EW00439 CIR

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					   THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION


If you are in any doubt as to any aspect of this circular or as to the action you should take, you should consult a licensed securities dealer or
registered institution in securities, bank manager, solicitor, professional accountant or other professional advisor.
If you have sold or transferred all your shares in Climax International Company Limited, you should at once hand this circular and the
accompanying form of proxy to the purchaser or transferee or to the bank, the licensed securities dealer or registered institution or other agent
through whom the sale or transfer was effected for transmission to the purchaser or transferee.
This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the shares or
other securities of the Company.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this
circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the contents of this circular.




          CLIMAX INTERNATIONAL COMPANY LIMITED
                                          (Incorporated in Bermuda with limited liability)
                                                           (Stock code: 439)
                        (1) STATUS ON RESUMPTION
    (2) CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE
         (3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS
     (4) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER;
 CONNECTED TRANSACTIONS AND APPLICATION FOR WHITEWASH WAIVER
                        (5) BONUS ISSUE OF SHARES
               (6) CONTINUING CONNECTED TRANSACTIONS
                (7) NOTICE OF SPECIAL GENERAL MEETING
                                                               Underwriters




    World Treasure Global Limited
                                                            Financial Adviser




                                                    Independent Financial Adviser




A letter of advice from Messis Capital Limited to the Independent Board Committee and the Independent Shareholders is set out on pages 92 to
121 of this circular.
To qualify for the Open Offer and the Bonus Issue, a Qualifying Shareholder’s name must appear on the register of members of the Company on
the Record Date, which is currently expected to be 10 April 2012. In order to be registered as members of the Company on the Record Date, all
transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor
Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on 2 April 2012.
A notice convening the SGM to be held at 3/F, Nexxus Building, 77 Des Voeux Road Central, Hong Kong at 11:00 a.m. on 28 March 2012 is
set out on pages SGM-1 to SGM-5 of this circular. Whether or not you intend to attend the SGM, you are requested to complete the
accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in
Hong Kong, Tricor Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong as soon as possible and in any event
not later than 48 hours before the time fixed for the holding of the SGM or any adjournment thereof. Completion and return of the form of
proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting should you so wish. In such event, the
instrument appointing a proxy shall be deemed revoked.
If the Underwriters terminate the Underwriting Agreement or if the conditions to the Underwriting Agreement have not been fulfilled in
accordance therewith, the Open Offer will not proceed. Shareholders and potential investors are advised to exercise due caution when
dealing in the Shares, and if they are in any doubt about their position they should consult their professional advisors.



                                                                                                                             5 March 2012
                                                                        CONTENTS


                                                                                                                                                              Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1

Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            10

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               13

Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                       90

Letter from Messis Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  92

Appendix I              —       Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              I-1

Appendix II             —       Financial information of the Target Group . . . . . . . . . . . . . . . . . . . . . . . . .                                    II-1

Appendix IIA —                  Financial information of New Spring Offset . . . . . . . . . . . . . . . . . . . . . . . . .                                  IIA-1

Appendix III —                  Unaudited pro forma financial information of the Enlarged Group . . . .                                                       III-1

Appendix IV —                   Statement of pro forma net tangible asset of the Enlarged Group
                                  for the Open Offer only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   IV-1

Appendix V              —       Profit/(Loss) forecasts up to the year ending 31 March 2013
                                  and comfort letters on 2012 Guaranteed Amount and Forecasts . . . . .                                                        V-1

Appendix VI —                   General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               VI-1

Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM-1




                                                                                –i–
                                         DEFINITIONS


     In this circular, the following expressions shall have the following meanings unless the context
requires otherwise:

‘‘Acquired Assets’’                  the machinery, equipment, furniture, office equipment, computer
                                     equipment together with all the data stored therein,
                                     communication equipment and including, without limitation, all
                                     rights, title, benefits and interests of NSG therein

‘‘Acquisition’’                      the sale and purchase of the Sale Shares pursuant to the S&P
                                     Agreement

‘‘acting in concert’’                has the meaning ascribed to it under the Takeovers Code

‘‘Adjusted Share(s)’’                ordinary share(s) of HK$0.01 each in the capital of the Company
                                     immediately after the Capital Reorganisation becoming effective

‘‘Announcements’’                    the announcements of the Company dated 16 January 2012, 20
                                     January 2012 and 5 March 2012 in relation to: (1) the status on
                                     Resumption; (2) Capital Reorganisation and change of board lot
                                     size; (3) very substantial acquisition of paper business; (4)
                                     fundraising by ways of Subscription and Open Offer, connected
                                     transactions and application for Whitewash Waiver; (5) Bonus
                                     Issue of Shares; (6) continuing connected transactions; and (7)
                                     despatch of this Circular

‘‘Annual Caps’’                      the maximum aggregate annual values of the transactions
                                     contemplated under the Master Agreement for the production of
                                     printing orders by the Target Group for New Spring Label for
                                     each of the three years ending 31 March 2015

‘‘Application Form’’                 the application form for use by the Qualifying Shareholders to
                                     apply for the Offer Shares

‘‘Asset Purchase’’                   the acquisition of the Acquired Assets as agreed by Sky Will
                                     from NSG at an agreed consideration

‘‘Asset Purchase Agreement’’         the agreement dated 31 January 2011 entered into between Sky
                                     Will as the purchaser and NSG as the vendor for the sale and
                                     purchase of the Acquired Assets

‘‘associate(s)’’                     has the same meaning ascribed thereto in the Listing Rules

‘‘Board’’                            board of Directors

‘‘Bonus Issue’’                      the proposed issue of five (5) Bonus Shares for every seven (7)
                                     then Adjusted Shares

‘‘Bonus Share(s)’’                   41,023,612 new Adjusted Share(s) which may fall to be allotted
                                     and issued by way of Bonus Issue



                                               –1–
                                 DEFINITIONS


‘‘Business Day’’             means a day on which banks are generally open for business in
                             Hong Kong (excluding Saturdays, Sundays and public holidays)

‘‘BVI’’                      British Virgin Islands

‘‘Bye-law(s)’’               Bye-laws of the Company

‘‘Capital Reduction’’        upon the Share Consolidation taking effect, the proposed
                             reduction of the nominal value of the issued share capital of the
                             Company from HK$0.20 per Consolidated Share to HK$0.01 per
                             Adjusted Share by way of cancellation of HK$0.19 of the paid up
                             capital on each Consolidated Share

‘‘Capital Reorganisation’’   the Share Consolidation, the Capital Reduction and the Share
                             Subdivision

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

‘‘CIL’’                      Climax Investments Limited, a former wholly-owned subsidiary
                             of the Company before a disposal completed on 17 March 2010

‘‘CIL Group’’                CIL and its subsidiaries

‘‘Circular’’                 this circular of the Company in relation to, inter alia, the
                             transactions under the Resumption Proposal

‘‘Companies Act’’            Companies Act 1981 of Bermuda (as amended from time to time)

‘‘Companies Ordinance’’      the Companies Ordinance (Chapter 32 of the Laws of Hong
                             Kong)

‘‘Company’’                  Climax International Company Limited (stock code: 439), a
                             company incorporated in Bermuda with limited liability and the
                             Shares of which are listed on the Stock Exchange

‘‘connected person(s)’’      has the same meaning ascribed thereto in the Listing Rules

‘‘Consideration’’            HK$110 million, being the consideration payable by the
                             Company to the Vendor for the Sale Shares

‘‘Consideration Shares’’     an aggregate of 200,000,000 Adjusted Shares to be allotted and
                             issued by the Company to the Vendor upon the completion of the
                             S&P Agreement at an issue price of HK$0.10 per Adjusted Share
                             pursuant to the S&P Agreement




                                        –2–
                                      DEFINITIONS


‘‘Consolidated Share(s)’’         ordinary share(s) of HK$0.20 each in the share capital of the
                                  Company after the Share Consolidation becoming effective but
                                  before the Capital Reduction and the Share Subdivision

‘‘Director(s)’’                   director(s) of the Company

‘‘Enlarged Group’’                the Group and the Target Group

‘‘Excluded Shareholder(s)’’       those Overseas Shareholder(s) to whom the Company (having
                                  obtained relevant and necessary legal opinions) considers it
                                  necessary or expedient not to offer the Offer Shares on account
                                  of the legal restrictions under the laws of the relevant place or the
                                  requirements of the relevant regulatory body or stock exchange in
                                  that place

‘‘Executive’’                     the Executive Director of the Corporate Finance Division of the
                                  SFC or any delegate of the Executive Director

‘‘First Right Deed’’              the deed of undertakings dated 29 February 2012 given by Mr.
                                  Ng and Ms. Li in favour of the Company

‘‘Group’’                         the Company and its subsidiaries

‘‘HKSCC’’                         Hong Kong Securities Clearing Company Limited

‘‘HK$’’ and ‘‘cents’’             Hong Kong dollars and cents, the lawful currency of Hong Kong

‘‘Hong Kong’’                     the Hong Kong Special Administrative Region of the PRC

‘‘ICAC’’                          the Independent Commission Against Corruption

‘‘ICAC Investigation’’            the investigation by the ICAC

‘‘Independent Board Committee’’   an independent board committee comprising all the independent
                                  non-executive Directors

‘‘Independent Shareholders’’      Shareholders other than (i) the Subscriber, Mr. Wong, their
                                  respective associates and parties acting in concert with any of
                                  them; (ii) the Vendor, its ultimate beneficial owners, their
                                  respective associates and parties acting in concert with any of
                                  them; and (iii) those who are interested in, or involved in, the
                                  S&P Agreement, the Underwriting Agreement, the Subscription
                                  Agreement, the Whitewash Waiver and the Master Agreement.
                                  For the avoidance of doubt, Shareholders who are only interested
                                  in the Bonus Issue are Independent Shareholders




                                             –3–
                                       DEFINITIONS


‘‘Independent Third Party(ies)’’   third party(ies) independent of the Company and connected
                                   person(s) of the Company and is/are not connected person(s) of
                                   the Company

‘‘Kingston Securities’’            Kingston Securities Limited, a licensed corporation to carry out
                                   business in type 1 regulated activity (dealing in securities) under
                                   the SFO, being one of the Underwriters

‘‘Last Acceptance Date’’           25 April 2012, being the last date for acceptance of and payment
                                   for the Offer Shares

‘‘Last Trading Day’’               22 September 2008, being the last trading day prior to the date of
                                   this circular

‘‘Latest Practicable Date’’        2 March 2012, being the latest practicable date prior to the
                                   despatch of this Circular for ascertaining certain information in
                                   this Circular

‘‘Listing Committee’’              the Listing Committee of the Stock Exchange

‘‘Listing Division’’               the Listing Division of the Stock Exchange

‘‘Listing Rules’’                  the Rules Governing the Listing of Securities on the Stock
                                   Exchange

‘‘Lock Up Arrangement’’            the provisions under the Subscription Agreement and the
                                   Underwriting Agreement respectively that the Subscriber is
                                   restricted from transferring, charging or pledging any
                                   Subscription Shares and any Underwritten Offer Shares taken up
                                   by the Subscriber for six months from Resumption

‘‘Long Stop Date’’                 30 June 2012 (or such other date as the parties may agree in
                                   writing), being the long stop date of the S&P Agreement, the
                                   Subscription Agreement and the Underwriting Agreement

‘‘Master Agreement’’               an agreement entered into between the Target Company and New
                                   Spring Label on 29 February 2012 for the production of printing
                                   orders

‘‘Messis Capital’’                 Messis Capital Limited, a corporation licensed under the SFO to
                                   conduct type 6 (advising on corporate finance) regulated activity
                                   as defined under the SFO, the independent financial adviser to the
                                   Independent Board Committee and the Independent Shareholders

‘‘Mr. Ng’’                         Mr. Ng Man Chan, one of the directors of the Target Company

‘‘Mr. Wong’’                       Mr. Wong Hin Shek, an executive Director




                                              –4–
                                DEFINITIONS


‘‘Ms. Li’’                  Ms. Li Mi Lai, the spouse of Mr. Ng

‘‘New Spring Label’’        New Spring Label & Packaging Limited, a company incorporated
                            in Hong Kong in which Mr. Ng and Ms. Li have beneficial
                            interests

‘‘New Spring Offset’’       新高準柯式印刷(深圳)有限公司 (New Spring Offset Printing
                            (Shenzhen) Limited), a wholly foreign owned enterprise
                            established in the PRC

‘‘New Spring Paper’’        新高準紙製品(深圳)有限公司 (New Spring Paper Products
                            (Shenzhen) Limited), a wholly foreign owned enterprise
                            established in the PRC and a wholly owned subsidiary of Sky
                            Will before completion of the Reorganisation

‘‘New Spring (SW)’’         New Spring (SW) Printing & Packaging Limited, a company
                            incorporated in Hong Kong and a wholly owned subsidiary of
                            Sky Will

‘‘NSG’’                     New Spring Group Company Limited, a company incorporated in
                            Hong Kong. NSG was the vendor of New Spring Offset and the
                            vendor under the Asset Purchase

‘‘Offer Price’’             HK$0.10 per Offer Share

‘‘Offer Share(s)’’          459,464,456 new Adjusted Share(s) to be issued by the Company
                            pursuant to the Open Offer

‘‘Open Offer’’              the issue of Offer Shares by the Company on the basis of eight
                            (8) Offer Shares for every Adjusted Share to the Qualifying
                            Shareholders at the Subscription Price

‘‘Open Offer Documents’’    the Prospectus and the Application Form

‘‘Overseas Shareholders’’   Shareholders with registered address (as shown in the register of
                            member of the Company on the Record Date) which are outside
                            Hong Kong

‘‘PRC’’ or ‘‘China’’        the People’s Republic of China, for the purposes of this circular
                            and for geographical reference only, excludes Taiwan, the Macao
                            Special Administrative Region and Hong Kong (unless otherwise
                            indicated)

‘‘Promissory Note’’         the promissory note to be issued by the Company in the principal
                            amount of HK$55,000,000 within seven Business Days after the
                            issuance of the 2012 Audited Accounts with maturity date falling
                            two calendar years from the date of issue




                                      –5–
                                    DEFINITIONS


‘‘Prospectus’’                  the document containing details of the Open Offer to be
                                despatched to the Shareholders

‘‘Qualifying Shareholder(s)’’   the Shareholders, whose names appear on the register of members
                                of the Company as at the close of business on the Record Date,
                                other than the Excluded Shareholders

‘‘Record Date’’                 the date by reference to which entitlements to the Open Offer and
                                the Bonus Issue will be determined

‘‘Registrar’’                   Tricor Secretaries Limited, the Company’s branch share registrar
                                in Hong Kong

‘‘Reorganisation’’              the reorganisation of the corporate structure of the Target Group
                                comprising (i) Sky Will acquired the entire issued share capital of
                                New Spring Offset; and (ii) the completion of deregistration of
                                New Spring Paper

‘‘Resumption’’                  the resumption of trading in the Shares/Adjusted Shares on the
                                Stock Exchange

‘‘Resumption Conditions’’       the conditions for the Resumption as set out in the letter dated 14
                                December 2011 from the Stock Exchange to the Company, which
                                had been set out in the same order in the announcement of the
                                Company dated 16 January 2012

‘‘Resumption Proposal’’         the proposal compiled by Veda Capital on behalf of the Company
                                dated 20 January 2011 for the purpose of seeking approval of the
                                Stock Exchange on the Resumption and the subsequent related
                                submissions to the Stock Exchange

‘‘RMB’’                         Renminbi, the lawful currency of the PRC

‘‘S&P Agreement’’               the sale and purchase agreement dated 20 January 2011 (as
                                supplemented on 30 September 2011 and 29 February 2012
                                respectively) entered into between the Vendor and the Company
                                in relation to the Acquisition

‘‘Sale Shares’’                 100 shares of the Target Company, being the entire issued share
                                capital of the Target Company

‘‘SFC’’                         Securities and Futures Commission of Hong Kong

‘‘SFO’’                         Securities and Futures Ordinance (Chapter 571 of the Laws of
                                Hong Kong)




                                           –6–
                                   DEFINITIONS


‘‘SGM’’                        a special general meeting of the Company to be convened to
                               consider and, if thought fit, approve, amongst other, the Capital
                               Reorganisation, the Acquisition, the Open Offer (including the
                               absence of excess application arrangement), the Subscription, the
                               Whitewash Waiver, the Bonus Issue, the Master Agreement and
                               the transactions contemplated thereunder (including the Annual
                               Caps)

‘‘SGM Results Announcement’’   an announcement of the Company to be published on the date of
                               the SGM stating the results of the SGM

‘‘Share Consolidation’’        the consolidation of every 20 issued and unissued Shares of
                               HK$0.01 each in the share capital of the Company into one
                               Consolidated Share of HK$0.20 each

‘‘Share Subdivision’’          the subdivision of each authorized but unissued Consolidated
                               Share into 20 Adjusted Shares

‘‘Shareholder(s)’’             holder(s) of the Share(s) or Adjusted Shares, as the case may be

‘‘Share(s)’’                   ordinary shares of HK$0.01 each in the share capital of the
                               Company

‘‘Sky Will’’                   Sky Will Printing & Packaging Limited, a wholly owned
                               subsidiary of the Target Company

‘‘Stock Exchange’’             The Stock Exchange of Hong Kong Limited

‘‘Subscriber’’                 the subscriber under the Subscription Agreement, i.e. World
                               Treasure Global Limited which is a company incorporated in the
                               BVI and wholly owned by Mr. Wong

‘‘Subscriber Undertaking’’     the undertaking dated 29 February 2012 provided by the
                               Subscriber in favour of the Company that it will not transfer,
                               charge or pledge any of its interest in the Company for the period
                               of second six months up to two years from the date of the
                               Resumption, resulting the Subscriber to cease to be the
                               controlling Shareholder

‘‘Subscription’’               the subscription of the Subscription Shares in the amount of
                               HK$45 million by the Subscriber

‘‘Subscription Agreement’’     the agreement dated 29 February 2012 entered into between the
                               Company and the Subscriber in respect of the Subscription

‘‘Subscription Price’’         HK$0.10 per Subscription Share pursuant to the Subscription
                               Agreement




                                          –7–
                                    DEFINITIONS


‘‘Subscription Share(s)’’       450,000,000 new Adjusted Share(s) to be issued and allotted
                                under the Subscription

‘‘Suspension’’                  the suspension of trading in the Shares since 23 September 2008

‘‘Sweet Wishful’’               Sweet Wishful Limited, a substantial Shareholder and is wholly
                                owned by Mr. Deng Junjie

‘‘Takeovers Code’’              the Hong Kong Code on Takeovers and Mergers

‘‘Target Company’’              Sky Will Printing & Packaging (Holdings) Limited, a company
                                incorporated in the BVI and is wholly-owned by the Vendor

‘‘Target Group’’                the Target Company and its subsidiaries upon completion of the
                                Reorganisation

‘‘Underwriters’’                the Subscriber and Kingston Securities

‘‘Underwriting Agreement’’      the underwriting agreement dated 29 February 2012 entered into
                                between the Company and the Underwriters in relation to the
                                Open Offer

‘‘Underwritten Offer Shares’’   all the Offer Shares, being 459,464,456 Offer Shares (assuming
                                no issue of Shares from the date of the Underwriting Agreement
                                to the Record Date)

‘‘USA’’                         United States of America

‘‘Veda Capital’’                Veda Capital Limited, a corporation licensed under the SFO to
                                conduct type 6 (advising on corporate finance) regulated activity
                                as defined under the SFO and is wholly and beneficially owned
                                by Mr. Wong, the financial adviser to the Company in respect of
                                the Resumption

‘‘Vendor’’                      Sky Will Printing & Packaging (BVI) Limited, a company
                                incorporated in the BVI and is owned as to 30% by Mr. Chan
                                Fook Kai; as to 30% by Mr. Kao Wai Kwong, Eric and as to 40%
                                by Mr. Fung Ming

‘‘Whitewash Waiver’’            a waiver of the obligation of the Subscriber and parties acting in
                                concert with it to make a mandatory general offer for all the
                                Adjusted Shares not already owned or agreed to be acquired by
                                them as a result of the Subscription and its underwriting
                                obligation under the Underwriting Agreement pursuant to Note 1
                                on dispensations from Rule 26 of the Takeovers Code by the
                                Executive




                                           –8–
                                                    DEFINITIONS


‘‘1st Deposit’’                                HK$5 million paid by the Company to the Vendor as refundable
                                               deposit within 5 Business Days after signing of the S&P
                                               Agreement and shall be used as partial payment to settle the
                                               Consideration pursuant to the S&P Agreement

‘‘2nd Deposit’’                                HK$10 million payable by the Company to the Vendor as
                                               refundable deposit within 7 Business Days after approval of the
                                               S&P Agreement by the Shareholders at the SGM and shall be
                                               used as partial payment to settle the Consideration pursuant to the
                                               S&P Agreement

‘‘2012 Audited Accounts’’                      the audited accounts of the Target Group for the year ending 31
                                               March 2012 to be prepared in accordance with the generally
                                               accepted accounting principles in Hong Kong by an accounting
                                               firm as agreed by the Company and the Vendor

‘‘2012 Guaranteed Amount’’                     the amount undertaken by the Vendor to the Company that the
                                               2012 Net Profit will not be less than HK$16 million

‘‘2012 Net Profit’’                            the audited net profit after tax and before extraordinary items of
                                               the Target Group for the year ending 31 March 2012 under the
                                               2012 Audited Accounts calculated in accordance with the
                                               generally accepted accounting principles in Hong Kong

‘‘%’’                                          per cent

* English name translation is for identification purpose only




                                                                –9–
                                           EXPECTED TIMETABLE


      The expected timetable for the Capital Reorganisation, the Open Offer and the Bonus Issue set out
below is for indicative purposes only and has been prepared on the assumption that all the conditions of
the Capital Reorganisation, the Open Offer and the Bonus Issue will be fulfilled. The expected timetable
is subject to change, and any changes will be announced in a separate announcement by the Company as
and when appropriate.

                                                                                                                          2012

Latest time for lodging proxy forms for the SGM . . . . . . . . . . . . . . 11:00 a.m. on Monday, 26 March

Expected time and date of the SGM . . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on Wednesday, 28 March

SGM Results Announcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 28 March

Effective time and date of the Capital Reorganisation
  and change of board lot size . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Thursday, 29 March

Free exchange of existing Share certificates for
  Adjusted Share certificates commences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 29 March

Last day of cum-entitlements of the
  Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 29 March

First day of ex-entitlements of the Open Offer and
  the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 30 March

Latest time for lodging transfer of the Adjusted Shares in
  order to qualify for the Open Offer and the Bonus Issue . . . . . . . . . . 4:30 p.m. on Monday, 2 April

Closure of register of members to determine the eligibility
  of the Open Offer and the Bonus Issue (both dates inclusive) . . Tuesday, 3 April to Tuesday, 10 April

Record Date for the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 10 April

Despatch of the Open Offer Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 11 April

Latest time for acceptance of and payment for the Offer Shares . . . . 4:00 p.m. on Wednesday, 25 April

Latest time for termination of the Underwriting Agreement . . . . . . . . . 4:00 p.m. on Monday, 30 April

Announcement of results of the Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 30 April

Despatch of certificates for Offer Shares and Bonus Shares . . . . . . . . . . . . . . . . . . . .Thursday, 3 May

If the Open Offer is terminated, refund cheques
   to be despatched on or before. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 3 May

Completion of the Acquisition, the Subscription,
 the Open Offer and the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Thursday, 3 May




                                                            – 10 –
                                              EXPECTED TIMETABLE


                                                                                                                                2012

Free exchange of existing Share certificates for
  Adjusted Share certificates ends (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 4 May

Resumption of trading in the Adjusted Shares,
 including, inter alia, the Offer Shares
 and the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 7 May

Matching of odd lots of the Adjusted Shares commences . . . . . . . . . . . . 9:00 a.m. on Monday, 7 May

Matching of odd lots of the Adjusted Shares ends . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 25 May

Notes:

1.       For the avoidance of doubt:

         (a)    the Consideration Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and
                (ii) are not entitled to the Bonus Shares under the Bonus Issue;

         (b)    the Subscription Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and
                (ii) are not entitled to the Bonus Shares under the Bonus Issue;

         (c)    the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue; and

         (d)    the Bonus Shares do not have the entitlements to subscribe for the Offer Shares under the Open Offer,

         since the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares will be issued after the
         Record Date.

2.       The certificates of the Adjusted Shares will be available for collection within ten (10) Business Days after the submission of
         the existing Share certificates for exchange. Existing Share certificates will not be accepted for delivery, trading and
         settlement purposes on and after Monday, 7 May 2012.

3.       All references to time in this circular are references to Hong Kong time.


EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND
PAYMENT FOR THE OPEN OFFER

If there is:

.        a tropical cyclone warning signal number 8 or above, or

.        a ‘‘black’’ rainstorm warning

         (i)    in force in Hong Kong at any local time before 12:00 noon and no longer in force after
                12:00 noon on the Last Acceptance Date, the latest time for acceptance of and payment for
                the Offer Shares will not take place at 4:00 p.m. on the Last Acceptance Date, but will be
                extended to 5:00 p.m. on the same day instead;




                                                                – 11 –
                                   EXPECTED TIMETABLE


     (ii)   in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Last
            Acceptance Date, the latest time for acceptance of and payment for the Offer Shares will not
            take place on the Last Acceptance Date, but will be rescheduled to 4:00 p.m. on the
            following business day which does not have either of those warnings in force at any time
            between 9:00 a.m. and 4:00 p.m..

     If the latest time for acceptance of and payment for the Offer Shares does not take place on the
Last Acceptance Date, the dates mentioned in the section headed ‘‘Expected Timetable’’ in this circular
may be affected. An announcement will be made by the Company in such event.




                                                 – 12 –
                                LETTER FROM THE BOARD




       CLIMAX INTERNATIONAL COMPANY LIMITED
                              (Incorporated in Bermuda with limited liability)
                                           (Stock code: 439)

Executive Director                                                           Registered office
Mr. Wong Hin Shek (Chief Executive Officer)                                  Clarendon House
                                                                             2 Church Street
Independent non-executive Directors                                          Hamilton HM11
Mr. Lau Man Tak                                                              Bermuda
Mr. Man Kwok Leung
Dr. Wong Yun Kuen                                                            Principal place of business
                                                                             Unit 906, 9/F
                                                                             Wings Building
                                                                             110–116 Queen’s Road Central
                                                                             Central, Hong Kong

                                                                             5 March 2012

To the Shareholders

Dear Madam/Sir,

                        (1) STATUS ON RESUMPTION
    (2) CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE
         (3) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS
     (4) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER;
            CONNECTED TRANSACTIONS AND APPLICATION FOR
                            WHITEWASH WAIVER
                        (5) BONUS ISSUE OF SHARES
               (6) CONTINUING CONNECTED TRANSACTIONS
                (7) NOTICE OF SPECIAL GENERAL MEETING

     References are made to the Announcements.

      The purpose of this Circular is to provide you with, among other things, further information in
respect of (1) the status on Resumption; (2) Capital Reorganisation and change of board lot size; (3)
very substantial acquisition of paper business; (4) fundraising by ways of the Subscription and the Open
Offer, connected transactions and application for Whitewash Waiver; (5) Bonus Issue of Shares; and (6)
continuing connected transactions; (7) a letter from the Independent Board Committee in relation to the
Acquisition, the Subscription, the Open Offer, the Whitewash Waiver, the Master Agreement and the
transactions contemplated thereunder (including the Annual Caps); (8) a letter of advice from Messis




                                                  – 13 –
                                LETTER FROM THE BOARD


Capital to the Independent Board Committee and the Independent Shareholders in relation to the
Acquisition, the Subscription, the Open Offer (including the absence of excess application arrangement),
the Whitewash Waiver, the Master Agreement and the transactions contemplated thereunder (including
the Annual Caps); and (9) a notice to convene the SGM.

(1)   STATUS ON RESUMPTION

     On 22 September 2008, the ICAC executed a search warrant at the then Company’s principal place
of business in Hong Kong. The Company was informed by the ICAC that certain then officers of the
Group were arrested for offences under the Prevention of Bribery Ordinance and Theft Ordinance on the
same day.

     On 23 September 2008, trading of the Shares was suspended at the request of the Company
pending the release of an announcement in relation to price sensitive information.

      On 28 January 2010, the Stock Exchange informed the Company that in view of the prolonged
suspension of trading in the Shares, the delisting procedures set out in Practice Note 17 to the Listing
Rules have been applied to the Company and the first delisting stage commenced on 23 September
2008.

      On 10 August 2010, the Stock Exchange has decided to place the Company in the second stage of
delisting under Practice Note 17 to the Listing Rules with effect from 10 August 2010.

     The Company is pleased to announce that the Stock Exchange decided to allow the Company to
proceed with the Resumption Proposal subject to the following Resumption Conditions to be fulfilled by
13 June 2012:

      1.   Completion of the Acquisition, the Subscription, the Open Offer, the Bonus Issue and all
           transactions contemplated under the Resumption Proposal.

      2.   Inclusion in the Circular the following:

           (a)   detailed disclosure of the Resumption Proposal which is comparable to prospectus
                 standards;

           (b)   profit forecasts of the Target Group and the Enlarged Group for each of the two years
                 ending 31 March 2013 together with reports from the auditors and the financial adviser
                 under paragraph 29(2) of Appendix 1b of the Listing Rules; and

           (c)   a pro forma balance sheet upon completion of the Acquisition, the Subscription, the
                 Open Offer and the Bonus Issue and a comfort letter from the auditors under Rule 4.29
                 of the Listing Rules.

      3.   Informing the market of all material information relating to the ICAC Investigation and its
           implications on the Company.

      4.   Provision of an internal control review report before resumption confirming the Group has an
           adequate and effective internal control system.




                                                 – 14 –
                                  LETTER FROM THE BOARD


    The Company should also comply with the Listing Rules. The Stock Exchange may modify the
Resumption Conditions if the Company’s situation changes.

      In respect of Resumption Condition 1, details of the Acquisition, the Subscription, the Open Offer,
the Bonus Issue and all transactions under the Resumption Proposal has been set out in the
Announcements and this Circular. In respect of Resumption Conditions 2(a), (b) and (c), the required
disclosures had been included in this Circular. In respect of Resumption Conditions 3 and 4, separate
announcement(s) will be made by the Company before Resumption.

(2)   CAPITAL REORGANISATION AND CHANGE OF BOARD LOT SIZE

      The Company proposed to effect the Capital Reorganisation which involves:

      (i)    Share Consolidation: the consolidation of every 20 issued and unissued Shares of HK$0.01
             each into 1 Consolidated Share of HK$0.20 each;

      (ii)   Capital Reduction: upon the Share Consolidation taking effect, the proposed reduction of the
             issued share capital of the Company by cancelling the issued share capital to the extent of
             HK$0.19 on each issued Consolidated Share in the share capital of the Company such that
             the nominal value of the issued Consolidated Share will be reduced from HK$0.20 each to
             HK$0.01 each; and

      (iii) Share Subdivision: upon the Share Consolidation taking effect, the subdivision of each
            authorized but unissued Consolidated Share of HK$0.20 each into 20 Adjusted Shares of
            HK$0.01 each.

      As at the Latest Practicable Date, there are 1,148,661,140 Shares of HK$0.01 each in issue which
are fully paid or credited as fully paid. Assuming no further Shares will be issued from the Latest
Practicable Date and up to the date of the SGM, there will be 57,433,057 Adjusted Shares of HK$0.01
each in issue which are fully paid or credited as fully paid following the Capital Reorganisation but
before the issue of the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus
Shares.

      Conditions of the Capital Reorganisation

          The Capital Reorganisation (which will be effected in accordance with the Bye-laws and the
      Companies Act) is conditional upon:

             (a)   the passing of a special resolution by the Shareholders to approve the Capital
                   Reorganisation at the SGM;

             (b)   the Listing Committee granting the listing of, and permission to deal in, the Adjusted
                   Shares in issue arising from the Capital Reorganisation; and

             (c)   the compliance with the requirements under the Companies Act.




                                                  – 15 –
                           LETTER FROM THE BOARD


Effect and reason of the Capital Reorganisation

      As at the Latest Practicable Date, the authorised share capital of the Company is
HK$100,000,000 divided into 10,000,000,000 Shares of HK$0.01 each, of which 1,148,661,140
Shares have been issued and are fully paid. Subject to the approval of the Capital Reorganisation
by the Shareholders, the authorised share capital of the Company upon the Capital Reorganisation
becoming effective will be HK$100,000,000 comprising 10,000,000,000 Adjusted Shares, of which
57,433,057 Adjusted Shares will be in issue. On the assumption that no further Shares will be
issued or repurchased, a credit of approximately HK$10,912,280 will arise as a result of the
Capital Reduction. The credit will be transferred to the contributed surplus account of the
Company and may be applied by the Directors to set off against the accumulated losses of the
Company.

      Upon completion of the Capital Reorganisation, the Company has greater flexibility for
future fundraising activities and the credit in the contributed surplus account arising as a result of
the Capital Reduction may be applied by the Directors to set off against the accumulated losses of
the Company.

      The Capital Reorganisation will also reduce the total number of Shares currently in issue. As
such, the transaction and handling costs of the Company in relation to the dealings in the Adjusted
Shares are expected to be reduced, which will be beneficial to the Company. Moreover, as the
market value of each board lot upon the Capital Reorganisation becoming effective will be higher
than the market value of each existing board lot, the transaction cost as a proportion of the market
value of each board lot will be lower. It is expected that the liquidity in trading of the Adjusted
Shares will increase accordingly and the market value of the Adjusted Shares will be more precise
in reflecting the intrinsic value of the Company upon the Resumption.

    Accordingly, the Board is of the view that the Capital Reorganisation is beneficial to the
Company, the Shareholders and investors as a whole.

      Save for the necessary professional expenses for the implementation of the Capital
Reorganisation, the implementation of the Capital Reorganisation will not alter the underlying
assets, business operation, management position of the Company and the interests and rights of the
Shareholders.

Status of the Adjusted Shares

      The Adjusted Shares will rank pari passu in all respects with each other and the Capital
Reorganisation will not result in any change in the relative rights of the Shareholders. Fractional
Adjusted Shares will not be issued by the Company to the Shareholders. Any fractional entitlement
to the Adjusted Shares will be aggregated, sold and retained for the benefit of the Company.

Arrangement on odd lot trading

      In order to facilitate the trading of odd lots (if any) of the Adjusted Shares, the Company has
appointed Kingston Securities to provide matching service, on a best effort basis, to those
Shareholders who wish to acquire odd lots of the Adjusted Shares to make up a full board lot, or
to dispose of their holding of odd lots of the Adjusted Shares.



                                            – 16 –
                                 LETTER FROM THE BOARD


            Matching of odd lots of the Adjusted Shares arising from the Capital Reorganisation will
      commence from 9:00 a.m. on Monday, 7 May 2012 and will end at 4:00 p.m. on Friday, 25 May
      2012.

      Exchange of Share certificates

             Subject to the Capital Reorganisation becoming effective, which is expected to be 9:00 a.m.,
      Thursday, 29 March 2012, being the Business Day immediately after the date of the SGM,
      Shareholders may, on or after Thursday, 29 March 2012 until 4:00 p.m. on Friday, 4 May 2012
      (both days inclusive), submit share certificates for existing Shares to the Registrar at 26th Floor,
      Tesbury Centre, 28 Queen’s Road East, Hong Kong, to exchange, at the expense of the Company,
      for certificates of the Adjusted Shares. Thereafter, certificates of Shares will be accepted for
      exchange only on payment of a fee of HK$2.50 (or such other amount as may from time to time be
      specified by the Stock Exchange) by the Shareholders for each certificate issued or cancelled,
      whichever is higher. Existing certificates for the Shares will remain effective as documents of title
      but will not be accepted for delivery, trading and settlement purpose and may be exchanged for
      certificates for Adjusted Shares at any time.

           The Adjusted Share certificates will be issued in yellow colour in order to distinguish them
      from the existing Share certificates which are in purple colour.

      Change of board lot size

           As at the Latest Practicable Date, the Shares are traded in board lots of 8,000 Shares. It is
      proposed that the Adjusted Shares will be changed to be traded in board lots of 20,000 Adjusted
      Shares upon the Capital Reorganisation becoming effective.

(3)   VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS

     The Group was engaged in the production and marketing of paper products at the time of
Suspension.

      On 20 January 2011, the Company entered into the S&P Agreement with the Vendor, whereby the
Vendor agreed to sell and the Company agreed to purchase the Sale Shares, representing the entire
issued share capital of the Target Company. The Target Group is principally engaged in the manufacture
and sale of paper packaging products and paper gift items and the printing of paper promotional
materials in accordance with customers’ designs and specifications. Details of the transaction are as
follows:

      A.   The S&P Agreement

           Date:            20 January 2011 (as supplemented on 30 September 2011 and 29 February
                            2012 respectively)




                                                  – 17 –
                      LETTER FROM THE BOARD


Parties:        (1)     Vendor:      Sky Will Printing & Packaging (BVI) Limited which is a
                                     company incorporated in the BVI and is owned as to
                                     30% by Mr. Chan Fook Kai; as to 30% by Mr. Kao Wai
                                     Kwong, Eric and as to 40% by Mr. Fung Ming. The
                                     Vendor is principally engaged in investment holding. All
                                     of the ultimate beneficial owners of the Vendor are
                                     merchants. As at the Latest Practicable Date, none of the
                                     Vendor or any of its ultimate beneficial owners is
                                     interested in any Shares.

                To the best of the Directors’ knowledge, information and belief, having
                made all reasonable enquiries, the Vendor and its ultimate beneficial owners
                are Independent Third Parties and independent of the Board (including the
                proposed Directors).

                Mr. Wong is independent of, not acting in concert with and does not have
                any relationship with the Vendor and/or its ultimate beneficial owners.

                (2)     Purchaser:   The Company

Assets to be acquired

      The Sale Shares, representing the entire issued share capital of the Target Company.

Consideration

      The Consideration for the sale and purchase of the Sale Shares was determined after
arm’s length negotiation between the Vendor and the Company with reference to, among
other things, (i) the 2012 Guaranteed Amount; and (ii) the prospect of the Target Group’s
business as mentioned in the paragraphs headed ‘‘Future plans and development’’ under the
section headed ‘‘Information of the Target Group’’ in this Circular. The 2012 Guaranteed
Amount constitutes profit forecast under Rule 10 of the Takeovers Code and the relevant
comfort letters have been set out in Appendix V to this Circular. Based on the 2012
Guaranteed Amount, the Consideration represents a price-to-earnings ratio of approximately
6.875 times which is within the range of the price-to-earnings ratio of companies listed on
the Stock Exchange whose principal activity is the provision of production and marketing of
paper products. The price-earnings ratios of the comparable listed companies in Hong Kong
engaging in the similar businesses of the Target Group (with market capitalization less than
HK$1,000 million), namely Come Sure Group (Holdings) Limited (stock code: 794), Hop
Fung Group Holdings Limited (stock code: 2320), Samson Paper Holdings Limited (stock
code: 731) and Starlite Holdings Limited (stock code: 403), ranged from approximately 5.91
times to approximately 13.07 times with an average of approximately 9.72 times as at 20
January 2011, being the date of the S&P Agreement.




                                       – 18 –
                     LETTER FROM THE BOARD


     The Consideration of HK$110 million shall be payable in the following manners:

     (a)   the 1st Deposit of HK$5 million being paid to the Vendor within 5 Business Days
           after signing of the S&P Agreement;

     (b)   the 2nd Deposit of HK$10 million payable to the Vendor in cash or by cheque
           within 7 Business Days after the approval of the S&P Agreement by the
           Shareholders;

     (c)   HK$20 million payable to the Vendor in cash or by cheque upon the completion
           of the S&P Agreement;

     (d)   HK$20 million by way of the Company issuing the Consideration Shares to the
           Vendor (or its nominee(s)) upon the completion of the S&P Agreement; and

     (e)   HK$55 million (subject to adjustment(s) as stated under the section headed ‘‘Profit
           guarantee and adjustments of Consideration’’ in this Circular) by way of issuing
           the Promissory Note by the Company to the Vendor (or its nominee(s)) within 7
           Business Days after the issuance of the 2012 Audited Accounts.

      The 1st Deposit has been settled by the internal cash resources of the Group. The
balance of the cash portion of the Consideration in the amount of HK$30 million will also be
settled by the internal cash resources of the Group.

Conditions precedents

     Completion of the S&P Agreement is conditional in all respects upon:

     (a)   the Reorganisation having been completed to the satisfaction of the Company;

     (b)   if necessary, all approvals by the Shareholders, government and regulatory
           authorities (including but not limited to the Stock Exchange) for the transactions
           contemplated under the S&P Agreement being obtained;

     (c)   the Asset Purchase having been completed to the satisfaction of the Company
           (please refer to the section headed ‘‘Asset Purchase’’ in this Circular for the
           details of the Asset Purchase);

     (d)   in relation to the transactions contemplated under the S&P Agreement, all relevant
           regulatory requirements (including but not limited to those under the Listing Rules
           and all relevant regulatory requirements in Hong Kong) having been complied
           with and satisfied;

     (e)   Mr. Ng having signed service agreement with the Company on such terms and
           conditions as may be agreed between the parties and the Company. (Please refer
           to the section headed ‘‘Experience of the Board and the Enlarged Group in paper
           business’’ in this Circular for the salient terms of the service agreement);




                                      – 19 –
                      LETTER FROM THE BOARD


     (f)   the Company having completed the due diligence investigation on the business,
           assets, liabilities and financial position of the Target Group, and fully or
           substantially satisfied with the result of the due diligence;

     (g)   the warranties under the S&P Agreement having remained true and accurate in all
           material respects;

     (h)   the Target Group having duly performed and complied with all agreements,
           obligations and conditions contained in the S&P Agreement that are required to be
           performed or complied with by it on or before the completion of the Acquisition;

     (i)   no material adverse change or prospective material adverse change in the Target
           Group’s business, operations, financial conditions or prospects taken as a whole
           has occurred since the date of signing of the S&P Agreement;

     (j)   the Capital Reorganisation becoming effective; and

     (k)   the completions of the Subscription, the Open Offer and the Bonus Issue.

      The Vendor shall use its best endeavours to procure the fulfilment of the conditions (so
far as it is within its power and practicable to do so) as soon as practicable and in any event
before the Long Stop Date. As at the Latest Practicable Date, conditions (a), (c) and (e) have
been fulfilled.

      The Company may at any time waive in writing any conditions (other than conditions
(a) to (d), (j) and (k)) and such waiver may be made subject to such terms and conditions as
may be determined by the Company.

     If the conditions have not been fulfilled or waived by the Company at or before
12:00 noon on the Long Stop Date (or such other date as the Vendor and the Company may
agree), the S&P Agreement shall lapse, whereupon all rights and obligations of the parties to
the S&P Agreement shall cease to have effect except in respect of any accrued rights and
obligations of the parties to the S&P Agreement.

Profit guarantee and adjustments of Consideration

    Pursuant to the S&P Agreement, the Vendor has irrevocably undertaken to the
Company that the 2012 Net Profit will not be less than HK$16 million.

     2012 Shortfall

          In the event that the 2012 Net Profit is less than HK$16 million, the Consideration
     will be adjusted downward by an amount equal to the shortfall between the 2012
     Guaranteed Amount and the 2012 Net Profit multiplied by 6.875, being

           2012 Shortfall = (2012 Guaranteed Amount – 2012 Net Profit) X 6.875;

           ‘‘2012 Shortfall’’ means the actual amount in HK$ (if any) payable by the Vendor
     to the Company as set out above in this section.



                                      – 20 –
                      LETTER FROM THE BOARD


          The 2012 Shortfall payable by the Vendor as illustrated above will be offset
     against the Promissory Note on a dollar for dollar basis.

           For the avoidance of doubt, the maximum liability of the Vendor under this
     section shall not exceed the amount of the Promissory Note, being HK$55 million.

Completion

      Completion of the Acquisition is expected to take place within 7 Business Days
following the day on which all the conditions are satisfied in full (subject to those conditions
having been waived), or such other date as the Vendor and the Company may agree. Upon
completion of the Acquisition, the Target Group will become wholly-owned subsidiaries of
the Company and the financial statements of the Target Group will be consolidated in the
accounts of the Group.

Consideration Shares

     The issue price per Consideration Share is equivalent to the Subscription Price and the
Offer Price of HK$0.10 per Adjusted Share, representing a discount of 80% to the closing
price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted Share assuming the
Capital Reorganisation having become effective) as quoted on the Stock Exchange on the
Last Trading Day. There is no restriction on subsequent sale of the Consideration Shares.

      In order to relief cashflow pressure on the Group, the Company has proposed the issue
of Consideration Shares as part of the settlement of the Consideration. In view of the long
suspension of trading of the Shares since 23 September 2008, the Company has, upon arm’s
length negotiation, agreed with the Vendor that the issue price of the Consideration Shares
should represent a substantial discount to the closing price before Suspension.

      Assuming the Capital Reorganisation becoming effective, the 200,000,000
Consideration Shares represent: (i) approximately 3.48 times of the total number of issued
Adjusted Shares as at the Latest Practicable Date; (ii) approximately 77.69% of the total
number of issued Adjusted Shares as enlarged by the Consideration Shares; and (iii)
approximately 16.56% of the total number of issued Adjusted Shares as enlarged by the
Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares. The
issue of the Consideration Shares will not result in a change of control of the Company. The
Vendor has no intention to nominate any candidate to the Board.

      For the avoidance of doubt, the Consideration Shares (i) do not have the entitlements to
subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus
Shares under the Bonus Issue since the Consideration Shares will be issued after the Record
Date.




                                       – 21 –
                            LETTER FROM THE BOARD


     Major terms of the Promissory Note

     Issuer                     :   the Company

     Initial noteholder         :   the Vendor

     Principal amount           :   HK$55 million

     Date of issue              :   within 7 Business Days after the issuance of the 2012 Audited
                                    Accounts

     Maturity                   :   the date falling two calendar years from the date of issue

     Interest                   :   0%

     Transferability            :   Freely transferable

     Restriction on early       :   the holder of the Promissory Note cannot redeem for cash of
       redemption                   the Promissory Note on or before 31 March 2013

B.   Business operation of the Enlarged Group

     Information on the Group

          Before the Suspension on 23 September 2008, the Group was engaged in the design,
     development, production and marketing of paper products.

           The Group established the business of trading of electronic products in 2009.

           Taking into account the substantial net liabilities position and the continued loss of the
     then paper business of the Group, the Company decided to dispose of the paper business in
     October 2009. Following the completion of such disposal in March 2010, the then Group’s
     principal activity was trading of electronic products.

           Revenue generated from the electronics business had been decreasing since the financial
     year ended 31 March 2011. During the six-month period ended 30 September 2011, no
     transaction was concluded to generate any trading income from trading of electronic
     products.




                                            – 22 –
                    LETTER FROM THE BOARD


Information on the Target Group

     The Target Group is principally engaged in the manufacture and sale of paper
packaging products and paper gift items and the printing of paper promotional materials in
accordance with customers’ designs and specifications.

     a.   Development background of the Target Group

           In January 2011, during the time when the Company entered into the S&P
     Agreement with the Vendor and after preliminary due diligence performed by the
     Group, it was agreed that New Spring Paper should not be included in the Target Group
     and hence the deregistration of New Spring Paper formed part of the Reorganisation.
     Taking into account the facts that (i) the Target Company, Sky Will and New Spring
     (SW) do not have manufacturing function; and (ii) the decision of shareholders of NSG
     to downsize its operation (details of which are set out in the section headed ‘‘Business
     of Target Group taken up from NSG’’ below in this Circular), it was agreed between the
     Company and the Vendor to expand the operation of the Target Group by way of
     acquisitions of (a) New Spring Offset (which formed part of the Reorganisation because
     New Spring Offset possesses the manufacturing function) and; (b) the Acquired Assets
     under the Asset Purchase (including the key operating assets of NSG which are relevant
     for the expansion of operation of the Target Group). Completion of the S&P Agreement
     will be subject to, amongst other, the Reorganisation and the Asset Purchase having
     been completed. Details of the Reorganisation and the Asset Purchase are set out in the
     following sections. As at the Latest Practicable Date, the Reorganisation and the Asset
     Purchase were completed.

          (i)   Reorganisation

               The following is the organization structure chart of the Target Company
          before the Reorganisation:


                                                The Vendor


                                                      100%


                                            The Target Company


                                                      100%


                                                 Sky Will




                             100%                                           100%

                    New Spring Paper                                New Spring (SW)




                                       – 23 –
            LETTER FROM THE BOARD


      The Reorganisation involved (i) Sky Will acquired the entire issued share
capital of New Spring Offset from NSG; and (ii) the completion of deregistration
of New Spring Paper.

     As at the Latest Practicable Date, the Reorganisation has been completed.
The following is the organization structure chart of the Target Group as at the
Latest Practicable Date:


                                        The Vendor


                                              100%


                                    The Target Company


                                              100%


                                         Sky Will




                    100%                                              100%

            New Spring (SW)                                  New Spring Offset



(ii)   Asset Purchase

      On 31 January 2011, Sky Will as the purchaser and NSG as the vendor
entered into the Asset Purchase Agreement for the acquisition of the Acquired
Assets which represented the key operating assets of NSG. The Asset Purchase
was completed on 31 January 2011. Principal terms of the Asset Purchase
Agreement are set out as follows:

       Date of the Asset Purchase      31 January 2011
         Agreement:

       Parties:                        Sky Will (as the purchaser)
                                       NSG (as the vendor)

       Acquired Assets:                the machinery, equipment, furniture, office
                                       equipment, computer equipment together with
                                       all the data stored therein, communication
                                       equipment and including, without limitation,
                                       all rights, title, benefits and interests of NSG
                                       therein

       Consideration:                  HK$13,800,000



                              – 24 –
          LETTER FROM THE BOARD


(iii) Current companies within the Target Group

      The Target Group currently comprises three operating entities, namely Sky
Will, New Spring (SW) and New Spring Offset.

      The Target Company, incorporated in the BVI with limited liability on 2
November 2010, has been an investment holding company of the Target Group
since 15 January 2011.

      The first operating entity within the Target Group, namely Sky Will, was
incorporated in Hong Kong on 19 March 2004 with limited liability. Sky Will was
principally engaged in the sale of paper packaging products and paper gift items
before the commencement of business of New Spring (SW). Since then, Sky Will
has been reducing its participation in the sale of paper packaging products and
paper gift items (by issuing letters to request customers to place their new sales
orders with New Spring (SW)) and becoming an investment holding company.

     New Spring (SW) was incorporated in Hong Kong on 3 November 2010
with limited liability and it is principally engaged in the sale of paper packaging
products and paper gift items. It commenced business in January 2011.

      New Spring Offset was incorporated in the PRC on 1 December 2009 with
limited liability and commenced business in June 2010. The acquisition of New
Spring Offset by Sky Will from NSG completed in April 2011. New Spring Offset
is principally engaged in the manufacture and sale of paper packaging products
and paper gift items and the printing of paper promotional materials. New Spring
Offset is the only entity within the Target Group engaging in the manufacturing
function.

(iv) Business of Target Group taken up from NSG

      NSG is a company incorporated in Hong Kong and was previously
principally engaged in the manufacture and sale of paper packaging products and
paper gift items and the printing of paper promotional materials. Save for NSG
being the vendor of New Spring Offset and the vendor under the Asset Purchase
and Mr. Ng is a director of NSG, NSG and its ultimate beneficial owners are third
parties independent of Mr. Ng, the Target Group, the Vendor and its ultimate
beneficial owners and their respective associates.

      Since 2011, the shareholders of NSG decided to downsize its operation and
NSG disposed of (i) the Acquired Assets to Sky Will in January 2011; and (ii)
New Spring Offset to Sky Will in April 2011. NSG has referred its customers to
place new sales orders directly with the Target Group. Currently, most of the
staffs in the sales and marketing department of NSG have now been employed by
the Target Group. Since November 2011, NSG did not record any turnover from
sales of paper packaging products.




                           – 25 –
          LETTER FROM THE BOARD


      New Spring Label is principally engaged in the manufacture and trading of
plastic labels and related products and trading of packaging products. New Spring
Label is beneficially owned as to 20% by Mr. Ng, as to 30% by Ms. Li and as to
50% by an Independent Third Party.

     New Spring Label was one of the previous customers of NSG before NSG
disposed of New Spring Offset to Sky Will in April 2011. Before such disposal,
New Spring Label engaged NSG to arrange for the production at New Spring
Offset when it received sales orders from customers. Upon the completion of the
Reorganisation, New Spring Label engaged New Spring (SW) to arrange for the
production at New Spring Offset and is currently one of the customers of the
Target Group.

      Given the fact that Mr. Ng will become an executive Director upon
completion of the Acquisition and New Spring Label is an associate of Mr. Ng,
hence New Spring Label will become a connected person of the Company upon
completion of the Acquisition. Accordingly, the Master Agreement was entered
into between the Target Company and New Spring Label for governing the
ongoing production of printing orders upon completion of the Acquisition and
specifying the terms adopted including the Annual Caps. Please refer to the
section headed ‘‘Continuing connected transactions’’ in this Circular for the terms
of the Master Agreement. It is considered that the business of New Spring Label
in plastic labels business is not in competition with the Target Group since the
Target Group is not engaged in manufacture or trading in plastic labels business.
In respect of the trading of packaging products business, Mr. Ng and Ms. Li have
entered into the First Right Deed in favour of the Company so that upon the
completion of the Acquisition, for new packaging transactions initiated by Mr. Ng
and Ms. Li, they will give the first right of refusal to the Target Group. Please
refer to the section headed ‘‘Competition from New Spring Label’’ in this Circular
for the terms of the First Right Deed.




                           – 26 –
                LETTER FROM THE BOARD


b.   Operation structure of the Target Group

     The following is the simplified existing operation structure of the Target Group:

                Place purchase orders and payment
                Delivery of products


                      Overseas customers                  PRC customers




                       New Spring (SW)




                       New Spring Offset



     Most of the customers of the Target Group are from overseas in the USA and
Europe and they prefer to trade with Hong Kong companies. In view of the simpler tax
system in Hong Kong and the preferences from overseas customers, the management of
the Target Group decided to incorporate New Spring (SW) to trade with overseas
customers and New Spring Offset is designated to trade with PRC customers.

c.   Products

     The major products of the Target Group are as follows:

     Paper packaging products

         Paper packaging products include packaging for liquors, snacks, toys,
     domestic appliances and other packaging materials for gifts.

           The Target Group manufactures and sells a variety of paper packaging
     products. It is made of different kinds of paper e.g. coated paper and cardboard,
     etc. which are die-cut into the required shapes and sizes, then are folded and glued
     to form gift packages and container boxes. The Target Group also prints logo,
     brands and graphics on the packaging products according to customers’
     specifications.




                                – 27 –
                 LETTER FROM THE BOARD


     Paper gift items

           The Target Group manufactures a range of paper gift items primarily made
     of different kinds of paper and decorated with elaborate designs. Examples of
     products include jewellery boxes, carrier bags, letter sets and other stationery and
     gift accessories.

     Paper promotional materials

           Paper promotional materials include promotional leaflets, product manuals,
     catalogues, brochures, calendars, posters, flyers and other paper promotional
     materials.

d.   Customers and suppliers

     The Target Group has established long term business relationship with its
customers. Currently, there are over 35 customers and most of which are distributors,
manufacturers of consumer products and advertising agencies based in the USA,
Europe, Hong Kong and the PRC.

      The five largest major customers of the Target Group contributed to an aggregate
of approximately 91% and approximately 71% of the total turnover of the Target Group
for the year ended 31 March 2011 and for the 6 months ended 30 September 2011
respectively. The Target Group does not have long term sales commitments with its
customers. However, the Target Group has maintained an average of around 5 years’
business relationship with the top five customers. Orders will be given by the customers
throughout the year and each order would be a definitive agreement which lists out the
terms of the order.

     Set out below brief information of the major customers for the 6 months ended 30
September 2011:

     Top five
     customers     Product nature                                Location of customer

     1             Food packaging bags for a fast food           Hong Kong
                     restaurant
     2             Kid’s toys e.g. puzzles, stickers             Hong Kong
     3             Packaging boxes for wines                     Hong Kong
     4             Packaging boxes for cosmetics                 PRC
     5             Stationery e.g. notebooks, files, photo       Europe
                     albums, etc.

      The Target Group offers credit terms to its customers ranging from 30 to 60 days
depending on the length of their business relationship with the Target Group and their
credibility based on the Target Group’s assessment.




                                – 28 –
                LETTER FROM THE BOARD


      Instead of a general provision policy, the Target Group adopts a credit control
measure. The senior management of the Target Group closely monitors the overdue
balances of the customers. When trade receivables become overdue, reminders will be
sent to the relevant customers and the responsible sales and marketing staff of the
Target Group will contact the respective customers to follow up the collection status.
Based on the results of discussion with problematic customers and past experience, the
Target Group will assess if it is necessary to write-off or make provision for doubtful
debts and/or terminate business relationship with those customers with long overdue
balances of trade receivables. The Target Group may reject purchase orders from the
respective customer until full settlement of all outstanding invoices. The Target Group
makes allowance for doubtful debts based on assessments of the recoverability of the
trade receivables, including the current creditworthiness and the past collection history
of the respective customer. Impairments arise where events or changes in circumstances
indicate that the balances may not be collectible. The Target Group may consider to
take legal actions against customers with long outstanding unsettled balance with the
Target Group. The Target Group has adopted an effective credit control measure and
has not encountered material difficulty in the enforcement of debt collection.

      The Target Group’s purchases from its five largest suppliers accounted for an
aggregate of 100% and approximately 63% of the Target Group’s total purchases for the
year ended 31 March 2011 and for the 6 months ended 30 September 2011 respectively.
The Target Group mainly purchases certain key raw materials e.g. raw papers and
packaging papers from these major suppliers located in Hong Kong and the PRC. No
long-term agreement has been entered into between the Target Group and the suppliers.
The Target Group usually places orders when necessary and each order represents an
agreement between the Target Group and the supplier. The Target Group has
maintained an average of around 5 years’ business relationship with the top five
suppliers.




                                – 29 –
                 LETTER FROM THE BOARD


e.   Sales and marketing

     The operation model on placing orders and delivery of products is illustrated as
below:


           Place purchase orders and payment                  Brand name
           Delivery of products                               companies




                   Customers of the                          Agents of brand
                    Target Group                             name company




                                          Target Group

                                         Received orders




                                        Produce samples/
                                          Modifications




                                        Purchase materials




                                           Production




      Customers place their orders either directly or via the agents to the Target Group.
The Target Group will base on their designs to produce samples for customers’
examination or modifications. Once the samples are confirmed with the customers, the
final designs will be put into production and raw materials will be purchased at the
same time. Final products will be further examined by the customers before delivery.
Products and invoices will be delivered to the designated location per customers’
instruction. Customers will settle the bills according to the credit terms granted.

      The Target Group has a sales and marketing team which focuses primarily on the
promotion of sales through emphasizing the quality of the Target Group’s products, the
reliability of its services and the competitiveness of its pricing. The sales and marketing
team of the Target Group also makes regular visits to its customers to maintain good
customer relations and provide after-sale services.

     All the Target Group’s sales were conducted on the basis of receipt of purchase
orders. To facilitate the planning of material procurement and production schedule of
the Target Group, the sales and marketing team has maintained close communication




                                      – 30 –
                LETTER FROM THE BOARD


with its major customers on their purchase forecasts and preliminary quotations. With
extensive experience in the industry, the Target Group has established its market
reputation in terms of product quality, reliability of delivery and after-sales services.

      The products manufactured by the Target Group will be delivered to the
designated locations in Hong Kong or the PRC according to customers’ instructions. In
the case of delivery to Hong Kong, customs procedures are handled by the Target
Group. In the case of delivery within the PRC through factory transfers, the Target
Group will send details of such transfers to the relevant customs authorities in the PRC
for their records. Products sold to overseas customers are delivered to Hong Kong prior
to exports to overseas.

f.   Pricing

      Customers place their orders either directly or via the agents to the Target Group.
The sales and marketing department with assistance from production department will
prepare a cost estimate in accordance with the product specifications with special design
requirements, expected raw materials usage and costs, complexity of manufacturing
process, estimation of production manpower, production lead time and delivery
arrangement. The senior management of the Target Group will assess and verify the
cost estimation initiated by the sales and marketing department and then propose a
target profit margin with reference among others the prevailing market price, the
creditworthiness and business relationship with the customer, the volume of purchase
order and re-ordering potential, etc. In the event that the customer rejects a quotation,
the sales & marketing department and senior management of the Target Group may re-
negotiate and review the estimate in order to provide a more accommodating offer with
products parameter.

g.   Production facilities

     Currently, all manufacturing activities of the Target Group are carried out by New
Spring Offset in a leased production plant in Sha Jing Zhen, Baoan District, Shenzhen,
the PRC. The production plant is leased from 深圳市沙井辛養股份合作公司 (Shenzhen
Shi Shajing Xinyang Joint Stock Cooperation Company*) which is ultimately owned by
various individuals who are Independent Third Parties under a lease term from 1 July
2011 to 30 June 2013.

     The machineries in the leased production plant are owned by New Spring Offset
and Sky Will. The gross floor area of the production plant is approximately 8,000
square metres. There are 7 production lines with maximum production capacity of
56,000 sheets of paper per hour.

     Regular checking and maintenance are performed on the machinery and equipment
by the Target Group’s staffs.




                                – 31 –
                 LETTER FROM THE BOARD


     Production facility

          The key machinery and equipment are stated as follows:

          Machinery                       Application

          Sheeters                        Devices used to cut paper rolling materials
                                          into individual sheets

          Die cutting machines            Devices used to and trim paper sheets into
                                          specified shape and/or size

          Offset printing machines        Machines which transfer an inked image from
                                          a printing plate to an intermediate blanket
                                          cylinder and then to a printing surface

          Hot foil stamping machines      Machines which use heat to transfer metallic
                                          foil to a printing surface

          Varnishing machines             Machines used in applying a coat of varnish
                                          on the surface of the paper and cardboard to
                                          protect them from scratching and to give a
                                          glossy surface

          Graining machines               Machines used in embossing an artificial
                                          pattern in a printing surface and/or an offset
                                          printed paper

h.   Production process

     The production process of the Target Group can be simplified into three steps of
pre-press, offset printing and post-press which are set out as follows:

     Pre-press

     Major Machinery involved: Sheeters, die cutting machines

           All products are made according to the designs and specifications of
     customers. The designs are provided either in the form of mechanical artwork or
     computer-graphic designs. Based on the designs and specifications provided by
     the customers, the relevant structural designs of the packaging products are
     produced as a sample for review by the respective customers to ensure that the
     packaging product meets the packaging requirements of the customers. The
     structural designs approved by customers will then be sent for colour separation.
     At the colour separation stage, a set of films, each representing one of the four
     basic colours, namely cyan, magenta, yellow and black, as well as other special
     colours such as gold and silver, are prepared according to the approved structural
     designs.



                                 – 32 –
             LETTER FROM THE BOARD


     After the process of colour separation, film imposition and plate making
processes, the set of films prepared at the colour separation stage will be placed
and registered into the correct position and in the appropriate order. The image of
each of the films will then be chemically applied onto an aluminum printing plate
before offset printing.

Offset printing

Major Machinery involved: Offset printing machines

      The set of aluminium plates will be mounted onto the cylindrical drum on
each of the printing units of the printing machine and paper is cut to the required
size to minimize wastage of paper. During the offset printing process, ink will be
applied on the plate and transferred onto the paper that passes through a set of
printing units each with different colour. For example, a five-colour printing
machine will have five printing units which can produce colour prints of up to
five colours at a time and printing products of six colours are required to be
applied to a five-colour printing machine in two runs in order to produce the six-
colour effect.

Post-press

Major Machinery involved: Die cutting machines, hot foil stamping machines,
graining machines, varnishing machines

      After the printing process, a series of post-press operations including
printing finishing, die-making, die-cutting and folding and gluing have to be
undertaken. At the printing finishing stage, printed paper and cardboard are coated
by applying a coat of varnish on the surface of the paper and cardboard to protect
it from scratching and to give a glossy surface. The varnishing may be performed
on various materials ranging from a selection of plastics to ultra lacquer and
water-based polymer.

      After the printing finishing process, the paper and cardboard are cut into the
required box shapes using special die cutting machines which can cater for a wide
range of printing materials from lightweight paper to laminated corrugated boards.
Pattern embossing on the surface is also possible.

       For those packaging boxes requiring a transparent window to display the
goods contained in the box, polyvinyl chloride sheets are applied to die-cut
windows of all shapes and sizes by window-patching machinery or manually.
After window-patching, the die-cut paper and cardboard is folded and glued into
its finished form to be packed and delivered.




                           – 33 –
                LETTER FROM THE BOARD


i.   Procurement

     The principal raw materials required by the Target Group for printing and
manufacturing are paper and ink. The Target Group purchases raw paper of different
weights, colours and strength according to the specifications of its customers. Currently,
approximately 70% of raw materials are purchased from the PRC and the rest are from
Hong Kong.

j.   Inventory control

      The Target Group monitors and controls inventory levels of its raw materials and
finished products by implementing a comprehensive inventory management policy to
enhance smooth operations and to minimize wastage.

      Maintaining minimum stock level of raw materials is always the Target Group’s
policy. Purchases of materials other than basic materials for paper products are usually
made after receiving sales orders from customers. However, for basic raw materials
such like raw paper, the Target Group develops an inventory cycle plan which reflects
its production planning requirements and ensure that it maintains a systematic and cost
effective control over its level of inventory. To meet general and planned production
requirement, the Target Group has developed and adopted a policy to maintain
inventory of raw paper which will be sufficient for approximately 60 days of its
production usage under normal circumstances. Typically, the Target Group works
closely with its customers to develop a production programmes in accordance with their
expected delivery time frame. In light of this, the Target Group is able to plan it’s raw
material reservation and indents. The Target Group’s sales and production departments
are work closely with each other on a weekly basis to review and monitor the existing
and potential sales orders from customers to ensure that the inventory levels of raw
material is accommodating.

      The Target Group performs quarterly full stock takes for all inventories.
Impairment will be charged for any obsolete or damaged inventories identified during
the stock takes.

k.   Quality control

     The Target Group adopts stringent internal quality control measures to ensure that
products can meet the required quality standard and adhere to customers’ specifications
before delivery. The Target Group will from time to time invest in machinery and
equipment to enhance production efficiency and product quality.

      The Target Group sources quality raw paper for production from selected suppliers
principally based on their price, product quality, stability of supply and delivery and
market reputation. Every batch of paper delivered to the Target Group will be tested
before use. Colour is regularly matched against the relevant customer’s approved sample
and the gloss level on coating is also measured. The quality control team is responsible




                                 – 34 –
                 LETTER FROM THE BOARD


for ensuring that the final products are produced according to the exact designs and
specifications of the customers and established quality standards. Returns of
unsatisfactory products from customers for the past years have been minimal.

      The Target Group has been accredited with the internationally recognized ISO
9001 certification. ISO 9001 is a set of standards and guidelines relating to quality
management systems, and represents an international consensus on good quality
management practices. ISO 9001 is maintained by the International Organisation for
Standardisation, or ISO, and are administered by accreditation and certification bodies.
The certification of the Target Group to ISO 9001 standard certifies that consistent
business processes are being applied, and provides an objective standard against which
third parties can assess the quality of the Target Group’s management and products.

l.   Logistics

      The Target Group does not maintain its own logistic team to collect raw materials
from its suppliers or deliver finished products to its customers. The suppliers usually
deliver raw materials directly to the Target Group. For finished products, the Target
Group arranges third party logistics operators to deliver the finished products from its
factory to its customers, the delivery cost of which will be borne by the Target Group.
The Target Group has entered into contract with a third party logistics operator to
deliver its finished products to its customers.

m.   Employees

      Currently, the Target Group has 631 employees and the breakdown in departments
is set out as below:

                                                                            Number of
     Department                                                             employees

     Management                                                                       8
     Finance and administration                                                      54
     Procurement                                                                      2
     Production                                                                     550
     Sales and marketing                                                              8
     Quality control                                                                  9


     Total                                                                          631




                                  – 35 –
                 LETTER FROM THE BOARD


n.   Licences and permits

      The Target Group has obtained the printing licence (‘‘印刷經營許可證’’) in 2009,
the pre-requisite of operating printing business in the PRC.

      The Enlarged Group has obtained all licences, permits or certificates necessary to
carry out its business in both Hong Kong and the PRC and has complied with the
relevant PRC rules and regulations in conducting its printing business as at the Latest
Practicable Date.

o.   Insurance

     Hong Kong

          Under the Employees’ Compensation Ordinance (Cap. 282, Laws of Hong
     Kong), an employer is required to take out an insurance policy to cover his
     employees (including full-time and part-time) who are injured or die in the
     accidents out of and in the course of employment. The Target Group has
     maintained an insurance policy in relation to its staff employed in Hong Kong in
     accordance with the above statutory requirement. The Target Group has also
     maintained employees’ compensation insurance and is covered by property and
     vehicle insurances.

     The PRC

            In accordance with relevant regulatory requirements of the PRC, inter alia,
     Interim Regulation Concerning the Levy of Social Insurance 《社會保險費      (
     徵繳暫行條例》 Regulation on Pension for Employees in the Shenzhen
                      ),
     Special Economic Zone 《深圳經濟特區企業員工社會養老保險條例》 Measures
                               (                                              ),
     Concerning Social Medical Insurance in Shenzhen 《深圳市社會醫療保險辦法》
                                                           (                           ),
     Regulation on Industrial Injury Insurance 《工傷保險條例》 Regulation on
                                                      (                ),
     Industrial Injury Insurance for the Guangdong Province 《廣東省工傷保險條例》
                                                               (                       ),
     and the Interim Regulation on Social Insurance in Shenzhen 《深圳市社會保險暫
                                                                    (
     行規定》 the Group has made social security contribution which covers
               ),
     retirement, industrial injury and medical expenses for its PRC employees. The
     Target Group maintains insurance policies in respect of its buildings, machinery,
     equipment, inventory and other facilities owned by the Target Group covering
     physical loss or damage arising from natural hazards or accidents in relation to its
     operation in the PRC. At present, the Target Group does not maintain any public
     liability insurance or any product liability insurance, which is in line with market
     practice in the PRC.




                                – 36 –
               LETTER FROM THE BOARD


p.   Environmental matters

      The Target Group is subject to the PRC national environmental laws and
regulations and environmental regulations promulgated by the local government. Details
about the environmental protection requirements related to the Target Group’s
operations are set out in the section headed ‘‘Regulations governing the industry’’ of
this Circular.

      The Target Group discharges waste water and chemical waste during production.
For the year ended 31 March 2011 and for the 6 months ended 30 September 2011, fees
paid by the Target Group in respect of waste water treatment were approximately
RMB24,000 and RMB46,000 respectively. On 20 May 2011, a waste treatment and
disposal and industrial service agreement was entered into between New Spring Offset
and 東江環保股份有限公司 (DongJiang Environmental Protection Co., Ltd*), effective
from 20 May 2011 to 19 May 2012, according to which, New Spring Offset entrusts 東
江環保股份有限公司 (DongJiang Environmental Protection Co., Ltd*) to dispose the
industrial wastes generated from its production process.

q.   Labour and safety matters

     Hong Kong

           Under the Occupational Safety and Health Ordinance (Cap. 509, Laws of
     Hong Kong), an employer should provide and maintain a safe and healthy work
     environment by, inter alia, (i) providing and maintaining plant and work systems
     that do not endanger safety or health; and (ii) making arrangement for ensuring
     safety and health in connection with the use, handling, storage or transport of
     plant or substances. The Target Group has not been in contravention with the
     safety and health requirements set out in the above ordinance.

     The PRC

           New Spring Offset is subject to the relevant labour and safety laws and
     regulations in the PRC. According to the PRC Labour Law 《中華人民共和國勞
                                                                 (
     動法》 a labour contract must be signed if an employment relationship is to be
           ),
     established between the employee and New Spring Offset. New Spring Offset is
     also required to establish a system for labour safety and sanitation and provide
     relevant education to their respective employees.

           The PRC Production Safety Law 《中華人民共和國生產安全法》 requires
                                            (                               )
     that the New Spring Offset shall maintain conditions for safe production as
     provided in the PRC Production Safety Law and other relevant laws and industrial
     standards. The New Spring Offset is required to offer education and training
     programs to the employees regarding production safety. The design, manufacture,
     installation, use, checking and maintenance of New Spring Offset’s safety
     equipment are required to conform to applicable national or industrial standards.




                                 – 37 –
                LETTER FROM THE BOARD


     Furthermore, the Target Group monitors the operation of the production facilities
     itself to ensure they are in good condition. The Target Group is not involved in
     any material production safety matters.

          As at the Latest Practicable Date, there has not been any material labour
     disputes and non-compliance of safety measures reported by New Spring Offset.
     New Spring Offset had been in compliance with applicable laws and regulations in
     the PRC and no material litigation or claims had been brought against New Spring
     Offset with regard to work safety and labour related issues since New Spring
     Offset commences production.

       As at the Latest Practicable Date, the Enlarged Group has been in compliance with
applicable laws and regulations in both Hong Kong and the PRC and no material
litigation or claims had been brought against the Enlarged Group in respect of the work
safety and labour related issues.

r.   Information technology

       The Target Group did not develop any in-house operational and management
system in the past. However, in view of the business expansion, the management of the
Target Group considers to implement an enterprise resource planning system (ERP
system) to facilitate the flow of information between departments, such as procurement,
production, sales and marketing, accounting and human resources. The ERP system is
still under designing and testing stage.

s.   Tax liabilities

     The Target Group is subject to Hong Kong Profits Tax and PRC Enterprise
Income Tax in respect of the assessable profit generated in tax jurisdiction respectively.
The Group is not involved in any material tax disputes.

t.   Legal and administrative proceedings

       As at the Latest Practicable Date, the Target Group was not involved in any
litigation, arbitration or claim of material importance, and no litigation, arbitration or
claim of material importance was known to the management of the Target Group to be
pending or threatened against any member of the Target Group. The Target Group is
not currently involved in any material litigation, arbitration or administrative
proceedings that could have a material adverse effect on its financial condition or
results of operations.




                                 – 38 –
               LETTER FROM THE BOARD


u.   Competition

      The Target Group is engaged in the manufacture and sale of paper packaging
products and paper gift items and the printing of paper promotional materials. Based on
the knowledge and experience of the management of the Target Group in the paper
packaging industry, the overall paper manufacturing industry is relatively fragmented
with large number manufacturers. However, due to (i) intensive capital investment in
technologically advanced machinery and (ii) industry knowledge, experience and skills
of the management personnel and technical professionals in product development, these
factors present significant entry barriers to newcomers. The management of the Target
Group is of the view that the Target Group is well-positioned to face any competition.

     The Target Group maintains its competitive edge through timely introduction of
new products and continuous improvement of existing products. It will continue to
devote resources to research and development for new and existing products and
techniques in the production process to retain the market share in the industry.

     Competition from New Spring Label

           New Spring Label is principally engaged in the manufacture and trading of
     plastic labels and related products and trading of packaging products. New Spring
     Label is beneficially owned as to 20% by Mr. Ng, as to 30% by Ms. Li and as to
     50% by an Independent Third Party.

           It is considered that the business of New Spring Label in plastic labels
     business is not in competition with the Target Group since the Target Group is not
     engaged in the manufacture or trading in plastic labels business. In respect of the
     trading of packaging products business, Mr. Ng and Ms. Li have entered into the
     First Right Deed in favour of the Company so that upon the completion of the
     Acquisition and Mr. Ng becoming an executive Director, for new packaging
     transactions initiated by Mr. Ng and Ms. Li, they will give the first right of refusal
     to the Target Group to resolve the issue on potential competition from trading of
     packaging products business of New Spring Label initiated by Mr. Ng and Ms. Li.
     Summary of the major terms of the First Right Deed is set out as follows:

          Date of First Right Deed:       29 February 2012

          Parties:                        Mr. Ng and Ms. Li in favour of the Company

          Terms:                          Commencing on the date of completion of the
                                          Acquisition and ending on the date on which
                                          (i) the shares of New Spring Label or other
                                          company engaged in trading of packaging
                                          products business cease to be owned directly
                                          or indirectly by Mr. Ng and Ms. Li in
                                          aggregate for less than 30%; or (ii) Mr. Ng
                                          ceases to be director of the Group




                                 – 39 –
    LETTER FROM THE BOARD


Undertakings:            (1)   Mr. Ng and Ms. Li have, jointly and
                               severally,       unconditionally        and
                               irrevocably undertaken to the Company
                               that, during the terms of the First Right
                               Deed, if Mr. Ng, Ms. Li and/or their
                               respective associates identify or are
                               offered any future business investment
                               or other commercial opportunity relating
                               to the trading of packaging products of
                               the Group, Mr. Ng and Ms. Li will
                               notify the Company immediately upon
                               identifying or being offered such
                               opportunity and provide the Company
                               with all information which is reasonably
                               necessary for the independent non-
                               executive Directors to consider whether
                               or not (i) such opportunity would
                               constitute competition with the Group’s
                               business (after completion of the
                               Acquisition); and (ii) it is in the interest
                               of the Company to acquire such
                               opportunity. Mr. Ng and Ms. Li are also
                               obliged to use their best efforts to
                               procure that such opportunity is first
                               offered to the Company on terms that
                               are fair and reasonable.

                         (2)   Mr. Ng and Ms. Li will be entitled to
                               pursue such opportunity only if (i) they
                               have received a notice from the
                               Company declining such opportunity and
                               confirming that such opportunity would
                               not constitute competition with the
                               Group’s core business; or (ii) Mr. Ng
                               and Ms. Li have not received such notice
                               from the Group within 10 Business Days
                               from the date of receipt of the notice by
                               the Company. If there is any material
                               change in the terms and conditions of the
                               opportunity pursued by Mr. Ng and/or
                               Ms. Li, Mr. Ng and/or Ms. Li will refer
                               the opportunity as so revised to the
                               Company in the manner set out above.




                – 40 –
                      LETTER FROM THE BOARD


      Given the safeguard measures as included in the undertakings provided by Mr. Ng and
Ms. Li in favour of the Company pursuant to the First Right Deed, it is considered that the
potential conflict of interests of Mr. Ng and Ms. Li for new packaging transactions initiated
by them can be handled in accordance to the terms of the First Right Deed. Accordingly, the
Directors consider the terms of the First Right Deed are fair and reasonable and are in the
interests of the Company and the Shareholders as a whole.

Reasons for the Acquisition

      Before the Suspension, the Group was engaged in the design, development, production
and marketing of paper products. Subsequently in 2009, the Group established the business
of trading of electronic products. Taking into account the substantial net liabilities position
and the continued loss of the then paper business of the Group, the Company decided to
dispose of the paper business in October 2009. Following the completion of such disposal in
March 2010, the then Group’s principal activity was trading of electronic products. Revenue
generated from the electronics business had been decreasing since the financial year ended 31
March 2011. For the six months ended 30 September 2011, the Group did not record any
revenue.

     The Target Group is principally engaged in the manufacture and sale of paper
packaging products and paper gift items and the printing of paper promotional materials in
accordance with customers’ designs and specifications. As such, the principal business of the
Target Group is similar to that of the Group prior to the Suspension, being engaging in the
design, development and production of paper products.

      In view of the 2012 Guaranteed Amount provided by the Vendor, the Directors
(including the proposed Directors) consider that the Acquisition provides an excellent
opportunity for the development of the Group’s business and broadens its revenue and
customer bases.

       Upon completion of the Acquisition, it is expected that (i) the Acquisition will generate
an additional income to the Group; (ii) the adjustment mechanism to the Consideration
facilitates the safeguard of the 2012 Guaranteed Amount; and (iii) the Board believes that the
Company would have sufficient level of operations and assets under Rule 13.24 of the
Listing Rules.

      The Directors (including the proposed Directors and the independent non-executive
Directors) are of the view that the terms of the S&P Agreement are fair and reasonable and in
the interests of the Shareholders and the Company as a whole.

Experience of the Board and the Enlarged Group in paper business

Executive Director — Mr. Wong

     Mr. Wong, aged 42, joined the Group on 18 June 2007 as an executive Director and
was appointed as the chief executive officer of the Company on 17 June 2008. Mr. Wong
worked in a number of reputable investment banks and the Listing Division and has extensive
experience in finance, operation and strategic investment of listed companies in Hong Kong.



                                       – 41 –
                       LETTER FROM THE BOARD


Mr. Wong holds a Master of Science (Financial Management) degree from University of
London in United Kingdom and a Bachelor of Commerce degree from University of Toronto
in Canada. Mr. Wong is also a responsible officer of Veda Capital, the financial adviser to
the Company for the Resumption. Mr. Wong was a director of the holding company of
Kingston Securities, being Kingston Financial Group Limited (stock code: 1031) up to April
2011 and is currently a consultant to a subsidiary of Kingston Financial Group Limited.

     The Group was principally engaged in (i) the design, development, production and
marketing of paper products (through the CIL Group); and (ii) the trading of electronic
products prior to the completion of the disposal of the CIL Group on 17 March 2010. Upon
Mr. Wong’s appointment as an executive Director of the Company on 18 June 2007 and up to
the date of the completion of the disposal of CIL Group, Mr. Wong has managed and
overseen the operation of the paper business for more than 3 years.

Proposed executive Director — Mr. Ng

     Mr. Ng, aged 61, is proposed to be an executive Director upon completion of the
Acquisition. Mr. Ng will be responsible for the Target Group’s overall management and
development of corporate policy and strategy, and liaison with various local government and
authorities in the PRC. Mr. Ng commenced his career in the printing industry in 1960s. He
has extensive experience in printing operations and printing machinery.

      Mr. Ng is currently a director of NSG and certain companies within the Target Group,
namely, the Target Company, Sky Will and New Spring Offset respectively. Mr. Ng is also
one of the ultimate beneficial owners of New Spring Label. Mr. Ng does not have
shareholdings in the Target Group, does not hold any securities of the Company and will not
be interested in the securities of the Company upon Resumption. Save as New Spring Label,
Mr. Ng does not have beneficial interest in any company which is engaged in the paper
business.

     Principal terms of the service agreement of Mr. Ng are set out as follows:

     Date of service agreement:         29 February 2012

     Effective date:                    Upon completion of the Acquisition

     Parties:                           The Company and Mr. Ng

     Engagement:                        Mr. Ng shall be appointed as an executive Director

     Term:                              Mr. Ng shall be engaged for an initial term of three
                                        years and shall continue thereafter unless and until
                                        terminated by either the Company or Mr. Ng giving
                                        to the other not less than three months’ notice in
                                        writing to determine the same.




                                     – 42 –
                LETTER FROM THE BOARD


Remuneration:              Mr. Ng shall receive during the continuance of the
                           term of engagement:

                           (a)   an annual salary of HK$360,000 (inclusive of
                                 salary, commission, housing reimbursement
                                 and allowances) which shall accrue on a day
                                 to day basis payable by 12 equal monthly
                                 instalments, with each monthly instalment of
                                 HK$30,000 to be payable in arrears. Such
                                 annual salary may be reviewed annually after
                                 each year of service during the term of the
                                 service agreement at a rate to be determined
                                 by the Board. Salary of Mr. Ng shall be
                                 decided and approved by the Board; and

                           (b)   in respect of each financial year during the
                                 term of engagement, a discretionary bonus of
                                 a sum to be determined and approved by the
                                 Board at its absolute discretion having regard
                                 to the operating results of the Group and the
                                 performance of Mr. Ng. The discretionary
                                 bonus shall be decided and approved by the
                                 Board.

                           Mr. Ng may, at the discretion of the Board, be
                           granted share options entitling Mr. Ng to subscribe
                           for shares of the Company under any share option
                           scheme from time to time adopted by the Company.

Termination:               If the Company is for any reason not entitled to
                           terminate the engagement of Mr. Ng in accordance
                           with the service agreement, it may at any time, by
                           giving Mr. Ng payment of salary in lieu of notice to
                           terminate the engagement.

                           If the Company becomes entitled pursuant to the
                           service agreement to terminate the engagement of
                           Mr. Ng, it shall be entitled (but without prejudice to
                           its right subsequently to terminate the engagement
                           on the same or any other ground) to suspend the
                           engagement of Mr. Ng without payment of salary,
                           in full or in part, to the extent permitted by law.




                        – 43 –
                     LETTER FROM THE BOARD


Proposed non-executive Director — Mr. Wong Hung Ki

      Mr. Wong Hung Ki, aged 58, is proposed to be a non-executive Director upon
completion of the Acquisition. Mr. Wong Hung Ki has over 40 years of experience in
printing industry. He has been responsible for the overall management and operation and is
involved in the development of corporate strategy and liaison with customers and suppliers in
his current and previous engagements.

     Senior management of the Target Group and their backgrounds are set out as follows:

Mr. Kao Wai Kwong, Eric

      Mr. Kao Wai Kwong, Eric, aged 48, is a director of the Target Company and is
interested in as to 30% of the Vendor. Mr. Kao Wai Kwong, Eric is working closely with Mr.
Ng for the Target Group’s overall management and development. He has more than 15 years
experience in the printing and packaging industry and was a senior management of a sizable
company engaged in printing business. Mr. Ng has known Mr. Kao Wai Kwong, Eric for
more than 12 years. They were colleagues in printing and packaging industry for several
years.

Ms. Li

      Ms. Li, aged 52, is responsible for human resources and administration policy of the
Target Group. Ms. Li has over 24 years of experience in corporate and production
management and marketing. Ms. Li was a production and administrative manager of a
printing company before joining the Target Group. She is the spouse of Mr. Ng.

Mr. Tham Ming Yong

     Mr. Tham Ming Yong, aged 49, joined the Target Group in July 2011 and is
responsible for the accounting function of the Target Group. Mr. Tham Ming Yong is an
associate member of the Association of International Accountants. He has over 20 years of
experience in accounting, taxation and the PRC business. Prior to joining the Target Group,
Mr. Tham Ming Yong had worked in an international accounting firm, then in various
companies listed in Hong Kong or Malaysia as PRC office representative, financial
controller, deputy general manager and executive director.

      With the above mentioned, it is expected that the Board and the management has
sufficient knowledge and experience in managing the paper business upon completion of the
Acquisition.




                                     – 44 –
                          LETTER FROM THE BOARD


C.   Competitive strengths

    The achievements of the Target Group are principally attributable to the following
competitive strengths:

     A.   Good relationship with suppliers

           The Target Group has maintained good and long-term relationship with its local and
     overseas suppliers. In particular, the Target Group has maintained more than 4 years business
     relationship with a major supplier of raw paper. The Target Group has been given
     competitive pricing and credit terms and stable supply from these suppliers, which in turn
     allows the Target Group to offer competitive pricing to its customers and meet customers’
     product specifications and delivery schedules on a timely basis.

     B.   Good relationship with customers

           The Target Group has established long term business relationship with its customers.
     Currently, there are over 35 customers and most of which are distributors, manufacturers of
     consumer products and advertising agencies based in the USA, Europe, Hong Kong and the
     PRC. The Target Group manufacture packaging products for customers including, (i) branded
     cosmetic retailer which are sold in over 988 stores and 56 countries worldwide, (ii)
     international luxury fashion group based in Germany and (iii) world-leading cognac house
     which sells about 50 million bottles a year worldwide.

     C.   Strong production capability

           As at 31 March 2011, the production plant had maximum production capacity of
     approximately 56,000 sheets of paper per hour and currently, the production capacity reaches
     to 25,000 sheets of paper per hour. The Target Group made considerable amount of
     investments in plant and machinery including those imported from Germany and Japan. Due
     to high production efficiency, the Target Group is able to product and delivers products to
     customers of a timely basis.

     D.   Stringent quality control

          The Target Group has adopted stringent quality control measures throughout the entire
     production process which include sample testing of raw paper texture and random inspection
     of quality at each stage of production. Sample testing of finished products before delivery has
     been carried out.

           The Target Group has been accredited with the internationally recognized ISO 9001
     certification in respect of the quality management system they operate. The Target Group has
     maintained good reputation for product quality among the paper packaging industry as a
     result of its continual adherence to stringent quality control procedures.




                                           – 45 –
                           LETTER FROM THE BOARD


     E.   Strong management team with in-depth knowledge in the paper-based packaging and
          printing industry

           The Target Group’s continued success, to a large extent, is attributable to its strong and
     experienced management team led by Mr. Ng. The management team has in-depth knowledge
     of the paper-based packaging and printing products and maintains good relationship with its
     customers and suppliers. In particular, Mr. Ng, a director of the Target Company, has over 40
     years of experience and knowledge in the printing and paper packaging industry and
     packaging requirements for various industries such as domestic appliances, food and
     beverages, jewellery as well as toys. The senior management not only possesses extensive
     experience and profound knowledge of the paper-based packaging and printing industry in
     the PRC, but also understands the needs of the Target Group’s customers which enable the
     Target Group to maintain its competitive edges over its competitors.

D.   Industry overview

     Global packaging market

          Used in a wide range of industries across food and drink, healthcare, cosmetics and
     other consumer goods as well as a range of industrial sectors, packaging has become an
     essential everyday item, with its usage growing broadly in line with the global economy.

           According to the statistics provided by World Packaging Organization
     (www.worldpackaging.org), a non-profit and non-governmental international of national
     packaging institutes and associations, the sales in the packaging market has grown up by
     51.4% from US$372 billion in 1999 to US$563 billion in 2009. In a report published in
     December 2011 from the Pira International Limited (www.pira-international.com), an
     organisation which provides independent, knowledge-based information and testing services
     to clients in the packaging, paper and print industry and their supply chains, has projected the
     global packaging sales to reach approximately US$696 billion in 2011 and will set to exceed
     US$800 billion by 2016. The growth is believed to be driven mainly by increasing demand
     for packaging in emerging and transitional economies including China, India, Brazil and
     some other eastern European countries.




                                            – 46 –
                                                    LETTER FROM THE BOARD


                                                 The global packaging market in 1999–2009



              600,000                                                                                                               563,847

                                                                                                                      477,094
              500,000                                                                                     459,263
                                                                                         427,210
                              372,400        383,352         376,140    382,803
              400,000
US$ Million




              300,000

              200,000

              100,000

                     –
                              1999           2000            2001        2002            2003              2004        2005           2009
                                                                                  Year



                           Note: constant 2004 prices from 2005 onwards

                           Source: Pira International Limited


                      In 2009, Asian market, including China and Japan accounted for the largest share of the
                global packaging market, ahead of North America and Western Europe. The largest single
                national packaging market during the same year was USA with sales of approximately
                US$128 billion. Japan ranked second with sales of US$58 billion, ahead of China at US$53
                billion.

                                      World packaging consumption by region in 2003–2009



                     Oceania

                          Asia

South & Central America

                                                                                                                                             2009
                North America
                                                                                                                                             2003
                         Africa

                  Middle East

               Eastern Europe

               Western Europe

                                  -     20,000      40,000     60,000   80,000     100,000      120,000     140,000   160,000   180,000
                                                                           US$ million




                           Note: constant 2004 prices in 2009

                           Source: Pira International Limited




                                                                        – 47 –
                                      LETTER FROM THE BOARD


                              Top 15 national packaging markets in 2003–2009



  Indonesia

South Korea

    Turkey

      India

     Brazil

     Spain

    Canada
                                                                                                                 2009
     Russia
                                                                                                                 2003
      Italy

       UK

     France

  Germany

     China

     Japan

      USA


              -           20,000       40,000          60,000             80,000   100,000   120,000   140,000
                                                            US$ million



                  Note: constant 2004 prices in 2009

                  Source: Pira International Limited


            Packaging encompasses a wide range of material types across paper, board, plastic,
       metal, glass, wood and other materials. The largest share of global packaging is accounted for
       paper and board packaging with sales of US$165 billion in 2003, equating to 38% of the
       market. Paper and board remains the single largest element of the market in 2009, growing at
       an annual rate of around 4% in real terms, driven on the one hand by rising demand in fast-
       growth national markets as well as steady growth in secondary/bulk packaging across the
       globe.




                                                                – 48 –
                                                LETTER FROM THE BOARD


                                World packaging consumption by sector in 2003–2009



                Other

                Glass

             Metal                                                                                                                      2009
                                                                                                                                        2003
   Flexible plastic

     Rigid plastic

  Paper and board


                        -                    50,000            100,000                 150,000            200,000            250,000
                                                                         US$ million



                        Note: constant 2004 prices in 2009

                        Source: Pira International Limited


                  The largest market for paper and board packaging in 2009 was USA, accounted for
            approximately US$51 billion. China ranked second with sales of approximately US$30
            billion and followed by Japan with sales of approximately US$23 billion.

                                    Top ten paper and board packaging markets in 2009


  Russia                    4,768
Indonesia                    5,377
      UK                      6,178
    Italy                     6,436
  Canada                        7,237
  France                        7,342
Germany                              8,155
   Japan                                                          23,467
   China                                                                          30,122
    USA                                                                                                                  50,533

            -                    10,000               20,000                30,000               40,000             50,000             60,000
                                                                         US$ million


                        Source: Pira International Limited




                                                                         – 49 –
                                 LETTER FROM THE BOARD


              The need for packaging has been ‘‘long-lasting/sustainable’’ as suggested by the World
        Packaging Organization. Both USA and China have been putting efforts to improve
        environmental issues. Paper packaging has very strong environmental credentials and with
        further improving papers barrier properties the industry is increasing its viability as a
        packaging material. As technological improvement continue to progress and more countries
        striving for a more sustainable future, the continuous growth of paper packaging is further
        enhanced by its eco-friendly nature and emerging acceptance amongst consumers.

        Pricing trend of wood pulp

             Wood pulp is the most common raw material in the process of manufacturing of paper
        and paperboard. The commodity markets review published by the World Bank recorded an
        average price of wood pulp in 2011 to be US$899.3 per ton. As shown in the price graph of
        wood pulp below, the average price of wood pulp had suffered a slump of 33.3% in 2009 due
        to a weakened world-wide demand for general commodity goods along with a global
        economic downturn. In 2010, however, the demand for commodity goods had recovered and
        the average price of wood pulp had rebounded strongly illustrated a 41.0% growth reaching
        US$867 per ton. The graph also illustrated a positive trend in the average price of wood pulp
        through time with an average annual growth of 4.8% in the period from 2006 to 2011.

                            Wood pulp annual average price in 2006–2011


        1,200

        1,000                                                                         899
                                                                        867
                                                   820
                                    767
         800         699
                                                             615
US$/t




         600

         400

         200

           –
                    2006           2007            2008      2009       2010         2011



                Source: World Bank (www.worldbank.org)




                                                    – 50 –
                                          LETTER FROM THE BOARD


               The packaging market in China

                     Over the past decade, China’s economy has experienced significant growth with strong
               potential for future growth, despite the economic crisis, and it is still one of the fastest
               growing economies in the world. China is believed to emerge from the economic crisis more
               quickly than the rest of the world with the aids of the government stimuli. According to the
               National Bureau of Statistics of China, China’s GDP had improved by 10.4% from
               approximately RMB34,051 billion to approximately RMB40,120 billion in 2009 and 2010
               respectively. China’s economic outlook is expected to remain broadly favorable, according to
               reports from Bloomberg, China’s GDP is projected to grow at rates of 9.2%, 8.5% and 8.2%
               in 2011 to 2013. It is also noticeable that in 2010, China has already surpassed Japan to be
               the world’s second largest economy and estimated to overtake the USA as the world’s largest
               economy around 2020. The graph below has recorded the annual GDP of China’s from 1999
               to 2010.

                                           Annual GDP of China in 1999–2010


              45,000
                                                                                                                        40,120
              40,000
                                                                                                               34,051
              35,000
                                                                                                      31,405
RMB Billion




              30,000                                                                         26,581
              25,000                                                                21,631
              20,000                                                       18,494
                                                                  15,988
              15,000                                     13,582
                                9,921   10,966 12,033
              10,000    8,968

               5,000
                   -
                        1999    2000     2001    2002     2003     2004    2005     2006      2007     2008     2009     2010


                       Source: National Bureau of Statistics of China




                                                                 – 51 –
                                           LETTER FROM THE BOARD


                        China has undergone a transformation of economic development to strengthen and
                 improve macro economic control and encourage market mechanism performance. The rapid
                 urbanization and steadily increase of urban and rural household disposable income have
                 contributed to the significant growth of the China’s consumer market. Extracted from the
                 National Bureau of Statistics of China, China’s urban household disposable income per capita
                 had increased from approximately RMB11,759 to approximately RMB19,109 representing an
                 average annual growth of 12.5% during the implementation of the Eleventh Five-Year plan.
                 In addition, the per capita urban household disposable income in the first three quarters of
                 2011 had reached approximately RMB17,886 illustrating a year-on-year real growth of 7.8%.
                 The Eleventh Five-Year Plan as a long-term strategic policy to maintain the momentum of
                 economic growth had further stimulated domestic demand of consumer goods. According to
                 the National Bureau of Statistics of China, China’s total retail sales of consumer goods had
                 increased from approximately RMB7,641 billion to approximately RMB15,455 billion
                 illustrating an average annual growth of 20.5% from 2006 to 2010. In the first three quarters
                 of 2011, China’s total retail sales of consumer goods had reached approximately RMB13,081
                 billion illustrating a year-on-year real growth of 11.3%. The graph below has recorded
                 China’s annual urban household disposable income and total retail sales of consumer goods
                 from 1999 to 2010.

                       Annual urban household disposable income per capita in 1999–2010


                  22,500

                  20,000                                                                                                19,109
                                                                                                               17,175
                  17,500
                                                                                                      15,781
                  15,000                                                                     13,786
RMB per Capita




                  12,500                                                            11,759
                                                                           10,493
                                                                   9,422
                  10,000                                   8,472
                                                   7,703
                   7,500                   6,860
                           5,854   6,280

                   5,000

                   2,500

                      0
                           1999    2000    2001    2002    2003    2004     2005    2006     2007     2008     2009      2010

                                                    Urban household disposable income per capita



                       Source: National Bureau of Statistics of China




                                                               – 52 –
                                       LETTER FROM THE BOARD


                        Total retail sales of consumer goods in China in 1999–2010


                                                                                                                        15,455
              16,000

              14,000
                                                                                                               12,534
              12,000                                                                                  11,243
RMB Billion




              10,000                                                                          8,921
                                                                                   7,641
               8,000
                                                                          6,718
                                                                 5,950
               6,000                                    5,252
                                               4,814
                                       4,306
                               3,911
                       3,565
               4,000

               2,000

                   0
                       1999    2000    2001    2002      2003     2004     2005     2006      2007    2008     2009      2010

                                                       Total retail sales of consumer goods



                   Source: National Bureau of Statistics of China


                    Emerged as the largest exporting country in the world, China’s GDP should continue its
              growth. Along with higher consumer spending powers and increasing demand for domestic
              consumer goods, the value of the packaging industry in China is expected to continue to
              blossom and will eventually pass and replace the packaging industry in USA as the leader.
              Following the positive impact of the Eleventh Five-Year Plan on the consumer market, the
              National People’s Congress of China has launched the Twelfth Five-Year Plan on 14 March
              2011, covering the period from 2011 to 2015, emphasized more on the ideas of
              environmental sustainability. China’s continuous economic growth favoring the use of
              environmental friendly packaging materials has enhanced the growth of the paper packaging
              industry because the process of paper packaging is, in general, simpler and less energy and
              material consuming and paper is recyclable. As noted from articles from the Chinese
              Packaging Federation released in 2011, China packaging industry had a booming year in
              2010 accounting a gross industrial output of approximately RMB1.2 trillion and the sales of
              the packaging industry will continue under the Twelfth Five-Year Plan to enjoy an average
              annual growth of 6% in 2011 to 2015 and that China’s packaging industry has become the
              pillar industry of national economy of the 40 major industrial categories ranked 14th.

              Luxury packaging market

                   Increasing consumer purchasing power has also contributed to the demand for luxury
              goods in China to grow significantly to replace Japan as the largest luxury goods market and
              overtake Japan as the sustained influx of high-end stores continues to spread across China.
              Research conducted by CLSA Asia-Pacific Markets, an Asia leading independent brokerage
              and investment group, shows that, China will become the world’s foremost luxury goods
              market by 2020, with total expected sales amounting to approximately US$100 billion. This




                                                             – 53 –
                                         LETTER FROM THE BOARD


               is supported by the fact that the high-end goods are now spilling over into 2nd and 3rd-tier
               cities, but not only concentrated in major cities like Beijing and Shanghai. In additional,
               according to another official report from Pira International Limited, although USA will
               remain the largest national market for luxury packaging in present, demand in China will
               continue to close the gap, and it anticipated that this type of packaging in China will grow by
               a projected CAGR of 7.1% over the next five years from 2010 to 2015.

               The packaging market in USA

                     According to the Bureau of Economic Analysis (www.bea.gov) under the United States
               Department of Commerce, GDP of USA has recorded a growth from approximately
               US$9,951.5 billion in 2000 to approximately US$15,087.7 billion in 2011, representing an
               average annual growth rate of 4.7%. After a decrease of around 3% to 4% in 2009, the real
               GDP had increased 3.0% and 1.7% in 2010 and 2011 respectively, showed that the
               conditions of the economy in USA is recovering from the economic crisis started in 2008.
               The Bureau of Economic Analysis latest published news in January 2012 stated that the GDP
               in 2011 accelerated in the forth quarter at 2.8% after increased 1.8% in the third. The growth
               was partly contributed from the turning up of inventory investment and consumer spending
               for both durable goods and nondurable goods. According to reports from Bloomberg, GDP of
               USA is projected to grow at rates of 1.7%, 2.3% and 2.4% in 2011 to 2013. The graph below
               has recorded the annual GDP of USA in current dollars from 2000 to 2011.

                               Annual GDP of USA in current dollars in 2000–2011


              16,000                                                                                               15,088
                                                                                     14,029 14,292 13,939 14,527
              14,000                                                        13,377
                                                                   12,623
                                                         11,853
              12,000                            11,142
                                       10,642
                        9,952 10,286
US$ Billion




              10,000

               8,000

               6,000

               4,000

               2,000

                  0
                        2000   2001    2002     2003     2004       2005    2006     2007   2008    2009   2010    2011


                       Source: Bureau of Economic Analysis


                    Personal income increased with a year on year growth rate of 3.7% and 4.7% in 2010
               and 2011 resulting in more consumer goods expenditures. As illustrated in the graph below,
               personal consumption expenditures have increased in an average of 4% annually from
               US$7,804.1 billion to US$10,245.5 billion from 2003 to 2010. Real personal consumption
               expenditures recorded a year on year growth of 2.0% in 2010 and a further 2.2% in 2011.
               The graph below has recorded the annual personal consumption expenditures in USA from
               2003 to 2010.




                                                                  – 54 –
                                  LETTER FROM THE BOARD


                      Annual personal consumption expenditures in 2003–2010



                12,000

                                                                       10,036           10,246
                                                               9,772            9,866
                10,000                                 9,301
                                             8,804
                                    8,271
                          7,804
                  8,000
  US$ Billion




                  6,000


                  4,000


                  2,000


                     –
                          2003      2004      2005      2006   2007     2008     2009    2010



                Source: Bureau of Economic Analysis


      As noted from the report from Pira International Limited released on January 2012,
USA was the largest consumer for packaging with a demand of US$137 billion in 2010. The
leading consumer among the countries in the packaging industry has showed signs of slowly
recovering from the recession from 2008. It is expected that the packaging industry will
continue to be an essential part of the economy in USA and will experience a similar
growing trend to the personal consumption expenditures in USA.

      According to a report published in Spring 2011 by the Paperboard Packaging Council,
an organization encompasses approximately 80% of all paper-based packaging manufactured
in the USA and includes several Canada firms, the paperboard packaging industry is expected
to grow at an average annual rate of 4.7% in sales, 0.6% in tons and the average value per
ton per year is expected to rise 4.1% in five years from 2010 to 2014. Paperboard packaging
council explains that 56% of all paperboard packaging is destined for food product segments
including but not limited to beverages and dairy products, candy and confections and the
balance services other vital industries including but not limited to pharmaceuticals, cosmetics
and personal care products and most of the items found in grocery or club stores. The fact
that most paper based packaging is used for consumer staples, a major strength to the
industry, is to be able to bring steady growth and stable earnings. Paperboard Packaging
Council expects that the demand for this industry will further enhanced by the fact that
paperboard packaging is more environmental friendly and that currently, American forests are
growing as the trees are being planted three times more than used, such that the supplies of
paper will not affect the paperboard packaging industry.




                                                      – 55 –
                          LETTER FROM THE BOARD


E.   Regulations governing the industry

     Laws and regulations relating to the printing industry in the PRC

           Companies in the printing industry in the PRC have to comply with certain regulatory
     requirements established and published by the PRC government including but not limited to
     (i) the Regulations of Administration of Printing Industry 《印刷業管理條例》 promulgated
                                                                (                   )
     and implemented on 2 August 2001 by the PRC State Council (中華人民共和國國務院); (ii)
     the Regulations on Publication Administration 《出版管理條例》 promulgated on 25
                                                         (                )
     December 2001 and implemented on 1 February 2002 by the PRC State Council; (iii) the
     Administration Regulations on Fulfilling Printing Orders 《印刷品承印管理規定》 jointly
                                                                  (                     )
     promulgated on 18 July 2003 and implemented on 1 September 2003 by the General
     Administration of Press and Publication of the PRC (中華人民共和國新聞出版總署) and the
     Ministry of Public Security of the PRC (中華人民共和國公安部); (iv) the Temporary
     Regulations for the Establishment of Foreign Investment Printing Enterprises 《設立外商投資
                                                                                  (
     印刷企業暫行規定》 jointly promulgated and implemented by the General Administration of
                         )
     Press and Publication of the PRC and the Ministry of Foreign Trade and Economic
     Cooperation of the PRC (中華人民共和國對外貿易經濟合作部) (now known as the Ministry
     of Commerce of the PRC (中華人民共和國商務部)) on 29 January 2002 and the
     Supplementary Provisions of the Temporary Regulations for the Establishment of Foreign
     Investment Printing Enterprises 《關於<設立外商投資印刷企業暫行規定>的補充規定》
                                          (                                                     )
     jointly promulgated on 12 November 2008 and implemented on 1 January 2009 by the
     General Administration of Press and Publication of the PRC and the Ministry of Commerce
     of the PRC; and (v) the Temporary Regulations for the Qualifications of the Operators in the
     Printing Industry 《印刷業經營者資格條件暫行規定》 promulgated and implemented on 9
                       (                                   )
     November 2001 by the General Administration of Press and Publication of the PRC; and (vi)
     the Rules of the Shenzhen Special Economic Zone on the Implementation of Regulations of
     the Administration of Printing Industry (深圳經濟特區實施《印刷業管理條例》若干規定)
     promulgated on 25 June 2004 and implemented on 1 July 2004 by the Standing Committees
     of Shenzhen Municipal People’s Congress (深圳市人民代表大會常務委員會) (collectively,
     the ‘‘Printing Laws and Regulations’’).

           Pursuant to the Printing Laws and Regulations, foreign entities are allowed to set up
     foreign capital invested printing enterprises which can be (i) a joint venture or cooperation
     engaging in the printing industry in the PRC (a PRC partner is required); or (ii) a wholly
     foreign owned enterprise engaging in package segment of the printing industry. Moreover,
     any legal entities (including those foreign capital invested enterprises) or individuals
     engaging in printing business in the PRC must apply for a printing license from the
     publication administrative authority at the relevant provincial, autonomous region or
     municipal level. The printing license may not be leased, lent or transferred by any means.
     The Printing Laws and Regulations also stipulate that, upon obtaining approval from relevant
     administrative departments in charge of publishing, those foreign capital invested enterprises
     engaging in printing business may receive production orders from foreign publishers to print
     publications, packaging and decorative printed products and other printed products that are to
     be exported out of the PRC.




                                           – 56 –
                      LETTER FROM THE BOARD


      Furthermore, in accordance with the Temporary Regulations for the Qualification of the
Operators in the Printing Industry 《印刷業經營者資格條件暫行規定》 as mentioned above,
                                    (                                   ),
in order to obtain a printing licence, applicants are required to: (i) submit the name of the
enterprise and its bylaws; (ii) provide a well-defined scope of business; (iii) be in possession
of production and business premises that can meet the needs of its scope of business, and
necessary capital, equipment and other production and business conditions as well; (iv) be in
possession of an organizational structure and staff that can meet the needs of its scope of
business; and (v) fulfill other conditions stipulated by the relevant laws and administrative
regulations. In addition to the provisions stipulated above, the approval of the establishment
of a printing enterprise must also conform to the planning of the PRC relating to the total
number, structure and distribution of the printing enterprises.

Laws and regulations relating to processing trade arrangements in the PRC

      According to the Interim Measures for the Administration of Examination and Approval
of Processing Trade 《加工貿易審批管理暫行辦法》 (the ‘‘Interim Measures’’)
                             (                               )
(promulgated on 27 May 1999 and implemented on 1 June 1999 by the Ministry of Foreign
Trade and Economic Cooperation of the PRC (now known as the Ministry of Commerce of
the PRC), processing arrangements in the PRC refer to business activities involving the
importing of all or part of the raw and auxiliary materials, parts and components, accessories,
and packaging materials from abroad, and re-exporting the finished products after processing
or assembling by PRC processing enterprises. Processing trade includes the processing of
supplied materials and imported materials. In particular, processing of supplied materials
refers to processing trade with materials supplied by foreign partners. Under such
arrangement, PRC processing partners neither need to purchase materials with foreign
currency nor reimburse its foreign partners with processing fees. However, the foreign partner
shall take back all finished products for sale upon payment of the processing fees to PRC
processing enterprises. A PRC processing enterprise shall be a manufacturing company with a
legal person status or a factory established by an operating enterprise as non-legal person
with business license and accounting independently with respect to the processing trade. In
addition, the Interim Measures specify that approval from provincial level or the authorised
district or county level departments of foreign economic relations and trade must be obtained
by the PRC processing partner before it commences the processing activities.

     Pursuant to the PRC Customs Supervision and Administration of Processing Trade
Goods 《中華人民共和國海關對加工貿易貨物監管辦法》 (promulgated by the General
        (                                                  )
Administration of Customs on 1 November 2010 and which came into effect on 5 December
2010), subject to the granting of the approval of customs and fulfillment of the required
procedures, PRC processing partners may subcontract processing work of its products to
other sub-contractors. Upon completion of the sub-contracting processing, the processed
products shall be returned to the PRC processing partners.

      The Regulations of the Export-oriented Processing and Assembly Trade of Guangdong
Province 《廣東省對外加工裝配業務條例》 issued by the Standing Committee of the
          (                                 )
Guangdong Provincial People’s Congress on 28 November 2008, makes it clear that export-
oriented processing and assembly companies may enter into contracts with foreign investors
to coordinate and arrange the processing factory to manufacture products as agreed.




                                       – 57 –
                      LETTER FROM THE BOARD


Laws and regulations relating to quality and safety of products

      The Product Quality Law of the PRC 《中華人民共和國產品質量法》 (‘‘Product
                                                   (                              )
Quality Law’’) was adopted by the Standing Committee of the National People’s Congress
on 22 February 1993 and amended on 8 July 2000 and on 27 August 2009. The Product
Quality Law is applicable to all production and marketing activities in China, and was
formulated to strengthen the administration of rules pertaining to product quality, as well as
to clarify product liability rules, protect consumers and maintain social and economic order.

       The State Council established a national administration in charge of nationwide product
quality, with local authorities performing this duty at the local level. Products offered for sale
must meet relevant quality and safety standards. Enterprises may not produce or market
counterfeit products in any fashion, including forging brand labels or providing false
information about the manufacturer of a product. Violations of state or industrial standards
for health and safety and any other related violations may result in civil liabilities and
penalties, such as compensation for damages, fines, suspension or shutdown of businesses, as
well as confiscation of products illegally produced and sold and the sales proceeds from such
products. Serious violations may subject the responsible individual or enterprise to criminal
liabilities. Manufacturers whose products cause personal or property damages due to their
latent defects are liable for such damages.

      The Interim Measures on the Administration of Quality Supervision of Printed Books
and Periodicals 《書刊印刷產品質量監督管理暫行辦法》 (effected on 20 November 1992)
                 (                                        )
and the Provisions on the Administration of Quality of Books 《圖書質量管理規定》(                      )
(effected on 1 March 2005) provide for special provisions with respect to quality supervision
and inspection of printed books and periodicals. The printing of books and periodicals is
subject to applicable quality standards and provisions in the contracts. Administrative
penalties such as warnings, fines, suspension of business, and cancellation of printing license
may be imposed in case of breaches of the above provisions.

Laws and regulations relating to production safety

      The Production Safety Law of the PRC 《中華人民共和國安全生產法》 (‘‘Production
                                                (                              )
Safety Law’’) was promulgated by the Standing Committee of the National People’s
Congress on 29 June 2002 and became effective on 1 November 2002 and amended on 27
August 2009. The Production Safety Law provides safety standards for any production or
business operation in order to reduce accidents and protect the general public security and
safety of property. The State Administration of Work Safety (國家安全生產監督管理總局), a
central government authority established by the State Council, is primarily responsible for the
nationwide supervision and administration of the Production Safety Law. Local government
authorities at the county level and above are responsible for supervision and administration of
production safety within their respective local jurisdictions.

      Enterprises are required to undertake necessary measures to set up and maintain
appropriate equipment, monitor the safety of production procedures, assign designated
personnel, conduct workplace safety training and undertake all other measures required by
the law to ensure the safety of employees and the general public. Any responsible individual
or enterprise that fails to perform its duty to meet the safety production standards may be



                                       – 58 –
                     LETTER FROM THE BOARD


ordered to rectify the breach within a prescribed period and/or pay a fine. Failure to rectify
the breach within the prescribed period may result in suspension or closure of the business.
Serious violations that result in any production safety accident may subject the responsible
individuals to criminal liabilities.

Laws and regulations relating to labour protection

       PRC Labour Law 《中華人民共和國勞動法》 which came into effect on 1 January
                          (                          )
1995 and amended on 27 August 2009 stipulates general provisions with regard to labour
contracts, working hours, wages, occupational safety and health, special protection for female
staff and juvenile workers, vocational training, social insurance and welfare, and settlement
of labor disputes. Enterprises failing to comply with the PRC Labour Law may be subject to
warnings, fines, order to pay compensation, and cancellation of business license. Criminal
liabilities may also be imposed for serious violations.

      On 29 June 2007, the National People’s Congress enacted the PRC Labour Contract
Law 《中華人民共和國勞動合同法》 which became effective on 1 January 2008. The
      (                               )
Implementation Regulation for the PRC Labour Contract Law, or the Implementation
Regulation 《中華人民共和國勞動合同法實施條例》 was promulgated by the State Council
            (                                        ),
and took effect on 18 September 2008. The Labour Contract Law formalises, among others,
workers’ rights concerning overtime hours, pensions and layoffs, the execution, performance,
modification and termination of the labour contracts. In particular, it provides for specific
standards and procedures for entering into non-fixed-term labour contracts. Both the
employer or the employee is entitled to terminate the labour contract in circumstances as
prescribed in the Labour Contract Law or if certain preconditions are fulfilled, and in certain
cases, the employer is required to make a statutory severance payment upon the termination
of the labour contract pursuant to the standards provided by the Labour Contract Law.

Laws and regulations relating to environmental protection

      The PRC Environmental Protection Law 《中華人民共和國環境保護法》 (effected on
                                               (                                 )
26 December 1989), the PRC Law on Appraisal of Environment Impact 《中華人民共和國環
                                                                         (
境影響評價法》 (effected on 1 September 2003), and the Regulations on Administration of
               )
Environmental Protection of Construction Projects 《建設項目環境保護管理條例》 (effected
                                                    (                               )
on 29 November 1998), together set out the legal framework on, among others, the design
and construction requirements of production facilities of the Processing Facility in respect of
pollution control and environmental protection. The PRC Law on the Prevention and
Treatment of Air Pollution 《中華人民共和國大氣污染防治法》 (effected on 1 September
                            (                                     )
2000), the PRC Law on the Prevention and Treatment of Water Pollution 《中華人民共和國
                                                                           (
水污染防治法》 (effected on 1 June 2008), the PRC Law on the Prevention and Treatment of
               )
Noise Pollution 《中華人民共和國環境噪聲污染防治法》 (effected on 1 March 1997) and
                 (                                         )
the PRC Law on the Prevention and Treatment of Solid Waste Pollution 《中華人民共和國固
                                                                         (
體廢物污染環境防治法》 (effected on 1 April 2005) together impose further requirements on
                        )
the Processing Facility on the discharge and treatment of waste by-products, including
wastewater and chemical waste.




                                      – 59 –
                           LETTER FROM THE BOARD


           A person or an enterprise failing to comply with the Environmental Protection Law may
     be subject to various penalties imposed by environmental protection authorities, depending on
     the individual circumstances of each case and the extent of contamination. Such penalties
     may include warnings, fines, imposition of deadlines for remedying the contamination and
     orders to close down enterprises. Enterprises that cause air, water, noise or solid waste
     pollution are obligated to eliminate the pollution and are required to compensate the parties
     directly affected by the pollution for their losses. Criminal liabilities may also be imposed for
     serious violations.

     Apart from the laws and regulations of Hong Kong and the PRC, the Enlarged Group is not
subject to other rules and regulations in other jurisdictions.

F.   Future plans and development

     With its experienced management team and the adoption of proactive policies to capitalize on
new market demands and trends, the Directors (including the proposed Directors) believe that the
Target Group is well positioned to benefit from the business opportunities in the paper products
industry. As such, the Target Group’s objective is to strengthen its market position in the paper
packaging industry by (i) developing the PRC market; (ii) diversifying its product types and
customer base; and, (iii) strengthening its production efficiency and product quality.

     A.   Development of the PRC market

           In view of the high economic growth in the PRC, the Directors are of the view that the
     demand for consumer products in the PRC will continue to increase, which in turn will
     increase the demand for paper-based packaging products for consumer products. The Target
     Group will expand its production capacity by upgrading its production facilities and
     employing more headcounts with experience in paper packaging industry. More resources
     will be allocated to the sales and marketing team in developing the PRC market by visiting
     new customers and participating in packaging related exhibitions and seminars.

     B.   Diversification of products and customer base

          The Target Group is committed to satisfy its customers’ requirements and to offer a
     comprehensive range of paper products to match customers’ specifications and broaden its
     customer base. The range of the products includes products that require advance printing
     technology, such as security printing products and three-dimension cards.

           The production and sales and marketing team of the Target Group will further
     participate in exhibitions and seminars in relation to paper packaging industry in order to
     gain more advanced knowledge in both products and market trends. The management of the
     Target Group is considering engaging more headcount in developing new products.

     C.   Strengthening of the production efficiency and product quality

           The Directors believe that with an increase in volume of orders, the Target Group’s
     manufacturing operations will enjoy increasing economies of scale. In order to enhance the
     efficiency of its existing production facilities, the Target Group intends to purchase or
     upgrade its machinery and equipment to enhance the production and processing capacity
     together with the production effectiveness. Such production machines and equipment may be
     imported from overseas with advanced technology.



                                            – 60 –
                           LETTER FROM THE BOARD


           Furthermore, more qualified professional will be engaged to assist in devising more
     cost-effective production methods and refining its manufacturing process.

G.   Risk factors

     Risks relating to the Enlarged Group

     A.   No long-term sales agreements with most of the customers

          The Target Group has not entered into any long-term sales agreements with its
     customers. If any of these customers, particularly the major customers, materially reduce their
     orders from the Target Group, the business and financial performance of the Target Group
     may be adversely affected.

          With the amendments to the Clean Production Promotion Law of the PRC《中華人民共
     和國清潔生產促進法》by the National People’s Congress of the PRC on 29 February 2012,
     which prevent excessive packaging for products by enterprises, the demand for packaging
     products by the Target Group’s customers may be affected and the business and profit of the
     Target Group may be consequently affected.

           The Target Group has established long term business relationship with its customers
     and has maintain good relationship with its customer by providing services with high product
     quality, reliability of delivery and after-sales service.

     B.   No long-term purchase agreements with its major suppliers

          No long-term procurement contract has been entered into between the Target Group and
     any of these major suppliers. Should these major suppliers cease to supply materials to the
     Target Group and the Target Group fails to procure alternative replacement, the Target
     Group’s business and profitability may be adversely affected.

           The Target Group has established long term business relationship with its suppliers and
     will continue in searching for other reliable suppliers.

     C.   Lease of production plant

          The Target Group currently carries out its production in a leased production plant in
     Sha Jing Zhen, Baoan District, Shenzhen, the PRC. The management of the Target Group has
     signed a new tenancy agreement for the production plant with lease term from 1 July 2011 to
     30 June 2013. Should the Target Group fail to renew the respective lease agreement upon
     expiry and fail to relocate the production lines to suitable sites, the business operation of the
     Target Group may be adversely affected.

     D.   Reliance on key management personnel

          The Target Group’s success, to a significant extent, is attributable to the leadership,
     management, expertise and experience of the directors, in particular, Mr. Ng. He commenced
     his career in the printing industry in 1960s. He has extensive experience in printing
     operations and printing machinery. According to the conditions precedent to the S&P
     Agreement, Mr. Ng has to sign services agreement with the Target Company and/or its
     subsidiaries on such terms and conditions as may be agreed between the parties and the



                                            – 61 –
                     LETTER FROM THE BOARD


Company. The terms of the service agreement are set out in the section headed ‘‘Experience
of the Board and the Enlarged Group in paper business’’ in this Circular. The reliance on Mr.
Ng and other directors and management of the Target Group for the operation of the Target
Group could have an adverse impact on the Target Group’s business and profitability should
the Company fail to retain these competent key personnel or recruit competent replacement.

      Mr. Kao Wai Kwong, Eric, the director of the Target Company has more than 15 years
experience in the printing and packaging industry. Mr. Ng has known Mr. Kao for more than
12 years. They were colleagues in printing and packaging industry for several years.
Currently, Mr. Kao and Mr. Ng are working closely for the operation and future development
of the Target Group.

     Besides, with the extensive experience of the senior management in the printing and
packaging industry for more than 5 years, no material impact affecting the Target Group is
expected when Mr. Ng cease his involvement in the Target Group.

Risks relating to the operation of the Enlarged Group

A.   Operation disruption

      Most of the Target Group’s production processes are semi-automated or involve the use
of machineries, and therefore rely on an adequate and stable supply of electricity. A power
surge or outage could disrupt or even result in the halt of our production process and thereby
adversely affect our printing and manufacturing yield. In time of power shortage, the local
government may limit the electricity supply during which some of the production processes
of the Target Group would be forced to be suspended. The Target Group may need to limit or
delay the production if we face any suspension or shortage of electricity supply which would
have a material and adverse impact on our Group’s profitability. Production process might
need to be rescheduled in order to fit the customer’s delivery schedule.

B.   Payment delays and/or defaults by customers

      Credit period of 30–60 days upon delivery of the finished paper products will be
granted to the customers. There is no assurance that the Target Group’s major customers
would make payment to the Group within the credit period granted by the Group. Should
there be any of the Group’s major customers delay in making payment to the Group, the
Group’s turnover and cash flows may be materially and/or adversely affected. However, as
advised by the management of the Target Group, the Target Group had not experienced any
default by the customers which had any material adverse effects on their operation and
financial condition.

C.   Major customers contributed to more than 50% of the Target Group’s turnover

      The five largest major customers of the Target Group contributed to an aggregate of
approximately 71% of the total turnover to the Target Group for the 6 months ended 30
September 2011. In view of the long business relationship with the customers, the Directors
expect these major customers will continue to contribute more than 50% of the total turnover
of the Enlarged Group. Therefore, any decrease or delay in the customers’ orders on
packaging could have adverse effects on the business and profits of the Enlarged Group. In
addition, there is no assurance that the Target Group can continue to diversify the
composition of customer base.



                                      – 62 –
                     LETTER FROM THE BOARD


D.   Focus on limited products

      The Target Group is currently focusing on production of packaging boxes for wines,
food and cosmetics, stationeries and kid’s toys. There is no assurance that these products will
continue to be in demand in the future and should there be a decrease in demand for these
packaging products, the business and profits of the Enlarged Group could be adversely
affected. The Directors may need to explore other business opportunities in production of
other paper packaging products.

E.   Failure in implementation of safety measures and change of relevant laws, policies and
     regulations

      The Target Group requires staffs to adhere to and implement all safety measures and
procedures as stipulated in safety manual. The management of the Target Group have closely
monitored and supervised the staffs in implementation of such safety measures and
procedures during the operation of machines and equipment and executions of works,
however the Target Group cannot guarantee that there will not be any violation of rules, law
or regulations by the staffs. In the event that the staffs fail to implement safety measures,
there may be higher number of occurrence and more seriousness of personal injuries,
property damage or fatal accidents, which may adversely effect on the financial position of
the Enlarged Group to the extent not covered by the insurance policy and may cause relevant
licences being suspended or not renewed.

     There is no assurance that the PRC government will not introduce new ordinances and
regulations in the future and that the Target Group will be able to comply with such new
ordinances and regulations. Any failure to comply with such new laws or regulations may
have an adverse effect on the operations of the Enlarged Group.

F.   Concentration on constant and reliable supplies

      The Target Group’s purchases from the five largest suppliers accounted for an aggregate
of approximately 63% of the Target Group’s total purchases for the 6 months ended 30
September 2011. The concentration in certain vendors for the purchases is due to the benefits
of the long business relationship established with the suppliers and the convenience and
economic benefits for bulk orders. As advised by the management of the Target Group, there
are many suppliers providing identical or similar types of raw materials. The Directors
believe that there is a concentration in vendors for purchases for the Target Group but there
is no reliance. However, should any of those major suppliers cease to supply raw paper to the
Target Group and the Target Group is unable to find suitable replacements, the Enlarged
Group’s business operation may be adversely affected, and there is no assurance that the
Enlarged Group will not encounter any interruption, delay or shortage in supplies from these
vendors in the future. Any disruption in supplies may materially and adversely affect our
business, financial condition, results of operations and prospects. In the event of any
interruption, delay or shortage in supplies from these vendors in the future, the Enlarged
Group may contact other suppliers and/or reschedule production process in order to achieve
punctual delivery to the customers.




                                      – 63 –
                      LETTER FROM THE BOARD


G.   Inadequate insurance coverage

       The Target Group does not have any insurance cover for product liability. Accordingly,
the Enlarged Group may suffer losses arising from any damage caused by its products which
are not covered by insurance. The Directors are of the view that the exposure to product
liability is remote and the cost of insurance coverage for product liability is not justifiable
compared against such exposure. However, any payment the Enlarged Group makes to cover
any uninsured losses, damages or liabilities could have a material adverse effect on its
business, results of operations and financial condition. In addition, if the Enlarged Group
does not have sufficient funds to cover any uninsured losses, damages or liabilities or to
replace any asset that has been destroyed, the Group’s business, results of operations and
financial condition could be adversely affected.

H.   Seasonal factors

      As advised by the management of the Target Group, the peak season of the paper
packaging industry is normally from June to November each year, being the few months
before the approach of Christmas and Chinese Lunar New Year. Should the Target Group fail
to capture orders from customers during the peak season, the financial results of the Enlarged
Group during the year may be adversely affected. In order to secure more orders during the
peak season, the Target Group generally would increase human resources at the sales team
and actively approach existing customers and contact new customers for orders.

Risks relating to the industry in which the Enlarged Group operates

A.   Industry risk

      The future growth and prospects of the packaging industry in which the Group
specialises is likely to depend upon the general economic conditions of the consumer goods
market. It is believed that the recent down-turned of economic performance has affected the
spending power of individuals on consumer goods. If the Group’s end customer market
suffers from this economic crisis, the spending power of individuals on consumer goods is
likely to be weakened, which in turn will adversely affect the demand for packaging products
for these consumer goods.

     In addition, in amid of the credit tightening environment, loans from banks and
financial facilities will have tighter terms and conditions to generate, if necessary, additional
operational cash flow to both packaging business owners and suppliers resulting in a higher
operation risk. If this economic down-turn continues, the Group’s financial position or
business operations could be adversely affected.

B.   Intense competition

      The Directors consider that there are no significant entry barriers for those who wish to
enter the business of producing packaging products. The packaging industry is highly
competitive and the Group faces competition from other packaging suppliers around the
world, especially from those in Thailand and those in Hong Kong production facilities based
in the PRC, who produce similar products to the Group’s or other packaging products that
may be used as substitute products for the Group’s. These competitors may possess more
advanced technical know-how and better craftsmanship, and may have greater access to




                                       – 64 –
                     LETTER FROM THE BOARD


capital and generate manufacturing, financial, research and development, marketing and other
resources when compared with the Group. As a result, the Group may be unable to compete
successfully with these competitors in the future.

C.   Environmental protection

      Recently, there have been growing concerns in environmental protection globally.
Environmental supporters argue that packaging materials consume depletive resources, such
as wood (further produced into paper) and crude oil (further processed to plastic) and urge
luxurious consumer goods producers to reduce the use of packaging materials. The Directors
believe that such concerns are likely to continue and intensify at least in the near future and
could affect the packaging materials requirements from the Group’s customers due to changes
in consumer preferences. The Directors believe that any significant changes in consumer
preferences, caused by growing environmental concerns, could have material adverse changes
in the Group’s turnover.

      In addition, the PRC government has placed great emphasis on environmental issues
and imposed various environmental laws and regulations, and is believed that they will
become more stringent in the near future. These environmental laws and regulations impose
rigorous standards on us regarding water discharge, the use, handling, discharge and disposal
of solid waste and hazardous materials, noise pollution, and remediation of environmental
contamination. Failure by us to meet the environmental standards stipulated by the PRC law
could cause us to suffer business suspension, fines, lawsuits and may cause significant
damage to our reputation. In addition, failure by us to upgrade production facilities could
result in less competitive and losing our current market position.

D.   Fluctuation in price and supply of materials

      The principal raw material used by the Group is raw paper and the prices of them are
subject to fluctuations according to market conditions, in particular, the number and
production capacity of paper manufacturers which affect the supply of raw paper, and
demand of raw paper which is affected by the worldwide economic growth. In the event of
any substantial increase in the cost of these raw materials, the profitability of the Group may
be adversely affected since there is no guarantee that the Group can pass on all or part of the
increased cost to its customers.

Risks relating to the social and economic conditions

A.   Economic, social and legal considerations

      The PRC has a long history of being a planned economy. The PRC economy is still to a
large extent a planned economy, albeit that the PRC government has undergone economic
reforms to transform the PRC economy into a market economy with socialist characteristics.
These reforms have resulted in a more significant role being played by market forces in the
overall economic performance. Nevertheless, many of the regulations are subject to further
refinement and revision which aim at optimizing the economic system. There is no assurance
that any change in the economic conditions as a result of the economic reforms or macro-
economic control measures adopted by the PRC government will have a positive effect on the
economic development of the PRC.




                                      – 65 –
                     LETTER FROM THE BOARD


      Since 1979, the PRC has promulgated various laws and regulations relating to economic
issues in general as well as issues involving foreign investment. In 1982, the National
People’s Congress of the PRC resolved to amend the PRC constitution to allow foreign
investment and to protect the legal interests of foreign investors in the PRC. The enforcement
of existing laws and regulations may be uncertain or inconsistent, and the interpretation of
these laws and regulations may change from time to time. Any such change could have an
adverse impact on the business operation of the Group.

B.   Financial market crisis in the US and Europe

      The tightening of liquidity, significant turmoil in the global financial markets and the
resulting general recession in major economies that began in the second half of 2008 have
adversely affected, and may continuously affect, the US and Europe economy, including the
consumption power in the areas, which is directly related to the demand for paper packaging
products. While there are signs that the global economies have begun to recover, there is no
assurance of continuous recovery or that global financial crisis will not re-occur. Any global
economic recession or financial market turmoil in the future may adversely affect
consumption power of the area and lead to decrease in the general demand for packaging
products and may have adverse impact in the financial position of the Enlarged Group.

C.   Epidemics, acts of war and other disasters

      The Group’s business is subject to general economic and social conditions in the PRC.
Natural disasters, epidemics and other acts of God which are beyond human control may
adversely affect the economy, infrastructure and livelihood of the people of the PRC. Many
major cities in the PRC are under threat of flood, earthquake, typhoon, sandstorm or drought.
The business, operation results and financial condition of the Group may be adversely
affected if such natural disasters occur. In particular, any future outbreaks of SARS, Avian
Flu or any other epidemic could have an adverse effect on the results of operation of the
Group.

     In addition, acts of war and terrorist attacks may cause damage or disruption to the
manufacturing plants, employees, distribution channels, markets or customers, any of which
could adversely impact turnover, cost of goods sold, overall result and financial condition or
Share price of the Group. Potential war or terrorist attacks may also cause uncertainty and
cause the business to suffer in ways that the Group cannot currently predict.




                                      – 66 –
                      LETTER FROM THE BOARD


Risks relating to certain information contained in this circular

A.   Statistics and industry information

      Statistics, industry data and other information relating to the economy and the industry
contained in this circular have been derived, in part, from government official publications.
The Company cannot ensure or make any representation as to the accuracy or completeness
of such information. Neither the Company nor any of its respective affiliates or advisers,
have prepared or independently verified the accuracy or completeness of such information
derived from government official publication. Statistics, industry data and other information
relating to the economy and the industry derived from government official publications may
not be consistent with other information available from other sources and should not be
unduly relied upon. Due to possible flawed collection methods, descrepancies between
published information, different market practices or other problems, the statistics, industry
data and other information relating to the economy and the industry derived from government
official publications might be inaccurate or might not be comparable to statistics produced
from other sources. In all cases, investors should give careful consideration as to how much
weight or importance the investors should attach or place on such statistics, the projected
industry data and other information relating to the economy and the industry.

B.   Forward-looking statements contained in this document may not materialise

      This circular contains certain statements and information that are ‘‘forward-looking’’
and uses of forward-looking terminology such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’,
‘‘expect’’, ‘‘estimate’’, ‘‘may’’, ‘‘ought to’’, ‘‘should’’ or ‘‘will’’. Those statements include,
among other things, the discussion of the Group’s development strategy and expectations
concerning its future operations, liquidity and capital resources. Although the Directors
believe the assumptions on which the forward-looking statements are reasonable, any or all
of those assumptions could prove to be incorrect and as a result, the forward-looking
statements based on those assumptions could also be incorrect. The uncertainties in this
regard include, but are not limited to, those identified in this ‘‘Risk factors’’ section, many of
which are not within the Group’s control. In light of these and other uncertainties, the
inclusion of forward-looking statements in this circular should not be regarded as
representations by the Company that its plans or objectives will be achieved and investors
should not place undue reliance on such forward-looking statements. The Company does not
undertake any obligation to update publicly or release any revisions of any forward-looking
statements, whether as a result of new information, future events or otherwise.




                                       – 67 –
                                 LETTER FROM THE BOARD


H.   Financial information of the Target Group

      During the two financial years ended 31 March 2009 and 2010, Sky Will was the only
operating entity in the Target Group. For the financial year ended 31 March 2011, the operating
results of the Target Group, besides Sky Will, was also contributed by New Spring (SW) upon the
commencement of business of New Spring (SW) in January 2011. Upon completion of the
acquisition of New Spring Offset in April 2011, revenue and profit of the Target Group are
currently generated from all three entities, being Sky Will, New Spring (SW) and New Spring
Offset.

     The following table sets out the historical financial information of the Target Group:

                                                                                                          For the
                                                             For the                   For the   6 months ended
                                                         year ended                year ended      30 September
                                                      31 March 2010             31 March 2011               2011
                                                            (Note 1)                  (Note 2)           (Note 3)
                                                           HK$’000                   HK$’000            HK$’000
                                                           (audited)                 (audited)          (audited)

     Revenue                                                     18,633                 43,644               54,936

     Profit before taxation and
       extraordinary items                                         3,155                 5,667               18,279

     Profit after taxation and
       extraordinary items                                         2,627                 4,738               15,885

     Net (liabilities)/asset value as at
       year/period end                                              (464)                4,265               20,150

     Notes:

     1.       The operating entity within the Target Group was Sky Will only.

     2.       The operating entities within the Target Group were Sky Will and New Spring (SW) (which commenced
              business in January 2011).

     3.       The operating entities within the Target Group were Sky Will, New Spring (SW) (which commenced business
              in January 2011) and New Spring Offset (which was acquired by Sky Will in April 2011).




                                                     – 68 –
                                 LETTER FROM THE BOARD


      The results of New Spring Offset has been consolidated into those of the Target Group since
1 April 2011. For information purpose, the historical financial information of New Spring Offset is
set out as follows:

                                                       From date of
                                                   incorporation on
                                                        1 December                  For the                For the
                                                            2009 to              year ended        9 months ended
                                                       31 December             31 December           30 September
                                                               2009                    2010                   2011
                                                           HK$’000                 HK$’000                HK$’000
                                                           (audited)               (audited)              (audited)

     Revenue (Note 1)                                                 —                 52,944                 60,503

     Gross Profit                                                     —                 11,520                11,146
                                                                                       (Note 2)              (Note 3)

     (Loss)/Profit before taxation and
       extraordinary items                                         (113)                 8,350                  7,955

     (Loss)/Profit after taxation and
       extraordinary items                                         (113)                 6,186                  5,992

     Net (liabilities)/assets value as at
       year/period end                                             (113)                16,939                 24,631

     Notes:

     1.       For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the
              period before the acquisition of New Spring Offset by Sky Will), revenue generated from the Target Group
              were approximately HK$23,373,000 and HK$10,534,000 respectively.

     2.       Based on the gross profit margin of New Spring Offset of approximately 21.76% for the year ended 31
              December 2010, gross profit generated from the Target Group was approximately HK$5,411,000.

     3.       Based on the gross profit margin of New Spring Offset of approximately 18.42% for the 9 months ended 30
              September 2011, gross profit generated from the Target Group (except New Spring Offset) for the 3 months
              from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset acquired by Sky Will) was
              approximately HK$1,943,000.

     4.       For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the
              period before the acquisition of New Spring Offset by Sky Will), purchases from the Target Group were
              approximately HK$nil and HK$15,198,000 respectively. Save as the aforesaid, there were no other
              transactions incurred between the Target Group and New Spring Offset for the year ended 31 December 2010
              and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset
              acquired by Sky Will).


     Further details of the financial information of the Target Group and the pro forma financial
information of the Enlarged Group are contained in Appendices II, IIA and III respectively to this
Circular.




                                                    – 69 –
                                  LETTER FROM THE BOARD


(4)   FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER; CONNECTED
      TRANSACTIONS AND APPLICATION FOR WHITEWASH WAIVER

      A.   Subscription

           Subscription Agreement

           Date:                                29 February 2012

           Parties:                             (i)    The Company (as the issuer); and

                                                (ii)   World Treasure Global Limited (as the Subscriber)

           Amount of Subscription:              HK$45,000,000

           Subscription Price:                  HK$0.10 per Subscription Share

           Subscription Shares:                 450,000,000 new Adjusted Shares

           Lock Up Arrangement:                 The Subscriber is restricted from transferring, charging or
                                                pledging any Subscription Shares for six months from
                                                Resumption

           Conditions of the Subscription Agreement

           (a)     the Listing Committee granting or agreeing to grant the listing of, and permission to
                   deal in the Subscription Shares;

           (b)     the passing by the Independent Shareholders by way of poll at the SGM to approve the
                   Whitewash Waiver and the allotment and issue of the Subscription Shares;

           (c)     the Stock Exchange has granted its approval-in-principle (subject to any conditions as
                   may be imposed by the Stock Exchange) for the Resumption;

           (d)     the Capital Reorganisation having become effective;

           (e)     the obtaining of the Whitewash Waiver from the Executive by the Subscriber; and

           (f)     the completions of the Acquisition, the Open Offer and the Bonus Issue.

                 All of the above conditions are not waivable. If any of the aforesaid conditions has not
           been fulfilled by the Long Stop Date, the Subscription Agreement shall lapse and no party
           shall have any other claim against the other parties except in respect of any antecedent breach
           and the costs and expenses which shall be borne by the parties.




                                                   – 70 –
                           LETTER FROM THE BOARD


     Subscription Shares

           Assuming the Capital Reorganisation becoming effective, the 450,000,000 Subscription
     Shares represent: (i) approximately 7.84 times of the total number of issued Adjusted Shares
     as at the Latest Practicable Date; (ii) approximately 88.68% of the total number of issued
     Adjusted Shares as enlarged by the Subscription Shares; and (iii) approximately 37.25% of
     the total number of issued Adjusted Shares as enlarged by the Consideration Shares, the
     Offer Shares, the Subscription Shares and the Bonus Shares. Save for the Lock Up
     Arrangement and the Subscriber Undertaking, there is no restriction on the subsequent sale of
     the Subscription Shares.

           For the avoidance of doubt, the Subscription Shares (i) do not have the entitlements to
     subscribe for the Offer Shares under the Open Offer; and (ii) are not entitled to the Bonus
     Shares under the Bonus Issue since the Subscription Shares will be issued after the Record
     Date.

B.   Open Offer

     Issue statistics of the Open Offer

     Basis of the Open Offer:             eight (8) Offer Shares for every Adjusted Share held on
                                          the Record Date

     Offer Price:                         HK$0.10 per Offer Share

     Number of Shares in issue as at      1,148,661,140 Shares (equivalent to 57,433,057 Adjusted
      the Latest Practicable Date:        Shares assuming the Capital Reorganisation becoming
                                          effective)

     Number of Offer Shares:              459,464,456 Offer Shares

     Underwriters:                        Kingston Securities and the Subscriber

           The Company has no outstanding options, warrants, derivatives or convertible securities
     in issue which confer any rights to subscribe for, convert or exchange into the Shares as at
     the Latest Practicable Date.

          The Company has not procured any undertaking and has not received any undertaking
     provided by any Shareholders to subscribe for his entitlement under the Open Offer or any
     arrangement that may have an effect on the Open Offer.

     Offer Price

          The Offer Price of HK$0.10 per Offer Share represents a discount of 80% to the closing
     price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted Share assuming the
     Capital Reorganisation having become effective) as quoted on the Stock Exchange on the
     Last Trading Day.




                                            – 71 –
                      LETTER FROM THE BOARD


      Trading of the Shares had been suspended since 23 September 2008, the Company has,
upon arm’s length negotiation, agreed with the Underwriters that the Offer Price should
represent a substantial discount to the closing price before Suspension so as to incentivize the
Qualifying Shareholders to take up their entitlements under the Open Offer. Each Qualifying
Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to
his/her/its shareholding in the Company as at the Record Date. The Directors (including the
proposed Directors and the independent non-executive Directors) consider the Offer Price is
fair and reasonable and in the interests of the Company and the Independent Shareholders as
a whole.

Offer Shares

      Assuming the Capital Reorganisation becoming effective, the 459,464,456 Offer Shares
represent: (i) 8 times of the total number of issued Adjusted Shares as at the Latest
Practicable Date; (ii) approximately 88.89% of the total number of issued Adjusted Shares as
enlarged by the Offer Shares; and (iii) approximately 38.04% of the total number of issued
Adjusted Shares as enlarged by the Consideration Shares, the Offer Shares, the Subscription
Shares and the Bonus Shares.

     For the avoidance of doubt, the Offer Shares are not entitled to the Bonus Shares under
the Bonus Issue since the Offer Shares will be issued after the Record Date.

Qualifying Shareholders

     The Open Offer is only available to the Qualifying Shareholders. The Company will
send (i) the Open Offer Documents to the Qualifying Shareholders; and (ii) if and to the
extent legally and practically permissible, the Prospectus, for information purposes only, to
the Excluded Shareholders.

     To qualify for the Open Offer, a Shareholder must, at the close of business on the
Record Date:

     (i)    be registered as a member of the Company on the register of members of the
            Company; and

     (ii)   not be an Excluded Shareholder.

      In order to be registered as a member of the Company on the Record Date,
Shareholders must lodge any transfer of the Shares (with the relevant share certificate(s))
with the Registrar at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong by 4:30
p.m. on Monday, 2 April 2012.

Rights of the Excluded Shareholders

      If, at 4:30 p.m. on the Record Date, a Shareholder’s address on the register of members
of the Company is in a place outside Hong Kong, that Shareholder may not be eligible to
take part in the Open Offer. The Company will make enquiries pursuant to Rule 13.36(2)(a)
of the Listing Rules with overseas legal advisors as to the feasibility of extending the Open




                                       – 72 –
                        LETTER FROM THE BOARD


Offer to Overseas Shareholders taking into account the applicable securities legislation of the
relevant overseas jurisdictions or the requirements of the relevant regulatory body or stock
exchange for the issue of the Offer Shares to the Overseas Shareholders and the result of
such enquiries will be included in the Prospectus. If, after making such enquiry, the
Company are of the opinion that it would be unduly burdensome to, or otherwise necessary
or expedient not to offer the Offer Shares to such Overseas Shareholders on account of any
legal restrictions under the laws of such jurisdiction or the requirements of the relevant
regulatory body or stock exchange in that jurisdiction, the Open Offer will not be extended to
such Overseas Shareholders and they will become Excluded Shareholders. The results of the
enquiries and the basis of any exclusion of the Excluded Shareholders will be included in the
Prospectus. As at the Latest Practicable Date, no Shareholder whose address on the register
of members of the Company is outside Hong Kong.

      The Open Offer Documents will not be registered or filed under the applicable
securities or equivalent legislation of any jurisdiction other than Hong Kong and Bermuda.
The Company will send the Prospectus (but not the Application Form), for information
purposes only, to the Excluded Shareholders (if any), if and to the extent legally and
practically permissible. The entitlements of the Excluded Shareholders under the Open Offer
will be taken up by the Underwriters. The Open Offer is subject to, amongst other things, the
approval of the Independent Shareholders at the SGM.

Closure of register of members

      The Company’s register of members will be closed from Tuesday, 3 April 2012 to
Tuesday, 10 April 2012 both dates inclusive, for the purpose of, among other things,
establishing entitlements to the Open Offer. No transfer of Shares will be registered during
this period.

Nil-paid entitlements

      The provisional allotments under the Open Offer on an assured basis are not
transferable nor are they capable of renunciation. No listing on the Stock Exchange will be
sought for the nil-paid entitlements.

No application for excess Offer Shares

      The Qualifying Shareholders will not be entitled to subscribe for any Offer Share in
excess of their respective assured entitlements. Considering that each Qualifying Shareholder
will be given an equal opportunity to participate in the Company’s future development by
subscribing for his/her/its entitlements under the Open Offer, the Directors (including the
proposed Directors and the independent non-executive Directors) consider that the Company
will not be justified in making additional effort and incurring additional costs to administer
the excess application procedures. All Offer Shares not taken up by the Qualifying
Shareholders are underwritten by the Underwriters.




                                      – 73 –
                     LETTER FROM THE BOARD


      Pursuant to Rule 7.26A(2) of the Listing Rules, since the Open Offer will be partly
underwritten by the Subscriber which is ultimately beneficially owned by Mr. Wong, an
executive Director, the absence of excess application arrangement of the Open Offer is
required to be approved by the Independent Shareholders by way of poll at the SGM.

Fractions of Offer Shares

      Fractional entitlements to the Offer Shares will not be issued but will be aggregated and
taken up by the Underwriters. The Company will not allot any fractions of Offer Shares. No
odd lot matching services will be provided by the Company in respect of the Open Offer
before Resumption. Matching of odd lots of the Adjusted Shares will be available from 9:00
a.m. on the date of Resumption, i.e. Monday, 7 May 2012 until 4:00 p.m. on Friday, 25 May
2012.

Certificates and refund cheques for the Offer Shares

      Subject to the Open Offer becoming unconditional, certificates for all fully-paid Offer
Shares shall be despatched by ordinary post to those Qualifying Shareholders who have
accepted and paid for their Offer Shares, at their own risk. Refund cheques in respect of the
Offer Shares if the Open Offer is terminated shall be despatched by ordinary post to the
applicants at their own risk.

Underwriting Agreement

     Principal terms of the Underwriting Agreement are set out as follows:

     Date:                               29 February 2012

     Parties:                            the Company and the Underwriters

     Underwriters:                       the Subscriber and Kingston Securities

     Number of Underwritten Offer        459,464,456 Offer Shares
      Shares:

     Commitment of the Subscriber        230,000,000 Offer Shares
       under the Underwriting
       Agreement:

     Commitment of Kingston              229,464,456 Offer Shares
       Securities under the
       Underwriting Agreement:




                                      – 74 –
                     LETTER FROM THE BOARD


     Priority of underwriting            The obligations of the Subscriber under the
       obligations:                      Underwriting Agreement shall take precedence over
                                         that of Kingston Securities so that Kingston
                                         Securities shall only be required to perform its
                                         obligations under the Underwriting Agreement after
                                         the Subscriber has subscribed for any of the
                                         Underwritten Offer Shares which (i) has not been
                                         taken up by the Qualifying Shareholders; and (ii)
                                         the entitlements to Excluded Shareholders, up to the
                                         commitment of the Subscriber under the
                                         Underwriting      Agreement,    i.e.   230,000,000
                                         Underwritten Offer Shares

     Underwriting commission:            As to the Subscriber, nil
                                         As to Kingston Securities, 2.5%

     Lock Up Arrangement:                The Subscriber is restricted from transferring,
                                         charging or pledging any Underwritten Offer Shares
                                         taken up by the Subscriber for six months from
                                         Resumption

     As at the Latest Practicable Date, none of the Underwriters is interested in any Shares.

     Kingston Securities is an Independent Third Party. For information purpose, Mr. Wong
was a director of the holding company of Kingston Securities, being Kingston Financial
Group Limited (stock code: 1031) up to April 2011 and is a consultant to a subsidiary of
Kingston Financial Group Limited.

      Should the Open Offer be undersubscribed, Kingston Securities, as one of the
Underwriters, may be required to take up certain Offer Shares. However, Kingston Securities
has undertaken to the Company to place down any Offer Shares under the Open Offer to
Independent Shareholders after the latest time for termination of the Underwriting Agreement
at 4:00 p.m. on Monday, 30 April 2012 and before the date of Resumption so that (i) none of
the placees to whom Kingston Securities will place down any Offer Shares will hold 10% or
more shareholding in the Company; and (ii) Kingston Securities will not be interested in any
Offer Shares immediately before the Resumption.

Termination of the Underwriting Agreement

     Kingston Securities (after obtaining the agreement of the Subscriber) may terminate the
arrangements set out in the Underwriting Agreement by notice in writing issued to the
Company at any time prior to the latest time for termination if there occurs:

     (i)   in the reasonable opinion of Kingston Securities (on behalf of the Underwriters),
           the success of the Open Offer would be materially and adversely affected by:

           (a)   the introduction of any new law or regulation or any change in existing law
                 or regulation (or the judicial interpretation thereof) or other occurrence of
                 any nature whatsoever which may in the reasonable opinion of Kingston



                                      – 75 –
                  LETTER FROM THE BOARD


             Securities (on behalf of the Underwriters) materially and adversely affect the
             business or the financial or trading position or prospects of the Group as a
             whole or is materially adverse in the context of the Open Offer; or

       (b)   the occurrence of any local, national or international event or change
             (whether or not forming part of a series of events or changes occurring or
             continuing before, and/or after the date thereof) of a political, military,
             financial, economic or other nature, or in the nature of any local, national or
             international outbreak or escalation of hostilities or armed conflict, or
             affecting local securities markets which may, in the reasonable opinion of
             Kingston Securities (on behalf of the Underwriters) materially and adversely
             affect the business or the financial or trading position or prospects of the
             Group as a whole or materially and adversely prejudice the success of the
             Open Offer or otherwise makes it inexpedient or inadvisable to proceed with
             the Open Offer; or

(ii)   any adverse change in market conditions (including without limitation, any change
       in fiscal or monetary policy, or foreign exchange or currency markets, suspension
       or material restriction or trading in securities) occurs which in the reasonable
       opinion of Kingston Securities (on behalf of the Underwriters) is likely to
       materially or adversely affect the success of the Open Offer or otherwise makes it
       inexpedient or inadvisable to proceed with the Open Offer; or

(iii) there is any change in the circumstances of the Company or any member of the
      Group which in the reasonable opinion of Kingston Securities (on behalf of the
      Underwriters) will adversely affect the prospects of the Company, including
      without limiting the generality of the foregoing the presentation of a petition or
      the passing of a resolution for the liquidation or winding up or similar event
      occurring in respect of any of member of the Group or the destruction of any
      material asset of the Group; or

(iv) any event of force majeure including, without limiting the generality thereof, any
     act of God, war, riot, public disorder, civil commotion, fire, flood, explosion,
     epidemic, terrorism, strike or lock-out; or

(v)    any other material adverse change in relation to the business or the financial or
       trading position or prospects of the Group as a whole whether or not ejusdem
       generis with any of the foregoing; or

(vi) any matter which, had it arisen or been discovered immediately before the date of
     the Prospectus and not having been disclosed in the Open Offer Documents,
     would have constituted, in the reasonable opinion of Kingston Securities (on
     behalf of the Underwriters), a material omission in the context of the Open Offer.




                                   – 76 –
                      LETTER FROM THE BOARD


      Upon the giving of notice in accordance with the above, the Underwriting Agreement
shall terminate and the obligations of the parties shall forthwith cease and be null and void
and none of the parties shall, save in respect of any right or liability accrued before such
termination, have any right against or liability towards any of the other parties arising out of
or in connection with the Underwriting Agreement.

Conditions of the Open Offer

      The Open Offer is conditional upon the following conditions being fulfilled or waived
(as appropriate):

     (i)    the delivery to the Stock Exchange for authorisation and the registration with the
            Registrar of Companies in Hong Kong respectively one copy of each of the Open
            Offer Documents duly signed by two Directors (or by their agents duly authorised
            in writing) as having been approved by resolution of the Directors (and all other
            documents required to be attached thereto) and otherwise in compliance with the
            Listing Rules and the Companies Ordinance not later than the posting date of the
            Open Offer Documents;

     (ii)   the registration with the Registrar of Companies in Bermuda one copy of each of
            the Open Offer Documents duly signed by a Director for and on behalf of all the
            Directors in compliance with the requirements under the Companies Act.

     (iii) the passing by the Independent Shareholders by way of poll at the SGM to
           approve the Open Offer and the Whitewash Waiver;

     (iv) the posting of the Open Offer Documents to the Qualified Shareholders on or
          before the posting date of the Open Offer Documents;

     (v)    the Listing Committee granting or agreeing to grant (subject to allotment) and not
            having withdrawn or revoked listings of and permission to deal in all the Offer
            Shares;

     (vi) the Stock Exchange has granted its approval-in-principle (subject to any
          conditions as may be imposed by the Stock Exchange) for the Resumption;

     (vii) the obligations of the Underwriters becoming unconditional and that the
           Underwriting Agreement is not terminated in accordance with its terms;

     (viii) compliance by the Company with all of its obligations under the Underwriting
            Agreement;

     (ix) the Capital Reorganisation having become effective;

     (x)    the obtaining of the Whitewash Waiver from the Executive by the Subscriber; and

     (xi) the completions of the Acquisition, the Subscription and the Bonus Issue.




                                       – 77 –
                               LETTER FROM THE BOARD


                 All the above conditions are not waivable. In the event that the above conditions of the
          Open Offer have not been satisfied on or before 5:00 p.m. on the Long Stop Date, the
          Underwriting Agreement shall terminate and the obligations of the parties shall forthwith
          cease and be null and void and none of the parties shall, save in respect of any right or
          liability accrued before such termination, have any right against or liability towards any of
          the other parties arising out of or in connection with the Underwriting Agreement.

          Reasons for the Open Offer

                The Board (including the proposed Directors and the independent non-executive
          Directors) considers that in view of the potential dilution effect of the interests of the
          Shareholders due to the issue of the Subscription Shares and the Consideration Shares, the
          Open Offer is in the interests of the Company and the Shareholders as a whole as it offers all
          the Qualifying Shareholders an equal opportunity to participate in the enlargement of the
          capital base of the Company and continue to participate in the future development of the
          Enlarged Group should they wish to do so.

                Based on the closing price of HK$0.025 per Share (equivalent to HK$0.50 per Adjusted
          Share and assuming the Capital Reorganisation becoming effective) as quoted on the Stock
          Exchange on the Last Trading Day, the theoretical ex-entitlement price per Adjusted Share
          (assuming the Capital Reorganisation becoming effective) after the Open Offer is
          approximately HK$0.1444, representing a discount of approximately 71.12% to the adjusted
          closing price of HK$0.50 per Adjusted Share (assuming the Capital Reorganisation becoming
          effective).

                The Directors (including the proposed Directors and the independent non-executive
          Directors) consider that the Open Offer is fair and reasonable and in the interests of the
          Company and the Independent Shareholders as a whole having taken into account the terms
          of the Open Offer.

WARNING OF THE RISKS OF DEALING IN THE SHARES

      The Open Offer is conditional, inter alia, upon the fulfillment of the conditions set out in the
section headed ‘‘Conditions of the Open Offer’’ in this Circular. In particular, the Open Offer is
conditional upon the approval of the Open Offer and the Whitewash Waiver by the Independent
Shareholders at the SGM by way of poll, the Underwriting Agreement having become
unconditional and the Underwriters not having terminated the Underwriting Agreement in
accordance with the terms thereof as set out in the paragraph headed ‘‘Termination of the
Underwriting Agreement’’ in this Circular. Accordingly, the Open Offer may or may not proceed.
Shareholders and potential investors of the Company should therefore exercise extreme caution
when dealing in the Shares/Adjusted Shares, and if they are in any doubt about their position, they
should consult their professional advisers.




                                                – 78 –
                                LETTER FROM THE BOARD


Financial resources of the Enlarged Group and use of net proceeds of the Subscription and the
Open Offer

     As at the Latest Practicable Date, the bank balances and cash of the Group was approximately
HK$57 million, of which as to HK$30 million will be used to settle the balance of the cash portion of
the Consideration.

     As at the Latest Practicable Date, the bank balances and cash of the Target Group was
approximately HK$2 million.

      The aggregate gross proceeds from the Subscription and the Open Offer will be approximately
HK$91 million and the net proceeds (after deducting the resumption professional fees and commission
for the Open Offer payable by the Company) will be approximately HK$85 million, of which as to
approximately HK$55 million will be used to settle the Promissory Note (such amount will be placed as
fixed deposit in financial institution(s) until settlement).

      Taking into account of the usages as mentioned above, the bank balances and cash of the Enlarged
Group upon completion of the transactions under the Resumption will be approximately HK$59 million,
of which as to (i) approximately HK$40 million for the general working capital of the Target Group
taking into consideration of (a) the financial position of the Target Group as mentioned under the
section headed ‘‘Emphasis of matter’’ as contained in Appendix II to this Circular; and (b) the future
plans and development of the Target Group as mentioned under the section headed ‘‘Future plans and
development’’ in this Circular; and (ii) approximately HK$19 million for general working capital of the
Enlarged Group (other than the Target Group) and/or potential future investments of the Enlarged
Group.

Information of the Subscriber

     The Subscriber is wholly owned by Mr. Wong and is an investment holding company which its
ordinary business does not involve underwriting. The sole director of the Subscriber is Mr. Wong.
Please refer to the section headed ‘‘Experience of the Board and the Enlarged Group in paper business’’
above of this Circular for the background and experience of Mr. Wong.

     The Subscriber and Mr. Wong have confirmed that the funding in relation to the Subscription and
the underwriting obligation under the Open Offer are not from (i) the Vendor and/or its ultimate
beneficial owners; (ii) Sweet Wishful and/or its ultimate beneficial owner; (iii) connected persons of the
Company (save for Mr. Wong and his associates); and (iv) the respective associates of (i) to (iii) above.

      The Subscriber entered into the Subscription Agreement and the Underwriting Agreement aiming
to provide funding to the Company for future development of the Enlarged Group and acquire shares of
the Company. In the event that the Qualifying Shareholders do not take up the entitlements under the
Open Offer in full, the Subscriber may further consolidate control of the Company.

Intentions of the Subscriber regarding the Enlarged Group

     The Subscriber intends to continue with the existing business of the Enlarged Group upon
Resumption and will continue to identify suitable business opportunities to expand the revenue and
income of the Enlarged Group. Mr. Wong, being the sole director of the Subscriber and a Director, and



                                                 – 79 –
                                 LETTER FROM THE BOARD


other Directors (including the proposed Directors) do not have any agreement, arrangement, negotiation,
intention and/or plan to cause the Group to conduct its principal business other than manufacturing and
trading of paper products or dispose of or re-deploy the Group’s assets other than in the ordinary course
of the business of the Enlarged Group within 24 months upon Resumption.

     It is the intention of the Subscriber that all the existing Directors will remain on the Board and
employees of the Company will remain in employment upon Resumption.

      Mr. Wong and/or the Subscriber does not have any plan, agreement, arrangement or understanding
to transfer, charge or pledge any of his interest in the Company,

     (i)    for the first six-month from the date of the Resumption; and

     (ii)   for the period of second six months up to two years from the date of the Resumption,
            resulting the Subscriber to cease to be the controlling Shareholder.

      Further to the Lock Up Arrangement, the Subscriber has undertaken to the Company pursuant to
the Subscriber Undertaking that it will not transfer, charge or pledge any of his interest in the Company
for the period of second six months up to two years from the date of the Resumption, resulting the
Subscriber to cease to be the controlling Shareholder.

Fundraising activities of the Company in the past 12 months

     The Company did not carry out any right issue, open offer or other issue of equity securities for
fundraising purpose or otherwise within the past 12 months immediately prior to the date of the
Announcements.

C.   CONNECTED TRANSACTIONS

     The Subscriber, being an associate of Mr. Wong who is a Director, is a connected person of the
Company. The Subscription and the underwriting arrangement of the Subscriber under the Underwriting
Agreement constitute connected transactions for the Company under Chapter 14A of the Listing Rules
and are subject to the requirements of reporting, announcement and Independent Shareholders’ approval.

D.   APPLICATION FOR WHITEWASH WAIVER

     The sequence of completion of the transactions under the Resumption Proposal is (1) the Capital
Reorganisation; (2) the Acquisition, the Subscription, the Open Offer and the Bonus Issue will be
completed simultaneously since their completions are inter-conditional.

      As at the Latest Practicable Date, the Subscriber and parties acting in concert with it are not
interested in any Shares or securities of the Company. Upon completions of the Acquisition, the
Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert with it
will hold (i) approximately 37.25% of the issued share capital (should all existing Shareholders take up
their entitlements under the Open Offer to subscribe for the Offer Shares in full) as enlarged by the
Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares; and (ii)
approximately 56.30% of the issued share capital (should no existing Shareholders take up their
entitlements under the Open Offer to subscribe for the Offer Shares) as enlarged by the Consideration




                                                 – 80 –
                                 LETTER FROM THE BOARD


Shares, the Subscription Shares, the Offer Shares and the Bonus Shares. Accordingly, the Subscriber is
required to make a mandatory general offer for all the issued Adjusted Shares (other than those already
owned or agreed to be acquired by the Subscriber and parties acting in concert with it) pursuant to Rule
26 of the Takeovers Code.

      The Subscriber has made an application to the Executive for the Whitewash Waiver, pursuant to
Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Subscriber
and parties acting in concert with it to make a mandatory general offer for all the Adjusted Shares not
already owned or agreed to be acquired by them, arising from the Subscription of 450,000,000
Subscription Shares and its underwriting obligation of 230,000,000 Offer Shares under the Underwriting
Agreement by the Subscriber. The Executive has indicated that the grant of the Whitewash Waiver
subject to, among other things, the approval of the Independent Shareholders at the SGM by way of
poll. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent
Shareholders, the Subscription and the Open Offer will not proceed.

      Please refer to the section headed ‘‘SHAREHOLDING CHANGES UPON COMPLETION OF THE
TRANSACTIONS UNDER THE RESUMPTION PROPOSAL’’ in this Circular for the detailed analysis
in the shareholding changes pursuant to the transactions contemplated under the Resumption Proposal.

     Investors should be aware that there is a possibility that, upon completion of the Acquisition,
the Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert
with it will hold more than 50% of the voting rights in the Company. By then, the Subscriber and
parties acting in concert with it may increase its shareholdings in the Company without incurring
further obligation of making mandatory general offers pursuant to Rule 26 of the Takeovers Code.

Subscriber’s dealing and interest in the Company’s securities

     Save for the entering into of the Subscription Agreement and the Underwriting Agreement, the
Subscriber and parties acting in concert with it have not dealt in the Shares, outstanding options,
derivatives, warrants or other securities convertible or exchangeable into the Shares during the period
commencing on the date falling six months prior to 16 January 2012 up to the Latest Practicable Date.

     As at the Latest Practicable Date,

     (i)    there are 1,148,661,140 Shares in issue;

     (ii)   the Company has no outstanding securities, options, warrants or derivatives which are
            convertible into or which confer rights to require the issue of Shares and the Company has no
            other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code);

     (iii) none of the Subscriber, Mr. Wong or parties acting in concert with any of them holds, owns
           or has control or direction over any Shares, warrants, options or convertible securities of the
           Company;

     (iv) none of the Subscriber, Mr. Wong or parties acting in concert with any of them holds, owns
          or has control or direction over any derivatives in respect of the securities of the Company
          entered into by the Subscriber, Mr. Wong or any person acting in concert with any of them;




                                                  – 81 –
                                  LETTER FROM THE BOARD


      (v)   there is no arrangement (whether by way of option, indemnity or otherwise) in relation to the
            Shares and shares of the Subscriber and which might be material to the transactions under the
            Acquisition, the Subscription, the Open Offer and the Whitewash Waiver;

      (vi) none of the Subscriber, Mr. Wong or parties acting in concert with any of them has borrowed
           or lent any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code)
           in the Company;

      (vii) there is no agreement or arrangement pursuant to which any of the Subscriber, Mr. Wong or
            parties acting in concert with any of them is a party which relates to circumstances which it
            may or may not invoke or seek to invoke a pre-condition or a condition to the Acquisition,
            the Subscription, the Open Offer and the Whitewash Waiver; and

      (viii) none of the Subscriber, Mr. Wong or parties acting in concert with any of them has received
             any irrevocable commitment to vote for or against the Acquisition, the Subscription, the
             Open Offer and the Whitewash Waiver.

(5)   BONUS ISSUE OF SHARES

      The Company proposed the Bonus Issue to issue the Bonus Shares to the existing Shareholders
whose names appear on the register of members of the Company on the Record Date on the basis of five
(5) Bonus Shares for every seven (7) then Adjusted Shares. On the basis of 1,148,661,140 Shares in
issue (equivalent of 57,433,057 Adjusted Shares assuming Capital Reorganisation becoming effective),
41,023,612 Bonus Shares would be issued.

      The Bonus Issue would allow the Shareholders to enjoy the results of the business growth of the
Enlarged Group as a result of the transactions contemplated under the Resumption Proposal by way of
capitalisation of a portion of the share premium account of the Company upon completions of the
transactions contemplated under the Resumption Proposal (other than the Bonus Issue).

      Conditions of the Bonus Issue

            The Bonus Issue is conditional upon:

            (i)    completions of the Acquisition, the Subscription and the Open Offer;

            (ii)   the passing of an ordinary resolution by the Independent Shareholders at the SGM
                   approving the Bonus Issue;

            (iii) the Capital Reorganisation becoming effective; and

            (iv) the Stock Exchange granting the listing of, and permission to deal in, the Bonus Shares.

      Bonus Shares

            Assuming the Capital Reorganisation becoming effective, the 41,023,612 Bonus Shares
      represent: (i) approximately 71.43% of the total number of issued Adjusted Shares as at the Latest
      Practicable Date; (ii) approximately 41.67% of the total number of issued Adjusted Shares as




                                                   – 82 –
                                            LETTER FROM THE BOARD


         enlarged by the Bonus Shares; and (iii) approximately 3.40% of the total number of issued
         Adjusted Shares as enlarged by the Consideration Shares, the Offer Shares, the Subscription Shares
         and the Bonus Shares.

               For the avoidance of doubt, the Bonus Shares do not have the entitlements to subscribe for
         the Offer Shares under the Open Offer since the Bonus Shares will be issued after the Record
         Date.

SHAREHOLDING CHANGES UPON COMPLETION OF THE TRANSACTIONS UNDER THE
RESUMPTION PROPOSAL

Scenario A: Assuming all existing Shareholders take up the entitlements under the Open Offer in
            FULL

                                                          Step 1                                         Step 2
                                                                                 Upon            Upon          Upon
                                                       Upon Capital         completion     completion     completion
                              As at the Latest        Reorganisation                 of             of      of Open      Upon completion
Sequence (Note 1)             Practicable Date       becoming effective     Acquisition   Subscription         Offer      of Bonus Issue
                                                        Adjusted              Adjusted        Adjusted      Adjusted       Adjusted
                                 Shares          %       Shares         %       Shares         Shares         Shares         Shares      %

Subscriber and parties
   acting in concert
   with it                           —           —           —        —             —     450,000,000     450,000,000   450,000,000    37.25

Vendor                               —           —           —        —     200,000,000   200,000,000     200,000,000   200,000,000    16.56

Independent Shareholders
— Sweet Wishful
     (Note 2)               176,000,000     15.32     8,800,000     15.32     8,800,000      8,800,000     79,200,000    85,485,714     7.08

— other existing
    Shareholders            972,661,140     84.68    48,633,057     84.68    48,633,057    48,633,057     437,697,513   472,435,411    39.11

Total                      1,148,661,140   100.00    57,433,057    100.00   257,433,057   707,433,057 1,166,897,513 1,207,921,125     100.00




                                                                   – 83 –
                                            LETTER FROM THE BOARD


Scenario B: Assuming NO existing Shareholders take up the entitlements under the Open Offer

                                                          Step 1                                         Step 2
                                                                                 Upon            Upon          Upon
                                                       Upon Capital         completion     completion     completion
                              As at the Latest        Reorganisation                 of             of      of Open      Upon completion
Sequence (Note 1)             Practicable Date       becoming effective     Acquisition   Subscription         Offer      of Bonus Issue
                                                        Adjusted              Adjusted        Adjusted      Adjusted       Adjusted
                                 Shares          %       Shares         %       Shares         Shares         Shares         Shares      %

Subscriber and parties
   acting in concert
   with it                           —           —           —        —             —     450,000,000     680,000,000   680,000,000    56.30

Vendor                               —           —           —        —     200,000,000   200,000,000     200,000,000   200,000,000    16.56

Independent Shareholders
— Sweet Wishful
     (Note 2)               176,000,000     15.32     8,800,000     15.32     8,800,000      8,800,000      8,800,000    15,085,714     1.25

— other existing
    Shareholders            972,661,140     84.68    48,633,057     84.68    48,633,057    48,633,057      48,633,057    83,370,955     6.90

— placees from Open
    Offer (Note 3)                   —           —           —        —             —              —      229,464,456   229,464,456    18.99

Total                      1,148,661,140   100.00    57,433,057    100.00   257,433,057   707,433,057 1,166,897,513 1,207,921,125     100.00

Notes:

1.       The sequence of completion of the transactions set out in the above tables is (1) the Capital Reorganisation; (2) the
         Acquisition, the Subscription, the Open Offer and the Bonus Issue.

         For the avoidance of doubt:

         (a)   the Consideration Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and
               (ii) are not entitled to the Bonus Shares under the Bonus Issue;

         (b)   the Subscription Shares (i) do not have the entitlements to subscribe for the Offer Shares under the Open Offer; and
               (ii) are not entitled to the Bonus Shares under the Bonus Issue;

         (c)   the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue; and

         (d)   the Bonus Shares do not have the entitlements to subscribe for the Offer Shares under the Open Offer,

         since the Consideration Shares, the Offer Shares, the Subscription Shares and the Bonus Shares will be issued after the
         Record Date.

2.       Sweet Wishful is wholly owned by Mr. Deng Junjie and is a substantial Shareholder since November 2011 with no
         representation in the Board. Sweet Wishful will not nominate candidates to the Board. Save as being a substantial
         Shareholder, Sweet Wishful and Mr. Deng Junjie are Independent Third Parties and are independent of (a) Mr. Wong; (b)
         the Vendor and its ultimate beneficial owners; (c) the respective associates of (a) and (b) above; and (d) parties acting in
         concert with the Subscriber and Mr. Wong. Sweet Wishful and Mr. Deng Junjie were Independent Third Parties before
         becoming a Shareholder.

3.       Kingston Securities has undertaken to the Company to place down any Offer Shares under the Open Offer to the
         Independent Shareholders after the latest time for termination of the Underwriting Agreement at 4:00 p.m. on Monday, 30
         April 2012 and before the date of Resumption so that (i) none of the placees to whom Kingston Securities will place down
         any Offer Shares will hold 10% or more shareholding in the Company; and (ii) Kingston Securities will not be interested in
         any Offer Shares immediately before the Resumption.




                                                                   – 84 –
                                LETTER FROM THE BOARD


FINANCIAL EFFECTS OF THE TRANSACTIONS UNDER THE RESUMPTION PROPOSAL

     Upon completion of the Acquisition, the Target Group will become wholly owned subsidiaries of
the Company and their financial statements will be consolidated in the Company’s financial statements.
According to the unaudited consolidated statement of financial position of the Company as at 30
September 2011, the Group’s total assets was approximately HK$70.1 million and total liabilities was
approximately HK$2.3 million. The Group recorded a net loss of approximately HK$4.4 million for the
year ended 31 March 2011.

      As set out in the ‘‘Unaudited pro forma financial information of the Enlarged Group’’ as contained
in Appendix III to this Circular, upon completion of all transactions contemplated under the Resumption
Proposal, (A) (i) the Enlarged Group’s total assets will be increased by approximately HK$141.1 million
to approximately HK$309.4 million; (ii) the Enlarged Group’s total liabilities will be increased by
approximately HK$49.8 million to approximately HK$130.2 million, assuming all the transactions
contemplated under the Resumption Proposal were completed on 30 September 2011; and (B) the
Enlarged Group would have recorded a net loss position of approximately HK$8.2 million, assuming all
the transactions contemplated under the Resumption Proposal were completed on 31 March 2010.

(6)   CONTINUING CONNECTED TRANSACTIONS

     On 29 February 2012, the Master Agreement was entered into between the Target Company and
New Spring Label for governing the ongoing production of printing orders and specifying the terms
adopted including the Annual Caps.

     Since New Spring Label is a company beneficially owned as to 20% by Mr. Ng and as to 30% by
Ms. Li, New Spring Label is an associate of Mr. Ng and will become a connected person of the
Company upon the completion of the Acquisition and the employment of Mr. Ng as an executive
Director. Therefore, transactions contemplated under the Master Agreement, following the completion of
the Acquisition and the employment of Mr. Ng as an executive Director, will constitute continuing
connected transactions under the Listing Rules. The principal terms of the Master Agreement are set out
below:

      Master Agreement

      Date:                                29 February 2012

      Parties:                             (i)    The Target Company; and

                                           (ii)   New Spring Label

      Term:                                The Master Agreement was entered into between the above-
                                           mentioned parties for a term from the date of completion of
                                           the Acquisition and employment of Mr. Ng as an executive
                                           Director to 31 March 2015

      Condition precedent:                 Conduct of the transactions contemplated under the Master
                                           Agreement shall be conditional upon the Independent
                                           Shareholders’ approval to be obtained at the SGM




                                                  – 85 –
                          LETTER FROM THE BOARD


Nature of transactions:               Printing and production of paper packaging and promotional
                                      products and materials by the Target Group to New Spring
                                      Label

Pricing basis:                        The production of products and materials to New Spring
                                      Label should be provided on normal commercial terms or
                                      terms no less favourable than sales to independent
                                      customers of the Target Group

Annual Caps:                          HK$24 million for the year ending 31 March 2013
                                      HK$26 million for the year ending 31 March 2014
                                      HK$28 million for the year ending 31 March 2015

                                      The Annual Cap for the year ending 31 March 2013 is
                                      determined with reference to the actual amount of
                                      production of products and materials by the Target Group
                                      to the New Spring Label for the period from 1 April 2011 to
                                      31 December 2011 of approximately HK$18 million and the
                                      expected growth in sales orders of New Spring Label for the
                                      year ending 31 March 2013.

                                      The annual increase of the Annual Caps for the two years
                                      ending 31 March 2014 and 2015 respectively is estimated at
                                      approximately HK$2 million from the previous year on a
                                      prudent basis with respect to the estimated growth rate of
                                      sales orders projected by New Spring Label.

      Upon completion of the Acquisition, save as the transactions contemplated under the Master
Agreement, there will be no other continuing connected transaction of the Company subject to
reporting requirement pursuant to Chapter 14A of the Listing Rules.

Reasons for and benefits of the Master Agreement

      New Spring Label is principally engaged in manufacture and trading of plastic labels and
related products and trading of packaging products. New Spring Label is beneficially owned as to
20% by Mr. Ng, as to 30% by Ms. Li and as to 50% by an Independent Third Party. Mr. Ng will
become an executive Director upon completion of the Acquisition.

      New Spring Label does not have its production facilities for packaging products and the
production of printing orders of New Spring Label has been provided by New Spring Offset which
is currently one of the companies in the Target Group. In order to ensure the continual engagement
of production of printing orders from New Spring Label, it was proposed to enter into the Master
Agreement with New Spring Label so that New Spring Label will engage the Target Group for the
production of orders. The Directors (including the proposed Directors and the independent non-
executive Directors) are of the view that the Master Agreement and the transactions contemplated
thereunder (including the Annual Caps) are (i) on arm’s length basis and on normal commercial
terms; and (ii) fair and reasonable and in the interests of the Company and the Shareholders as a
whole.




                                           – 86 –
                                 LETTER FROM THE BOARD


GENERAL

SGM

      The SGM will be held for the purpose of considering and, if thought fit, approving the resolutions
in respect of the Capital Reorganisation, the Acquisition, the Subscription, the Open Offer (including the
absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master
Agreement and the transactions contemplated thereunder (including the Annual Caps).

     The Capital Reorganisation is subject to the Shareholders’ approval at the SGM and no
Shareholders are required to abstain from voting on the resolution in relation to the Capital
Reorganisation.

      The completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue are
inter-conditional. Accordingly, the Acquisition, the Subscription, the Open Offer (including the absence
of excess application arrangement), the Whitewash Waiver, the Bonus Issue and all transactions
contemplated thereunder will be subject to the approval by the Independent Shareholders by way of poll
at the SGM.

      As all the relevant percentage ratios in respect of the Annual Caps exceed 5%, the Master
Agreement and the transactions contemplated thereunder (including the Annual Caps) are subject to the
requirement of reporting, announcement and the Independent Shareholders’ approval at the SGM.

     Shareholders including (i) the Subscriber, Mr. Wong, their respective associates and parties acting
in concert with any of them; (ii) the Vendor, its ultimate beneficial owners, their respective associates
and parties acting in concert with any of them; and (iii) those who are interested in, or involved in, the
S&P Agreement, the Underwriting Agreement, the Subscription Agreement, the Whitewash Waiver and
the Master Agreement shall abstain from voting for the resolutions in respect of the transactions
contemplated under the Acquisition, the Open Offer (including the absence of excess application
arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the
Annual Caps.

     As at the Latest Practicable Date, none of (i) the Subscriber, its associates and parties acting in
concert with it; (ii) the Vendor, its associates and parties acting in concert with it; and (iii) those who
are interested in, or involved in, the Acquisition, the Open Offer, the Subscription, the Whitewash
Waiver and the Master Agreement is interested in the Shares. If any of those who are interested in, or
involved in, the Acquisition, the Open Offer, the Subscription, the Whitewash Waiver and/or the Master
Agreement become interested in the Shares prior to the SGM, they will need to abstain from voting at
the SGM.

Application for listing

      The Company will apply to the Stock Exchange for the listing of, and permission to deal in the
Adjusted Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the
Bonus Shares. Subject to the granting of the listing of, and permission to deal in, Adjusted Shares,
including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares, on
the Stock Exchange, the Adjusted Shares, including the Consideration Shares, the Subscription Shares,
the Offer Shares and the Bonus Shares, will be accepted as eligible securities by HKSCC for deposit,
clearance and settlement in CCASS with effect from the commencement date of dealings in the Adjusted



                                                  – 87 –
                                LETTER FROM THE BOARD


Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus
Shares, on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions
between participants of the Stock Exchange on any trading day is required to take place in CCASS on
the second settlement day thereafter. All activities under CCASS are subject to the General Rules of
CCASS and CCASS Operational Procedures in effect from time to time. Dealings in the Adjusted
Shares, including the Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus
Shares, may be settled through CCASS.

Status of the Adjusted Shares

     When allotted, issued and fully paid, the Consideration Shares, the Subscription Shares, the Offer
Shares and the Bonus Shares will rank pari passu in all respects with the then Adjusted Shares in issue
on the date of allotment and issue of the Consideration Shares, the Subscription Shares, the Offers
Shares and the Bonus Shares respectively. Holders of the Consideration Shares, the Subscription Shares,
the Offer Shares and the Bonus Shares will be entitled to receive all future dividends and distributions
which are declared, made and paid after the date of allotment and issue of the Consideration Shares, the
Subscription Shares, the Offer Shares and the Bonus Shares respectively.

INDEPENDENT BOARD COMMITTEE

      The Independent Board Committee comprising all the independent non-executive Directors, namely
Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen, has been formed to advise the
Independent Shareholders in relation to the terms of the Acquisition, the Subscription, the Open Offer
(including the absence of excess application arrangement), the Whitewash Waiver, the Bonus Issue, the
Master Agreement and the Annual Caps.

INDEPENDENT FINANCIAL ADVISER

     Messis Capital has been appointed as the independent financial adviser to advise the Independent
Board Committee and the Independent Shareholders in relation to the Acquisition, the Subscription, the
Open Offer (including the absence of excess application arrangement), the Whitewash Waiver, the
Bonus Issue, the Master Agreement and the Annual Caps. The appointment of Messis Capital has been
approved by the Independent Board Committee.

CONTINUED SUSPENSION OF TRADING IN THE SHARES

     Trading in the Shares on the Stock Exchange has been suspended since 23 September 2008.
Until satisfaction of all the Resumption Conditions set by the Listing Committee, trading in the
Shares will continue to be suspended. The release of this Circular does not indicate that the Shares
will resume trading or that the listing approval for the Adjusted Shares, including the
Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares will be
granted. Shareholders should note that the Shares may be delisted by the Stock Exchange in the
event that the Company fails to satisfy all the Resumption Conditions within the time stipulated by
the Stock Exchange. Accordingly, Shareholders and potential investors are advised to exercise
caution when dealing in the Shares or Adjusted Shares up to the date when the Resumption
Conditions are satisfied.




                                                – 88 –
                                LETTER FROM THE BOARD


RECOMMENDATIONS

      The Directors (including the proposed Directors and independent non-executive Directors) consider
that the terms of the transactions under the Resumption Proposal, including the Capital Reorganisation,
the Acquisition, the Subscription, the Open Offer (including the absence of excess application
arrangement), the Whitewash Waiver and the Bonus Issue; and the terms of the Master Agreement and
the transactions contemplated thereunder (including the Annual Caps) are fair and reasonable and in the
interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the
proposed Directors and independent non-executive Directors) recommend the Independent Shareholders
to vote in favour of the relevant resolutions to be proposed at the SGM.

      Your attention is drawn to the ‘‘Letter from the Independent Board Committee’’ set out on pages
90 to 91 of this Circular and the ‘‘Letter from Messis Capital’’ set out on pages 92 to 121 of this
Circular. The Independent Board Committee, after considering the advice from Messis Capital which
considers that the terms of the Acquisition, the Subscription, the Open Offer (including the absence of
excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the
Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the
interests of the Company and the Independent Shareholders as a whole and recommends the Independent
Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote
for the resolutions in these respects. You are strongly advised to read the ‘‘Letter from the Independent
Board Committee’’ and the ‘‘Letter from Messis Capital’’ before voting.

ADDITIONAL INFORMATION

     Your attention is also drawn to the additional information set out in the appendices to this Circular

                                                                          Yours faithfully,
                                                                        For and on behalf of
                                                               Climax International Company Limited
                                                                          Wong Hin Shek
                                                                         Executive Director




                                                 – 89 –
            LETTER FROM THE INDEPENDENT BOARD COMMITTEE




       CLIMAX INTERNATIONAL COMPANY LIMITED
                               (Incorporated in Bermuda with limited liability)
                                            (Stock code: 439)

                                                                                           5 March 2012

To the Independent Shareholders

Dear Madam/Sir,

        (1) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS
    (2) FUNDRAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER;
CONNECTED TRANSACTIONS AND APPLICATION FOR WHITEWASH WAIVER
                      (3) BONUS ISSUE OF SHARES
                                  AND
              (4) CONTINUING CONNECTED TRANSACTIONS

      We refer to the circular issued by the Company to the Shareholders dated 5 March 2012 (the
‘‘Circular’’) of which this letter forms part. Terms defined in the Circular shall have the same meanings
in this letter unless the context otherwise requires.

      The Independent Board Committee has been constituted to, among other things, give
recommendations to the Independent Shareholders in respect of the Acquisition, the Open Offer
(including the absence of excess application arrangement), the Subscription, the Whitewash Waiver, the
Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including the Annual
Caps). Messis Capital has been appointed as the independent financial adviser to advise us in connection
with the terms of the Acquisition, the Open Offer (including the absence of excess application
arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the
transactions contemplated thereunder (including the Annual Caps) and as to voting. Details of its advice,
together with the principal factors and reasons taken into consideration in arriving at such advices, are
set out in its letter on pages 92 to 121 of this Circular, and the additional information set out in other
sections of and appendices to this Circular.




                                                   – 90 –
           LETTER FROM THE INDEPENDENT BOARD COMMITTEE


      Having considered the terms of the Acquisition, the Open Offer (including the absence of excess
application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master
Agreement and the transactions contemplated thereunder (including the Annual Caps) as well as the
advice and recommendations of Messis Capital as set out in its letter of advice, we consider that the
terms of the Acquisition, the Open Offer (including the absence of excess application arrangement), the
Subscription, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions
contemplated thereunder (including the Annual Caps) are fair and reasonable as far as the Independent
Shareholders are concerned. The Acquisition, the Open Offer (including the absence of excess
application arrangement), the Subscription, the Whitewash Waiver, the Bonus Issue, the Master
Agreement and the transactions contemplated thereunder (including the Annual Caps) are in the interests
of the Company and the Independent Shareholders as a whole. Accordingly, we recommend that the
Independent Shareholders vote in favour of the resolutions to be proposed at the SGM to approve the
Acquisition, the Open Offer (including the absence of excess application arrangement), the Subscription,
the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated
thereunder (including the Annual Caps) respectively.




                                          Yours faithfully,
                                    Independent Board Committee
                               Climax International Company Limited

            Lau Man Tak                  Man Kwok Leung                     Wong Yun Kuen
                                 Independent non-executive Directors




                                                – 91 –
                              LETTER FROM MESSIS CAPITAL


     The following is the full text of the letter from Messis Capital which sets out its advice to the
Independent Board Committee and the Independent Shareholders for inclusion in this circular.




                                                                                          5 March 2012

To the Independent Board Committee and the Independent Shareholders
  of Climax International Company Limited

Dear Sirs,

       (1) VERY SUBSTANTIAL ACQUISITION OF PAPER BUSINESS;
   (2) FUND RAISING BY WAYS OF SUBSCRIPTION AND OPEN OFFER;
CONNECTED TRANSACTION AND APPLICATION FOR WHITEWASH WAIVER;
                    (3) BONUS ISSUE OF SHARES; AND
              (4) CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

      We refer to our appointment as the independent financial adviser to the Independent Board
Committee and the Independent Shareholders in respect of the Acquisition, the Subscription, the Open
Offer, the Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated
thereunder (including the Annual Caps), details of which are set out in the letter from the Board (the
‘‘Letter from the Board’’) contained in the circular (the ‘‘Circular’’) of the Company to the
Shareholders dated 5 March 2012, of which this letter forms part. Capitalised terms used in this letter
shall have the same meanings as defined in the Circular unless the context requires otherwise.

     On 5 March 2012, the Company announced, among others, that

     (i)     on 20 January 2011 (as supplemented on 30 September 2011 and 29 February 2012
             respectively), the Company entered into the S&P Agreement with the Vendor, whereby the
             Vendor agreed to sell and the Company agreed to purchase the Sale Shares, representing the
             entire issued share capital of the Target Company, at an aggregate consideration of HK$110
             million;

     (ii)    on 29 February 2012, the Company entered into the Subscription Agreement with the
             Subscriber for the issuance of the Subscription Shares at the Subscription Price of HK$0.10
             per Subscription Share to raise approximately HK$45 million;

     (iii) on 29 February 2012, the Company entered into the Underwriting Agreement with the
           Underwriters, whereby the Company proposes to raise approximately HK$45.9 million,
           before expenses, by way of Open Offer of 459,464,456 Offer Shares at the Offer Price of
           HK$0.10 per Offer Share, on the basis of eight (8) Offer Shares for every Adjusted Share
           held on the Record Date;



                                                  – 92 –
                            LETTER FROM MESSIS CAPITAL


     (iv) the Company proposes the Bonus Issue to issue the Bonus Shares to the existing
          Shareholders whose names appear on the register of members of the Company on the Record
          Date on the basis of five (5) Bonus Shares for every seven (7) then Adjusted Shares; and

     (v)   on 29 February 2012, the Target Company has entered into the Master Agreement with New
           Spring Label for governing the ongoing production of printing orders and specifying the
           terms adopted including the Annual Caps.

      As at the Latest Practicable Date, the Subscriber and parties acting in concert with it are not
interested in any Shares or securities of the Company. Upon completions of the Acquisition, the
Subscription, the Open Offer and the Bonus Issue, the Subscriber and parties acting in concert with it
will hold (i) approximately 37.25% of the issued share capital (should all existing Shareholders take up
their entitlements under the Open Offer to subscribe for the Offer Shares in full) as enlarged by the
Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares; and (ii)
approximately 56.30% of the issued share capital (should no existing Shareholders take up their
entitlements under the Open Offer to subscribe for the Offer Shares) as enlarged by the Consideration
Shares, the Subscription Shares, the Offer Shares and the Bonus Shares. Accordingly, the Subscriber is
required to make a mandatory general offer for all the issued Adjusted Shares (other than those already
owned or agreed to be acquired by the Subscriber and parties acting in concert with it) pursuant to Rule
26 of the Takeovers Code.

      The Subscriber has made an application to the Executive for the Whitewash Waiver, pursuant to
Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Subscriber
and parties acting in concert with it to make a mandatory general offer for all the Adjusted Shares not
already owned or agreed to be acquired by them, arising from the Subscription of 450,000,000
Subscription Shares and its underwriting obligation of 230,000,000 Offer Shares under the Underwriting
Agreement by the Subscriber. The Executive has indicated that the grant of the Whitewash Waiver
subject to, among other things, the approval of the Independent Shareholders at the SGM by way of
poll. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent
Shareholders, the Subscription and the Open Offer will not proceed.

     As set out in the Letter from the Board, the Subscriber, being an associate of Mr. Wong who is a
Director, is a connected person of the Company and therefore, the Subscription and the underwriting
arrangement of the Subscriber under the Underwriting Agreement constitute connected transactions for
the Company under Chapter 14A of the Listing Rules and are subject to the requirements of reporting,
announcement and Independent Shareholders’ approval. Pursuant to Rule 7.26A(2) of the Listing Rules,
since the Open Offer will be partly underwritten by the Subscriber which is ultimately beneficially
owned by Mr. Wong, the absence of excess application arrangement of the Open Offer is required to be
approved by the Independent Shareholders by way of poll at the SGM.

      Completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue are inter-
conditional and accordingly, the Acquisition, the Subscription, the Open Offer (including the absence of
excess application arrangement), the Whitewash Waiver, the Bonus Issue and all transactions
contemplated thereunder will be subject to the approval by the Independent Shareholders by way of poll
at the SGM. In addition, as all the relevant percentage ratios in respect of the Annual Caps exceed 5%,




                                                – 93 –
                            LETTER FROM MESSIS CAPITAL


the Master Agreement and the transactions contemplated thereunder (including the Annual Caps) are
subject to the requirement of reporting, announcement and the Independent Shareholders’ approval at the
SGM.

      The Independent Board Committee comprising all the independent non-executive Directors, namely
Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen, has been established to advise the
Independent Shareholders in respect of the Acquisition, the Subscription, the Open Offer, the Whitewash
Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated thereunder (including
the Annual Caps). We, Messis Capital Limited, have been appointed by the Company to advise the
Independent Board Committee and the Independent Shareholders as to (i) whether the terms and
conditions of the Acquisition, the Subscription, the Open Offer (including the absence of excess
application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the
transactions contemplated thereunder (including the Annual Caps) are on normal commercial terms, and
fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Acquisition,
the Subscription, the Open Offer (including the absence of excess application arrangement), the
Whitewash Waiver, the Bonus Issue, the Master Agreement and the transactions contemplated
thereunder (including the Annual Caps) are in the interests of the Company and the Independent
Shareholders as a whole; (iii) whether the Independent Shareholders should vote in favour of the
resolutions to approve the Acquisition, the Subscription, the Open Offer (including the absence of
excess application arrangement), the Whitewash Waiver, the Bonus Issue, the Master Agreement and the
transactions contemplated thereunder (including the Annual Caps).

BASIS OF OUR ADVICE

     In formulating our opinion to the Independent Board Committee and the Independent Shareholders,
we have relied on the statements, information, opinions and representations contained in the Circular
and the information and representations provided to us by the Company, the Directors and the
management of the Company. We have assumed that all information, representations and opinions
contained or referred to in the Circular, which have been provided by the Company, Directors and
management of the Company and for which they are solely and wholly responsible, were true and
accurate at the time when they were made and continue to be so as at the Latest Practicable Date, and
should there be any material changes to our opinion after the Latest Practicable Date, Shareholders
would be notified as soon as possible.

      The Directors jointly and severally accept full responsibility for the accuracy of the information
contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their
knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration
and there are no other facts not contained in the Circular the omission of which would make any
statement in the Circular, misleading. We consider that we have been provided with sufficient
information on which to form a reasonable basis for our opinion. We have no reason to suspect that any
relevant information has been withheld, nor are we aware of any facts or circumstances which would
render the information provided and representations made to us untrue, inaccurate or misleading. We
consider that we have performed all the necessary steps to enable us to reach an informed view and to
justify our reliance on the information provided so as to provide a reasonable basis for our opinion.




                                                – 94 –
                              LETTER FROM MESSIS CAPITAL


     We have not, however, carried out any independent verification of the information provided by the
Directors and the management of the Company, nor have we conducted an independent investigation
into the business and affairs of the Group, the Vendor, the Target Group, the Subscriber, the
Underwriters, New Spring Label and their respective associates.

     We have not considered the tax implications on the Qualifying Shareholders of their acceptances
or non-acceptances of the Open Offer since these are particular to their own individual circumstances.
Qualifying Shareholders should consider their own tax position with regard to the Open Offer and, if in
any doubt, should consult their own professional advisers in due course.

      This letter is issued for the information for the Board solely in connection with their consideration
of the Acquisition, the Subscription, the Open Offer (including the absence of excess application
arrangement), the Whitewash Waiver, the Bonus Issue and the Master Agreement (including the Annual
Caps), except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor
shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

     In formulating our opinion and recommendations to the Independent Board Committee and the
Independent Shareholders, we have taken into consideration the following principal factors and reasons:

     1.    Historical Financial Performance of the Group

          The Group is principally engaged in the production and marketing of paper products at the
     time of suspension.

           The Group established the business of trading of electronic products in 2009.

           Taking into account the substantial net liabilities position and the continued loss of the then
     paper business of the Group, the Company decided to dispose of the paper business in October
     2009. Following the completion of such disposal in March 2010, the then Group’s principal
     activity was trading of electronic products.

           The table below summaries the audited consolidated financial results of the Group for each of
     the three years ended 31 March 2011 as extracted from the Group’s annual report for the year
     ended 31 March 2011 (‘‘AR 2011’’) and the Group’s annual report for the year ended 31 March
     2010 (‘‘AR 2010’’):

                                                                 For the year ended 31 March
                                                                  2011            2010           2009
                                                              HK$’000         HK$’000        HK$’000
                                                              (Audited)       (Audited)      (Audited)

           Continuing operation
           Revenue                                              87,366            166,927              3,947
           Loss for the year from continuing
             operation                                           (4,371)          (11,886)           (16,227)
           Profit/(Loss) for the year attributable
             to the Shareholders                                 (4,371)           21,473            (99,622)


                                                   – 95 –
                       LETTER FROM MESSIS CAPITAL


      According to the AR 2011, the Group reported revenue from continuing operations, i.e.
trading of electronic products, of approximately HK$87.37 million for the year ended 31 March
2011, representing a decrease of approximately 47.66% from that for the year ended 31 March
2010 of approximately HK$166.93 million. As advised by the Company, the reduction in revenue
was mainly due to the drop of sales orders from customers. The Group reported profit attributable
to the Shareholders of approximately HK$21.47 million for the year ended 31 March 2010 whilst
reported loss attributable to Shareholders of approximately HK$4.37 million for the year ended 31
March 2011. As advised by the Company, the deterioration was mainly due to the absence of the
profit from discontinued operation, i.e. the production and marketing of paper products, of
approximately HK$33.36 million for the year ended 31 March 2010, of which approximately
HK$44.83 million represented the gain on disposal of subsidiaries and approximately HK$11.47
million represented the operating loss of the discontinued operation.

     As noted from the independent auditor’s report in AR 2011, the auditors of the Company
have given disclaimer opinion on the consolidated financial statements of the Company for the
year ended 31 March 2010. The basis of qualified opinion and the qualified opinion on the loss
and cash flows arising from limitation of scope as set out in the independent auditor’s report in AR
2011 have been extracted as follows:

     ‘‘Basis for Qualified Opinion

     Corresponding figures

           As explained in our independent auditor’s report dated 13 July 2010 on the Group’s
     consolidated financial statements for the year ended 31 March 2010, due to the lost of
     accounting books and records and high turnover rate of accounting personnel of Climax
     Investments Limited and its subsidiaries (collectively referred to as the ‘‘CIL Group’’), which
     was disposed of during the year ended 31 March 2010, we were unable to obtain sufficient
     appropriate audit evidence to ascertain the appropriateness of the profit for the year from
     discontinued operation of HK$33,358,000 as recorded in the Group’s consolidated statement
     of comprehensive income for the year ended 31 March 2010, which included loss for the year
     of the CIL Group attributed to the Group of HK$11,470,000 and the gain on disposal of the
     CIL Group of HK$44,828,000, and the related amounts recorded in the consolidated
     statement of cash flows and the related amounts disclosed in the notes to the consolidated
     financial statements in respect of CIL Group for the year ended 31 March 2010. In addition,
     we were unable to obtain sufficient reliable evidence to satisfy ourselves as to the existence,
     accuracy and completeness of the adjustment and/or disclosures in relation to the contingent
     liabilities, commitment and pledge of assets of the CIL Group arising from the lawsuits and
     claims against it during the year ended 31 March 2010 and upon its disposal. We issued a
     ‘‘disclaimer opinion’’ on the consolidated financial statements for the year ended 31 March
     2010 in respect of this scope limitation accordingly.

           Any adjustments that might have been found necessary in respect of the above would
     have had a consequential impact on the related amounts recorded in the consolidated
     statement of comprehensive income and consolidated statement of cash flows; and the related
     disclosures thereof for the year ended 31 March 2010.




                                           – 96 –
                       LETTER FROM MESSIS CAPITAL


     Qualified Opinion on the Loss and Cash Flows Arising from Limitation of Scope

          In our opinion, except for the possible effects of any adjustments that might have been
     determined to be necessary had we been able to obtain sufficient information concerning the
     matters as described in the basis for qualified opinion paragraph, the consolidated statement
     of comprehensive income and the consolidated statement of cash flows give a true and fair
     view of the Group’s loss and cash flows for the year ended 31 March 2011 in accordance
     with Hong Kong Financial Reporting Standards and have been properly prepared in
     accordance with the disclosure requirements of the Hong Kong Companies Ordinance.’’

      According to the AR 2010, for the year ended 31 March 2010, the Group’s revenue from
continuing operations of approximately HK$166.93 million, representing a significant increase of
approximately 4,126% over the preceding year of approximately HK$3.95 million. As advised by
the Company, there was only 1 month revenue recognized for the year ended 31 March 2010 as
the electronic products business commenced in March 2010 while revenue for the year ended 31
March 2011 represented a full year sales orders from customers. The Group reported profit
attributable to the Shareholders of approximately HK$21.47 million for the year ended 31 March
2010 whilst reported loss attributable to Shareholders of approximately HK$99.62 million for the
preceding year. As advised by the Company, the profit attributable to the Shareholder for the year
ended 31 March 2010 is attributed from the profit from discontinued operation of approximately
HK$33.36 million, of which approximately HK$44.83 million represented the gain on disposal of
subsidiaries and approximately HK$11.47 million represented the operating loss of the
discontinued operation. Also, approximately HK$83.40 million of loss from discontinued
operation was recorded for the year ended 31 March 2009.

      According to the interim report of the Company for the six months ended 30 September 2011
(‘‘IR 2011/12’’), the Group did not report any revenue from continuing operation for the six
months ended 30 September 2011. As set out in IR 2011/12, for the six months ended 30
September 2010, the Group is organized into a single operating segment of trading of electronic
products. The electronic products segment was deemed discontinued on 30 September 2011 as no
transactions were concluded to generate any trading income from trading of electronic products
during the six months ended 30 September 2011 and the Directors would like to focus on
formulating a plan for the resumption of trading of the Shares. Accordingly, no reportable segment
is presented.




                                           – 97 –
                       LETTER FROM MESSIS CAPITAL


     The table below summaries the consolidated financial position of the Group as at 30
September 2011, 31 March 2011, 31 March 2010 and 31 March 2009 as extracted from IR 2011/
12, AR 2011 and AR 2010:

                                           As at
                                   30 September                      As at 31 March
                                           2011              2011              2010           2009
                                        HK$’000          HK$’000           HK$’000        HK$’000
                                     (Unaudited)         (Audited)         (Audited)      (Audited)

     Current assets                        69,169          70,609          114,192           98,708
     Non-current assets                       884             240              303           14,330
     Current liabilities                    2,239           2,536           41,805           60,748
     Non-current liabilities                   15              18               24               —
     Total equity attributable
       to the Shareholders                 67,799          68,295           72,666           52,289

      As at 30 September 2011, the Group’s unaudited net assets were approximately HK$67.80
million. The gearing ratio of the Group as calculated as the percentage of total bearing debt to net
asset value was approximately 0.03%.

2.   The Acquisition

     Information on the Target Group

          The Target Company, incorporated in the BVI with limited liability on 2 November
     2010, has been an investment holding company of the Target Group since 15 January 2011.
     The Target Group, which comprised three operating entities, namely Sky Will, New Spring
     (SW) and New Spring Offset as at the Latest Practicable Date, is principally engaged in the
     manufacture and sale of paper packaging products and paper gift items and the printing of
     paper promotional materials in accordance with customers’ designs and specifications.

          Sky Will was incorporated in Hong Kong on 19 March 2004 with limited liability. Sky
     Will was the first operating entity within the Target Group and was principally engaged in
     the sale of paper packaging products and paper gift items before the commencement of
     business of New Spring (SW), a wholly-owned subsidiary of Sky Will. Since then, Sky Will
     has been reducing its participation in the sale of paper packaging products and paper gift
     items (by issuing letters to request customers to place their new sales orders with New Spring
     (SW)) and becoming an investment holding company.

            New Spring (SW) was incorporated in Hong Kong on 3 November 2010 with limited
     liability and it is principally engaged in the sale of paper packaging products and paper gift
     items. It commenced business in January 2011.

          New Spring Offset, which is wholly owned by Sky Will as at the Latest Practicable
     Date, was incorporated in the PRC on 1 December 2009 with limited liability and
     commenced business in June 2010. The acquisition of New Spring Offset by Sky Will from
     NSG completed in April 2011. New Spring Offset is principally engaged in the manufacture



                                           – 98 –
                      LETTER FROM MESSIS CAPITAL


and sale of paper packaging products and paper gift items and the printing of paper
promotional materials. New Spring Offset is the only entity within the Target Group
engaging in the manufacturing function.

     During the two financial years ended 31 March 2009 and 2010, Sky Will was the only
operating entity in the Target Group. For the financial year ended 31 March 2011, the
operating results of the Target Group, besides Sky Will, was also contributed by New Spring
(SW) upon the commencement of business of New Spring (SW) in January 2011. Upon
completion of the acquisition of New Spring Offset in April 2011, revenue and profit of the
Target Group are currently generated from all three entities, being Sky Will, New Spring
(SW) and New Spring Offset.

     Set out below is the financial information of the Target Group as extracted from
financial information of the Target Group in Appendix II to the Circular:

                                                                                                    For the
                                                        For the year        For the year         6 months
                                                               ended               ended             ended
                                                          31 March            31 March       30 September
                                                                2010                2011              2011
                                                             (Note 1)            (Note 2)          (Note 3)
                                                            HK$’000             HK$’000           HK$’000
                                                            (audited)           (audited)         (audited)

     Revenue                                                    18,633             43,644            54,936

     Profit before taxation and
       extraordinary items                                       3,155              5,667            18,279

     Profit after taxation and
       extraordinary items                                       2,627              4,738            15,885

                                                                As at               As at            As at
                                                            31 March            31 March     30 September
                                                                 2010                2011             2011
                                                             HK$’000             HK$’000          HK$’000
                                                             (audited)           (audited)        (audited)

     Net asset value/(deficiency in equity)                        (464)            4,265            20,150

     Notes:

     1.       The operating entity within the Target Group was Sky Will only.

     2.       The operating entities within the Target Group were Sky Will and New Spring (SW) (which
              commenced business in January 2011).

     3.       The operating entities within the Target Group were Sky Will, New Spring (SW) (which commenced
              business in January 2011) and New Spring Offset (which was acquired by Sky Will in April 2011).




                                              – 99 –
                      LETTER FROM MESSIS CAPITAL


      As set out in the Letter from the Board, the results of New Spring Offset has been
consolidated into the Target Group since 1 April 2011. For information purpose, the
historical financial information of New Spring Offset is set out as follows:

                                                     From date of
                                                    incorporation                                      For the
                                                   on 1 December                 For the             9 months
                                                          2009 to             year ended                 ended
                                                     31 December            31 December          30 September
                                                             2009                   2010                  2011
                                                         HK$’000                HK$’000               HK$’000
                                                         (audited)              (audited)             (audited)

     Revenue (Note 1)                                               —               52,944                60,503

     Gross profit                                                   —               11,520               11,146
                                                                                   (Note 2)             (Note 3)

     (Loss)/Profit before taxation and
       extraordinary items                                       (113)                8,350                 7,955

     (Loss)/Profit after taxation and
       extraordinary items                                       (113)                6,186                 5,992

                                                             As at                 As at                 As at
                                                      31 December           31 December          30 September
                                                              2009                  2010                  2011
                                                          HK$’000               HK$’000               HK$’000
                                                          (audited)             (audited)             (audited)

     Net (liabilities)/asset value as at
       year/period end                                           (113)              16,939                24,631

     Notes:

     1.       For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011
              (being the period before New Spring Offset acquired by Sky Will), revenue generated from the Target
              Group were approximately HK$23,373,000 and approximately HK$10,534,000 respectively.

     2.       Based on the gross profit margin of New Spring Offset of approximately 21.76% for the year ended 31
              December 2010, gross profit generated from the Target Group was approximately HK$5,411,000.

     3.       Based on the gross profit margin of New Spring Offset of approximately 18.42% for the 9 months
              ended 30 September 2011, gross profit generated from the Target Group (except New Spring Offset)
              for the 3 months from 1 January 2011 to 31 March 2011 (being the period before New Spring Offset
              acquired by Sky Will) was approximately HK$1,943,000.

     4.       For the year ended 31 December 2010 and for the 3 months from 1 January 2011 to 31 March 2011
              (being the period before the acquisition of New Spring Offset by Sky Will), purchases from the Target
              Group were approximately HK$nil and HK$15,198,000 respectively. Save as the aforesaid, there were




                                              – 100 –
                   LETTER FROM MESSIS CAPITAL


           no other transactions incurred between the Target Group and New Spring Offset for the year ended 31
           December 2010 and for the 3 months from 1 January 2011 to 31 March 2011 (being the period before
           New Spring Offset acquired by Sky Will).


      As set out above, the revenue of the Target Group for the year ended 31 March 2011
was approximately HK$43.64 million, representing an increase of approximately 134.25%
from that for the year ended 31 March 2010 of approximately HK$18.63 million. As advised
by the Company, such increase in revenue was mainly due to the gradual recovery of the
worldwide economy from the financial tsunami in the second half of 2010 and the referral of
customers from NSG to place new sales orders with the Target Group. The profit after
taxation and extraordinary items of the Target Group for the year ended 31 March 2011 was
approximately HK$4.74 million, representing an increase of approximately 80.23% from that
for the year ended 31 March 2010 of approximately HK$2.63 million. As advised by the
Company, such increase in profit after taxation and extraordinary items was mainly due to
the increase in revenue for the year ended 31 March 2011. The revenue and profit after
taxation and extraordinary items of the Target Group for the six months ended 30 September
2011 (which is on six-month basis) represented approximately 1.26 times and approximately
3.35 times respectively to the revenue and profit after taxation and extraordinary items of the
Target Group for the year ended 31 December 2011 (which is on twelve-month basis). As
advised by the Company, such improvement was mainly because of the consolidation of the
account of New Spring Offset into the Target Group since 1 April 2011 and the recognition
of gain on bargain purchase upon completion of the acquisition of New Spring Offset of
approximately HK$8.0 million.

       Independent Shareholders should note from the accountants’ report of the Target Group
as set out in the financial information of the Target Group in Appendix II to the Circular that
the auditors have given an adverse opinion for the financial statements of the Target Group
for each of the three years ended 31 March 2011 and for the six months ended 30 September
2011 since that the Target Company has not consolidated the results of New Spring Paper
into the combined financial statements for each of the three years ended 31 March 2011 and
the effect on the combined financial statements of the failure to consolidate New Spring
Paper have not been determined. In addition, the auditors, even though without qualifying its
opinion, have expressed an uncertainty opinion concerning the going concern basis of the
Target Group’s accounts for each of the three years ended 31 March 2011 and for the six
months ended 30 September 2011 since that the Target Group had incurred net current
liabilities as at 31 March 2009, 2010, 2011 and 30 September 2011. Details of the basis for
such adverse opinion and uncertainty opinion have been set out in the financial information
of the Target Group in Appendix II to the Circular.

      Despite the adverse opinion and the going concern raised by the auditors, taking into
account (i) the Target Group will become wholly-owned subsidiaries of the Company upon
completion of the Acquisition, which will allow the Company to strengthen the internal
control of the Target Group and closely monitor the operation of the Target Group; (ii) the
improvement of the financial performance of the Target Group after commencement of
operation of New Spring (SW) in January 2011 and the acquisition of New Spring Offset in
April 2011; (iii) the 2012 Guaranteed Amount; (iv) in the event that the 2012 Net Profit is
less than HK$16 million, the Consideration will be adjusted downward by an amount equal
to the shortfall between the 2012 Guaranteed Amount and 2012 Net Profit multiplied by



                                          – 101 –
                  LETTER FROM MESSIS CAPITAL


6.875 (the ‘‘Adjustment Mechanism’’); (v) the enhancement on the working capital and the
financial position of the Group upon completions of the Acquisition, the Subscription, the
Open Offer and the Bonus Issue; and (vi) the optimistic prospect of the paper packing
business in the USA, Europe, the PRC and Hong Kong as mentioned under the below
paragraph headed ‘‘Reasons for the Acquisition’’ under the section headed ‘‘2. The
Acquisition’’, we consider such issues may not pose significant impact on arriving at our
opinion regarding the fairness and reasonableness of the Acquisition. Furthermore, when
considering the fairness and reasonableness of the Acquisition, Independent Shareholders
should also consider other factors including the reasons for and benefits of the Acquisition as
detailed under the below paragraph headed ‘‘Reasons for the Acquisition’’.

      Further information of the Target Group has been set out under the section headed
‘‘Information on the Target Group’’ in the Letter from the Board and the financial
information of the Target Group in Appendix II to the Circular.

Reasons for the Acquisition

      Before the Suspension, the Group was engaged in the design, development, production
and marketing of paper products. Subsequently in 2009, the Group established the business
of trading of electronic products. Taking into account the substantial net liabilities position
and the continued loss of the then paper business of the Group, the Company decided to
dispose of the paper business in October 2009. Following the completion of such disposal in
March 2010, the then Group’s principal activity was trading of electronic products. Revenue
generated from the electronics business had been decreasing since the financial year ended 31
March 2011. For the six months ended 30 September 2011, the Group did not record any
revenue.

      We noted from IR 2011/12, the electronic products segment was deemed discontinued
on 30 September 2011 as no transaction were concluded to generate any trading income from
trading of electronic products during the six months ended 30 September 2011.

     The Target Group is principally engaged in the manufacture and sale of paper
packaging products and paper gift items and the printing of paper promotional materials in
accordance with customers’ designs and specifications. As such, the principal business of the
Target Group is similar to that of the Group prior to the Suspension, being engaging in the
design, development and production of paper products.

      In view of the 2012 Guaranteed Amount provided by the Vendor, the Directors
(including the proposed Directors) consider that the Acquisition provides an excellent
opportunity for the development of the Group’s business and broadens its revenue and
customer bases.

      As demonstrated in the Resumption Proposal, upon completion of the Acquisition, the
Subscription and the Open Offer, it is expected that (i) the Acquisition will generate an
additional income to the Group; (ii) the Adjustment Mechanism facilitates the safeguard of
the 2012 Guaranteed Amount; and (iii) the issuance of the Subscription Shares and the Offer
Shares may provide funding to the Company for the Acquisition and future development of
the Group; (iv) the Subscription and the Open Offer will strengthen the financial position,



                                      – 102 –
                  LETTER FROM MESSIS CAPITAL


working capital position and Shareholders’ base of the Group; and (v) the Open Offer
provides opportunity for the existing Shareholders to participate in the future development of
the Enlarged Group (if they so wish), the Board therefore believes that the Company would
have sufficient level of operations and assets under Rule 13.24 of the Listing Rules.

    The Directors (including the proposed Directors) are of the view that the terms of the
S&P Agreement are fair and reasonable and in the interests of the Shareholders and the
Company as a whole.

      As noted from the Letter from the Board, the Target Group has maintained good and
long-term relationship with its local and overseas suppliers. In particular, the Target Group
has maintained more than 4 years business relationship with a major supplier of raw paper.
The Target Group has also established long term business relationship with its customers
which include distributors, manufacturers of consumer products and advertising agencies
based in the USA, Europe, Hong Kong and the PRC. As advised by the Company, sales from
customers from the USA, Europe, Hong Kong and the PRC accounted for approximately
12.18%, 8.69%, 69.06% and 6.68% respectively of the Target Group’s revenue for the year
ended 31 March 2011. For the year ended 31 March 2010, sales from customers from the
USA, Europe, Hong Kong and the PRC accounted for approximately 30.96%, 38.21%,
28.47% and nil respectively of the Target Group’s revenue. The Target Group has maintained
an average of around 5 years’ business relationship with its top five customers. As at 31
March 2011, the production plant of the Target Group had maximum production capacity of
approximately 56,000 sheets of paper per hour and currently, the production capacity reaches
to 25,000 sheets of paper per hour. In addition, the Target Group has been accredited with
the internationally recognized ISO 9001 certification in respect of the quality management
systems they operate.

      According to a report headed ‘‘Market Statistics and Future Trends in Global
Packaging’’ which was jointly issued by World Packaging Organisation (WPO), a non-profit,
non-governmental and international federation of national packaging institutes and
associations, regional packaging federations and other interested parties and Pira
International Limited (‘‘Pira’’), an organisation provides independent, knowledge-based
information and testing services to clients in the packaging, paper and print industry and their
supply chains, the global packaging sales has increased substantially by approximately 52%
from approximately US$372 billion in 1999 to approximately US$564 billion in 2009. The
largest share of global packaging is paper and board packaging with sales of $165 billion in
2003, equating to 38% of the market. Paper and board remains the single largest element of
the market into 2009, growing at an annual rate of approximately 4% in real terms, driven on
the one hand by rising demand in fast-growth national markets as well as steady growth in
secondary or bulk packaging across the globe. It is further announced by Pira in a report
named ‘‘The Future of Global Packaging to 2016’’ on 23 December 2011, the global
packaging sales is projected to grow by approximately 4% to reach approximately US$696
billion as compared to the previous year, driven mainly by increasing demand for packaging
in emerging and transitional economies. Going forward, Pira predicts a growth of 3% per
annum, with sales set to exceed US$800 billion by 2016.




                                      – 103 –
                  LETTER FROM MESSIS CAPITAL


      We further noted from Pira that USA was the largest consumption market for paper and
board packaging in 2009 and the sales of which was approximately US$51 billion. The PRC
ranked the second with sales of approximately US$30 billion. Asia, North America and
Western Europe ranked as the top three paper and board packaging consumption regions in
the world in 2009. According to CEPI Key Statistics 2010 issued in June 2011 by The
Confederation of European Paper Industries (CEPI), a Brussels-based non-profit making
organization which represents the European pulp and paper industry towards the European
Institutions, the CEPI total packaging papers production in 2010 was approximately 41.47
million tonnes, representing an increase of approximately 9.07% as compared with the CEPI
total packaging papers production in 2009 of approximately 38.02 million tonnes. The CEPI
total packaging papers consumption in 2010 was approximately 37.07 million tonnes,
representing an increase of approximately 7.82% as compared with the CEPI total packaging
papers consumption in 2009 of approximately 34.38 million tonnes.

      As stated in the above paragraph, the PRC ranked the second largest consumption
market for paper and board packaging in 2009. In addition, as set out in the paragraph
headed ‘‘D. Industry overview’’ under the section headed ‘‘(3) VERY SUBSTANTIAL
ACQUISITION OF PAPER BUSINESS’’ in the Letter from the Board, the packaging
industry in the PRC had a booming year in 2010 accounting a gross industrial output of
approximately RMB1.2 trillion and the sales of which will continue to grow under the
Twelfth Five-Year Plan to enjoy an average annual growth rate of 6% in 2011 to 2015. On
29 February 2012, lawmakers in the PRC has passed an amendment (the ‘‘Amendment’’) to
restrict excessive packaging and promoted clean production. However, the Amendment did
not give a clear definition of what constitutes excessive packaging. Having considered (i) the
products of the Target Group currently comprise packaging boxes for wines, food and
cosmetics, stationeries and kid’s toys which are to be sold worldwide; (ii) as advised by the
Company, the Amendment is not directly governing the paper packaging producers, we
therefore concur with the Director’s view that the Amendment would have immaterial impact
on the business of the Target Group.

      According to the report headed ‘‘Packaging materials industry in Hong Kong’’, which is
published by the Hong Kong Trade Development Council (HKTDC) on 28 November 2011,
in addition to quick response, flexibility in customizing products and short delivery lead
time, the development of Hong Kong packaging materials industry is also supported by the
strong printing industry. For the year 2010, Hong Kong’s exports of packaging materials
were approximately HK$866 million, representing an increase of approximately 6% over the
year 2009. Hong Kong’s re-exports of packaging materials has reached approximately
HK$26,170 million in 2010, increased by approximately 32% as compared to the year 2009.

     Having taken into consideration that (i) the customers of the Target Group are based in
the USA, Europe, Hong Kong and the PRC; and (ii) the optimistic prospect of the global
paper packaging industry, in particular the huge market potential of the USA, Europe, the
PRC and Hong Kong, as supported by the above mentioned statistics, we consider that the
business performance of the Target Group will benefit from the positive development in the
paper packaging industry in the aforesaid countries and regions.




                                     – 104 –
                  LETTER FROM MESSIS CAPITAL


      In view of (i) the Vendor has irrevocably undertaken to the Company that the 2012 Net
Profit will not be less than HK$16 million; (ii) comfort letters (the ‘‘Comfort Letters’’) from
Veda Capital and SHINEWING (HK) CPA LIMITED, the reporting accountant of the
Company regarding the profit forecasts of the Target Group up to the year ending 31 March
2013 (the ‘‘Profit Forecast’’), details of which are set out in Appendix IV to the Circular;
and (iii) the Adjustment Mechanism, details of which are disclosed in the paragraph headed
‘‘Profit guarantee and adjustments of Consideration’’ under the Section ‘‘(3) VERY
SUBSTANTIAL ACQUISITION OF PAPER BUSINESS’’ in the Letter from the Board, we
consider that the 2012 Guaranteed Amount and the Profit Forecast are reasonable
expectations and the interests of the Company and the Shareholders in the Acquisition will
be safeguarded.

      Having considered (i) the loss making of the Group and no revenue have been
generated for the six months ended 30 September 2011 from the continuing operation of the
Group; (ii) the improvement on revenue and profit of the Target Group for the year ended 31
March 2011 as compared with the year ended 31 March 2010; (iii) the 2012 Guaranteed
Amount, the Adjustment Mechanism and the Comfort Letters; (iv) the Acquisition enables
the Company to enhance its revenue base and broaden its customer base; (v) the Acquisition
allows the Group to recommence its paper packaging business given the single operating
segment of trading of electronic products was deemed discontinued on 30 September 2011;
(vi) the optimistic prospect of the paper packing business in Europe and PRC as supported by
the abovementioned statistics; and (vii) completion of the Acquisition is one of the
Resumption Conditions, we concur with the view of the Directors that the Acquisition is in
the interests of the Company and the Independent Shareholders as a whole.

Consideration for the Acquisition

      As set out in the Letter from the Board, the Consideration of HK$110 million was
determined after arm’s length negotiation between the Vendor and the Company with
reference to, among other things, (i) the 2012 Guaranteed Amount; and (ii) the prospect of
the Target Group’s business as mentioned in the paragraphs headed ‘‘Future plans and
development’’ under the section headed ‘‘Information of the Target Group’’ in the Letter from
the Board.

     We have considered price-to-earnings ratio (‘‘PER’’) and price to book ratio approaches
to access the fairness and reasonableness of the Consideration. However, given the Target
Group does not have its own production factory and all manufacturing activities of the Target
Group are carried out by New Spring Offset in a leased production plant in Shenzhen, we
consider it is inappropriate to justify the Consideration with price-to-book ratio.

      Based on the 2012 Guaranteed Amount, the Consideration represents a PER of
approximately 6.875 times. In order to access the fairness and reasonableness of the PER of
the Acquisition, we have identified comparable companies (the ‘‘Industry Comparables’’)
being companies (i) listed on the Stock Exchange on or before 20 January 2011, being the
date of the S&P Agreement; and (ii) engaging in businesses similar to those of the Target
Group including, but not limited to, manufacture and sale of paper packaging products and
other related paper products for their latest financial year. To the best of our knowledge, we




                                      – 105 –
                   LETTER FROM MESSIS CAPITAL


have identified 4 Industry Comparables by searching through published information on the
Stock Exchange’s website. The PERs are based on their respective market capitalisations as
at 20 January 2011 and the profit attributable to the equity holders of the Industry
Comparables as set out in their respective latest annual reports published on or before 20
January 2011. As the Industry Comparables are engaged in similar business of the Target
Group and their respective PERs are determined with reference to their respective market
capitalisations at the date of the S&P Agreement, we consider the list of the Industry
Comparables is an exhaustive list and the Industry Comparables are fair and representative
samples.

Industry Comparables
(Stock code)                Principal business                               PER (times)

Starlite Holdings Limited   Printing and manufacturing of packaging                 5.912
  (403)                       materials, labels, paper products and
                              environmentally friendly products.

Samson Paper Holdings       Trading and marketing of paper products,               12.851
  Limited (731)               provision of logistics services, trading and
                              marketing of aeronautic parts, and provision
                              of marine services to marine, oil and gas
                              industries.

Come Sure Group             Manufacture and sale of corrugated board,              13.068
  (Holdings) Limited         corrugated paper-based packing products
  (794)                      and offset printed corrugated products

Hop Fung Group              Manufacture and sale of containerboard, and             7.033
 Holdings Limited            corrugated packaging
 (2320)

Maximum                                                                            13.068
Minimum                                                                             5.912
Mean                                                                                9.716


The Acquisition                                                                     6.875

Source: www.hkex.com.hk


     As indicated in the above table, the PER based on the 2012 Guaranteed Amount, being
6.875 times, is below the mean and falls within the range of the PER of the Industry
Comparables from approximately 5.912 times to approximately 13.068 times.

      As set out in the Letter from the Board, pursuant to the S&P Agreement, the Vendor
has irrevocably undertaken to the Company that the 2012 Net Profit will not be less than
HK$16 million. In the event that the 2012 Net Profit is less than HK$16 million, the




                                    – 106 –
                  LETTER FROM MESSIS CAPITAL


Consideration will be adjusted downward by an amount equal to the shortfall (the ‘‘2012
Shortfall’’) between the 2012 Guaranteed Amount and 2012 Net Profit multiplied by 6.875,
being:

     2012 Shortfall = (2012 Guaranteed Amount – 2012 Net Profit) X 6.875

      The 2012 Shortfall payable by the Vendor as illustrated above will be offset against the
Promissory Note on a dollar for dollar basis. For avoidance of doubt, the maximum liability
of the Vendor under this section shall not exceed the amount of the Promissory Note, being
HK$55 million.

     In view that (i) the Adjustment Mechanism facilitates the safeguard of the 2012
Guaranteed Amount; (ii) the shortfall difference will be multiplied by the PER of the
Acquisition; and (iii) the audited net profit after tax and extraordinary items of the Target
Group which is amounted to approximately HK$15.89 million for the six months ended 30
September 2011 is in line with the 2012 Guaranteed Amount, we considered the Adjustment
Mechanism is fair and reasonable and in the interests of the Company and the Independent
Shareholders as a whole.

      Having considered (i) the Consideration represents a PER which is below the mean and
falls within the range of the Industry Comparables PERs; (ii) the improvement of the
financial performance of the Target Group after commencement of operation of New Spring
(SW) in January 2011 and the acquisition of New Spring Offset in April 2011; and (iii) the
2012 Guaranteed Amount and the Adjustment Mechanism, we consider the Consideration is
fair and reasonable so far as the Independent Shareholders are concerned.

     (a)   Consideration Shares

         Pursuant to S&P Agreement, HK$20 million of the Consideration will be settled
     by way of the Company issuing the Consideration Shares at the issue price of HK$0.10
     per Adjusted Share (the ‘‘Issue Price’’) to the Vendor (or its nominee(s)) upon
     completion of the S&P Agreement.

           The Issue Price which is equivalent to the Offer Price and the Subscription Price
     represents a discount of 80% to the closing price of HK$0.025 per Share (equivalent to
     HK$0.50 per Adjusted Share assuming the Capital Reorganisation having become
     effective) as quoted on the Stock Exchange on the Last Trading Day. There is no
     restriction on subsequent sale of the Consideration Shares.

           As set out in the Letter from the Board, in order to relief cashflow pressure on the
     Group, the Company has proposed the issue of the Consideration Shares as part of the
     settlement of the Consideration. In view of the long suspension of trading of the Shares
     since 23 September 2008, the Company has, upon arm’s length negotiation, agreed with
     the Vendor that the Issue Price should represent a substantial discount to the closing
     price before Suspension.




                                     – 107 –
            LETTER FROM MESSIS CAPITAL


     As noted from AR 2011 and IR 2011/12, the Group reported loss-making for the
financial year ended 31 March 2011 and for the six months ended 30 September 2011
and the Group had bank balances and cash of approximately HK$59.21 million (the
‘‘Cash Position’’) as at 30 September 2011.

      Having considered (i) the Consideration Shares enables the Group to reduce cash
outflow of the Group given no revenue has been generated from the continuing
operation of the Group for the six months ended 30 September 2011 and the loss
making financial performance of the Group for the financial year ended 31 March 2011
and for the six months ended 30 September 2011; (ii) the bargaining power of the
Company given the prolonged suspension of the Shares and completion of the
Acquisition is one of the Resumption Conditions; (iii) the Issue Price is equivalent to
the Offer Price, hence, the Issue Price offered to the Vendor is not more favorable than
the Offer Price offered to the Independent Shareholders under the Open Offer provided
that we considered the Offer Price is fair and reasonable (details of the Offer Price
analysis has been set out under the paragraph headed ‘‘The Offer Price and the
Subscription Price’’ under below section headed ‘‘3. Fundraising by Ways of the Open
Offer and the Subscription’’); and (iv) the Consideration Shares do not have
entitlements to subscribe for Offer Shares under Open Offer and subscribe for Bonus
Shares under the Bonus Issue, we are of the view that the terms of the Consideration
Shares (including the Issue Price) are fair and reasonable and in the interests of the
Company and the Independent Shareholders as a whole.

(b)   Promissory Note

     Pursuant to S&P Agreement, HK$55 million (subject to adjustment(s)) of the
Consideration will be settled by way of issuing the Promissory Note by the Company to
the Vendor (or its nominee(s)). The Promissory Note has a term of two calendar years
and is interest free. The holder of the Promissory Note cannot redeem for cash of the
Promissory Note on or before 31 March 2013.

       As set out in the Letter from the Board, the 2012 Shortfall payable by the Vendor
will be offset against the Promissory Note on a dollar for dollar basis and the maximum
liability of the Vendor under this section shall not exceed the amount of the Promissory
Note.

      Having considered (i) the Cash Position of the Group of HK$59.21 million as at
30 September 2011 and the size of the Promissory Note; (ii) the issuance of the
Promissory Note would not induce immediate cash outflow from the Group as a result
of the Acquisition; (iii) the Promissory Note is non-interest bearing so that would not
give rise to any interest payment burden on the Company; (iv) the issuance of the
Promissory Note and the Adjustment Mechanism would safeguard the Group’s interest
against possible unsatisfactory financial performance of the Target Group for the year
ending 31 March 2012, we are of the view that the terms of the Promissory Note are
fair and reasonable and in the interests of the Company and the Independent
Shareholders as a whole.




                               – 108 –
                       LETTER FROM MESSIS CAPITAL


3.   Fundraising by Ways of the Open Offer and the Subscription

     Reasons for the fundraising and use of proceeds

           As set out in the Letter from the Board, the Board (including the proposed Directors)
     considers that the Open Offer is in the interests of the Company and the Shareholders as a
     whole as it offers all the Qualifying Shareholders an equal opportunity to participate in the
     enlargement of the capital base of the Company and enables the Qualifying Shareholders to
     maintain their proportionate interests in the Company and continue to participate in the future
     development of the Enlarged Group should they wish to do so.

           As noted from the Letter from the Board, the aggregate gross proceeds from the
     Subscription and the Open Offer will be approximately HK$91 million and the net proceeds
     (after deducting the resumption professional fees and commission for the Open Offer payable
     by the Company) will be approximately HK$85 million, of which as to HK$55 million for
     the settlement of the Promissory Note (such amount will be placed as fixed deposit in
     financial institution until settlement).

           Having considered (i) the Group has been loss making for the year ended 31 March
     2011 and for the six months ended 30 September 2011; (ii) the Cash Position of the Group of
     approximately HK$59.21 million as at 30 September 2011 and the remaining balance of the
     Consideration of approximately HK$85 million (after deduction of the 1st Deposit and the
     amount of the Consideration Shares); (iii) the Open Offer and the Subscription would
     strengthen the Group’s capital base so as to allow the Group to grasp suitable business and/or
     investment opportunities with immediately available fund should appropriate chance arise;
     (iv) the Open Offer is on the basis that all Qualifying Shareholders have been offered the
     same opportunity to maintain their proportional interests; and (v) that the Open Offer and the
     Subscription are part of the Resumption Conditions, we concur with the view of the Directors
     that the Open Offer and the Subscription (including the use of proceeds) are in the interests
     of the Company and the Independent Shareholders as a whole.

     The Offer Price and the Subscription Price

           The Offer Price and the Subscription Price are HK$0.10 per Adjusted Share, which
     represented:

          (i)    a discount of approximately 80.00% to the closing price of approximately
                 HK$0.50 per Adjusted Share, as adjusted for the Capital Reorganisation (or
                 approximately HK$0.025 per Share), as quoted on the Stock Exchange on the Last
                 Trading Day;

          (ii)   a discount of approximately 80.77% to the average closing price of approximately
                 HK$0.52 per Adjusted Share, as adjusted for the Capital Reorganisation (or
                 approximately HK$0.026 per Share), as quoted on the Stock Exchange for the 5
                 consecutive trading days up to and including the Last Trading Day; and




                                           – 109 –
                  LETTER FROM MESSIS CAPITAL


     (iii) a discount of approximately 28.57% to the theoretical ex-rights price of
           approximately HK$0.14 per Adjusted Share, as adjusted for the Capital
           Reorganisation (or approximately HK$0.0072 per Share), based on the closing
           price of approximately HK$0.50 per Adjusted Share, as adjusted for the Capital
           Reorganisation (or approximately HK$0.025 per Share) as quoted on the Stock
           Exchange on the Last Trading Day.

       As set out in the Letter from the Board, trading of the Shares had been suspended since
23 September 2008, the Company has, upon arm’s length negotiation, agreed with the
Underwriters that the Offer Price should represent a substantial discount to the closing price
before Suspension so as to incentivize the Qualifying Shareholders to take up their
entitlements under the Open Offer. Each Qualifying Shareholder is entitled to subscribe for
the Offer Shares at the same price in proportion to his/her/its shareholding in the Company as
at the Record Date. The Directors (including the proposed Directors) consider the Offer Price
is fair and reasonable and in the interests of the Company and the Independent Shareholders
as a whole.

       As advised by the Company, the Subscription Price was determined under arm’s length
negotiation between the Company and the Subscriber with reference to, among others, the
Offer Price. The Directors (including the proposed Directors) consider the Subscription Price
is fair and reasonable and in the interests of the Company and the Independent Shareholders
as a whole.

Comparison with other open offers

      In assessing the fairness of the Offer Price, we have compared the Open Offer with
other open offers (the ‘‘Open Offer Comparables’’) which are conducted by prolonged
suspension companies listed on the Stock Exchange, which announced their respective open
offer transactions from 1 February 2011 to 29 February 2012 (being around twelve-month
period prior to the date of the Underwriting Agreement for comparison purposes. In view that
(i) for prolonged suspension companies, it is a common market practice to price the open
offer or rights issue at a discount to the market price of relevant shares in order to encourage
subscription by their shareholders; and (ii) the market sentiment at the relevant time may also
play an important role in the determination of the offer price, we believe that the Open Offer




                                      – 110 –
                           LETTER FROM MESSIS CAPITAL


Comparables may reflect the recent trend of open offer transactions in the market for
prolonged suspension companies and consider the list of the Open Offer Comparables is an
exhaustive list and the Open Offer Comparables are fair and representative samples. Details
of the Open Offer Comparables are summarised in the following table:

                                                               Premium/          Premium/
                                                            (discount) of     (discount) of
                                                            subscription       subscription
                                                          price over/(to)    price over/(to)
Open Offer                                                    the closing    the theoretical                 Maximum
Comparables                      Date of      Basis of      price on the     ex-entitlement    Maximum     underwriting        Excess
(Stock code)               announcement    entitlement   last trading day             price     dilution   Commission      application
                                                                     (%)                (%)     (Note 1)            (%)


Ocean Grand Holdings            8/8/2011       2 for 3            (95.61)            (92.89)      40.00            0.00            no
   Limited (1220)


Sunlink International         11/11/2011       2 for 1            (85.71)            (66.67)      66.67            3.00            no
   Holdings Limited
   (2336)


New City (China)              15/11/2011      23 for 3            (77.36)            (28.14)      88.46    2.50 (Note 2)           no
   Development
   Limited (456)


Victory Group Limited         23/11/2011     110 for 1             (95.64)           (16.49)      99.10            2.50            no
   (1139)


Maximum                                                           (95.64)            (92.89)      99.10            3.00
Minimum                                                            (77.36)           (16.49)      40.00            0.00
Mean                                                              (88.58)            (51.05)      73.56            2.00



The Company                                    8 for 1             (80.00)           (28.57)      88.89    2.50 (Note 3)           no


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

         Notes:

         1.        Maximum dilution effect of each open offer is calculated as: ((number of offer shares and (if any)
                   bonus shares to be issued under the basis of entitlement)/(number of existing shares held for the
                   entitlement for the offer shares under the basis of entitlement + number of offer shares and (if any)
                   bonus shares to be issued under the basis of entitlement) x 100%, e.g. for a open offer with basis of 8
                   offer shares for every share held, the maximum dilution effect is calculated as (8/(1+8)) x 100% =
                   88.89%.

         2.        As set out in the relevant announcement of the Open Offer Comparables, there were two underwriters
                   for the open offer. The two underwriters received 0% and 2.50% underwriting commissions for the
                   open offer. The higher underwriting commission has been used for illustration purposes.

         3.        As set out in the Letter from the Board, there are two underwriters for the Open Offer. The two
                   Underwriters received 0% and 2.50% underwriting commissions for the Open Offer. The higher
                   underwriting commission has been used for illustration purposes.


      As shown in the above table, the discounts represented by the offer prices to the closing
prices of shares of the Open Offer Comparables on the last trading days prior to the release
of the respective announcements ranged from approximately 77.36% to approximately




                                                     – 111 –
                  LETTER FROM MESSIS CAPITAL


95.64% (the ‘‘LTD Market Range’’). The discount of approximately 80.00% as represented
by the Offer Price to the closing price of the Adjusted Shares on the Last Trading Day falls
below the mean and within the LTD Market Range.

     The discount represented by the offer prices to the theoretical ex-entitlement prices of
the shares of the Open Offer Comparables ranged from approximately 16.49% to
approximately 92.89% (the ‘‘TEP Market Range’’). The discount of approximately 28.57%
as represented by the Offer Price to the theoretical ex-entitlement price of the Adjusted
Shares falls below the mean and within the TEP Market Range.

      In general, we consider that it is common for the listed issuers in Hong Kong to issue
offer shares at a discount to the market price in order to enhance the attractiveness of an
open offer transaction. Having considered that (i) the loss-making performance of the Group
and the Shares have been suspended for trading for more than 3 years and hence, it is
inevitable to set the Offer Price at a discount in order to enhance the attractiveness of the
Open Offer and to encourage the existing Shareholders to participate in the Open Offer; (ii)
the Offer Price was determined after arm’s length negotiations between the Company and the
Underwriters; (iii) the discount represented by the Offer Price to the adjusted closing price of
the Adjusted Shares on the Last Trading Day falls below the mean and within the LTD
Market Range; (iv) the discount represented by the Offer Price to the theoretical ex-
entitlement price of the Adjusted Shares falls below the mean and within the TEP Market
Range; and (v) all Qualifying Shareholders are offered an equal opportunity to subscribe for
the Offer Shares at the Offer Price, we consider the Offer Price is fair and reasonable so far
as the Independent Shareholders are concerned.

      We noted from the Letter from the Board that the Subscriber is restricted from
transferring, charging or pledging any Underwritten Offer Shares and Subscription Shares for
six months from Resumption (the ‘‘Lock Up Arrangement’’). Having considered (i) the
Subscription Price is equivalent to the Offer Price and hence, the Subscriber will subscribe
the Subscription Shares at a price which is not more favorable than the Offer Price offered to
all Qualifying Shareholders under the Open Offer; and (ii) the investment risk exposure to
the Subscriber aroused from the Lock Up Arrangement, we are of the view that the
Subscription Price is fair and reasonable and in the interests of the Company and the
Independent Shareholders as a whole.

Underwriting commission

     As set out in the Letter from the Board, the Company will pay Kingston Securities an
underwriting commission of 2.50% whilst there is no underwriting commission payable to the
Subscriber. In view that the underwriting commission of 2.50% falls within the range of
underwriting commission of the Open Offer Comparables and no underwriting commission
will be paid to the Subscriber, we consider the underwriting commissions payable to the
Underwriters are in line with the market and fair and reasonable as far as the Independent
Shareholders are concerned.




                                      – 112 –
                       LETTER FROM MESSIS CAPITAL


     Excess application

           As set out in the Letter from the Board, the Qualifying Shareholders will not be entitled
     to subscribe for any Offer Share in excess of their respective assured entitlements.
     Considering that each Qualifying Shareholder will be given an equal opportunity to
     participate in the Company’s future development by subscribing for his/her/its entitlements
     under the Open Offer, the Directors (including the proposed Directors) consider that the
     Company will not be justified in making additional effort and incurring additional costs to
     administer the excess application procedures. All Offer Shares not taken up by the Qualifying
     Shareholders are underwritten by the Underwriters.

           Although the absence of the excess application arrangement may not be desirable from
     the point of view of those Qualifying Shareholders who wish to take up additional Offer
     Shares in excess of their assured entitlements, in light of that (i) the nil excess application
     should be balanced against the fact that the Offer Price has been set at discounts to the
     closing price of the Adjusted Shares on the Last Trading Day which provides reasonable
     incentive for the Qualifying Shareholders to take up their respective assured entitlement of
     the Offer Shares and participate in the Open Offer; (ii) those Qualifying Shareholders who
     choose to accept their respective entitlements under the Open Offer in full can maintain their
     respective existing shareholdings in the Company after the Open Offer; (iii) the Open Offer
     allows the Qualifying Shareholders who are optimistic about the future development of the
     Company to exercise their rights to subscribe for the Offer Shares with a fair chance; (iv) the
     nil excess application would lower the administrative costs of the Open Offer to the
     Company; and (v) there is no excess application arrangement in the open offer transactions
     conducted by the Open Offer Comparables and hence, absence of excess application in an
     open offer conducted by long suspension companies is not uncommon in the market, we are
     of the view that the absence of excess application arrangement, on balance, is acceptable.

     Risk associated with the Open Offer

           Shareholders and potential investors should note that the Open Offer is conditional,
     inter alia, upon the fulfillment of the conditions set out in the section headed ‘‘Conditions of
     the Open Offer’’ in the Letter from the Board. In particular, the Open Offer is conditional
     upon the approval of the Open Offer and the Whitewash Waiver by the Independent
     Shareholders at the SGM by way of poll, the Underwriting Agreement having become
     unconditional and the Underwriters not having terminated the Underwriting Agreement in
     accordance with the terms thereof as set out in the paragraph headed ‘‘Termination of the
     Underwriting Agreement’’ in the Letter from the Board. Accordingly, the Open Offer may or
     may not proceed. Shareholders and potential investors of the Company should therefore
     exercise extreme caution when dealing in the Shares/Adjusted Shares, and if they are in any
     doubt about their position, they should consult their professional advisers.

4.   Fundraising Alternatives

      Comparing the Open Offer and the Subscription to other methods of fund raisings such as
placement of new Shares or other convertible securities and bank borrowing, and taking into
account that (i) debt financing and bank borrowing will incur interest burden to the Company; (ii)
placing of new Shares may not be desirable alternatives as compared with the Subscription given



                                           – 113 –
                         LETTER FROM MESSIS CAPITAL


the loss-making financial performance of the Company; and (iii) the Open Offer will enable the
Shareholders to maintain their proportionate interests in the Company, we concur with the view of
the Directors that fund raising by way of the Open Offer and the Subscription is fair and
reasonable and in the interests of the Company and the Independent Shareholders as a whole.

5.   Bonus Issue

     The Company proposes the Bonus Issue to issue the Bonus Shares to the existing
Shareholders whose names appear on the register of members of the Company on the Record Date
on the basis of five (5) Bonus Shares for every seven (7) then Adjusted Shares. On the basis of
1,148,661,140 Shares in issue (equivalent to 57,433,057 Adjusted Shares assuming Capital
Reorganisation becoming effective), 41,023,612 Bonus Shares would be issued.

      The Bonus Issue would allow the Shareholders to enjoy the results of the business growth of
the Enlarged Group as a result of the transactions contemplated under the Resumption Proposal by
way of capitalisation of a portion of the share premium account of the Company upon completions
of the transactions contemplated under the Resumption Proposal (other than the Bonus Issue).

      As noted from the Letter from the Board, the Consideration Shares, the Subscription Shares
and the Offer Shares are not entitled to the Bonus Shares under the Bonus Issue. In view that (i)
the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the issue
of the Consideration Shares, Subscription Shares and Offer Shares; (ii) the Bonus Issue will
enhance the liquidity of the Shares in the market and thereby enlarging the Shareholder base; (iii)
the Bonus Issue is one of the Resumption Conditions; and (iv) the Bonus Shares will be issued to
all existing Shareholders on the same basis, we consider the Bonus Issue is fair and reasonable and
in the interests of the Company and the Independent Shareholders as a whole.

6.   Possible Financial Effects

     (i)    Working capital

           Immediately upon completions of the Acquisition, the Subscription, the Open Offer and
     the Bonus Issue, the Group’s working capital is expected to be reduced by the cash outflow
     of the cash consideration of approximately HK$35 million and is expected to be increased by
     the net proceeds from the Subscription and the Open Offer of approximately HK$85 million,
     of which HK$55 million will be placed as fixed deposit in financial institution until
     settlement of the Promissory Note. Accordingly, the working capital will be improved upon
     completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.

     (ii)   Net assets

          As set out in IR 2011/12, the unaudited consolidated net assets of the Group was
     approximately HK$67.80 million as at 30 September 2011. As set out in the unaudited pro
     forma financial information of the Enlarged Group in Appendix III to the Circular, upon
     completions of the Acquisition, the Subscription, the Open Offer and the Bonus Issue, the
     Group’s net assets will be increased by approximately HK$111.41 million to approximately
     HK$179.21 million.




                                           – 114 –
                       LETTER FROM MESSIS CAPITAL


          Also set out in the statement of pro forma net tangible asset of the Enlarged Group for
     the Open Offer only in Appendix IV to the Circular, upon completion of the Capital
     Reorganisation and immediately before the Acquisition, the Subscription, the Open Offer and
     the Bonus Issue, the net assets of the Group per Adjusted Share was approximately HK$1.18
     (equivalent to approximately HK$0.059 per Share). Upon completions of the Acquisition, the
     Subscription, the Open Offer and the Bonus Issue, the net assets of the Group per Adjusted
     Share will be decreased by approximately HK$1.11 (equivalent to approximately HK$0.0555
     per Share) to approximately HK$0.07 (equivalent to approximately HK$0.0035 per Share).

           Having considered the enhancement on the working capital and the financial position of
     the Group upon completions of the Acquisition, the Subscription, the Open Offer and the
     Bonus Issue, we consider that the Acquisition, the Subscription, the Open Offer and the
     Bonus Issue are fair and reasonable so far as the Company and the Independent Shareholders
     are concerned.

7.   Potential Dilution after the Open Offer and the Bonus Issue

      Based on the shareholding structure of the Company as set out in the section headed
‘‘SHAREHOLDING CHANGES UPON COMPLETION OF THE TRANSACTIONS UNDER THE
RESUMPTION PROPOSAL’’ in the Letter from the Board, assuming the Capital Reorganisation
has become effective, 57,433,057 Adjusted Shares were held by the Independent Shareholders as at
the Latest Practicable Date, representing approximately 100% of the issued share capital of the
Company. The shareholding of the existing Independent Shareholders will (i) decrease to
approximately 46.19% in the event that all existing Shareholders take up the entitlements under the
Open Offer in full; and (ii) further decrease to approximately 27.14% in the event that none of the
existing Shareholders take up their entitlements under the Open Offer upon completions of the
Acquisition, the Subscription, the Open Offer and the Bonus Issue.

     Having considered that:

     (i)    the Acquisition, the Subscription, the Open Offer and the Bonus Issue are part of the
            Resumption Conditions;

     (ii)   the loss making financial performance of the Group and no revenue have been
            generated for the six months ended 30 September 2011 from the continuing operation of
            the Group;

     (iii) the Acquisition enables the Company to enhance its revenue base and broaden its
           customer base;

     (iv) the Acquisition allows the Group to recommence its paper packaging business given the
          single operating segment of trading of electronic products was deemed discontinued on
          30 September 2011;

     (v)    the optimistic prospect of the paper packing business in the USA, Europe, the PRC and
            Hong Kong as mentioned under the paragraph headed ‘‘Reasons for the Acquisition’’
            under the section headed ‘‘2. The Acquisition’’;




                                          – 115 –
                       LETTER FROM MESSIS CAPITAL


     (vi) the Consideration Shares would reduce the cash outflow of the Company;

     (vii) the Open Offer and the Subscription would strengthen the Group’s capital base so as to
           allow the Group to grasp suitable business/investment opportunities with immediately
           available fund should appropriate chance arise;

     (viii) the Cash Position of the Group of approximately HK$59.21 million as at 30 September
            2011 and the remaining balance of the Consideration of approximately HK$85 million
            (after deduction of the 1st Deposit and the amount of the Consideration Shares);

     (ix) the Open Offer is on the basis that all Qualifying Shareholders have been offered the
          same opportunity to maintain their proportional interests;

     (x)   the discount represented by the Offer Price to the closing price of the Adjusted Shares
           on the Last Trading Day falls below the mean and within the LTD Market Range and
           the discount represented by the Offer Price to the theoretical ex-entitlement price of the
           Adjusted Shares falls below the mean and within the TEP Market Range;

     (xi) the Issue Price and the Subscription Price are equivalent to the Offer Price and hence,
          the Vendor and the Subscriber will subscribe the Consideration Shares and the
          Subscription Shares respectively at a price which is not more favorable than the Offer
          Price offered to all Qualifying Shareholders under the Open Offer; and

     (xii) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result
           of the issue of the Consideration Shares, Subscription Shares and Offer Shares;

     we consider the dilution effects is acceptable and justifiable.

8.   Whitewash Waiver

      Immediately before completions of the Acquisition, the Subscription, the Open Offer and the
Bonus Issue, the Subscriber and parties acting in concert with it are not interested in any Shares or
securities of the Company. Upon completions of the Acquisition, the Subscription, the Open Offer
and the Bonus Issue, the Subscriber and parties acting in concert with it will hold (i)
approximately 37.25% of the issued share capital (should all existing Shareholders take up their
entitlements under the Open Offer to subscribe for the Offer Shares in full) as enlarged by the
Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares; and (ii)
approximately 56.30% of the issued share capital (should no existing Shareholders take up their
entitlements under the Open Offer to subscribe for the Offer Shares) as enlarged by the
Consideration Shares, the Subscription Shares, the Offer Shares and the Bonus Shares.
Accordingly, the Subscriber is required to make a mandatory general offer for all the issued
Adjusted Shares (other than those already owned or agreed to be acquired by the Subscriber and
parties acting in concert with it) pursuant to Rule 26 of the Takeovers Code.

     The Subscriber has made an application to the Executive for the Whitewash Waiver pursuant
to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the
Subscriber and parties acting in concert with it to make a mandatory general offer for all the
Adjusted Shares not already owned or agreed to be acquired by them, arising from the



                                           – 116 –
                       LETTER FROM MESSIS CAPITAL


Subscription of 450,000,000 Subscription Shares and its underwriting obligation of 230,000,000
Offer Shares under the Underwriting Agreement by the Subscriber. The Executive has indicated
that the grant of the Whitewash Waiver subject to, among other things, the approval of the
Independent Shareholders at the SGM by way of poll. If the Whitewash Waiver is not granted by
the Executive or not approved by the Independent Shareholders, the Subscription and the Open
Offer will not proceed.

      Based on our above analysis of the Subscription and the Open Offer, we consider that the
Subscription and the Open Offer are in the interests of the Company and the Independent
Shareholders as a whole. If the Whitewash Waiver is not approved by the Independent
Shareholders at the SGM, the Subscription and the Open Offer will not proceed and given the
Subscription and the Open Offer are part of the Resumption Proposal, the Shares/Adjusted Shares
may not be able to resume trading as a result of the fail of the completions of the Subscription and
the Open Offer. Accordingly, we are of the view that for the purposes of implementing the
Subscription and the Open Offer, the Whitewash Waiver is fair and reasonable and in the interests
of the Company and the Independent Shareholders as a whole.

9.   The Master Agreement

     Reasons and benefits of the Master Agreement

          New Spring Label is principally engaged in manufacture and trading of plastic labels
     and related products and trading of packaging products. New Spring Label is beneficially
     owned as to 20% by Mr. Ng and as to 30% by Ms. Li. Mr. Ng will become an executive
     Director upon completion of the Acquisition.

          New Spring Label does not have its production facilities for packaging products and the
     production of printing orders of New Spring Label has been provided by New Spring Offset
     which is currently one of the companies in the Target Group. In order to ensure the continual
     engagement of production of printing orders from New Spring Label (the ‘‘Transactions’’), it
     was proposed to enter into the Master Agreement with New Spring Label so that New Spring
     Label will engage the Target Group for the production of orders. The Directors (including the
     proposed Directors) are of the view that the Master Agreement and the transactions
     contemplated thereunder (including the Annual Caps) are (i) on arm’s length basis and on
     normal commercial terms; and (ii) fair and reasonable and in the interests of the Company
     and the Shareholders as a whole.

           Having considered (i) the principal activities of the Target Group and the recurring
     nature of the Transactions; and (ii) the Transactions would enhance the income base of the
     Target Group which will be consolidated into the account of the Group upon completion of
     the Acquisition, we consider that the Master Agreement is fair and reasonable and in the
     interests of the Company and the Independent Shareholders as whole.

     Pricing basis for Transactions

           As advised by the Company, the production of products and materials to New Spring
     Label should be provided on normal commercial terms or terms no less favourable than sales
     to independent customers of the Target Group and the price for each production order made



                                           – 117 –
                  LETTER FROM MESSIS CAPITAL


from New Spring Label shall be with reference to the existing prices of similar products in
the market. Given that (i) the independent non-executive Directors will, pursuant to Rule
14A.37 of the Listing Rules, review, amongst other things, whether the Transactions are
conducted on normal terms, or if there are no sufficient comparable transactions to judge
whether they are on normal commercial terms, on terms no less favourable to the Group than
those offered to the customers of the Group who are Independent Third Parties; and (ii) the
auditors of the Company will, pursuant to Rule 14A.38 of the Listing Rules, review for the
purpose of confirming whether the Transactions are conducted in accordance with the Master
Agreement, we are of the opinion that (i) the Transactions are fair and reasonable and on
normal commercial terms; and (ii) adequate measures have been in place, as required under
the said Listing Rules above, to monitor the Transactions in order to protect the interests of
the Company and the Independent Shareholders.

The Annual Caps

     Set out below are the Annual Caps for the three years ending 31 March 2015:

                                       For the year         For the year         For the year
                                             ending               ending               ending
                                    31 March 2013        31 March 2014        31 March 2015
                                      (HK$ million)        (HK$ million)        (HK$ million)

     Annual Caps                              24.00                26.00                28.00
                                 (the ‘‘2013 Cap’’)   (the ‘‘2014 Cap’’)   (the ‘‘2015 Cap’’)

     As set out in the Letter from the Board, the 2013 Cap is determined with reference to
the actual amount of production of products and materials by the Target Group to the New
Spring Label for the period from 1 April 2011 to 31 December 2011 of approximately
HK$18 million (the ‘‘Nine Month Sales’’) and the expected growth in sales orders of New
Spring Label for the year ending 31 March 2013.

      As advised by the Company, based on the information provided by the Vendor, the
Transactions, including the transactions provided by New Spring Offset which is the
subsidiary of Sky Will since 1 April 2011, was amounted to approximately HK$24 million
(the ‘‘Historical Sales’’) for the year ended 31 March 2011. In view the 2013 Cap is (i)
equivalent to the annualized amount of the Nine Month Sales and (ii) in line with the amount
of the Historical Sales, we consider the 2013 Cap has been arrived with an acceptable basis
which is fair and reasonable so far as the Independent Shareholders are concerned and in the
interests of the Independent Shareholders and the Company as a whole.

      As noted from the Letter from the Board, the annual increase of the Annual Caps for
the two years ending 31 March 2014 and 2015 respectively is estimated at approximately
HK$2 million from the previous year on a prudent basis with respect to the estimated growth
rate of sales orders projected by New Spring Label. As advised by the Company, New Spring
Label expected around 10% growth for the sales orders to the Target Group for each of the
two years ending 31 March 2015. In view the 2014 Cap represents approximately 8.33%
growth from the 2013 Cap and the 2015 Cap represents approximately 7.69% growth from




                                     – 118 –
                             LETTER FROM MESSIS CAPITAL


            the 2014 Cap, we consider the 2014 Cap and the 2015 Cap are arrived with an acceptable
            basis which is fair and reasonable so far as the Independent Shareholders are concerned and
            in the interests of the Independent Shareholders and the Company as a whole.

RECOMMENDATION

     Taking into consideration of the above mentioned principal factors and reasons, in particular:

     in relation to the Acquisition:

     (i)    the loss making of the Group and no revenue have been generated for the six months ended
            30 September 2011 from the continuing operation of the Group;

     (ii)   the improvement on revenue and profit of the Target Group for the year ended 31 March
            2011 as compared with the year ended 31 March 2010;

     (iii) the Acquisition enables the Company to enhance its revenue base and broaden its customer
           base;

     (iv) the Acquisition allows the Group to recommence its paper packaging business given the
          single operating segment of trading of electronic products was deemed discontinued on 30
          September 2011;

     (v)    the optimistic prospect of the paper packing business in Europe and PRC as mentioned under
            the paragraph headed ‘‘Reasons for the Acquisition’’ under the section headed ‘‘2. The
            Acquisition’’ in this letter;

     (vi) completion of the Acquisition is one of the Resumption Conditions;

     (vii) the Consideration represents a PER which is below the mean and falls within the range of the
           Industry Comparables PERs;

     (viii) the improvement of the financial performance of the Target Group after commencement of
            operation of New Spring (SW) in January 2011 and the acquisition of New Spring Offset in
            April 2011; and

     (ix) the 2012 Guaranteed Amount and the Adjustment Mechanism;

     in relation to the Subscription, the Open Offer (including the absence of excess application
arrangement), the Bonus Issue and the Whitewash Waiver:

     (i)    the Acquisition, the Subscription, the Open Offer and the Bonus Issue are part of the
            Resumption Conditions;

     (ii)   the loss making financial performance of the Group and no revenue have been generated for
            the six months ended 30 September 2011 from the continuing operation of the Group;




                                                – 119 –
                        LETTER FROM MESSIS CAPITAL


(iii) the Open Offer and the Subscription would strengthen the Group’s capital base so as to allow
      the Group to grasp suitable business/investment opportunities with immediately available
      fund should appropriate chance arise;

(iv) the Cash Position of the Group of approximately HK$59.21 million as at 30 September 2011
     and the remaining balance of the Consideration of approximately HK$85 million (after
     deduction of the 1st Deposit and the amount of the Consideration Shares);

(v)   the Open Offer is on the basis that all Qualifying Shareholders have been offered the same
      opportunity to maintain their proportional interests;

(vi) the discount represented by the Offer Price to the closing price of the Adjusted Shares on the
     Last Trading Day falls below the mean and within the LTD Market Range and the discount
     represented by the Offer Price to the theoretical ex-entitlement price of the Adjusted Shares
     falls below the mean and within the TEP Market Range;

(vii) the Issue Price and the Subscription Price are equivalent to the Offer Price and hence, the
      Vendor and the Subscriber will subscribe the Consideration Shares and the Subscription
      Shares respectively at a price which is not more favorable than the Offer Price offered to all
      Qualifying Shareholders under the Open Offer; and

(viii) the nil excess application should be balanced against the fact that the Offer Price has been set
       at discounts to the closing price of the Adjusted Shares on the Last Trading Day which
       provides reasonable incentive for the Qualifying Shareholders to take up their respective
       assured entitlement of the Offer Shares and participate in the Open Offer;

(ix) those Qualifying Shareholders who choose to accept their respective entitlements under the
     Open Offer in full can maintain their respective existing shareholdings in the Company after
     the Open Offer;

(x)   the Open Offer allows the Qualifying Shareholders who are optimistic about the future
      development of the Company to exercise their rights to subscribe for the Offer Shares with a
      fair chance;

(xi) the nil excess application would lower the administrative costs of the Open Offer to the
     Company;

(xii) there is no excess application arrangement in the open offer transactions conducted by the
      Open Offer Comparables;

(xiii) the Bonus Issue will reduce the dilution effect on the existing Shareholders as a result of the
       issue of the Consideration Shares, Subscription Shares and Offer Shares; and

(xiv) if the Whitewash Waiver is not approved by the Independent Shareholders at the SGM, the
      Subscription and the Open Offer will not proceed and given the Subscription and the Open
      Offer are part of the Resumption Proposal, the Shares/Adjusted Shares may not be able to
      resume trading as a result of the fail of the completions of the Subscription and the Open
      Offer;




                                            – 120 –
                              LETTER FROM MESSIS CAPITAL


     in relation to the Master Agreement (including the Annual Caps):

     (i)    the principal activities of the Target Group and the recurring nature of the Transactions;

     (ii)   the Transactions would enhance the income base of the Target Group which will be
            consolidated into the account of the Group upon completion of the Acquisition;

     (iii) the 2013 Cap is equivalent to the annualized amount of the Nine Month Sales and in line
           with the amount of the Historical Sales; and

     (iv) the annual increase of the Annual Caps for the two years ending 31 March 2014 and 2015
          respectively is estimated at approximately HK$2 million from the previous year on a prudent
          basis with respect to the estimated growth rate of sales orders projected by New Spring
          Label,

      we consider that (i) the terms of the Acquisition, the Subscription, the Open Offer (including the
absence of excess application arrangement), the Bonus Issue, the Whitewash Waiver and the Master
Agreement (including the Annual Caps) are normal commercial terms and are fair and reasonable so far
as the Company and the Independent Shareholders are concerned; and (ii) the Acquisition, the
Subscription, the Open Offer (including the absence of excess application arrangement), the Bonus
Issue, the Whitewash Waiver and the Master Agreement (including the Annual Caps) are in the interests
of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the
Independent Shareholders, as well as the Independent Board Committee to advise the Independent
Shareholders, to vote in favour of the resolutions to be proposed at the SGM to approve the Acquisition,
the Subscription, the Open Offer (including the absence of excess application arrangement), the Bonus
Issue, the Whitewash Waiver and the Master Agreement (including the Annual Caps).

                                                                                     Yours faithfully,
                                                                                   For and on behalf of
                                                                                  Messis Capital Limited
                                                                                        Robert Siu
                                                                                    Executive Director




                                                  – 121 –
     APPENDIX I                         FINANCIAL INFORMATION OF THE GROUP


1.     FINANCIAL INFORMATION OF THE GROUP

(A) Financial summary for the six months ended 30 September 2011 and three years ended 31
    March 2011

     Financial information of the Group for the six months ended 30 September 2011 are set out in the
unaudited consolidated financial statement in the interim report of the Company for the six months
ended 30 September 2011 published at

      http://www.hkexnews.hk/listedco/listconews/sehk/2011/1202/LTN20111202080.pdf and as extracted
in section B in this Appendix I.

      Financial information of the Group for each of the three years ended 31 March 2009, 2010 and
2011 are set out in the audited consolidated financial statements annual reports of the Company for the
years ended 31 March 2009, 2010 and 2011 at

       http://www.hkexnews.hk/listedco/listconews/sehk/2009/0730/LTN20090730683.pdf,

       http://www.hkexnews.hk/listedco/listconews/sehk/2010/0716/LTN20100716009.pdf and

       http://www.hkexnews.hk/listedco/listconews/sehk/2011/0630/LTN20110630340.pdf

respectively and as extracted from the annual report for the year ended 31 March 2011 as set out in
section C in this appendix I.

      Set out below is a summary of the financial results of the Group for the six months ended 30
September 2011 and each of the years ended 31 March 2009, 2010 and 2011 as extracted from the
interim report of the Company for the six months ended 30 September 2011 and annual reports of the
Company for the years ended 31 March 2009, 2010 and 2011 respectively. There was no material
minority interest or extraordinary items or exceptional items or dividend declared or paid in the
consolidated statement of comprehensive income of the Group for the six months’ period ended 30
September 2011 and each of the three years ended 31 March 2011. SHINEWING (HK) CPA Limited is
the auditor of the Group. Qualified opinion have been reported for the year ended 31 March 2011 and
disclaimer of opinion have been reported for the two years ended 31 March 2010, which have been
extracted from the respective annual reports of the Company in the section headed ‘‘4. THE
AUDITORS’ REPORTS FOR THE THREE YEARS ENDED 31 MARCH 2011’’ from page I-54 to I-60
in this appendix.




                                                – I-1 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


  Consolidated statement of comprehensive income

                                                     For the six
                                                         months
                                                           ended
                                                   30 September          For the year ended 31 March
                                                            2011          2011           2010             2009
                                                        HK$’000       HK$’000        HK$’000          HK$’000
                                                      (unaudited)     (audited)      (audited)        (audited)
                                                                                                 (re-presented)

  Continuing operations

  Revenue                                                       —       87,366        166,927            3,947
  Cost of sales                                                 —      (86,045)      (165,238)          (3,915)


  Gross (loss)/profit                                         —          1,321          1,689               32
  Other revenue                                              492           808            917            1,257
  Selling and distribution expenses                           —             —              —               (32)
  Administrative expenses                                 (1,199)       (6,311)       (10,696)         (11,698)
  Gain on redemption of financial assets at
     fair value through profit or loss                          —           —              —               187
  Gain on change in fair value of financial
     assets at fair value through profit or loss                —           —              —               131
  (Loss) gain on changes in fair value of held
     for trading investments                                   327        (183)           432           (4,526)
  Loss on disposal of held for trading
     investments                                                —           —          (4,227)          (1,540)
  Finance costs                                                 (1)         (2)            (1)             (38)


  Loss before tax                                           (381)       (4,367)       (11,886)         (16,227)
  Income tax expense                                          —             (4)            —                —


  Loss for the year from continuing
    operations                                              (381)       (4,371)       (11,886)         (16,227)

  Discontinued operation

  (Loss)/profit for the period attributable to
    owners of the Company from
    discontinued operation                                  (115)           —          33,358          (83,395)


  (Loss)/profit for the period and other
    comprehensive expense attributable
    to owners of the Company                                (496)       (4,371)        21,472          (99,622)




                                                     – I-2 –
APPENDIX I                                 FINANCIAL INFORMATION OF THE GROUP


  Consolidated statement of financial position

                                                       As at
                                               30 September                  As at 31 March
                                                        2011         2011              2010        2009
                                                    HK$’000      HK$’000           HK$’000     HK$’000
                                                  (unaudited)    (audited)         (audited)   (audited)

  Non-current asset
    Plant and equipment                                    884        240              303        4,113
    Prepayments                                             —          —                —        10,217

                                                           884        240              303       14,330
  Current assets
    Inventories                                             —          —                 —          200
    Trade receivables                                       —          21            39,494       7,224
    Deposits, prepayments and other
       receivables                                     5,098        6,211               431       8,861
    Held for trading investments                       4,625        4,299             4,482       9,820
    Amounts due from related companies                    —            —                 —           63
    Deposits in other financial institutions             233          170                63      69,803
    Bank balances and cash                            59,213       59,908            69,722       2,737

                                                      69,169       70,609          114,192       98,708

  Current liabilities
    Trade and other payables                           2,233        2,526            41,800      57,844
    Income tax payable                                    —             4                —        2,330
    Obligation under finance lease
      — amount due within one year                          6          6                5           492
    Bank overdrafts                                         —          —                —            82

                                                       2,239        2,536            41,805      60,748

  Net current assets                                  66,930       68,073           72,387       37,960

  Total assets less current liabilities               67,814       68,313           72,690       52,290

  Non-current liability
    Obligation under finance lease
      — amount due after one year                           15         18               24           —

                                                      67,799       68,295            72,666      52,290

  Capital and reserves
    Share capital                                     11,486       11,486            11,486      11,486
    Reserves                                          56,313       56,809            61,180      40,803

  Total equity attributable to owners of the
    Company and total equity                          67,799       68,295            72,666      52,289
  Minority interests                                      —            —                 —            1

  Total equity                                        67,799       68,295            72,666      52,290




                                                 – I-3 –
 APPENDIX I                                FINANCIAL INFORMATION OF THE GROUP


(B)   For the six months ended 30 September 2011

      Set out below is the financial statements of the Group for the six months ended 30 September 2011
as extracted from the interim report of the Company for six months ended 30 September 2011.

      Condensed consolidated statement of comprehensive income

            The board of directors (the ‘‘Board’’) of Climax International Company Limited (the
      ‘‘Company’’) announces the unaudited consolidated results of the Company and its subsidiaries
      (the ‘‘Group’’) for the six months ended 30 September 2011 as follows:

                                                                              Six months ended
                                                                                30 September
                                                                                 2011            2010
                                                                 Notes       HK$’000         HK$’000
                                                                           (Unaudited)    (Unaudited)
                                                                                        (Re-presented)

           Continuing operation
           Revenue                                                3                 —                —
           Other income                                                            492              161
           Administrative expenses                                              (1,199)          (3,336)
           Gain on changes in fair value of held for trading
             investments                                                           327             285
           Finance costs                                                            (1)             (1)

           Loss before tax                                                        (381)          (2,891)
           Income tax expense                                     4                 —                —

           Loss for the period attributable to owners of the
             Company from continuing operation                    5               (381)          (2,891)

           Discontinued operation
           (Loss)/profit for the period attributable to owners
             of the Company from discontinued operation           6               (115)          1,132

           Loss for the period and other comprehensive
             expense for the period attributable to owners of
             the Company                                                          (496)          (1,759)

           Loss per share
           Basic and diluted loss per share (in Hong Kong
             cents)                                               7
           — From continuing operation                                            (0.03)          (0.25)
           — From discontinued operation                                          (0.01)           0.10

                                                                                  (0.04)          (0.15)




                                                    – I-4 –
APPENDIX I                                FINANCIAL INFORMATION OF THE GROUP


  Condensed consolidated statement of financial position

                                                                              At           At
                                                                   30 September    31 March
                                                                           2011         2011
                                                           Notes        HK$’000      HK$’000
                                                                     (Unaudited)    (Audited)

  Non-current asset
    Plant and equipment                                     9               884          240


  Current assets
    Trade receivables                                       10               —            21
    Deposits, prepayments and other receivables                           5,098        6,211
    Held for trading investments                                          4,625        4,299
    Deposits in other financial institution                                 233          170
    Bank balances and cash                                               59,213       59,908


                                                                         69,169       70,609


  Current liabilities
    Trade and other payables                                11             2,233       2,526
    Income tax payable                                                        —            4
    Obligation under finance leases
      — amount due within one year                                            6            6


                                                                           2,239       2,536


  Net current assets                                                     66,930       68,073


  Total assets less current liabilities                                  67,814       68,313


  Non-current liability
    Obligations under finance leases
     — amount due after one year                                             15           18


  Net assets                                                             67,799       68,295


  Capital and reserves
    Share capital                                           12           11,486       11,486
    Reserves                                                             56,313       56,809


  Total equity attributable to owners of the Company and
    total equity                                                         67,799       68,295




                                              – I-5 –
APPENDIX I                                     FINANCIAL INFORMATION OF THE GROUP


  Condensed consolidated statement of changes in equity

                                                                 Attributable to owners of the Company
                                              Share       Share Share option        Capital Contributed Accumulated
                                             capital   premium       reserve        reserve       surplus     losses           Total
                                            HK$’000    HK$’000      HK$’000        HK$’000       HK$’000    HK$’000          HK$’000

  At 1 April 2010 (audited)                  11,486     131,205        2,260       17,900       103,941         (194,126)     72,666
  Loss for the period and other
     comprehensive expense for the period        —           —            —            —             —            (1,759)      (1,759)

  At 30 September 2010 (unaudited)           11,486     131,205        2,260       17,900       103,941         (195,885)     70,907

  At 1 April 2011 (audited)                  11,486     131,205        2,260       17,900       103,941         (198,497)     68,295
  Loss for the period and other
     comprehensive expense for the period        —           —            —            —             —              (496)       (496)

  At 30 September 2011 (unaudited)           11,486     131,205        2,260       17,900       103,941         (198,993)     67,799

  Condensed consolidated statement of cash flows

                                                                                               Six months ended
                                                                                                 30 September
                                                                                                  2011          2010
                                                                                              HK$’000       HK$’000
                                                                                            (Unaudited)   (Unaudited)

  CASH USED IN OPERATING ACTIVITIES                                                                  (120)                  (3,281)

  INVESTING ACTIVITIES
    Interest received                                                                                 406                      181
    Dividend received                                                                                  86                       78
    Purchase of plant and equipment                                                                (1,000)                      —
    Increase in deposits in other financial institution                                               (63)                     (55)

  NET CASH (USED IN)/FROM INVESTING ACTIVITIES                                                       (571)                     204

  FINANCING ACTIVITIES
    Principal repayment for obligations under finance leases                                              (3)                    (3)
    Finance leases charges paid                                                                           (1)                    (1)

  NET CASH USED IN FINANCING ACTIVITIES                                                                   (4)                     (4)

  NET DECREASE IN CASH AND CASH EQUIVALENTS                                                          (695)                  (3,081)
  CASH AND CASH EQUIVALENTS
   AT BEGINNING OF THE PERIOD                                                                     59,908                    69,722

  CASH AND CASH EQUIVALENTS
   AT THE END OF THE PERIOD, represented by
   Bank balances and cash                                                                         59,213                    66,641




                                                       – I-6 –
APPENDIX I                                      FINANCIAL INFORMATION OF THE GROUP


  Notes to the condensed consolidated financial statements

  1.    BASIS OF PREPARATION

         The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure
  requirements of Appendix 16 of the Rules Governing the Listing of Securities (the ‘‘Listing Rules’’) on The Stock Exchange
  of Hong Kong Limited (the ‘‘Stock Exchange’’) and with Hong Kong Accounting Standard (‘‘HKAS’’) 34 ‘‘Interim
  Financial Reporting’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’). The condensed
  consolidated financial statements do not include all the information and disclosures required in the annual financial
  statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 March
  2011, which have been prepared in accordance with Hong Kong Financial Reporting Standards (the ‘‘HKFRSs’’).

         The functional currency of the Company for the year ended 31 March 2011 is United States dollars (‘‘US$’’) as the
  major business is derived from US$. During the six months ended 30 September 2011, no transactions were concluded to
  generate any trading income from the major business, the functional currency of the other subsidiaries is Hong Kong dollars
  (‘‘HK$’’). Therefore, the functional currency of the Company is changed to HK$ for the six months ended 30 September
  2011. The presentation currency is HK$ which is same as the functional currency of the Company.

  2.    PRINCIPAL ACCOUNTING POLICIES

         The condensed consolidated financial statements have been prepared on the historical cost basis except for certain
  financial instruments, which are measured at fair values, as appropriate.

        The accounting policies used in the condensed consolidated financial statements for the six months ended 30
  September 2011 are consistent with those followed in the preparation of the Group’s annual financial statements for the year
  ended 31 March 2011 except as described below.

         In the current interim period, the Group has applied, for the first time, the following new and revised standards,
  amendments and interpretations issued by the HKICPA, which are effective for the Group’s financial year beginning on 1
  April 2011.

        HKFRSs (Amendments)                          Improvements to HKFRSs 2010
        HKFRS 1 (Amendment)                          Limited Exemption from Comparative HKFRS 7 Disclosures for
                                                       First-time Adopters
        HKAS 24 (Revised)                            Related Party Disclosures
        HKAS 32 (Amendments)                         Classification of Rights Issues
        HK(IFRIC)-Interpretation (‘‘Int’’) 14        Prepayments of a Minimum Funding Requirement
          (Amendments)
        HK(IFRIC)-Int 19                             Extinguishing Financial Liabilities with Equity Instruments

         The adoption of the new or revised HKFRSs had no material effect on how the results and financial position for the
  current or prior accounting periods have been prepared and presented.




                                                        – I-7 –
APPENDIX I                                           FINANCIAL INFORMATION OF THE GROUP


         The Group has not early applied the following new or revised standards and amendments that have been issued but
  are not yet effective.

        HKFRS 1 (Amendment)                                 Severe Hyperinflation and Removal of Fixed Dates
                                                              for First-time Adopters 1
        HKFRS 7 (Amendments)                                Disclosure — Transfers of Financial Assets1
        HKFRS 9                                             Financial Instruments4
        HKFRS 10                                            Consolidated Financial Statements4
        HKFRS 11                                            Joint Arrangements4
        HKFRS 12                                            Disclosure of Interests in Other Entities 4
        HKFRS 13                                            Fair Value Measurement4
        HKAS 1 (Amendments)                                 Presentation of Item of Other Comprehensive Income3
        HKAS 12 (Amendments)                                Deferred Tax: Recovery of Underlying Assets2
        HKAS 19 (2011)                                      Employee Benefits 4
        HKAS 27 (2011)                                      Separate Financial Statements4
        HKAS 28 (2011)                                      Investments in Associates and Joint Ventures4
        HK(IFRIC)-Int 20                                    Stripping Costs in the Production Phase of a Surface Mine 4

        1
               Effective   for   annual   periods   beginning   on   or   after   1   July 2011.
        2
               Effective   for   annual   periods   beginning   on   or   after   1   January 2012.
        3
               Effective   for   annual   periods   beginning   on   or   after   1   July 2012.
        4
               Effective   for   annual   periods   beginning   on   or   after   1   January 2013.

        The Group has not early adopted the new HKFRSs that have been issued but not yet effective. The directors of the
  Company are currently assessing the impact of these new HKFRSs but are not yet in a position to state whether they would
  have material financial impact on the Group’s result of operations and financial position.

  3.    REVENUE AND SEGMENT INFORMATION

         For the six months ended 30 September 2010, the Group is organized into a single operating segment of trading of
  electronic products. The electronic products segment was deemed discontinued on 30 September 2011 as no transactions
  were concluded to generate any trading income from trading of electronic products during the six months ended 30
  September 2011 and the directors of the Company would like to focus on formulating a plan for the resumption of trading
  of the shares of the Company. Accordingly, no reportable segment is presented.

        The revenue and results of electronic products segment are stated in note 6.

         The Group’s continuing operation is located in Hong Kong. Accordingly, no geographical segment information is
  presented.

  4.    INCOME TAX EXPENSE

        Continuing operation

               No provision for Hong Kong profits tax has been made as the Group had no estimated assessable profits
        arising in Hong Kong for both periods.

               No provision for tax in other jurisdictions has been made as the Group did not have any assessable profits in
        the respective jurisdictions for both periods.




                                                                 – I-8 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


  5.    LOSS FOR THE PERIOD

        Continuing operation

                                                                                               Six months ended
                                                                                                 30 September
                                                                                                  2011              2010
                                                                                              HK$’000           HK$’000
                                                                                            (Unaudited)       (Unaudited)

        Loss for the period has been arrived at after charging:

           Staff costs:
              Directors’ remuneration                                                               120                  120
              Other staff costs                                                                     295                  463
              Retirement benefit scheme contributions for staff                                      10                   19


           Total staff costs                                                                        425                  602


           Depreciation of plant and equipment                                                      173                   32
           Lease payment in respect of rented premises                                              168                  300
           Loss on written off of plant and equipment                                               183                   —

        and after crediting:

           Dividend income                                                                           86                   78
           Interest income                                                                          406                   79

  6.    DISCONTINUED OPERATION

         During the six months ended 30 September 2011, no transactions were concluded to generate any trading income
  from trading of electronic products. The business segment of electronic products is classified as discontinued operation on
  30 September 2011.

         The results of the electronic products operation for the period from 1 April 2011 to 30 September 2011, which have
  been included in the condensed consolidated statement of comprehensive income, were as follows:

                                                                                               Six months ended
                                                                                                 30 September
                                                                                                  2011              2010
                                                                                              HK$’000           HK$’000
                                                                                            (Unaudited)       (Unaudited)

        Revenue                                                                                       —               60,000
        Cost of sales                                                                                 —              (59,084)


        Gross profit                                                                                  —                  916
        Other income                                                                                  —                  344
        Administrative expenses                                                                     (115)               (128)


        (Loss)/profit before tax                                                                    (115)              1,132
        Income tax expense                                                                            —                   —


        (Loss)/profit for the period                                                                (115)              1,132




                                                         – I-9 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


       (Loss)/profit for the period from discontinued operation has been arrived at:

                                                                                             Six months ended
                                                                                               30 September
                                                                                                2011              2010
                                                                                            HK$’000           HK$’000
                                                                                          (Unaudited)       (Unaudited)

       after charging:

          Staff costs                                                                             105                  126

       and after crediting:

          Interest income                                                                           —                  102
          Written off of other payables                                                             —                  242

  7.   LOSS PER SHARE

       From continuing and discontinued operations

              The calculation of the basic and diluted loss per share attributable to owners of the Company is based on the
       following data:

                                                                                             Six months ended
                                                                                               30 September
                                                                                                2011              2010
                                                                                            HK$’000           HK$’000
                                                                                          (Unaudited)       (Unaudited)

              Loss for the period attributable to owners of the Company and loss
                for the purposes of basic loss per share                                          (496)             (1,759)


                                                                                               Six months ended
                                                                                                 30 September
                                                                                                  2011                2010

              Number of shares:

              Weighted average number of ordinary shares for the purpose of basic
                and diluted loss per share                                              1,148,661,140        1,148,661,140




                                                      – I-10 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


        From continuing operation

             The calculation of the basic and diluted loss per share from continuing operation attributable to owners of the
        Company is based on the following data:

               Loss figures are calculated as follows:

                                                                                               Six months ended
                                                                                                 30 September
                                                                                                  2011              2010
                                                                                              HK$’000           HK$’000
                                                                                            (Unaudited)       (Unaudited)

               Loss for the period attributable to owners of the Company                            (496)              (1,759)
               Less:
               (Loss)/profit for the period from discontinued operation                             (115)              1,132


               Loss for the purpose of basic and diluted loss per share from
                 continuing operation                                                               (381)              (2,891)

               The denominators used are the same as those detailed above for both basic and diluted loss per share.

        From discontinued operation

               Basic and diluted loss per share for the discontinued operation is HK0.01 cent per share (2010: basic and
        diluted earnings per share of HK0.1 cent) based on the loss for the six months from the discontinued operation of
        approximately HK$115,000 (six months ended 30 September 2010: profit of approximately HK$1,132,000) and the
        denominators detailed above for basic and diluted loss per share.

               The computation of diluted loss per share does not assume the exercise of the Company’s outstanding share
        options as the exercise price of those options is higher than the average market price for shares during the two
        periods ended 30 September 2011 and 2010 before the suspension of trading in shares on the Stock Exchange in
        September 2008.

  8.    INTERIM DIVIDEND

       No dividends were paid, declared or proposed during the reported period. The directors do not recommend the
  payment of an interim dividend for both periods.

  9.    PLANT AND EQUIPMENT

         For the six months ended 30 September 2011, the Group spent approximately HK$1,000,000 (2010: Nil) for
  acquisition of assets and certain furniture and fixtures of approximately HK$183,000 (2010: Nil) has been written off as no
  future economic benefits were expected to arise from these assets.




                                                         – I-11 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


  10.   TRADE RECEIVABLES

        The Group allows an average credit period of 90 days to its trade customers.

        The following is an analysis of trade receivables by age, presented based on the invoice date net of allowance for
  doubtful debts:

                                                                                        30 September            31 March
                                                                                                2011                 2011
                                                                                             HK$’000              HK$’000
                                                                                          (Unaudited)            (Audited)

        0–30 days                                                                                  —                   —
        31–60 days                                                                                 —                   9
        61–90 days                                                                                 —                   9
        91–120 days                                                                                —                   3
        Over 120 days                                                                              —                   —


                                                                                                   —                   21

  11.   TRADE AND OTHER PAYABLES

                                                                                        30 September            31 March
                                                                                                2011                 2011
                                                                                             HK$’000              HK$’000
                                                                                          (Unaudited)            (Audited)

        Trade payables                                                                             —                   —
        Other payables and accrued charges                                                      2,233               2,526


                                                                                                2,233               2,526

  12.   SHARE CAPITAL

                                                                                        30 September            31 March
                                                                                                2011                 2011
                                                                                             HK$’000              HK$’000
                                                                                          (Unaudited)            (Audited)

        Authorised:
        10,000,000,000 (2010:10,000,000,000)
          Ordinary shares of HK$0.01 each                                                     100,000             100,000

                                                                                           Number of
                                                                                              shares        Share capital
                                                                                                                HK$’000

        Issued and fully paid:
        Ordinary shares of HK$0.01 each
        At 31 March 2011 and 30 September 2011                                          1,148,661,140              11,486




                                                      – I-12 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


  13.   COMMITMENTS

                                                                                         30 September             31 March
                                                                                                 2011                  2011
                                                                                              HK$’000               HK$’000
                                                                                           (Unaudited)             (Audited)

        Capital expenditure in respect of acquisition of assets contracted but not
          provided in the condensed consolidated financial statements                                —                  565

  14.   RELATED PARTY TRANSACTIONS

        Other than the details as disclosed elsewhere in the condensed consolidated financial statements, during the six
  months ended 30 September 2011, the Group entered into the following related party transactions:

        (i)    the Group paid rent amounting HK$100,000 during the six months ended 30 September 2011 (six months
               ended 30 September 2010: HK$300,000) to Kingston Property Investment Limited, of which Mr. Tse On Kin,
               the former director of the Company, is one of the directors.

        (ii)   the Group paid rent amounting HK$68,000 during six months ended 30 September 2011 (six months ended 30
               September 2010: Nil) to Coast Holdings Limited, of which Mr. Tse On Kin, the former director of the
               Company, is one of the directors.

  15.   COMPARATIVES

        The comparative figures of condensed consolidated statement of comprehensive income have been re-presented to
  conform with the current period’s presentation as a result of the discontinued operation in accordance with HKFRS 5 ‘‘Non-
  Current Assets Held for Sale and Discontinued Operations’’.




                                                       – I-13 –
 APPENDIX I                             FINANCIAL INFORMATION OF THE GROUP


(C) For the year ended 31 March 2011

      Set out below is the financial statements of the Group for the year ended 31 March 2011 as
extracted from the annual report of the Company for the year ended 31 March 2011.

     Consolidated statement of comprehensive income
     For the year ended 31 March 2011

                                                                          2011            2010
                                                           Notes       HK$’000         HK$’000

     Continuing operations

     Revenue                                                7            87,366          166,927
     Cost of sales                                                      (86,045)        (165,238)


     Gross profit                                                         1,321            1,689
     Other revenue                                          8               808              917
     Administrative expenses                                             (6,311)         (10,696)
     (Loss) gain on changes in fair value of held for
       trading investments                                                 (183)             432
     Loss on disposal of held for trading investments                        —            (4,227)
     Finance costs                                          9                (2)              (1)


     Loss before tax                                                     (4,367)         (11,886)
     Income tax expense                                     10               (4)              —


     Loss for the year from continuing operations                        (4,371)         (11,886)

     Discontinued operation

     Profit for the year from discontinued operation        11               —           33,358


     (Loss) profit for the year                             12           (4,371)         21,472


     Other comprehensive expense

     Release of exchange differences upon disposal of
       subsidiaries                                                          —            (1,096)


     Other comprehensive expense for the year                                —            (1,096)


     Total comprehensive (expense) income for the year                   (4,371)         20,376




                                                – I-14 –
APPENDIX I                             FINANCIAL INFORMATION OF THE GROUP


                                                                     2011        2010
                                                           Note   HK$’000     HK$’000

  (Loss) profit for the year attributable to:

  Owners of the Company
  — Loss for the year from continuing operations                    (4,371)    (11,885)
  — Profit for the year from discontinued operation                     —       33,358


  (Loss) profit for the year attributable to owners of
    the Company                                                     (4,371)    21,473


  Non-controlling interests
  — Loss for the year from continuing operations                       —            (1)
  — Profit for the year from discontinued operation                    —            —


  Loss for the year attributable to non-controlling
    interests                                                          —            (1)


                                                                    (4,371)    21,472


  Total comprehensive (expense) income
    attributable to:

  Owners of the Company                                             (4,371)    20,377
  Non-controlling interests                                             —          (1)


                                                                   (4,371)     20,376


  (LOSS) EARNINGS PER SHARE

  Basic and diluted (loss) earnings per share
    (in Hong Kong cents)                                   15
    From continuing operations                                       (0.38)      (1.03)
    From discontinued operation                                         —         2.90


                                                                    (0.38)        1.87




                                                – I-15 –
APPENDIX I                                FINANCIAL INFORMATION OF THE GROUP


  Consolidated statement of financial position
  As at 31 March 2011

                                                                    2011      2010
                                                         Notes   HK$’000   HK$’000

  Non-current asset
   Plant and equipment                                    16         240       303


  Current assets
    Trade receivables                                     17          21    39,494
    Deposits, prepayments and other receivables           18       6,211       431
    Held for trading investments                          19       4,299     4,482
    Deposits in other financial institutions              20         170        63
    Bank balances and cash                                21      59,908    69,722


                                                                  70,609   114,192


  Current liabilities
    Trade and other payables                              22       2,526    41,800
    Income tax payable                                                 4        —
    Obligation under finance lease
      — amount due within one year                        23           6         5


                                                                   2,536    41,805


  Net current assets                                              68,073    72,387


  Total assets less current liabilities                           68,313    72,690


  Non-current liability
   Obligation under finance lease
      — amount due after one year                         23          18        24


                                                                  68,295    72,666


  Capital and reserves
    Share capital                                         24      11,486    11,486
    Reserves                                                      56,809    61,180


  Total equity attributable to owners of the Company
    and total equity                                              68,295    72,666




                                              – I-16 –
APPENDIX I                                                FINANCIAL INFORMATION OF THE GROUP


  Consolidated statement of changes in equity
  For the year ended 31 March 2011

                                                                 Attributable to owners of the Company
                                                                             Share                                                                Non-
                                      Share      Share    Translation       options       Capital   Contributed Accumulated                 controlling
                                     capital   premium        reserve       reserve       reserve         surplus     losses      Total       interests      Total
                                    HK$’000    HK$’000      HK$’000        HK$’000      HK$’000          HK$’000    HK$’000     HK$’000       HK$’000      HK$’000
                                                                                         (Note a)        (Note b)


  At 1 April 2009                    11,486     131,205         1,096        2,935        17,900         103,941    (216,274)    52,289              1      52,290


  Profit for the year                    —          —              —            —             —               —      21,473      21,473              (1)    21,472
  Other comprehensive expense for
        the year                         —          —          (1,096)          —             —               —           —       (1,096)           —        (1,096)
  Total comprehensive (expense)
        income for the year              —          —          (1,096)          —             —               —      21,473      20,377              (1)    20,376


  Cancellation of share options          —          —              —          (675)           —               —         675           —             —            —


  At 31 March 2010                   11,486     131,205            —          2,260       17,900         103,941    (194,126)    72,666             —       72,666
  Total comprehensive expense for
        the year                         —          —              —            —             —               —       (4,371)     (4,371)           —        (4,371)


  At 31 March 2011                   11,486     131,205            —          2,260       17,900         103,941    (198,497)    68,295             —       68,295


  Notes:

  (a)         The balance of capital reserve represents the capital reserve arising from the group restructuring which took place in
              1992.

  (b)         The balance of contributed surplus arose as a result of the Company’s capital reduction exercises which took place in
              the financial years of 2003 and 2006.




                                                                     – I-17 –
APPENDIX I                           FINANCIAL INFORMATION OF THE GROUP


  Consolidated statement of cash flows
  For the year ended 31 March 2011

                                                                    2011        2010
                                                          Note   HK$’000     HK$’000

  OPERATING ACTIVITIES
   Loss before tax from continuing operations                      (4,367)    (11,886)
   Profit before tax from discontinued operation                       —       33,282


                                                                  (4,367)     21,396

  Adjustments for:
   Release of non-current prepayments                                 —          524
   Depreciation for plant and equipment                               63         243
   Loss (gain) on changes in fair value of held for
      trading investments                                            183        (432)
   Loss on written off of plant and equipment                         —        3,610
   Impairment loss recognised in respect of deposits,
      prepayments and other receivables                                —         454
   Impairment loss recognised in respect of amount
      due from a related company                                       —         320
   Deposits forfeited for early termination of a rental
      agreement                                                        —          691
   Interest income                                                   (408)       (181)
   Dividend income                                                   (155)       (148)
   Gain on disposal of subsidiaries                       26           —      (44,828)
   Finance costs                                                        2          15
   Loss on disposal of held for trading investments                    —        4,227
   Allowance for inventories                                           —          200
   Written off of other payables                                     (245)       (588)


    Operating cash flows before movements in
       working capital                                            (4,927)     (14,497)
    Decrease (increase) in trade receivables                      39,473      (34,767)
    (Increase) decrease in deposits, prepayments and
       other receivables                                             (780)     1,050
    (Decrease) increase in trade and other payables               (39,029)    41,411


    Cash used in operations                                        (5,263)     (6,803)
    Income tax paid                                                    —         (118)


    NET CASH USED IN OPERATING
     ACTIVITIES                                                    (5,263)     (6,921)




                                             – I-18 –
APPENDIX I                            FINANCIAL INFORMATION OF THE GROUP


                                                                   2011        2010
                                                         Note   HK$’000     HK$’000

  INVESTING ACTIVITIES
    Deposit paid for acquisition of an investment                 (5,000)        —
    (Increase) decrease in deposits in other financial
       institutions                                                (107)     69,740
    Dividend received                                               155         148
    Interest received                                               408         181
    Purchase of plant and equipment                                  —          (13)
    Repayment from related companies                                 —           63
    Proceeds from disposal of held for trading
       investments                                                   —        1,543
    Net cash inflow on disposal of subsidiaries          26          —        2,342


  NET CASH (USED IN) FROM INVESTING
   ACTIVITIES                                                     (4,544)    74,004


  FINANCING ACTIVITIES
    Repayment for obligation under finance lease                      (5)        (1)
    Interest paid                                                     (2)       (15)


  NET CASH USED IN FINANCING ACTIVITIES                               (7)       (16)


  NET (DECREASE) INCREASE IN CASH AND
   CASH EQUIVALENTS                                               (9,814)    67,067

  CASH AND CASH EQUIVALENTS AT
   BEGINNING
   OF THE YEAR                                                   69,722       2,655


  CASH AND CASH EQUIVALENTS AT THE END
   OF THE YEAR,
   represented by bank balances and cash                         59,908      69,722




                                             – I-19 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


  Notes to the consolidated financial statements
  For the year ended 31 March 2011

  1.    GENERAL

         Climax International Company Limited (the ‘‘Company’’) was incorporated in Bermuda as an exempted company
  with limited liability with its shares listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). The
  addresses of the registered office and principal place of business of the Company are disclosed in the section headed
  ‘‘Corporation Information’’ to the annual report.

         The functional currency of the major operating subsidiary is United States dollars (‘‘US$’’) while that of the
  remaining subsidiaries are all in Hong Kong dollars (‘‘HK$’’). The functional currency of the Company is US$, which is
  different from its presentation currency, HK$. As the Company is listed in Hong Kong, the directors of the Company
  consider that it is appropriate to present the consolidated financial statements in HK$.

        The Company is an investment holding company. Its subsidiaries principally engaged in trading of electronic
  products. Details of the principal activities of the subsidiaries are disclosed in note 31.

  2.    APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
        (‘‘HKFRSS’’)

         In the current year, the Group has applied the following new and revised standards, amendments and interpretations
  (‘‘new and revised HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).



        HKFRSs (Amendments)                      Amendment to HKFRS 5 as part of Improvements to HKFRSs 2008
        HKFRSs (Amendments)                      Improvements to HKFRSs 2009
        Hong Kong Accounting Standard            Consolidated and Separate Financial Statements
            (‘‘HKAS’’) 27 (Revised)
        HKAS 32 (Amendment)                      Classification of Rights Issues
        HKAS 39 (Amendment)                      Eligible Hedged Items
        HKFRS 1 (Revised)                        First-time Adoption of Hong Kong Financial Reporting Standards
        HKFRS 1 (Amendment)                      Additional Exemptions for First-time Adopters
        HKFRS 2 (Amendment)                      Group Cash-settled Share-based Payment Transactions
        HKFRS 3 (Revised)                        Business Combinations
        HK-Interpretation (‘‘Int’’) 5            Presentation of Financial Statements — Classification by the Borrower of a
                                                    Term Loan that Contains a Repayment on Demand Clause
        HK(IFRIC)-Int 17                         Distributions of Non-cash Assets to Owners

        HKFRS 3 (Revised 2008) Business Combinations

               The Group applies HKFRS 3 (Revised) Business Combinations prospectively to business combinations of
        which the acquisition date is on or after 1 April 2010. The requirements in HKAS 27 (Revised) Consolidated and
        Separate Financial Statements in relation to accounting for changes in ownership interests in a subsidiary after
        control is obtained and for loss of control of a subsidiary are also applied prospectively by the Group on or after 1
        April 2010.

               As there was no transaction during the current year in which HKFRS 3 (Revised) and HKAS 27 (Revised) are
        applicable, the application of HKFRS 3 (Revised), HKAS 27 (Revised) and the consequential amendments to other
        HKFRSs had no effect on the consolidated financial statements of the Group for the current or prior accounting
        periods.

             Results of the Group in future periods, may be affected by future transactions for which HKFRS 3 (Revised),
        HKAS 27 (Revised) and the consequential amendments to the other HKFRSs are applicable.




                                                      – I-20 –
APPENDIX I                                      FINANCIAL INFORMATION OF THE GROUP


           The Group has not early applied the following new and revised standards, amendments or interpretations that
     have been issued but are not yet effective.

            HKFRSs (Amendments)                              Improvements to HKFRSs 2010 except for the amendments to
                                                                HKFRS 3 (Revised in 2008), HKFRS 7, HKAS 1 and HKAS 281
            HKFRS 1 (Amendment)                              Limited Exemption from Comparative HKFRS 7 Disclosures for
                                                                First-time Adopters2
            HKFRS 1 (Amendment)                              Severe Hyperinflation and Removal of Fixed Dates for First-time
                                                                Adopters4
            HKFRS 7 (Amendments)                             Disclosures — Transfers of Financial Assets4
            HKFRS 9                                          Financial Instruments6
            HKFRS 10                                         Consolidated Financial Statements6
            HKFRS 11                                         Joint Arrangements6
            HKFRS 12                                         Disclosure of Interests in Other Entities 6
            HKFRS 13                                         Fair Value Measurement6
            HKAS 12 (Amendment)                              Deferred Tax: Recovery of Underlying Assets 5
            HKAS 24 (Revised)                                Related Party Disclosures 3
            HKAS 27 (2011)                                   Separate Financial Statements6
            HKAS 28 (2011)                                   Investments in Associates and Joint Ventures 6
            HK(IFRIC)-Int 14 (Amendment)                     Prepayments of a Minimum Funding Requirement 3
            HK(IFRIC)-Int 19                                 Extinguishing Financial Liabilities with Equity Instruments 2

            1
                   Effective   for   annual   periods   beginning   on   or   after   1   July 2010 or 1 January 2011, as appropriate.
            2
                   Effective   for   annual   periods   beginning   on   or   after   1   July 2010.
            3
                   Effective   for   annual   periods   beginning   on   or   after   1   January 2011.
            4
                   Effective   for   annual   periods   beginning   on   or   after   1   July 2011.
            5
                   Effective   for   annual   periods   beginning   on   or   after   1   January 2012.
            6
                   Effective   for   annual   periods   beginning   on   or   after   1   January 2013.

            HKFRS 9 Financial Instruments issued in November 2009 and amended in October 2010 introduces new
     requirements for the classification and measurement of financial assets and financial liabilities and for derecognition.

            .      HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial
                   Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value.
                   Specifically, debt investments that are held within a business model whose objective is to collect the
                   contractual cash flows, and that have contractual cash flows that are solely payments of principal and
                   interest on the principal outstanding are generally measured at amortised cost at the end of subsequent
                   accounting periods. All other debt investments and equity investments are measured at their fair values
                   at the end of subsequent accounting periods.

            .      The most significant effect of HKFRS 9 regarding the classification and measurement of financial
                   liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair
                   value through profit or loss) attributable to changes in the credit risk of that liability. Specifically,
                   under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the
                   amount of change in the fair value of the financial liability that is attributable to changes in the credit
                   risk of that liability is recognised in other comprehensive income, unless the recognition of the effects
                   of changes in the liability’s credit risk in other comprehensive income would create or enlarge an
                   accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit
                   risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount
                   of the change in the fair value of the financial liability designated as at fair value through profit or loss
                   was recognised in profit or loss.

            HKFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application
     permitted.

            The directors anticipate that HKFRS 9 that will be adopted in the Group’s consolidated financial statements
     for the annual period beginning 1 January 2013 and that the application of the new standard will have a significant
     impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not
     practicable to provide a reasonable estimate of that effect until a detailed review has been completed.




                                                           – I-21 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


               The amendments to HKFRS 7 titled Disclosures — Transfers of Financial Assets increase the disclosure
        requirements for transactions involving transfers of financial assets. These amendments are intended to provide
        greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level
        of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are
        not evenly distributed throughout the period.

               The directors do not anticipate that these amendments to HKFRS 7 will have a significant effect on the
        Group’s disclosures regarding transfers of financial assets. However, if the Group enters into other types of transfers
        of financial assets in the future, disclosures regarding those transfers may be affected.

               HKAS 24 Related Party Disclosures (as revised in 2009) modifies the definition of a related party and
        simplifies disclosures for government-related entities.

              The disclosure exemptions introduced in HKAS 24 (as revised in 2009) do not affect the Group because the
        Group is not a government-related entity.

             The directors of the Company anticipate that the application of the other new and revised standards,
        amendments or interpretations will have no material impact on the results and the financial position of the Group.

  3.    SIGNIFICANT ACCOUNTING POLICIES

         The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In
  addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of
  Securities on the Stock Exchange (the ‘‘Listing Rules’’) and by the Hong Kong Companies Ordinance.

         The consolidated financial statements have been prepared on the historical cost basis except for certain financial
  instruments that are measured at fair values, as explained in the accounting policies set out below. Historical cost is
  generally based on the fair value of the consideration given in exchange for assets.

        The principal accounting policies are set out below.

        Basis of consolidation

               The consolidated financial statements incorporate the financial statements of the Company and entities
        controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the
        financial and operating policies of an entity so as to obtain benefits from its activities.

              The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement
        of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as
        appropriate.

               Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
        policies into line with those used by other members of the Group.

               All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

               Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

        Allocation of total comprehensive income to non-controlling interests

                Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to
        the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 1
        April 2010, losses applicable to the non-controlling interests in excess of the non-controlling interests in the
        subsidiary’s equity were allocated against the interests of the Group except to the extent that the non-controlling
        interests had a binding obligation and were able to make an additional investment to cover the losses.




                                                       – I-22 –
APPENDIX I                                  FINANCIAL INFORMATION OF THE GROUP


     Revenue recognition

            Revenue is measured at the fair value of the consideration received or receivable and represents amounts
     receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

              Revenue from sale of goods is recognised when the goods are delivered and title has passed.

            Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
     the Group and the amount of revenue can be measured reliably. Interest income from a financial asset is accrued on a
     time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that
     exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net
     carrying amount on initial recognition.

              Rental income under operating leases of buildings is recognised on a straight-line basis over the lease team.

             Dividend income from investments is recognised when the shareholders’ rights to receive payment have been
     established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue
     can be measured reliably).

     Leasing

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

     The Group as lessee

            Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of
     the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is
     included in the consolidated statement of financial position as a finance lease obligation.

             Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
     achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised
     immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are
     capitalised in accordance with the Group’s policy on borrowing costs (see the accounting policy below).

              Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant
     lease.

     Foreign currencies

             In preparing the financial statements of each individual group entity, transactions in currencies other than the
     functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the
     currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on
     the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies
     are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in
     foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-
     monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

            Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
     are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of
     non-monetary items carried at fair value are included in profit or loss for the period.

            For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s
     foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the rate of exchange
     prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange
     rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and
     accumulated in equity (the translation reserve).




                                                      – I-23 –
APPENDIX I                                 FINANCIAL INFORMATION OF THE GROUP


             From 1 April 2010 onwards, on the disposal of a foreign operation (i.e. a disposal of the Group’s entire
     interest in a foreign operation), all of the exchange differences accumulated in equity in respect of that operation
     attributable to the owners of the Company are reclassified to profit or loss.

     Borrowing costs

            Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which
     are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
     the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment
     income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
     deducted from the borrowing costs eligible for capitalisation.

            All borrowing costs are recognised in profit or loss in the period in which they are incurred.

     Retirement benefit costs

            Payments to the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered
     service entitling them to the contributions.

     Taxation

            Income tax expense represents the sum of the tax currently payable and deferred tax.

             The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported
     in the consolidated statement of comprehensive income because it excludes items of income or expense that are
     taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s
     liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the
     reporting period.

             Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
     the consolidated financial statements and the corresponding tax base used in the computation of taxable profit.
     Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are
     generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will
     be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not
     recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business
     combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
     profit.

            Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
     subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that
     the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
     temporary differences associated with such investments and interests are only recognised to the extent that it is
     probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences
     and they are expected to reverse in the foreseeable future.

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

            The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
     the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of
     its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are
     recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in
     other comprehensive income or directly in equity respectively.




                                                     – I-24 –
APPENDIX I                                  FINANCIAL INFORMATION OF THE GROUP


     Plant and equipment

             Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment
     losses, if any.

            Depreciation is recognised so as to write off the cost of items of plant and equipment less their residual values
     over their estimated useful lives using the straight-line method. The estimated useful lives, residual values and
     depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate
     accounted for on a prospective basis.

            Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
     assets or, where shorter, the term of the relevant lease.

            An item of plant and equipment is derecognised upon disposal or when no future economic benefits are
     expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
     item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of
     the asset and is recognised in profit or loss.

     Cash and cash equivalents

            Bank balances and cash in the consolidated statement of financial position comprise cash at banks and on
     hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement
     of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above.

     Financial instruments

           Financial assets and financial liabilities are recognised in the consolidated statement of financial position when
     a group entity becomes a party to the contractual provisions of the instrument.

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

     Financial assets

            The Group’s financial assets are classified into financial assets at fair value through profit or loss (‘‘FVTPL’’)
     and loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on
     a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of
     assets within the time frame established by regulation or convention in the marketplace.

     Effective interest method

             The effective interest method is a method of calculating the amortised cost of a financial asset and of
     allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
     estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest
     rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where
     appropriate, a shorter period to the net carrying amount on initial recognition.

            Interest income is recognised on an effective interest basis for debt instruments.

     Financial assets at fair value through profit or loss

            Financial assets at FVTPL represent financial assets held for trading.




                                                      – I-25 –
APPENDIX I                                  FINANCIAL INFORMATION OF THE GROUP


            A financial asset is classified as held for trading if:

            .      it has been acquired principally for the purpose of selling in the near future; or

            .      it is a part of an identified portfolio of financial instruments that the Group manages together and has a
                   recent actual pattern of short-term profit-taking; or

            .      it is a derivative that is not designated and effective as a hedging instrument.

           Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement
     recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss
     excludes any dividend or interest earned on the financial assets.

     Loans and receivables

            Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
     quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade receivables,
     deposits and other receivables, deposits in other financial institutions, and bank balances and cash) are carried at
     amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on
     impairment of financial assets below).

     Impairment of financial assets

            Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of the
     reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more
     events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial
     assets have been affected.

            For all other financial assets, objective evidence of impairment could include:

            .      significant financial difficulty of the issuer or counterparty; or

            .      breach of contract, such as default or delinquency in interest or principal payments; or

            .      it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

            .      the disappearance of an active market for that financial asset because of financial difficulties.

            For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
     individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a
     portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number
     of delayed payments in the portfolio past the average credit period of 90 days, observable changes in national or
     local economic conditions that correlate with default on receivables.

            For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is
     objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount
     and the present value of the estimated future cash flows discounted at the original effective interest rate.

            The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
     with the exception of trade and other receivables, where the carrying amount is reduced through the use of an
     allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a
     trade and other receivable is considered uncollectible, it is written off against the allowance account. Subsequent
     recoveries of amounts previously written off are credited to profit or loss.




                                                      – I-26 –
APPENDIX I                                 FINANCIAL INFORMATION OF THE GROUP


            For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss
     decreases and the decrease can be related objectively to an event occurring after the impairment losses was
     recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying
     amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been
     had the impairment not been recognised.

     Financial liabilities and equity instruments

            Financial liabilities and equity instruments issued by a group entity are classified according to the substance
     of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

            An equity instrument is any contract that evidences a residual interest in the assets of the group after
     deducting all of its liabilities. The Group’s financial liabilities are mainly other financial liabilities.

     Effective interest method

             The effective interest method is a method of calculating the amortised cost of a financial liability and of
     allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
     estimated future cash payments through the expected life of the financial liability, or where appropriate, a shorter
     period.

            Interest expense is recognised on an effective interest basis.

     Other financial liabilities

           Other financial liabilities including trade and other payables and obligation under finance lease are
     subsequently measured at amortised cost, using the effective interest method.

     Equity instruments

            Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

     Derecognition

            Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial
     assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the
     financial assets.

           On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the
     sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other
     comprehensive income and accumulated in equity is recognised in profit or loss.

            Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged,
     cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the
     consideration paid and payable is recognised in profit or loss.

     Share-based payment transactions

     Equity-settled share-based payment transactions

     Share options granted to directors and employees after 7 November 2002 and vested on or after 1 January 2005

            The fair value of services received determined by reference to the fair value of share options granted at the
     grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share
     options reserve).




                                                     – I-27 –
APPENDIX I                                     FINANCIAL INFORMATION OF THE GROUP


                At the end of the reporting period, the Group revises its estimates of the number of options that are expected
        to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit
        or loss, with a corresponding adjustment to share options reserve.

               At the time when the share options are exercised, the amount previously recognised in share options reserve
        will be transferred to share premium. When the share options are forfeited after the vesting date or are still not
        exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to
        accumulated losses.

        Share options granted to suppliers/consultants

               Share options issued in exchange for goods or services are measured at the fair values of the goods or services
        received, unless that fair value cannot be reliably measured, in which case the goods or services received are
        measured by reference to the fair value of the share options granted. The fair values of the goods or services received
        are recognised as expenses, with a corresponding increase in equity (share options reserve), when the Group obtains
        the goods or when the counterparties render services, unless the goods or services qualify for recognition as assets.

        Impairment losses on tangible assets

               At the end of the reporting period, the Group reviews the carrying amounts of its tangible assets to determine
        whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
        recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the
        recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is
        reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

               Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
        estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
        that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of
        an impairment loss is recognised as income immediately.

  4.    KEY SOURCES OF ESTIMATION UNCERTAINTY

         In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are
  required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not
  readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other
  factors that are considered to be relevant. Actual results may differ from these estimates.

         The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
  recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
  revision and future periods if the revision affects both current and future periods.

         The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
  end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets
  and liabilities within the next financial year.

        Estimated impairment of trade receivables

              Allowances for estimated irrecoverable amounts are recognised in profit and loss when there is objective
        evidence that the receivables are not recoverable.

                In making the judgement, management considered detailed procedures have been in place to monitor this risk
        as a significant proportion of the Group’s working capital is devoted to trade receivables. In determining whether
        provision for impairment is required, the Group takes into consideration the ageing status, and likelihood of
        collection. Specific provision is only made for trade receivables that are unlikely to be collected. As at 31 March
        2011, the carrying amount of trade receivables is approximately HK$21,000 (31 March 2010: HK$39,494,000). No
        allowance for doubtful debts was provided for the year ended 31 March 2011 and 2010.




                                                         – I-28 –
APPENDIX I                                     FINANCIAL INFORMATION OF THE GROUP


  5.    CAPITAL RISK MANAGEMENT

        The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
  maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall strategy
  remains unchanged from prior year.

         The capital structure of the Group consists of debt representing obligation under finance lease, cash and cash
  equivalents and equity attributable to owners of the Company, comprising issued share capital and reserves.

         The directors of the Company review the capital structure on an annual basis. As part of this review, the directors of
  the Company consider the cost of capital and the risks associated with each class of capital. Based on recommendations of
  the directors, the Group will balance its overall capital structure through new shares issue. The directors of the Company
  will also consider the raise of long-term borrowings as second resource of capital when investment opportunities arise and
  the return of such investments will justify the cost of debts from the borrowings.

  6.    FINANCIAL INSTRUMENTS

        a.     Categories of financial instruments

                                                                                                     2011                 2010
                                                                                                  HK$’000              HK$’000

               Financial assets
               Fair value through profit or loss
                 — held for trading investments                                                      4,299                4,482
               Loans and receivables (including cash and cash equivalents)                          65,207              109,386


               Financial liabilities
               Other financial liabilities stated at amortised cost                                  2,550                41,829

        b.     Financial risk management objectives and policies

                The Group’s major financial instruments include trade receivables, deposits and other receivables, held for
        trading investments, deposits in other financial institutions, bank balances and cash, trade and other payables and
        obligation under finance lease. Details of these financial instruments are disclosed in respective notes. The risks
        associated with these financial instruments include market risk (currency risk, interest rate risk and other price risk),
        credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages
        and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

               Market risk

               (i)    Currency risk

                      As at 31 March 2011, majority bank balances and cash and trade receivables (2010: majority bank
               balances and cash, held for trading investments and other payables) of the Group are denominated in foreign
               currencies which expose the Group to currency risk. The Group did not have a foreign currency hedging
               policy as at the end of the reporting period. However, the management monitors foreign exchange exposure
               and will consider hedging significant foreign currency exposure should the need arise.




                                                         – I-29 –
APPENDIX I                             FINANCIAL INFORMATION OF THE GROUP


                 The carrying amounts of the Group’s foreign currency denominated financial assets and financial
        liabilities at the reporting date are as follows:

                                                       2011                                       2010
                                        Financial     Financial          Net      Financial      Financial           Net
                                           assets     liabilities   exposure         assets      liabilities    exposure
                                        HK$’000        HK$’000      HK$’000       HK$’000         HK$’000       HK$’000

               HK$                          6,810         2,526         4,284        74,374             3,384     70,990


               Renminbi (‘‘RMB’’)          41,948             —        41,948            —                —           —

               Sensitivity analysis

                      The Group is mainly exposed to HK$ and RMB (2010: HK$).

                       The following table details the Group’s sensitivity to a possible percentage change in the
               functional currencies of the relevant group entities, US$ and HK$ against the relevant foreign
               currencies. The percentages in the table are the sensitivity rates used when reporting foreign currency
               risk internally to key management personnel and represents management’s assessment of the reasonably
               possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
               currency denominated monetary items and adjusts their translation at the end of the reporting period for
               the relevant change in foreign currency rates.

                      A negative number below indicates an increase in loss (2010: a decrease in profit) after tax
               where the respective functional currencies strengthen certain percentages against the relevant foreign
               currencies. For the same percentages weakening of the respective functional currencies against the
               relevant foreign currencies, there would be an equal and opposite impact on the loss (2010: profit) after
               tax and accumulated losses, and the balances below would be positive.

                                                                                          Effect on profit or
                                                                                             loss after tax
                                                                                             2011                2010
                                                                                         HK$’000              HK$’000

                      Respective functional currencies strengthen against
                      — HK$ by 1%                                                                (43)               (710)
                      — RMB by 5%                                                             (2,097)                 —

        (ii)   Interest rate risk

               The Group is exposed to cash flow interest rate risk primarily in relation to variable-rate deposits in
        other financial institutions and bank balances. The Group currently does not have an interest rate risk hedging
        policy. However, the management monitors interest rate exposure and will consider other necessary action
        when significant interest rate exposure is anticipated.

               The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk
        management section of this note. The Group’s cash flow interest rate risk is mainly concentrated on the
        fluctuation of prevailing market interest rate arising from the Group’s deposits in other financial institutions
        and bank balances.

               Sensitivity analysis

                      The sensitivity analyses below have been determined based on the exposure to interest rates for
               non-derivative instruments. The analysis is prepared assuming the financial instruments outstanding at
               the end of the reporting period were outstanding for the whole year. A 100 basis points (2010: 100
               basis points) increase or decrease is used when reporting interest rate risk internally to key management
               personnel and represents management’s assessment of the reasonably possible change in interest rates.




                                                – I-30 –
APPENDIX I                             FINANCIAL INFORMATION OF THE GROUP


                       If interest rates had been 100 basis points (2010: 100 basis points) higher/lower and all other
                variables were held constant, the Group’s loss for the year ended 31 March 2011 would decrease/
                increase by approximately HK$597,000 (2010: profit for the year would increase/decrease by
                HK$694,000).

        (iii)   Other price risk

               The Group is exposed to equity price risk through its investments in listed equity securities in Hong
        Kong. The management manages this exposure by maintaining a portfolio of investments with different risks.
        The Group’s equity price risk is mainly concentrated on equity instruments operating in telecommunication
        industry section quoted in the Stock Exchange. The management will consider hedging the risk exposure
        should the need arise.

                Sensitivity analysis

                        The sensitivity analyses below have been determined based on the exposure to equity price risks
                at the reporting date.

                        If the prices of the respective equity instruments had been 10% (2010: 10%) higher/lower, loss
                for the year ended 31 March 2011 would decrease/increase by approximately HK$430,000 (2010: profit
                for the year would increase/decrease by HK$448,000) as a result of the changes in fair value of held
                for trading investments.

        Credit risk

               As at 31 March 2011, the Group’s maximum exposure to credit risk which will cause a financial loss to
        the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount
        of the respective recognised financial assets as stated in the consolidated statement of financial position.

                In order to minimise the credit risk, the management of the Group has delegated a team responsible for
        determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up
        action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each
        individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for
        irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is
        significantly reduced.

               The credit risk on liquid funds is limited because the counterparties are banks and financial institutions
        with high credit-ratings assigned by international credit-rating agencies.

              The Group’s concentration of credit risk by geographical locations is mainly in Europe, which
        accounted for 100% (2010: 100%) of the total trade receivables as at 31 March 2011.

               The Group has concentration of credit risk as 100% (2010: 0%) and 100% (2010: 99.6%) of the total
        trade receivables was due from the Group’s largest customers and the five largest customers respectively.

        Collateral held as security and other credit enhancement

               The Group does not hold any collateral or other credit enhancements to cover its credit risks associated
        with its financial assets.

        Liquidity risk

               In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash
        equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of
        fluctuations in cash flows.




                                                – I-31 –
APPENDIX I                                FINANCIAL INFORMATION OF THE GROUP


                    The following table details the Group’s remaining contractual maturity for its non-derivative financial
           liabilities based on the agreed repayment terms. The table has been drawn up based on the undiscounted cash
           flows of financial liabilities based on the earliest date on which the Group can be required to pay.

                   The table includes both interest and principal cash flows. To the extent that interest flows are floating
           rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

                 The amounts included below for variable interest rate instruments for non-derivative financial liabilities
           are subject to change if changes in variable interest rates different to those estimates of interest rates
           determined at the end of the reporting period.

                  Liquidity table

                                                                 More than        More than
                                                On demand        1 year but      2 years but         Total        Carrying
                                                  or within        less than        less than undiscounted       amount at
                                                     1 year          2 years          5 years   cash flows       31 March
                                                   HK$’000         HK$’000          HK$’000       HK$’000         HK$’000

                  At 31 March 2011
                  Non-derivative financial
                     liabilities
                  Trade and other payables             2,526               —               —           2,526           2,526
                  Obligation under finance
                     lease                                  7               7              13             27              24


                                                       2,533                7              13          2,553           2,550


                  At 31 March 2010
                  Non-derivative financial
                     liabilities
                  Trade and other payables            41,800               —               —          41,800          41,800
                  Obligation under finance
                     lease                                  7               7              20             34              29


                                                      41,807                7              20         41,834          41,829

     c.    Fair value

           The fair values of financial assets and financial liabilities are determined as follows:

           —      the fair values of financial assets and financial liabilities with standard terms and conditions and traded
                  in active liquid markets are determined with reference to quoted market bid prices, and ask prices
                  respectively; and

           —      the fair values of other financial assets and financial liabilities are determined in accordance with
                  generally accepted pricing model based on discounted cash flow analysis.

            The directors of the Company consider that the fair values of other financial assets and financial liabilities
     recorded at amortised cost in the consolidated statement of financial position approximate their carrying amounts due
     to short term maturities.




                                                    – I-32 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


               Fair value measurements recognised in the consolidated statement of financial position

                       Financial instruments that are measured subsequent to initial recognition at fair value, are disclosed in
               the following hierarchy based on the degree to which the fair value is observable.

                      —      Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
                             market for identical assets or liabilities.

                      —      Level 2 fair value measurements are those derived from inputs other than quoted prices included
                             with Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
                             indirectly (i.e. derived from prices).

                      —      Level 3 fair value measurements are those derived from valuation techniques that include inputs
                             for the asset or liability that are not based on observable market data (unobservable inputs).

                      As at 31 March 2011, the Group’s non-derivative financial assets held for trading of HK$4,299,000
               (2010: HK$4,482,000) is classified as level 1.

                      During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and
               no transfers into or out of Level 3 (2010: Nil).

  7.    REVENUE AND SEGMENT INFORMATION

        The principle activity of the Group is trading of electronic products.

        Revenue represents the net amounts received and receivable for goods sold by the Group to outside customers less
  discounts.

          Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are
  identified from the financial data and information provided regularly to the Group’s chief operating decision maker, the
  Chief Executive Officer, for the purpose of allocating resources to segments and assessing their performance. The Group is
  organised into a single operating segment of trading of electronic products. Accordingly, no reportable segment is presented.

        Paper products segment was discontinued with effect from 17 March 2010. Its revenue and results are stated in note
  11.

        (a)    Geographical information

               The Group’s operations are located in Hong Kong during the year ended 31 March 2011. During the year
        ended 31 March 2010, the Group’s operations were located in Hong Kong and the People’s Republic of China (the
        ‘‘PRC’’) before the disposal of certain subsidiaries on 17 March 2010.

               The Group’s revenue from continuing operations from external customers and information about its non-
        current assets by geographical location of the assets are detailed below:

                                                              Revenue from
                                                            external customers                      Non-current assets
                                                               2011            2010                   2011             2010
                                                            HK$’000         HK$’000                HK$’000          HK$’000

               Europe                                         87,366             135,900                 —                   —
               Australia                                          —               31,027                 —                   —
               Hong Kong                                          —                   —                 240                 303


                                                              87,366             166,927                240                 303

               Non-current asset excluded those relating to discontinued operation.




                                                       – I-33 –
APPENDIX I                                     FINANCIAL INFORMATION OF THE GROUP


        (b)    Information about major customers

                Revenue from customers of the corresponding years contributing over 10% of the total sales of the Group are
        as follows:

                                                                                                      2011                2010
                                                                                                   HK$’000             HK$’000

               Customer A                                                                                —*             92,064
               Customer B                                                                            87,366             74,863

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

  8.    OTHER REVENUE

                                                                                                      2011                2010
                                                                                                   HK$’000             HK$’000

        Continuing operations

        Dividend income                                                                                 155                148
        Interest income                                                                                 408                181
        Written off of other payables                                                                   245                588


                                                                                                        808                917

  9.    FINANCE COSTS

                                                                                                      2011                2010
                                                                                                   HK$’000             HK$’000

        Continuing operations

        Interest on obligation under finance lease                                                         2                 1

  10.   INCOME TAX EXPENSE

        Continuing operations

                                                                                                      2011                2010
                                                                                                   HK$’000             HK$’000

        Hong Kong Profits Tax
        — Under-provision in prior year                                                                    4                —

        Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for both years.

        Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

       No provision for Hong Kong Profits Tax has been made as the Group did not have any assessable profits subject to
  Hong Kong Profits Tax for both years.

         No provision for tax in other jurisdictions has been made as the Group did not have any assessable profits in the
  respective jurisdictions for both years.




                                                         – I-34 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


          The income tax expense can be reconciled to the loss before tax per consolidated statement of comprehensive income
  as follows:

                                                                                                  2011                  2010
                                                                                               HK$’000               HK$’000

        Loss before tax (from continuing operations)                                             (4,367)              (11,886)


        Tax at Hong Kong Profits Tax rate at 16.5% (2010: 16.5%)                                   (720)               (1,961)
        Tax effect of expenses not deductible for tax purpose                                       187                   196
        Tax effect of income not taxable for tax purpose                                            (93)                  (42)
        Tax effect of tax losses and other deductible temporary differences
          not recognised                                                                            626                 1,807
        Under-provision in prior year                                                                 4                    —


        Income tax expense                                                                            4                    —

         At 31 March 2011, the Group had unused tax losses and other deductible temporary difference of approximately
  HK$20,247,000 (2010: HK$16,484,000) and HK$152,000 (2010: HK$123,000) respectively available for offsetting against
  future profits. No deferred tax asset has been recognised in respect of these tax losses and deductible temporary difference
  due to the unpredictability of future profit streams. The tax losses may be carried forward indefinitely.

  11.   DISCONTINUED OPERATION

         On 8 October 2009, the Group entered into a sale agreement with Good Billion Holdings Limited (‘‘Good Billion’’),
  a company wholly-owned by Mr. Tse On Kin, who is a substantial shareholder of the Group, to dispose of Climax
  Investments Limited and its subsidiaries (hereinafter collectively referred to as the ‘‘CIL Group’’), which carried out the
  Group’s paper products business.

         The disposal was effected in order to generate cash flows for the expansion of the Group’s electronic products
  business. The disposal was completed on 17 March 2010, on which date control of the CIL Group passed to the acquirer.

        The profit for the year from the discontinued operation is analysed as follows:

                                                                                             Year ended          Year ended
                                                                                          31 March 2011       31 March 2010
                                                                                               HK$’000             HK$’000

        Loss of paper products operation for the year attributable to the Group                      —                (11,470)
        Gain on disposal of paper products operation (Note 26)                                       —                 44,828


                                                                                                     —                 33,358




                                                       – I-35 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


         The results of the paper products operation for the period from 1 April 2009 to 17 March 2010, which have been
  included in the consolidated statement of comprehensive income, were as follows:

                                                                                           Year ended            Period ended
                                                                                        31 March 2011          17 March 2010
                                                                                             HK$’000                 HK$’000

        Revenue                                                                                      —                 12,768
        Cost of sales                                                                                —                (13,339)


        Gross loss                                                                                   —                   (571)
        Other revenue                                                                                —                  1,347
        Selling and distribution expenses                                                            —                   (811)
        Administrative expenses                                                                      —                (11,497)
        Finance costs                                                                                —                    (14)


        Loss before tax                                                                              —                (11,546)
        Income tax credit                                                                            —                     76


        Loss for the year/period                                                                     —                (11,470)

        Loss for the year/period from discontinued operation has been arrived at after charging (crediting):

                                                                                           Year ended            Period ended
                                                                                        31 March 2011          17 March 2010
                                                                                             HK$’000                 HK$’000

        Allowance for inventories                                                                    —                    200
        Release of non-current prepayments                                                           —                    524
        Loss on written off of plant and equipment                                                   —                  2,659
        Staff costs                                                                                  —                  6,573
        Rental income, net of outgoings included in administrative expenses
           of Nil (2010: HK$524,000)                                                                 —                   (666)

        No charge or credit arose on gain on discontinuance of the operation.

        Cash flows from discontinued operation:

                                                                                           Year ended            Period ended
                                                                                        31 March 2011          17 March 2010
                                                                                             HK$’000                 HK$’000

        Net cash outflows from operating activities                                                  —                   (850)
        Net cash inflows from investing activities                                                   —                  1,247
        Net cash outflows from financing activities                                                  —                   (289)


        Net cash inflows                                                                             —                    108

        The carrying amounts of the assets and liabilities of the CIL Group at the date of disposal were disclosed in Note 26.




                                                       – I-36 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


  12.   (LOSS) PROFIT FOR THE YEAR

        (Loss) profit for the year has been arrived at after charging:

                                                                                                 2011              2010
                                                                                              HK$’000           HK$’000

        Continuing operations

        Directors’ emoluments (Note 13)                                                             240             219
        Other staff costs                                                                         1,278             404
        Retirement benefit scheme contributions for staff                                            49              17


        Total staff costs                                                                         1,567             640


        Auditor’s remuneration                                                                     450              450
        Depreciation for plant and equipment                                                        63              243
        Exchange loss                                                                               59               —
        Loss on written off of plant and equipment                                                  —               951
        Impairment loss recognised in respect of deposits, prepayments
          and other receivables                                                                      —              454
        Impairment loss recognised in respect of amount due from a
          related company                                                                           —               320
        Deposits forfeited for early termination of a rental agreement                              —               691
        Lease payment in respect of rented premises                                                600            2,385

  13.   DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

        (i)    Directors’ emoluments

               The emoluments paid or payable to each of the 5 (2010: 6) directors were as follows:

                                                                                 Contributions
                                                                      Salaries   to retirement
                                                                    and other          benefits   Share-based
                                                         Fees         benefits          scheme       payment      Total
                                                      HK$’000        HK$’000          HK$’000        HK$’000    HK$’000

               Year ended 31 March 2011

               Executive directors
               Tse On Kin                                    60            —                —              —         60
               Wong Hin Shek                                 —             —                —              —         —


                                                             60            —                —              —         60


               Independent non-executive
                 directors
               Lau Man Tak                                   60            —                —              —         60
               Man Kwok Leung                                60            —                —              —         60
               Wong Yun Kuen                                 60            —                —              —         60


                                                            180            —                —              —        180


                                                            240            —                —              —        240




                                                        – I-37 –
APPENDIX I                                FINANCIAL INFORMATION OF THE GROUP


                                                                             Contributions
                                                                  Salaries   to retirement
                                                                and other          benefits   Share-based
                                                      Fees        benefits          scheme       payment       Total
                                                   HK$’000       HK$’000          HK$’000        HK$’000     HK$’000

            Year ended 31 March 2010

            Executive directors
            Tse On Kin (Note a)                           —            —                —              —           —
            Wong Hin Shek                                 —            —                —              —           —
            Chan Hoi Ling (Note b)                        39           —                —              —           39


                                                          39           —                —              —           39


            Independent non-executive
              directors
            Lau Man Tak                                   60           —                —              —           60
            Man Kwok Leung                                60           —                —              —           60
            Wong Yun Kuen                                 60           —                —              —           60


                                                       180             —                —              —          180


                                                       219             —                —              —          219

            Notes:

            (a)      Appointed on 31 March 2010.

            (b)      Resigned on 24 November 2009.

            No director has waived any emoluments during the two years ended 31 March 2011 and 2010.

     (ii)   Employees’ emoluments

           No director was included in the five highest paid individuals of the Group for the two years ended 31 March
     2011 and 2010. The emoluments of the five highest paid employees are as follows:

                                                                                             2011               2010
                                                                                          HK$’000            HK$’000

            Salaries and other benefits                                                       1,278              2,527
            Contributions to retirement benefits scheme                                          49                 24


                                                                                              1,327              2,551

            Emoluments of these employees were within the following bands:

                                                                                         Number of employee(s)
                                                                                            2011                 2010

            Nil to HK$1,000,000                                                                  5                  4
            HK$1,000,001 to HK$1,500,000                                                         —                  1


                                                                                                  5                 5




                                                     – I-38 –
APPENDIX I                                    FINANCIAL INFORMATION OF THE GROUP


               No emoluments have been paid by the Group to any of the directors of the Company and the five highest paid
        individuals as an inducement to join or upon joining the Group or as compensation for loss of office during the two
        years ended 31 March 2011 and 2010.

  14.   DIVIDEND

         No dividend was paid or proposed during the year ended 31 March 2011, nor has any dividend been proposed since
  the end of the reporting period (2010: Nil).

  15.   (LOSS) EARNINGS PER SHARE

        For continuing and discontinued operations

              The calculation of the basic and diluted (loss) earnings per share attributable to the owners of the Company is
        based on the loss for the year attributable to owners of the Company of approximately HK$4,371,000 (2010: profit
        of HK$21,473,000) and the following data:



                                                                                                  2011                   2010

               Number of shares

               Weighted average number of shares for the purpose of basic
                 and diluted (loss) earnings per share                                   1,148,661,140         1,148,661,140

        From continuing operations

              The calculation of the basic and diluted loss per share from continuing operations attributable to the owners of
        the Company is based on the following data:

               (Loss) earnings figures are calculated as follows:

                                                                                                 2011                   2010
                                                                                              HK$’000                HK$’000

               (Loss) profit for the year attributable to owners of the Company                  (4,371)               21,473
               Less:
               Profit for the year from discontinued operation                                       —                 33,358


               Loss for the purpose of basic and diluted loss per share from
                 continuing operations                                                           (4,371)               (11,885)

               The denominators used are the same as those detailed above for both basic and diluted loss per share.

        From discontinued operation

              Basic and diluted earnings per share for the discontinued operation is HK2.90 cents per share (2011: Nil),
        based on the profit for the year ended 31 March 2010 from the discontinued operation of approximately
        HK$33,358,000 (2011: Nil) and the denominators detailed above for both basic and diluted earnings per share.

               The computation of diluted earnings per share does not assume the exercise of the Company’s outstanding
        share options as the exercise price of those options is higher than the average market price for shares during two
        years ended 31 March 2011 and 2010 before the suspension of trading in shares on the Stock Exchange in September
        2008.




                                                       – I-39 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


  16.   PLANT AND EQUIPMENT

                                                                 Machinery
                                                  Furniture            and           Motor           Office
                                                and fixtures     equipment          vehicles     equipment          Total
                                                   HK$’000         HK$’000         HK$’000         HK$’000        HK$’000

        COST
        At 1 April 2009                                7,318         56,743            1,268            6,776       72,105
        Additions                                         43             —                —                —            43
        Written off                                   (6,985)       (56,743)          (1,268)          (6,776)     (71,772)


        At 31 March 2010 and
           31 March 2011                                 376             —                —               —            376


        DEPRECIATION
        At 1 April 2009                                5,864         54,300            1,057            6,771       67,992
        Provided for the year                            243             —                —                —           243
        Eliminated on written off                     (6,034)       (54,300)          (1,057)          (6,771)     (68,162)


        At 31 March 2010                                  73             —                —               —             73
        Provided for the year                             63             —                —               —             63


        At 31 March 2011                                 136             —                —               —            136


        CARRYING VALUES
        At 31 March 2011                                 240             —                —               —            240


        At 31 March 2010                                 303             —                —               —            303

        The above items of plant and equipment are depreciated over their estimated useful lives, using the straight-line
  method, at the following rates per annum:

        Furniture and fixtures                   8% — 33%
        Machinery and equipment                  8% — 14%
        Motor vehicles                           20%
        Office equipment                         10% — 20%

        As at 31 March 2011, the carrying value of furniture and fixtures in respect of assets held under finance lease was
  approximately HK$23,000 (2010: HK$29,000).

         During the year ended 31 March 2010, certain machinery and equipment related to the paper products operation has
  been fully written off as no future economic benefits were expected to arise from these assets.

  17.   TRADE RECEIVABLES

                                                                                               2011                  2010
                                                                                            HK$’000               HK$’000

        Trade receivables                                                                         21                39,494
        Less: impairment loss recognised                                                          —                     —


                                                                                                  21                39,494




                                                      – I-40 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


         The Group allows an average credit period of 90 days (2010: 90 days) to its trade customers. The following is an
  aged analysis of trade receivables net of impairment loss recognised presented based on the invoice date at the end of the
  reporting period. The Group did not hold any collateral over these balances.

                                                                                                2011                  2010
                                                                                             HK$’000               HK$’000

        Within 30 days                                                                             —                 34,099
        31–60 days                                                                                 9                  4,961
        61–90 days                                                                                 9                    252
        91–120 days                                                                                3                    171
        Over 120 days                                                                              —                     11


                                                                                                   21                39,494

          Included in the Group’s trade receivables balance are debtors with aggregate carrying amount of approximately
  HK$3,000 (2010: HK$182,000) which are past due as at the reporting date for which the Group has not provided for
  impairment loss. The Group does not hold any collateral over these balances. Trade receivables that were past due but not
  impaired relate to independent customers that have a good track record with the Group. Based on the past experience,
  management believes that no impairment allowance is necessary in respect of these balances as there has not been a
  significant change in credit quality and the balances are still considered fully recoverable.

        Ageing of trade receivables which are past due but not impaired

                                                                                                2011                  2010
                                                                                             HK$’000               HK$’000

        91–120 days                                                                                3                    171
        Over 120 days                                                                              —                     11


        Total                                                                                       3                   182

               Trade receivables that were neither past due nor impaired relate to customers for whom there was no recent
        history of default.

        Movement in the impairment loss on trade receivables

                                                                                                2011                  2010
                                                                                             HK$’000               HK$’000

        1 April                                                                                    —                  7,037
        Disposal of subsidiaries                                                                   —                 (7,037)


        31 March                                                                                   —                     —

               The Group did not hold any collateral over these balances. The factors considered by management in
        determining the allowance are described in note 4. It was assessed that the remaining portion of the receivables is
        expected to be recovered.




                                                      – I-41 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


  18.   DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

                                                                                                2011                   2010
                                                                                             HK$’000                HK$’000

        Other receivables                                                                           —                    454
        Less: impairment loss recognised                                                            —                   (454)


                                                                                                    —                     —
        Deposits and prepayments                                                                 1,211                   431
        Refundable deposit paid for acquisition of an investment                                 5,000                    —


                                                                                                 6,211                   431

        Movement in the impairment loss on deposits, prepayments and other receivables

                                                                                                2011                   2010
                                                                                             HK$’000                HK$’000

        1 April                                                                                    454                18,985
        Impairment loss recognised                                                                  —                    454
        Written off on receivables                                                                (454)                   —
        Disposal of subsidiaries                                                                    —                (18,985)


        31 March                                                                                    —                    454

                As at 31 March 2010, included in other receivables amounting approximately HK$454,000 was due from an
        investee of unlisted equity investments held by the Group and full amount of impairment loss was recognised during
        the year ended 31 March 2010. As at 31 March 2010, included in the impairment loss on deposits, prepayments and
        other receivables were individually impaired other receivables with an aggregate balance of approximately
        HK$454,000 since the management considered the prolonged outstanding balances were uncollectible. No impairment
        loss on deposits, prepayments and other receivables was included as at 31 March 2011. The Group did not hold any
        collateral over these balances. The factors considered by management in determining the impairment are described in
        note 4.

             Included in deposits, prepayments and other receivables as at 31 March 2011 are refundable deposit of
        HK$5,000,000 paid for acquisition of an investment.

                Pursuant to a conditional sale and purchase agreement entered into between the Company and an independent
        third party (the ‘‘Vendor’’), on 20 January 2011, the Vendor agreed to sell and the Company agreed to purchase the
        entire issued share capital of a company which, together with its subsidiaries, is principally engaged in manufacture
        and sale of paper packaging products and paper gift items and the printing of paper promotional materials.

               Details are set out in the Company’s announcement dated 9 February 2011.

               The proposed acquisition had not yet been completed at the date of this report.

  19.   HELD FOR TRADING INVESTMENTS

         The held for trading investments comprise equity securities listed in Hong Kong and are stated at fair values which
  are based on the quoted market bid prices on the Stock Exchange.

  20.   DEPOSITS IN OTHER FINANCIAL INSTITUTIONS

         The amounts represented deposits placed with securities brokers for trading listed securities in Hong Kong and
  carried interest at prevailing market rates for both years.




                                                      – I-42 –
APPENDIX I                                        FINANCIAL INFORMATION OF THE GROUP


  21.       BANK BALANCES AND CASH

            Bank balances and cash comprise bank balances carrying interest at prevailing market rates.

  22.       TRADE AND OTHER PAYABLES

                                                                                                    2011                 2010
                                                                                                 HK$’000              HK$’000

            Trade payables                                                                             —                38,381
            Other payables and accruals                                                             2,526                3,419


                                                                                                    2,526               41,800

            The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting
  period.

                                                                                                    2011                 2010
                                                                                                 HK$’000              HK$’000

            Within 30 days                                                                                —             33,604
            31–60 days                                                                                    —              4,777


                                                                                                          —             38,381

         The average credit period on purchases of goods is 90 days. The Group has financial risk management policies in
  place to ensure that all payables are settled within the credit timeframe.

  23.       OBLIGATION UNDER FINANCE LEASE

                                                                                                    2011                 2010
                                                                                                 HK$’000              HK$’000

            Analysed for reporting purposes as:

            Current liabilities                                                                            6                 5
            Non-current liabilities                                                                       18                24


                                                                                                          24                29




                                                          – I-43 –
APPENDIX I                                     FINANCIAL INFORMATION OF THE GROUP


         It is the Group’s policy to lease certain of its furniture and fixtures under finance lease. The contracted lease term is
  5 years. Interest rates are fixed at the contract date. For the year ended 31 March 2011, the average effective borrowing rate
  (which was also equal to contracted interest rates) is 7.68% (2010: 7.68%). The lease is on a fixed repayment basis and no
  arrangements have been entered into for contingent rental payments.

                                                                                                          Present value of
                                                           Minimum lease payments                     minimum lease payments
                                                                2011            2010                       2011              2010
                                                             HK$’000         HK$’000                    HK$’000           HK$’000

         Amounts payable under finance lease

         Within one year                                              7                     7                     6              5
         In more than one year but not more than
            two years                                                 7                     7                     6              6
         In more than two years but not more
            than five years                                         13                     20                 12                18


                                                                    27                     34                24                 29
         Less: Future finance charges                               (3)                    (5)              N/A                N/A


         Present value of lease obligation                          24                     29                 24                29


         Less: Amount due for settlement
                within one year shown under
                current liabilities                                                                           (6)                (5)


         Amount due for settlement after one year                                                             18                24

         The Group’s obligation under finance lease is secured by the lessors’ charge over the leased assets.

  24.    SHARE CAPITAL

                                                                             Number of            Par value per
                                                                                shares           ordinary share       Share capital
                                                                                                           HK$            HK$’000

         Authorised:
           At 1 April 2009, 31 March 2010 and
              31 March 2011                                               10,000,000,000                   0.01            100,000


         Issued and fully paid:
            At 1 April 2009, 31 March 2010 and
               31 March 2011                                               1,148,661,140                   0.01             11,486




                                                         – I-44 –
APPENDIX I                                              FINANCIAL INFORMATION OF THE GROUP


  25.   SHARE OPTIONS

         On 29 August 2002, the Company adopted a share option scheme (the ‘‘Scheme’’) which complies with the new
  requirements of Chapter 17 of the Listing Rules effective 1 September 2001.

        No option was granted during the year ended 31 March 2011 and 2010.

         The details of the movements in the number of options outstanding during the year which have been granted under
  the Scheme are as follows:

        Year ended 31 March 2011

                                                                                                  Number of share options
                                                                                                                                                       Weighted
                                                  Exercise     Exercise                Granted      Exercised      Lapsed    Cancelled                   average
        Category/              Date of grant        period        price Outstanding      during        during       during      during Outstanding closing price
        name of participant     (Notes 1&2)       (Note 1)    per share at 1.4.2010    the year      the year     the year    the year at 31.3.2011     (Note 3)
                                                                   HK$

        Director
        Wong Hin Shek              17.6.2008   17.6.2008 to     0.1740     9,000,000        —             —             —            —      9,000,000       N/A
                                                  16.6.2011

        Others
        In aggregate               17.6.2008   17.6.2008 to     0.1740    26,999,994        —             —             —            —     26,999,994       N/A
                                                  16.6.2011

        Total                                                             35,999,994        —             —             —            —     35,999,994


        Weighted average
           exercise price                                                    0.1740        N/A           N/A          N/A          N/A        0.1740

         The details of the movements in the number of options outstanding during the year which have been granted under
  the Scheme are as follows:

        Year ended 31 March 2010

                                                                                                  Number of share options
                                                                                                                                                       Weighted
                                                  Exercise     Exercise                Granted      Exercised      Lapsed    Cancelled                   average
        Category/              Date of grant        period        price Outstanding      during        during       during      during Outstanding closing price
        name of participant     (Notes 1&2)       (Note 1)    per share at 1.4.2009    the year      the year     the year    the year at 31.3.2010     (Note 3)
                                                                   HK$

        Director
        Wong Hin Shek              17.6.2008   17.6.2008 to     0.1740     9,000,000        —             —             —            —      9,000,000       N/A
                                                  16.6.2011

        Employees and others
        In aggregate               30.4.2007   30.4.2007 to     0.2084     6,180,000        —             —             —    (6,180,000)          —         N/A
                                                  29.4.2010
                                                   (Note 4)

                                   17.6.2008   17.6.2008 to     0.1740    26,999,994        —             —             —            —     26,999,994       N/A
                                                  16.6.2011

                                                                          33,179,994        —             —             —    (6,180,000)   26,999,994

        Total                                                             42,179,994        —             —             —    (6,180,000)   35,999,994


        Weighted average
           exercise price                                                    0.1790        N/A           N/A          N/A       0.2084        0.1740




                                                                   – I-45 –
APPENDIX I                                     FINANCIAL INFORMATION OF THE GROUP


        Notes:

        (1)      All dates are shown day/month/year.

        (2)      The vesting period of the options is from the date of grant until the commencement of the exercise period.

        (3)      The weighted average closing price of the Company’s shares immediately before the dates on which the
                 options were exercised.

        (4)      The grantee of the share options is no longer the employee of the Group after the completion of disposal of
                 the CIL Group on 17 March 2010. Those share options lapsed on the date of cessation of the employment
                 with the Group.

  26.   DISPOSAL OF SUBSIDIARIES

         As referred to in note 11, on 17 March 2010, the Group discontinued its paper products operation at the time of
  disposal of its subsidiaries, the CIL Group. The net liabilities of the CIL Group at the date of disposal were as follows:

                                                                                                                     HK$’000

        Prepayments — non-current                                                                                        9,693
        Trade receivables                                                                                                2,497
        Deposits, prepayments and other receivables                                                                      6,235
        Bank balances and cash                                                                                             158
        Trade and other payables                                                                                       (56,867)
        Income tax payable                                                                                              (2,136)
        Obligation under finance lease — amount due within one year                                                       (492)
        Amount due to ultimate holding company                                                                        (364,843)
        Amount due to a fellow subsidiary                                                                                 (320)


        Net liabilities disposed of                                                                                   (406,075)
        Translation reserve realised on disposal of subsidiaries                                                        (1,096)
        Disposal of the total indebtedness owned by the CIL Group to the Company at the date of
           disposal                                                                                                   364,843
        Gain on disposal                                                                                               44,828


        Total consideration                                                                                              2,500


        Satisfied by:
           Cash                                                                                                          2,500
        Net cash inflow arising from disposal:
          Cash consideration                                                                                             2,500
          Bank balances and cash disposed of                                                                              (158)


                                                                                                                         2,342

        The impact of the CIL Group on the Group’s results and cash flows in the prior period is disclosed in note 11.

  27.   COMMITMENTS

                                                                                                  2011                  2010
                                                                                               HK$’000               HK$’000

        Capital expenditure in respect of acquisition of assets contracted
          but not provided in the consolidated financial statements                                 565                  1,420




                                                        – I-46 –
APPENDIX I                                   FINANCIAL INFORMATION OF THE GROUP


  28.   OPERATING LEASES

        The Group as lessee

                                                                                                2011                   2010
                                                                                             HK$’000                HK$’000

        Minimum lease payments paid under operating leases during the year:
         Premises                                                                                  600                 2,385

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

                                                                                                2011                   2010
                                                                                             HK$’000                HK$’000

        Within one year                                                                             —                    550

         Operating lease payments represent rentals payable by the Group for its office premises. Leases are negotiated for a
  term of one year. The lease payments are fixed and no arrangements have been entered into for contingent rental.

  29.   RETIREMENT BENEFITS SCHEME

        Hong Kong

                A retirement plan has been established for all eligible employees of the Group in Hong Kong starting from 1
        January 1996. Eligible employees enjoy a defined contribution scheme to which the employees and the Group
        contribute 5% and 5-10% of monthly salary respectively. Employees under the defined contribution scheme are
        entitled to 100% of the employers’ contribution and the accrued interest upon retirement or leaving the Group after
        completing ten years of service counting from the date of joining the Group, or at a reduced scale of between 30%
        and 90% after completing three to nine years of service counting from the date of joining the Group. From 1
        December 2000 onwards, staff in Hong Kong are required to join the new Mandatory Provident Fund Scheme (the
        ‘‘MPF Scheme’’). Contributions to the MPF Scheme are made in accordance with the statutory limits prescribed by
        the Mandatory Provident Fund Ordinance.

                                                                                                2011                   2010
                                                                                             HK$’000                HK$’000

               Employers’ contributions under defined contribution schemes
                 and MPF Scheme                                                                     49                    66

        The PRC

                No defined contribution retirement scheme organised by the government in PRC was noted for the year ended
        31 March 2011. For the year ended 31 March 2010, the Group participates in a defined contribution retirement
        scheme organised by the government in PRC. All employees of the Group in PRC are entitled to an annual pension
        equal to a fixed portion of their individual final basic salaries at their retirement date. The Group is required to
        contribute a specified percentage of the payroll of its employees to the retirement scheme. The total contribution
        incurred in connection with the scheme for the year ended 31 March 2010 was approximately HK$81,000. No
        forfeited contributions may be used by the employers to reduce the existing level of contributions.




                                                       – I-47 –
APPENDIX I                                         FINANCIAL INFORMATION OF THE GROUP


  30.      RELATED PARTY TRANSACTIONS

         Other than as disclosed elsewhere in the consolidated financial statements, during the year the Group entered into the
  following related party transactions:

           (i)     on 17 March 2010, the Company completed the disposal of the entire interest in CIL Group to Good Billion
                   Holdings Limited, which is wholly-owned by Mr. Tse On Kin, a substantial shareholder and the director of the
                   Company. Details of the disposal are stated in notes 11 and 26 respectively.

           (ii)    the Group paid rent amounting HK$600,000 during the year ended 31 March 2011 (2010: HK$400,000) to
                   Kingston Property Investment Limited, of which Mr. Tse On Kin is one of the directors since 29 July 2009.

           (iii)   no consultancy fees was paid to Mr. Chan Hoi Lam during the year ended 31 March 2011 (2010:
                   HK$207,000).

           The remuneration of key management of the Group is set out in note 13.

  31.      PRINCIPAL SUBSIDIARIES

                                                            Issued and
                                                             fully paid
                                                                share/
                                           Place of          registered   Percentage of nominal value of issued share/
           Name of subsidiary              incorporation        capital     registered capital held by the Company              Principal activities
                                                                                  2011                      2010
                                                                            directly     indirectly   directly     indirectly


           New Able Investments Limited    British Virgin        US$1         100%              —       100%              — Investment holding
                                              Islands


           New Able Trading Limited        Hong Kong             HK$1        100%               —       100%              — Trading of electronic
                                                                                                                                   products


           Instant Up Limited              Hong Kong             HK$1         100%              —       100%              — Provision of
                                                                                                                                   administrative
                                                                                                                                   services


           Advance Summit Limited (Note)   British Virgin        US$1         100%              —          —              — Inactive
                                              Islands


           Note:

           The Company was incorporated on 15 June 2010.

           None of the subsidiaries had any debt securities outstanding at 31 March 2011 and 2010 or at anytime during both
  years.




                                                            – I-48 –
APPENDIX I                                       FINANCIAL INFORMATION OF THE GROUP


  32.   THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY

                                                                                               2011                  2010
                                                                          Notes             HK$’000               HK$’000

        Non-current assets
          Plant and equipment                                                                     183                 233
          Investments in subsidiaries                                                              —                   —

                                                                                                  183                 233

        Current assets
          Amounts due from subsidiaries                                    (a)                  64,921              2,833
          Deposits, prepayments and other receivables                                            6,101                270
          Bank balances                                                                              6                  7

                                                                                                71,028              3,110

        Current liabilities
          Accruals and other payables                                                            2,526              3,176
          Amounts due to subsidiaries                                      (a)                   1,069                163

                                                                                                 3,595              3,339

        Net current assets (liabilities)                                                        67,433               (229)

        Total assets less current liabilities                                                   67,616                   4


        Capital and reserves
          Share capital                                                                         11,486              11,486
          Reserves                                                         (b)                  56,130             (11,482)

        Total equity                                                                            67,616                   4

        Notes:

        (a)      The amounts are unsecured, interest-free and repayable on demand.

        (b)      The movement of reserves of the Company is as follows:

                                                                      Share
                                                       Share         options      Contributed Accumulated
                                                    premium          reserve          surplus       losses          Total
                                                    HK$’000         HK$’000          HK$’000      HK$’000         HK$’000

                 At 1 April 2009                      131,205          2,935          103,941       (292,540)      (54,459)
                 Profit for the year and total
                    comprehensive income for
                    the year                               —                —             —              42,977    42,977
                 Cancellation of share options             —              (675)           —                 675        —

                 At 31 March 2010                     131,205          2,260          103,941       (248,888)      (11,482)
                 Profit for the year and total
                    comprehensive income for
                    the year                               —                —             —              67,612    67,612

                 At 31 March 2011                     131,205          2,260          103,941       (181,276)      56,130




                                                       – I-49 –
     APPENDIX I                           FINANCIAL INFORMATION OF THE GROUP


2.     FINANCIAL AND TRADING PROSPECTS

      Before the Suspension, the Group was engaged in the design, development, production and
marketing of paper products. Subsequently in 2009, the Group established the business of trading of
electronic products. Taking into account the substantial net liabilities position and the continued loss of
the then paper business of the Group, the Company decided to dispose of the paper business in October
2009. Following the completion of such disposal in March 2010, the then Group’s principal activity was
trading of electronic products. Revenue generated from the electronics business had been decreasing
since the financial year ended 31 March 2011. For the six months ended 30 September 2011, the Group
did not record any revenue.

     The Target Group is principally engaged in the manufacture and sale of paper packaging products
and paper gift items and the printing of paper promotional materials in accordance with customers’
designs and specifications. As such, the principal business of the Target Group is similar to that of the
Group prior to the Suspension, being engaging in the design, development and production of paper
products.

      Upon completion of the Acquisition, it is expected that (i) the Acquisition will generate an
additional income to the Group; (ii) the adjustment mechanism to the Consideration facilitates the
safeguard of the 2012 Guaranteed Amount; and (iii) the Board believes that the Company would have
sufficient level of operations and assets under Rule 13.24 of the Listing Rules.

3.     MANAGEMENT DISCUSSION AND ANALYSIS

       Management Discussion and Analysis on the Group

             Set out below is the management discussion and analysis of the performance of the Group for
       the three years ended 31 March 2009, 2010 and 2011.

       Business and Financial Review

           For the year ended 31 March 2009, the Group commenced the business of electronic products
       and recorded turnover of approximately HK$3.9 million and gross profit of approximately
       HK$32,000. Net loss for the year ended 31 March 2009 was approximately HK$100 million.

             For the year ended 31 March 2010, the Group recorded turnover of approximately HK$166.9
       million and gross profit of approximately HK$1.7 million. Net profit for the year ended 31 March
       2010 was approximately HK$21.5 million. The turnover was mainly contributed from the
       electronic business. Due to the poor performance of the paper business, the Company decided to
       dispose of it in October 2009 and re-allocated resources in the electronic business. The net profit
       mainly contributed from the profit for the year from the discontinued paper business which
       included the gain on disposal of the paper business of approximately HK$44.8 million.

             For the year ended 31 March 2011, the Group recorded turnover of approximately HK$87.4
       million and gross profit of approximately HK$1.3 million. Net loss for the year ended 31 March
       2011 was approximately HK$4.4 million.




                                                 – I-50 –
APPENDIX I                           FINANCIAL INFORMATION OF THE GROUP


        Upon the completion of the Acquisition, the results of the Target Group will be consolidated
  into the results of the Group using the purchase method. Approximately HK$89.4 million goodwill
  will be aroused from the Acquisition as set out in Appendix III of this Circular. Kovas Magni
  Appraisal Limited, an independent valuer, has been engaged to perform an impairment review on
  goodwill as if the Target Group has been consolidated into the Company. The basis of assessment
  includes (i) reviewed 5-years profit and cash flow projections of the Target Group; (ii) reviewed
  the assumptions made; (iii) discussed with the management of the Target Group; and (iv) taken
  into account of discount factors. Based on the assessment result, the recoverable amount of the
  goodwill exceeds its carrying amount. Therefore, no material impairment on goodwill is expected.
  The accounting standards adopted for the impairment review on goodwill is in accordance with the
  current accounting standards issued by the Hong Kong Institute of Certified Public Accountants
  which is the accounting standards adopted by the Group for the preparation of the annual report for
  the year ended 31 March 2011.

  Capital Structure

      On 23 June 2008, 191,000,000 ordinary shares of HK$0.01 each in the capital of the
  Company were issued pursuant to a placing agreement in relation to placing of new shares of the
  Company at the placing price of HK$0.159 per placing share.

       On 30 September 2008, 6 ordinary shares of HK$0.01 each in the capital of the Company
  were issued upon exercise of share options granted on 17 June 2008.

        During the year ended 31 March 2010 and 2011, the Group had no changes in the capital
  structure.

  Liquidity, Financial Resources and Gearing Ratio

        As at 31 March 2009, the audited total assets, total liabilities and net assets of the Group
  amounted to approximately HK$113.0 million, HK$60.7 million and HK$52.3 million respectively.
  The aggregate of deposits in other financial institution and cash and bank balances as at 31 March
  2009 amounted to approximately HK$72.5 million. The gearing ratio, defined as the percentage of
  total liabilities to total equity, as at 31 March 2009 was approximately 1.16.

        As at 31 March 2010, the audited total assets, total liabilities and net assets of the Group
  amounted to approximately HK$114.5 million, HK$41.8 million and HK$72.7 million respectively.
  The aggregate of deposits in other financial institution and cash and bank balances as at 31 March
  2010 amounted to approximately HK$69.8 million. The gearing ratio, defined as the percentage of
  total liabilities to total equity, as at 31 March 2010 was approximately 0.58.

        As at 31 March 2011, the audited total assets, total liabilities and net assets of the Group
  amounted to approximately HK$70.8 million, HK$2.6 million and HK$68.3 million respectively.
  The aggregate of deposits in other financial institution and cash and bank balances as at 31 March
  2011 amounted to approximately HK$60.1 million. The gearing ratio, defined as the percentage of
  total liabilities to total equity, as at 31 March 2011was approximately 0.04.




                                            – I-51 –
APPENDIX I                           FINANCIAL INFORMATION OF THE GROUP


  Material Acquisitions and Disposals

       During the year ended 31 March 2009, the Group had no material acquisition and disposal.

       On 17 March 2010, the Group disposed of the CIL Group and assigned all the debts due
  from the CIL Group to the purchaser at approximately HK$2.5 million which resulted in a gain on
  disposal of approximately HK$44.8 million. The CIL Group was engaged in the paper products
  business. Upon the disposal of paper products business, resources were reallocated to electronic
  products business.

       During the year ended 31 March 2011, the Group had no material acquisition and disposal.

  Capital Commitment

       As at 31 March 2009, the Group was committed to purchase plant and equipment of
  approximately HK$12.7 million and construction project of approximately HK$0.9 million.

       As at 31 March 2010 and 2011, the Group was committed to purchase plant and equipment
  of approximately HK$1.4 million and HK$0.6 million respectively.

  Contingent liabilities

       During the year ended 31 March 2009, the Group had the following litigations:

       (a)   On 27 August 2008, Climax Paper Converters, Limited and Climax Paper Products
             Manufacturing (Dongguan) Co., Ltd, the then wholly-owned subsidiaries of the
             Company which were disposed of on 17 March 2010, were sued by their customer for
             a balance of deposit in aggregate of approximately RMB2.9 million together with
             interest. The Group had proper and valid defences, therefore, no provision for the claim
             was made as at 31 March 2009.

       (b)   On 18 March 2009, Climax Paper Converters, Limited, the then wholly-owned
             subsidiary which was disposed of on 17 March 2010, was sued for approximately
             HK$1.4 million plus costs and interest in respect of goods purchase. Judgment was
             issued on 8 April 2009. The Group had accrued for such balance plus costs and interest
             as at 31 March 2009.

       (c)   On 30 March 2009, Shiu’s Investments Limited and Climax Paper Converters, Limited,
             the then wholly-owned subsidiaries which were disposed of on 17 March 2010, were
             sued by their supplier for approximately HK$4.1 million in aggregate plus costs and
             interest in respect of goods purchase. Judgment was issued on 7 July 2009. The Group
             had accrued for such balance plus costs and interest as at 31 March 2009.

       (d)   On 29 May 2009, Climax Marketing Company Limited, the then wholly-owned
             subsidiary which was disposed of on 17 March 2010, was sued by its supplier for
             approximately HK$0.3 million plus costs and interest in respect of goods purchase.
             Notice of intention to enter judgment was served on 10 July 2009. The Group had
             accrued for such balance plus costs and interest as at 31 March 2009.




                                            – I-52 –
  APPENDIX I                                      FINANCIAL INFORMATION OF THE GROUP


             (e)    On 5 March 2009, the Company was sued for recovery of approximately HK$0.2
                    million under the lease and guarantees agreements with Orix Asia Limited. On 16 April
                    2009, judgment has been issued. The Group had accrued for such balances plus costs
                    and interest as at 31 March 2009.

             (f)    On 29 May 2009, the Company was sued for approximately HK$1.2 million plus costs
                    and interest in respect of goods purchase. Judgment was issued on 11 August 2008. The
                    Group had accrued for such balance plus costs and interest as at 31 March 2009.

             (g)    On 17 February 2008, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery
                    Factory*), Shiu’s Investments Limited, Climax Paper Products Manufacturing
                    (Dongguan) Co., Ltd, Climax Paper Converters, Limited and Climax Marketing
                    Company Limited, the then wholly-owned subsidiaries which were disposed of on 17
                    March 2010, were sued by their suppliers for approximately RMB1.0 million plus costs
                    and interest in respect of goods purchase. The Group had accrued for such balance plus
                    costs and interest as at 31 March 2009.

             (h)    On 6 March 2009, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery
                    Factory*), Shiu’s Investments Limited and Climax Paper Products Manufacturing
                    (Dongguan) Co., Ltd, the then wholly-owned subsidiaries which were disposed of on 17
                    March 2010, were sued by their suppliers for approximately RMB0.6 million plus costs
                    and interest in respect of goods purchase. The Group had accrued for such balance plus
                    costs and interest as at 31 March 2009.

             (i)    On 5 November 2008, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery
                    Factory*), Shiu’s Investments Limited, Climax Paper Converters, Limited and Climax
                    Paper Products Manufacturing (Dongguan) Co., Ltd, the then wholly-owned subsidiaries
                    which were disposed of on 17 March 2010, were sued by their suppliers for
                    approximately RMB0.4 million plus costs and interest in respect of goods purchase.
                    The Group had accrued for such balance plus costs and interest as at 31 March 2009.

             (j)    On 9 June 2009, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery
                    Factory*), the then wholly-owned subsidiary which was disposed of on 17 March 2010,
                    was sued by its employee for approximately RMB0.9 million in respect of
                    compensation of medication and treatment from suffering leukemia. Judgment was
                    issued on 16 July 2009. The Group had accrued for such balance plus costs and interest
                    as at 31 March 2009.

             (k)    On 5 November 2008, 東莞長安肇業文具制品廠 (Dongguan Changan Shiu’s Stationery
                    Factory*) and Shiu’s Investments Limited, the then wholly-owned subsidiaries which
                    were disposed of on 17 March 2010, were sued by their supplier for approximately
                    RMB0.1 million in respect of goods purchase. Accommodation was reached between
                    the parties. The Group had accrued for such balance as at 31 March 2009.

           Upon the disposal of the CIL Group on 17 March 2010, there was no financial and other
      impact on the Group in respect of the above litigations as the CIL Group was no longer the
      subsidiaries of the Company.

* The English names are for identification purpose only. The official name is in Chinese


                                                           – I-53 –
     APPENDIX I                            FINANCIAL INFORMATION OF THE GROUP


             As at 31 March 2010 and 2011, the Group had no material contingent liabilities.

       Employees and Remuneration Policy

             As at 31 March 2009, 2010 and 2011, the Group had 163, 5, 4 employees respectively.

            Remuneration was determined by reference to market terms and the qualifications and
       experience of the staff concerned.

       Pledged of assets

             As at 31 March 2009, the Group pledged plant and equipment with carrying value of HK$nil
       after full impairment of approximately HK$1.5 million to financial institutions to secure the
       Group’s obligation under finance leases.

            As at 31 March 2010 and 2011, the Group pledged furniture and fixtures with carrying value
       of HK$0.029 million and HK$0.023 million respectively to secure the Group’s obligation under
       finance leases.

       Foreign Exchange Exposure

             The Group’s business activities and its assets and liabilities were denominated in HK$ and
       United States dollars. The management of the Group considers the exposure to foreign currency
       risk is insignificant.

4.     THE AUDITORS’ REPORTS FOR THE THREE YEARS ENDED 31 MARCH 2011

    Set out below independent auditor’s report as extracted from each of the annual reports of the
Company for the three years ended 31 March 2011.

       (a)   For the year ended 31 March 2011

             We have audited the consolidated financial statements of Climax International Company
             Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) set
             out on pages 22 to 69, which comprise the consolidated statement of financial position as at
             31 March 2011, and the consolidated statement of comprehensive income, consolidated
             statement of changes in equity and consolidated statement of cash flows for the year then
             ended, and a summary of significant accounting policies and other explanatory information.

             DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL
             STATEMENTS

                  The directors of the Company are responsible for the preparation of consolidated
             financial statements that give a true and fair view in accordance with Hong Kong Financial
             Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and
             the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal
             control as the directors determine is necessary to enable the preparation of consolidated
             financial statements that are free from material misstatement, whether due to fraud or error.




                                                  – I-54 –
APPENDIX I                         FINANCIAL INFORMATION OF THE GROUP


     AUDITOR’S RESPONSIBILITY

           Our responsibility is to express an opinion on these consolidated financial statements
     based on our audit and to report our opinion solely to you, as a body, in accordance with
     Section 90 of the Bermuda Companies Act, and for no other purpose. We do not assume
     responsibility towards or accept liability to any other person for the contents of this report.
     Except for the limitation in the scope of our work as described below, we conducted our
     audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong
     Institute of Certified Public Accountants. Those standards require that we comply with ethical
     requirements and plan and perform the audit to obtain reasonable assurance as to whether the
     consolidated financial statements are free from material misstatement.

           An audit involves performing procedures to obtain audit evidence about the amounts
     and disclosures in the consolidated financial statements. The procedures selected depend on
     the auditor’s judgement, including the assessment of the risks of material misstatement of the
     consolidated financial statements, whether due to fraud or error. In making those risk
     assessments, the auditor considers internal control relevant to the entity’s preparation of the
     consolidated financial statements that give a true and fair view in order to design audit
     procedures that are appropriate in the circumstances, but not for the purpose of expressing an
     opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
     the appropriateness of accounting policies used and the reasonableness of accounting
     estimates made by the directors, as well as evaluating the overall presentation of the
     consolidated financial statements.

          We believe that the audit evidence we have obtained is sufficient and appropriate to
     provide a basis for our audit opinion.

     BASIS FOR QUALIFIED OPINION

     Corresponding figures

            As explained in our independent auditor’s report dated 13 July 2010 on the Group’s
     consolidated financial statements for the year ended 31 March 2010, due to the lost of
     accounting books and records and high turnover rate of accounting personnel of Climax
     Investments Limited and its subsidiaries (collectively referred to as the ‘‘CIL Group’’), which
     was disposed of during the year ended 31 March 2010, we were unable to obtain sufficient
     appropriate audit evidence to ascertain the appropriateness of the profit for the year from
     discontinued operation of HK$33,358,000 as recorded in the Group’s consolidated statement
     of comprehensive income for the year ended 31 March 2010, which included loss for the year
     of the CIL Group attributed to the Group of HK$11,470,000 and the gain on disposal of the
     CIL Group of HK$44,828,000, and the related amounts recorded in the consolidated
     statement of cash flows and the related amounts disclosed in the notes to the consolidated
     financial statements in respect of CIL Group for the year ended 31 March 2010. In addition,
     we were unable to obtain sufficient reliable evidence to satisfy ourselves as to the existence,
     accuracy and completeness of the adjustment and/or disclosures in relation to the contingent
     liabilities, commitment and pledge of assets of the CIL Group arising from the lawsuits and




                                           – I-55 –
APPENDIX I                            FINANCIAL INFORMATION OF THE GROUP


        claims against it during the year ended 31 March 2010 and upon its disposal. We issued a
        ‘‘disclaimer opinion’’ on the consolidated financial statements for the year ended 31 March
        2010 in respect of this scope limitation accordingly.

              Any adjustments that might have been found necessary in respect of the above would
        have had a consequential impact on the related amounts recorded in the consolidated
        statement of comprehensive income and consolidated statement of cash flows; and the related
        disclosures thereof for the year ended 31 March 2010.

        QUALIFIED OPINION ON THE LOSS AND CASH FLOWS ARISING FROM
        LIMITATION OF SCOPE

             In our opinion, except for the possible effects of any adjustments that might have been
        determined to be necessary had we been able to obtain sufficient information concerning the
        matters as described in the basis for qualified opinion paragraph, the consolidated statement
        of comprehensive income and the consolidated statement of cash flows give a true and fair
        view of the Group’s loss and cash flows for the year ended 31 March 2011 in accordance
        with Hong Kong Financial Reporting Standards and have been properly prepared in
        accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

        OPINION ON THE FINANCIAL POSITION

              In our opinion, the consolidated statement of financial position gives a true and fair
        view of the state of affairs of the Group as at 31 March 2011 in accordance with Hong Kong
        Financial Reporting Standards and have been properly prepared in accordance with the
        disclosure requirements of the Hong Kong Companies Ordinance.

  (b)   For the year ended 31 March 2010

        We were engaged to audit the consolidated financial statements of Climax International
        Company Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the
        ‘‘Group’’) set out on pages 22 to 83, which comprise the consolidated statement of financial
        position as at 31 March 2010, and the consolidated statement of comprehensive income, the
        consolidated statement of changes in equity and the consolidated statement of cash flows for
        the year then ended, and a summary of significant accounting policies and other explanatory
        notes.

        DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL
        STATEMENTS

              The directors of the Company are responsible for the preparation and the true and fair
        presentation of these consolidated financial statements in accordance with Hong Kong
        Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
        Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This
        responsibility includes designing, implementing and maintaining internal control relevant to
        the preparation and the true and fair presentation of the consolidated financial statements that




                                              – I-56 –
APPENDIX I                         FINANCIAL INFORMATION OF THE GROUP


     are free from material misstatement, whether due to fraud or error; selecting and applying
     appropriate accounting policies; and making accounting estimates that are reasonable in the
     circumstances.

     AUDITOR’S RESPONSIBILITY

           Our responsibility is to express an opinion on these consolidated financial statements
     based on our audit and to report our opinion solely to you, as a body, in accordance with
     Section 90 of the Bermuda Companies Act and for no other purpose. We do not assume
     responsibility towards or accept liability to any other person for the contents of this report.
     Except for the limitation in the scope of our work as explained below, we conducted our
     audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong
     Institute of Certified Public Accountants. Those standards require that we comply with ethical
     requirements and plan and perform the audit to obtain reasonable assurance as to whether the
     consolidated financial statements are free from material misstatement.

           However, because of the matters described in the basis for disclaimer of opinion
     paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a
     basis for an audit opinion.

     BASIS FOR DISCLAIMER OF OPINION

           We were unable to obtain sufficient appropriate audit evidence in respect of the
     financial information of one of the Group’s subsidiaries, Climax Paper Products
     Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’), when we conducted the audit of the
     consolidated financial information of the Group as at 31 March 2009 and for the year then
     ended, and a disclaimer opinion on such financial statements was issued on 31 July 2009. As
     a result, the opening balances and related disclosures of the consolidated financial statements
     of the Group as at 1 April 2009 might have been significantly different had we been able to
     obtain such evidence.

           As explained in note 1.2 to the consolidated financial statements, management was still
     unable to make available to us the complete and accurate financial information of CPD as a
     result of the lost of the accounting books and records of CPD during relocation of factory
     due to cessation of business in the year ended 31 March 2009 and such books and records
     were not able to be recovered. In addition, during the year ended 31 March 2010, Climax
     Investments Limited (‘‘CIL’’), the indirect controlling shareholder of CPD, was sold to Good
     Billion Holdings Limited, a connected person and a related party of the Company. The
     disposal was completed in March 2010. Certain accounting books and records of CIL and its
     subsidiaries (which included CPD and collectively referred to as the ‘‘CIL Group’’) were lost
     during relocation of office of the CIL Group in October 2009 and not be able to be recovered
     due to the high turnover rate of accounting personnel as a result of lack of financial resources
     of the CIL Group. Furthermore, as a result of the lost of accounting books and records and
     the high turnover rate of accounting personnel of the CIL Group, the directors of the
     Company were unable to provide us with complete information of the status of the lawsuits
     and claims of the CIL Group during the year and upon the completion of its disposal.




                                           – I-57 –
APPENDIX I                            FINANCIAL INFORMATION OF THE GROUP


              Against this background, we were unable to obtain sufficient appropriate audit evidence
        to ascertain the appropriateness of the profit for the year from discontinued operation of
        HK$33,358,000 as recorded in the Group’s consolidated statement of comprehensive income
        for the year ended 31 March 2010, which included loss for the year of the CIL Group
        attributed to the Group of HK$11,470,000 and the gain on disposal of the CIL Group of
        HK$44,828,000, and the related disclosures included in notes 11 and 31 respectively to the
        consolidated financial statements. In addition, we were unable to obtain sufficient reliable
        evidence to satisfy ourselves as to the existence, accuracy and completeness of the
        adjustment and/or disclosures in relation to the contingent liabilities, commitment and pledge
        of assets of the CIL Group arising from the lawsuits and claims against it during the year and
        upon its disposal. Consequently we were not able to determine whether any adjustments to
        the amounts and related disclosures might have been necessary had we been able to obtain
        such financial information.

              There were no other satisfactory audit procedures that we could adopt to obtain
        sufficient evidence regarding the abovementioned matters. Accordingly, we have not been
        able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
        Any adjustment to these figures may have a consequential significant effect on the opening
        balances of the consolidated financial statements of the Group as at 1 April 2009 and the
        profit of the Group for the year ended 31 March 2010.

        DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY LIMITATION OF
        SCOPE

              Because of the significance of the matters described in the basis for disclaimer of
        opinion paragraphs, we do not express an opinion on the consolidated financial statements as
        to whether they give a true and fair view of the state of affairs of the Group as at 31 March
        2010 and of its profit and cash flows for the year then ended in accordance with Hong Kong
        Financial Reporting Standards. In all other aspects, in our opinion the consolidated financial
        statements have been properly prepared in accordance with the disclosure requirements of the
        Hong Kong Companies Ordinance.

  (c)   For the year ended 31 March 2009

        We were engaged to audit the consolidated financial statements of Climax International
        Company Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the
        ‘‘Group’’) set out on pages 23 to 79, which comprise the consolidated balance sheet as at 31
        March 2009, and the consolidated income statement, the consolidated statement of changes in
        equity and the consolidated cash flow statement for the year then ended, and a summary of
        significant accounting policies and other explanatory notes.

        DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL
        STATEMENTS

             The directors of the Company are responsible for the preparation and the true and fair
        presentation of these consolidated financial statements in accordance with Hong Kong
        Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
        Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This



                                             – I-58 –
APPENDIX I                         FINANCIAL INFORMATION OF THE GROUP


     responsibility includes designing, implementing and maintaining internal control relevant to
     the preparation and the true and fair presentation of the consolidated financial statements that
     are free from material misstatement, whether due to fraud or error; selecting and applying
     appropriate accounting policies; and making accounting estimates that are reasonable in the
     circumstances.

     AUDITOR’S RESPONSIBILITY

           Our responsibility is to express an opinion on these consolidated financial statements
     based on our audit and to report our opinion solely to you, as a body, in accordance with
     Section 90 of the Bermuda Companies Act and for no other purpose. We do not assume
     responsibility towards or accept liability to any other person for the contents of this report.
     Except for the limitation in the scope of our work as explained below, we conducted our
     audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong
     Institute of Certified Public Accountants. Those standards require that we comply with ethical
     requirements and plan and perform the audit to obtain reasonable assurance as to whether the
     consolidated financial statements are free from material misstatement.

           However, because of the matters described in the basis for disclaimer of opinion
     paragraphs, we were not able to obtain sufficient appropriate audit evidence to provide a
     basis for an audit opinion.

     BASIS FOR DISCLAIMER OF OPINION

           Our report on the consolidated financial statements of the Group for the year ended 31
     March 2009 was disclaimed in view of the significance of the limitations in the scope of our
     audit resulting from insufficiency of supporting documentation and explanations. The
     accounting books and records of a Group’s subsidiary, namely Climax Paper Products
     Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’) located in Dongguan, were lost during
     relocation of factory due to cessation of business and not be able to be recovered. As a result,
     we were unable to carry out audit procedures to satisfy ourselves as to whether the income,
     expenses, assets and liabilities relating to CPD which have been included in the consolidated
     financial statements of the Group as stated below have been accurately recorded and properly
     accounted for in the consolidated financial statements:

          Income and expenses for the year ended 31 March 2009:

          Turnover                                                                    HK$1,070,000
          Cost of sales                                                               HK$8,063,000
          Other income                                                                HK$2,569,000
          Selling and distribution expenses                                             HK$44,000
          Administrative expenses                                                     HK$6,767,000
          Impairment loss recognised in respect of deposits,
            prepayment and other receivable                                             HK$215,000




                                           – I-59 –
     APPENDIX I                            FINANCIAL INFORMATION OF THE GROUP


                   Assets and liabilities as at 31 March 2009 (in gross amount):

                   Deposits, prepayments and other receivables                                 HK$808,000
                   Bank balances and cash                                                       HK$28,000
                   Trade and other payables                                                   HK$2,036,000
                   Tax payables                                                               HK$1,810,000

                 We were also unable to obtain sufficient reliable evidence to satisfy ourselves as to
            whether the Group has any significant contingent liabilities and commitment in respect of
            CPD that need to be adjusted for or disclosed in the consolidated financial statements.

                  There were no other satisfactory audit procedures that we could adopt to obtain
            sufficient evidence regarding the abovementioned matters. Accordingly, we have not been
            able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
            Any adjustment to these figures may have a consequential significant effect on the loss for
            the year and net assets at 31 March 2009.

            DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY LIMITATION OF
            SCOPE

                  Because of the significance of the matters described in the basis for disclaimer of
            opinion paragraphs, we do not express an opinion on the consolidated financial statements as
            to whether they give a true and fair view of the state of the Group’s affairs as at 31 March
            2009 and of its loss and cash flows for the year then ended in accordance with Hong Kong
            Financial Reporting Standards. In all other aspects, in our opinion the consolidated financial
            statements have been properly prepared in accordance with the disclosure requirements of the
            Hong Kong Companies Ordinance.

5.     INDEBTEDNESS STATEMENT OF THE ENLARGED GROUP

       Borrowings

            As at the close of business on 31 January 2012, being the latest practicable date for the
       purpose of this indebtedness statement prior to the printing of this circular, the indebtedness of the
       Enlarged Group was as follows:

            (i)    Interest bearing bank borrowings in the amount of approximately HK$8,150,000 due
                   within one year;

            (ii)   Interest bearing other borrowings in the amount of approximately HK$5,000,000 due
                   within one year;

            (iii) Interest-bearing obligation under finance leases in the amount of approximately
                  HK$6,178,000;

            (iv) Amount due to a director in the amount of approximately HK$11,668,000 which is non-
                 interest bearing and repayment on demand; and




                                                   – I-60 –
APPENDIX I                             FINANCIAL INFORMATION OF THE GROUP


       (v)   Amount due to related parties in the amount of approximately HK$19,513,000 which is
             non-interest bearing and repayment on demand.

  Commitments

       As at 31 January 2012, the Enlarged Group had total future minimum lease payments under
  non-cancellable operating leases which falling due as follows:

                                                                                                HK$’000

       Within one year                                                                              1,272
       In the second to fifth years, inclusive                                                        520


                                                                                                    1,792

  Contingent liabilities

       As at the close of business on 31 January 2012, the Enlarged Group had contingent liabilities
  of HK$39,394,000 representing maximum amount of guarantee given to a bank in respect of
  banking facilities granted to related companies.

       Save as aforesaid and apart from intra-group liabilities, at the close of business on 31 January
  2012, the Enlarged Group did not have any outstanding mortgages, charges, debentures or other
  loan capital or bank overdrafts, loans, debt securities or other similar indebtedness, liabilities under
  acceptances or acceptances credits or hire purchase commitments, or any guarantees.

       The Directors have confirmed that, save as disclosed above, there has not been any material
  change in the indebtedness and contingent liabilities of the Group since 31 January 2012 and up to
  the Latest Practicable Date.

        For the purpose of the above indebtedness statement, foreign currency accounts have been
  translated into Hong Kong Dollars at the approximately rates of exchange prevailing at the close of
  business on 31 January 2012.

  Disclaimer

        Save as aforesaid and apart from intra-group liabilities and normal trade payables in the
  ordinary course of business, the Enlarged Group did not have any bank borrowings, bank
  overdrafts and liabilities under acceptances or other similar indebtedness, debentures or other loan
  capital, mortgage, charges, finance leases or hire purchases commitments, guarantees or other
  material contingent liabilities outstanding at the close of business on 31 January 2012.




                                              – I-61 –
     APPENDIX I                           FINANCIAL INFORMATION OF THE GROUP


6.     WORKING CAPITAL SUFFICIENCY

       The Directors, after due and careful enquiry, are of the opinion that taking into account its present
available financial resources and the existing available credit facilities and subject to the completion of
the transactions contemplated under the Resumption Proposal, including (i) the Capital Reorganisation;
(ii) the Acquisition; (iii) the Subscription; (iv) the Open Offer; and (v) the Bonus Issue, the Enlarged
Group will have sufficient working capital for its operations and to meet its financial obligations when
they fall due for at least the next twelve months from the date of this Circular.

7.     NO MATERIAL CHANGE

      As at the Latest Practicable Date, save as the fact that no transaction was concluded to generate
any trading income from trading of electronic products so that the Group did not record any revenue
since 1 April 2011, the Directors confirm that there is no material change in the financial or trading
position or outlook of the Group since 31 March 2011, being the date to which the latest published
audited financial statements of the Group were made up.




                                                 – I-62 –
     APPENDIX II                     FINANCIAL INFORMATION OF THE TARGET GROUP


1.     ACCOUNTANTS’ REPORT OF THE TARGET GROUP




                                                                                                                             5 March 2012

The Directors
Climax International Company Limited
Unit 906, 9/F., Wings Building
110–116 Queen’s Road Central,
Central, Hong Kong

Dear Sirs,

      We set out below our report on the financial information regarding Sky Will Printing & Packaging
(Holdings) Limited (‘‘Sky Will Holdings’’) and its subsidiaries (hereinafter collectively referred to as
the ‘‘Target Group’’), including the combined statements of financial position as at 31 March 2009,
2010, 2011 and 30 September 2011, the combined statements of comprehensive income, the combined
statements of changes in equity and the combined statements of cash flows of the Target Group for each
of the years ended 31 March 2009, 2010, 2011 and the six months ended 30 September 2011 (the
‘‘Relevant Periods’’), and notes thereto (the ‘‘Financial Information’’) for inclusion in the circular of
Climax International Company Limited (the ‘‘Company’’) dated 5 March 2012 (the ‘‘Circular’’) in
connection with the proposed very substantial acquisition of the entire equity interest of Sky Will
Holdings by the Company.

     Sky Will Holdings was incorporated with limited liability in the British Virgin Islands (the
‘‘BVI’’) on 2 November 2010 and is engaged in investment holding.

     As at the date of this report, Sky Will Holdings has direct and indirect interests in the following
subsidiaries, all of which are private companies, particulars of which are set out below:

                                                         Issued and        Percentage of equity interest attributable
                                                          fully paid                to Sky Will Holdings
                                  Place and date      share capital/                                               As at
                                  of incorporation/       registered           As at 31 March              30 September
       Name of subsidiary         establishment               capital      2009         2010          2011         2011 Principal activities

       Sky Will Printing &        Hong Kong/             HK$10,000         100%         100%          100%              100% Trading of
          Packaging Limited       19 March 2004                                                                                 packaging
          (‘‘Sky Will’’)                                                                                                        products
       天安印刷包裝有限公司

       New Spring (SW) Printing   Hong Kong/             HK$10,000            —            —          100%              100% Trading of
         & Packaging Limited      3 November 2010                                                                               packaging
         (‘‘New Spring (SW)’’)                                                                                                  products
       新高準(天安)印刷包裝
         有限公司




                                                                – II-1 –
  APPENDIX II                         FINANCIAL INFORMATION OF THE TARGET GROUP


                                                           Issued and        Percentage of equity interest attributable
                                                            fully paid                to Sky Will Holdings
                                   Place and date       share capital/                                               As at
                                   of incorporation/        registered           As at 31 March              30 September
      Name of subsidiary           establishment                capital      2009         2010          2011         2011 Principal activities

      New Spring Offset Printing   The People’s        HK$12,000,000            —            —             —              100% Manufacture and
        (Shenzhen) Limited            Republic of                                                                                trading of
        (‘‘New Spring Offset’’)*      China (PRC)/                                                                               packaging
      新高準柯式印刷(深圳)                  1 December 2009                                                                               products
        有限公司


      Other than Sky Will, all subsidiaries are indirectly held by Sky Will Holdings.

       All companies now comprising the Target Group have adopted 31 March as their financial year
end date except the newly acquired subsidiary, New Spring Offset, which have adopted 31 December as
its financial year end.

      The statutory financial statements of Sky Will for the year ended 31 March 2009, 2010 and 2011
were prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the
Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’). The statutory financial
statements of Sky Will for the year ended 31 March 2009 were audited by Law Tze Lun, certified public
accountants registered in Hong Kong and the statutory financial statements of Sky Will for the year
ended 31 March 2010 and 2011 were audited by us.

      The statutory financial statements of New Spring Offset for the period from 1 December 2009
(date of establishment) to 31 December 2010 were prepared in accordance with the relevant accounting
principles and financial regulations applicable to enterprises established in the PRC and were audited by
深圳永信瑞和會計師事務所 (Shenzhen Yongxin Ruihe Certified Public Accountants*), certified public
accountants registered in the PRC.

     No statutory financial statements have been prepared for Sky Will Holdings since its date of
incorporation as there is no statutory requirement in the BVI. No statutory financial statements have
been prepared for New Spring (SW) since its date of incorporation as it has not reached its first
financial reporting year end.

      The auditor’s report on the financial statements of Sky Will for the year ended 31 March 2009 was
qualified in respect of disagreement with the management of Sky Will as Sky Will had not consolidated
the results of its subsidiary, namely 新高準紙製品(深圳)有限公司 (New Spring Paper Products
(Shenzhen) Limited* (‘‘New Spring Paper’’)), into its financial statements in accordance with the
requirements of Hong Kong Companies Ordinance and Hong Kong Accounting Standard 27
‘‘Consolidated and Separate Financial Statements’’ issued by the HKICPA.

      Adverse opinion in respect of disagreement with management was issued by us in our auditor’s
reports dated 2 June 2011 and 14 September 2011 respectively, on the financial statements of Sky Will
for the year ended 31 March 2010 and 2011 as Sky Will had not consolidated the results of New Spring
Paper into its consolidated financial statements in accordance with the requirements of Hong Kong
Companies Ordinance and Hong Kong Accounting Standard 27 ‘‘Consolidated and Separate Financial
Statements’’ issued by the HKICPA.

* The English names are for identification purpose only. The official name is in Chinese


                                                                  – II-2 –
  APPENDIX II                FINANCIAL INFORMATION OF THE TARGET GROUP


     For the purpose of this report, the directors of Sky Will Holdings have prepared the combined
financial statements of the Target Group for the Relevant Periods in accordance with HKFRSs issued by
the HKICPA (the ‘‘Underlying Financial Statements’’). We have carried out independent audit
procedures on the Underlying Financial Statements in accordance with Hong Kong Standards on
Auditing issued by the HKICPA.

      The Financial Information of the Target Group for the Relevant Periods as set out in this report for
inclusion in the Circular has been prepared from the Underlying Financial Statements, on the basis of
presentation set out in note 1 of Section A, whereas no adjustment was considered necessary. We have
examined the Financial Information and have carried out such additional procedures as considered
necessary in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting
Accountants’’ as recommended by the HKICPA.

DIRECTORS’ RESPONSIBILITY

      The directors of Sky Will Holdings are responsible for the preparation of the Underlying Financial
Statements and the Financial Information which give a true and fair view. In preparing the Financial
Information, it is fundamental that appropriate accounting policies are selected and applied consistently,
that the judgements and estimates made are prudent and reasonable and that the reasons for any
significant departure from applicable accounting standards are stated. The directors of the Company are
responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

      In respect of the Financial Information for the Relevant Periods, our responsibility is to express an
opinion on the Financial Information based on our audit. We conducted our audit in accordance with
Hong Kong Standards of Auditing and the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting
Accountant’’ issued by the HKICPA. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are
free from material misstatement.

BASIS FOR ADVERSE OPINION

      In accordance with Hong Kong Accounting Standard (‘‘HKAS’’) 27 ‘‘Consolidated and Separate
Financial Statements’’ issued by the HKICPA, Sky Will Holdings is required to prepare consolidated
financial statements which consolidated the assets, liabilities and results of its subsidiaries. As explained
in note 16 to the Financial Information, Sky Will Holdings has not consolidated the results of one of the
subsidiaries, New Spring Paper, into the combined financial statements for the year ended 31 March
2009, 2010 and 2011. The results for the year ended 31 March 2009, 2010 and 2011, the relevant assets
and liabilities of New Spring Paper as at 31 March 2009, 2010 and 2011 are material to Sky Will
Holdings. The effect on the combined financial statements of the failure to consolidate New Spring
Paper have not been determined.

     During the six months ended 30 September 2011, New Spring Paper was deregistered and the
deregistration was completed on 18 July 2011 (the ‘‘Deregistration Date’’). The combined statement of
comprehensive income and combined statement of cash flows for the six months ended 30 September
2011 has not consolidated the results and cash flows of New Spring Paper for the period from 1 April
2011 to the Deregistration Date.



                                                  – II-3 –
 APPENDIX II                FINANCIAL INFORMATION OF THE TARGET GROUP


ADVERSE OPINION

      In our opinion, on the basis of presentation set out in above, because of the significance of the
matters discussed in the basis for adverse opinion paragraphs, the Financial Information does not give,
for the purpose of this report, a true and fair view of the state of affairs of the Target Group as at 31
March 2009, 2010, 2011 and 30 September 2011 and of the Target Group’s combined results and cash
flows for the year ended 31 March 2009, 2010 and 2011 and the six months ended 30 September 2011
in accordance with Hong Kong Financial Reporting Standards. In all other respects, in our opinion the
Financial Information has been properly prepared in accordance with the disclosure requirements of
Hong Kong Companies Ordinance.

EMPHASIS OF MATTER

      Without qualifying our opinion, we draw attention to note 1 of Section A to the Financial
Information which states that the Target Group had incurred net current liabilities of HK$3,625,000,
HK$912,000, HK$9,747,000 and HK$12,523,000 as at 31 March 2009, 2010, 2011 and 30 September
2011 respectively. The financial statements have been prepared on a going concern basis because the
directors of Sky Will Holdings and certain related companies of the Target Group have agreed to
provide adequate funds to enable the Target Group to meet in full its financial obligations as and when
they fall due in the foreseeable future and not to demand for repayment for balances due from the Target
Group until it is in a financial position to do so. Such matters indicated the existence of an uncertainty
which may cast doubt on the Target Group’s ability to continue as a going concern.

REVIEW CONCLUSION

      The comparative combined statements of comprehensive income, combined statement of changes in
equity and combined statement of cash flows of the Target Group for the six months ended 30
September 2010 together with the notes thereto have been extracted from the Target Group’s unaudited
combined financial statements for the same period (the ‘‘30 September 2010 Financial Information’’)
which was prepared by the directors of Sky Will Holdings solely for the purpose of this report.

      We have reviewed the 30 September 2010 Financial Information in accordance with the Hong
Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by
the Independent Auditor of the Entity’’ issued by the HKICPA. Our review consists principally of
making enquires, primarily of persons responsible for financial and accounting matters and applying
analytical procedures and other review procedures. A review is substantially less in scope than an audit
conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion on the 30 September 2010 Financial Information.

     Because of the significance of the matters described in the basis for adverse opinion paragraphs,
we were unable to reach a review conclusion as to whether material modifications should be made to the
30 September 2010 Financial Information.




                                                 – II-4 –
 APPENDIX II                   FINANCIAL INFORMATION OF THE TARGET GROUP


A.   FINANCIAL INFORMATION

     Combined Statements of Comprehensive Income

                                                                                    Six months ended
                                           Year ended 31 March                        30 September
                                         2009          2010       2011                 2010          2011
                               Note   HK$’000      HK$’000     HK$’000             HK$’000       HK$’000
                                                                                 (Unaudited)

     Revenue                    7       39,490           18,633        43,644         8,254        54,936
     Cost of sales                     (38,215)         (14,489)      (37,008)       (6,521)      (40,456)


     Gross profit                       1,275                4,144     6,636          1,733        14,480
     Other income               8          89                  119     1,188             36         1,968
     Gain on bargain
       purchase of a
       subsidiary              30           —                   —          —             —          7,445
     Impairment loss of
       investment in a
       subsidiary                       (4,500)                 —          —             —             —
     Selling expenses                     (241)               (140)      (751)         (149)       (1,586)
     Administrative
       expenses                           (740)               (647)      (943)         (403)       (3,638)
     Finance costs              9           (5)               (321)      (463)         (253)         (390)


     (Loss) profit before
       tax                              (4,122)              3,155     5,667            964        18,279
     Income tax expense        10          (63)               (528)     (929)          (162)       (2,394)


     (Loss) profit and total
       comprehensive
       (expense) income
       for the year/period
       attributable to the
       owners of Sky Will
       Holdings                11       (4,185)              2,627     4,738            802        15,885




                                                  – II-5 –
APPENDIX II                        FINANCIAL INFORMATION OF THE TARGET GROUP


  Combined Statements of Financial Position

                                                             The Target Group                       Sky Will Holdings
                                                                                          As at        As at          As at
                                                        As at 31 March            30 September     31 March 30 September
                                               2009              2010        2011         2011         2011           2011
                                     Note   HK$’000           HK$’000     HK$’000      HK$’000      HK$’000       HK$’000

  Non-current assets
    Plant and equipment              15         620                521      14,071       37,999          —              —
    Investment in a subsidiary       16          —                  —           —            —           10             10

                                                620                521      14,071       37,999          10             10

  Current assets
     Inventories                     17          —                 —               —     15,662           —             —
     Trade and other receivables     18       4,091             3,212           5,776    23,444           —             —
     Amount due from holding
        company                      19          —                  —              1          1            1              1
     Amounts due from related
        companies                    20       7,507             2,397       28,233       17,956           —             —
     Amounts due from directors      21         442             2,260           —           220           —             —
     Bank balances and cash          22         379                59          276        3,038           —             —

                                             12,419             7,928       34,286       60,321            1              1

  Current liabilities
     Trade and other payables        23         158                 89          1,413    21,860           —             —
     Amounts due to related
        companies                    24      15,040             3,183       33,082       19,799           2              2
     Amount due to a director        24         607               607        3,297       10,657          10             10
     Amount due to an ultimate
        shareholder                  24          —                  —              —        155           —             —
     Income tax payables                        208                499          1,269     4,273           —             —
     Obligations under finance
        leases                       25          31                —               —      1,419           —             —
     Bank and other borrowings       26          —              4,462           4,972    14,681           —             —

                                             16,044             8,840       44,033       72,844          12             12

  Net current liabilities                     (3,625)            (912)      (9,747)     (12,523)         (11)           (11)

  Total assets less current
     liabilities                              (3,005)            (391)          4,324    25,476           (1)            (1)

  Non-current liabilities
    Obligations under finance
        leases                       25          —                  —             —       5,288           —             —
    Deferred tax liabilities         27          86                 73            59         38           —             —

                                                 86                 73            59      5,326           —             —

  Net (liabilities) assets                    (3,091)            (464)          4,265    20,150           (1)            (1)

  Capital and reserve
     Share capital                   28          10                 10             1          1            1              1
     (Accumulated losses) retained
         profits                              (3,101)            (474)          4,264    20,149           (2)            (2)

     (Deficiency) shareholders’
        equity                                (3,091)            (464)          4,265    20,150           (1)            (1)

  Note:

  The statements of financial position as at 31 March 2009 and 2010 of Sky Will Holdings are not presented as Sky Will
  Holdings was incorporated in the BVI with limited liability on 2 November 2010. As at 31 March 2011 and 30 September
  2011, Sky Will Holdings had 100 issued ordinary shares of US$1 each and minimal assets on the statement of financial
  position.




                                                        – II-6 –
APPENDIX II             FINANCIAL INFORMATION OF THE TARGET GROUP


  Combined Statements of Changes in Equity

                                                                         Retained
                                                                           profits
                                                                     (accumulated
                                                    Share capital          losses)      Total
                                                        HK$’000           HK$’000     HK$’000

  At 1 April 2008                                             10            1,084       1,094

  Loss and total comprehensive expense for
    the year                                                  —             (4,185)     (4,185)


  At 31 March 2009                                            10            (3,101)     (3,091)

  Profit and total comprehensive income for
    the year                                                  —             2,627       2,627


  At 31 March 2010                                            10             (474)       (464)

  Deemed distribution to the controlling
    shareholders under group reorganisation
    (Note 28)                                                  (9)             —            (9)

  Profit and total comprehensive income for
    the year                                                  —             4,738       4,738


  At 31 March 2011                                             1            4,264       4,265

  Profit and total comprehensive income for
    the period                                                —            15,885      15,885


  At 30 September 2011                                         1           20,149      20,150


  (Unaudited)
  Six months ended 30 September 2010
  At 1 April 2010                                             10             (474)       (464)

  Profit for the period and total comprehensive
    income for the period                                     —               802         802


  At 30 September 2010                                        10              328         338




                                              – II-7 –
APPENDIX II               FINANCIAL INFORMATION OF THE TARGET GROUP


  Combined Statements of Cash Flows

                                                                                  Six months ended
                                        Year ended 31 March                         30 September
                                      2009          2010       2011                  2010          2011
                                   HK$’000      HK$’000     HK$’000              HK$’000       HK$’000
                                                                               (Unaudited)

  OPERATING ACTIVITIES
  (Loss) profit before tax           (4,122)              3,155      5,667            964        18,279
  Adjustments for:
  Depreciation of plant and
     equipment                         100                   99        250             49         1,711
  Finance costs                          5                  321        463            253           390
  Impairment of plant and
     equipment                          —                    —           —             —           129
  (Gain) loss on disposal of
     plant and equipment                 (5)                 —           —             —             78
  Bad debts written off in
     respect of trade and other
     receivables                        —                    90          —             —             —
  Impairment loss on trade and
     other receivables                  —                    20          —             —             —
  Write-off of amount due from
     a subsidiary                       21                   —           —             —             —
  Waiver of amount due to a
     subsidiary                         —                    —         (902)           —             —
  Impairment loss on investment
     in a subsidiary                 4,500                   —           —             —             —
  Waiver of trade and other
     payables                           —                    (37)        —             —             —
  Gain on deregistration of a
     subsidiary                         —                    —           —             —           (195)
  Interest income                       (1)                  —           —             —             (2)
  Gain on bargain purchase of a
     subsidiary                         —                    —           —             —         (7,445)

  Operating cash flows before
     movements in working
     capital                           498                3,648      5,478          1,266        12,945
  (Increase) decrease in amounts
     due from related companies         —                    —      (40,560)       (3,646)       46,091
  Increase in inventories               —                    —           —             —           (613)
  Decrease (increase) in trade
     and other receivables           4,588                  769      (2,564)         (953)      (14,947)
  (Decrease) increase in trade
     and other payables              (1,448)                 (32)    1,324             18        12,890
  Increase (decrease) in amounts
     due to related companies        1,513                (5,189)   33,082          1,633       (28,351)




                                               – II-8 –
APPENDIX II               FINANCIAL INFORMATION OF THE TARGET GROUP


                                                                                Six months ended
                                       Year ended 31 March                        30 September
                                     2009          2010       2011                 2010          2011
                                  HK$’000      HK$’000     HK$’000             HK$’000       HK$’000
                                                                             (Unaudited)

  Cash generated from (used in)
    operations                      5,151                 (804)    (3,240)       (1,682)       28,015
  Tax paid                             —                  (250)      (103)           —         (1,741)


  NET CASH FROM (USED
    IN) OPERATING
    ACTIVITIES                      5,151                (1,054)   (3,343)       (1,682)       26,274


  INVESTING ACTIVITIES
  Proceeds on disposal of plant
     and equipment                    200                   —         —              —          1,032
  Repayment from a subsidiary           9                   —         —              —             —
  (Advance to) repayment from
     related companies              (1,396)              (1,553)   2,373             —           (530)
  (Advance to) repayment from
     directors                         —                 (1,818)   2,251            200          (220)
  Interest income received              1                    —        —              —              2
  Additional investment in a
     subsidiary                     (3,500)                 —         —              —             —
  Advance to holding company            —                   —         (1)            —             —
  Acquisition of a subsidiary           —                   —         —              —        (11,514)
  Purchase of plant and
     equipment                          (9)                 —      (3,800)           —         (6,202)


  NET CASH (USED IN)
    FROM INVESTING
    ACTIVITIES                      (4,695)              (3,371)     823            200       (17,432)


  FINANCING ACTIVITIES
  New bank borrowings raised           —                 6,000     3,000          3,000        10,977
  Advance from a director              —                    —      2,690             —          7,360
  Advance to an ultimate
     shareholder                       —                    —         —              —           155
  Repayment to related
     companies                         (72)                 (5)       —              —        (20,697)
  Interest paid                         (5)               (321)     (463)          (253)         (390)
  Repayment of obligations
     under finance leases              (81)                 (31)      —              —         (2,217)
  Repayment of bank
     borrowings                        —                 (1,538)   (2,490)       (1,221)       (1,268)



                                              – II-9 –
APPENDIX II            FINANCIAL INFORMATION OF THE TARGET GROUP


                                                                      Six months ended
                                  Year ended 31 March                   30 September
                                2009          2010       2011            2010          2011
                             HK$’000      HK$’000     HK$’000        HK$’000       HK$’000
                                                                   (Unaudited)

  NET CASH (USED IN)
    FROM FINANCING
    ACTIVITIES                  (158)              4,105   2,737        1,526        (6,080)


  NET INCREASE
    (DECREASE) IN CASH
    AND CASH
    EQUIVALENTS                  298               (320)    217            44         2,762

  CASH AND CASH
    EQUIVALENTS AT THE
    BEGINNING OF THE
    YEAR/PERIOD                   81                379      59            59          276


  CASH AND CASH
    EQUIVALENTS AT THE
    END OF THE YEAR/
    PERIOD, represented by
    bank balances and cash       379                 59     276           103         3,038




                                       – II-10 –
APPENDIX II                   FINANCIAL INFORMATION OF THE TARGET GROUP


  Notes to the Financial Information

  1.     GENERAL AND BASIS OF PRESENTATION

        Sky Will Holdings was incorporated with limited liability in the BVI on 2 November 2010. Its holding company is
  Sky Will Printing & Packaging (BVI) Limited (‘‘Sky Will BVI’’), a company incorporated in the BVI with limited liability
  which is owned by Chan Fook Kai, Fung Ming and Kao Wai Kwong, Eric (the ‘‘Beneficial Owners’’).

         The address of the registered office and principal place of business of Sky Will Holdings is 10/F., Fook Hing Factory
  Building, 33 Lee Chung Street, Chaiwan, Hong Kong.

         Sky Will Holdings is an investment holding company. The principal activities of its subsidiaries are manufacture and
  trading of packaging products.

        Sky Will was originally directly held by the Beneficial Owners. Group reorganisation (the ‘‘Group Reorganisation’’)
  was taken by Sky Will Holdings as following:

         (i)    On 15 January 2011, the Beneficial Owners entered into an equity transfer agreement (the ‘‘Equity Transfer’’)
                with Sky Will Holdings which is indirectly owned by the Beneficial Owners whereby the Beneficial Owners
                transferred the entire equity interest in Sky Will to Sky Will Holdings for a total consideration of HK$10,000
                on the same day; and

         (ii)   On 4 April 2011, Sky Will acquired New Spring Offset from a related company.

         The Equity Transfer involved the incorporation of investment holding entities, including Sky Will BVI and Sky Will
  Holdings, between the Beneficial Owners and Sky Will. Accordingly, the combined financial statements are prepared as a
  continuation of Sky Will and its subsidiaries existed at the date of the Equity Transfer. The combined statement of
  comprehensive income, combined statement of changes in equity and combined statement of cash flows are prepared as if
  the group structure upon the completion of the Group Reorganisation (other than the acquisition of New Spring Offset) had
  been in existence throughout the Relevant Periods, or since the respective date of incorporation of the relevant entities to 30
  September 2011, where this is a shorter period. The combined statement of financial position as at 31 March 2009, 31
  March 2010, 31 March 2011 and 30 September 2011 presents the assets and liabilities of the companies comprising the
  Target Group upon the completion of the Group Reorganisation (other than the acquisition of New Spring Offset) which
  were in existence at those dates. The results of New Spring Offset acquired during the Relevant Periods are included in the
  combined statement of comprehensive income from the effective date of acquisition on 4 April 2011.

        The Financial Information is presented in Hong Kong dollars (‘‘HK$’’), which is the same as the functional currency
  of Sky Will Holdings.

           The Financial Information have been prepared on a going concern basis notwithstanding that the Target Group had
  incurred net current liabilities of HK$3,625,000, HK$912,000, HK$9,747,000 and HK$12,523,000 as at 31 March 2009,
  2010, 2011 and 30 September 2011 respectively. The directors of Sky Will Holdings and certain related companies of the
  Target Group have undertaken to provide adequate funds to enable the Target Group to meet in full its financial obligations
  as they fall due in the foreseeable future and not to demand for repayment of the balances due from the Target Group until
  it is in a financial position to do so.

         The results of one of the subsidiaries, namely New Spring Paper, have not been consolidated into the combined
  financial statements in accordance with Hong Kong Accounting Standard (‘‘HKAS’’) 27 ‘‘Consolidated and Separate
  Financial Statements’’ since in the opinion of the directors of Sky Will Holdings, it would involve expense and would be
  out of proportion to the value to shareholders of Sky Will Holdings.

  2.     APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
         (‘‘HKFRSs’’)

         For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Group has
  consistently adopted all of the new and revised HKAS, HKFRSs, amendments and interpretations issued by the HKICPA
  which are effective for the Target Group’s financial year beginning on 1 April 2011.




                                                        – II-11 –
APPENDIX II              FINANCIAL INFORMATION OF THE TARGET GROUP


     New and revised standards, amendments and interpretations in issue but not yet effective

            The Target Group has not early applied the following new and revised standards, amendments or
     interpretations that have been issued but are not yet effective.

           HKFRS 1 (Amendments)                             Severe Hyperinflation and Removal of Fixed Dates for First-time
                                                               Adopters1
           HKFRS 7 (Amendments)                             Disclosures — Transfers of Financial Assets1
           HKFRS 9                                          Financial Instruments4
           HKFRS 10                                         Consolidated Financial Statements4
           HKFRS 11                                         Joint Arrangements4
           HKFRS 12                                         Disclosure of Interests in Other Entities 4
           HKFRS 13                                         Fair Value Measurement4
           Amendments to HKAS 1 (Revised)                   Presentation of Items of Other Comprehensive Income 3
           HKAS 12 (Amendments)                             Deferred Tax: Recovery of Underlying Assets2
           HKAS 19 (Revised 2011)                           Employee Benefits4
           HKAS 27 (Revised 2011)                           Separate Financial Statements 4
           HKAS 28 (Revised 2011)                           Investments in Associates and Joint Ventures4
           Amendments to HKAS 32                            Offsetting Financial Assets and Financial Liabilities 5
           HK(IFRIC)-Interpretation 20                      Stripping Costs in the Production Phase of a Surface Mine 4

           1
                  Effective   for   annual   periods   beginning   on   or   after   1   July 2011.
           2
                  Effective   for   annual   periods   beginning   on   or   after   1   January 2012.
           3
                  Effective   for   annual   periods   beginning   on   or   after   1   July 2012.
           4
                  Effective   for   annual   periods   beginning   on   or   after   1   January 2013.
           5
                  Effective   for   annual   periods   beginning   on   or   after   1   January 2014.

              HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial
     assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial
     liabilities and for derecognition.

           Key requirements of HKFRS 9 are described as follows:

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

           .      The most significant effect of HKFRS 9 regarding the classification and measurement of financial
                  liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at
                  fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically,
                  under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the
                  amount of change in the fair value of the financial liability that is attributable to changes in the credit
                  risk of that liability is presented in other comprehensive income, unless the recognition of the effects of
                  changes in the liability’s credit risk in other comprehensive income would create or enlarge an
                  accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit
                  risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount
                  of the change in the fair value of the financial liability designated as at fair value through profit or loss
                  was presented in profit or loss.




                                                          – II-12 –
APPENDIX II                    FINANCIAL INFORMATION OF THE TARGET GROUP


               The directors of Sky Will Holdings anticipate that the adoption of HKFRS 9 in the future may have significant
         impact on amounts reported in respect of the Target Group’s financial assets and financial liabilities. Regarding the
         Group’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has
         been completed.

                The amendments to HKFRS 7 titled Disclosures — Transfers of Financial Assets increase the disclosure
         requirements for transactions involving transfers of financial assets. These amendments are intended to provide
         greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level
         of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are
         not evenly distributed throughout the period.

                To date, the Target Group has not entered into transactions involving transfers of financial assets. However, if
         the Target Group enters into other types of transfers of financial assets in the future, disclosures regarding those
         transfers may be affected.

                The five new or revised standards on consolidation, joint arrangements and disclosures including HKFRS 10,
         HKFRS 11, HKFRS 12, HKAS 27 (Revised 2011) and HKAS 28 (Revised) were issued by the HKICPA in June
         2011 and are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted
         provided that all of the five new or revised standards are applied early at the same time. The directors of Sky Will
         Holdings anticipate that these new or revised standards will be applied in the Target Group’s consolidated financial
         statements for financial year ending 31 March 2014 and the potential impact is described below.

                HKFRS 10 replaces the parts of HKAS 27 Consolidated and Separate Financial Statements that deal with
         consolidated financial statements. Under HKFRS 10, there is only one basis for consolidation, that is control. In
         addition, HKFRS 10 includes a new definition of control that contains three elements; (a) power over an investee, (b)
         exposure, or rights, to variable returns from its involvement with the investee, and (c) ability to use its power over
         the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal
         with complex scenarios. Overall, the application of HKFRS 10 requires a lot of judgement. The application of
         HKFRS 10 might result in the Target Group no longer consolidating some of its investees, and consolidating
         investees that were not previously consolidated.

                The amendments to HKAS 1 have been issued to improve the presentation of other comprehensive income.
         The amendments require entities to group together the items of other comprehensive income that may be reclassified
         to profit or loss in the future by presenting them separately from those that would never be reclassified to profit or
         loss. The application of the amendment to HKAS 1 might result in changes in presentation of the statement of
         comprehensive income.

                The directors of Sky Will Holdings anticipate that the application of other new and revised standards,
         amendments or interpretations will have no material impact on the results and the financial position of the Target
         Group.

  3.     SIGNIFICANT ACCOUNTING POLICIES

         The Financial Information has been prepared in accordance with HKFRSs, except for the failure to consolidate New
  Spring Paper in accordance with HKAS 27 ‘‘Consolidated and Separate Financial Statements’’ issued by the HKICPA. In
  addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities
  on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance. These policies have been
  consistently applied throughout the Relevant Periods and materially consistent with the accounting policies adopted by the
  Company.

          The Financial Information has been prepared on the historical cost basis except for certain financial instruments that
  are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the
  fair value of the consideration given in exchange for goods.

         The principal accounting policies are set out below.




                                                         – II-13 –
APPENDIX II               FINANCIAL INFORMATION OF THE TARGET GROUP


     Basis of combination

           The Financial Information incorporates the financial statements of Sky Will Holdings and entities controlled
     by Sky Will Holdings (its subsidiaries) now comprising the Target Group.

            The results of subsidiaries acquired or disposed of during the Relevant Periods are included in the combined
     statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as
     appropriate.

            Where necessary, adjustments are made to the Financial Information of subsidiaries to bring their accounting
     policies into line with those used by other members of the Target Group.

            All intra-group transactions, balances, income and expenses are eliminated in full on combination.

     Business combinations under common control

            Business combinations under common control are accounted for using merger accounting. In applying merger
     accounting, the consolidated financial information incorporates the financial information of the combining entities or
     businesses in which the common control combination occurs as if they had been consolidated from the date when the
     combining entities or businesses first came under the control of the Beneficial Owners.

             The net assets of the combining entities or businesses are consolidated using the existing book values from the
     Beneficial Owners’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the
     net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common
     control combination, to the extent of the continuation of the Beneficial Owners’ interest.

            The combined statements of comprehensive income include the results of each of the combining entities or
     businesses from the earliest date presented or since the date when the combining entities or businesses first came
     under the common control, where this is a shorter period, regardless of the date of the common control combination.

     Investment in a subsidiary

             Investment in a subsidiary is included in the combined statements of financial position at cost less any
     identified impairment loss.

     Plant and equipment

             Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment
     losses, if any.

            Depreciation is recognised so as to write off the cost of items of plant and equipment less their residual values
     over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and
     depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate
     accounted for on a prospective basis.

            Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
     assets or, where shorter, the term of the relevant lease.

            An item of plant and equipment is derecognised upon disposal or when no future economic benefits are
     expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
     item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of
     the asset and is recognised in profit or loss.




                                                    – II-14 –
APPENDIX II                FINANCIAL INFORMATION OF THE TARGET GROUP


     Inventories

           Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted
     average method.

     Cash and cash equivalents

            Bank balances and cash in the combined statements of financial position comprise cash at banks and on hand.
     For the purpose of the combined statements of cash flows, cash and cash equivalents consist of bank balances and
     cash.

     Financial instruments

           Financial assets and financial liabilities are recognised in the combined statements of financial position when a
     group entity becomes a party to the contractual provisions of the instrument.

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

     Financial assets

            The Target Group’s financial assets are loans and receivables. All regular way purchases or sales of financial
     assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales
     of financial assets that require delivery of assets within the time frame established by regulation or convention in the
     marketplace.

     Effective interest method

             The effective interest method is a method of calculating the amortised cost of a financial asset and of
     allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
     estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest
     rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where
     appropriate, a shorter period to the net carrying amount on initial recognition.

            Interest income is recognised on an effective interest basis for debt instruments.

     Loans and receivables

            Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
     quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other
     receivables, amount due from holding company, amounts due from related companies, amounts due from directors,
     and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified
     impairment losses (see accounting policy on impairment of financial assets below).

     Impairment of financial assets

           Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets
     are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial
     recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.




                                                     – II-15 –
APPENDIX II                FINANCIAL INFORMATION OF THE TARGET GROUP


            For all financial assets, objective evidence of impairment could include:

            .      significant financial difficulty of the issuer or counterparty; or

            .      breach of contract, such as default or delinquency in interest and principal payments; or

            .      it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

            .      the disappearance of an active market for that financial asset because of financial difficulties.

            For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
     individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a
     portfolio of receivables could include the Target Group’s past experience of collecting payments, an increase in the
     number of delayed payments in the portfolio past the average credit period ranged from 30 to 60 days, observable
     changes in national or local economic conditions that correlate with default on receivables.

            For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is
     objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount
     and the present value of the estimated future cash flows discounted at the original effective interest rate.

             The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
     with the exception of trade and other receivables, amount due from holding company, amounts due from related
     companies and amounts due from directors where the carrying amount is reduced through the use of an allowance
     account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade or
     other receivable or an amount due from holding company/a related company/a director is considered uncollectible, it
     is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to
     profit or loss.

            For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss
     decreases and the decrease can be related objectively to an event occurring after the impairment losses was
     recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying
     amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been
     had the impairment not been recognised.

     Financial liabilities and equity instruments

            Financial liabilities and equity instruments issued by a group entity are classified according to the substance
     of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

            An equity instrument is any contract that evidences a residual interest in the assets of the Target Group after
     deducting all of its liabilities. The Target Group’s financial liabilities are classified as other financial liabilities.

     Effective interest method

             The effective interest method is a method of calculating the amortised cost of a financial liability and of
     allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
     estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter
     period.

            Interest expense is recognised on an effective interest basis.

     Other financial liabilities

            Other financial liabilities including trade and other payables, amounts due to related companies, amount due to
     a director, amount due to an ultimate shareholder, obligations under finance leases and bank and other borrowings
     are subsequently measured at amortised cost, using the effective interest method.




                                                     – II-16 –
APPENDIX II                 FINANCIAL INFORMATION OF THE TARGET GROUP


     Equity instruments

              Equity instruments issued by Sky Will Holdings are recorded at the proceeds received, net of direct issue
     costs.

     Financial guarantee contracts

             A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
     the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the
     original or modified terms of a debt instrument. A financial guarantee contract issued by the Target Group and not
     designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are
     directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, Sky Will
     Holdings measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with
     HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognised less,
     when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue.

     Derecognition

            Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial
     assets are transferred and the Target Group has transferred substantially all the risks and rewards of ownership of the
     financial assets.

           On derecognition of a financial asset in its entirely, the difference between the asset’s carrying amount and the
     sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other
     comprehensive income and accumulated in equity is recognised in profit or loss.

            Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged,
     cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the
     consideration paid and payable is recognised in profit or loss.

     Revenue recognition

            Revenue is measured at the fair value of the consideration received or receivable and represents amounts
     receivable for goods sold in the normal course of business, net of sales related taxes and discounts.

              Revenue from sale of goods is recognised when the goods are delivered and title has passed.

             Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
     the Target Group and the amount of revenue can be measured reliably. Interest income from a financial asset is
     accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which
     is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to
     that asset’s net carrying amount on initial recognition.

     Borrowing costs

            Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which
     are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
     the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment
     income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
     deducted from the borrowing costs eligible for capitalisation.

              All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

     Foreign currencies

            In preparing the financial statements of each individual group entity, transactions in currencies other than the
     functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the
     currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on




                                                     – II-17 –
APPENDIX II               FINANCIAL INFORMATION OF THE TARGET GROUP


     the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies
     are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in
     foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-
     monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

            Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
     are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of
     non-monetary items carried at fair value are included in profit or loss for the period.

           For the purposes of presenting the combined financial statements, the assets and liabilities of the Target
     Group’s foreign operations are translated into the presentation currency of the Target Group (i.e. HK$) at the rate of
     exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average
     exchange rates for the reporting period. Exchange differences arising, if any, are recognised in other comprehensive
     income and accumulated in equity (the translation reserve).

     Leasing

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

     The Target Group as lessor

            Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the
     relevant lease.

     The Target Group as lessee

            Assets held under finance leases are recognised as assets of the Target Group at their fair value at the
     inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to
     the lessor is included in the combined statements of financial position as a finance lease obligation.

            Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to
     achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised
     immediately in profit or loss.

            Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

     Taxation

            Income tax expense represents the sum of the tax currently payable and deferred tax.

            The tax currently payable is based on taxable profit for the reporting period. Taxable profit differs from profit
     as reported in the combined statements of comprehensive income because it excludes items of income or expense that
     are taxable or deductible in other reporting periods and it further excludes items that are never taxable or deductible.
     The Target Group’s liability for current tax is calculated using tax rates that have been enacted or substantively
     enacted by the end of the reporting period.

              Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
     the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax
     liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised
     for all deductible temporary difference to the extent that it is probable that taxable profits will be available against
     which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
     temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
     other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

            Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
     subsidiaries, except where the Target Group is able to control the reversal of the temporary difference and it is
     probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from




                                                    – II-18 –
APPENDIX II                   FINANCIAL INFORMATION OF THE TARGET GROUP


        deductible temporary differences associated with such investments and interests are only recognised to the extent that
        it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary
        differences and they are expected to reverse in the foreseeable future.

                Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in
        which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or
        substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets
        reflects the tax consequences that would follow from the manner in which the Target Group expects, at the end of the
        reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in
        profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity,
        in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

        Retirement benefit costs

               Payments to state-managed retirement benefit scheme and the Mandatory Provident Fund Scheme are charged
        as an expense when employees have rendered service entitling them to the contributions.

        Impairment losses on tangible assets

                At the end of the reporting period, the Target Group reviews the carrying amounts of its tangible assets to
        determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
        exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if
        any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the
        asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

               Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
        estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
        that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of
        an impairment loss is recognised as income immediately.

  4.    CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

         In the application of the Target Group’s accounting policies, which are described in note 3, the directors of Sky Will
  Holdings are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities
  that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
  experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

         The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
  recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
  revision and future periods if the revision affects both current and future periods.

        Critical judgements in applying the entity’s accounting policy

               The followings are the critical judgements, apart from those involving estimations (see below), that the
        directors have made in the process of applying the entity’s accounting policies and that has the most significant effect
        on the amounts recognised in the Financial Information.

        Going concern consideration

               The assessment of the going concern assumption involves making judgement by the directors of Sky Will
        Holdings, at a particular point of time, about the future outcome of events or conditions which are inherently
        uncertain. The directors of Sky Will Holdings consider that the Target Group has the ability to continue as a going
        concern and the major events or conditions, which may give rise to business risks, that individually or collectively
        may cast significant doubt about the going concern assumptions are set out in note 1.




                                                       – II-19 –
APPENDIX II                FINANCIAL INFORMATION OF THE TARGET GROUP


     Key sources of estimation uncertainty

            The following are the key assumptions concerning the future, and other key sources of estimation uncertainty
     at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying
     amounts of assets and liabilities within the next financial year.

     Depreciation of plant and equipment

            Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into
     account the estimated residual value. The Target Group assesses annually the residual value and the useful life of the
     plant and equipment and if the expectation differs from the original estimates, such differences from the original
     estimates will impact the depreciation charges in the period in which the estimates change.

     Estimated impairment of plant and equipment

            The Target Group assesses annually whether plant and equipment has any indication of impairment, in
     accordance with the relevant accounting policies. The recoverable amount of the plant and equipment has been
     determined based on value-in-use calculations. These calculations require the use of judgement and estimates on
     future operating cash flows and discount rates adopted. Where the actual cash flows are different from the original
     estimates, a material change in the amount of impairment may arise. Except for impairment of HK$129,000
     recognised for the six months ended 30 September 2011, there was no impairment of plant and equipment recognised
     for the Relevant Periods.

     Estimated impairment of investment in the non-consolidated subsidiary

            In determining whether Sky Will Holdings’s investment in the non-consolidated subsidiary is impaired
     requires an estimation of the future cash flows expected to arise from the subsidiary in order to calculate the present
     value. Where the estimated future cash flows are less than expected, a material impairment loss may arise.
     Impairment assessment had been carried out at the end of the reporting period on the subsidiary in its entirety. As at
     31 March 2009, 2010 and 2011, the investment cost in the non-consolidated subsidiary amounting HK$4,500,000
     was fully impaired. The non-consolidated subsidiary was deregistered in July 2011.

     Estimated impairment of trade and other receivables, amounts due from related companies and amounts due from
     directors

             When there is objective evidence of impairment loss, the Target Group takes into consideration the estimation
     of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying
     amount and the present value of estimated future cash flows (excluding future credit losses that have not been
     incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at
     initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise.

            As at 31 March 2009, 2010, 2011 and 30 September 2011, the carrying amounts of trade and other receivables
     are HK$4,091,000, HK$3,212,000, HK$5,776,000 and HK$23,444,000 respectively (Net of allowance for doubtful
     debts of nil, HK$20,000, HK$20,000 and HK$20,000 respectively).

           As at 31 March 2009, 2010, 2011 and 30 September 2011, the carrying amounts of amounts due from related
     companies are HK$7,507,000, HK$2,397,000, HK$28,233,000 and HK$17,956,000 respectively. No allowance for
     doubtful debts was provided for the amounts due from related companies at the end of each reporting period.

            As at 31 March 2009, 2010, 2011 and 30 September 2011, the carrying amounts of amounts due from
     directors are HK$442,000, HK$2,260,000, nil and HK$220,000 respectively. No allowance for doubtful debts was
     provided for the amounts due from directors at the end of each reporting period.

     Provision for guarantees

            The Target Group follows the guidance of HKAS 37 Provisions, Contingent Liabilities and Contingent Assets
     in determining the provision for guarantees. Provisions have been made based on management’s best estimates and
     judgements at the date of grant and at the end of the reporting period if it is probable that an outflow of resources




                                                     – II-20 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


        will be required to settle the defaulted guarantees and the amount of such provision can be measured reliably. Sky
        Will Holdings’s management considers the fair value of the guarantees at the date of grant is insignificant and the
        default risk is low at the end of the reporting period. No provision for contingent liability in respect of the guarantees
        provided is considered necessary by the directors of Sky Will Holdings.

  5.    CAPITAL RISK MANAGEMENT

        The Target Group manages its capital to ensure entities in the Target Group will be able to continue as a going
  concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Target
  Group’s overall strategy remains unchanged throughout the Relevant Periods.

        The capital structure of the Target Group consists of bank and other borrowings, obligations under finance leases,
  amount(s) due to related companies and a director, bank balances and cash and equity attributable to owners of Sky Will
  Holdings, comprising issued share capital and reserve.

         The directors of Sky Will Holdings review the capital structure on an annual basis. As part of this review, the
  directors of Sky Will Holdings consider the cost of capital and the risks associated with each class of capital. Based on
  recommendations of the directors, the Target Group will balance its overall capital structure through the payment of
  dividends, new share issues as well as the issue of new debts or the redemption of existing debts.

  6.    FINANCIAL INSTRUMENTS

        (a)    Categories of financial instruments

                                                                                                                           As at
                                                                         As at 31 March                            30 September
                                                                2009               2010                2011                2011
                                                             HK$’000            HK$’000             HK$’000             HK$’000

               Financial assets
               Loans and receivables (including
                  cash and cash equivalents)                   12,419               7,928              34,286              43,799


               Financial liabilities
               Amortised cost                                  15,836               8,341              41,564              68,751

        (b)    Financial risk management objectives and policies

               The Target Group’s major financial instruments include trade and other receivables, amount due from holding
        company, amount due to an ultimate shareholder, amounts due from/to related companies, amounts due from/to
        directors, bank balances and cash, trade and other payables, obligations under finance leases and bank and other
        borrowings. Details of the financial instruments are disclosed in respective notes. The risks associated with these
        financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The
        policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to
        ensure appropriate measures are implemented on a timely and effective manner.

               Market risk

               (i)    Currency risk

                      The Target Group’s business activities and its assets and liabilities were denominated in HK$,
               Renminbi (‘‘RMB’’), United States dollars (‘‘US$’’) and Euro (‘‘EUR’’). The management considers the Target
               Group is not exposed to significant foreign currency risk as majority of its operations and transactions are
               denominated in the functional currency of the Target Group. The Target Group currently does not have a
               foreign currency hedging policy. However, the management monitors foreign exchange exposure and will
               consider hedging significant foreign currency exposure should the need arise.




                                                        – II-21 –
APPENDIX II           FINANCIAL INFORMATION OF THE TARGET GROUP


        (ii)   Interest rate risk

               The Target Group is exposed to cash flow interest rate risk in relation to variable-rate borrowing (see
        note 26 for details). It is the Target Group’s policy to keep its borrowings at floating rates of interest so as to
        minimise the fair value interest rate risk.

               The Target Group’s exposures to interest rate risk on financial liabilities are detailed in the liquidity
        risk management section of this note. The Target Group’s cash flow interest rate risk is mainly concentrated
        on the fluctuation of prime rate arising from the Target Group’s HK$ denominated borrowings.

               Sensitivity analysis

                      The sensitivity analyses below have been determined based on the exposure to interest rates for
               non-derivative instruments. The analysis is prepared assuming the financial instruments outstanding at
               the end of the reporting period were outstanding for the whole year. A 100 basis points increase or
               decrease is used when reporting interest rate risk internally to key management personnel and
               represents management’s assessment of the reasonably possible change in interest rates.

                      If interest rate had been 100 basis points higher/lower and all other variables were held constant,
               the Target Group’s post-tax profits for the Relevant Periods would decrease/increase as follows:

                                                                                                 Six months ended
                                                 For the year ended 31 March                       30 September
                                                   2009          2010        2011                   2010          2011
                                                HK$’000      HK$’000      HK$’000                HK$’000      HK$’000

                      Profit for the year              —               45               49              62              91

        Credit risk

               As at the end of the reporting period, the Target Group’s maximum exposure to credit risk which will
        cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties and
        financial guarantees provided by the Target Group is arising from:

               .      the carrying amount of the respective recognised financial assets as stated in the combined
                      statements of financial position; and

               .      the amount of contingent liabilities in relation to financial guarantee issued by the Target Group
                      as disclosed in note 35.

               In order to minimise the credit risk, the management of the Target Group has imposed various
        monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the
        Target Group reviews the recoverable amount of each individual debt at the end of each reporting period to
        ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of Sky
        Will Holdings consider that the Target Group’s credit risk is significantly reduced.

               The credit quality of the counterparties in respect of amounts due from holding company/related
        companies/directors are assessed by taking into account their financial position, credit history and other
        factors. The directors are of the opinion that the risk of default by these counterparties is low.

                The Target Group trades only with recognised and creditworthy third parties. The Target Group’s
        trading terms with its customers are mainly on credit. The normal credit period is generally for a period of 30
        days to 60 days for major customers. Each customer has a maximum credit limit. The Target Group seeks to
        maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior
        management. In view of the aforementioned measures and the fact that the Target Group’s trade receivables
        relate to the customers with good creditworthiness, there is no significant credit risk.




                                                – II-22 –
APPENDIX II              FINANCIAL INFORMATION OF THE TARGET GROUP


               As at 31 March 2009, 2010 and 2011 and 30 September 2011, the Target Group had a concentration of
        credit risk as of approximately 47%, 43%, 44% and 37% of the total trade receivables was due from the
        Target Group’s largest customer respectively.

               As at 31 March 2009, 2010 and 2011 and 30 September 2011, the Target Group had a concentration of
        credit risk as of approximately 100%, 100%, 75% and 81% of the total trade receivables were due from the
        Target Group’s five largest customers respectively.

              The Target Group’s concentration of credit risk by geographical locations is mainly in Hong Kong,
        which accounted for 100%, 100%, 100% and 72% of the total trade receivable as at 31 March 2009, 2010,
        2011 and 30 September 2011 respectively.

               The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings
        assigned by international credit-rating agencies.

        Collateral held as security and other credit enhancement

               The Target Group does not hold any collateral or other credit enhancements to cover its credit risks
        associated with its financial assets.

        Liquidity risk

                In managing the liquidity risk, the Target Group monitors and maintains a level of cash and cash
        equivalents deemed adequate by the management to finance the Target Group’s operations and mitigate the
        effects of fluctuations in cash flows. The management monitors the utilisation of its bank borrowings.

               As at 31 March 2009, 2010 and 2011 and 30 September 2011, the Target Group is exposed to liquidity
        risk as the Target Group had net current liabilities of HK$3,625,000, HK$912,000, HK$9,747,000 and
        HK$12,523,000 respectively. The liquidity of the Target Group primarily depends on the funding provided by
        the directors of Sky Will Holdings and certain related companies to meet its financial obligations when they
        fall due.

                 The following tables detail the Target Group’s remaining contractual maturity for its non-derivative
        financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial
        liabilities and based on the earliest date on which the Target Group can be required to pay. Specifically, bank
        borrowings with a repayment on demand clause are included in the earliest time band regardless of the
        probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial
        liabilities are based on the agreed repayment dates.




                                                – II-23 –
APPENDIX II           FINANCIAL INFORMATION OF THE TARGET GROUP


                The tables include both interest and principal cash flows. To the extent that interest flows are floating
        rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

               Liquidity tables

                                                                     On demand                Total
                                                                      and within       undiscounted            Carrying
                                                                          1 year         cash flows             amount
                                                                        HK$’000            HK$’000             HK$’000

               At 31 March 2009
               Non-derivative financial liabilities
               Trade and other payables                                       158                158                 158
               Amounts due to related companies                            15,040             15,040              15,040
               Amount due to a director                                       607                607                 607
               Obligations under finance leases                                32                 32                  31
               Financial guarantee contract                                24,648             24,648                  —


                                                                           40,485             40,485              15,836

                                                                     On demand                Total
                                                                      and within       undiscounted            Carrying
                                                                          1 year         cash flows             amount
                                                                        HK$’000            HK$’000             HK$’000

               At 31 March 2010
               Non-derivative financial liabilities
               Trade and other payables                                        89                 89                  89
               Amounts due to related companies                             3,183              3,183               3,183
               Amount due to a director                                       607                607                 607
               Bank and other borrowings                                    4,721              4,721               4,462
               Financial guarantee contract                                20,815             20,815                  —


                                                                           29,415             29,415               8,341

                                                                     On demand                Total
                                                                      and within       undiscounted            Carrying
                                                                          1 year         cash flows             amount
                                                                        HK$’000            HK$’000             HK$’000
               At 31 March 2011
               Non-derivative financial liabilities
               Trade and other payables                                       213                213                 213
               Amounts due to related companies                            33,082             33,082              33,082
               Amount due to a director                                     3,297              3,297               3,297
               Bank and other borrowings                                    5,246              5,246               4,972
               Financial guarantee contract                                19,089             19,089                  —


                                                                           60,927             60,927              41,564




                                                – II-24 –
APPENDIX II              FINANCIAL INFORMATION OF THE TARGET GROUP


                                                On demand                                           Total
                                                 and within                                  undiscounted          Carrying
                                                     1 year     1 to 2 years    2 to 5 years   cash flows           amount
                                                   HK$’000          HK$’000         HK$’000      HK$’000           HK$’000

                  At 30 September 2011
                  Non-derivative financial
                     liabilities
                  Trade and other payables           16,752               —               —           16,752          16,752
                  Amount due to an
                     ultimate shareholder                155              —               —              155             155
                  Amounts due to related
                     companies                       19,799               —               —           19,799          19,799
                  Amount due to a director           10,657               —               —           10,657          10,657
                  Bank and other
                     borrowings                      14,878               —               —           14,878          14,681
                  Obligations under finance
                     leases                            1,636           1,770           4,280           7,686           6,707
                  Financial guarantee
                     contract                        39,394               —               —           39,394              —


                                                    103,271            1,770           4,280        109,321           68,751

                   Bank borrowings with a repayment on demand clause are included in the ‘‘on demand or within 1
           year’’ time band in the above maturity analysis. As at 31 March 2010, 2011 and 30 September 2011, the
           aggregate undiscounted principal amounts of these bank borrowings amounted to HK$2,489,000,
           HK$2,297,000 and HK$1,634,000 respectively. Taking into account the Target Group’s financial position, the
           directors of Sky Will Holdings do not believe that it is probable that the banks will exercise their discretionary
           rights to demand immediate repayment. The directors of Sky Will Holdings believe that such bank borrowings
           will be repaid approximately four years after the reporting date in accordance with the scheduled repayment
           dates set out in the loan agreements. At that time, the aggregate principal and interest cash outflows for the
           bank and other borrowings as at 31 March 2010, 2011 and 30 September 2011 will amount to HK$5,212,000,
           HK$5,976,000 and HK$15,388,000 respectively.

                  The amounts included above for financial guarantee contracts are the maximum amounts the Target
           Group could be required to settle under the arrangement for the full guaranteed amount if that amount is
           claimed by the counterparty to the guarantee. Based on expectations at the end of the reporting period, the
           Target Group considers that it is more likely than not that no amount will be payable under the arrangement.
           However, this estimate is subject to change depending on the probability of the counterparty claiming under
           the guarantee which is a function of the likelihood that the financial receivables held by the counterparty
           which are guaranteed suffer credit losses.

                  The amounts included above for variable interest rate instruments for non-derivative financial liabilities
           are subject to change if changes in variable interest rates are different from those estimates of interest rates
           determined at the end of the reporting period.

     (c)   Fair value

           The fair value of financial guarantee contracts is determined using option pricing models where the major
     assumptions are the probability of default by the specified counterparty extrapolated from market-based credit
     information and the amount of loss, given the default.

            The directors consider that the carrying amounts of financial assets and financial liabilities recorded at
     amortised cost in the Financial Information approximate their fair values due to their immediate or short-term
     maturities.




                                                   – II-25 –
APPENDIX II                    FINANCIAL INFORMATION OF THE TARGET GROUP


  7.   REVENUE AND SEGMENT INFORMATION

       Revenue

              Revenue represents revenue arising on sales of packaging products net of sales related taxes and discounts,
       during the Relevant Periods.

       Segment information

              The chief operating decision-makers have been identified as the directors of Sky Will Holdings. The Target
       Group is principally engaged in manufacture and trading of packaging products. The directors regard it as a single
       operating segment and therefore, no segment information is presented.

       Geographical information

             The Target Group’s operations are located in Hong Kong and the PRC (excluding Hong Kong).

             The Target Group’s revenue from external customers and information about its non-current assets by
       geographical location of the assets are detailed below:

                                                 Revenue from external customers                          Non-current assets
                                                                        Six months ended                                              As at 30
                                           Year ended 31 March            30 September               As at 31 March                 September
                                          2009        2010      2011       2010        2011      2009        2010      2011              2011
                                       HK$’000    HK$’000    HK$’000   HK$’000      HK$’000   HK$’000     HK$’000   HK$’000           HK$’000
                                                                     (Unaudited)

             Hong Kong                   6,533       5,304     30,142        1,233   29,130       168         112              57         625
             PRC (excluding Hong
                 Kong)                      66          —       2,917        1,950   12,399       452         409       14,014         37,374
             Europe                     11,976       7,120      3,794          403   13,339        —           —            —              —
             United State of America    20,452       5,769      5,318        4,554       68        —           —            —              —
             Others                        463         440      1,473          114       —         —           —            —              —


             Total                      39,490      18,633     43,644        8,254   54,936       620         521       14,071         37,999

       Information about major customers

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

                                                                                                           Six months ended
                                                       Year ended 31 March                                   30 September
                                                    2009           2010                   2011                2010          2011
                                                 HK$’000       HK$’000                 HK$’000            HK$’000        HK$’000
                                                                                                        (Unaudited)

             Customer     A                         6,133                4,371              NA1                 NA1                     NA1
             Customer     B                        12,437                4,749            7,139               4,472                     NA1
             Customer     C                        11,434                6,393              NA1               1,935                     NA1
             Customer     D                         4,714                  NA1              NA1                 NA1                     NA1
             Customer     E                           NA1                  NA1           18,452                 NA1                  14,481
             Customer     F                           NA1                  NA1            8,555                 NA1                     NA1
             Customer     G                           NA1                  NA1              NA1                 NA1                   8,081
             Customer     H                           NA1                  NA1              NA1                 NA1                   6,746


                                                   34,718               15,513           34,146               6,407                  29,308

             1
                      The corresponding revenue did not contribute over 10% of the total sales of the Target Group.




                                                         – II-26 –
APPENDIX II                 FINANCIAL INFORMATION OF THE TARGET GROUP


  8.   OTHER INCOME

                                                                                              Six months ended
                                                     Year ended 31 March                        30 September
                                                   2009         2010              2011           2010          2011
                                                HK$’000     HK$’000            HK$’000       HK$’000       HK$’000
                                                                                           (Unaudited)

       Motor car rental income                        72             72              72             36            36
       Gain on disposal of plant and
          equipment                                   5              —               —              —             —
       Net foreign exchange gain                      —              —               56             —            877
       Gain on deregistration of a subsidiary
          (Note 16)                                   —              —               —              —            195
       Interest income                                 1             —               —              —              2
       Waiver of amount due to a subsidiary           —              —              902             —             —
       Waiver of trade and other payables             —              37              —              —             —
       Sundry income                                  11             10              —              —            404
       Compensation income (Note)                     —              —              158             —             —
       Disposal of scrap materials                    —              —               —              —            454


                                                      89            119           1,188             36         1,968

       Note: Compensation income represents amounts received from a customer of the Target Group for the cancellation
             of orders during the Relevant Periods.

  9.   FINANCE COSTS

                                                                                              Six months ended
                                                     Year ended 31 March                        30 September
                                                   2009         2010              2011           2010          2011
                                                HK$’000     HK$’000            HK$’000       HK$’000       HK$’000
                                                                                           (Unaudited)
       Interest expenses on:
       Bank loans and other borrowings
          wholly repayable within five years          —             320             463            253           255
       Finance leases                                 5               1              —              —            135


                                                       5            321             463            253           390




                                                  – II-27 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


  10.   INCOME TAX EXPENSE

                                                                                                   Six months ended
                                                         Year ended 31 March                         30 September
                                                       2009         2010              2011            2010          2011
                                                    HK$’000     HK$’000            HK$’000        HK$’000       HK$’000
                                                                                                (Unaudited)

        Current tax
          Hong Kong Profits Tax                           89            541              943            162            605
          PRC Enterprise Income Tax                       —              —                —              —           1,810


                                                          89            541              943            162          2,415


        Deferred tax (Note 27)
          Current year/period                            (20)           (13)             (14)            —             (21)
          Attributable to a change in tax rate            (6)            —                —              —              —


                                                         (26)           (13)             (14)            —             (21)


                                                          63            528              929            162          2,394

        Under the Law of the People’s Republic of China on Enterprise Income Tax (the ‘‘EIT Law’’) and Implementation
  Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

          On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits
  tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009.

         The income tax expense for the Relevant Periods can be reconciled to the (loss) profit before tax per the combined
  statements of comprehensive income as follows:

                                                                                                   Six months ended
                                                         Year ended 31 March                         30 September
                                                       2009         2010              2011            2010          2011
                                                    HK$’000     HK$’000            HK$’000        HK$’000       HK$’000
                                                                                                (Unaudited)

        (Loss) profit before tax                      (4,122)         3,155            5,667            964         18,279


        Tax at domestic income tax rate
           of 16.5%                                     (680)           521              935            159          3,016
        Tax effect of expenses not deductible
           for tax purpose                               749              7                3              3             12
        Tax effect of income not taxable for
           tax purpose                                    —              —                (9)            —          (1,228)
        Effect of different tax rates of
           subsidiaries operating in other
           jurisdictions                                  —              —                —              —             594
        Decrease in opening deferred tax
           liability resulting from a decrease
           in applicable tax rate                         (6)            —                —              —              —


        Tax expense for the year/period                   63            528              929            162          2,394




                                                     – II-28 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


  11.   (LOSS) PROFIT FOR THE YEAR/PERIOD

                                                                                                Six months ended
                                                       Year ended 31 March                        30 September
                                                     2009         2010              2011           2010          2011
                                                  HK$’000     HK$’000            HK$’000       HK$’000       HK$’000
                                                                                             (Unaudited)

        (Loss) profit for the year/period has
           been arrived at after charging:

        Directors’ remuneration                         42              8              —              —             —
        Other staff costs
           — salaries, allowances and
                other benefits                         419           224              953           315         13,263
           — Retirement benefit schemes
                contributions                           28            14               42             15           249


        Total staff costs                              489           246              995           330         13,512


        Auditor’s remuneration                          15            20               25             —             51
        Depreciation of plant and equipment            100            99              250             49         1,711
        Minimum lease payments under
          operating lease for rented office
          premise                                      180           180              180             90           233
        Bad debts written off in respect of
          trade and other receivables (Note)            —             90               —              —             —
        Impairment on plant and equipment               —             —                —              —            129
        Impairment loss on trade and other
          receivables                                   —             20               —              —             —
        Loss on disposal of plant and
          equipment                                     —              —               —              —             78
        Write-off of amount due from
          a subsidiary                                  21             —               —              —             —
        Cost of inventories recognised
          as expenses                                   —              —               —              —         40,456
        Net foreign exchange losses                     10             6               —              6             —

        Note: The bad debts written off are the balances due from debtors which either had been deregistered or loss of
              contact.




                                                   – II-29 –
APPENDIX II                 FINANCIAL INFORMATION OF THE TARGET GROUP


  12.   DIRECTORS’ EMOLUMENTS AND EMPLOYEES’ EMOLUMENTS

        Directors’ emoluments

               Details of the emoluments paid or payable to each of the directors during the Relevant
        Period were as follows:

                                                                              Salaries,      Retirement
                                                                           allowances            benefit
                                                                            and other           schemes
                                                              Fees             benefits    contributions            Total
                                                           HK$’000           HK$’000           HK$’000            HK$’000

              Year ended 31 March 2009

              Chan Fook Kai                                      —                  —                   —              —
              Fung Ming                                          —                  42                  —              42
              Kao Wai Kwong, Eric                                —                  —                   —              —
              Ng Man Chan (Appointed on 8
                December 2008)                                   —                  —                   —              —


                                                                 —                  42                  —              42

                                                                              Salaries,      Retirement
                                                                           allowances            benefit
                                                                            and other           schemes
                                                              Fees             benefits    contributions            Total
                                                           HK$’000           HK$’000           HK$’000            HK$’000
              Year ended 31 March 2010

              Chan Fook Kai                                      —                  —                   —              —
              Fung Ming                                          —                  8                   —              8
              Kao Wai Kwong, Eric                                —                  —                   —              —
              Ng Man Chan                                        —                  —                   —              —


                                                                 —                   8                  —               8

              No directors’ emoluments were incurred for the year ended 31 March 2011 and the six months ended 30
        September 2010 and 2011.

              During the Relevant Periods, no emoluments have been paid by the Target Group to the directors as an
        inducement to join or upon joining the Target Group or as compensation for loss of office.

              None of the directors of Sky Will Holdings has waived any emoluments during the Relevant Periods.




                                                     – II-30 –
APPENDIX II                   FINANCIAL INFORMATION OF THE TARGET GROUP


        Employees’ emoluments

               The five highest paid individuals of the Target Group included 1 director for the year ended 31 March 2009
        and 2010, none director for the year ended 31 March 2011 and the six months ended 30 September 2010 and 2011,
        whose remuneration are reflected in the analysis presented above. Details of remuneration paid to the remaining 4, 4,
        5, 5 and 5 highest paid individuals of the Target Group for the years ended 31 March 2009, 2010 and 2011 and the
        six months ended 30 September 2010 and 2011 respectively were as follows:

                                                                                                      Six months ended
                                                          Year ended 31 March                           30 September
                                                        2009         2010                2011            2010          2011
                                                     HK$’000     HK$’000              HK$’000        HK$’000       HK$’000
                                                                                                   (Unaudited)

               Salaries, allowances and other
                  benefits                                 461            232               953            315             466

               Retirement benefit schemes
                 contributions                              28             14                42             15              22


                                                           489            246               995            330             488

               The emoluments of the five highest paid individuals were individually less than HK$1,000,000.

               During the Relevant Periods, no emoluments have been paid by the Target Group to the five highest paid
        individuals as an inducement to join or upon joining the Target Group or as compensations for loss of office.

  13.   DIVIDENDS

         No dividend was paid or proposed during the Relevant Periods, nor has any dividend been proposed since the end of
  the reporting period.

  14.   LOSS/EARNINGS PER SHARE

        No loss/earnings per share information is presented as its inclusion, for the purpose of this report, is not considered
  meaningful.




                                                       – II-31 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


  15.   PLANT AND EQUIPMENT

                                               Plant and          Office   Furniture and      Motor
                                               machinery      equipment          fixtures    vehicle      Total
                                                HK$’000         HK$’000         HK$’000     HK$’000     HK$’000

        COST
        At 1 April 2008                              916             44               14        245       1,219
        Additions                                     —               9               —          —            9
        Disposals                                   (263)            —                —          —         (263)


        At 31 March 2009 and 31 March
           2010                                      653             53               14        245         965
        Additions                                 13,800             —                —          —       13,800


        At 31 March 2011                          14,453             53               14        245      14,765
        Additions                                 14,270             70               —         786      15,126
        Acquired on acquisition of a
           subsidiary                             11,211             24               —         517      11,752
        Disposals                                 (1,086)            —                —         (84)     (1,170)


        At 30 September 2011                      38,848            147               14       1,464     40,473


        DEPRECIATION AND
           IMPAIRMENT
        At 1 April 2008                              224             17               3          69         313
        Provided for the year                         45              3               2          50         100
        Eliminated on disposals                      (68)            —                —          —          (68)


        At 31 March 2009                             201             20                5        119         345
        Provided for the year                         44              6                1         48          99


        At 31 March 2010                             245             26                6        167         444
        Provided for the year                        194              5                2         49         250


        At 31 March 2011                             439             31               8         216         694
        Provided for the period                    1,624              8               —          79       1,711
        Impairment loss recognised in profit
           or loss                                   129             —                —           —         129
        Eliminated on disposals                      (48)            —                —          (12)       (60)


        At 30 September 2011                       2,144             39                8        283       2,474


        CARRYING VALUES
        At 31 March 2009                             452             33                9        126         620


        At 31 March 2010                             408             27                8         78         521


        At 31 March 2011                          14,014             22                6         29      14,071


        At 30 September 2011                      36,704            108                6       1,181     37,999




                                                  – II-32 –
APPENDIX II                   FINANCIAL INFORMATION OF THE TARGET GROUP


         The above items of plant and equipment are depreciated on a straight-line basis, after taking into account their
  estimated residual values, at the following rates per annum:

        Plant and machinery                      6.6%–20%
        Office equipment                         10%–20%
        Furniture and fixtures                   10%
        Motor vehicles                           20%

         During the six months ended 30 September 2011, impairment loss of HK$129,000 has been recognised in respect of
  plant and machinery sold after the end of the reporting period. The recoverable amounts of the disposed assets are the
  disposal consideration of those assets.

         As at the end of the reporting years, the carrying values of plant and equipment held under finance leases were as
  follows:

                                                                                                                     As at
                                                                       As at 31 March                        30 September
                                                             2009                2010             2011               2011
                                                          HK$’000             HK$’000          HK$’000            HK$’000

        Plant and machinery                                     —                  —                  —              8,042
        Motor vehicle                                          126                 —                  —                586


                                                               126                 —                  —              8,628

  16.   INVESTMENT IN A SUBSIDIARY

        The Target Group

                                                                                                                     As at
                                                                       As at 31 March                        30 September
                                                              2009               2010              2011              2011
                                                              HK$                HK$               HK$                HK$

        Unlisted equity interest, at cost                 4,500,000         4,500,000          4,500,000                —
        Impairment loss recognised                       (4,500,000)       (4,500,000)        (4,500,000)               —


                                                                 —                 —                  —                 —

               The results of one of the subsidiaries, New Spring Paper with investment cost of HK$4,500,000 have not been
        consolidated in the Financial Information for the Relevant Periods in accordance with HKAS 27 issued by the
        HKICPA since in the opinion the directors, it would involve expense and delay out of proportion to the value to
        shareholders of Sky Will Holdings.

               During the year, the directors of Sky Will Holdings reviewed the carrying values of the investment cost in
        New Spring Paper with references to the business operated by the subsidiary. Full impairment loss has been
        recognised in respect of New Spring Paper as at 31 March 2009, 2010 and 2011. New Spring Paper was de-registered
        in July 2011 with gain on deregistration of HK$195,000.

        Sky Will Holdings

             On 15 January 2011, Sky Will Holdings acquired the entire equity interest in Sky Will from the Beneficial
        Owners. Details are set out in note 1.




                                                     – II-33 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


  17.   INVENTORIES

                                                                                                                     As at
                                                                      As at 31 March                         30 September
                                                              2009              2010               2011              2011
                                                           HK$’000           HK$’000            HK$’000           HK$’000

        Raw materials                                             —                 —                  —              6,414
        Work in progress                                          —                 —                  —              6,943
        Finished goods                                            —                 —                  —              2,305


                                                                  —                 —                  —             15,662

  18.   TRADE AND OTHER RECEIVABLES

                                                                                                                     As at
                                                                      As at 31 March                         30 September
                                                              2009              2010               2011              2011
                                                           HK$’000           HK$’000            HK$’000           HK$’000

        Trade receivables                                     3,953              3,184             4,889             22,197
        Less: allowance for doubtful debts                       —                 (20)              (20)               (20)


                                                              3,953              3,164             4,869             22,177

        Deposits, prepayments and other
          receivables                                           138                 48               907              1,267


                                                              4,091              3,212             5,776             23,444

         The Target Group allows credit period ranged from 30 to 60 days to its trade customers. The following is an aged
  analysis of trade receivables net of allowance for doubtful debts presented based on the invoice date at the end of each
  reporting period.

                                                                                                                     As at
                                                                      As at 31 March                         30 September
                                                              2009              2010               2011              2011
                                                           HK$’000           HK$’000            HK$’000           HK$’000

        Within 30 days                                        2,315              1,439             3,835             10,206
        31 to 60 days                                           589              1,198                88              8,388
        Over 60 days                                          1,049                527               946              3,583


                                                              3,953              3,164             4,869             22,177

         Trade receivables disclosed as below include amounts which are past due at the end of each reporting period for
  which the Target Group has not recognised an allowance for doubtful debts because there has not been a significant change
  in credit quality and the amounts are still considered recoverable. The Target Group does not hold any collateral or other
  credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Target
  Group to the counterparty.




                                                      – II-34 –
APPENDIX II                 FINANCIAL INFORMATION OF THE TARGET GROUP


        Ageing of trade receivables which are past due but not impaired

                                                                                                                    As at
                                                                     As at 31 March                         30 September
                                                            2009               2010              2011               2011
                                                         HK$’000            HK$’000           HK$’000            HK$’000

        31 to 60 days                                          300                378                64             1,519
        Over 60 days                                         1,049                527               946             3,583


        Total                                                1,349                905             1,010             5,102

        Movement in the allowance for doubtful debts

                                                                                                                    As at
                                                                     As at 31 March                         30 September
                                                            2009               2010              2011               2011
                                                         HK$’000            HK$’000           HK$’000            HK$’000

        Balance at beginning of year/period                     —                  —                 20                20

        Impairment losses recognised in respect
          of trade receivables                                  —                  20                —                 —


        Balance at end of year/period                           —                  20                20                20

               Included in the allowance for doubtful debts are individually impaired trade receivables with an aggregate
        balance of HK$20,000 as at 31 March 2010, 31 March 2011 and 30 September 2011, which are long outstanding and
        the directors of Sky Will Holdings consider the probability of recovery is low. The Target Group does not hold any
        collateral over these balances.

  19.   AMOUNT DUE FROM HOLDING COMPANY

        The amount was unsecured, non-interest bearing and repayable on demand.




                                                    – II-35 –
APPENDIX II                    FINANCIAL INFORMATION OF THE TARGET GROUP


  20.   AMOUNTS DUE FROM RELATED COMPANIES

        The details of amounts due from related companies are as follows:

                                                                                                                       As at
                                                                          As at 31 March                       30 September
                                                                     2009           2010              2011             2011
                                                  Notes           HK$’000        HK$’000           HK$’000          HK$’000
        New Spring Label & Packaging
          Limited (‘‘New Spring Label’’)         (a), (d)               844          1,101           19,685          14,898
        力新時紙品(深圳)有限公司
          (‘‘力新時’’)                              (b), (e)             6,663               —              —               —
        New Spring Group Company
          Limited (‘‘New Spring Group’’)         (c), (d)                —                —           8,419            2,399
        New Pearl Hot Stamping &
          Packaging Limited (‘‘New
          Pearl’’)                               (b), (e)                —           1,296               24             483
        Beautiking Investment Limited
          (‘‘Beautiking’’)                       (c), (e)                —                —              45              —
        Glory Motion Company Limited
          (‘‘Glory Motion’’)                     (c), (e)                —                —              60             176


                                                                      7,507          2,397           28,233          17,956

        Notes:

        (a)      Kao Wai Kwong, Eric, the director of Sky Will Holdings is also the director of the related company. He has
                 resigned as the director of the related company on 18 May 2010. For the year ended 31 March 2011 and six
                 months ended 30 September 2011, Ng Man Chan, the director of Sky Will Holdings, is the shareholder of the
                 related company.

        (b)      Kao Wai Kwong, Eric, the director of Sky Will Holdings was also the director of the related company. He has
                 resigned as the director of the related company on 25 February 2011. For the year ended 31 March 2011 and
                 30 September 2011, Li Mi Lai, the spouse of the director of Sky Will Holdings, Ng Man Chan, is the director
                 of the related company.

        (c)      Ng Man Chan, the director of Sky Will Holdings is also the director of the related company.

        (d)      The amounts are in trade nature with a credit term of 60 days.

        (e)      The amounts are unsecured, non-interest bearing and repayable on demand.

        Maximum amount outstanding from related companies during the Relevant Periods:

                                                                                                                       As at
                                                                         As at 31 March                        30 September
                                                                 2009              2010             2011               2011
                                                              HK$’000           HK$’000          HK$’000            HK$’000

        New Spring Label                                        1,268             1,292             35,792           35,792
        力新時                                                     6,663             6,663                 —            12,793
        New Spring Group                                           —                 —              18,095           18,095
        New Pearl                                                  —              1,551              1,356            1,356
        Beautiking                                                 —                 —                  60               60
        Glory Motion                                               —                 —                  60              176




                                                          – II-36 –
APPENDIX II                      FINANCIAL INFORMATION OF THE TARGET GROUP


  21.       AMOUNTS DUE FROM DIRECTORS

            The details of amounts due from directors are as follows:

                                                                                                                         As at
                                                                             As at 31 March                      30 September
                                                                  2009                 2010            2011              2011
                                                               HK$’000              HK$’000         HK$’000           HK$’000

            Kao Wai Kwong, Eric                                      —                  —                 —                  30
            Fung Ming                                               442                442                —                  —
            Ng Man Chan                                              —               1,818                —                 190

                                                                    442              2,260                —                 220

            Maximum amount outstanding from directors during the Relevant Periods:

                                                                                                                       As at 30
                                                                             As at 31 March                          September
                                                                  2009                 2010            2011               2011
                                                               HK$’000              HK$’000         HK$’000            HK$’000

            Kao Wai Kwong, Eric                                      —                  —                 —                  30
            Fung Ming                                               442                442               442                 —
            Ng Man Chan                                              —               1,818             1,818                190

            The amounts are unsecured, non-interest bearing and repayable on demand.

  22.       BANK BALANCES AND CASH

        Bank balances carried interest at prevailing market rates at a range from 0.01% to 0.5% per annum throughout the
  Relevant Periods.

  23.       TRADE AND OTHER PAYABLES

                                                                                                                         As at
                                                                             As at 31 March                      30 September
                                                                  2009                 2010            2011              2011
                                                               HK$’000              HK$’000         HK$’000           HK$’000

            Trade payables                                           39                 —                 —              12,865
            Deposits received                                        —                  —              1,200              5,474
            Accruals and other payables                             119                 89               213              3,521

                                                                    158                 89             1,413             21,860

            The following is an aged analysis of trade payables presented based on the invoice date at the end of each reporting
  period.

                                                                                                                         As at
                                                                             As at 31 March                      30 September
                                                                  2009                 2010            2011              2011
                                                               HK$’000              HK$’000         HK$’000           HK$’000

            Within 30 days                                               2              —                 —               3,575
            31 to 60 days                                               —               —                 —               5,529
            Over 60 days                                                37              —                 —               3,761

                                                                        39              —                 —              12,865




                                                         – II-37 –
APPENDIX II                       FINANCIAL INFORMATION OF THE TARGET GROUP


         The average credit period on purchases of goods is 30 days. The Target Group has financial risk management
  policies in place to ensure that all payables are settled within the credit timeframe.

  24.    AMOUNTS DUE TO RELATED COMPANIES/A DIRECTOR/AN ULTIMATE SHAREHOLDER

         The Target Group

               The amounts are unsecured, non-interest bearing and repayable on demand except for the balances of amounts
         due to related companies of HK$15,035,000, HK$3,183,000, HK$28,351,000 and nil as at 31 March 2009, 2010,
         2011 and 30 September 2011 respectively which are in trade nature with a credit term of 60 days.

         Sky Will Holdings

                 The amounts are unsecured, non-interest bearing and repayable on demand.

  25.    OBLIGATIONS UNDER FINANCE LEASES

         It is the Target Group’s policy to lease plant and machinery and motor vehicle under finance leases. The average
  lease term is 3 years and 4–5 years for the year ended 31 March 2009 and for the period ended 30 September 2011
  respectively. Interest rates underlying obligations under finance leases are fixed at respective contract dates at a range from
  6.95% to 9.04% for the year ended 31 March 2009 and 3.00% to 4.86% for the six months ended 30 September 2011.

                                              Minimum lease payments                  Present value of minimum lease payments
                                                                         As at 30                                         As at 30
                                           As at 31 March              September             As at 31 March             September
                                      2009          2010       2011         2011        2009          2010       2011        2011
                                   HK$’000      HK$’000     HK$’000      HK$’000     HK$’000      HK$’000     HK$’000     HK$’000

         Amounts payable
           under finance leases

         Within one year                32            —           —         1,636         31           —           —            1,419
         In more than one year
            but not more than
            two years                   —             —           —         1,770         —            —           —            1,544
         In more than two years
            but not more than
            five years                  —             —           —         4,280         —            —           —            3,744

                                        32            —           —         7,686         31           —           —            6,707
         Less: future finance
                 charges                (1)           —           —          (979)       N/A         N/A         N/A             N/A

         Present value of lease
            obligations                 31            —           —         6,707         31           —           —            6,707


         Less: Amounts due for
                settlement
                within 12
                months (shown
                under current
                liabilities)                                                             (31)          —           —        (1,419)

         Amounts due for
           settlement after 12
           months                                                                         —            —           —            5,288




                                                          – II-38 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


         The Target Group’s obligations under finance leases are denominated in HK$ and secured by the lessor’s charge over
  the leased assets.

  26.   BANK AND OTHER BORROWINGS

                                                                                                                     As at
                                                                      As at 31 March                         30 September
                                                             2009               2010               2011              2011
                                                          HK$’000            HK$’000            HK$’000           HK$’000

        Bank loans                                               —              4,462              4,972                9,681
        Other loans                                              —                 —                  —                 5,000


                                                                 —              4,462              4,972               14,681


        Carrying amount repayable:
        On demand or within one year                             —              1,973              2,675               13,047
        Carrying amount of bank borrowings that
          are not repayable within one year
          from the end of the reporting period
          but contain a repayment on demand
          clause (shown under current
          liabilities)                                           —              2,489              2,297                1,634


                                                                 —              4,462              4,972               14,681

        The ranges of effective interest rates (which are also equal to contracted interest rates) on the Target Group’s
  borrowings are as follows:

                                                                                                                     As at
                                                                      As at 31 March                         30 September
                                                             2009               2010               2011              2011
                                                          HK$’000            HK$’000            HK$’000           HK$’000

        Effective interest rate:
        Fixed-rate borrowings                                    —                  —                  —                5%
        Variable-rate borrowings                                 —               7.5%               7.5%        6% to 7.5%

        All bank and other borrowings were unsecured.

        The bank borrowings were guaranteed by the directors of Sky Will Holdings. Details are stated in note 33(i).

        The other borrowing was guaranteed by a director, Ng Man Chan.




                                                     – II-39 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


  27.   DEFERRED TAX LIABILITIES

         The following is the major deferred tax (liabilities) assets recognised and movements thereon during the Relevant
  Periods:

                                                                            Accelerated
                                                                                    tax
                                                                           depreciation         Tax losses             Total
                                                                              HK$’000            HK$’000             HK$’000

        At 1 April 2008                                                            (112)                —                  (112)
        Effect of change in tax rate                                                  6                 —                     6
        Credited to combined statement of comprehensive income                       20                 —                    20


        At 31 March 2009                                                            (86)                —                   (86)
        Credited to combined statement of comprehensive income                       13                 —                    13


        At 31 March 2010                                                            (73)                —                   (73)
        Credited to combined statement of comprehensive income                       14                 —                    14


        At 31 March 2011                                                            (59)                —                   (59)
        (Charged) credited to combined statement of comprehensive
           income                                                                   (13)                34                  21


        At 30 September 2011                                                        (72)                34                  (38)

         Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by PRC
  subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the Financial Information in
  respect of temporary differences attributable to accumulated profits of a PRC subsidiary amounting to HK$1,913,000 as at
  30 September 2011 as the Target Group is able to control the timing of the reversal of temporary differences and it is
  probable that the temporary differences will not reverse in the foreseeable future. There is no such temporary difference as
  at 31 March 2009, 2010 and 2011.

          As at 30 September 2011, the Target Group had unused tax losses of HK$206,000 available for offset against future
  profits. Deferred tax asset has been recognised in respect of such losses. There was no tax loss as at 31 March 2009, 2010
  and 2011.

  28.   SHARE CAPITAL

        Sky Will Holdings was incorporated on 2 November 2010. Sky Will Holdings’ 100 ordinary shares of US$1 each
  which equivalent to a total of HK$780 were issued and allotted to and fully paid by Sky Will Printing & Packaging (BVI)
  Limited on 2 November 2010.

         For the purpose of this report, the share capital as at 31 March 2009 and 2010 represented the share capital of   Sky
  Will amounting to HK$10,000. As mentioned in note 1, after the Equity Transfer, the newly incorporated company,          Sky
  Will Holdings, became the holding company of the Target Group and share capital contributed by the shareholders          was
  decreased from HK$10,000 to HK$780. The decrease of HK$9,220 in share capital contributed by the shareholders            was
  treated as deemed distribution to the controlling shareholder under group reorganisation.

  29.   MAJOR NON-CASH TRANSACTIONS

        During the year ended 31 March 2011, the Target Group acquired plant and equipment at a total consideration of
  HK$13,800,000 of which HK$10,000,000 was settled through off setting of amount due from New Spring Group, this
  amount was included in amount due from the related company, New Spring Group.




                                                      – II-40 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


        During the year ended 31 March 2010, pursuant to an agreement signed as at 30 September 2009 among Sky Will,
  力新時 and New Spring Group, an amount of HK$6,663,000 due from 力新時, as included in amounts due from related
  companies as at 30 September 2009, was set off with an equivalent amounts due to New Spring Group, of which the amount
  was included in amounts due to related companies as at 30 September 2009.

         During the six months ended 30 September 2011, the Target Group entered into finance lease arrangements in respect
  of assets with a total capital value at the inception of the lease of approximately HK$8,924,000.

       During the six months ended 30 September 2011, the gain on deregistration of a subsidiary of approximately
  HK$195,000 was settled through off setting of amount due from a related company.

  30.   ACQUISITION OF A SUBSIDIARY

         On 4 April 2011, Sky Will acquired entire equity interest of New Spring Offset from a related company for
  consideration of HK$12,000,000. This acquisition has been accounted for using the purchase method. The amount of gain
  on bargain purchase arising as a result of the acquisition was HK$7,445,000. New Spring Offset is engaged in
  manufacturing and trading of packaging products. New Spring Offset was acquired so as to continue the expansion of the
  Target Group’s operation on manufacture and trading of packaging products.

         Cash consideration of HK$12,000,000 had been transferred in respect of this acquisition of subsidiary. No
  acquisition-related costs had been incurred.

        Assets acquired and liabilities recognised at the date of acquisition are as follows:

                                                                                                                  HK$’000

        Plant and equipment                                                                                         11,752
        Inventories                                                                                                 15,049
        Trade and other receivables                                                                                  2,721
        Amounts due from related companies                                                                          35,089
        Bank balances and cash                                                                                         486
        Trade and other payables                                                                                    (7,557)
        Amounts due to related companies                                                                           (35,765)
        Income tax payable                                                                                          (2,330)


                                                                                                                    19,445

         The fair value of trade and other receivables at the date of acquisition amounted to HK$3,455,000 which is same as
  the gross contractual amounts of those trade and other receivables acquired. No amount is not expected to be collected
  based on the best estimate at acquisition date of the contractual cash flows.

        Gain on bargain purchase arising on acquisition:

                                                                                                                  HK$’000

        Consideration transferred                                                                                   12,000
        Less: net assets acquired                                                                                  (19,445)


        Gain on bargain purchase arising on acquisition                                                             (7,445)




                                                       – II-41 –
APPENDIX II                   FINANCIAL INFORMATION OF THE TARGET GROUP


         The gain on bargain purchase is attributable to the ability of the Target Group in negotiating the agreed terms of the
  transaction with the vendor.

        Net cash outflow on acquisition of New Spring Offset:

                                                                                                                     HK$’000

        Cash consideration paid                                                                                         12,000
        Less: cash and cash equivalent balances acquired                                                                  (486)


                                                                                                                        11,514

         Included in the profit for the six months ended 30 September 2011 is HK$5,185,000 attributable to the additional
  business generated by New Spring Offset. Revenue for the six months ended 30 September 2011 includes HK$3,862,000
  generated from New Spring Offset.

        As the date of acquisition is close to the beginning of six months ended 30 September 2011, no pro-forma
  information of revenue and profit for the six months ended 30 September 2011 is presented.

  31.   CAPITAL COMMITMENTS

                                                                                                                        As at
                                                                        As at 31 March                          30 September
                                                               2009               2010               2011               2011
                                                            HK$’000            HK$’000            HK$’000            HK$’000

        Capital expenditure in respect of the
          acquisition of plant and machinery
          contracted but not provided in the
          Financial Information                                    —                  —               7,749                 —

        Commitment in respect of capital
          contribution to a subsidiary contracted
          for but not provided in the Financial
          Information                                           3,500              3,500                 —                  —

        On 20 August 2008, the registered capital of a subsidiary, New Spring Paper, was increased by HK$7,000,000, from
  HK$1,000,000 to HK$8,000,000. Up to 8 July 2008, Sky Will had paid up for capital of HK$3,500,000. The remaining
  amount of HK$3,500,000 has not yet been paid as at 31 March 2009 and 2010. No capital commitment existed in respect of
  such event as at 31 March 2011 and 30 September 2011 since the contract for contribution to the remaining capital amount
  was expired on 20 August 2010. The subsidiary had been de-registered on 18 July 2011.

  32.   RETIREMENT BENEFITS SCHEME

         The Target Group operates a Mandatory Provident Fund Scheme for all qualifying employees in Hong Kong. The
  assets of the scheme are held separately from those of the Target Group, in funds under the control of trustees. The Target
  Group contributes 5% of relevant basic salaries to the scheme, which contribution is matched by employees.

         The employees of the Target Group’s subsidiary in PRC are members of a state-managed retirement benefit scheme
  operated by the government of PRC. The subsidiary is required to contribute 10% of payroll costs to the retirement benefit
  scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the
  specified contributions.

        The total costs charged to the combined statements of comprehensive income of HK$28,000, HK$14,000,
  HK$42,000, HK$15,000 and HK$249,000 for the year ended 31 March 2009, 2010, 2011 and the six months ended 30
  September 2010 and 2011 respectively, represent contributions payable to these schemes by the Target Group during the
  Relevant Periods.




                                                       – II-42 –
APPENDIX II                    FINANCIAL INFORMATION OF THE TARGET GROUP


  33.   RELATED PARTY TRANSACTIONS

        (i)     The directors of Sky Will Holdings, Chan Fook Kai, Kao Wai Kwong, Eric, Ng Man Chan and spouse of Ng
                Man Chan, provided personal guarantees for the Target Group’s banking facility at HK$6,000,000,
                HK$9,000,000 and HK$29,534,000 for the year ended 31 March 2010, 2011 and the six months ended 30
                September 2011 respectively.

        (ii)    The remuneration of the directors and other members of key management of the Target Group is disclosed in
                note 12.

        (iii)   Other than as disclosed elsewhere in the Financial Information, the Target Group entered into the following
                transactions with its related companies during the Relevant Periods:

                                                                                                                 Six months ended
                Name of                  Nature of                              Year ended 31 March                30 September
                related company          transactions                          2009        2010        2011         2010         2011
                                                                 Notes      HK$’000     HK$’000     HK$’000     HK$’000      HK$’000
                                                                                                              (Unaudited)

                Beautiking               Rental expenses           (a)           —          180         180           90          90


                New Spring Group         Rental expenses           (a)          180          —           —            —            —


                New Spring Group         Sales of packaging
                                            products               (b)           —           —        8,623           —          244


                New Spring Group         Purchase of plant
                                            and machinery          (c)           —           —       13,800           —            —


                New Spring Group         Sub-contracting
                                            charges                (d)       36,560      14,055       2,541           —            —


                New Pearl                Rental income             (e)           72          72          72           36          36


                New Spring Label         Sub-contracting
                                            charges                (d)          404          49          —            —            —


                New Spring Label         Sales of packaging
                                            products               (b)           —           —       18,384           49       15,137


                New Spring Label         Management fee
                                           income                  (f)           —           —           —            —          360


                New Spring Label         Disposal of plant
                                            and equipment          (g)           —           —           —            —          860


                New Spring Offset        Sub-contracting        (d), (h),
                                            charges             (i) & (j)        —           —       34,041           —          N/A

                Notes:

                (a)      The rental expenses were charged on a monthly fixed amount basis as mutually agreed by the Target
                         Group and the related company.

                (b)      The sales of packaging products was mutually agreed by the Target Group and the related company.




                                                             – II-43 –
APPENDIX II                  FINANCIAL INFORMATION OF THE TARGET GROUP


               (c)    The purchase of plant and equipment at fair value was executed under a sale and purchase agreement
                      with the related company.

               (d)    The sub-contracting charges were charged on certain percentage of sales price which was mutually
                      agreed by the Target Group and the related companies.

               (e)    The rental income was charged at a monthly fixed amount mutually agreed by the Target Group and the
                      related company.

               (f)    New Spring (SW) signed a management agreement with New Spring Label on 1 April 2011 for the
                      provision of general management services to New Spring Label for the period from 1 April 2011 to 31
                      March 2012.

               (g)    Certain plant and equipment was disposed at the net book value.

               (h)    Ng Man Chan, the director of Sky Will Holdings, is also the director of New Spring Offset.

               (i)    Certain plant and machinery were leased to the related company without charges.

               (j)    New Spring Offset became the subsidiary of the Target Group since April 2011. The subcontracting
                      charges were eliminated in the Financial Information for the six months ended 30 September 2011.

  34.   OPERATING LEASES

        The Target Group as leasee

              At the end of the reporting period, the Target Group had commitments for future minimum lease payments
        under non-cancellable operating leases which fall due as follows:

                                                                                                                        As at
                                                                        As at 31 March                          30 September
                                                               2009               2010               2011               2011
                                                            HK$’000            HK$’000            HK$’000            HK$’000

               Within one year                                    —                   —                 180              1,452
               In the second to fifth year
                  inclusive                                       —                   —                 270              1,047


                                                                  —                   —                 450              2,499

                Operating lease payments represent rentals payable by the Target Group for certain of its manufacturing
        facilities and office properties. Leases are negotiated for an average term of one to three years and rentals are fixed
        for an average of one to three years.

               At 31 March 2009 and 2010, the Target Group had no commitments under operating leases.

  35.   CONTINGENT LIABILITIES

          As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group provided financial guarantees to a bank
  in respect of banking facilities granted to a related company, New Spring Label. Outstanding balance of the relevant
  facilities utilised by the related company amounted to HK$24,648,000, HK$20,815,000, HK$19,089,000 and nil as at 31
  March 2009, 2010, 2011 and 30 September 2011 respectively. The fair value of the financial guarantees at its grant date was
  zero which was based on the valuation report issued by RHL Appraisal Ltd, an independent professional valuer. In addition,
  the directors of Sky Will Holdings reviewed the financial information of New Spring Label and considered that the related
  default risk was low at the end of each reporting period. No provision for contingent liability in respect of the guarantees
  provided is considered necessary by the directors of Sky Will Holdings.




                                                      – II-44 –
  APPENDIX II                    FINANCIAL INFORMATION OF THE TARGET GROUP


            As at 30 September 2011, the Target Group provided financial guarantees to a bank in respect of banking facilities
     granted to related companies, Beaumax Company Limited, Beautiking Investments Limited and Glory Motion Company
     Limited. Outstanding balance of the relevant facilities utilised by the related companies amounted to HK$8,617,000,
     HK$17,235,000 and HK$13,542,000 respectively as at 30 September 2011. The fair value of the financial guarantees at its
     grant date on 9 June 2011 was zero which was based on the valuation report issued by RHL Appraisal Ltd, an independent
     professional valuer. In addition, the directors of Sky Will Holdings reviewed the financial information of the related
     companies and considered that the related default risk of the financial guarantee was low at the end of the reporting period.
     No provision for contingent liability in respect of the guarantees provided is considered necessary by the directors of Sky
     Will Holdings.


B.   SUBSEQUENT FINANCIAL STATEMENTS

    As at the date of this report, no audited financial statements have been prepared by the Target
Group in respect of any period subsequent to 30 September 2011.




Yours faithfully,




SHINEWING (HK) CPA Limited
Certified Public Accountants
Wong Hon Kei, Anthony
Practising Certificate Number: P05591
Hong Kong




                                                          – II-45 –
     APPENDIX II             FINANCIAL INFORMATION OF THE TARGET GROUP


2.     MANAGEMENT DISCUSSION AND ANALYSIS

       Management Discussion and Analysis on the Target Group

            Set out below is the management discussion and analysis of the performance of the Target
       Group for the three years ended 31 March 2009, 2010 and 2011 and the six months ended 30
       September 2011.

       Business and Financial Review

            For the years ended 31 March 2009 and 2010, the operating entity within the Target Group
       was Sky Will only.

            For the year ended 31 March 2009, the Target Group recorded turnover of approximately
       HK$39.5 million and gross profit of approximately HK$1.3 million. Net loss for the year ended 31
       March 2009 was approximately HK$4.2 million which was mainly contributed from the
       impairment loss of investment in New Spring Paper which was de-registered on 18 July 2011.

            For the year ended 31 March 2010, the Target Group recorded turnover and gross profit of
       approximately HK$18.6 million and HK$4.1 million respectively. Net profit for the year ended 31
       March 2010 was approximately HK$2.6 million.

             The Target Group’s revenue dropped of approximately HK$20.9 million as compared to
       revenue for the year ended 31 March 2010 of approximately HK$39.5 million. Gross profit margin
       for the year ended 31 March 2010 increased to approximately 22.2% from 3.2% for the year ended
       31 March 2009. Starting from the fiscal year 2010, going through the experience during the global
       financial tsunami, the management of the Target Group changed their business strategy that they
       target to select and accept orders with higher profit margins and from those customers with better
       credit record. Therefore, resources can be reallocated to maximize the profit and improve the
       quality of the products. Sales orders received during the year ended 31 March 2010 was less than
       those for the year ended 31 March 2009. Sales orders received for the year ended 31 March 2010
       were mainly paper packaging products for liquor, cosmetics and perfume with prestigious brand
       names which were in higher profit margins. Net profit for the year ended 31 March 2009 and
       adjusted to impairment loss on investment in a subsidiary amounted to approximately HK$0.3
       million, representing approximately 0.8% to revenue whereas the net profit to revenue for the year
       ended 31 March 2010 was approximately 14.1% of revenue. The increase in net profit margin was
       primarily attributable from the increase in gross profit margin.

            For the year ended 31 March 2011, the operating entities within the Target Group were Sky
       Will and New Spring (SW) which commenced business in January 2011.

            For the year ended 31 March 2011, the Target Group recorded turnover and gross profit of
       approximately HK$43.6 million and HK$6.6 million respectively. Net profit for the year ended 31
       March 2011 was approximately HK$4.7 million.

             Revenue for the year ended 31 March 2011 represented an increase of approximately HK$25
       million as compared to revenue for the year ended 31 March 2010 of approximately HK$18.6
       million. With the benefit from the gradual recovery of the worldwide economy from the financial



                                                – II-46 –
APPENDIX II              FINANCIAL INFORMATION OF THE TARGET GROUP


  tsunami in the second half of 2010 and the referral of customers from NSG to place new sales
  orders with the Target Group, the number of sales orders and revenue increased significantly.
  Gross profit margin for the year ended 31 March 2011 was approximately 15.2% whereas that for
  the year ended 31 March 2010 was approximately 22.2%. Net profit to revenue for the year ended
  31 March 2011 was approximately 10.9% whereas that for the year ended 31 March 2010 was
  approximately 14.1%. The decrease in gross profit and net profit margin was primarily due to
  increase in material costs.

       For the six months ended 30 September 2011, the operating entities within the Target Group
  were Sky Will, New Spring (SW) which commenced business in January 2011 and New Spring
  Offset which was acquired by Sky Will in April 2011.

        For the six months ended 30 September 2011, the Target Group recorded turnover and gross
  profit of approximately HK$54.9 million and HK$14.5 million respectively. Net profit for the six
  months ended 30 September 2011 was approximately HK$15.9 million.

        Upon the completion of the acquisition of New Spring Offset in April 2011, the Target
  Group had expanded its sales in the PRC market. In the first quarter of 2011, the gross domestic
  product growth rate of the PRC market was 9.4% whereas the real gross domestic product growth
  rate of the Hong Kong market was 4.6%. Taken the advantage from the economic growth in
  consumer market in both Hong Kong and the PRC, more sales orders were received during the six
  months ended 30 September 2011. Gross profit margin for the six months ended 30 September
  2011 was approximately 26.4% whereas that for the year ended 31 March 2011 was approximately
  15.2%. With advanced machinery and equipment and recognized product quality and services
  among customers, the Target Group had maintained certain gross profit margin. Most of the paper
  packaging products produced by the Target Group were with prestigious brand name and most of
  them were in complex design were in higher profit margin comparatively. Net profit for the six
  months ended 30 September 2011 and adjusted to the gain on bargain purchase of a subsidiary
  amounted to approximately HK$8.4 million, representing approximately 15.4% to revenue whereas
  that for the year ended 31 March 2011 was approximately 10.9%. The increase in net profit margin
  was primarily due to increase in gross profit margin.

  Capital Structure, Liquidity, Financial Resources and Gearing Ratio

        As at 31 March 2009, the audited total assets, total liabilities and net liabilities of the Target
  Group amounted to approximately HK$13.0 million, HK$16.1 million and HK$3.1 million
  respectively. The cash and bank balances as at 31 March 2009 amounted to approximately HK$0.4
  million.

       As at 31 March 2010, the audited total assets, total liabilities and net liabilities of the Target
  Group amounted to approximately HK$8.4 million, HK$8.9 million and HK$0.5 million
  respectively. The cash and bank balances as at 31 March 2010 amounted to approximately
  HK$0.06 million.

        As the Target Group had net liabilities at 31 March 2009 and 2010, no gearing ratio is
  calculated.




                                              – II-47 –
APPENDIX II                FINANCIAL INFORMATION OF THE TARGET GROUP


        As at 31 March 2011, the audited total assets, total liabilities and net assets of the Target
  Group amounted to approximately HK$48.4 million, HK$44.1 million and HK$4.3 million
  respectively. The cash and bank balances as at 31 March 2011 amounted to approximately HK$0.3
  million.

       The gearing ratio, defined as the percentage of total liabilities to total equity, as at 31 March
  2011 was approximately 10.3.

       As at 30 September 2011, the audited total assets, total liabilities and net assets of the Target
  Group amounted to approximately HK$98.3 million, HK$78.2 million and HK$20.2 million
  respectively. The cash and bank balances as at 30 September 2011 amounted to approximately
  HK$3 million.

       The gearing ratio, defined as the percentage of total liabilities to total equity, as at 30
  September 2011 was approximately 3.9.

  Material Acquisitions and Disposals

       During the year ended 31 March 2009 and 2010, the Target Group had no material
  acquisition and disposal.

       During the year ended 31 March 2011, the Target Group acquired machinery and equipment
  from New Spring Group at a consideration of HK$13.8 million.

        During the six months ended 30 September 2011, the Target Group acquired entire equity
  interest of New Spring Offset so as to continue the expansion of the Target Group’s business.

  Capital Commitment

        The registered capital of New Spring Paper was HK$8 million. Up to 8 July 2008, the Target
  Group had paid up for capital of HK$3.5 million. The Target Group committed to contribute for
  the remaining capital amount of HK$3.5 million as at 31 March 2009 and 2010. Subsequent to the
  year ended 31 March 2010, no such capital commitment existed as New Spring Paper had been de-
  registered on 18 July 2011.

        As at 31 March 2011, the Target Group committed to capital expenditure of HK$7.7 million
  in respect of the acquisition of plant and machinery.

       As at 30 September 2011, the Target Group had no material capital commitment.

  Contingent liabilities

       As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group provided
  financial guarantees to a bank in respect of banking facilities granted to New Spring Label.
  Outstanding balance of the relevant facilities utilized by New Spring Label amounted to
  approximately HK$24.6 million, HK$20.8 million, HK$19.1 million and HK$nil respectively.




                                             – II-48 –
APPENDIX II             FINANCIAL INFORMATION OF THE TARGET GROUP


         As at 30 September 2011, the Target Group provided financial guarantees to a bank in
  respect of banking facilities granted to related companies, Beaumax Company Limited, Beautiking
  Investments Limited and Glory Motion Company Limited. Outstanding balance of the relevant
  facilities utilised by the related companies amounted to HK$8,617,000, HK$17,235,000 and
  HK$13,542,000 respectively as at 30 September 2011.

       The management of the Target Group reviewed the financial information of the related
  companies and considered that the related default risk was slow at 31 March 2009, 2010, 2011 and
  30 September 2011, no provision for contingent liability in respect of the guarantees provided.

  Employees and Remuneration Policy

       As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group had 5, 5, 10,
  625 employees respectively.

       Remuneration was determined by reference to market terms and the qualifications and
  experience of the staff concerned.

  Pledged of assets

       As at 31 March 2009, 2010, 2011 and 30 September 2011, the Target Group did not have
  any pledge of its assets.

  Foreign Exchange Exposure

       The Target Group’s business activities and its assets and liabilities were denominated in HK$,
  RMB, United States dollars and Euro. The management of the Target Group considers the
  exposure to foreign currency risk is insignificant.

  Prospects

        The management of the Target Group believes the PRC will provide strong growth
  opportunities for the Target Group as it grows rapidly to become a major market for consumer
  products. In the first quarter of 2011, the gross domestic product growth rate of the PRC market
  was 9.4%. Strengthening its expansion of sales in the PRC market is part of the means to achieve
  long-term sustainable growth.

        Given that the customers will continue to adopt conservative strategies in the coming
  financial year, the Target Group is adopting measures to enhance the efficiency of its existing
  production facilities by upgrading its machinery and equipment, and on the other hand,
  diversifying the products range and broadening the customer base.




                                            – II-49 –
  APPENDIX IIA                        FINANCIAL INFORMATION OF NEW SPRING OFFSET




                                                                                           5 March 2012

The Directors
Climax International Company Limited
Unit 906, 9/F., Wings Building
110–116 Queen’s Road Central
Central, Hong Kong

Dear Sirs,

      We set out below our report on the financial information regarding New Spring Offset Printing
(Shenzhen) Limited* (新高準柯式印刷(深圳)有限公司) (‘‘New Spring Offset’’) including the
statements of financial position as at 31 December 2009, 2010 and 30 September 2011, the statements
of comprehensive income, the statements of changes in equity and the statements of cash flows of New
Spring Offset for the period from 1 December 2009 (date of establishment) to 31 December 2009, year
ended 31 December 2010 and the nine months ended 30 September 2011 (the ‘‘Relevant Periods’’) and
notes thereto (the ‘‘Financial Information’’) for inclusion in the circular issued by Climax International
Company Limited (the ‘‘Company’’) dated 5 March 2012 (the ‘‘Circular’’) in connection with the
proposed very substantial acquisition of 100% equity interest in Sky Will Printing & Packaging
(Holdings) Limited (‘‘Sky Will Holdings’’) by the Company. Sky Will Holdings has become the
intermediate holding company of New Spring Offset since 4 April 2011.

     New Spring Offset was established in the People’s Republic of China (the ‘‘PRC’’) on 1 December
2009 and is engaged manufacture and trading of packaging products.

      New Spring Offset has adopted 31 December as its financial year end date. The statutory financial
statements of New Spring Offset which were prepared in accordance with the relevant accounting
principles and financial regulations applicable to enterprises established in the PRC for the period from
1 December 2009 (date of establishment) to 31 December 2010 were audited by Shenzhen Yongxin
Ruihe Certified Public Accountants* (深圳永信瑞和會計師事務所), certified public accountants
registered in the PRC. No audited financial statements for the year ended 31 December 2011 has been
issued up to the date of this report.

      For the purpose of this report, the sole director of New Spring Offset has prepared the financial
statements of New Spring Offset for the Relevant Periods in accordance with Hong Kong Financial
Reporting Standards (the ‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public
Accountants (the ‘‘HKICPA’’) (the ‘‘Underlying Financial Statements’’). We have carried out
independent audit procedures on the Underlying Financial Statements in accordance with Hong Kong
Standards on Auditing issued by the HKICPA.

      The Financial Information of New Spring Offset for the Relevant Periods as set out in this report
for inclusion in the Circular has been prepared from the Underlying Financial Statements, on the basis
of presentation set out in note 1 of Section A, whereas no adjustment was concluded necessary. We have


* The English name is for identification purpose only. The official name is in Chinese.


                                                          – IIA-1 –
  APPENDIX IIA                 FINANCIAL INFORMATION OF NEW SPRING OFFSET


examined the Financial Information and have carried out such additional procedures as considered
necessary in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and Reporting Accountant’’ as
recommended by the HKICPA.

DIRECTOR’S RESPONSIBILITY

      The sole director of New Spring Offset is responsible for the preparation of the Underlying
Financial Statements and the Financial Information which give a true and fair view. In preparing the
Financial Information, it is fundamental that appropriate accounting policies are selected and applied
consistently, that the judgements and estimates made are prudent and reasonable and that the reasons for
any significant departure from applicable accounting standards are stated. The directors of the Company
are responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

      In respect of the Financial Information for the Relevant Periods, our responsibility is to express an
opinion on the Financial Information based on our audit. We conducted our audit in accordance with
Hong Kong Standards of Auditing and the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting
Accountant’’ issued by the HKICPA. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are
free from material misstatement.

AUDIT OPINION

      In our opinion, the Financial Information together with the notes thereon gives, for the purpose of
this report, a true and fair view of the state of affairs of New Spring Offset as at 31 December 2009 and
2010 and 30 September 2011 and of the results and cash flows of New Spring Offset for the Relevant
Periods.

REVIEW CONCLUSION

     The comparative statement of comprehensive income, statement of changes in equity and statement
of cash flows of New Spring Offset for the nine months ended 30 September 2010 together with the
notes thereto have been extracted from New Spring Offset’s unaudited financial statements for the same
period (the ‘‘30 September 2010 Financial Information’’) which was prepared by the sole director of
New Spring Offset solely for the purpose of this report.

      We have reviewed the 30 September 2010 Financial Information in accordance with the Hong
Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by
the Independent Auditor of the Entity’’ issued by the HKICPA. Our review consists principally of
making enquires, primarily of persons responsible for financial and accounting matters and applying
analytical procedures and other review procedures. A review is substantially less in scope than an audit
conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion on the 30 September 2010 Financial Information.




                                                – IIA-2 –
 APPENDIX IIA                   FINANCIAL INFORMATION OF NEW SPRING OFFSET


     Based on our review, nothing has come to our attention that causes us to believe that the 30
September 2010 Financial Information is not prepared, in all material respects, in accordance with the
accounting policies consistent with those used in the preparation of the Financial Information which
conform with HKFRSs.

A.   FINANCIAL INFORMATION

     Statements of Comprehensive Income

                                        For the period
                                                 from
                                           1 December
                                         2009 (date of
                                        establishment)
                                                    to     Year ended         Nine months ended
                                         31 December      31 December            30 September
                                                  2009           2010             2010           2011
                                Note          HK$’000         HK$’000         HK$’000         HK$’000
                                                                            (Unaudited)

     Revenue                     7                  —           52,944           7,093          60,503
     Cost of sales                                  —          (41,424)         (7,292)        (49,357)


     Gross profit (loss)                            —           11,520            (199)         11,146
     Other income                8                  —              546             360             754
     Selling expenses                               —             (499)           (132)           (596)
     Administrative expenses                      (113)         (3,217)         (1,930)         (3,349)


     (Loss) profit before tax                     (113)          8,350          (1,901)          7,955
     Income tax (expense)
        credit                   9                  —           (2,164)           475           (1,963)


     (Loss) profit and total
       comprehensive
       (expense) income for
       the period/year           10               (113)          6,186          (1,426)          5,992




                                              – IIA-3 –
APPENDIX IIA                 FINANCIAL INFORMATION OF NEW SPRING OFFSET


  Statements of Financial Position

                                                                                   As at 30
                                                        As at 31 December        September
                                                           2009           2010        2011
                                     Note               HK$’000        HK$’000     HK$’000

  Non-current asset
   Plant and equipment               14                      —          12,170      21,811


  Current assets
    Inventories                      15                      —          13,163      15,662
    Trade and other receivables      16                      —           7,264       2,536
    Amounts due from related
      companies                      17                      —          28,399        4,467
    Amount due from a fellow
      subsidiary                     20                      —              —       11,463
    Bank balances and cash           18                       9            134         667


                                                              9         48,960      34,795


  Current liabilities
    Trade and other payables         19                      —          13,113      16,785
    Amounts due to related
      companies                      20                      11         11,560         658
    Amount due to immediate
      holding company                20                      —          17,236        7,089
    Amount due to a director         20                     111            115        4,447
    Amount due to an ultimate
      shareholder                    20                      —               3          154
    Income tax payables                                      —           2,164        2,842


                                                            122         44,191      31,975


  Net current (liabilities) assets                         (113)         4,769        2,820


  Net (liabilities) assets                                 (113)        16,939      24,631


  Capital and reserves
    Paid-up capital                  21                      —          10,300      12,000
    Reserves                                               (113)         6,639      12,631


  (Deficiency) shareholder’s
    equity                                                 (113)        16,939      24,631




                                            – IIA-4 –
APPENDIX IIA                    FINANCIAL INFORMATION OF NEW SPRING OFFSET


  Statements of Changes in Equity

                                                                                  (Accumulated
                                             Paid-up                Capital       loss) retained
                                              capital               reserve               profits               Total
                                             HK$’000               HK$’000              HK$’000               HK$’000
                                                                     (Note)

  As 1 December 2009
    (dated of establishment)                         —                     —                    —                     —
  Loss and total
    comprehensive expense
    for the period                                   —                     —                  (113)                (113)


  At 31 December 2009                                —                     —                  (113)                (113)

  Capital injection                             10,300                   566                    —               10,866
  Profit and total
    comprehensive income
    for the year                                     —                     —                6,186                 6,186


  At 31 December 2010                           10,300                   566                6,073               16,939

  Capital injection                              1,700                     —                    —                 1,700
  Profit and total
    comprehensive income
    for the period                                   —                     —                5,992                 5,992


  At 30 September 2011                          12,000                   566               12,065               24,631


  (Unaudited)

  Nine months ended 30
    September 2010

  At 31 December 2009                                —                     —                  (113)                (113)

  Capital injection                             10,300                   566                    —               10,866
  Loss and total
    comprehensive expense
    for the period                                   —                     —               (1,426)               (1,426)


  At 30 September 2010                          10,300                   566               (1,539)                9,327

  Note: The paid-in capital of HK$7,000,000 was satisfied by the plant and equipment with fair value of HK$7,566,000. The
        surplus of HK$566,000 was recognised as capital reserve.




                                                    – IIA-5 –
APPENDIX IIA                   FINANCIAL INFORMATION OF NEW SPRING OFFSET


  Statements of Cash Flow

                                                For the
                                           period from
                                            1 December
                                          2009 (date of
                                         establishment)
                                                     to      Year ended       Nine months ended
                                          31 December       31 December          30 September
                                                   2009            2010          2010            2011
                                               HK$’000          HK$’000      HK$’000          HK$’000
                                                                           (Unaudited)

  OPERATING ACTIVITIES
  (Loss) profit before tax                        (113)           8,350        (1,901)          7,955
  Adjustments for:
  Loss on disposal of plant and
     equipment                                      —                —             —               19
  Interest income                                   —                (1)           (1)             (2)
  Impairment of plant and equipment                 —                —             —              129
  Depreciation for plant and
     equipment                                      —             1,174          880            1,716

  Operating cash flows before
     movements in working capital                 (113)           9,523        (1,022)           9,817
  Increase in inventories                           —           (13,163)      (13,865)          (2,499)
  (Increase) decrease in trade and
     other receivables                              —            (7,264)       (7,880)          4,728
  (Increase) decrease in amounts due
     from related companies                         —           (28,367)          (90)         26,748
  Increase in amount due from a
     fellow subsidiary                              —                —             —           (11,463)
  Increase in trade and other payables              —            13,113        17,493            3,672
  Increase (decrease) in amount due
     to immediate holding company                   —            17,236            —           (10,147)

  Cash (used in) generated from
    operations                                    (113)          (8,922)       (5,364)         20,856
  Tax paid                                          —                —             —           (1,285)

  NET CASH (USED IN) FROM
    OPERATING ACTIVITIES                          (113)          (8,922)       (5,364)         19,571




                                                – IIA-6 –
APPENDIX IIA                  FINANCIAL INFORMATION OF NEW SPRING OFFSET


                                            For the
                                       period from
                                        1 December
                                      2009 (date of
                                     establishment)
                                                 to      Year ended       Nine months ended
                                      31 December       31 December          30 September
                                               2009            2010          2010            2011
                                           HK$’000          HK$’000      HK$’000          HK$’000
                                                                       (Unaudited)

  INVESTING ACTIVITIES
  Purchase of plant and equipment               —            (5,778)       (5,544)         (11,558)
  Proceed of disposal of plant and
     equipment                                  —                —             —               53
  Advance to related companies                  —               (32)          (32)          2,816
  Interest received                             —                 1             1               2

  NET CASH USED IN INVESTING
    ACTIVITIES                                  —            (5,809)       (5,575)         (14,319)

  FINANCING ACTIVITIES
  Advance from a director                      111                4             3           4,332
  Capital injection                             —             3,300         3,300           1,700
  Advance from (repayment to)
    related companies                           11           11,549         7,674          (10,902)
  Advance from an ultimate
    shareholder                                 —                 3           —               151

  NET CASH FROM (USED IN)
    FINANCING ACTIVITIES                       122           14,856        10,977           (4,719)

  NET INCREASE IN CASH AND
    CASH EQUIVALENTS                             9              125           38              533

  CASH AND CASH
    EQUIVALENTS AT
    BEGINNING OF THE PERIOD/
    YEAR                                        —                 9             9             134

  CASH AND CASH
    EQUIVALENTS AT THE END
    OF THE PERIOD/YEAR,
    represented by bank balances
    and cash                                     9              134           47              667




                                            – IIA-7 –
APPENDIX IIA                       FINANCIAL INFORMATION OF NEW SPRING OFFSET


  Notes to the Financial Information

  1.    GENERAL

         New Spring Offset was established and registered in the PRC with limited liability on 1 December 2009. At the date
  of this report, the ultimate holding company of New Spring Offset is Sky Will Printing & Packaging (BVI) Limited, a
  company incorporated in the British Virgin Islands and its immediate holding company is Sky Will Printing and Packaging
  Limited.

          The principal activity of New Spring Offset is manufacture and trading of packaging products. The address of the
  registered office and principal place of business of New Spring Offset is at Xinyang Industrial Zone, Shajing Town, Bao’an
  District, Shenzhen, Guangdong, the PRC.

        The Financial Information is presented in Hong Kong dollars (‘‘HK$’’), which is the same as the functional currency
  of New Spring Offset.

  2.    APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
        (‘‘HKFRSs’’)

          For the purpose of preparing and presenting the Financial Information for the Relevant Periods, New Spring Offset
  has consistently adopted all of the new and revised HKAS, amendments and interpretations issued by the HKICPA that are
  effective for New Spring Offset’s financial year beginning on 1 January 2011 throughout the Relevant Periods.

        New and revised standards, amendments and interpretations in issue but not yet effective

               New Spring Offset has not early applied the following new or revised standards, amendments or
        interpretations that have been issued but are not yet effective.

               HKFRS 1 (Amendments)                                     Severe Hyperinflation and Removal of Fixed Dates for
                                                                          First-time Adopters 1
               HKFRS 7 (Amendments)                                     Disclosures — Transfers of Financial Assets 1
               HKFRS 9                                                  Financial Instruments4
               HKFRS 10                                                 Consolidated Financial Statements 4
               HKFRS 11                                                 Joint Arrangements4
               HKFRS 12                                                 Disclosure of Interests in Other Entities4
               HKFRS 13                                                 Fair Value Measurement 4
               Amendments to HKAS 1 (Revised)                           Presentation of Items of Other Comprehensive Income3
               HKAS 12 (Amendments)                                     Deferred Tax: Recovery of Underlying Assets 2
               HKAS 19 (Revised 2011)                                   Employee Benefits4
               HKAS 27 (Revised 2011)                                   Separate Financial Statements 4
               HKAS 28 (Revised 2011)                                   Investments in Associates and Joint Ventures 4
               Amendments to HKAS 32                                    Offsetting Financial Assets and Financial Liabilities5
               HK(IFRIC) — Interpretation 20                            Stripping Costs in the Production Phase of a Surface Mine4

               1
                      Effective   for   annual   periods   beginning   on   or   after   1   July 2011.
               2
                      Effective   for   annual   periods   beginning   on   or   after   1   January 2012.
               3
                      Effective   for   annual   periods   beginning   on   or   after   1   July 2012.
               4
                      Effective   for   annual   periods   beginning   on   or   after   1   January 2013.
               5
                      Effective   for   annual   periods   beginning   on   or   after   1   January 2014.

                 HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial
        assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial
        liabilities and for derecognition.




                                                              – IIA-8 –
APPENDIX IIA               FINANCIAL INFORMATION OF NEW SPRING OFFSET


         Key requirements of HKFRS 9 are described as follows:

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

         .      The most significant effect of HKFRS 9 regarding the classification and measurement of financial
                liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at
                fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically,
                under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the
                amount of change in the fair value of the financial liability that is attributable to changes in the credit
                risk of that liability is presented in other comprehensive income, unless the recognition of the effects of
                changes in the liability’s credit risk in other comprehensive income would create or enlarge an
                accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit
                risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount
                of the change in the fair value of the financial liability designated as at fair value through profit or loss
                was presented in profit or loss.

                  The directors of New Spring Offset anticipate that the adoption of HKFRS 9 in the future may have
         significant impact on amounts reported in respect of New Spring Offset’s financial assets and financial
         liabilities. Regarding New Spring Offset’s financial assets, it is not practicable to provide a reasonable
         estimate of that effect until a detailed review has been completed.

                The amendments to HKFRS 7 titled Disclosures — Transfers of                   Financial Assets increase the
         disclosure requirements for transactions involving transfers of financial assets.   These amendments are intended
         to provide greater transparency around risk exposures when a financial asset        is transferred but the transferor
         retains some level of continuing exposure in the asset. The amendments              also require disclosures where
         transfers of financial assets are not evenly distributed throughout the period.

                To date, New Spring Offset has not entered into transactions involving transfers of financial assets.
         However, if New Spring Offset enters into other types of transfers of financial assets in the future, disclosures
         regarding those transfers may be affected.

                The amendments to HKAS 1 have been issued to improve the presentation of other comprehensive
         income. The amendments require entities to group together the items of other comprehensive income that may
         be reclassified to profit or loss in the future by presenting them separately from those that would never be
         reclassified to profit or loss. The application of the amendment to HKAS 1 might result in changes in
         presentation of the statement of comprehensive income.

                The sole director of New Spring Offset anticipates that the application of other new and revised
         standards, amendments or interpretations will have no material impact on the results and the financial position
         of New Spring Offset.




                                                  – IIA-9 –
APPENDIX IIA                       FINANCIAL INFORMATION OF NEW SPRING OFFSET


  3.     SIGNIFICANT ACCOUNTING POLICIES

         The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the
  Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The
  Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance. These policies have been consistently
  applied throughout the Relevant Periods and materially consistent with the accounting policies adopted by the Company.

          The Financial Information has been prepared on the historical cost basis except for certain financial instruments that
  are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the
  fair value of the consideration given in exchange for goods.

         The principal accounting policies are set out below.

         Plant and equipment

                 Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment
         losses, if any.

                Depreciation is recognised so as to write off the cost of items of plant and equipment less their residual values
         over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and
         depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate
         accounted for on a prospective basis.

                An item of plant and equipment is derecognised upon disposal or when no future economic benefits are
         expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an
         item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of
         the asset and is recognised in profit or loss.

         Inventories

               Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted
         average method.

         Cash and cash equivalents

               Bank balances and cash in the statements of financial position comprise cash at banks and on hand. For the
         purpose of the statements of cash flows, cash and cash equivalents consist of bank balances and cash.

         Financial instruments

              Financial assets and financial liabilities are recognised in the statements of financial position when a entity
         becomes a party to the contractual provisions of the instrument.

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

         Financial assets

                New Spring Offset’s financial assets are loans and receivables. All regular way purchases or sales of financial
         assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales
         of financial assets that require delivery of assets within the time frame established by regulation or convention in the
         marketplace.




                                                        – IIA-10 –
APPENDIX IIA                     FINANCIAL INFORMATION OF NEW SPRING OFFSET


     Effective interest method

             The effective interest method is a method of calculating the amortised cost of a financial asset and of
     allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
     estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest
     rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where
     appropriate, a shorter period to the net carrying amount on initial recognition.

            Interest income is recognised on an effective interest basis for debt instruments.

     Loans and receivables

            Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
     quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other
     receivables, amount(s) due from related companies/a fellow subsidiary and bank balances and cash) are carried at
     amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on
     impairment of financial assets below).

     Impairment of financial assets

           Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets
     are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial
     recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

            For all financial assets, objective evidence of impairment could include:

            .      significant financial difficulty of the issuer or counterparty; or

            .      breach of contract, such as default or delinquency in interest or principal payments; or

            .      it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

            .      the disappearance of an active market for that financial asset because of financial difficulties.

            For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
     individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a
     portfolio of receivables could include New Spring Offset’s past experience of collecting payments, an increase in the
     number of delayed payments in the portfolio past the average credit period of 30 to 60 days, as well as observable
     changes in national or local economic conditions that correlate with default on receivables.

            For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is
     objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount
     and the present value of the estimated future cash flows discounted at the original effective interest rate.

            The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets
     with the exception of trade and other receivables, amount(s) due from related companies/a fellow subsidiary where
     the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the
     allowance account are recognised in profit or loss. When a trade or other receivable, an amount due from related
     company/a fellow subsidiary is considered uncollectible, it is written off against the allowance account. Subsequent
     recoveries of amounts previously written off are credited to profit or loss.

            For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss
     decreases and the decrease can be related objectively to an event occurring after the impairment losses was
     recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying
     amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been
     had the impairment not been recognised.




                                                    – IIA-11 –
APPENDIX IIA                     FINANCIAL INFORMATION OF NEW SPRING OFFSET


     Financial liabilities and equity instruments

            Financial liabilities and equity instruments issued by an entity are classified according to the substance of the
     contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

            An equity instrument is any contract that evidences a residual interest in the assets of New Spring Offset after
     deducting all of its liabilities. New Spring Offset’s financial liabilities are classified as other financial liabilities.

     Effective interest method

             The effective interest method is a method of calculating the amortised cost of a financial liability and of
     allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
     estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter
     period.

     Other financial liabilities

             Other financial liabilities including trade and other payables, amount(s) due to related parties/immediate
     holding company/a director and an ultimate shareholder are subsequently measured at amortised cost, using the
     effective interest method.

     Equity instruments

              Equity instruments issued by New Spring Offset are recorded at the proceeds received, net of direct issue
     costs.

     Derecognition

            Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial
     assets are transferred and New Spring Offset has transferred substantially all the risks and rewards of ownership of
     the financial assets.

           On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the
     sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other
     comprehensive income and accumulated in equity is recognised in profit or loss.

            Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged,
     cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the
     consideration paid and payable is recognised in profit or loss.

     Revenue recognition

            Revenue is measured at the fair value of the consideration received or receivable and represents amounts
     receivable for goods sold in the normal course of business and net of sales related taxes and discounts.

              Revenue from sale of goods is recognised when the goods are delivered and title has passed.

             Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
     New Spring Offset and the amount of revenue can be measured reliably. Interest income from a financial asset is
     accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which
     is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to
     that asset’s net carrying amount on initial recognition.

     Leasing

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




                                                    – IIA-12 –
APPENDIX IIA                   FINANCIAL INFORMATION OF NEW SPRING OFFSET


            Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

     Foreign currencies

            In preparing the financial statements of New Spring Offset, transactions in currencies other than the functional
     currency of New Spring Offset (foreign currencies) are recorded in the functional currency (i.e. the currency of the
     primary economic environment in which New Spring Offset operates) at the rates of exchanges prevailing on the
     dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are
     retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in
     foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-
     monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

            Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items,
     are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of
     non-monetary items carried at fair value are included in profit or loss for the period.

     Retirement benefit costs

            Payments to state-managed retirement benefit schemes are charged as an expense when employees have
     rendered service entitling them to the contributions.

     Taxation

            Income tax expense represents the sum of the tax currently payable and deferred tax.

             The tax currently payable is based on taxable profit for the period/year. Taxable profit differs from profit as
     reported in the statements of comprehensive income because it excludes items of income or expense that are taxable
     or deductible in other years and it further excludes items that are never taxable or deductible. New Spring Offset’s
     liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the
     reporting period.

              Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
     the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax
     liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised
     for all deductible temporary differences to the extent that it is probable that taxable profits will be available against
     which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
     temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
     other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

            The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
     the manner in which New Spring Offset expects, at the end of the reporting period, to recover or settle the carrying
     amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are
     recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in
     other comprehensive income or directly in equity respectively.

     Impairment losses on tangible assets

             At the end of the reporting period, New Spring Offset reviews the carrying amounts of its tangible assets to
     determine whether there is any indication that those assets have suffered an impairment loss. If any such indication
     exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if
     any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the
     asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.




                                                    – IIA-13 –
APPENDIX IIA                      FINANCIAL INFORMATION OF NEW SPRING OFFSET


               Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
        estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
        that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of
        an impairment loss is recognised as income immediately.

  4.    CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

         In the application of New Spring Offset’s accounting policies, which are described in note 3, the sole director of New
  Spring Offset is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities
  that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
  experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

         The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
  recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
  revision and future periods if the revision affects both current and future periods.

        Key sources of estimation uncertainty

               The following are the key assumptions concerning the future, and other key sources of estimation uncertainty
        at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying
        amounts of assets and liabilities within the next financial year.

        Depreciation of plant and equipment

               Plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into
        account their estimated residual values. New Spring Offset assesses annually the residual value and the useful life of
        the plant and equipment and if the expectation differs from the original estimate, such differences from the original
        estimates will impact the depreciation changes in the period in which the estimate change.

        Estimated impairment of plant and equipment

               New Spring Offset assesses annually whether plant and equipment has any indication of impairment, in
        accordance with the relevant accounting policies. The recoverable amount of the plant and equipment has been
        determined based on value-in-use calculations. These calculations require the use of judgement and estimates on
        future operating cash flows and discount rates adopted. Where the actual cash flows are different from the original
        estimates, a material change in the amount of impairment may arise.

        Estimated impairment of trade and other receivables, amount(s) due from related companies/a fellow subsidiary

               When there is objective evidence of impairment loss, New Spring Offset takes into consideration the
        estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s
        carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not
        been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate
        computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment
        loss may arise.

               As at 31 December 2009 and 2010, and 30 September 2011, the carrying amounts of trade and other
        receivables are nil, HK$7,264,000 and HK$2,536,000 respectively. No allowance for doubtful debts was provided for
        the trade and other receivables at the end of each reporting period.

               As at 31 December 2009 and 2010, and 30 September 2011, the carrying amounts of amounts due from
        related companies are nil, HK$28,399,000 and HK$4,467,000 respectively. No allowance for doubtful debts was
        provided for the amounts due from related companies at the end of each reporting period.

               As at 31 December 2009 and 2010, and 30 September 2011, the carrying amounts of amount due from a
        fellow subsidiary are nil, nil and HK$11,463,000 respectively. No allowance for doubtful debts was provided for the
        amount due from a fellow subsidiary at the end of each reporting period.




                                                      – IIA-14 –
APPENDIX IIA                      FINANCIAL INFORMATION OF NEW SPRING OFFSET


  5.    CAPITAL RISK MANAGEMENT

         New Spring Offset manages its capital to ensure that it will be able to continue as a going concern while maximising
  the return to the shareholder through the optimisation of the debt and equity balance. New Spring Offset’s overall strategy
  remains unchanged throughout the Relevant Periods.

         The capital structure of New Spring Offset consists of equity attributable to owner of New Spring Offset, comprising
  paid-up capital and reserve.

         The sole director of New Spring Offset reviews the capital structure on an annual basis. As part of this review, the
  sole director considers the cost of capital and the risks associated with each class of capital. Based on recommendations of
  the sole director, New Spring Offset will balance its overall capital structure through the payment of dividends to
  shareholder as well as the issue of new debt.

  6.    FINANCIAL INSTRUMENTS

        (a)    Categories of financial instruments

                                                                                                                        As at
                                                                               As at 31 December                30 September
                                                                                  2009           2010                   2011
                                                                               HK$’000        HK$’000                HK$’000

               Financial assets

               Loans and receivables (including cash
                 and cash equivalents)                                                 9            35,402              18,381


               Financial liabilities

               Amortised cost                                                       122             42,003              26,598

        (b)    Financial risk management objectives and policies

                New Spring Offset’s major financial instruments include trade and other receivables, amount(s) due from (to)
        related companies/a fellow subsidiary/related parties/immediate holding company/a director/an ultimate shareholder,
        bank balances and cash and trade and other payables. Details of these financial instruments are disclosed in the
        respective notes. The risks associated with these financial instruments include market risk (currency risk and interest
        rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The
        management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and
        effective manner.




                                                       – IIA-15 –
APPENDIX IIA                  FINANCIAL INFORMATION OF NEW SPRING OFFSET


         Market risk

         (i)    Currency risk

                Certain bank balances, receivables and payables of New Spring Offset are denominated in foreign
         currencies. New Spring Offset currently does not have a foreign currency hedging policy. However, the
         management monitors foreign exchange exposure and will consider hedging significant foreign currency
         exposure should the need arises.

               The carrying amounts of New Spring Offset’s foreign currency denominated monetary assets and
         monetary liabilities were Reminbi (‘‘RMB’’) at the reporting date are as follows:

                                                                                                                     As at
                                                                   As at 31 December                         30 September
                                                                      2009              2010                         2011
                                                                   HK$’000           HK$’000                      HK$’000

                Assets                                                     9                  7,003                   2,437
                Liabilities                                               —                  13,204                  14,250

                Sensitivity analysis

                        The following table details the Company’s sensitivity to a 5% increase or decrease in HK$
                against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency
                risk internally to key management personnel and represents management’s assessment of the reasonably
                possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
                currencies denominated monetary items and adjusts their translation at the period/year end for a 5%
                change in foreign currency rates. A positive number below indicates a increase in profit where HK$
                strengthen 5% against RMB. For a 5% weakening of HK$ against the relevant currencies, there would
                be an equal and opposite impact on the profit and the balances below would be negative.

                                                             For the period
                                                                       from
                                                          1 December 2009
                                                                    (date of                                  Nine months
                                                          establishment) to            Year ended                   ended
                                                              31 December             31 December            30 September
                                                                       2009                  2010                    2011
                                                                   HK$’000                HK$’000                 HK$’000

                Profit or loss                                            —                     310                     591

         (ii)   Interest rate risk

                New Spring Offset is exposed to cash flow interest rate risk in relation to variable-rate bank balances
         carried at the prevailing market rate. However, in the opinion of its sole director, the exposure is insignificant.

         Credit risk

                As at the end of reporting period, New Spring Offset’s maximum exposure to credit risk which will
         cause a financial loss to New Spring Offset due to failure to discharge an obligation by the counterparties is
         arising from the carrying amount of the respective recognised financial assets as stated in the statements of
         financial position.

                In order to minimise the credit risk, the management of New Spring Offset imposed various monitoring
         procedures to ensure that follow-up action is taken to recover overdue debts. In addition, New Spring Offset
         reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that
         adequate impairment losses are made for irrecoverable amounts. In this regard, the sole director of New
         Spring Offset considers that New Spring Offset’s credit risk is significantly reduced.



                                                – IIA-16 –
APPENDIX IIA                  FINANCIAL INFORMATION OF NEW SPRING OFFSET


                  The credit quality of the counterparties in respect of amount(s) due from related companies/a fellow
           subsidiary are assessed by taking into account their financial position, credit history and other factors. The
           sole director of New Spring Offset is of the opinion that the risk of default by these counterparties is low.

                   New Spring Offset trades only with recognised and creditworthy third parties. New Spring Offset’s
           trading terms with its customers are mainly on credit. The normal credit period is generally for a period of 30
           days to 60 days for major customers. Each customer has a maximum credit limit. New Spring Offset seeks to
           maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior
           management. In view of the aforementioned measures and the fact that New Spring Offset’s trade receivables
           relate to the customers with good creditworthiness, there is no significant credit risk.

                  The revenue of New Spring Offset was mainly arisen from the sales to the related companies and a
           fellow subsidiary which represented 81% and 93% of total revenue for the year ended 31 December 2010 and
           the nine months ended 30 September 2011 respectively. The concentration of credit risk of trade receivable
           balances including the trade balances with the related companies and a fellow subsidiary are as follows:

                  As at 31 December 2010 and 30 September 2011, New Spring Offset had a concentration of credit risk
           as of approximately 64% and 78% respectively of the total trade receivable balances were due from its largest
           customer which is its related company and its fellow subsidiary as at 31 December 2010 and 30 September
           2011 respectively.

                 As at 31 December 2010 and 30 September 2011, New Spring Offset had a concentration of credit risk
           as of 100% and 99% respectively of the total trade receivable balances were due from its five largest
           customers including the related company and the fellow subsidiary.

                 New Spring Offset’s concentration of credit risk by geographical locations is mainly in the PRC, which
           accounted for 100% of the total trade receivables as at 31 December 2010 and 30 September 2011.

                  The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings
           assigned by international credit-rating agencies.

           Collateral held as security and other credit enhancement

                  New Spring Offset does not hold any collateral or other credit enhancements to cover its credit risks
           associated with its financial assets.

           Liquidity risk

                  In the management of the liquidity risk, New Spring Offset monitors and maintains a level of cash and
           cash equivalents deemed adequate by the management to finance New Spring Offset’s operations and mitigate
           the effects of fluctuations in cash flows.

                  As at 31 December 2009, New Spring Offset is exposed to liquidity risk as New Spring Offset had net
           current liabilities of HK$113,000. The liquidity of New Spring Offset primarily depends on the funding
           provided by its immediate holding company to meet its financial obligations when they fall due.

                All financial liabilities are non-interest bearing and their maturity dates are within one year or on
           demand.

     (c)   Fair value

            The fair values of financial assets and financial liabilities are determined in accordance with generally
     accepted pricing models based on discounted cash flow analysis using the relevant prevailing market rates.

            The sole director considers that the carrying amounts of financial assets and financial liabilities recorded at
     amortised cost in the Financial Information approximate their fair values due to their immediate or short-term
     maturities.




                                                  – IIA-17 –
APPENDIX IIA                   FINANCIAL INFORMATION OF NEW SPRING OFFSET


  7.   REVENUE AND SEGMENT INFORMATION

       Revenue

              Revenue represents revenue arising on sales of packaging products, net of sale related taxes and discounts,
       during the Relevant Periods.

       Segment information

              The chief operating decision-maker has been identified as sole director of New Spring Offset. New Spring
       Offset is principally engaged in manufacture and trading of packaging products. The sole director regards it as a
       single operating segment and therefore, no segment information is presented.

       Geographical information

             New Spring Offset’s operations are located in the PRC (excluding Hong Kong). New Spring Offset’s revenue
       from external customers by geographical location are detailed below:

                                                          For the
                                                     period from
                                                     1 December
                                                    2009 (date of
                                                establishment) to       Year ended            Nine months ended
                                                    31 December        31 December              30 September
                                                            2009              2010               2010            2011
                                                         HK$’000           HK$’000           HK$’000          HK$’000
                                                                                           (Unaudited)

             PRC (excluding Hong Kong)                         —               9,975              1,950            4,474
             Hong Kong                                         —              42,969              5,143           56,029


                                                               —              52,944              7,093           60,503

       Information about major customers

            Revenues from customers of the corresponding periods/years contributing over 10% of the total revenue of
       New Spring Offset are as follows:

                                                          For the
                                                     period from
                                                     1 December
                                                    2009 (date of
                                                establishment) to       Year ended            Nine months ended
                                                    31 December        31 December              30 September
                                                            2009              2010               2010            2011
                                                         HK$’000           HK$’000           HK$’000          HK$’000
                                                                                           (Unaudited)

             Customer   A                                      —              23,373              5,143             N/A1
             Customer   B                                      —              13,884                 —                —
             Customer   C                                      —               9,107              1,205             N/A1
             Customer   D                                      —               5,713                 —                —
             Customer   E                                      —                  —                  —            50,809


                                                               —              52,077              6,348           50,809

             1
                 The corresponding revenue did not contribute over 10% of the total sales of New Spring Offset.




                                                   – IIA-18 –
APPENDIX IIA                     FINANCIAL INFORMATION OF NEW SPRING OFFSET


  8.    OTHER INCOME

                                                            For the
                                                       period from
                                                       1 December
                                                      2009 (date of
                                                  establishment) to       Year ended            Nine months ended
                                                      31 December        31 December              30 September
                                                              2009              2010               2010            2011
                                                           HK$’000           HK$’000           HK$’000          HK$’000
                                                                                             (Unaudited)

        Sales of scrap materials                                 —                 545               359                669
        Interest income                                          —                   1                 1                  2
        Net foreign exchange gain                                —                  —                 —                  83


                                                                 —                 546               360                754

  9.    INCOME TAX EXPENSE (CREDIT)

                                                            For the
                                                       period from
                                                       1 December
                                                      2009 (date of
                                                  establishment) to       Year ended            Nine months ended
                                                      31 December        31 December              30 September
                                                              2009              2010               2010            2011
                                                           HK$’000           HK$’000           HK$’000          HK$’000
                                                                                             (Unaudited)



        PRC Enterprise Income Tax
          Current tax                                            —               2,164                 —              1,963
          Deferred tax for the year/period                       —                  —                (475)               —


                                                                 —               2,164               (475)            1,963

         Income tax expense for the year ended 31 December 2010 and the nine months ended 30 September 2011 represented
  the current PRC income tax for the year/period. Income tax credit for the nine months ended 30 September 2010 represented
  the deferred tax assets regarding the tax losses of approximately HK$1,901,000 for the period. There were no tax losses as
  at 31 December 2009, 2010 and 30 September 2011.

        No provision of Hong Kong Profit Tax has been made as New Spring Offset’s income neither arise in, nor is derived
  from Hong Kong.

        Under the Law of the People’s Republic of China on Enterprise Income Tax (the ‘‘EIT Law’’) and Implementation
  Regulation of the EIT Law, the tax rate of New Spring Offset is 25% since New Spring Offset was established onwards.




                                                     – IIA-19 –
APPENDIX IIA                        FINANCIAL INFORMATION OF NEW SPRING OFFSET


        The income tax expense (credit) for the period/year can be reconciled to the (loss) profit before tax per the statements
  of comprehensive income as follows:

                                                              For the
                                                         period from
                                                         1 December
                                                        2009 (date of
                                                    establishment) to       Year ended             Nine months ended
                                                        31 December        31 December               30 September
                                                                2009              2010                2010            2011
                                                             HK$’000           HK$’000            HK$’000          HK$’000
                                                                                                (Unaudited)

         (Loss) profit before tax                                (113)             8,350              (1,901)             7,955


         Tax at domestic income tax rate of
           25%                                                    (28)             2,088                (475)             1,989

         Tax effect of expenses not deductible
           for tax purposes                                        28                  76                 —                  34

         Tax effect of income not taxable for
           tax purposes                                            —                   —                  —                 (60)

         Income tax expense (credit)                               —               2,164                (475)             1,963

  10.    (LOSS) PROFIT FOR THE PERIOD/YEAR

                                                              For the
                                                         period from
                                                         1 December
                                                        2009 (date of
                                                    establishment) to       Year ended             Nine months ended
                                                        31 December        31 December               30 September
                                                                2009              2010                2010            2011
                                                             HK$’000           HK$’000            HK$’000          HK$’000
                                                                                                (Unaudited)

         (Loss) profit for the period/year has
            been arrived at after charging:

         Director’s remuneration                                   —                   —                  —                  —
         Other staff costs
         — salaries, allowances and other
              benefits                                             85             10,418               5,832             15,379
         — Retirement benefits schemes
              contributions                                        —                 204                 130                234

         Total staff costs                                         85             10,622               5,962             15,613

         Auditors’ remuneration                                    —                   17                 —                  —
         Cost of inventories recognised as an
           expense                                                 —              41,424               7,292             49,357
         Depreciation for plant and equipment                      —               1,174                 880              1,716
         Minimum lease payments under
           operating lease for rented premises                     —                 818                 548                621
         Loss on disposal of plant and
           equipment                                               —                   —                  —                  19
         Impairment loss of plant and
           equipment                                               —                  —                   —                 129
         Net foreign exchange losses                               —                 299                  27                 —




                                                      – IIA-20 –
APPENDIX IIA                      FINANCIAL INFORMATION OF NEW SPRING OFFSET


  11.    DIRECTOR’S EMOLUMENTS AND EMPLOYEES’ EMOLUMENTS

         Director’s emoluments

                During the Relevant Periods, no emoluments were paid or payable to the sole director of New Spring Offset.

                During the Relevant Periods, no emoluments have been paid by New Spring Offset to the sole director of New
         Spring Offset as an inducement to join or upon joining New Spring Offset or as compensation for loss of office.

                The sole director of New Spring Offset has not waived any emoluments during the Relevant Periods.

         Employees’ emoluments

                The emoluments of the five highest paid individuals, which were individually less than HK$1,000,000 during
         the Relevant Periods and the nine months ended 30 September 2010, were as follows:

                                                              For the
                                                         period from
                                                         1 December
                                                        2009 (date of
                                                    establishment) to        Year ended             Nine months ended
                                                        31 December         31 December               30 September
                                                                2009               2010                2010            2011
                                                             HK$’000            HK$’000            HK$’000          HK$’000
                                                                                                 (Unaudited)

                Salaries and other benefits                         85                432                307                 364
                Contributions to retirement
                   benefits schemes                                 —                   9                   6                 19


                                                                    85                441                313                 383

                During the Relevant Periods, no emoluments have been paid by New Spring Offset to the five highest paid
         individuals as an inducement to join or upon joining New Spring Offset, or as compensation for loss of office.

  12.    DIVIDENDS

         No dividend was paid or proposed during the Relevant Periods, nor has any dividend been proposed since the end of
  the reporting period.

  13.    (LOSS) EARNINGS PER SHARE

        No (loss) earnings per share information is presented as its inclusion, for the purpose of this report, is not considered
  meaningful.




                                                       – IIA-21 –
APPENDIX IIA                       FINANCIAL INFORMATION OF NEW SPRING OFFSET


  14.   PLANT AND EQUIPMENT

                                                                            Furniture,
                                                                          fixtures and
                                                         Plant and               office           Motor
                                                         machinery          equipment            vehicles            Total
                                                          HK$’000             HK$’000           HK$’000            HK$’000

        COST
        At 1 December 2009 (date of
           establishment) and 31 December 2009                   —                  —                 —                  —
        Additions                                            12,779                 16               549             13,344


        At 31 December 2010                                  12,779                 16               549             13,344
        Additions                                            11,275                 81               202             11,558
        Disposals                                                —                  —                (84)               (84)


        At 30 September 2011                                 24,054                 97               667             24,818


        DEPRECIATION AND
           IMPAIRMENT
        At 1 December 2009 (date of
           establishment) and 31 December 2009                   —                  —                  —                 —
        Provided for the year                                 1,164                 2                  8              1,174


        At 31 December 2010                                   1,164                 2                   8             1,174
        Provided for the period                               1,630                 5                  81             1,716
        Impairment loss                                         129                 —                  —                129
        Elimination on disposals                                 —                  —                 (12)              (12)


        At 30 September 2011                                  2,923                  7                 77             3,007


        CARRYING VALUES
        At 31 December 2009                                      —                  —                  —                 —


        At 31 December 2010                                  11,615                 14               541             12,170


        At 30 September 2011                                 21,131                 90               590             21,811

         The above items of plant and equipment are depreciated on a straight-line basis, after taking into account of their
  estimated residual values, at the following rates per annum:

        Plant and machinery                                                     10%–20%
        Furniture, fixtures and office equipment                                20%
        Motor vehicles                                                          20%

         During the nine months ended 30 September 2011, impairment loss of HK$129,000 has been recognised in respect of
  plant and machinery which was sold after the end of the reporting period. The recoverable amount of those assets is
  reference to their net sales proceeds.




                                                     – IIA-22 –
APPENDIX IIA                     FINANCIAL INFORMATION OF NEW SPRING OFFSET


  15.   INVENTORIES

                                                                                                                      As at
                                                                              As at 31 December               30 September
                                                                                 2009           2010                  2011
                                                                              HK$’000        HK$’000               HK$’000

        Raw materials                                                               —               6,634              6,414
        Work-in-progress                                                            —               5,438              6,943
        Finished goods                                                              —               1,091              2,305


                                                                                    —              13,163             15,662

  16.   TRADE AND OTHER RECEIVABLES

                                                                                                                      As at
                                                                              As at 31 December               30 September
                                                                                 2009           2010                  2011
                                                                              HK$’000        HK$’000               HK$’000

        Trade receivables                                                           —               6,707              1,529
        Prepayment and deposits paid and other receivables                          —                 557              1,007


                                                                                    —               7,264              2,536

        New Spring Offset allows a credit period ranging from 30 days to 60 days to its trade customers. The following is an
  aged analysis of trade receivables presented based on the invoice date at the end of each reporting period.

                                                                                                                      As at
                                                                              As at 31 December               30 September
                                                                                 2009           2010                  2011
                                                                              HK$’000        HK$’000               HK$’000

        Within 30 days                                                              —               6,707                790
        31 to 60 days                                                               —                  —                 739


                                                                                    —               6,707              1,529

         Before accepting any new customer, the Company assesses the potential customer’s credit quality and defines credit
  limits by customer. Limits attributed to customers are reviewed twice a year. Majority of the trade receivables that are
  neither past due nor impaired have no default payment history.

        No balance was past due as at the reporting date. New Spring Offset does not hold any collateral over these balances.




                                                     – IIA-23 –
APPENDIX IIA                      FINANCIAL INFORMATION OF NEW SPRING OFFSET


  17.   AMOUNTS DUE FROM RELATED COMPANIES

                                                                                                                       As at
                                                                                  As at 31 December            30 September
                                                                                     2009           2010               2011
                                                              Note                HK$’000        HK$’000            HK$’000

        New Spring Group Co. Ltd
          (‘‘New Spring Group’’)                            (a) & (e)                  —               —               2,400
        Sky Will Printing & Packaging Limited
          (‘‘Sky Will’’)                                    (a) & (d)                  —           22,603                 —
        New Spring Label & Packaging Limited
          (‘‘New Spring Label’’)                            (b) & (d)                  —            5,764              1,619
        New Pearl Hot Stamping & Packaging
          Limited (‘‘New Pearl’’)                           (c) & (e)                  —               32               448


                                                                                       —           28,399              4,467

        Notes:

        (a)      Ng Man Chan is the common director.

        (b)      Ng Man Chan, the shareholder of New Spring Label is also the director of New Spring Offset.

        (c)      Li Mi Lai, the Director of New Pearl is the spouse of the sole director of New Spring Offset, Ng Man Chan.

        (d)      The amounts are in trade nature with a credit term of 60 days.

        (e)      The amounts are unsecured, non-interest bearing and repayable on demand.

        Maximum amount outstanding from related companies during the Relevant Periods:

                                                                                                                       As at
                                                                                  As at 31 December            30 September
                                                                                     2009           2010               2011
                                                                                  HK$’000        HK$’000            HK$’000

        New Spring Group                                                             N/A             N/A              2,706
        Sky Will                                                                     N/A           24,002            28,289
        New Spring Label                                                             N/A            5,957             8,098
        New Pearl                                                                    N/A               32               448

  18.   BANK BALANCES AND CASH

       Bank balances carried interest at prevailing market rates at a range from 0.36% to 0.5% per annum as at 31
  December 2009, 31 December 2010 and 30 September 2011.




                                                      – IIA-24 –
APPENDIX IIA                        FINANCIAL INFORMATION OF NEW SPRING OFFSET


  19.       TRADE AND OTHER PAYABLES

                                                                                                                         As at
                                                                                 As at 31 December               30 September
                                                                                    2009           2010                  2011
                                                                                 HK$’000        HK$’000               HK$’000

            Trade payables                                                              —             10,562             10,531
            Accruals, deposits received and other payables                              —              2,551              6,254

                                                                                        —             13,113             16,785

            The following is an aged analysis of trade payables presented based on the invoice date at the end of each reporting
  period.

                                                                                                                         As at
                                                                                 As at 31 December               30 September
                                                                                    2009           2010                  2011
                                                                                 HK$’000        HK$’000               HK$’000

            Within 30 days                                                              —              2,408              2,949
            31 to 60 days                                                               —              2,694              4,754
            Over 60 days                                                                —              5,460              2,828

                                                                                        —             10,562             10,531

         The average credit period on purchases of goods is 30 days. New Spring Offset has financial risk management
  policies in place to ensure that all payables are settled within the credit timeframe.

  20.       AMOUNT DUE FROM A FELLOW SUBSIDIARY/AMOUNT(S) DUE TO RELATED COMPANIES/
            IMMEDIATE HOLDING COMPANY/A DIRECTOR/AN ULTIMATE SHAREHOLDER

        The amount(s) due to related companies/a director/an ultimate shareholder are unsecured, interest-free and repayable
  on demand.

          The amount due from a fellow subsidiary and amount due to immediate holding company are in trade nature with a
  credit term of 60 days.

  21.       PAID-UP CAPITAL

                                                                                                                       HK$’000

            Registered capital:

            At 1 December 2009 (date of establishment), 31 December 2009,
               31 December 2010 and 30 September 2011                                                                    12,000


                                                                                                                       HK$’000

            Paid-up capital:

            At 1 December 2009 (date of establishment) and 31 December 2009                                                  —
            Capital injection on 13 January 2010                                                                          2,400
            Capital injection on 18 March 2010                                                                            7,000
            Capital injection on 18 June 2010                                                                               900

            At 31 December 2010                                                                                          10,300
            Capital injection on 22 February 2011                                                                         1,700

            At 30 September 2011                                                                                         12,000




                                                        – IIA-25 –
APPENDIX IIA                     FINANCIAL INFORMATION OF NEW SPRING OFFSET


         On 13 January 2010 and 18 June 2010, New Spring Group injected cash of HK$2,400,000 and HK$900,000
  respectively as paid-up capital of New Spring Offset.

          On 18 March 2010, New Spring Group Limited (‘‘New Spring Group’’), the shareholder of New Spring Offset,
  injected plant and equipment to New Spring Offset as paid-up capital of HK$7,000,000 of New Spring Offset. The excess of
  fair value of those plant and equipment of HK$7,566,000 over the paid-up capital of HK$7,000,000 was recorded as capital
  reserve.

        On 22 February 2011, New Spring Group injected cash of HK$1,700,000 as paid-up capital of New Spring Offset.

  22.   MAJOR NON-CASH TRANSACTIONS

         As mentioned in note 21, the capital injection of HK$7,000,000 was satisfied by the plant and equipment with fair
  value of HK$7,566,000 for the year ended 31 December 2010.

  23.   OPERATING LEASES

         The Company lease its office premises and staff quarters under operating lease. Leases are negotiable for an average
  term of one to two years and lease payments are fixed during the lease term.

        At the end of the reporting period, New Spring Offset had commitments for future minimum lease payments under
  non-cancellable operating leases in respect of rented premises which fall due as follows:

                                                                                                                      As at
                                                                              As at 31 December               30 September
                                                                                 2009           2010                  2011
                                                                              HK$’000        HK$’000               HK$’000

        Within one year                                                              —                684              1,288
        In the second to fifth year inclusive                                        —                 —                 878


                                                                                     —                684              2,166

  24.   RETIREMENT BENEFITS SCHEMES

         The employees of New Spring Offset in PRC are members of a state-managed retirement benefit scheme operated by
  the government of PRC. New Spring Offset is required to contribute 10% of payroll costs to the retirement benefit scheme
  to fund the benefits. The only obligation of New Spring Offset with respect to the retirement benefit scheme is to make the
  specified contributions.

         The total costs charged to the statements of comprehensive income of nil, HK$204,000, HK$130,000 and
  HK$234,000 for the period from 1 December 2009 (date of establishment) to 31 December 2009, the year ended 31
  December 2010 and the nine months ended 30 September 2010 and 2011 respectively, represent contributions payable to
  these schemes by New Spring Offset during the Relevant Periods.




                                                     – IIA-26 –
APPENDIX IIA                       FINANCIAL INFORMATION OF NEW SPRING OFFSET


  25.   RELATED PARTY TRANSACTIONS

        (i)   Other than disclosed elsewhere on the Financial Information, New Spring Offset entered into the following
              transactions with its related companies during the Relevant Periods and the nine months ended 30 September
              2010:

                                                                      For the period
                                                                               from 1
                                                                      December 2009
                                                                              (date of
                                                                       establishment) For year ended   For nine months period
              Name of related       Nature of                        to 31 December     31 December      ended 30 September
              party                 transactions                                 2009           2010         2010             2011
                                                          Notes              HK$’000        HK$’000       HK$’000         HK$’000
                                                                                                       (Unaudited)

              Sky Will              Sales of goods          (a)                  —            23,373        5,143            5,223


              New Spring Group      Sales of goods          (a)                  —            13,884           —                —


              New Spring Label      Sales of goods          (a)                  —             5,713           —                —


              New Spring (SW)       Sales of goods          (a)                  —                —            —            50,809


              寶安區沙井鎮辛養新             Purchases of raw
                高准柯式印刷廠                materials
                (‘‘New Spring’’)                         (b) & (e)               —             1,617           —               —


              New Spring Group      Purchases of raw
                                       materials            (b)                  —            20,796           —              176


              新高準紙製品 (深圳)           Purchases of raw
                有限公司 (‘‘New            materials and
                Spring paper’’)        finished goods    (b) & (f)               —              135            —               —


              New Spring (SW)       Purchases of raw
                                       materials            (b)                  —                —            —            15,198


              New Spring paper      Purchase of motor
                                       vehicles          (c) & (f)               —              284            —               —


              New Spring            Rental expenses      (d) & (e)               —              459            —               —


              Zhang Xiangnong       Rental expenses      (d) & (g)               —               31            —               —

              Notes:

              (a)      The sales of paper products were mutually agreed by New Spring Offset and the related companies.

              (b)      The purchases of raw materials and finished goods were mutually agreed by New Spring Offset and the
                       related companies.

              (c)      The purchase of motor vehicles was mutually agreed by New Spring Offset and the related party.




                                                        – IIA-27 –
  APPENDIX IIA                       FINANCIAL INFORMATION OF NEW SPRING OFFSET


                    (d)   The rental expenses were charged on a monthly fixed amount basis as mutually agreed by New Spring
                          Offset and the related parties.

                    (e)   Ng Man Chan, the director of New Spring Offset, is also the director of the related companies.

                    (f)   Li Mi Lai, the spouse of Ng Man Chan, is the director of the related company.

                    (g)   Zhang Xiangnong is one of the ultimte shareholder of New Spring Offset before 4 April 2011.

           (ii)     Compensation of key management personnel

                    No remuneration was paid to key management personnel during the Relevant Periods.


B.   SUBSEQUENT FINANCIAL STATEMENTS

     No audited financial statements have been prepared by New Spring Offset in respect of any period
subsequent to 30 September 2011.




Yours faithfully,




SHINEWING (HK) CPA Limited
Certified Public Accountants
Wong Hon Kei, Anthony
Practising Certificate Number: P05591
Hong Kong




                                                        – IIA-28 –
 APPENDIX III                                  UNAUDITED PRO FORMA FINANCIAL
                                          INFORMATION OF THE ENLARGED GROUP


A.   ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA FINANCIAL
     INFORMATION




                                                                                            5 March 2012

     The Board of Directors
     Climax International Company Limited

     Dear Sirs,

           We report on the unaudited pro forma financial information (the ‘‘Unaudited Pro Forma
     Financial Information’’) of Climax International Company Limited (the ‘‘Company’’) and its
     subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) set out in Appendix III of the
     circular dated 5 March 2012 (the ‘‘Circular’’) in connection with the following proposed
     transactions (the ‘‘Transactions’’):

          (i)     the proposed share consolidation (the ‘‘Share Consolidation’’) of every 20 issued and
                  unissued shares of the Company of HK$0.01 each into 1 share of the Company of
                  HK$0.2 each (the ‘‘Consolidated Share’’);

          (ii)    upon the Share Consolidation taking effect, the proposed reduction (the ‘‘Capital
                  Reduction’’) of issued share capital of the Company by cancelling the issued share
                  capital to the extent of HK$0.19 on each issued Consolidated Share in the share capital
                  of the Company such that the nominal value of the issued Consolidated Share will be
                  reduced from HK$0.20 each to HK$0.01 each;

          (iii) upon the Share Consolidation and Capital Reduction taking effect, the proposed
                subdivision of each authorised but unissued Consolidated Share of HK$0.20 each into
                20 ordinary shares of HK$0.01 each (the ‘‘Adjusted Shares’’);

          (iv) the proposed subscription of 450,000,000 Adjusted Shares at a subscription price of
               HK$0.10 each by World Treasure Global Limited which is a company incorporated in
               the British Virgin Islands and wholly-owned by Mr. Wong Hin Shek, the executive
               director of the Company;

          (v)     the proposed open offer of 8 offer shares for every Adjusted Shares held by the existing
                  shareholders at an offer price of HK$0.10 each;

          (vi) the proposed issue of bonus (the ‘‘Bonus Issue’’) shares of 5 ordinary shares for every 7
               Adjusted Shares held by the existing shareholders;




                                                 – III-1 –
APPENDIX III                               UNAUDITED PRO FORMA FINANCIAL
                                      INFORMATION OF THE ENLARGED GROUP


       (vii) the proposed acquisition 100% of the issued share capital of Sky Will Printing &
             Packaging (Holdings) Limited (‘‘Sky Will Holdings’’) and its subsidiaries (hereinafter
             collectively referred to as the ‘‘Target Group’’) (together with the Group collectively
             referred to as the ‘‘Enlarged Group’’).

        The Unaudited Pro Forma Financial Information has been prepared by the directors of the
  Company (the ‘‘Directors’’), for illustrative purpose only, to provide information about how the
  transactions might have affected the financial information presented. The basis of preparation of
  the Unaudited Pro Forma Financial Information is set out on page III-4 of the Circular.

  Respective responsibilities of the Directors and reporting accountants

       It is the responsibility solely of the Directors to prepare the Unaudited Pro Forma Financial
  Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of
  Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference
  to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in
  Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the
  ‘‘HKICPA’’).

        It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the
  Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you.
  We do not accept any responsibility for any reports previously given by us on any financial
  information used in the compilation of the Unaudited Pro Forma Financial Information beyond that
  owed to those to whom those reports were addressed by us at the dates of their issue.

  Basis of opinion

       We conducted our work in accordance with Hong Kong Standard on Investment Circular
  Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in
  Investment Circulars’’ issued by the HKICPA. Our work consisted primarily of comparing the
  unadjusted financial information with the source documents, considering the evidence supporting
  the adjustments and discussing the Unaudited Pro Forma Financial Information with the Directors.
  This engagement did not involve independent examination of any of the underlying financial
  information.

        We planned and performed our work so as to obtain the information and explanations we
  considered necessary in order to provide us with sufficient evidence to give reasonable assurance
  that the Unaudited Pro Forma Financial Information has been properly compiled by the Directors
  on the basis stated, that such basis is consistent with the accounting policies of the Group and that
  the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information
  as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.




                                             – III-2 –
  APPENDIX III                                   UNAUDITED PRO FORMA FINANCIAL
                                            INFORMATION OF THE ENLARGED GROUP


           The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the
     judgments and assumptions of the Directors, and, because of its hypothetical nature, does not
     provide any assurance or indication that any event will take place in the future and may not be
     indicative of:

           .        the financial position of the Enlarged Group as at 30 September 2011 or at any future
                    date; or

           .        the results and cash flows of the Enlarged Group for the year ended 31 March 2011 or
                    for any future period.

     Opinion

           In our opinion:

           (a)      the Unaudited Pro Forma Financial Information has been properly compiled by the
                    Directors on the basis stated;

           (b)      such basis is consistent with the accounting policies of the Group; and

           (c)      the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial
                    Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.




Yours faithfully,




SHINEWING (HK) CPA Limited
Certified Public Accountants
Wong Hon Kei, Anthony
Practising Certificate Number: P05591

Hong Kong




                                                   – III-3 –
 APPENDIX III                                 UNAUDITED PRO FORMA FINANCIAL
                                         INFORMATION OF THE ENLARGED GROUP


B.   UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

     Introduction to the unaudited pro forma financial information of the Enlarged Group

           The accompanying unaudited pro forma financial information (the ‘‘Unaudited Pro Forma
     Financial Information’’) of Climax International Company Limited (the ‘‘Company’’) and its
     subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and Sky Will Printing &
     Packaging (Holdings) Limited (‘‘Sky Will Holdings’’) and its subsidiaries (hereinafter referred to
     as the ‘‘Target Group’’; together with the Group hereinafter referred to as the ‘‘Enlarged Group’’)
     has been prepared by the directors of the Company (the ‘‘Directors’’) to illustrate the effect of the
     following proposed transactions (the ‘‘Transactions’’):

          (i)    the proposed share consolidation (the ‘‘Share Consolidation’’) of every 20 issued and
                 unissued shares of the Company of HK$0.01 each into 1 share of the Company of
                 HK$0.2 each (the ‘‘Consolidated Share’’);

          (ii)   upon the Share Consolidation taking effect, the proposed reduction (the ‘‘Capital
                 Reduction’’) of issued share capital of the Company by cancelling the issued share
                 capital to the extent of HK$0.19 on each issued Consolidated Share in the share capital
                 of the Company such that the nominal value of the issued Consolidated Share will be
                 reduced from HK$0.20 each to HK$0.01 each;

          (iii) upon the Share Consolidation and Capital Reduction taking effect, the proposed
                subdivision (the ‘‘Share Subdivision’’) of each authorised but unissued Consolidated
                Share of HK$0.20 each into 20 ordinary shares of HK$0.01 each (the ‘‘Adjusted
                Shares’’);

          (iv) the proposed subscription (the ‘‘Subscription’’) of 450,000,000 Adjusted Shares at a
               subscription price of HK$0.10 each by World Treasure Global Limited (‘‘World
               Treasure’’) which is a company incorporated in the British Virgin Islands and wholly-
               owned by Mr. Wong Hin Shek, the executive director of the Company;

          (v)    the proposed open offer (the ‘‘Open Offer’’) of 8 offer shares for every Adjusted Shares
                 held by the existing shareholders at an offer price of HK$0.10 each;

          (vi) the proposed issue of bonus shares (the ‘‘Bonus Issue’’) of 5 ordinary shares for every 7
               Adjusted Shares held by the existing shareholders;

          (vii) the proposed acquisition 100% of the issued share capital of Sky Will Holdings (the
                ‘‘Acquisition’’).

           The following is the Unaudited Pro Forma Financial Information of the Enlarged Group as if
     the Transactions have been completed (the ‘‘Completion’’) on 30 September 2011 for the unaudited
     pro forma consolidated statement of financial position and on 1 April 2010 for the unaudited pro
     forma consolidated statement of comprehensive income and unaudited pro forma consolidated
     statement of cash flows.




                                                – III-4 –
APPENDIX III                               UNAUDITED PRO FORMA FINANCIAL
                                      INFORMATION OF THE ENLARGED GROUP


        The unaudited pro forma consolidated statement of comprehensive income and the unaudited
  pro forma consolidated statement of cash flows of the Enlarged Group are prepared based on the
  audited consolidated statement of comprehensive income and the audited consolidated statement of
  cash flows of the Group for the year ended 31 March 2011 as extracted from the published annual
  report of the Group for the year ended 31 March 2011, and the audited combined statement of
  comprehensive income and the audited combined statement of cash flows of the Target Group for
  the year ended 31 March 2011 as set out in Appendix II to the Circular.

        The unaudited pro forma consolidated statement of financial position of the Enlarged Group
  is prepared based on the unaudited condensed consolidated statement of financial position of the
  Group as at 30 September 2011 as extracted from the published interim report of the Group for the
  six months ended 30 September 2011, and the audited combined statement of financial position of
  the Target Group as at 30 September 2011 as extracted from the accountants’ reports of the Target
  Group as set out in Appendix II to the Circular.

        The accompanying Unaudited Pro Forma Financial Information of the Enlarged Group is
  prepared by the Directors and based on a number of assumptions, estimates, uncertainties and
  currently available information to provide information of the Enlarged Group upon completion of
  the Transactions. As it is prepared for illustrative purpose only and because of its hypothetical
  nature, it does not purport to give a true picture of the actual financial position, results and cash
  flow of the Enlarged Group on completion of the Transactions. Further, the accompanying
  Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to predict the
  future financial position or results of operations of the Enlarged Group after the completion of the
  Transactions.




                                             – III-5 –
APPENDIX III                                   UNAUDITED PRO FORMA FINANCIAL
                                          INFORMATION OF THE ENLARGED GROUP


  UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE
  INCOME OF THE ENLARGED GROUP

                                                           The Target
                                           The Group            Group
                                               for the         for the
                                           year ended      year ended
                                            31 March        31 March       Pro forma           The Enlarged
                                                 2011            2011     adjustment    Note         Group
                                             HK$’000         HK$’000         HK$’000               HK$’000

  Revenue                                      87,366           43,644            —                 131,010
  Cost of sales                               (86,045)         (37,008)           —                (123,053)


  Gross profit                                  1,321           6,636             —                   7,957

  Other revenue                                    808          1,188             —                   1,996
  Selling expenses                                  —            (751)            —                    (751)
  Administrative expenses                       (6,311)          (943)        (5,000)    1          (12,254)
  Loss on changes in fair value of held
     for trading investments                     (183)              —             —                    (183)
  Finance costs                                    (2)            (463)       (3,585)   4a           (4,050)


  (Loss) profit before tax                      (4,367)         5,667         (8,585)                (7,285)

  Income tax expense                                (4)           (929)           —                    (933)


  (Loss) profit and total comprehensive
    (expense) income for the year
    attributable to owners of the
    Company                                     (4,371)         4,738         (8,585)                (8,218)




                                               – III-6 –
APPENDIX III                                    UNAUDITED PRO FORMA FINANCIAL
                                           INFORMATION OF THE ENLARGED GROUP


  UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
  OF THE ENLARGED GROUP

                                             The Group       The Target
                                                   as at    Group as at
                                           30 September    30 September     Pro forma           The Enlarged
                                                   2011            2011    adjustment    Note         Group
                                                HK$’000         HK$’000       HK$’000               HK$’000

  Non-current assets
  Plant and equipment                               884          37,999         1,284     3           40,167
  Goodwill                                           —               —         89,408     2           89,408

                                                    884          37,999        90,692                129,575

  Current assets
  Inventories                                         —          15,662            —                  15,662
  Trade and other receivables                      5,098         23,444        (5,000)    5           23,542
  Amounts due from directors                          —             220            —                     220
  Amount due from holding company                     —               1            —                       1
  Amounts due from related companies                  —          17,956            —                  17,956
  Deposit in other financial institution             233             —             —                     233
  Held for trading investments                     4,625             —             —                   4,625
  Bank balances and cash                          59,213          3,038        (5,000)    1          117,623
                                                                              (30,000)    5
                                                                               45,372    10
                                                                               45,000    11

                                                 69,169          60,321        50,372                179,862

  Current liabilities
  Trade and other payables                         2,233         21,860            —                  24,093
  Amount due to a director                            —          10,657            —                  10,657
  Amounts due to related companies                    —          19,799            —                  19,799
  Amount due to an ultimate holding
     shareholder                                     —              155            —                     155
  Income tax payables                                —            4,273            —                   4,273
  Obligations under finance leases                   6            1,419            —                   1,425
  Bank and other borrowings                          —           14,681            —                  14,681

                                                   2,239         72,844            —                  75,083

  Net current assets (liabilities)               66,930         (12,523)       50,372                104,779

  Total assets less current liabilities          67,814          25,476       141,064                234,354

  Non-current liabilities
  Obligations under finance leases                   15           5,288            —                   5,303
  Deferred tax liabilities                           —               38           281    3               319
  Promissory note                                    —               —         49,527    4a           49,527

                                                     15           5,326        49,808                 55,149

  Net assets                                     67,799          20,150        91,256                179,205




                                                 – III-7 –
APPENDIX III                                     UNAUDITED PRO FORMA FINANCIAL
                                            INFORMATION OF THE ENLARGED GROUP


  UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION
  OF THE ENLARGED GROUP

                                                              The Target
                                              The Group            Group
                                                    as at           as at
                                            30 September    30 September     Pro forma           The Enlarged
                                                    2011            2011    adjustment    Note         Group
                                                 HK$’000         HK$’000       HK$’000               HK$’000

  CAPITAL AND RESERVES

  Share capital                                   11,486               1            (1)    6           12,078
                                                                                 2,000    4b
                                                                               (10,912)    9
                                                                                 4,594    10
                                                                                 4,500    11
                                                                                   410    12

  Reserves                                         56,313         20,149        (5,000)    1          167,127
                                                                                24,034    4b
                                                                               (20,149)    7
                                                                                10,912     9
                                                                                40,778    10
                                                                                40,500    11
                                                                                  (410)   12


  Total equity attributable to the owners
    of the Company and total equity               67,799          20,150        91,256                179,205




                                                  – III-8 –
APPENDIX III                                       UNAUDITED PRO FORMA FINANCIAL
                                              INFORMATION OF THE ENLARGED GROUP


  UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE
  ENLARGED GROUP

                                                               The Target
                                                The Group       Group for
                                                    for the      the year
                                                year ended          ended
                                                 31 March       31 March      Pro forma           The Enlarged
                                                      2011           2011    adjustment    Note         Group
                                                  HK$’000        HK$’000        HK$’000               HK$’000

  OPERATING ACTIVITIES
  (Loss) profit before tax                           (4,367)        5,667        (5,000)    1           (7,285)
                                                                                 (3,585)   4a


  Adjustments for:
  Depreciation of plant and equipment                   63            250            —                     313
  Finance costs                                          2            463         3,585                  4,050
  Waiver of amount due to a subsidiary                  —            (902)           —                    (902)
  Interest income                                     (408)            —             —                    (408)
  Loss on changes in fair value of held for
     trading investments                               183             —             —                     183
  Dividend income                                     (155)            —             —                    (155)
  Written off of other payables                       (245)            —             —                    (245)


  Operating cash flows before movements
     in working capital                              (4,927)        5,478        (5,000)                (4,449)
  Decrease (increase) in trade and other
     receivables                                    38,693         (2,564)           —                  36,129
  Increase in amounts due from related
     companies                                           —        (40,560)           —                 (40,560)
  (Decrease) increase in trade and other
     payables                                      (39,029)         1,324            —                 (37,705)
  Increase in amounts due to related
     companies                                           —         33,082            —                  33,082


  Cash used in operations                            (5,263)       (3,240)       (5,000)               (13,503)
  Tax paid                                               —           (103)           —                    (103)


  NET CASH USED IN OPERATING
    ACTIVITIES                                       (5,263)       (3,343)       (5,000)               (13,606)




                                                   – III-9 –
APPENDIX III                                     UNAUDITED PRO FORMA FINANCIAL
                                            INFORMATION OF THE ENLARGED GROUP


                                                             The Target
                                              The Group       Group for
                                                  for the      the year
                                              year ended          ended
                                               31 March       31 March      Pro forma           The Enlarged
                                                    2011           2011    adjustment    Note         Group
                                                HK$’000        HK$’000        HK$’000               HK$’000

  INVESTING ACTIVITIES
  Advance to holding company                          —              (1)           —                      (1)
  Repayment from directors                            —           2,251            —                   2,251
  Repayment from related companies                    —           2,373            —                   2,373
  Interest income                                    408             —             —                     408
  Dividend income                                    155             —             —                     155
  Acquisition of a subsidiary                         —              —        (35,000)    5          (35,000)
  Deposit paid for acquisition of an
     investment                                    (5,000)           —          5,000     5               —
  Increase in deposits in other financial
     institution                                    (107)            —             —                    (107)
  Purchase of plant and equipment                     —          (3,800)           —                  (3,800)

  NET CASH (USED IN) FROM
    INVESTING ACTIVITIES                           (4,544)         823        (30,000)               (33,721)

  FINANCING ACTIVITIES
  New bank borrowings raised                          —           3,000            —                   3,000
  Advance from a director                             —           2,690            —                   2,690
  Proceeds from issue of shares                       —              —         90,372 10&11           90,372
  Interest paid                                       (2)          (463)           —                    (465)
  Repayment of obligations under finance
     leases                                           (5)            —             —                      (5)
  Repayment of bank borrowings                        —          (2,490)           —                  (2,490)

  NET CASH (USED IN) FROM
    FINANCING ACTIVITIES                               (7)        2,737        90,372                 93,102

  NET (DECREASE) INCREASE IN
    CASH AND CASH EQUIVALENTS                      (9,814)         217         55,372                 45,775

  CASH AND CASH EQUIVALENTS AT
    THE BEGINNING OF THE YEAR                     69,722             59            —                  69,781

  CASH AND CASH EQUIVALENTS
    AT THE END OF THE YEAR,
    represented by bank balances and cash         59,908           276         55,372                115,556




                                                – III-10 –
APPENDIX III                                           UNAUDITED PRO FORMA FINANCIAL
                                                  INFORMATION OF THE ENLARGED GROUP


  NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE
  ENLARGED GROUP

  Notes:

  1.       This represents the legal and professional fees of approximately HK$5,000,000 which are directly attributable to the
           Transactions. This adjustment has no continuing effect on the pro forma consolidated statement of comprehensive
           income of the Enlarged Group.

  2.       The adjustment on goodwill of approximately HK$89,408,000 resulted from the Acquisition is calculated as follows:

                                                                                                                         HK$’000

           Fair value of consideration                                                          (Note 4)                  110,561
           Less: Fair value of consolidated identifiable assets and liabilities acquired        (Note 3)                   21,153


           Goodwill on Acquisition                                                                                          89,408

           Pursuant to the sale and purchase agreement dated 20 January 2011 in respect of the Acquisition (the ‘‘Agreement’’),
           the total consideration of HK$110,000,000 is to be satisfied by (i) cash consideration of HK$35,000,000; (ii)
           issuance of interest-free promissory note of HK$55,000,000 (the ‘‘Promissory Note’’); and (iii) issuance of
           200,000,000 ordinary shares of HK$0.1 each of the Company (the ‘‘Consideration Shares’’).

           Pursuant to the Agreement, the consideration settled by the Promissory Note of HK$55,000,000 is subject to the
           adjustment based on the consolidated net profit of the Target Group not be less than HK$16,000,000 for the year
           ending 31 March 2012 (the ‘‘Guaranteed Amount’’). The consideration shall be reduced by such amount equal to the
           shortfall in the Guaranteed Amount multiplied by 6.875 and limited to HK$55,000,000. For the purpose of the
           Unaudited Pro Forma Financial Information, the Directors assume that the Guaranteed Amount will be achieved and
           considered that the fair value of the contingent consideration is approximate to zero. The consideration would be
           adjusted if the Guaranteed Amount cannot be met.

           The Directors have reviewed the carrying value of goodwill of the Target Group in accordance with Hong Kong
           Accounting Standard 36 Impairment of Assets (‘‘HKAS 36’’), taking into account the assessment result carried out by
           an independent valuer, Kovas Magni Appraisal Limited. Based on the assessment result, the Directors are of the
           opinion that there are no indications that the values of the goodwill of the Target Group may be impaired.

  3.       During the business combination, except for plant and equipment held by the Target Group, it is assumed that the
           fair value of the identifiable assets and liabilities of the Target Group approximate to their carrying amounts as at 30
           September 2011.

           The fair value of the plant and equipment as at 30 September 2011 is approximately HK$39,283,000 which was
           determined with reference to valuation carried out by Kovas Magni Appraisal Limited, an independent valuer. The
           adjustment represented the fair value increase of plant and equipment held by the Target Group of approximately
           HK$1,284,000 and the corresponding deferred tax liability of approximately HK$281,000 charged at PRC and Hong
           Kong applicable tax rates of 25% and 16.5% respectively. No pro forma adjustment regarding the depreciation of the
           increment on fair value of plant and equipment for the Pro Forma Financial Information as such depreciation is
           insignificant.




                                                          – III-11 –
APPENDIX III                                       UNAUDITED PRO FORMA FINANCIAL
                                              INFORMATION OF THE ENLARGED GROUP


       The fair value of consolidated identifiable assets and liabilities acquired is calculated as follows:

                                                                                                                   HK$’000

       Carrying amounts of consolidated identifiable assets and liabilities acquired                                 20,150
       Fair value adjustment to the plant and equipment                                                               1,284
       Deferred tax liability                                                                                          (281)


       Fair value of consolidated identifiable assets and liabilities acquired                                       21,153

       Upon the Completion, the fair value of the identifiable assets and liabilities of the Target Group will be reassessed
       and may be different from the fair value as stated above. As a result, the goodwill on acquisition at the date of the
       Completion may be different from that estimated amount presented.

  4.   The fair value of total consideration at the Completion as if the Acquisition was completed on 30 September 2011
       and the Promissory Note was issued on the same date which is to be satisfied in the following manners, is:

                                                                     Non-discounted             Fair value
                                                                           HK$’000               HK$’000

       Consideration settled by Promissory Note                                   55,000            49,527     (Note 4a)
       Consideration settled by cash                                              35,000            35,000
       Consideration settled by Consideration Shares                              20,000            26,034     (Note 4b)


                                                                                 110,000           110,561

       (a)    The fair value of the Promissory Note is determined by discounting the nominal amount of HK$55,000,000 at
              the discount rate of 7.24% as determined by the directors of the Company with reference to valuation carried
              out by Kovas Magni Appraisal Limited, an independent valuer, as if it is to be paid in 1 April 2013, being 18
              months from its issue date.

              Imputed interest of HK$3,585,000 is to be recognised in the profit or loss for the year ended 31 March 2011.
              The adjustment has continuing effect on the unaudited pro forma consolidated statement of comprehensive
              income of the Enlarged Group.

       (b)    Pursuant to the Agreement, the 200,000,000 Consideration Shares will be issued at an issue price of HK$0.1
              per Consideration Share, credited as fully paid. The estimated fair value of the Consideration Shares is
              approximately HK$26,034,000 as at 30 September 2011 which was determined by the directors of the
              Company with reference to valuation carried out by Kovas Magni Appraisal Limited, an independent valuer.
              The share capital and share premium of the Company will increase by HK$2,000,000 and HK$24,034,000
              respectively. The issue of the Consideration Shares is a non-cash transaction.

       Upon the Completion, the fair values of the Promissory Note and the Consideration Shares would be reassessed upon
       actual issuance and may be different from the estimated ones as stated above and will be used to determine the cost
       of the Acquisition. As a result, the goodwill on acquisition at the date of the Completion may be different from that
       estimated amount presented.

  5.   The decrease in bank balances and cash of HK$30,000,000 represents the consideration settlement with cash of
       HK$30,000,000 (HK$35,000,000 net of deposit of HK$5,000,000 paid by the Company included in other
       receivables) (Note 2).

  6.   The elimination of the issued share capital of Sky Will Holdings of approximately HK$1,000.

  7.   The elimination of the pre-acquisition reserves of the Target Group of approximately HK$20,149,000.




                                                      – III-12 –
APPENDIX III                                     UNAUDITED PRO FORMA FINANCIAL
                                            INFORMATION OF THE ENLARGED GROUP


  8.    The Share Consolidation and Share Subdivision do not have any impact on the Unaudited Pro Forma Financial
        Information. There are 1,148,661,140 shares of HK$0.01 each in issue as at 30 September 2011. After the Share
        Consolidation, there will be 57,433,057 adjusted shares of HK$0.2 each in issue.

  9.    This represents the reversal of the share capital and share premium of approximately HK$10,912,000 arising from the
        Capital Reduction. The share capital of the Company will decrease from HK$11,486,000 to HK$574,000 following
        the Capital Reduction. After the Capital Reduction, there will be 57,433,057 Adjusted Shares of HK$0.01 each in
        issue.

  10.   The adjustment reflects Open Offer of 459,464,456 Adjusted Shares at an offer price of HK$0.10 each with net
        proceed of approximately HK$45,372,000 after deduction of a direct cost of HK$574,000. The shares issued in the
        Open Offer do not have the entitlements to subscribe for the shares in the Bonus Issue.

  11.   The adjustment reflects the Subscription of 450,000,000 Adjusted Shares at a subscription price of HK$0.10 each by
        World Treasure to approximately HK$45,000,000. The shares issued in the Subscription do not have the entitlements
        to subscribe for shares in the Open Offer and the Bonus Issue.

  12.   The adjustment reflects the Bonus Issue of 41,023,612 Bonus Shares to the existing shareholders of the 57,433,057
        Adjusted Shares. The Bonus Shares are issued on the basis of 5 Bonus Shares for every 7 Adjusted Shares held.




                                                    – III-13 –
 APPENDIX IV               STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                       OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


A.   ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA NET TANGIBLE
     ASSETS




                                                                                           5 March 2012

     The Board of Directors
     Climax International Company Limited

     Dear Sirs,

           We report on the unaudited pro forma statement of adjusted consolidated net tangible assets
     (the ‘‘Unaudited Pro Forma NTA’’) of Climax International Company Limited (the ‘‘Company’’)
     and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and Sky Will Printing &
     Packaging (Holdings) Limited and its subsidiaries (together with the Group collectively referred to
     as the ‘‘Enlarged Group’’) which has been prepared by the directors of the Company (the
     ‘‘Directors’’) for illustrative purposes only, to provide information about how the transactions
     contemplated under the resumption proposal (the ‘‘Resumption Proposal’’) might have affected the
     unaudited consolidated net tangible assets of the Enlarged Group as if it had taken place and
     completed on 30 September 2011, for the inclusion as Appendix IV to the circular of Company
     dated 5 March 2012 (the ‘‘Circular’’). The transactions contemplated under the Resumption
     Proposal which were defined in the Circular include: (i) the Capital Reorganisation; (ii) the
     Acquisition; (iii) the Subscription; (iv) the Open Offer; and (v) the Bonus Issue. Two scenarios are
     presented for the Unaudited Pro Forma NTA: (a) after the completion of the Resumption Proposal,
     but before the Open Offer; and (b) after the completion of the Resumption Proposal (including the
     Open Offer). The basis of preparation of the Unaudited Pro Forma NTA is set out on page IV-3 to
     the Circular.

     Respective responsibilities of the Directors and reporting accountants

          It is the responsibility solely of the Directors to prepare the Unaudited Pro Forma NTA in
     accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on
     The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to
     Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in
     Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (the
     ‘‘HKICPA’’).

           It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the
     Listing Rules, on the Unaudited Pro Forma NTA and to report our opinion to you. We do not
     accept any responsibility for any reports previously given by us on any financial information used
     in the compilation of the Unaudited Pro Forma NTA beyond that owed to those to whom those
     reports were addressed by us at the dates of their issue.




                                                – IV-1 –
  APPENDIX IV                  STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                           OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


     Basis of opinion

           We conducted our work in accordance with Hong Kong Standard on Investment Circular
     Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in
     Investment Circulars’’ issued by the HKICPA. Our work consisted primarily of comparing the
     unadjusted financial information with the source documents, considering the evidence supporting
     the adjustments and discussing the Unaudited Pro Forma NTA with the Directors. This engagement
     did not involve independent examination of any of the underlying financial information.

           We planned and performed our work so as to obtain the information and explanations we
     considered necessary in order to provide us with sufficient evidence to give reasonable assurance
     that the Unaudited Pro Forma NTA has been properly compiled by the Directors on the basis
     stated, that such basis is consistent with the accounting policies of the Group and that the
     adjustments are appropriate for the purpose of the Unaudited Pro Forma NTA as disclosed
     pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

           The Unaudited Pro Forma NTA is for illustrative purpose only, based on the judgments and
     assumptions of the Directors, and, because of its hypothetical nature, does not provide any
     assurance or indication that any event will take place in the future and may not be indicative of the
     consolidated net tangible assets per share of the Group as at 30 September 2011 or at any future
     date.

     Opinion

           In our opinion:

           (a)      the Unaudited Pro Forma NTA has been properly compiled by the Directors on the
                    basis stated;

           (b)      such basis is consistent with the accounting policies of the Group; and

           (c)      the adjustments are appropriate for the purposes of the Unaudited Pro Forma NTA as
                    disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.




Yours faithfully,




SHINEWING (HK) CPA Limited
Certified Public Accountants
Wong Hon Kei, Anthony
Practising Certificate Number: P05591

Hong Kong




                                                   – IV-2 –
 APPENDIX IV                STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                        OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


B.   UNAUDITED PRO FORMA NET TANGIBLE ASSETS OF THE ENLARGED GROUP

     Introduction to the unaudited pro forma statement of adjusted consolidated net tangible
     assets of the Enlarged Group

           The following is an illustrative and unaudited pro forma statement of adjusted consolidated
     net tangible assets (the ‘‘Unaudited Pro Forma NTA’’) of Climax International Company Limited
     (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) and Sky
     Will Printing & Packaging (Holdings) Limited and its subsidiaries (together with the Group
     hereinafter referred to as the ‘‘Enlarged Group’’) which has been prepared on the basis of the notes
     set out below for illustrating the effect of the transactions contemplated under the resumption
     proposal (the ‘‘Resumption Proposal’’), which were defined in the Circular including (i) the Capital
     Reorganisation; (ii) the Acquisition; (iii) the Subscription; (iv) the Open Offer; and (v) the Bonus
     Issue under 2 scenarios, (a) after the completion of the Resumption Proposal, but before the Open
     Offer; and (b) after the completion of the Resumption Proposal (including the Open Offer), on the
     consolidated net tangible assets of the Enlarged Group as if it had taken place on 30 September
     2011. This pro forma financial information has been prepared for illustrative purposes only, and
     because of its hypothetical nature, it may not give a true picture of the financial position of the
     Enlarged Group as at 30 September 2011 or any future date.

           The unaudited pro forma statement of adjusted consolidated net tangible assets of the
     Enlarged Group is prepared based on the unaudited consolidated net tangible assets of the Group
     as at 30 September 2011 as set out in the financial information of the Group in Appendix I of the
     Circular and is adjusted for the effect of the completion of the Resumption Proposal under 2
     scenarios, (a) after the completion of the Resumption Proposal, but before the Open Offer; and (b)
     after the completion of the Resumption Proposal (including the Open Offer).




                                                – IV-3 –
APPENDIX IV                      STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                             OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


  Unaudited pro forma statement of adjusted consolidated net tangible assets of the Enlarged
  Group

        The unaudited pro forma statement of adjusted consolidated net tangible assets of the
  Enlarged Group has been prepared for illustrative purposes only and, because of its hypothetical
  nature, it may not give a true picture of the consolidated net tangible assets of the Enlarged Group
  following the Resumption Proposal under 2 scenarios.

                                                                                                Unaudited                              Unaudited
                                                                                               Pro Forma                              Pro Forma
                                                                                               NTA of the                             NTA of the
                                                                                          Enlarged Group                         Enlarged Group
                                                                                           attributable to                        attributable to
                                                                                        the owners of the                      the owners of the
                                                                                           Company upon                           Company upon
                                                                                        the completion of                      the completion of
                                                        Unaudited      Estimated net      the transactions                       the transactions
                                                 consolidated net      proceeds from         contemplated                           contemplated
                                                tangible assets of   the transactions           under the                               under the
                                                        the Group       contemplated          Resumption                              Resumption
                                                   attributable to         under the        Proposal, but                                Proposal
                                               the owners of the         Resumption      before the Open                           (including the
                                                  Company as at             Proposal,          Offer as at        Estimated    Open Offer) as at
                                                    30 September       but before the       30 September      proceeds from        30 September
                                                             2011         Open Offer                 2011    the Open Offer                 2011
                                                          HK$’000            HK$’000             HK$’000           HK$’000               HK$’000
                                                          (Note 1)           (Note 2)                               (Note 3)

       Net tangible assets                                 67,799            (23,374)              44,425            45,372               89,797


       Unaudited consolidated net tangible
          assets of the Group per share
          attributable to the owners of the
          Company as at 30 September
          2011 (Note 4)                                                                                                                 HK$1.18


       Unaudited consolidated net tangible
          assets of the Group per share
          attributable to the owners of the
          Company upon completion of the
          Capital Reorganisation and Open
          Offer, but before the Acquisition,
          the Subscription and the Bonus
          Issue as at 30 September 2011
          (Note 5)                                                                                                                      HK$0.22




                                                               – IV-4 –
APPENDIX IV                 STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                        OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


                                                                                             Unaudited                              Unaudited
                                                                                            Pro Forma                              Pro Forma
                                                                                            NTA of the                             NTA of the
                                                                                       Enlarged Group                         Enlarged Group
                                                                                        attributable to                        attributable to
                                                                                     the owners of the                      the owners of the
                                                                                        Company upon                           Company upon
                                                                                     the completion of                      the completion of
                                                     Unaudited      Estimated net      the transactions                       the transactions
                                              consolidated net      proceeds from         contemplated                           contemplated
                                             tangible assets of   the transactions           under the                               under the
                                                     the Group       contemplated          Resumption                              Resumption
                                                attributable to         under the        Proposal, but                                Proposal
                                            the owners of the         Resumption      before the Open                           (including the
                                               Company as at             Proposal,          Offer as at        Estimated    Open Offer) as at
                                                 30 September       but before the       30 September      proceeds from        30 September
                                                          2011         Open Offer                 2011    the Open Offer                 2011
                                                       HK$’000            HK$’000             HK$’000           HK$’000               HK$’000
                                                       (Note 1)           (Note 2)                               (Note 3)

     Scenario 1
     Unaudited Pro Forma NTA of the
        Enlarged Group per share
        attributable to the owners of the
        Company after the transactions
        contemplated under the
        Resumption Proposal, but before
        the Open Offer as at 30
        September 2011 (Note 6)                                                                                                      HK$0.06


     Scenario 2
     Unaudited Pro Forma NTA of the
        Enlarged Group per share
        attributable to the owners of the
        Company after the transactions
        contemplated under the
        Resumption Proposal (including
        the Open Offer) as at 30
        September 2011 (Note 7)                                                                                                      HK$0.07

     Notes:

     1.       The unaudited consolidated net tangible assets of the Group attributable to the owners of the Company (the
              ‘‘Group’s NTA’’) as at 30 September 2011 of approximately HK$67,799,000 are extracted from published
              unaudited interim report of the Company for the six months ended 30 September 2011.




                                                            – IV-5 –
APPENDIX IV            STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                   OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


     2.   The adjustment to the unaudited consolidated net tangible assets of the Enlarged Group attributable to the
          owners of the Company as at 30 September 2011 represents the estimated net proceeds from the transactions
          contemplated under the Resumption Proposal, but before the Open Offer of approximately HK$23,374,000 as
          follows:

                                                                                                              HK$’000

          Net proceeds from the subscription (Refer to pro forma adjustment 11 in Appendix III)                 45,000
          Estimated professional fee and other direct expenses for the resumption of trading
             (Refer to pro forma adjustment 1 in Appendix III)                                                  (5,000)
          Net assets from the acquisition of Sky Will Printing & Packaging (Holdings) Limited and
             its subsidiary (hereinafter referred to as the ‘‘Target Group’’) (Refer to pro forma
             adjustments 2, 3 and 4 in Appendix III)
             —      fair value of consolidated identifiable assets and liabilities of the Target Group          21,153
             —      consideration settled by cash                                                              (35,000)
             —      fair value consideration settled by the promissory note                                    (49,527)


                                                                                                              (23,374)

     3.   The adjustment to the unaudited consolidated net tangible assets of the Enlarged Group attributable to the
          owners of the Company as at 30 September 2011 represents the estimated net proceeds from the Open Offer
          of approximately HK$45,372,000 after deduction of a direct cost of HK$574,000 from the gross proceeds of
          approximately HK$45,946,000 (which are calculated based on the 459,464,456 offer shares (the ‘‘Offer
          Shares’’) to be issued at the subscription price of HK$0.1 per Offer Share).

     4.   The unaudited consolidated net tangible assets attributable to owners of the Company per share before
          completion of the Resumption Proposal are based on 57,433,057 shares (after taking into the effect of the
          Capital Reorganisation) in issue as at 30 September 2011.

     5.   The unaudited consolidated adjusted net tangible assets attributable to owners of the Company per share upon
          completion of the Capital Reorganisation and the Open Offer, but before the Acquisition, the Subscription and
          the Bonus Issue, is calculated based on the unaudited pro forma adjusted consolidated net tangible assets of
          the Group attributable to owners of the Company upon completion of the Open Offer of approximately
          HK$113,171,000 (which is the Group’s NTA as at 30 September 2011 of approximately HK$67,799,000 plus
          the estimated net proceeds from the Open Offer of approximately HK$45,372,000) and on the basis of
          516,897,513 shares issued and issuable, comprising 57,433,057 shares (after taking into the effect of the
          Capital Reorganisation) in issue as at 30 September 2011 and 459,464,456 Offer Shares to be issued.

     6.   The Unaudited Pro Forma NTA of the Enlarged Group attributable to the owners of the Company per share
          after the transactions contemplated under the Resumption Proposal, but before the Open Offer are based on
          the Unaudited Pro Forma NTA of the Group attributable to owners of the Company upon completion of the
          transactions contemplated under the Resumption Proposal, but before the Open Offer and on the basis of
          748,456,669 shares issued and issuable in the following transactions:

                                                                                                            Number of
                                                                                                               shares

          Shares in issue as at 30 September 2011 after taking into the effect of the
            Capital Reorganisation                                                                          57,433,057
          Consideration shares for the Acquisition (Refer to pro forma adjustment 4(b) in
            Appendix III)                                                                                 200,000,000
          Shares for the Subscription (Refer to pro forma adjustment 11 in Appendix III)                  450,000,000
          Shares for the Bonus Issue (Refer to pro forma adjustment 12 in Appendix III)                    41,023,612


                                                                                                          748,456,669




                                                  – IV-6 –
APPENDIX IV            STATEMENT OF PRO FORMA NET TANGIBLE ASSET
                   OF THE ENLARGED GROUP FOR THE OPEN OFFER ONLY


     7.   The Unaudited Pro Forma NTA of the Enlarged Group attributable to the owners of the Company per share
          after the transactions contemplated under the resumption proposal (including the Open Offer) is calculated
          based on the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners
          of the Company upon completion of the transactions contemplated under the Resumption Proposal (including
          the Open Offer) and on the basis of 1,207,921,125 shares issued and issuable, comprising 748,456,669 shares
          stated in adjustment 6 and 459,464,456 shares to be issued under the Open Offer.

     8.   No adjustment has been made to reflect any trading results or other transactions of the Group entered into
          subsequent to 30 September 2011.




                                                 – IV-7 –
 APPENDIX V                  PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                        31 MARCH 2013 AND COMFORT LETTERS
                                 ON 2012 GURANTEED AMOUNT AND FORECASTS

A.   PROFIT/(LOSS) FORECASTS

     FORECASTS FOR THE YEAR ENDING 31 MARCH 2012

     1.   Group

          Forecast consolidated net loss attributable
            to the Shareholders for the year ending
            31 March 2012 (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$7.5 million

          Unaudited pro forma forecast loss per
           Adjusted Share for the year ending
           31 March 2012 (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$0.0062

          Forecast consolidated net loss attributable
            to the Shareholders for the year ending
            31 March 2012 (excluding the Resumption Fees
            incurred for the year) (Note 3) . . . . . . . . . . . . . . . . . . . approximately HK$2.5 million

          Unaudited pro forma forecast loss per
           Adjusted Share for the year ending
           31 March 2012 (excluding the Resumption Fees
           incurred for the year) (Note 4) . . . . . . . . . . . . . . . . . . . . . . approximately HK$0.0021

     2.   Target Group

          Forecast consolidated net profit for the year ending
            31 March 2012 (Note 5) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$16.0 million

     FORECASTS FOR THE YEAR ENDING 31 MARCH 2013

     1.   Enlarged Group

          Forecast consolidated net profit attributable
            to the Shareholders for the year ending
            31 March 2013 (Note 6) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$10.5 million

          Unaudited pro forma forecast profit per
           Adjusted Share for the year ending
           31 March 2013 (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . approximately HK$0.0087

     2.   Target Group

          Forecast consolidated net profit for the year ending
            31 March 2013 (Note 8) . . . . . . . . . . . . . . . . . . . . . . . approximately HK$17.8 million




                                                  – V-1 –
 APPENDIX V                         PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                               31 MARCH 2013 AND COMFORT LETTERS
                                        ON 2012 GURANTEED AMOUNT AND FORECASTS

     Notes:

     1.       The bases and assumptions on which the above consolidated loss forecast for the year ending 31 March 2012 has
              been prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.

     2.       The calculation of unaudited pro forma forecast loss per Share for the year ending 31 March 2012 is based on the
              forecast consolidated loss attributable to the Shareholders for the year and 1,207,921,125 Adjusted Shares in issue
              upon the Capital Reorganisation becoming effective and completion of the Acquisition, the Subscription, the Open
              Offer and the Bonus Issue.

     3.       The Resumption Fee incurred for the year ending 31 March 2012 is estimated to be HK$5 million.

     4.       The calculation of unaudited pro forma forecast loss per Share for the year ending 31 March 2012 is based on the
              forecast consolidated loss attributable to the Shareholders for the year (excluding the Resumption Fee incurred for the
              year) and 1,207,921,125 Adjusted Shares in issue upon the Capital Reorganisation becoming effective and
              completion of the Acquisition, the Subscription, the Open Offer and the Bonus Issue.

     5.       The forecast consolidated net profit for the year ending 31 March 2012 of approximately HK$16.0 million has
              excluded the gain on bargain purchase of a subsidiary of approximately HK$7.4 million which set out in the
              ‘‘FINANCIAL INFORMATION OF THE TARGET GROUP’’ of Appendix II in this Circular. The bases and
              assumptions on which the above consolidated net profit for the year ending 31 March 2012 has been prepared are
              summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.

     6.       The bases and assumptions on which the above consolidated profit forecast for the year ending 31 March 2013 has
              been prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.

     7.       The calculation of unaudited pro forma forecast profit per Adjusted Share for the year ending 31 March 2013 is
              based on the forecast consolidated profit attributable to the Shareholders for the year and 1,207,921,125 Adjusted
              Shares in issue upon the Capital Reorganisation becoming effective and completion of the Acquisition, the
              Subscription, the Open Offer and the Bonus Issue.

     8.       The bases and assumptions on which the above consolidated net profit for the year ending 31 March 2013 has been
              prepared are summarized in the section headed ‘‘BASES AND ASSUMPTIONS’’ below in this appendix.


B.   BASES AND ASSUMPTIONS

     (a)      For the year ending 31 March 2012 for the Group

          The Directors have prepared the forecast consolidated loss attributable to the Shareholders for
     the year ending 31 March 2012 based on:

              (i)    the audited consolidated results of the Group for the year ended 31 March 2011;

              (ii)   the unaudited consolidated results in the management accounts of the Group for the 6
                     months ended 30 September 2011; and

              (iii) a forecast of the consolidated results of the Group for the remaining 6 months ending
                    31 March 2012.

          The forecast has been prepared based on the accounting policies consistent in all material
     respects with those presently adopted by the Group.




                                                             – V-2 –
APPENDIX V                PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                     31 MARCH 2013 AND COMFORT LETTERS
                              ON 2012 GURANTEED AMOUNT AND FORECASTS

  (b)   For the year ending 31 March 2012 for the Target Group

       The Directors have prepared the forecast consolidated profit for the year ending 31 March
  2012 based on:

        (i)    the audited consolidated results of the Target Group for the year ended 31 March 2011;

        (ii)   the audited consolidated results of the Target Group for the six months ended 30
               September 2011 (including the audited revenue of approximately HK$55 million); and

        (iii) a forecast of the consolidated results of the Target Group for the remaining 6 months
              ending 31 March 2012 (including (a) the unaudited revenue of approximately HK$26
              million for the 4 months ended 31 January 2012; (b) confirmed orders in the amount of
              approximately HK$9 million as at 31 January 2012; and (c) orders in negotiation of
              approximately HK$11 million as at 31 January 2012).

       The forecast has been prepared based on the accounting policies consistent in all material
  respects with those presently adopted by the Group.

  (c)   For the year ending 31 March 2013 for the Enlarged Group

        The Directors have prepared the forecast consolidated profit attributable to the Shareholders
  for the year ending 31 March 2013 based on:

        (i)    the audited consolidated results of the Group for the year ended 31 March 2011;

        (ii)   the unaudited consolidated results in the management accounts of the Group for the 6
               months ended 30 September 2011;

        (iii) a forecast of the consolidated results of the Group for the remaining 18 months ending
              31 March 2013;

        (iv) the audited consolidated results of the Target Group for the year ended 31 December
             2011;

        (v)    the audited consolidated results of the Target Group for the six months ended 30
               September 2011; and

        (vi) a forecast of the consolidated results of the Target Group for the remaining 18 months
             ending 31 March 2013.

       The forecast has been prepared based on the accounting policies consistent in all material
  respects with those presently adopted by the Group.




                                              – V-3 –
APPENDIX V                 PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                      31 MARCH 2013 AND COMFORT LETTERS
                               ON 2012 GURANTEED AMOUNT AND FORECASTS

  (d)   For the year ending 31 March 2013 for the Target Group

       The Directors have prepared the forecast consolidated profit for the year ending 31 March
  2013 based on:

        (i)    the audited consolidated results of the Target Group for the year ended 31 March 2011;

        (ii)   the audited consolidated results of the Target Group for the six months ended 30
               September 2011 (including the audited revenue of approximately HK$55 million); and

        (iii) a forecast of the consolidated results of the Target Group for the remaining 18 months
              ending 31 March 2013 (including (a) the unaudited revenue of approximately HK$26
              million for the 4 months ended 31 January 2012; (b) confirmed orders in the amount of
              approximately HK$9 million as at 31 January 2012; and (c) orders in negotiation of
              approximately HK$11 million as at 31 January 2012).

             The forecast has been prepared based on the accounting policies consistent in all
        material respects with those presently adopted by the Group.

  (e)   General

        1.     There will be no material changes in the existing political, legal, fiscal, market or
               economic conditions in the PRC, Hong Kong or any other countries or territories in
               which the Enlarged Group has arrangements or agreements, which may materially
               adversely affect the Enlarged Group’s business or operation.

        2.     There will be no changes in legislation, regulations or rules in the PRC, Hong Kong or
               any other countries or territories in which the Enlarged Group operates or with which
               the Enlarged Group has arrangements or agreements, which may materially adversely
               affect the Enlarged Group’s business or operation.

        3.     There will be no material changes in inflation rates or interest rates from those currently
               prevailing in the context of the Enlarged Group’s operation.

        4.     There will be no material changes in the bases or applicable rates of taxation,
               surcharges or other government levies in the countries or territories in which the
               Enlarged Group operates.

        5.     There will be no other unforeseen circumstances, including but not limited to the
               occurrence of natural disasters or catastrophes (such as floods and typhoons), epidemics
               or serious accidents, beyond the control of the Enlarged Group which will have a
               material adverse effect on the results of operations of the Enlarged Group.

        6.     All the transactions contemplated under the Resumption Proposal are duly completed in
               May 2012.

        7.     During the forecast period conversion of RMB to HK$ is assumed as RMB0.84:
               HK$1.0.




                                               – V-4 –
 APPENDIX V                 PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                       31 MARCH 2013 AND COMFORT LETTERS
                                ON 2012 GURANTEED AMOUNT AND FORECASTS

C.   COMFORT LETTERS

     (a)   Letter from the reporting accountant

          The following is the text of a report received from SHINEWING (HK) CPA Limited, the
     reporting accountant of the Company and prepared for the sole purpose of inclusion in this
     Circular.




                                                                                           5 March 2012

     The Board of Directors
     Climax International Company Limited
     Unit 906, 9/F., Wings Building
     110–116 Queen’s Road Central
     Central, Hong Kong

     Dear Sirs,

     Re: Independent Assurance Report on the profit forecast of Sky Will Printing & Packaging
         (Holdings) Limited and its subsidiaries (the ‘‘Target Group’’) for the year ending 31
         March 2012

          We have examined the accounting policies adopted and calculations of the underlying profit
     forecast (the ‘‘Underlying Forecast’’) to the guaranteed amount of not less than HK$16 million
     net profit after tax and before extraordinary items of the Target Group for the year ending 31
     March 2012 as set out in the circular of Climax International Company Limited (the ‘‘Company’’)
     dated 5 March 2012 (the ‘‘Circular’’).

     Responsibilities

           The directors of the Company and the Target Group (the ‘‘Directors’’) are solely responsible
     for the preparation of the Underlying Forecast including the assumptions. The Underlying Forecast
     has been prepared using a set of assumptions (the ‘‘Assumptions’’), which are set out in section B
     in Appendix V to the Circular, that include hypothetical assumptions about future events and
     management’s actions that are not necessarily expected to occur. Even if the events anticipated
     occur, actual results are still likely to be different from the Underlying Forecast and the variation
     may be material. The Directors are responsible for the reasonableness and validity of the
     Assumptions.

           It is our responsibility to form an opinion, based on our work on the Underlying Forecast and
     to report our opinion solely to you, as a body, solely for the purpose of reporting under Rule 10 of
     the Code on Takeovers and Mergers issued by Securities and Futures Commission of Hong Kong




                                                – V-5 –
APPENDIX V               PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                    31 MARCH 2013 AND COMFORT LETTERS
                             ON 2012 GURANTEED AMOUNT AND FORECASTS

  and for no other purpose. We have not reviewed, considered or conducted any work on the
  reasonableness and the validity of the Assumptions and express no opinion on the reasonableness
  and validity of the Assumptions on which the Underlying Forecast is based. We accept no
  responsibility to any other person in respect of, arising out of or in connection with our work.

  Summary of our work

        We conducted our work in accordance with the Hong Kong Standard on Assurance
  Engagements 3000 ‘‘Assurance Engagements Other Than Audits or Review of Historical Financial
  Information’’ issued by the Hong Kong Institute of Certified Public Accountants and with
  reference to the procedures specified in Auditing Guideline 3.341 ‘‘Accountants’ Report on Profit
  Forecasts’’. We examined the consistency of accounting policies adopted and the arithmetical
  accuracy of the Underlying Forecast. Our work has been undertaken solely to assist the Directors
  in evaluating whether the Underlying Forecast, so far as the accounting policies and calculations
  are concerned, has been properly compiled in accordance with the Assumptions made by the
  Directors.

  Opinion

       In our opinion, so far as the accounting policies and calculations are concerned, the
  Underlying Forecast has been properly compiled in accordance with the Assumptions made by the
  Directors and is presented on a basis consistent in all material aspects with the accounting policies
  currently adopted by the Company.

                                                                           Yours faithfully,
                                                                SHINEWING (HK) CPA Limited
                                                                    Certified Public Accountants
                                                                     Wong Hon Kei, Anthony
                                                               Practising Certificate Number: P05591
                                                                             Hong Kong




                                             – V-6 –
APPENDIX V                PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                     31 MARCH 2013 AND COMFORT LETTERS
                              ON 2012 GURANTEED AMOUNT AND FORECASTS




                                                                                           5 March 2012

  The Board of Directors
  Climax International Company Limited
  Unit 906, 9/F., Wings Building
  110–116 Queen’s Road Central
  Central, Hong Kong

  Dear Sirs,

  Re: Climax International Company Limited (the ‘‘Company’’) and its subsidiaries
      (hereinafter collectively referred to as the ‘‘Group’’)

        We have examined the accounting policies adopted and calculations made in arriving at the
  profit forecast of the Group and Sky Will Printing & Packaging (Holdings) Limited and its
  subsidiaries (the ‘‘Target Group’’; together with the Group collectively referred to as the
  ‘‘Enlarged Group’’) for the fifteen months from 1 January 2012 to 31 March 2013 (the
  ‘‘Forecast’’) as set out in sections A and B in Appendix V to circular of the Company dated 5
  March 2012 (the ‘‘Circular’’).

  Responsibilities

        The directors of the Company (the ‘‘Directors’’) are solely responsible for the preparation of
  the Forecast including the assumptions. The Forecast has been prepared using a set of assumptions
  (the ‘‘Assumptions’’), which are set out in section B in Appendix V to the Circular, that include
  hypothetical assumptions about future events and management’s actions that are not necessarily
  expected to occur. Even if the events anticipated occur, actual results are still likely to be different
  from the Forecast and the variation may be material. The Directors are responsible for the
  reasonableness and validity of the Assumptions.

        It is our responsibility to form an opinion, based on our work on the Forecast and to report
  our opinion solely to you, as a body, solely for the purpose of reporting under Rule 14.62 of Rules
  Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and Rule 10 of
  the Code on Takeovers and Mergers issued by Securities and Futures Commission of Hong Kong
  and for no other purpose. We have not reviewed, considered or conducted any work on the
  reasonableness and the validity of the Assumptions and express no opinion on the reasonableness
  and validity of the Assumptions on which the Forecast is based. We accept no responsibility to any
  other person in respect of, arising out of or in connection with our work.




                                               – V-7 –
APPENDIX V               PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                    31 MARCH 2013 AND COMFORT LETTERS
                             ON 2012 GURANTEED AMOUNT AND FORECASTS

  Summary of our work

        We conducted our work in accordance with the Hong Kong Standard on Assurance
  Engagements 3000 ‘‘Assurance Engagements Other Than Audits or Review of Historical Financial
  Information’’ issued by the Hong Kong Institute of Certified Public Accountants and with
  reference to the procedures specified in Auditing Guideline 3.341 ‘‘Accountants’ Report on Profit
  Forecasts’’. We examined the consistency of accounting policies adopted and the arithmetical
  accuracy of the Forecast. Our work has been undertaken solely to assist the Directors in evaluating
  whether the Forecast, so far as the accounting policies and calculations are concerned, has been
  properly compiled in accordance with the Assumptions made by the Directors.

  Opinion

        In our opinion, so far as the accounting policies and calculations are concerned, the Forecast
  has been properly compiled in accordance with the Assumptions made by the Directors as set out
  in sections A and B in Appendix V to the Circular and is presented on a basis consistent in all
  material aspects with the accounting policies currently adopted by the Company.

                                                                           Yours faithfully,
                                                                SHINEWING (HK) CPA Limited
                                                                    Certified Public Accountants
                                                                     Wong Hon Kei, Anthony
                                                               Practising Certificate Number: P05591
                                                                             Hong Kong




                                             – V-8 –
APPENDIX V               PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                    31 MARCH 2013 AND COMFORT LETTERS
                             ON 2012 GURANTEED AMOUNT AND FORECASTS

  (b)   Comfort letter from the financial adviser

       The following is the text of a report from the financial adviser and prepared for the sole
  purpose of inclusion in this circular.

                                                             Veda Capital Limited
                                                             Suite 3214, 32/F., COSCO Tower
                                                             183 Queen’s Road Central, Hong Kong

                                                             5 March 2012

  The Board of Directors
  Climax International Company Limited
  Unit 906, 9/F
  Wings Building
  110–116 Queen’s Road Central
  Central, Hong Kong

  Dear Sirs,

        We refer to the circular dated 5 March 2012 issued by the Company to the Shareholders (the
  ‘‘Circular’’) of which this letter forms part. Terms used in this letter, unless otherwise defined,
  shall have the same meanings as those used in the Circular. We refer to (i) the 2012 Guaranteed
  Amount of not less than HK$16 million net profit after tax and before extraordinary items of Sky
  Will Printing & Packaging (Holdings) Limited and its subsidiaries (the ‘‘Target Group’’) provided
  by Sky Will Printing & Packaging (BVI) Limited (the ‘‘Vendor’’) for the year ending 31 March
  2012; (ii) (a) the consolidated loss of the Group attributable to the Shareholders for the year
  ending 31 March 2012; (b) the consolidated profit of the Target Group for the year ending 31
  March 2012; (c) the consolidated profit of the Enlarged Group attributable to the Shareholders for
  the year ending 31 March 2013; and (d) the consolidated profit of the Target Group for the year
  ending 31 March 2013 (collectively, the ‘‘Forecasts’’). The 2012 Guaranteed Amount constitutes
  profit forecast under Rule 10 of the Takeovers Code and the Forecasts constitute profit forecasts
  under paragraph 29(2) of Appendix 1b of the Listing Rules and Rule 10 of the Takeovers Code.

        We are engaged to assist the Directors to comply with paragraph 29(2) of Appendix 1b of the
  Listing Rules and Rule 10 of the Takeovers Code. We are not reporting on the arithmetical
  calculations of the 2012 Guaranteed Amount and the Forecasts and the adoption of accounting
  policies thereof. We have reviewed the forecasts in deriving the 2012 Guaranteed Amount and the
  Forecasts for which the directors of the Target Group and you as the Directors are solely
  responsible, and have discussed with you the information and documents provided by you which
  formed part of the bases and assumptions, which are set out in section B in Appendix V to the
  Circular, upon which the 2012 Guaranteed Amount and the Forecasts have been prepared. We have
  also considered the two letters from SHINEWING (HK) CPA Limited both dated 5 March 2012
  addressed to yourselves regarding the calculations and accounting policies upon which the
  underlying profit forecast to the 2012 Guaranteed Amount and the Forecasts have been made.




                                            – V-9 –
APPENDIX V             PROFIT/(LOSS) FORECASTS UP TO THE YEAR ENDING
                                  31 MARCH 2013 AND COMFORT LETTERS
                           ON 2012 GURANTEED AMOUNT AND FORECASTS

       Our work has been undertaken for the purpose of reporting solely to you under paragraph
  29(2) of Appendix 1b of the Listing Rules and Rule 10 of the Takeovers Code and for no other
  purpose. We accept no responsibility to any other person in respect of, arising out of or in
  connection with our work.

       On the basis of the foregoing, we are of the opinion that the 2012 Guaranteed Amount and
  the Forecasts, for which the directors of the Target Group and you as the Directors are solely
  responsible, have been made after due and careful enquiry and due and careful consideration by
  you.

                                                                             Yours faithfully,
                                                                           For and on behalf of
                                                                          Veda Capital Limited
                                                                               Julisa Fong
                                                                            Managing Director




                                          – V-10 –
     APPENDIX VI                                                   GENERAL INFORMATION


1.     RESPONSIBILITY STATEMENT

      This Circular, for which the Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose
of giving information with regard to the Company. The Directors having made all reasonable enquiries,
confirm that to the best of their knowledge and belief the information contained in this Circular is
accurate and complete in all material respects and not misleading or deceptive, and there are no other
facts not contained in this Circular, the omission of which would make any statement herein or this
Circular misleading.

      The Directors jointly and severally accept full responsibility for the accuracy of the information
contained in this Circular (other than that relating to the Subscriber) and confirm, having made all
reasonable enquiries, that to the best of their knowledge, opinions expressed in this Circular (other than
opinions expressed by the Subscriber) have been arrived at after due and careful consideration and there
are no other facts not contained in this Circular, the omission of which would make any statement in
this Circular misleading.

      The sole director of the Subscriber accepts full responsibility for the accuracy of the information
contained in this Circular (other than that relating to the Company) and confirms having made all
reasonable enquiries, that to the best of his knowledge, opinions expressed in this Circular have been
arrived at after due and careful consideration and there are no other facts not contained in this Circular,
the omission of which would make any statement in this Circular misleading.

2.     SHARE CAPITAL

       Authorised share capital                                                                       HK$

        10,000,000,000   Shares of HK$0.01 each                                            100,000,000.00
                           (before and after Capital Reorganisation becoming
                           effective)


       Issued and to be issued as fully paid

         1,148,661,140   Shares in issue as at the Latest Practicable Date                  11,486,611.40


            57,433,057   Adjusted Shares of HK$0.01 each                                       574,330.57
                           (after Capital Reorganisation becoming effective)
           200,000,000   Consideration Shares to be issued                                   2,000,000.00
           450,000,000   Subscription Shares to be issued                                    4,500,000.00
           459,464,456   Offer Shares to be issued                                           4,594,644.56
            41,023,612   Bonus Shares to be issued                                             410,236.12


         1,207,921,125   Adjusted Shares                                                    12,079,211.25




                                                 – VI-1 –
     APPENDIX VI                                                                 GENERAL INFORMATION


      No shares have been issued since the end of the financial year on 31 March 2011 until the Latest
Practicable Date. As at the Latest Practicable Date, there were no outstanding options, warrants,
derivatives or convertible securities which may confer any right to the holder thereof to subscribe for,
convert or exchange into Shares.

     All the Consideration Shares, Subscription Shares, Offer Shares and Bonus Shares, when allotted
and issued, will rank pari passu in all respects among themselves and with the Shares then in issue on
the date of allotment and issue including the rights as to voting, dividends and return of capital.

3.     DISCLOSURE OF INTERESTS

       (a)   Interests of Directors and chief executives

             As at the Latest Practicable Date, the following directors or chief executives of the Company
       or their associates had interests or short positions in the shares, underlying shares and debentures
       of the Company or any of its associated corporations, as notified to the Company and the Stock
       Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or as recorded in the register to be
       kept under Section 352 of the SFO or as notified to the Company and the Stock Exchange pursuant
       to the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’).

                                                                                                              Percentage of
                                                                               Interest in ordinary               the issued
             Name of Directors                 Capacity                                 shares held            share capital

             The Subscriber                    Beneficial owner                      13,600,000,000                1,183.99%
                                                                                            (Note 1)
             Mr. Wong                          Interest of controlled                13,600,000,000                1,183.99%
                                                 corporation                                (Note 1)

             Note:

             1.      Upon completion of the Subscription and the Open Offer (assuming that the Subscriber takes up all the Offer
                     Shares pursuant to its obligation under the Underwriting Agreement), the Subscriber will be interested in
                     13,600,000,000 shares (before the Capital Reorganisation becoming effective). The Subscriber is wholly
                     owned by Mr. Wong. By virtue of the SFO, Mr. Wong is deemed to be interested in the same shares held by
                     the Subscriber.


             Save as disclosed above, as at the Latest Practicable Date, the Company was not aware of
       any other directors or chief executives of the Company who had an interest, directly or indirectly,
       or short position in the shares and underlying shares of the Company which would fall to be
       disclosed to the Company and the Stock Exchange under provisions of Divisions 7 and 8 of Part
       XV of the SFO or as recorded in the register required to be kept by the Company under Section
       352 of the SFO and the Stock Exchange pursuant to the Model Code.




                                                           – VI-2 –
APPENDIX VI                                                                   GENERAL INFORMATION


  (b)   Interests of substantial Shareholders

        As at the Latest Practicable Date, the following shareholders had interests, directly or
  indirectly, or short positions in the shares and underlying shares of the Company would fall to be
  disclosed to the Company and the Stock Exchange under provisions of Division 2 and 3 of Part
  XV of the SFO or as recorded in the register required to be kept by the Company under Section
  336 of the SFO:

                                                                                                            Percentage of
                                                                            Interest in ordinary                the issued
        Name of shareholders                Capacity                                 shares held             share capital

        The Vendor                          Beneficial owner                        4,000,000,000                  348.23%
                                                                                          (Note 1)
        Fung Ming                           Interest of controlled                  4,000,000,000                  348.23%
                                              corporation                                 (Note 1)
        Kingston Securities                 Beneficial owner                          229,464,456                   18.99%
                                                                                          (Note 2)
        Mrs. Chu Yuet Wah                   Interest of controlled                    229,464,456                   18.99%
          (‘‘Mrs. Chu’’)                      corporation                                  (Note2)
        Active Dynamic Limited              Interest of controlled                    229,464,456                   18.99%
                                              corporation                                  (Note2)
        Kingston Financial                  Interest of controlled                    229,464,456                   18.99%
          Group Limited                       corporation                                  (Note2)
        Kingston Capital Asia               Interest of controlled                    229,464,456                   18.99%
          Limited                             corporation                                  (Note2)
        Galaxy Sky Investments              Interest of controlled                    229,464,456                   18.99%
          Limited                             corporation                                  (Note2)
        Sweet Wishful                       Beneficial owner                          176,000,000                   15.32%
        Deng Junjie                         Interest of controlled                    176,000,000                   15.32%
                                              corporation

        Notes:

        1.       Upon completion of the Acquisition, the Vendor will be interested in 4,000,000,000 shares (before the Capital
                 Reorganisation becoming effective). The Vendor is owned as to 40% by Fung Ming. By virtue of the SFO,
                 Fung Ming is deemed to be interested in the same shares held by the Vendor.

        2.       Upon completion of the Open Offer (assuming that Kingston Securities takes up all the Offer Shares pursuant
                 to its obligation under the Underwriting Agreement), Kingston Securities will be interested in 229,464,456
                 shares (after the Capital Reorganisation becoming effective, completion of the Acquisition, the Subscription,
                 the Open Offer and the Bonus Issue).

                 Kingston Securities is wholly owned by Galaxy Sky Investments Limited; Galaxy Sky Investments Limited is
                 wholly owned by Kingston Capital Asia Limited; Kingston Capital Asia Limited is wholly owned by Kingston
                 Financial Group Limited; Kingston Financial Group Limited is owned as to 40.48% by Active Dynamic
                 Limited; Active Dynamic Limited is wholly owned by Mrs. Chu. Accordingly by virtue of the SFO, the
                 abovementioned parties are deemed to be interested in the same shares held by Kingston Securities.




                                                       – VI-3 –
     APPENDIX VI                                                   GENERAL INFORMATION


             Save as disclosed above, as at the Latest Practicable Date, the Company was not aware of
       any other person (other than the directors or chief executives of the Company) who had an interest,
       directly or indirectly, or short position in the shares and underlying shares of the Company which
       would fall to be disclosed to the Company and the Stock Exchange under provisions of Divisions 2
       and 3 of Part XV of the SFO or as recorded in the register required to be kept by the Company
       under Section 336 of the SFO.

4.     COMPETING INTERESTS

     As at the Latest Practicable Date, none of the Directors or controlling shareholder or substantial
Shareholder or any of their respective associates has any interest in business which competes with or
may compete with the business of the Group or has any other conflict of interests which any person has
or may have with the Group.

5.     MATERIAL CONTRACTS

      Save as disclosed below, there are no material contracts (being contracts entered outside the
ordinary course of business carried on or intended to be carried on by the Enlarged Group) having been
entered into by any member of the Enlarged Group within the two years immediately preceding 16
January 2012:

       (a)   the sale and purchase agreement dated 27 July 2010 in relation to an acquisition of
             companies engaged in sales, design, installation and repair of audio visual equipment and
             trading of electronic products;

       (b)   the termination agreement dated 23 November 2010 in relation to the termination of the sale
             and purchase agreement dated 27 July 2010;

       (c)   the Asset Purchase Agreement;

       (d)   the sale and purchase agreement dated 4 April 2011 in relation to an acquisition of entire
             interest of New Spring Offset by Sky Will;

       (e)   the Master Agreement;

       (f)   the S&P Agreement;

       (g)   the Subscription Agreement; and

       (h)   the Underwriting Agreement.

6.     DIRECTORS’ SERVICE CONTRACTS

      Mr. Ng is proposed to be the executive Director upon completion of the Acquisition. Terms of the
service agreement is set out in the letter from the Board of this Circular. Mr. Wong Hung Ki is proposed
to be a non-executive Director upon completion of the Acquisition. As at the Latest Practicable Date, no
service agreement is entered into for his proposed appointment.




                                                 – VI-4 –
     APPENDIX VI                                                   GENERAL INFORMATION


     Please refer to the principal terms of the service agreement of Mr. Ng under the section headed
‘‘Experience of the Board and the Enlarged Group in paper business — Proposed executive Director —
Mr. Ng’’ on pages 42 to 43 in the Letter from the Board.

     Save as disclosed herein, as at the Latest Practicable Date, none of the Directors had any existing
or proposed service contract with any member of the Group or any associated companies of the
Company or the Enlarged Group, excluding contracts expiring or determinable by the employer within
one year without payment of compensation (other than statutory compensation).

7.     INTEREST IN CONTRACTS AND ASSETS

      As at the Latest Practicable Date, none of the Directors has any direct or indirect interest in any
assets acquired or disposed of by or leased to any member of the Enlarged Group or is proposed to be
acquired or disposed of by or leased to any member of the Enlarged Group since 31 March 2011, being
the date to which the latest published audited accounts of the Company were made up.

     As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any
Director was materially interested and which was significant in relation to the business of the Enlarged
Group.

8.     LITIGATION

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

9.     EXPERTS AND CONSENTS

     The following is the qualification of the expert who has given opinions or advices, which are
contained in this Circular.

       Name                                 Qualification

       Veda Capital Limited                 a licensed corporation to carry out type 6 (advising on
                                            corporate finance) regulated activity under the SFO

       Messis Capital Limited               a licensed corporation to carry out type 6 (advising on
                                            corporate finance) regulated activity under the SFO

       SHINEWING (HK) CPA Limited           Certified Public Accountants

      As at the Latest Practicable Date, save for the fact that both the Subscriber and Veda Capital are
wholly and beneficially owned by Mr. Wong and the interests of the Subscriber in the Company
pursuant to the Subscription Agreement and the Underwriting Agreement, none of the above experts has
direct or indirect shareholdings in any member of the Enlarged Group, or any right to subscribe for or to
nominate persons to subscribe for shares in any member of the Enlarged Group, or any interests, directly




                                                – VI-5 –
 APPENDIX VI                                                        GENERAL INFORMATION


or indirectly, in any assets which have been acquired, disposed of or leased to or which are proposed to
be acquired, disposed of or leased to any member of the Enlarged Group since 31 March 2011, being
the date to which the latest published audited accounts of the Company were made up.

     Each of the above experts has given and has not withdrawn its written consent to the issue of this
Circular with the inclusion therein of its reports and references to its name in the form and context in
which they appear.

10.   SHAREHOLDINGS AND DEALINGS

      As at the Latest Practicable Date:

      (a)   the Subscriber is wholly owned by Mr. Wong, an executive Director. Aside from Mr. Wong,
            none of the Company or the Directors had shareholdings in the Subscriber;

      (b)   no Shares, convertible securities, warrants, options and derivatives in the Company were
            owned, controlled, borrowed or lent by the Directors or by the Company;

      (c)   no persons, prior to the posting of this Circular, irrevocably committed themselves to vote for
            or against the Acquisition, the Open Offer, the Subscription, the Whitewash Waiver and/or
            the Bonus Issue;

      (d)   none of the Directors holds, owns or has control or direction over any Shares, warrants,
            options or convertible securities of the Company;

      (e)   none of the Subscriber, Mr. Wong or parties acting in concert with any of them held,
            borrowed or lent any Shares, warrants, options or convertible securities of the Company or
            any derivatives in respect of the securities of the Company;

      (f)   there is no agreement, arrangement or understanding (including any compensation
            arrangement) exists between (i) any of the Subscriber, Mr. Wong or parties acting in concert
            with any of them; and (ii) any Director, recent Directors, Shareholders or recent Shareholders
            having any connection with or dependence upon the Acquisition, the Open Offer, the
            Subscription, the Whitewash Waiver and/or the Bonus Issue;

      (g)   no benefit will be given to any Director as compensation for loss of office in any member of
            the Group or otherwise in connection with the Acquisition, the Subscription, the Open Offer,
            the Whitewash Waiver and/or the Bonus Issue;

      (h)   none of the Directors has entered into any agreement or arrangement with any other persons
            which is conditional on or dependent upon the outcome of the Acquisition, the Subscription,
            the Open Offer, the Whitewash Waiver and/or the Bonus Issue;

      (i)   save as the Underwriting Agreement and the Subscription Agreement pursuant to which Mr.
            Wong has personal interest, there was no material contract entered into by the Subscriber,
            Mr. Wong or parties acting in concert with any of them in which any Director had a material
            personal interest;




                                                 – VI-6 –
 APPENDIX VI                                                     GENERAL INFORMATION


     (j)   there is no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code
           existed between (i) any of the Subscriber, Mr. Wong or parties acting in concert with any of
           them; and (ii) any other person;

     (k)   no Shares, convertible securities, warrants, options and derivatives in the Company were
           owned or controlled by a subsidiary of the Company or by a pension fund of any member of
           the Group or by any advisor to the Company as specified in class (2) of the definition of
           associate under the Takeovers Code;

     (l)   no Shares, convertible securities, warrants, options and derivatives in the Company were
           owned or controlled by a person who had an 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 and
           neither the Company nor such person who is an associate of the Company have entered into
           such an arrangement; and

     (m) no Shares, convertible securities, warrants, options or derivatives of the Company and the
         Subscriber were managed on a discretionary basis by fund managers connected with the
         Company.

     During the period of six months prior to the date of the announcement of the Company dated 16
January 2012 and up to the Latest Practicable Date:

     (a)   none of the Company or the Directors had dealt for value in the Shares, convertible
           securities, warrants, options and derivatives of the Subscriber or the Company or shares of
           the Subscriber (except for Mr. Wong, being the wholly-owned beneficial owner of the
           Subscriber);

     (b)   none of (i) the sole director of the Subscriber; and (ii) any of the Subscriber, Mr. Wong and
           parties acting in concert with any of them had dealt for value in the Shares, convertible
           securities, warrants, options and derivatives of the Company;

     (c)   none of the subsidiaries of the Company, any pension fund of the Company or any of its
           subsidiaries, nor any adviser to the Company as specified in class (2) of the definition of
           associate in the Takeovers Code has dealt for value in the Shares, convertible securities,
           warrants, options or derivatives of the Company;

     (d)   no person had an 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) or the definition of associate in the Takeovers Code; and

     (e)   no fund managers managing funds on a discretionary basis which are connected with the
           Company had dealt for value in the Shares, convertible securities, warrants, options or
           derivatives of the Company.




                                               – VI-7 –
  APPENDIX VI                                                       GENERAL INFORMATION


11.   EXPENSES

     The professional costs and expenses incurred in connection with the implementation of the
Resumption Proposal, including financial advisory fees, printing, registration, translation, legal and
accountancy charges are estimated to amount to approximately HK$5 million and are payable by the
Company.

12.   MARKET PRICES

      Trading in the Shares has been suspended since 23 September 2008, as such, the closing prices of
the Shares as recorded on the Stock Exchange on the last day on which dealings took place in each of
the six months immediately preceding 16 January 2012 and ending on the Latest Practicable Date prior
to the posting of this Circular and the Latest Practicable Date, are not available. The closing price of the
Shares on the Last Trading Day was HK$0.025.




                                                 – VI-8 –
 APPENDIX VI                                             GENERAL INFORMATION


13.   CORPORATE INFORMATION

      Board of directors                               Registered office
      Executive Director                               Clarendon House
      WONG Hin Shek (Chief Executive Officer)          2 Church Street
                                                       Hamilton HM11
      Independent Non-executive Directors              Bermuda
      LAU Man Tak
      MAN Kwok Leung                                   Head office and principal place
      WONG Yun Kuen                                      of business
                                                       Unit 906, 9/F
      Company secretary                                Wings Building
      TSANG Kwai Ping                                  110–116 Queen’s Road Central
                                                       Central
      Audit committee                                  Hong Kong
      LAU Man Tak (Chairman)
      MAN Kwok Leung                                   Registrars
      WONG Yun Kuen                                    Hong Kong
                                                       Tricor Secretaries Limited
      Remuneration committee                           26th Floor, Tesbury Centre
      LAU Man Tak (Chairman)                           28 Queen’s Road East
      MAN Kwok Leung                                   Hong Kong
      WONG Yun Kuen
                                                       Bermuda
      Auditor                                          Codan Services Limited
      SHINEWING (HK) CPA Limited                       2 Church Street
      43/F., The Lee Gardens                           Hamilton HM 11
      33 Hysan Avenue                                  Bermuda
      Causeway Bay, Hong Kong
                                                       Principal bankers
                                                       Standard Chartered Bank (Hong Kong)
                                                       Limited
                                                       The Bank of East Asia, Limited
                                                       Bank of China (Hong Kong) Limited




                                            – VI-9 –
 APPENDIX VI                                                      GENERAL INFORMATION


14.   PARTICULARS OF DIRECTORS AND COMPANY SECRETARY

     Set out below the full name, business or residential address and brief biographical details of the
Directors:

      (A) Executive Director

            Mr. Wong Hin Shek (Chief executive officer)

                 Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

                  Mr. Wong Hin Shek, aged 42, joined the Group on 18 June 2007 as an executive
            Director of the Company and was appointed as the chief executive officer of the Company on
            17 June 2008. Mr. Wong is the director of certain subsidiaries of the Company. Mr. Wong
            worked in a number of reputable investment banks and the Listing Division of the Stock
            Exchange and has extensive experience in finance, operation and strategic investment of
            listed companies in Hong Kong. Mr. Wong holds a Master of Science (Financial
            Management) degree from University of London in United Kingdom and a Bachelor of
            Commerce degree from University of Toronto in Canada. Mr. Wong is also a responsible
            officer of a licensed corporation which carries out Type 6 (advising on corporate finance)
            regulated activity under the SFO. Mr. Wong is currently the chairman and an executive
            director of Hua Yi Copper Holdings Limited (stock code: 559) and is an executive director of
            Interchina Holdings Company Limited (stock code: 202). Mr. Wong has been involved in
            management, business development, strategic investment and investor relations in these
            companies. He was an executive director of China Public Procurement Limited (stock code:
            1094) from November 2007 to September 2009 and Kingston Financial Group Limited (stock
            code: 1031) from February 2005 to April 2011.

      (B)   Proposed executive Director

            Mr. Ng Man Chan

                 10/F., Fook Hing Factory Building, 33 Lee Chung Street, Chaiwan, Hong Kong

                  Mr. Ng Man Chan, aged 61, is proposed to be an executive Director upon completion
            of the Acquisition and is a director of the Target Company. Mr. Ng is responsible for the
            Target Group’s overall management and development of corporate policy and strategy, and
            liaison with various local government and authorities in the PRC. Mr. Ng commenced his
            career in the printing industry in 1960s. He has extensive experience in printing operations
            and printing machinery.




                                               – VI-10 –
APPENDIX VI                                                 GENERAL INFORMATION


  (C) Proposed non-executive Director

      Mr. Wong Hung Ki

           Flat 405, 4/F, Block K, Kornhill, 35–37 Hong Yue Street, Hong Kong

            Mr. Wong Hung Ki, aged 58, is proposed to be a non-executive Director upon
      completion of the Acquisition. Mr. Wong Hung Ki has over 40 years of experience in
      printing industry. He has been responsible for the overall management and operation and is
      involved in the development of corporate strategy and liaison with customers and suppliers in
      his current and previous engagements.

  (D) Independent non-executive Directors

      Dr. Wong Yun Kuen

           Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

            Dr. Wong Yun Kuen, aged 54, joined the Group on 26 June 2007 and is the member of
      audit committee and remuneration committee of the Company. Dr. Wong received his Ph.D.
      degree from Harvard University, and was ‘‘Distinguished Visiting Scholar’’ at Wharton
      School of the University of Pennsylvania. Dr. Wong has worked in financial industries in the
      United States and Hong Kong for many years, and has considerable experience in corporate
      finance, investment and derivative products. He is a member of the Hong Kong Securities
      Institute. Dr. Wong is an executive director of UBA Investments Limited (stock code: 768),
      and an independent non-executive director of Harmony Asset Limited (stock code: 428),
      Bauhaus International (Holdings) Limited (stock code: 483), Kaisun Energy Group Limited
      (stock code: 8203), China Yunnan Tin Minerals Group Company Limited (stock code: 263),
      Kong Sun Holdings Limited (stock code: 295), Kingston Financial Group Limited (stock
      code: 1031), ZMAY Holdings Limited (stock code: 8085), Hua Yi Copper Holdings Limited
      (stock code: 559), China Grand Forestry Green Resources Group Limited (stock code: 910)
      and New Island Printing Holdings Limited (stock code: 377). Harmony Asset Limited is also
      listed on Toronto Stock Exchange. Dr. Wong was an independent non-executive director of
      Grand Field Group Holdings Limited (stock code: 115) from September 2004 to September
      2009, Superb Summit International Timber Company Limited (stock code: 1228) from April
      2007 to June 2010 and China E-Learning Group Limited (stock code: 8055) from August
      2007 to June 2010, and an executive director and chairman of Green Energy Group Limited
      (stock code: 979) from December 2009 to May 2010.

      Mr. Lau Man Tak

           Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

            Mr. Lau Man Tak, aged 42, joined the Group on 27 March 2008 and is the chairman of
      audit committee and remuneration committee of the Company. Mr. Lau graduated from Hong
      Kong Polytechnic University with a Bachelor degree in Accountancy. Mr. Lau has more than
      15 years of finance, accounting and auditing experiences. Mr. Lau is a fellow member of the
      Association of Chartered Certified Accountants in the United Kingdom and an associate



                                          – VI-11 –
 APPENDIX VI                                                      GENERAL INFORMATION


            member of the Hong Kong Institute of Certified Public Accountants. He is also a member of
            the Hong Kong Securities Institute. Mr. Lau is currently an executive director of China Grand
            Forestry Green Resources Group Limited (stock code: 910), an independent non-executive
            director of Kingston Financial Group Limited (stock code: 1031), Kong Sun Holdings
            Limited (stock code: 295) and Guojin Resources Holdings Limited (stock code: 630). Mr.
            Lau was an executive director of Warderly International Holdings Limited (stock code: 607)
            from December 2007 to January 2010.

            Mr. Man Kwok Leung

                   Unit 906, 9/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong

                  Mr. Man Kwok Leung, aged 65, joined the Group on 13 May 2008 and is the member
            of audit committee and remuneration committee of the Company. Mr. Man is a solicitor of
            the High Court of Hong Kong and a civil celebrant of marriages. Mr. Man has extensive
            experience in legal practice. He had been appointed by Xinhua News Agency as a district
            advisor from 1995 to 1997. Mr. Man is currently appointed as a director of Apleichau Kai
            Fong Primary School, the deputy chairman of Apleichau Kai Fong Welfare Association, the
            secretary of Apleichau Promotion of Tourism Association and the honorary legal advisor of
            Junior Police Officers’ Association. Mr. Man is currently an independent non-executive
            director of ZMAY Holdings Limited (stock code: 8085), Kong Sun Holdings Limited (stock
            code: 295), Hua Yi Copper Holdings Limited (stock code: 559) and Sam Woo Holdings
            Limited (stock code: 2322).

      (E)   Company secretary

            Ms. Tsang Kwai Ping

                 Ms. Tsang is a member of the Hong Kong Institute of Certified Public Accountants and
            the Institute of Chartered Accountants in England and Wales. Ms. Tsang has extensive
            experiences in auditing and financial management.

15.   PARTIES INVOLVED AND REGISTERED OFFICE

      Subscriber                                  World Treasure Global Limited
                                                  OMC Chambers
                                                  Wickhams Cay 1
                                                  Road Town
                                                  Tortola
                                                  British Virgin Islands

      Financial adviser to the Company            Veda Capital Limited
                                                  Suite 3214, 32/F
                                                  COSCO Tower
                                                  183 Queen’s Road Central
                                                  Hong Kong




                                                – VI-12 –
 APPENDIX VI                                                      GENERAL INFORMATION


      Independent financial adviser              Messis Capital Limited
                                                 Room 2002, 20th Floor
                                                 Tower 1, Lippo Centre
                                                 89 Queensway, Hong Kong

      Reporting Accountant                       SHINEWING (HK) CPA Limited
                                                 43/F., The Lee Gardens
                                                 33 Hysan Avenue
                                                 Causeway Bay, Hong Kong

      Legal adviser as to Hong Kong laws         D.S. Cheung & Co.
                                                 29/F
                                                 Bank of East Asia Harbour View Centre
                                                 56 Gloucester Road
                                                 Wanchai, Hong Kong

      Legal adviser as to Bermuda laws           Conyers Dill & Pearman
                                                 2901 One Exchange Square
                                                 8 Connaught Place
                                                 Central, Hong Kong

      Branch share registrar                     Tricor Secretaries Limited
                                                 26th Floor, Tesbury Centre
                                                 28 Queen’s Road East
                                                 Hong Kong

      Underwriter                                Kingston Securities Limited
                                                 Suite 2801, 28th Floor
                                                 One International Finance Centre
                                                 1 Harbour View Street
                                                 Central, Hong Kong

16.   DOCUMENTS AVAILABLE FOR INSPECTION

     Copies of the following documents will be available for inspection at the principal office of
business in Hong Kong of the Company at Unit 906, 9th Floor, Wings Building, 110–116 Queen’s Road
Central, Central, Hong Kong during 9:30 a.m. to 5:30 p.m., Monday to Friday (other than public
holidays) from the date of this Circular up to and including the date of the SGM and will be displayed
on the website of the SFC (www.sfc.hk) and the website of the Company (www.climaxintlco.com).

      (a)   the Bye-laws of the Company;

      (b)   the memorandum and articles of association of the Subscriber;

      (c)   the interim report of the Company for the six months ended 30 September 2011 and the
            annual reports of the Company for the three financial years ended 31 March 2011 as set out
            in Appendix I to this Circular;




                                               – VI-13 –
 APPENDIX VI                                                         GENERAL INFORMATION


      (d)   the accountants’ report on the financial information of the Target Group as set out in
            Appendix II to this Circular;

      (e)   the accountants’ report on the financial information of New Spring Offset as set out in
            Appendix IIA to this Circular;

      (f)   the report from SHINEWING (HK) CPA Limited on unaudited pro forma financial
            information of the Enlarged Group as set out in Appendix III to this Circular;

      (g)   the statement of pro forma net tangible asset of the Enlarged Group for the Open Offer only,
            as set out in Appendix IV to this Circular;

      (h)   the letters of comfort in relation to the profit forecasts of the Enlarged Group and the Target
            Group for the two years ending 31 March 2013 issued by SHINEWING (HK) CPA Limited
            and Veda Capital Limited respectively, as set out in Appendix V to this Circular;

      (i)   the letter from the Board, the text of which is set out on pages 13 to 89 of this Circular;

      (j)   the letter from the Independent Board Committee, the text of which is set out on pages 90 to
            91 of this Circular;

      (k)   the letter from Messis Capital, the text of which is set out on pages 92 to 121 of this
            Circular;

      (l)   the letters of consent from the experts as referred to in the paragraph headed ‘‘Experts and
            consents’’ in this appendix;

      (m) material contracts as referred to in the section headed ‘‘Material contracts’’ in this appendix;

      (n)   the service contract as referred to in the section headed ‘‘Directors’ service contracts’’ in this
            appendix; and

      (o)   this Circular.

17.   MISCELLANEOUS

      (a)   The English text of this Circular shall prevail over Chinese text in case of any inconsistency.

      (b)   As at the Latest Practicable Date, the Subscriber was wholly owned by Mr. Wong who is also
            the sole director of the Subscriber. The correspondence address of Mr. Wong is Unit 906, 9/F,
            Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong.




                                                  – VI-14 –
                                         NOTICE OF SGM




          CLIMAX INTERNATIONAL COMPANY LIMITED
                               (Incorporated in Bermuda with limited liability)
                                            (Stock code: 439)

      NOTICE IS HEREBY GIVEN that a special general meeting of Climax International Company
Limited (the ‘‘Company’’) will be held at 3/F., Nexxus Building, 77 Des Voeux Road Central, Hong
Kong at 11:00 a.m. on Wednesday, 28 March 2012 for the purpose of considering and, if thought fit,
passing, with or without modification, the following resolutions:

                                       SPECIAL RESOLUTION

     1.    ‘‘THAT subject to (i) the fulfillment of all the conditions set out in the section headed
           ‘‘Conditions of the Capital Reorganisation’’ in the circular of the Company dated 5 March
           2012 (the ‘‘Circular’’), a copy of which has been produced to the meeting marked ‘‘A’’ and
           initialled by the chairman of the meeting for the purpose of identification:

           (a)   every twenty (20) issued and unissued shares of HK$0.01 each in the share capital of
                 the Company be consolidated into one (1) share of HK$0.20 each (the ‘‘Consolidated
                 Share’’) in the share capital of the Company (the ‘‘Share Consolidation’’), and any
                 fractional entitlements to the then issued Consolidated Shares resulting from the Share
                 Consolidation shall be aggregated and sold in the form of Consolidated Shares for the
                 benefit of the Company in such manner and on such terms as the directors of the
                 Company (the ‘‘Directors’’) may think fit;

           (b)   subject to and forthwith upon the Share Consolidation