – 75,537 27,643	Plant and machinery HK$’000 59,745 – 59,745	Furniture, office equipment and motor vehicles HK$’000 51,484 – 51,484	Total HK$’000 (Restated) (Note 2.1(a)) 138,872 75,537
				214,409

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APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The analysis of the cost or valuation at 31st December, 2009 of the above assets is as follows:

At cost At 2009 valuation	Land and buildings Leasehold improvements HK$’000 HK$’000 – 26,439 79,360 – 79,360 26,439	Plant and machinery HK$’000 56,966 – 56,966	Furniture, office equipment and motor vehicles HK$’000 51,565 – 51,565	Total HK$’000 (Restated) (Note 2.1(a)) 134,970 79,360
				214,330

The analysis of the cost or valuation at 31st December, 2010 of the above assets is as follows:

Land and buildings HK$’000 At cost – At 2010 valuation 74,731 74,731 Net book value of land and buildings is Outside Hong Kong, held on: – Leases of between 10 to 50 years – Leases of less than 10 years	Land and buildings HK$’000 At cost – At 2010 valuation 74,731 74,731 Net book value of land and buildings is Outside Hong Kong, held on: – Leases of between 10 to 50 years – Leases of less than 10 years	Leasehold improvements Plant and machinery Furniture, office equipment and motor vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 26,476 57,814 53,156 137,446 – – – 74,731 26,476 57,814 53,156 212,177 analysed as follows: As at 1st January, 2009 As at 31st December, 2010 2009 HK$’000 HK$’000 HK$’000 (Restated) (Restated) (Note 2.1(a)) (Note 2.1(a)) 47,577 58,477 64,157 27,154 20,883 11,380 74,731 79,360 75,537	Leasehold improvements Plant and machinery Furniture, office equipment and motor vehicles Total HK$’000 HK$’000 HK$’000 HK$’000 26,476 57,814 53,156 137,446 – – – 74,731 26,476 57,814 53,156 212,177 analysed as follows: As at 1st January, 2009 As at 31st December, 2010 2009 HK$’000 HK$’000 HK$’000 (Restated) (Restated) (Note 2.1(a)) (Note 2.1(a)) 47,577 58,477 64,157 27,154 20,883 11,380 74,731 79,360 75,537		Total HK$’000 137,446 74,731

			75,537

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APPENDIX II

17 Land use rights

The Group’s land use rights represent prepaid operating lease payments and their net book values are analysed as follows:

				As at
		As at 31st December,		1st January,
		2010	2009	2009
		HK$’000	HK$’000	HK$’000
			(Restated)	(Restated)
			(Note 2.1(a))	(Note 2.1(a))
	In Mainland China held on:
	– Leases of between 10 to 50 years	15,282	11,147	11,859

			2010	2009
			HK$’000	HK$’000
	At 1st January
	Balance as previously reported		12,053	13,042
	Effect of adoption of HKAS 17 (Amendment)		(906)	(1,183)
	Balance as restated		11,147	11,859
	Additions		4,441	–
	Amortisation of prepaid operating lease
	payments		(306)	(712)
	Balance as at 31st December		15,282	11,147

18	Investments in subsidiaries
			Company
			2010	2009
			HK$’000	HK$’000
	Costs, unlisted shares		165,938	165,938
	Provision for impairment loss		(39,718)	(1,838)
			126,220	164,100

Details of principal subsidiaries are set out in Note 34 to the financial statements.

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APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

19 Interests in associates

Beginning of the year Share of loss End of the year Amount due from an associate	2010 HK$’000 40,212 (332) 39,880 3,000 42,880	2009 HK$’000 45,951 (5,739)
		40,212 3,000
		43,212

The Group’s interest in its associates, which are unlisted, is as follows:

							% of
	Registered and	Country of					effective
Name	paid up capital	incorporation	Assets	Liabilities	Turnover	Loss	interest held
			HK$’000	HK$’000	HK$’000	HK$’000
Fortune Champ Group	US$150	British Virgin Islands	8,648	14,131	–	(1,539)	20
Limited
山東魏橋恒富針織印染	US$12,375,000	People’s Republic of	104,482	1,694	85,746	(61)	27
有限公司		China
(ShanDong WeiQiao
HengFu Textile Limited)

20 Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include the following:

Listed equity securities – securities listed on The Stock Exchange of Hong Kong Limited Derivatives – foreign currency linked structured note – leveraged foreign forward exchange contracts	2010 HK$’000 6,180 – – 6,180	2009 HK$’000 8,325 9,792 270
		18,387

The fair values of all listed equity securities are based on their current bid prices in an active market.

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FINANCIAL INFORMATION OF THE GROUP

The above assets are denominated in the following currencies:

United States dollar Hong Kong dollar End of the year	2010 HK$’000 – 6,180 6,180	2009 HK$’000 10,062 8,325
		18,387

21 Amounts due from subsidiaries

As at 31st December, 2010, the amounts due from subsidiaries are unsecured and interest-free. Repayment will not be required within the next twelve months.

22 Inventories

Raw materials Work in progress Finished goods	2010 HK$’000 32,146 59,825 14,202 106,173	2009 HK$’000 35,398 49,675 12,250
		97,323

The cost of inventories recognised as expenses and included in cost of goods sold amounted to approximately HK$395,536,000 (2009: HK$364,530,000).

23 Trade and other receivables

Trade receivables Prepayments, deposits and other receivables	Group 2010 2009 HK$’000 HK$’000 95,765 89,086 29,448 21,869 125,213 110,955	Company 2010 2009 HK$’000 HK$’000 – – 601 781 601 781	Company 2010 2009 HK$’000 HK$’000 – – 601 781 601 781
			781

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The carrying amounts of the trade receivables, deposits and other receivables approximate their fair values.

The majority of the Group’s sales to customers are on open account basis, with credit terms ranging from 30 to 45 days. The remaining sales are on letter of credit at sight to 90 days. The ageing analysis of trade receivables is as follows:

Within 30 days 31-60 days 61-90 days Over 90 days	Group 2010 2009 HK$’000 HK$’000 66,467 60,572 26,260 22,774 2,043 1,601 995 4,139 95,765 89,086	Group 2010 2009 HK$’000 HK$’000 66,467 60,572 26,260 22,774 2,043 1,601 995 4,139 95,765 89,086
		89,086

As at 31st December, 2010, the trade receivables from the Group’s five largest customers accounted for 73% (2009: 73%) of the total trade receivables. The Group’s approach to managing credit risk is disclosed in Note 3.

Ageing analysis of trade receivables past due but not impaired is shown below. These relates to a number of independent customers for whom there is no recent history of default.

Within 30 days 31-60 days 61-90 days Over 90 days	Group 2010 2009 HK$’000 HK$’000 8,105 6,333 310 4,828 759 48 10 504 9,184 11,713	Group 2010 2009 HK$’000 HK$’000 8,105 6,333 310 4,828 759 48 10 504 9,184 11,713
		11,713

At 31st December, 2010, there were no provisions for impairment of trade receivables (2009: Nil).

The other classes within trade and other receivables do not contain impaired assets.

– 113 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above. The Group does not hold any collateral as security.

The carrying amounts of the trade receivables are denominated in the following currencies:

United States dollar Renminbi Hong Kong dollar Others	Group 2010 2009 HK$’000 HK$’000 66,533 78,354 27,928 10,175 1,304 87 – 470 95,765 89,086	Group 2010 2009 HK$’000 HK$’000 66,533 78,354 27,928 10,175 1,304 87 – 470 95,765 89,086
		89,086

The carrying amounts of deposits and other receivables are denominated in the following currencies:

Hong Kong dollar South African Rand Indonesian Rupiah Renminbi Others	Group 2010 2009 HK$’000 HK$’000 3,809 4,949 2,569 5,477 4,943 5,021 4,302 1,539 1,063 – 16,686 16,986	Company 2010 2009 HK$’000 HK$’000 601 781 – – – – – – – – 601 781	Company 2010 2009 HK$’000 HK$’000 601 781 – – – – – – – – 601 781
			781

24 Bank deposits

The effective interest rate of the bank deposits is 0.89% (2009: 0.57%) per annum. These deposits have maturities of 104 to 172 days (2009: 182 days).

The carrying amount of the time deposit is denominated in United States dollar.

As of 31st December, 2010, these bank deposits are secured for bank borrowings amounting to HK$ 27,414,000 (Note 27).

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APPENDIX II

25 Cash and cash equivalents

Cash at bank and in hand Short-term bank deposits	Group 2010 2009 HK$’000 HK$’000 61,130 75,134 13,424 3,875 74,554 79,009	Company 2010 2009 HK$’000 HK$’000 523 1,108 – – 523 1,108	Company 2010 2009 HK$’000 HK$’000 523 1,108 – – 523 1,108
			1,108

The effective interest rates on short-term bank deposits are 0.4 to 9% (2009: 0.09%) per annum where these deposits have maturities of 3 to 17 days (2009: 14 days).

The carrying amount of the cash and cash equivalents are denominated in the following currencies:

Hong Kong dollar United States dollar Indonesian Rupiah Renminbi Others	Group 2010 2009 HK$’000 HK$’000 10,288 6,335 42,893 55,769 12,533 12,467 8,638 3,883 202 555 74,554 79,009	Company 2010 2009 HK$’000 HK$’000 523 1,108 – – – – – – – – 523 1,108

26 Derivative financial instruments

As at 31st December, 2010, derivative financial instruments comprise a leveraged foreign forward exchange contract. As at 31st December, 2009, the leverage foreign forward exchange contract amounting to HK$270,000, was included in financial assets at fair value through profit or loss.

The Group relies on valuations from the counterparty financial institutions to determine the fair value of the leveraged foreign forward exchange contract, which in turn is based on the forward foreign exchange rate at the balance sheet date.

The notional principal amount of the outstanding leveraged forward foreign contract as at 31st December, 2010 is USD1,000,000 (2009: USD 2,000,000).

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APPENDIX II

27 Bank borrowings

Trust receipts loans Portion of bank loans due for repayment within one year Portion of bank loans due for repayment after one year which contain a repayment on demand clause Total borrowings	As at 31st December, 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 73,279 44,135 59,452 23,521 11,833 5,917 144,564 73,573	As at 1st January, 2009 HK$’000 (Restated) (Note 2.1(a)) 97,872 27,534 22,188
		147,594

At 31st December, interest-bearing bank loans and trust receipt loans are due for repayment as follows:

Trust receipts loans Portion of bank loans due for repayment within one year Bank loans due for repayment after one year (Note): After 1 year but within 2 years After 2 years but within 5 years Total borrowings	2010 HK$’000 73,279 59,452 132,731 9,000 2,833 144,564	2009 HK$’000 44,135 23,521
		67,656 5,917 –
		73,573

Note:

The amounts due are based on the scheduled repayment dates set out in the loan agreements and ignore the effect of any repayment on demand clause.

– 116 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

At 31st December, 2010, the bank loans and trust receipts loans are secured as follows:

Bank loans – secured Bank loans – unsecured Trust receipts loans – unsecured Total borrowings	2010 HK$’000 27,414 43,871 73,279 144,564	2009 HK$’000 – 29,438 44,135
		73,573

Bank borrowings amounting to HK$27,414,000 (2009: Nil) are secured by the bank deposits of the Group (Note 24).

The exposures of the Group’s borrowings to interest rate changes and the contractual repricing dates as of the balance sheet are as follows:

		2010	2009
		HK$’000	HK$’000
6	months or less	144,564	73,573

The carrying amounts of the bank borrowings are denominated in the following currencies:

Hong Kong dollar United States dollar Renminbi Total borrowings	2010 HK$’000 38,876 78,274 27,414 144,564	2009 HK$’000 22,591 50,982 –
		73,573

– 117 –

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APPENDIX II

The bank loans bear interest rates ranging from 1.8% to 5.5% per annum for United States dollar denominated loans (2009: 2.6% to 4.6% per annum) and 1.8% to 2.0% per annum for Hong Kong dollar denominated loans (2009: 1.5% to 1.6% per annum) and 4.8% to 5.8% per annum for Renminbi denominated loans.

The trust receipts loans bear interest rates ranging from 1.8% to 2.3% per annum for United States dollar denominated loans (2009: 2.1% to 2.6% per annum) and 1.8% to 2.3% per annum for Hong Kong dollar denominated loans (2009: 2.1% to 2.2% per annum).

The carrying amounts of bank borrowings approximate their fair values as the effect of discounting is not significant.

28 Deferred income tax

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:

Deferred income tax assets Deferred income tax liabilities	As at 31st December, 2010 2009 HK$’000 HK$’000 (Restated) (Note 2.1(a)) 5,010 3,820 (10,943) (9,045) (5,933) (5,225)	As at 1st January, 2009 HK$’000 (Restated) (Note 2.1(a)) 2,679 (7,621) (4,942)

– 118 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

The gross movements on the deferred income tax account are as follows:

At 1st January Balance as previously reported Effect of adoption of HKAS 17 (Amendment) Balance as restated Deferred income tax credited to income statement (Note 10) Deferred income tax charged to equity Exchange differences Balance as at 31st December	2010 HK$’000 (1,581) (3,644) (5,225) 1,190 (2,049) 151 (5,933)	2009 HK$’000 (2,515) (2,427) (4,942) 983 (1,649) 383 (5,225)

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group did not recognise deferred income tax assets of HK$28,688,000 (2009: HK$21,953,000) in respect of losses amounting to approximately HK$135,197,000 (2009: HK$105,362,000) that can be carried forward against future taxable income. Cumulative tax losses of approximately HK$64,709,000 (2009: HK$51,613,000) can be carried forward indefinitely while tax losses of approximately HK$70,488,000 (2009: HK$53,749,000) will expire in five years.

– 119 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The movements in deferred income tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year are as follows:

Deferred income tax assets

At 1st January, 2009 Credited to income statement Exchange differences At 31st December, 2009 At 1st January, 2010 Credited to income statement Exchange differences At 31st December, 2010	Provision for post- employment benefits HK$’000 2,679 626 515 3,820 3,820 1,003 187 5,010

– 120 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Deferred income tax liabilities

At 1st January, 2009 Balance as previously reported Effect of adoption of HKAS 17 (Amendment) Balance as restated Credited to income statement Charged to equity Exchange differences At 31st December, 2009 as restated At 1st January, 2010 Balance as previously reported Effect of adoption of HKAS 17 (Amendment) Balance as restated Credited to income statement Charged to equity Exchange differences At 31st December, 2010	Fair value gains of land and buildings HK$’000 2,050 2,427 4,477 – 1,649 – 6,126 Fair value gains of land and buildings HK$’000 2,482 3,644 6,126 – 2,049 – 8,175	Accelerated tax depreciation HK$’000 1,417 – 1,417 (357) – 132 1,192 Accelerated tax depreciation HK$’000 1,192 – 1,192 (187) – 36 1,041	Withholding tax for undistributed retained earnings HK$’000 1,727 – 1,727 – – – 1,727 Withholding tax for undistributed retained earnings HK$’000 1,727 – 1,727 – – – 1,727	Total HK$’000 5,194 2,427 7,621 (357) 1,649 132 9,045 Total HK$’000 5,401 3,644 9,045 (187) 2,049 36 10,943

– 121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

29 Trade and other payables

Trade payables Other payables and accruals	Group 2010 2009 HK$’000 HK$’000 79,874 81,975 66,943 58,603 146,817 140,578	Company 2010 2009 HK$’000 HK$’000 – – 998 878 998 878	Company 2010 2009 HK$’000 HK$’000 – – 998 878 998 878
			878

The ageing analysis of the trade payables based on invoice date is as follows:

Within 30 days 31-60 days 61-90 days Over 90 days	Group 2010 2009 HK$’000 HK$’000 51,450 61,116 19,251 11,968 6,210 1,759 2,963 7,132 79,874 81,975	Group 2010 2009 HK$’000 HK$’000 51,450 61,116 19,251 11,968 6,210 1,759 2,963 7,132 79,874 81,975
		81,975

Trade payables are denominated in the following currencies:

Hong Kong dollar United States dollar Indonesian Rupiah Renminbi Others	Group 2010 2009 HK$’000 HK$’000 27,987 42,160 19,603 19,637 2,347 2,547 29,838 17,631 99 – 79,874 81,975	Group 2010 2009 HK$’000 HK$’000 27,987 42,160 19,603 19,637 2,347 2,547 29,838 17,631 99 – 79,874 81,975
		81,975

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Other payables and accruals are denominated in the following currencies:

Hong Kong dollar Indonesian Rupiah Renminbi South African Rand Others	Group 2010 2009 HK$’000 HK$’000 11,832 11,307 26,476 21,788 26,829 23,145 1,806 1,980 – 383 66,943 58,603	Company 2010 2009 HK$’000 HK$’000 998 878 – – – – – – – – 998 878	Company 2010 2009 HK$’000 HK$’000 998 878 – – – – – – – – 998 878
			878

The carrying amounts of trade and other payables approximate their fair values due to their short term nature.

30 Share capital

At 1st January and 31st December	2010 Number of Shares (thousands) 371,874	2010 Ordinary shares HK$’000 37,187	2009 Number of Shares (thousands) 371,874	2009 Ordinary shares HK$’000 37,187

The total authorised number of ordinary shares is 2,000,000,000 (2009: 2,000,000,000) shares with a par value of HK$0.10 per share (2009: HK$0.10 per share).

– 123 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

31 Other reserves

At 1st January, 2009 Balance as previously reported Effect of adoption of HKAS 17 (Amendment) Balance as restated Exchange differences arising on the translation of the financial statements of overseas subsidiaries and associates Fair value changes, net of deferred tax At 31st December, 2009 as restated At 1st January, 2010 Balance as previously reported Effect of adoption of HKAS 17 (Amendment) Balance as restated Exchange differences arising on the translation of the financial statements of overseas subsidiaries and associates Fair value changes, net of deferred tax At 31st December, 2010	Share premium HK$’000 43,522 – 43,522 – – 43,522 43,522 – 43,522 – – 43,522	Exchange translation reserve HK$’000 (17,277) – (17,277) 11,078 – (6,199) (6,199) – (6,199) 3,531 – (2,668)	Group Fixed assets revaluation reserve HK$’000 4,784 7,193 11,977 – 6,433 18,410 7,750 10,660 18,410 – 4,888 23,298	Merger Reserve (Note (i)) HK$’000 (200) – (200) – – (200) (200) – (200) – – (200)	Total HK$’000 30,829 7,193
					38,022 11,078 6,433
					55,533

					44,873 10,660
					55,533 3,531 4,888
					63,952

– 124 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

At 1st January, 2009 At 31st December, 2009 At 1st January, 2010 At 31st December, 2010	Share premium HK$’000 43,522 43,522 43,522 43,522	Company Contributed surplus (Note (ii)) HK$’000 147,694 147,694 147,694 147,694	Total HK$’000 191,216
			191,216

			191,216
			191,216

Notes:

(i) The merger reserve of the Group represents the difference between the nominal value of the shares of a subsidiary acquired and the nominal value of the Company’s shares issued in exchange thereof.
(ii) The contributed surplus of the Company represents the difference between the consolidated shareholders’ funds of the subsidiary acquired and the nominal value of the Company’s shares issued in exchange thereof.

– 125 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

32 Notes to the consolidated cash flow statement

Reconciliation of (loss)/profit before income tax to net cash (used in)/generated from operations is as follows:

(Loss)/profit before income tax Depreciation of properties, plant and equipment (Gain)/loss on disposal of properties, plant and equipment Impairment of properties, plant and equipment Amortisation of land use rights Share of loss of associates Dividend income on listed equity securities Finance income Finance costs Changes in working capital: Inventories Trade and other receivables Trade and other payables Financial assets at fair value through profit or loss Derivative financial instruments Net cash (used in)/generated from operations	2010 HK$’000 (59,803) 21,601 (345) 5,348 306 332 (48) (409) 2,292 (30,726) (5,398) (14,066) 5,132 12,207 147 (32,704)	2009 HK$’000 (Restated) (Note 2.1 (a)) 6,233 21,121 18 – 712 5,739 – (979) 2,340 35,184 27,210 47,459 10,013 21,099 (21,768) 119,197

– 126 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

33 Commitments

Commitments under operating leases

The Group had future aggregate minimum lease payments for land and buildings under non-cancellable operating leases as follows:

Not later than one year Later than one year and not later than five years Later than five years	2010 HK$’000 8,035 23,886 8,425 40,346	2009 HK$’000 5,989 7,048 6,518
		19,555

34 Subsidiaries

The following is a list of the principal subsidiaries at 31st December, 2010:

	Place of			Percentage
	incorporation/		Particulars of	of interest
Company name	Place of operation	Principal activities	issued share capital	held
Shares held directly:
Topwell Group	British Virgin	Investment holding	1,000 ordinary shares of	100
Development Ltd.	Islands		US$1 each
Shares held indirectly:
Best Sphere Group Limited	British Virgin	Investment holding	1 ordinary share	100
	Islands		of US$1
Carry Wealth Limited	Hong Kong	Garment trading, marketing	4,000,000 ordinary	100
		and provision of	shares of HK$1 each
		management services
Carry Wealth (South Africa)	British Virgin	Investment holding	1 ordinary share	100
Investment Limited	Islands		of US$1
Cityshine Investments	British Virgin	Investment holding	1,000 ordinary shares	51
Limited	Islands		of US$1 each and 1
			preference share with
			no par value

– 127 –

APPENDIX II

FINANCIAL INFORMATION OF THE GROUP

	Place of			Percentage
	incorporation/		Particulars of	of interest
Company name	Place of operation	Principal activities	issued share capital	held
East Success International	British Virgin	Investment holding	1 ordinary share	100
Limited	Islands		of US$1
Easy Victory Investments	British Virgin	Investment holding	1 ordinary share	100
Limited	Islands		of US$1
Gold Clipper Trading	British Virgin	Investment holding	1 ordinary share	100
Limited	Islands		of US$1
Hillwealth International	Hong Kong	Garment trading and	1 ordinary share	100
Limited		marketing	of HK$1
Hipmode Investment Limited	Hong Kong	Investment holding	1 ordinary share	100
			of HK$1
Mass Wealth Investments	Hong Kong	Investment holding	1 ordinary share	100
Limited			of HK$1
Mutual Grace Investments	Hong Kong	Investment holding	1 ordinary share	66.7
Limited			of HK$1
PT Caterindo Garment	Indonesia	Manufacture of knit tops	15,000 ordinary shares	95
Industri			of Rp1 million each
Queentime International	Hong Kong	Investment holding	1 ordinary share	51
Limited			of HK$1
Shinning Century Limited	Hong Kong/	Manufacture of knit tops	1,000,000 ordinary	70
	Lesotho		shares of HK$1 each
Sino Precision Limited	British Virgin	Investment holding	1,000 ordinary shares of	66.7
	Islands		US$1 each
廣州協旺時尚貿易	People’s Republic	Design and wholesale of	US$700,000	100
有限公司	of China	apparel products and
(Guangzhou Fashion		accessories
Republics Trading
Limited)
鶴山恒富製衣有限公司	People’s Republic	Manufacture of knit products	US$10,500,000	100
(Heshan Carry Wealth	of China
Garment Limited)
鶴山恒傲印綉有限公司	People’s Republic	Printing and embroidery of	HK$5,100,000	51
(Heshan Heng Ao	of China	knit products
Printing and Embroidery
Limited)

– 128 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

35 Related party transactions

(a) As at 31st December, 2010, 169,062,000 shares (45.46%) of the Company were held by Respected International Limited, which was ultimately owned as to 46.03% and 46.03% by Mr. Rusli Hendrawan and Mr. Lee Sheng Kuang, James, directors of the Company, respectively through their respective wholly-owned companies.
(b) During the year, the Group had the following transaction with its associate, ShanDong WeiQiao HengFu Textile Limited:

Purchases of raw materials (c) Key management compensation Salaries and other short-term employee benefits Contributions to the MPF Scheme	2010 HK$’000 408 2010 HK$’000 10,043 36 10,079	2009 HK$’000 536

		2009 HK$’000 9,841 224
		10,065

(d) At 31st December, 2010, the Company had provided guarantees in respect of banking facilities of its subsidiaries amounting to approximately HK$471,820,000 (2009: HK$471,820,000). The facilities utilised by the subsidiaries at 31st December, 2010 amounted to HK$117,150,000 (2009: HK$73,573,000).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3. INDEBTEDNESS STATEMENT

As at the close of business on 30th April, 2011, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this Composite Offer Document, the Group had outstanding indebtedness of approximately HK$114,174,000, which comprised secured bank loans of HK$31,205,000, unsecured bank loans of HK$17,000,000 and unsecured trust receipt loans of HK$65,969,000. The secured bank loans were secured by the Group’s bank deposits of HK$11,625,000 and land and buildings located in the PRC with net book value of HK$48,709,000.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any debt securities, issued and outstanding, and authorised or otherwise created but unissued, any other outstanding loan capital, any other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or similar indebtedness, debentures, mortgages, charges, loans, acceptance credits, hire purchase commitments, guarantees or other material contingent liabilities at the close of business on 30th April, 2011 and the Directors confirm that there had been no material changes since 30th April, 2011 and up to the Latest Practicable Date.

4. MATERIAL CHANGE

The Directors confirm that as at the Latest Practicable Date, there had been no material changes in the financial or trading position or outlook of the Group since 31st December, 2010, being the date to which the latest published audited consolidated financial statements of the Company were made up.

– 130 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENTS

The sole director of the Offeror, Mr. Li, accepts full responsibility for the accuracy of the information contained in this Composite Offer Document (other than that in relation to the Group) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this Composite Offer Document have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Offer Document the omission of which would make any statements (other than those in relation to the Group) in this Composite Offer Document misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Offer Document (other than that in relation to the Offeror and its sole shareholder and associates) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Offer Document have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Offer Document the omission of which would make any statements (other than those in relation to the Offeror and its sole shareholder and associates) in this Composite Offer Document misleading.

2. SHARE CAPITAL

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

Authorized: HK$ 2,000,000,000 Shares 200,000,000 Issued and fully paid: 371,874,000 Shares 37,187,400

No new Shares have been issued by the Company since 31 December 2010 (being the date to which its latest published audited accounts were prepared). All the existing issued Shares are fully paid up and rank pari passu in all respects including all rights as to dividends, voting and capital.

Save for the Shares, the Company has no outstanding securities, options, derivatives, warrants and other convertible securities or rights affecting the Shares as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX III

3. DISCLOSURE OF INTERESTS

(a) Substantial Shareholders

As at the Latest Practicable Date, the interests of the Offeror and parties acting in concert with it in the Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company were as follows:

			Approximate
Name of		Number of	percentage of
Shareholder	Capacity and nature of interest	Shares held	interest
Offeror	Beneficial owner	236,662,000	63.64%
Mr. Li	Interest of a controlled corporation	236,662,000	63.64%

Notes:

The Offeror is wholly owned by Mr. Li and Mr. Li is therefore deemed to be interested in the Shares and underlying Shares held by the Offeror under the SFO.

(b) Directors’ interests in the Shares

As at the Latest Practicable Date, none of the Directors had any interests in the Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company.

(c) As at the Latest Practicable Date, save as disclosed in sub-paragraphs (a) and (b) above:

none of the Offeror, its director or any parties acting in concert with it had any interests in or owned or controlled any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company;
there were no Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company which the Offeror or any parties acting in concert with it has borrowed or lent;

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GENERAL INFORMATION

APPENDIX III

the Company had no interest in the equity share capital or any convertible securities, warrants, options and derivatives of the Offeror;
none of the Directors had any interest in the Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options and derivatives of the Company or of the equity share capital or any convertible securities, warrants, options and derivatives of the Offeror;
no Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options and derivatives of the Company was owned or controlled by a subsidiary of the Company or by a pension fund (if any) of any member of the Group or by an adviser to the Company as specified in class (2) of the definition of associate under the Takeovers Code including the Independent Financial Adviser but excluding exempt principal traders; and
there were no Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company which the Company and any Directors had borrowed or lent.
(d) The Offeror will finance the Offer from the Facility provided by Sun Hung Kai Investment Services Limited. Save for the Shares acquired through the Sale and Purchase Agreement and the Shares to be acquired through the Offer being pledged to Sun Hung Kai Investment Services Limited for the Facility, there was no agreement, arrangement or understanding that the Shares acquired in pursuance of the Offer would be transferred, charged or pledged to any other persons.
(e) No person who owned or controlled any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company has irrevocably committed themselves to accept or not to accept the Offer.
(f) None of the Offeror, its associates, or any parties acting in concert with them, have entered into any arrangements of the kind (whether by way of option, indemnity, or otherwise) as referred to in Note 8 to Rule 22 of the Takeovers Code with any other person.
(g) Save for the Sale and Purchase Agreement, there was no agreement or arrangement to which the Offeror 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.

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GENERAL INFORMATION

APPENDIX III

(h) No person has any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code.
(i) No Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options or derivatives of Company are managed on a discretionary basis by fund managers connected with the Company.

4. DEALING IN SECURITIES

(a) During the Relevant Period, save for the sale and purchase of the Sale Shares by the Offeror from the Vendors on the terms of the Sale and Purchase Agreement,
none of the Directors had dealt in any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company;
none of the Offeror, its director or any parties acting in concert with it had dealt in any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company;
no person (if any) with whom the Offeror or any parties acting in concert with it has an arrangement, if any, of the kind referred to in Note 8 to Rule 22 of the Takeovers Code had dealt for value in the Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options or derivatives of the Company; and
none of the Offeror or any parties acting in concert with it has borrowed or lent any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company.

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GENERAL INFORMATION

APPENDIX III

(b) During the Relevant Period,
the Company did not deal in any interest in the equity share capital or any convertible securities, warrants, options and derivatives of the Offeror;
none of the Directors had dealt in any equity share capital or any convertible securities, warrants, options and derivatives of the Offeror;
none of the subsidiaries of the Company or a pension fund (if any) of any member of the Group or an adviser to the Company as specified in class (2) of the definition of associate under the Takeovers Code including the Independent Financial Adviser but excluding exempt principal traders had dealt in any interest in the Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options and derivatives of the Company;
no person, if any, with whom 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 has an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code had dealt in the Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options and derivatives of the Company;
no fund managers (other than exempt fund managers) (if any) connected with the Company had dealt in the Shares or other securities of the Company carrying voting rights or any convertible securities, warrants, options and derivatives of the Company; and
none of the Company or any of the Directors has borrowed or lent any Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company.

– 135 –

GENERAL INFORMATION

APPENDIX III

5. MARKET PRICES

(a) The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$1.250 per Share on 24 May 2011 and HK$0.455 per Share on 21 December 2010.
(b) The table below sets out the closing prices of the Shares as quoted on the Stock Exchange on (i) the last trading day of each of the calendar months during the Relevant Period and (ii) the Latest Practicable Date:

Date	Share Price
	HK$
30 November 2010	0.495
31 December 2010	0.470
31 January 2011	0.600
28 February 2011	0.620
31 March 2011	0.550
29 April 2011	0.590
31 May 2011	1.220
3 June 2011, being the last trading day prior
to the Latest Practicable Date	1.050

6. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims of material importance and no litigation or claims of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

7. MATERIAL CONTRACTS

Neither the Company nor any of its subsidiaries had, during the period after the date two years before the date of the Joint Announcement up to and including the Latest Practicable Date, entered into any contracts which are or may be material, other than contracts in the ordinary course of business of the Group.

– 136 –

GENERAL INFORMATION

APPENDIX III

8. EXPERTS AND CONSENTS

The followings are the qualification of the experts who have given opinions or advice contained in this Composite Offer Document:

Name

Qualification

SHK A licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

Independent Financial A licensed corporation to carry out Type 6 (advising on corporate Adviser finance) regulated activity under the SFO

Each of SHK and the Independent Financial Adviser has given and has not withdrawn its written consent to the issue of this Composite Offer Document with the inclusion herein of its advice or report, as the case may be, and reference to its name, in the form and context in which they appear.

9. GENERAL

(a) No benefit (other than statutory compensation) will 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, arrangement or understanding (including any compensation arrangement) between the Offeror or any party acting in concert with the Offeror and any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or was dependent upon the Offer.
(c) As at the Latest Practicable Date, there was no agreement or arrangement between any of the Directors and any other person which is conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer.
(d) As at the Latest Practicable Date, there was no material contract entered into by the Offeror in which any Director has a material personal interest.

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GENERAL INFORMATION

APPENDIX III

(e) As at the Latest Practicable Date, save for the Sale and Purchase Agreement, there was no agreement or arrangement to which the Offeror 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.
(f) (i) On 20 April 2011, Mr. Cheung Kwok Ming, an independent non-executive Director, entered into a service agreement with the Company for a term of 2 years from 27 April 2011. His remuneration is HK$168,000 per year without any variable remuneration; (ii) on 13 December 2010, Mr. Kwok Lam Kwong, Larry, an independent non-executive Director, entered into a service agreement with the Company for a term of 2 years from 1 January 2011. His remuneration is HK$198,000 per year without any variable remuneration; and (iii) on 13 December 2010, Mr. Lau Siu Ki, Kevin, an independent non-executive Director, entered into a service agreement with the Company for a term of 2 years from 1 January 2011. His remuneration is HK$198,000 per year without any variable remuneration.

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 (i) (including both continuous and fixed term contracts) have been entered into or amended within 6 months preceding the date of the Joint Announcement; (ii) are continuous contracts with a notice period of 12 months or more; or (iii) are fixed term contracts with more than 12 months to run irrespective of the notice period.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) on the website of the Company (www.carrywealth.com); (ii) on the website of the SFC (www.sfc.hk) and; (iii) at the principal office and place of business of the Company at 2701, 27th Floor, One Kowloon, 1 Wang Yuen Street, Kowloon Bay, Hong Kong from the date of this Composite Offer Document until the Closing Date or the date on which the Offer lapses or is withdrawn (whichever is earlier):

(a) the memorandum of association and bye-laws of the Company;
(b) the memorandum and articles of association of the Offeror;

– 138 –

GENERAL INFORMATION

APPENDIX III

(c) the annual reports of the Company for the year ended 31 December 2009 and the year ended 31 December 2010;
(d) the letter from SHK, the text of which is set out on pages 6 to 16 of this Composite Offer Document;
(e) the letter from the Board, the text of which is set out on pages 17 to 22 of this Composite Offer Document;
(f) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 23 to 24 of this Composite Offer Document;
(g) the letter from the Independent Financial Adviser to the Independent Board Committee, the text of which is set out on pages 25 to 46 of this Composite Offer Document;
(h) the written consents referred to in the section headed “Experts and consents” in this Appendix III;
(i) the service contracts referred to in the paragraph (f) under section headed “9. General” in this Appendix III; and
(j) the facility letter dated 6 May 2011 in relation to the Facility.

11. MISCELLANEOUS

(a) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its head office and principal place of business in Hong Kong is 2701, 27th Floor, One Kowloon, 1 Wang Yuen Street, Kowloon Bay, Hong Kong.
(b) The registered address of the Offeror is at Quastisky Building, P.O. Box 4389, Road Town, Tortola, British Virgin Islands and the correspondence address of the Offeror is at Suite A, 11/F., Ho Lee Commercial Building, 38-44 D’Aguilar Street, Central, Hong Kong.
(c) As at the Latest Practicable Date, Mr. Li, who is deemed to be a party acting in concert with the Offeror under the Takeovers Code, is the sole beneficial owner and the sole director of the Offeror and his address is at Suite A, 11/F., Ho Lee Commercial Building, 38-44 D’Aguilar Street, Central, Hong Kong.

– 139 –

GENERAL INFORMATION

APPENDIX III

(d) The branch share registrar and transfer agent of the Company in Hong Kong is Tricor Abacus Limited, which is located at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong.
(e) The registered office of SHK is situated at 42/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong.
(f) The registered office of the Independent Financial Adviser is situated at 2903C-6 The Centrium, 60 Wyndham Street, Central, Hong Kong.
(g) The English text of this Composite Offer Document and the accompanying Form of Acceptance shall prevail over their respective Chinese text in case of inconsistency.

– 140 –

AI assistant

XIAMEN YAN PALACE BIOENGINEERING CO., LTD. — M&A Activity 2011

49960_rns_2011-06-06_edc5e3f2-7927-4e82-b8da-5792e6dfe3fd.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Dragon Peace Limited

CONTENTS

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM SHK

SUN HUNG KAI INTERNATIONAL LIMITED

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

LETTER FROM SHK

THE OFFER

The Offer is not conditional upon any minimum level of acceptances of the Offer and is unconditional. The Offer will close on Tuesday, 28 June 2011.

Comparison of value

LETTER FROM SHK

Highest and lowest price

Total consideration

LETTER FROM SHK

Financial resources

Dealing and interest in the Company’s securities

Stamp duty

LETTER FROM SHK

Effects of accepting the Offer

Payment

Other arrangements

LETTER FROM SHK

Overseas Shareholders

Compulsory acquisition

INFORMATION ON THE GROUP

LETTER FROM SHK

INFORMATION ON THE OFFEROR

THE OFFEROR’S INTENTION ON THE GROUP

LETTER FROM SHK

PROPOSED CHANGE OF THE BOARD COMPOSITION

The Board is currently made up of seven Directors, comprising four executive Directors and three independent non-executive Directors.

Executive Directors

LETTER FROM SHK

Independent non-executive Director

LETTER FROM SHK

MAINTENANCE OF THE LISTING STATUS OF THE COMPANY

TAX IMPLICATIONS

ACCEPTANCE AND SETTLEMENT

LETTER FROM SHK

GENERAL

Sun Hung Kai International Limited

Derek Chan

LETTER FROM THE BOARD

INTRODUCTION

LETTER FROM THE BOARD

THE OFFER

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

FURTHER INFORMATION OF THE OFFER

INFORMATION OF THE GROUP

INFORMATION OF THE OFFEROR

LETTER FROM THE BOARD

INTENTION OF THE OFFEROR REGARDING THE COMPANY

INTENTION OF THE BOARD REGARDING THE COMPANY

PROPOSED CHANGE OF BOARD COMPOSITION OF THE COMPANY

MAINTAINING THE LISTING STATUS OF THE COMPANY

LETTER FROM THE BOARD

RECOMMENDATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

RECOMMENDATION

Yours faithfully,

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

UNCONDITIONAL MANDATORY GENERAL CASH OFFER BY SUN HUNG KAI INTERNATIONAL LIMITED FOR AND ON BEHALF OF DRAGON PEACE LIMITED FOR ALL THE ISSUED SHARES IN CARRY WEALTH HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED BY DRAGON PEACE LIMITED AND PARTIES ACTING IN CONCERT WITH IT)

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

XIAMEN YAN PALACE BIOENGINEERING CO., LTD. M&A Activity 2011