Esprit Holdings Limited — Proxy Solicitation & Information Statement 2021

Jan 22, 2021

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 your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Nimble Holdings Company Limited, you should at once hand this circular to the purchaser or the transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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.

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NIMBLE HOLDINGS COMPANY LIMITED ��������

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability) (Stock Code: 186)

VERY SUBSTANTIAL ACQUISITIONS AND

MAJOR TRANSACTION

LAND ACQUISITIONS

Unless the context otherwise requires, all capitalised terms used in this circular have the meanings set out in the section headed ‘‘Definitions’’ of this circular.

A letter from the Board is set out on pages 7 to 25 of this circular.

Hong Kong, 25 January 2021

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		7
APPENDIX I	– FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II	– MANAGEMENT DISCUSSION AND
	ANALYSIS OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1

– i –

DEFINITIONS

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

• ‘‘Announcements’’

the announcement of the Company dated 17 November 2020 in relation to the Land Acquisition (Nanning) and the Land Acquisition (Shantou), dated 27 November 2020 in relation to the Land Acquisition (Yongzhou), and dated 11 December 2020 in relation to the deemed disposal of 49% equity interest in the Project Company (Nanning) for the joint venture arrangement in respect of the Land Acquisition (Nanning)

• ‘‘associate’’

• has the same meaning ascribed to it under the Listing Rules

• ‘‘Bidder’’

Guangzhou Ruihua Property Development Company Limited*（ 廣州市瑞華物業發展有限公司 ）, a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

• ‘‘Board’’ the Board of Directors

• ‘‘Capital Increase’’

• the capital increase in the Project Company (Nanning), subject to and in accordance with the Cooperation Agreement

• ‘‘Chongqing Huayu’’

• Chongqing Huayu Group Co Ltd*（重慶華宇集團有限公 司）, a company incorporated in the PRC with limited liability

• ‘‘close associate’’

• has the same meaning ascribed to it under the Listing Rules

• ‘‘Company’’

• Nimble Holdings Company Limited, a company incorporated in the Cayman Islands and continued in Bermuda with limited liability whose Shares are listed and traded on the Main Board of the Stock Exchange (Stock Code: 186)

• ‘‘connected person’’

has the same meaning ascribed to it under the Listing Rules

– 1 –

DEFINITIONS

• ‘‘controlling shareholder’’

has the same meaning ascribed to it under the Listing Rules

• ‘‘Cooperation Agreement’’ the cooperation agreement dated 11 December 2020 entered into among the Bidder, Guangxi Huayu and the Project Company (Nanning) in relation to the Capital Increase in the Project Company (Nanning) and the joint venture development of the Land (Nanning)

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Guangxi Huayu’’

• Guangxi Huayu Ye Rui Enterprise Management Company Limited*（廣西華宇業瑞企業管理有限公司）, a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of Chongqing Huayu

• ‘‘GZ Minjie’’

Guangzhou Minjie Real Estate Development Co., Ltd.*（廣 州 市 敏 捷 房 地 產 開 發 有 限 公 司 ）, a limited liability company established in the PRC, which owns 49% of the equity interest in Ningxiang Minjun

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Third Party(ies)’’

• person(s) or company(ies) which is/are third party(ies) independent of the Company and its connected persons

• ‘‘Land (Nanning)’’

• a parcel of land situated at the north side of Wu Xiang Da Road at Liangqing District, Nanning City, Guangxi Province, the PRC（中國廣西省南寧市良慶區五象大道北 側）, with a site area of approximately 40,941.25 sq. m., for residential use

• ‘‘Land (Shantou)’’

• a parcel of land situated at Huang Cuo Wei Sub-district, Zhu Gang New Town, Shantou City, Guangdong Province, the PRC（中國廣東省汕頭市珠港新城黃厝圍片區）, with a site area of approximately 69,660.6 sq. m., for residential use

– 2 –

DEFINITIONS

• ‘‘Land (Yongzhou)’’

• ‘‘Land Acquisition (Nanning)’’

• ‘‘Land Acquisition (Shantou)’’

• ‘‘Land Acquisition (Yongzhou)’’

• ‘‘Land Acquisitions’’

• ‘‘Land Use Rights’’

• ‘‘Land Use Rights Grant Contract (Nanning)’’

• ‘‘Land Use Rights Grant Contract (Shantou)’’

• ‘‘Land Use Rights Grant Contract (Yongzhou)’’

• a parcel of land situated at the north-west juncture of Li Zi Yuan Road and Ma Lu Jie Road at Leng Shui Tan District, Yongzhou City, Hunan Province, the PRC（中國湖南省永 州市冷水灘區梨子園路與馬路街路交匯處西北角）, with a site area of approximately 61,135.98 sq. m., for residential use

• the acquisition of the Land Use Rights of the Land (Nanning) through winning the listing-for-sale by the Bidder

• the acquisition of the Land Use Rights of the Land (Shantou) through winning the listing-for-sale by the Bidder

• the acquisition of the Land Use Rights of the Land (Yongzhou) through winning the listing-for-sale by the Bidder

• the Land Acquisition (Nanning), the Land Acquisition (Shantou) and the Land Acquisition (Yongzhou)

• state-owned construction land use rights（國有建設用地使 用權）in respect of the Land (Nanning) or the Land (Shantou) or the Land (Yongzhou), as the case may be

• the land use rights grant contract（國有建設用地使用權出 讓合同）entered into on 23 November 2020 between the Bidder and Nanning City Natural Resources Bureau in relation to the Land Acquisition (Nanning)

• the land use rights grant contract（國有建設用地使用權出 讓合同）dated 27 November 2020 entered into between the Project Company (Shantou) and Shantou City Natural Resources Bureau in relation to the Land Acquisition (Shantou)

• the land use rights grant contract（國有建設用地使用權出 讓合同）dated 22 December 2020 entered into between the Project Company (Yongzhou) and Yongzhou City Natural Resources and Planning Bureau in relation to the Land Acquisition (Yongzhou)

– 3 –

DEFINITIONS

• ‘‘Latest Practicable Date’’

• ‘‘Listing Rules’’

• ‘‘Mr. Deng’’

• ‘‘Mr. Tan’’

• ‘‘Nanning City Natural Resources Bureau’’

• ‘‘Ningxiang Minjun’’

• ‘‘Ningxiang Minjun Capital Increase Agreement’’

• ‘‘percentage ratio(s)’’

• ‘‘PRC’’

• ‘‘PRC Governmental Body’’

• ‘‘Project Company (Nanning)’’

• 20 January 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• the Rules Governing the Listing of Securities on the Stock Exchange

• Mr. Deng Xiangping, an executive Director

• Mr. Tan Bingzhao, an executive Director, the chairman of the Board and a controlling shareholder of the Company

• Nanning City Natural Resources Bureau*（南寧市自然資源 局）, a bureau established by the local government of Nanning City and a PRC Governmental Body within the meaning of Rule 19A.04 of the Listing Rules

• Changsha Ningxiang Minjun Real Estate Development Co., Ltd.*（長沙市寧鄉敏駿房地產開發有限公司）, a company established in the PRC with limited liability which is an indirect 51% owned subsidiary of the Company

• the capital increase agreement dated 1 August 2019 entered into among the Bidder, Ningxiang Minjun and GZ Minjie in relation to the injection of RMB10,408,200 in cash by the Bidder into the capital of Ningxiang Minjun

has the meaning as ascribed to this term under the Listing Rules

• the People’s Republic of China, which for the purpose of this circular excludes Hong Kong and the Macau Special Administrative Region of the PRC and Taiwan

has the meaning as ascribed to this term under Rule 19A.04 of the Listing Rules

Nanning Ruihua Real Estate Development Co., Ltd.*（南寧 市瑞華房地產開發有限公司）, a company incorporated in the PRC with limited liability established for the Land Acquisition (Nanning) and holding the Land Use Rights of the Land (Nanning), being a wholly-owned subsidiary of the Bidder immediately prior to completion of the Capital Increase

– 4 –

DEFINITIONS

• ‘‘Project Company (Shantou)’’

• ‘‘Project Company (Yongzhou)’’

• ‘‘Qualified Issuer’’

• ‘‘Qualified Property Acquisition’’

• ‘‘RMB’’

• ‘‘SFO’’

• ‘‘Shantou City Land Resources Online Trading System’’

• ‘‘Shantou City Natural Resources Bureau’’

• ‘‘Share(s)’’

• ‘‘Shareholder(s)’’

• ‘‘sq. m.’’

Shantou Ruijing Real Estate Development Co., Ltd. *（汕 頭市瑞景房地產開發有限公司）, a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Bidder established for the Land Acquisition (Shantou) and holding the Land Use Rights of the Land (Shantou)

Yongzhou Ruijing Real Estate Development Co., Ltd.*（永 州市瑞璟房地產開發有限公司）, a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of the Bidder established for the Land Acquisition (Yongzhou) and holding the Land Use Rights of the Land (Yongzhou)

• has the meaning as ascribed to this term under Rule 14.04(10B) of the Listing Rules

• has the meaning as ascribed to this term under Rule 14.04(10C) of the Listing Rules

Renminbi, the lawful currency of the PRC

• the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

Shantou City land resources online trading system（汕頭市 國土資源網上交易系統 ）, the online trading system designated by Shantou City Natural Resources Bureau for the listing-of-sale of the Land Use Rights of the Land (Shantou) which can be assessed at the following link: https://www.shantou.gov.cn/ggzyjy

• Shantou City Natural Resources Bureau*（汕頭市自然資源 局）, a bureau established by the local government of Shantou City and a PRC Governmental Body within the meaning of Rule 19A.04 of the Listing Rules

ordinary share(s) of HK$0.01 in the share capital of the Company

• holder of the Shares

square metre(s)

– 5 –

DEFINITIONS

• ‘‘Stock Exchange’’

• The Stock Exchange of Hong Kong Limited

‘‘USA’’

• the United States of America

• ‘‘Yongzhou City Land Resources Online Trading System’’

• Yongzhou City land resources online trading system（永州 市國土資源網上交易系統）, the online trading system designated by Yongzhou City Natural Resources and Planning Bureau for the listing-of-sale of the Land Use Rights of the Land (Yongzhou) which can be assessed at the following link: http://www.hngtjy.org/trade-engine/ trade/resources?DQ=431100

• ‘‘Yongzhou City Natural Resources and Planning Bureau’’

• Yongzhou City Natural Resources and Planning Bureau*

• （永州市自然資源和規劃局）, a bureau established by the local government of Yongzhou City and a PRC Governmental Body within the meaning of Rule 19A.04 of the Listing Rules

• ‘‘%’’ per cent.

Unless otherwise specified in this circular and for illustrative purpose only, amounts in RMB have been translated into HK$ at the rate of RMB1.00 = HK$1.16 for the Land Acquisition (Nanning) and the Land Acquisition (Shantou) or RMB1.00 = HK$1.166 for the Land Acquisition (Yongzhou) or RMB1.00 = HK$1.1715 for the transactions contemplated under the Cooperation Agreement. No representation is made that any amounts in RMB have been or could be converted at the above rates or at any other rates.

• For identification purpose only. The English names are only translations of the official Chinese names, and in case of any inconsistency, the Chinese names shall prevail.

– 6 –

LETTER FROM THE BOARD

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NIMBLE HOLDINGS COMPANY LIMITED ��������

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock Code: 186)

Executive Directors: Registered office: Mr. Tan Bingzhao (Chairman) Wessex House, 5th Floor Mr. Deng Xiangping 45 Reid Street Hamilton HM 12, Bermuda

Independent non-executive Directors:

Dr. Lin Jinying Principal place of business in Hong Kong: Dr. Lu Zhenghua Flat C01, 32/F, TML Tower Dr. Ye Hengqing 3 Hoi Shing Road Tsuen Wan New Territories Hong Kong

25 January 2021

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITIONS AND

MAJOR TRANSACTION

LAND ACQUISITIONS

1. INTRODUCTION

Reference is made to the Announcements.

• The Land Acquisition (Nanning)

On 13 November 2020, the Bidder, an indirect wholly-owned subsidiary of the Company, through listing-for-sale, successfully won the bidding in respect of the Land Use Rights of the Land (Nanning) at the bidding price of approximately RMB859.77 million (equivalent to approximately HK$997.33 million).

– 7 –

LETTER FROM THE BOARD

Upon successful bidding of the Land Use Rights of the Land (Nanning), the Bidder executed the confirmation notice and transfer confirmation notice（宗地移交確認書）with Nanning City Natural Resources Bureau and the construction cooperation agreement（建設 合作協議）with the government of Liangqing District on 13 November 2020. On 23 November 2020, the Bidder entered into the Land Use Rights Grant Contract (Nanning) in relation to the Land Acquisition (Nanning) with Nanning City Natural Resources Bureau.

On 11 December 2020, the Bidder, Guangxi Huayu and the Project Company (Nanning) entered into the Cooperation Agreement, pursuant to which the Bidder and Guangxi Huayu agreed to make respective capital contributions to the registered capital of and provide shareholder’s loans on a pro rata basis to the Project Company (Nanning) which will be used to finance the Land Acquisition (Nanning) and for the development of the Land (Nanning).

• The Land Acquisition (Shantou)

On 13 November 2020, the Bidder, through listing-for-sale, successfully won the bidding in respect of the Land Use Rights of the Land (Shantou) at the bidding price of RMB1,397 million (equivalent to approximately HK$1,620.52 million).

After completion of the qualification examination on the Bidder, Shantou City Public Resources Trading Centre*（汕頭市公共資源交易中心）executed the confirmation notice with the Bidder on 19 November 2020, and the Project Company (Shantou) entered into the Land Use Rights Grant Contract (Shantou) in relation to the Land Acquisition (Shantou) with Shantou City Natural Resources Bureau on 27 November 2020.

• The Land Acquisition (Yongzhou)

On 27 November 2020, the Bidder, through listing-for-sale, successfully won the bidding in respect of the Land Use Rights of the Land (Yongzhou) at the bidding price of RMB411.80 million (equivalent to approximately HK$480.16 million).

After completion of the qualification examination on the Bidder, Yongzhou City Natural Resources and Planning Bureau and Yongzhou City Public Resources Trading Centre*（永州市公共資源交易中心）executed the confirmation notice with the Bidder on 2 December 2020, and the Project Company (Yongzhou) entered into the Land Use Rights Grant Contract (Yonghzou) in relation to the Land Acquisition (Yonghzou) with Yongzhou City Natural Resources and Planning Bureau on 22 December 2020.

The purpose of this circular is to provide you with, among other things, further details of the Land Acquisitions and such other information as required under the Listing Rules.

– 8 –

LETTER FROM THE BOARD

2. DETAILS OF THE LAND ACQUISITION (NANNING)

Date : 13 November 2020

Parties : Nanning City Natural Resources Bureau as vendor.

The Bidder as the successful bidder and via the Project Company (Nanning) as the purchaser.

• Land : The Land (Nanning) is situated at the north side of Wu Xiang Da Road at Liangqing District, Nanning City, Guangxi Province, the PRC（中國廣西省南寧市良慶區五象 大道北側）, with a site area of approximately 40,941.25 sq. m., for residential use.

• Duration of the Land : 70 years. Use Rights

• Consideration and : approximately RMB859.77 million (equivalent to payment terms approximately HK$997.33 million), of which:-

• (i) RMB116.68 million as security deposit has been paid on 10 November 2020 and will form part of the consideration;

• (ii) approximately RMB313.20 million being 50% of the consideration less the security deposit shall be paid by 22 December 2020; and

• (iii) approximately RMB429.88 million being the balance of the consideration shall be paid by 22 March 2021.

• Other terms and : The Land Use Rights were delivered on 13 November 2020. conditions

– 9 –

LETTER FROM THE BOARD

The construction work of the Land (Nanning) shall be commenced by 23 August 2021. The placement housing（安 置房）shall be completed by 23 August 2023, and the other construction work of the Land (Nanning) shall be completed by 23 August 2024.

The development of the Land (Nanning) and buildings constructed thereon shall comply with the relevant development plan and requirements set by Nanning City Natural Resources Bureau, including (without limitation) the floor area ratio more than 3.0 but not more than 4.0, building density more than 25% but not more than 35%, building height not more than 100 metres, and greening rate not less than 35%.

As conditions of selling the Land Use Rights in respect of the Land (Nanning) as decided by Nanning City Natural Resources Bureau:

• (i) placement housing（安置房）with gross floor area not less than 66,000 sq. m. should be built on the Land (Nanning), after the completion of which the placement housing（安置房）will be repurchased by the government at RMB4,969 per sq. m.;

• (ii) a kindergarten with gross floor area not less than 4,004 sq. m. should be built on the Land (Nanning), after the completion of which the kindergarten shall be handed over to the relevant governmental department at nil consideration.

Given that these are the conditions set by Nanning City Natural Resources Bureau for selling the Land Use Rights in respect of the Land (Nanning) and considering the development potential of the Land (Nanning) (more details below), the Directors are of the view that these conditions are fair and reasonable.

As of the Latest Practicable Date, the Project Company (Nanning) has paid approximately RMB429.88 million to Nanning City Natural Resources Bureau.

– 10 –

LETTER FROM THE BOARD

3. DETAILS OF THE LAND ACQUISITION (SHANTOU)

Date : 13 November 2020

Parties : Shantou City Natural Resources Bureau as vendor.

The Bidder as the successful bidder and via the Project Company (Shantou) as the purchaser.

• Land : The Land (Shantou) is situated at Huang Cuo Wei Subdistrict, Zhu Gang New Town, Shantou City, Guangdong Province, the PRC（中國廣東省汕頭市珠港新城黃厝圍片 區）, with a site area of approximately 69,660.6 sq. m., for residential use.

• Duration of the Land : 70 years. Use Rights

• Consideration and : RMB1,397 million (equivalent to approximately payment terms HK$1,620.52 million), of which:-

• (i) RMB277.40 million as security deposit has been paid on 12 November 2020 and will form part of the consideration;

• (ii) RMB421.10 million being 50% of the consideration less the security deposit shall be paid by 27 December 2020; and

• (iii) RMB698.50 million being the balance of the consideration shall be paid by 26 May 2021.

– 11 –

LETTER FROM THE BOARD

Other terms and conditions

• : The Land Use Rights were delivered by 27 December 2020.

The construction work of the Land (Shantou) shall be commenced by 27 December 2021, and shall be completed by 27 December 2024.

The development of the Land (Shantou) and buildings constructed thereon shall comply with the relevant development plan and requirements set by Shantou City Natural Resources Bureau, including (without limitation) the floor area ratio more than 2.0 but not more than 4.0, building density not more than 30%, building height not more than 150 metres, and greening rate not less than 35%.

As conditions of selling the Land Use Rights in respect of the Land (Shantou) as decided by Shantou City Natural Resources Bureau, the Bidder shall sign an agreement with the relevant governmental department regarding facilities to be built, which should include a kindergarten, after the completion, the kindergarten and the facilities shall be handed over to the relevant governmental department at nil consideration. Given that it is a condition set by Shantou City Natural Resources Bureau for selling the Land Use Rights in respect of the Land (Shantou) and considering the development potential of the Land (Shantou) (more details below), the Directors are of the view that handing over the kindergarten and the facilities to the relevant governmental department at nil consideration is fair and reasonable.

As of the Latest Practicable Date, the Project Company (Shantou) has paid RMB698.50 million to Shantou City Natural Resources Bureau.

– 12 –

LETTER FROM THE BOARD

4. DETAILS OF THE LAND ACQUISITION (YONGZHOU)

• Date : 27 November 2020

• Parties : Yongzhou City Natural Resources and Planning Bureau as vendor.

The Bidder as the successful bidder and via the Project Company (Yongzhou) as the purchaser.

• Land : The Land (Yongzhou) is situated at the north-west juncture of Li Zi Yuan Road and Ma Lu Jie Road at Leng Shui Tan District, Yongzhou City, Hunan Province, the PRC（中國湖 南省永州市冷水灘區梨子園路與馬路街路交匯處西北角 ）, with a site area of approximately 61,135.98 sq. m., for residential use.

• Duration of the Land : 70 years. Use Rights

• Consideration and : RMB411.80 million (equivalent to approximately payment terms HK$480.16 million), of which:-

• (i) RMB201.80 million as security deposit has been paid on 20 November 2020 and will form part of the consideration; and

• (ii) RMB210 million being the balance of the consideration shall be paid by 1 January 2021.

• Other terms and : The Land Use Rights were delivered on 8 January 2021. conditions

The construction work of the Land (Yongzhou) shall be commenced by 24 December 2021, and shall be completed by 23 December 2023.

– 13 –

LETTER FROM THE BOARD

The development of the Land (Yongzhou) and buildings constructed thereon shall comply with the relevant development plan and requirements set by Yongzhou City Natural Resources and Planning Bureau, including (without limitation) the floor area ratio less than 3.0, building density less than 35%, building height not more than 100 metres, and greening rate not less than 35%.

As of the Latest Practicable Date, the Project Company (Yongzhou) has paid the total consideration of RMB411.80 million to Yongzhou City Natural Resources and Planning Bureau.

5. BASIS FOR DETERMINING THE CONSIDERATION

• In respect of the Land (Nanning)

The consideration for the Land Acquisition (Nanning) is the winning bidding price of the listing-for-sale in respect of the Land Use Rights of the Land (Nanning) conducted in accordance with the relevant PRC laws and regulations at the auction hall of Nanning City Public Resources Trading Centre*（南寧市公共資源交易中心拍賣大廳）on 13 November 2020.

The Group set the bidding price after taking into account, among other things (i) the initial bidding price for the Land Use Rights in respect of the Land (Nanning) of approximately RMB583.41 million set by Nanning City Natural Resources Bureau plus a premium as the Group’s first step into the property market of Nanning City which is expected to be averaged out by the future rapid development in Nanning City, a provincial centre of politics, economy, culture, technology, education, finance and exhibition, (ii) the current property market conditions in Nanning City, Guangxi Province, the PRC that there is a strong potential demand of residential properties in the market due to steady growth of population in Nanning City, (iii) the strategic location and the development potential of the Land (Nanning) considering that it is adjacent to a commercial business district and a subway station, easily accessible by transportation with relatively comprehensive public facilities surrounded including but not limited to primary and middle schools, hospital and sports centre, and (iv) the average floor area price of the Land (Nanning) of approximately RMB5,250 per sq. m., compared to the average recent selling price ranging from approximately RMB18,000 to RMB22,000 per sq. m. for the residential flats in the surrounding area of similar transport accessibility and public facilities, which is approximately three to four times of the average floor area price of the Land (Nanning), implying the great development potential of the Land (Nanning). In view of the factors set out above, the Directors consider that consideration for the Land Use Rights in respect of the Land (Nanning) is fair and reasonable.

– 14 –

LETTER FROM THE BOARD

• Payment of the consideration for the Land Acquisition (Nanning)

The consideration for the Land Acquisition (Nanning) will be financed by the internal resources of the Group and Guangxi Huayu in proportion to their respective shareholdings in the Project Company (Nanning) pursuant to the Cooperation Agreement (more details below) as well as external borrowings.

• In respect of the Land (Shantou)

The consideration for the Land Acquisition (Shantou) is the winning bidding price of the listing-for-sale in respect of the Land Use Rights of the Land (Shantou) conducted in accordance with the relevant PRC laws and regulations via the Shantou City Land Resources Online Trading System on 13 November 2020.

The Group set the bidding price after taking into account, among other things (i) the initial bidding price for the Land Use Rights in respect of the Land (Shantou) of RMB1,387 million set by Shantou City Natural Resources Bureau plus a premium as the Group’s first step into the property market of Shantou City which is expected to be averaged out by the future rapid development in Shantou City, a special economic zone and an important port city along the south-eastern coastline in the PRC as well as a vital gateway of the Maritime Silk Road, (ii) the current property market conditions in Shantou City, Guangdong Province, the PRC that there is a strong potential demand of residential properties in the market due to steady growth of population in Shantou City, (iii) the strategic location and the development potential of the Land (Shantou) considering that it is situated at Zhu Gang New Town which is positioned as a coastal leisure and business area in eastern Guangdong offering business, exhibition, cultural tourism and residential related services, and is easily accessible by transportation with relatively comprehensive public facilities surrounded whilst currently there are not many residential buildings in sale in the district, and (iv) the average floor area price ranging from approximately RMB4,200 to RMB7,200 per sq. m. for the land plots in the surrounding area auctioned recently which would be developed for residential use and are of similar transport accessibility and public facilities, compared to the average floor area price of the Land (Shantou) of approximately RMB5,500 per sq. m. which is within the range of, and is comparable to, the average floor area price for the land plots in the surrounding area auctioned recently. In view of the factors set out above, the Directors consider that consideration for the Land Use Rights in respect of the Land (Shantou) is fair and reasonable.

• Payment of the consideration for the Land Acquisition (Shantou)

The consideration for the Land Acquisition (Shantou) will be financed by the internal resources of the Group and external borrowings.

– 15 –

LETTER FROM THE BOARD

• In respect of the Land (Yongzhou)

The consideration for the Land Acquisition (Yongzhou) is the winning bidding price of the listing-for-sale in respect of the Land Use Rights of the Land (Yongzhou) conducted in accordance with the relevant PRC laws and regulations via the Yongzhou City Land Resources Online Trading System on 27 November 2020.

The Group set the bidding price after taking into account, among other things (i) the initial bidding price for the Land Use Rights in respect of the Land (Yongzhou) of RMB201.80 million set by Yongzhou City Natural Resources and Planning Bureau plus a premium as the Group’s first step into the property market of Yongzhou City which is expected to be averaged out by the future rapid development in Yongzhou City, a key economic development city across the southwest area of Hunan Province, (ii) the current property market conditions in Yongzhou City, Hunan Province, the PRC that there is a great potential demand of residential properties in the market due to steady growth of urbanization in Yongzhou City, (iii) the strategic location and the development potential of the Land (Yongzhou) considering that it is close to the government centre of Yongzhou City and the being-built shopping mall, with relatively comprehensive public facilities such as commercial, educational, medical and administrative facilities surrounded, and will be easily accessible by transportation when the transportation network and facilities are to be opened next year, and (iv) the average floor area price ranging from approximately RMB1,600 to RMB2,500 per sq. m. for the land plots in the surrounding area auctioned recently which would be developed for residential use and are of similar commercial, education and medical facilities, compared to the average floor area price of the Land (Yongzhou) of approximately RMB2,260 per sq. m. which is within the range of, and is comparable to, the average floor area price for the land plots in the surrounding area auctioned recently. In view of the factors set out above, the Directors consider that consideration for the Land Use Rights in respect of the Land (Yongzhou) is fair and reasonable.

• Payment of the consideration for the Land Acquisition (Yongzhou)

The consideration for the Land Acquisition (Yongzhou) will be financed by the internal resources of the Group and external borrowings.

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LETTER FROM THE BOARD

6. THE COOPERATION AGREEMENT IN RELATION TO THE LAND ACQUISITION (NANNING)

As disclosed in the Announcement dated 11 December 2020, the Bidder, Guangxi Huayu and the Project Company (Nanning), on 11 December 2020, entered into the Cooperation Agreement for the joint venture arrangement in respect of the Land Acquisition (Nanning). Principal terms of the Cooperation Agreement are summarised below:-

• Capital Increase and shareholding structure of the Project Company (Nanning)

Pursuant to the Cooperation Agreement, the registered capital of the Project Company (Nanning) will be increased from RMB10 million (equivalent to approximately HK$11.72 million) to RMB100 million (equivalent to approximately HK$117.15 million), whereby the Bidder and Guangxi Huayu agreed to make capital contributions of RMB51 million (equivalent to approximately HK$59.75 million) and RMB49 million (equivalent to approximately HK$57.40 million) as registered capital of the Project Company (Nanning) (i.e., the Capital Increase), such that the Project Company (Nanning) will be held as to 51% and 49% by the Bidder and Guangxi Huayu respectively after completion of the Capital Increase.

• Funding to the Project Company (Nanning)

The Bidder and Guangxi Huayu agreed to inject further funds into the Project Company (Nanning) in the form of shareholder’s loans in proportion to their respective shareholdings therein for the payment of the consideration and related tax in connection with the Land Acquisition (Nanning) as well as for the development of the Land (Nanning) and daily operation of the Project Company (Nanning). Based on the total consideration for the Land Acquisition (Nanning) of approximately RMB859.77 million, the Bidder and Guangxi Huayu shall, in addition to their respective capital contributions of RMB51 million and RMB49 million, provide shareholder’s loans of approximately RMB387.48 million (equivalent to approximately HK$453.93 million) and approximately RMB372.29 million (equivalent to approximately HK$436.14 million) to the Project Company (Nanning) respectively according to their respective shareholdings therein. Given that the amount of the shareholder’s loans was determined with reference to the consideration for the Land Acquisition (Nanning) and will be borne by the Bidder and Guangxi Huayu on a pro rata basis, the Directors consider such amount is fair and reasonable.

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LETTER FROM THE BOARD

In order to meet the initial funding requirement of the Project Company (Nanning), the Bidder and Guangxi Huayu agreed, within 5 business days after signing of the Cooperation Agreement, to inject a total amount of RMB5 million (equivalent to approximately HK$5.86 million) to the Project Company (Nanning) as shareholder’s loans, to be borne in proportion to their respective shareholdings therein.

Where required, the Project Company (Nanning) may also obtain external financing from financial institutions as approved by its board of directors from time to time.

• Repayment of the excess portion of the security deposit paid by the Bidder for the Land Acquisition (Nanning)

Guangxi Huayu shall pay approximately RMB57.17 million (equivalent to approximately HK$66.97 million), equivalent to 49% of the security deposit of RMB116.68 million paid by the Bidder to Nanning City Natural Resources Bureau on 10 November 2020 for the Land Acquisition (Nanning), to the Project Company (Nanning) and the Project Company (Nanning) shall, upon receipt, return such funds to the Bidder.

• Board composition of the Project Company (Nanning)

The board of directors of the Project Company (Nanning) shall consist of 3 directors, with 2 being nominated by the Bidder and 1 being nominated by Guangxi Huayu. The chairman of the board and the legal representative of the Project Company (Nanning) shall be a director nominated by the Bidder.

The general manager of the Project Company (Nanning) shall be nominated by the Bidder.

The Project Company (Nanning) shall consist of 2 supervisors to be nominated by the Bidder and Guangxi Huayu respectively.

• Matters requiring shareholders’ approval

Pursuant to the Cooperation Agreement, the Project Company (Nanning) shall not, without the unanimous consent from its shareholders, (i) change the nature or scope of its business, and if there are any changes then they must still be consistent with the scope or purpose specified in the transfer documents in respect of the Land Use Rights of the Land (Nanning), or (ii) enter into any transaction which is not on arm’s length basis.

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LETTER FROM THE BOARD

Besides, as required under the PRC law, certain matters such as increase or reduction in registered capital, merger, division, dissolution, liquidation or change in the form of the company, and amendment to articles of association will require approval from shareholders holding more than two-third of the voting rights of the Project Company (Nanning).

Save for the above, all other matters to be approved by the shareholders of the Project Company (Nanning) shall be passed by shareholders representing more than one half of the voting rights.

• Profit distribution arrangement of the Project Company (Nanning)

The Bidder and Guangxi Huayu shall share the profits (and losses) of the Project Company (Nanning) in proportion to their respective shareholdings therein.

• Entering into a supplemental agreement to the Land Use Rights Grant Contract (Nanning)

The Bidder shall, within 20 business days after the signing of the Cooperation Agreement and the Land Use Rights Grant Contract (Nanning) (or such other date as agreed between the Bidder and Guangxi Huayu in writing), procure the Project Company (Nanning), Nanning City Natural Resources Bureau and itself to enter into a supplemental agreement to the Land Use Rights Grant Contract (Nanning) whereby the Project Company (Nanning) shall assume all rights and obligations of the Bidder under the Land Use Rights Grant Contract (Nanning) so that the title certificate in respect of the Land (Nanning) will be issued in the name of the Project Company (Nanning) and the Project Company (Nanning) will be entitled to all the development rights in respect of the Land (Nanning). The said supplemental agreement was entered into among the Bidder, the Project Company (Nanning) and Nanning City Natural Resources Bureau on 14 December 2020.

• Preceding stage of property management services

The Bidder and Guangxi Huayu agreed that the preceding stage of property management in respect of the properties to be built on the Land (Nanning) will be provided by a property management company selected by Guangxi Huayu, which shall not be a related company of the Company, and the arrangement and terms under the agreement for the preceding stage of property management services shall comply with the requirements under the Listing Rules.

Further details of the Cooperation Agreement please refer to the Announcement dated 11 December 2020.

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LETTER FROM THE BOARD

7. DEVELOPMENT PLANS OF THE LAND (NANNING), THE LAND (SHANTOU) AND THE LAND (YONGZHOU)

• In respect of the Land (Nanning)

The site area of the Land (Nanning) is approximately 40,941.25 sq. m. It is the Group’s preliminary plan to develop the Land (Nanning) into residential properties with a total gross floor area of approximately 219,144 sq. m., comprising high-rise residential buildings with shops, placement housing and car parks in basement. The total estimated gross floor areas of high-rise residential buildings and placement housing will be approximately 148,699 sq. m. For the shops, its estimated gross floor area will be approximately 8,189 sq. m.

Pursuant to the Land Use Rights Grant Contract (Nanning), the construction work of the Land (Nanning) shall be commenced by 23 August 2021 and completed by 23 August 2024. Assuming the construction work of the Land (Nanning) is on schedule, the pre-sale of properties is expected to be in or around the second quarter of 2021.

The Project Company (Nanning) will, in accordance with practical market conditions, make adjustment to the actual arrangement of the construction and development of the Land (Nanning).

• In respect of the Land (Shantou)

The site area of the Land (Shantou) is approximately 69,660.6 sq. m. It is the Group’s preliminary plan to develop the Land (Shantou) into residential properties with a total gross floor area of approximately 329,199 sq. m., comprising high-rise residential buildings with shops and car parks in basement. The estimated gross floor area of high-rise residential buildings and shops will be approximately 231,265 sq. m. and 12,292 sq. m. respectively.

Pursuant to the Land Use Rights Grant Contract (Shantou), the construction work of the Land (Shantou) shall be commenced by 27 December 2021 and completed by 27 December 2024. Assuming the construction work of the Land (Shantou) is on schedule, the pre-sale of properties is expected to be in or around the second quarter of 2021.

The Project Company (Shantou) will, in accordance with practical market conditions, make adjustment to the actual arrangement of the construction and development of the Land (Shantou).

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LETTER FROM THE BOARD

• In respect of the Land (Yongzhou)

The site area of the Land (Yongzhou) is approximately 61,135.98 sq. m. It is the Group’s preliminary plan to develop the Land (Yongzhou) into residential properties with a total gross floor area of approximately 234,677 sq. m., comprising high-rise residential buildings with shops and car parks in basement. The estimated gross floor areas of high-rise residential buildings and shops will be approximately 170,936 sq. m. and 8,582 sq. m. respectively.

Pursuant to the Land Use Rights Grant Contract (Yongzhou), the construction work of the Land (Yongzhou) shall be commenced by 24 December 2021 and completed by 23 December 2023. Assuming the construction work of the Land (Yongzhou) is on schedule, the pre-sale of properties is expected to be in or around the third quarter of 2021.

The Project Company (Yongzhou) will, in accordance with practical market conditions, make adjustment to the actual arrangement of the construction and development of the Land (Yongzhou).

8. REASONS FOR AND BENEFITS OF THE LAND ACQUISITIONS AND THE ENTERING INTO OF THE COOPERATION AGREEMENT IN RELATION TO THE LAND ACQUISITION (NANNING)

As disclosed in the Company’s annual report for the year ended 31 March 2020, the Group has established a foothold in the PRC’s property development business since November 2019. The Group intends to intensify efforts to strengthen this business sector by increasing its land bank both in terms of quality and quantity with the aim of developing the PRC’s property development as one of its major businesses. The Land Acquisitions demonstrated the Group’s determination in entering and promoting its PRC’s property development business. The Directors consider that the Land Acquisitions are in line with the business development strategy and planning of the Group.

The Land (Nanning) is located in Nanning City, Guangxi Province, the PRC. As the capital city of Guangxi Province, Nanning City is the provincial centre of politics, economy, culture, technology, education, finance and exhibition. The Land (Nanning) is situated at Wu Xiang New District with proximity to the central business district and comprehensive facilities and infrastructures. The Land (Nanning) is easily accessible by transportation as it is adjacent to a subway station. It is believed that the surrounding areas of the Land (Nanning) is well-planned and is of great potential for development.

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LETTER FROM THE BOARD

Similarly, the Land (Shantou) is located in Shantou City, Guangdong Province, the PRC, and is one of the special economic zones in the PRC. Shantou City is an important port city along the south-eastern coastline of the PRC and is a vital gateway of the Maritime Silk Road. The Land (Shantou) is situated at Zhu Gang New Town, which is positioned as a coastal leisure and business area in eastern Guangdong offering business, exhibition, cultural tourism and residential related services.

As to the Land (Yongzhou), it is located in Leng Shui Tan District, Yongzhou City, Hunan Province, the PRC, with proximity to the government centre of Yongzhou City, other concentrated residential areas and core comprehensive facilities. The nearby transportation network is under development and it is expected that transportation facilities will be opened next year.

With a view to lowering the capital contribution required from the Group as well as reducing the financial and operational risks exposed by the Group, the Bidder and the Project Company (Nanning) entered into the Cooperation Agreement in relation to the Land Acquisition (Nanning) with Guangxi Huayu. The Directors are of the view that by entering into the Cooperation Agreement, on one hand, the Group may spare its resources to engage in more land acquisitions and property development activities while at the same time continue to have control over the Project Company (Nanning) and the Land (Nanning). On the other hand, the Bidder and Guangxi Huayu could best utilize their respective resources and comparative advantages for the development of the Land (Nanning) in cooperation; in particular, the immediate shareholder of Guangxi Huayu, Chongqing Huayu, is a leading real estate developer in the PRC possessing the national first-class real estate group qualification and first-class property service qualification, and has real estate projects in 28 cities of the PRC. Developing the Land (Nanning) with Guangxi Huayu will allow the Group to leverage on Chongqing Huayu’s well-established presence and property development and management experience in the PRC.

Accordingly, the Board is of the view that the Land Acquisitions and the entering into of the Cooperation Agreement are in the ordinary and usual course of business of the Company, the respective terms of the Land Acquisitions (including the consideration) and the Cooperation Agreement are fair and reasonable, and the Land Acquisitions and the Cooperation Agreement are in the interests of the Company and Shareholders as a whole.

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LETTER FROM THE BOARD

9. INFORMATION ON THE GROUP, THE BIDDER, THE PROJECT COMPANY (NANNING), THE PROJECT COMPANY (SHANTOU) AND THE PROJECT COMPANY (YONGZHOU)

The Group is principally engaged in the distribution of houseware products and audio products in the USA, holding and licensing of brands and trademarks, trading of household appliances in the PRC, provision of information technology services in the PRC, and property development in the PRC.

The Bidder is an indirect wholly-owned subsidiary of the Company incorporated in the PRC with limited liability. As at the date hereof, it is principally engaged in property development in the PRC.

The Project Company (Nanning) was incorporated in the PRC with limited liability established solely for the Land Acquisition (Nanning) and holding the Land Use Rights of and development of the Land (Nanning). Since incorporation and prior to the Capital Increase, the Project Company (Nanning) has been wholly-owned by the Bidder and an indirect wholly-owned subsidiary of the Company. Upon completion of the Capital Increase, the Project Company (Nanning) will be held as to 51% and 49% by the Bidder and Guangxi Huayu respectively. The Project Company (Nanning) will continue to be a subsidiary of the Company and its financial results will be consolidated with the Group’s results.

The Project Company (Shantou) was incorporated in the PRC with limited liability and is a wholly-owned subsidiary of the Bidder established for the Land Acquisition (Shantou) and holding the Land Use Rights of the Land (Shantou).

The Project Company (Yongzhou) was incorporated in the PRC with limited liability and is a wholly-owned subsidiary of the Bidder established for the Land Acquisition (Yongzhou) and holding the Land Use Rights of the Land (Yongzhou).

10. INFORMATION ON NANNING CITY NATURAL RESOURCES BUREAU, SHANTOU CITY NATURAL RESOURCES BUREAU AND YONGZHOU CITY NATURAL RESOURCES AND PLANNING BUREAU

Nanning City Natural Resources Bureau is a bureau established by the local government of Nanning City and a PRC Governmental Body within the meaning of Rule 19A.04 of the Listing Rules.

Shantou City Natural Resources Bureau is a bureau established by the local government of Shantou City and a PRC Governmental Body within the meaning of Rule 19A.04 of the Listing Rules.

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LETTER FROM THE BOARD

Yongzhou City Natural Resources and Planning Bureau is a bureau established by the local government of Yongzhou City and a PRC Governmental Body within the meaning of Rule 19A.04 of the Listing Rules.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, each of Nanning City Natural Resources Bureau, Shantou City Natural Resources Bureau and Yongzhou City Natural Resources and Planning Bureau and their respective ultimate beneficial owners are Independent Third Parties.

11. INFORMATION ON GUANGXI HUAYU

Guangxi Huayu is a company incorporated in the PRC with limited liability and is principally engaged in property development and operation in the PRC. As advised by Guangxi Huayu, as at the Latest Practicable Date, Guangxi Huayu was wholly-owned by Chongqing Huayu, which was beneficially owned as to approximately 82.55% and 17.45% by Mr. Jiang Yehua and Ms. Fa Baozhen respectively.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, Guangxi Huayu and its ultimate beneficial owners are Independent Third Parties.

12. IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios in respect of each of the Land Acquisition (Nanning) and the Land Acquisition (Shantou) are more than 100%, each of the Land Acquisition (Nanning) and the Land Acquisition (Shantou) constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the Land Acquisition (Yongzhou) are more than 25% but all of them are less than 100%, the Land Acquisition (Yongzhou) constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.

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LETTER FROM THE BOARD

As the Group’s principal businesses include property development, the Company is regarded as a Qualified Issuer under Rule 14.04(10B) of the Listing Rules. Besides, each of the Land Acquisitions involves an acquisition of government land from a PRC Governmental Body through listing-for-sale governed by PRC law. For the Land Acquisition (Nanning), it is undertaken by the Bidder (an indirect wholly-owned subsidiary of the Company) and Guangxi Huayu on a joint basis via the Project Company (Nanning) pursuant to the Cooperation Agreement which contains clauses as required under Rule 14.33A(2)(c) of the Listing Rules. The Board confirms that the Project Company (Nanning) was established solely for the Land Acquisition (Nanning) and development of the Land (Nanning) and the terms of the Cooperation Agreement were determined after arm’s length negotiations between the parties thereto and are on normal commercial terms. As to the Land Acquisition (Shantou) and the Land Acquisition (Yongzhou), both of them are undertaken on a sole basis by the Company via the Project Company (Shantou) or the Project Company (Yongzhou) (as the case may be). As such, each of the Land Acquisitions is regarded as a Qualified Property Acquisition under Rule 14.04(10C) of the Listing Rules, and is subject to the reporting, announcement and circular requirements but exempt from the shareholders’ approval requirement pursuant to Rule 14.33A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the transactions contemplated under the Cooperation Agreement exceed 5% but all of them are less than 25%, the entering into of the Cooperation Agreement constitutes a discloseable transaction for the Company, and is subject to the reporting and announcement requirements but exempt from the circular and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

13. ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board Nimble Holdings Company Limited Tan Bingzhao Chairman

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Group for each of the financial years ended 31 March 2018, 31 March 2019 and 31 March 2020 and for the six months ended 30 September 2020 are disclosed in the following documents which have been published on both the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.nimbleholding.com):

• (a) the annual report of the Company for the year ended 31 March 2018 published on 24 July 2018 (pages 41 to 108):

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0724/ltn20180724601.pdf

• (b) the annual report of the Company for the year ended 31 March 2019 published on 24 July 2019 (pages 42 to 120):

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0724/ltn20190724329.pdf

• (c) the annual report of the Company for the year ended 31 March 2020 published on 22 July 2020 (pages 52 to 131):

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0722/2020072200804.pdf

• (d) the interim report of the Company for the six months ended 30 September 2020 published on 15 December 2020 (pages 5 to 38):

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1215/2020121500591.pdf

2. INDEBTEDNESS STATEMENT

Indebtedness

As at the close of business on 30 November 2020, being the latest practicable date for the purpose of this indebtedness statement prior to the publication of this circular, the Group had (i) outstanding unsecured and unguaranteed loans from/balance due to related parties of approximately HK$2,442 million; (ii) an outstanding unsecured and guaranteed bank loan of approximately HK$2 million; and (iii) lease liabilities of approximately HK$4 million.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Contingent liabilities

Save for set out below, the Group did not have significant contingent liabilities as at 30 November 2020:-

(i) Guarantees

The Group had provided guarantees of approximately HK$101 million as at 30 November 2020 to banks in favour of the purchasers of the Group’s properties under development up to an amount of 80% of the purchase price of an individual property in respect of the mortgage loans provided by the banks to such purchasers. These guarantees provided by the Group to the banks will be released upon receiving the building ownership certificates of the respective properties by the banks from the customers as a pledge for security to the mortgage loans granted.

Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principals together with any accrued interests and penalties owed by the defaulted purchasers to the banks, and the Group is entitled to take over the legal title and possession of the related properties. The guarantees start from the respective dates of grant of the mortgage loans.

In the opinion of the Directors, the total fair value of the financial guarantee contracts of the Group is insignificant at initial recognition. The Directors also consider the possibility of default by the parties involved to be remote and in case of default in payments, the net realisable value of the related properties would be able to cover the outstanding principal together with the accrued interest and penalties. Accordingly, no value has been recognised in the consolidated statement of financial position as at 30 November 2020.

(ii) Legal cases

In an order made by the High Court of Hong Kong Special Administrative Region (the ‘‘High Court’’) on 9 May 2016 in respect of case HCCW 177/2011, the Company is required to:

• (a) indemnify and keep indemnified the former provisional liquidators in the event that the funds paid into court are insufficient to meet the taxed fees and expenses of the former provisional liquidators; and

• (b) indemnify and keep indemnified Mr. Fok Hei Yu and FTI Consulting (Hong Kong) Limited in respect of the costs of the defence of proceedings HCA 92/2014 (the ‘‘Action’’), subject to the final determination of the Action.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HCA 92/2014 is a legal case filed in January 2014 in the High Court by Sino Bright Enterprises Co., Ltd. against Mr. Fok Hei Yu and FTI Consulting (Hong Kong) Limited for alleged misrepresentation and the case is ongoing.

As at 30 November 2020, the Company had received no such requests for the related fees, costs and expenses.

The Directors are of the opinion that the estimated contingent liabilities as at 30 November 2020 arising from the legal cases cannot be reasonably ascertained.

Save as aforesaid or otherwise disclosed herein, and apart from intra-group liabilities and normal trade and other payables in the ordinary course of the business, the Group did not have other material debt securities issued and outstanding, debt securities authorised or otherwise created but unissued, term loans, mortgage, charges, bank overdrafts, liabilities under acceptances or other similar indebtedness, acceptance credits or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, or guarantees or other material contingent liabilities as at close of business on 30 November 2020.

For the purpose of the above indebtedness statement, functional currency amounts have been translated into Hong Kong dollars at the applicable rate of exchange prevailing at the close of business on 30 November 2020.

3. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date and to the best knowledge of the Directors, there was no material adverse change in the financial or trading position of the Group as a whole since 31 March 2020, being the date to which the latest published audited financial statements of the Company were made up.

4. WORKING CAPITAL SUFFICIENCY

The Directors are of the opinion that, taking into account the financial resources and banking facilities available to the Group, the Group will have sufficient working capital to satisfy its present requirements for the next twelve months from the date of this circular in the absence of unforeseen circumstances.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL EFFECTS OF THE LAND ACQUISITIONS AND THE TRANSACTIONS CONTEMPLATED UNDER THE COOPERATION AGREEMENT

Immediately upon completion of the Land Acquisition (Nanning), there would be no significant financial impact on the Group’s earnings, and would have an increase in assets (being the value of the Land (Nanning) offset by the decrease in cash and bank balances) and the increase in liabilities (being the external borrowings).

Immediately upon completion of the Land Acquisition (Shantou), there would be no significant financial impact on the Group’s earnings, and would have an increase in assets (being the value of the Land (Shantou) offset by the decrease in cash and bank balances) and the increase in liabilities (being the external borrowings).

Immediately upon completion of the Land Acquisition (Yongzhou), there would be no significant financial impact on the Group’s earnings, and would have an increase in assets (being the value of the Land (Yongzhou) offset by the decrease in cash and bank balances) and the increase in liabilities (being the external borrowings).

Immediately upon completion of the transactions contemplated under the Cooperation Agreement, there would be no significant impact on the Group’s earnings. As at 11 December 2020 (the date of the Cooperation Agreement), the net book value of the Project Company (Nanning) was nil and the consideration payable by Guangxi Huayu for the 49% equity interest in the Project Company (Nanning) under the Cooperation Agreement of approximately RMB421.29 million (equivalent to approximately HK$493.54 million) represented a premium over the net book value attributable to the 49% equity interest in the Project Company (Nanning).

6. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As disclosed in the annual report of the Company for the year ended 31 March 2020 and the interim report of the Company for the six months ended 30 September 2020, the abrupt and rapid spread of the COVID-19 pandemic is expected to add to the woes, resulting from the lingering China-US trade conflict and uncertain geopolitical risks in different countries, which have put the economic growth of most countries on a slow growth trajectory. Although the agreement of a phase one deal between the PRC and the USA was signed in early 2020, uncertainties remain and warrant caution. Due to the global situation of the COVID-19 pandemic, the management is not optimistic as to the Group’s operations in Emerson Radio Corp. (‘‘Emerson’’), licensing, PRC’s housing appliances and PRC’s IT services in the second half of the financial year ending 31 March 2021.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Emerson and licensing operations

Despite Emerson’s efforts to monitor the external environment and to mitigate its repercussion on its business activities, it is not immune from these external risk factors. Notwithstanding, apart from expanding and strengthening its existing distribution channels, Emerson has been developing and promoting new products to regain shelf spaces in these and other retailers in the USA. During the six months ended 30 September 2020, Emerson recorded a revenue of approximately HK$27 million. Persistent efforts have been put in investing in new products and marketing activities to increase its sales through internet and e-commerce channels and in identifying strategic courses of action related to its licensing activities. However, due to the ongoing COVID-19 pandemic, most licensees’ businesses have faced difficulties by not being able to meet their respective projected purchases in accordance with their licensing agreements during the six months ended 30 September 2020. As such, the revenue generated by the licensing operation business was approximately HK$8 million during the six months ended 30 September 2020, while the income recorded for the period could only cover its costs and expenses.

PRC’s household appliances business

The PRC’s household appliances business was also deeply hit by the COVID-19 pandemic. A revenue of approximately HK$43 million and an operating profit of approximately HK$5 million were recorded during the six months ended 30 September 2020. As economic activities in the PRC have been disrupted by the COVID-19 pandemic, the sales of the PRC’s household appliances business have fallen. Besides, the competition in the household appliance trading industry in the PRC is fierce. The Group will therefore continue to keep itself abreast of this industry development and formulate and implement different business strategies as and when required and appropriate, in order for this business activities to be a steady source of income of the Group.

PRC’s IT services business

Due to the global COVID-19 pandemic, most business activities in the major cities in the PRC have been delayed since early 2020. With this, the IT services operation has been suffering from searching new customers. For the six months ended 30 September 2020, the PRC’s IT business recorded no income. This loss in income was due to the ongoing COVID19 pandemic as most companies have had to reduce their budget for non-profit generating units. The management has therefore re-considered the Group’s future development in this business sector as the prospects of this segment are uncertain, and the majority of the staff have voluntarily resigned during the six months ended 30 September 2020. If the COVID-19 pandemic continues in the second half of the financial year ending 31 March 2021, the management may consider to close down the operation of this segment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

PRC’s property development business

The completion of the capital injection into Ningxiang Minjun at the end of November 2019 has marked a great milestone in the Group’s development and meanwhile demonstrated the Group’s determination in entering the PRC’s property development business. During the six months ended 30 September 2020, the Group achieved a total contracted sales amount of approximately HK$104 million (equivalent to approximately RMB94 million), with a total contracted sales gross floor area of approximately 19,800 sq. m. The average selling price was approximately HK$5,300 (equivalent to approximately RMB4,700) per sq. m. It is expected that the delivery of these units will take place in around early 2022.

Since September 2020 and up to the Latest Practicable Date, the Group has acquired a total of seven parcels of land, two pieces of which are situated in Gongyi City, and the other five pieces of which are situated in Yangjiang City, Ningbo City, Nanning City, Shantou City and Yongzhou City respectively, all of which add up to a total of approximately 347,986 sq. m. of land acquired by the Group. The Group will continue to focus on other land acquisitions and where appropriate opportunities arise further increase the quality and quantity of the land bank to enhance sustainable growth with the aim of developing the PRC’s property development as one of the major businesses of the Group. However, the property market in the PRC is affected by a number of factors, such as changes in social, political, economic and legal environment as well as the PRC government’s undertakings of fiscal, economic, monetary, industrial and environmental policies. Changes in macroeconomic conditions, consumer confidence, consumption spending, and consumption preferences may also affect the Group’s property development business. As such, the management will take precautionary measures in order to mitigate the associated risks in the property development business. The Group will continue to strengthen the property development business and will also expand its development business in potential cities in order to maximize shareholders’ value.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below is the management discussion and analysis of the Group’s results of operation for each of the three years ended 31 March 2018, 2019 and 2020, which is principally extracted from the annual reports of the Company for the three years ended 31 March 2018, 2019 and 2020 respectively, in order to provide further information relating to the financial condition and results of operation of the Group during the periods stated. Capitalised terms used below shall have the same meanings as defined in the respective annual reports.

1. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2018

(a) Business review

The Group recorded a revenue of HK$171 million for the year ended 31 March 2018 (the ‘‘Year’’) as compared to HK$288 million for the 15 months ended 31 March 2017 (the ‘‘Corresponding Period’’), a decrease of 40.6%. The significant decrease in revenue was mainly due to the decrease in the revenue generated from the distribution of houseware products and the licensing income of Emerson Radio Corp (‘‘Emerson’’). The Group recorded an audited net profit attributable to shareholders of HK$175 million for the Year, as compared to HK$2,813 million for the Corresponding Period. The significant drop in the net profit was mainly due to (1) there was a significant gain of HK$2,636 million arising from the settlement of the Company’s scheme creditors through the schemes of arrangement recorded in the Corresponding Period, which was an one-off event of the restructuring exercise of the Group that took place in May 2016 and no similar item occurred during the Year, (2) a net decrease in impairment loss of HK$110 million, mainly in relation to the trademark of Emerson; and (3) a net increase of HK$75 million in the write back of accrued liabilities with Deconsolidated Subsidiaries in the Year as compared with the gain on deconsolidation of subsidiaries in the Corresponding Period.

The operations of the Group include the Emerson operations and licensing operations for Akai, Sansui and Nakamichi brands.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Emerson operations

The revenue generated from the distribution of houseware products and audio products of Emerson for the Year was HK$115 million as compared to HK$194 million for the Corresponding Period. The major elements which contributed to the overall decrease in net product sales of HK$79 million or 40.7% was a decrease in sales of Emerson-branded microwave ovens and compact refrigerators, partly offset by an increase in toaster ovens, wine products and clock radios. Emerson anticipates that the loss of these sales has had and is expected to continue to have a material adverse effect on Emerson’s business and results of operations. Emerson will continue to expand the existing distribution channels and to develop and promote new products to regain shelf spaces in these retailers in the United States of America (the ‘‘USA’’). Emerson is also investing in products and marketing activities to expand its sales through internet and ecommerce channels. These efforts will require investments in appropriate human resources, media marketing and development of products in various categories, in addition to the traditional home appliances and audio products which Emerson has historically focused on.

Licensing revenue of Emerson for the Year was HK$5 million as compared to HK$37 million for the Corresponding Period, a decrease of HK$32 million, or 86.5%. This is primarily due to the termination of Emerson’s largest license agreement with Funai Corporation, Inc. (‘‘Funai’’), which ended on 31 December 2016. Emerson is continuing to find licensees and to negotiate for a replacement licensee to Funai. However, given the current status of the worldwide TV consumer market, it is doubtful as to when a new contract will be concluded. As a result, the loss of this licensing income has had and is expected to continue to have a material adverse effect on Emerson’s business and results of operations. Emerson is analyzing the impacts to its business of these events and is identifying strategic courses of action for consideration.

Emerson continues to take active steps to further streamline its operations to reduce and control its operating costs. Excluding legal fees of HK$4 million attributable to an infringement suit taken by Emerson against a third party, the ongoing operating costs for the Year was reduced to HK$51 million as compared to HK$75 million for the Corresponding Period.

Due to the Tax Cuts and Jobs Acts newly enacted by the United States Government, under Section 965, Emerson must include in the Year a one-time transition tax estimated at approximately HK$24 million on the deemed repatriation of Emerson’s undistributed earnings of its foreign subsidiaries. In this respect, Emerson had to provide for the additional tax which is payable in eight instalments over eight years.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

In December 2016, Emerson publicly announced the approval by its board of directors of the repurchase program of up to US$5 million of its common stock and intended to run the repurchase program through the end of 2017. In September 2017, Emerson’s board of directors further approved an additional US$5 million, bringing the total authorised stock repurchase under the program to US$10 million and in June 2018 extended the program to 31 December 2018. Under the program, repurchases will be funded from Emerson’s available working capital and any repurchased shares will be held in the treasury as authorised and issued shares available for general corporate purposes. As at 31 March 2018, Emerson has repurchased 4,330,744 shares of its common stock. In this respect, the deemed acquisition increased the Group’s shareholding in Emerson from 56.3% as at 31 March 2017 to 66.9% as at the year end of 31 March 2018.

Licensing operations

The revenue generated from these operations was HK$51 million for the Year as compared to HK$57 million for the Corresponding Period. The operating profit of these operation for the Year was HK$37 million as compared to HK$42 million for the Corresponding Period which represented the net licensing income received from the licensees. Since the Corresponding Period consisted of 15 months, the level of revenue generated from the licensing operations for the Year, in fact, was approximately HK$5.4 million or 11.8% higher than the Corresponding Period if compared on a year on year basis. On the same basis, the operating profit of this operation for the Year was HK$3.4 million or 10.1% higher than the Corresponding Period.

The continuing licensing model is that, Akai, Sansui and Nakamichi will grant licensing rights to individual licensees around the world, authorising them to sell products under the respective trademark. In return, the licensees will pay a licensing fee ranging from 2% to 6%, depending on the respective brand involved, on the gross value of purchases made during the license period. All licensing agreements are subject to a minimum fee payable by the licensees, which varies with individual contracts and are non-refundable. This minimum fee corresponds to the guaranteed minimum gross purchase that each licensee commits. The licensee will have to pay an additional license fee in the case where the actual gross purchase for a license period is exceeding the guaranteed minimum gross purchase, unless the contract is based on a fixed fee structure.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

The Group is still subject to geo-political challenges in certain countries under political unrest, like the Middle-East. Currency fluctuation also effects those licensees operating with currencies depreciating against the US dollars, which is the currency of the fees under our licensing agreements. On the other hand, our licensees usually obtain their products from the People’s Republic of China (‘‘PRC’’) and as the RMB was relatively strong as compared to non-US denominated currencies, it also increased the cost of products for our licensees. The other major challenge comes from competitive consumer electronic brands offering licensing opportunities. However, we have built up and maintained a steady portfolio of licensees, with some licensees out and some new licensees in. In the past few years, we can always maintain a total of 30 contracts or above in force with licensees to distribute products in the brand names of Akai, Sansui and Nakamichi around the world. The Company believes that we can continue to maintain very strong relationships with our licensees and are ready to work with these licensing partners to tackle these challenges and strengthen their businesses.

(b) Business prospect

On 22 September 2017, the Company’s former immediate holding company, Sino Bright Enterprises Co., Ltd. (‘‘Sino Bright’’) entered into a sale and purchase agreement to sell 3,616,495,378 Shares to Wealth Warrior (the ‘‘Offeror’’), a company wholly-owned by our Chairman, Mr. Tan Bingzhao. The transaction was completed on 26 September 2017. Since there was a change of control of the Company, under the Code on Takeovers and Merger, the Offeror was required to make a mandatory unconditional cash offer for all the issued Shares, other than those already owned and/or agreed to be acquired by the Offeror or parties acting in concert with it (the ‘‘Offer’’). A composite document was then issued to the shareholders of the Company for the mandatory unconditional cash offer on 1 December 2017 (the ‘‘Composite Document’’).

As stated in the Composite Document, Mr. Tan Bingzhao has intended to continue the principal businesses of the Group and may look into business opportunities to enhance the long-term growth potential of the Group. As at the date of this report, Mr. Tan Bingzhao and the Board have decided to continue to support the operation of the principal businesses of the Group. However, no investment or business opportunities had yet been identified nor has the Company entered into any agreements, arrangements, undertakings or negotiation in relation to the injection of any assets or business into the Group.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

(c) Liquidity and financial resources

The current ratio of the Group as at 31 March 2018 was 2.22 as compared to 5.58 as at 31 March 2017. The decrease in current ratio was due to (1) the accrued liabilities with Deconsolidated Subsidiaries of HK$127 million classified as long term liabilities as at 31 March 2017 was reclassified as short term liabilities as at 31 March 2018, based on the liquidation status of those Deconsolidated Subsidiaries; and (2) approximately HK$50 million cash was utilised to repurchase the common stock of Emerson.

The Group’s working capital requirements were entirely financed by internal resources as the Group continued to generate cash from its licensing business and the distribution of electrical appliances. As at 31 March 2018, the Group had accumulated cash and bank balances amounting to HK$446 million as compared to HK$502 million as at 31 March 2017.

(d) Material acquisition and disposal of subsidiaries and affiliated companies

Save for the disposal of the subsidiary, Tomei Kawa Electronics International Limited, on 16 June 2017, the Group did not make any material acquisition or disposal of subsidiaries and affiliated companies during the Year.

(e) Significant investment

The Group did not make any new significant investment during the Year.

(f) Future plan for material investments and capital assets

The Group does not have any concrete plan for material investments or capital assets acquisitions for the coming 12 months.

(g) Gearing

There were no interest-bearing borrowings recorded in the consolidated financial statements of the Group for the Year and for the Corresponding Period respectively.

(h) Charges on group assets

As at 31 March 2018, certain of the Group’s assets with a total carrying value of approximately HK$196 million (approximately HK$176 million as at 31 March 2017) were pledged to secure other liabilities granted in previous years to certain Deconsolidated Subsidiaries and the Group.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

(i) Treasury policies

The Group’s revenues are mainly in US dollars. The Group is not exposed to any significant currency risks since the HK dollar is linked with the US dollar.

(j) Employees and remuneration

The number of employees of the Group as at 31 March 2018 and 31 March 2017 was 40. The Group remunerates its employees mainly based on industry practice, individual performance and experience. Apart from the basic remuneration, a discretionary bonus may be granted to eligible employees by reference to the Group’s performance as well as to an individual’s performance in the relevant financial year. Other benefits include medical and retirement schemes.

(k) Contingent liabilities

Details of the contingent liabilities of the Group are set out in note 32 to the consolidated financial statements of the annual report.

(l) Bank and other borrowings

No bank and other borrowings were additionally incurred by the Group during the Year and the 15 months ended 31 March 2017.

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2019

(a) Business review

The Group recorded a revenue of HK$123 million for the Year as compared to HK$171 million for the Corresponding Year, representing a decrease of 28.1%. The decrease in revenue was mainly due to the decrease in the revenue generated from the distribution of houseware products of Emerson Radio Corp. (‘‘Emerson’’). The Group recorded an audited net profit attributable to shareholders of HK$91 million for the Year, as compared to HK$175 million for the Corresponding Year. The significant drop in the net profit was mainly due to (1) a net increase in impairment loss of HK$52 million recognised in respect of brands and trademarks, as compared with the Corresponding Year; and (2) a net decrease of HK$79 million in the write back of accrued liabilities with the Deconsolidated Subsidiaries (as defined in note 27 to the consolidated financial statements) in the Year as compared with the Corresponding Year, which was partly offset by the increase of HK$27 million in the write back of accrued liabilities with former associated companies.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

The operations of the Group include the Emerson operations, the licensing operations for Akai, Sansui and Nakamichi brands; and the trading of household appliances in the PRC.

Emerson operations

The revenue generated from the distribution of houseware products and audio products of Emerson for the Year was HK$67 million as compared to HK$115 million for the Corresponding Year. The major reason which contributed to the overall decrease in net product sales of HK$48 million or 41.7% was the decrease in sales of microwave ovens which was driven by a model discontinuation by one of the key customers. Emerson has continued to take active steps to further streamline its operations and reduce and control its operating costs. The operating costs of Emerson for the Year were reduced to HK$29.8 million as compared to HK$38.3 million for the Corresponding Year. As a result, the operating loss of Emerson for the Year was reduced to HK$27 million as compared to HK$31 million for the Corresponding Year.

Licensing revenue of Emerson for both the Year and the Corresponding Year was HK$5 million. In order to increase the licensing income, at the end of 2018, Emerson appointed Leveraged Marketing Corporation of America (‘‘LMCA’’) as an agent to identify and procure licensing opportunities going forward.

Due to the uncertainties brought by the trade war between the USA and the PRC, the economic environment for the distribution of houseware products and audio products, which are mainly imported from the PRC, has deteriorated. In this respect, the value of the Emerson trademarks, which had already been impaired in previous years, has been further impaired by HK$23 million for the Year.

In December 2016, Emerson publicly announced the approval by its board of directors of the repurchase program of up to US$5 million of its common stock and intended to run the repurchase program to the end of 2017. In September 2017, Emerson’s board of directors further approved an additional US$5 million, bringing the total authorised stock repurchase under the program to US$10 million. The program was extended to 30 June 2018, and subsequently to 31 December 2018 at which point it ended. Under the program, repurchases were funded by Emerson’s available working capital and repurchased shares were held in the treasury as authorised and issued shares available for general corporate purposes. Upon the completion date of the program, Emerson has repurchased 6,087,180 shares of its common stock. In this respect, the deemed acquisition increased the Group’s shareholding in Emerson from 66.9% as at 31 March 2018 to 72.4% as at 31 March 2019.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Licensing operations

The revenue generated from the licensing operations was HK$50 million for the Year as compared to HK$51 million for the Corresponding Year. The operating profit of these operations for the Year was HK$32 million as compared to HK$37 million for the Corresponding Year which represented the net licensing income received from the licensees. The performance of these operations has remained steady throughout the past few years.

The continuing licensing model is that, Akai, Sansui and Nakamichi will grant licensing rights to individual licensees around the world, authorising them to sell products under the respective trademarks. In return, the licensees will pay a licensing fee ranging from 2% to 6%, depending on the respective brands involved, on the gross value of purchases made during the license period. All licensing agreements are subject to a minimum fee payable by the licensees, which varies with individual contracts and are non-refundable. This minimum fee corresponds to the guaranteed minimum gross purchase that each licensee commits. The licensee will have to pay an additional license fee in the case where the actual gross purchase for a license period exceeds the guaranteed minimum gross purchase.

Hong Kong Financial Reporting Standard 15 ‘‘Revenue from Contracts with Customers’’ has been effective for annual periods beginning on or after 1 January 2018, and affects the basis of recognition of licensing income. The Group has adopted this financial reporting standard since the beginning of the Year. Accordingly, we have reviewed the basis for the recognition of licensing income adopted by the Group in the previous years to see whether it complies with the new standard or not. As a result of the review, we have changed the basis of recognising the licensing income from over a period of time for previous years to at a point of time for the Year. This change of basis of recognition has a favourable impact of approximately HK$7 million on the total amount of licensing income recognised during the Year.

Although the licensing income generated for the Year is comparable to the Corresponding Year, the values of the brands and trademarks owned by the licensing operations have been impaired by HK$71 million for the Year, as compared to the impairment charge reversal of HK$2 million in the value of the brands and trademarks in the Corresponding Year. The significant impairment was due to (1) the uncertainty over the trade war between the USA and the PRC; (2) the unfavourable global economic outlook going forward; (3) the renewal of key customer contracts and negotiation with potential customers during the Year on such terms which were below the expectation of management; and (4) keen competition of the relevant markets.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Household appliances operation in the PRC

The Group has many years of experience in the distribution of houseware products and audio products in the USA. The management has decided to utilise this expertise and experience to expand its market in the PRC. A wholly owned subsidiary was therefore incorporated in the PRC in October 2018 to set up a new household appliances trading operation. Towards the end of the Year, this operation has generated approximately HK$1 million revenue. The products traded in this operation mainly include household appliances, wires and cables.

(b) Business prospect

As mentioned above, the uncertainties brought by the trade war between the USA and the PRC negatively impacted the economic environment of the distribution of houseware products and audio products in the USA, as well as the expected licensing income of the Group. The management has therefore planned to develop three new operations in the PRC as new sources of income, namely, (1) household appliances operation, (2) information technology operation and (3) property development. By the end of the Year, trading transactions of household appliances have successfully commenced and attributed approximately HK$1 million revenue to the Group. The management expects that this operation may continue to generate steady income to the Group. Preparation work has been implemented for the information technology operation and property development during the Year, which will form new sources of income. The information technology operation includes the provision of services for various applications. The property development may include the provision of project management services to those property developers and acting as property developer in the PRC. The management expects these new business activities can maximise the shareholders’ value of the Company in the long run.

Regarding the established operations, Emerson will continue to expand its existing distribution channels and to develop and promote new products to regain shelf spaces in these and other retailers in the USA. Emerson is also investing in products and marketing activities to expand its sales through internet and e-commerce channels. These efforts require investments in appropriate human resources, media marketing and development of products in various categories in addition to the traditional home appliances and audio products that Emerson has offered. Besides, Emerson continues putting efforts to identify strategic courses of action related to its licensing activities, and as previously mentioned has entered into a master license agreement with LMCA to procure potential licensees.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Emerson expects that the recently announced USA tariffs on certain imported goods from the PRC, and the current USA administration’s public support for additional tariffs on imported goods from the PRC, and the PRC’s retaliatory tariffs on certain goods imported from the USA, as well as modifications to international trade policy, may affect its product costs going forward, which could require Emerson to take pricing action to offset the increasing costs; however, at this time Emerson is unable to quantify this possible effect on its costs. Although Emerson is monitoring the trade environment and working to mitigate the possible effect of tariffs through pricing and sourcing strategies, Emerson cannot be certain how its customers and competitors will react to the actions taken, and some costs may be passed through to Emerson’s customers as product price increases in the future.

For the Group’s licensing operations, the management expects to expand the footing of its licensing operations in developing countries, such as India and some other countries in Africa.

(c) Liquidity and financial resources

The current ratio of the Group as at 31 March 2019 was 16.03 as compared to 2.22 as at 31 March 2018. The increase in the current ratio was because (1) the accrued liabilities with the Deconsolidated Subsidiaries of HK$127 million as at 31 March 2018 was fully written back during the Year; and (2) approximately HK$27 million accrued liabilities with former associated companies brought forward from the Corresponding Year was also written back during the Year.

The Group’s working capital requirements were entirely financed by internal resources as the Group continued to generate cash from its licensing business and the distribution of houseware products during the Year. As at 31 March 2019, the Group had accumulated cash and bank balances amounting to HK$424 million as compared to HK$446 million as at 31 March 2018.

(d) Material acquisition and disposal of subsidiaries and affiliated companies

The Group did not make any material acquisition or disposal of subsidiaries and affiliated companies during the Year.

(e) Significant investment

The Group did not make any new significant investment during the Year.

(f) Future plan for material investments and capital assets

The Group does not have any concrete plan for material investments or capital assets acquisitions for the coming 12 months.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

(g) Gearing

There were no interest-bearing borrowings recorded in the consolidated financial statements of the Group for the Year and for the Corresponding Year respectively.

(h) Charges on group assets

As at 31 March 2019, no assets were pledged to secure other borrowing facilities for the Group (approximately HK$196 million as at 31 March 2018).

(i) Treasury policies

The Group’s revenues are mainly in US dollars. The Group is not exposed to any significant currency risks since Hong Kong dollars have continued to be linked with the US dollars.

(j) Employees and remuneration

The numbers of employees of the Group as at 31 March 2019 and 31 March 2018 were 53 and 40 respectively. The Group remunerates its employees mainly based on industry practice, individual performance and experience. Apart from the basic remuneration, a discretionary bonus may be granted to eligible employees by reference to the Group’s performance as well as to an individual’s performance in the relevant financial year. Other benefits include medical and retirement schemes.

(k) Contingent liabilities

Details of the contingent liabilities of the Group are set out in note 29 to the consolidated financial statements of the annual report.

(l) Bank and other borrowings

No bank and other borrowings were additionally incurred by the Group during the Year and the Corresponding Year.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

1. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2020

(a) Business review

The Group recorded a revenue of HK$240 million for the Year as compared to HK$123 million for the Corresponding Year, representing an increase of approximately 95%. The increase in revenue was mainly due to the full year’s operation of the trading of household appliances, wires and cables in the PRC, which the operation commenced since early 2019. The Group recorded an audited loss attributable to shareholders of HK$87 million for the Year, as compared to an audited profit attributable to shareholders of HK$91 million for the Corresponding Year. The turnaround from a profit to a loss was mainly due to no write back of accrued liabilities with deconsolidated subsidiaries and former associated companies in the Year, whereas there was a write back of accrued liabilities with deconsolidated subsidiaries and former associated companies amounting to HK$127 million and HK$27 million respectively in the Corresponding Year.

Since the completion of the capital injection in Ningxiang Minjun at the end of November 2019, Ningxiang Minjun has become a 51% owned subsidiary of the Company, after which the Group has commenced its property development business in the PRC. As at the date of this report, the current and continuing principal business activities of the Group include Emerson operations business, licensing operations business for Akai, Sansui and Nakamichi brands, PRC’s household appliances business, PRC’s IT services business, and PRC’s property development business.

Emerson operations business

Emerson, a 72.4% owned subsidiary whose shares are listed on the NYSE American in the USA, generated revenue from the distribution of houseware products and audio products of HK$48 million for the Year as compared to HK$67 million for the Corresponding Year, representing a decrease of approximately 28%. The decrease in revenue was mainly due to a model discontinuation in microwave ovens by one of Emerson’s key customers and the decrease in sales of clock radios. During the Year, Emerson has continued to take active steps to streamline its operations and reduce and control its operating costs. The operating costs of Emerson for the Year were higher than that of the Corresponding Year due to recorded legal fees. As a result, the operating loss of Emerson for the Year was HK$36 million as compared to HK$27 million for the Corresponding Year.

Licensing revenue of Emerson for the Year was HK$2 million as compared to HK$5 million for the Corresponding Year. The year-over-year decrease was due to the non-renewal of one of Emerson’s licensees which expired in December 2018.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Due to the uncertainties brought by the trade war between the USA and the PRC, and the outbreak of the COVID-19 pandemic, it is expected that the economic environment for the distribution of houseware products and audio products will be worse in the coming year. In this respect, the value of the Emerson trademark, which had already been impaired in previous years, has been further impaired by HK$24 million and reduced to nil in the Group’s consolidated financial statements for the Year.

Licensing operations business

The revenue generated from the licensing operations business was HK$58 million for the Year as compared to HK$50 million for the Corresponding Year. The operating profit of these operations for the Year was HK$39 million as compared to HK$32 million for the Corresponding Year which represented the net licensing income received from the licensees. The performance of these operations has remained steady throughout the past few years.

The continuing licensing model is that, Akai, Sansui and Nakamichi will grant licensing rights to individual licensees around the world, authorising them to sell products under the respective trademarks. In return, the licensees will pay a licensing fee ranging from 2% to 6%, depending on the respective brands involved, on the gross value of purchases made during the license period. All licensing agreements are subject to a minimum fee payable by the licensees, which varies with individual contracts and are non-refundable. This minimum fee corresponds to the guaranteed minimum gross purchase that each licensee commits. The licensee will have to pay an additional license fee in the case where the actual gross purchase for a license period exceeds the guaranteed minimum gross purchase.

Although the licensing income generated for the Year is comparably higher than the licensing income generated for the Corresponding Year, the total value of the brands and trademarks owned by the licensing operations has been impaired by HK$73 million for the Year, as compared to the impairment charge of HK$71 million in the value of the brands and trademarks in the Corresponding Year. The impairment provided for the Year was due to (1) the uncertainty over the trade war between the USA and the PRC; (2) the unfavourable global economic outlook due to the global COVID-19 pandemic; (3) the negotiation and renewal of key customer contracts during the Year on such terms which were below the expectation of management; and (4) keen competition of the relevant markets.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

PRC’s household appliances business

A wholly-owned subsidiary of the Group was set up to engage in the trading of a wide variety of household appliances in the PRC at the end of 2018. The management was of the view that, by capitalizing on the Group’s experience in the distribution of houseware products in the USA, the engagement in the trading of household appliances in the PRC may broaden the revenue’s base of the Group. During the Year, a full year’s operation in trading of household appliances, wires and cables in the PRC generated a revenue of HK$123 million, whereas a revenue of HK$1 million was recorded in the Corresponding Year for two months’ operations and therefore, the Group achieved an enormous revenue growth in this operation.

PRC’s IT services business

The Group has also commenced the provision of IT services in the PRC since the second quarter of 2019 through its newly established subsidiary. The principal business scope of this operation is to provide IT system development and related services to enhance customers’ competitiveness through big data analysis, online and offline integration development as well as advancement of internetisation. During the Year, this operation has contributed a revenue of HK$9 million and an operating profit of HK$4 million to the Group.

PRC’s property development business

During the Year, the Group completed the capital injection of RMB10,408,200 in cash in Ningxiang Minjun through a wholly-owned subsidiary (i.e. the Capital Increase). The Capital Increase completed in November 2019, after which Ningxiang Minjun has become a 51% owned subsidiary of the Company. Details of the Capital Increase are set out in the circular of the Company dated 19 September 2019 (the ‘‘Circular’’).

Since the completion of the Capital Increase, the Group, via Ningxiang Minjun, has been holding a piece of land (the ‘‘Land’’), comprising a residential land with a site area of approximately 49,502.99 sq. m. and a total planned gross floor area of approximately 191,789.95 sq. m. for residential use, situated at the west of Ningxiang Avenue, north of Tongjie Road, Jingkai District, Ningxiang City, Hunan Province, the PRC. As at the date of this report, the Land was under development and pre-sale of certain units had been launched.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

As at 31 March 2020, the Group achieved a total contracted sales amount of approximately HK$32 million (equivalent to approximately RMB29 million), with a total contracted sales gross floor area of approximately 6,300 sq. m. The average selling price was approximately HK$5,100 (equivalent to approximately RMB4,600) per sq. m. It is expected that the delivery of these units will take place in early 2022.

(b) Business prospect

Looking ahead, the abrupt and rapid spread of the COVID-19 pandemic is expected to add to the woes, resulting from the lingering China-US trade conflict and uncertain geopolitical risks in different countries, which have put the economic growth of most countries on a slow growth trajectory. Although the agreement of a phase one deal between the PRC and the USA was signed in early 2020, uncertainties remain and warrant caution.

Despite Emerson’s efforts to monitor the external environment and to mitigate its repercussion on its business activities, it is not immune from these external risk factors. Notwithstanding, apart from expanding and strengthening its existing distribution channels, Emerson has been developing and promoting new products to regain shelf spaces in these and other retailers in the USA. Persistent efforts have been put in investing in new products and marketing activities to increase its sales through internet and e-commerce channels and in identifying strategic courses of action related to its licensing activities.

The increase in revenue of the PRC’s household appliances business has shown our operating strategies to be effective. However, the competition in the household appliance trading industry in the PRC is fierce and we will therefore continue to keep ourselves abreast of this industry development and formulate and implement different business strategies as and when required and appropriate, in order for this business activities to be a steady source of income of the Group.

Due to the global COVID-19 pandemic, most business activities in the major cities in the PRC have been delayed since early 2020. With this, the IT services operation has been suffering from searching new customers. The management expects that it would be difficult to maintain the income source in the coming year. In this respect, the management will consider to consolidate the IT services team and use these resources to focus on the household appliances business and the property development business.

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APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

The Capital Increase has marked a great milestone in the Group’s development and meanwhile demonstrated our determination in entering the PRC’s property development business. The Group will then focus on land acquisition with an increase in quality and quantity of the land bank to enhance sustainable growth with the aim of developing the PRC’s property development as one of the major businesses of the Group. However, the property market in the PRC is affected by a number of factors, such as changes in social, political, economic and legal environment as well as the PRC government’s undertakings of fiscal, economic, monetary, industrial and environmental policies. Changes in macroeconomic conditions, consumer confidence, consumption spending, and consumption preferences may also affect the Group’s property development business. As such, the management will take precautionary measures in order to mitigate the associated risks in the property development business. In the ensuing days, the Group will continue to strengthen the property development business and will also expand its property development business in potential cities in order to maximize shareholders’ value.

(c) Liquidity and financial resources

As at 31 March 2020, the Group had net current assets of HK$642 million as compared to HK$436 million as at 31 March 2019. As at 31 March 2020, the Group had a current ratio of approximately 5.49 (16.03 as at 31 March 2019). The increase in net current assets but decrease in current ratio were mainly attributable to (1) the consolidation of properties under development amounting to HK$266 million up to 31 March 2020 following the completion of the Capital Increase; and (2) the increase in accounts receivable from the PRC’s household appliances business which was partially offset by the increase in accounts payable during the Year.

As at 31 March 2020, the Group had HK$447 million cash and bank balances (HK$424 million as at 31 March 2019). The Group’s working capital requirements were mainly financed by internal resources.

The Group had inventories of HK$15 million as at 31 March 2020 (HK$28 million as at 31 March 2019).

(d) Material acquisition and disposal of subsidiaries and affiliated companies

Other than the Capital Increase (details of the Capital Increase are set out in the Circular), the Group did not make any other material acquisition and disposal of subsidiaries and affiliated companies during the Year.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

(e) Significant investment

Other than the Capital Increase in the registered capital of Ningxiang Minjun, the Group did not enter into any new significant investment during the Year.

Ningxiang Minjun is principally engaged in property development and operation in the PRC, and holds 100% of the Land. The Land is now under development and pre-sale of certain units has been launched. It is expected that Ningxiang Minjun not only diversifies the Group’s businesses, but also increases the opportunities and broadens the income base of the Group.

Given the rapid economic development of Ningxiang, the PRC in recent years, especially in the real estate industry, the Company believes that the prospect of the housing market in Ningxiang is encouraging, thereby driving the growth of property development market in Ningxiang, the PRC, and Ningxiang Minjun is expected to be benefited from the positive impact of the real estate market in the region.

(f) Future plan for material investments and capital assets

The Group does not have any concrete plan for material investments or capital assets acquisitions for the coming 12 months.

(g) Gearing

As at 31 March 2020, the Group’s gearing ratio, expressed as total borrowings over equity attributable to the shareholders of the Company, was approximately 0.47 time (as at 31 March 2019: Nil).

(h) Charges on group assets

As at 31 March 2020, no assets were pledged to secure other borrowing facilities for the Group (as at 31 March 2019: Nil).

(i) Treasury policies

The Group’s revenues are mainly in US dollars and Renminbi (‘‘RMB’’). Since Hong Kong dollars is linked with US dollars, the Group is not exposed to significant currency risks in transactions settled in US dollars. However, for transactions settled in RMB, the Group will be exposed to foreign currency risks. Considering the amount of the transactions settled in RMB during the Year, the Group is not engaged in any particular hedge against foreign currency risks at the moment. The Group will closely monitor and manage its foreign currency exposure and to make use of appropriate measures when required.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

(j) Employees and remuneration

The numbers of employees of the Group as at 31 March 2020 and 31 March 2019 were 82 and 53 respectively. The Group remunerates its employees mainly based on industry practice, individual performance and experience. Apart from the basic remuneration, a discretionary bonus may be granted to eligible employees by reference to the Group’s performance as well as to an individual’s performance in the relevant financial year. Other benefits include medical and retirement schemes.

(k) Contingent liabilities

Details of the contingent liabilities of the Group are set out in note 33 to the consolidated financial statements of the annual report.

(l) Capital commitments

Following completion of the Capital Increase and as at 31 March 2020, the Group had contracted, but not provided for, capital expenditure commitments of HK$499 million (as at 31 March 2019: Nil) in respect of properties under development.

(m) Bank and other borrowings

No bank borrowings were incurred by the Group during the Year and the Corresponding Year. Particulars of other borrowings of the Group as at 31 March 2020 are set out in note 31 to the consolidated financial statements of the annual report.

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes 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.

2. DISCLOSURE OF INTEREST

(a) Interests of Directors

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO), which were required (a) 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 were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the ‘‘Model Code’’) to be notified to the Company and the Stock Exchange, were as follows:

		Number of Shares	Number of Shares	held in the Company
						Approximate
						percentage of
		Corporate				total issued
Name of Director	Nature of interest	interest	Note	Other interests	Note	share capital
Mr. Tan	Long position	3,616,712,779	(ii)	439,180,000	(iii)	73.85%

Notes:

• (i) As at the Latest Practicable Date, the total number of issued Shares of the Company was 5,492,232,889.

• (ii) The 3,616,712,779 Shares in which Mr. Tan is deemed to hold interests under the SFO are the Shares held by Wealth Warrior Global Limited (‘‘Wealth Warrior’’), which is wholly owned by Mr. Tan.

• (iii) The 439,180,000 Shares are owned by Merchant Link Holdings Limited and Rise Vision Global Limited, each of which holds 219,590,000 Shares and they are indirectly wholly owned by a discretionary trust. Mr. Tan is a director of both Merchant Link Holdings Limited and Rise Vision Global Limited and is the settlor and a beneficiary of the discretionary trust. In this respect, Mr. Tan is deemed to hold interests of these Shares under the SFO.

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GENERAL INFORMATION

APPENDIX III

Save as disclosed above, none of the Directors or chief executive of the Company had, or were deemed to hold, any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (i) were required 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 were taken or deemed to have under such provisions of the SFO); or (ii) were required to be entered in the register referred to therein pursuant to section 352 of the SFO; or (iii) were required, pursuant to the Model Code to be notified to the Company and the Stock Exchange, as at the Latest Practicable Date.

(b) Interests of substantial shareholders

As at the Latest Practicable Date, so far as known to the Directors or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had interests or short positions in the Shares or underlying Shares of the Company under provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company under section 336 of the SFO:

			Approximate
		Number of Shares	percentage of total
Name of substantial shareholder	Capacity	held/interested	issued share capital
Wealth Warrior	Beneficial owner	3,616,712,779 (L)	65.85%
Sino Bright Enterprises Co., Ltd.	Beneficial owner and person	1,023,463,423 (L)	18.63%
(‘‘Sino Bright’’)	having a security interest in	(Note 1)
	shares
LEHD Pte. Ltd. (‘‘LEHD’’)	Trustee	1,428,769,939 (L)	26.01%
		(Notes 1, 2)
Airwave Capital Limited	Interest of controlled	405,306,516 (L)	7.38%
(‘‘Airwave’’)	Corporation	(Note 3)
Barrican Investments Corporation	Beneficial owner and interest	405,306,516 (L)	7.38%
(‘‘Barrican’’)	of controlled corporation	(Notes 2, 4)
Splendid Brilliance (PTC) Limited	Trustee	439,180,000 (L)	8.00%
(‘‘Splendid Brilliance’’)		(Note 5)
He Guichai	Interest of controlled	439,180,000 (L)	8.00%
	corporation	(Note 5)

The letter ‘‘L’’ denotes a person’s ‘‘long position’’ (as defined under Part XV of the SFO) in such Shares.

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GENERAL INFORMATION

APPENDIX III

Notes:

1. Sino Bright owns 23,463,423 Shares, representing approximately 0.42% of the total issued share capital of the Company. Sino Bright is deemed to be interested in 1,000,000,000 Shares pursuant to the legal charge under the share mortgage dated 26 September 2017 in favour of Sino Bright (as mortgagee) granted by Wealth Warrior (as mortgagor) as security for the deferred consideration under the sale and purchase agreement dated 22 September 2017 between Sino Bright (as vendor) and Wealth Warrior (as purchaser).

2. LEHD is deemed to have interests in 1,428,769,939 Shares as the trustee to the discretionary trust which owns the entire issued share capital of The Ho Family Trust Limited (‘‘The Ho Family Trust’’). The Ho Family Trust is deemed to be interested in the Shares held by Barrican, McVitie Capital Limited (‘‘McVitie’’) and Sino Bright, which are wholly owned subsidiaries of The Ho Family Trust and directly own 335,260,845 Shares, 70,045,671 Shares and 1,023,463,423 Shares, respectively.

3. Barrican is a wholly owned subsidiary of Airwave and owns 100% interests in McVitie. Accordingly, Airwave is deemed to be interested in the Shares held by Barrican and McVitie.

4. McVitie is a wholly owned subsidiary of Barrican. Accordingly, Barrican is deemed to be interested in the Shares held by McVitie.

5. Splendid Brilliance, being a party acting in concert with Wealth Warrior, is deemed to have interests in 439,180,000 Shares as the trustee to the discretionary trust which indirectly owns the entire issued share capital of Merchant Link Holdings Limited and Rise Vision Global Limited, each of which holds 219,590,000 Shares. Mr. Tan is a director of both Merchant Link Holdings Limited and Rise Vision Global Limited and is the settlor and a discretionary beneficiary of the discretionary trust. Ms. He Guichai is the sole director and sole shareholder of Splendid Brilliance.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor chief executive of the Company was aware of any other person (other than the Directors or chief executive of the Company) or corporation who had an interest or short position in the Shares or underlying Shares of the Company under provisions of Divisions 2 and 3 of Part XV of the SFO which were required to be recorded in the register kept by the Company pursuant to section 336 of the SFO.

III – 3

GENERAL INFORMATION

APPENDIX III

3. DIRECTORS’ COMPETING INTERESTS

As at the Latest Practicable Date, Mr. Tan had shareholding interests and/or held directorships in certain companies engaged in property development in the PRC (the ‘‘Relevant Companies’’). Pursuant to Rule 8.10 of the Listing Rules, Mr. Tan was hence regarded as being interested in businesses which competed or were likely to compete, either directly or indirectly, with some of the businesses of the Group. Nevertheless, as at the Latest Practicable Date, the business activities of the Relevant Companies and the Group were conducted in different geographical areas in the PRC.

Mr. Tan is aware of his fiduciary duties in the Company and understands that he must, in the performance of his duties as Director, avoid actual and potential conflicts of interest and ensure that he acts in the best interests of the Company and the Shareholders as a whole. In addition, any significant business decisions of the Group are to be determined by the Board. Any Director who has a material interest in any matter being resolved shall abstain from voting on the relevant Board resolutions.

In view of the above, the Board considers that the interests of Mr. Tan in the Relevant Companies will neither prejudice his capacity as a Director nor compromise the interests of the Group and the Shareholders. The Board also opines that coupled with the diligence of independent non-executive Directors, the Group is capable of carrying on its businesses independently of, and at arm’s length with, the Relevant Companies.

Save as disclosed above, to the best knowledge of the Directors, as at the Latest Practicable Date, none of the Directors and their respective close associates was interested in any business which competed, or was likely to compete, either directly or indirectly, with the businesses of the Group pursuant to Rule 8.10 of the Listing Rules.

4. DIRECTOR’S INTERESTS IN ASSETS OF THE GROUP

As at the Latest Practicable Date, the Group’s certain offices and warehouses were leased from Mr. Tan’s associates, all of which were fully exempt connected transactions or continuing connected transactions for the Company pursuant to Rule 14A.76(1)(c) of the Listing Rules, with particulars summarised below:-

• (i) the Company’s office and principal place of business in Hong Kong, situated at Flat C01, 32/F, TML Tower, 3 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong, was leased to the Group by an associate of Mr. Tan pursuant to a tenancy agreement entered into between the parties for a rental period commencing on 20 August 2020 and up to 19 August 2021 at a monthly rent of HK$4,800;

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GENERAL INFORMATION

APPENDIX III

• (ii) the office and warehouse of Guangzhou Nimble Household Appliances Trading Ltd.* （廣州敏捷家電貿易有限公司）, a wholly-owned subsidiary of the Company, were leased to the Group by an associate of Mr. Tan pursuant to two tenancy agreements entered into between the parties both for a rental period commencing on 20 March 2020 and up to 22 April 2022 at monthly rents of RMB6,660 and RMB13,000 respectively;

• (iii) the office of Guangzhou Junrong Real Estate Co., Ltd.*（廣州駿榮房地產有限公司）, a wholly-owned subsidiary of the Company, was leased to the Group by an associate of Mr. Tan pursuant to a tenancy agreement entered into between the parties for a rental period commencing on 20 March 2020 and up to 22 April 2022 at a monthly rent of RMB10,140;

• (iv) the office of Guangzhou Jinheng Property Consulting Co., Ltd.（廣州市錦恆地產顧問 有限公司, ‘‘Guangzhou Jinheng’’), a wholly-owned subsidiary of the Company, was leased to the Group by an associate of Mr. Tan pursuant to a tenancy agreement entered into between the parties for a rental period commencing on 20 May 2019 and up to 19 May 2022 at a monthly rent of RMB6,780, as supplemented by a supplemental agreement entered into among Guangzhou Jinheng, Nimble Information Technology (Guangzhou) Co., Ltd.（敏捷信息科技（廣州）有限公司, ‘‘Nimble IT’’), a wholly-owned subsidiary of the Company, and Mr. Tan’s associate pursuant to which the office was then leased to Guangzhou Jinheng and Nimble IT on a 50:50 basis with effect from 20 May 2020 and each of Guangzhou Jinheng and Nimble IT shall share the monthly rent of RMB3,390;

• (v) the office of Nimble IT was leased to the Group by an associate of Mr. Tan pursuant to a tenancy agreement entered into between the parties for a rental period commencing on 20 May 2020 and up to 19 May 2022 at a monthly rent of RMB3,390 (the tenancy agreement was entered into by the parties subsequent to the supplemental agreement as mentioned in paragraph (iv) above); and

• (vi) the office of the Bidder, a wholly-owned subsidiary of the Company, was leased to the Group by an associate of Mr. Tan pursuant to a tenancy agreement entered into between the parties for a rental period commencing on 1 July 2019 and up to 30 June 2022 at a monthly rent of RMB1,800.

Save as disclosed above, none of the Directors had any interest, either directly or indirectly, in any assets which have, since 31 March 2020 (being the date to which the latest published audited consolidated financial statements of the Group were made up) and up to the Latest Practicable Date, been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

III – 5

GENERAL INFORMATION

APPENDIX III

5. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

Ningxiang Minjun, prior to becoming a non-wholly owned subsidiary of the Company on 30 November 2019, entered into two loan agreements on 1 August 2019 with GZ Minjie and Guangzhou Jinxiu Investment Company Limited*（廣州錦繡投資有限公司, ‘‘GZ Investment’’) (collectively, the ‘‘Loan Agreements’’), respectively, pursuant to which GZ Minjie and GZ Investment agreed to provide loans to Ningxiang Minjun in the principal amounts of up to RMB243.8 million and RMB86.2 million respectively, for refinancing, provision of additional financings for the business development of Ningxiang Minjun as well as for its general working capital purpose. Details of the Loan Agreements are disclosed in the circular of the Company dated 19 September 2019.

As at the Latest Practicable Date, GZ Minjie was owned as to approximately 1.73% by Mr. Tan Huichuan, the son of Mr. Tan, and approximately 98.27% by GZ Investment, which was held as to 10% by Mr. Tan Huichuan and 90% by Guangzhou Jinxiu Dadi Real Estate Development Co., Ltd.*（廣州錦繡大地房地產開發有限公司）, which in turn was owned as to 90% by Mr. Tan Huichuan and 10% by Mr. Tan Haocheng, the elder brother of Mr. Tan.

Save for the Loan Agreements, as at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which is significant in relation to the business of the Group.

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any 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).

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GENERAL INFORMATION

APPENDIX III

7. MATERIAL LITIGATION

The Shares were suspended from trading on the Stock Exchange on 30 May 2011. Pursuant to an order of the High Court, Mr. Fok Hei Yu and Mr. Roderick John Sutton, both of FTI Consulting (Hong Kong) Limited, were appointed as the provisional liquidators of the Company (the ‘‘Former Provisional Liquidators’’) on 31 May 2011. The Company completed the restructuring of the Group and fulfilled all resumption conditions imposed by the Stock Exchange and trading in the Shares resumed on 30 May 2016. The Former Provisional Liquidators were discharged and released on 26 May 2016 by the High Court. In an order made by the High Court on 9 May 2016 in respect of case HCCW 177/2011, the Company is required to:

• (i) indemnify and keep indemnified the Former Provisional Liquidators in the event that the funds paid into Court are insufficient to meet the taxed fees and expenses of the Former Provisional liquidators; and

• (ii) indemnify and keep indemnified Mr. Fok Hei Yu and FTI Consulting (Hong Kong) Limited in respect of the costs of the defence of proceedings HCA 92/2014, subject to the final determination of HCA 92/2014. HCA 92/2014 is a legal case filed in January 2014 in the High Court by Sino Bright against Mr. Fok Hei Yu and FTI Consulting (Hong Kong) Limited for alleged misrepresentation and the case is ongoing.

As at the Latest Practicable Date, the Company had received no such requests for the related fees, costs and expenses.

The Directors are of the view that no provision is necessary for any of the matters described above, after having considered their respective merits.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other litigation or claims of material importance which were pending or threaten against any member of the Group.

8. MATERIAL CONTRACT

Save for the Ningxiang Minjun Capital Increase Agreement dated 1 August 2019 entered into among the Bidder, Ningxiang Minjun and GZ Minjie in relation to the injection of RMB10,408,200 in cash by the Bidder into the capital of Ningxiang Minjun (details of which please refer to the Company’s announcement and circular dated 1 August 2019 and 19 September 2019 respectively), the Group did not enter into any material contract (not being contracts entered into in the ordinary course of business) within two years immediately preceding and including the Latest Practicable Date.

III – 7

GENERAL INFORMATION

APPENDIX III

9. MISCELLANEOUS

• (a) The registered office of the Company is situated at Wessex House, 5th Floor, 45 Reid Street Hamilton HM 12, Bermuda.

• (b) The secretary of the Company is Mr. Hui Yick Lok, Francis, who is an associate member of the Hong Kong Institute of Certified Public Accountants.

• (c) The Company’s principal place of business in Hong Kong is situated at Flat C01, 32/F, TML Tower, 3 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong.

• (d) The Company’s share registrar and transfer office in Hong Kong is Tricor Tengis Limited, Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (e) The English texts of this circular shall prevail over the respective Chinese texts in case of any inconsistency.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be on available for inspection during the normal business hours from 9:00 a.m. to 6:00 p.m. on any weekday (except public holidays) at the principal place of business of the Company in Hong Kong up to and including the date which is 14 days from the date of this circular:

• (a) the memorandum of continuance and bye-laws of the Company;

• (b) the annual reports of the Company for the three financial years ended 31 March 2018, 2019 and 2020;

• (c) the interim report of the Company for the six months ended 30 September 2020;

• (d) the letter from the Board, the text of which is set out on pages 7 to 25 of this circular;

• (e) the Ningxiang Minjun Capital Increase Agreement, being the material contract referred to in the section headed ‘‘8. Material contract’’ in this appendix;

• (f) the Cooperation Agreement;

• (g) the circular of the Company dated 18 November 2020; and

• (h) this circular.

III – 8