THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES … · THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of the

THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of the Offer, this Composite Document and/or the accompanying Form of Acceptance or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Yugang International Limited, you should at once hand this Composite Document and the accompanying Form of Acceptance to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

This Composite Document should be read in conjunction with the accompanying Form of Acceptance, the contents of which form part of the terms and conditions of the Offer contained in this Composite Document.

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 Composite Document and the accompanying Form of Acceptance, make no representation as to their 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 Composite Document and the accompanying Form of Acceptance.

A letter from Get Nice Securities containing, amongst other things, details of the terms and conditions of the Offer is set out on pages 10 to 20 of this Composite Document. A letter from the Board is set out on pages 21 to 24 of this Composite Document. A letter from the Independent Board Committee containing its recommendation and advice to the Independent Shareholders in respect of the Offer is set out on pages 25 to 26 of this Composite Document. A letter from the Independent Financial Adviser containing its recommendation and advice to the Independent Board Committee in respect of the Offer is set out on pages 27 to 52 of this Composite Document.

The procedures for acceptance and settlement of the Offer are set out in Appendix I to this Composite Document and in the accompanying Form of Acceptance.

Acceptances of the Offer should be received by the Registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong by no later than 4:00 p.m. on Thursday, 18 April 2019 or such later time and/or date as the Offeror may determine and announce with the consent of the Executive, in accordance with the Takeovers Code.

Capitalised terms used on this cover page shall have the same meanings as those defined in the section headed “Definitions” in this Composite Document.

FUTURE CAPITAL GROUP LIMITED(Incorporated in British Virgin Islands with limited liability)

YUGANG INTERNATIONAL LIMITED（渝港國際有限公司）*

(Incorporated in Bermuda with limited liability)(Stock Code: 0613)

COMPOSITE DOCUMENT RELATING TOTHE CONDITIONAL MANDATORY CASH OFFER BY

GET NICE SECURITIES LIMITEDFOR AND ON BEHALF OF FUTURE CAPITAL GROUP LIMITED

TO ACQUIRE ALL THE ISSUED SHARES(OTHER THAN THOSE ALREADY OWNED BY FUTURE CAPITAL GROUP LIMITED AND

PARTIES ACTING IN CONCERT WITH IT)OF YUGANG INTERNATIONAL LIMITED

Joint Financial Advisers to Offeror

Independent Financial Adviser to the Independent Board Committee

* For identification purpose only28 March 2019

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TABLE OF CONTENTS

Page

Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Letter from Get Nice Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . 25

Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . 27

Appendix I – Further Terms of the Offer and Procedures of Acceptance . . 53

Appendix II – Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . 62

Appendix III – General Information of the Group . . . . . . . . . . . . . . . . . . . . . . 67

Appendix IV – General Information of the Offeror . . . . . . . . . . . . . . . . . . . . . 74

— 1 —

EXPECTED TIMETABLE

The expected timetable set out below is indicative and is subject to changes. Any changes to the timetable will be jointly announced by the Offeror and the Company as and when appropriate. All time and date references contained in this Composite Document refer to Hong Kong time and dates.

2019Despatch date of this Composite Document and

the accompanying Form of Acceptance and the commencement of the Offer (Note 1) . . . . . . . . . . . . . . . . . . . . . .Thursday, 28 March

Latest time and date for acceptance of the Offer on the First Closing Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by 4:00 p.m. on

Thursday, 18 April

First Closing Date (Notes 2 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 18 April

Announcement of the results of the Offer on the website of the Stock Exchange (Notes 2 and 6) . . . . . . . . . . . . . . . by 7:00 p.m. on

Thursday, 18 April

Latest date of posting of remittances in respect of valid acceptances received under the Offer by the First Closing Date (assuming the Offer becomes or is declared unconditional on the First Closing Date) (Notes 3 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 2 May

Latest time and date for the Offer to remain open for acceptance (assuming the Offer becomes or is declared unconditional on the First Closing Date) (Notes 4 and 6) . . . . . . . . by 4:00 p.m.

Thursday, 2 May

Final closing date of the Offer if the Offer becomes or is declared unconditional on the First Closing Date . . . . . . . . . . . . . . Thursday, 2 May

Latest date of posting of remittances in respect of valid acceptances received under the Offer on or before 4:00 p.m. Thursday, 2 May 2019, being the latest date on which the Offer remains open for acceptances assuming the Offer becomes or is declared unconditional in all respects on the First Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 14 May

Latest date by which the Offer can be declared unconditional (Notes 5 and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . by 7:00 p.m. on

Monday, 27 May

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EXPECTED TIMETABLE

Notes:

1. The Offer, which is conditional, is made on the date of posting of this Composite Document, and is capable of acceptance on and from Thursday, 28 March 2019 until the close of the Offer Period on the First Closing Date. Acceptances of the Offer shall be irrevocable and not capable of being withdrawn, except in the circumstances set out in the section headed “Right of Withdrawal” in Appendix I to this Composite Document.

2. The Offer must remain open for acceptance for at least 21 days following the date on which this Composite Document is posted. The Offer will be closed at 4:00 p.m. on the First Closing Date unless the Offeror revises or extends the Offer in accordance with the Takeovers Code. An announcement will be jointly issued by the Company and the Offeror through the website of the Stock Exchange by 7:00 p.m. on the First Closing Date stating the results of the Offer and whether the Offer has been revised or extended or has expired. In the event that the Offeror decides that the Offer will remain open, the announcement will state the next closing date of the Offer or that the Offer will remain open until further notice. In the latter case, at least 14 days’ notice in writing will be given, before the Offer is closed, to those Independent Shareholders who have not accepted the Offer.

3. Remittances in respect of the consideration (after deducting the seller’s ad valorem stamp duty) payable for the Offer Share(s) under the Offer will be despatched to the accepting Independent Shareholders by ordinary post at their own risk as soon as possible, but in any event within seven (7) Business Days from the later of the date on which the Offer becomes or is declared unconditional and the date of receipt of a duly completed acceptance in accordance with the Takeovers Code.

An acceptor of the Offer shall be entitled to withdraw its/his/her acceptance within 21 days from the First Closing Date if the Offer has not by then become unconditional as to acceptances. However, this entitlement to withdraw shall only be exercisable until such time as the Offer becomes or is declared unconditional as to acceptances. For further details, please refer to Appendix I to this Composite Document.

4. In accordance with the Takeovers Code, where the Offer becomes or is declared unconditional in all respects, the Offer should remain open for acceptance for not less than 14 days thereafter. In such case, at least 14 days’ notice in writing must be given before the Offer is closed to the Independent Shareholders who have not accepted the Offer. The Offeror has the right, subject to the Takeovers Code, to extend the Offer until such date as it may determine or as permitted under the Takeovers Code.

5. In accordance with the Takeovers Code, except with the consent of the Executive, the Offer may not become or be declared unconditional in all respects after 7:00 p.m. on the 60th day after the day on which this Composite Document was posted. Where a period laid down by the Takeovers Code ends on a day which is not a Business Day, the period is extended until the next Business Day. Accordingly, unless the Offer has previously become or is declared unconditional as to acceptance, the Offer will lapse after 7:00 p.m. on Monday, 27 May 2019, unless extended with the consent of the Executive.

6. If there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal in force on the First Closing Date and (i) not cancelled in time for trading on the Stock Exchange to resume in the afternoon, the time and date of the close of the Offer will be postponed to 4:00 p.m. on the next Business Day which does not have either of those warnings in force in Hong Kong or such other day as the Executive may approve; or (ii) cancelled in time for trading on the Stock Exchange to resume in the afternoon, the time and date of the close of the Offer will be the same day, i.e. 4:00 p.m. on the First Closing Date.

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DEFINITIONS

In this Composite Document, unless the context otherwise requires, the following expressions have the following meanings:

“1st Sale Shares” 3,194,434,676 Shares, beneficial ly owned by the 1st Vendor as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion, representing approximately 34.33% of the total issued share capital of the Company as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion

“1st Vendor” Chongqing Industrial Limited, a company incorporated in Hong Kong with limited liability and is owned as to 35%, 30%, 5% and 30% by the 3rd Vendor, Peking Palace Limited, Miraculous Services Limited and Prize Winner Limited respectively. Prize Winner Limited is beneficially owned by the 3rd Vendor and his associates. Peking Palace Limited and Miraculous Services Limited are held by Palin Holdings Limited as the trustee for Palin Discretionary Trust, a family discretionary trust, the objects of which include the 3rd Vendor and his family. The 3rd Vendor is the sole shareholder of Palin Holdings Limited

“2nd Sale Shares” 851,955,056 Shares, beneficially owned by the 2nd Vendor as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion, representing approximately 9.16% of the total issued share capital of the Company as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion

“2nd Vendor” Timmex Investment Limited, a company incorporated in the BVI with limited liability and is 100% beneficially owned by the 3rd Vendor

“3rd Sale Shares” 53,320,000 Shares, beneficially owned by the 3rd Vendor as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion, representing approximately 0.57% of the total issued share capital of the Company as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion

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DEFINITIONS

“3rd Vendor” or “Mr. Cheung”

Mr. Cheung Chung Kiu, chairman of the Board and an executive Director

“acting in concert” has the same meaning ascribed to it under the Takeovers Code

“associate(s)” has the same meaning ascribed to it under the Listing Rules

“Board” the board of Directors

“Business Day” a day on which the Stock Exchange is open for the transaction of business

“BVI” the British Virgin Islands

“CCASS” the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited

“CHH” The Cross -Harbour (Hold ings ) L imi ted , a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 00032)

“Company” Yugang International Limited (渝港國際有限公司 )*, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 00613)

“Composite Document” this formal composite document jointly issued by or on behalf of the Offeror and the Company in connection with the Offer in accordance with the Takeovers Code containing, amongst other things, detailed terms of the Offer and the Form of Acceptance, as may be revised or supplemented as appropriate

“Controlling Shareholder” has the same meaning ascribed to it under the Listing Rules

“Director(s)” the director(s) of the Company

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DEFINITIONS

“Encumbrances” pledges, charges, liens, mortgages, security interests, pre-emption rights, options and any other encumbrances or third-party rights, interests or claims of any kind

“Executive” executive director of the Corporate Finance Division of the SFC or any delegate of the executive director

“First Closing Date” 18 April 2019, being the first closing date of the Offer which is the first Business Day immediately after 21 days from the date on which this Composite Document was posted

“Form of Acceptance” the form of acceptance and transfer of the Offer Shares in respect of the Offer

“Get Nice Capital” Get Nice Capital Limited, a licensed corporation permitted to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO, which is appointed as one of the joint financial advisers to the Offeror in respect of the Offer

“Get Nice Securities” Get Nice Securities Limited, a licensed corporation permitted to carry out businesses in type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO

“Group” the Company and its subsidiaries

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“Independent Board Committee”

an independent committee of the Board comprising the non-executive Director, namely, Mr. Lee Ka Sze, Carmelo and all the independent non-executive Directors, namely, Mr. Luk Yu King, James, Mr. Leung Yu Ming, Steven and Mr. Ng Kwok Fu, which has been established by the Board to make a recommendation to the Independent Shareholders in relation to the terms of the Offer

— 6 —

DEFINITIONS

“Independent Financial Adviser” or “Shinco Capital”

Shinco Capital Limited, a licensed corporation permitted to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed by the Company to advise the Independent Board Committee pursuant to Rule 2.1 of the Takeovers Code in respect of the Offer

“Independent Shareholders” Shareholders other than the Offeror and parties acting in concert with it

“Joint Announcement” the joint announcement dated 23 January 2019 jointly issued by the Company and the Offeror, in relation to, amongst other things, the Sale and Purchase Agreement and the Offer

“Last Trading Day” 16 January 2019, being the last trading day for the Shares prior to the halt of trading in the Shares pending the release of the Joint Announcement

“Latest Practicable Date” 26 March 2019, being the latest practicable date prior to the printing of this Composite Document for ascertaining certain information contained herein

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“Loan Facility” a loan facility of up to HK$712 million granted by Get Nice Securities to the Offeror to finance the amount payable by the Offeror upon acceptances of the Offer

“Ms. Lo” Ms. Lo Ki Yan Karen, who directly and beneficially owns 100% of the Offeror

“Offer” the conditional mandatory cash offer being made by Get Nice Securities for and on behalf of the Offeror for all the issued Shares (other than those already owned by the Offeror and parties acting in concert with it) pursuant to Rule 26.1 of the Takeovers Code

“Offer Period” has the same meaning ascribed to it under the Takeovers Code

— 7 —

DEFINITIONS

“Offer Price” the price per Offer Share at which the Offer being made in cash, being HK$0.175 per Offer Share

“Offer Shares” 5,152,849,024 Shares, being all the Shares in issue, other than those Shares already owned by the Offeror and parties acting in concert with it

“Offeror” Future Capital Group Limited, a company incorporated in the BVI with limited liability and wholly and beneficially owned by Ms. Lo

“Overseas Shareholder(s)” Shareholder(s) whose addresses, as shown on the register of members of the Company, are outside Hong Kong

“PRC” the People’s Republic of China which, for the purpose of this Composite Document, shall exclude Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan

“Retained Shares” 4 Shares beneficially owned by the 1st Vendor upon the Share Completion, which have not been accounted for under the Sale and Purchase Agreement

“Registrar” Tricor Tengis Limited, the Company’s branch share registrar and transfer office in Hong Kong at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong

“Relevant Period” the period from 23 July 2018, being the date falling six months preceding the commencement of the Offer Period, up to and including the Latest Practicable Date

“Sale and Purchase Agreement”

the sale and purchase agreement dated 16 January 2019 and entered into between the Vendors and the Offeror (as amended by the Side Letter) for the sale and purchase of the Sale Shares

— 8 —

DEFINITIONS

“Sale Shares” an aggregate of 4,099,709,732 Shares beneficially owned by the Vendors as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion, representing approximately 44.06% of the total issued share capital of the Company as at the date of the Sale and Purchase Agreement and immediately prior to Share Completion

“SFC” Securities and Futures Commission of Hong Kong

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Shareholder(s)” holder(s) of the Share(s)

“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

“Share Completion” completion of the sale and purchase of the Sale Shares pursuant to the Sale and Purchase Agreement

“Share Completion Date” the date on which Share Completion took place, i.e. 17 January 2019

“Side Letter” the side letter dated 23 January 2019 and signed by the Vendors and the Offeror in respect of, among others, the undertaking given by the 1st Vendor not to accept the Offer in respect of the Retained Shares

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Takeovers Code” The Hong Kong Code on Takeovers and Mergers

“USD” United States dollars, the lawful currency of the United States of America

“Veda Capital” Veda Capital Limited, a licensed corporation to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO, which is appointed as one of the joint financial advisers to the Offeror in respect of the Offer

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DEFINITIONS

“Vendors” collectively the 1st Vendor, the 2nd Vendor and the 3rd Vendor

“YT” Y.T. Realty Group Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 00075)

“%” per cent.

* for identification purposes only

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LETTER FROM GET NICE SECURITIES

Get Nice Securities Limited10/F, Cosco TowerGrand Millennium Plaza183 Queen’s Road CentralHong Kong

28 March 2019

To the Independent Shareholders,

Dear Sir or Madam,

THE CONDITIONAL MANDATORY CASH OFFER BYGET NICE SECURITIES LIMITED

FOR AND ON BEHALF OF FUTURE CAPITAL GROUP LIMITEDTO ACQUIRE ALL THE ISSUED SHARES

(OTHER THAN THOSE ALREADY OWNED BY FUTURE CAPITAL GROUP LIMITED ANDPARTIES ACTING IN CONCERT WITH IT)OF YUGANG INTERNATIONAL LIMITED

INTRODUCTION

Reference is made to the Joint Announcement.

On 16 January 2019 (after trading hours), the Vendors had entered into the Sale and Purchase Agreement with the Offeror, pursuant to which the Vendors agreed to sell and the Offeror agreed to purchase the Sale Shares, being 4,099,709,732 Shares, for a total consideration of HK$717,449,203.10, equivalent to HK$0.175 per Sale Share, which was agreed between the Vendors and the Offeror after arm’s length negotiations, and that Share Completion took place on 17 January 2019. The Sale Shares represent approximately 44.06% of the entire issued share capital of the Company as at the date of the Sale and Purchase Agreement.

— 11 —


Before entering into the Sale and Purchase Agreement and immediately before the Share Completion, Ms. Lo was interested in 52,718,000 Shares, representing approximately 0.57% of the entire issued share capital of the Company. Immediately following the Share Completion and as at the Latest Practicable Date, the Offeror and parties acting in concert with it are interested in an aggregate of 4,152,427,732 Shares, representing approximately 44.62% of the entire issued share capital of the Company. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make a conditional mandatory general offer in cash for all the issued Shares other than those already owned by the Offeror and parties acting in concert with it.

This letter sets out, among other things, the principal terms of the Offer, together with the information on the Offeror and the Offeror’s intention regarding the Group. Further details of the terms of the Offer and procedures of acceptance are also set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

CONDITIONAL MANDATORY CASH OFFER

Principal terms of the Offer

Get Nice Securities, on behalf of the Offeror, is making the Offer to acquire all the issued Shares other than those already owned by the Offeror and parties acting in concert with it, in compliance with the Takeovers Code on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.175 in cash

The Offer Price of HK$0.175 per Offer Share equals to the purchase price per Sale Share paid by the Offeror under the Sale and Purchase Agreement. The Offer Shares to be acquired under the Offer shall be fully paid and free from all Encumbrances and together with all rights attaching thereto, including all rights to any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document.

Condition of the Offer

The Offer is conditional upon the Offeror having received valid acceptances of the Offer which, together with the Shares already acquired or agreed to be acquired by the Offeror and the parties acting in concert with it before or during the Offer Period, will result in the Offeror and parties acting in concert with it holding more than 50% of the voting rights of the Company.

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Comparison of value

The Offer Price of HK$0.175 per Offer Share:

(i) represents a discount of approximately 1.13% to the closing price of HK$0.177 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

(ii) represents a premium of approximately 2.94% over the closing price of HK$0.170 per Share as quoted on the Stock Exchange on the Last Trading Day;

(iii) represents a premium of approximately 4.17% over the average closing prices of the Shares as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day of approximately HK$0.168 per Share;

(iv) represents a premium of approximately 5.42% over the average closing prices of the Shares as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day of approximately HK$0.166 per Share;

(v) represents a premium of approximately 3.55% over the average closing prices of the Shares as quoted on the Stock Exchange for the 30 consecutive trading days up to and including the Last Trading Day of approximately HK$0.169 per Share;

(vi) represents a discount of approximately 41.67% to the audited consolidated net asset value attributable to owners of the Company of approximately HK$0.300 per Share (based on the number of issued Shares as at the Latest Practicable Date) as at 31 December 2017, the date to which the latest audited financial results of the Group were made up;

(vii) represents a premium of approximately 2.94% over the audited consolidated net asset value attributable to owners of the Company of approximately HK$0.170 per Share as adjusted for a distribution in specie of 51,179,018 shares in CHH on 19 September 2018 and 273,000,000 shares in YT on 23 November 2018 (based on the number of issued Shares as at the Latest Practicable Date) as at 31 December 2017, the date to which the latest audited financial results of the Group were made up; and

(viii) is equivalent to the unaudited consolidated net asset value attributable to owners of the Company of approximately HK$0.175 per Share (based on the number of issued Shares as at the Latest Practicable Date) as at 31 December 2018, the date to which the latest unaudited financial results of the Group were made up.

— 13 —


As announced by the Company on 24 August 2018, 19 September 2018 and 30 October 2018, the Company has declared and made payment of interim dividend by way of distributions in specie of 51,179,018 shares in CHH on 19 September 2018 and 273,000,000 shares in YT on 23 November 2018 (collectively, the “Distributions”). As the Distributions were made subsequent to 31 December 2017, being the date to which the audited financial results of the Group for the year ended 31 December 2017 were made up, it would only be meaningful that the comparison of the Offer Price with the published consolidated net asset value attributable to owners of the Company as at 31 December 2017 be made taking into account the effects of the Distributions. In respect of paragraph (vii) above, the audited consolidated net asset value attributable to owners of the Company of approximately HK$0.170 per Share is arrived at by dividing the adjusted audited consolidated net asset value of the Company of approximately HK$1,577,517,000 by the 9,305,276,756 Shares in issue as at the Latest Practicable Date. The adjusted audited consolidated net asset value of the Company of approximately HK$1,577,517,000 represents the audited consolidated net asset value of the Company of approximately HK$2,792,004,000 as a t 31 December 2017 as adjusted by (1) approximately HK$660,209,000, being the fair value of the 51,179,018 shares of CHH as at 31 December 2017, as such shares of CHH were recorded by the Group as listed equity investments at fair value through profit or loss; and (2) approximately HK$554,278,000, being the share of net asset value of the 273,000,000 shares of YT as at 31 December 2017, as such shares of YT were recorded by the Group as an investment in an associate.

Highest and lowest Share prices

During the Relevant Period:

(i) the highest closing price of the Shares as quoted on the Stock Exchange was HK$0.208 per Share on 25 January 2019; and

(ii) the lowest closing price of the Shares as quoted on the Stock Exchange was HK$0.108 per Share on 25 July 2018.

— 14 —


Value of the Offer

As at the Latest Practicable Date, the Company has 9,305,276,756 Shares in issue. The Company does not have any outstanding options, derivatives or warrants or other securities which are convertible or exchangeable into the Shares and has not entered into any agreement for the issue of such options, derivatives or warrants or other securities of the Company.

Based on the Offer Price of HK$0.175 per Offer Share, the entire issued share capital of the Company is valued at HK$1,628,423,432.30 and assuming that the Offer is accepted in full by the Independent Shareholders of 5,152,849,024 Offer Shares, the total amount of cash required to effect the Offer will be HK$901,748,579.20

Financial resources available to the Offeror

The Offeror intends to finance the consideration payable under the Offer through its internal resources and the Loan Facility. Under the terms of the Loan Facility, (i) the Shares to be acquired pursuant to the Offer the payment for which is financed by the amount drawn under the Loan Facility, as well as Sale Shares acquired by the Offeror under the Sale and Purchase Agreement shall be, and have been, charged to Get Nice Securities as security and (ii) Ms. Lo shall, and has, executed a personal guarantee for the obligations and liabilities of the Offeror under the Loan Facility. The payment of interest on and repayment of any liability (contingent or otherwise) by the Offeror to Get Nice Securities under the Loan Facility will not depend on the business of the Group. Get Nice Capital and Veda Capital are satisfied that sufficient financial resources are available to the Offeror to satisfy the full acceptances of the Offer.

Effect of accepting the Offer

By accepting the Offer, the Independent Shareholders will sell their Shares to the Offeror free from all Encumbrances and together with all rights attaching or accruing thereto (including all rights to receive any dividend or other distribution declared, made or paid on or after the date on which the Offer is made, being the date of this Composite Document).

— 15 —


Hong Kong stamp duty

The seller’s Hong Kong ad valorem stamp duty on acceptances of the Offer at a rate of 0.1% (or part thereof) of the consideration payable in respect of the relevant acceptances by the Independent Shareholders or if higher, the market value of the Offer Shares subject to such acceptance, will be deducted from the amount payable to those Independent Shareholders who accept the Offer.

The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the relevant Independent Shareholders who accept the Offer and pay the buyer’s Hong Kong ad valorem stamp duty in connection with the acceptances of the Offer and the transfers of the Offer Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

Payment

Payment in cash in respect of acceptances of the Offer will be made as soon as possible but in any event within seven (7) business days (as defined in the Takeovers Code) of the later of the date on which the Offer becomes, or is declared, unconditional and the date on which the relevant documents of title in respect of such acceptances are received by the Offeror (or its agent) to render each such acceptance complete and valid.

In the event that the Offer cannot be declared unconditional, the Offer will lapse and the Offeror shall as soon as possible but in any event within 10 days thereafter return the Share certificates and/or any other documents of title lodged with the Form of Acceptance by ordinary post to the Shareholders who have accepted the Offer at their own risk.

Taxation advice

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. None of the Offeror, parties acting in concert with the Offeror, the Company, Get Nice Securities, Get Nice Capital and Veda Capital and their respective ultimate beneficial owners, directors, officers, advisers, agents or associates or any other person involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offer.

— 16 —


Overseas Shareholders

The Offeror intends to make the Offer available to all the Independent Shareholders, including the Overseas Shareholders. However, the availability of the Offer to any Overseas Shareholders may be affected by the applicable laws and regulations of their relevant jurisdictions of residence. Overseas Shareholders should observe any applicable legal and regulatory requirements and, where necessary, consult their own professional advisers. It is the responsibilities of the Overseas Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offer (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due by such Overseas Shareholders in respect of such jurisdictions).

Procedure for acceptance and settlement

Your attention is drawn to the further details regarding the procedures for acceptance and settlement of the Offer as set out in Appendix I to this Composite Document and the accompanying Form of Acceptance.

Compulsory Acquisition

The Offeror does not intend to exercise any power of compulsory acquisition of any Offer Shares outstanding and not acquired under the Offer after the close of the Offer.

Dealing and interests in the Company’s securities

Save for the Sale Shares, none of the Offeror, its ultimate beneficial owner, nor parties acting in concert with any of them has dealt in any Shares, options, derivatives, warrants or other securities convertible into Shares during the Relevant Period.

Other arrangements

Other than the consideration under the Sale and Purchase Agreement as disclosed in the section headed “Consideration for the Sale Shares” in the Joint Announcement, there is no other consideration, in whatever form, which has been or will be paid by any of the Offeror, Ms. Lo and/or parties acting in concert with any of them, their respective nominees and/or representatives (the “Offeror Group”) to each of the Vendors and/or their respective ultimate beneficial owners (if applicable) and/or the parties acting in concert with any of them and/or their respective nominees and/or representatives in connection with the Sale and Purchase Agreement or otherwise.

— 17 —


There is no special deal under Rule 25 of the Takeovers Code between any members of the Offeror Group on one hand and any Shareholders (including their respective concert parties) on the other.

There is no agreement, arrangement or understanding (including any compensation arrangement) existing between the Offeror, Ms. Lo and/or parties acting in concert with any of them and any of the Directors, recent Directors, Shareholders or recent Shareholders (including the Vendors and parties acting in concert with any of them) having any connection with or dependence upon the Sale and Purchase Agreement and/or the Offer.

INFORMATION ON THE GROUP

The Company is incorporated in Bermuda with limited liability and the issued shares of which are listed on the Main Board of the Stock Exchange. The Company is an investment holding company principally engaged in property businesses. The principal activities of the Group are (i) treasury management; (ii) money lending; and (iii) property leasing.

The following table is a summary of certain audited financial information of the Group for the two financial years ended 31 December 2016 and 31 December 2017 and published unaudited financial information of the Group for the year ended 31 December 2018.

Year ended31 December

2016


2017


2018(Audited) (Audited) (Unaudited)HK$’000 HK$’000 HK$’000

Revenue 30,114 34,293 65,958Profit before taxation 26,034 142,785 90,366Profit for the year 21,848 127,505 109,180

As at 31 December

2016

As at 31 December

2017

As at31 December

2018(Audited) (Audited) (Unaudited)HK$’000 HK$’000 HK$’000

Consolidated net asset value attributable to owners of the Company 2,791,417 2,792,004 1,632,379

— 18 —


Further information of the Group is set out under the section headed “Information of the Group” in the “Letter from the Board” and in Appendices II and III of this Composite Document.

INFORMATION ON THE OFFEROR

The Offeror is an investment holding company incorporated in the BVI with limited liability. As at the Latest Practicable Date, the Offeror is wholly and directly beneficially owned by Ms. Lo. Ms. Lo is the sole director of the Offeror. She is a seasoned investor with real estate investments (which is one of the principal businesses of the Group) in particular, properties in Hong Kong and the United States of America and other investments in Hong Kong and overseas. In 2014, Ms. Lo acquired the controlling interest in another listed company on the Main Board of the Stock Exchange, formerly known as Qualipak International Holdings Limited (Stock Code: 01332). The Offeror acquired the controlling interest in the Company with a medium term of two to five years’ investment horizon subject to market environment and conditions from time to time to make decision regarding its investment in the Company. Ms. Lo does not intend to participate in the management of the Group.

OFFEROR’S INTENTION ON THE COMPANY

Following the close of the Offer, the Offeror intends to continue the existing principal businesses of the Group. The Offeror will conduct a review on the financial position and the operations of the Company and will formulate long-term business plans and strategy of the Company, explore other business opportunities such as any business opportunities that would come to the attention to the Offeror from time to time and consider whether any asset disposal, asset acquisition, business rationalisation, business divestment, fund raising, restructuring of the business and/or business diversification will be appropriate in order to enhance the long-term growth potential of the Company. As at the Latest Practicable Date, the Offeror and the Board have no intention and have not entered into any agreement, arrangement or understanding to (i) acquire and/or develop any new business; and (ii) dispose of or downsize the existing businesses and/or material operating assets of the Company. Should such corporate actions materialise, further announcement(s) will be made in accordance with the Listing Rules. As at the Latest Practicable Date, the Offeror has no intention to (i) discontinue the employment of any employees of the Group; or (ii) redeploy the fixed assets of the Company other than those in its ordinary and usual course of business.

— 19 —


Board composition of the Company

As at the Latest Practicable Date, the Board comprises nine Directors, namely Mr. Cheung Chung Kiu (Chairman), Mr. Yuen Wing Shing (Managing Director), Mr. Zhang Qing Xin, Mr. Lam Hiu Lo and Mr. Liang Kang as executive Directors; Mr. Lee Ka Sze, Carmelo as non-executive Director; and Mr. Luk Yu King, James, Mr. Leung Yu Ming, Steven and Mr. Ng Kwok Fu as independent non-executive Directors. It is expected that all the members of the Board will resign as soon as practicable following the First Closing Date, or the date when the Offer becomes or is declared unconditional, whichever is the later.

The Offeror intends to nominate new Directors to the Board in compliance with the Company’s bye-laws, the Takeovers Code and the Listing Rules with effect from a date which is no earlier than such date as permitted under the Takeovers Code. As at the Latest Practicable Date, the Offeror has not reached any final decision as to who will be nominated as new Directors and the timing of such appointment, but it is expected that such decision will be reached prior to the First Closing Date. Further announcement(s) will be made by the Company in compliance with the requirements of the Listing Rules as and when there are changes in the composition of the Board.

MAINTENANCE OF THE LISTING STATUS OF THE COMPANY

The Stock Exchange has stated that if, at the close of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the Shares, are held by the public or if the Stock Exchange believes that:

— a false market exists or may exist in the trading of the Shares; or

— that there are insufficient Shares in public hands to maintain an orderly market;

it will consider exercising its discretion to suspend dealings in the Shares.

The Offeror intends the Company to remain listed on the Stock Exchange. The new directors to be appointed to the Board and Ms. Lo, being the sole director of the Offeror, will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Shares following the close of the Offer.

— 20 —


GENERAL

All communications, notices, the Form of Acceptance, Share certificate(s), transfer receipt(s), other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to settle the consideration payable under the Offer to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their designated agents, by ordinary post at their own risk, and none of the Company, the Offeror, Get Nice Capital, Veda Capital and Get Nice Securities and any of their respective directors or other parties involved in the Offer or any of their respective agents accept any liability for any loss in postage or any other liabilities that may arise as a result thereof. Further details have been set out in Appendix I to this Composite Document and in the Form of Acceptance.

ADDITIONAL INFORMATION

Your attention is drawn to the “Letter from the Board”, the “Letter from the Independent Board Committee” and the “Letter from the Independent Financial Adviser” as set out in this Composite Document, the accompanying Form of Acceptance and the additional information set out in the appendices to, which form part of, this Composite Document.

Yours faithfullyFor and on behalf of

Get Nice Securities LimitedLarry NgDirector

— 21 —

LETTER FROM THE BOARD


(Incorporated in Bermuda with limited liability)

(Stock Code: 00613)

Executive Directors:Cheung Chung Kiu (Chairman)Yuen Wing Shing (Managing Director)Zhang Qing XinLam Hiu LoLiang Kang

Non-Executive Director:Lee Ka Sze, Carmelo

Independent Non-Executive Directors:Luk Yu King, JamesLeung Yu Ming, StevenNg Kwok Fu

Registered Office:Clarendon House2 Church StreetHamilton HM 11Bermuda

Head Office and Principal Place of Business in Hong Kong:

25th FloorChina Resources Building26 Harbour RoadWanchaiHong Kong

28 March 2019


Dear Sir or Madam,

CONDITIONAL MANDATORY CASH OFFER BYGET NICE SECURITIES LIMITED

FOR AND ON BEHALF OF FUTURE CAPITAL GROUP LIMITED TO ACQUIRE ALL THE ISSUED SHARES


1. INTRODUCTION

Reference is made to the Joint Announcement.

— 22 —


The Company was informed by the Vendors (together, the Controlling Shareholder of the Company immediately before the Share Completion) that on 16 January 2019 (after trading hours), they had entered into the Sale and Purchase Agreement with the Offeror, pursuant to which the Vendors agreed to sell and the Offeror agreed to purchase the Sale Shares, being 4,099,709,732 Shares, for a total consideration of HK$717,449,203.10, equivalent to HK$0.175 per Sale Share, which was agreed between the Vendors and the Offeror after arm’s length negotiations, and that Share Completion took place on 17 January 2019.

Pursuant to Rule 26.1 of the Takeovers Code and following the Share Completion, the Offeror is required to make a conditional mandatory general offer in cash for all the issued Shares other than those already owned by the Offeror and parties acting in concert with it.

The purpose of the Composite Document (of which this letter forms part) is to provide you with, among other matters, (i) information relating to the Group, the Offeror and the Offer; (ii) a letter from Get Nice Securities containing, among other things, details of the Offer; (iii) a letter from the Independent Board Committee containing its recommendation to the Independent Shareholders as to whether the Offer is, or is not, fair and reasonable and as to acceptance of the Offer; and (iv) a letter from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee in relation to the Offer.

Unless the context otherwise requires, terms defined in the Composite Document shall have the same meanings when used in this letter.

2. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

In accordance with Rules 2.1 and 2.8 of the Takeovers Code, the Independent Board Committee comprising the non-executive Director, namely, Mr. Lee Ka Sze, Carmelo and all the independent non-executive Directors, namely, Mr. Luk Yu King, James, Mr. Leung Yu Ming, Steven and Mr. Ng Kwok Fu, has been established to make recommendation to the Independent Shareholders as to whether the Offer is, or is not, fair and reasonable and as to acceptance of the Offer.

Shinco Capital, with the approval of the Independent Board Committee, has been appointed as the Independent Financial Adviser to advise the Independent Board Committee as to whether the Offer is, or is not, fair and reasonable and as to acceptance of the Offer.

— 23 —


3. THE OFFER

As disclosed in the “Letter from Get Nice Securities” in the Composite Document, Get Nice Securities, on behalf of the Offeror, is making the Offer to acquire all the issued Shares other than those already owned by the Offeror and parties acting in concert with it, in compliance with the Takeovers Code on the following basis:

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.175 in cash

Further details of the Offer are set out under the section headed “Letter from Get Nice Securities” and Appendix I to the Composite Document and the accompanying Form of Acceptance, which together set out the terms and conditions of the Offer and certain related information.

4. OFFEROR’S INTENTION ON THE COMPANY

Your attention is drawn to the section headed “Offeror’s Intention on the Company” in the “Letter from Get Nice Securities” in the Composite Document which sets out the intentions of the Offeror with regard to the Group.

The Board is pleased to note the intention of the Offeror in respect of the Group as disclosed.

5. INFORMATION ON THE OFFEROR

Your attention is drawn to the section headed “Information on the Offeror” in the “Letter from Get Nice Securities” in the Composite Document for information relating to the Offeror.

6. INFORMATION ON THE GROUP

The Company is incorporated in Bermuda with limited liability and the issued shares of which are listed on the Main Board of the Stock Exchange. As at the Latest Practicable Date, the Company is an investment holding company principally engaged in property businesses, and the principal activities of the Group are (i) treasury management; (ii) money lending; and (iii) property leasing.

Your attention is also drawn to Appendices II and III to the Composite Document which contain the financial information of the Group and the general information of the Group respectively.

— 24 —


7. MAINTAINING THE LISTING STATUS OF THE COMPANY

Your attention is drawn to the section headed “Maintenance of the listing status of the Company” in the “Letter from Get Nice Securities” in the Composite Document.

8. FURTHER INFORMATION

You are advised to read the “Letter from Get Nice Securities” in the Composite Document and the accompanying Form of Acceptance for information relating to the Offer and the acceptance and settlement procedures of the Offer. Your attention is also drawn to the additional information contained in the appendices to the Composite Document.

9. RECOMMENDATION

Your attention is drawn to (i) “Letter from the Independent Board Committee” as set out on pages 25 to 26 of the Composite Document, which contains the recommendation of the Independent Board Committee to the Independent Shareholders in relation to the Offer; and (ii) “Letter from the Independent Financial Adviser” as set out on pages 27 to 52 of the Composite Document, which sets out the advice and recommendation of the Independent Financial Adviser to the Independent Shareholders and the Independent Board Committee in relation to the Offer and the principal factors considered by it before arriving at its recommendation. You are urged to read both letters and the other information contained in the Composite Document carefully before taking any action in respect of the Offer.

In considering what action to take in response to the Offer, you should also consider your own tax positions, if any, and in case of doubt, consult your professional advisers.

Yours faithfully,By order of the Board

Yugang International LimitedYuen Wing ShingManaging Director

— 25 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE


(Incorporated in Bermuda with limited liability)

(Stock Code: 00613)

28 March 2019


Dear Sir or Madam,

CONDITIONAL MANDATORY CASH OFFER BYGET NICE SECURITIES LIMITED

FOR AND ON BEHALF OF FUTURE CAPITAL GROUP LIMITED TO ACQUIRE ALL THE ISSUED SHARES


INTRODUCTION

We refer to the Composite Document dated 28 March 2019 issued jointly by the Offeror and the Company of which this letter forms part. Unless the context requires otherwise, terms used in this letter shall have the same meaning as those defined in the Composite Document.

We have been appointed by the Board to form the Independent Board Committee to make recommendation to you as to whether, in our opinion, the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and as to acceptance of the Offer.

We, being the members of the Independent Board Committee, have declared that we are independent and do not have any conflict of interest in respect of the Offer and are therefore able to consider the terms of the Offer and to make recommendation to the Independent Shareholders.

— 26 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Shinco Capital has been appointed, with our approval, as the Independent Financial Adviser to advise and make recommendation to us and the Independent Shareholders as to the terms of the Offer and as to acceptance of the Offer. Details of its advice and recommendation and the principal factors taken into consideration in arriving at its recommendation are set out in the “Letter from the Independent Financial Adviser” set out in the Composite Document.

We also wish to draw your attention to the “Letter from Get Nice Securities”, the “Letter from the Board” and the additional information set out in the Composite Document, including the Appendices to the Composite Document and the accompanying Form of Acceptance.

RECOMMENDATION

Having taken into account the advice and recommendation of the Independent Financial Adviser, in particular the factors, reasons and recommendation as set out in the “Letter from the Independent Financial Adviser” of the Composite Document, we concur with the view of the Independent Financial Adviser and consider that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned, and recommend the Independent Shareholders to accept the Offer.

Notwithstanding our recommendation, the Independent Shareholders are strongly advised that their decision to realise or to hold their investment in the Company depends on their own individual circumstances and investment objectives. If in any doubt, the Independent Shareholders should consult their own professional advisers for professional advice.

Yours faithfully,For and on behalf of the

Independent Board Committee ofYugang International Limited

Mr. Lee Ka Sze, Carmelo

Mr. Luk Yu King, James

Mr. Leung Yu Ming, Steven

Mr. Ng Kwok Fu

Non-Executive Director

Independent Non-Executive

Director


Director


Director

— 27 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of a letter received from Shinco Capital, the Independent Financial Adviser to the Independent Board Committee and Independent Shareholders in respect of the Offer for the purpose of inclusion in this Composite Document.

Room 1106, 11/FOffice Plus@Sheung Wan

No. 93 – 103 Wing Lok StreetSheung WanHong Kong

28 March 2019

To the Independent Board Committee and Independent Shareholders ofYugang International Limited (the “Company”)

Dear Sir or Madam,

THE CONDITIONAL MANDATORY CASH OFFER BYGET NICE SECURITIES LIMITED

FOR AND ON BEHALF OFFUTURE CAPITAL GROUP LIMITED TO ACQUIRE

ALL THE ISSUED SHARES(OTHER THAN THOSE ALREADY OWNED BY

FUTURE CAPITAL GROUP LIMITED ANDPARTIES ACTING IN CONCERT WITH IT) OF

YUGANG INTERNATIONAL LIMITED

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee in respect of the terms of the Offer, details of which are set out in the Composite Document dated 28 March 2019 jointly issued by the Company and the Offeror to the Independent Shareholders, of which this letter (the “Letter”) forms part. Terms used in this Letter shall have the same meanings as those defined in the Composite Document unless the context requires otherwise.

Reference is made to the Joint Announcement that, on 16 January 2019 (after trading hours), the Vendors entered into the Sale and Purchase Agreement with the Offeror, pursuant to which the Vendors agreed to sell, and the Offeror agreed to purchase the Sale Shares, being an aggregate of 4,099,709,732 Shares, representing approximately 44.06% of the entire issued share capital of the Company as at the date of the Sale and Purchase Agreement and the Latest Practicable Date, for a total consideration of HK$717,449,203.10 (equivalent to HK$0.175 per Sale Share) in cash.

— 28 —


Share Completion took place on 17 January 2019. Immediately following the Share Completion, the Offeror and parties acting in concert with it are interested in an aggregate of 4,152,427,732 Shares, representing approximately 44.62% of the entire issued share capital of the Company.

Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make a conditional mandatory general offer in cash for all the issued Shares other than those already owned by the Offeror and parties acting in concert with it. Get Nice Securities, on behalf of the Offeror, is making the Offer to all the Independent Shareholders for all the issued Shares (other than those Shares already owned by the Offeror and parties acting in concert with it).

As at the Latest Practicable Date, (i) there are 9,305,276,756 Shares in issue; and (ii) the Company does not have any outstanding options, derivatives, warrants or securities which are convertible or exchangeable into Shares or other types of equity interest and has not entered into any agreement for the issue of such options, derivatives, warrants or relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) convertible into Shares.

In accordance with Rule 2.8 of the Takeovers Code, the Company has established the Independent Board Committee, comprising the non-executive Director, namely Mr. Lee Ka Sze, Carmelo and all the independent non-executive Directors, namely Mr. Luk Yu King James, Mr. Leung Yu Ming, Steven and Mr. Ng Kwok Fu, to make recommendation to the Independent Shareholders as to whether the Offer is, or is not, fair and reasonable and as to acceptance of the Offer pursuant to Rule 2.1 of the Takeovers Code.

We, Shinco Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the Offer is, or is not, fair and reasonable and as to acceptance of the Offer pursuant to Rule 2.1 of the Takeovers Code. Our appointment as the Independent Financial Adviser has been approved by the Independent Board Committee.

As at the Latest Practicable Date, we are not associated or connected with the Company or the Offeror, or any party acting, or presumed to be acting, in concert with any of them. During the past two years immediately preceding and up to the date of our appointment as the Independent Financial Adviser, save for this appointment as the Independent Financial Adviser in respect of the Offer, there were no other engagements between Shinco Capital Limited and the Group or the Offeror. Apart from normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser, no arrangement exists whereby we will receive any fees or benefits from the Company or the Offeror or any party acting, or presumed to be acting, in concert with any of them. Accordingly, we are considered eligible to give independent advice on the Offer.

— 29 —


BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee, we have relied on the statements, information, opinions and representations contained or referred to in the Composite Document and the representations made to us by the Directors and the senior management of the Company (the “Management”).

We have assumed that all statements, information and representations provided by the Directors and the Management, for which they are solely responsible, are true and accurate at the time when they were provided and continue to be so as at the Latest Practicable Date and the Independent Shareholders will be notified of any material changes to such statements, information, opinions and/or representations as soon as possible in accordance with Rule 9.1 of the Takeovers Code. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors or the Offeror (as the case may be) in the Composite Document were reasonably made after due enquiries and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Composite Document, or the reasonableness of the opinions expressed by the Company, the Offeror, their respective advisers, the Directors and/or the director of the Offeror, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/arrangements or implied understanding with anyone between the Group and/or the Offeror concerning the Offer.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Composite Document (other than the information relating to the Offeror, Ms. Lo, and parties acting in concert with any one of them) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Composite Document (other than opinions expressed by the Offeror, Ms. Lo, and parties acting in concert with any of them) have been arrived at after due and careful consideration and there are no other facts not contained in the Composite Document, the omission of which would make any statement (other than those relating to the Offeror and Ms. Lo) contained in the Composite Document misleading.

The sole director and sole shareholder of the Offeror, being Ms. Lo, accepts full responsibility for the accuracy of the information contained in the Composite Document (other than any information relating to the Group, the Vendors and parties acting in concert with any one of them), and confirms, having made all reasonable enquiries, that to the best of her knowledge, opinions expressed in the Composite Document (other than opinions expressed by Group and the Vendors) have been arrived at after due and careful consideration and there are no other facts not contained in the Composite Document, the omission of which would make any statement in the Composite Document misleading.

— 30 —


We consider that we have been provided with sufficient information and have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group, the Vendors, the Offeror or their respective subsidiaries or associates (if applicable).

Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Where information in this Letter has been extracted from published or otherwise publicly available sources, the sole responsibility of us is to ensure that such information has been correctly and fairly extracted, reproduced or presented from the relevant stated sources and not be used out of context.

We have not considered the tax and regulatory implications on the Group or the Independent Shareholders as a result of the Offer since these depend on their individual circumstances. In particular, the Independent Shareholders who are residents overseas or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions, and if in any doubt, should consult their own professional advisers. We will not accept responsibility for any tax effect on or liability of any person resulting from his or her acceptance or non-acceptance of the Offer.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion and recommendation to the Independent Board Committee in respect of the Offer, we have taken into account the following principal factors and reasons:

1. Background and terms of the Offer

1.1 Terms of the Offer

Get Nice Securities, on behalf of the Offeror, is making the Offer to all the Independent Shareholders to acquire all the issued Shares other than those already owned by the Offeror and parties acting in concert with it, in compliance with the Takeovers Code on the following basis:

For each Offer Share ............................................................. HK$0.175 in cash

— 31 —


The Offer Price of HK$0.175 per Offer Share equals to the purchase price per Sale Share paid by the Offeror under the Sale and Purchase Agreement. The Offer is conditional upon the Offeror having received valid acceptances of the Offer which, together with the Shares already acquired or agreed to be acquired by the Offeror and the parties acting in concert with it before or during the Offer Period, will result in the Offeror and parties acting in concert with it holding more than 50% of the voting rights of the Company.

2. Business and financial information of the Group

2.1 Basic information of the Group

The Company is incorporated in Bermuda with limited liability and the issued shares of which are listed on the Main Board of the Stock Exchange. As at the Latest Practicable Date, the Company is an investment holding company principally engaged in property businesses, and the principal activities of the Group are (i) treasury management; (ii) money lending; and (iii) property leasing.

2.2 Historical financial performance of the Group

Set out below are extracts of consolidated financial information of the Group from the published annual results of the Company for the financial year ended 31 December 2018 (the “2018 Annual Results”) and the annual report of the Company for the financial year ended 31 December 2017 (the “2017 Annual Report”).

Further financial information of the Group is set out in Appendix II to the Composite Document.

For the financial year ended 31 December

2016 2017 2018HK$’000 HK$’000 HK$’000(Audited) (Audited) (Unaudited)

Revenue 30,114 34,293 65,958Other income and gains 2,411 137,228 31,636Share of profit of an associate 121,577 18,696 28,048Profit before income tax 26,034 142,785 90,366Profit for the year attributable to

the Shareholders 21,848 127,505 109,180

— 32 —


As at 31 December

2016

As at 31 December

2017

As at 31 December

2018HK$’000 HK$’000 HK$’000(Audited) (Audited) (Unaudited)

Total assets 2,849,037* 2,831,197* 1,646,845Net asset value attributable to the

Shareholders 2,791,417* 2,792,004* 1,632,379

* During the financial year ended 31 December 2018, there are the CHH Distribution in Specie and the Y. T. Distribution in Specie (as defined below).

For the financial year ended 31 December 2017

For the financial year ended 31 December 2017, the Group’s revenue amounted to approximately HK$34.29 million, representing an increase of approximately 13.88% as compared to the previous financial year, of which approximately HK$26.20 million was generated from the treasury management and approximately HK$8.10 million from the property leasing business. The increase in revenue was attributable to the increase in gross rental income. Such increase in revenue for the financial year ended 31 December 2017 was mainly due to the full year recognition of rental income from the leasing of investment properties that are reclassified from leasehold properties in late 2016 and the additional rental income brought by the two companies (each holding a commercial property) acquired in May 2017 that commenced to generate more revenue. The Group also recognized other income and gains of approximately HK$137.23 million as compared to approximately HK$2.41 million in the previous financial year. Such increase was mainly due to the increase in net fair value gains on listed equity investments at fair value through profit or loss of approximately HK$103.86 million and increase in fair value gains on investment properties of approximately HK$28.89 million.

For the financial year ended 31 December 2017, the Group recorded a profit before income tax and a profit for the year of approximately HK$142.79 million and HK$127.51 million respectively, representing increases of approximately 448.46% and approximately 483.60% respectively as compared to the previous financial year. The significant increase in profit were mainly attributable to the increase in other income and gains of approximately HK$134.82 million and reduction in the administrative cost of approximately

— 33 —


HK$44.80 million and other expense, being fair value losses on listed equity investments at fair value through profit or loss, of approximately HK$35.44 million but offset by the decrease in share of profit of an associate (namely Y. T. Realty Group Limited (stock code: 00075.HK) (“Y. T.”)) of approximately HK$102.88 million.

The increase in other income and gains was mainly contributed by the one-off fair value gains from the Group’s investment in CHH of approximately HK$90.1 million (2016: HK$25.4 million) for the year ended 31 December 2017. The decrease in share of profit of Y. T. was due to the substantial decrease in profit, mainly attributable to the recognition of one-off gain on disposal of subsidiaries holding the two major Hong Kong investment properties and related property services companies of Y. T. in the previous year and no profit contribution from its then associated company, namely The Cross-Harbour (Holdings) Limited (stock code: 00032.HK) (“CHH”) after the distribution in specie by Y. T. in 2016.

As at 31 December 2017, the Group recorded audited total assets of approximately HK$2,831.20 million, comprising mainly investment in an associate (i.e. Y. T.) of approximately HK$554.28 million, investment properties of approximately HK$437.30 million, available-for-sale investment of approximately HK$505.50 million and listed equity investments at fair value through profit or loss of approximately HK$1,080.21 million. The net asset value attributable to the Shareholders as at 31 December 2017 was approximately HK$2,792.00 million.

For the financial year ended 31 December 2018

During the financial year ended 31 December 2018, the Group declared a special dividend by way of distributing (i) its interest in the CHH shares, representing approximately 96.55% of the Group’s total investment in CHH (the “CHH Distribution in Specie”) in September 2018; and (ii) its entire interest in Y. T. in November 2018 (the “Y. T. Distribution in Specie”), whereupon Y. T. ceased to be an associate and would no longer contribute to the Group through the share of profit or loss of an associate.

For the financial year ended 31 December 2018, the Group’s revenue amounted to approximately HK$65.96 million, representing an increase of approximately 92.34% as compared to the previous financial year, of which approximately HK$54.67 million was generated from the treasury management business and approximately HK$11.29 million from the property leasing business.

— 34 —


The increase in revenue was mainly attributable to the increase in gain on disposal of listed equity investments at fair value through profit or loss of approximately HK$14.55 million and the increase in interest income from loan receivables of approximately HK$8.96 million, increase in dividend income of approximately HK$4.52 million and increase in rental income of approximately HK$3.19 million.

The Group also recognized other income and gains of approximately HK$31.64 million as compared to approximately HK$137.23 million in the previous financial year. Such significant decrease was mainly due to the recognition of the one-off fair value gain of approximately HK$90.1 million from the interest in the CHH shares for the year ended 31 December 2017, in which approximately 96.55% of the Group’s total investment in CHH was distributed in the form of distribution in specie in September 2018.

For the financial year ended 31 December 2018, the Group recorded a consolidated profit for the year of approximately HK$109.18 million, representing a decrease of approximately 14.40% as compared to the previous financial year. Such decrease was mainly attributable to the decrease in other income and gains of approximately HK$105.59 million due to no fair value gain on listed equity investment recorded for the financial year of 2018 (2017: fair value gain of HK$103.86 million) which was however mostly offset by the improvement in other key performance indicators for the year including the increase in revenue of approximately HK$31.67 million, reduction in administrative expenses of approximately HK$19.9 million, increase in share of profit of an associate of Y. T. (distributed in the form of Y. T. Distribution in Specie) of approximately HK$9.35 million and an income tax provision difference of HK$34.1 million for the year.

As at 31 December 2018, the Group recorded total assets of approximately HK$1,646.85 million, comprising investment properties of approximately HK$464.00 million, investment in listed debt investments at amortised cost of approximately HK$66.77 million, loan receivables of approximately HK$115.08 million, listed equity investments at fair value through profit or loss of approximately HK$818.48 million, time deposits and cash and bank balances of approximately HK$168.88 million. The net asset value attributable to the Shareholders as of 31 December 2018 was approximately HK$1,632.38 million.

— 35 —


As set out in the above table, both the total assets and the net asset value as at 31 December 2018 decreased as compared to the same as at 31 December 2017, such decreases were mainly attributed to the CHH Distribution in Specie and the Y. T. Distribution in Specie. The total interest in CHH was recorded as listed equity investments at fair value through profit or loss under current assets, at approximately HK$683.83 million as at 31 December 2017. The interest in associate was recorded at approximately HK$554.28 million as at 31 December 2017.

2.3 Industry outlook of the principal business of the Group

For the past two financial years, majority of the Group’s revenue and gains came from the treasury management business segment. As shown in the 2018 Annual Results, (i) the treasury management segment (excluding the money lending business as “Treasury Investment”) generated revenue of approximately HK$39.42 million, representing approximately 59.76% of the total revenue, (ii) the money lending business (classified as treasury business under the 2018 Annual Results) generated interest income of approximately HK$15.25 million, representing approximately 23.13% of the total revenue; and (iii) the property leasing business recorded revenue of approximately HK$11.29 million, representing 17.11% of the total revenue. We also note that the Treasury Investment generated total revenue and gains of approximately HK$46.11 million, representing approximately 47.24% of the total revenue and gains. As at 31 December 2018, the value of listed equity investments at fair value through profit or loss, being part of the assets under Treasury Investment was approximately HK$818.48 million, representing approximately 49.70% of the total assets. Thus the Treasury Investment business (excluding the money lending) is the prominent part business of the Company.

The prospect of the business in Treasury Investment depends on the overall investment environment. Set out below are the Hang Seng Index from 2017 to the Latest Practicable Date.

— 36 —


Chart: Hang Seng Index

0

5000

10000

15000

20000

25000

30000

35000

3/1/

2017

3/2/

2017

3/3/

2017

3/4/

2017

3/5/

2017

3/6/

2017

3/7/

2017

3/8/

2017

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3/10

/201

73/

11/2

017

3/12

/201

73/

1/20

183/

2/20

183/

3/20

183/

4/20

183/

5/20

183/

6/20

183/

7/20

183/

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183/

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183/

10/2

018

3/11

/201

83/

12/2

018

3/1/

2019

3/2/

2019

3/3/

2019

26/3

/201

9

Hang Seng Index

33,154

24,585

Point

As depicted in the above chart, the overall market environment became worse in 2018. The Hang Seng Index exhibited increasing trend from the start of 2017 to early 2018, where it peaked and closed at approximately 33,154 points on 26 January 2018. After the peak, the index started to drop and reached the bottom of approximately 24,585 points on 30 October 2018, representing a decrease of approximately 25% from the peak. Such change was mainly due to the pessimistic market sentiment under the trade disputes between the United States of America and China, the decelerated pace of growth in China’s economy and the aggressive interest rate hike of U.S. Federal Reserve in 2018 that exerted downward pressure on the Hang Seng Index. As stated in the World Economic Outlook published by International Monetary Fund in January 2019, global growth in 2018 is estimated to be 3.7 percent, but signs of a slowdown in the second half of 2018 have led to downward revisions for several economies. The global growth projected to decline to 3.5 percent in 2019 (0.2 percentage point below last projections in October 2018).

Although the Hang Seng Index started to improve since January 2019, it is not guaranteed that it will continue to improve as the macro-economic environment remains uncertain, as the growth of china economy is losing momentum with the uncertain prospect of the China-US trade negotiation. Therefore, the operating environment of the treasury management business would remain challenging.

— 37 —


In view of the uncertain and challenging economic environment, the Company has maintained a prudent and cautious investment strategy. It is noted that in the second half of 2018, the Group announced the investment in two senior notes that were aimed at providing the Company with opportunities to earn a stable income on its investment. In December 2018, the Company acquired on the market (i) senior notes issued by Fantasia Holdings Group Co., Limited in the aggregate principal amount of US$5,000,000 (equivalent to approximately HK$39,105,000), such notes will mature on 8 March 2021, with annual coupon rate of 8.375%; (ii) senior notes issued by Kaisa Group Holdings Ltd. in the aggregate principal amount of US$4,000,000 (equivalent to approximately HK$31,284,000), such notes will mature on 30 June 2021, with annual coupon rate of 7.875%, and; (iii) senior notes issued by Kaisa Group Holdings Ltd. in the aggregate principal amount of US$2,000,000 (equivalent to approximately HK$15,640,000), such notes will mature on 30 June 2022, with annual coupon rate of 8.5%. These notes issuers are both principally engaging in the property development and related businesses in the PRC. Detailed information of the above notes are contained in the announcements of the Company dated 13 December 2018 and 14 December 2018.

As mentioned in the 2018 Annual Results, in view of various economic and geopolitical uncertainties, the Group has adopted a defensive strategy by reducing the exposure of listed equity investments. Also, the Group’s corporate strategy for 2019 focuses on maintaining a stable business development principally by increasing its exposure in investment properties for recurring and stable rental income with reasonable return, fixed income debt investment for stable interest income and expanding its money lending business to earn interest income for future growth.

Section summary

It is noted that although the Group has recorded a profit for the financial year ended 31 December 2018, the recorded profit has decreased as compared to the previous financial year ended 31 December 2017 mainly due to the recognition of an one-off fair value gain of approximately HK$90.1 million from the Company’s interest in CHH shares in 2017. It is also noted that the prudent investment strategies adopted by the Group since the 2018 financial year would provide the Group with a relatively stable stream of income. Yet, taking into account of the foregoing and having considered that (i) the investments in Y. T. ceased and investments in CHH were substantially reduced after the Y. T. Distribution in Specie and the CHH Distribution in Specie in the financial year ended 31 December 2018, there would not be any future share of profit or loss from Y. T. and future contribution from such reduced investment

— 38 —


in CHH would decrease; and (ii) the business in Treasury Investment remains as the prominent part business of the Company and will be subject to the uncertain market condition, due to sluggish global economy prospect in 2019 and potential volatility in the financial market which would continue to affect the overall investment sentiment of the financial markets, we are cautiously optimistic about the prospect of the Group in the short run.

3. Information on the Offeror and the Offeror’s intention in relation to the Group

3.1 Information on the Offeror

As set out in the Letter from Get Nice Securities in the Composite Document, the Offeror is an investment holding company incorporated in the BVI with limited liability. As at the Latest Practicable Date, the Offeror is wholly and directly beneficially owned by Ms. Lo, who is also the sole director of the Offeror. She is a seasoned investor with real estate investment (which is one of the principal businesses of the Group) in particular, properties in Hong Kong and the United States of America and other investments in Hong Kong and overseas. In 2014, Ms. Lo acquired the controlling interest in another listed company on the main board of the Stock Exchange, formerly known as Qualipak International Holdings Limited (stock code: 01332). The Offeror acquired the controlling interest in the Company with a medium term of two to five years’ investment horizon subject to market environment and conditions from time to time to make decision regarding its investment in the Company. Ms. Lo does not intend to participate in the management of the Group.

3.2 The Offeror’s intention in relation to the Group

As disclosed in the Letter from Get Nice Securities in the Composite Document, the Offeror intends to continue the existing principal businesses of the Group. The Offeror has no intention to discontinue the employment of any employees or to redeploy the fixed assets of the Company other than those in its ordinary course of business.

The Offeror will conduct a review on the financial position and the operations of the Company and will formulate long-term business plans and strategy of the Company, explore other business opportunities such as any business opportunities that would come to the attention to the Offeror from time to time and consider whether any asset disposal, asset acquisition, business rationalization, business divestment, fund raising, restructuring of business and/or business diversification will be appropriate in order to enhance the

— 39 —


long-term growth potential of the Company. As set out in the Letter from Get Nice Securities, as at the Latest Practicable Date, the Offeror and the Board have no intention and have not entered into any agreement, arrangement, understanding to (i) acquire and/or develop any new business; and (ii) dispose of or downsize of the existing businesses and/or material operating assets of the Company.

Compulsory Acquisition and Maintenance of the listing status of the Company

The Stock Exchange has stated that if, at the close of the Offer, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that: (i) a false market exists or may exist in the trading of the Shares; or (ii) that there are insufficient Shares in public hands to maintain an orderly market; it will consider exercising its discretion to suspend dealings in the Shares.

As set out in the Letter from Get Nice Securities in the Composite Document, the Offeror intends the Company to remain listed on the Stock Exchange. The new directors to be appointed to the Board and Ms. Lo, being the sole director of the Offeror, will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Shares following the close of the Offer.

As set out in the Letter from Get Nice Securities in the Composite Document, the Offeror does not intend to exercise any power of compulsory acquisition of any Offer Shares outstanding and not acquired under the Offer after the close of the Offer.

Board composition of the Company

As at the Latest Practicable Date, the Board comprises nine Directors, namely Mr. Cheung Chung Kiu (Chairman), Mr. Yuen Wing Shing (Managing Director), Mr. Zhang Qing Xin, Mr. Lam Hiu Lo and Mr. Liang Kang as executive Directors; Mr. Lee Ka Sze, Carmelo as non-executive Director; and Mr. Luk Yu King, James, Mr. Leung Yu Ming, Steven and Mr. Ng Kwok Fu as independent non-executive Directors. It is expected that all the members of the Board will resign as soon as practicable following the First Closing Date, or the date when the Offer becomes or is declared unconditional, whichever is the later.

— 40 —


The Offeror intends to nominate new Directors to the Board in compliance with the Company’s constitutional documents, the Takeovers Code and the Listing Rules with effect from a date which is no earlier than such date as permitted under the Takeovers Code, i.e. upon the Composite Document has been posted. As at the Latest Practicable Date, the Offeror has not reached any final decision as to who will be nominated as new Directors and the timing of such appointment, but it is expected that such decision will be reached prior to the First Closing Date. Further announcement(s) will be made by the Company in compliance with the requirements of the Listing Rules as and when there are changes in the composition of the Board.

Based on the above information, having considered (i) the Offeror has not laid down any detailed business plan as at the Latest Practicable Date; (ii) it is expected that all the members of the Board will resign as soon as practicable following the First Closing Date, and the Offeror has not reached any final decision as to who will be nominated as new Directors, there is no assurance that the new Directors to be appointed will possess expertise and experience in the current principal businesses of the Company in the treasury management, money lending and property investment and leasing business, and (iii) though Ms. Lo, the sole director and owner of the Offeror is experienced in property investment, she has indicated that she does not intend to participate in the management of the Group; thus we consider that there are uncertainties in the future operation and business development strategies of the Group, including the investment strategies as discussed in above section.

4. Information on the Offer and Offer Price

4.1 Offer Price

The Offer Price of HK$0.175 per Offer Share represents:

(i) a slight discount of approximately 1.13% to closing price of HK$0.177 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

(ii) a premium of approximately 2.94% over the closing price of HK$0.170 per Share as quoted on the Stock Exchange on the Last Trading Day;

(iii) a premium of approximately 4.17% over the average closing prices of the Shares as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day of approximately HK$0.168 per Share;

— 41 —


(iv) a premium of approximately 5.42% over the average closing prices of the Shares as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day of approximately HK$0.166 per Share;

(v) a premium of approximately 3.55% over the average closing prices of the Shares as quoted on the Stock Exchange for the 30 consecutive trading days up to and including the Last Trading Day of approximately HK$0.169 per Share; and

(vi) approximately an amount equal to the consolidated net asset value attributable to owners of the Company of approximately HK$0.175 per Share (based on the number of issued Shares as at the Latest Practicable Date) as at 31 December 2018, the date to which the latest financial results of the Group were made up.

As disclosed above, the Offer Price represents (i) a slight premium over the closing price of the Shares as quoted on the Stock Exchange on the Last Trading Day; (ii) slight premiums to the relevant closing prices of the Share as quoted on the Stock Exchange for the last five (5), ten (10) and thirty (30) consecutive trading days up to and including the Last Trading Day; and (iii) approximately an amount equal to the consolidated net asset value attributable to owners of the Company per Share as at 31 December 2018.

4.2 Historical price performance of the Shares

The following chart depicts the historical closing prices of the Shares as quoted on the Stock Exchange during the period from 16 January 2018 to 16 January 2019 (i.e., the Last Trading Day), being one year prior to the Last Trading Day, and further up to the Latest Practicable Date (the “Review Period”). We consider that the Review Period is adequate to illustrate the recent closing price movement of the Shares for conducting a reasonable comparison among the historical closing prices of the Shares and the Offer Price. The comparison of daily closing prices of the Shares and the Offer Price is illustrated as follows:

— 42 —


Chart: Comparison of the Offer Price to the closing prices of the Shares

0.000.010.020.030.040.050.060.070.080.090.100.110.120.130.140.150.160.170.180.190.200.210.22

Offer Price

2018/8/24 Announcement of 2018 interim results and the CHH Distribution in Specie

2018

/01/

1620

18/0

1/25

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/02/

0520

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2/14

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/02/

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/03/

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/04/

1120

18/0

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/05/

0220

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/05/

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/06/

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/07/

0420

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/07/

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/08/

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/08/

3120

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/09/

2020

18/1

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/10/

1220

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0/24

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/11/

0220

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1/13

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/11/

2220

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2/03

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/12/

1220

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1/04

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1520

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0420

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2720

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/03/

26

HK$

2018/10/31 Announcementof Y.T. Distribution inSpecie

Source: Website of the Stock Exchange

Note: During the Review Period, trading in the Shares was suspended from 17 January 2019 to 23 January 2019 pending the release of the Joint Announcement.

As illustrated by the chart above, the closing prices of the Shares maintained stably ranging from approximately HK$0.102 to HK$0.114 from the beginning of the Review Period to late July 2018. Thereafter there shows a significant rise in Share price from HK$0.109 on 1 August 2018 to HK$0.157 on 27 August 2018. It is noted that the Company announced the proposed CHH Distribution in Specie in August 2018.

Another significant rise in Share price took place in November 2018, after the Company announced the Y. T. Distribution in Specie. The closing price of the Share reached its peak at HK$0.183 (on 23 November 2018 and 30 November 2018) before the Last Trading Day.

The Share price closed at HK$0.170 on the Last Trading Day and rose to the closing price of HK$0.208 after resumption of trading on 24 January 2019, thereafter the Share price gradually decreased and maintained relatively stable

— 43 —


and slightly above the Offer Price. We consider that such increase in the Share price immediately after the release of the Joint Announcement may be due to market reaction to the change in control of the Company and there is no assurance that the price of the Shares will rise or continue to maintain at a level equal to or above the Offer Price after the Latest Practicable Date or after the close of Offer. During the Review Period, the Share price ranged from HK$0.102 to HK$0.208 with an average price of approximately HK$0.138 per Share.

Taking into account that (i) out of the 288 trading days in the Review Period, 227 trading days of which were with the Offer Price greater than the closing prices, the Offer Price represents a premium of approximately 26.81% over the average closing price of approximately HK$0.138 per Share during the Review Period; (ii) the Offer Price was approximately same amount to the net asset value attributable to owners of the Company as at 31 December 2018 of approximately HK$0.175 per Share; (iii) the thin trading volume of the Shares (as discussed in the following section) may indicate uncertainty as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares, and (iv) the increase in the Share price after the release of the Joint Announcement may due to market reaction to change in control of the Company, there is no assurance on the future price level, we are of the view that the Offer Price is fair and reasonable so far as the Independent Shareholders are concerned.

Shareholders should note that the information set out above is not an indicator of the future performance of the Shares, and that the price of the Shares may increase or decrease from its closing price as at the Latest Practicable Date.

4.3 Historical trading liquidity of the Shares

Apart from the daily closing price of the Shares, we have also performed a review on the average daily trading volume per month (the “Average Daily Volume”) of the Shares in the Review Period, which is commonly used for analysis purpose to illustrate the liquidity of the Shares.

— 44 —


Month

Average daily trading volume

of the Shares during the

month/period


during the month/period

as a percentage of the total number of

Shares as at the Latest

Practicable Date


during the month/period

as a percentage of the Shares

held by public Shareholders

as at the Latest Practicable

Date(approximate) (approximate%) (approximate%)

(Note 3)

2018January (Note 1) 4,052,333 0.04% 0.08%February 1,757,889 0.02% 0.03%March 2,049,238 0.02% 0.04%April 5,074,211 0.05% 0.10%May 2,132,057 0.02% 0.04%June 1,817,000 0.02% 0.04%July 882,000 0.01% 0.02%August 7,296,957 0.08% 0.14%September 6,517,263 0.07% 0.13%October 3,258,952 0.04% 0.06%November 2,589,091 0.03% 0.05%December 959,474 0.01% 0.02%

2019January (up to the Last

Trading Day) 1,034,000 0.01% 0.02%January (after the Last

Trading Day) 36,125,333 0.39% 0.71%February 5,409,295 0.06% 0.11%March (Note 2) 7,565,889 0.08% 0.15%

Source: Website of the Stock Exchange

— 45 —


Notes:

(1) The average trading volume of the Shares in January 2018 began on 16 January 2018.

(2) The average trading volume of the Shares in March 2019 was up to the Latest Practicable Date.

(3) Based on 5,067,449,020 Shares held by public shareholders as at the Latest Practicable Date.

As illustrated in the table above, the Average Daily Volume of Shares during the Review Period before the Last Trading Day ranged from approximately 882,000 Shares in July 2018 to approximately 7,296,957 Shares in August 2018, representing approximately 0.01% to approximately 0.08% of the total number of Shares as at the Latest Practicable Date. The Average Daily Volume of Share in January 2019 after the release of the Joint Announcement, from 24 January 2019 to 31 January 2019, was 36,125,333 Shares and representing approximately 0.39% of the total number of Shares. We consider such increase in trading volume may due to market reaction to the change in control of the Company and there is no assurance that the trading volume could maintain at such level. Given the Average Daily Volume as a percentage of the total number of issued Shares as at the Latest Practicable Date for each month (except in January 2019, after the release of the Joint Announcement) during the Review Period was less than 0.1%, we consider that the trading volume of the Shares was low and the trading of the Shares did not appear to be active during the Review Period.

Such thin trading may indicate uncertainty as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares. Accordingly, the market trading price of the Shares may not necessarily reflect the proceeds that the Independent Shareholders can receive by the disposal of their Shares in the open market. Therefore, the Offer represents an assured opportunity for the Independent Shareholders, particularly for those who hold a large number of the Shares, to dispose of some or all of their Shares at the Offer Price if they so wish, without creating a significant downside pressure on the market trading price of the Shares.

— 46 —


4.4 Comparable analysis

To further assess the fairness and reasonableness of the Offer Price, we have performed a price-to-earnings ratio (the “PER”) and a price-to-book ratio (the “PBR”) analysis, both being the most commonly used benchmark for valuation of companies, to compare the Offer Price against the market valuation of other comparable companies.

For comparison purpose, we have conducted a search of comparables which meet the criteria of (i) having listed on the Stock Exchange on the Last Trading Day; (ii) with market capitalization of not more than HK$2.5 billion and not less than HK$100 million as at the Latest Practicable Date; (iii) having businesses closely comparable with that of the Group, i.e., investment in treasury business for their latest financial year; (iv) generated more than 50% of their consolidated revenues from investment business, or for companies with no revenue, generated net value gains in fair value of financial assets at fair value through profit or loss; and (v) recorded profit in their latest published annual results/reports.

Based on the aforesaid selection criteria and based on our search conducted through published information on the Stock Exchange’s website, we have found an exhaustive list of 8 comparables (the “Comparable(s)”), we set out our findings in the table below.

While it should be noted that all the subject companies involved in the Comparable analysis may have different market capitalisation, financial positions and investment strategies as compared with those of the Company, the analysis is meant to cover a list of similar companies listed on the Stock Exchange and form an appropriate sample size to reflect the value of comparable companies in the same industry. Therefore, we consider the PER analysis and PBR analysis are appropriate.

No. Company name Principal business PER PBRMarket

capitalisation(stock code) (Note 1) (Note 2)

(times) (times) (HK$ million)(approximate) (approximate) (approximate)

1 China Merchants China Direct Investments Limited

(招商局中國基金有限公司 )

(133.HK)

Principally engaged in financial investment.

1.77 0.33 1,642.15(Note 3) (Note 3)

— 47 —





2 Gemini Investments (Holdings) Limited

（盛洋投資（控股）有限公司）(174.HK)

Principally engaged in investment business.

32.48 0.07 397.22

3 DT Capital Limited(鼎立資本有限公司 )

(356.HK)

Principally engaged in investment in listed equity securities and unlisted debt securities. 25.53 1.02 205.15

4 Oriental Explorer Holdings Limited

東方網庫控股有限公司(430.HK)

Principally engaged in property and security businesses.

1.34 0.19 270.00

5 Global Mastermind Capital Limited

環球大通投資有限公司(905.HK)

Principally engaged in securities investment.

5.37 0.33 142.17

6 G-Resources Group Ltd.國際資源集團有限公司(1051.HK)

Principally engaged in the investment of listed and unlisted financial assets, financial services and property investment. 8.49 0.19 2,082.76

(Note 3) (Note 3)

7 China Development Bank International Investment Limited

國開國際投資有限公司(1062.HK)

Principally engaged in the investment in equity instruments and other financial instruments.

3.15 0.32 557.23

— 48 —





8 China Innovation Investment Limited

中國創新投資有限公司(1217.HK)

Principally engaged in investing in listed and unlisted companies mainly in Hong Kong and the People’s Republic of China (the PRC). 7.26 0.38 268.83

Maximum 32.48 1.02

Minimum 1.34 0.07

Average 10.68 0.35

The Company 14.96 1.00 1,647.03(Note 4) (Note 5)

Source: Information from the website of the Stock Exchange

Notes:

(1) In our analysis, we make reference to the profit attributable to the owners of the respective companies according to their latest available annual results/reports.

(2) The PBR of the Comparables are calculated as their respective market capitalisation as at the Latest Practicable Date divided by their respective equity attributable to owners of the company according to their latest available interim/annual results/reports or announcements of unaudited net asset value.

(3) As the financial results of G-Resources Group Ltd. and China Merchants China Direct Investments Limited are in United States dollar (USD), we use exchange rate of USD1: HK$7.85 to calculate their PERs and PBRs.

(4) The implied PER of the Company represents the Offer Price divided by the earnings per share attributable to ordinary equity holders of the Company for the year ended 31 December 2018.

(5) The implied PBR of the Company represents the Offer Price divided by the equity attributable to equity holders of the Company per Share as at 31 December 2018.

— 49 —


Analysis of PER

As illustrated in the table above, we note that the PERs of the Comparables range from approximately 1.34 times to approximately 32.48 times, with an average of approximately 10.68 times.

With reference to the Offer Price of HK$0.175 per Offer Share under the Offer and the profit attributable to owners of the Company per Share of approximately HK$0.0117 as at 31 December 2018, the Group’s implied PER by the Offer Price is approximately 14.96 times, which falls within the range and is above the average of the Comparables’ PER. Hence, we consider that, based upon the analysis of PER, the Offer Price is fair and reasonable so far as the Independent Shareholders are concerned.

Analysis of PBR

As illustrated in the table above, we note that the PBRs of the Comparables range from approximately 0.07 times to approximately 1.02 times, with an average of approximately 0.35 times. We also note that only 1 out of the 8 Comparables were trading at slight premium to the net asset value per share (i.e., being with PBR more than 1).

The Offer Price of HK$0.175 per Offer Share under the Offer is approximately an amount equal to the consolidated net asset value attributable to owners of the Company per Share of approximately HK$0.175 as at 31 December 2018, the Group’s implied PBR by the Offer Price is approximately 1.00 time, which is above the average and close to the maximum of the Comparables’ PBR. Hence, we consider that, based upon the analysis of PBR, the Offer Price is fair and reasonable so far as the Independent Shareholders are concerned.

4.5 Section summary

Notwithstanding the Offer Price is at slight discounts to closing price of HK$0.177 at the Latest Practicable Date, having considered that (i) the Offer Price falls within the range of closing price of Shares during the Review Period; (ii) the implied PER and PBR calculated based upon the Offer Price both fall within the range and are above the average of Comparables’ PER and PBR respectively; and (iii) historical trading volume of the Shares is relatively thin, we consider that the Offer Price as well as the Offer are fair and reasonable so far as the Independent Shareholders are concerned.

— 50 —


RECOMMENDATION

Taking into consideration the following principal factors and reasons as discussed above:

1. the business in Treasury Investment remains as the prominent part business of the Company and is subject to the uncertain market condition as discussed above, we remain cautiously optimistic about the prospect of the Group in the short run under the Group’s defensive investment strategies facing the current macro-economic environment as discussed above;

2. there are uncertainties in the Board composition after the close of the Offer, in particular the Directors will resign and there is no assurance that the new Directors to be appointed will possess expertise and experience in the current principal businesses of the Company, thus we consider that there are uncertainties in the future operation and business development strategies of the Group, including the investment strategies;

3. the Offer Price during the Review Period are generally higher than the closing prices of the Shares and the Offer Price represents premiums, ranging from approximately 2.94% to 5.42% over the average closing price of the Shares as quoted on the Stock Exchange on the Last Trading Day and the last five (5), ten (10) and thirty (30) consecutive trading days up to and including the Last Trading Day;

4. the Offer Price of HK$0.175 per Offer Share represents a slight discount of approximately 1.13% to closing price of HK$0.177 per Share on the Latest Practicable Date;

5. the increase in the Share price after the release of the Joint Announcement may due to market reaction to change in control of the Company and there is no assurance that the price of the Shares will rise or continue to maintain at a level equal to or above the Offer Price after the Latest Practicable Date or after the close of Offer;

6. the trading volume of the Shares has been thin, it may indicate uncertainty as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares;

7. the Offer Price of HK$0.175 is approximately an amount equal to the latest consolidated net asset value attributable to owners of the Company per Share as at 31 December 2018; and

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8. the implied PER and PBR based upon the Offer Price fall within the range and are above the average Comparables’ PER and PBR respectively,

we are of the opinion that on balance the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to make recommendation to the Independent Shareholders and we recommend the Independent Shareholders to accept the Offer.

However, the Independent Shareholders who intend to accept the Offer are reminded to closely monitor the market price and liquidity of the Shares during the Offer Period, and having regard to their own circumstances, consider selling the Shares in the open market, instead of accepting the Offer, if the net proceeds from the ultimate sale of such Shares would be higher than that receivable under the Offer.

For the Independent Shareholders who intend to dispose large blocks of Shares in the open market are also reminded of the possible difficulty in disposing of their Shares in the open market without creating downward pressure on the price of the Shares as a result of the thin trading of the Shares.

For those Independent Shareholders who consider to retain their Shares in full or in part, are advised that there is no guarantee that the prevailing level of the Share price will sustain during and after the Offer Period.

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The Independent Shareholders are reminded that their decisions to dispose of or hold their investment in the Shares are subject to their individual circumstances and investment objectives. The Independent Shareholders should read carefully the procedures for accepting the Offer as detailed in the Composite Document, the appendices to the Composite Document and the Form of Acceptance accompanied, if they wish to accept the Offer.

Yours faithfully,For and on behalf of

Shinco Capital Limited

Bobby Chow Teresa TsangManaging Director Director

Mr. Bobby Chow is a licensed person registered with the Securities and Futures Commission to carry out Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance and has over 10 years of experience in corporate finance industry.

Ms. Teresa Tsang is a licensed person registered with the Securities and Futures Commission to carry out Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance and has over 10 years of experience in corporate finance industry.

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APPENDIX I FURTHER TERMS OF THE OFFER AND PROCEDURES OF ACCEPTANCE

1. PROCEDURES FOR ACCEPTANCE OF THE OFFER

(a) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in your name, and you wish to accept the Offer, you must send the duly completed and signed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) for not less than the number of Shares in respect of which you intend to accept the Offer, by post or by hand, to the Registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, in any event no later than 4:00 p.m. on the First Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code.

(b) If the Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Offer in respect of your holding of Shares (whether in full or in part), you must either:

(i) lodge your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of tit le (and/or any satisfactory indemnity or indemnities required in respect thereof) with the nominee company, or other nominee, with instructions authorising it to accept the Offer on your behalf and requesting it to deliver the duly completed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or

(ii) arrange for the Shares to be registered in your name by the Company through the Registrar, and deliver the duly completed and signed Form of Acceptance together with the relevant Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or

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(iii) if your Shares have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorize HKSCC Nominees Limited to accept the Offer on your behalf on or before the deadline set by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, you should check with your licensed securities dealer/registered institution in securities/custodian bank for the timing on the processing of your instruction, and submit your instruction to your licensed securities dealer/registered institution in securities/custodian bank as required by them; or

(iv) if your Shares have been lodged with your investor participant’s account maintained with CCASS, authorise your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set out by HKSCC Nominees Limited.

(c) If the Share certificate(s) and/or transfer receipts and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are not readily available and/or is/are lost, as the case may be, and you wish to accept the Offer in respect of your Shares, the Form of Acceptance should nevertheless be completed and delivered to the Registrar together with a letter stating that you have lost one or more of your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, it/they should be forwarded to the Registrar as soon as possible thereafter. If you have lost your Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title, you should also write to the Registrar a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar.

(d) If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your Share certificate(s), and you wish to accept the Offer in respect of your Shares, you should nevertheless complete and sign the Form of Acceptance and deliver it to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable authority to the Offeror and/or Get Nice Securities or

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their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant Share certificate(s) when issued and to deliver such Share certificate(s) to the Registrar on your behalf and to authorize and instruct the Registrar to hold such Share certificate(s), subject to the terms and conditions of the Offer, as if it was/they were delivered to the Registrar with the Form of Acceptance.

(e) Acceptance of the Offer will be treated as valid only if the completed Form of Acceptance is received by the Registrar by no later than 4:00 p.m. on the First Closing Date (or such later time and/or date as the Offeror may determine and announce with the consent of the Executive) and the Registrar has recorded the acceptance and any relevant documents required by the Takeovers Code have been so received, and is:

(i) accompanied by the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if those share certificate(s) is/are not in your name, such other documents in order to establish your right to become the registered holder of the relevant Shares; or

(ii) from a registered Shareholder or his personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to Shares which are not taken into account under another sub-paragraph of this paragraph (e)); or

(iii) certified by the Registrar or the Stock Exchange.

(iv) If the Form of Acceptance is executed by a person other than the registered Shareholder, appropriate documentary evidence of authority (e.g. grant of probate or certified copy of a power of attorney) to the satisfaction of the Registrar must be produced.

(f) If the Offer is withdrawn or lapses, the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) lodged with the Form of Acceptance to the relevant Shareholder(s).

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(g) No acknowledgement of receipt of any Form of Acceptance, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given.

2. SETTLEMENT OF THE OFFER

Subject to the Offer becoming or being declared unconditional and provided that the Form of Acceptance and the relevant Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are complete and in good order in all respects and have been received by the Registrar no later than the latest time for acceptance, a cheque for the amount due to each of the Independent Shareholders who accepts the Offer less seller’s ad valerom stamp duty in respect of the Shares tendered by it/him/her under the Offer will be despatched to such Independent Shareholder by ordinary post at its/his/her own risk as soon as possible but in any event within seven (7) Business Days of the later of the date on which the Offer becomes or is declared unconditional and the receipt of all the relevant documents by the Registrar to render such acceptance complete and valid.

Settlement of the consideration to which any accepting Independent Shareholder is entitled under the Offer will be implemented in full in accordance with the terms of the Offer (save with respect to the payment of seller’s ad valerom stamp duty), without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such accepting Independent Shareholder.

3. ACCEPTANCE PERIOD AND REVISIONS

(a) All acceptances must be received by the latest time for acceptances, being 4:00 p.m. on the First Closing Date in accordance with the instructions printed on the Form of Acceptance, unless the Offer become or are declared unconditional, or are extended or revised with the consent of the Executive. The Offer is conditional upon the Offeror having received valid acceptances in respect of the Shares which, together with the Shares already held by it and any party acting in concert with it before or during the Offer Period, will result in the Offeror and any party acting in concert with it holding more than 50% of the Shares. Pursuant to the Takeovers Code, where the Offer becomes

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or is declared unconditional, the Offer will remain open for acceptance for not less than 14 days thereafter. The Offeror will make an announcement as and when the Offer becomes or is declared unconditional.

(b) If the Offeror revises the terms of the Offer (in accordance with the relevant requirements under the Takeovers Code), all Independent Shareholders, whether or not they have already accepted the Offer, will be entitled to accept the revised Offer under the revised terms.

(c) If the Offer is extended or revised, the announcement of such extension or revision will state the next closing date or, if the Offer has become unconditional as to acceptances, a statement that the Offer will remain open until further notice. In the latter case, at least 14 days’ notice in writing will be given before the Offer is closed to the Independent Shareholders who have not accepted the Offer, and an announcement will be released. The revised Offer will be kept open for at least 14 days thereafter.

(d) If the First Closing Date of the Offer is extended, any reference in this Composite Document and in the Form of Acceptance to the First Closing Date shall, except where the context otherwise requires, be deemed to refer to the closing date of the Offer as so extended, unless the Offer becomes or is declared unconditional, or are extended.

4. ANNOUNCEMENTS

(a) By 6:00 p.m. on the First Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of its decision in relation to the revision, extension, expiry or unconditionality of the Offer. The Offeror must post an announcement on the Stock Exchange’s website by 7:00 p.m. on the First Closing Date stating, amongst other information required under Rule 19.1 of the Takeovers Code, whether the Offer has been revised, extended, or has expired or has become or been declared unconditional.

The announcement will state the total number of Shares and rights over Shares:

(i) for which acceptances of the Offer have been received;

(ii) held, controlled or directed by the Offeror or persons acting in concert with it before the Offer Period; and

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(iii) acquired or agreed to be acquired during the Offer Period by the Offeror and persons acting in concert with it.

The announcement must include details of any relevant securities (as defined in the Takeovers Code) in the Company which the Offeror or any person acting in concert with it has borrowed or lent, save for any borrowed shares which have been either on-lent or sold. The announcement must also specify the percentages of the issued share capital of the Company and the percentages of voting rights of the Company represented by these numbers of Shares.

(b) In computing the total number of Shares represented by acceptances, only valid acceptances that are complete and in good order and satisfy the acceptance conditions set out in paragraph 1 of this Appendix and which have been received by the Registrar no later than 4:00 p.m. on the First Closing Date, being the latest time and date for acceptance of the Offer, shall be included.

(c) As required under the Takeovers Code, all announcements in relation to the Offer which the Executive and the Stock Exchange have confirmed that they have no further comments thereon must be made in accordance with the requirement of the Takeovers code and the Listing Rules.

5. RIGHT OF WITHDRAWAL

(a) Acceptance of the Offer tendered by the Independent Shareholders shall be irrevocable and cannot be withdrawn, except in the circumstances set out in (b) below or in compliance with Rule 17 of the Takeovers Code, which provides that an acceptor of the Offer shall be entitled to withdraw its/his/her acceptance within 21 days from the First Closing Date if the Offer has not by then become unconditional as to acceptances. An acceptor of the Offer may withdraw its/his/her acceptance by lodging a notice in writing signed by the acceptor (or its/his/her agent dully appointed in writing and evidence of whose appointment is produced together with the notice) to the Registrar or the Company, as the case may be.

(b) If the Offeror are unable to comply with the requirements set out in the paragraph headed “Announcements” above, the Executive may require that the Independent Shareholders, who have tendered acceptances to the Offer to be granted a right of withdrawal on terms that are acceptable to the Executive until the requirements set out in that paragraph are met.

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In such case, when the Independent Shareholders withdraw their acceptance(s), the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the Share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) lodged with the Form of Acceptance to the relevant Independent Shareholder(s).

6. OVERSEAS SHAREHOLDERS

The Offeror intends to make the Offer available to all the Independent Shareholders, including the Overseas Shareholders. However, the Offer is in respect of securities of a company incorporated in the Bermuda and is subject to the procedural and disclosure requirements of Hong Kong which may be different from other jurisdictions. The Overseas Shareholders who wish to participate in the Offer but with a registered address outside Hong Kong are subject to, and may be limited by, the laws and regulations of their respective jurisdiction in connection with their participation in the Offer. Overseas Shareholders who are citizens, residents or nationals of a jurisdiction outside Hong Kong should observe any applicable legal or regulatory requirements and, where necessary, seek legal advice. It is the responsibility of Overseas Shareholders who wish to accept the Offer to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdiction in connection with the acceptance of the Offer (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due in respect of such jurisdiction).

7. STAMP DUTY

Seller’s ad valorem stamp duty payable by the Independent Shareholders who accept the Offer and calculated at a rate of 0.1% of (i) the market value of the Offer Shares subject to such acceptance; or (ii) consideration payable by the Offeror in respect of the relevant acceptances of the Offer, whichever is higher, will be deducted from the amount payable by the Offeror to such person on acceptance of the Offer. The Offeror will arrange for payment of the seller’s ad valorem stamp duty on behalf of the accepting Independent Shareholders and will pay the buyer’s ad valorem stamp duty in connection with the acceptances of the Offer and the transfer of the Offer Shares to the Stamp Office in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

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8. TAX IMPLICATIONS

Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offer. None of the Offeror, parties acting in concert with the Offeror, the Company, Get Nice Securities, Get Nice Capital and Veda Capital and their respective ultimate beneficial owners, directors, officers, agents or associates or any other person involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offer.

9. GENERAL

(a) All communications, notices, Form of Acceptance, Share certificate(s), transfer receipt(s), other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to settle the consideration payable under the Offer to be delivered by or sent to or from the Independent Shareholders will be delivered by or sent to or from them, or their designated agents, by ordinary post at their own risk, and none of the Offeror, parties acting in concert with the Offeror, the Company, Get Nice Securities, Get Nice Capital and Veda Capital and any of their respective directors nor the Registrar or other parties involved in the Offer or any of their respective agents accept any liability for any loss in postage or any other liabilities that may arise as a result thereof.

(b) The provisions set out in the Form of Acceptance form part of the terms and conditions of the Offer.

(c) The accidental omission to despatch this Composite Document and/or Form of Acceptance or any of them to any person to whom the Offer is made will not invalidate the Offer in any way.

(d) The Offer is, and all acceptances will be, governed by and construed in accordance with the laws of Hong Kong.

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(e) Due execution of the Form of Acceptance will constitute an authority to the Offeror, Get Nice Securities or such person or persons as the Offeror may direct to complete, amend and execute any document on behalf of the person or persons accepting the Offer and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as it may direct, the Shares in respect of which such person or persons has/have accepted the Offer.

(f) By accepting the Offer, the Independent Shareholders will sell their Shares to the Offeror free from all Encumbrances and all third party rights and with all rights attached thereto as at the date of this Composite Document, including the right to receive all dividends and declared, paid or made, if any, on or after the date of this Composite Document. The making of the Offer to a person with a registered address in a jurisdiction outside Hong Kong may be affected by the applicable laws of the relevant jurisdiction. Overseas Shareholders with registered addresses in jurisdictions outside Hong Kong should inform themselves about and observe any applicable legal requirements in their own jurisdictions.

(g) Acceptance of the Offer by any nominee will be deemed to constitute a warranty by such nominee to the Offeror that the number of Shares in respect of which it is indicated in the Form of Acceptance is the aggregate number of Shares held by such nominee for such beneficial owner who is accepting the Offer.

(h) Reference to the Offer in this Composite Document and in the Form of Acceptance shall include any extension or revision thereof.

(i) All acceptances, instructions, authorities and undertakings given by the Independent Shareholders in the Form of Acceptance shall be irrevocable except as permitted under the Takeovers Code.

(j) The English text of this Composite Document and the Form of Acceptance shal l prevai l over the i r respect ive Chinese text for the purpose of interpretation.

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APPENDIX II FINANCIAL INFORMATION OF THE GROUP

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP FOR EACH OF THE FOUR YEARS ENDED 31 DECEMBER 2015, 2016, 2017 AND 2018

Set out below is a summary of certain consolidated financial results of the Group for the years ended 31 December 2015, 2016 and 2017 extracted from the 2016 and 2017 annual report of the Company and consolidated financial results of the Group for the year ended 31 December 2018 extracted from the 2018 published annual results announcement of the Company:

For the years ended 31 December2018 2017 2016 2015

(unaudited) (audited) (audited) (audited)(HK$’000) (HK$’000) (HK$’000) (HK$’000)

REVENUE 65,958 34,293 30,114 34,957

Other income and gains (Note 1) 31,636 137,228 2,411 27,093Administrative expenses (26,814) (46,687) (91,484) (81,073)Impairment losses on loan receivables (5,912) — — —Other expenses (Note 2) (2,110) — (35,438) —Finance costs (440) (745) (1,146) (1,544)Share of profit of an associate 28,048 18,696 121,577 182,428

PROFIT BEFORE TAX 90,366 142,785 26,034 161,861

Income tax credit/(expense) 18,814 (15,280) (4,186) (32)

PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 109,180 127,505 21,848 161,829

EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANYBasic and diluted HK1.17 cents HK1.37 cents HK0.23 cents HK1.74 cents

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For the years ended 31 December2018 2017 2016 2015

(unaudited) (audited) (audited) (audited)(HK$’000) (HK$’000) (HK$’000) (HK$’000)

PROFIT FOR THE YEAR 109,180 127,505 21,848 161,829OTHER COMPREHENSIVE

INCOME/(LOSS)Items that will be reclassified

subsequently to profit or loss when specific conditions are met:

Changes in fair value of an available-for-sale investment — (146,596) (41,663) 278,623

Share of other comprehensive income/(loss) of an associate (20,957) 38,289 (65,489) 24,268

Release of other reserves upon distribution in specie of shares in an associate 230,861 — — —

209,904 (108,307) (107,152) 302,891

Items that will not be reclassified subsequently to profit or loss:

Surplus on property revaluation upon transfer from owner-occupied properties to investment properties — — 49,211 —

OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 209,904 (108,307) (57,941) 302,891

TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY 319,084 19,198 (36,093) 464,720

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Note 1: The net fair value gains on listed equity investments at fair value through profit or loss as an item under “Other income and gains” for each of the years ended 31 December 2015, 2016, 2017 and 2018 was HK$26.1 million, nil, HK$103.9 million and nil respectively and a material fluctuation was recorded for the years ended 2017 and 2018. The fair value gains on investment properties as an item under “Other income and gains” for each of the years ended 31 December 2015, 2016, 2017 and 2018 was HK$1.0 million, HK$1.1 million, HK$29.99 million and HK$24.92 million respectively. Other income and gains for the year ended 31 December 2018 also included a gain of HK$6.1 million on distribution in specie of shares in a listed equity investment at fair value through profit or loss.

Note 2: The net fair value losses on listed equity investments at fair value through profit or loss as an item under “other expenses” for each of the year ended 31 December 2015, 2016, 2017 and 2018 was nil, HK$35.4 million, nil and HK$2.1 million respectively.

Save as disclosed in Note 1 and Note 2 above, there is no item of any other income and gains or other expenses that is material for each of the years ended 31 December 2015, 2016, 2017 and 2018.

There is no profit or loss attributable to non-controlling interests nor comprehensive income attributable to non-controlling interests of the Company for each of the years ended 31 December 2015, 2016, 2017 and 2018.

The dividend per share for each of the four years ended 31 December 2015, 2016, 2017 and 2018 was HK$0.004, HK$0.002, HK$0.002 and nil respectively. The total dividends declared and paid by the Company amounted to HK$74.44 million for the four years ended 31 December 2015, 2016, 2017 and 2018.

The auditors of the Company for the years ended 31 December 2015, 2016 and 2017 were Ernst & Young. Their opinions on the consolidated financial statements of the Group for each of the three years ended 31 December 2017 were unqualified.

2. AUDITED CONSOLIDATED FINANCIAL INFORMATION

The Company is required to set out or refer to in this Composite Document the consolidated statement of financial position, consolidated statement of cash flows and any other primary statement as shown in (i) the audited consolidated financial statements of the Group for the year ended 31 December 2017 (the “2017 Financial Statements”) and (ii) the audited consolidated financial statements of the Group for the year ended 31 December 2016 (the “2016 Financial Statements”), together with the notes to the relevant published financial statements which are of major relevance to the appreciation of the above financial information.

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The 2017 Financial Statements are set out on pages 49 to 96 of the annual report of the Company for the year ended 31 December 2017, which was published on 17 April 2018. The annual report of the Company for the year ended 31 December 2017 is posted on the websites of the Stock Exchange and the Company. Please also see below a direct link:

http://www3.hkexnews.hk/listedco/listconews/SEHK/2018/0417/LTN20180417387.pdf

The 2016 Financial Statements are set out on pages 46 to 88 of the annual report of the Company for the year ended 31 December 2016, which was published on 12 April 2017. The annual report of the Company for the year ended 31 December 2016 is posted on the websites of the Stock Exchange and the Company. Please also see below a direct link:


The 2017 Financial Statements and the 2016 Financial Statements (but not any other part of the annual report of the Company for the year ended 31 December 2017 and the annual report of the Company for the year ended 31 December 2016 in which they respectively appear) are incorporated by reference into this Composite Document and form part of this Composite Document.

3. UNAUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR THE SIX MONTHS ENDED 30 JUNE 2018 AND THE YEAR ENDED 31 DECEMBER 2018

The unaudited consolidated financial statements of the Group for the six months ended 30 June 2018 are set out on pages 11 to 30 of the interim report of the Company for the six months ended 30 June 2018, which was published on 11 September 2018. The interim report of the Company for the six months ended 30 June 2018 is posted on the websites of the Stock Exchange and the Company. Please also see below a direct link:


The unaudited consolidated results of the Group for the year ended 31 December 2018 are set out on pages 1 to 11 of the annual results announcement of the Company for the year ended 31 December 2018, which was published on 22 March 2019 and is posted on the websites of the Stock Exchange and the Company. Please also see below a direct link:


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4. INDEBTEDNESS

At the close of business on 31 December 2018, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Composite Document, the Group had short-term banking facilities of, in aggregate, approximately HK$150.0 million the availability of which is subject to review by the banks from time to time), which were unutilized, and the Group did not have any outstanding borrowings. As at 31 December 2018, the Group pledged certain of its investment properties as securities for the general banking facilities granted to the Group.

Save as aforesaid or as otherwise disclosed herein, at the close of business on 31 December 2018, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchases or finance lease commitments, guarantees or other material contingent liabilities.

5. MATERIAL CHANGE

The Directors were not aware of any material change in the financial or trading position or outlook of the Group since 31 December 2018, being the date on which the consolidated financial information of the Company were made up and disclosed in the annual results announcement for the year ended 31 December 2018 (as announced by the Company on 22 March 2019), and up to and including the Latest Practicable Date.

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APPENDIX III GENERAL INFORMATION OF THE GROUP

1. RESPONSIBILITY STATEMENT

All the Directors jointly and severally accept full responsibility for the accuracy of the information contained in this Composite Document (other than the information relating to the Offeror, Ms. Lo and parties acting in concert with any one of them) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than the opinions expressed by the Offeror, Ms. Lo and parties acting in concert with any one of them) have been arrived at after due and careful consideration and that there are no other facts not contained in this Composite Document, the omission of which would make any statement (other than those relating to the Offeror and Ms. Lo) in this Composite Document misleading.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

Authorised: HK$

50,000,000,000 Shares 500,000,000

Issued:

9,305,276,756 Shares 93,052,768

Up to the Latest Practicable Date, no Share has been issued by the Company since 31 December 2018, being the end of the last financial year of the Company.

All Shares in issue rank pari passu in all respects regarding rights to capital, dividends and voting.

Other than the Shares, the Company had no other outstanding shares, options (whether or not under the share option scheme adopted by the Company on 21 May 2015), warrants, derivative or other securities that are convertible or exchangeable into Shares or other types of equity interest in issue as at the Latest Practicable Date.

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3. DISCLOSURE OF INTEREST AND DEALINGS IN SECURITIES

For the purpose of paragraph 3 in this Appendix III to this Composite Document, “interested” has the same meaning as ascribed to that term in Part XV of the SFO.

(a) Directors’ and Chief Executive’s interests

As at the Latest Practicable Date, the interest of the Directors and chief executive of the Company in the issued share capital of the Company was set out as follows:

Name of DirectorCapacity/ Nature of interest

Number of Shares held

Approximate percentage of

shareholding(Note 1)

Mr. Cheung Chung Kiu Interest of controlled corporation (note 2)

4 0.00%

Mr. Zhang Qing Xin Beneficial Owner 13,600,000 0.15%Mr. Lam Hiu Lo Beneficial Owner 41,800,000 0.45%Mr. Liang Kang Beneficial Owner 30,000,000 0.32%

Notes:

1. The percentage of shareholding in the Company is calculated by reference to the number of Shares in issue as at the Latest Practicable Date (i.e. 9,305,276,756 Shares).

2. As at the Latest Practicable Date, 1st Vendor is the beneficial owner of the Retained Shares and 1st Vendor is owned as to 35%, 30%, 5% and 30% by 3rd Vendor, Peking Palace Limited (“Peking Palace”), Miraculous Services Limited (“Miraculous Services”) and Prize Winner Limited (“Prize Winner”) respectively. Prize Winner is beneficially owned by 3rd Vendor and his associates. Peking Palace and Miraculous Services are held by Palin Holdings Limited as the trustee for Palin Discretionary Trust, a family discretionary trust, the objects of which include 3rd Vendor and his family. 3rd Vendor is the sole shareholder of Palin Holdings Limited.

Save as disclosed in this sub-section (a), none of the Directors and chief executive of the Company had any interests in the Shares or other securities of the Company carrying voting rights or convertible securities, warrants, options or derivatives of the Company.

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(b) As at the Latest Practicable Date, neither the Company nor any Director had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

(c) As at the Latest Practicable Date:

(i) save as disclosed in paragraph (a) above, none of the Directors had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company;

(ii) none of the subsidiaries of the Company, pension funds of the Company or of any member of the Group or a person who is presumed to be acting in concert with the Company by virtue of class (5) of the definition of “acting in concert” under the Takeovers Code or an associate of the Company by virtue of class (2) of the definition of “associate” under the Takeovers Code but excluding any exempt principal trader and exempt fund managers had owned or controlled any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or had dealt in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company during the Relevant Period;

(iii) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is presumed to be acting in concert with the Company by virtue of classes (1), (2), (3) and (5) of the definition of “acting in concert” under the Takeovers Code with the Company or who is an associate of the Company by virtue of classes (2), (3) and (4) of the definition of “associate” under the Takeovers Code, and none of such persons had dealt in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company during the Relevant Period;

(iv) no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company were managed on a discretionary basis by fund managers (other than exempt fund managers) connected with the Company, and none of them had dealt in any relevant securities in the Company during the Relevant Period;

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(v) in respect of the Retained Shares, the 1st Vendor has undertaken, among others, not to accept the Offer in respect of the Retained Shares and in respect of the 13,600,000 Shares, 41,800,000 Shares and 30,000,000 Shares, beneficially owned by three executive Directors, namely Mr. Zhang Qing Xin, Mr. Lam Hiu Lo and Mr. Liang Kang respectively, Mr. Zhang Qing Xin intended not to accept the Offer, and Mr. Lam Hiu Lo and Mr. Liang Kang intended to accept the Offer. Save as the aforesaid, none of the Directors held any beneficial shareholdings in the Company which would otherwise entitle them to accept or reject the Offer; and

(vi) neither the Company nor any of the Directors had borrowed or lent any of the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company, save for any borrowed Shares which had been either on-lent or sold.

(d) During the Relevant Period:

(i) the 1st Vendor, the 2nd Vendor and Mr. Cheung, an executive Director and the Chairman of the Company, disposed of 4,099,709,732 Shares at a price of HK$0.175 per Share pursuant to the terms of the Sale and Purchase Agreement. Save for such dealings, during the Relevant Period, none of the Director had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; and

(ii) none of the Company nor any Director had dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Offeror.

4. ARRANGEMENTS AFFECTING DIRECTORS

As at the Latest Practicable Date:

(a) no benefit (other than statutory compensation) was or would be given to any Director as compensation for loss of office or otherwise in connection with the Offer;

(b) there was no agreement or arrangement existed between any Director and any other person which was conditional or dependent upon the outcome of the Offer or otherwise connected with the Offer; and

(c) there was no material contract entered into by the Offeror in which any Director had a material personal interest.

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5. SERVICE CONTRACTS WITH DIRECTORS

As at the Latest Practicable Date, none of the Directors had entered into any service contracts with the Company or any of its subsidiaries or associated companies which (i) (including both continuous and fixed term contracts) have been entered into or amended within 6 months prior to the commencement of the Offer Period; (ii) are continuous contracts with a notice period of 12 months or more; or (iii) are fixed term contracts with more than 12 months to run irrespective of the notice period.

6. MATERIAL CONTRACTS

As at the Latest Practicable Date, save as disclosed below, no contract (not being contracts entered into in the ordinary course of business carried on or intended to be carried on by any member of the Group) had been entered into by any member of the Group within the two years prior to the commencement of the Offer Period and ending on the Latest Practicable Date which are or may be material:

(i) the sale and purchase agreement dated 14 March 2017 entered into, among others, Joywell Holdings Limited, an indirect wholly-owned subsidiary of the Company, and Future Master Investments Limited in relation to the acquisition of the 2 issued shares of USD1.00 each in the share capital of August Estate Limited at a consideration of HK$144,600,000 as referred to in the announcement of the Company dated 14 March 2017; and

(ii) the sale and purchase agreement dated 14 March 2017 entered into, among others, Joywell Holdings Limited, an indirect wholly-owned subsidiary of the Company, and Future Master Investments Limited in relation to the acquisition of the 2 issued shares of USD1.00 each in the share capital of Supreme Access International Limited and the outstanding unsecured, interest-free loan (if any) without any fixed term of repayment owed by Supreme Access International Limited and Sharp Light International Limited to Future Master Investments Limited immediately prior to completion at a consideration of HK$136,100,000 as referred to in the announcement of the Company dated 14 March 2017.

7. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation or arbitration of material importance and, so far as the Directors are aware, no litigation or claims of material importance was pending or threatened by or against any members of the Group.

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8. QUALIFICATIONS OF EXPERT

The following are the qualifications of the expert who has been named in this Composite Document or who have given its opinion or advice, which is contained in this Composite Document:

Name Qualification

Shinco Capital a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

9. CONSENT

The expert named in the paragraph headed “Qualifications of Expert” above has given and has not withdrawn i ts wri t ten consent to the issue of the Composite Document with the inclusion therein of the opinions, reports, advice, recommendations, and/or letters and/or the references to its name and/or opinions, reports, advice, recommendations, and/or letters in the form and context in which they respectively appear.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at (a) 5th Floor, Alexandra House, 18 Chater Road, Central, Hong Kong from 9:30 a.m. to 5:30 p.m., Monday to Friday (except public holidays), unless (i) a tropical cyclone warning signal number 8 or above is hoisted or is announced to be hoisted; or (ii) a black rainstorm warning signal is issued or is announced to be issued; (b) on the website of the Company at http://www.yugang.com.hk/; and (c) on the website of the SFC at http://www.sfc.hk from 28 March 2019 until the earlier of: (a) the First Closing Date; and (b) the date on which the Offer is withdrawn or lapse, whichever is the earliest:

(i) the memorandum of association and new bye-laws of the Company;

(ii) the annual reports of the Company for the two years ended 31 December 2017 and the interim report of the Company for the six months ended 30 June 2018;

(iii) the annual results announcement of the Company for the year ended 31 December 2018;

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(iv) the “Letter from the Board”, the text of which is set out on pages 21 to 24 of the Composite Document;

(v) the “Letter from the Independent Board Committee”, the text of which is set out on pages 25 to 26 of the Composite Document;

(vi) the “Letter from the Independent Financial Adviser”, the text of which is set out on pages 27 to 52 of the Composite Document;

(vii) the written consent from the Independent Financial Adviser referred to in the paragraph headed “Consent” in this Appendix III to the Composite Document; and

(viii) material contracts as referred to in the paragraph headed “Material Contracts” in Appendix III to the Composite Document.

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APPENDIX IV GENERAL INFORMATION OF THE OFFEROR

1. RESPONSIBILITY STATEMENT

The information contained in this Composite Document relating to the Offeror and its intention has been supplied by the Offeror. The sole director of the Offeror accepts full responsibility for the accuracy of the information contained in this Composite Document (other than any information relating to the Group, the Vendors and parties acting in concert with any one of them), and confirms, having made all reasonable enquiries, that to the best of her knowledge, opinions expressed in this Composite Document (other than the opinions expressed by the Group and the Vendors) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement contained in this Composite Document misleading.

2. MARKET PRICE

The table below shows the closing price of the Shares quoted on the Stock Exchange on (i) the last day on which trading took place in each of the calendar months during the Relevant Period; (ii) the Last Trading Day; and (iii) the Latest Practicable Date.

Date Closing price per ShareHK$

201831 July 0.10931 August 0.14728 September 0.14331 October 0.16630 November 0.18331 December 0.162

2019Last Trading Day 0.17031 January 0.18428 February 0.177Latest Practicable Date 0.177

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During the Relevant Period:

(i) the highest closing price of the Shares as quoted on the Stock Exchange was HK$0.208 per Share on 25 January 2019; and

(ii) the lowest closing price of the Shares as quoted on the Stock Exchange was HK$0.108 per Share on 25 July 2018.

Source: Website of the Stock Exchange as at the Latest Practicable Date

3. DISCLOSURE OF INTERESTS

The Offeror is an investment holding company incorporated in the BVI with limited liability. As at the Latest Practicable Date, the Offeror is wholly and directly owned by Ms. Lo. Ms. Lo is the sole director of the Offeror.

Save for an aggregate of 4,152,427,732 Shares owned by the Offeror and Ms. Lo, none of the Offeror, its director and parties acting in concert with any one of them had owned or controlled any other interest in the Shares, options, warrants, derivatives or securities which are convertible into Shares as at the Latest Practicable Date.

4. SHAREHOLDINGS AND DEALINGS IN SECURITIES OF THE COMPANY

(a) Save for the purchase of the Sale Shares under the Sale and Purchase Agreement, none of the Offeror, its director and parties acting in concert with any one of them has dealt in the Shares, outstanding option, derivatives, warrants or other securities convertible into Shares during the Relevant Period.

(b) As at the Latest Practicable Date, save for the Loan Facility, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between the Offeror or its associates or any party acting in concert with it and any other person.

(c) As at the Latest Practicable Date, save for the 1st Vendor has undertaken to the Offeror that it will not accept the Offer in respect of the Retained Shares, no person had irrevocably committed himself to accept or not to accept the Offer.

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(d) As at the Latest Practicable Date, save for the Loan Facility, no arrangement of any kind referred to in Note 8 to Rule 22 of the Takeovers Code exists between a person who owned or controlled Shares or convertible securities, warrants, options or derivatives of the Company and the Offeror or any party acting in concert with it during the Relevant Period.

(e) As at the Latest Practicable Date, neither the Offeror nor any party acting in concert with it had borrowed or lent any Shares or convertible securities, warrants, options or derivatives of the Company.

(f) As at the Latest Practicable Date, no Shares, convertible securities, warrants, options or derivatives of the Company was managed on a discretionary basis by any fund managers connected with the Offeror or any party acting in concert with it, and no such person had dealt in any Shares or convertible securities, warrants, options or derivatives of the Company during the Relevant Period.

(g) Mr. Shum Kin Wai Frankie, a responsible officer and director of Get Nice Securities, acquired 1,000,000 Shares on 5 September 2018 at the price of HK$0.265 per Share and disposed of 500,000 Shares on 31 October 2018 at the price of HK$0.223 per Share. Mr. Shum is currently holding 500,000 Shares and only came to know about the proposed transaction which crystalized in the Sale and Purchase Agreement on 7 January 2019.

5. OTHER ARRANGEMENTS IN RELATION TO THE OFFER

As at the Latest Practicable Date:

(a) save for the Sale and Purchase Agreement, there was no agreement, arrangement or understanding (including any compensation arrangement) between the Offeror and parties acting in concert with it and any Director, recent Director, Shareholder or recent Shareholder which had any connection with or dependent on the Offer;

(b) save for the Sale and Purchase Agreement, no material contracts had been entered into by the Offeror in which any Director has a material personal interest;

(c) there is no agreement or arrangement to which the Offeror and its concert party is a party which relates to circumstances in which it may or may not invoke or seek to invoke a precondition or a condition to the Offer;

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(d) save for the charge of the Shares to be acquired pursuant to the Offer the payment for which is financed by the amount drawn under the Loan Facility, there was no agreement, arrangement or understanding that the securities acquired in pursuance of the Offer would be transferred, charged or pledged to any other persons;

(e) no benefit had been or would be given to any Directors as compensation for loss of office or otherwise in connection with the Offer; and

(f) there were no arrangements (whether by way of option, indemnity or otherwise) in relation to the Shares (or other relevant securities of the Company) or the shares of the Offeror (or other relevant securities of the Offeror) which might be material to the Offer.

6. QUALIFICATIONS AND CONSENTS

The following is the qualifications of the professional advisers engaged by the Offeror whose letter, opinion or advice, is contained in this Composite Document:

Name Qualification

Get Nice Capital a licensed corporation permitted to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO and one of the joint financial advisers to the Offeror

Get Nice Securities a licensed corporation permitted to carry out business in type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO and making the Offer on behalf of the Offeror

Veda Capital a licensed corporation permitted to carry out business in type 6 (advising on corporate finance) regulated activity under the SFO and one of the joint financial advisers to the Offeror

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As at the Latest Practicable Date, the above advisers did not have any shareholding, direct or indirect, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did they have any direct or indirect interest in any assets which had been, since 31 December 2017, being the date of the latest published audited consolidated financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

The above advisers have given and have not withdrawn their respective written consents to the issue of this Composite Document with the inclusion of their advices, reports and/or the references to their names in the form and context in which they appear.

7. MISCELLANEOUS

(i) The principal members of the Offeror’s concert group are the Offeror and Ms. Lo.

(ii) The registered office of the Offeror is si tuated at Coastal Building, Wichkham’s Cay II , P .O.Box 2221, Road Town, Tortola , BVI. The correspondence address of the Offeror and Ms. Lo is situated at Room 2001, 20/F., China United Centre, 28 Marble Road, North Point, Hong Kong.

(iii) The registered office of Get Nice Securities and Get Nice Capital are situated at 10/F, COSCO Tower, Grand Millennium Plaza, 183 Queen’s Road Central, Hong Kong.

(iv) The registered office of Veda Capital is situated at Suite 1106, 11/F, Wing On Centre, 111 Connaught Road Central, Hong Kong.

(v) The English text of this Composite Document and Form of Acceptance shall prevail over the Chinese text in the case of inconsistency.

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8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (a) during normal business hours at the correspondence address of the Offeror in Hong Kong at Room 2001, 20/F., China United Centre, 28 Marble Road, North Point, Hong Kong from 9:30 a.m. to 5:30 p.m., Monday to Friday (except public holidays), unless (i) a tropical cyclone warning signal number 8 or above is hoisted or is announced to be hoisted; or (ii) a black rainstorm warning signal is issued or is announced to be issued ; (b) on the SFC’s website at http://www.sfc.hk; and (c) the website of the Company at http://www.yugang.com.hk, from the date of this Composite Document until the earlier of: (aa) the First Closing Date; and (bb) the date on which the Offer is withdrawn or lapse:

(a) the memorandum and articles of association of the Offeror;

(b) the Side Letter;

(c) the letter from Get Nice Securities, the text of which is set out in the section headed “Letter from Get Nice Securities” in this Composite Document; and

(d) the written consents from Get Nice Securities, Get Nice Capital and Veda Capital respectively as referred to in the paragraph headed “Qualifications and Consents” in this Appendix IV.

Documents

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