HAO WEN HOLDINGS LIMITED 皓文控股有限公司

Transcription

1 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 your licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Hao Wen Holdings Limited, you should at once hand this circular together with the enclosed form of proxy to the purchaser or the transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the transferee. This circular appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company. Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company 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. HAO WEN HOLDINGS LIMITED 皓文控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8019) (1) SHARE CONSOLIDATION AND CHANGE IN BOARD LOT SIZE; (2)PROPOSEDOPENOFFERONTHEBASISOF EIGHT OFFER SHARES FOR EVERY ONE CONSOLIDATED SHARE HELD ON THE RECORD DATE; (3) APPLICATION FOR THE WHITEWASH WAIVER; AND (4) NOTICE OF EXTRAORDINARY GENERAL MEETING Financial Adviser Underwriters Independent Financial Adviser Grand Vinco Capital Limited (A wholly owned subsidiary of Vinco Financial Group Limited) A letter from the Board is set out on pages 12 to 35 of this circular. A letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 38 to 59 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders is set out on pages 36 to 37 of this circular. A notice convening the EGM to be held at Jasmine Room on 3/F., Ramada Hong Kong Hotel, 308 Des Voeux Road West, Hong Kong on Tuesday, 17 September 2013 at 10:00 a.m. is set out on pages EGM-1 to EGM-3 of this circular. A form of proxy for use at the EGM is enclosed. Whether or not you intend to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited at 26th Floor, Tesbury Centre, 28 Queen s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so desire. The Open Offer is subject to the satisfaction of certain conditions as described under the section headed Conditions of the Open Offer. In particular, it is subject to the Underwriters not terminating the Underwriting Agreement (see the section headed Termination of the Underwriting Agreement herein) on or before the Latest Time for Termination. Accordingly, the Open Offer may or may not become unconditional and may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealings in the Shares up to the date when the conditions of the Open Offer are fulfilled. 30 August 2013

2 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM. i

3 CONTENTS Page Characteristics of GEM... i Definitions... 1 Summary of the Open Offer... 6 Expected Timetable... 7 Termination of the Underwriting Agreement Letter from the Board Letter from the Independent Board Committee Letter from the Independent Financial Adviser Appendix I Financial Information of the Group... I-1 Appendix II Unaudited pro forma financial information of the Remaining Group... II-1 Appendix III General Information... III-1 Notice of EGM... EGM-1 ii

4 DEFINITIONS In this circular, unless the context requires otherwise, the following expressions have the following meanings: actinginconcert Announcement has the meaning ascribed to it under the Takeovers Code the announcement of the Company dated 11 July 2013 in relation to, among others, the Share Consolidation and change in board lot size, the Open Offer and the Whitewash Waiver Application Form(s) the application form(s) for use by the Qualifying Shareholders to apply for the Offer Shares associate(s) Board Business Day CCASS Companies Ordinance Company Concert Group connected person(s) Consolidated Share(s) Directors EGM has the meaning ascribed thereto in the GEM Listing Rules the board of Directors a day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business the Central Clearing and Settlement System established and operated by HKSCC the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) Hao Wen Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the Existing SharesofwhicharelistedonGEM Mr. Yip Chi Fai Stevens, Beckon Investments Limited, Elegant Mark Investment Limited, Smart Galaxy Investments Limited and Mr. Wong Tin Lung, and parties acting in concert with each of them has the meaning ascribed thereto in the GEM Listing Rules ordinary share(s) of HK$0.10 each in the share capital of the Company after the Share Consolidation becoming effective the directors of the Company the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving the Share Consolidation and change in board lot size, the Open Offer, the Underwriting Agreement and the Whitewash Waiver 1

5 DEFINITIONS Excess Application Form(s) the form(s) of application for excess Offer Shares to be used in connection with the Open Offer Excluded Shareholder(s) Shareholder(s) whose names appear on the register of members of the Company on the Record Date and whose addresses are in places outside Hong Kong and whom the Directors are of the view that it would be necessary or expedient to exclude from the Open Offer on account either of the legal restrictions under the laws of the places of his/ her/their registered address(es) or the requirements of the relevant regulatory body or stock exchange in that place Executive Existing Share(s) GEM GEM Listing Rules Group HKSCC Hong Kong Independent Board Committee Independent Financial Adviser the Executive Director of the Corporate Finance Division of the SFC or any of his delegate(s) ordinary share(s) of HK$0.01 each in the share capital of the Company before the implementation of the Share Consolidation the Growth Enterprise Market of the Stock Exchange the Rules Governing the Listing of Securities on GEM the Company and its subsidiaries Hong Kong Securities Clearing Company Limited the Hong Kong Special Administrative Region of the PRC a committee of the Board (comprising Mr. Lam Kai Tai, Mr. Wong Ting Kon and Ms. Yeung Mo Sheung, Ann, all being independent non-executive Directors) established to advise the Independent Shareholders on the Open Offer, the Underwriting Agreement and the Whitewash Waiver Grand Vinco Capital Limited, a wholly-owned subsidiary of Vinco Financial Group Limited (stock code: 8340), a licensed corporation under the SFO to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Open Offer, the Underwriting Agreement and the Whitewash Waiver 2

6 DEFINITIONS Independent Shareholder(s) Last Trading Day Latest Practicable Date Latest Time for Acceptance Latest Time for Termination Lender Listing Committee Loan Agreement Offer Share(s) for the Whitewash Waiver, Shareholder(s) other than the Concert Group, Orient Securities Limited and parties acting in concert with it, and those who are involved in or interested in the Open Offer, the Underwriting Agreement or the Whitewash Waiver; for the Open Offer, the Independent Shareholder(s) shall also exclude Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates 30 May 2013, being the last trading day immediately before the date of the Announcement 28 August 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein 4:00 p.m. on Friday, 11 October 2013 or such later time or date as may be agreed between the Company and the Underwriters, being the latest time for acceptance of, and payment, for, the Offer Shares 4:00 p.m. on Monday, 21 October 2013 or such other time or date as may be agreed between the Company and the Underwriters, being the latest time to terminate the Underwriting Agreement Elegant Mark Investment Limited, a company incorporated in Hong Kong and a money lender licensed under the Money Lenders Ordinance (Cap. 163 of the Laws of Hong Kong), which is wholly owned by Smart Galaxy Investments Limited, a company incorporated in the British Virgin Islands with limited liability has the meaning ascribed thereto in the GEM Listing Rules the loan agreement dated 30 May 2013 entered into between the Lender and Beckon Investments Limited in respect of a loan facility up to HK$122.4 million not less than 1,621,334,832 Consolidated Shares and not more than 1,657,334,832 Consolidated Shares proposed to be offered to the Qualifying Shareholders to subscribe pursuant to the Open Offer 3

7 DEFINITIONS Open Offer Posting Date PRC Prospectus Prospectus Documents Qualifying Shareholders Record Date Registrar SFC SFO Share(s) Share Consolidation Share Option(s) Shareholders the proposed issue of the Offer Shares to the Qualifying Shareholders at the Subscription Price on the basis of eight Offer Shares for every one Consolidated Share held on the Record Date on the terms pursuant to the Prospectus Documents Thursday, 26 September 2013 or such later date as may be agreed between the Underwriters and the Company, for the despatch of the Prospectus Documents the People s Republic of China which, for the purpose of this circular, excludes Hong Kong, Taiwan and the Macau Special Administrative Region of the People s Republic of China the prospectus to be issued by the Company in relation to the Open Offer the Prospectus, the Application Form(s) and the Excess Application Form(s) the Shareholder(s), other than the Excluded Shareholder(s), whose name(s) appear(s) on the register of members of the Company on the Record Date Wednesday, 25 September 2013, the record date for the determination of the entitlements of the Qualifying Shareholders for the Open Offer the Company s branch share registrar and transfer office in Hong Kong, Tricor Abacus Limited, at 26th Floor, Tesbury Centre, 28 Queen s Road East, Wanchai, Hong Kong the Securities and Futures Commission of Hong Kong Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) the Existing Share(s) and/or the Consolidated Share(s) the proposed consolidation of every ten (10) issued and unissued Existing Shares into one (1) Consolidated Share in the share capital of the Company the share option(s) granted under the share option scheme adopted by the Company holders of the Shares 4

8 DEFINITIONS Stock Exchange Subscription Price Takeovers Code Trading Day Underwriters The Stock Exchange of Hong Kong Limited the subscription price per Offer Share, being HK$0.10 thehongkongcodeontakeoversandmergers the day on which the Stock Exchange is open for trading Orient Securities Limited, a licensed corporation to carry on Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities under the SFO, and Beckon Investments Limited, an investment holding company which is incorporated in the British Virgin Islands with limited liability, being underwriters to the Open Offer Underwriting Agreement the underwriting agreement dated 11 July 2013 (as supplemented on 29 August 2013) and entered into between the Company and the Underwriters relating to the underwriting of the Offer Shares and other arrangements in respect of the Open Offer Underwritten Shares Whitewash Waiver HK$ not less than 1,474,102,832 Offer Shares and not more than 1,510,102,832 Offer Shares, being all Offer Shares after deducting the Offer Shares allotted to Beckon Investments Limitedonanassuredbasiswhichhavebeenundertakento be accepted by it the whitewash waiver from the obligation of the Concert Group to make a mandatory offer under Rule 26 of the Takeovers Code as a result of the underwriting of up to 999,990,095 Offer Shares under the Underwriting Agreement pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code Hong Kong dollars, the lawful currency of Hong Kong from time to time % per cent. 5

9 SUMMARY OF THE OPEN OFFER The following information is derived from, and should be read in conjunction with, the full text of this circular. Basis of the Open Offer: Subscription Price: Number of Existing Shares in issue as at the Latest Practicable Date: Number of Consolidated Shares upon Share Consolidation becoming effective: Number of Offer Shares: Eight (8) Offer Shares for every one (1) Consolidated Share held on the Record Date HK$0.10 per Offer Share 2,026,668,549 Existing Shares 202,666,854 Consolidated Shares Not less than 1,621,334,832 Offer Shares and not more than 1,657,334,832 Offer Shares The aggregate nominal value of the Offer Shares will be not less than HK$162,133,483.2 and not more than HK$165,733,483.2 Number of Offer Shares undertakentobesubscribedby Beckon Investments Limited: Number of Underwritten Shares: 147,232,000 Offer Shares Not less than 1,474,102,832 Offer Shares and not more than 1,510,102,832 Offer Shares Amount to be raised: Not less than approximately HK$162,133,483 before costs and expenses 6

10 EXPECTED TIMETABLE The expected timetable for the Open Offer set out below is for indicative purposes only and it has been prepared on the assumption that all the conditions of the Open Offer will be fulfilled. The expected timetable is subject to change, and any such change will be announced by way of a separate announcement by the Company as and when appropriate. Event 2013 Latesttimeforlodgingproxyforms...10:00a.m.on Sunday, 15 September ExpecteddateoftheEGM...10:00a.m.on Tuesday, 17 September AnnouncementofresultsoftheEGM...Tuesday,17September EffectivedatefortheShareConsolidation...Wednesday,18September CommencementofdealingsintheConsolidatedShares...9:00a.m.on Wednesday, 18 September Original counter for trading in existing share certificates inboardlotsof5,000existingsharestemporarilycloses...9:00a.m.on Wednesday, 18 September Temporary counter for trading in Consolidated Shares in board lots of 500 Consolidated Shares (in the formofexistingsharecertificates)opens...9:00a.m.on Wednesday, 18 September First day for free exchange of existing certificates for the ExistingSharesintonewsharecertificatesforConsolidatedShares...9:00a.m.on Wednesday, 18 September Last day of dealings in Existing Shares and Consolidated Shares on a cum-entitlement basis.....wednesday,18september First day of dealings in Existing Shares and Consolidated Shares on an ex-entitlement basis.....thursday,19september Latest time for lodging transfer of Existing Shares and Consolidated Shares for entitlement to the Open Offer :00p.m.on Monday, 23 September Bookclosureperiod(bothdaysinclusive)...Tuesday,24Septemberto Wednesday, 25 September Record Date to determine the entitlements under the Open Offer...Wednesday, 25 September Registerofmembersre-opens...Thursday,26September 7

11 EXPECTED TIMETABLE DespatchofProspectusDocuments...Thursday,26September Designated broker starts to stand in the market to provide matchingservicesforoddlotsofconsolidatedshares...9:00a.m.on Friday, 4 October Original counter for trading in Consolidated Shares in new board lots of 20,000 Consolidated Shares (intheformofnewsharecertificates)re-opens...9:00a.m.on Friday, 4 October Parallel trading in Consolidated Shares (in the form of both existing certificates in board lots of 500 Consolidated Shares and new share certificates inboardlotsof20,000consolidatedshares)commences...9:00a.m.on Friday, 4 October LatesttimeforpaymentforandacceptanceoftheOpenOffer...4:00p.m.on Friday, 11 October Latest time for the Open Offer becomes unconditional :00p.m.on Monday, 21 October AnnouncementonresultsoftheOpenOffer...Tuesday,22October Refund cheques and share certificates of fully paid OfferSharestobeposted... Wednesday,23October DealingsinOfferSharesexpectedtocommence...9:00a.m.on Thursday, 24 October Temporary counter for trading in Consolidated Shares in board lots of 500 Consolidated Shares (intheformofexistingcertificates)closes...4:00p.m.on Friday, 25 October Parallel trading in the Consolidated Shares (represented by both existing share certificates in board lots of 500 Consolidated Shares and new share certificates inboardlotsof20,000consolidatedshares)ends...4:00p.m.on Friday, 25 October Designated broker ceases to stand in the market toprovidematchingservice...4:00p.m.on Friday, 25 October Last day for free exchange of existing share certificates fornewsharecertificates... Wednesday,30October 8

12 EXPECTED TIMETABLE EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE AND PAYMENT FOR THE OFFER SHARES All times stated in this circular refer to Hong Kong time. The latest time for acceptance of and payment for the Offer Shares will be postponed if there is:. a tropical cyclone warning signal number 8 or above, or. a black rainstorm warning (i) (ii) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on Friday, 11 October Instead the latest time for acceptance of and payment for the Open Offer will be extended to 5:00 p.m. on the same Business Day; in force in Hong Kong at any local lime between 12:00 noon and 4:00 p.m. on Friday, 11 October Instead the latest time of acceptance of and payment fortheopenofferwillberescheduledto4:00p.m.onthefollowingbusiness 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 at the Latest Time for Acceptance, the dates mentioned in the section headed Expected Timetable in this circular may be affected. The Company will notify Shareholders by way of announcements on any change to the expected timetable as soon as practicable. 9

13 TERMINATION OF THE UNDERWRITING AGREEMENT TERMINATION OF THE UNDERWRITING AGREEMENT The Underwriters may by notice in writing to the Company served prior to the Latest Time for Termination, terminate the Underwriting Agreement, on any of the following grounds: 1. the success of the Open Offer would be materially and adversely affected by the development, occurrence or enforcement of: (a) any new law or regulation or any change in existing laws or regulations which in the reasonable opinion of the Underwriters have or are likely to have a material adverse effect on the financial position of the Group as a whole; (b) any significant change (whether or not permanent) in local, national or international economic, financial, political or military conditions which in the reasonable opinion of the Underwriters are or would be materially adverse to the success of the Open Offer; (c) any significant change (whether or not permanent) in local, national or international securities market conditions or currency exchange rates or exchange controls which in the reasonable opinion of the Underwriters are or would be materially adverse to the success of the Open Offer, or makes it impracticable or inadvisable or inexpedient to proceed therewith; (d) (e) any suspension of dealings in the Shares for any period longer than five consecutive Business Days after the date of the Underwriting Agreement (other than as a result of the Open Offer); or any moratorium, suspension or material restriction on trading in shares or securities generally on the Stock Exchange due to exceptional financial circumstances or otherwise at any time prior to the Latest Time for Termination; or 2. any breach of any of the warranties under the Underwriting Agreement by the Company comes to the knowledge of the Underwriters; or 3. any event occurs or any matter arises on or after the date of the Underwriting Agreement and prior to the Latest Time for Termination which if it had occurred or arisen before the date of the Underwriting Agreement would have rendered any of such representations, warranties and undertakings untrue or incorrect in any material respect in such a manner as would in the absolute opinion of the Underwriters materially and adversely affect the financial position or business of the Group as a whole; or 4. there is any such adverse change in the general affairs, management, business, stockholders equity or in the financial or trading position of the Group as a whole which in the absolute opinion of the Underwriters is materially adverse to the success of the Open Offer; or 10

14 TERMINATION OF THE UNDERWRITING AGREEMENT 5. there is any change in the composition of the Board which in the absolute opinion of the Underwriters may affect the management and general affairs of the Company. In the event that the Underwriters terminate the Underwriting Agreement by notice in writing given to the Company on or before the Latest Time for Termination, all obligations of the Underwriters and the Company under the Underwriting Agreement shall cease and determine and no party shall have any claim against any other party in respect of any matter arising out of and in connection with the Underwriting Agreement except for, among others, any antecedent breach of any obligation under the Underwriting Agreement. In such circumstances, the Open Offer will not proceed. 11

15 LETTER FROM THE BOARD HAO WEN HOLDINGS LIMITED 皓文控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8019) Executive Directors: Mr. Chow Yik Mr. Leung King Fai Mr. Lee Cheuk Yue, Ryan Independent non-executive Directors: Mr. Lam Kai Tai Mr.WongTingKon Ms. Yeung Mo Sheung, Ann Registered Office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands Principal place of business in Hong Kong: Unit 2707, 27/F China Resources Building, 26 Harbour Road, Wanchai Hong Kong 30 August 2013 To the Qualifying Shareholders and, for information only, the Excluded Shareholders Dear Sir or Madam, (1) SHARE CONSOLIDATION AND CHANGE IN BOARD LOT SIZE; (2)PROPOSEDOPENOFFERONTHEBASISOF EIGHT OFFER SHARES FOR EVERY ONE CONSOLIDATED SHARE HELD ON THE RECORD DATE; (3) APPLICATION FOR THE WHITEWASH WAIVER; AND (4) NOTICE OF EXTRAORDINARY GENERAL MEETING INTRODUCTION Reference is made to the Announcement in relation to, among others, (i) the Share Consolidation and change in board lot size; (ii) the Open Offer on the basis of eight Offer Shares for every Consolidated Share held on the Record Date; and (iii) application for the Whitewash Waiver. 12

16 LETTER FROM THE BOARD The purpose of this circular is to provide you with, among others, further details of the Share Consolidation and change in board lot size, the Open Offer, the Underwriting Agreement and the Whitewash Waiver, including, among others, (i) a letter from the Independent Board Committee to the Independent Shareholders setting out their advice in relation to the Open Offer, the Underwriting Agreement and the Whitewash Waiver; (ii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver, together with (iii) a notice convening the EGM. SHARE CONSOLIDATION AND CHANGE IN BOARD LOT SIZE The Company proposes to implement the Share Consolidation on the basis that every ten (10) issued and unissued Existing Shares with a par value of HK$0.01 each will be consolidated into one (1) Consolidated Share with a par value of HK$0.10 each. Effects of the Share Consolidation As at the Latest Practicable Date, the authorised share capital of the Company is HK$200,000,000 comprising 20,000,000,000 Existing Shares of par value of HK$0.01 each, of which 2,026,668,549 Existing Shares have been issued and fully paid. The issued share capital of the Company is HK$20,266, Assuming no further Existing Shares will be issued from the Latest Practicable Date up to the date of the EGM, upon completion of the Share Consolidation there will be 202,666,854 Consolidated Shares of HK$0.10 each in issue which are fully paid or credited as fully paid following the Share Consolidation. The authorised share capital of the Company will remain at HK$200,000,000 but will be divided into 2,000,000,000 Consolidated Shares of HK$0.10 each. Conditions of the Share Consolidation The implementation of the Share Consolidation is conditional upon: (i) (ii) the passing of the necessary ordinary resolution by the Shareholders at the EGM to approve the Share Consolidation; and the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consolidated Shares in issue and to be issued upon the Share Consolidation becoming effective. Listing Application Application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consolidated Shares in issue and to be issued upon the Share Consolidation becoming effective. All necessary arrangements will be made for the Consolidated Shares to be admitted into the Central CCASS. The Share Consolidation will be conducted in accordance with the provisions in the articles of association of the Company. 13

17 LETTER FROM THE BOARD Change in board lot size The Board proposes to change the board lot size for trading of the Shares from 5,000 Existing Shares to 20,000 Consolidated Shares subject to and after the Share Consolidation becoming effective. Based on the closing price of HK$0.04 per Existing Share (equivalent to HK$0.4 per Consolidated Share) as at the Latest Practicable Date, the value of each board lot of 20,000 Consolidated Shares, assuming the Share Consolidation had already been effective, would be HK$8,000. Status of the Consolidated Shares The Consolidated Shares will rank pari passu in all respects with each other and the Share Consolidation will not result in any change in the relative rights of the Shareholders. Fractional Consolidated Shares will not be issued by the Company to Shareholders. Any fractional entitlement to the Consolidated Shares will be aggregated, sold and retained for the benefit of the Company. Arrangement on odd lot trading In order to alleviate the difficulties arising from the existence of odd lots of Consolidated Shares arising from the Share Consolidation and change in board lot size, the Company has appointed Orient Securities Limited to provide matching service, on a best effort basis, to those Shareholders who wish to acquire odd lots of the Consolidated Shares to make up a full board lot, or to dispose of their holding of odd lots of the Consolidated Shares. Shareholders who wish to utilise the service should contact Mr. Lau Wai Man of Orient Securities Limited at (852) or at Room , 28/F., Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong during the period from 4 October 2013 to 25 October 2013, both days inclusive. Holders of odd lots of the Consolidated Shares should note that successful matching of the sale and purchase of odd lots of the Consolidated Shares is not guaranteed. If you are in any doubt as to the above arrangements, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. Exchange of certificates for Consolidated Shares Subject to the Share Consolidation becoming effective, which is currently expected to be on Wednesday, 18 September 2013, Shareholders may on or after Wednesday, 18 September 2013 and until 4:00 p.m. on Wednesday, 30 October 2013 (both days inclusive), submit their existing share certificates in yellow for the Existing Shares to the Company s branch share registrar in Hong Kong, Tricor Abacus Limited at 26th Floor, Tesbury Centre, 28 Queen s Road East, Wanchai, Hong Kong for exchange for share certificates in light blue for the Consolidated Shares at the expense of the Company. It is expected that the new share certificates for the Consolidated Shares will be available for collection within 10 business days after the submission of the existing share certificates to the branch share registrar of the 14

18 LETTER FROM THE BOARD Company for exchange. Thereafter, a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) will be payable by the Shareholders to the Company s branch share registrar for each share certificate for the Consolidated Shares issued or each share certificate for the Existing Shares submitted for cancellation. With effect from Monday, 28 October 2013, trading will only be in Consolidated Shares which share certificates will be issued in light blue. Existing share certificates in yellow for the Existing Shares will cease to be valid for trading and settlement purpose, but will remain valid and effective as documents of title. Adjustments in relation to the Share Options The Share Consolidation will cause adjustments to the subscription price and the number of Consolidated Shares to be issued under the outstanding Share Options. As to the adjustments to the number of Consolidated Shares to be issued and the subscription price in respect of the outstanding Share Options, the Company will instruct its auditors or an independent financial adviser to review and certify the basis of such adjustments as soon as possible. Further announcement will be made by the Company in respect of such adjustments as and when appropriate. Reasons for the Share Consolidation and change in board lot size The proposed Share Consolidation will increase the nominal value of the Existing Shares. As such, the transaction and handling costs of the Company in relation to the dealing in the Consolidated Shares are expected to be reduced, which will be beneficial to the Company. Moreover, as the market value of each board lot upon the Share Consolidation and change in board lot size 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 Existing Shares will increase accordingly and the market value of the Consolidated Shares will more precisely reflect the intrinsic value of the Company. Accordingly, the Board is of the view that the Share Consolidation and change in board lot size are beneficial to the Company, the Shareholders and investors as a whole. Save for the necessary professional expenses and printing charges for the implementation of the Share Consolidation and change in board lot size, the implementation of the Share Consolidation and change in board lot size will not alter the underlying assets, business operation, management or financial position of the Company and the interests and rights of the Shareholders. 15

19 LETTER FROM THE BOARD OPEN OFFER Issue statistics Basis of the Open Offer: Subscription Price: Number of Existing Shares in issue as at the Latest Practicable Date: Number of Consolidated Shares upon Share Consolidation becoming effective: Number of Offer Shares: Eight (8) Offer Shares for every one (1) Consolidated Share held on the Record Date HK$0.10 per Offer Share 2,026,668,549 Existing Shares 202,666,854 Consolidated Shares Not less than 1,621,334,832 Offer Shares and not more than 1,657,334,832 Offer Shares The aggregate nominal value of the Offer Shares will be not less than HK$162,133,483.2 and not more than HK$165,733,483.2 Number of Offer Shares undertakentobesubscribedby Beckon Investments Limited: Number of Underwritten Shares: 147,232,000 Offer Shares Not less than 1,474,102,832 Offer Shares and not more than 1,510,102,832 Offer Shares Amount to be raised: Not less than approximately HK$162,133,483 before costs and expenses As at the Latest Practicable Date, the Company has 49,000,000 outstanding Share Options which entitle holders thereof to subscribe for 49,000,000 Existing Shares. Mr. Leung King Fai, a Director, holding 4,000,000 outstanding Share Options, has undertaken irrevocably to the Company that he will not exercise his rights under the Share Options to subscribe for the Existing Shares (or the Consolidation Shares) before the Record Date. Pursuant to the existing share option scheme of the Company, the said Share Options are personal to Mr. Leung King Fai and shall not be assignable and Mr. Leung King Fai shall not in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any third party over or in relation to any of his Share Options. As at the Latest Practicable Date, the Company has not received any notice from any other holders of the outstanding Share Options of their intention to exercise or not to exercise any outstanding Share Options before the Record Date. Save as disclosed above, there are no outstanding options, warrants or securities convertible or exchangeable into Existing Shares. 16

20 LETTER FROM THE BOARD Pursuant to the Underwriting Agreement, the Company has undertaken that it shall not, without the prior consent of the Underwriters, issue any Existing Shares, Consolidated Shares (save for the Consolidated Shares issued under Share Consolidation) or issue or grant any share options or other securities which carry rights to acquire or convert into Existing Shares or Consolidated Shares (other than the Offer Shares) or repurchase its own Existing Shares or Consolidated Shares from the date of the Underwriting Agreement until the Latest Time for Acceptance, being at 4:00 p.m. on Friday, 11 October The Offer Shares Assuming no outstanding Share Options will be exercised from the Latest Practicable Date to the Record Date, the total number of Offer Shares of 1,621,334,832 Consolidated Shares represents: (i) (ii) approximately 800% of the Company s existing issued share capital as at the Latest Practicable Date; and approximately 88.9% of the Company s issued share capital as enlarged by the issuance of the Offer Shares. Assuming all outstanding Share Options (other than 4,000,000 outstanding Share Options hold by Mr. Leung King Fai) being exercised before the Record Date, the total number of Offer Shares of 1,657,334,832 Consolidated Shares represents: (i) (ii) approximately 817.8% of the Company s existing issued share capital as at the Latest Practicable Date; and approximately 88.9% of the Company s issued share capital as enlarged by the issuance of the Offer Shares. Subscription Price The Subscription Price for the Offer Share is HK$0.10 per Offer Share, payable fully in cash upon application by a Qualifying Shareholder. The Subscription Price of HK$0.10 per Offer Share represents: (i) (ii) a discount of approximately 61.5% to the closing price of HK$0.026 per Existing Share (equivalent to HK$0.26 per Consolidated Share) as quoted on the Stock Exchange on the Last Trading Day; a discount of approximately 64.3% to the average closing price of HK$0.028 per Existing Share (equivalent to HK$0.28 per Consolidated Share) for the five consecutive trading days up to and including the Last Trading Day; (iii) a discount of approximately 67.2% to the average closing price of HK$ per Existing Share (equivalent to HK$0.305 per Consolidated Share) for the ten consecutive trading days up to and including the Last Trading Day; 17

21 LETTER FROM THE BOARD (iv) a discount of approximately 15.3% to the theoretical ex-entitlement price of approximately HK$ per Existing Share (equivalent to HK$0.118 per Consolidated Share) based on the closing price as quoted on the Stock Exchange on the Last Trading Day; and (v) a discount of approximately 75% to the closing price of HK$0.040 per Existing Share (equivalent to HK$0.40 per Consolidated Share) as quoted on the Stock Exchange on the Latest Practicable Date. The Subscription Price was arrived at after arm s length negotiations between the Company and the Underwriters with reference to the recent market environment, the prevailing market price of the Existing Shares and the urgent need of capital to repay the Group s indebtedness. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to his/her/its existing shareholding in the Company held on the Record Date. The Directors (including the independent non-executive Directors after taking into consideration the advice of the Independent Financial Adviser) consider the Subscription Price, which has been set as a discount as described above with an objective to encourage the existing Shareholders to take up their entitlements so as to participate in the potential growth of the Company, to be fair and reasonable and in the interests of the Company and the Shareholders as a whole. Status of the Offer Shares The Offer Shares, when allotted and issued, will rank pari passu in all respects with the then Consolidated Shares in issue on the date of allotment and issuance of the Offer Shares. Holders of the Offer Shares will be entitled to receive all future dividends and distributions which are declared, made or paid in respect thereof on or after the date of allotment and issuance of such Offer Shares. Certificates for the Offer Shares Subject to the fulfillment of the conditions of the Open Offer as set out in the section headed Conditions of the Open Offer below, share certificates for all fully-paid Offer Shares are expected to be posted on or before Wednesday, 23 October 2013 to those Qualifying Shareholders who have accepted and (where applicable) applied for, and paid for the Offer Shares, by ordinary post at their own risks. Qualifying Shareholders The Open Offer is only available to the Qualifying Shareholders. To qualify for the Open Offer, the Qualifying Shareholders must be registered as members of the Company on the Record Date and not be Excluded Shareholders. In order to be registered as a member of the Company on the Record Date, all transfer of Shares must be lodged for registration with the Company s branch share registrar in Hong Kong, Tricor Abacus Limited, at 26/F., Tesbury Centre, 28 Queen s Road East, Wanchai, Hong Kong by 4:00 p.m. on Monday, 23 September

22 LETTER FROM THE BOARD Closure of register of members The Company s register of members will be closed from Tuesday, 24 September 2013 to Wednesday, 25 September 2013, 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. Rights of Excluded Shareholders If at the close of business on the Record Date, a Shareholder s address on the Company s register of members is in a place outside of Hong Kong, that Shareholder may not be eligible to take part in the Open Offer. The Prospectus Documents will not be registered under the applicable securities legislation of any jurisdiction other than Hong Kong. The Board will make enquiries as to whether the issuance of Offer Shares to the Excluded Shareholders may contravene the applicable securities legislation of the relevant overseas places or the requirements of the relevant regulatory body or stock exchange and details and results of such enquiries will be included in the Prospectus. If, after making such enquiry, the Board is of the opinion that it would be necessary or expedient, on account either of the legal restrictions under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place, not to offer the Offer Shares to such Excluded Shareholders, the Open Offer will not be extended to such Excluded Shareholders. The Company will send the Prospectus to the Excluded Shareholders for their information only, but will not send the Application Forms and Excess Application Forms to the Excluded Shareholders. The Company will disclose the results of the enquiry in the Prospectus regarding the legal restrictions on the issue and allotment of Offer Shares to the Excluded Shareholders. As at the Latest Practicable Date, there were no Excluded Shareholders. Fractions of the Offer Shares Fractional entitlements of Offer Shares will not be allotted and issued. All Offer Shares arising from the aggregation of such fractional entitlements will be firstly taken up by the Qualifying Shareholders who have applied for the excess Offer Shares and then by the Underwriters if there is any excess Offer Shares which have not been taken up by the Qualifying Shareholders. Application for excess Offer Shares Qualifying Shareholders are entitled to apply for any Offer Shares provisionally allotted but not accepted by the Qualifying Shareholders. However, Beckon Investments Limited has undertaken to the Company that it shall not make any application for any excess Offer Shares in respect of the entitlement of the Existing Shares or Consolidated Shares owned by it under the Open Offer. Application may be made by completing the Excess Application Form and lodging the same with a separate remittance for the excess Offer Shares. 19

23 LETTER FROM THE BOARD Basis of allocation of excess Offer Shares The Directors will allocate the excess Offer Shares at their discretion, but on a fair and equitable basis to Qualifying Shareholders who have applied for excess Offer Shares on the following principles: 1. preference will be given to applications for less than a board lot of Offer Shares where they appear to the Directors that such applications are made to round up oddlot holdings (in particular those already existed on the date of the Announcement or created as a result of the Open Offer) to whole-lot holdings and that such applications are not made with the intention to abuse this mechanism; 2. subject to availability of excess Offer Shares after allocation under principle (1) above, any remaining excess Offer Shares will be allocated to applicants with reference to their respective shareholdings in the Company as at the Record Date; and 3. subject to availability of excess Offer Shares after allocation under principles (1) and (2) above, any further remaining excess Offer Shares will be allocated to applicants in proportion to the number of excess Offer Shares being applied for under each application. Shareholders with their Consolidated Shares held by a nominee company (or which are deposited into the CCASS) should note that the Board will regard the nominee company (including HKSCC Nominees Limited) as a single Shareholder according to the register of members of the Company. Accordingly, Shareholders should note that the above arrangement in relation to allocation of excess Offer Shares will not be extended to beneficial owners individually. The Shareholders with their Shares held by a nominee company (or which are deposited into CCASS) are advised to consider whether they would like to arrange for the registration of the relevant Shares in their own names prior to the Record Date. Shareholders whose Shares are held by their nominee(s) (or which are deposited into CCASS) and who would like to have their names registered on the register of members of the Company on the Record Date, must lodge all necessary documents with the Share Registrar for completion of the relevant registration by 4:00 p.m. on Monday, 23 September 2013 (the register of members of the Company will be closed from Tuesday, 24 September 2013 to Wednesday, 25 September 2013 (both days inclusive)). Application for listing The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares. The Offer Shares shall have the board lot size of 20,000 Consolidated Shares per board lot. Subject to the granting of listing of, and permission to deal in, the Offer Shares on the Stock Exchange, the Offer 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 Offer Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement 20

24 LETTER FROM THE BOARD of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time. UNDERWRITING AGREEMENT Date: 11 July 2013 (as supplemented by a supplemental agreement enteredbythepartiestotheunderwritingagreementon29august 2013) Parties: (i) the Company; (ii) Orient Securities Limited; and (iii) Beckon Investments Limited Number of Underwritten Shares: Commission: Not less than 1,474,102,832 Offer Shares and not more than 1,510,102,832 Offer Shares, in which Orient Securities Limited and Beckon Investments Limited have agreed to underwrite 33.78% and 66.22%, respectively. 3% of the aggregate Subscription Price of the Underwritten Shares (on the basis that all outstanding Share Options (other than 4,000,000 outstanding Share Options hold by Mr. Leung King Fai) will be exercised before the Record Date), among which: (i) 1% arrangement fee will be charged by Orient Securities Limited for its arrangement of the underwriting of the Offer Shares; and (ii) 2% underwriting commission will be shared by the Underwriters in proportion to their Underwritten Shares as follows: Underwriters No. of Underwritten Shares assuming all outstanding Share Options (other than 4,000,000 outstanding Share Options hold by Mr. Leung King Fai) will be exercised before the Record Date Beckon Investments Limited 999,990,095 Orient Securities Limited 510,112,737 Pursuant to the Underwriting Agreement, Beckon Investments Limited has irrevocably undertaken, inter alia, (i) to subscribe for its entitlement of 147,232,000 Offer Shares under the Open Offer; and (ii) not to enter into sub-underwriting arrangement with sub-underwriter(s) or 21

25 LETTER FROM THE BOARD appoint any person to be sub-agent(s) on its behalf for the purpose of arranging for the placing of the Underwritten Shares with selected placees or procure any person to subscribe for any Offer Share that Beckon Investments Limited is required to take up. On the other hand, Orient Securities Limited may enter into sub-underwriting arrangement with sub-underwriter(s) or appoint any person to be sub-agent(s) on its behalf for the purpose of arranging for the placing of the Underwritten Shares with selected placees with such authority and rights as Orient Securities Limited has pursuant to its appointment under the Underwriting Agreement. Pursuant to the Underwriting Agreement, the Underwriters have conditionally agreed to subscribe or procure subscription for not less than 1,474,102,832 Offer Shares and not more than 1,510,102,832 Offer Shares which are not taken up by the Qualifying Shareholders, and they have also undertaken to the Company that the Underwriters will not trigger a mandatory offer obligation under Rule 26 of Takeovers Code on the part of the Underwriters in respect of performing its obligations under the Underwriting Agreement (assuming the Whitewash Waiver will be granted by the Executive). Pursuant to the Underwriting Agreement, Orient Securities Limited has undertaken to the Company that (i) it will not acquire any Existing Shares or Consolidated Shares on or before the Record Date; and (ii) none of the subscribers procured by the Orient Securities Limited to subscribe for the Underwritten Shares will be a substantial Shareholder of the Company holding 10% or more shareholding in the Company. The Directors (including the independent non-executive Directors after taking into consideration the advice of the Independent Financial Adviser) are of the opinion that the terms of the Underwriting Agreement and the amount of commission given to the Underwriters are fair as compared to the market practice and commercially reasonable as agreed between the Company and the Underwriters. Orient Securities Limited is ultimately and beneficially owned as to 75% by Mr. Lam Shu Chung, 15% by Mr. Lam Shing Wan and 10% by Mr. Wong Kwan Lok. Beckon Investments Limited currently holds 184,040,000 Existing Shares (or equivalent to 18,404,000 Consolidated Shares after the Share Consolidation becoming effective), representing approximately 9.1% of the existing issued share capital of the Company. Please refer to the section headed Information of Beckon Investments Limited for the background of Beckon Investments Limited. To the best of the Directors knowledge, information and belief, the Underwriters and their ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons (as defined in the GEM Listing Rules). 22