ZO Future Group — Proxy Solicitation & Information Statement 2003

Nov 24, 2003

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓鋒國際控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

DISCLOSEABLE TRANSACTION

18th November, 2003

* For identification purpose only

CONTENTS

		Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD
1.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	SALES AND PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
3.	INFORMATION ABOUT FAIR GOOD, EASY BILLION,
	VIEW JOY AND XIONG YUAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
4.	SOURCES OF FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
5.	REASONS FOR, AND BENEFITS OF, THE ACQUISITION . . . . . . . . . . . . . . . . . . . .	7
6.	INFORMATION ON WHITLAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
7.	GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8

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DEFINITIONS

In this circular, the following expression have the meanings set out below unless the context requires otherwise:–

“Acquisition”	the acquisition of 100% interest of Fair Good;
“Agreement”	the sales and purchase agreement dated 27th October, 2003
	among the Company and Whitlam for the acquisition of
	100% interest of Fair Good;
“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;
“Consideration”	the total sum of HK$10,600,000 pay to Whitlam, in which
	HK$6.36 million has been paid to Whitlam upon signing of
	the Agreement and the remaining balance will be paid upon
	completion of the Agreement;
“Director”	directors of the Company;
“Easy Billion”	Easy Billion International Enterprise Limited, a company
	incorporated in Hong Kong with limited liability, an indirect
	wholly owned subsidiary of Whitlam;
“Fair Good”	Fair Good Limited, a company incorporated in the British
	Virgin Islands, a wholly owned subsidiary of Whitlam. Fair
	Good has three subsidiaries which are Easy Billion
	International Enterprise Limited, View Joy Limited and
	Xiong Yuan Spinning Clothing Company Limited;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;

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DEFINITIONS

“Latest Practicable Date”	17th November, 2003, being the latest practicable date prior
	to the printing of this circular for the purpose of ascertaining
	certain information contained in this circular;
“Mr. Lei”	Mr. Lei Iat Seng is a Macau resident, who owns 100%
	interest in Whitlam;
“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;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Shareholders”	shareholders of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“US”	The United States of America;
“View Joy”	View Joy Limited, a company incorporated in the British
	Virgin Islands with limited liability, in which Whitlam
	indirectly own 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);
“Whitlam”	Whitlam Limited, a company incorporated in the Republic
	of Seychelles with limited liability, in which Mr. Lei owns
	100% interest;
“Xiong Yuan”	Xiong Yuan Spinning Clothing Company Limited（雄苑紡
	織服裝有限公司）, a company registered in the PRC with
	limited liability, in which Whitlam indirectly owns 51%
	interest (the remaining 49% are owned by Mr. Li who is not
	a connected person of the Company as defined in the Listing
	Rules);

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LETTER FROM THE BOARD

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GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓鋒國際控股有限公司[*]

(incorporated in the Cayman Islands with limited liability)

Executive Directors: Mr. Siu Kwok Kin, Garry (Chairman) Mr. Edmund Siu Mrs. Tsai Lai Wa, Jenny Mr. Sze Edvon Yeung Lung

Independent Non-executive Directors: Miss Lo Wing Yan, Emmy Mr. Poon Kuai Cheong

Registered Office: Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681 GT, George Town, Grand Cayman, British West Indies

Principal Place of Business in Hong Kong: Room 1110, 11th Floor, Lippo Sun Plaza, 28 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong

18th November, 2003

To the Shareholders of Grandtop International Holdings Limited

Dear Sir/Madam,

DISCLOSEABLE TRANSACTION

1. INTRODUCTION

Reference is made to the announcement of the Company dated 31st October, 2003 that the Company had entered into a sales and purchase agreement with Whitlam to acquire 100% of Fair Good, in which Fair Good owns 100% direct interest in Easy Billion and both 51% in direct 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, for an aggregate cash consideration of HK$10.6 million.

* For identification purpose only

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LETTER FROM THE BOARD

The Acquisition constitutes a discloseable transaction for the Company under the Listing Rules. The purpose of this circular is to provide you with further information about the Agreement as required under the Listing Rules.

2. SALES AND PURCHASE AGREEMENT

Parties to the Agreement

Buyer: the Company Seller: Whitlam

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

Date of the Agreement: 27th October, 2003

Consideration

Under the Agreement, the Company shall pay a cash 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 the Acquisition, the Board of Directors accepted to pay down payment of HK$6.36 million in cash, being sixty per cent of the Consideration, 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. There is no condition attached to the Agreement.

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$4 million for the year ending 31st March, 2004. Pursuant to the Agreement, Whitlam should pay the Company the shortfall between the warranted audited net profit after-tax earnings of HK$ 4 million and the actual results of Fair Good for the year ending 31st March, 2004.

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LETTER FROM THE BOARD

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 Main board of the Stock Exchange 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 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.

Structure of the Acquisition

The corporate structure of Fair Good prior to the Acquisition is set out below:

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

Whitlam
100%
Fair Good
100%
Easy Billion
51% 51%
49% 49%
Mr. Lei View Joy Xiong Yuan Mr. Li
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The corporate structure of Fair Good immediately upon completion of the Acquisition is set out below:

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

the Company
100%
Fair Good
100%
Easy Billion
51% 51%
49% 49%
Mr. Lei View Joy Xiong Yuan Mr. Li
----- End of picture text -----

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LETTER FROM THE BOARD

3. 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 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 31st 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 31st March, 2003 were approximately HK$3.4 million and HK$4 million respectively.

4. SOURCES OF FUNDING

The Consideration will be financed by the Company’s internal cash resources. The Directors confirm that the Acquisition will not have any material adverse effect on the working capital position of the Group.

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LETTER FROM THE BOARD

5. REASONS FOR, AND BENEFITS OF, THE ACQUISITION

The Company 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 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 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.

6. INFORMATION ON WHITLAM

Whitlam 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.

7. GENERAL

After the completion of the 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 31st March, 2003. The Acquisition therefore constitutes a discloseable transaction for the Company under the Listing Rules.

Your attention is drawn to further information contained in the Appendix to this circular.

Yours faithfully, By Order of the Board Grandtop International Holdings Limited Sze Edvon Yeung Lung

Executive Director

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best knowledge and belief, there are no other facts the omission of which make any statement herein misleading.

2. DISCLOSURE OF INTERESTS

(i) Directors

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Future Ordinance (“SFO”)) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules (collectively “Discloseable Interests or Short Positions”), were as follows:

	Long position/	Nature of	Number of shares of
Director	short position	interest	the Company held
Mr. Siu Kwok Kin, Garry	Long position	Corporate_(Note)_	180,000,000
Mrs. Tsai Lai Wa, Jenny	Long position	Corporate_(Note)_	180,000,000
Mr. Edmund Siu	Long position	Corporate_(Note)_	180,000,000

Note: These shares are registered in the name of Huge Gain Development Limited (“Huge Gain”). The entire issued share capital of Huge Gain is owned by Nerine Trust Company Limited (“Nerine Trust”). Nerine Trust is the trustee of SB Unit Trust and holds properties for the benefit of holders of units issued by SB Unit Trust. All the units issued by SB Unit Trust were held by the family members of Mr. Siu Ban, co-founder of the Group and the discretionary objects of which include Mr. Siu Kwok Kin, Garry, Mrs. Tsai Lai Wa, Jenny and Mr. Edmund Siu, being the executive directors of the Group.

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GENERAL INFORMATION

APPENDIX

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company had, under Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to he Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules or any interest which are required to be entered into the register kept by the Company pursuant to section 352 of the SFO.

(ii) Substantial Shareholders

As at the Latest Practicable Date, according to the register kept by the company pursuant to section 336 of the SFO and so far as is known to, or can be ascertained after reasonable enquiry by the Directors, the following persons had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO:

			Percentage of the
	Long position/	Number of	Company’s
Name of shareholders	short position	shares held	share capital
Huge Gain Development	Long position	180,000,000	75%
Limited_(Note)_

Note: These shares are registered in the name of Huge Gain Development Limited (“Huge Gain”). The entire issued share capital of Huge Gain is owned by Nerine Trust Company Limited (“Nerine Trust”). Nerine Trust is the trustee of SB Unit Trust and holds properties for the benefit of holders of units issued by SB Unit Trust. All the units issued by SB Unit Trust were held by the family members of Mr. Siu Ban, co-founder of the Group and the discretionary objects of which include Mr. Siu Kwok Kin, Garry, Mrs. Tsai Lai Wa, Jenny and Mr. Edmund Siu, being the executive directors of the Group.

Saved as disclosed in this circular, so far as is known to the Directors, there is no other person who had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, had a direct or indirect interests amounting to 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any members of the Group. As at the Latest Practicable Date, no short positions were recorded in the register kept by the Company under section 336 of the SFO.

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GENERAL INFORMATION

APPENDIX

3. SHARE CAPITAL

Set out below are details of the authorised and issued share capital of the Company as at the Latest Practicable Date:

Authorised: 1,000,000,000 Shares Issued and fully paid: 240,000,000 Shares	HK$ 10,000,000
	2,400,000

4. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration proceedings of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

5. DIRECTORS’ SERVICE CONTRACTS

Mr. Siu Kowk Kin, Garry, Mr. Edmund Siu and Mr. Sze Edvon Yeung Lung have entered into service agreement with the Company for an initial term of three years commencing from 3rd July, 2002, renewable automatically for successive terms of one year each commencing from the day next after the expiry of the then current term of the executive Director’s appointment, unless terminated by not less than three months’ notice in writing served by either party on the other expiring at the end of the initial term or at any time thereafter.

Save as disclosed above, as at the Latest Practicable Date, none of the directors have a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

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GENERAL INFORMATION

APPENDIX

6. MISCELLANEOUS

• (a) The registered office of the Company is at Century Yard, Cricket Square, Hutchins Drive, P.O. Box 2681 GT, George Town, Grand Cayman, British West Indies.

• (b) The principal place of business in Hong Kong is at Room 1110, 11th Floor, Lippo Sun Plaza, 28 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.

• (c) The company secretary of the Company is Mr. Edmund Siu CA (Aust.), AHKSA.

• (d) The branch share registrars of the Company in Hong Kong are Tengis Limited, G/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.

• (e) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

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