Artini Holdings Limited - Proxy Solicitation & Information Statement 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountants or other professional adviser.

If you have sold or transferred all your shares in Artini China Co. Ltd. (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company and it must not be used for the purpose of offering or inviting offers for any securities.

The Securities and Futures Commission of Hong Kong, Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

ARTINI CHINA CO. LTD. 雅天妮中國有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 789)

(1) MAJOR TRANSACTION RELATING TO THE ACQUISITION OF ENTIRE INTEREST IN THE TARGET COMPANY; (2) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES BY A CONTROLLING SHAREHOLDER; (3) APPLICATION FOR WHITEWASH WAIVER; AND

(4) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

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China Investment Securities International Capital Limited

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 8 to 39 of this circular and a letter of recommendation from the Independent Board Committee to the Independent Shareholder is set out on pages 40 to 41 of this circular. A letter from TC Capital, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 42 to 89 of this circular.

A notice convening the SGM to be held at 9/F., Gloucester Tower, The Landmark, 15 Queen’s Road, Central, Hong Kong on 26 August 2016 (Friday) at 9:00 a.m. is set out on pages SGM-1 to SGM-3 of this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof to the office of the Company’s branch share registrar and transfer office in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish and in such event, the relevant proxy form shall be deemed to be revoked.

11 August 2016

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . .	40
LETTER FROM TC CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . .	I-1
APPENDIX II – ACCOUNTANTS’ REPORT ON THE TARGET
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III – UNAUDITED PRO FORMA FINANCIAL
INFORMATION OF THE ENLARGED GROUP . . .	III-1
APPENDIX IV – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . .	IV-1
NOTICE OF SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

“Acquisition”
the acquisition of the Sale Shares by the Purchaser from the Vendors pursuant to the Acquisition Agreement
“Acquisition Agreement”
the sale and purchase agreement dated 13 April 2016 entered into among the Purchaser, the Vendors and the Guarantor in relation to the Acquisition
“acting in concert”
has the meaning ascribed to it under the Takeovers Code
“Announcement”
the announcement dated 13 April 2016 made by the Company in relation to, among the others, the Acquisition, the Subscription, and the application for the Whitewash Waiver
“Annual Report”
the annual report for the year ended 31 March 2016 of the Company
“Asian Alliance”
Asian Alliance (HK) CPA Limited (華融（香港）會計師事務所有限公司), the auditors of the Company
“associate(s)”
has the meaning ascribed to it under the Listing Rules
“Board”
board of Directors
“Business Day(s)”

a day (excluding a Saturday, Sunday, public holiday or any day during which typhoon no. 8 signal (or above) or a black rainstorm warning is hoisted at any time during 9:00 a.m. and 5:00 p.m. on that day) on which licensed banks in Hong Kong are generally open for business

– 1 –

DEFINITIONS

“CISIC”
China Investment Securities International Capital Limited, a licensed corporation to carry on Type 6 (advising on corporate finance) regulated activity under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“close associate(s)”
has the meaning ascribed to it under the Listing Rules
“Company”
Artini China Co. Ltd., a company incorporated in Bermuda with limited liability and whose Shares are listed on the Stock Exchange (stock code: 789)
“Concert Group” means the Subscriber and persons acting in concert with it which, as at the Latest Practicable Date, being the Subscriber and Mr. Tse
“connected person”
has the meaning as ascribed to it under the Listing Rules
“Director(s)”
the director(s) of the Company
“Dragon Max”
Dragon Max Enterprises Limited, a company incorporated in the British Virgin Islands and is wholly-owned by Mr. Zhuang
“Enlarged Group”
the Group and the Target Company
“Executive”
the Executive Director of the Corporate Finance Division of the SFC from time to time and any delegate of such Executive Director
“Group”
the Company and its subsidiaries
“Henan Dazhen”
河南大正投資置業有限公司 (Henan Dazhen Property Investment Company Limited[#] ), a company incorporated in Henan Province PRC with limited liability
“HK$” or
“Hong Kong dollars”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC

– 2 –

DEFINITIONS

“Independent Board Committee”
“Independent Financial Adviser” or “TC Capital”
“Independent Shareholders”
“Independent Third Party(ies)”
“Interim Report”
“Last Trading Day”
the independent board committee comprising all of the independent non-executive Directors, namely Mr. Lau Fai Lawrence, Mr. Lau Yiu Kit and Mr. Zheng Zhaohui, which has been established by the Company to advise and make recommendations to the Independent Shareholders on the terms of the Acquisition Agreement and the transactions contemplated thereunder, the terms of the Subscription Agreement and the transactions contemplated thereunder, the Whitewash Waiver and as to voting at the SGM
TC Capital International Limited, a licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
Shareholders other than (a) the Subscriber, Mr. Tse and parties acting in concert with any one of them; (b) the Subscriber ’s associates; and (c) any other Shareholders who are involved in or interested in the Subscription Agreement and the transactions contemplated thereunder, the Acquisition Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver
third party(ies) independent of and/or not connected with nor acting in concert with any of the Company, its subsidiaries, the respective directors, chief executives, substantial shareholders of the Company and any of its subsidiaries, and associates of any of them, and are not connected persons of the Company or any of its subsidiaries (as defined under Listing Rules)
interim report for the six months ended 30 September 2015 of the Company

12 April 2016, being the last trading day of the Shares on the Stock Exchange prior to the date of the Announcement

– 3 –

DEFINITIONS

“Latest Practicable Date”
“Listing Committee”
“Listing Rules”
“Long Stop Date”
“Marketing Channel Expansion”
“Mr. Tse”
“Mr. Zhuang”
“Outstanding Options”
“PRC”
“Purchaser”
“Relevant Period”
“RMB”
8 August 2016, being the latest practicable date prior to the publication of this circular for the purpose of ascertaining certain information in this circular
has the meaning as ascribed to it under the Listing Rules
The Rules Governing the Listing of Securities on the Stock Exchange
30 September 2016
expansion of the Group’s marketing channel on the e-commerce platform and to market the Group’s products via mobile phone applications targeting primarily smart phone users in the PRC
Mr. Tse Hoi Chau, the executive Director, chairman and chief executive officer of the Company
莊競華 (Mr. Zhang Jinghua*), the sole director and ultimate legal and beneficial owner of the Vendors, and is an Independent Third Party who did not hold any Shares as at the Latest Practicable Date
the outstanding, vested and unvested, options granted by the Company to subscribe for an aggregate of 378,042,600 Shares under the Share Option Scheme
People’s Republic of China, which, solely for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan
Artini Sales Company Limited, a company incorporated in Hong Kong and is a wholly-owned subsidiary of the Company
the period commencing 13 October 2015, being the date falling 6 months before the date of Announcement, up to and including the Latest Practicable Date

Renminbi, the lawful currency of the PRC

– 4 –

DEFINITIONS

“Sale Shares”
“SFC”
“SFO”
“SGM”
“Share(s)”
“Share Option Scheme”
“Shareholder(s)”
“Shenzhen Artini”
“Stand Charm”
“Stock Exchange”
“Subscriber”
“Subscription”
the entire issued share capital of the Target Company legally and beneficially owned as to approximately 94% by Stand Charm and 6% by Dragon Max respectively, immediately prior to completion of the Acquisition
Securities and Futures Commission of Hong Kong
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
the special general meeting of the Company to be convened for the purpose of considering, and if thought fit, approving the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver
ordinary share(s) of HK$0.01 each in the share capital of the Company
the share option scheme of the Company currently in force and adopted by the Company on 23 April 2008
holder(s) of Share(s)
Shenzhen Artini Hongli Enterprises Co. Ltd. (深圳雅天妮弘力實業有限公司), a company incorporated in the Shenzhen, the PRC and an indirect wholly-owned subsidiary of the Company
Stand Charm Limited, a company incorporated in the Republic of Seychelles and Mr. Zhuang is its sole director and ultimate legal and beneficial owner
The Stock Exchange of Hong Kong Limited
Walifax Investments Limited, a company incorporated in the British Virgin Islands, and is beneficially wholly-owned by Mr. Tse
the subscription by the Subscriber for the 2,440,000,000 Subscription Shares pursuant to the Subscription Agreement

– 5 –

DEFINITIONS

“Subscription Agreement”
“Subscription Price”
“Subscription Share(s)”
“substantial shareholder”
“Takeovers Code”
“Target Company”
“Target Company’s December 2016 Accounts”
“Target Company’s June 2016 Accounts”
“Vendors”
“Whitewash Waiver”

“%”

the subscription agreement dated 13 April 2016 between the Subscriber and the Company relating to the subscription of 2,440,000,000 new Shares by the Subscriber
the subscription price of HK$0.074 per Subscription Share
new Share(s) to be subscribed by the Subscriber pursuant to the Subscription Agreement
has the meaning ascribed under in the Listing Rules
the Hong Kong Code on Takeovers and Mergers
Primeview Technology Limited, a company incorporated in Hong Kong with limited liability and is owned as to 94% by Stand Charm and 6% by Dragon Max respectively
the management accounts of the Target Company for the full year ending 31 December 2016
the management accounts of the Target Company for the six months ending 30 June 2016
collectively, Stand Charm and Dragon Max, and each a “Vendor”

waiver granted by the Executive under Note 1 on dispensations from Rule 26 of the Takeovers Code of the obligation on the part of the Subscriber to make a general offer to the Shareholders for all issued Shares and other securities of the Company not already owned or agreed to be acquired by the Subscriber or persons acting in concert with it, which would, if the Subscription proceeds to completion, arise as a result of the allotment and issue of the Subscription Shares to the Subscriber

per cent.

For illustration purposes only

– 6 –

DEFINITIONS

The English transliteration of the Chinese name(s) in this circular, where indicated with “[#] ”, is included for information purpose only and should not be regarded as the official English name(s) of such Chinese names.

For the purpose of this circular, unless the context otherwise requires, conversion of Renminbi into HK Dollars is based on the approximate exchange rate of RMB1 to HK$1.19. Such exchange rate is for the purpose of illustration only and does not constitute a representation that any amounts in Hong Kong dollars or Renminbi have been could have been or may be converted out such or at any other rate or at all.

– 7 –

LETTER FROM THE BOARD

ARTINI CHINA CO. LTD. 雅天妮中國有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 789)

Executive Directors: Registered Office: Mr. Tse Hoi Chau Clarendon House (Chairman and Chief Executive) 2 Church Street Mr. Lin Shao Hua Hamilton HM 11 Bermuda

Independent non-Executive Directors: Mr. Lau Fai Lawrence Principal Place of Business in Hong Kong: Mr. Lau Yiu Kit Suite No. 10, 8/F. Mr. Zeng Zhaohui Tower 3, China Hong Kong City China Ferry Terminal 33 Canton Road, Kowloon Hong Kong

11 August 2016

To the Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION RELATING TO THE ACQUISITION OF ENTIRE INTEREST IN THE TARGET COMPANY; (2) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES BY A CONTROLLING SHAREHOLDER;

(3) APPLICATION FOR WHITEWASH WAIVER;

AND

(4) NOTICE OF SPECIAL GENERAL MEETING

I. INTRODUCTION

Reference is made to the Announcement. On 13 April 2016 (after trading hours), the Purchaser, the Vendors and the Guarantor entered into the Acquisition Agreement, pursuant to which the Purchaser has conditionally agreed to purchase, and the Vendors have conditionally agreed to sell the Sale Shares (representing all the issued shares of the Target Company) for an aggregate consideration of HK$160 million, which will be satisfied in cash from the net proceeds of the Subscription. The Vendors and Mr. Zhuang are Independent Third Parties and as at the Latest Practicable Date, did not hold any Shares.

– 8 –

LETTER FROM THE BOARD

In addition, on 13 April 2016 (after trading hours), the Subscriber entered into the Subscription Agreement with the Company pursuant to which the Subscriber has conditionally agreed to subscribe for, in cash, and the Company has conditionally agreed to allot and issue a total of 2,440,000,000 Subscription Shares at the price of HK$0.074 per Subscription Share.

Assuming there is no change in the share capital of the Company other than the issue of the Subscription Shares since the date of the Subscription Agreement up to completion of the Subscription, the 2,440,000,000 Subscription Shares represent (i) approximately 94.95% of all the issued shares of the Company as at the Latest Practicable Date; and (ii) approximately 48.70% of all the issued shares of the Company as enlarged by the allotment and issue of the Subscription Shares.

As one or more of the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules exceeds 25% but is less than 100%, the Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to the approval of the Independent Shareholders at the SGM. In addition, given the Acquisition and the Subscription are inter-conditional, the Company voluntarily complies with the reporting, announcement and Independent Shareholders’ approval requirements in respect of the Acquisition under Chapter 14A of the Listing Rules.

Since the Subscriber is a controlling shareholder of the Company and is therefore a connected person of the Company. Accordingly, the Subscription constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the approval of the Independent Shareholders by way of poll at the SGM.

Given the Subscriber is beneficially wholly-owned by Mr. Tse and the Acquisition and the Subscription are inter-conditional, Mr. Tse, the Subscriber, their respective associates and parties acting in concert with any of them, which together are interested in 1,100,091,988 Shares, representing approximately 42.81% of the issued share capital of the Company as at the Latest Practicable Date, will abstain from voting in respect of the resolution(s) approving the Acquisition, the Subscription (including the grant of a specific mandate for the issuance of new Shares pursuant to the Subscription) and the Whitewash Waiver at the SGM. As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, save for the 1,100,091,988 Shares that Mr. Tse, the Subscriber, their respective associates and parties acting in concert with any of them are interested in, no other Shareholder will be required to abstain from voting at the SGM in respect of the resolution(s) approving the Acquisition, the Subscription (including the grant of a specific mandate for the issuance of new Shares pursuant to the Subscription) and the Whitewash Waiver at the SGM.

– 9 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, the Subscriber held 1,085,267,988 Shares, representing approximately 42.23% of the voting rights of the Company. Upon completion of the Subscription, 2,440,000,000 Subscription Shares will be issued to the Subscriber, and the interests of the Concert Group in the voting rights of the Company will be increased from approximately 42.81% to approximately 70.66% (assuming that no additional Shares other than the Subscription Shares will be issued since the date of the Subscription Agreement up to completion of the Subscription). Accordingly, the Concert Group, in the absence of the Whitewash Waiver, would be obliged to make a general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by them.

An application to the Executive for the Whitewash Waiver has been made by the Subscriber. The Executive has agreed, subject to the approval of the Independent Shareholders at the SGM by way of poll and such other condition(s) as may be imposed by the Executive, to grant the Whitewash Waiver. The Subscriber and parties acting in concert with it, and any other Shareholders who are involved or interested in the Acquisition, Subscription and/or the Whitewash Waiver shall abstain from voting at the SGM in respect of the resolution approving the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver. If the Executive does not grant the Whitewash Waiver, neither the Acquisition nor the Subscription will proceed.

The purpose of this circular is to provide you, among other things, (i) further details of the Acquisition Agreement; the Subscription Agreement and the Whitewash Waiver; (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder as well as the Whitewash Waiver and as to voting at the SGM; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver; (iv) a notice of the SGM; and (v) other information as required under the Listing Rules and the Takeovers Code, for the purpose of the SGM.

II. ACQUISITION

1. Principal Terms of the Acquisition Agreement

Date:

13 April 2016 (after trading hours)

– 10 –

LETTER FROM THE BOARD

Parties:

Purchaser: Artini Sales Company Limited Vendors: (1) Stand Charm; and (2) Dragon Max The principal business of each Vendor is investment holding.

Guarantor: Mr. Zhuang, as guarantor of the Vendors’ obligations under the Acquisition Agreement

Mr. Zhuang is the sole director and ultimate legal and beneficial owner of each Vendor. The Vendors and Mr. Zhuang are Independent Third Parties and as at the Latest Practicable Date, did not hold any Shares.

Assets being acquired:

The Sale Shares, representing all the issued shares of the Target Company.

Upon completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Company.

Consideration of the Acquisition Agreement

The consideration for the Acquisition under the Acquisition Agreement is HK$160 million in total and all payments will be apportioned between Stand Charm and Dragon Max as to 94% and 6% respectively, proportionate to their respective shareholding in the Target Company. The consideration is payable to a designated account of the Vendors in three installments as follows:

(i) HK$100 million within 14 days of completion of Subscription;
(ii) HK$30 million within 14 days after completion and an agreement being reached between the Purchaser and the Vendors on the Target Company’s June 2016 Accounts and provided that the profit after tax attributable to shareholders based on such unaudited management accounts is not less than HK$5 million; and
(iii) HK$30 million within 14 days after completion and an agreement being reached between the Purchaser and the Vendors on the Target Company’s December 2016 Accounts and provided that the profit after tax attributable to shareholders is not less than HK$11 million.

– 11 –

LETTER FROM THE BOARD

For the avoidance of doubt:

(i) the second installment of the consideration for the Acquisition will only be payable when (a) the Target Company’s June 2016 Accounts is available and has been agreed upon by the Purchaser and the Vendors; and (b) the profit after tax attributable to the shareholders of the Target Company as set out in the Target Company’s June 2016 Accounts is not less than HK$5 million. As at the Latest Practicable Date, the Vendors had prepared the Target Company’s June 2016 Accounts, the contents of which were still pending agreement by the Company for the purpose of the Acquisition Agreement; and
(ii) the third installment of the consideration for the Acquisition will only be payable when (a) the Target Company’s December 2016 Accounts is available and has been agreed upon by the Purchaser and the Vendors; and (b) the profit after tax attributable to shareholders of the Target Company as set out in the Target Company’s December 2016 Accounts is not less than HK$11 million.

Further updates in respect of the determination of the consideration under the Acquisition Agreement will be disclosed by the Company by way of an announcement and disclosure in its annual report.

The consideration for the Acquisition was arrived at based on normal commercial terms after arm’s length negotiation between the Purchaser and the Vendors with reference to, among the other things, (i) the historical financial performance of the Target Company; (ii) the growth and development potential and prospect of the Target Company, having considered the fact that the Target Company (a) was making profit for the year ended 31 December 2015 and the three months ended 31 March 2016; (b) has stable monthly maintenance income from software maintenance contracts which are renewable annually; and (c) has the resources to develop software related application that is compatible with smart accessories; (iii) the anticipated synergy to be created for the Group’s existing business after completion of the Acquisition, such as enhancement on the platform for the Group’s existing online sales, obtaining a better understanding on the customer’s needs between both sides in our retail and internet sales and further development on smart jewellery accessories; and (iv) the historical price-to-earnings ratio of selected comparable companies (“ Comparable Companies “) that (i) are currently listed on the Main Board of the Stock Exchange; and (ii) are principally engaged in software related application business in Hong Kong and the PRC.

– 12 –

LETTER FROM THE BOARD

Given the fact that (i) at 12 April 2016, the historical price-to-earning ratio of Comparable Companies mentioned above in 2015 ranged from approximately 4.6 times to 53.1 times, with the average of approximately 28.0 times; (ii) the Target Group’s business is expected to bring synergy with the Group’s existing business after completion of the Acquisition as the Company intends to develop its internet retail business with the Target Company with a view to improving the sale of the Group’s products and in turn the profitability and the competitiveness of the Group, which are essential for the sustainable development of the Group in the long run; and (iii) the Target Company was making profit for the year ended 31 March 2016 and able to maintain stable monthly maintenance income by (a) successfully renewing software maintenance contracts with four customers in January 2016; and (b) signing software maintenance contract with a new customer in May 2016 with a contract sum of HK$3 million for the year 2016 and subject to renewal in January 2017, the Directors (excluding independent non-executive Directors) are of the view that the implied price-to-earning ratio of approximately 19.8 times and 43.2 times based on the net profit of the Target Company for the year ended 31 December 2015 and the three month ended 31 March 2016 respectively, are fair and reasonable.

Conditions precedent to the completion of the Acquisition:

Completion of the Acquisition is conditional upon, among other things, upon the fulfillment of the following conditions precedent:

(i) the Whitewash Waiver being granted by the Executive;
(ii) all the conditions precedent under the Subscription Agreement (except the satisfaction of conditions precedent under the Acquisition Agreement) having been satisfied (including, among other things, the approval by the Independent Shareholders of the Acquisition Agreement and the transactions contemplated thereunder);
(iii) each key employee of the Target Company (including Mr. Zhuang) as specified in the Acquisition Agreement (none of whom was a Shareholder as at the Latest Practicable Date) having signed an employment contract with the Purchaser or its nominee in the form and substance satisfactory to the Purchaser and effective on the date of completion of the Acquisition;
(iv) the Purchaser having completed the financial and legal due diligence review on the Target Company and being satisfied with the results of such review in all aspects;

– 13 –

LETTER FROM THE BOARD

(v) all necessary approvals and/or consents in relation to authorizing the execution, delivery and performance of the Acquisition Agreement and the transactions contemplated thereunder having been obtained by the Vendors and/or the Target Company;
(vi) the consummation of the transactions contemplated under the Acquisition Agreement not having been restrained, enjoined or otherwise prohibited by any applicable laws and regulations, any order, injunction, decree or judgment of any court or other governmental authority;
(vii) all representations, warranties and undertakings given by the Vendors under the Acquisition Agreement remaining true, accurate and complete, and none of the provisions of the Acquisition Agreement having been breached in any material respect; and
(viii) there being no material adverse change in the financial position, business or operations of the Target Company.

Any of the above conditions precedent (other than in paragraphs (i) and (ii) above) can be waived by the Purchaser.

As one of the conditions precedent to the completion of the Acquisition, Mr. Zhuang will enter into an employment contract with the Purchaser or its nominee in the form and substance satisfactory to the Purchaser. While the terms of the employment contracts are still being negotiated pending finalisation, the following sets out the indicative terms of Mr. Zhuang’s employment after completion of the Acquisition:-

Remuneration:

RMB20,000 payable monthly (equivalent to RMB240,000 per year)

Term of Service: No specified term Notice Period required to 3-month notice terminate Contract:

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LETTER FROM THE BOARD

others, confidentiality, notice and governing law, which shall survive) and thereafter no party shall have any liability save for antecedent breaches. As at the Latest Practicable Date, condition (v) set out above has been fulfilled.

Completion of the Acquisition:

Completion of the Acquisition will, subject to all the conditions precedent set out in the section headed “Conditions precedent to the completion of the Acquisition” above (to the extent not waived) being fulfilled, take place on the fourth Business Day after the date of the fulfillment or waiver of such conditions precedent or such later date as the parties to the Acquisition Agreement may agree in writing.

2. Information of the Target Company

The Target Company is a company incorporated in Hong Kong with limited liability that is principally engaged in developing and selling software related applications which can be purchased by businesses to facilitate e-commerce of their products and services. As at the Latest Practicable Date, the Target Company is owned as to 94% by Stand Charm and 6% by Dragon Max, and to the best knowledge of the Directors, all customers of Target Company are Independent Third Parties.

Set out below is a summary of the profit or loss before and after taxation of the Target Company as extracted from the accountants’ report of the Target Company set out in Appendix II to this circular, which have been prepared in accordance with generally accepted accounting standards in Hong Kong:

(Loss)/Profit before taxation (Loss)/Profit after taxation	For the year ended 31 December 2014 (audited) (HK$’000) (52) (52)	For the year ended 31 December 2015 (audited) (HK$’000) 9,659 8,095	For the three months ended 31 March 2015 2016 (unaudited) (audited) (HK$’000) (HK$’000) (107) 1,108 (107) 925	For the three months ended 31 March 2015 2016 (unaudited) (audited) (HK$’000) (HK$’000) (107) 1,108 (107) 925

				925

The audited net assets of the Target Company as at 31 March 2016 was approximately HK$9.1 million.

– 15 –

LETTER FROM THE BOARD

3. Management discussion and analysis of the Target Company

Accountants’ report on the Target Company for the period from 18 June 2013 (date of incorporation) to 31 December 2013, the two years ended 31 December 2014 and 2015 and the three months ended 31 March 2016 was set out in Appendix II to this circular. Management discussion and analysis of the Target Company for the corresponding period are set out as follows:

Business model and segment information

The Target Company focuses on developing and selling software related applications and the Target Company’s resources are integrated and no discrete operating segment financial information is available. However, the business of the Target Company can be classified as two major categories, namely, sales of goods and software-related application development service.

The Target Company’s sale of goods segment represents the sale of mobile phone which installed with 易銷E店 (Easy Sales Electronic Shop) (“ Easy Shop* ”). Its software-related application development service segment comprises (i) the sales of Easy Shop, which may or may not bundle with the provision of maintenance services on Easy Shop to customers; and (ii) renewal of software maintenance contracts with existing customers.

For the period from 18 June 2013 to 31 December 2014, there is no revenue generated from the software-related application development service segment as none of the customers who bought the mobile phone which installed with Easy Shop had entered into software maintenance contract with the Target Company.

As the Target Company expected that the revenue from software-related application development service will be the major income and account for a significant proportion of its revenue in the next few years when compared with the revenue from sales of goods, for the year ended 31 December 2015, the Target Company is focusing on soliciting customers who would like to use the software maintenance service by entering software maintenance contracts with them. At the same time, the Target Company were also selling to those customers mobile phone installed with Easy Shop. It is expected that the business model of the Target Company can facilitate (i) maintaining a long term relationship with its existing customers by providing maintenance services to them; and (ii) generating stable revenue from such customers in the future.

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From year 2016 onwards, other than selling the mobile phone installed with Easy Shop, the Target Company also sold Easy Shop as a standalone product to individual end-users directly. The Target Company will provide individual end-users with an user manual and online assistance to assist them to install Easy Shop by themselves. With this new selling channel, the Target Company believed that the standalone products can target new customers who desire flexibility in hardware, such as mobile phones and computers, and eventually maximize our number of customers.

Revenue recognition policy

Revenue is recognised when it is probable that the economic benefits will flow to the Target Company and when the revenue can be measured reliably, on the following bases:

(a) for income from sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Target Company maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold; and
(b) for income from software maintenance contracts, when rendering of services.

Financial review, business review, prospects

For the period from 18 June 2013 to 31 December 2013, the two years ended 31 December 2015 and the three months ended 31 March 2016, revenue generated from sales of goods were HK$10,906, HK$1,162,005, HK$1,147,923 and nil respectively. After the successful development of Easy Shop in 2013, the Target Company started outsourcing the production process of installing Easy Shop in the mobile phones to third party manufacturers and subsequently the Target Company purchased the goods from such manufacturers and resold to its customer. Those mobile phones were not manufactured by the Target Company. For the period from 18 June 2013 to 31 December 2013, the two years ended 31 December 2015 and the three months ended 31 March 2016, 8, 500, 524 and nil mobile phones were respectively sold.

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In 2014, the Target Company had only one customer, which was a wholesaler of mobile phones. In 2015, the Target Company had four new customers which (i) were small and medium enterprises from different industries, including frozen and processed food industry and jewellery industry; and (ii) engaged the Target Company to provide maintenance services. While these customers entered into software maintenance contracts with us and paid monthly maintenance fee to the Target Company, the Target Company also sold to them mobiles phones installed with Easy Shop. For the three months ended 31 March 2016, the Target Company renewed the software maintenance contracts with four existing customers. Also, for the three months ended 31 March 2016, it also sold Easy Shop as a standalone product to five individuals end-users.

For the period from 18 June 2013 to 31 December 2013, the two years ended 31 December 2014 and 2015 and the three months ended 31 March 2016, revenue generated from software-related application development service were nil, nil, HK$11,147,260 and HK$2,328,309 respectively.

As the maintenance services provided by the Target Company include (i) modifying the software in response to the markets needs from time to time (whereas the software prohibits any modification without authorisation by the Target Company); and (ii) providing training to customers’ staff, the nature of software maintenance contract is different from license agreement for our customers to use Easy Shop. Once Easy Shop is installed in the mobile phone, the customer can access to it without paying any further license fee.

The loss before taxation and after taxation of the Target Company for the period ended 18 June 2013 to 31 December 2013 were HK$10,526 and HK$10,526 respectively, and further increased to HK$51,594 and HK$51,594 for the year ended 31 December 2014 respectively, which were mainly due to the large operating expenses as the proportion to the revenue during the beginning stage of the operation of the Target Company.

After the initial set-up phase in the previous period under review, the Target Company has successfully marketed its software platform to customers in a number of industries, including frozen and proceed food distribution, as well as merchandise and jewellery retail. It has also secured a number of software maintenance contracts during the period under review. Normally the software maintenance contracts is renewable yearly. Accordingly, the Target Company started to make profits in 2015. The profit before taxation and after taxation of the Target Company for the year ended 31 December 2015 were approximately HK$9.7 million and HK$8.1 million respectively. The Target Company continued to make profit for the three months ended 31 March 2016,

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the profit before taxation and after taxation of the Target Company for the three months ended 31 March 2016 were approximately HK$1.1 million and HK$0.9 million, respectively. The relatively modest net profit of the Target Company for the three months ended 31 March 2016 was mainly influenced by (i) the decrease in monthly maintenance income, as there were slight adjustments on the monthly maintenance fee after the renewal of software maintenance contracts with customers in January 2016; and (ii) the increase in monthly staff costs from approximately HK$200,000 in December 2015 to approximately HK$320,000 in March 2016, as more sale personnel and technical staff who are responsible for the maintenance services and the product development has been employed in the first quarter of 2016 in order to cope with the future development of the Target Company.

On the assumption that if the Target Company can successfully renew software maintenance contracts with its customers, the Company expected that the revenue from software-related application development service for the year ending 31 December 2016 is expected to be maintained in a similar level on their contribution on the revenue from software-related application development service for year ended 31 December 2015.

Cost Structure

For the period end from 18 June 2013 to 31 December 2013, the two year ended 31 December 2015 and the three months ended 31 March 2016, the total cost (excluding income tax) that the Target Company incurred were HK$21,432, HK$1,213,599, HK$2,636,448 and HK$1,220,501, respectively. Out of which, the cost of inventories sold was HK$6,978, HK$1,077,031, HK$1,844,791 and HK$714,505 and operating expenses was HK$14,454, HK$136,568, HK$791,657 and HK$505,996, respectively. Staff cost is the major cost component of operating expenses, representing nil, HK$130,000, HK$658,458 and HK$376,715 of the operating expenses for the period end from 18 June 2013 to 31 December 2013, the two year ended 31 December 2015 and the three months ended 31 March 2016.

Capital structure, liquidity, financial resources and gearing ratio

As at 31 December 2013, the total assets, total liabilities and net liabilities of the Target Company were valued at HK$61,257, HK$61,783 and HK$526 respectively. As at 31 December 2014, the total assets, total liabilities and net liabilities of the Target Company were valued at HK$548,099, HK$600,219 and HK$52,120 respectively. As at 31 December 2015, the total assets, total liabilities and net assets of the Target Company were valued at approximately HK$11.6 million, HK$3.4 million and HK$8.2 million

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respectively. As at 31 March 2016, the total asset, total liabilities and net asset of the Target Company were valued at HK$13.0 million, HK$3.9 million and HK$9.1 million, respectively.

Of the total liabilities, HK$3,805, HK$93,805, HK$93,805 and HK$93,805 was amount due to directors which are denominated in Hong Kong dollars as at 31 December 2013, 2014 and 2015 and 31 March 2016 respectively. The amount due to directors are unsecured, interest free and has no fixed terms of repayment. As at 31 December 2015 and 31 March 2016, there was an amount due to a related party of HK$1,480,339 and HK$1,485,704 respectively (2013 and 2014: Nil), which is unsecured, interest-free and is payable on demand.

Cash and bank balances of the Target Company as at 31 December 2013, 2014 and 2015 and 31 March 2016 amounted to HK$61,257, HK$548,099, approximately HK$1.0 million and HK$6.2 million respectively. The gearing ratio (calculated as total debts over total assets) was approximately 6.2%, 17.1%, 13.6% and 12.1% as at 31 December 2013, 2014 and 2015 and 31 March 2016 respectively.

As at the Latest Practicable Date, approximately 66% of trade receivables of the Target Company had been collected subsequent to 31 March 2016.

Capital commitment

The Target Company did not have any capital commitment as at 31 December 2013, 2014 and 2015 and 31 March 2016.

Treasury policies

The Target Company has no formal treasury policy and has not entered into any form of financial arrangement or used any financial instrument for hedging purposes during the period under review.

Exchange rate exposure

The Target Company did not have exchange rate risk as at 31 December 2013, 2014 and 2015 and 31 March 2016.

Contingent liabilities

The Target Company did not have any significant contingent liabilities as at 31 December 2013, 2014 and 2015 and 31 March 2016.

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Significant investments, material acquisition and disposals

The Target Company did not have any significant investments, material acquisition and disposals and future plans for material investments for the period under review.

Employment and remuneration policy

As at 31 December 2013, 2014 and 2015 and 31 March 2016, the Target Company had 0, 1, 15 and 19 employees respectively. The Target Company ensured that the remuneration of employees was attractive and bonuses were given based on the performance of the employees in accordance with the general standards of salary policies of the Target Company.

For the period end from 18 June 2013 to 31 December 2013 and the two years ended 31 December 2014, 2015 and the three months ended 31 March 2016, the staff cost of the Target Company was nil, HK$130,000, HK$658,485 and HK$376,715 respectively, which included employees benefit expense, salaries and allowance, and pension scheme contributions.

Pledged of assets

The Target Company did not have any pledged of assets as at 31 December 2013, 2014 and 2015 and 31 March 2016.

Future plans for material investments or capital assets

The Target Company does not have any plans for material investments or capital assets in coming year.

4. Financial effects of the Acquisition

Earnings

Upon completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Company and the financial information of the Target Company will be consolidated into the consolidated financial statements of the Group. As set out in the accountants’ report on the Target Company in Appendix II to this circular, the revenue and profit after taxation reached approximately HK$2.3 million and HK$0.9 million for the three months ended 31 March 2016, respectively. After completion of the Acquisition, the revenue and profit after taxation of the Target Company will be consolidated in the consolidated financial statements of the Group.

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Assets and liabilities

According to the Annual Report, the consolidated net assets of the Group as at 31 March 2016 was approximately HK$57,319,000 comprising total assets of HK$106,716,000 and total liabilities of approximately HK$49,397,000.

According to the unaudited pro forma financial information of the Enlarged Group set out in Appendix III to this circular, the unaudited pro forma net assets of the Enlarged Group would increase to approximately HK$230.3 million, comprising unaudited pro forma total assets of approximately HK$283.6 million and unaudited pro forma total liabilities of approximately HK$53.3 million. For further information, please refer to the unaudited pro forma financial information of the Enlarged Group set out in Appendix III to this circular.

Transaction costs for the Acquisition

The transaction costs for the Acquisition are estimated to be approximately HK$5.1 million, which consist mainly of the professional fees directly attributable to the Acquisition.

5. Financial and trading prospects of the Enlarged Group

The Company is an investment holding company. The Group is principally engaged in the development, design and export of fashion accessories and gifts and sales of own brand fashion accessories. The Purchaser is an indirect wholly-owned subsidiary of the Company and is principally engaged in the trading of fashion accessories and investment holding.

As disclosed in the Annual Report, the Group recorded a total turnover of approximately HK$46,907,000 for the year ended 31 March 2016, representing a decrease of approximately 39.6% as compared with last year. The decrease was mainly due to the loss of major customers in customer’s desired final design business following our factory disposal in December 2014, restructuring of our retail business and sluggish global economy.

With the rapid development of electronic commerce in recent years, it brought the huge and profound influence to brick and mortar business. The internet is constantly permeating traditional industries, and blurring the divisions across industries. The management of the Company considers that the integration between traditional industry and e-commerce represents the general market trend. Therefore, the Group has promoted the transformation of “Internet plus”

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innovation, and tried to seek suitable platforms, software companies, technical development personnel or other relative resources in the market, which would enable the Group’s business operations to deeper integrate to internet, and bring the high-tech and big data to the conventional fashion jewelry industry. The management of the Company believes that the new concept of the combination of “Internet + Traditional accessories + Smart wearable + Big health + Big data”, i.e. by using traditional accessories with smart wearable functions to provide health suggestions to customers based on users’ data through the Internet in order to cater for the trends of healthy life, will be a broad prospective blue ocean in the future. Also, as mentioned in the section headed “REASONS FOR AND THE BENEFITS OF THE ACQUISITION AND THE SUBSCRIPTION”, the Directors consider that the software and related applications developed by the Target Company are expected to enable the Group to expand its internet retail business.

6. Implication under the Listing Rules

III. SUBSCRIPTION

1. Principal Terms of the Subscription Agreement

Date:

13 April 2016 (after trading hours)

Parties:

(i) Subscriber: Walifax Investments Limited
(ii) Issuer: the Company

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The Subscription Shares

The Subscriber has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue a total of 2,440,000,000 Subscription Shares. As at the Latest Practicable Date, there were 2,569,840,644 Shares in issue and the Subscription Shares represent approximately 94.95% of all the issued shares of the Company as at the Latest Practicable Date and, assuming that there is no change in the share capital of the Company other than the issue of the Subscription Shares since the date of the Subscription Agreement up to completion of the Subscription, approximately 48.70% of all the issued shares of the Company upon completion of the Subscription as enlarged by the issue of the Subscription Shares.

Subscription Price:

The Subscription Price of HK$0.074 per Subscription Share represents:

(i) a discount of approximately 24.5% to the closing price of HK$0.0980 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 26.7% to the closing price of HK$0.101 per Share as quoted on the Stock Exchange on the date of the Subscription Agreement;
(iii) a discount of approximately 47.1% to the closing of HK$0.140 per share as quoted on the Stock Exchange on the Latest Practicable Date;
(iv) a discount of approximately 22.4% to the average closing price of HK$0.0954 per Share as quoted on the Stock Exchange for the five trading days up to and including the Last Trading Day;
(v) a discount of approximately 22.5% to the average closing price of HK$0.0955 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including the Last Trading Day;
(vi) a discount of approximately 26.9% to the average closing price of HK$0.1013 per Share as quoted on the Stock Exchange for the last 30 trading days up to and including the Last Trading Day; and

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(vii) a premium of approximately 98.4% over and above the Group’s unaudited consolidated net asset value attributable to the Shareholders per Share as at 30 September 2015, the date to which the latest unaudited consolidated financial results of the Company were made up to, of approximately HK$0.0373 (based on a total of 2,569,840,644 Shares as at the Latest Practicable Date and the Group’s unaudited consolidated net asset value attributable to the Shareholders of approximately HK$95,865,000 as at 30 September 2015).

The Subscription Price was determined after arm’s length negotiations between the Company and the Subscriber with reference to, among other factors, the financial position of the Group, the historical trading volume of the Shares on the Stock Exchange and the recent trading prices of the Shares as quoted on the Stock Exchange. The total consideration for the Subscription Shares in the sum of HK$180,560,000 will be financed by internal resources available to the Subscriber.

Rankings:

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects among themselves and with all the other existing Shares in issue at the date of allotment and issue of the Subscription Shares, including the right to any dividends or distributions made or declared on or after the date of allotment and issue of the Subscription Shares.

Specific mandate:

The Subscription Shares are to be issued pursuant to a special mandate to be sought from the Independent Shareholders by way of poll at the SGM. An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Subscription Shares.

Conditions precedent to the completion of the Subscription:

Completion of the Subscription is conditional upon the fulfillment of the following conditions precedent:

(i) the obtaining of the Whitewash Waiver, and if such approval is subject to any conditions imposed by the SFC, such conditions being reasonably acceptable to the Subscriber (it being acknowledged that any condition requiring the approval of

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Shareholders other than the Subscriber or its associates (as defined in the Listing Rules) is acceptable to the Subscriber);

(ii) the Acquisition Agreement becoming unconditional in accordance with its terms;
(iii) the approval by the Shareholders who are not required to abstain from voting under the Listing Rules and the Takeovers Code of each of the following at the SGM in accordance with the requirements of the Listing Rules and the Takeovers Code:
(a) the Subscription Agreement and the transaction contemplated thereunder, including the allotment and issue under a specific mandate of the Subscription Shares;
(b) the Whitewash Waiver; and
(c) the Acquisition Agreement and the transactions contemplated thereunder;
(iv) the listing of, and permission to deal in, all the Subscription Shares having been granted by the Stock Exchange (either unconditionally or subject only to allotment and matters ancillary thereto) and if such approval is subject to any conditions imposed by the Stock Exchange, such conditions having been fulfilled;
(v) the Shares remaining listed and traded on the main board of the Stock Exchange at all times from the date of the Subscription Agreement up to the date of completion of the Subscription, save for any temporary suspension in connection with the approval and clearance of the documents relating to the transactions contemplated under the Subscription Agreement and the Acquisition Agreement by the SFC or the Stock Exchange prior to their release of publication;
(vi) no indication being received prior to the completion of the Subscription from the SFC and the Stock Exchange to the effect that the listing of the Shares on the main board of the Stock Exchange shall or may be withdrawn or objected to;
(vii) all the authorizations, approvals, consents, waives, and permits of the relevant authorities of the relevant jurisdictions which are necessary to give effect to the Subscription Agreement and the

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Subscription as required by all laws or regulations applicable to the Company and the Subscriber having been granted, received and obtained, or where such approval, consent, waiver or permit is given subject to conditions, on such conditions as are acceptable to the Company and the Subscriber (as the case may be) acting reasonably;

(viii) the warranties made, or any of the undertakings given, by the Company under the Subscription Agreement remaining true and correct in all material respects; and
(ix) there not having occurred at any time any material adverse change or development in the financial or trading position of the Group.

None of the above conditions precedent can be waived by the parties to the Subscription Agreement, save that the Subscriber may, in its absolute discretion, waive the conditions precedent in paragraphs (viii) and (ix) above by notice in writing to the Company.

If all of the conditions precedent set out in the Subscription Agreement have not been fulfilled and/or waived (as the case may be) on or before the Long Stop Date or such other date as may be agreed by the Subscriber and the Company in writing, the Subscription Agreement will automatically terminate with immediate effect (other than the provisions in relation to, among others, notice, governing law and confidentiality, which shall survive), in which case, neither party thereto will have any liability to the other party save for any antecedent breaches of the Subscription Agreement.

None of the above conditions precedent has been fulfilled as at the Latest Practicable Date.

Completion of the Subscription:

Completion of the Subscription will, subject to the Whitewash Waiver and the listing permission contemplated in the condition precedent set out in paragraph (iv) of the sub-paragraph headed “Conditions precedent to the completion of the Subscription” not being revoked or withdrawn, take place on the second Business Day after the fulfillment or waiver of the conditions precedent to the completion of the Subscription (or such later date as parties to the Subscription Agreement may agree in writing).

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Use of proceeds from the Subscription:

The gross proceeds from the Subscription and the net proceeds (after deducting estimated expenses, including mainly legal and professional fees) from the issue of the Subscription Shares) from the Subscription is estimated to be approximately HK$181 million and approximately HK$178 million, respectively. Based on the estimated net proceeds, the net subscription price would be approximately HK$0.073 per Subscription Share.

The Group intends to apply approximately HK$160 million of the net proceeds from the Subscription to finance the cash consideration for the Acquisition and to use approximately HK$18 million of the net proceeds from the Subscription as the general working capital of the Group.

2. Information on the Subscriber and Mr. Tse

The Subscriber is an investment holding company that is beneficially wholly-owned by Mr. Tse. As at the Latest Practicable Date, the Concert Group held 1,100,091,988 Shares, representing approximately 42.81% of all the issued shares of the Company.

Mr. Tse is the executive Director, chairman, and chief executive officer of the Company and possesses more than 20 years’ experience in the fashion ornament and jewellery wholesale industry. He also has experience in property investment, mineral exploration and mineral trade and sales.

3. Intention of Subscriber

It is the intention of the Subscriber to maintain the listing of the Shares on the Stock Exchange and to maintain the existing business of the Group following completion of the Subscription. The Subscriber has no intention to introduce any major changes to the existing business, including any redeployment of the employees or the fixed assets of the Group after completion of the Subscription, nor to make any major changes to the continued employment of the employees of the Group, other than in its ordinary and usual course of business. The Subscriber and the Company will comply with the relevant requirements under the Listing Rules and the Takeovers Code in the event any possible diversification of the Group’s business operations materializes after completion of the Subscription.

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4. Listing Rules Implications

Since the Subscriber is a controlling shareholder of the Company, the Subscriber is a connected person of the Company. Accordingly, the Subscription constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the approval of the Independent Shareholders by way of poll at the SGM.

Save for Mr. Tse and the Subscriber (being a beneficially wholly-owned subsidiary of his), no other Shareholder is interested in the Acquisition, the Subscription and the Whitewash Waiver. Given the Subscriber is beneficially wholly owned by Mr. Tse and the Acquisition and the Subscription are inter-conditional, Mr. Tse, the Subscriber, their respective associates and parties acting in concert with any of them shall abstain from voting in respect of the resolution(s) approving the Acquisition, the Subscription (including the grant of a specific mandate for the issuance of new Shares pursuant to the Subscription) and the Whitewash Waiver at the SGM.

5. Takeovers Code Implications

As at the Latest Practicable Date, the Subscriber held 1,085,267,988 Shares, representing approximately 42.23% of the voting rights of the Company. Mr. Tse, being person acting in concert with the Subscriber, held 14,824,000 Shares, representing approximately 0.58% of the voting rights of the Company.

Upon completion of the Subscription, 2,440,000,000 Subscription Shares will be issued to the Subscriber, and the interests of the Concert Group in the voting rights of the Company will be increased from approximately 42.81% to approximately 70.66% (assuming that no additional Shares other than the Subscription Shares will be issued since the date of the Subscription Agreement up to completion of the Subscription). Accordingly, the Concert Group, in the absence of the Whitewash Waiver, would be obliged to make a general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by them.

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Each of the Subscriber and Mr. Tse has undertaken to the Company that apart from the Subscription Agreement, the Subscriber and Mr. Tse will not and each of them will procure persons acting in concert with each of them respectively will not from the date of the Subscription Agreement until the date of completion of the Subscription acquire or dispose of or enter into any agreement or arrangement to acquire or dispose of any voting rights in the Company.

Shareholders and potential investors should be aware that, upon completion of the Subscription, the Concert Group will hold more than 50% of the voting rights of the Company. Hence, the Subscriber may increase its holdings of voting rights of the Company without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer.

6. Information required under the Takeovers Code

Save as the Outstanding Option, as at the Latest Practicable Date, the Company does not have any options, warrants or convertible securities in issue.

The Subscriber has confirmed that, as at the Latest Practicable Date, neither the Subscriber nor any persons acting in concert with it:

(i) apart from 2,440,000,000 new Shares under the Subscription Agreement, has acquired or disposed of or entered into any agreement or arrangement to acquire or dispose of any voting rights in the Company during the Relevant Period;
(ii) apart from the 14,824,000 Shares owned by Mr. Tse and the 1,085,267,988 Shares owned by the Subscriber (in which Mr. Tse is indirectly interested as the Subscriber is wholly-owned by Mr. Tse), and 26,671,400 Outstanding Options owned by Mr. Tse, owns, controls or has direction over any voting rights or rights over the Shares or any warrants, options, or convertible securities or derivatives of the Company, nor has entered into any outstanding derivative in respect of securities in the Company;
(iii) has made any arrangement referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) with any other persons in relation to the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or the Subscriber and which might be material to the transactions contemplated under the Subscription Agreement and/or the Whitewash Waiver;

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(iv) has any agreements or arrangements to which the Subscriber or parties acting in concert with it is a party which relate to the circumstances in which the Subscriber or parties acting in concert with it may or may not invoke or seek to invoke a pre-condition or a condition to the transactions contemplated under the Subscription Agreement and/or the Whitewash Waiver;
(v) has received any irrevocable commitment to vote for the resolution approving the transactions contemplated under the Subscription Agreement and/or the Whitewash Waiver; and
(vi) has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

7. Fund raising activities in the past twelve months

Save as disclosed below, the Company has not undertaken any equity fund raising exercise during the past 12 months immediately preceding the date of the Announcement.

				Actual use of
				the net
				proceeds up to
Date of	Fund raising	Net proceeds	Intended use	the date of this
announcement	activity	raised	of proceeds	circular
27 August 2015	Placing of new	Approximately	Hiring	All used as
	Shares under	HK$9,561,000	technical staff	intended
	general		and
	mandate		implementing
			Marketing
			Channel
			Expansion

IV. REASONS FOR AND THE BENEFITS OF THE ACQUISITION AND THE SUBSCRIPTION

Reasons for the Acquisition

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With the growing popularity of online shopping, the Company considered that it is necessary to expand its internet retail market. The Company has over three years’ experience in the internet retail business prior to entering into the Acquisition Agreement. The Company has considered expanding its internet retail business by outsourcing or acquiring the relevant software from the market. However, having considered that (i) the Company may not have full control in operation and efficient software/customization if it is outsourced; and (ii) the software require upgrades from time to time and/or continuous development in order to meet the fast-changing environment, the Directors are of the view that acquiring a company with existing technology, software and expertise is the most appropriate way to expand its internet retail market.

The Target Company is principally engaged in developing and selling software related application which can be purchased by businesses to facilitate distribution of their products and services via e-commerce. The management of the Target Company has over five years’ experience in developing software related application for internet retail business. Three of the software developed by the Target Company, namely PrimeView 微信分銷管理平台軟件2.0.0 (PrimeView WeChat Sales Management Platform Software 2.0.0), PrimeView 微信即時通訊平台軟件2.0.0 (PrimeView WeChat Instant Messaging Software 2.0.0) and PrimeView 電子商城平台軟件2.0.0 (PrimeView Electronic Emporium Platform Software 2.0.0*) had been registered with 中華人民共和國國家版權局 (National Copyright Administration of the People’s Republic of China) in February 2016.

As at the Latest Practicable Date, the existing product of the Target Company was Easy Shop, which is a multi-layer distribution system designed for use with WeChat, a telecommunications software developed primarily for smart phone. Through Easy Shop, WeChat users can be engaged as the distributor of an enterprise and market a product to friends in their circle. An enterprise can manage the distributors more effectively and efficiently by obtaining sales record of the distributors, the sales network of the distributors and monthly commission of the distributors through the backstage system of Easy Shop. Besides, Easy Shop can improve the seamless shopping experience across multiple channels, including both online and offline, to the customer. The software of Easy Shop can be modified for applying in other mobile shopping apps.

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In light of the above, by using Easy Shop, the existing software developed by the Target Company, the Directors are of the view that the operation of the Company’s internet retail business can be improved and expanded in below several ways:

(i) Engaging WeChat users as the Company’s distributors to promote our products, which can boost our internet sales business;
(ii) Analysing customer’s behavior and thereby improving our ability to assess and react to changes in consumer demand, preferences and tastes; and
(iii) Strengthening our inventory management and order management by reducing lead time.

Shareholders should note that the Target Company currently has only one product and five enterprises customers as at 31 May 2016 and thus its operation performance is currently solely reliant on this product and heavily reliant on few customers. The future business prospects of the Target Company depends on a number of factors including the following: (i) the continuous success of the Target Company’s product; (ii) its successful development and launch of new software related application that is compatible with smart accessories; (iii) the renewal of the maintenance contracts with the existing customers; and (iv) its success in securing new customers in order to minimize the risk of customer concentration. There is no assurance that the existing software of the Target Company will continue to be well-received by the market or that the Target Company will be able to successfully develop and launch new software that is well-received by the market, or that the Target Company will be able to maintain its relationship with the customers or explore and secure new customers and in the event the existing/new software developed by the Target Company is not well-received by the market and/or its relationship with its customers cannot be maintained; and/or its customer base cannot be strengthened, the prospect, financial conditions and results of operations of the Enlarged Group will be materially and adversely affected.

Although the Target Company currently has only one product, in view of that the management of the Target Company has over five years of experience in developing software related application, the Directors believe the Target Company can still develop and launch of new software related application that is compatible with smart accessories, which can be (i) used by the Company to further expand its internet retail business or create synergy for the Group’s existing business such as enhancement on the platform for the Group’s existing sales, obtaining a better understanding on the customer’s needs and spending behavior and further development on smart jewellery accessories; (ii) sold to other target customers to make profits.

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LETTER FROM THE BOARD

Based on the above, the Directors are of the view that the software and related applications developed by the Target Company will enable the Group to expand its internet retail business, which would increase the sales of the Group’s products and in turn improve the profitability and the competitiveness of the Group and is essential for the sustainable development of the Group in the long run. Taking into account the benefits of the Acquisition, the Directors are of the view that the terms of the Acquisition Agreement are normal commercial terms and are fair and reasonable and in the interests of the Independent Shareholders as a whole.

The Company has no plan to terminate the employment of any other employees or other personnel of the Target Company after the completion of the Acquisition, and will continue to operate the Target Company’s business.

Reasons for the Subscription

Having considered that (i) the cash and cash equivalents of the Group as at 30 September 2015 was approximately HK$68 million as stated in the Interim Report, (ii) the Group used its internal resources to satisfy an aggregate consideration of RMB20 million (equivalent to approximately HK$23.8 million) for the acquisition by an indirect wholly-owned subsidiary of the Company of certain properties in Zhengzhou City in the PRC in March 2016, and (iii) the Group has utilised all of the net proceeds from the placing completed on 10 September 2015, the Directors are of the view that Company does not have sufficient cash to satisfy the consideration for the Acquisition.

The Company had considered the availability of the following funding alternatives (apart from the Subscription) for the cash consideration for the Acquisition and to increase the working capital of the Company:

(i) debt financing: the Board does not consider this to be appropriate for the Group since it would increase the gearing level of the Group and the Group would have to incur interest expenses which would impose additional financial burden on the Group’s future cash flows;
(ii) equity financing through placement of new Shares to independent investors: the Company encountered difficulties in engaging a placing agent, which the Board believes to be attributable to the relative small market capitalization of the Company and the low trading volume of the Shares under the current market sentiment; and

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LETTER FROM THE BOARD

(iii) a rights issue or an open offer: the Company encountered difficulties in procuring an independent underwriter in Hong Kong in underwriting a rights issue or an open offer of the Company. Moreover, in light of the uncertainty involved, the Subscriber was not willing to act as an underwriter of a right issue or an open offer.

In light of the above, the Company is of the view that equity financing by way of the Subscription is the most appropriate means of raising additional capital to finance the cash consideration for the Acquisition and to increase the working capital, as it is:

(i) more practicable and direct under a volatile market and the uncertain global market conditions currently prevailing;
(ii) less costly and no interest expenses will need to be paid;
(iii) less time consuming; and
(iv) in the interest of the Group and the Independent Shareholders as a whole, given it signifies the confidence of the Company’s controlling shareholder in the existing and future development potentials of the Group.

Based on the above, the Directors (other than the independent non-executive Directors who will express their view after considering the advice from the Independent Financial Adviser in the letter from the Independent Board Committee in this circular) consider that the Subscription represents a straightforward and cost-effective means of financing for the Group, and the terms of the Acquisition Agreement, the Subscription Agreement and the Whitewash Waiver are fair and reasonable and on normal commercial terms, and in the interests of the Independent Shareholders as a whole.

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LETTER FROM THE BOARD

V. EFFECT OF THE SUBSCRIPTION

The shareholdings in the Company as at the Latest Practicable Date and immediately after the completion of the Subscription (assuming there are no changes to the share capital and shareholding structure of the Company other than the issue of the Subscription Shares from the date of the Subscription Agreement up to the date of completion of the Subscription):

As at the Latest Practicable Date No. of Shares % Controlling Shareholder The Subscriber_(Note 1) 1,085,267,988 42.23 Mr. Tse(Note 2) 14,824,000 0.58 Sub-total of the Subscriber and persons acting concert with it 1,100,091,988 42.81 Executive Director(s) Mr. Lin Shao Hua – – Public Grantees of Outstanding Options (other than Mr. Tse and the Directors(Note 3)_ – – Other Public Shareholders 1,469,748,656 57.19 2,569,840,644 100.0	Immediately after completion of the Subscription (assuming no Outstanding Options are exercised)(Note 4) No. of Shares % 3,525,267,988 70.37 14,824,000 0.29 3,540,091,988 70.66 – – – – 1,469,748,656 29.34 5,009,840,644 100.0	Immediately after completion of the Subscription (assuming all Outstanding Option are exercised)(Note 4) No. of Shares % 3,525,267,988 65.43 41,495,400 0.77 3,566,763,388 66.20 26,671,400 0.50 324,699,800 6.03 1,469,748,656 27.27 5,387,883,244 100.0	Immediately after completion of the Subscription (assuming all Outstanding Option are exercised)(Note 4) No. of Shares % 3,525,267,988 65.43 41,495,400 0.77 3,566,763,388 66.20 26,671,400 0.50 324,699,800 6.03 1,469,748,656 27.27 5,387,883,244 100.0
			0.50 6.03 27.27
			100.0

Notes:

The Subscriber is wholly-owned by Mr. Tse.
Mr. Tse is the executive Director, chairman and chief executive officer of the Company.
None of these grantee of the Outstanding Options is a director, chief executive or substantial shareholder of the Company, or any of their respective associates or parties acting in concert with the Subscriber.
Full exercise of the Outstanding Option would result in a maximum of 378,042,600 new Shares being fallen to be allotted and issued to its holders.

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LETTER FROM THE BOARD

VI. GENERAL

A SGM will be convened to for the purpose of approving the Acquisition and the transactions contemplated thereunder, the Subscription and the transaction contemplated (including the grant of a specific mandate for the issue and allotment of the Subscription Shares pursuant to the Subscription), and the Whitewash Waiver, pursuant to the Listing Rules and Takeovers Code.

As at the Latest Practicable Date, the Vendors and Mr. Zhuang did not hold any Shares.

Pursuant to Rule 14A.40 of the Listing Rules, the Independent Board Committee comprising all the independent non-executive Directors has been established by the Company to advise and to give a recommendation to the Independent Shareholders as to whether the terms of the Acquisition Agreement and the transactions contemplated thereunder and the terms of the Subscription Agreement and the transactions contemplated thereunder are on normal commercial terms, in the ordinary and usual course of business of the Group, fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole, and as to voting at the SGM. Pursuant to Rule 2.1 of the Takeovers Code, the Independent Board Committee comprising all the independent non-executive Directors has been established by the Company to advise and to give a recommendation to the Independent Shareholders on whether the terms of the Subscription and Whitewash Wavier are fair and reasonable, and as to voting at the SGM.

None of the members of the Independent Board Committee have any direct or indirect interest or involvement in the transactions contemplated under the Acquisition Agreement, the Subscription Agreement and/or the Whitewash Waiver.

VII. SPECIAL GENERAL MEETING

A notice convening the SGM to be held at 9/F., Gloucester Tower, The Landmark, 15 Queen’s Road, Central, Hong Kong on 26 August 2016 (Friday) at 9:00 a.m. is set out on pages SGM-1 to SGM-3 of this circular. Ordinary resolutions will be proposed at the SGM to consider and, if thought, fit, to approve (i) the Acquisition Agreement and the transaction contemplated thereunder; (ii) the Subscription Agreement and the transaction contemplated thereunder; and (iii) the Whitewash Waiver by way of poll, the result of which will be announced after the SGM.

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LETTER FROM THE BOARD

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof to the office of the Company’s branch share registrar and transfer office in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish in such event, the proxy shall be deemed to be revoked.

VIII. RECOMMENDATION

The Directors (including all the independent non-executive Directors after considering the advice of the Independent Financial Adviser) consider that (i) the Acquisition Agreement and the transaction contemplated thereunder are fair and reasonable and on normal commercial terms despite the entering into of the Acquisition Agreement being not in the ordinary and usual course of business of the Group; (ii) the Subscription Agreement and the transaction contemplated thereunder are fair and reasonable and on normal commercial terms despite the entering into of the Subscription Agreement being not in the ordinary and usual course of business of the Group; (iii) the Whitewash Waiver is fair and reasonable; (iv) the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver are in the interests of the Group and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favor of the resolution to be proposed at the SGM to approve (i) the Acquisition Agreement and the transaction contemplated; (ii) the Subscription Agreement and the transaction contemplated thereunder; and (iii) the Whitewash Waiver.

Your attention is drawn to:

(a) this letter of the Board;
(b) the letter of recommendation from the Independent Board Committee, the text of which is set out on pages 40 to 41 of this circular; and
(c) the letter from TC Capital International Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 42 to 89 in this circular.

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LETTER FROM THE BOARD

IX. FURTHER INFORMATION

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

Yours faithfully, By order of the Board Artini China Co., Ltd. Tse Hoi Chau

Chairman

– 39 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Acquisition Agreement, the Subscription Agreement and the Whitewash wavier.

ARTINI CHINA CO. LTD. 雅天妮中國有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 789)

11 August 2016

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION RELATING TO THE

ACQUISITION OF ENTIRE INTEREST IN THE TARGET COMPANY; (2) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES BY A CONTROLLING SHAREHOLDER;

(3) APPLICATION FOR WHITEWASH WAIVER; AND

(4) NOTICE OF SPECIAL GENERAL MEETING

We refer to the circular dated 11 August 2016 (the “ Circular ”) to the shareholders of the Company of which this letter forms apart. Unless otherwise specified, terms defined in the Circular shall have the same meanings in this letter.

We have been appointed to form the Independent Board Committee to advise the Independent Shareholders in respect of the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver, details of which are set out in the “Letter from the Board” contained in the Circular. TC Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

Details of the advice of and the principal factors and reasons TC Capital has taken into consideration in giving such advice, are set out in the “Letter from TC Capital” in the Circular. Your attention is also drawn to the “Letter from the Board” in the Circular and the additional information set out in the appendices thereto.

– 40 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the terms of the Acquisition Agreement, the Subscription Agreement and the transactions respectively contemplated thereunder, the Whitewash Waiver and the advice of TC Capital, we are of the opinion (i) the terms of the Acquisition Agreement and the transaction contemplated thereunder are fair and reasonable so far as the Shareholders (including the Independent Shareholders) are concerned, on normal commercial terms despite the entering into of the Acquisition Agreement being not in the ordinary and usual course of business of the Group and in the interests of the Group and the independent Shareholders as whole; (ii) the terms of the Subscription Agreement and the transaction contemplated thereunder are fair and reasonable so far as the independent Shareholders are concerned, on normal commercial terms despite the entering into of the Subscription Agreement being not in the ordinary and usual course of business of the Group and in the interests of the Group and the independent Shareholders as whole; and (iii) the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Group and the Independent Shareholders as a whole. We, therefore, recommend that you vote in favour of the resolutions to be proposed at the SGM to approve (i) the Acquisition Agreement and the transaction contemplated thereunder; (ii) the Subscription Agreement and the transaction contemplated thereunder; and (iii) the Whitewash Waiver.

Yours faithfully, For and on behalf of Independent Board Committee

Lau Fai, Lawrence

Lau Yiu Kit

Zeng Zhaohui

Independent non-executive Directors

– 41 –

LETTER FROM TC CAPITAL

The following is the text of the letter of advice from TC Capital, the independent financial adviser to the Independent Board Committee and the Independent Shareholders for the purpose of incorporation into this circular.

11 August 2016

The Independent Board Committee and the Independent Shareholders of Artini China Co. Ltd.

Dear Sir/Madam,

(1) MAJOR TRANSACTION RELATING TO THE ACQUISITION OF ENTIRE INTEREST IN THE TARGET COMPANY; (2) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES BY A CONTROLLING SHAREHOLDER; AND (3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver, details of which are set out in the “Letter from the Board” (the “ Letter from the Board ”) contained in the circular of Artini China Co. Ltd. (the “ Company ”) dated 11 August 2016 issued to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular, unless otherwise specified.

On 13 April 2016 (after trading hours), the Purchaser (an indirectly wholly-owned subsidiary of the Company), the Vendors and the Guarantor entered into the Acquisition Agreement pursuant to which the Purchaser has conditionally agreed to acquire and the Vendors have conditionally agreed to sell the Sale Shares (representing all the issued shares of the Target Company) for an aggregate consideration of HK$160 million. In addition, on 13 April 2016 (after trading hours), the Company entered into the Subscription Agreement with the Subscriber pursuant to which the Company has conditionally agreed to allot and issue and the Subscriber has conditionally agreed to subscribe for a total of 2,440,000,000 Subscription Shares at the price of HK$0.074 per Subscription Share.

– 42 –

LETTER FROM TC CAPITAL

The Subscriber is a controlling shareholder of the Company and is therefore a connected person of the Company. Accordingly, the Subscription constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the approval of the Independent Shareholders by way of poll at the SGM.

As at the Latest Practicable Date, the Subscriber held 1,085,267,988 Shares, representing approximately 42.23% of the voting rights of the Company. The Subscriber is wholly and beneficially owned by Mr. Tse who, in additional to his shareholding through the Subscriber, also held 14,824,000 Shares, representing approximately 0.58% of the voting rights of the Company as at the Latest Practicable Date. Upon completion of the Subscription, 2,440,000,000 Subscription Shares will be issued to the Subscriber, and the interests of the Concert Group in the voting rights of the Company will be increased from approximately 42.81% to approximately 70.66% (assuming that no additional Shares other than the Subscription Shares will be issued since the date of the Subscription Agreement up to completion of the Subscription). Accordingly, the Concert Group, in the absence of the Whitewash Waiver, would be obliged to make a general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by them.

Given the Subscriber is beneficially wholly-owned by Mr. Tse and the Acquisition and the Subscription are inter-conditional, Mr. Tse, the Subscriber, their respective associates and parties acting in concert with any of them shall abstain from voting in respect of the resolution(s) approving the Acquisition, the Subscription (including the grant of a specific mandate for the issuance of new Shares pursuant to the Subscription) and the Whitewash Waiver at the SGM.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Lau Fai Lawrence, Mr. Lau Yiu Kit and Mr. Zeng Zhaohui, has been formed to give advice and recommendation to the Independent Shareholders in respect of the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver.

– 43 –

LETTER FROM TC CAPITAL

We have been appointed by the Company to advise (i) the Independent Board Committee and the Independent Shareholders as to whether or not the terms of the Acquisition Agreement and the Subscription Agreement are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and the Independent Shareholders as a whole; (ii) the Independent Board Committee and the Independent Shareholders as to whether or not the Whitewash Waiver is fair and reasonable and in the interests of the Independent Shareholders as a whole; and (iii) whether the Independent Shareholders should vote in favour of the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver. As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to the independence of us.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have considered, among other things, (i) the Circular; (ii) the Acquisition Agreement and the Subscription Agreement; (iii) the annual report of the Company for the years ended 31 March 2014 (the “ 2014 Annual Report ”), 31 March 2015 (the “ 2015 Annual Report ”) and 31 March 2016 (the “ 2016 Annual Report ”); (iv) the accountants’ report on the Target Company for the period from 18 June 2013 (i.e. date of incorporation) to 31 December 2013, for the years ended 31 December 2014 and 31 December 2015 and for the three months ended 31 March 2015 and 31 March 2016 as set out in Appendix II to the Circular (the “ Accountants’ Report of the Target Company ”); and (v) relevant market data and information available from the website of Stock Exchange. We have also relied on all relevant information, opinions and facts supplied and represented by the Company, the Directors and the management of the Company. We have also studied the relevant market information and trends of the related industry. We have assumed that all such information, opinions, facts and representations, which have been provided to us by the Directors or the management of the Company, for which they are fully responsible, were true, accurate and complete in all respects as at the date hereof and may be relied upon. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Company, and the Company has confirmed that no material facts have been withheld or omitted from the information provided and referred to in the Circular, which would make any statement therein misleading.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out independent verification of the information provided by the Directors and the management of the Company, nor have we conducted any form of in-depth investigation into the businesses, affairs, operations, financial position or future prospects of the Company, the Target Company, the Subscriber and any of their respective subsidiaries and associates.

– 44 –

LETTER FROM TC CAPITAL

THE ACQUISITION

In formulating our opinions in respect of the Acquisition, we have taken into consideration the following principal factors and reasons:

I. Background to and reasons for entering into the Acquisition Agreement

1. Background information of the Group, the Purchaser, the Vendors and the Target Company

a. Information on the Group and the Purchaser

As stated in the Letter from the Board, the Company is an investment holding company. The Group is principally engaged in the development, design and export of fashion accessories and gifts and sales of own brand fashion accessories. The Purchaser is an indirect wholly-owned subsidiary of the Company and is principally engaged in the trading of fashion accessories and investment holding.

As discussed with the management of the Company, the business of the Group has long been experiencing difficulties due to the weakened consumer sentiment caused by economic uncertainties in the PRC and sluggish performance of the European economy. In the latest three consecutive financial years that we have reviewed, the Group recorded substantial amount of losses. In order to achieve a business model breakthrough and strength its corporate image in the future, the Group continued to enhance the establishment and development of its e-commerce platform so as to devise new business models targeting Internet users. As stated in the 2016 Annual Report, the Group will promote the transformation of the “ Internet Plus ” innovation, and tried to seek suitable platforms, software companies, technical development personnel or other relative resources in the market, which would enable the Group’s business operations to deeper integrate to internet, and bring the high-tech and big data to the conventional fashion jewelry industry.

– 45 –

LETTER FROM TC CAPITAL

Set out below is the financial information as extracted from the 2014 Annual Report, the 2015 Annual Report and the 2016 Annual Report:

Turnover Loss before tax Loss for the year Total assets Total liabilities Net assets Pledged bank deposits and cash and cash equivalents	For the year ended 31 2016 2015 (Audited) (Audited) HK$’000 HK$’000 46,907 77,707 (100,019) (90,972) (100,030) (90,990) As at 31 March 2016 2015 (Audited) (Audited) HK$’000 HK$’000 106,716 156,062 49,397 25,953 57,319 130,109 10,858 122,822	March 2014 (Audited) HK$’000 173,236 (105,578) (108,320) 2014 (Audited) HK$’000 126,098 66,695 59,403 11,717

As depicted by the table above, the Group has recorded net loss for the three years ended 31 March 2014, 31 March 2015 and 31 March 2016.

According to the 2014 Annual Report and the 2015 Annual Report, the net loss of the Group for the two years ended 31 March 2015 was mainly attributable to (i) a decrease in turnover of the Group of approximately 55.1% from approximately HK$173.2 million for the year ended 31 March 2014 to approximately HK$77.7 million for the year ended 31 March 2015; (ii) a significant amount of selling and distribution expenses of the Group of approximately HK$30.6 million and HK$97.8 million for the years ended 31 March 2014 and 2015 respectively, which represented approximately 17.7% and 125.9% of the respective turnover, as a result of promotion for the retailing business; and (iii) a significant amount of administrative expenses of the Group of approximately HK$78.3 million and HK$39.9 million for the years ended 31 March 2014 and 2015 respectively, which represented approximately 45.2% and 51.3% of the respective turnover. Administrative expenses of the Group primarily comprised fixed assets depreciation, staff costs (including directors’ remuneration) and legal and professional fee. The decrease in administrative expenses of the Group for the year ended 31 March

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LETTER FROM TC CAPITAL

2015 as compared with the previous year was mainly due to the decrease in staff costs (including directors’ remuneration). There was a decrease in staff as the Group disposed its manufacturing arms in December 2014.

According to the 2016 Annual Report, the increase of loss of the Group for the year ended 31 March 2016 was attributable to (i) the decrease in the Group’s turnover of approximately 39.6% for the year ended 31 March 2016 as compared to that of the year ended 31 March 2015, mainly due to economic uncertainties in the PRC and the restructuring of the location of retailing points; (ii) the increase in selling expenses as a result of continuous promotion of the retailing business in order to maintain the Group’s brand; (iii) the effect of share based payment expenses arising from the grants of share options by the Company in July and November 2015; (iv) losses on disposals of the investment properties for the year ended 31 March 2016 (as compared to gains on disposal of properties recorded for the year ended 31 March 2015); and (v) no significant gain on disposals of the subsidiaries for the year ended 31 March 2016 (as compared to significant gains on disposals of subsidiaries recorded for the year ended 31 March 2015).

Total assets and net assets of the Group were generally shrinking in the three years ended 31 March 2016, from approximately HK$126.1 million and HK$59.4 million as at 31 March 2014 to approximately HK$106.7 million and HK$57.3 million as at 31 March 2016, respectively. The decrease in total assets and net assets was mainly due to continuous sub-optimal operating performance of the Group. Pledged bank deposits and cash and cash equivalents of the Group were also shrinking over the period, from approximately HK$11.7 million as at 31 March 2014, increased to approximately HK$122.8 million as at 31 March 2015 and then decreased to approximately HK$10.9 million as at 31 March 2016. The increase in pledged bank deposits and cash and cash equivalents of the Group as at 31 March 2015 was mainly due to (i) proceeds from an open offer undertaken by the Company in November 2014; (ii) proceeds from sales of office premise in Hong Kong; and (iii) the proceeds from disposal of TCK Company Limited and its wholly owned subsidiary, the manufacturing arms of the Group, during the year ended 31 March 2015. The decrease in pledged bank deposits and cash and cash equivalents of the Group as at 31 March 2016 was mainly due to the losses in the operation for the year ended 31 March 2016.

All net proceeds from the placing of the Shares in the Company, which was completed in September 2015, had been utilised.

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LETTER FROM TC CAPITAL

b. Information on the Vendors

As stated in the Letter from the Board, the principal business of each Vendor is investment holding. Mr. Zhuang is the sole director and ultimate legal and beneficial owner of each Vendor. The Vendors and Mr. Zhuang are Independent Third Parties and as at the Latest Practicable Date, did not hold any Shares.

c. Information on the Target Company

As set out in the Letter form the Board, the Target Company is a company incorporated in Hong Kong with limited liability that is principally engaged in developing and selling software related applications which can be purchased by businesses to facilitate e-commerce of their products and services. As at the Latest Practicable Date, the Target Company was owned as to 94% by Stand Charm and 6% by Dragon Max.

The management of the Company advised that the Target Company commenced operation in September 2013. The management of the Target Company has over five years’ experience in developing software related application for internet retail business. Three of the software developed by the Target Company, namely PrimeView 微信分銷管理平臺軟件 2.0.0 (PrimeView WeChat Sales Management Platform Software 2.0.0), PrimeView 微信即時通訊平臺軟件 2.0.0 (PrimeView WeChat Instant Messaging Software 2.0.0) and PrimeView 電子商城平臺軟件 2.0.0 (PrimeView Electronic Emporium Platform Software 2.0.0*) had been registered with 中華人民共和國國家版權局 (National Copyright Administration of the People’s Republic of China) in February 2016.

As stated in the Letter from the Board, as at the Latest Practicable Date, the existing product of the Target Company was 易銷E店 (Easy Sales Electronic Shop) (“ Easy Shop* ”), which is a multi-layer distribution system designed for use with WeChat, a telecommunications software developed primarily for smart phone. Through Easy Shop, WeChat users can engage as the distributor of an enterprise and market a product to friends in their circle. An enterprise can manage the distributors more effectively and efficiently by obtaining sales record of the distributors, the sales network of the distributors and monthly commission of the distributors through the backstage system of Easy Shop. Besides, Easy Shop can improve the seamless shopping experience across multiple channels, including both online and offline, to the customer. The software of Easy Shop can be modified for applying in other mobile shopping apps.

– 48 –

LETTER FROM TC CAPITAL

The management of the Company believes that these marketing tools represent a new trend of e-commerce with the potential to boost the sales of the end sellers, who are the target customers of the Target Company. Moreover, the Target Company has the resources to develop software for the intellectual technology to be installed in the fashionable and smart accessories which the Group plans to promote as mentioned in the paragraph headed “Reasons and benefits for entering into the Acquisition Agreement” below.

Although the Target Company currently has only one product, in view of that the management of the Target Company has over five years of experience in developing software related application for internet retail business (the management of the Company advised that the 5 employees of the Target Company who have more than five years of experience in developing software related application have developed 8 applications), the Directors believe the Target Company can still develop and launch new software related application that is compatible with smart accessories, which can be (i) used by the Company to further expand its internet retail business or create synergy for the Group’s existing business such as enhancement on the platform for the Group’s existing sales, obtaining a better understanding on the customer’s needs and spending behavior and further development on smart jewellery accessories; and (ii) sold to other target customers to make profits.

– 49 –

LETTER FROM TC CAPITAL

Financial information and business model

Set out below is certain financial information of the Target Company as extracted from the Accountants’ Report of the Target Company, prepared in accordance with generally accepted accounting standards in Hong Kong, which is included in Appendix II to the Circular:

For the

	For the
	period from
	18 June 2013
	(date of	For the	For the
	incorporation)	year ended	year ended	For the three months
	to 31 December	31 December	31 December	ended 31 March
	2013	2014	2015	2015		2016
	(audited)	(audited)	(audited)	(unaudited)	(audited)
	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)	(HK$’000)
Turnover	11	1,162	12,295	–		2,328
(Loss)/profit before tax	(11)	(52)	9,659	(107)		1,108
(Loss)/profit for the
period/year	(11)	(52)	8,095	(107)		925

The audited net assets of the Target Company as at 31 December 2015 and 31 March 2016 was approximately HK$8.2 million and HK$9.1 million respectively.

As depicted by the table above, turnover of the Target Company increase from approximately HK$11,000 for the period from 18 June 2013 (date of incorporation) to 31 December 2013 to HK$1,162,000 (all of which is revenue from sale of goods (i.e. sale of mobile phones installed with Easy Shop)) for the year ended 31 December 2014 and further to approximately HK$12,295,000 (of which revenue from sale of goods (i.e. sale of mobile phones installed with Easy Shop) is approximately HK$1,148,000 and provision of software-related application developing service (i.e. sale of Easy Shop together with the provision of maintenance services on Easy Shop) is approximately HK$11,147,000)) for the year ended 31 December 2015, representing an increase of approximately 958.1%. Turnover of the Target Company increased from nil for the three months ended 31 March 2015 to approximately HK$2,328,000 (all of which is provision of software-related application developing service (i.e. sale of Easy Shop and revenue of maintenance services on Easy Shop with existing customers)) for the three months ended 31 March 2016. The increase in turnover for the year ended 31 December 2014 and 31 December 2015 and for the three months ended 31

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LETTER FROM TC CAPITAL

March 2016 was mainly due to (i) the Target Company commenced its operation in September 2013 and generated its revenue largely starting from May 2014; and (ii) the Target Company had successfully marketed its products to customers in a number of industries, including frozen and processed food distribution, as well as merchandise and jewellery retail for the year. In 2014, the Target Company targeted the individual seller in WeChat, so it sold mobile phones installed with Easy Shop to a wholesaler of mobile phones. In 2015, the Target Company targeted small medium enterprises and these customers will afford the maintenance fees. Thus the Target Company had secured a number of software maintenance contracts for the year ended 31 December 2015 and the three months ended 31 March 2016. The Target Company recorded a profit of approximately HK$8,095,000 for the year ended 31 December 2015 as compared to a loss of approximately HK$52,000 for the year ended 31 December 2014 and a loss of approximately HK$11,000 for the period from 18 June 2013 (date of incorporation) to 31 December 2013. In addition, the Target Company recorded a profit of approximately HK$925,000 for the three months ended 31 March 2016 as compared to a loss of approximately HK$107,000 for the three months ended 31 March 2015. The Target Company had a profit for the year ended 31 December 2015 and for the three months ended 31 March 2016 was mainly due to the increase in turnover while most of the operating costs of the Target Company was fixed cost. The relatively modest net profit of the Target Company for the three months ended 31 March 2016 was mainly influenced by (i) the decrease in monthly maintenance income, as there were slight adjustments on the monthly maintenance fee after the renewal of software maintenance contracts with customers in January 2016; and (ii) the increase in monthly staff costs from approximately HK$200,000 in December 2015 to approximately HK$320,000 in March 2016, as more sale personnel and technical staff who are responsible for the maintenance services and the product development has been employed in the first quarter of 2016 in order to cope with the future development of the Target Company.

As stated in the Letter from the Board, for the period from 18 June 2013 (date of incorporation) to 31 December 2014, there is no revenue generated from the software-related application development service segment as none of the customers who bought the mobile phone which installed with Easy Shop had entered into software maintenance contract with the Target Company.

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the software maintenance service by entering software maintenance contracts with them. At the same time, the Target Company were also selling mobile phone which installed with Easy Shop to those customers. Eventually, the Target Company can (i) maintain a long term relationship with its existing customers by providing maintenance services to them; and (ii) generate stable revenue from such customers in the future.

For the period from 18 June 2013 (date of incorporation) to 31 December 2013, the two years ended 31 December 2015, and the three months ended 31 March 2015 and 2016, revenue generated from sales of goods were approximately HK$10,906, HK$1,162,005, HK$1,147,923, nil and nil respectively. After the successful development of Easy Shop in 2013, the Target Company started outsourcing the production process of installing Easy Shop in the mobile phones to third party manufacturers and subsequently the Target Company purchased the goods from such manufacturers and resold to its customer. Those mobile phones were not manufactured by the Target Company. For the period from 18 June 2013 (date of incorporation) to 31 December 2013, the two years ended 31 December 2015 and the three months ended 31 March 2015 and 2016, 8, 500, 524, nil and nil mobile phones were respectively sold.

In 2014, the Target Company had only one customer, which was a wholesaler of mobile phones. In 2015, the Target Company had four new customers which (i) were small and medium enterprises from different industries, including frozen and processed food industry and jewellery industry; and (ii) engaged the Target Company to provide maintenance services. While these customers entered into the software maintenance contracts (including sale of Easy Shop) with the Target Company and paid monthly maintenance fee to the Target Company, the Target Company also sold to them mobile phones which installed with the Easy Shop. For the three months ended 31 March 2016, the Target Company renewed the software maintenance contracts with four existing customers. Also, for the three months ended 31 March 2016, it also sold the Easy Shop as a standalone product to five individual end-users. For the period from 18 June 2013 (date of

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incorporation) to 31 December 2013, the two years ended 31 December 2014 and 2015, and the three months ended 31 March 2015 and 2016, revenue generated from software-related application development service were nil, nil, approximately HK$11,147,260, nil and approximately HK$2,328,309 respectively.

As the maintenance services provided by the Target Company include (i) modifying the software in response to the markets needs from time to time (whereas the software prohibits any modification without authorisation by the Target Company); and (ii) providing training to customers’ staff, the nature of software maintenance contract is different from license agreement for its customers to use Easy Shop. Once the Easy Shop is installed in the mobile phone, the customer can access to it without paying any further license fee.

The management of the Company advised that the Target Company had four and five customers as at 31 December 2015 and 31 May 2016 respectively. To the best knowledge of the Directors, all customers of the Target Company are Independent Third Parties. Four of these five existing customers of the Target Company started the relationship with the Target Company in 2015.

Shareholders should note that the Target Company currently has only one product and five enterprises customers as at 31 May 2016 and thus its operation performance is currently solely reliant on this product and few customers. The future business prospects of the Target Company depends on a number of factors including in the following: (i) the continuous success of the Target Company’s product; (ii) its successful development and launch of new software related application that is compatible with smart accessories; (iii) the renewal of the maintenance contracts with the existing customers; and (iv) its success in securing new customers in order to minimize the risk of customer concentration. There is no assurance that the existing software of the Target Company will continue to be well-received by the market, or that the Target Company will be able to successfully develop and launch new software that is well-received by the market or that the Target Company will be able to maintain its relationship with the customers or explore and secure new customers, and in the event the existing/new software developed by the Target Company is not well-received by the market and/or its relationship with its customers cannot be maintained, and/or its customer base cannot be strengthened, the prospect, financial conditions and results of operations of the Enlarged Group will be materially and adversely affected.

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Industry overview

Overview of the online retailing in Asian markets

According to a report namely “2015-16 Outlook for the retail and consumer products sector in Asia” (the “ 2015-16 Outlook Report ”) issued by PricewaterhouseCoopers Limited in February 2015, Asian markets, especially China, are driving growth in e-commerce globally. They are also well primed for sales made using mobile devices (m-commerce) and social media (s-commerce). The latter is still nascent, but interest has been lodged by Asian firms. Japanese e-commerce firm Rakuten has invested heavily in online pinboard community Pinterest, with a view to using the network as a storefront for popular items. Alibaba’s purchase of a US$586 million stake in Sina Weibo in 2013, a Chinese Twitter-like service, has highlighted the value that social media could hold for online retailers.

According to the 2015-16 Outlook Report, McKinsey, a management consultancy, expects Chinese e-commerce sales to reach US$650 billion by 2020. In China, mobile payments accounted for 8% of total online transactions in 2013, up from just 1.5% in 2011. Data from iResearch show that 26% to 30% of web visits (through browsers and apps) are made by smartphones and tablets, and mobile devices already contribute to 15% of orders. According to the 2015-16 Outlook Report, if the current trend continues, there is a high likelihood that mobile payments will account for 20%-30% of online transactions by 2016.

According to the 2015-16 Outlook Report, Hong Kong’s heavily-concentrated population and high level of Internet penetration make it a promising prospect for online retail. A culture that favours bargain-hunting and a hands-on shopping experience will mean that a large amount of shopping continues to be done offline. Yet, couponing and Groupon-type sites, as well as social media or mobile applications linking location services to special offers, are increasingly blurring the line between online and bricks-and-mortar retail.

Overview of the China mobile shopping market and the China mobile social networking Apps

As we have not found any official statistics on mobile shopping market and the mobile social networking Apps in China, we have reviewed two articles on the website of China Internet Watch. According to the website of China Internet Watch, China Internet Watch is part of Incitez Pte. Ltd. China Internet Watch shares China market intelligence, online insights, China Internet statistics, online trends and marketing strategies. According to the

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website of Incitez Pte. Ltd. Incitez Pte. Ltd. is a data-driven digital marketing company based in Singapore with another office in China providing digital strategy consulting and digital development, with experts in digital marketing for over 10 years Having assessed the background of China Internet Watch, we consider it is appropriate and fair to quote the articles.

According to an article namely “China’s Mobile Shopping Exceeded US80 billion in Q3 2015” dated 25 January 2016 issued on the website of China Internet Watch, China’s mobile shopping market reached more than RMB519.99 billion with an increase of 120.9% quarter-on-quarter in third quarter of 2015 according to iResearch. Mobile shopping market has developed quickly in China. The growth rate of mobile shopping came faster than the overall online shopping market in third quarter of 2015. Mobile shopping transaction sales reached RMB519.99 billion in third quarter of 2015 accounting for 56.7% of total internet shopping sales.

==> picture [357 x 268] intentionally omitted <==

----- Start of picture text -----

Mobile shopping market has surpassed the PC client
since Q2 2015
Mobile PC
43.3%
66.0% 60.0% 52.4% 49.2%
69.6%
74.1%
56.7%
34.0% 40.0% 47.6% 50.8%
30.4%
25.9%
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3
% of total online shopping transaction value in Q3 2015
China Infernet Watch Source: iResearch Dec 2015
----- End of picture text -----

Mobile shopping continued to reach China internet users. Transactions on mobile client accounted for 56.7% overall online sales with 5.9% higher compared to the previous quarter and 22.7% higher compared to the same period last year.

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According to an article namely “Top 6 China Mobile Social Networking Apps” dated 7 April 2016 issued on the website of China Internet Watch, the average monthly reached users by mobile social networking apps in China exceeded 608 million in fourth quarter of 2015 according to data from iResearch. China’s top 6 mobile social apps by the total number of monthly reached users in fourth quarter of 2015 are WeChat/Weixin (535 million), QQ (496 million), Momo (56.9 million), Aliwangwang (27.4 million), Yixin (14.4 million), and DDChong (8.83 million; formerly called Laiwang).

==> picture [357 x 256] intentionally omitted <==

----- Start of picture text -----

China Mobile social Networking Apps in 2015
The Average Monthly Reached Users
Monthly reached users (million) Growth rate QoQ
5.1%
5.1%
4.3%
527.626 554.650 582.877 608.007
2015Q1 2015Q2 2015Q3 2015Q4
China Infernet Watch Source: iResearch Jan 2016
----- End of picture text -----

According to an article namely “WeChat is the cornerstone of e-commerce in China” published on the website of WeChat Marketing Experts, Chinese internet users shift from computers to cell phones. In 2016 Chinese New Year, WeChat has seen a total of 8.08 billion transactions via red envelopes which is almost double what PayPal did 4.9 billion transactions in entire year 2015.

2. Reasons and benefits for entering into the Acquisition Agreement

As stated in the 2016 Annual Report, in the past, the retail market continued to deteriorate without any abating. Because of the high rental of shopping mall spaces and declining customer flows, the management of the Company has been exploring means to expand its distribution channel outside of the Group’s existing retail business model.

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As stated in the 2016 Annual Report, with the rapid development of electronic commerce in recent years, it brought the huge and profound influence to brick and mortar business. The internet is constantly permeating traditional industries, and blurring the divisions across industries. The management of the Company considers that the integration between traditional industry and e-commerce represents the general market trend. Therefore, the Group has promoted the transformation of “Internet Plus” innovation, and tried to seek suitable platforms, software companies, technical development personnel or other relative resources in the market, which would enable the Group’s business operations to deeper integrate to internet, and bring the high-tech and big data to the conventional fashion jewelry industry. The completion of the Acquisition is expected to bring synergy with the Group’s existing business, such as enhancement on the platform for the Group’s existing online sales, obtaining a better understanding on the customer’s needs between both sides in its retail and internet sales and further development on smart jewellery accessories. The management of the Company believes that the new concept of the combination of “Internet + Traditional accessories + Smart wearable + Big health + Big data” (i.e. by using traditional accessories with smart wearable functions to provide health suggestions to customers based on users’ data through the Internet in order to cater for the trends of healthy life) will be a broad prospective blue ocean in the future. In order to implement such new concepts, the Target Company will assist the Company in developing softwares to transmit the data, such as the amounts of calories consumed each day collected from the smart wearable into the health information which can be used by the customers in their mobile phone and enable them to have a better understanding about their personal health, so that they can improve their health accordingly. The Company will continue to review its retail business model after completion of the Acquisition and will consider means to optimise deployment of resources as and when appropriate.

As stated in the Letter from the Board, with the growing popularity of online shopping, the Company considered that it is necessary to expand its internet retail market. The Company has over three years’ experience in internet retail business prior to the entering into the Acquisition Agreement. The Company has considered expanding its internet retail business by outsourcing or acquiring the relevant software from the market. However, having considered that (i) the Company may not have full control in operation and efficient software customization if it is outsourced; and (ii) the software require upgrades from time to time and/or continuous development in order to meet the fast-changing environment, the Directors are of the view that acquiring a company with existing technology, software and expertise is the most appropriate way to expand its internet retail market.

By using Easy Shop, the existing software developed by the Target Company, the Directors are of the view that the operation of the Company’s internet retail business can be improved and expanded in below several ways:

(i) engaging WeChat users as the Company’s distributors to promote its products, which can boost its internet sales business;

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(ii) analysing customer’s behavior and thereby improving the Company’s ability to assess and react to changes in consumer demand, preferences and tastes; and
(iii) strengthening the Company’s inventory management and order management by reducing lead time.

Based on the above, the Directors are of the view that the software and related applications developed by the Target Company will enable the Group to expand its internet retail business, which would increase the sales of the Group’s products and in turn improve the competitiveness of the Group and is essential for the sustainable development of the Group in the long run. Moreover, the Directors expected that there will be synergy to be created for the Group’s existing business after completion of the Acquisition, such as enhancement on the platform for the Group’s existing online sales, obtaining a better understanding on the customer’s needs and spending behavior and further development on smart jewellery accessories.

As discussed with the management of the Company, the Company considers the Acquisition would enable the Company to expand its business into application software industry, especially application software applied in mobile shopping. Through the Acquisition, the Group would be able to generate income from sale of goods (i.e. sale of smartphone installed with Easy Shop) and/or provision of software-related application developing service (i.e. sale of Easy Shop and/or provision of maintenance services to the platform). The Company confirmed that they will not change the above existing business model of the Target Company immediately after the completion of the Acquisition.

Having taken into account (i) the Acquisition is in line with the Group’s business development strategy as mentioned above, i.e. (a) the Target Company will enable the Group to expand its internet retail business and can develop software for the intellectual technology to be installed in the fashionable and smart female health products to be developed by the Group; and (b) the Acquisition would enable the Company to expand its business into application software industry, especially application software applied in mobile shopping; and (ii) the Target Company was making profit for the year ended 31 December 2015 and the three months ended 31 March 2016 as mentioned in the paragraph headed “Information on the Target Company” above, we consider that the entering into the Acquisition Agreement is fair and reasonable insofar as the Independent Shareholders are concerned and in the interest of the Company and the Shareholders as a whole, despite the entering into the Acquisition Agreement being not in the ordinary and usual course of business of the Group.

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II. Principal terms of the Acquisition Agreement

On 13 April 2016 (after trading hours), the Purchaser, the Vendors and the Guarantor entered into the Acquisition Agreement, pursuant to which the Purchaser has conditionally agreed to purchase, and the Vendors have conditionally agreed to sell the Sale Shares (representing all the issued shares of the Target Company) for an aggregate consideration of HK$160 million. The principal terms of the Acquisition Agreement have been set out in the Letter from the Board and are summarized below.

Date:

13 April 2016 (after trading hours)

Parties:

Artini Sales Company Limited (as the Purchaser)

Stand Charm and Dragon Max (as the Vendors)

Mr. Zhuang (as guarantor of the Vendors’ obligations under the Acquisition Agreement)

Assets being acquired:

The Sale Shares, representing all the issued shares of the Target Company.

Upon completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Company.

Consideration of the Acquisition Agreement:

(i) HK$100 million within 14 days of completion of Subscription;
(ii) HK$30 million within 14 days after completion of and an agreement being reached between the Purchaser and the Vendors on the Target Company’s June 2016 Accounts and provided that the profit after tax attributable to shareholders based on such unaudited management accounts is not less than HK$5 million; and

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(iii) HK$30 million within 14 days after completion of and an agreement being reached between the Purchaser and the Vendors on the Target Company’s December 2016 Accounts for the full year ending 31 December 2016 and provided that the profit after tax attributable to shareholders is not less than HK$11 million.

For the avoidance of doubt:

(i) the second installment of the consideration for the Acquisition will only be payable when (a) the Target Company’s June 2016 Accounts is available and has been agreed upon by the Purchaser and the Vendors; and (b) the profit after tax attributable to the shareholders of the Target Company as set out in the Target Company’s June 2016 Accounts is not less than HK$5 million. As at the Latest Practicable Date, the Vendors had prepared the Target Company’s June 2016 Accounts, the contents of which were still pending agreement by the Company for the purpose of the Acquisition Agreement; and
(ii) the third installment of the consideration for the Acquisition will only be payable when (a) the Target Company’s December 2016 Accounts is available and has been agreed upon by the Purchaser and the Vendors; and (b) the profit after tax attributable to shareholders of the Target Company as set out in the Target Company’s December 2016 Accounts is not less than HK$11 million.

Further updates in respect of the determination of the consideration under the Acquisition Agreement will be disclosed by the Company by way of an announcement or disclosure in its annual report as and when appropriate.

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Conditions precedent:

Completion of the Acquisition is conditional upon, among other things, upon the fulfillment of the following conditions precedent:

(i) the Whitewash Waiver being granted by the Executive;
(ii) all the conditions precedent under the Subscription Agreement (except the satisfaction of conditions precedent under the Acquisition Agreement) having been satisfied (including, among other things, the approval by the Independent Shareholders of the Acquisition Agreement and the transactions contemplated thereunder);
(iii) each key employee of the Target Company (including Mr. Zhuang) as specified in the Acquisition Agreement (none of whom was a Shareholder as at the Latest Practicable Date) having signed an employment contract with the Purchaser or its nominee in the form and substance satisfactory to the Purchaser and effective on the date of completion of the Acquisition;
(iv) the Purchaser having completed the financial and legal due diligence review on the Target Company and being satisfied with the results of such review in all aspects;
(v) all necessary approvals and/or consents in relation to authorizing the execution, delivery and performance of the Acquisition Agreement and the transactions contemplated thereunder having been obtained by the Vendors and/or the Target Company;

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(vi) the consummation of the transactions contemplated under the Acquisition Agreement not having been restrained, enjoined or otherwise prohibited by any applicable laws and regulations, any order, injunction, decree or judgment of any court or other governmental authority;
(vii) all representations, warranties and undertakings given by the Vendors under the Acquisition Agreement remaining true, accurate and complete, and none of the provisions of the Acquisition Agreement having been breached in any material respect; and
(viii) there being no material adverse change in the financial position, business or operations of the Target Company.

Any of the above conditions precedent (other than in paragraphs (i) and (ii) above) can be waived by the Purchaser.

If all of the conditions precedent set out in the Acquisition Agreement have not been fulfilled and/or waived (as the case maybe) on or before the Long Stop Date or such other date as may be agreed by the Vendors and the Purchaser, each of the Vendors and the Purchaser has the right to terminate the Acquisition Agreement (other than the provisions in relation to, among others, confidentiality, notice and governing law, which shall survive) and thereafter no party shall have any liability save for antecedent breaches. As at the Latest Practicable Date, condition (v) set out above has been fulfilled.

Completion of the Acquisition:

Completion of the Acquisition will, subject to all the conditions precedent set out above (to the extent not waived) being fulfilled, take place on the fourth Business Day after the date of the fulfillment or waiver of such conditions precedent or such later date as the parties to the Acquisition Agreement may agree in writing.

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As stated in the Letter from the Board, Mr. Zhuang is one of the key employees of the Target Company. The management of the Company advised that each key employee of the Target Company will sign the employment contract in the form provided by the Company before the completion of the Acquisition. The management of the Company further advised that the purpose of such arrangement is to ensure smooth operations of the Target Company immediately after the Completion and the Company did not take into account of such arrangement in determining the consideration for the Acquisition.

III. Evaluation of the consideration for the Acquisition

As stated in the Letter from the Board, the consideration for the Acquisition was arrived at based on normal commercial terms after arm’s length negotiation between the Purchaser and the Vendors with reference to, among the other things, (i) the historical financial performance of the Target Company; (ii) the growth and development potential and prospect of the Target Company, having considered the fact that the Target Company (a) was making profit for the year ended 31 December 2015 and the three months ended 31 March 2016; (b) has stable monthly maintenance income from software maintenance contract which are renewable annually; and (c) has the resources to develop software related application that is compatible with smart accessories; (iii) the anticipated synergy to be created for the Group’s existing business after completion of the Acquisition, such as enhancement on the platform for the Group’s existing online sales, obtaining a better understanding on the customer’s needs and spending behavior and further development on smart jewellery accessories; and (iv) the historical price-to-earnings ratio of selected comparable companies that (a) are currently listed on the Main Board of the Stock Exchange; and (b) are primarily engaged in software related application business in Hong Kong and the PRC.

Given the fact that (i) at 12 April 2016, the historical price-to-earning ratio of the comparable companies mentioned above in 2015 ranged from approximately 4.6 times to 53.1 times, with the average of approximately 28.0 times; (ii) the Target Company’s business is expected to bring synergy with the Group’s existing business after completion of the Acquisition as the Company intend to develop its internet retail business with the Target Company with a view to improving the sale of the Group’s products and in turn the profitability and the competitiveness of the Group which are essential for the sustainable development of the Group in the long run, the Directors are of the view that the implied price-to-earning ratio of approximately 19.8 times based on the net profit of the Target Company for the year ended 31 December 2015, is fair and reasonable. Given the major feature of the above selected comparable companies are similar to that of the Target Company, i.e. all of them are primarily engaged in software related application business in Hong Kong and the PRC, we concur with the Company’s selection basis of the above comparable companies.

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As stated in the Accountants’ Report of the Target Company, the Target Company recorded a revenue of approximately HK$1,162,000 for the year ended 31 December 2014, all of which is revenue from sale of goods, i.e. sale of mobile phones installed with Easy Shop. The Target Company recorded a revenue of approximately HK$12,295,000 for the year ended 31 December 2015, of which revenue from sale of goods (i.e. sale of mobile phones installed with Easy Shop) is approximately HK$1,148,000 and provision of software-related application developing service (i.e. sale of Easy Shop together with the provision of maintenance services on Easy Shop) is approximately HK$11,147,000. The Target Company signed four contracts for the provision of software-related application developing service for the year ended 31 December 2015. As stated in the Letter from the Board, the Target Company has stable monthly maintenance income from software maintenance contracts which are renewable annually. The management of the Company advised that it is the sales strategy of the Target Company to sell the application software together with the maintenance services and its target customers are small medium enterprises who can afford the maintenance fees. The Target Company puts emphasis on client relationship with its existing customers and wants to maintain a long-term relationship with its existing customers to obtain the maintenance contract. Given (i) it is the sales strategy of the Target Company to sell the application software together with the maintenance services; (ii) the customers require the maintenance services to modify the software in response to the market needs from time to time as the software is prohibited from any modification without authorisation by the Target Company and to provide training to its staff; (iii) all the four customers of the Target Company in 2015 have renewed the maintenance contract in 2016; and (iv) the Target Company has signed a software maintenance contract with a new customer in May 2016 with a contract sum of HK$3 million for the year 2016 and subject to renewal in January 2017, we concur with the Directors’ view that service income is recurring and sustainable as to support the implied price-to-earning of the Target Company at 19.8 times, although there is only less than three years of track record of revenue for the Target Company.

1. Comparable companies analysis

In order to assess the fairness and reasonableness of the consideration for the Acquisition, we have attempted to identify comparable software related application (according to the classification of Bloomberg) companies (the “ Comparable Companies ”) that (i) are currently listed on the Main Board of the Stock Exchange; and (ii) are primarily engaged in software related application business in Hong Kong and the PRC (i.e. generating more than 50% of their revenue from software related application business). The Comparable Companies have been selected exhaustively based on the above criteria, which have been identified, to the best of our endeavours, in our research through public information. Shareholders should note that the businesses, operations and prospects of the Target Company are not the same as those of the Comparable Companies and as such, the Comparable Companies may only be used to provide a general reference only.

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In our assessment, we have considered price-to-earnings ratio (“ P/E ”) which are commonly used to assess the financial valuation of a company engaged in software related application business. P/E analysis of the Comparable Companies are shown below.

		Market
Company name	Ticker	capitalization(Note 1)	P/E(Note 2)
		(HK$ million)	(times)
Feiyu Technology
International Company Ltd.	1022	2,169.2	29.6
Sinosoft Technology Group
Limited	1297	4,851.6	26.1
Century Sage Scientific
Holdings Limited	1450	504.2	8.6
Chanjet Information	1588	2,067.6	N/A_(Note 3)_
Technology Company
Limited – H Shares
Tian Ge Interactive Holdings
Limited	1980	5,790.1	31.5
BAIOO Family Interactive
Limited	2100	1,126.8	9.3
Sino-i Technology Limited	250	2,330.0	48.7
Kingdee International
Software Group Company
Limited	268	8,086.6	59.7
Kingsoft Corporation Limited	3888	18,941.4	39.0
Boyaa Interactive
International Limited	434	2,218.8	4.8
Forgame Holdings Limited	484	1,413.5	N/A_(Note 3)_
Inspur International Limited	596	1,379.4	N/A_(Note 3)_

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		Market
Company name	Ticker	capitalization(Note 1)	P/E(Note 2)
		(HK$ million)	(times)
North Asia Resources	61	1,877.2	N/A_(Note 3)_
Holdings Limited
Ourgame International
Holdings Limited	6899	2,267.3	17.0
NetDragon Websoft Inc.	777	13,163.4	N/A_(Note 3)_
IGG Inc	799	4,662.3	10.4
		Average	25.9
		Maximum	59.7
		Minimum	4.8
The Target Company_(Note 4)_			19.8

Source: calculated from data from the website of the Stock Exchange

Notes:

The market capitalizations of the Comparable Companies are calculated by multiplying the share price and the number of issued shares of the respective companies as at the Latest Practicable Date.
P/Es of the Comparable Companies are calculated by dividing their market capitalization by the profits attributable to equity holders of the respective companies according to their latest financial reports.
The company incurred loss for the latest financial year.
The implied P/E of the Target Company is calculated by dividing the consideration for the Acquisition by the profit of the Target Company for the year ended 31 December 2015.

As illustrated above, the P/Es of the Comparable Companies range from approximately 4.8 times to 59.7 times (the “ Comparable Companies P/E Range ”), with the average of approximately 25.9 times (the “ Average Comparable Companies P/E ”).

We note that the implied P/E of the Target Company is 19.8 times, which is lower than the Average Comparable Companies P/E and within the Comparable Companies P/E Range. As such, we are of the view that the consideration for the Acquisition is fair and reasonable in this regard.

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2. Comparable transactions analysis

In order to assess the fairness and reasonableness of the consideration for the Acquisition, to the best of our endeavours, we have reviewed transactions from 14 April 2015 (being the date of one year before the date of the Acquisition Agreement) to 13 April 2016 (being the date of the Acquisition Agreement) which involved acquisition of equity interests in software application business (according to the classification of Bloomberg) (the “ Comparable Transactions ”) by companies listed on the Stock Exchange. The Comparable Transactions have been selected exhaustively based on the above criteria, which have been identified, to the best of our endeavours, in our research through public information. Shareholders should note that the businesses, operations and prospects of the Target Company are not the same as the target companies of the Comparable Transactions and as such, the Comparable Transactions may be used to provide a general reference only.

Similar to the Comparable Companies analysis, in our assessment, we have considered P/E as our benchmark and the analysis of the Comparable Transactions are shown below.

Announcement	Target	Listed
date	name	company	Ticker	Transaction size	P/E(times)(Note 1)
7 May 2015	Shenzhen	Forefront	885	HK$38.4 million for	22.9
	Cneop	Group		38.75% equity interest
	Technology	Limited		in the target company
	Co., Ltd
7 May 2015	Wise Visual	China	8178	HK$80.0 million for 25%	N/A_(Note 2)_
	Holdings	Information		equity interest in the
	Limited	Technology		target company
		Development
		Limited
10 July 2015	Promethean	NetDragon	777	HK$1,012.7 million for	N/A_(Note 2)_
	World PLC	Websoft Inc.		100% equity interest in
				the target company
				(maximum)
30 October	Cfu Come Ltd	C Cheng	1486	HK$20.3 million for	N/A_(Note 2)_
2015		Holdings		80.5% equity interest
		Limited		in the target company

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Announcement	Target	Listed
date	name	company	Ticker	Transaction size	P/E(times)(Note 1)
26 November	Genesis	Credit China	8207	RMB560 million for 35%	17.5
2015	Business	Holdings		equity interest in the
	Holdings	Limited		target company
	Limited
11 December	Four	Finsoft	8018	HK$20.0 million for 30%	18.5
2015	Directions	Financial		equity interest in the
	Investment	Investment		target company
	Limited	Holdings
		Limited
8 January	Wuhan Jiuxin	Tian Ge	1980	RMB20.8 million for 20%	N/A_(Note 3)_
2016	Puhui	Interactive		equity interest in the
	Financial	Holdings		target company
	Information	Limited
	Services
	Company
	Limited
14 January	Charm Team	China Mobile	8081	HK$2 for 49% equity	N/A_(Note 2)_
2016	Group	Games and		interest in the target
	Limited	Cultural		company
		Investment
		Limited
28 March	Wanliyun	Alibaba	241	RMB225 million for 25%	N/A_(Note 2)_
2016	Medical	Health		equity interest in the
	Information	Information		target company
	Technology	Technology
	Beijing Co.,	Limited
	Ltd.
				Average	19.6
				Maximum	22.9
				Minimum	17.5
The Target Company_(Note 4)_					19.8

Source: calculated from data from the website of the Stock Exchange

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LETTER FROM TC CAPITAL

Notes:

The P/Es of the Comparable Transactions are calculated by dividing the consideration by the then profit of the respective company.
The target company incurred loss for the then latest financial year.
The respective announcement did not mention the financial information of the target company.
The implied P/E of the Target Company is calculated by dividing the consideration for the Acquisition by the profit of the Target Company for the year ended 31 December 2015.

As illustrated above, the P/Es of the Comparable Transactions range from approximately 17.5 times to 22.9 times (the “ Comparable Transactions P/E Range ”), with the average of approximately 19.6 times (the “ Average Comparable Transactions P/E ”).

We note that the implied P/E of the Target Company is 19.8 times, which is within the Comparable Transactions P/E Range and slightly above the Average Comparable Transactions P/E. As such, we are of the view that the consideration for the Acquisition is fair and reasonable in this regard.

IV. Conclusion

Taking into account that (i) the entering into the Acquisition Agreement is fair and reasonable insofar as the Independent Shareholders are concerned and in the interest of the Company and the Shareholders as a whole, despite the entering into the Acquisition Agreement being not in the ordinary and usual course of business of the Group, as mentioned in the paragraph headed “Reasons and benefits for entering into the Acquisition Agreement” above; (ii) the consideration for the Acquisition is fair and reasonable as far as the Company and the Shareholders as a whole are concerned as mentioned in the paragraph headed “Evaluation of the consideration for the Acquisition” above; and (iii) the Acquisition and the Subscription would bring positive impact to the performance and the net assets value of the Group and are beneficial to the Group from the financial point of the view as mentioned in the section headed “Financial effects of the Acquisition and the Subscription” below, we are of the view that, though the entering into of the Acquisition Agreement is not in the ordinary and usual course of business of the Group, the terms of the Acquisition Agreement are on normal commercial terms, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

THE SUBSCRIPTION

In formulating our opinions in respect of the Subscription, we have taken into consideration the following principal factors and reasons:

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I. Background to and reasons for entering into Subscription Agreement and use of proceeds from the Subscription

1. Background information of the Subscriber and Mr. Tse

As stated in the Letter from the Board, the Subscriber is an investment holding company that is beneficially wholly-owned by Mr. Tse. As at the Latest Practicable Date, the Concert Group held 1,100,091,988 Shares, representing approximately 42.81% of all the issued shares of the Company.

2. Use of proceeds from the Subscription and reasons and benefits for entering into the Subscription Agreement

As stated in the Letter from the Board, the gross proceeds from the Subscription and the net proceeds (after deducting estimated expenses, including mainly legal and professional fees) from the issue of the Subscription Shares) from the Subscription is estimated to be approximately HK$181 million and approximately HK$178 million, respectively. Based on the estimated net proceeds, the net subscription price would be approximately HK$0.073 per Subscription Share. The Group intends to apply approximately HK$160 million of the net proceeds from the Subscription to finance the cash consideration for the Acquisition and to use approximately HK$18 million of the net proceeds from the Subscription as the general working capital of the Group.

According to the 2016 Annual Report, the cash and cash equivalents of the Group as at 31 March 2016 was approximately HK$10.9 million, the Directors are of the view that Company does not have sufficient cash to satisfy the consideration for the Acquisition.

The Board had considered the availability of the following funding alternatives (apart from the Subscription) for the cash consideration for the Acquisition and to increase the working capital of the Company:

(i) debt financing: the Board does not consider this to be appropriate for the Group since it would increase the gearing level of the Group and the Group would have to incur interest expenses which would impose additional financial burden on the Group’s future cash flows;

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(ii) equity financing through placement of new Shares to independent investors: the Company encountered difficulties in engaging a placing agent, which the Board believes to be attributable to the relative small market capitalization of the Company and the low trading volume of the Shares under the current market sentiment; and
(iii) a rights issue or an open offer: the Company encountered difficulties in procuring an independent underwriter in Hong Kong in underwriting a rights issue or an open offer of the Company. Moreover, in light of the uncertainty involved, the Subscriber was not willing to act as an underwriter of a right issue or an open offer.

In light of the above, the Board is of the view that equity financing by way of the Subscription is the most appropriate means of raising additional capital to finance the cash consideration for the Acquisition and to increase the working capital as it is:

(i) more practicable and direct under a volatile market and the uncertain global market conditions currently prevailing;
(ii) less costly and no interest expenses will need to be paid;
(iii) less time consuming; and
(iv) in the interest of the Group and the Independent Shareholders as a whole, given it signifies the confidence of the Company’s controlling shareholder in the existing and future development potentials of the Group.

The management of the Company advised that a rights issue or an open offer is more time consuming and cumbersome as more documentation to be prepared. The management of the Company further advised that the Subscriber indicated that he has commercial difficulties to be underwriter of right issue or an open offer due to uncertainty of fund commitment of the Subscriber.

Based on the above, the Directors consider that the Subscription represents a straightforward and cost-effective means of financing for the Group.

Taking into account that (i) the additional financial burden incurred by debt financing; (ii) the difficulties in the equity financing through placement of new Shares and conducting a rights issue or an open offer and its deep discount due to the low trading volume of the Shares; and (iii) the benefits of the Subscription as

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described above, we concur with the Directors that it is in the interest of the Company and the Independent Shareholders to raise fund by the Subscription.

Having taken into account (i) the terms of the Acquisition Agreement are on normal commercial terms, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole as mentioned in the paragraph headed “Conclusion” in the section headed “The Acquisition” above; and (ii) the Subscription represents a straightforward and cost-effective means of financing the Acquisition as mentioned above, we consider that, despite the entering into of the Subscription Agreement being not in the ordinary and usual course of business of the Group, the entering into the Subscription Agreement is fair and reasonable under the Group’s present development.

II. Principal terms of the Subscription Agreement

Date:

13 April 2016 (after trading hours)

Parties:

Walifax Investments Limited (as the Subscriber) The Company (as the Issuer)

The Subscription Shares:

The Subscriber has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue a total of 2,440,000,000 Subscription Shares. As at the Latest Practicable Date, there were 2,569,840,644 Shares in issue and the Subscription Shares represent approximately 94.95% of all the issued shares of the Company as at the Latest Practicable Date and, assuming that there is no change in the share capital of the Company other than the issue of the Subscription Shares since the Latest Practicable Date up to completion of the Subscription, approximately 48.70% of all the issued shares of the Company upon completion of the Subscription as enlarged by the issue of the Subscription Shares.

Subscription Price:

HK$0.074 per Subscription Share

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LETTER FROM TC CAPITAL

Ranking:

Specific mandate:

Conditions precedent to the completion of the Subscription:

Completion of the Subscription is conditional upon the fulfillment of the following conditions precedent:
(i) the obtaining of the Whitewash Waiver, and if such approval is subject to any conditions imposed by the SFC, such conditions being reasonably acceptable to the Subscriber (it being acknowledged that any condition requiring the approval of Shareholders other than the Subscriber or its associates (as defined in the Listing Rules) is acceptable to the Subscriber);
(ii) the Acquisition Agreement becoming unconditional in accordance with its terms;
(iii) the approval by the Shareholders who are not required to abstain from voting under the Listing Rules and the Takeovers Code of each of the following at the SGM in accordance with the requirements of the Listing Rules and the Takeovers Code:

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(a) the Subscription Agreement and the transaction contemplated thereunder, including the allotment and issue under a specific mandate of the Subscription Shares;
(b) the Whitewash Waiver; and
(c) the Acquisition Agreement and the transactions contemplated thereunder;
(iv) the listing of, and permission to deal in, all the Subscription Shares having been granted by the Stock Exchange (either unconditionally or subject only to allotment and matters ancillary thereto) and if such approval is subject to any conditions imposed by the Stock Exchange, such conditions having been fulfilled;
(v) the Shares remaining listed and traded on the main board of the Stock Exchange at all times from the date of the Subscription Agreement up to the date of completion of the Subscription, save for any temporary suspension in connection with the approval and clearance of the documents relating to the transactions contemplated under the Subscription Agreement and the Acquisition Agreement by the SFC or the Stock Exchange prior to their release of publication;
(vi) no indication being received prior to the completion of the Subscription from the SFC and the Stock Exchange to the effect that the listing of the Shares on the main board of the Stock Exchange shall or may be withdrawn or objected to;

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LETTER FROM TC CAPITAL

(vii) all the authorizations, approvals, consents, waives, and permits of the relevant authorities of the relevant jurisdictions which are necessary to give effect to the Subscription Agreement and the Subscription as required by all laws or regulations applicable to the Company and the Subscriber having been granted, received and obtained, or where such approval, consent, waiver or permit is given subject to conditions, on such conditions as are acceptable to the Company and the Subscriber (as the case may be) acting reasonably;
(viii) the warranties made, or any of the undertakings given, by the Company under the Subscription Agreement remaining true and correct in all material respects; and
(ix) there not having occurred at any time any material adverse change or development in the financial or trading position of the Group.

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LETTER FROM TC CAPITAL

None of the above conditions precedent has been fulfilled as at the Latest Practicable Date.

Completion of the Subscription:

Completion of the Subscription will, subject to the Whitewash Waiver and the listing permission contemplated in the condition precedent set out in paragraph (iv) above not being revoked or withdrawn, take place on the second Business Day after the fulfillment or waiver of the conditions precedent to the completion of the Subscription (or such later date as parties to the Subscription Agreement may agree in writing).

III. Evaluation of the Subscription Price

1. Historical price analysis

As stated in the Letter from the Board, the Subscription Price was determined after arm’s length negotiation between the Company and the Subscriber with reference to, among other factors, the financial position of the Group, the historical trading volume of the Shares on the Stock Exchange and the recent trading prices of the Shares as quoted on the Stock Exchange. The issue price per Subscription Share of HK$0.074 represents:

(i) a discount of approximately 24.5% to the closing price of HK$0.0980 per Share as quoted on the Stock Exchange on the Last Trading Date;
(ii) a discount of approximately 26.7% to the closing price of HK$0.101 per Share as quoted on the Stock Exchange on the date of the Subscription Agreement;
(iii) a discount of approximately 47.1% to the closing price of HK$0.140 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(iv) a discount of approximately 22.4% to the average closing price of HK$0.0954 per Share as quoted on the Stock Exchange for the five trading days up to and including the Last Trading Day;
(v) a discount of approximately 22.5% to the average closing price of HK$0.0955 per Share as quoted on the Stock Exchange for the last 10 trading days up to and including the Last Trading Day;

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(vi) a discount of approximately 26.9% to the average closing price of HK$0.1013 per Share as quoted on the Stock Exchange for the last 30 trading days up to and including the Last Trading Day; and
(vii) a premium of approximately 231.8% over and above the Group’s audited consolidated net asset value attributable to the Shareholders per Share as at 31 March 2016, the date to which the latest audited consolidated financial results of the Company were made up to, of approximately HK$0.0223 (based on a total of 2,569,840,644 Shares as at Latest Practical Date and the Group’s audited consolidated net asset value attributable to the Shareholders of approximately HK$57,319,000 as at 31 March 2016).

The Directors believe the discount to the closing price on the date of the Subscription Agreement of approximately 26.7% as represented by the Subscription Price is reasonable in view of the following reasons:

(i) the Subscription Price represents a premium of approximately 231.8% over and above the Group’s audited consolidated net asset value attributable to the Shareholders per Share as at 31 March 2016 of approximately HK$0.0223; and
(ii) the average daily trading volume of the Shares for the last 30 trading days up to and including the Last Trading Day were approximately 23,700,000 Shares, representing a percentage of the average total number of Shares held by the public Shareholders of approximately 1.429%. Given the low trading volume of the Shares, it is difficult for the Company to conduct a sizeable equity fund raising activities with independent investors due to the lack of interest of them.

To assess the fairness and reasonableness of the Subscription Price, we set out the following analyses which include reviews on both the historical price and trading liquidity of the Shares.

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LETTER FROM TC CAPITAL

The chart below illustrates the daily closing prices of the Shares and Hang Seng Index (the “ HSI ”) during the period from 14 May 2015 (being one year before the date of the Subscription Agreement) up to and including the Latest Practicable Date (the “ Review Period ”):

==> picture [420 x 177] intentionally omitted <==

----- Start of picture text -----

0.350 30000.00
0.300
25000.00
0.250
20000.00
0.200
15000.00
0.150
10000.00
0.100
0.050 Subscription Price (HK$0.074) 5000.00
NAV per Share (HK$0.022)
0.000 0.00
14-Apr-2015 14-Jul-2015 14-Oct-2015 14-Jan-2016 14-Apr-2016 14-Jul-2016
Closing Price Subscription Price NAV Per Share HSI
HSI
(HK$)
Closing Price
----- End of picture text -----

Source: Bloomberg

During the Review Period, the daily closing price of the Shares ranged from HK$0.09 per Share to HK$0.285 per Share. The Subscription Price falls below the above prices but represents a premium over the Group’s audited consolidated net asset value attributable to the Shareholders per Share as at 31 March 2016. If short term fluctuation is excluded, we note that the daily closing price of the Shares has been on a declining trend during the Review Period.

For the purpose of assessing the trading liquidity of the Shares, we set out below the total monthly trading volume, the average daily trading volume per month and the respective percentage of average daily trading volume to total number of Shares in issue as at the Latest Practicable Date and total number of Shares held by public shareholders as at the Latest Practicable Date during the Review Period.

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LETTER FROM TC CAPITAL

					Percentage of average
				Percentage of average	daily trading volume to
				daily trading volume to	total number of Shares
		Total monthly trading	Average daily trading	total number of Shares	held by public
Month		volume	volume (Note 1)	in issue(Note 2)	shareholders (Note 3)
		(Number of Shares)	(Number of Shares)	(%)	(%)
2015
April (14 April 2015
to 30 April 2015)		2,161,088,184	166,237,553	6.469%	11.311%
May		1,357,476,857	71,446,150	2.780%	4.861%
June		793,852,968	36,084,226	1.404%	2.455%
July		537,127,962	24,414,907	0.950%	1.661%
August		104,776,470	5,238,824	0.204%	0.356%
September		352,509,937	17,625,497	0.686%	1.199%
October		638,102,500	31,905,125	1.242%	2.171%
November		421,005,500	20,047,881	0.780%	1.364%
December		402,761,044	18,307,320	0.712%	1.246%
2016
January		337,491,500	16,874,575	0.657%	1.148%
February		243,826,000	13,545,889	0.527%	0.922%
March		489,140,762	22,233,671	0.865%	1.513%
April		798,122,210	39,906,111	1.553%	2.715%
May		405,886,000	19,327,905	0.752%	1.315%
June		217,012,500	10,333,929	0.402%	0.703%
July		373,727,000	17,796,524	0.693%	1.211%
August (Up	to the
Latest Practicable
Date)		164,563,000	32,912,600	1.281%	2.239%
Source:	Bloomberg

Notes:

Average daily trading volume is calculated by dividing the total trading volume of the Shares for the month by the number of trading days during the month.
Based on 2,569,840,644 Shares in issue as at the Latest Practicable Date.
Based on 1,469,748,656 Shares held by the public Shareholders as at the Latest Practicable Date.

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LETTER FROM TC CAPITAL

During the Review Period, the average daily trading volume of the Shares as a percentage of the total number of Shares in issue as at the Latest Practicable Date ranged from approximately 0.204% to 6.469% while the average daily trading volume of the Shares as a percentage of the total number of Shares held by the public Shareholders as at the Latest Practicable Date ranged from approximately 0.356% to 11.311%.

During the Review Period, the average daily trading volume of the Shares was generally below 2.00% of total number of Shares in issue as at the Latest Practicable Date except for the period from April 2015 to May 2015 during which the overall stock market was booming as evidenced by the continuous growth of the closing price of the Shares as well as the HSI, as illustrated in Chart above. We also note that the trading volume of the Shares raised to 234,506,460 Shares on 14 April 2016, the date after the Announcement. Apart from the trading volume from April 2015 to May 2015 and on 14 April 2016, the Shares were generally illiquid in the open market.

Based on the above average daily trading volume of Shares as a percentage of the total number of Shares in issue as at the Latest Practicable Date as well as average daily trading volume of Shares as a percentage of the total number of Shares held by the public Shareholders as at the Latest Practicable Date, we are of the view that the trading of the Shares was relatively thin and inactive during the Review Period.

2. Comparable Issues Analysis

In order to further assess the fairness and reasonableness of the Subscription Price, we have identified 27 transactions (the “ Comparable Issues ”) in relation to subscriptions/placing involving issue of new ordinary shares by companies listed on the Stock Exchange (excluding delisting company) which would trigger mandatory general offer but applied for whitewash waiver and announced during the Review Period. Shareholders should noted that the subject companies in the Comparable Issues may have different principal activities, market capitalisations, profitability and financial positions as compared to those of the Company. The circumstances surrounding such subscriptions/placing may also be different from

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those relating to the Company. We have compared the respective issue price of the Comparable Issues with the Subscription, details of which are set out in the table below:

			(Discount)/		(Discount)/	(Discount)/
			premium of the	premium of the		premium of the
			issue price		issue price	issue price
			(to)/over the		(to)/over the	(to)/over the
			closing price per	closing price per		closing price per
			share on the last	share on the last		share on the last
			trading day		five trading	ten trading days
			prior to/on the	days prior to/on		prior to/on the
			date of the	the date of the		date of the
Date of		Stock	announcement/	announcement/		announcement/
announcement	Company name	Code	agreement		agreement	agreement
			(%)		(%)	(%)
15 April 2015	Shougang Concord Grand
	(Group) Limited	730	(7.9)		(6.2)	(3.1)
13 May 2015	21 Holdings Limited	1003	(79.2)		(70.4)	(68.0)
20 May 2015	China City Railway
	Transportation Technology
	Holdings Company Limited	1522	(15.4)		(11.8)	(2.9)
27 May 2015	China Jinhai International
	Group Limited	139	(74.0)		(67.4)	(64.7)
29 May 2015	Reorient Group Limited	376	(77.8)		(73.7)	(71.1)
4 June 2015	World Wide Touch Technology
	(Holdings) Limited	1282	(41.0)		(36.8)	(32.3)
16 July 2015	A8 New Media Group Limited	800	(12.3)		6.5	(14.1)
31 July 2015	Mascotte Holdings Limited	136	(97.9)		(97.6)	(97.5)
5 August 2015	Shanghai Tonva Petrochemical
	Co., Ltd.	1103	(4.8)		(15.8)	(13.0)

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LETTER FROM TC CAPITAL

			(Discount)/	(Discount)/	(Discount)/
			premium of the	premium of the	premium of the
			issue price	issue price	issue price
			(to)/over the	(to)/over the	(to)/over the
			closing price per	closing price per	closing price per
			share on the last	share on the last	share on the last
			trading day	five trading	ten trading days
			prior to/on the	days prior to/on	prior to/on the
			date of the	the date of the	date of the
Date of		Stock	announcement/	announcement/	announcement/
announcement	Company name	Code	agreement	agreement	agreement
			(%)	(%)	(%)
10 August 2015	Beijing Capital Land Limited	2868	2.4	6.1	4.1
27 August 2015	China Seven Star Holdings
	Limited	245	(89.9)	(87.7)	(86.6)
30 August 2015	Global Bio-chem Technology
	Group Company Limited	809	(31.1)	(25.1)	(29.9)
12 October 2015	SRE Group Limited	1207	(74.4)	(73.3)	(73.5)
4 December 2015	Yuhua Energy Holdings Limited	2728	0.0	(2.2)	(2.4)
10 December 2015	China Jiuhao Health Industry
	Corporation Limited_(Note)_	419	(86.2)	(87.7)	(87.9)
14 December 2015	Optics Valley Union Holding
	Company Limited	798	(15.8)	(13.0)	(14.9)
16 December 2015	FDG Electric Vehicles Limited	729	0.0	(3.9)	(5.1)
5 January 2016	Addchance Holdings Limited	3344	(60.8)	(66.9)	(61.4)
16 February 2016	Varitronix International Limited	710	(33.7)	(34.5)	(33.4)
19 February 2016	Sino Credit Holdings Limited	628	(55.5)	(56.5)	(54.5)
25 February 2016	Jiangxi Copper Company
	Limited	358	(2.0)	(6.2)	(3.4)

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LETTER FROM TC CAPITAL

			(Discount)/	(Discount)/	(Discount)/
			premium of the	premium of the	premium of the
			issue price	issue price	issue price
			(to)/over the	(to)/over the	(to)/over the
			closing price per	closing price per	closing price per
			share on the last	share on the last	share on the last
			trading day	five trading	ten trading days
			prior to/on the	days prior to/on	prior to/on the
			date of the	the date of the	date of the
Date of		Stock	announcement/	announcement/	announcement/
announcement	Company name	Code	agreement	agreement	agreement
			(%)	(%)	(%)
29 February 2016	Hang Fat Ginseng Holdings
	Company Limited	911	(85.1)	(84.3)	(92.3)
7 March 2016	Nickel Resources
	International Holdings
	Company Limited	2889	(23.1)	(15.1)	(15.1)
27 April 2016	Hin Sang Group
	(International) Holding Co.
	Ltd.	6893	(33.33)	(22.37)	(23.0)
17 May 2016	New Times Energy
	Corporation Limited	166	(3.14)	(1.3)	(3.8)
25 May 2016	O Luxe Holdings Limited	860	0.0	(1.6)	(8.0)
13 July 2016	Sino Golf Holdings Limited	361	(63.2)	(59.9)	(54.0)
	Average		(39.5)	(37.4)	(37.5)
	Minimum		(97.9)	(97.6)	(97.5)
	Maximum		8.0	6.5	4.1
	The Subscription	789	(26.7)	(22.4)	(22.5)

Source: from relevant announcements/circulars or calculated form data on the website of the Stock Exchange

Note: A distribution, comprised a distribution of cash and shares, of the company was completed on 6 October 2015. The respectively closing price represented the theoretical ex-entitlement closing price (after excluding the pro forma value of distribution per share).

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LETTER FROM TC CAPITAL

As set out in the table above, the issue price of the Comparable Issues (i) as compared to their respective closing price on the last trading day prior to/on the date of the announcement/agreement ranges from a discount of approximately 97.9% to a premium of approximately 8.0%, with an average of a discount of approximately 39.5%; (ii) as compared to the average closing price for the last five trading days prior to/on the date of the announcement/agreement ranges from a discount of approximately 97.6% to a premium of approximately 6.5%, with an average of a discount of approximately 37.4%; (iii) as compared to the average closing price for the last ten trading days prior to/on the date of the announcement/agreement ranges from a discount of approximately 97.5% to a premium of approximately 4.1%, with an average of a discount of approximately 37.5%. The discount represented by the Subscription Price to the closing price/average closing price of the Shares on each of (i) the Last Trading Day; (ii) the last five trading days up to and including the Last Trading Day; and (iii) the last 10 trading days up to and including the Last Trading Day is lower (i.e. more favourable to the Company) than the average discount and within the range of discounts of the Comparable Issues.

Although the Subscription Price represents a discount to the closing prices of the Shares, having taken into account (i) the Subscription Price represents a premium over the audited consolidated net asset value per Share as at 31 March 2016; (ii) the price of the Shares was in a declining trend during the Review Period; (iii) the low liquidity in the trading of the Shares during the Review Period, which may imply that it would be difficult for the Company to further raise funds due to the lack of interest from potential investors; and (iv) the discounts of the Subscription Price over the closing prices of the Shares are lower (i.e. more favourable to the Company) than all the discounts of the Comparable Issues, we are of the view that the Subscription Price is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

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LETTER FROM TC CAPITAL

IV. Effects on the shareholding of existing Shareholders

The following table sets out the shareholdings in the Company as at the Latest Practicable Date and immediately after the completion of the Subscription (assuming there are no changes to the share capital and shareholding structure of the Company other than the issue of the Subscription Shares from the Latest Practicable Date to the date of completion of the Subscription):

Controlling Shareholder The Subscriber_(Note 1) Mr. Tse(Note 2) Sub-total of the Subscriber and persons acting concert with it Executive Director(s) Mr. Lin Shao Hua Public Grantees of Outstanding Options (other than Mr. Tse and the Directors)(Note 3)_ Other Public Shareholders	As at the Latest Practicable Date No. of Shares % 1,085,267,988 42.23 14,824,000 0.58 1,100,091,988 42.81 – – – – 1,469,748,656 57.19 2,569,840,644 100.0	Immediately after completion of the Subscription (assuming no Outstanding Options are exercised)(Note 4) No. of Shares % 3,525,267,988 70.37 14,824,000 0.29 3,540,091,988 70.66 – – – – 1,469,748,656 29.34 5,009,840,644 100.0	Immediately after completion of the Subscription (assuming all Outstanding Option are exercised)(Note 4) No. of Shares % 3,525,267,988 65.43 41,495,400 0.77 3,566,763,388 66.20 26,671,400 0.50 324,699,800 6.03 1,469,748,656 27.27 5,387,883,244 100.0	Immediately after completion of the Subscription (assuming all Outstanding Option are exercised)(Note 4) No. of Shares % 3,525,267,988 65.43 41,495,400 0.77 3,566,763,388 66.20 26,671,400 0.50 324,699,800 6.03 1,469,748,656 27.27 5,387,883,244 100.0
				0.50 6.03 27.27
				100.0

Notes:

The Subscriber is beneficially wholly-owned by Mr. Tse.
Mr. Tse is the executive Director, chairman and chief executive officer of the Company.
None of these grantee of the Outstanding Options is a director, chief executive or substantial shareholder of the Company, or any of their respective associates or parties acting in concert with the Subscriber.
Full exercise of the Outstanding Option would result in a maximum of 378,042,600 new Shares being fallen to be allotted and issued to its holders.

– 85 –

LETTER FROM TC CAPITAL

As illustrated above, the shareholding of the existing public Shareholders would be reduced from approximately 57.19% as at the Latest Practicable Date to approximately 29.34% upon completion of the Subscription assuming no Outstanding Options are exercised and approximately 33.30% immediately upon completion of the Subscription and the exercise in full of the outstanding Options.

There will be substantial dilution to the shareholding interest of the existing public Shareholders as a result of the Subscription. However, having taken into account (i) the benefits to be derived by the Group from the Subscription as set out in the paragraph headed “Use of proceeds from the Subscription and reasons and benefits for entering into the Subscription Agreement” above; (ii) that the Subscription Price is considered to be fair and reasonable as set out in the paragraph headed “Evaluation of the Subscription Price” above; and (iii) the difficulties in conducting a rights issue or an open offer, which can maintain pro-rata shareholding of the public Shareholders, as mentioned in the paragraph headed “Use of proceeds from the Subscription and reasons and benefits for entering into the Subscription Agreement” above, we consider that the dilution effect to the shareholding interest of the existing public Shareholders as a result of the Subscription is acceptable.

V. The Whitewash Waiver

– 86 –

LETTER FROM TC CAPITAL

The Subscription is conditional on, among other things, the approval of the Whitewash Waiver by the Independent Shareholders at the SGM. If the Whitewash Waiver is not approved, the Subscription will not proceed. The Acquisition will also not proceed as the Acquisition and the Subscription are inter-conditional.

Having considered (i) the Subscription is a reasonable financing alternative available to the Group; (ii) the Subscription would provide funds to settle the consideration of the Acquisition and the Acquisition is fair and reasonable as mentioned in the section headed “The Acquisition” above; (iii) the dilution effect as a result of the Subscription being acceptable as mention in the paragraph headed “Effects on the shareholding of existing Shareholders” above; and (iv) the Acquisition and the Subscription would bring positive impact to the performance and the net assets value of the Group and are beneficial to the Group from the financial point of the view as mentioned in the section headed “Financial effects of the Acquisition and the Subscription” below, we are of the view that the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

VI. Conclusion

Taking into account that (i) the entering into the Subscription Agreement is fair and reasonable, despite the entering into the Subscription Agreement being not in the ordinary and usual course of business of the Group, as mentioned in the paragraph headed “Use of proceeds from the Subscription and reasons and benefits for entering into the Subscription Agreement” above; (ii) the Subscription Price is fair and reasonable as far as the Company and the Independent Shareholders are concerned as mentioned in the paragraph headed “Evaluation of the Subscription Price” above; (iii) the dilution effect to the shareholding interest of the existing public Shareholders as a result of the Subscription being acceptable as mention in the paragraph headed “Effects on the shareholding of existing Shareholders” above; (iv) the granting of the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole as mentioned in the paragraph headed “The Whitewash Waiver” above; and (v) the Acquisition and the Subscription would bring positive impact to the performance and the net assets value of the Group and are beneficial to the Group from the financial point of the view as mentioned in the section headed “Financial effects of the Acquisition and the Subscription” below, we are of the view that, though the entering into the Subscription Agreement is not in the ordinary and usual course of business of the Group, the terms of the Subscription Agreement are on normal commercial terms, in the ordinary and usual course of business of the Company, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Company and the Independent Shareholders and the Whitewash Waiver is fair and reasonable and in the interests of the Independent Shareholders.

– 87 –

LETTER FROM TC CAPITAL

FINANCIAL EFFECTS OF THE ACQUISITION AND THE SUBSCRIPTION

(i) Effect on net profit

As stated in the Letter from the Board, upon completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Company and the financial information of the Target Company will be consolidated into the consolidated financial statements of the Group. As set out in the accountants’ report on the Target Company in Appendix II to the Circular, the revenue reached approximately HK$12.3 million and HK$2.3 million for the year ended 31 December 2015 and for the three months ended 31 March 2016 respectively, and profit after taxation reached approximately HK$8.1 million and HK$0.9 million for the year ended 31 December 2015 and for the three months ended 31 March 2016 respectively. After completion of the Acquisition, the revenue and profit after taxation of the Target Company will be consolidated in the consolidated financial statements of the Group. As such, we consider that the Acquisition will have a positive impact on the net profit of the Group. The management of the Company advised that the Subscription will not have any effect on the net profit of the Group.

(ii) Effect on net assets value

As stated in the 2016 Annual Report, the audited consolidated net assets of the Group as at 31 March 2016 was approximately HK$57.3 million comprising total assets of HK$106.7 million and total liabilities of approximately HK$49.4 million. According to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to the Circular, the unaudited pro forma net assets of the Enlarged Group would increase to approximately HK$230.3 million, comprising unaudited pro forma total assets of approximately HK$283.6 million and unaudited pro forma total liabilities of approximately HK$53.3 million. The net asset value per Share would increase from approximately HK$0.0223 as at 31 March 2016 to approximately HK$0.0460 immediately upon completion of the Acquisition and the Subscription (calculated by dividing the unaudited pro forma net assets of the Enlarged Group of approximately HK$230.3 million by the number of Shares in issue immediately after completion of the Acquisition and the Subscription (assuming no Outstanding Options are exercised) of 5,009,840,644 Shares). As such, we consider that the Acquisition and the Subscription will have a positive impact on the net assets value of the Group.

As the Acquisition and the Subscription would bring positive impact to the performance and the net assets value of the Group, we are of the view that the Acquisition and the Subscription are beneficial to the Group from the financial point of the view.

Shareholders should note that the aforementioned analyses are for illustrative purpose only and do not purport to represent how the financial position of the Enlarged Group will be upon the completion of the Acquisition and the Subscription.

– 88 –

LETTER FROM TC CAPITAL

RECOMMENDATION

Having taken into account the above principal factors and reasons stated in the paragraphs headed “Conclusion” in the sections headed “The Acquisition” and “The Subscription” above respectively, we consider that, though the entering into the Acquisition Agreement and the Subscription Agreement are not in the ordinary and usual course of business of the Group, (i) the terms of the Acquisition Agreement and the Subscription Agreement are on normal commercial terms, fair and reasonable insofar as the Independent Shareholders are concerned and in the interests of the Independent Shareholders; and (ii) the Whitewash Waiver is fair and reasonable and in the interests of the Independent Shareholders.

Accordingly, we advise the Independent Board Committee to advise the Independent Shareholders to vote in favour, and we also recommend that Independent Shareholders vote in favour, of the ordinary resolution as set out in “Notice of SGM” to the Circular, which to be proposed at the SGM in this regard.

Yours faithfully, For and on behalf of TC Capital International Limited Edward Wu Chairman

Note: Mr. Edward Wu has been a responsible officer of Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance since 2005. Mr. Wu has participated in and completed various advisory transactions in respect of connected transactions of listed companies in Hong Kong.

The English translation of the Chinese name(s) in this letter, where indicated with * is included for information purpose only and should not be regarded as the official English name(s) of such Chinese names.

– 89 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. SUMMARY OF THE FINANCIAL INFORMATION

The following summary of financial information for each of the three financials years ended 31 March 2014, 2015 and 2016 as extracted from the annual report of the Company for the year ended 31 March 2014, 2015 and 2016, all of which have been published on the website of the Stock Exchange as specifically set out below:

Annual report:

Page numbers of

Financial financial year ended information Website 31 March 2014 Pages 47 – 112 http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0730/LTN20140730333.pdf 31 March 2015 Pages 43 – 108 http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0729/LTN20150729139.pdf 31 March 2016 Pages 37 – 102 http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0727/LTN20160727249.pdf

The above annual reports are also available at the website of the Company at http://www.artini-china.com/hk/investor.php.

Asian Alliance, the auditor of the Company for the financial year ended 31 March 2014, 2015 and 2016, did not issue any qualified opinion on the financial statements of the Group for each of the three financial years ended 31 March 2014, 2015 and 2016. The Group had no items which are exceptional or extraordinary because of size, nature, or incidence for each of the three financial years ended 31 March 2014, 2015 and 2016.

– I-1 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Turnover Cost of sales Gross profit (loss) Other income Other gains and losses Gains (losses) on disposals of property, plant and equipment Losses on disposals of investment properties Net gains on disposals of subsidiaries Selling and distribution expenses Administrative expenses Finance costs Loss before tax Income tax expense Loss for the year Attributable to: – Owners of the Company – Non-controlling interests Loss for the year Loss per share – Basic (HK$) – Diluted (HK$) Dividend	For the year ended 31 March 2016 2015 2014 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 (Restated) 46,907 77,707 173,236 (45,335) (96,395) (155,021) 1,572 (18,688) 18,215 315 486 1,262 (6,992) (15,116) (15,010) 70 42,897 (279) (3,613) – – 17 39,312 474 (47,918) (97,796) (30,589) (43,460) (39,919) (78,305) (10) (2,148) (1,346) (100,019) (90,972) (105,578) (11) (18) (2,742) (100,030) (90,990) (108,320) (100,030) (90,990) (108,299) – – (21) (100,030) (90,990) (108,320) (0.040) (0.080) (0.175) N/A N/A N/A nil nil nil	For the year ended 31 March 2016 2015 2014 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 (Restated) 46,907 77,707 173,236 (45,335) (96,395) (155,021) 1,572 (18,688) 18,215 315 486 1,262 (6,992) (15,116) (15,010) 70 42,897 (279) (3,613) – – 17 39,312 474 (47,918) (97,796) (30,589) (43,460) (39,919) (78,305) (10) (2,148) (1,346) (100,019) (90,972) (105,578) (11) (18) (2,742) (100,030) (90,990) (108,320) (100,030) (90,990) (108,299) – – (21) (100,030) (90,990) (108,320) (0.040) (0.080) (0.175) N/A N/A N/A nil nil nil
		(105,578) (2,742)
		(108,320)

		(108,299) (21)
		(108,320)

		(0.175)

		N/A

		nil

– I-2 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Assets and liabilities Non-current assets Current assets Total assets Current liabilities Total assets less current liabilities Non-current liabilities Net assets Share Capital Reserves Total equity	31 March 2016 (audited) HK$’000 55,927 50,789 106,716 (49,006) 57,710 (391) 57,319 25,698 31,621 57,319	As at 31 March 2015 (audited) HK$’000 10,571 145,491 156,062 (25,953) 130,109 – 130,109 24,746 105,363 130,109	31 March 2014 (audited) HK$’000 51,161 74,937
			126,098 (66,547)
			59,551 (148)
			59,403

			123,732 (64,329)
			59,403

– I-3 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016

The following is the full text of audited consolidated financial statements of the Group for the year ended 31 March 2016 as extracted from the annual report of the Company for the year ended 31 March 2016:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 31 March 2016

Notes Revenue 7 Cost of sales Gross profit (loss) Other income 8 Other gains and losses 9 Gains on disposals of property, plant and equipment Losses on disposals of investment properties Net gains on disposals of subsidiaries 30 Selling and distribution expenses Administrative expenses Finance costs 10 Loss before tax 11 Income tax expense 14 Loss for the year Loss per share 15 – Basic (HK$) – Diluted (HK$)	2016 HK$’000 46,907 (45,335) 1,572 315 (6,992) 70 (3,613) 17 (47,918) (43,460) (10) (100,019) (11) (100,030) (0.040) N/A	2015 HK$’000 77,707 (96,395) (18,688) 486 (15,116) 42,897 – 39,312 (97,796) (39,919) (2,148) (90,972) (18) (90,990) (0.080) N/A

– I-4 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 March 2016

Notes Loss for the year Other comprehensive income (expense) Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Release of translation reserve upon disposals of subsidiaries 30 Other comprehensive income (expense) for the year, net of income tax Total comprehensive expense for the year	2016 HK$’000 (100,030) 1,156 (37) 1,119 (98,911)	2015 HK$’000 (90,990) 123 (21,474) (21,351) (112,341)

– I-5 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 March 2016

Notes NON-CURRENT ASSETS Property, plant and equipment 16 Investment properties 17 Intangible assets 18 Deferred tax assets 19 Deposits paid 20 CURRENT ASSETS Inventories 21 Trade and other receivables 22 Cash and bank balances 23 CURRENT LIABILITIES Trade and other payables 24 Tax liabilities Obligations under finance lease – current portion 25 NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITY Obligations under finance lease – non-current portion 25 NET ASSETS CAPITAL AND RESERVES Share capital 26 Reserves TOTAL EQUITY	2016 HK$’000 885 – – – 55,042 55,927 428 39,503 10,858 50,789 48,745 101 160 49,006 1,783 57,710 391 57,319 25,698 31,621 57,319	2015 HK$’000 1,607 8,901 – 63 –
		10,571
		3,515 19,154 122,822
		145,491
		25,794 159 –
		25,953
		119,538
		130,109
		–
		130,109

		24,746 105,363
		130,109

– I-6 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2016

As at 1 April 2014 Loss for the year Other comprehensive expense for the year, net of income tax Total comprehensive expense for the year Disposals of subsidiaries Capital Reduction_(as defined_ in Note 26(a)) Issue of shares in respect of Open Offer_(as defined in_ Note 26(b)) Transaction costs attributable to the issue of shares (Note 26(b)) Lapsed of share options (Note 28) As at 31 March 2015 Loss for the year Other comprehensive income for the year, net of income tax Total comprehensive income (expense) for the year Issue of shares in respect of Placing_(as defined in Note_ 26(c)) Transaction costs attributable to the issue of shares (Note 26(c)) Recognition of share options (Note 28) As at 31 March 2016	Share capital HK$’000 123,732 – – – – (117,545) 18,559 – – 24,746 – – – 952 – – 25,698	Share premium HK$’000 549,974 – – – – – 167,039 (2,551) – 714,462 – – – 9,044 (440) – 723,066	Other reserves Translation reserve HK$’000 HK$’000 (note (A)) (19,518) 38,730 – – – (21,351) – (21,351) – – – – – – – – – – (19,518) 17,379 – – – 1,119 – 1,119 – – – – – – (19,518) 18,498	PRC statutory reserves HK$’000 (note (B)) 21,755 – – – (13,114) – – – – 8,641 – – – – – – 8,641	Share- based payment capital reserve Accumulated losses HK$’000 HK$’000 14,718 (669,988) – (90,990) – – – (90,990) – 13,114 – 117,545 – – – – (1,146) 1,146 13,572 (629,173) – (100,030) – – – (100,030) – – – – 16,565 – 30,137 (729,203)	Total HK$’000 59,403
						(90,990) (21,351)
						(112,341)
						– – 185,598 (2,551) –
						130,109
						(100,030) 1,119
						(98,911)
						9,996 (440) 16,565
						57,319

– I-7 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

A. OTHER RESERVES

The other reserves comprise of the following:

i. Restructuring reserve

The restructuring reserve of debit balance of approximately HK$19,615,000 (2015: HK$19,615,000) represents the difference between the nominal value of the share capital issued by the Company and the nominal value of the share capital of the subsidiaries comprising of the Group prior to the reorganisation of the Group in 2008.

ii. Legal reserve

Pursuant to the Macao Commercial Code, the Company’s subsidiary incorporated in Macao is required to appropriate 25% of net profit to legal reserve until the balance of the reserve reaches 50% of the subsidiary’s registered capital. At the end of reporting period, legal reserve of approximately HK$97,000 (2015: HK$97,000) is not distributable to equity holders of the Company.

B. PRC STATUTORY RESERVES

The amounts represent the transfers from retained earnings to PRC statutory reserves which are made in accordance with the relevant rules and regulations in the People’s Republic of China (the “ PRC ”) and the articles of association of the Company’s subsidiaries established in the PRC and were approved by the respective boards of directors which comprise of:

i. General reserve fund

Subsidiaries in the PRC are required to transfer 10% of the net profits, as determined in accordance with the PRC accounting rules and regulations, to general reserve fund until the reserve balance reaches 50% of the registered capital. The transfer to this fund must be made before distribution of dividends to equity holders.

General reserve fund can be used to make good previous years’ losses, if any, and may be converted into paid-up capital provided that the balance of the general reserve fund after such conversion is not less than 25% of the subsidiary’s registered capital.

ii.

Enterprise expansion fund

Subsidiaries in the PRC are required to transfer a certain percentage of their net profits, as determined in accordance with the PRC accounting rules and regulations, to the enterprise expansion fund. The percentage of appropriation is decided by the directors of the subsidiaries.

Enterprise expansion fund can be used for the subsidiaries’ business development purposes and for working capital purposes. This fund can also be used to increase capital of the relevant subsidiaries, if approved. This fund is non-distributable other than upon liquidation. Transfers to this fund must be made before distribution of dividends to the equity holders.

– I-8 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2016

OPERATING ACTIVITIES Loss before tax Adjustments for: Depreciation of property, plant and equipment Depreciation of investment properties Amortisation of prepaid lease payments Finance costs recognised in profit or loss Interest income recognised in profit or loss Net losses on disposals of investment properties Net gains on disposals of subsidiaries Gains on disposals of property, plant and equipment Written-off of property, plant and equipment Impairment losses recognised in respect of other receivables Impairment losses recognised in respect of inventories (Reversal of impairment losses) impairment losses recognised in respect of trade receivables, net Waiver of other payables Share-based payment expenses Operating cash flows before movements in working capital (Increase) decrease in inventories (Increase) decrease in trade and other receivables Increase in trade and other payables Cash used in operations Income taxes paid Interest paid NET CASH USED IN OPERATING ACTIVITIES	2016 HK$’000 (100,019) 1,100 118 – 10 (13) 3,613 (17) (70) 105 3,089 2,709 (458) – 16,565 (73,268) (428) (22,797) 23,826 (72,667) (6) – (72,673)	2015 HK$’000 (90,972) 3,820 293 401 2,148 (25) – (39,312) (42,897) 5,496 3,475 3,598 7,427 (1,305) – (147,853) 2,918 17,299 16,293 (111,343) (198) (2,148) (113,689)

– I-9 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

INVESTING ACTIVITIES Deposit paid for acquisition of trademarks Deposit paid for acquisition of properties Purchase of property, plant and equipment Net proceeds on disposals of investment properties Net proceeds on disposals of property, plant and equipment Interest received Net cash (outflow) inflow on disposals of subsidiaries (Note 30) Decrease in pledged bank deposits NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Proceeds from issue of shares Transaction costs attributable to the issue of shares Repayments of obligations under finance lease Interest paid on obligations under finance lease Repayments of borrowings NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR represented by cash and bank balances	2016 HK$’000 (31,000) (24,042) (28) 4,827 70 13 (97) – (50,257) 9,996 (440) (129) (10) – 9,417 (113,513) 122,822 1,549 10,858	2015 HK$’000 – – (2,079) – 56,470 25 13,940 999 69,355 185,598 (2,551) – – (26,350) 156,697 112,363 10,718 (259) 122,822

– I-10 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 March 2016

1. GENERAL INFORMATION

Artini China Co. Ltd. (the “ Company ”) was incorporated in Bermuda on 30 May 2007 as an exempted company with limited liability under the Bermuda Companies Act 1981 and its shares are listed on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”).

The addresses of the registered office and principal place of business of the Company are disclosed in the section of “Corporate Information” in the annual report.

The consolidated financial statements are presented in Hong Kong dollars (“ HK$ ”), which is also the functional currency of the Company.

The Company acts as an investment holding company. The Company and its subsidiaries (collectively referred to as the “Group”) are principally engaged in the design, retailing and distribution and concurrent design manufacturing (“ CDM ”) of fashion accessories.

The principal activities of its subsidiaries are set out in Note 36 to the consolidated financial statements.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

Application of new and revised HKFRSs

The Group has applied the following amendments to Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“ HKAS ”) (collectively referred to as “ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) for the first time in the current year.

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions Annual Improvements Project Annual Improvements to HKFRSs 2010 – 2012 Cycle Annual Improvements Project Annual Improvements to HKFRSs 2011 – 2013 Cycle

The application of the amendments to HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

– I-11 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

New and revised HKFRSs in issue but not yet effective

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective:

HKFRS 9 Financial Instruments[2] HKFRS 14 Regulatory Deferral Accounts[1] HKFRS 15 Revenue from Contracts with Customers[2] HKFRS 16 Leases[3] Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations[1] Amendments to HKAS 1 Disclosure Initiative[1] Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation[1] Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer Plants[1] Amendments to HKAS 27 Equity Method in Separate Financial Statements[1] Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture[4] Amendments to HKFRS 10, HKFRS 12 Investment Entities: Applying the Consolidation and HKAS 28 Exception[1] Annual Improvements Project Annual Improvements to HKFRSs 2012 – 2014 Cycle[1]

1 Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted.
2 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.
3 Effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.
4 Effective date to be determined and early application is permitted.

HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for general hedge accounting. Another revised version of HKFRS 9 was issued in 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a “fair value through other comprehensive income” (“ FVTOCI ”) measurement category for certain simple debt instruments.

Key requirements of HKFRS 9:

All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are generally measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

– I-12 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of financial liability designated as fair value through profit or loss is presented in profit or loss.
In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in HKAS 39. Under HKFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. Specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the retrospective quantitative effectiveness test has been removed. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

The directors of the Company (“ Directors ”) anticipate that the application of HKFRS 9 in the future may have a material impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the financial effect on the Group’s financial statements until a detailed review has been completed.

HKFRS 15 Revenue from Contracts with Customers

HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue , HKAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue recognition:

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

– I-13 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15.

The Directors anticipate that the application of HKFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Group performs a detailed review.

HKFRS 16 Leases

HKFRS 16, which upon the effective date will supersede HKAS 17 Leases , introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Specifically, under HKFRS 16, a lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Accordingly, a lessee should recognise depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows. Also, the right-of-use asset and the lease liability are initially measured on a present value basis. The measurement includes non-cancellable lease payments and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. This accounting treatment is significantly different from the lessee accounting for leases that are classified as operating leases under the predecessor standard, HKAS 17.

In respect of the lessor accounting, HKFRS 16 substantially carries forward the lessor accounting requirements in HKAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The Directors will assess the impact of the application of HKFRS 16. For the moment, it is not practicable to provide a reasonable estimate of the effect of the application of HKFRS 16 until the Group performs a detailed review.

Amendments to HKAS 1 Disclosure Initiative

The amendments to HKAS 1 Presentation of Financial Statements give some guidance on how to apply the concept of materiality in practice.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 January 2016. The Directors anticipate that the application of these amendments to HKAS 1 will not have a material impact on the amounts recognised in the Group’s consolidated financial statements.

Amendments to HKAS 16 and HKAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments to HKAS 16 Property, Plant and Equipment prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to HKAS 38 Intangible Assets introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only be rebutted in the following two limited circumstances:

(a) when the intangible asset is expressed as a measure of revenue; or
(b) when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

– I-14 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The amendments apply prospectively for annual periods beginning on or after 1 January 2016. Currently, the Group uses the straight-line method for depreciation for its plant and equipment. The Directors believe that the straight-line method is the most appropriate method to reflect the consumption of economic benefits inherent in the respective assets and accordingly, the Directors anticipate that the application of these amendments to HKAS 16 and HKAS 38 will not have a material impact on the Group’s consolidated financial statements.

Amendments to HKAS 27 Equity Method in Separate Financial Statements

The amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements:

At cost
In accordance with HKFRS 9 Financial Instruments (or HKAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted HKFRS 9), or
Using the equity method as described in HKAS 28 Investments in Associates and Joint Ventures .

The accounting option must be applied by category of investments.

The amendments also clarify that when a parent ceases to be an investment entity, or becomes an investment entity, it shall account for the change from the date when the change in status occurred.

In addition to the amendments to HKAS 27, there are consequential amendments to HKAS 28 to avoid a potential conflict with HKFRS 10 Consolidated Financial Statements and to HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards .

The Directors do not anticipate that the application of these amendments to HKAS 27 will have a material impact on the Group’s consolidated financial statements.

Annual Improvements to HKFRSs 2012 – 2014 Cycle

The Annual Improvements to HKFRSs 2012 – 2014 Cycle include a number of amendments to various HKFRSs, which are summarised below.

The amendments to HKFRS 5 introduce specific guidance in HKFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa). The amendments clarify that such a change should be considered as a continuation of the original plan of disposal and hence requirements set out in HKFRS 5 regarding the change of sale plan do not apply. The amendments also clarify the guidance for when held-for-distribution accounting is discontinued.

The amendments to HKFRS 7 provide additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets.

The amendments to HKAS 19 clarify that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high quality corporate bonds should be at the currency level (i.e. the same currency as the benefits are to be paid). For currencies for which there is no deep market in such high quality corporate bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead.

The Directors do not anticipate that the application of these amendments will have a material effect on the amounts recognised in the Group’s consolidated financial statements.

– I-15 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Except for the above impact, the Directors do not anticipate that the application of the other new and revised HKFRSs will have significant impact on the Group’s consolidated financial statements.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and by the Hong Kong Companies Ordinance (the “ CO ”).

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis, at the end of each reporting period, as explained in the accounting policies set out below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.

The Group reassess whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

– I-16 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss from the date the Group gains control until the date when the Group ceases to control the subsidiary.

Profit or loss and each item of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interests in existing subsidiaries

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs).

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date (see accounting policy below); and
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed exceeds

– I-17 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value or, when applicable, on the basis specified in another HKFRS.

Investment in subsidiaries

Investment in subsidiaries is included in the Company’s statement of financial position at cost less accumulated impairments, if any. The results of subsidiary are accounted for by the Company on the basis of dividend received or receivable.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Revenue from sale of goods is recognised when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow to the Group; and
the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

The Group’s accounting policy for recognition of revenue from operating leases is described in the accounting policy for leasing below.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

– I-18 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recognised at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) using rate of exchange prevailing at the end of the reporting period. Income and expenses items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

Retirement benefit costs

Payments to defined contribution retirement benefit plans, including state-managed retirement benefits schemes and the Mandatory Provident Fund Scheme (the “ MPF Scheme ”) are recognised as expenses when employees have rendered service entitling them to the contributions.

– I-19 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Short-term and other long-term employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date.

Share-based payment arrangements

Equity-settled share-based payment transactions

Share options granted to employees

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 28 to the Group’s consolidation financial statements.

The fair value determined at the grant date of the share options are expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in the share-based payment capital reserve. For share options that vest immediately at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the share-based payment capital reserve.

When the share options are exercised, the amount previously recognised in share-based payment capital reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share-based payment capital reserve will be transferred to accumulated losses.

Share options granted to suppliers/consultants

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. The fair values of the goods or services received are recognised as expenses, with a corresponding increase in equity (share-based payment capital reserve), when the Group obtains the goods or when the counterparties render services, unless the goods or services qualify for recognition as assets.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from “loss before tax” as reported in the consolidated statement of profit or loss because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

– I-20 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Property, plant and equipment

Property, plant and equipment including buildings in the production or supply of goods or services, or for administrative purposes as described below are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write-off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

– I-21 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses, if any. Depreciation is recognised so as to write-off the cost of investment properties over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the property is derecognised.

Intangible assets

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised so as to write-off the cost of intangible assets over their estimated useful lives, using the straight-line method. The estimated useful lives and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are recognised in profit or loss when the asset is derecognised.

Impairment on tangible and intangible assets

At the end of the reporting period, the Group reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment losses, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is indication that they may be impaired.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in profit or loss.

– I-22 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment losses been recognised for the asset (or a cash generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted average method. Net realisable value represents the estimated selling price for inventories less estimated costs of completion and cost necessary to make the sale.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Group’s financial assets are being loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis.

– I-23 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables and cash and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been affected.

For all financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
disappearance of an active market for that financial asset because of financial difficulties

For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit terms of the customers, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade and other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Debts and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

– I-24 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its liabilities. Equity instruments issued by a Group are recognised at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities (including trade and other payables and obligations under finance leases) are subsequently measured at amortised cost, using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Group derecognises financial liability when, and only when, the Group’s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Cash and cash equivalents

Bank balances and cash included in the consolidated statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 3 to the consolidated financial statements, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

– I-25 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Critical judgements in applying accounting policies

The Directors have not come across any significant areas where critical judgements are involved in applying the Group’s accounting policies.

a. Impairment of trade and other receivables

In determining individual impairment allowances, the Group periodically reviews its trade and other receivables to assess whether impairment allowances exist. In determining whether impairment allowances should be recorded in the consolidated statement of profit or loss, management estimates the present value of future cash flows which are expected to be received, taking into account the customers’ financial situation and the net realisable value of the underlying collateral or guarantees in favour of the Group, if any.

b. Impairment of property, plant and equipment

The Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. Determining whether property, plant and equipment are impaired requires an estimation of the value in use of the assets. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the continuing use of the assets and from its ultimate disposal and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

c.

Deferred tax assets

As at the end of the reporting period, no deferred tax asset in relation to unused tax losses and certain deductible temporary difference has been recognised in the consolidated statement of financial position. The recognition of the deferred tax asset mainly depends on whether sufficient profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are different from the original estimate, a material recognition of deferred tax assets may arise, which would be recognised in profit or loss in the period in which such estimate is changed.

d. Impairment for investments in subsidiaries

If circumstances indicate that the Company’s investments in subsidiaries, including the receivables from the subsidiaries are not recoverable, the Company’s investments in subsidiaries may be considered impaired, and an impairment loss may be recognised in accordance with HKAS 36 Impairment of Assets . The carrying amount of the Company’s investments in subsidiaries is reviewed periodically in order to assess whether the recoverable amount has declined below the carrying amount. The asset is tested for impairment whenever events or changes in circumstances indicate that the recorded carrying amount may not be recoverable. When such a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amount is the greater of the fair value less costs to sell and the value in use. It is difficult to precisely estimate selling prices because quoted market prices for investment in subsidiaries are not readily available. In determining the value in use, expected cash flows generated by the Company’s investments in subsidiaries are discounted to their present value, which requires significant judgement relating to level of sale volume and amount of operating costs of the subsidiaries. The Company use all readily available information in determining an amount that is a reasonable approximation of the recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sale volume and amount of operating costs of the subsidiaries.

– I-26 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities within the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances. The Group’s overall strategy remains unchanged from prior years.

The capital structure of the Group consists of net debt, which includes obligations under finance lease, net of cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued share capital and reserves.

The management reviews the capital structure regularly. The Group considers the cost of capital and the risks associated with each class of capital, and will balance its overall capital structure through new share issues as well as raising of new borrowings or the repayment of existing borrowings.

6. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

Financial assets Loans and receivables: – Trade and other receivables – Cash and bank balances Financial liabilities Financial liabilities at amortised cost: – Trade and other payables – Obligations under finance lease	2016 HK$’000 38,324 10,858 49,182 44,558 551 45,109	2015 HK$’000 8,171 122,822
		130,993

		19,351 –
		19,351

b. Financial risk management objectives and polices

The Group’s major financial instruments include trade and other receivables, cash and bank balances, trade and other payables and obligations under finance lease. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (interest rate risk and foreign currency risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

c. Market risk

The Group’s activities expose it primarily to the market risks including interest rate risk (Note 6(c)(i)) and foreign currency risk (Note 6(c)(ii)).

– I-27 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

i. Interest rate risk management

The Group is exposed to fair value interest rate risk in relation to obligations under finance lease at fixed rate. The Group is exposed to cash flow interest rate risk through the impact of rate changes on bank balances which carried interest at prevailing market rates. The Group currently does not use any derivative contracts to hedge its exposure to interest rate risk. However, the Directors will consider hedging significant interest rate risk should the need arise. The Directors considered the Group’s exposure to interest rate risk is not material. Hence, no interest rate sensitivity analysis is presented.

ii. Foreign currency risk management

Foreign currency risk is the risk that the holding of monetary assets and liabilities and entering into transactions denominated in foreign currencies which will affect the Group’s financial position and performance as a result of a change in foreign currency exchanges rates. At the end of the financial years, certain trade and other receivables, cash and bank balances and trade and other payables of the Group are denominated in or linked to foreign currencies, details of which are set out in respective notes, expose the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting periods are as follows:

Assets United Stated Dollars (“US$”) Renminbi (“RMB”) Liabilities US$ RMB Net assets (liabilities) US$ RMB	2016 HK$’000 36,917 5,944 – 6,124 36,917 (180)	2015 HK$’000 5,942

		54,709

		5,696

		17,169

		246

		37,540

As HK$ is linked to US$, the Group does not have material exchange rate risk on such currency. Thus, the Group is mainly exposed to the currency risk of RMB.

The following table demonstrates the sensitivity analysis of the carrying amounts of significant outstanding monetary assets and monetary liabilities denominated in RMB at the end of reporting period if there was a 5% change in the exchange rate of the HK$ against RMB, with all other variables held constant, of the Group’s

– I-28 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

post-tax loss. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates.

Year ended 31 March 2015 If HK$ weakens against RMB If HK$ strengthens against RMB Year ended 31 March 2016 If HK$ weakens against RMB If HK$ strengthens against RMB	Increase (decrease) in RMB rate % 5 (5) 5 (5)	Increase (decrease) in post-tax loss HK$’000 (1,877)

		1,877

		9

		(9)

In the opinion of the Directors, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposures do not reflect the exposure during the year ended 31 March 2016.

d. Credit risk management

As at 31 March 2016, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up actions are taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the Directors consider that the Group’s credit risk is significantly reduced.

As at 31 March 2016, the Group has concentration of credit risk as the Group’s gross trade receivables of HK$41,220,000 (2015: HK$13,827,000), representing 78.58% (2015: 65.91%) of total gross trade receivables were derived from certain major customers. In order to minimise the credit risk, the management continuously monitor the level of exposure to ensure that follow up actions and/or corrective actions are taken promptly to lower exposure or even to recover the overdue debts. The Group has no significant concentration of credit risk on the remaining trade receivables, with exposure spread over a number of counterparties and customers.

The amounts presented in the consolidated statement of financial position are net of allowances for doubtful receivables, if any, estimated by the Directors based on prior experience and their assessment of the current economic environment. In this regard, the Directors consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration of credit risk.

– I-29 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

e. Liquidity risk management

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the Group’s operations.

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.

At 31 March 2015 Trade and other payables At 31 March 2016 Trade and other payables Obligations under finance lease	Weighted average interest rate % – – 2%	On demand or within 1 year HK$’000 19,351 44,558 184 44,742	More than 1 year but less than 5 years Total undiscounted cash flows HK$’000 HK$’000 – 19,351 – 44,558 412 596 412 45,154	Carrying amounts HK$’000 19,351

				44,558 551
				45,109

f. Fair value measurements of financial instruments

The Directors consider that the carrying amounts of other financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

7. REVENUE AND SEGMENT INFORMATION

a. Revenue

Revenue represents the net amounts received and receivables that are derived from sales of goods to customers during the year.

b. Segment information

The Group’s operating segments, based on information reported to the board of directors of the Company, being the chief operating decision maker (“ CODM ”), for the purposes of resource allocation and assessment of segment performance.

Specifically, the Group’s reportable and operating segments were as follows:

Retailing and Distribution:

Sale of own brand fashion accessories

CDM Sales:

Sale of the customer’s chosen level of participation in the design process, concurrently works with its customer in designing the products and sales the same according to the customer’s desired final design

– I-30 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

i. Segment revenue and results, assets and liabilities and other information

The following is an analysis of the Group’s revenue and results, assets and liabilities and other information by reportable and operating segments:

Year ended 31 March 2015 Revenue External sales Internal sales Segment revenue Results Segment results Unallocated income Unallocated expenses Loss before tax Assets Segment assets Investment properties Unallocated assets Total assets Liabilities Segment liabilities Unallocated liabilities Total liabilities Other information Depreciation of property, plant and equipment Depreciation of investment properties Amortisation of prepaid lease payments Impairment losses recognised in respect of trade receivables Impairment losses recognised in respect of other receivables Impairment losses recognised in respect of inventories Additions to property, plant and equipment Gains on disposals of property, plant and equipment Written-off of property, plant and equipment Net gains on disposals of subsidiaries	Retailing and Distribution Mainland China Hong Kong Sub-total HK$’000 HK$’000 HK$’000 5,524 2,588 8,112 – – – 5,524 2,588 8,112 (20,093) (7,576) (27,669) 63,473 19,660 83,133 133,727 61,677 195,404 1,458 38 1,496 – – – – – – 358 38 396 2,691 – 2,691 1,981 115 2,096 1,590 489 2,079 – (5,673) (5,673) 2,905 314 3,219 – – –	CDM Sales Eliminations/ unallocated Consolidated HK$’000 HK$’000 HK$’000 69,595 – 77,707 1,783 (1,783) – 71,378 (1,783) 77,707 (116,314) – (143,983) 77,516 (24,505) (90,972) 129,810 (125,944) 86,999 8,901 60,162 156,062 158,012 (329,370) 24,046 1,907 25,953 877 1,447 3,820 – 293 293 401 – 401 7,031 – 7,427 289 495 3,475 1,502 – 3,598 – – 2,079 (155) (37,069) (42,897) – 2,277 5,496 – (39,312) (39,312)	CDM Sales Eliminations/ unallocated Consolidated HK$’000 HK$’000 HK$’000 69,595 – 77,707 1,783 (1,783) – 71,378 (1,783) 77,707 (116,314) – (143,983) 77,516 (24,505) (90,972) 129,810 (125,944) 86,999 8,901 60,162 156,062 158,012 (329,370) 24,046 1,907 25,953 877 1,447 3,820 – 293 293 401 – 401 7,031 – 7,427 289 495 3,475 1,502 – 3,598 – – 2,079 (155) (37,069) (42,897) – 2,277 5,496 – (39,312) (39,312)
			77,707
			(143,983) 77,516 (24,505)
			(90,972)

			86,999 8,901 60,162
			156,062

			24,046 1,907
			25,953

			3,820 293 401 7,427 3,475 3,598 2,079 (42,897) 5,496 (39,312)

– I-31 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Year ended 31 March 2016 Revenue Segment revenue – external sales Results Segment results Unallocated income Unallocated expenses Loss before tax Assets Segment assets Unallocated assets Total assets Liabilities Segment liabilities Unallocated liabilities Total liabilities Other information Depreciation of property, plant and equipment Depreciation of investment properties Impairment losses recognised in respect of trade receivables Reversal of impairment losses recognised in respect of trade receivables Impairment losses recognised in respect of other receivables Impairment losses recognised in respect of inventories Additions to property, plant and equipment Gains on disposals of property, plant and equipment Written-off of property, plant and equipment Losses on disposals of investment properties Net gains on disposals of a subsidiary	Retailing and Distribution Mainland China Hong Kong Sub-total HK$’000 HK$’000 HK$’000 949 – 949 (7,444) – (7,444) 37,453 – 37,453 7,238 – 7,238 928 77 1,005 – – – 173 – 173 (92) – (92) 1,379 26 1,405 2,709 – 2,709 28 – 28 – – – 105 – 105 – – – – – –	CDM Sales Unallocated Consolidated HK$’000 HK$’000 HK$’000 45,958 – 46,907 (61,444) – (68,888) 385 (31,516) (100,019) 38,517 – 75,970 30,746 106,716 37,645 – 44,883 4,514 49,397 – 95 1,100 – 118 118 2,274 – 2,447 (2,813) – (2,905) 1,684 – 3,089 – – 2,709 – 603 631 – (70) (70) – – 105 – 3,613 3,613 – (17) (17)	CDM Sales Unallocated Consolidated HK$’000 HK$’000 HK$’000 45,958 – 46,907 (61,444) – (68,888) 385 (31,516) (100,019) 38,517 – 75,970 30,746 106,716 37,645 – 44,883 4,514 49,397 – 95 1,100 – 118 118 2,274 – 2,447 (2,813) – (2,905) 1,684 – 3,089 – – 2,709 – 603 631 – (70) (70) – – 105 – 3,613 3,613 – (17) (17)
			(68,888) 385 (31,516)
			(100,019)

			75,970 30,746
			106,716

			44,883 4,514
			49,397

			1,100 118 2,447 (2,905) 3,089 2,709 631 (70) 105 3,613 (17)

– I-32 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The accounting policies of the above reportable and operating segments are the same as the Group’s accounting policies described in Note 3 to the consolidated financial statements.

Revenue reported above represents revenue generated from external customers. No internal sales transactions between the Group’s subsidiaries in the Retailing and Distribution segment and the CDM Sales segment during the year ended 31 March 2016 (2015: HK$1,783,000).

Segment results represent the profit earned or loss incurred by each segment without allocation of items not directly related to the relevant segments. This is the measure reported to CODM for the purposes of resource allocation and assessment of segment performance.

For the purposes of monitoring segment performance and allocating resources between segments:

All assets are allocated to reportable and operating segments other than investment properties, deferred tax assets, certain property, plant and equipment, other receivables, certain deposit paid and certain cash and bank balances.
All liabilities are allocated to reportable and operating segments other than tax liabilities, certain other payables and obligations under finance lease.

ii.

Geographical information

The following table provides an analysis of the Group’s revenue from external customers based on the location where the goods were delivered:

Hong Kong and Macao The PRC, other than Hong Kong and Macao The United Arab Emirates Europe Americas Others	2016 HK$’000 2,013 6,907 36,000 1,987 – – 46,907	2015 HK$’000 6,379 9,445 – 48,835 8,861 4,187
		77,707

The following table provides an analysis of the Group’s non-current assets, excluding deferred tax assets and financial instruments based on the geographical location of the assets:

Hong Kong and Macao The PRC, other than Hong Kong and Macao	2016 HK$’000 634 55,293 55,927	2015 HK$’000 203 10,305
		10,508

– I-33 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

c. Information about major customers

The following table sets forth a breakdown of the Group’s customers individually accounted for over 10% of the Group’s total revenue during the year:

Reportable and operating segments Customer A CDM Sales Customer B CDM Sales 8. OTHER INCOME Other income comprises of: Interest income Rental income, less direct outgoings Others 9. OTHER GAINS AND LOSSES Other gains and losses comprise of: Net exchange losses Waiver of other payables Written-off of property, plant and equipment Impairment losses recognised in respect of trade receivables Impairment losses recognised in respect of other receivables Reversal of impairment losses recognised in respect of trade receivables	2016 HK$’000 – 36,000 2016 HK$’000 13 – 302 315 2016 HK$’000 (4,256) – (105) (2,447) (3,089) 2,905 (6,992)	2015 HK$’000 26,557 –

		2015 HK$’000 25 20 441
		486

		2015 HK$’000 (23) 1,305 (5,496) (7,427) (3,475) –
		(15,116)

– I-34 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. FINANCE COSTS

Finance costs comprise of: Interest on obligations under finance lease Interest on borrowings wholly repayable within five years 11. LOSS BEFORE TAX Loss before tax has been arrived at after charging: Staff costs (included directors’ remuneration (Note12(a)): Salaries, wages and other benefits Share-based payment expenses for the Directors and employees Contributions to defined contribution retirement plans Cost of inventories recognised as an expense, including written-off of inventories of approximately HK$2,709,000 (2015: HK$3,598,000) Depreciation of property, plant and equipment Depreciation of investment properties Amortisation of prepaid lease payments Share-based payment expenses for consultants Auditor’s remuneration Operating leases charges in respect of office premises, shops and Directors’ quarters	2016 HK$’000 10 – 10 2016 HK$’000 6,616 4,427 287 11,330 45,335 1,100 118 – 12,138 632 1,985	2015 HK$’000 – 2,148
		2,148

		2015 HK$’000 23,498 – 900
		24,398
		96,395 3,820 293 401 – 795 9,726

– I-35 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

a. Directors’ and chief executive’s emoluments

Directors’ and chief executive’s remuneration for the year, disclosed pursuant to the applicable Listing Rules and CO, is as follows:

For the year ended 31 March 2015 Executive directors Mr. Tse Hoi Chau Ms. Yip Ying Kam (note (i)) Mr. Lin Shao Hua Non-executive director Ms. He Yun (note (ii)) Independent non-executive directors Mr. Lau Fai Lawrence Mr. Lau Yiu Kit Mr. Li Youhuan (note (iii)) Mr. Zeng Zhaohui (note (iv)) For the year ended 31 March 2016 Executive directors Mr. Tse Hoi Chau Mr. Lin Shao Hua Non-executive director Ms. He Yun (note (ii)) Independent non-executive directors Mr. Lau Fai Lawrence Mr. Lau Yiu Kit Mr. Zeng Zhaohui (note (iv))	Directors’ fees Salaries, allowances and benefits in kind Retirement benefit scheme contributions Share-based payments HK$’000 HK$’000 HK$’000 HK$’000 – 3,352 18 – – 207 1 – – 485 – – 66 – – – 183 – – – 135 – – – 183 – – – 60 – – – 627 4,044 19 – – 2,600 18 1,388 – 390 – 1,388 20 – – – 120 – – – 120 – – – 120 – – – 380 2,990 18 2,776	Total HK$’000 3,370 208 485 66 183 135 183 60
		4,690

		4,006 1,778 20 120 120 120
		6,164

– I-36 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

i. Ms. Yip Ying Kam was resigned as the executive director on 13 April 2014.
ii. Ms. He Yun was appointed as non-executive director on 22 December 2014 and was resigned as non-executive director on 23 April 2015.
iii. Mr. Li Youhuan was resigned as independent non-executive director on 22 August 2014.
iv. Mr. Zeng Zhaohui was appointed as independent non-executive director on 1 October 2014.

Apart from the Directors, the Group has not classified any other person as a chief executive during the years ended 31 March 2016 and 31 March 2015.

During the years ended 31 March 2016 and 31 March 2015, no emoluments was paid by the Group to the Directors as an inducement to join or upon joining the Group or as compensation for loss of office.

None of the Directors has waived or agreed to waive any emoluments during the years ended 31 March 2016 and 31 March 2015.

The executive directors’ emoluments shown above were mainly for their services in connection with the management of the affairs of the Company and the Group. The non-executive director’s emoluments shown above were mainly for their services as director of the Company or its subsidiaries. The independent non-executive directors’ emoluments shown above were mainly for their services as directors of the Company.

b. Employees’ emoluments

Of the five individuals with the highest emoluments, two (2015: two) are Directors for the year ended 31 March 2016, details of whose emoluments are included in the disclosure in Note 12(a) above.

The emoluments of the remaining three (2015: three) individuals were as follows:

Salaries, allowances and benefits in kind Retirement benefit scheme contributions Share-based payments	2016 HK$’000 1,550 47 1,651 3,248	2015 HK$’000 1,390 38 –
		1,428

The emoluments of these three (2015: three) individuals with the highest emoluments are within the following band:

			2016	2015
Nil	to	HK$1,000,000	3	3

During the current and prior years, no emoluments were paid by the Group to any of the five highest paid individuals as an inducement to join, or upon joining the Group, or as compensation for loss of office.

– I-37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13. DIVIDENDS

No dividend was paid or proposed for ordinary shareholders of the Company during the year ended 31 March 2016, nor has any dividend been proposed since the end of the reporting period (2015: Nil).

14. INCOME TAX EXPENSE

Hong Kong Profits Tax – Current year – Overprovision in prior years PRC Enterprise Income Tax (“PRC EIT”) – Current year Deferred tax – Current year (Note 19) Income tax expense	2016 HK$’000 (5) 57 52 – (63) (11)	2015 HK$’000 (159) 604
		445
		–
		(463)
		(18)

Hong Kong Profits Tax is calculated at the rate of 16.5% (2015: 16.5%) on the estimated assessable profits for the year.

Macao Complementary Tax is calculated at the maximum progressive rate of 12% (2015: 12%) on the estimated assessable profits arising from Macao for the year.

Under the Law of the People’s Republic of China on Enterprise Income Tax (the “ EIT Law ”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiary is 25% (2015: 25%) for the year.

Artini Macao Commercial Offshore Limited (formerly known as Arts Empire Macao Commercial Offshore Limited) was established as a Macao offshore company under the Macao Offshore Law and is exempted from Macao Complementary Tax. No provision for Macao Complementary Tax and PRC EIT has been made in the consolidated financial statements as the relevant group entities incurred tax losses for the years ended 31 March 2016 and 31 March 2015.

– I-38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The income tax expense for the years can be reconciled to the loss before tax per the consolidated statement of profit or loss as follows:

Loss before tax Tax calculated at the rate applicable to the tax jurisdictions concerned Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Tax effect of deductible temporary differences not recognised Write-down of deferred tax assets on temporary differences previously recognised Tax effect of utilisation of temporary differences previously not recognised Tax effect of tax losses not recognised Overprovision in prior years Tax effect of utilisation of tax losses previously not recognised Others Income tax expense	2016 HK$’000 (100,019) (13,547) 19,486 (8,154) 9 54 − 2,264 (57) (29) (15) 11	2015 HK$’000 (90,972)

		(13,273) 25,994 (21,193) 46 565 (148) 8,808 (604) (177) –
		18

15. LOSS PER SHARE

The calculation of basic loss per share attributable to the owners of the Company is based on the consolidated loss for the year attributable to the owners of the Company of approximately HK$100,030,000 (2015: HK$90,990,000) and the weighted average of approximately 2,527,702,000 (2015: approximately 1,142,403,000) ordinary shares of the Company in issue during the year.

Diluted loss per share for the years ended 31 March 2016 and 31 March 2015 is not presented because the exercise of outstanding share options during the years have anti-dilutive effect on the basic loss per share.

– I-39 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. PROPERTY, PLANT AND EQUIPMENT

Cost As at 1 April 2014 Exchange adjustments Additions Disposals of subsidiaries Other disposals Written-off As at 31 March 2015 Exchange adjustments Additions Disposal of a subsidiary Other disposals Written-off As at 31 March 2016 Accumulated depreciation and impairments As at 1 April 2014 Exchange adjustments Provided for the year Eliminated on disposals of subsidiaries Eliminated on other disposals Written-off As at 31 March 2015 Exchange adjustments Provided for the year Eliminated on disposal of a subsidiary Eliminated on other disposals Written-off As at 31 March 2016 Carrying amounts As at 31 March 2016 As at 31 March 2015	Buildings Leasehold improvements HK$’000 HK$’000 32,534 14,697 197 52 – 1,866 (15,028) (298) (17,703) – – (12,879) – 3,438 – (42) – 4 – (12) – – – (1,344) – 2,044 9,984 10,769 63 40 1,120 910 (5,260) (224) (5,907) – – (8,995) – 2,500 – (18) – 748 – (11) – – – (1,239) – 1,980 – 64 – 938	Office equipment HK$’000 27,497 181 201 (2,156) (1,752) (23,729) 242 (11) 24 (215) – – 40 25,262 158 455 (2,244) (1,446) (22,117) 68 (4) 94 (118) – – 40 – 174	Furniture and fixtures HK$’000 2,710 15 12 (1,186) (668) (855) 28 – – – – – 28 2,560 15 4 (1,106) (600) (855) 18 – 2 – – – 20 8 10	Motor vehicles HK$’000 9,475 34 – (1,454) – (1,860) 6,195 (91) 603 – (623) – 6,084 7,598 24 1,091 (1,143) – (1,860) 5,710 (72) 256 – (623) – 5,271 813 485	Plant and machinery HK$’000 3,896 35 – (1,939) (1,992) – – – – – – – – 1,864 17 240 (1,532) (589) – – – – – – – – – –	Total HK$’000 90,809 514 2,079 (22,061) (22,115) (39,323)
						9,903 (144) 631 (227) (623) (1,344)
						8,196
						58,037 317 3,820 (11,509) (8,542) (33,827)
						8,296 (94) 1,100 (129) (623) (1,239)
						7,311
						885

						1,607

– I-40 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The above items of property, plant and equipment after taking into account of their estimated residual values, are depreciated on a straight-line basis on the following basis:

Buildings Over the terms of the leases or 50 years, whichever is shorter Leasehold improvements Over the terms of the leases Office equipment 5 to 10 years Furniture and fixtures 5 years Motor vehicles 5 to 10 years Plant and machinery 5 to 10 years

As at 31 March 2016, the carrying amount of motor vehicle included an amount of approximately HK$562,000 (2015: Nil) in respect of assets held under finance lease (Note 25).

17. INVESTMENT PROPERTIES

Cost As at 1 April 2014 Exchange adjustments As at 31 March 2015 Disposals Exchange adjustments As at 31 March 2016 Accumulated depreciation As at 1 April 2014 Provided for the year Exchange adjustments As at 31 March 2015 Provided for the year Eliminated on disposals Exchange adjustments As at 31 March 2016 Carrying amounts As at 31 March 2016 As at 31 March 2015	HK$’000 11,302 131
	11,433 (10,992) (441)
	–
	2,212 293 27
	2,532 118 (2,552) (98)
	–
	–

	8,901

The Group’s investment properties are depreciated on a straight-line basis over the terms of the leases.

As at 31 March 2015, the Group’s investment properties of approximately HK$8,901,000 are erected on land held under medium-term land use rights in the PRC.

During the year ended 31 March 2016, all of the Group’s investment properties were disposed.

– I-41 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. INTANGIBLE ASSETS

Cost As at 1 April 2014, 31 March 2015 and 31 March 2016 Accumulated amortisation and impairments As at 1 April 2014, 31 March 2015 and 31 March 2016 Carrying amount As at 31 March 2016 As at 31 March 2015	Trademarks HK$’000 1,840 1,840 – –	Licence rights HK$’000 14,048 14,048 – –	Total HK$’000 15,888
			15,888
			–

			–

The Group’s licence rights with finite useful lives are amortised on a straight-line basis over period of the licence of three years.

The trademarks related to the Group’s brand name are considered to have indefinite useful lives which were fully impaired in prior years.

19. DEFERRED TAXATION

The following are the Group’s major deferred tax assets in respect of accelerated tax depreciation recognised and the movements thereon, during the current and prior years.

As at 1 April 2014 Charged to profit or loss (Note 14) Disposals of subsidiaries (Note 30(a)(ii)) As at 31 March 2015 Charged to profit or loss (Note 14) As at 31 March 2016	HK$’000 (480) 463 (46)
	(63) 63
	–

As at 31 March 2016, the Group has deductible temporary difference of approximately HK$19,000 (2015 HK$455,000) in respect of trade and other receivables. No deferred tax asset has been recognised in relation to such deductible temporary differences as it is not certain that taxable profit will be available which the deductible temporary differences can be utilised.

As at 31 March 2016, the Group has unused tax losses of approximately HK$339,843,000 (2015: HK$334,184,000) available for offsetting against future profits. No deferred tax assets have been recognised as certain entities of the Group have been loss making for several years and it is not considered probable that taxable profits will be available against which the tax losses can be utilised. Tax losses may be carried forwards indefinitely except for those tax losses amounted to HK$137,697,000 (2015: HK$185,532,000) that will expire in the coming few years.

– I-42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

20. DEPOSITS PAID

Notes Deposits paid in respect of: – Acquisition of properties a – Acquisition of trademarks b	2016 HK$’000 24,042 31,000 55,042	2015 HK$’000 – –
		–

Notes:

a. Deposit paid in respect of acquisition of properties

The amount represents the deposit paid in respect of the acquisition of certain properties in the PRC. Pursuant to the Company’s announcement dated 1 March 2016, Shenzhen Artini Hongli Enterprises Co. Ltd. (“ CEPA ”, the “ Purchaser ”), an indirect wholly-owned subsidiary of the Company, and 河南大正投資置業有限公司 (Henan Dazhen Property Investment Company Limited, the “Seller”) entered into the sale and purchase agreements (the “ Properties Sale and Purchase Agreements ”) and pursuant to which, CEPA agreed to acquire and the Seller agreed to sell four properties located in Zhengzhou City, the PRC (the “ Properties ”) to the Group for a total consideration of RMB20,000,000 (equivalent to approximately HK$24,042,000). Pursuant to the Properties Sale and Purchase Agreements, the Seller shall have applied for initial registration in respect of the Properties with governmental authorities by 31 July 2016 (and shall deliver the relevant building ownership certificate within 180 days of such registration), and shall deliver the Properties by 31 August 2016 in a completed state fitted with utilities. Where the Seller fails to deliver the Properties after 90 days from 31 August 2016, the Purchaser is entitled to terminate the relevant Properties Sale and Purchase Agreement for a refund together with compensation.

Further details of the above transaction are set out in the Company’s announcement dated 1 March 2016.

b. Deposit paid in respect of acquisition of trademarks

The amount represents the deposit paid in respect of the acquisition of trademarks (the “ Trademarks ”) which were registered in the PRC in relation to the retailing and distribution segment. During the year ended 31 March 2016, Instar International Co, Ltd, an indirectly wholly-owned subsidiary of the Company, agreed to acquire the Trademarks for a total consideration of HK$31,000,000 (equivalent to US$4,000,000). As at 31 March 2016, the titles of the Trademarks have not yet transferred to the Group and thus, the amount was classified as the “Deposits paid” in the Group’s consolidated statement of financial position.

21. INVENTORIES

		2016	2015
		HK$’000	HK$’000
Finished	goods	428	3,515

– I-43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

22. TRADE AND OTHER RECEIVABLES

Trade receivables Less: Allowances Trade receivables, net Rental deposits Advances to staff Receivable from disposals of subsidiaries (Note 30) Other receivables, net of allowances	2016 HK$’000 52,455 (17,177) 35,278 250 10 1,400 2,565 4,225 39,503	2015 HK$’000 20,980 (17,677)
		3,303
		2,250 804 100 12,697
		15,851
		19,154

Trade receivables at the end of the reporting period comprise amounts receivable from the sales of goods. No interest is charged on the trade receivables.

Before accepting any new customer, the Group gathers and assesses the credit information of the potential customer in considering the customer’s quality and determining the credit limits for that customer.

The Group generally allows an average credit period of 30 to 90 days to its customers. The aging analysis of the Group’s trade receivables presented (net of allowances) based on invoice date as at the end of the reporting period, which approximated the respective revenue recognition dates, is as follows:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	2016 HK$’000 16,498 10,582 8,198 – 35,278	2015 HK$’000 308 – 2,837 158
		3,303

The aging analysis of trade receivables which are past due but not impaired is as follows:

					2016	2015
					HK$’000	HK$’000
Over	6	months	past	due	–	158

– I-44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Movements of the Group’s allowances for doubtful debts for trade receivables during the two years are as follows:

As at 1 April Allowances Reversal of provision for impairment Disposal of a subsidiary Exchange adjustments As at 31 March	2016 HK$’000 17,677 2,447 (2,905) (2) (40) 17,177	2015 HK$’000 10,240 7,427 – – 10
		17,677

Other than the above allowances for doubtful debts, the Group did not provide any allowance on the remaining past due receivables as, in the opinion of the Directors, there has not been a significant change in credit quality and the amounts are still considered recoverable based on the historical experience. The Group does not hold any collateral over these balances.

Furthermore, in the opinion of the Directors, there has not been a significant change in credit quality of the Group’s trade receivables which are neither past due nor impaired and the amounts are still considered recoverable based on the historical experience.

Included in trade receivables are the following amounts denominated in a currency other than the functional currency of the Group:

US$ RMB 23. CASH AND BANK BALANCES Cash and bank balances	2016 HK$’000 35,248 30 2016 HK$’000 10,858	2015 HK$’000 2,866 437

		2015 HK$’000 122,822

As at 31 March 2016, the Group’s bank balances carry interest at market rates ranged from 0.001% to 0.6% per annum (2015: 0.01% to 0.35% per annum).

– I-45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s cash and bank balances denominated in RMB which is not a freely convertible currency in the international market and the remittance of RMB out of the PRC is subject to exchange restrictions imposed by the Government of the PRC in respect of the relevant group companies were as follows:

Currency: RMB 24. TRADE AND OTHER PAYABLES Trade payables Receipts in advance Value added tax and other tax payables Payrolls and staff cost payables Other payables	2016 HK$’000 4,430 2016 HK$’000 37,820 4,176 11 12 6,726 48,745	2015 HK$’000 47,957

		2015 HK$’000 4,094 6,430 13 819 14,438
		25,794

The Group’s trade payables principally comprise amounts outstanding for trade purchases. Payment terms with suppliers are mainly on credit term of 30 to 90 days (2015: 30 days).

The aging analysis of the Group’s trade payables presented based on invoice date as at the end of the reporting period is as follows:

Within 3 months Over 1 year	2016 HK$’000 35,156 2,664 37,820	2015 HK$’000 1,083 3,011
		4,094

– I-46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. OBLIGATIONS UNDER FINANCE LEASE

At the end of the reporting period, the Group had obligations under finance lease repayable as follows:

Amount payables under finance lease: – Within one year – Within a period of more than one year but not more than two years – Within a period of more than two years but not more than five years Less: Total future finance charges Less: Amount due for settlement within one year shown under current liabilities Amount due for settlement after 12 months	2016 Present value of minimum lease payments Total minimum lease payments HK$’000 HK$’000 160 184 169 184 222 228 551 596 – (45) 551 551 (160) 391	2015 Present value of minimum lease payments Total minimum lease payments HK$’000 HK$’000 – – – – – – – – – – – – – –	2015 Present value of minimum lease payments Total minimum lease payments HK$’000 HK$’000 – – – – – – – – – – – – – –
			– –

			–

The Group’s obligations under finance lease are secured by the leased assets as set out in Note 16 to the consolidated financial statements.

It is the Group’s policy to lease a motor vehicle under finance lease. The lease term is 4 years for the year ended 31 March 2016. Interest rates underlying all obligations under finance lease are fixed at respective contract dates at 2% per annum. The Group has option to purchase the motor vehicle for a nominal value at the end of the lease term. No arrangement has been entered into for contingent rental.

– I-47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. SHARE CAPITAL

Ordinary shares Authorised: As at 1 April Share Consolidation (note (a)(i)) Capital Reduction (note (a)(ii)) Share Subdivision (note (a)(iii)) As at 31 March Issued and fully paid: As at 1 April Share Consolidation (note (a)(i)) Capital Reduction (note (a)(ii)) Issue of shares in respect of Open Offer (note (b)) Issue of shares in respect of Placing (note (c)) As at 31 March	2016 Number of shares Amount ’000 HK$’000 30,000,000 300,000 – – – – – – 30,000,000 300,000 2,474,640 24,746 – – – – – – 95,200 952 2,569,840 25,698	2015 Number of shares Amount ’000 HK$’000 3,000,000 300,000 (1,500,000) – – (285,000) 28,500,000 285,000 30,000,000 300,000 1,237,320 123,732 (618,660) – – (117,545) 1,855,980 18,559 – – 2,474,640 24,746	2015 Number of shares Amount ’000 HK$’000 3,000,000 300,000 (1,500,000) – – (285,000) 28,500,000 285,000 30,000,000 300,000 1,237,320 123,732 (618,660) – – (117,545) 1,855,980 18,559 – – 2,474,640 24,746
			300,000

			123,732 – (117,545) 18,559 –
			24,746

The movements of the authorised and issued share capital of the Company during the current and prior years are as follows:

a. Capital reorganisation (the “Capital Reorganisation”)

Pursuant to the special resolution of the Company’s shareholders at its special general meeting on 17 November 2014, the Capital Reorganisation, involving the share consolidation (the “ Share Consolidation ”), the capital reduction (the “ Capital Reduction ”), the share subdivision (the “ Share Subdivision ”) and the elimination of accumulated losses (the “ Elimination of Accumulated Losses ”) were approved by the shareholders of the Company and the details are as follows:

i. Share Consolidation

The consolidation of every two existing shares of nominal value of HK$0.10 each in the issued and unissued share capital of the Company were consolidated into one consolidated share of nominal value of HK$0.20 (the “ Consolidated Share ”). Prior to the Share Consolidation, there were 1,237,320,323 existing shares in issue and fully paid. On the basis of such issued share capital, there were 618,660,161 Consolidated Shares in issue at nominal value of HK$0.20 and were fully paid following the Share Consolidation.

– I-48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

ii. Capital Reduction

The issued share capital of the Company was reduced by the cancellation of: (a) the paid-up capital of the Company to the extent of HK$0.19 on each Consolidated Share such that the nominal value of each issued Consolidated Share was reduced from HK$0.20 to HK$0.01 of the Company; and (b) any fractional Consolidated Share in the issued share capital of the Company arising from the Share Consolidation.

iii. Share Subdivision

Immediately following the Share Consolidation and the Capital Reduction, each authorised but unissued Consolidated Share of nominal value of HK$0.20 (including all those arising from the Capital Reduction) was subdivided into twenty new shares of HK$0.01 each (the “ New Share ”).

iv. Elimination of Accumulated Losses

Based on 1,237,320,323 existing shares in issue as at the date prior to the Share Consolidation and the Capital Reduction, the credit arising from the Capital Reduction of approximately HK$117,545,000 was transferred to the contributed surplus account of the Company. Subsequently, the whole sum of approximately HK$117,545,000 in the contributed surplus account was applied to set off against part of the accumulated losses of the Company as at 31 March 2014.

b. Issue of shares in respect of Open Offer

Pursuant to the ordinary resolution of the Company’s independent shareholders at its special general meeting on 17 November 2014, the open offer (the “ Open Offer ”) was approved by the independent shareholders of the Company whereby the Company issued 1,855,980,483 offer shares (the “ Offer Shares ”) at the subscription price of HK$0.10 per Offer Share on the basis of three Offer Shares for every one New Share at the nominal value of HK$0.01 each of the Company to the then existing shareholders of the Company. On 16 December 2014, the Company completed its Open Offer. The net proceeds from the Open Offer, after deducting directly attributable costs of approximately HK$2,600,000 were approximately HK$183,000,000.

Details of the Capital Reorganisation and Open Offer were disclosed in the Company’s announcements dated 23 September 2014, 17 November 2014, 18 November 2014, 27 November 2014 and 18 December 2014, and the Company’s circular dated 24 October 2014 and the Company’s prospectus dated 27 November 2014, respectively.

c.

Issue of shares in respect of Placing

On 27 August 2015, the Company entered into a placing agreement with a placing agent to place 95,200,000 placing shares with the par value of HK$0.01 each at a price of HK$0.105 per placing share to certain independent placees (the “ Placing ”). The Placing has been completed on 10 September 2015.

Details of the Placing were disclosed in the Company’s announcements dated 27 August 2015 and 10 September 2015.

All the new shares issued during the two years ended 31 March 2015 and 31 March 2016 rank pari passu with the then existing shares of the Company in all respects.

– I-49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

27. RETIREMENT BENEFIT SCHEMES

The employees of the Group in the PRC are members of government-managed retirement benefit schemes operated by the PRC government. The Group is required to contribute a specified percentage of its payroll costs to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit schemes is to make the specified contributions under the schemes.

The Group participates in a defined contribution scheme which is registered under the MPF Scheme established under the Mandatory Provident Fund Schemes Ordinance in December 2000. The assets of the scheme are held separately from those of the Group, in funds under the control of trustee. For member of the MPF Scheme, the Group contributes 5% or HK$1,500 in maximum of relevant payroll costs to the scheme, which contribution is matched by employees.

The amounts of contributions made by the Group in respect of the retirement benefit scheme during the current and prior years are disclosed in Note 11 to the consolidated financial statements.

28. EQUITY SETTLED SHARE-BASED TRANSACTIONS

The Company has a share option scheme which were adopted on 23 April 2008 whereby the Directors are authorised, at their discretion, to invite directors (including executive, non-executive and independent non-executive directors) and employees of the Group and any advisors, consultants, distributors, contractors, suppliers, agents, customers, business partners, joint venture business partners, promoters or service providers for the Group, to take up options at nominal consideration to subscribe for shares of the Company.

The total number of shares which may be issued upon exercise of all options to be granted under the schemes shall not in aggregate exceed 10% of the total number of shares in issue as at the date of approval of the schemes, unless the Company obtains a fresh approval from its shareholders. Notwithstanding this, the maximum number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the schemes shall not exceed 30% of the total number of shares in issue from time to time. The total number of shares issued and to be issued upon exercise of the options granted to any individual in any 12-month period shall not exceed 1% of the total number of shares in issue at any point in time, without prior approval from the Company’s shareholders. Options granted to any individual who is a substantial shareholder of the Company or independent non-executive director or any of their respective associates in the 12-month period up to and including date of such grant in excess of 0.1% of the Company’s share capital at the date of grant and with a value in excess of HK$5,000,000 must be approved in advance by the Company’s shareholders.

Options granted under the share option scheme must be taken up within 28 days of the date of grant upon payment of HK$1 per grant of option. Options may generally be exercised at any time during the period after the options have been granted, such period to expire not later than 10 years after the date of the grant of the options. The subscription price for shares will not be less than the higher of (i) the closing price of the Company’s shares on the date of options granted; (ii) the average closing price of the Company’s shares for the 5 business days immediately preceding the date of options granted; and (iii) the nominal value of the Company’s share.

– I-50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The movements of the options granted during the current and prior years are as follows:

Name of category of participant Particulars Date of grant Exercise price Exercise price after adjustment# Exercise period HK$ HK$ Year ended 31 March 2015 Directors Ms. Yip Ying Kam Tranche H (note (a)) 24 February 2012 0.222 N/A 24 February 2012 to 23 February 2015 Tranche I (note (a)) 24 February 2012 0.222 N/A 24 February 2015 to 23 February 2018 Mr. Tse Hoi Chau Tranche J (note (c)) 28 March 2014 0.2618 0.4709 28 March 2014 to 27 March 2019 Mr. Lin Shao Hua Tranche J (note (c)) 28 March 2014 0.2618 0.4709 28 March 2014 to 27 March 2019 Employees Tranche J (note (c)) 28 March 2014 0.2618 0.4709 28 March 2014 to 27 March 2019 Others – Consultants Tranche J (note (c)) 28 March 2014 0.2618 0.4709 28 March 2014 to 27 March 2019 – Others Tranche J (note (c)) 28 March 2014 0.2618 0.4709 28 March 2014 to 27 March 2019 Weighted average exercise prices	Number of share options Outstanding as at 1 April Adjustment due to Share Consolidation and Open Offer# Lapsed during the year Reclassification (Note b) 6,000,000 – (6,000,000) – 6,000,000 – (6,000,000) – 12,000,000 (5,328,600) – – 12,000,000 (5,328,600) – – 24,000,000 (10,657,200) – (6,671,400) 60,000,000 (26,643,000) – – – – – 6,671,400 120,000,000 (47,957,400) (12,000,000) – 0.2578 0.4709 0.222 0.4709	Outstanding as at 31 March – – 6,671,400 6,671,400 6,671,400 33,357,000 6,671,400
		60,042,600

		0.4709

Weighted average exercise prices

Following the Share Consolidation and Open Offer on 17 November 2014 and 16 December 2014, respectively, the exercise price of the outstanding share options was adjusted from HK$0.2618 to HK$0.4709. The numbers of share options were also adjusted as a result of the Share Consolidation and the Open Offer.

– I-51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The movements of the options granted during the current and prior years are as follows:

					Number of share options	Number of share options	Number of share options
					Outstanding	Granted	Outstanding
Name of category			Exercise		as at	during the	as at
of participant	Particulars	Date of grant	price	Exercise period	1 April	year	31 March
			HK$
Year ended 31 March	2016
Directors
Mr. Tse Hoi Chau	Tranche J	28 March 2014	0.4709	28 March 2014 to	6,671,400	–	6,671,400
	(note (c))			27 March
				2019
	Tranche K	9 July 2015	0.147	9 July 2015 to	–	10,000,000	10,000,000
	(note (d))			8 July 2020
	Tranche L	9 July 2015	0.147	9 July 2016 to	–	10,000,000	10,000,000
	(note (d))			8 July 2020
Mr. Lin Shao Hua	Tranche J	28 March 2014	0.4709	28 March 2014 to	6,671,400	–	6,671,400
	(note (c))			27 March
				2019
	Tranche K	9 July 2015	0.147	9 July 2015 to	–	10,000,000	10,000,000
	(note (d))			8 July 2020
	Tranche L	9 July 2015	0.147	9 July 2016 to	–	10,000,000	10,000,000
	(note (d))			8 July 2020
Employees	Tranche J	28 March 2014	0.4709	28 March 2014 to	6,671,400	–	6,671,400
	(note (c))			27 March
				2019
	Tranche K	9 July 2015	0.147	9 July 2015 to	–	800,000	800,000
	(note (d))			8 July 2020
	Tranche L	9 July 2015	0.147	9 July 2016 to	–	800,000	800,000
	(note (d))			8 July 2020
	Tranche M	27 November	0.1488	27 November	–	16,000,000	16,000,000
	(note (e))	2015		2015 to
				26 November
				2020
	Tranche N	27 November	0.1488	27 November	–	16,000,000	16,000,000
	(note (e))	2015		2016 to
				26 November
				2020
Others
– Consultants	Tranche J	28 March 2014	0.4709	28 March 2014 to	33,357,000	–	33,357,000
	(note (c))			27 March
				2019
	Tranche K	9 July 2015	0.147	9 July 2015 to	–	10,100,000	10,100,000
	(note (d))			8 July 2020
	Tranche L	9 July 2015	0.147	9 July 2016 to	–	10,100,000	10,100,000
	(note (d))			8 July 2020

– I-52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

					Number of share options	Number of share options	Number of share options
					Outstanding	Granted	Outstanding
Name of category			Exercise		as at	during the		as at
of participant	Particulars	Date of grant	price	Exercise period	1 April	year	31	March
			HK$
	Tranche M	27 November	0.1488	27 November	–	112,100,000	112,100,000
	(note (e))	2015		2015 to
				26 November
				2020
	Tranche N	27 November	0.1488	27 November	–	112,100,000	112,100,000
	(note (e))	2015		2016 to
				26 November
				2020
– Others	Tranche J	28 March 2014	0.4709	28 March 2014 to	6,671,400	–	6,671,400
	(note (c))			27 March 2019
					60,042,600	318,000,000	378,042,600

Weighted average	exercise prices				0.4709	0.1485		0.1997

Notes:

a. Pursuant to the Company’s announcement dated 14 March 2014, Ms. Yip Ying Kam has tendered her resignation as executive director and vice chairman of the Company and also as director of all subsidiaries of the Company in which she was a director, which has become effective on 13 April 2014 and accordingly, the 12,000,000 share options granted to Ms. Yip Ying Kam were lapsed and recognised as reversal of share-based payments expense of HK$1,146,000 (2014: Nil) upon the lapsed of such share options in the consolidated statement of changes in equity subsequently.

The options outstanding which was granted on 24 February 2012 had an exercise price of HK$0.222 as at 31 March 2014 and a weighted average remaining contractual life of 2.40 years. As at 31 March 2015, after resignation of Ms. Yip Ying Kam, there were no options outstanding granted on 24 February 2012.

b. An employee was granted 12,000,000 share options during the year ended 31 March 2014. As the employee was resigned as an employee during the year ended 31 March 2015 and the respective share options are reclassified from the category of employees to others.
c. Pursuant to the Company’s announcement on 28 March 2014, a total of 108,000,000 share options to subscribe for ordinary shares of HK$0.10 each of the Company were granted to certain eligible participants, including the directors and employees of the Company and the consultants under the share option scheme adopted by the Company on 23 April 2008. Details of the share options granted are as follows:

Date of grant: 28 March 2014 Exercise price of share options granted: HK$0.2618 per share Number of share options granted: 108,000,000 share options Closing price of the share on the date of grant: HK$0.231 Exercise periods 28 March 2014 to 27 March 2019

Each of the share option shall entitle the holder of the share option to subscribe for one share upon exercise of such share option at an exercise price of HK$0.2618 per share, which represents the higher of (i) the closing price of HK$0.231 per share as stated in the daily quotations sheet issued by the Stock Exchange on 28 March 2014, being the date of grant (the “ Date of Grant 2014 ”); (ii) the average closing price of HK$0.2618 per share as stated in the daily quotations sheet issued by the Stock Exchange for the five business days immediately preceding the Date of Grant 2014; and (iii) the nominal value of the share of HK$0.10 each in the capital of the Company.

– I-53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

d. Pursuant to the Company’s announcement on 9 July 2015, a total of 61,800,000 share options to subscribe for ordinary shares of HK$0.01 each of the Company were granted to certain eligible participants, including the directors and employees of the Company and the consultants under the share option scheme adopted by the Company on 23 April 2008. Details of the share options granted are as follows:

Date of grant: 9 July 2015 Exercise price of share options granted: HK$0.147 per share Number of share options granted: 61,800,000 share options Closing price of the share on the date of grant: HK$0.136 Exercise periods – 30,900,000 share options 9 July 2015 to 8 July 2020 – 30,900,000 share options 9 July 2016 to 8 July 2020

Each of the share option shall entitle the holder of the share option to subscribe for one share upon exercise of such share option at an exercise price of HK$0.147 per share, which represents the higher of (i) the closing price of HK$0.136 per share as stated in the daily quotations sheet issued by the Stock Exchange on 9 July 2015, being the date of grant (the “ Date of Grant 2015(A) ”); (ii) the average closing price of HK$0.147 per share as stated in the daily quotations sheet issued by the Stock Exchange for the five business days immediately preceding the Date of Grant 2015(A); and (iii) the nominal value of the share of HK$0.01 each in the capital of the Company.

A maximum of 50% of the total number of share options granted to the eligible participants may be exercisable immediately after the Date of Grant 2015(A). The remaining 50% of the total number of share options granted to the eligible participants may be exercisable after 8 July 2016. The fair value of the share options is expensed on a straight-line basis over the vesting period.

e. Pursuant to the Company’s announcement on 27 November 2015, a total of 256,200,000 share options to subscribe for ordinary shares of HK$0.01 each of the Company were granted to certain eligible participants, including the employees of the Company and the consultants under the share option scheme adopted by the Company on 23 April 2008. Details of the share options granted are as follows:

Date of grant:	27 November 2015
Exercise price of share options granted:	HK$0.1488 per share
Number of share options granted:	256,200,000 share options
Closing price of the share on the date of grant:	HK$0.147
Exercise periods
– 128,100,000 share options	27 November 2015 to 26 November
	2020
– 128,100,000 share options	27 November 2016 to 26 November
	2020

Each of the share option shall entitle the holder of the share option to subscribe for one share upon exercise of such share option at an exercise price of HK$0.1488 per share, which represents the higher of (i) the closing price of HK$0.147 per share as stated in the daily quotations sheet issued by the Stock Exchange on 27 November 2015, being the date of grant (the “ Date of Grant 2015(B) ”); (ii) the average closing price of HK$0.1488 per share as stated in the daily quotations sheet issued by the Stock Exchange for the five business days immediately preceding the Date of Grant 2015(B); and (iii) the nominal value of the share of HK$0.01 each in the capital of the Company.

– I-54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

A maximum of 50% of the total number of the share options granted to the eligible participants may be exercisable immediately after the Date of Grant 2015(B), and the remaining 50% of the total number of the share options granted to the eligible participants may be exercisable after 26 November 2016. The fair value of the share options is expensed on a straight-line basis over the vesting period.

As at 31 March 2016, the outstanding options granted on 28 March 2014 had an exercise price of HK$0.4709 (2015: HK$0.4709 (after the adjustment of Share Consolidation and Open Offer)) and a weighted average remaining contractual life of 2.99 years (2015: 3.99 years).

As at 31 March 2016, the outstanding options granted on 9 July 2015 had an exercise price of HK$0.147 and a weighted average remaining contractual life of 4.27 years.

As at 31 March 2016, the outstanding options granted on 27 November 2015 had an exercise price of HK$0.1488 and a weighted average remaining contractual life of 4.66 years.

No share options were exercised during the current and prior years. Each option holder is entitled to subscribe for one ordinary share in the Company.

Share-based payment expenses of approximately HK$16,565,000 (2015: Nil) has been included in the consolidated statement of profit or loss for the year ended 31 March 2016 which gave rise to a share-based payment capital reserve and details are summarised as following:

i. During the year ended 31 March 2016, the fair value of the share options granted to the Directors and employees of the Company was estimated at approximately HK$5,676,000 (2015: Nil). The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The Group recognised the total expense of approximately of HK$4,427,000 for the year ended 31 March 2016 (2015: Nil) in relation to the share options granted to the Directors and employees of the Company.
ii. During the year ended 31 March 2016, the fair value of the share options granted to the consultants was estimated at approximately HK$17,886,000 (2015: Nil). In the opinion of the Directors, in view of the fair value of the service received from the consultants could not be estimated reliably by the Company, the fair value of the service received from the consultants was measured indirectly by reference to the fair value of the share option granted to the consultants and accordingly, the fair value was estimated at approximately HK$17,886,000 (2015: Nil). The Group recognised the total expense of approximately HK$12,138,000 (2015: Nil) for the year ended 31 March 2016 in relation to the share option granted to the consultants.

The fair values of share options granted during the year ended 31 March 2016 were determined by the Directors with reference to a valuation performed by an independent valuer, BMI Appraisals Limited.

No liabilities were recognised due to these equity-settled share-based payment transactions.

– I-55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The fair values of the share options granted which are existed during the year was measured based on the binomial option pricing model. The inputs into the model were as follows:

	24	24				27	27
	February	February	28 March	9 July	9 July	November	November
Granted on	2012	2012	2014	2015	2015	2015	2015
Tranche	H	I	J	K	L	M	N
Fair value per share
option at measurement
date (HK$)
– Directors	HK$0.098	HK$0.134	HK$0.120	HK$0.079	HK$0.082	N/A	N/A
– Employees	N/A	N/A	HK$0.108	HK$0.072	HK$0.076	HK$0.071	HK$0.075
– Consultants	N/A	N/A	HK$0.135	HK$0.072	HK$0.076	HK$0.071	HK$0.075
Exercise price (HK$)	HK$0.222	HK$0.222	HK$0.2618	HK$0.147	HK$0.147	HK$0.1488	HK$0.1488
Expected volatility (%)	69.56%	71.76%	74.3%	88.18%	88.18%	88.81%	88.81%
Expected option period
(Years)	3 years	6 years	5 years	5 years	5 years	5 years	5 years
Risk-free rate (based on
Hong Kong Exchange
Fund Notes) (%)	0.350%	0.790%	1.474%	1.129%	1.129%	1.053%	1.053%
Expected dividend yield
(%)	0%	0%	0%	0%	0%	0%	0%
Fair value	588,000	806,000	13,572,000	2,368,000	2,462,000	9,105,000	9,627,000

The expected volatility was based on the historical volatility of the share price of the Company and comparable companies. The expected life used in the model was adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.

The option pricing model requires the input of highly subjective assumptions, including the volatility of share price. Changes in the subjective input assumptions could materially affect the fair value estimate.

As at 31 March 2016, the Company had 378,042,600 (2015: 60,042,600) share options outstanding under the share option scheme. The exercise in full of the remaining share options under the present capital structure of the Company, would result in issue of 378,042,600 (2015: 60,042,600) additional ordinary shares of the Company and additional share capital of HK$3,780,426 (2015: HK$600,426) and share premium of approximately HK$71,701,000 (2015: HK$27,673,000) (before the issue expenses).

29. OTHER COMMITMENTS

a. Operating leases

The Group as lessee
	2016	2015
	HK$’000	HK$’000
Minimum lease payments paid under operating
leases during the year in respect of office
premises, shops and Directors’ quarters	1,985	9,726

– I-56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancelable operating leases which fall due as follows:

Within one year In the second to the fifth years, inclusive	2016 HK$’000 918 518 1,436	2015 HK$’000 4,169 3,644
		7,813

Operating lease payments represent rentals payable by the Group for the Group’s office premises, shops and Directors’ quarters. Leases are negotiated for lease terms ranging from one to two years (2015: one to four years) at inception, with an option to renew the lease at the expiry date or at dates mutually agreed between the Group and the landlord.

The Group as lessor

At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to the fifth years, inclusive	2016 HK$’000 – – –	2015 HK$’000 234 550
		784

Property rental income earned was approximately HK$20,000 in 2014. The Group’s properties held for rental purposes have been disposed during the year ended 31 March 2016.

b. Capital commitments

At the end of the reporting period, the Group had the following outstanding capital commitments:

	2016	2015
	HK$’000	HK$’000
Capital expenditure in respect of acquisition of
property, plant and equipment that are
contracted for but not provided in the
consolidated financial statements	–	3,470

– I-57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30. DISPOSAL OF SUBSIDIARIES

a. Disposal of subsidiaries during the year ended 31 March 2015

(i) Disposal of TCK Company Limited (“TCK”)

On 9 October 2014, the Group entered into a sale and disposal agreement with Celestial Elite Investments Limited (“ Celestial Elite ”) and pursuant to which, the Group disposed of the entire equity interests in TCK to Celestial Elite for a consideration of HK$16,257,000 (the “ TCK Disposal ”). Celestial Elite is a private limited liability company incorporated in Samoa and is wholly owned by Mr. Tse Hoi Chau (“ Mr. Tse ”), the Chairman, an executive director and a controlling shareholder of the Company. TCK is a private limited liability company incorporated in the British Virgin Islands which was a former wholly owned subsidiary of the Company. 超群（海豐）首飾廠有限公司 (Artist Empire (Hai Feng) Jewellery Mfy. Limited, “Artist Hai Feng”) is a private limited liability company incorporated in the PRC which is a wholly owned subsidiary of TCK. TCK and Artist Hai Feng are collectively referred to as the TCK Group. The TCK Group had been responsible for the manufacture and sale of the Group’s own brand fashion accessories for customers. The Directors consider that the business environment for the manufacture and sale of fashion accessories has been competitive in the past few years and TCK Group has recorded losses for the past three years. Accordingly, the Directors consider that the disposal of TCK Group will enhance the Company to reallocate its resources to expand the existing accessories retailing business and retailing business for other types of products with higher growth potential. The completion of the TCK Disposal took place on 29 December 2014.

Details of the TCK Disposal were disclosed in the Company’s announcements dated 9 October 2014, 18 November 2014 and 29 December 2014 and the Company’s circular dated 30 October 2014, respectively.

Consideration transferred

		HK$’000
Consideration	received	16,257

– I-58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The net assets of the TCK Group disposed of during the year were as follows:

Net assets disposed of: – Property, plant and equipment – Prepaid lease payments – Inventories – Trade and other receivables – Amounts due from group companies – Cash and cash equivalents – Trade and other payables – Tax liabilities – Amounts due to group companies Total identifiable net liabilities disposed of Cumulative exchange differences in respect of the net liabilities of TCK Group reclassified from equity to profit or loss upon the disposals of TCK Group Waiver of amounts due from/to TCK Group – net Gains on disposals of subsidiaries Total consideration received Net cash inflow arising on the disposals of the TCK Group Cash consideration Less: Cash and cash equivalents disposed of	HK$’000 10,433 7,948 2,833 3,221 179,997 466 (25,412) (1,872) (345,021)
	(167,407) (21,579) 165,024 40,219
	16,257

	HK$’000 16,257 (466)
	15,791

(ii) Disposal of Artist Empire Jewellery Enterprise Co. Ltd. (“AEL”)

On 29 August 2014, the Group entered into a sale and disposal agreement with an independent third party and pursuant to which, the Group disposed of the entire equity interests in AEL for a consideration of HK$100,000. AEL is a private limited liability company incorporated in Hong Kong which was a former wholly owned subsidiary of the Company. 寶華豐（深圳）貿易有限公司 (Bo-Wealth (Shenzhen) Trading Co. Ltd., “BWL”) is a private limited liability company incorporated in the PRC which is a wholly owned subsidiary of AEL. AEL and BWL are collectively referred to as the AEL Group. The consideration was recorded as a receivable as at 31 March 2015.

Consideration transferred

HK$’000

Consideration recorded as receivable (Note 22)

100

– I-59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The net assets of the AEL Group disposed of during the year were as follows:

Net assets disposed of: – Property, plant and equipment – Trade and other receivables – Amounts due from group companies – Cash and cash equivalents – Trade and other payables – Amounts due to group companies – Deferred tax liabilities Total identifiable net liabilities disposed of Cumulative exchange differences in respect of the net liabilities of AEL Group reclassified from equity to profit or loss upon the disposals of AEL Group Waiver of amounts due from/to AEL Group – net Loss on disposals of subsidiaries Total consideration recorded as receivable (Note 22) Net cash outflow arising on the disposals of the AEL Group Cash consideration Less: Cash and cash equivalents disposed of	HK$’000 119 264 168,569 1,851 (1,286) (249,746) (46)
	(80,275) 105 81,177 (907)
	100

	HK$’000 – (1,851)
	(1,851)

b. Disposal of a subsidiary during the year ended 31 March 2016

On 18 March 2016, the Group entered into a sale and disposal agreement with an independent third party and pursuant to which, the Group disposed of the entire equity interests in Guangzhou Artini Strategic Sales Co., Ltd. (“ GAL ”) for a consideration of HK$1,400,000. GAL is a private limited liability company incorporated in the PRC which was a former wholly owned subsidiary of the Company. The consideration was recorded as a receivable as at 31 March 2016.

Consideration transferred

HK$’000

Consideration recorded as receivable (Note 22)

1,400

– I-60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The net assets of GAL disposed of during the year were as follows:

Net assets disposed of: – Property, plant and equipment – Inventories – Trade and other receivables – Amounts due from group companies – Cash and cash equivalents – Trade and other payables – Amounts due to group companies Total identifiable net liabilities disposed of Cumulative exchange differences in respect of the net liabilities of GAL reclassified from equity to profit or loss upon the disposals of GAL Waiver of amounts due from/to GAL – net Gain on disposals of a subsidiary Total consideration recorded as receivable (Note 22) Net cash outflow arising on the disposal of GAL Cash consideration Less: Cash and cash equivalents disposed of	HK$’000 98 806 1,294 81,953 97 (875) (93,259)
	(9,886) (37) 11,306 17
	1,400

	HK$’000 – (97)
	(97)

31. MATERIAL RELATED PARTY TRANSACTIONS AND BALANCES

a. Balances with related parties

Saved as disclosed in these consolidated financial statements, in the opinion of the Directors, the Group did not have any significant balances with the related parties as at the end of the reporting period.

b. Key management personnel remuneration

During the years ended 31 March 2015 and 31 March 2016, the Group had remuneration paid to the Directors and other members of key management of the Group as follows:

Salaries and other benefits Retirement benefit scheme contributions Share-based payments	2016 HK$’000 4,920 65 4,427 9,412	2015 HK$’000 6,061 57 –
		6,118

– I-61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The remuneration of the key management personnel is determined with reference to the performance of individuals and market trends.

32. PLEDGE OF ASSETS

At 31 March 2016, a motor vehicle with a carrying value of approximately HK$562,000 (2015: Nil) was pledged to the financial institution to secure the obligations under finance lease to the Group.

33. MAJOR NON-CASH TRANSACTIONS

During the year, the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the lease of HK$603,000.

34. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Notes NON-CURRENT ASSET Interests in subsidiaries a CURRENT ASSETS Other receivables Cash and bank balances CURRENT LIABILITIES Amounts due to subsidiaries Other payables NET CURRENT (LIABILITIES) ASSETS NET ASSETS CAPITAL AND RESERVES Share capital Reserves b TOTAL EQUITY	2016 HK$’000 58,792 – 1,573 1,573 17,845 2,585 20,430 (18,857) 39,935 25,698 14,237 39,935	2015 HK$’000 143,816
		8,857 48,374
		57,231
		17,202 700
		17,902
		39,329
		183,145

		24,746 158,399
		183,145

– I-62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

a. Interests in subsidiaries

Unlisted shares, at cost Fair value of share options granted to employees of subsidiaries Amounts due from subsidiaries Less: Impairments	2016 HK$’000 153,424 5,189 339,780 (439,601) 58,792	2015 HK$’000 153,424 5,189 372,701 (387,498)
		143,816

During the years ended 31 March 2016 and 31 March 2015, a number of the Company’s subsidiaries had sustained losses and had net liabilities as at 31 March 2016 and 31 March 2015. The Company assessed the Company’s investments in subsidiaries and the recoverable amounts of the amounts due from subsidiaries. The estimated recoverable amounts were determined based on the estimated future cash flows to be generated from these subsidiaries.

Movements of the impairments during the two years are as follows:

As at 1 April Allowances Disposals of subsidiaries Reversal of provision for impairments As at 31 March	2016 HK$’000 387,498 55,637 (3,289) (245) 439,601	2015 HK$’000 669,426 61,792 (325,319) (18,401)
		387,498

Amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment but are not expected to be recovered within one year from the end of the reporting period.

– I-63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

b. Reserves of the Company

As at 1 April 2014 Loss and total comprehensive expense for the year Capital Reduction (Note 26(a)) Issuance of shares in respect of Open Offer (Note 26(b)) Transaction costs attributable to the issue of shares (Note 26(b)) Lapsed of share options (Note 28) As at 31 March 2015 Loss and total comprehensive expense for the year Issuance of shares upon Placing (Note 26(c)) Transaction costs attributable to the issue of shares (Note 26(c)) Recognition of share options (Note 28) As at 31 March 2016	Share premium Contributed surplus Share-based payment capital reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 (note below) 549,974 133,424 14,718 (768,051) – – – (53,699) – – – 117,545 167,039 – – – (2,551) – – – – – (1,146) 1,146 714,462 133,424 13,572 (703,059) – – – (169,331) 9,044 – – – (440) – – – – – 16,565 – 723,066 133,424 30,137 (872,390)	Total HK$’000 (69,935) (53,699) 117,545 167,039 (2,551) –
		158,399 (169,331) 9,044 (440) 16,565
		14,237

Note: The contributed surplus of the Company represented the difference between the underlying net tangible assets of the subsidiaries acquired by the Company and the nominal value of the share capital issued by the Company at the time of the reorganisation of the Group in 2008.

– I-64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35. EVENT AFTER REPORTING PERIOD

Acquisition of the entire equity interests of Primeview Technology Limited

Pursuant to the Company’s announcements dated 13 April 2016, Artini Sales Company Limited (“ ACL ”), a wholly owned subsidiary of the Company, entered into the sale and purchase agreement with Stand Charm Limited (“ Stand Charm ”) and Dragon Max Enterprises Limited (“ Dragon Max ”) (collective referred to as the “ Vendors ”) in relation to the proposed acquisition of the entire equity interest in Primeview Technology Limited (the “ Target Company ”, a company incorporated in Hong Kong with limited liability and is 94% owned by Stand Charm and 6% owned by Dragon Max, respectively) for an aggregate consideration of HK$160,000,000, of which will be satisfied in cash from the net proceeds of the subscription by issuing a total of 2,440,000,000 new shares of the Company (the “ Subscription Shares(s) ”) at the subscription price of HK$0.074 per Subscription Share to Walifax Investments Limited (the “ Subscriber ”, a company incorporated in the British Virgin Islands and is beneficially wholly-owned by Mr. Tse Hoi Chau, the executive Director, chairman and chief executive officer of the Company). The principal business of the Target Company is engaged in developing and selling software related applications which can be purchased by businesses to facilitate e-commerce of their products and services.

Further details of the above transactions are set out in the Company’s announcements dated 13 April 2016, 4 May 2016, 25 May 2016 and 15 June 2016.

36. SUBSIDIARIES

The following list contains the particular of the Company’s subsidiaries, all are private limited liability company and the class of shares held is ordinary unless otherwise stated:

			Percentage	of	Proportion of	Proportion of	Issued and
	Place of		equity		voting power		fully paid-up/
	incorporation/	Place of	attributable to		held by the		registered	Principal
Name of company	establishment	operation	the Company		Company		capital	activities
			2016	2015	2016	2015
			%	%	%	%
Directly held by the
Company
Artist Star	British	Hong Kong	100	100	100	100	1,000 ordinary	Investment
International	Virgin						shares of	holding
Development	Islands						US$1 each
Limited	(“BVI”)
Indirectly held by the
Company
Alfreda Int’l Co. Ltd	Macao	Macao	100	100	100	100	MOP50,000	Inactive
Artini International	Hong Kong	Hong Kong	100	100	100	100	300,000	Retailing of
Company Limited							ordinary	fashion
							shares of	accessories
							HK$1 each
Artini Macao	Macao	Macao	100	100	100	100	MOP200,000	Trading of
Commercial								fashion
Offshore Limited								accessories
(Formerly known as								and related
Arts Empire Macao								raw materials
Commercial
Offshore Limited)

– I-65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Percentage	of	Proportion of	Proportion of	Issued and
	Place of		equity		voting power		fully paid-up/
	incorporation/	Place of	attributable to		held by the		registered	Principal
Name of company	establishment	operation	the Company		Company		capital	activities
			2016	2015	2016	2015
			%	%	%	%
Artini Sales Company	Hong Kong	Hong Kong	100	100	100	100	10,000	Trading of
Limited							ordinary	fashion
							shares of	accessories
							HK$1 each
Artist Empire	Hong Kong	Hong Kong	100	100	100	100	100 ordinary	Inactive
Jewellery Mfy.							shares of
Limited							HK$1 each
Artist Empire Silver	Hong Kong	Hong Kong	100	100	100	100	10,000	Inactive
Jewellery Mfy.							ordinary
Limited							shares of
							HK$1 each
China Regent	Hong Kong	Hong Kong	100	100	100	100	1 ordinary	Inactive
Investments Limited							share of
							HK$1 each
Gain Trade Enterprise	Hong Kong	Hong Kong	100	100	100	100	100 ordinary	Provision of
Limited							shares of	management
							HK$1 each	services
Gentleman	Hong Kong	Hong Kong	100	100	100	100	10,000	Inactive
Investments Limited							ordinary
							shares of
							HK$1 each
Guangzhou Artini	PRC	PRC	–	100	–	100	HK$4,010,000/	Retailing of
Strategic Sales							HK$20,000,000	fashion
Company Limited								accessories
(Notes a and b)
Ho Easy Limited	BVI	Hong Kong	100	100	100	100	1 ordinary	Investment
							share of	holding
							US$1 each
Instar International	BVI	Hong Kong	100	100	100	100	100 ordinary	Investment
Company Limited							shares of	holding
							US$1 each
JCM Holding	BVI	Hong Kong	100	100	100	100	500 ordinary	Investment
Company							shares of	holding
							US$1 each
Keon Company	Hong Kong	Hong Kong	100	100	100	100	10,000	Provision of
Limited							ordinary	logistics
							shares of	services
							HK$1 each
King Erich	BVI	Hong Kong	100	100	100	100	300 ordinary	Investment
International							shares of	holding
Development							US$1 each
Limited
King Land Limited	Hong Kong	Hong Kong	100	100	100	100	100 ordinary	Trading of
							shares of	fashion
							HK$1 each	accessories
								and related
								raw materials

– I-66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Percentage	of	Proportion of	Proportion of	Issued and
	Place of		equity		voting power		fully paid-up/
	incorporation/	Place of	attributable to		held by the		registered	Principal
Name of company	establishment	operation	the Company		Company		capital	activities
			2016	2015	2016	2015
			%	%	%	%
Riccardo International	BVI	Hong Kong	100	100	100	100	700 ordinary	Investment
Trading Limited							shares of	holding
							US$1 each
Shenzhen Artini	PRC	PRC	100	100	100	100	HK$200,000,000	Retailing of
Hongli Enterprises								fashion
Co., Ltd.(Note b)								accessories

Notes:

a. During the year ended 31 March 2016, the Group disposed of this entity.
b. These entities are wholly owned foreign enterprises established in the PRC. The English translation of the Company names is for reference only. The official names of these companies are in Chinese.

None of the subsidiaries had any debt securities outstanding as at the end of the year or at any time during the year.

3. STATEMENT OF INDEBTEDNESS

Indebtedness

At the close of business on 30 June 2016, being the latest practicable date for the purpose of determining the indebtedness of the Enlarged Group prior to the printing of this Circular. We have obligation under finance lease payable of approximately HK$513,000 which was secured with the Enlarged Group’s property, plant and equipment with the carrying value of approximately HK$532,000. Saved as disclosed above, apart from intra-group liabilities, the Enlarged Group did not have any outstanding 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 commitments, guarantees or other material contingent liabilities. Our Directors confirm that, as at the Latest Practicable Date, there has been no material change in indebtedness of the Enlarged Group.

Contingent liabilities and guarantees

At the close of business on 30 June 2016, the Enlarged Group did not have any outstanding loan capital or bank overdrafts, or hold any liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or acceptance credits, or guarantees, or other contingent liabilities. Our Directors confirm that, as at the Latest Practicable Date, there has been no material change in the contingent liabilities and guaranteed of the Enlarged Group.

– I-67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the effect of the Acquisition, the net proceeds from the Subscription and the internal resources and cash generated from the business operations of the Enlarged Group, the Enlarged Group has sufficient working capital for its present requirements, that is, for at least the next 12 months from the date of this Circular, in the absence of any unforeseeable circumstances.

– I-68 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

The following is the text of a report prepared by the reporting accountants Dominic K.F. Chan & Co. on the audited financial information of the Target Company for the sole purpose of inclusion in this circular.

11 August 2016

The Board of Directors Artini China Co. Ltd. Suite No. 10, 8/F, Tower 3, China Hong Kong City, 33 Canton Road, Kowloon, Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “ Financial Information ”) regarding to Primeview Technology Limited 領視科技有限公司 (the “ Target Company ”) for the period from 18 June 2013 (date of incorporation) to 31 December 2013, each of the years ended 31 December 2014 and 2015 and three months ended 31 March 2016 (the “ Relevant Periods ”), for inclusion in the shareholders’ circular of Artini China Co. Ltd. (the “ Company ”) dated 11 August 2016 (the “ Circular ”) in connection with the Company’s proposed acquisition (the “ Acquisition ”) of the 100% issued share capital of the Target Company, pursuant to the acquisition agreement dated 13 April 2016 entered into between the Company and Stand Charm Limited and Dragon Max Enterprise Limited (“ Vendors ”). The financial information of Target Company set out in Section I of this report comprises the statement of financial position as at 31 December 2013, 2014 and 2015 and 31 March 2016, and the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for each of the years ended 31 December, 2013, 2014 and 2015, and three months ended 31 March 2016 and a summary of significant accounting policies and other explanatory notes.

The Target Company was incorporated in Hong Kong with limited liability on 18 June 2013 with paid-in capital of HK$10,000. As at the date of this report, the Target Company is principally engaged in developing and selling software related applications.

For the purpose of this report, the directors of the Target Company have prepared the Financial Information in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”) and accounting principles generally accepted in Hong Kong (the “ Underlying Financial Statements ”), with no adjustments considered necessary to comply with HKFRSs.

– II-1 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

DIRECTORS’ RESPONSIBILITY

The directors of Target Company are responsible for the preparation of the Financial Information in order to give a true and fair view. In preparing the Financial Information that gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently, and that judgements and estimates made are prudent and reasonable.

REPORTING ACCOUNTANT’S RESPONSIBILITY

For the purpose of this report, we have carried out independent audit procedures on the Financial Information in accordance with Hong Kong Standards on Auditing issued by the HKICPA, and such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. It is our responsibility to form an independent opinion, based on our procedures, on the Financial Information and to report our opinion thereon.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the results and cash flows of the Target Company for the Relevant Periods and of the state of affairs of the Target Company as at 31 December 2013, 2014 and 2015, and 31 March 2016.

Yours faithfully,

Dominic K.F. Chan & Co.

Certified Public Accountants (Practising)

Hong Kong

11 August 2016

– II-2 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

I. FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Period from 18 June 2013 (date of incorporation) to 31 December Notes 2013 HK$ Revenue 4 10,906 Cost of inventories sold (6,978) Operating expenses (14,454) (LOSS)/PROFIT BEFORE TAX 5 (10,526) Income tax 6 – (LOSS)/PROFIT FOR THE YEAR/PERIOD (10,526) TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR/PERIOD, NET OF TAX (10,526) (LOSS)/PROFIT ATTRIBUTABLE TO THE SHAREHOLDERS OF THE TARGET COMPANY (10,526) TOTAL COMPREHENSIVE (LOSS)/INCOME ATTRIBUTABLE TO THE SHAREHOLDERS OF THE TARGET COMPANY (10,526)	Year ended 31 2014 HK$ 1,162,005 (1,077,031) (136,568) (51,594) – (51,594) (51,594) (51,594) (51,594)	December 2015 HK$ 12,295,183 (1,844,791) (791,657) 9,658,735 (1,563,441) 8,095,294 8,095,294 8,095,294 8,095,294	Three months ended 31 March 2015 2016 HK$ HK$ (unaudited) – 2,328,309 – (714,505) (107,422) (505,996) (107,422) 1,107,808 – (182,788) (107,422) 925,020 (107,422) 925,020 (107,422) 925,020 (107,422) 925,020	Three months ended 31 March 2015 2016 HK$ HK$ (unaudited) – 2,328,309 – (714,505) (107,422) (505,996) (107,422) 1,107,808 – (182,788) (107,422) 925,020 (107,422) 925,020 (107,422) 925,020 (107,422) 925,020
				1,107,808 (182,788)
				925,020

				925,020

				925,020

				925,020

– II-3 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

STATEMENTS OF FINANCIAL POSITION

Notes NON-CURRENT ASSETS Plant and equipment 9 CURRENT ASSETS Trade receivables 10 Prepayment, deposit and other receivables Cash and bank balances 11 Total current assets CURRENT LIABILITIES Trade payables 12 Accruals and other payables 13 Amount due to directors 14 Tax payable Total current liabilities NET CURRENT (LIABILITIES)/ASSETS Net (liabilities)/assets EQUITY ATTRIBUTABLE TO THE SHAREHOLDERS OF THE TARGET COMPANY Share capital 15 (Accumulated losses)/Retained profits (Capital deficiency)/Total equity	At 31 December 2013 2014 HK$ HK$ – – – – – – 61,257 548,099 61,257 548,099 6,978 411,449 51,000 94,965 3,805 93,805 – – 61,783 600,219 (526) (52,120) (526) (52,120) 10,000 10,000 (10,526) (62,120) (526) (52,120)	2015 HK$ – 10,533,660 – 1,034,894 11,568,554 183,917 1,524,217 93,805 1,563,441 3,365,380 8,203,174 8,203,174 170,000 8,033,174 8,203,174	At 31 March 2016 HK$ 112,248 6,652,610 25,172 6,246,983
			12,924,765
			214,853 1,853,932 93,805 1,746,229
			3,908,819
			9,015,946
			9,128,194

			170,000 8,958,194
			9,128,194

– II-4 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

STATEMENTS OF CHANGES IN EQUITY

At 18 June 2013 (date of incorporation) Issue of shares Loss of the period and total comprehensive loss for the period At 31 December 2013 and 1 January 2014 Loss for the year and total comprehensive loss for the year At 31 December 2014 and 1 January 2015 Profit for the year and total comprehensive income for the year Issue of shares At 31 December 2015 and 1 January 2016 Profit for the period and total comprehensive income for the period At 31 March 2016	Attributable to the shareholders of the Target Company Share capital (Accumulated losses)/ Retained profits Total equity HK$ HK$ HK$ – – – 10,000 – 10,000 – (10,526) (10,526) 10,000 (10,526) (526) – (51,594) (51,594) 10,000 (62,120) (52,120) – 8,095,294 8,095,294 160,000 – 160,000 170,000 8,033,174 8,203,174 – 925,020 925,020 170,000 8,958,194 9,128,194	Attributable to the shareholders of the Target Company Share capital (Accumulated losses)/ Retained profits Total equity HK$ HK$ HK$ – – – 10,000 – 10,000 – (10,526) (10,526) 10,000 (10,526) (526) – (51,594) (51,594) 10,000 (62,120) (52,120) – 8,095,294 8,095,294 160,000 – 160,000 170,000 8,033,174 8,203,174 – 925,020 925,020 170,000 8,958,194 9,128,194
		(526) (51,594)
		(52,120) 8,095,294 160,000
		8,203,174 925,020
		9,128,194

– II-5 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

STATEMENTS OF CASH FLOWS

Period from 18 June 2013 (date of incorporation) to 31 December 2013 HK$ CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/Profit before tax (10,526) Depreciation – (Increase)/decrease in trade receivables – Increase/(decrease) in trade payables 6,978 Increase in prepayment, deposits and other receivables – Increase in amount to directors 3,805 Increase in accruals and other payables 51,000 Cash generated from/(used in) operations 51,257 Net cash flows from operating activities 51,257 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property, plant and equipment – Net cash flows from investing activities – CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 10,000 Net cash flows from financing activities 10,000 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 61,257 Cash and bank balances at beginning of period/year – CASH AND CASH EQUIVALENTS AT END OF PERIOD/YEAR 61,257 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 61,257	Year ended 31 2014 HK$ (51,594) – – 404,471 – 90,000 43,965 486,842 486,842 – – – – 486,842 61,257 548,099 548,099	December 2015 HK$ 9,658,735 – (10,533,660) (227,532) – – 1,429,252 326,795 326,795 – – 160,000 – 486,795 548,099 1,034,894 1,034,894	Three months ended 31 March 2015 2016 HK$ HK$ (unaudited) (107,422) 1,107,808 – 6,631 – 3,881,050 (236,377) 30,936 – (25,172) – – 107,281 329,715 (236,518) 5,330,968 (236,518) 5,330,968 – (118,879) – (118,879) – – – – (236,518) 5,212,089 548,099 1,034,894 311,581 6,246,983 311,581 6,246,983	Three months ended 31 March 2015 2016 HK$ HK$ (unaudited) (107,422) 1,107,808 – 6,631 – 3,881,050 (236,377) 30,936 – (25,172) – – 107,281 329,715 (236,518) 5,330,968 (236,518) 5,330,968 – (118,879) – (118,879) – – – – (236,518) 5,212,089 548,099 1,034,894 311,581 6,246,983 311,581 6,246,983
				5,330,968
				5,330,968
				(118,879)
				(118,879)
				–
				–
				5,212,089 1,034,894
				6,246,983

				6,246,983

– II-6 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

II. NOTES TO THE FINANCIAL INFORMATION

1. CORPORATE INFORMATION

The Target Company was incorporated in Hong Kong with limited liability on 18 June 2013. As at the date of the report, the registered office of the Target Company is located at Room 602, Eastern Commercial Centre, 397 Hennessy Road, Wan Chai, Hong Kong.

As at 31 December 2015, the immediate and ultimate holding company of the Target Company was Stand Charm Limited, which is incorporated in the Republic of Seychelles, and Dragon Max Enterprise Limited, which is incorporated in the British Virgin Islands.

During the Relevant Periods, the Target Company was principally engaged in developing and selling software related applications.

2.1 BASIS OF PREPARATION

These Financial Information have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“ HKASs ”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), accounting principles generally accepted in Hong Kong and the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention. The Financial Information is presented in Hong Kong Dollars (“ HK$ ”), which is also the functional currency of the Target Company, and all values are rounded to the nearest thousand except when otherwise indicated.

The Financial Information is the first set of the Target Company’s financial statements prepared in accordance with HKFRSs. Accordingly, HKFRS 1 First-time Adoption of Hong Kong Financial Reporting Standards has been applied in preparing the Financial Information. Since the Underlying Financial Statements, on which the preparation of the Financial Information was based, were prepared in accordance with HKFRSs, and therefore, disclosures as required by HKFRS 1 are not made in the Financial Information.

For the purposes of preparing and presenting the Financial Information for the Relevant Periods, the Target Company has consistently applied all of the new and revised HKASs, HKFRSs, amendments and the related interpretations which are effective for the Relevant Periods.

2.2 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Target Company has not early adopted the following new and revised HKFRSs, that have been issued but are not yet effective, in these Financial Information.

HKFRS 9	Financial Instruments2
Amendments to HKFRS 10,	Investment Entities: Applying the Consolidation Exception1
HKFRS 12 and HKAS 28 (2011)
Amendments to HKAS 1	Disclosure Initiative1
Annual Improvements	Amendments to a number of HKFRSs1
2012-2014 Cycle

1 Effective for annual periods beginning on or after 1 January 2016

2 Effective for annual periods beginning on or after 1 January 2018

The Target Company is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, the Target Company considers these new and revised HKFRSs are unlikely to have a significant impact on the Target Company’s results of operations and financial position.

– II-7 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Related parties

A party is considered to be related to the Target Company if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Target Company;
(ii) has significant influence over the Target Company; or
(iii) is a member of the key management personnel of the Target Company or of a parent of the Target Company;

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Target Company are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Target Company are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Target Company or to the parent of the Target Company.

– II-8 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost (or valuation) less accumulated depreciation and any impairment losses. When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal group classified as held for sale, it is not depreciated and is accounted for in accordance with HKFRS 5, as further explained in the accounting policy for “Non-current assets and disposal groups held for sale”. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Computer and equipment 33.33%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Target Company is the lessee, rentals payable under operating leases net of any incentives received from the lessor are charged to the statement of profit or loss on the straight-line basis over the lease terms.

– II-9 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income and gains in the statement of profit or loss. The loss arising from impairment is recognised in the statement of profit or loss in finance costs for loans and in other expenses for receivables.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Target Company’s consolidated statement of financial position) when:

the rights to receive cash flows from the asset have expired; or
the Target Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Target Company has transferred substantially all the risks and rewards of the asset, or (b) the Target Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Target Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Target Company continues to recognise the transferred asset to the extent of the Target Company’s continuing involvement. In that case, the Target Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Target Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Target Company could be required to repay.

– II-10 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Impairment of financial assets

The Target Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Target Company first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Target Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition).

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Target Company.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other expenses in the statement of profit or loss.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Target Company’s financial liabilities include trade and other payables, an amount due to the ultimate holding company, derivative financial instruments and interest-bearing bank and other borrowings.

– II-11 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Target Company’s cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of profit or loss.

Provisions for product warranties granted by the Target Company on certain products are recognised based on sales volume and past experience of the level of repairs and returns, discounted to their present values as appropriate.

– II-12 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Target Company operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except:

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

– II-13 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Target Company and when the revenue can be measured reliably, on the following bases:

(a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Target Company maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;
(b) from the rendering of services; and
(c) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Judgements

In the process of applying the Target Company’s accounting policies, management has made the following judgements apart from those involving estimations which have the most significant effect on the amounts recognised in the financial statements.

(a) Income taxes

Significant judgements on the future tax treatment of certain transactions are required in determining income tax provisions. The Target Company carefully evaluates tax implications of transactions and tax provisions are recorded accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislation.

(b) Impairment of trade receivables

The Target Company maintains an allowance for the estimated loss arising from the inability of its customers to make the required payments. The Target Company makes its estimates based on the ageing of its trade receivable balances, customers’ creditworthiness, and historical write-off experience. If the financial condition of its customers was to deteriorate so that the actual impairment loss might be higher than expected, the Target Company would be required to revise the basis of making the allowance.

– II-14 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

4. REVENUE AND SEGMENT INFORMATION

The director of the Target Company, being the chief operating decision-maker, review the Target Company’s internal reporting in order to assess performance and allocate resources. The Target Company focuses on developing and selling software related applications. Information reported to the chief operating decision marker, for the purpose of resources allocation and performance assessment, focuses on the operating results of the Target Company as a whole as the Target Company’s resources are integrated and no discrete operating segment financial information is available. Accordingly, no operating segment information is presented.

Turnover represents the net invoiced value of goods sold or services provided during the period/year, after allowances for returns and trade discounts.

An analysis of revenue is as follows:

Period from 18 June 2013 (date of incorporation) to 31 December 2013 HK$ Sale of goods 10,906 Software-related application developing service – 10,906	Year ended 31 2014 HK$ 1,162,005 – 1,162,005	December 2015 HK$ 1,147,923 11,147,260 12,295,183	Three months ended 31 March 2015 2016 HK$ HK$ (unaudited) – – – 2,328,309 – 2,328,309	Three months ended 31 March 2015 2016 HK$ HK$ (unaudited) – – – 2,328,309 – 2,328,309
				2,328,309

5. (LOSS)/ PROFIT BEFORE TAX

The Target Company’s (loss)/profit before tax is arrived at after charging/(crediting):

	Period from
	18 June 2013
	(date of
	incorporation) to
	31 December	Year ended 31 December		Three months ended 31 March
	2013	2014	2015	2015	2016
	HK$	HK$	HK$	HK$	HK$
				(unaudited)
Staff costs (including directors’
remuneration) Wages and
salaries	–	130,000	658,485	114,281	376,715
Depreciation	–	–	–	–	6,631

– II-15 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

6. INCOME TAX

For the year ended 31 December 2015 and period from 1 January to 31 March 2016, Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits arising in Hong Kong during the year.

For the period from 1 January to 31 March 2015, year ended 31 December 2014 and period from 18 June 2013 (date of incorporation) to 31 December 2013, no provision for Hong Kong profits tax has been made as the Target Company did not generate any assessable profits arising in Hong Kong.

(a) Taxation in the income statement represents:

Period from 18 June 2013 (date of incorporation)to 31 December 2013 HK$ Current tax Provision for the year – Reconciliation between tax expense (Loss)/Profit before tax (10,526) Tax at the statutory tax rate of 16.5% (1,737) Tax losses utilized from previous periods – Tax reduction – Tax losses not recognized 1,737 –	Year ended 31 December Three months ended 31 March 2014 2015 2015 2016 HK$ HK$ HK$ HK$ (unaudited) – 1,563,441 – 182,788 and accounting (loss)/profit/at applicable tax rates: (51,594) 9,658,735 (107,422) 1,107,808 (8,513) 1,593,691 (17,725) 182,788 – (10,250) – – – (20,000) – – 8,513 – 17,725 – – 1,563,441 – 182,788	Year ended 31 December Three months ended 31 March 2014 2015 2015 2016 HK$ HK$ HK$ HK$ (unaudited) – 1,563,441 – 182,788 and accounting (loss)/profit/at applicable tax rates: (51,594) 9,658,735 (107,422) 1,107,808 (8,513) 1,593,691 (17,725) 182,788 – (10,250) – – – (20,000) – – 8,513 – 17,725 – – 1,563,441 – 182,788

		182,788 – – –
		182,788

(b) Reconciliation between tax expense and accounting (loss)/profit/at applicable tax rates:

As at 31 December 2013, 2014 and 2015 and 31 March 2015 and 2016, the Target Company had no material unprovided deferred tax liability.

7. DIVIDENDS

No dividend was paid or proposed for the Relevant Periods, nor has any dividend been proposed since the end of the reporting period.

8. EARNING/LOSS PER SHARE

No earning/loss per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

– II-16 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

9. PLANT AND EQUIPMENT

Cost: At 18 June 2013, 31 December 2013, 2014, 2015 and 1 January 2016 Addition At 31 March 2016 Accumulated depreciation: At 18 June 2013, 31 December 2013, 2014, 2015 and 1 January 2016 Change for the period At 31 March 2016 Net book value: At 31 December 2013, 2014 and 2015 At 31 March 2016	Computer and equipment HK$ – 118,879
	118,879
	– 6,631
	6,631
	–

	112,248

10. TRADE RECEIVABLES

Trade receivables Impairment	31 December 2013 2014 HK$ HK$ – – – – – –	2015 HK$ 10,533,660 – 10,533,660	31 March 2016 HK$ 6,652,610 –
			6,652,610

The Target Company’s trading terms with its customers are mainly on credit. The credit period is generally one month, extending up to twelve months (payment by instalments) for some customers. Each customer has a maximum credit limit. The Target Company seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management. The Target Company does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interest-bearing.

The aged analysis of trade receivables that are neither individually nor collectively considered to be impaired is as follows:

Neither past due nor impaired Past due but not impaired: Less than 30 days 31 to 60 days 61 to 90 days	31 December 2013 2014 HK$ HK$ – – – – – – – – – –	2015 HK$ 10,533,660 – – – 10,533,660	31 March 2016 HK$ 5,654,349 415,942 415,942 166,377
			6,652,610

– II-17 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

11. CASH AND BANK BALANCES

			December		31 March
		2013	2014	2015	2016
		HK$	HK$	HK$	HK$
Bank	balances	61,257	548,099	1,034,894	6,246,983

As at 31 December 2013, 2014 and 2015 and 31 March 2016, the cash and bank balances of the Target Company denominated in HK$. Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

12. TRADE PAYABLES

An aged analysis of the trade and bills payables as at the end of the reporting period, based on the invoice date, is as follows:

				December		31 March
			2013	2014	2015	2016
			HK$	HK$	HK$	HK$
Within	2	months	6,978	411,449	183,917	214,853

The trade payables are non-interest-bearing and are normally settled on 60-day terms.

13. ACCRUALS AND OTHER PAYABLES

Accrual Other payables	31 December 2013 2014 HK$ HK$ – 7,000 51,000 87,965 51,000 94,965	2015 HK$ 10,000 1,514,217 1,524,217	31 March 2016 HK$ 10,000 1,843,932
			1,853,932

As at 31 March 2016 and 31 December 2015, included in other payables is a amount due to a related party of HK$1,485,704 and HK$1,480,339 (2013 and 2014: Nil), which is unsecured, interest-free and is payable on demand.

Accruals and other payables are non-interest bearing and repayable on demand.

14. AMOUNT DUE TO DIRECTORS

The amount due to directors are unsecured, interest free and has no fixed terms of repayment.

The carrying amounts of amounts due to directors approximate to their fair values.

– II-18 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

15. SHARE CAPITAL

		31 December		31 March
	2013	2014	2015	2016
	HK$	HK$	HK$	HK$
Issued and fully paid:
10,000/10,000/170,000 ordinary
shares	10,000	10,000	170,000	170,000

The Target Company was incorporated on 18 June 2013 with an authorized share capital of HK$1,000,000 divided into 1,000,000 shares of HK$1 each of which 10,000 shares were taken up by a founder at par for cash on incorporation.

On 31 December 2015, 160,000 ordinary shares were issued at HK$1 each, which resulted in proceeds of HK$160,000. The purpose of the issue was to provide additional working capital for the Target Company.

In accordance with section 135 of the Hong Kong Company Ordinance (Cap. 622), the Target Company’s shares no longer have a par or nominal value with effect from 3 March 2014. There is no impact on the number of shares in issue or the relative entitlement of any of the members as a result of this transition.

16. OPERATING LEASE ARRANGEMENTS

The Target Company leases certain of its office properties and office equipment under operating lease arrangements. Leases for properties are negotiated for terms of two years.

The Target Company had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive	31 December 2013 2014 HK$ HK$ – – – – – –	2015 HK$ 249,378 145,470 394,848	31 March 2016 HK$ 249,378 83,126
			332,504

17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target Company’s exposure to credit risk and liquidity risk, arises in the normal course of its business. The director review and agree policies for managing each of these risks and they are summarised below.

Credit risk

The credit risk of the Target Company’s financial assets, which comprise trade receivables and cash and bank balances, arise from default of the counterparty, with a maximum exposure to the carrying amount of these instruments.

– II-19 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Liquidity risk

The Target Company aims to maintain sufficient cash and credit lines to meet its liquidity requirements. The Target Company finances its working capital requirements through a combination of funds generated from operations, amount due to director and bank and other borrowings.

The table below summarises the maturity profile of the Target Company’s non-derivative financial liabilities at 31 December based on contractual undiscounted payments including interest payments computed using contractual rates or, if floating, based on rates current at the end of the reporting period.

Year ended 31 December 2013

Trade payables Accruals and other payables Amount due to directors Year ended 31 December 2014 Trade payables Accruals and other payables Amount due to directors Year ended 31 December 2015 Trade payables Accruals and other payables Amount due to directors	On demand HK$ 6,978 51,000 3,805 61,783 On demand HK$ 411,449 94,965 93,805 600,219 On demand HK$ 183,917 1,524,217 93,805 1,801,939	Total HK$ 6,978 51,000 3,805
		61,783

		Total HK$ 411,449 94,965 93,805
		600,219

		Total HK$ 183,917 1,524,217 93,805
		1,801,939

– II-20 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

Year ended 31 March 2016

Trade payables Accruals and other payables Amount due to directors	On demand HK$ 214,853 1,853,932 93,805 2,162,590	Total HK$ 214,853 1,853,932 93,805
		2,162,590

Capital management

The primary objective of the Target Company’s capital management is to safeguard its ability to continue as a going concern. The Target Company does not have specific policies for managing capital but it will continue to maintain a healthy capital ratio.

The Target Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Target Company may adjust the dividend payment to shareholder, return capital to shareholder, issue new shares or sell assets to reduce debt. No changes in the objectives, policies or processes for managing capital were made during the period from 18 June 2013 (date of incorporation) to 31 December 2013, the years ended 31 December 2014 and 31 December 2015, and period from 1 January 2016 to 31 March 2016.

18. FINANCIAL INSTRUMENT BY CATEGORY

All the Target Company’s financial assets and liabilities as at 31 December 2013, 2014 and 2015 and 31 March 2016 were loans and receivables and financial liabilities stated at amortised cost, respectively.

19. SUBSEQUENT EVENTS

The Target Company did not have any significant event occurred subsequent to the Relevant Period.

20. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Company have been prepared in respect of any period subsequent to 31 March 2016.

Yours faithfully,

Dominic K.F. Chan & Co.

Certified Public Accountants (Practising)

Hong Kong 11 August 2016

– II-21 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. Introduction

The unaudited pro forma statement of assets and liabilities of the Enlarged Group (the “ Statement ”) set out in section B below has been prepared by the directors in accordance with paragraph 14.67 of the Listing Rules, for illustrative purpose only, to provide information about how the proposed Acquisition might have affected the financial position of the Group as if the Acquisition had been completed on 31 March 2016.

The Statement has been prepared based on the audited consolidated statement of financial position of the Group as at 31 March 2016 as set out in the Company’s annual result announcement 2016 dated 28 June 2016 in respect of the Group’s audited results for the year ended 31 March 2016, after making certain pro forma adjustments that are (i) directly attributable to the Acquisition and (ii) factually supportable, as further described in the accompanying notes.

The Statement is prepared based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the Statement, it may not give a true picture of the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 31 March 2016. Furthermore, the Statement does not purport to predict the Enlarged Group’s future financial position.

The Statement should be read in conjunction with the financial information of the Group and each members of the Target Company as set out in Appendices I to II to this Circular, respectively, the Company’s announcement dated 13 April 2016 and other financial information included elsewhere in this Circular.

– III-1 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group

Pro Forma Adjustments (HK$’000) Note 3 Notes 4, 5 Note 6 – – – – – – – 160 – – 150,738 – – 150,898 – – – – – – – 178,000 (160,000) (5,053) 178,000 (160,000) (5,053) – – – – – – – – – – – – 178,000 (160,000) (5,053) 178,000 (9,102) (5,053) – – – – 26 – – 26 – 178,000 (9,128) (5,053)	Pro Forma Adjustments (HK$’000) Note 3 Notes 4, 5 Note 6 – – – – – – – 160 – – 150,738 – – 150,898 – – – – – – – 178,000 (160,000) (5,053) 178,000 (160,000) (5,053) – – – – – – – – – – – – 178,000 (160,000) (5,053) 178,000 (9,102) (5,053) – – – – 26 – – 26 – 178,000 (9,128) (5,053)	Pro Forma Combined: the Enlarged Group (HK$’000) 997 55,042 160 150,738
Note 3 – – – – – – – 178,000 178,000 – – – – 178,000 178,000 – – – 178,000	(HK$’000) Notes 4, 5 – – 160 150,738 150,898 – – (160,000) (160,000) – – – – (160,000) (9,102) – 26 26 (9,128)
		206,937
		428 46,181 30,052
		76,661
		50,908 1,847 160 52,915
		23,746
		230,683
		391 26 417 230,266

– III-2 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

The carrying amounts of assets and liabilities of the Group as at 31 March 2016 are extracted from the audited consolidated statement of financial position as at 31 March 2016 set out in the 2016 annual results announcement of the Company dated 28 June 2016.
The assets and liabilities of the Target Company are extracted from the statement of financial position of the Target Company as at 31 March 2016 as set out in the Accountant’s Report set forth in Appendix II to this circular.
This adjustment represents the estimated net proceeds from subscription.
Upon the Completion of the Acquisition, the identifiable assets and liabilities of the Target Company will be accounted for in the consolidated financial statements of the Enlarged Group at their fair values as required by the acquisition method in accordance with Hong Kong Financial Reporting Standard (“ HKFRS ”) 3 (Revised) “Business Combinations”.

For the purpose of the unaudited pro forma financial information of the Enlarged Group and for illustrative purpose only, the allocation of the purchase price is determined based on the carrying amount of the Target Company’s identifiable assets and liabilities as at 31 March 2016 and an recognition of intangible assets, of HK$160,000. The effect on deferred tax liabilities arising from the fair value adjustment was HK$26,400.

The fair value of intangible assets, are appraised by an independent valuer with recognised professional qualifications and relevant experience. The fair value of the intangible assets is appraised using the income approach, the Multi-period Excess Earnings Method.

In the opinion of the Directors, the fair value of the assets and liabilities of the Target Company attributable to the Group is subject to changes upon the date of completion as the fair value of the identifiable assets and liabilities will be assessed at the date of completion. Since this Unaudited Pro Forma Financial Information is prepared solely for illustration purpose, the Directors assumed that the provisional fair value of the identifiable assets and liabilities to be the carrying amounts of the assets and liabilities of the Target Company as at 31 March 2016 with adjustments with reference to the fair value of the intangible asset as at 31 March 2016, and accordingly, the possible changes to the fair value of assets and liabilities of the Target Company being attributable to the Group may not be fully reflected in this Unaudited Pro Forma Financial Information.

– III-3 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Pursuant to the Acquisition Agreement, the Consideration for the Acquisition of the Sale Shares which amounted to HK$160,000,000 would be satisfied by the Company to the Vendors at Completion in cash.

Upon Completion, the Target Group would become a wholly-owned subsidiary of the Company and would be accounted for in the consolidated financial statements of the Group.

The difference between the consideration payable and the fair value of the Target Company’s net identifiable assets attributable to shareholders of the Target Group will be accounted for as goodwill. Such goodwill will be calculated as below:

Consideration payable for the Sale Shares: Cash Net assets attributable to shareholders of Target Company upon completion of the Acquisition Fair value adjustment on the Target Company Goodwill arising from acquisition of 100% equity interest in the Target Company	HK$’000 160,000(a) 160,000 9,128 134 150,738(b)

(a) The consideration for the Acquisition under the Acquisition Agreement is HK$160 million in total. The consideration is payable in three instalments as follows:
(i) HK$100 million within 14 days of completion of subscription;
(ii) HK$30 million within 14 days after completion of and an agreement being reached between the Purchaser and the Vendors on the Target Company’s June 2016 Accounts and provided that the profit after tax attributable to shareholders based on such unaudited management accounts is not less than HK$5 million; and
(iii) HK$30 million with 14 days after completion of and agreement being reached between the Purchaser and the Vendors on the Target Company’s December 2016 Accounts and provided that the profit after tax attributable to shareholders is not less than HK$11 million.

For the purpose of this Unaudited Pro Forma Financial Information, the consideration for the Acquisition is assumed to be HK$160 million, as if the terms discussed in (ii) and (iii) above are satisfied.

(b) For the purpose of the unaudited pro forma financial information, the Directors have assessed whether there is any impairment in respect of the goodwill expected to arise from the Acquisition following the principles set out in Hong Kong Accounting Standard 36 “Impairment of Assets”. Based on the Directors’ assessment, the Directors consider that there is no impairment indicator on the goodwill with assumed values set out above.
This adjustment represents the acquisition-related costs, such as professional fees for legal services, transfer taxes and other transaction costs, amount to approximately HK$5,053,000, are accounted as expense in the period. This adjustment will not have any continuing effect on the consolidated statement of cash flows of the Group after Completion.

– III-4 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report from the reporting accountants, Dominic K. F. Chan & Co., Certified Public Accountants, on the unaudited pro forma financial information of the Enlarged Group, for inclusion in this circular.

==> picture [171 x 34] intentionally omitted <==

�� 8 �� 21 � 2105-06 � Rooms 2105-06, 21/F., Office Tower, Langham Place, 8 Argyle Street, Mongkok, Hong Kong.

Tel: 2780 0607 Fax: 2780 0013 www.dominickfchancpa.com.hk

The Board of Directors

Artini China Co. Ltd. Suite No. 10, 8/F. Tower 3, China Hong Kong City China Ferry Terminal 33 Canton Road, Kowloon Hong Kong

Dear Sirs,

We have completed our assurance engagement to report on the compilation of pro forma financial information of Artini China Co. Ltd. (the “ Company ”) and its subsidiaries (collectively the “ Group ”) by the directors of the Company (the “ Directors ”) for illustrative purposes only. The pro forma financial information consists of the pro forma consolidated statement of financial position as at 31 March 2016 and related notes as set out in section headed “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III of the circular issued by the Company dated 11 August 2016 (the “ Circular ”). The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are also described in section headed “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III of the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition (the “ Acquisition ”) of the 100% equity interest in Primeview Technology Limited (the “ Target Company ”) on the Group’s financial position as at 31 March 2016 as if the transaction was completed on 31 March 2016. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s annual results announcement for the year ended 31 March 2016.

– III-5 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Directors’ Responsibility for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Acquisition at 31 March 2016 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for

– III-6 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

a. the pro forma financial information has been properly compiled on the basis stated;
b. such basis is consistent with the accounting policies of the Group; and
c. the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Dominic K. F. Chan & Co.

Certified Public Accountants

Hong Kong

11 August 2016

– III-7 –

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Takeovers Code and the Listing Rules for the purpose of giving information with regard to the Group, the Acquisition, the Subscription and the Whitewash Wavier.

This circular, for which the Directors collectively and individually accept full responsibility, including particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

All the Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than information relating to the Subscriber) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed (other than those expressed by the sole director of the Subscriber) in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to the Subscriber contained in this circular has been supplied by the sole director of the Subscriber. The sole director of the Subscriber accepts full responsibility for the accuracy of the information relating to the Subscriber contained in this circular and confirm, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed by him in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statements in this circular misleading.

2. MARKET PRICE

The table below sets out the closing price of the Shares on the Stock Exchange (i) at the end of each of the calendar months during the Relevant Period; (ii) on 12 April 2016 (being the Last Trading Day); and (iii) on the Latest Practicable Date.

– IV-1 –

APPENDIX IV

GENERAL INFORMATION

	Closing price
Date	per Share
	HK$
30 October 2015	0.154
30 November 2015	0.145
31 December 2015	0.135
29 January 2016	0.091
29 February 2016	0.096
31 March 2016	0.098
12 April 2016 (being the Last Trading Day)	0.098
29 April 2016	0.147
31 May 2016	0.145
30 June 2016	0.135
29 July 2016	0.136
8 August 2016 (being the Latest Practicable Date)	0.140

The lowest and highest closing market prices recorded on the Stock Exchange during the Relevant Period were HK$0.090 on 11 February 2016 and HK$0.178 on 23 October 2015, respectively.

3. SHARE CAPITAL, SHARE OPTIONS AND CONVERTIBLE SECURITIES

(a) Share capital

Set out below are the authorized and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the completion of the Subscription assuming no Outstanding Options have been exercised:

(i) As at the Latest Practicable Date

Authorised 30,000,000,000 Shares Issued and fully paid or credited as fully paid 2,569,840,644 Shares as at the Latest Practicable Date	HK$ 300,000,000.00

	HK$ 25,698,406.44

– IV-2 –

APPENDIX IV

GENERAL INFORMATION

(ii) Immediately after completion of the Subscription assuming no Outstanding Options have been exercised

Authorised 30,000,000,000 Shares Issued and fully paid or credited as fully paid 2,569,840,644 Shares as at the Latest Practicable Date 2,440,000,000 Shares allotment and issue of pursuant to the Subscription 5,009,840,644	HK$ 300,000,000.00

	HK$ 25,698,406.44 24,400,000.00
	50,098,406.44

All the issued Shares rank pari passu with each other in all respects including the rights in respect of capital, dividend and voting. The Shares are listed on and traded on the Main Board of the Stock Exchange. No Shares are listed on or dealt in, nor is any listing of or permission to deal in the Shares being, or proposed to be, sought on any other stock exchange.

No share had been issued since 31 March 2016 (being the date on which the latest audited financial statements of the Company were made up) and up to the Latest Practicable Date.

– IV-3 –

APPENDIX IV

GENERAL INFORMATION

(b) Share options

As the Latest Practicable Date, the Company had 378,042,600 outstanding share options granted under the Share Option Scheme entitling holders to subscribe a total of 378,042,600 Shares. Details of which are as follows:

Categories of
participants
Date of grant
Validity period
Directors
Tse Hoi Chau
28.03.2014
28.03.2014- 27.03.2019
09.07.2015
09.07.2015- 08.07.2020
Lin Shao Hua
28.03.2014
28.03.2014- 27.03.2019
09.07.2015
09.07.2015- 08.07.2020
Employees
In aggregate
28.03.2014
28.03.2014- 27.03.2019
09.07.2015
09.07.2015- 08.07.2020
27.11.2015
27.11.2015-26.11.2020
Other participants
In aggregate
28.03.2014
28.03.2014- 27.03.2019
09.07.2015
09.07.2015- 08.07.2020
27.11.2015
27.11.2015- 26.11.2020

Outstanding
as at the
Latest
Practicable
Date
Exercise price
of options
(HK$)
6,671,400
0.4709
20,000,000
0.1470
6,671,400
0.4709
20,000,000
0.1470
6,671,400
0.4709
1,600,000
0.1470
32,000,000
0.1488
40,028,400
0.4709
20,200,000
0.1470
224,200,000
0.1488
378,042,600

(c) Convertible securities

As at the Latest Practicable Date, the Company have no warrants or convertible securities in issue.

4. DISCLOSURE OF INTEREST

(a) As at the Latest Practicable Date, the interests and short positions of each Director and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have under such provisions of the SFO); (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to

– IV-4 –

APPENDIX IV

GENERAL INFORMATION

the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange, were as follows:

			Number of
			shares
			subject to	Approximate
			Outstanding	percentage
		Number of	Options	of
Name	Capacity	Shares held	granted	shareholding
		(Note 1)
Mr. Tse	Interest in controlled	1,085,267,988(L)	–	42.23%
	corporation	(Note 2)
	Beneficial owner	14,824,000(L)	26,671,400	0.58%
			(Note 3)
Mr. Lin Shao	Beneficial owner	–	26,671,400	–
Hua			(Note 3)

Notes:

The letter “L” represents the Director’s interests in the shares and underlying shares of the Company.
As at the Latest Practicable Date, these Shares are held by Walifax Investments Limited, which is wholly and beneficially owned by Mr. Tse.
These options were granted by the Company on 28 March 2014 and 9 July 2015 under the Share Option Scheme.

Save as disclosed above, so far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, none of Directors or chief executive of the Company had or was deemed to have any interest or short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have under such provisions of the SFO); (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange, nor did they have any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

– IV-5 –

APPENDIX IV

GENERAL INFORMATION

5. SUBSTANTIAL SHAREHOLDER’S INTERESTS

As at the Latest Practicable Date, the following persons and entities, other than a Director or chief executive of the Company, had an interest or a short position in the Shares and underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under section 336 of the SFO:

	Number of		Approximate
	ordinary		percentage
Name of Shareholder	Shares	Capacity	of interest
	(Note 1)
The Subscriber (Note 2)	1,085,267,988(L)	Beneficial	42.23
		owner

Notes:

The letter “L” represents the entity’s interests in the Shares.
Walifax Investments Limited is wholly and beneficially owned by Mr. Tse, its sole director who is also an executive Director, the chairman and the chief executive officer of the Company.

Save as disclosed above, so far as is known to the Directors, as at the Latest Practicable Date, no person or entity other than a Director or chief executive of the Company, had an interest or a short position in the Shares and underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were as recorded in the register required to be kept under section 336 of the SFO, nor did they have any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

6. SHAREHOLDINGS OF AND DEALINGS IN THE SECURITIES OF THE COMPANY AND THE SUBSCRIBER AND PERSONS ACTING IN CONCERT WITH IT

As at the Latest Practicable Date:

(a) the Company did not have any interest in, hold, control or have direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in any body corporate member of the Concert Group during the Relevant Period and had not dealt for value in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of any body corporate member of the Concert Group during the Relevant Period;

– IV-6 –

APPENDIX IV

GENERAL INFORMATION

(b) except as disclosed under the section headed “2. Information on the Subscriber and Mr. Tse” in the “Letter from the Board”, none of the Directors or chief executive of the Company held, controlled or had direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in any body corporate member of the Concert Group and none of the Directors or chief executive of the Company had dealt for value in any such securities of any body corporate member of the Concert Group during the Relevant Period;
(c) no Shares, convertible securities, warrants, options, derivatives in respect of securities in the Company and any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company were owned or controlled by a subsidiary of the Company or by a pension fund of any member of the Group or by an advisor to the Company (as specified in class (2) of the definition of “associate” under the Takeovers Code but excluding exempt principal traders), and none of them has dealt for value in any such securities of the Company during the Relevant Period;
(d) save for the Subscription Agreement, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of “associate” under the Takeovers Code and save for the Subscription, and none of them had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;
(e) no Shares, warrants, options, derivatives in respect of securities in the Company and any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company was managed on a discretionary basis by any fund manager (other than exempt fund managers as defined in the Takeovers Code) connected with the Company and none of them had dealt for value in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;

– IV-7 –

APPENDIX IV

GENERAL INFORMATION

(f) there was no benefit to be given to any Directors as compensation for loss of office or otherwise in connection with the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver;
(g) none of the Directors has entered into any agreement or arrangement with any other persons which is conditional on or dependent upon the outcome of the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver or otherwise in connection with the same;
(h) save for the Subscription Agreement, there was no material contract entered into by any of the members of the Concert Group in which any Director had a material personal interest;
(i) save for the respective shareholding in the Company of Mr. Tse (by himself and via the Subscriber) and Mr. Liu Shao Hua and their respective holding of share options as referred to in this appendix above, none of the Directors and their respective associates owned or controlled any Shares, convertible securities, warrants, options, derivative, in respect of securities in the Company and any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company. Both Mr. Tse (and the Subscriber) and Mr. Lin Shao Hua will abstain from voting on the resolutions with respect to the Subscription and the Whitewash Waiver, and save for the Subscription, none of them has dealt for value in any such securities of the Company during the Relevant Period; and
(j) neither the Company nor any of the Directors has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

As at the Latest Practicable Date, save for the Subscription and as disclosed under the paragraph head “V. EFFECT OF THE SUBSCRIPTION” in the Letter from the Board, and the paragraphs headed “DISCLOSURE OF INTEREST” and “SUBSTANTIAL SHAREHOLDER’S INTERESTS” in this appendix:

(a) no Director held, controlled or had direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company;

– IV-8 –

APPENDIX IV

GENERAL INFORMATION

(b) no member of the Concert Group and no directors of the Subscriber held, controlled or had direction over any Outstanding Options, warrants, or any securities that are convertible into Shares or any derivatives in respect of securities in the Company or any other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company and none of them has dealt for value in any such securities of the Company during the Relevant Period;
(c) no member of the Concert Group has received any irrevocable commitment to vote for or against the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver at the SGM;
(d) save for the Subscription Agreement, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person and any member of the Concert Group and save for the Subscription, no person who had any arrangements of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any member of the Concert Group had dealt for value in the Shares or any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period;
(e) no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company had been borrowed or lent by any member of the Concert Group and none of them had dealt for value in the same during the Relevant Period;
(f) save for Mr. Tse being the sole director and beneficial owner of the Subscriber, no agreement, arrangement or understanding (including any compensation arrangement) exists between (i) any of the members of the Concert Group; and (ii) any Director, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Acquisition Agreement and the transactions contemplated thereunder, the Subscription Agreement and the transactions contemplated thereunder and/or the Whitewash Waiver; and
(g) none of the Directors or chief executive of the Company held, controlled or had any direction over any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company, and none of them had dealt for value in any such securities during the Relevant Period;

– IV-9 –

APPENDIX IV

GENERAL INFORMATION

As at the Latest Practicable Date, no member of the Concert Group had any intention to transfer, charge or pledge any of the Shares to be acquired by the Subscriber pursuant to the Subscription to any other persons, nor had any member of the Concert Group entered into any such agreement, arrangement, undertaking or understanding.

7. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, (a) none of the Directors had entered or proposed to enter into a service contract with any member of the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation) and (b) none of the Directors had entered into a service contract with the Company or any of its subsidiaries or associated companies (as defined in the Takeovers Code), which: (i) (including both continuous and fixed term contracts) have been entered into or amended within 6 months before the date of the Announcement; (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.

8. MATERIAL CONTRACTS

The following contracts, not being contracts into the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries, have been entered into by a member of the Group after the date falling two years before the date of the Announcement up to and including the Latest Practicable Date that are or may be material:

(a) the Acquisition Agreement;
(b) the Subscription Agreement;
(c) the sale and purchase agreement dated 1 March 2016 between Shenzhen Artini as purchaser and Henan Dazhen as vendor in relation to the acquisition by Shenzhen Artini from Henan Dazhen the property located at Room 563, 5/F., Dehua Building, Dehua Street West and Yuanling Street North, Erqi District, Zhengzhou City, PRC, which is currently being constructed, for a consideration of RMB4,000,000 (equivalent to approximately HK$4,760,000);
(d) the sale and purchase agreement dated 1 March 2016 between Shenzhen Artini as purchaser and Henan Dazhen as vendor in relation to the acquisition by Shenzhen Artini from Henan Dazhen the property located at Room 564, 5/F., Dehua Building, Dehua Street West and Yuanling Street North, Erqi District, Zhengzhou City, PRC, which is currently being constructed, for a consideration of RMB5,000,000 (equivalent to approximately HK$5,950,000);

– IV-10 –

APPENDIX IV

GENERAL INFORMATION

(e) the sale and purchase agreement dated 1 March 2016 between Shenzhen Artini as purchaser and Henan Dazhen as vendor in relation to the acquisition by Shenzhen Artini from Henan Dazhen the property located at Room 565, 5/F., Dehua Building, Dehua Street West and Yuanling Street North, Erqi District, Zhengzhou City, PRC, which is currently being constructed, for a consideration of RMB5,000,000 (equivalent to approximately HK$5,950,000);
(f) the sale and purchase agreement dated 1 March 2016 between Shenzhen Artini as purchaser and Henan Dazhen as vendor in relation to the acquisition by Shenzhen Artini from Henan Dazhen the property located at RRoom 566, 5/F., Dehua Building, Dehua Street West and Yuanling Street North, Erqi District, Zhengzhou City, PRC, which is currently being constructed, for a consideration of RMB6,000,000 (equivalent to approximately HK$7,140,000);
(g) the placing agreement dated 27 August 2015 between the Company and Quam Securities Company Limited for the placing of a maximum of 95,200,000 new Shares at a price of HK$0.105 per Share;
(h) the provisional agreement for sale and purchase dated 14 October 2014 and entered into among Gentleman Investments Limited, a wholly-owned subsidiary of the Company as vendor, and two purchasers, Mr. Dung Kwok Yee and Mr. Fung Chi Wing, in relation to the disposal of the Unit B1 on 1st Floor, Kaiser Estate, No. 41 Man Yue Street, Kowloon, Hong Kong at a consideration of HK$20,000,000;
(i) the provisional agreement for sale and purchase dated 14 October 2014 and entered into between Gain Trade Enterprise Limited, a wholly-owned subsidiary of the Company, as vendor and Ms. Lee Yuk Hing as purchaser, in relation to the disposal of the Unit B on 2nd Floor, Kaiser Estate, No. 41 Man Yue Street, Kowloon, Hong Kong at a consideration of HK$20,000,000;
(j) the provisional agreement for sale and purchase dated 14 October 2014 and entered into among Artist Empire Jewellery Mfy. Limited, a wholly-owned subsidiary of the Company, as vendor, and two purchasers, Mr. Dung Kwok Yee and Mr. Fung Chi Wing, in relation to the disposal of the Car Parking Space No. 26 on Ground Floor, Kaiser Estate, Nos. 37-45 Man Yue Street, Kowloon, Hong Kong at a consideration of HK$4,000,000;

– IV-11 –

APPENDIX IV

GENERAL INFORMATION

(k) a sale and purchase agreement dated 9 October 2014 entered into between Artist Star International Development Limited, a wholly-owned subsidiary of the Company and Celestial Elite Investment Limited in relation to the disposal of the entire issued share capital of TCK Company Limited by Artist Star International Development Limited for a consideration of HK$16,257,000; and
(l) an underwriting agreement dated 19 September 2014 entered into among Mr. Tse, the Subscriber, Guotai Junan Securities (Hong Kong) Limited and the Company in relation to the underwriting arrangement in respect of the open offer of 1,855,980,483 offer shares at the subscription price of HK$0.10 per share on the basis of three offer share for every one existing share held on the record date at an underwriting commission of approximately HK$1,031,000, being 1.0% of the aggregate Subscription price of offer shares underwritten.

9. MATERIAL CHANGE

The Directors confirm that there are no material changes in the financial or trading position or outlook of the Group since 31 March 2016 (being the date to which the latest published audited consolidated financial statements of the Group were made up) up to and including the Latest Practicable Date.

10. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors and their respective close associates was interested in any business which competes or may compete, either directly or indirectly, with the business of the Group or have or may have any other conflicts of interest with the Group as required to be disclosed pursuant to the Listing Rules.

11. DIRECTORS’ INTEREST IN THE GROUPS’ ASSETS OR CONTRACTS OR ARRANGEMENT SIGNIFICANT TO THE GROUP

As at the Latest Practicable Date,

(a) save for the Subscription Agreement, none of the Directors is materially interested in any subsisting contract or arrangement, which was significant in relation to the business of the Enlarged Group; and
(b) none of the Directors had any direct or indirect interest in any assets which had been, since 31 March 2016, being the date to which the latest audited consolidated financial statements of the Company were made up, acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Enlarged Group.

– IV-12 –

APPENDIX IV

GENERAL INFORMATION

12. MATERIAL LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Enlarged Group.

13. EXPERTS’ QUALIFICATION AND CONSENTS

(a) Set out below are the qualifications of the professional advisers who have given opinion or advice contained in this circular:

Name Qualification

TC Capital a corporation licensed to carry out Type 1 (dealing in International securities) and Type 6 (advising on corporate finance) Limited regulated activities under the SFO
Dominic K.F. Chan & Co.
Certified Public Accountants
(b) As at the Latest Practicable Date, each the experts listed in paragraph 13(a) above was not legally or beneficially interested in the shareholding, direct or indirect, in any member of the Enlarged Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group, nor did they have any direct or indirect interest in any assets which had been, since 31 March 2016, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Enlarged Group, or were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.
(c) As at the Latest Practicable Date, each of the above experts listed in paragraph 13(a) above has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter, advice and/or report, and the references to its name in the form and context in which they appear.

14. MISCELLANEOUS

(a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda.

– IV-13 –

APPENDIX IV

GENERAL INFORMATION

(b) The head office and principal place of business of the Company in Hong Kong is at Suite No. 10, 8/F. Tower 3, China Hong Kong City, China Ferry Terminal, 33 Canton Road, Kowloon, Hong Kong.
(c) The company secretary of the Company is Mr. Leung Ka Shing. Mr. Leung is a member of Hong Kong Institute of Certified Public Accountants. Mr. Leung is experienced in accounting, auditing and corporate governance related work.
(d) The registered address and correspondence address of the Subscriber are at Palm Grove House, P.O. Box 438, Road Town, Tortola, British Virgin Islands, and Suites No. 10, 8/F., Tower 3, China Hong Kong City, China Ferry Terminal, 33 Canton Road, Kowloon, Hong Kong, respectively. The Subscriber is wholly and beneficially owned by Mr. Tse, its sole director.
(e) The principal share registrar and transfer office of the Company is MUFG Fund Services (Bermuda) Limited at The Belvedere Building, 69 Pitts Bay Road, Pembroke HM08, Bermuda.
(f) The Hong Kong branch share registrar and transfer office of the Company is Union Registrars Limited, at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong.
(g) The Independent Financial Adviser is TC Capital and its registered office is situated in suite 1903-4, 19/F., Tower 6, The Gateway, Harbour City, 9 Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.
(h) The financial adviser of the Company is China Investment Securities International Capital Limited and its business office is situated at 63/F., Bank of China Tower, 1 Garden Road, Central, Hong Kong.
(i) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

15. DOCUMENTS AVAILABLE FOR INSPECTION OF THE ENLARGED GROUP

Copies of the following documents will be available for inspection (i) at the head office and principal place of business of the Company in Hong Kong, Suite No. 10, 8/F. Tower 3, China Hong Kong City, China Ferry Terminal, 33 Canton Road, Kowloon, Hong Kong during normal business hours between 9:00 a.m. to 5:00 p.m. on any weekdays, except public holidays, (ii) on the website of the Company at www.artini-china.com, and (iii) on the website of the Securities and Futures Commission at www.sfc.hk from the date of this circular up to and including the date of the SGM:

– IV-14 –

APPENDIX IV

GENERAL INFORMATION

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for the financial years ended 31 March 2014, 2015 and 2016;
(c) the letter from the Board, the text of which is set out on pages 8 to 39 of this circular;
(d) the letter from the Independent Board Committee, the text of which is set out on pages 40 to 41 of this circular;
(e) the letter from TC Capital, the text of which is set out pages 42 to 89 of this circular;
(f) the accountants’ report on the Target Company, the text of which is set out on pages II-3 to II-21 in Appendix II of this circular;
(g) the report regarding the unaudited pro forma financial information of the Enlarged Group, the text of which is set out on pages III-1 to III-4 in Appendix III to this circular;
(h) the written consents referred to in the paragraph head “EXPERTS AND QUALIFICATIONS AND CONSENTS” in this appendix;
(i) the material contracts referred to in the paragraph headed “MATERIAL CONTRACTS” in this appendix;
(j) this circular;
(k) the circular of the Company dated 25 August 2015; and
(l) the memorandum and articles of association of the Subscriber.

– IV-15 –

NOTICE OF SGM

ARTINI CHINA CO. LTD. 雅天妮中國有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 789)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ Meeting ”) of Artini China Co. Ltd. (the “ Company ”) will be held at 9/F., Gloucester Tower, The Landmark, 15 Queen’s Road, Central, Hong Kong on 26 August 2016 (Friday) at 9:00 a.m. for the purpose of considering and, if though fit, passing, with or without modification, the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

“ THAT
(i) the conditional sale and purchase agreement (the “ Acquisition Agreement ”) entered into between Artini Sales Company Limited (the “ Purchaser ”) and Stand Charm Limited and Dragon Max Enterprises Limited (together, the “ Vendors ”) on 13 April 2016 pursuant to which the Purchaser has conditionally agreed to purchase and the Vendors have conditionally agreed to sell all the issued shares in Primeview Technology Limited (a copy of which has been tabled at the Meeting marked “A” and initialed by the chairman of the Meeting for the purpose of identification) and all the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(ii) the conditional subscription agreement (the “ Subscription Agreement ”) entered into between Walifax Investments Limited (the “ Subscriber ”) and the Company on 13 April 2016 pursuant to which the Subscriber has conditionally agreed to subscribe for and the Company has conditionally agreed to allot and issue a total of 2,440,000,000 ordinary shares of HK$0.01 each (the “ Subscription Shares ”) at the price of HK$0.074 per Subscription Share (a copy of which has been tabled at the Meeting marked “B” and initialed by the chairman hereof for the purpose of identification) and all the transactions contemplated thereunder (including but not limited to the allotment and issue of the Subscription Shares) be and are hereby approved, confirmed and ratified; and

– SGM-1 –

NOTICE OF SGM

(iii) any one director of the Company be and is hereby authorized to do all such acts and things and execute such documents and take all steps which, in his/her opinion deemed necessary, desirable or expedient to implement and/or give effect to the Acquisition Agreement and the transactions contemplated thereunder and/or the Subscription Agreement and the transactions contemplated thereunder (including but not limited to the allotment and issue of 2,440,000,000 new Shares under the Subscription Agreement) for and on behalf of the Company.”
“ THAT , subject to and conditional upon the passing of the resolution set out as Resolution No. 1 in the notice convening the Meeting, the waiver (the “ Whitewash Waiver ”) granted or to be granted by the executive director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong or any delegate thereof to the Subscriber pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers in respect of the obligation on the part of the Subscriber and the parties acting in concert with it to make a general offer for all the issued shares and other securities of the Company not already owned or agreed to be acquired by the Subscriber and the parties acting in concert with it be and is hereby approved and any one director of the Company be and is hereby authorized to do all such things and take all such action as he/she may consider to be necessary or desirable to implement or give effect any of the matters relating to or incidental to the Whitewash Waiver.”

By Order of the Board Artini China Co. Ltd Tse Hoi Chau Chairman

Hong Kong, 11 August 2016

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head Office and Principal Place of Business in Hong Kong: Suite No. 10, 8/F. Tower 3, China Hong Kong City China Ferry Terminal 33 Canton Road, Kowloon Hong Kong

– SGM-2 –

NOTICE OF SGM

Notes:

A form of proxy for the meeting is enclosed.
Any member of the Company entitled to attend and vote at the meeting shall be entitled to appoint another person as his/her/its proxy to attend and vote instead of him/her/it. A member who is the holder of two or more shares may appoint more than one proxy to represent him/her/it and vote on his/her/its behalf at a general meeting of the Company. A proxy need not be a member. In addition, a proxy representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he/she/it represents as such member could exercise.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly authorised to sign the same.
The instrument appointing a proxy and (if required by the board of directors of the Company) the power of attorney or other authority (if any), under which it is signed or a certified copy of such power or authority shall be delivered to the Company’s branch share registrar in Hong Kong, Union Registrars Limited, located at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong not less than 48 hours before the time appointed for holding the meeting at which the person named in the instrument proposes to vote.
Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting convened.
Where there are joint holders of any Share, any one of such joint holder may vote either in person or by proxy in respect of such Share as if he/she/it was solely entitled thereto; but if more than one of such joint holders be present at any meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members in respect of the joint holding.

As at the date hereof, the executive Directors are Mr. Tse Hoi Chau (Chairman) and Mr. Lin Shao Hua; and the Independent non-executive Directors are Mr. Lau Fai Lawrence, Mr. Lau Yiu Kit and Mr. Zeng Zhaohui.

– SGM-3 –

AI assistant

Artini Holdings Limited — Proxy Solicitation & Information Statement 2016

49467_rns_2016-08-11_d703c1b8-4cc6-4a65-a49a-823f805b7599.pdf

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

ARTINI CHINA CO. LTD. 雅 天 妮 中國有限公司

AND

(4) NOTICE OF SPECIAL GENERAL MEETING

I. INTRODUCTION

LETTER FROM THE BOARD

II. ACQUISITION

1. Principal Terms of the Acquisition Agreement

Consideration of the Acquisition Agreement

2. Information of the Target Company

3. Management discussion and analysis of the Target Company

Business model and segment information

Revenue recognition policy

Financial review, business review, prospects

Cost Structure

Capital structure, liquidity, financial resources and gearing ratio

Capital commitment

Treasury policies

Exchange rate exposure

Contingent liabilities

Employment and remuneration policy

Pledged of assets

4. Financial effects of the Acquisition

Earnings

Assets and liabilities

Transaction costs for the Acquisition

5. Financial and trading prospects of the Enlarged Group

6. Implication under the Listing Rules

III. SUBSCRIPTION

1. Principal Terms of the Subscription Agreement

The Subscription Shares

Subscription Price:

LETTER FROM THE BOARD

Rankings:

Specific mandate:

2. Information on the Subscriber and Mr. Tse

3. Intention of Subscriber

4. Listing Rules Implications

5. Takeovers Code Implications

LETTER FROM THE BOARD

6. Information required under the Takeovers Code

7. Fund raising activities in the past twelve months

IV. REASONS FOR AND THE BENEFITS OF THE ACQUISITION AND THE SUBSCRIPTION

Reasons for the Acquisition

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Reasons for the Subscription

V. EFFECT OF THE SUBSCRIPTION

VI. GENERAL

VII. SPECIAL GENERAL MEETING

VIII. RECOMMENDATION

IX. FURTHER INFORMATION

ARTINI CHINA CO. LTD. 雅 天 妮 中國有限公司

(1) MAJOR TRANSACTION RELATING TO THE

(4) NOTICE OF SPECIAL GENERAL MEETING

Lau Fai, Lawrence

Lau Yiu Kit

(1) MAJOR TRANSACTION RELATING TO THE ACQUISITION OF ENTIRE INTEREST IN THE TARGET COMPANY; (2) CONNECTED TRANSACTION RELATING TO THE SUBSCRIPTION FOR NEW SHARES BY A CONTROLLING SHAREHOLDER; AND (3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

BASIS OF OUR OPINION

THE ACQUISITION

I. Background to and reasons for entering into the Acquisition Agreement

b. Information on the Vendors

c. Information on the Target Company

Financial information and business model

Industry overview

Overview of the online retailing in Asian markets

2. Reasons and benefits for entering into the Acquisition Agreement

II. Principal terms of the Acquisition Agreement

III. Evaluation of the consideration for the Acquisition

1. Comparable companies analysis

2. Comparable transactions analysis

Notes:

Artini Holdings Limited Proxy Solicitation & Information Statement 2016

ARTINI CHINA CO. LTD. 雅天妮中國有限公司

ARTINI CHINA CO. LTD. 雅天妮中國有限公司