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History and Development and Reorganisation

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History and Development and Reorganisation HISTORY AND DEVELOPMENT AND REORGANISATION Our business was founded by our Founders in Hong Kong in the early 1980s. We have since grown into a PRC-based manufacturer and supplier of amenity products with established market position offering a wide range of quality amenity products for hotel, hospitality and travel industries. Throughout our history of development, we have continued to enhance our production facilities, broaden our product range and expand our sales market. Business Development 1980s Our business originated in 1981 when Ever-rich (Group) Limited (formerly known as Ever-rich Plastic Industrial Company Limited) (“Ever-rich”) was established by our Founders together with four other third parties to engage in the manufacture of shower caps in a small workshop in Hong Kong. In 1984, our Founders and Mr. Ching Chi Keung established Ming Fai Plastic Industrial Co as a partnership which acted as the processing agent of Ever-rich by gradually succeeding Ever-rich’s manufacturing operations while Ever-rich continued to source raw materials for such manufacturing operations and placed orders to Ming Fai Plastic Industrial Co. Under this arrangement, most of our products were sold to Ever-rich for export to overseas markets (including North America and Europe) through a trading company, which was controlled by one of the shareholders (other than the Founders) of Ever-rich at the time. In order to enjoy lower production costs and preferential tax treatments, we decided to move our production to mainland China. In 1986, we entered into a five-year processing arrangement with Shenzhen Baoan County External Trade Company ( )(“External Trade Company”), an Independent Third Party, pursuant to which the External Trade Company provided factory premises and labour and we sourced the raw materials required for production of shower caps, hotel-use slippers, and other bag items. 1990s The processing arrangement with the External Trade Company was extended for a further term of five years in 1990. In 1992, with a view to securing a firmer grip of our production process, this processing arrangement was terminated and replaced with a cooperative joint venture arrangement with Shenzhen Pinghu Bainikeng Economic Development Company Limited ( ), an Independent Third Party, whereby we acquired our first processing factory and formally established our production facilities in China. In 1994, as part of our product offering expansion plans, we commenced product printing and packaging operations. At the same time, our product offerings further expanded to include other paper packaging products such as packaging boxes for shower caps and sewing kits. Benefiting from the successful implementation of economic reforms and market policies, the PRC hotel and travel industries went through a rapid growth during the 1990s which brought along substantial market potentials for amenity products. In 1995, in view of – 102 – HISTORY AND DEVELOPMENT AND REORGANISATION the enormous market opportunities, we established our first sales office in Shenzhen to explore the feasibility of direct-sales distribution of amenity products to hotel operators in the Greater China Region, particularly in Southern China. We believed that success in this new market could only be achieved with a focused vision, and therefore we targeted the high-end and luxury hotels as our key customer group. Leveraging on our experience and physical location in China, we adopted a direct-sales strategy in order to maintain a closer relationship with our customers offering them flexibility, attentive services and competitive pricings. Mr. Liu Zigang and Ms. Chan Yim Ching, two of our executive Directors, joined us in the same year to assist the development of our sales and marketing in the Greater China market and overseas market respectively. In 1996, we established our in-house export sales department in order to develop our own sales and marketing capabilities and diversify our customer base. In the same year, we also commenced production of our chemical-based products. In 1998, our dedication to excellence led us to be awarded with the ISO accreditation for our quality system. In the same year, we also developed our in-house design capabilities by setting up our own design team under the sales and marketing department in order to customise our products for our customers. In 1999, noting the success of our Shenzhen initiatives and in order to increase our presence in the booming PRC market, particularly in Northern China, we established our second sales office in Beijing. 2000s In 2000, with continued business growth particularly in our PRC domestic sales, there was a need for expansion in our production capacities. For better management and economies of scale, we believed that a consolidated and fully integrated production base was essential. We therefore acquired land at Pinghu over which we began construction of our Pinghu Production Base. With our Shenzhen and Beijing sales offices servicing our customers in Southern and Northern China respectively, we expanded our sales network to cover Eastern China by establishing our third sales office in Shanghai in 2001. With Southern China, Northern China and Eastern China covered, we continued to extend our customer reach by setting up our fourth sales office in Dalian in 2002 to explore the Northeast China market. At the same time, we recognised the importance of branding and market potentials of branded products within the industry, and therefore launched our in-house branded amenity products under the “Rose Magnifique” and “Essence d’Orient” lines for distribution in the Greater China Region. Since then, we have continued to develop a selection of our own in-house brands as well as securing licences for other overseas brand names, thereby offering increased flexibility and choices to our customers to meet their respective marketing strategies and product positioning initiatives. As our sales were made mainly through Ever-rich at the time, all our brands were registered in the name of Ever-rich. – 103 – HISTORY AND DEVELOPMENT AND REORGANISATION With the incorporation of Ming Fai Enterprise and Ming Fai Asia Pacific (which was then known as Ming Fai Group Holdings Limited) in 2001 and 2002 respectively, we established our own overseas sales and sourcing arms and no longer relied on Ever-rich and the brands registered in the name of Ever-rich were transferred back to our Group. Pursuant to an assignment dated 28 August 2004, Ever-rich transferred the trademarks owned by it to our Group for a consideration of HK$16,000. We no longer made sales through Ever-rich since 4 November 2002, being the date when Ever-rich ceased business. Since then, Ever-rich has gradually ceased its operations and is currently in the process of being voluntary wound up by its shareholders. We also upgraded our management information system by purchasing the FLEX system from Flexsystem (Shanghai) Co. Ltd. ( ) in 2001. Our FLEX system comprised several modules covering sales, purchase, inventory and accounting. The year 2003 witnessed an important milestone in our development into a one-stop amenity products supplier and manufacturer. Our Pinghu Production Base, which occupies a total gross floor area of approximately 58,439 sq.m. comprising of production workshops, administration and office building, staff dormitories, warehouses, and other ancillary facilities, was completed and commenced operations. Equipped with advanced and sophisticated production facilities, our Pinghu Production Base significantly increased our production yield and enabled us to enhance our production of chemical-based amenity products such as bath soaps, shower gels, shampoo, hair conditioners and body lotions. We also established an advanced chemical and microbiological laboratory to develop our in-house product formulation capabilities and exert better quality control over our chemical-based products. With larger operations, the effective and efficient management of our Pinghu Production Base required more advanced management solutions and we developed our FLEX-side system based on our FLEX system to further cover the information management of our manufacturing operations. In 2005, our sales efforts received an incentive boost when we commenced our business relationship with Shangri-La Hotels and Resorts for supply of amenity products to its hotel rooms. In anticipation of further business growth, particularly our increasing sales in the PRC market and to relieve the pressure on our Pinghu Production Base, in May 2006, we signed a land transfer agreement with the Municipal Government of Shuangdong Town, Luoding City, Guangdong Province ( ) for the purchase of land use rights over a piece of land in Luoding and for the construction of our Luoding Production Base. Due to the additional time required in reclaiming the land and in view of needs for additional production facilities and early training of skilful workers to prepare for our Luoding Production Base, we leased our Luoding Leased Factory from an Independent Third Party and commenced production of some of our labour-intensive products such as shower caps, laundry bags and sewing kits. Our investment in and commitment to producing high quality chemical-based amenity products was first rewarded with GMPC accreditation in 2006 certifying that our daily chemical-based products were compliant with the GMPC standards applied in the United States and Europe. – 104 – HISTORY AND DEVELOPMENT AND REORGANISATION In 2006, we entered into
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