Business Plan MAYINLAY JEWELLERY HOLDINGS (HONG KONG) COMPANY LIMITED APRIL 2009

Transcription

1 MAYINLAY JEWELLERY HOLDINGS (HONG KONG) COMPANY LIMITED APRIL,2009

2 Foreword Mayinlay Jewellery Holdings (Hong Kong) Company Limited (hereinafter referred to as Mayinlay Jewelry or the company ), as a jewelry enterprise of fast growth integrating independent R&D, production and marketing, will set up 100 medium and high class chain retail stores of its own brands by 2011 committing itself in the prospect of becoming the symbolic brand in the jewelry industry of China. Its average annual growth of estimated sales volume is 68% with a sales volume growth from HKD 90 million of 2008 to HKD 389 million of The annual growth rate of profit will be 84% with the growth of profit from the HKD 7.7 million of 2008 to HKD million of The profit margin will achieve 90%. The earnings per share will be HKD 1.81 in 2011 with a gross profit rate of 26.67%, which is 14% higher than that of a listed jewelry company. It is going to transfer part of its equity to raise at least HKD 30 million in June 2009 to lay the foundation for its business expansion in retail market. 1

3 CONTENTS OPERATION OVERVIEW... 3 ⅠCORPORATE PLAN COMPANY OVERVIEW LEGAL SYSTEM PRODUCT INTRODUCTION AND TECHNOLOGY RESEARCH & DEVELOPMENT HONORS AND INTELLECTUAL PROPERTY RIGHT COMPANY PROSPECT PLANNING MANAGEMENT TEAM AND STAFF ACCOUNTING AND LEGAL AFFAIRS ISSUANCE AND SAFETY MEASURES ⅡMARKETING PLAN OVERVIEW AND TARGET OF MARKETING STRATEGY MACROECONOMIC AND ENVIRONMENT ANALYSIS MARKET ANALYSIS SALES POLICY SUPPLIER PRESENTATION PRESENTATION OF MAIN CUSTOMERS AND INTRODUCTION TO RELATED BUSINESS EVALUATION OF MARKETING BENEFIT Ⅲ FINANCIAL DOCUMENTS OVERVIEW OF CAPITAL DEMAND REPORT OF FUND USE BASIC ASSUMPTION AND PARAMETERS OF FINANCIAL EVALUATION ANALYSIS ON REVENUE AND COST EXPENSES OF RETAIL STORES ESTIMATION ON THREE-YEAR SALES REVENUE COST ESTIMATION PREPARE FINANCIAL STATEMENTS PROFITABILITY ANALYSIS CONCLUSION ON FINANCIAL EVALUATION

4 Operation Overview 1. Project Background China s jewelry industry has undergone unprecedented development during the last 20 years. Its output value grows from 0.1 billion to 100 billion and the number of its practitioners increases up to 2 million from 20 thousand. China has become one of the largest diamond markets in Asia with an annual diamond consumption of USD 1.1 billion; the largest consumption country of platinum in the world with an annual sales volume of 1.4 to 1.5 million ounces; the fourth largest consumption country of gold with an annual gold jewelry demand of about 200 tons, and also the largest consumption market of jade and emerald. Now, China s jewelry industry has entered a new stage featuring in all-round development. The emergence of industry clusters results in the formation of various characteristic jewelry industry bases. Many famous brands come into being. Product design begins to convey more Chinese elements and the patented products of independent property rights emerge. Definitely, China s jewelry consumption has occupied an important position in the world and the trend of China s jewelry market will give direct influence on the tendency and price of the international market. In 2008, the international financial crisis gave obvious impact on 3

5 worldwide jewelry industries. As a matter of fact, jewelers are optimistic about our domestic market, which has a great potential although shrinking foreign markets influenced the performance of the jewelry industry. The financial crisis mainly influences the enterprises depending on foreign orders. Its influences on those who are mainly engaged in domestic market are within the scope of purchase capacity changes and consumers confidence in the future. China s jewelry industry will keep on its upward develop trend as long as the domestic economy and demand do not slip in general. On one hand, facing the financial crisis, the governments of all countries are implementing loose fiscal and monetary policies and consumers psychologically have the prominent demand of retaining asset value, which makes jewelry, as rare resource, undoubtedly the best choice for them. On the other hand, financial tsunami brings great opportunity to jewelry industry together with the remarkable challenge. At present, domestic jewelry enterprises are at the turning point of strategic transformation, development of independent brands and retailing terminals. This project aims at financing for the further expansion of retailing business, the advancement of design and processing capabilities in order to form a complete industrial chain and to strengthen the core competence and anti-risk capacity. Meanwhile, the competition among enterprises has now expanded to the industry chain level. Mere 4

6 processing and manufacture will no longer meet the demand of the current trend. Only complete industrial chains can give sustainable competitive advantages and vitality to enterprises by the reinforcement and perfection of raw materials, R&D, design and end-consumption. This project aims at financing for the further expansion of retailing business and the advancement of design and processing capabilities in order to form a complete industrial chain and to strengthen the core competence and anti-risk capacity of our enterprise. 2. Operation Overview As the financing subject of this project, Mayinlay Jewellery Holdings (Hong Kong) Limited Company is a jewelry enterprise of fast growth integrating independent R&D, production and marketing. It is mainly engaged in the production and sales of middle and high-class inlaid products of diamonds, rubies, jade and emerald. Mayinlay Jewellry has been persisting in the operation concept and tenet of good faith oriented, quality and brand first, fashion leading bearing the ambition of carrying forward national jewelry culture and promoting national jewelry industry. Upholding the management concept of the combination of humanity and science, the unification of individuals and teamwork, it commits itself in building the brand of Mayinlay Jewellry. Mayinlay Jewellry promotes its development with technology development and independent innovation while building a united corporation management 5

7 team with advanced management technique, producing delicate jewelry by exquisite crafts. MAYINLAY Investment Consultant (SHENZHEN) Co., Ltd. is solely funded by Mayinlay Jewellery Holdings (Hong Kong) Limited Company in China. It is authorized to run Shenzhen Mayinlay Jewelry Co., Ltd. and Shenzhen Sufeiya Industrial Co., Ltd. as its subsidiaries. With the joint effort of the whole staff, Mayinlay persists in implementing the philosophy of R&D, implementation and credibility. Besides, it organizes rich and colorful cultural and social activities for its staff to form its unique corporation culture and strong cohesion, which reliably ensures the sustainable development of the Company. In recent years, our business has great development. In 2007, our sales volume achieved HKD million, with a growth of 29.95% compared with the previous year. Influenced by the financial crisis and increased uncertain elements of the global economy, the Company still realized the sales volume of HKD million in 2008, with a growth of 27.81% compared with the previous year. This shows its good growing trend in such unfavorable economic environment in the financial crisis, shown as follows: Sales Volumes of the Company in Recent Years Sales Volume (HKD10,000)

8 3. Analysis of Competitive Advantages Mayinlay Jewelry is highly recognized by domestic and overseas customers and business partners for its good faith in operation and consideration in services, which lays solid foundation for its development. Its competitive advantages on management, market position, technology R&D, cost, customer resources, industrial chain and chain-store operation, etc. not only ensure its good performance in recent years, but also serve as the core competitiveness for future development. First, an excellent and professional management team. All the members of its top management have over 10 years operation and management experience and wide business relationship in the field as the earliest professionals engaged in jewelry in China. They witnessed the development of the jewelry industry in China from its very beginning. Board Chairman Lin Huifeng (William Lam), the former Sales General Manager of the Indian multinational company JB Group, is very familiar with the market demand of the jewelry industry. General Manager Zhu Hongzhan (Sammy Chu), the former General Purchase Manager of a subsidiary of JB Group, with an annual purchasing amount of nearly HKD 400 million, which ranks among the highest volumes of 7

9 diamond purchases made by Chinese. Deputy General Managers Yuan Yanru (Eve Yuan) and Wang Yinghui (Hardy Wang) have the sales performance of over 100 million which proves their status as top sales talents in this field. The entire management team, from marketing and technology to finance, are experienced professionals full of vigor and vitality in the prime of life. Second, the advantage of raw material procurement. Our management team, with over twenty years of experience in raw materials of jewels, brings us mature and stable channels of raw material procurement and good reputation. We have established stable cooperation with several DTC sightholders from whom we directly procured loose stones of high quality at low prices. We also have special personnel on direct procurement of loose stones from DTC sightholders in overseas diamond distribution centers, such as Belgium, India, and etc., which saves intermediate steps to effectively reduce procurement cost and time. Therefore, our raw material procurement prices are much lower than the average level in the field. Third, faithful customer resources. We have taken up a leading market position with our broad distribution relationships and high product quality and established sound sales network and market consisting of 200 cooperators and distributors. Famous jewelry sellers in China, such as Laomiao Gold, Batar Jewelry and Laofengxiang etc., are 8

10 our long-term customers. In respect of customer development, we get rid of the disadvantage of random customer finding for ordinary products and adopt the strategy of choosing and classifying faithful customers to implement differentiated management. We put forward the principle of properly maintaining big customers and managing small customers that is, mainly maintaining big customers, developing small customers and regarding small customers as reliable and low-risk points of profit growth. Fourth, familiarity with the target market. As an information and marketing center of jewelers, we acquired plenty of first-hand and true marketing information and we clearly know the demand of nationwide consumers on sales trend, product orientation and fashionable styles, etc. Fifth, powerful R&D capacity. At present, our techniques have reached the middle and high level in the field. We have a jewelry promotion and technology R&D center that launches product series as scheduled and styles meet the requirements of the mass market and realizing technology innovation during development. Every year we develop and release new products of 3,600 varieties according to international fashion trends. The number of our best-selling styles is 6,800 to 8,000, which are developed by integration and optimization observing our domestic market tendency. In style R&D and innovation, we exceed our competitors greatly. Besides, we have been granted three 9

11 national patents by now, under which the patented products have been put into the market. Sixth, complete industry chain. Compared with the single business of common jewelry manufacturers, our business covers three sectors, i.e. retail, wholesale and processing. Our complete industry chain brings the advantages of multi-competence to us and diversifies the risks of operation. Meanwhile the relation and support of the links of the industry chain bring our products greater competence. 4. Financing Instructions Mayinlay Jewelry has stable distribution customers and stable channels of high-quality raw materials procurement with main global material suppliers. Through years of practice, we know well about customers consumption habits with fine manufacturing techniques and we have elementarily forged the brand and tried in retail sale. Our current capital may realize conventional development. However, provided we enter the retail market rapidly, our performance development will be in leaps and bounds. Our anticipated financing amount is over RMB 30 million for the first phase, which will be mainly employed in retail business promotion, adding processing equipment and inventory of finished goods. Further financing will follow up upon the completion of the first-phase in order to realize the plan of establishing 100 retail stores within 3 years. 10

12 We have been placing the investors maximum capital appreciation at retreat in the most important position and will persist in the operational target of value maximization. The three investors retreat modes are mainly IPO (Initial Public Offering), stock transfer or company buy-back and liquidation or bankruptcy. The IPO mode is the most successful with profit of listing exceeding those of the other two modes. 11

13 ⅠCorporate Plan Company Overview 1. Company Introduction Name of Company: Mayinlay Jewellery Holdings (Hong Kong) Limited Company Registered Address: Rooms A&B, 13F, Chasegold Tower, 100 Ma Tau Wai Road, Hunghom, Kowloon, Hong Kong Time of Establishment: 23 January, 2009 Total Shares: 30,000, Main Business (1) High-grade jewel trade: Procure high-quality jewelry like ruby, sapphire, emerald and opal and rough diamond for cutting and processing in domestic China and distribute them to big domestic retailers. (2) Wholesale of finished products: Independently operate an exhibition hall of finished jewelry wholesale of mainly diamond-inlaid K-gold products; secondary products are K-gold with inlaid medium and high-end emerald, rubies and sapphires. (3) Product processing: Possess a processing center mainly processing PT, diamond-inlaid K-gold products; secondary products are K-gold with inlaid medium and high-end emerald and diamonds. 12

14 (4) Integrated solution service for distributors: There are a few big enterprises have capacity and talents to provide this service, which is a feature service of Mayinlay Company embodying differentiation. A. Provide a series of services from product integrating, product concept designing, shaping, and processing to advertising and promotion by combining current market condition and fashion trend and in correspondence to customers demand. So far, feature products have been developed, promoted and sold jointly with multiple chain retail brands. B. To provide better service for medium and small jewelry brands, multiple series of products and other auxiliary goods are developed including show tools, brochures, slides, hanging flags and banner advertisement, etc. for marketing terminals, winning marketing opportunities. 5. Retail modes: Self-managed chain business is to be adopted for this project and chain stores will be constructed and run by Mayinlay Jewelry. Chain stores will be firstly opened in the Pearl River Delta and the Yangtze River Delta to establish regional famous brands and then business will be developed in other districts of the country for construction of a national brand. 3. Development Strategy Preliminary development stage:

15 The Company has accumulated stable customers and suppliers in the past two years. Financing is needed in the current stage through entering the retail market by purchasing existing jewelry retail shops. It is planned to purchase ten retail shops. Purchasing will enable reasonable utilization of the current network and reduce cost and investment risk. Fast development stage: Accumulate operation experience of jewelry retail shops and reinforce finished goods wholesale, product development, equipment renewal, factory expansion and employee training for rapid development. Stage of advantage establishment: 2011 The Company establishes perfect industry chain and competitive advantage. Consider refinancing and constructing flagship stores and medium-end standard shops in other districts like the Yangtze River Delta to stably increase market share. Consider retail business in other modes such as constructing league shops. 4. Main potential risk elements The Company may face the following risks during development: Market risks: In spite of the good marketing performance in early operation of the Company, there will be competition with the existing famous retailers and subsequent components after entering the retail market. It is hard to predict accurately the final market share achieved in competition, therefore uncertainty exists in the development perspective. 14

16 Financial risks: Continuous input of great deal of capital is required for the series of purchasing plans, retail business and scale expansion of the processing factory afterwards. In current situation, equity financing is needed to solve the capital problem; otherwise the implementation of the above plans will be influenced. Risks of raw materials: Though the raw materials of the Company are mainly from first-grade foreign jewelry suppliers and the good relationship with them are maintained, loose stones as non-renewable resource has growing price in the long run, which will have unfavorable influence on production cost and sales volume of diamonds the Company. Risks of operation modes: During the promotion of chain business, capital shortage restricts the development of the main business and it is big challenge of the Company to guarantee the increase of operation efficiency and profiting capacity during continuous business expansion, as with increasing competition, the expansion of chain business may have the risk of reduction of the gross profit rate and net profit rate. Force majeure and unpredictable incidents may cause investment loss of the Company. 5. Countermeasures for risks For market risks: 15

17 Ameliorate the feedback system of market consumption information while enhancing marketing and set reasonable product prices to increase the profiting capacity of the Company. Accelerate product design and supply, enhance market strain capacity, adjust duly product structure and increase the output of popular goods. Further improve product quality and reduce cost, increase the comprehensive competitive capacity and market adaptation capacity of products. For financial risks: The Company will implement financing in multiple channels and cooperate with famous financial institutions in a long term for uniform operation and planning of capital and to enhance routine management. Meanwhile, communication with the finance circle will be maintained for active capital operation for maximum payback for investors. In case of financing failure, the current situation of the Company enables operation with a slower speed. For risks of raw materials: From a long-term perspective, the increase of prices shows investment value of this project in certain degree, which can be taken as a sales point of product marketing. To avoid the operational risk, the Company will in one hand continue to reinforce the cooperative relationship with suppliers to stabilize the prices of raw materials, and in the other hand 16

18 will implement the strategy of brand creation during development, maintaining customers and prices through high-quality products and eliminating the influence of market prices fluctuation on the product prices of the Company. Meanwhile, after successful of this financing, the Company will purchase rough diamond factories and seats of Shanghai Diamond Exchange to further stabilize raw material supply. For risks of operation modes: The main reasons for the profit loss of current enterprises of jewelry chain business are incomplete industry chain resulting in excessive product cost, or not high standard of designing and processing and not strong product originality, or not enough understanding of the market and consumption trends resulting in unbalance of profit and loss of sales volume. The risks are controllable for this project unlike the chain business of other enterprises since raw material procurement, feedback and collection of market information, its own processing and design capacities and good relationship in the industry chain are favorable conditions for chain business. 17

19 Legal System 1. Enterprise character: public company 2. Equity structure Mayinlay Jewellery Holdings (Hong Kong) Co., Ltd Sole proprietorship Mayinlay Investment Consultation (Shenzhen) Co., Ltd Authorized operation Authorized operation Shenzhen Mayinlay Jewelry Co., Ltd. Shenzhen Sufeiya Industrial Co., Ltd Notes: (1) Lin Huifeng is the big shareholder and actual controller of the above four companies. (2) At present, Mayinlay Investment Consultation (Shenzhen) Co., Ltd. has started to negotiate its merger and acquisition with the jewelry manufacturer of the brand Karlssa Fare from Guangdong DKD Group, and will start to conduct the retail business of Mayinlay jewelry of Mayinlay Investment Consultation (Shenzhen) Co., Ltd. by this platform. (3) Mayinlay Jewellry Company is applying for the Important Culture Enterprise in Shenzhen, and it is forecasted that it will be applied 18

20 successfully in Jun. to Jul (4) Sufeiya Company is applying for the national high-tech enterprise attestation, it is forecasted that the application can be finished in Jul.-Oct., There are only 2 jewelry enterprises in Shenzhen that have passed the attestation, once succeeded, the income tax can be reduced to 15% and the VAT (value-added tax) will be refunded 3%, therefore, it can reduce the cost greatly, and improve the core competitiveness. (5) Within three years, Mayinlay Investment Consultation (Shenzhen) Co., Ltd. plans to acquire 51% of shareholding or above of Shenzhen Mayinlay Jewelry Co., Ltd. and Sufeiya Company. Product Introduction and Technology Research & Development 1. Overview on Product Now, the company owns 4 great businesses, including: high-class diamond trade, jewelry finished products wholesale, jewelry finished products manufacture and overall solutions for distributors. The company develops the products with aiming at the target market and customer group by supporting the development of the above businesses, including: high-class diamond, jewelry finished products and overall 19

21 solutions for distributors. 2. Product Category The products of Mayinlay Company mainly include high-class diamond, jewelry finished products and overall solution service for distributors. The products are classified in the following by different product categories: (1) High-class diamond: include diamond, high-class rubies and sapphires, emerald and rare jewels etc., this kind of products take the polished diamond as primary, and also include medium/high-class pearl, polished rubies and sapphire, emerald, profiled rubies and sapphire and rare diamond. (2) Finished products of jewelry: PT and K-gold set with diamond products, K-gold set with medium/high-class pearl, emerald and diamond etc. Finished products for jewelry are divided into two businesses: finished products wholesale and finished products manufacture, the products takes K-gold set with diamond as primary, and also include PT set with diamond, K-gold set with medium/high-class pearl, emerald and diamond etc. 3. Product Combination Mode Take classical style as primary and luxury style supplementation, and match with fashionable and popular styles. Products of classical styles: 20

22 70% of the total output; luxury styles: 20%, and; popular styles: 10%. 4. Product Styles The jewelry products of Mayinlay absorb the excellences of the classical jewelry widely, with highly praise on the elegant layout and harmonious shape principle. Based on the great works of forerunners, Mayinlay incorporates the currently fashionable design innovatively, and embeds the novel elements into the classical design, to create the inherent but not traditional classical. The classical style focuses on the harmony of the overall shape as well as the change and stereo on the line, and the luxury style stresses on the representation of details on the harmony of the overall shape as well as the innovation on the design and craft. 5. Price Structure of Products There is certain demanding in the popular and high-class jewelry consumption at home, but the manufacture in the finished products of the high-class jewelry has developed just at the beginning stage. By aiming at this market vacancy, this company locates as the exquisite and high-quality jewelry manufacturer, and launches the medium/high-class jewelry by meeting this segment of the market. It also launches the medium-class jewelry products for the public market, to form the complementary combination of medium/high-class products and medium-class products, and minority of low-class products are as supplementary. 21

23 Divide in cost price partition of product (see figure): Low-class product <RMB 3000, account for 10% Medium-class product RMB , account for 65% High-class product >RMB10000, account for 25% 6. Product R&D Achievements For the specific research & development achievements on product, this company launches the required classical style and luxury style series, products and multiple chain retail brands applicable for the target market continuously at the current stage in accordance with the planned direction, and develops, promotes and sales the featured products. 6.1 Classical styles Research and develop new products by the international fashion trend every year, and the number for the launched styles through self research & development is about 3500; integrate and optimize about

24 popular styles in the market by the national market trend. 6.2 Patent technology: Description: Metal Diamond Mount (invention patent) Patent No.: X Description for promotion: Star Diamond Star Diamond is the mounting matched with little diamonds set in, and is one of the patent products of this company and developed for the medium-class jewelry market. The structure for Star Diamond is that one main diamond surrounded by nine little diamonds set in the metal mounting with a shape like diamond, which simulates the visual effect of the big diamond. It costs just 1/20 of a single diamond with equivalent size, and the visual effects between them is very similar, thus it can replace the single diamond directly to be set in various jewelry products, to remain its decoration beauty at the same time of reducing cost greatly. The whole production process is controlled by the computer and fabricated by the machine from Switzerland; use another patent technology Tiffany Setting to set diamond, and the applied technology is leading in the manufacturing industry of finished products of jewelry. This company has developed multiple series of products based on the invention of Star Diamond. Description: Braille jewelry (utility model patent) Patent No.:

25 Description: Micro-setting craft (invention patent) Patent No.: Description for Promotion: Cut Claw Micro-setting 6.3 Theme series products: Angel Wings Faith diamond series Angel Wings faith diamond series is launched for the high/medium-class jewelry market. Most jewelry products in the current jewelry market still adopt the old mode and traditional thought in the shape, promotion and package, the product shape lacks the innovation and a sense of design, an the promotion mode is single. The company launches the products with faith value as core value and angel wings as design element according to the market features and requirements. This series not only can represent the product s decoration value, and the more important point is that it also shows the faith value of jewelry. With Angel wings as design element, it stands for hope, protection and peace, and the style is elegant and classical. This series product is the visual representation of faith and dream and the spirit support of keeping faith for ladies with good taste. For men buyers, it more represents the care and love to the other person. The One, The Only fashionable diamond series The One, The Only is specially launched for spring 2009 by Mayinlay, 24

26 The One, The Only is a fashionable diamond series specially launched for Spring 2009 by Mayinlay, which incorporates the characteristics of elegant, romantic and exquisite, and is made by the patent of diamond combination mounting Star Diamond supplemented with the patent technology Tiffany Setting. The One, The Only fashionable diamond series exhibits the unique charming of diamond and noble metal, combines the noble PT with the elegant rose gold perfectly, and deduces the mystic and luxury fashionable art exactly. This company also provides series assistant articles for product selling for matching the launch of main series products, besides the products-selves, including: magazine advertisement, soft article on magazine, album, hanging flag, shop window advertisement, outdoor advertisement, training material for employees of end retailer, to win the best selling choice for retail customers. 6.4 Overall solutions for distributors Until now, we has cooperated with multiple chain retail brands to develop, promote and sell featured products together by incorporating the market situation and fashion trend, and matching the requirements of customers, to provide perfect series service for customers, from product integration, product concept development, shape design, production processing to publicity and promotion. For example, Beloved and Smart series through cooperation with jewelry brand Hong Kong 25

27 King Taifook. Honors and Intellectual Property Right 1. Design Prizes 2003 Tahitian Pearl Trophy Asia Second place 2003 Tahitian Pearl Trophy Asia Third place 2004 China Gold Capital" 2 nd National Gold Jewelry Design Contest Second place 2005 Tahitian Pearl Trophy Asia Champion st National Jewelry Exquisites Contest Excellent prize 2007 HRD International Diamond Design Contest Entry prize 2008 China International Jewelry Design Contest Third prize There are still several works selected for multiple international jewelry design contests. 2. Company Trademark and LOGO 26

28 Company Prospect Planning 1. Three-year Planning To become a jeweler holding 100 medium and high class chain retail stores of its own brands within 3 years. 2. Company Vision Be the leading brand of the jewelry industry in China. 3. Company Philosophy Good faith is more precious than diamonds. Management Team and Staff 1. Organization Structure The departments of this company are established on the principle of scientific management, clear rights & responsibilities, incentive and restraint mechanism, to realize the logical division & collaboration and unified responsibilities, rights & benefits, and ensures the efficient running of the operating activities of the company duly, accurately, exactly and flexibly. For the organization structure of the company, please see the figure as below: 27

29 Board of Directors Audit Committee Board of supervisors Wage and employee relation committee Chairman General Manager Vice G.M All departments 2. Introduction on management team and consultants (1) Introduction on management team Mr. Lin Huifeng (William Lam) 34-year-old; graduated from Shenzhen Polytechnic, and majored in jewelry design and craft. Chairman and CEO of the Company. Shenzhen people; born in a jewelry aristocratic family; one of the earliest GIC and GIA appraiser in China. With 10-year jewelry profession experience; held the General Manager position for J.B. Group, which is an Indian transnational diamond company in , and achieved annual sales of RMB 60,000,000; founded MAYINLAY Jewelry Co., Ltd. in Deeply influenced by Chinese traditional culture, is very fond of the calligraphy and has certain attainments in it, once won national excellent work prize; likes social intercourse and sports; frequently organizes the personnel in the profession to carry on 28

30 the discussion and exchange on profession, economy, management and so on. Loves the jewelry profession very much. With rich profession experience, keen judgment ability to jewelry profession development, unique investment judgment, as well as respectable moral character and accomplishment, Chairman William Lin leads the Company to develop rapidly and steadily. Mr. Zhu Hongzhan (Sammy Chu) 51-year-old; General Manager of the Company. With rich profession experience; engaged in the jewelry profession in Hong Kong for 27 years. Entered into the profession in 1982; worked at the jewelry purchase in India, Belgium, Israel and other countries; one of few Chinese people who went abroad for purchasing jewelry material at that time. Started managing own jewelry company in 1992, which achieved annual sales of about 80,000,000 HK dollars during 10 years. Afterward was hired to take charge of the purchase for all raw materials by Sugem (Hong Kong) Limited subordinated to J.B. Group, which is an Indian transnational diamond company, for 6 years, during the time reached nearly 400,000,000 HK dollars of annual purchase amount, becomes one of Chinese people who purchase the most diamonds in the world. In 2007 joined this Company, established the purchase department in Hong Kong, and is responsible for the purchase of raw material specially. As years of purchase experiences knows the 29

31 superiority well on the products of any big diamond manufacturer in India, Israel, Belgium and so on, and maintains good relations with various raw materials suppliers. Ms. Yuan Yanru (Eve Yuan) 38-year-old; graduated from the Department of Foreign Languages, Northeast Normal University; Bachelor's degree. Deputy General Manager of the Company. Engaged in Chinese jewelry profession for 17 years since entering it in 1992, is one of professionals who earliest works at the jewelry profession in China. In was hired by Amy Diamond Co., Ltd., which is an Indian transnational diamond company, and is one of founders of Shanghai Amy Diamond Co., Ltd., as well as key executives of this company, achieved annual sales of 120,000,000 Yuan, was one of top saleswomen in jewelry profession. In 2008 joined this Company to be Deputy General Manager. Mr. Wang Yinghui (Hardy Wang) 30-year-old; majored in jewelry design and appraisal of Chinese Tongji University; Bachelor's degree. Deputy General Manager of the Company. Held the Sales Director position for listed Zhejiang Diamond Holding Co., Ltd., in took charge of the sales in Shenzhen where is a key area of the Company at that time, his annual sales reached nearly 30

32 100,000,000 Yuan, became one of top salesmen in jewelry profession. Managed own jewelry business in , has a set of precious attainments in the jewelry management, and joined MAYINLAY to hold the Deputy General Manager position in Mr. Zhen Junwei (David Chen) 28-year-old; Master's degree of Sichuan Normal University; on-the-job graduate student. Financial Director of the Company. Chinese licensed auctioneer, with the title of intermediate accountant. Held the Senior Manager position for Shenzhen Small & Medium Enterprises Credit Guarantee Center Co., Ltd. in , once handled the loan business for more than 40 small and medium-sized enterprises, which amounts to over RMB 3,000,000,000; concurrently held the Financing Consultant position for Shenzhen Jindingxin Pawn Shop Co., Ltd., listed Shenzhen Clou Electronics Co., Ltd. and Shenzhen Sunlord Electronics Co., Ltd. in Mr. Xiao Jinxiong 58-year-old. Deputy Financial Director of the Company. Engaged in the finance work more than 30 years, in , held the Chief position for Financial Department of Shenzhen Television Station; with strong sense of responsibility, good communication ability and team spirit, broad social relationship, excellent financial analysis, financing and fund administration and dispatch ability. Held the 31

33 Financial Director position for Shenzhen Lujinjiang Jewelry Co., Ltd. in , has rich experience in financial strategy plan on the jewelry profession. Joined MAYINLAY to hold the Financial Director position in Ms. Huang Liwen (Cecilia Wong) 32-year-old; graduated from Shenzhen Polytechnic, and majored in jewelry design and craft. Marketing Director of the Company. With 10-year experience in jewelry profession, after graduation worked in several well-known jewelry companies including two large-scale listed HK companies as well as domestic well-known jewelry enterprises to take charge of product development and planning, marketing and so on, and successively led many large-scale new product projects and exhibition projects. Once participated in lots of domestic and international jewelry design competition, and obtained many important awards including champion of Tahitian Pearl Trophy Asia and so on. Presently is responsible for the routine work of promotion and R&D center in the Company, including market development, product R&D and promotion and so on. Mr. Mao Jiarui (Garry Mao) 33-year-old. Graduated from Shenzhen Polytechnic, and majored in jewelry design and craft. Technical Director of the Company. With 10-year experience in jewelry profession, worked in several 32

34 well-known jewelry companies to take charge of marketing, planning market investigation and study and design on popular style. As a result of deep love to handicraft, by integrating with years of marketing and design experience in modern jewelry manufacture, proposed many craft innovations, is one of inventors on Po Zhua Wei Xiang patent. With rich experience in the R&D of jewelry craft, and the products manufactured by him are more suitable to market and consumer. Presently is responsible for the routine work of production and technology R&D center in the Company, including technical R&D, quality monitoring and so on. (2)Introduction on consultants Mr. Zhu Zhongyi 65-year-old; Professor and Master Tutor on Authentication of Jewelry; Standing Vice Chairman of Shenzhen Polytechnic Labor Union, and the member of the Shenzhen NPC Standing Committee. Technical adviser of the Company. Mr. Yang Mingxing 47-year-old; majored in Gemology and Mineralogy; Doctor s degree. Technical Adviser of the Company. Promoted to be the Professor of Gemological Institute China University of Geosciences (Wuhan) in Held the vice-president of Gemological Institute China University of Geosciences (Wuhan), which 33

35 specially is responsible for the development, concurrently was the Chief of Jewelry Testing Center China University of Geosciences. The main social concurrent posts includes: Deputy Secretary-general for Appraisal Committee of Gems & Jewelry Trade Association of China, Vice-chairman for Gems & Jewelry Trade Association of Hubei Province, Vice-chairman for Appraisal Committee of Gems & Jewelry Trade Association of Wuhan City and so on. Attained FGA certificate and DGA certificate of the British Jewellers' Association in 1997; attained CGC certificate of Gems & Jewelry Trade Association of China in 1998; attained the US certificate of Techniques of Professional Jewelry Appraising in Mr. Hu Chuyan 47-year-old; Technical Adviser of the Company. Associate Professor; Master Tutor. Engaged in jewelry teaching for many years in Guilin Institute of Technology before studying for the doctorate in July, Had been a teacher of Shenzhen Polytechnic until now from Worked at the jewelry manufacture and mosaic craft, jewelry and jade appraisal, gem inclusion, jade teaching and scientific research for a long time. Owns deep attainments in geology, gemology and jewelry technology and so on, and published over 40 scientific research dissertations. CGC member. Mr. Cao Yang 34

36 53-year-old; Senior Economist. Marketing Consultant of the Company. Once held the Investment Analyst position for JP, presently is the Independent Director of Hong Kong Huanguan Group, Special Invited Researcher of Beijing Gold Economic Development Research Center, Chief Analysis of Shenzhen Jiesheng Financing and Special Consultant of joint loan and guarantee business of China Construction Bank Shenzhen Branch. Engaged in strategic research work on the jewelry industrial development for a long time, has original opinion and rich operation experience in the jewelry brand cultivation, modern enterprise system establishing, gold investment and financing analysis, industry economic development program and so on, as well as in the investment, financing, property capitalization and IPO of jewelry enterprise. A renowned expert of profession development matters in jewelry field, as well as one of strategy advisers in Shenzhen s jewelry industrial development. Mr. Shen Wei 41-year-old; double Bachelor s degree in Law of Peking University and Accounting of Nanjing University of Science and Technology. Counselor of the Company. Attorney, Registration Number: Principal of Labor Law and Business Secret Protection Law Department of Guangdong Rong-guan Law Office. Member of Guangdong Law Society, Labor and 35

37 Social Insurance Law Service Committee of Shenzhen Lawyers Association. Independent Director, Senior Attorney, high-level HR Specialist and Economist of listed companies. Has deep fundamental research and practice experience to labor law, business secret protection law, law of corporation and so on. Is good at handling the lawsuits and non-lawsuit service including labor law, business secret protection law, law of corporation and so on, has highly comprehensive professional quality. 2. Employment plan The table of employment plan for retail shops and processing departments of the Company in next three years as follows: A. Flagship stores Name of Department Population Sales team 35~40 Logistics 4 Store Manager 1 Commodity controller 1 Maintenance department 1 Total 42~ 47 B. Standard stores Name of Department Population Sales team 12~18 Logistics 2 Store Manager 1 Total 15~21 C. Processing departments Name of Department Population Name of Department Population Sales Department Setting Department Commodity Department Polishing Department

38 Stone Matching Department Gold Plating Department Dispatching Department Casting Department 20 R&D Center Wax Injection Department Grinding Department QC Department Succession Planning (1) The Company has established good training, practice and cooperation with Gemological Institute China University of Geosciences (Wuhan), to provide high quality professionals for the Company. Gemological Institute China University of Geosciences (Wuhan) is one of the earliest and biggest gemology education and research institution in China, as well as one of 3 national CGC training stations before examination. Within 14 years since the establishment, it has developed many advanced jewelry appraisal instrument, simultaneously, it also trained large quantities of professionals for Chinese jewelry industry, changed the lagging Chinese jewelry education, and accelerated the development of domestic jewelry education. Yang Mingxing, the Dean of this Institute is one of consultants of the Company. On May 16, 2009, the Company reached agreement with this Institute officially to become the only practice base in Shenzhen of Gemological Institute China University of Geosciences (Wuhan). The Company may choose suitable professional according to its developing requirement. (2) Cooperates with the head-hunting company to advertise for outstanding jewelry professionals for high-end talent reserve of the 37

39 Company. (3) Continues to employ the outstanding talents of enterprise and shop purchased by the Company after passing unified training. 4. Primary departmental post responsibility Sales Department Conducts the work under the guidance of General Manager. Takes charge of the sales routine work; Establishes the sales strategy and sales program of the Company, pays special attention to the market investigation and study, develops the market positively, enhances the market share unceasingly; Builds sales network, visits the customer periodically or non-periodically, establishes the feedback network on customer information, solutes the difficulty of customer; Prepared departmental management and assignment, as well as reward means. Strengthens the study of clerk, improves the comprehensive quality and market regulation ability unceasingly; Perfects the delivery procedure, pays special attention to the product tracing management; Coordinates the Design Department to complete the product mix adjustment, satisfies the market requirement unceasingly. Pays special attention to the customer reception; Finishes the sales work economic activity analysis earnestly, 38

40 according to the market tendency, adjusts the marketing strategy at right moment; Fulfills the sales contract strictly, urges and receives the payment for goods promptly; rationalizes the price based on the market at right moment; Grasps customer s management and credit degree, and keeps the secret of the Company; Is responsible for the collection, reorganization, filing and management of the operation data; Completes other tasks delivered by the leader of the Company. Finance Department Participates in management and operation of the Company, and main financial personnel should participate in significant economic activity and contract conclusion and signing of the Company; Prepares corporate finance control system of the Company, after reporting the Company for approval, carries out specifically and supervises its fulfillment; Establishes and fulfills the budget, use the fund of the Company effectively. Administrative & Personnel Department Logs in the website of the Company every day, carries on normal examination and maintenance, makes the reply to conventional mail promptly, reports to the related leader to special event; 39

41 Handles the procedure advertising for personnel, replies the telephone consultation, arranges the interview notice and detailed program; Establishes all personnel file, renews promptly and guarantees the reality and validly of all material; Is responsible for handling staff's administrative procedure (including probation, promotion, transfer, salary adjustment, demission, asking for leave, overtime, vacation and so on), as well as daily check, surveillance and statistical examination on work attendance; According to the Company's request and staff's practical need, prepares monthly training plan. Design Department Assigns the special user of the computer for design, and pays attention to its using security and condition strictly; According to the requests of the Company arranges the tool controller for correct purchase, use and storage; Handles the project work according to the Company's design procedure, and the handover procedure should be perfect and clear; Is responsible for the template processing technology control, guarantees the manufacturing craft for product scientific and reasonable; Storages and absolutely keeps secret to the product design, development, as well as firsthand information to design and product; 40

42 Fulfills decision-making of the Company, proposes the suggestion that is advantageous for the Company, collects the market information, coordinates the upper-level department, and takes charge of the localization and style control of product. Accounting and Legal Affairs 1. Accounting system International accounting standards; China s Accounting Standards for Business Enterprises 2. Financial software Kingdee financial software 3. Legal affairs The Company invites professional law office and counselors to handle its legal affairs. Name: Guangdong Rong-guan Law Office Address: 47/F, Tower A, United Plaza, No. 5022, Binhe Road, Shenzhen Tel: Website: Counselor: Shen Wei, Attorney Duties: Handling the Company's economic contracts, rules and regulations, labor contracts and legal disputes. 41

43 Issuance and Safety Measures 1. The Company have all its employees covered by social insurance according to the Labor Law. 2. The Company s monitoring and burglarproof system is directly linked to the network of police station, and is preparing to purchase the business insurance from Hong Kong Insurance Company. 3. The company enters into confidentiality agreement with its staff. All computers in the Company are monitored. All mails and transmitted documents have backup for reference momentarily; regarding the staff that do not use computers, the company controls them through its strict management system; only backbone staff have the access to key technologies. 42

44 ⅡMarketing Plan Overview and Target of Marketing Strategy 1. Overview of core marketing strategy We adopt low price & differentiation strategies for both the finished product manufacture and raw material wholesale business, i.e. our products are priced at the bottom range for products of the same quality and type and differentiated from competitive products of similar prices. 1 Low price strategy: The technology R&D, network management system and stable goods supply channel of the Company provide favorable condition for the implementation of low price product strategy. For example, in an large product category, the technology and craft applied in each product shall be the same or close to each other to improve the productive efficiency effectively; perfect network management system simplifies the personnel system effectively and improves work efficiency, thus the lost caused by human errors; and the Company and the senior managers rich experience on supply channel maintaining brings more cost advantages. 2 Differentiation strategy: Differentiation mainly comes from three aspects including craft, appearance and concept culture. Firstly, the Company put great emphasis on the application of new craft, it takes the 43