ZO Future Group — Capital/Financing Update 2003

Nov 3, 2003

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss arising from or in reliance upon the whole or any part of the contents of this announcement.

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED ���������� *

(incorporated in the Cayman Islands with limited liability)

DISCLOSEABLE TRANSACTION

SUMMARY

The Directors of the Company wish to announce that on 27th October 2003 entered into a sale and purchase agreement with Whitlam Limited, a company incorporated in the Republic of Seychelles, to acquire 100% interest of Fair Good, in which Fair Good owns 100% direct interest in Easy Billion and both 51% indirect interest in each of View Joy (the remaining 49% are owned by Mr. Lei who is not a connected person of the Company as defined in the Listing Rules) and Xiong Yuan (the remaining 49% are owned by Mr. Li who is not a connected person of the Company as defined in the Listing Rules), all of which are currently subsidiaries of Whitlam Limited, for an aggregate cash consideration of HK$10.6 million. The sales and purchase agreement constitutes a discloseable transaction of the Company under the Listing Rules of the Stock Exchange of Hong Kong Limited. A circular setting out the details of the acquisition will be dispatched to shareholders as soon as practicable.

The Directors are of the view that the above acquisitions integrate the Company’s existing business, namely (i) marketing and compliance monitoring services; and (ii) sales support services into one-stop sourcing and supply chain management business with strong emphasis and proven track record in social compliance monitoring and strong sales network of the Company in the US. The above acquisitions enable the Company to further broaden its customers’ base in the US and expand its network into Russia, South Korea and Panama.

• For identification purposes only

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement

31st October, 2003

SALES AND PURCHASE AGREEMENT

1. Parties to the sales and purchase agreement

Buyer:

Grandtop International Holdings Limited (the “Company”) (Incorporated in the Cayman Islands with limited liability)

Seller: Whitlam Limited (“Whitlam”)

(Incorporated the Republic of Seychelles with limited liability)

Whitlam and its beneficial owner - Mr. Lei are not a connected person of the Company as defined in the Stock Exchange Listing Rules.

Date of the Agreement: 27th October, 2003 Consideration: HK$10.6 million

2. Terms of the Sales and Purchase Agreement

Under the Sales and Purchase Agreement (the “Agreement”), the Company shall pay a cash consideration (“Consideration”) of HK$10.6 million. The Consideration is arrived at based on arms length negotiation between the parties and represents a price earnings multiple of approximately 5 times the consolidated after-tax earnings of HK$4 million (before minority interest) of Fair Good for the year ended 31st March, 2003.

The Board of Directors considered that the business nature of Fair Good and its subsidiaries is attractive in which merges with the best interest concerned for future business development of the Company. In order to secure this acquisition, the Board of Directors accepted to pay down payment of HK$6.36 million in cash, being sixty per cent of the Consideration as agreed by both parties, upon signing of the Agreement. The remaining Consideration will be paid upon completion of the Agreement, currently expected to be on or before the mid of November 2003.

Pursuant to the Agreement, Whitlam has warranted that the audited net profit after-tax earnings (before minority interest) of Fair Good shall be not less than HK$4 million for the year ending 31st March, 2004. Pursuant to the Agreement, Whitlam should pay the

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement 31st October, 2003

Company the shortfall between the warranted audited net profit after-tax earnings of HK$4 million and the actual results of Fair Good for the year ending 31 March 2004.

The Board of Directors of the Company is of the opinion that the price earnings multiple applied in the transaction is fair and reasonable comparing to a Company listed on the Mainboard of the Stock Exchange of Hong Kong Limited which carries out activities similar to View Joy and Xiong Yuan and shares of which are currently trading at approximately 21 times price earning multiple as at 28th October 2003. As a result, the Board of Directors believes that the offer to the Company of 5 times price earning multiple is fair and reasonable. Based on the abovementioned, the Board of Directors has considered the terms of the sales and purchase agreement have been arrived at after arm’s length negotiations between the parties concerned and the transaction are considered fair and reasonable and in the best interests of the Group.

3. Structure of the Acquisition

Before the acquisition

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Whitlam
100%
Fair Good
100%
Easy Billion
51% 51%
49% 49%
Mr. Lei View Joy Xiong Yuan Mr. Li
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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement

31st October, 2003

After the acquisition

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The Company
100%
Fair Good
100%
Easy Billion
51% 51%
49% 49%
Mr. Lei View Joy Xiong Yuan Mr. Li
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4. Information about Fair Good, Easy Billion, View Joy and Xiong Yuan

The principal activities of Fair Good and Easy Billion are investment holding of View Joy and Xiong Yuan. View Joy and Xiong Yuan primarily provide apparel sourcing, quality assurance and social compliance monitoring services to customers located in the Russia, South Korea, Panama and the US. It has also engaged in the sales of quality denim and jeans products in the PRC since June 2003. Quality assurance is to monitor and maintain the products quality control so as to meet the international quality standard and customers requirements. Social compliance is to access suppliers’ manufacturing practices and standards in order to ensure that the suppliers are fully conformed of international labour standards which is consistent with the Group’s principal activities. In addition, View Joy and Xiong Yuan have its own denim and jeans brand names registered and have its own sales network established in the PRC. Apparel sourcing, quality assurance and social compliance monitoring services offered by View Joy and Xiong Yuan enable overseas retailers and international brands to ensure the quality (both in products and social compliance assurance) and timely delivery of products from their suppliers and manufacturers and that such suppliers also conform to international codes of labour practices. View Joy and Xiong Yuan currently has one office in the PRC, a service centre in Macau and a team of 30 staff from apparel sourcing, quality assurance and social compliance monitoring functions ensuring quality products for exporting customers located in the Russia, South Korea, Panama and the US. At present, approximately 44%, 37%, 11%, 8% of View Joy and Xiong Yuan’s sales are derived from customers in Russia, South Korea, Panama and the US respectively. In terms of the

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement

31st October, 2003

type of products serviced, turnover is currently derived from apparel products. Furthermore, in June 2003, View Joy and Xiong Yuan have commenced its sales network for quality denim and jeans products under its registered brand names in the PRC. View Joy and Xiong Yuan designs, produces patterns and makes samples of denim and jeans products in-house while subcontracting the manufacturing process to factories in Dongguan, the PRC. Since commencement of the retail operations, sales are promising.

For the two years ended 31st March, 2003, the consolidated turnover of Fair Good was approximately HK$49 million and HK$60 million respectively. The consolidated net assets value of Fair Good for the two years ended 31 March 2003 was approximately HK$4.5 million and HK$8.5 million respectively. The consolidated after-tax profits (before minority interest) for the two years ended 31 March 2003 were approximately HK$3.4 million and HK$4 million respectively.

SOURCES OF FUNDING

The Consideration will be financed by the Company’s internal cash resources.

REASONS FOR, AND BENEFITS OF, THE AGREEMENT

Grandtop International Holdings Limited is principally engaged in the provision of (i) marketing and compliance monitoring services; and (ii) sales support services, to garment and fashion manufacturers in Hong Kong with production facilities situated in Hong Kong and/or the PRC with the US being their principal export market. The Directors are of the view that the above acquisitions integrate the Company’s existing business into one-stop sourcing and supply chain management business with strong emphasis and proven track record in social compliance monitoring and strong sales network of the Company in the US. The above acquisitions enable the Company to further broaden its customers’ base in the US and expand its network into the Russia, South Korea and Panama. It is envisaged that both View Joy and Xiong Yuan will benefit from the Company’s existing business resources and support.

It is envisaged that existing operations of Fair Good, Easy Billion, View Joy and Xiong Yuan will be maintained and that key management of Fair Good, Easy Billion, View Joy and Xiong Yuan will be retained. The Company will also appoint its directors onto the boards of Fair Good, Easy Billion, View Joy and Xiong Yuan upon completion of the Agreement but it has not yet determined at this stage the exact number of members to be appointed to these companies.

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement

31st October, 2003

INFORMATION ON WHITLAM LIMITED

Whitlam Limited is wholly owned by Mr. Lei who is not a connected person of the Company as defined in the Stock Exchange Listing Rules which was introduced to Mr. Sze by a PRC agent who is a connected person under the Listing Rules, at a social function in Shenzhen, the PRC about 6 months ago. To the best knowledge of the Directors, Mr. Lei has over 7 years’ experience in the garment industry in the PRC.

GENERAL

After the completion of the sales and purchase agreement, Fair Good, Easy Billion will become a wholly owned subsidiary of the Company and View Joy and Xiong Yuan will become a non wholly owned subsidiary of the Company. The Company has assessed the size of its investment based on the total consideration of HK$10.6 million, which is above 15% of the net tangible assets value of the Group as set annual report for the year ended 31 March 2003. The acquisition therefore constitutes a discloseable transaction for the Company under the Listing Rules. A circular containing details about the transaction, the sales and purchase agreement and other relevant information will be dispatched to shareholders of the Company as soon as practicable.

DEFINITIONS

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

• “Board”

The board of directors of the Company

• “Company” Grandtop International Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Stock Exchange

• “Easy Billion” Easy Billion International Enterprise Limited, a company incorporated in Hong Kong with limited liability, an indirectly wholly owned subsidiary of Whitlam Limited

• “Fair Good” Fair Good Limited, a company incorporated in the British Virgin Islands, a wholly owned subsidiary of Whitlam Limited. Fair Good has three subsidiaries which are Easy Billion International Holdings Limited, View Joy Limited and Xiong Yuan Spinning Clothing Company Limited

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement

31st October, 2003

• “Group” the Company and its subsidiaries “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Listing Rules” The Rules Governing the Listing of Securities on the Stock Exchange “Mr. Lei” Mr. Lei Iat Seng is a Macau resident, who owns 100% interest in Whitlam Limited

• “Mr. Li” Mr. Li Man Qin is a PRC resident, who owns 49% interest in Xiong Yuan Spinning Clothing Company Limited

• “Mr. Sze” Mr. Sze Edvon Yeung Lung, an executive director of Grandtop International Holdings Limited

• “PRC” the People’s Republic of China

• “View Joy” View Joy Limited, a company incorporated in the British Virgin Islands with limited liability, in which Whitlam Limited indirectly owns 51% interest (the remaining 49% are owned by Mr. Lei Iat Seng who is not a connected person of the Company as defined in the Listing Rules)

• “Xiong Yuan” Xiong Yuan Spinning Clothing Company Limited��������� ���, a company registered in the PRC with limited liability, in which Whitlam Limited indirectly owns 51% interest (the remaining 49% are owned by Mr. Li Man Qin who is not a connected person of the Company as defined in the Listing Rules)

By Order of the Board Sze Edvon Yeung Lung Executive Director

Hong Kong, 31st October, 2003

Please also refer to the published version of this announcement in The Standard.

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED – Announcement

31st October, 2003