Global Strategic Group Limited

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about this circular or as to the action to be taken, you should consult your licensed securities dealer or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Global Strategic Group Limited (the ‘‘Company’’), you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer 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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GLOBAL STRATEGIC GROUP LIMITED ��

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8007)

(I) PROPOSED CAPITAL REORGANISATION;

(II) PROPOSED RIGHTS ISSUE ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON RECORD DATE; AND

(III) NOTICE OF EGM

Underwriter of the Rights Issue

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Rifa Securities Limited

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

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Capitalised terms used in this cover shall have the same meanings as defined in this circular.

It should be noted that the Shares will be dealt in on an ex-rights basis from Thursday, 5 August 2021. Dealings in the Rights Shares in the nil-paid form will take place from Thursday, 19 August 2021 to Thursday, 26 August 2021 (both days inclusive). If the conditions of the Rights Issue are not fulfilled or the Underwriting Agreement is terminated by the Underwriter, the Rights Issue will not proceed. Any person contemplating dealing in the nil-paid Rights Shares during the period from Thursday, 19 August 2021 to Thursday, 26 August 2021 (both days inclusive) will accordingly bear the risk that the Rights Issue may not become unconditional and/or may not proceed. Any person contemplating dealing in the Shares and/or the Rights Shares in their nil-paid form are recommended to consult his/her/its/their own professional advisers.

The Rights Issue will proceed on a non-fully underwritten basis. It should be noted that the Underwriting Agreement contains provisions granting the Underwriter the right to terminate the obligations of the Underwriter thereunder on the occurrence of certain events including force majeure. These certain events are set out in the paragraph headed ‘‘Termination of the Underwriting Agreement’’ on pages 4 to 5 of this circular. Shareholders and potential investors of the Company should note that the proposed Rights Issue is conditional upon, among others, the Underwriting Agreement having become unconditional and the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof. If the Underwriting Agreement is terminated by the Underwriter or does not become unconditional, the Rights Issue will not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

A notice convening the EGM to be held at 24/F., OfficePlus@Wan Chai, 303 Hennessy Road, Wan Chai, Hong Kong, at 11:00 a.m. on Wednesday, 21 April 2021 is set out on pages EGM-1 to EGM-4 of this circular. A proxy form for use at the EGM is enclosed. Whether or not you intend to attend the EGM, you are transferrequestedofficeto completeof the Companythe accompanyingin Hong Kong,proxyTricorform Secretariesin accordanceLimited,with theat Levelinstructions54, HopewellprintedCentre,thereon183andQueenreturn’s theRoadsameEast,toHongthe branchKong assharesoonregistraras possibleand but in any event not less than 48 hours before the time appointed for the holding of the EGM (i.e. Monday, 19 April 2021 at 11:00 a.m. (Hong Kong time)) or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so desire and in such case, the proxy form shall be deemed to be revoked.

Please see the section headed ‘‘Precautionary Measures for the EGM’’ in this circular for measures being taken to try to prevent and control the spread of the COVID-19 pandemic at the EGM.

26 March 2021

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate small and mid-sized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

PRECAUTIONARY MEASURES FOR THE EGM

Reference to the ‘‘Joint Statement in relation to General Meetings in light of the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation’’ jointly issued by the Stock Exchange and the SFC on 1 April 2020 in relation to the arrangement of the EGM.

VOTING BY PROXY IN ADVANCE OF THE EGM

The Company does not in any way wish to diminish the opportunity available to the Shareholders to exercise their rights and to vote, but is conscious of the pressing need to protect the Shareholders from possible exposure to the COVID-19 pandemic. For the health and safety of the Shareholders, the Company would like to encourage Shareholders to exercise their right to vote at the EGM by appointing the chairman of the EGM as their proxy instead of attending the EGM in person. Physical attendance is not necessary for the purpose of exercising Shareholders’ rights. Completion and return of the proxy form will not preclude the Shareholders from attending and voting in person at the EGM or any adjournment thereof should they subsequently so wish.

PREVENTIVE MEASURES AT THE EGM

The Company will implement the following preventive measures at the EGM to safeguard the health and safety of the attending Shareholders, staff and other stakeholders:

(i) compulsory body temperature checks will be conducted on every Shareholder, proxy and other attendee at the entrance of the EGM venue. Any person with a body temperature of over 37.5 degrees Celsius will be requested to stay in an isolated place for completing the voting procedures;
(ii) all Shareholders, proxies and other attendees are required to complete and submit at the entrance of the EGM venue a declaration form confirming their names and contact details, and confirming that they have not travelled to, or had physical contact with any person who to their best of knowledge has recently travelled to, any affected countries or areas outside Hong Kong (as per guidelines issued by the Hong Kong Government at www.chp.gov.hk/en/features/102742.html) at any time in the preceding 21 days. Any person who does not comply with this requirement will be requested to stay in an isolated place for completing the voting procedures;
(iii) every attendee will be required to wear a surgical face mask throughout the EGM. Please note that no masks will be provided at the EGM venue and attendees should bring and wear their own masks;
(iv) seating at the EGM will be arranged so as to reduce interaction between participants; and
(v) no refreshments will be served and there will be no corporate gifts.

– ii –

PRECAUTIONARY MEASURES FOR THE EGM

In the interest of all stakeholders’ health and safety and consistent with recent guidelines for prevention and control of the COVID-19 pandemic, the Company reminds all Shareholders that physical attendance in person at the EGM is not necessary for the purpose of exercising voting rights. As an alternative, by using proxy forms with voting instructions inserted, Shareholders may appoint the chairman of the EGM as their proxy to vote on the relevant resolutions at the EGM instead of attending the EGM in person.

The Company will closely monitor the development of the COVID-19 pandemic and any regulations or measures introduced or to be introduced by the Hong Kong Government in relation to the COVID-19 pandemic. The Company will ensure that the EGM will be conducted in compliance with the regulations or measures of the Hong Kong Government and Shareholders will not be deprived of their right of voting on the resolutions to be proposed at the EGM. Further announcements will be made by the Company as soon as possible if there is any update to the preventive measures as mentioned above.

– iii –

	Page
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Letter from Donvex Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – Unaudited pro forma financial information of the Group . . . . . .	II-1
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– iv –

EXPECTED TIMETABLE

The expected timetable for the Capital Reorganisation and the Rights Issue set out below is for indicative purposes only and it has been prepared on the assumption that all the conditions of the Rights Issue will be fulfilled. The expected timetable is subject to change, and any changes will be announced in separate announcement(s) by the Company as and when appropriate.

2021

Latest time for lodging transfers of the Shares in order to
qualify for attendance and voting at the EGM . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on
Wednesday, 14 April
Closure of register of members of the Company for
determination of the identity of the Shareholders entitled to
attend and vote at the EGM (both dates inclusive) . . . . . . . . . . . . . . Thursday, 15 April to
Wednesday, 21 April
Latest time for lodging proxy forms for the EGM . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on
Monday, 19 April
Expected time and date of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on
Wednesday, 21 April
Announcement of poll results of the EGM . . . . . . . . . . . . . . . . . . . . . Wednesday, 21 April
The following events are conditional on the fulfilment of the conditions for
the implementation of the Capital Reorganisation 2021
Effective date of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . Before 9:00 a.m. on
Wednesday, 4 August
Commencement of dealings in the Adjusted Shares . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on
Wednesday, 4 August
Last day of dealings in the Adjusted Shares on a cum-rights basis . . . . . Wednesday, 4 August
First day of dealings in the Adjusted Shares on an ex-rights basis . . . . . . . Thursday, 5 August
Latest time for lodging transfer of the Adjusted Shares
in order to qualify for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on
Friday, 6 August

– 1 –

2021

EXPECTED TIMETABLE

Closure of register of members of the Company (both days inclusive) .	. . Monday, 9 August to
	Friday, 13 August
Record Date for determining entitlements to the Rights Issue . . . . . . .	. . . . Friday, 13 August
Register of members of the Company re-opens . . . . . . . . . . . . . . .	. . . Monday, 16 August
Despatch of Prospectus Documents
(in the case of Non-Qualifying Shareholders, the Prospectus only) . .	. . . Tuesday, 17 August
First day of dealing in nil-paid Rights Shares . . . . . . . . . . . . . . . .	. . . . . . . . 9:00 a.m. on
	Thursday, 19 August
Latest time for splitting of the PAL . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . 4:30 p.m. on
	Monday, 23 August
Last day of dealing in nil-paid Rights Shares . . . . . . . . . . . . . . . .	. . . Thursday, 26 August
Latest Time for Acceptance of and payment for the Rights Shares
and application and payment for excess Rights Shares . . . . . . .	. . . . . . . . 4:00 p.m. on
	Tuesday, 31 August
Latest Time for Termination of the Underwriting Agreement
and for the Rights Issue to become unconditional (if applicable) . . .	. . . . . . . . 4:00 p.m. on
	Wednesday, 1 September
Announcement of allotment results . . . . . . . . . . . . . . . . . . . . . . .	Wednesday, 8 September
Despatch of certificates for fully-paid Rights Shares and refund cheques,
if any, in respect of wholly or partially unsuccessful application
for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. Thursday, 9 September
Expected first day of dealings in fully-paid Rights Shares . . . . . . . . .	. . Friday, 10 September

All times and dates stated in this circular refer to Hong Kong local times and dates. Dates or deadlines specified in the expected timetable above are indicative only and may be extended or varied by the Company. Any changes to the expected timetable will be published or notified to Shareholders as and when appropriate.

– 2 –

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

All times in this circular refer to Hong Kong time. The latest time for acceptance of and payment for the Rights Shares will not take place if there is a tropical cyclone warning signal no. 8 or above or ‘‘extreme conditions’’ caused by super typhoons is announced by the Government of Hong Kong, or a ‘‘black’’ rainstorm warning:

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on Tuesday, 31 August 2021. Instead the latest time for acceptance of and payment for the Rights Shares will be extended to 5:00 p.m. on the same Business Day; or
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Tuesday, 31 August 2021. Instead the latest time for acceptance of and payment for the Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m.

Under such circumstances, the dates mentioned in the expected timetable above (including, without limitation, the Latest Time for Termination) may be affected.

Dates or deadlines stated in this circular for events in the timetable are indicative only and may be extended or varied between the Company and the Underwriter. Any changes to the anticipated timetable for the Rights Issue will be announced as and when appropriate.

– 3 –

TERMINATION OF THE UNDERWRITING AGREEMENT

If, prior to the Latest Time for Termination (provided that if the date of the Latest Time for Termination shall be a business day on which a tropical cyclone warning signal no. 8 or above or ‘‘extreme conditions’’ caused by super typhoons is announced by the Government of Hong Kong or a black rainstorm warning signal is or remains hoisted in Hong Kong between 9:00 a.m. and 5:00 p.m. on that day, the date of the Latest Time for Termination shall be the next Business Day on which no tropical cyclone warning signal no. 8 or above and no black rainstorm warning signal is or remains hoisted in Hong Kong between 9:00 a.m. and 5:00 p.m. on that day):

(i) in the absolute opinion of the Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Rights Issue; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(ii) any material adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction of trading in securities) occurs which in the absolute opinion of the Underwriter is likely to materially or adversely affect the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(iii) there is any change in the circumstances of the Company or any member of the Group which in the absolute opinion of the Underwriter shall affect the prospects of the Company, including without limiting the generality of the foregoing, the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or

– 4 –

TERMINATION OF THE UNDERWRITING AGREEMENT

(iv) any event of force majeure occurs, including without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(vi) the Prospectus Documents in connection with the Rights Issue when published contain information (either as to business prospects or the financial condition of the Group or as to its compliance with any laws or the GEM Listing Rules or any applicable regulations) which has not prior to the date of the Underwriting Agreement been publicly announced or published by the Company and which may in the absolute opinion of the Underwriter is material to the Group as a whole and is likely to affect materially and adversely the success of the Rights Issue or might cause a reasonably prudent investor not to apply for its assured entitlements of Rights Shares under the Rights Issue; or
(vii) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of the Underwriter, a material omission in the context of the Rights Issue; or
(viii) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten (10) consecutive business days, excluding any suspension in connection with the clearance of the Announcement or the Prospectus Documents or other announcements or circulars in connection with the Rights Issue; or
(ix) any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange due to exceptional financial circumstances or otherwise,

the Underwriter shall be entitled by notice in writing to the Company, served prior to the Latest Time for Termination, to terminate the Underwriting Agreement.

Upon giving of notice pursuant to the Underwriting Agreement, the obligations of the Underwriter and the Company under the Underwriting Agreement shall terminate forthwith and no party shall have any claim against any other party for costs, damages, compensation or otherwise save for any antecedent breaches, provided that the Company shall remain liable to pay to the Underwriter such fees and expenses (other than the underwriting commission) payable by the Company pursuant to the Underwriting Agreement. If the Underwriter exercises such right, the proposed Rights Issue will not proceed.

– 5 –

DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the context requires otherwise:

‘‘acting in concert’’

has the meaning ascribed to it under the Takeovers Code

‘‘Adjusted Share(s)’’

the ordinary share(s) of HK$0.01 each in the share capital of the Company immediately upon the Capital Reorganisation becoming effective

‘‘Announcement’’

the announcement of the Company dated 20 November 2020 in relation to, among other things, the Capital Reorganisation and the Rights Issue

‘‘associates’’

has the meaning ascribed to it under the GEM Listing Rules

‘‘Board’’

the board of Directors

‘‘Business Day’’

any day (other than a Saturday or Sunday or public holiday or a day on which a tropical cyclone warning signal no. 8 or above or ‘‘extreme conditions’’ caused by super typhoons is announced by the Government of Hong Kong or ‘‘black’’ rainstorm warning signal is hoisted or remains hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m. on that day) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours

‘‘Capital Reduction’’

the reduction of the issued share capital of the Company by reducing the par value of each issued Existing Share from HK$0.50 to HK$0.01 by cancelling the paid up share capital to the extent of HK$0.49 per issued Existing Share

‘‘Capital Reorganisation’’
the proposed reorganisation of the share capital of the Company involving the Capital Reduction and Share Subdivision
‘‘CCASS’’
the Central Clearing and Settlement System established and operated by HKSCC
‘‘Companies Law’’
the Companies Act, Cap. 22 (Act 3 of 1961), of the Cayman Islands as consolidated and revised

– 6 –

DEFINITIONS

‘‘Company’’ Global Strategic Group Limited（環球戰略集團有限公司）, a company incorporated in the Cayman Islands with limited liability, the issued shares of which are listed on GEM
‘‘connected person’’ has the meaning ascribed to it under the GEM Listing Rules

‘‘Court’’ The Grand Court of the Cayman Islands

‘‘Director(s)’’ the director(s) of the Company
‘‘EAF(s)’’ the form(s) of application for use by the Qualifying Shareholders who wish to apply for excess Rights Shares, being in such form as may be agreed between the Company and the Underwriter
‘‘EGM’’ the extraordinary general meeting of the Company to be convened and held at which resolution(s) will be proposed to consider, and, if thought fit, to approve, among other things, the Capital Reorganisation, the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder

‘‘Existing Share(s)’’ the ordinary share(s) of HK$0.50 each in the existing issued share capital of the Company, before the Capital Reorganisation becoming effective

‘‘GEM’’ GEM operated by the Stock Exchange

‘‘GEM Listing Committee’’ has the meaning a scribed to it in the GEM Listing Rules ‘‘GEM Listing Rules’’ the Rules Governing the Listing of Securities on GEM ‘‘Group’’ the Company and its subsidiaries ‘‘HKSCC’’ the Hong Kong Securities Clearing Company Limited ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China ‘‘Hubei Biaodian’’ 湖北標典天然氣有限公司 (Hubei Biaodian Natural Gas Co., Ltd.*), a company established in the PRC with limited liability and a substantial shareholder of Yichang Biaodian

– 7 –

DEFINITIONS

‘‘Independent Board Committee’’
‘‘Independent Financial Adviser’’ or ‘‘Donvex Capital’’
‘‘Independent Shareholders’’
‘‘Independent Third Party(ies)’’
‘‘Latest Practicable Date’’
‘‘Last Trading Day’’
‘‘Latest Time for Acceptance’’
the independent board committee, comprising all the independent non-executive Directors, namely Mr. Leung Oh Man, Martin and Mr. Sun Zhi Jun, established to make recommendations to the Independent Shareholders in respect of the terms of the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder
Donvex Capital Limited, a corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO, an independent financial adviser appointed by the Company to advise for the purpose of advising the Independent Board Committee and the Independent Shareholders in respect of the terms of the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder

Shareholders other than the controlling shareholders and their associates or, where there is no controlling shareholder, the Directors (excluding independent nonexecutive Directors) and the chief executive of the Company and their respective associates

third party(ies) who, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, are independent of and not acting in concert or connected with the Company and its connected persons or any of their respective associates
22 March 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
20 November 2020, being the last full trading day of the Existing Shares on the Stock Exchange prior to the release of the Announcement
4:00 p.m. on Tuesday, 31 August 2021 or such later time and/or date as may be agreed between the Underwriter and the Company, being the latest time for acceptance of, and payment for, the Rights Shares as described in the Prospectus Documents

– 8 –

DEFINITIONS

‘‘Latest Time for Termination’’
4:00 p.m. on the first Business Day after the Latest Time for Acceptance, being the latest time to terminate the Underwriting Agreement
‘‘Non-Qualifying Shareholder(s)’’
those Overseas Shareholder(s) whom the Directors, based on legal opinions provided by the Company’s legal advisers, consider it necessary or expedient not to offer the Rights Shares to such Shareholders on account either of restrictions under the laws of the relevant place or the requirements of a relevant regulatory body or stock exchange in that place
‘‘Overseas Shareholder(s)’’ Shareholders with registered addresses (as shown in the register of members of the Company on the Record Date) which are outside Hong Kong
‘‘PAL(s)’’
the provisional allotment letter(s) in respect of the Rights Issue proposed to be issued to the Qualifying Shareholders
‘‘PRC’’
the People’s Republic of China, which, for the purposes of this circular, excludes Hong Kong and Macau Special Administrative Region of the People’s Republic of China
‘‘Prospectus’’
the prospectus to be despatched to the Shareholders by the Company containing details of the proposed Rights Issue
‘‘Prospectus Documents’’
the Prospectus, the PAL and the EAF
‘‘Prospectus Posting Date’’
Tuesday, 17 August 2021, or such other day as may be agreed between the Company and the Underwriter for the despatch of the Prospectus Documents
‘‘Qualifying Shareholder(s)’’
Shareholder(s) whose name(s) appear on the register of members of the Company on the Record Date, other than the Non-Qualifying Shareholders
‘‘Record Date’’
Friday, 13 August 2021 or such other date as may be agreed between the Company and the Underwriter in writing for the determination of the entitlements under the Rights Issue
‘‘Registrar’’

the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong

– 9 –

DEFINITIONS

‘‘Rights Issue’’ the proposed issue by way of rights on the basis of four (4) Rights Share for every one (1) Adjusted Share held by the Qualifying Shareholders on the Record Date at the Subscription Price on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents ‘‘Rights Share(s)’’ Shares to be issued and allotted under the proposed Rights Issue on the basis of four (4) Rights Share for every one (1) Adjusted Share in issue on the Record Date, being 364,688,000 Adjusted Shares based on the Company’s issued share capital as at the Latest Practicable Date ‘‘SFC’’ The Securities and Futures Commission of Hong Kong ‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the laws of Hong Kong) ‘‘Share(s)’’ the Existing Share(s) or the Adjusted Share(s) (as the case may be) ‘‘Share Sub-division’’ the proposed sub-division of each authorised but unissued share of the Company of HK$0.50 each into fifty (50) authorised but unissued Adjusted Shares ‘‘Shareholder(s)’’ holder(s) of issued Share(s) ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited ‘‘Subscription Price’’ HK$0.16 per Rights Share ‘‘substantial shareholder’’ has the meaning ascribed to it under the GEM Listing Rules ‘‘Takeovers Code’’ The Hong Kong Code on Takeovers and Mergers (as amended and supplemented from time to time) ‘‘Underwriter’’ Rifa Securities Limited, a corporation licensed to carry on Type 1 (dealing in securities) regulated activity under the SFO

– 10 –

DEFINITIONS

‘‘Underwriting Agreement’’

the underwriting agreement dated 20 November 2020 entered into between the Company and the Underwriter in relation to the underwriting arrangement in respect of the Rights Issue

‘‘Underwritten Share(s)’’ up to 182,344,000 Rights Shares, which are partially underwritten by the Underwriter pursuant to the terms and conditions set out in the Underwriting Agreement
‘‘Untaken Shares’’ all those Underwritten Shares not taken the

all those Underwritten Shares not taken up by the Qualifying Shareholders on or before the Latest Time for Acceptance

‘‘Yichang Biaodian’’ 宜昌標典天然氣利用有限公司 (Yichang Biaodian Natural Gas Utilisation Co., Ltd.*), a company established in the PRC with limited liability and a non-wholly owned subsidiary of the Company
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong
‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘%’’
percentage
For identification purposes only

– 11 –

LETTER FROM THE BOARD

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��

GLOBAL STRATEGIC GROUP LIMITED ��

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8007)

Executive Directors:

Mr. Wang Wenzhou (Chief Executive Officer) Mr. Wu Guoming Mr. Duan Fanfan

Independent non-executive Directors: Mr. Leung Oh Man, Martin Mr. Sun Zhi Jun

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in Hong Kong: Unit A, 11/F., Neich Tower 128 Gloucester Road Wanchai Hong Kong

26 March 2021

To the Shareholders

Dear Sir or Madam,

(I) PROPOSED CAPITAL REORGANISATION;

(II) PROPOSED RIGHTS ISSUE ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON RECORD DATE; AND

(III) NOTICE OF EGM

INTRODUCTION

Reference is made to the Announcement whereby the Board announced that the Company proposed to conduct the Capital Reorganisation and the Rights Issue.

– 12 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further details of the Capital Reorganisation, the Rights Issue and the notice of EGM.

PROPOSED CAPITAL REORGANISATION

As at the Latest Practicable Date, the authorised share capital of the Company is HK$80,000,000 divided into 160,000,000 Existing Shares, of which 91,172,000 Existing Shares have been issued and are fully paid or credited as fully paid. The Company proposes the Capital Reduction to be implemented in the following manner:

(i) the par value of each of the issued Existing Shares be reduced from HK$0.50 to HK$0.01 per issued Existing Share by cancelling the paid up share capital to the extent of HK$0.49 per issued Existing Share by way of a reduction of capital, so as to form issued Adjusted Shares with par value of HK$0.01 each;
(ii) the credit arising from the Capital Reduction be applied towards offsetting the accumulated loss of the Company as at the effective date of the Capital Reduction, thereby reducing the accumulated loss of the Company. The balance of credit (if any) will be transferred to a distributable reserve account of the Company and be applied for such purposes as permitted by all applicable laws, the memorandum and articles of association of the Company and as the Board considers appropriate;
(iii) immediately following the Capital Reduction, each of the authorised but unissued shares of the Company of HK$0.50 each be subdivided into fifty (50) authorised but unissued Adjusted Shares;
(iv) immediately following the Capital Reorganisation, the authorised share capital of the Company be changed from HK$80,000,000 divided into 160,000,000 Existing Shares to HK$80,000,000 divided into 8,000,000,000 Adjusted Shares; and
(v) each of the Adjusted Shares arising from the Capital Reorganisation shall rank pari passu in all respects with other shares in their respective classes and the Adjusted Shares will have rights and privileges and be subject to the restrictions contained in the memorandum and articles of association of the Company.

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LETTER FROM THE BOARD

Assuming there will be no change in the issued share capital of the Company from the Latest Practicable Date up to the date on which the Capital Reorganisation becomes effective, the share capital structure of the Company will be as follows:

		Immediately
		after the Capital
		Reorganisation
	As at the Latest	becoming
	Practicable Date	effective
Par value per Share	HK$0.50	HK$0.01
Amount of the authorised share capital	HK$80,000,000	HK$80,000,000
Number of authorised shares	160,000,000	8,000,000,000
Amount of the issued share capital	HK$45,586,000	HK$911,720
Number of issued Shares	91,172,000	91,172,000

The size of each board lot of the Adjusted Shares will remain the same as that of the Existing Shares, being 10,000 Adjusted Shares per board lot. The Adjusted Shares will rank pari passu in all respects with each other.

As at the Latest Practicable Date, 91,172,000 Existing Shares have been issued and are fully paid or credited as fully paid. Assuming that the par value of each of the 91,172,000 issued Existing Shares will be reduced from HK$0.50 to HK$0.01 per issued Existing Share by cancelling the paid up share capital to the extent of HK$0.49 per issued Existing Share by way of a reduction of capital, so as to form issued Adjusted Shares with par value of HK$0.01 each, the Company’s existing issued share capital of HK$45,586,000 will be reduced by HK$44,674,280 to HK$911,720.

As at the Latest Practicable Date, the Company has no outstanding share options, warrants or convertible bonds.

Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional on the following conditions being fulfilled:

(i) the Shareholders’ approval by way of special resolution at the EGM to be convened and held to consider and, if thought fit, approve, among other things, the Capital Reorganisation;
(ii) an order being made by the Court confirming the Capital Reduction;
(iii) compliance with any conditions which the Court may impose in relation to the Capital Reduction;

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LETTER FROM THE BOARD

(iv) registration by the Registrar of Companies of the Cayman Islands of a copy of the order of the Court confirming the Capital Reduction and the minute approved by the Court containing the particulars required under the Companies Law with respect to the Capital Reduction; and
(v) the GEM Listing Committee granting the listing of, and permission to deal in, the Adjusted Shares arising from the Capital Reorganisation.

The Capital Reorganisation will become effective when the conditions mentioned above are fulfilled. Upon the approval by the Shareholders of the Capital Reorganisation at the EGM, the legal advisers to the Company (as to the Cayman Islands Law) will apply to the Court for hearing date(s) to confirm the Capital Reduction and a further announcement will be made by the Company as soon as practicable after the Court hearing date(s) is confirmed.

Listing and dealings

Application will be made to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Adjusted Shares arising from the Capital Reorganisation.

The Adjusted Shares will be identical in all respects and rank pari passu in all respects with each other as to all future dividends and distributions which are declared, made or paid. Subject to the granting of the listing of, and permission to deal in, the Adjusted Shares on the Stock Exchange, the Adjusted Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Adjusted Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

None of the Existing Shares are listed or dealt in on any other stock exchange other than the Stock Exchange, and at the time the Capital Reorganisation becomes effective, the Adjusted Shares in issue will not be listed or dealt in on any stock exchange other than the Stock Exchange, and no such listing or permission to deal is being or is proposed to be sought.

Free exchange of certificates for the Adjusted Shares

As the Court hearing date(s) has yet to be fixed, the effective date of the Capital Reorganisation is not ascertainable at present. Should the Capital Reorganisation become effective, Shareholders may submit existing certificates for the Existing Shares to the Registrar, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for exchange, at the expense of the Company, within one month from the effective date of the Capital Reorganisation, for certificates for the Adjusted Shares. Details of such free exchange of share certificates will be announced as soon as the effective date of the Capital Reorganisation is ascertained.

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LETTER FROM THE BOARD

All existing certificates of the Existing Shares will continue to be evidence of title to such Existing Shares but will cease to be valid for delivery, trading and settlement purpose.

Reasons for and effects of the Capital Reorganisation

The proposed Capital Reorganisation will enable the par value of the Shares to be reduced from HK$0.50 to HK$0.01 each. The credit arising from the Capital Reduction will be applied towards offsetting the accumulated loss of the Company as at the effective date of the Capital Reorganisation, thereby reducing the accumulated loss of the Company in the amount of approximately HK$372 million as at the Latest Practicable Date. The balance of credit (if any) will be transferred to the distributable reserve account of the Company which may be utilised by the Directors as a distributable reserve. As at the Latest Practicable Date, the Company has no distributable reserves in its distributable reserve account.

The Board is of the opinion that the proposed Capital Reorganisation will give greater flexibility to the Company to declare dividends and/or to undertake any corporate exercise which requires the use of distributable reserves in the future, subject to the Company’s performance and when the Board considers that it is appropriate to do so in the future. In addition, the Board considers that the Capital Reorganisation will enable the nominal or par value of the Shares to be reduced from HK$0.50 to HK$0.01 each, thus giving greater flexibility to the Company to issue the Adjusted Shares given that the Company is not permitted, without order of the Court, to issue new Shares below their nominal or par value.

As such, the Directors are of the view that the Capital Reorganisation is in the best interests of the Company and its Shareholders as a whole.

Save for applying the credit arising from the Capital Reduction towards offsetting the accumulated loss of the Company and the expenses to be incurred in relation to the Capital Reorganisation, the Directors consider that the Capital Reorganisation will have no effect on the underlying assets, business operations, management or financial position of the Company or the proportional interests of the Shareholders in the Company.

PROPOSED RIGHTS ISSUE

The Company proposes, subject to the Capital Reorganisation becoming effective, to implement the Rights Issue on the basis of four (4) Rights Share for every one (1) Adjusted Share held on the Record Date at the Subscription Price of HK$0.16 per Rights Share, to raise approximately HK$58.35 million by issuing 364,688,000 Rights Shares to the Qualifying Shareholders.

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LETTER FROM THE BOARD

On 20 November 2020 (after trading hours), the Company entered into the Underwriting Agreement with the Underwriter in respect of the Rights Issue. Further details of the Rights Issue are set out below:

Issue statistics

Basis of the Rights Issue : Four (4) Rights Share for every one (1) Adjusted Share held on the Record Date Subscription Price : HK$0.16 per Rights Share Number of Existing Shares : 91,172,000 in issue at the Latest Practicable Date

Number of Adjusted Shares : 91,172,000 (assuming no change in the number of in issue upon the Capital Shares in issue on or before the Record Date) Reorganisation becoming effective
Number of Rights Shares : Up to 364,688,000 Rights Shares (based on the number of Existing Shares in issue as at the Latest Practicable Date and adjusted for the effect of the Capital Reorganisation, and assuming no change in the number of issued Shares on or before the Record Date)
Aggregate nominal value : HK$3,646,880 (assuming no change in the number of the Rights Shares of Adjusted Shares in issue on or before the Record Date)
Number of Adjusted Shares : Up to 455,860,000 Adjusted Shares (assuming no as enlarged by the change in the number of Adjusted Shares in issue allotment and issue of on or before the Record Date and that no new the Rights Shares Adjusted Shares (other than the Rights Shares) will be allotted and issued on or before completion of the Rights Issue)
Number of Rights Shares : 182,344,000 Rights Shares underwritten by the Underwriter

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LETTER FROM THE BOARD

As at the Latest Practicable Date, the Group had no outstanding derivatives, options, warrants, convertible or exchangeable securities carrying rights to subscribe for, convert or exchange into Shares.

Assuming that the Capital Reorganisation has become effective on the Latest Practicable Date and that no Shares are issued or repurchased on or before the Record Date, 364,688,000 Rights Shares to be issued pursuant to the terms of the proposed Rights Issue represents (i) 400% of the total number of issued Shares as at the Latest Practicable Date; and (ii) approximately 80% of the issued share capital of the Company as enlarged by the allotment and issue of the Rights Shares.

Subscription Price

The Subscription Price is HK$0.16 per Rights Share, payable in full upon acceptance of the relevant provisional allotment of Rights Shares and, where applicable, application for excess Rights Shares under the Rights Issue or when a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents (assuming the Capital Reorganisation has become effective as at the Latest Practicable Date):

(i) a discount of approximately 20.79% to the closing price of HK$0.202 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 21.95% to the average of the closing prices of HK$0.205 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 4.76% to the theoretical ex-rights price of HK$0.168 per Share as adjusted for the effect of the Rights Issue, based on the closing price of HK$0.202 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iv) a theoretical dilution effect (as defined under Rule 10.44A of the GEM Listing Rules) represented by a discount of approximately 17.56%, represented by the theoretical diluted price of approximately HK$0.169 per Share to the benchmarked price of approximately HK$0.205 per Share (as defined under Rule 10.44A of the GEM Listing Rules, taking into account the closing price on the Last Trading Day of HK$0.202 per Share and the average of the closing prices of the Shares as quoted on the Stock Exchange for the five previous consecutive trading days prior to the Last Trading Day of approximately HK$0.205 per Share); and
(v) a discount of approximately 25.58% to the closing price of HK$0.215 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

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LETTER FROM THE BOARD

The Subscription Price was determined after arm’s length negotiation between the Company and the Underwriter with reference to, among others, (i) the market price of the Shares under the prevailing market conditions; (ii) the latest business performance and financial position of the Group; and (iii) the reasons for and benefits of proposed Rights Issue as discussed in the section headed ‘‘Reasons for and benefits of the Rights Issue and intended use of proceeds’’ in this circular. The Directors (including the independent non-executive Directors) are of the view that given that the Group recorded a loss of approximately HK$274 million for the year ended 30 September 2020, the Subscription Price which represents a discount of approximately 20.79% to the closing price of HK$0.202 per Share on the Last Trading Day is fair and reasonable and in the best interests of the Company as a whole. The Directors (including the independent nonexecutive Directors) consider that, despite any potential dilution impact of the proposed Rights Issue on the shareholding interests of the Shareholders, the terms of the proposed Rights Issue, including the Subscription Price, to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole, after taking into account the following factors: (i) the Qualifying Shareholders who do not wish to take up their provisional entitlements under the proposed Rights Issue are able to sell the nil-paid rights in the market; (ii) the proposed Rights Issue allows the Qualifying Shareholders an opportunity to subscribe for their pro-rata Rights Shares for the purpose of maintaining their respective existing shareholding interests in the Company at a relatively low price as compared to the historical market price of the Shares and discount to the recent closing prices of the Shares; and (iii) the proceeds from the Rights Issue can fulfil the funding needs of the Group.

Qualifying Shareholders

The Company will send the Prospectus Documents to the Qualifying Shareholders only. For the Non-Qualifying Shareholders, the Company will send copies of the Prospectus to them for their information only, but no PAL and EAF will be sent to the Non-Qualifying Shareholders. To qualify for the Rights Issue, a Shareholder must be registered as a member of the Company and not be a Non-Qualifying Shareholder on the Record Date.

Shareholders whose Shares are held by nominee companies (or which are deposited in CCASS) should note that the Board will regard a nominee company (including HKSCC Nominees Limited) as a single Shareholder according to the register of members of the Company. Shareholders with their Shares held by nominee companies (or which are deposited in CCASS) are advised to consider whether they would like to arrange for registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date.

In order to be registered as members of the Company on the Record Date, a Shareholder must lodge the relevant transfer(s) of Share(s) (with the relevant share certificates) with the Registrar at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong by 4:30 p.m. on Friday, 6 August 2021.

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LETTER FROM THE BOARD

The last day of dealing in the Adjusted Shares on cum-rights basis is Wednesday, 4 August 2021. The Adjusted Shares will be dealt with on an ex-rights basis from Thursday, 5 August 2021.

Qualifying Shareholders who do not take up the Rights Shares to which they are entitled and Non-Qualifying Shareholders should note that their shareholdings in the Company will be diluted.

Rights of Overseas Shareholders

The Prospectus Documents are not intended to be registered under the applicable securities legislation of any jurisdiction other than Hong Kong.

In compliance with Rule 17.41(1) of the GEM Listing Rules, the Company will make enquiries regarding the feasibility of extending the Rights Issue to the Overseas Shareholders (if any). If, based on legal opinions, the Directors consider that it is necessary or expedient not to offer the Rights Shares to the Overseas Shareholders on account either of the legal restrictions under the laws of the relevant place(s) or the requirements of the relevant regulatory body or stock exchange in that (those) place(s), the Rights Issue will not be extended to such Overseas Shareholders.

Based on the register of members of the Company as at the Latest Practicable Date, there were 20 Overseas Shareholders with registered addresses situated in Australia, the PRC, the United Kingdom, Italy, Macau, Malaysia, Singapore, Switzerland and the United States of America (the ‘‘U.S.’’). Pursuant to Rule 17.41(1) of the GEM Listing Rules, the Company has made an enquiry regarding the legality and feasibility of extending the offer of the Rights Issue to the Overseas Shareholders. Based on the legal opinion from the legal advisers of the Company as to the laws of the PRC, the United Kingdom, Italy, Macau, Malaysia and Switzerland, there are no legal restrictions to extend the Rights Issue to the Overseas Shareholders in these jurisdictions. Accordingly, the Rights Issue will be extended to these Overseas Shareholders and the Prospectus Documents will be sent to these Overseas Shareholders.

Based on the legal advice provided by the legal advisers on the laws of Australia, Singapore and the U.S. (the ‘‘Specified Territories’’), the Directors are of the opinion that it would be expedient to exclude Overseas Shareholder(s) in the Specified Territories from the Rights Issue due to the legal restrictions under the relevant laws of the Specified Territories.

Based on the legal advisers with respect to legal restrictions under the laws of Australia or requirements of the relevant regulatory body or stock exchange in Australia, the Rights Issue cannot be extended to Shareholders in Australia without complying with the prospectus requirements under the Corporations Act 2001 (the ‘‘Act’’) of Australia, which include general and specific disclosure requirements under the Act and filing requirements with the Australian Securities and Investments Commission.

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LETTER FROM THE BOARD

Based on the legal advisers with respect to legal restrictions under the laws of Singapore or requirements of the relevant regulatory body or stock exchange in Singapore, the Rights Issue cannot be extended to Shareholders in Singapore without complying with the prospectus requirements under the Securities and Futures Act (Chapter 289) (the ‘‘SFA’’) of Singapore and the filing requirements with the Monetary Authority of Singapore. Having assessed the above requirements and obligations, the Board is of the view that the review of a prospectus in light of the prospectus requirements under the SFA is a costly and lengthy process.

Based on the legal advisers with respect to legal restrictions under the laws of the U.S. or requirements of the relevant regulatory body or stock exchange in the U.S., the Rights Issue cannot be extended to Shareholders in the U.S. without registering the Rights Shares with the Securities and Exchange Commission of the U.S. (the ‘‘U.S. Commission’’) and complying with the review, registration and disclosure obligations and requirements under the U.S. Securities Act of 1993 and with the U.S. Commission.

According to the advice obtained from the Company’s legal advisers with respect to legal restrictions under the laws or requirements of the relevant regulatory body or stock exchange, the extension of the Rights Issue to the Overseas Shareholders with registered addresses in the Specified Territories would, in the absence of compliance with relevant registration requirements for the Prospectus Documents and/or regulatory or filing requirements and/or other formalities in these jurisdictions, be unlawful or impracticable.

In view of (a) the legal restrictions and the requirements of the relevant regulatory body or stock exchange in the Specified Territories; and (b) the time and costs involved in complying with the legal restrictions and regulatory requirements if the Rights Issue were to be extended to the Overseas Shareholders in the Specified Territories, the Board considers that the extension of the Rights Issue to the Overseas Shareholders with registered addresses in the Specified Territories would outweigh the possible benefits to the Overseas Shareholders and the Company. As such, the Board considers that it would be necessary and expedient to exclude the Overseas Shareholders with registered addresses in the Specified Territories from the Rights Issue and accordingly the Overseas Shareholders with registered addresses in the Specified Territories will be regarded as Non-Qualifying Shareholders in relation to the Rights Issue. Accordingly, no Rights Shares (whether in nil-paid or fully-paid form) will be offered to such Overseas Shareholder(s) in these jurisdictions.

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LETTER FROM THE BOARD

The Company will send the Prospectus (without the PAL and the EAF) and a letter explaining the circumstances in which the Non-Qualifying Shareholders are not permitted to participate in the Rights Issue to the Non-Qualifying Shareholders for their information only.

Arrangements will be made for Rights Shares which would otherwise have been provisionally allotted to the Non-Qualifying Shareholders to be sold in the market in their nilpaid form as soon as practicable after dealings in the nil-paid Rights Shares commence, if a premium (net of expenses) can be obtained. The proceeds of such sale, less expenses and stamp duty, of more than HK$100 will be paid pro rata to the Non-Qualifying Shareholders. The Company will retain individual amounts of HK$100 or less for the benefit of the Company. Any unsold entitlement of Non-Qualifying Shareholders to the Rights Shares and any Rights Shares provisionally allotted but not accepted by the Qualifying Shareholders will be made available for excess applications by Qualifying Shareholders under the EAF(s).

Overseas Shareholders should note that they may or may not be entitled to the Rights Issue. Accordingly, Overseas Shareholders should exercise caution when dealing in the securities of the Company, and if they are in any doubt about their position, they should consult their professional advisers.

Closure of register of members

The register of members of the Company will be closed from Monday, 9 August 2021 to Friday, 13 August 2021 (both days inclusive) for determining the Shareholders’ entitlements to the Rights Issue.

No transfer of Shares will be registered during the above book closure periods.

Basis of provisional allotment

The basis of the provisional allotment shall be four (4) Rights Share for every one (1) Adjusted Share in issue and held by the Qualifying Shareholders at the close of business on the Record Date at the Subscription Price payable in full on acceptance and otherwise on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents.

Application for all or any part of a Qualifying Shareholder’s provisional allotment should be made by lodging a duly completed PAL and a cheque or a banker’s cashier order for the sum payable for the Rights Shares being applied for with the Registrar on or before the Latest Time for Acceptance.

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LETTER FROM THE BOARD

Fractional entitlements to the Rights Shares

On the basis of four (4) Rights Shares for every one (1) Adjusted Share held on the Record Date, no fractional entitlement will arise under the Rights Issue. No odd lot matching services will be provided by the Company in respect of the Rights Shares.

Status of the Rights Shares

The Rights Shares, when allotted and issued, shall rank pari passu in all respects with the Shares then in issue. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment of the Rights Shares in their fully-paid form.

Share certificates and refund cheques for the Rights Issue

Subject to the fulfillment of the conditions of the Rights Issue, certificates for all fully-paid Rights Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before Thursday, 9 September 2021. Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares (if any) are expected to be posted on or before Thursday, 9 September 2021 by ordinary post to the applicants at their own risk, to their registered addresses. Each Shareholder will receive one share certificate for all allotted Rights Shares.

Application for excess Rights Shares

Under the proposed Rights Issue, Qualifying Shareholders may apply, by way of excess application, for (i) any unsold entitlements of the Non-Qualifying Shareholder; and (ii) any Rights Shares provisionally allotted but not accepted by the Qualifying Shareholders or otherwise subscribed for by transferees of nil-paid Rights Shares.

Application for excess Rights Shares can be made by the Qualifying Shareholders only and by duly completing and signing an EAF (in accordance with the instructions printed therein) and lodging the same with a separate remittance for the excess Rights Shares being applied for with the Registrar no later than 4:00 p.m. on Tuesday, 31 August 2021.

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LETTER FROM THE BOARD

The Directors will allocate any excess Rights Shares at their discretion on a fair and equitable basis on the following principles:

(i) any excess Rights Shares will be allocated to Qualifying Shareholders who apply for them on a pro rata basis by reference to the number of the excess Rights Shares applied for under each application;
(ii) no reference will be made to the Rights Shares subscribed through applications by PALs or the existing number of Shares held by Qualifying Shareholders;
(iii) no preference will be given to applications for topping up odd-lot holdings to whole lot holdings; and
(iv) pursuant to Rule 10.31(3)(b) of the GEM Listing Rules, the Company will also take steps to identify the applications for excess Rights Shares made by any controlling shareholder or its associates (together, the ‘‘Relevant Shareholders’’), whether in their own names or through nominees. The Company shall disregard the Relevant Shareholders’ applications for excess Rights Shares to the extent that the total number of excess Rights Shares they have applied for exceeds a maximum number equivalent to the total number of Rights Shares offered under the Rights Issue minus the number of Rights Shares taken up by the Relevant Shareholders under their assured entitlement to the Rights Shares.

Shareholders with their Shares held by a nominee company (or which are deposited in CCASS) should note that the Board will regard such nominee company (including HKSCC Nominees Limited) as a single Shareholder according to the register of members of the Company. Accordingly, Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to the relevant beneficial owners individually. Shareholders with their Shares held by a nominee company (or which are held in CCASS) are advised to consider whether they would like to arrange for the registration of the relevant Shares under their own names on or prior to the Record Date for the purpose of the Rights Issue. Shareholders who would like to have their names registered on the register of members of the Company on the Record Date, must lodge all necessary documents with the Registrar for registration by no later than 4:30 p.m. on Friday, 6 August 2021. Shareholders and investors should consult their professional advisers if they are in doubt as to their status.

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LETTER FROM THE BOARD

Application for listing of the Rights Shares

The Company will apply to the GEM Listing Committee of the Stock Exchange for the listing of, and the permission to deal in, the Rights Shares, in both their nil-paid and fully-paid forms. The nil-paid Rights Shares shall have the same board lot size as the Shares.

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Rights Shares in both their nil-paid and fully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement dates of the dealings in the Rights Shares in both their nilpaid and fully-paid forms or such other dates as may be determined by HKSCC.

Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Dealing in the Rights Shares in both their nil-paid and fully-paid forms which are registered in the register of members of the Company in Hong Kong will be subject to the payment of stamp duty, Stock Exchange trading fee, transaction levy, investor compensation levy or any other applicable fees and charges in Hong Kong.

Shareholders are advised to consult their professional advisers if they are in doubt as to the taxation implications of the receipt, purchase, holding, exercising, disposing of or dealing in, the nil-paid Rights Shares or the fully-paid Rights Shares and, regarding Non-Qualifying Shareholders, their receipt of the net proceeds, if any, from sales of the nil-paid Rights Shares on their behalf.

Conditions of the Rights Issue

The Rights Issue is conditional upon the Underwriting Agreement having become unconditional and not being terminated in accordance with the terms thereof.

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LETTER FROM THE BOARD

THE UNDERWRITING AGREEMENT

The Underwriting Agreement

On 20 November 2020 (after trading hours), the Company entered into the Underwriting Agreement with the Underwriter, pursuant to which the Underwriter has conditionally agreed to partially underwrite the Underwritten Shares, subject to the terms and conditions of the Underwriting Agreement.

Date	:	20 November 2020 (after trading hours)
Underwriter	:	Rifa Securities Limited
Number of Right Shares	:	364,688,000 Rights Shares
Underwriting commitment	:	182,344,000 Rights Shares
of the Underwriter
Underwriting commission	:	3% of the aggregate Subscription Price in respect of the
		maximum number of Underwritten Shares

The Underwriter is a company incorporated in Hong Kong with limited liability and a corporation licensed to carry on Type 1 (dealing in securities) regulated activity under the SFO whose ordinary course of business includes underwriting of securities. To the best of the Directors’ knowledge, information and belief, the Underwriter and its ultimate beneficial owner(s) are Independent Third Parties. The Underwriter complies with the requirements under Rule 10.24A(1) of the GEM Listing Rules.

The terms of the Underwriting Agreement, including the underwriting commission rate, were determined after arm’s length negotiation between the Company and the Underwriter with reference to the existing financial position of the Group, the size of the Rights Issue, and the current and expected market condition. The Directors (other than Mr. Wu Guoming, who was required to abstain from voting on the relevant Board resolution(s) approving the Rights Issue by virtue of him having a material interest in the Rights Issue) consider the entering into of the Underwriting Agreement with the Underwriter and the terms of the Underwriting Agreement (including the underwriting commission) to be fair and reasonable and in the interest of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

Conditions of the Underwriting Agreement

The Underwriting Agreement is conditional upon the following conditions being fulfilled or waived (as appropriate):

(i) the completion of the Capital Reorganisation;
(ii) the passing of the necessary resolutions at the EGM to approve (i) the Capital Reorganisation and the transactions contemplated thereunder by the Shareholders; and (ii) the Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder (including but not limited to the allotment and issue of the Rights Shares) by the Independent Shareholders;
(iii) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by resolution of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the GEM Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance not later than the Prospectus Posting Date;
(iv) the posting of the Prospectus Documents to the Qualifying Shareholders by the Prospectus Posting Date and the posting of the Prospectus and a letter in the agreed form to the Non-Qualifying Shareholders, if any, for information purposes only explaining the circumstances in which they are not permitted to participate in the Rights Issue on or before the Prospectus Posting Date;
(v) the GEM Listing Committee granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the listing of, and the permission to deal in, the Rights Shares (in their nil-paid and fully-paid forms) by no later than the business day prior to the first day of their dealings;
(vi) the Underwriting Agreement not being terminated or rescinded by the Underwriter pursuant to the terms thereof on or before the Latest Time for Termination;
(vii) the compliance with and performance of all the undertakings and obligations of the Company under the terms of the Underwriting Agreement;
(viii) there being no event which would have rendered any of the warranties given by the Company under the Underwriting Agreement untrue or incorrect in any material respect occurring prior to the Latest Time for Termination; and

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LETTER FROM THE BOARD

(ix) the Shares remaining listed on GEM of the Stock Exchange at all times prior to the settlement date and the listing of the Shares not having been withdrawn or the trading of the Shares not having been suspended for a consecutive period of more than 10 trading days at any time prior to the Latest Time for Acceptance.

Save for the condition (vii) which can be waived by the Underwriter, none of the above conditions can be waived. If any of the conditions referred to above is not satisfied or waived (as the case may be) by the Latest Time for Termination or such other date as the Company and the Underwriter may agree, the Underwriting Agreement shall terminate and no party shall have any claim against any other party for costs, damages, compensation or otherwise save for any antecedent breaches and the Rights Issue will not proceed.

REASONS FOR AND BENEFITS OF THE RIGHTS ISSUE AND INTENDED USE OF PROCEEDS

The Group is principally engaged in natural gas supply and trading of petrochemical products.

The net proceeds from the Rights Issue (after deducting the estimated expenses) are estimated to be approximately HK$55.32 million. The estimated net subscription price per Rights Share after deducting the related expenses of the Rights Issue is expected to be approximately HK$0.15 million. The Company intends to apply the net proceeds from the proposed Rights Issue as to (i) approximately HK$48 million for the redemption of outstanding bonds issued by the Company; (ii) approximately HK$3 million for the payment of outstanding professional fees; and (iii) approximately HK$4.32 million as the general working capital of the Group.

As at the Latest Practicable Date, bonds in the aggregate amount of (i) approximately HK$48.87 million will be due on or before 30 June 2021; (ii) HK$3.5 million will be due during the period from 1 July 2021 to 31 December 2021; and (iii) HK$2.5 million will be due in the year of 2022. The Company intends to enter into a letter of intent with the respective bondholders to extend the maturity date of the bonds such that bonds in the aggregate amount of (i) approximately HK$19.14 million, which would not be involved in any extension of maturity date, will be due on or before 30 June 2021; and (ii) approximately HK$35.73 million will be due in the year of 2022. Two of the subscribers are employees of the Company. Save as disclosed, the subscribers are not connected with the Company and its connected persons.

– 28 –

LETTER FROM THE BOARD

The details of the application of approximately HK$3 million for the payment of outstanding professional fees are set out as follows:

Nature of outstanding
professional fees	Due date	Amount
		(HK$)
Legal services	From June 2018 to June 2020	618,000
Accounting services	From July 2020 to December 2020	1,113,000
Financial printing services	From January 2020 to September 2020	495,000
Valuation services	From April 2019 to December 2020	400,000
Corporate secretarial services	From March 2020 to October 2020	355,000

In relation to the application of approximately HK$4.32 million as the general working capital of the Group, approximately HK$642,000 and HK$78,000 will be used to settle staff costs and office rental and utilities fee to be incurred by the Group respectively.

The Directors have considered other financing alternatives including (i) additional debt financing; and (ii) equity fund raising such as placement of Shares and open offer. The Directors are of the view that while additional debt financing will increase the Group’s gearing ratio, it will also increase the ongoing interest expenses of the Group which may in term affect the profitability of the Company. As for equity fund raising, such as placement of Shares, it is a common market practice to conduct such activity on a best-effort basis and accordingly the amount to be raised would be uncertain and subject to the then market conditions. In addition, for placement of new Shares, it would lead to immediate dilution in the shareholding interest of existing Shareholders without offering them the opportunity to participate in the enlarged capital base of the Company. As for open offer, similar to a rights issue, it also offers qualifying shareholders to participate, but it does not allow the trading of rights entitlements in the open market. The Directors are of the view that the Rights Issue provides better financial flexibility for the Company as it will strengthen the capital base of the Company, thus enhancing its net asset position without the ongoing burden of interest expenses, and also offers all Qualifying Shareholders the opportunity to maintain their pro rata shareholding interests in the Company and avoid dilution for those Shareholders who take up their entitlement under the Rights Issue in full.

The Board considers that the Rights Issue will increase the capital base of the Company and give the Qualifying Shareholders equal opportunity to maintain their respective pro-rata shareholding interests in the Company. Hence, the Board considers that fund raising through the Rights Issue is in the interests of the Company and the Shareholders as a whole. However, those Qualifying Shareholders who do not take up the Rights Shares to which they are entitled and Non-Qualifying Shareholders should note that their shareholdings will be diluted.

– 29 –

LETTER FROM THE BOARD

CHANGE IN THE SHAREHOLDING STRUCTURE OF THE COMPANY ARISING FROM THE RIGHTS ISSUE

For illustration purposes only, set out below is the shareholding structure of the Company as at the Latest Practicable Date, and the effect on the shareholding structure of the Company upon completion of the Rights Issue in the manner contemplated under the Underwriting Agreement, is as follow:

Mr. Wu Guoming (Note 1) Hong Kong Hao Yue International Trading Co., Limited (‘‘Hong Kong Hao Yue’’) (Note 2) Underwriter (Note 3) Other public Shareholders Total	(i) As at the Latest Practicable Date Number of Shares % 3,687,500 4.04 11,005,500 12.07 – – 76,479,000 83.88 91,172,000 100.00	(ii) Immediately upon completion of the Rights Issue assuming full acceptance by all Qualifying Shareholders under the Rights Issue Number of Shares % 18,437,500 4.04 55,027,500 12.07 – – 382,395,000 83.88 455,860,000 100.00	(iii) Immediately upon completion of the Rights Issue assuming no acceptance by the Qualifying Shareholders under the Rights Issue and the excess Rights Shares are taken up by the Underwriter (on a partially underwritten basis) Number of Shares % 3,687,500 1.35 11,005,500 4.02 182,344,000 66.67 76,479,000 27.96 273,516,000 100.00	(iii) Immediately upon completion of the Rights Issue assuming no acceptance by the Qualifying Shareholders under the Rights Issue and the excess Rights Shares are taken up by the Underwriter (on a partially underwritten basis) Number of Shares % 3,687,500 1.35 11,005,500 4.02 182,344,000 66.67 76,479,000 27.96 273,516,000 100.00
				100.00

Notes:

Mr. Wu Guoming is an executive Director.
Hong Kong Hao Yue is owned as to 100% by Mr. Zhang Hai Ping who is deemed to be interested in 11,005,500 Shares pursuant to the Part XV of the SFO.
These scenarios are for illustrative purpose only. Under the Underwriting Agreement, the Underwriter has undertaken that each of the subscribers or purchasers of the Untaken Shares procured by it (i) shall be third party independent of, not acting in concert (within the meaning of the Takeovers Code) with and not connected with any directors, chief executive or substantial shareholders of the Company or its subsidiaries or any of their respective associates (as defined in the GEM Listing Rules); and (ii) shall not, together with any party acting in concert (within the meaning of the Takeovers Code) with it, hold 10.00% or more of the voting rights of the Company upon completion of the Rights Issue.

– 30 –

LETTER FROM THE BOARD

FUND RAISING ACTIVITY IN THE PAST TWELVE MONTHS

The Company has conducted the following equity fund raising activities involving the issue of its equity securities in the 12 months immediately preceding the Latest Practicable Date:

		Net proceeds
Date of	Fund raising	raised	Intend use of
announcement	activity	(approximately)	proceeds	Actual	use of proceeds
16 March	Placing of new	HK$12.2 million	As the general	(i)	as to approximately HK$8.54
2020	Shares under		working capital		million as the general
	general mandate		and for the		working capital of the Group,
			settlement of		of which approximately
			bonds of the		HK$3.88 million was used as
			Group		the payment for former
					Director’s reimbursement,
					HK$1 million was used as
					short-term receivable to
					independent third parties and
					approximately HK$3.66
					million was used for the
					payment of other expenses
					incurred by the Group such
					as insurance, office rental,
					printing and medical
					expenses etc.
				(ii)	as to approximately HK$3.66
					million for the settlement of
					bonds of the Group
9 April 2020	Placing of new	HK$7.0 million	As the general	(i)	as to approximately HK$6.35
	Shares under		working capital		million as the general
	general mandate		and for the		working capital of the Group,
			settlement of		of which HK$5 million was
			bonds of the		used as short-term receivable
			Group		to independent third parties
					and approximately HK$1.35
					million was used for the
					payment of other expenses
					incurred by the Group such
					as insurance, office rental,
					printing and medical
					expenses etc.
				(ii)	as to approximately
					HK$648,000 for the
					settlement of bonds of the
					Group

Save as disclosed above, the Company had not conducted any equity fund raising activities in the past 12 months immediately preceding the Latest Practicable Date.

– 31 –

LETTER FROM THE BOARD

GEM LISTING RULES IMPLICATIONS

The Rights Issue is partially underwritten by the Underwriter. As the Rights Issue will increase the issued share capital of the Company by more than 50%, under Rule 10.29(1) of the GEM Listing Rules, the Rights Issue is subject to approval of the Independent Shareholders at the EGM by a resolution on which any controlling Shareholders and their respective associates or, where there are no controlling Shareholders, the Directors (excluding the independent nonexecutive Directors) and the chief executive of the Company, and their respective associates shall abstain from voting in favour of the Rights Issue. Since there is no controlling Shareholder as at the Latest Practicable Date, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company, and their respective associates shall abstain from voting in favour of the Rights Issue in accordance with Rule 10.29(1) of the GEM Listing Rules. As at the Latest Practicable Date, Mr. Wu Guoming, an executive Director, together with his associates, hold 3,687,500 Shares, representing approximately 4.04% of the total issued share capital of the Company. Accordingly, Mr. Wu Guoming and his respective associates are required to abstain from voting in favour of the resolution(s) approving the Rights Issue at the EGM.

As at the Latest Practicable Date, none of the Underwriter and its respective close associates have any shareholding interest in the Company. In the event that the Underwriter and any of the sub-underwriters have shareholding interest in the Company, it/they is/are required to abstain from voting on the resolution(s) approving the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder at the EGM.

EGM

A notice of the EGM to be held at 11:00 a.m. on Wednesday, 21 April 2021 at 24/F., OfficePlus@Wan Chai, 303 Hennessy Road, Wan Chai, Hong Kong is set out on pages EGM-1 to EGM-4 of this circular for the purpose of considering and, if thought fit, approving the Capital Reorganisation, the Underwriting Agreement, the Rights Issue and the transactions contemplated respectively thereunder.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholder; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby any one of them has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case-by-case basis.

– 32 –

LETTER FROM THE BOARD

A proxy form for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon and return it to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Secretaries Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the EGM (i.e. Monday, 19 April 2021 at 11:00 a.m. (Hong Kong time)) or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment of it, if you so wish.

Subject to the Rights Issue being approved at the EGM, the Prospectus or the Prospectus Documents, where appropriate, containing further information on the Rights Issue will be despatched to the Shareholders as soon as practicable.

RECOMMENDATION

The Independent Board Committee, which comprises all the independent non-executive Directors, namely Mr. Leung Oh Man, Martin and Mr. Sun Zhi Jun, has been established to advise the Independent Shareholders as to whether the terms of the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder are fair and reasonable and in the interest of the Company and the Shareholders as a whole and to make recommendations to the Independent Shareholders on how to vote at the EGM. Donvex Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

Your attention is drawn to the letter from the Independent Board Committee set out on pages 35 to 36 of this circular which contains its recommendation to the Independent Shareholders in relation to the Rights Issue, and the letter from the Independent Financial Adviser set out on pages 37 to 60 of this circular which contains its advice to the Independent Board Committee and the Independent Shareholders.

The Directors consider that the Capital Reorganisation, the Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder are on normal commercial terms, and are fair and reasonable so far as the Shareholders or Independent Shareholders (as the case may be) are concerned and in the interests of the Company and the Shareholders as a whole and recommend the Shareholders or the Independent Shareholders (as the case may be) to vote in favour of the resolution(s) approving, among other things, the Capital Reorganisation, the Rights Issue and the Underwriting Agreement to be proposed at the EGM.

ADDITIONAL INFORMATION

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

– 33 –

LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALING IN SHARES AND THE NIL-PAID RIGHTS SHARES

Shareholders and potential investors of the Company should note that the proposed Rights Issue is conditional upon, among others, the Underwriting Agreement having become unconditional and the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof (a summary of which is set out in the section headed ‘‘Termination of the Underwriting Agreement’’ in this circular). Accordingly, the proposed Rights Issue may or may not proceed.

The Shares are expected to be dealt in on an ex-rights basis from Thursday, 5 August 2021. Dealings in the Rights Shares in nil-paid form are expected to take place from Thursday, 19 August 2021 to Thursday, 26 August 2021 (both days inclusive). Any Shareholder or other person contemplating transferring, selling or purchasing the Shares and/or Rights Shares in their nil-paid form is advised to exercise caution when dealing in the Shares and/or the nil-paid Rights Shares.

Any party who is in any doubt about his/her/its position or any action to be taken is recommended to consult his/her/its own professional adviser(s). Any Shareholder or other person dealing in the Shares or in the nil-paid Rights Shares up to the date on which all the conditions to which the proposed Rights Issue is subject are fulfilled (and the date on which the Underwriter’s right of termination of the Underwriting Agreement ceases) will accordingly bear the risk that the proposed Rights Issue may not become unconditional or may not proceed.

Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

Yours faithfully,

For and on behalf of the Board Global Strategic Group Limited Wang Wenzhou

Executive Director and Chief Executive Officer

– 34 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Rights Issue.

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��

GLOBAL STRATEGIC GROUP LIMITED ��

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8007)

26 March 2021

To the Independent Shareholders

Dear Sir or Madam,

PROPOSED RIGHTS ISSUE ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON RECORD DATE

We refer to the circular of the Company dated 26 March 2021 (the ‘‘Circular’’) of which this letter forms part. Unless the context specifies otherwise, capitalised terms used herein have the same meanings as defined in the Circular.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder are fair and reasonable insofar as the Independent Shareholders are concerned.

Donvex Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

– 35 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the terms of the Rights Issue and the Underwriting Agreement and the advice from Donvex Capital, we are of the opinion that the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder are on normal commercial terms, in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable insofar as the Company and the Independent Shareholders are concerned. Accordingly, we recommend you to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Rights Issue, the Underwriting Agreement and the transactions contemplated respectively thereunder.

Yours faithfully, For and on behalf of

Independent Board Committee of Global Strategic Group Limited

Mr. Leung Oh Man, Martin Mr. Sun Zhi Jun Independent non-executive Directors

– 36 –

LETTER FROM DONVEX CAPITAL

The following is the full text of the letter from Donvex Capital Limited setting out their advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

==> picture [128 x 78] intentionally omitted <==

Unit 2502, 25[th] Floor, Carpo Commercial Building 18-20 Lyndhurst Terrace Central Hong Kong

26 March 2021

The Independent Board Committee and the Independent Shareholders of Global Strategic Group Limited

Dear Sir or Madam,

PROPOSED RIGHTS ISSUE ON THE BASIS OF FOUR (4) RIGHTS SHARES FOR EVERY ONE (1) ADJUSTED SHARE HELD ON THE RECORD DATE

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, details of which are set out in the ‘‘Letter from the Board’’ (the ‘‘Letter from the Board’’) contained in the circular issued by the Company to the Shareholders dated 26 March 2021 (the ‘‘Circular’’), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

With reference to the Letter from the Board, the Company proposes, subject to the Capital Reduction becoming effective, to implement the Rights Issue on the basis of four (4) Rights Share for every one (1) Adjusted Share held on the Record Date at the Subscription Price of HK$0.160 per Rights Share, to raise approximately HK$58.35 million by issuing 364,688,000 Rights Shares to the Qualifying Shareholders. Qualifying Shareholders are entitled to apply for Rights Shares in excess of their respective entitlements under the Rights Issue.

As the Rights Issue will increase the issued share capital of the Company by more than 50%, under Rule 10.29(1) of the GEM Listing Rules, the Rights Issue is subject to approval of the Independent Shareholders at the EGM by a resolution on which any controlling Shareholders and their respective associates or, where there are no controlling Shareholders, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company, and their respective associates shall abstain from voting in favour of the Rights Issue. Since there is no controlling Shareholder as at the Latest Practicable Date, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company, and their respective associates shall abstain from voting in favour of the Rights Issue in accordance with Rule 10.29(1) of the GEM Listing Rules.

– 37 –

LETTER FROM DONVEX CAPITAL

The Independent Board Committee, comprising all independent non-executive Directors, namely Mr. Leung Oh Man, Martin and Mr. Sun Zhi Jun, has been formed to advise the Independent Shareholders in respect of the Rights Issue. We, Donvex Capital, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

INDEPENDENCE

As at the Latest Practicable Date, we did not have any relationship with, or interest in, the Company or any other parties that could reasonably be regarded as relevant to our independence. Save for this appointment as the Independent Financial Adviser in respect of the Rights Issue, there were no other engagements between us and the Company or any other parties to the Rights Issue in the last two years. Apart from normal professional fees for our services to the Company in connection with the engagements described above, no arrangement exists whereby we will receive any fees or benefits from the Group. We are independent from, and not connected with the Company or any party to the Rights Issue, or their respective substantial shareholder(s) or connected person(s), as defined under the GEM Listing Rules and accordingly, are qualified and independent from the Company pursuant to Rule 17.96 of the GEM Listing Rules to give an independent advice regarding the Rights Issue.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the Directors and the management of the Group (the ‘‘Management’’); and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and all such statements of belief, opinions and intentions of the Directors and the Management and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the Management. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the Management are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the Circular.

– 38 –

LETTER FROM DONVEX CAPITAL

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the Management, nor have we conducted any form of indepth investigation into the business, affairs, operations, financial position or future prospects of the Group, or any of its respective substantial shareholders, subsidiaries or associates.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Rights Issue and, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether the Rights Issue is fair and reasonable in so far as the Independent Shareholders are concerned, we have taken into account the principal factors and reasons set out below:

1 Information on the Group

1.1 Information on the Group

The Company is an investment holding company. The Company’s subsidiaries are principally engaged in natural gas supply and trading of petrochemical products.

– 39 –

LETTER FROM DONVEX CAPITAL

1.2 Financial performance on the Group

Set out below are the financial results of the Group for (i) the year ended 30 September 2020 (‘‘FY2020’’) as extracted from the annual results announcement of the Company (the ‘‘Results Announcement’’) for FY2020; and (ii) the period from 1 January 2019 to 30 September 2019 (‘‘FP2019’’) as extracted from the annual report of the Company for FP2019:

	FY2020	FP2019
	HK$’000	HK$’000
	(audited)	(audited)
Revenue	42,734	330,995
– Trading of petrochemical products	–	226,379
– Trading of copper products	–	68,691
– Sales of nature gas	37,438	29,833
– Pipeline installation services	563	1,090
– Technology support services	1,904	1,263
– Leasing business	2,330	3,739
– Independent financial advisory	499	–
Gross profit	12,987	12,410
Loss for the year/period	(274,163)	(63,662)

With reference to the Results Announcement, revenue of the Group decreased by approximately HK$288.3 million or 87.1% from approximately HK$331.0 million for FP2019 to approximately HK$42.7 million for FY2020. Such decrease was mainly attributed to (i) the drop in natural gas demand from customers as a result of the impact of COVID-19 pandemic in the PRC; and (ii) cessation of trading business, including supply of petrochemical and copper products, as the Management considered the trading business was not highly profitable in view of its thin gross profit margin.

We noted that the gross profit margin of the Group increased from approximately 3.7% for FP2019 to approximately 30.4% for FY2020 despite the revenue decreased by approximately 87.1%. Having taken into account the overall gross profit margin of the Group improved after such cessation, it is reasonable for the Company to cease its trading business.

– 40 –

LETTER FROM DONVEX CAPITAL

The loss for the period increased by approximately HK$210.5 million from approximately HK$63.7 million for FP2019 to approximately HK$274.2 million for FY2020. Such increase was mainly attributed to impairment loss on assets held by Yichang Biaodian, which is a subsidiary of the Company and principally engaged in supply of natural gas in Hubei Province. Owing to the revenue generated from supply of natural gas decreased as a result of the impact of COVID-19 pandemic, Yichang Biaodian suffered loss for FY2020. As such, the recoverable amount of Yichang Biaodian decreased and therefore impairment loss of HK$239.8 million was recoginised for FY2020.

1.3 Financial position on the Group

Set out below is a summary of the consolidated statements of financial position as at 30 September 2020 and 30 September 2019 as extracted from the Results Announcement:

	As at	As at
	30 September	30 September
	2020	2019
	HK$’000	HK$’000
	(audited)	(audited)
Non-current assets	184,615	436,512
Current assets	41,053	58,809
– Bank balances and cash	1,978	3,325
Total assets	225,668	495,321
Non-current liabilities	73,506	107,126
– Non-convertible bonds	2,706	3,000
– Bank borrowings	12,589	15,513
Current liabilities	118,415	110,412
– Non-convertible bonds	56,190	31,885
– Convertible bond	–	19,771
– Bank borrowings	8,012	2,216
Total liabilities	191,921	217,538
Net current liabilities	(77,362)	(51,603)
(Capital deficiency)/equity attributable to
owners of the Company	(10,201)	66,984

– 41 –

LETTER FROM DONVEX CAPITAL

The Group’s operation and investments were financed principally by cash generated from its business operations, convertible bond issued, bank borrowings and equity contribution from shareholders.

With reference to the Results Announcement, the Group recorded net current liabilities of approximately HK$51.6 million and approximately HK$77.3 million as at 30 September 2019 and 30 September 2020, respectively. As discussed with the Management, the Group was in net current liabilities position, which was mainly due to the significant amount of debts that would be due within 1 year, in particular to, the bonds with outstanding amount of approximately HK$56.2 million, representing approximately 47.5% of the current liabilities as at 30 September 2020.

In respect of the current liabilities of the Group, it was mainly comprised of the following debts which would be due and repayable within 1 year:

(i) non-convertible bonds with outstanding amount of approximately HK$56.2 million, among which bonds with principal amount of approximately HK$11.0 million has been overdue as at 30 September 2020; and
(ii) bank borrowings with outstanding amount of approximately HK$8.0 million.

As at the date of this letter, the Group could not obtain sufficient long-term financing to redeem the said bonds due to its high gearing ratio and poor liquidity ratio.

2 Use of proceeds of the Rights Issue

With reference to the Letter from the Board, the net proceeds from the Rights Issue (after deducting the estimated expenses) are estimated to be approximately HK$55.32 million. The estimated net subscription price per Rights Share after deducting the related expenses of the Rights Issue is expected to be approximately HK$0.152. The Company intends to utilise the net proceeds from the Rights Issue as follows:

(i) approximately HK$48.0 million for the redemption of outstanding bonds issued by the Company;
(ii) approximately HK$3.0 million for the settlement of the outstanding professional fee incurred, including professional fees payable to legal adviser, valuer, auditor, financial printer and other parties; and
(iii) approximately HK$4.32 million for the general working capital of the Group.

– 42 –

LETTER FROM DONVEX CAPITAL

Redemption of outstanding bonds issued by the Company

As at the Latest Practicable Date, bonds with outstanding amount of approximately (i) HK$48.9 million would be due and redeemable on or before 30 June 2021; (ii) HK$3.5 million would be due during the period from 1 July 2021 to 31 December 2021; and (iii) HK$2.5 million would be due in the year of 2022.

Having considered the factors and reasons as below:

(i) the Company had urgent funding needs, given bonds with principal amount of approximately HK$38.4 million has been overdue as at the Latest Practicable Date;
(ii) the redemption of the outstanding bonds would (1) enhance the financial position of the Group by reducing its liabilities; and (2) improve its gearing ratio and liquidity ratio, given the outstanding bonds represent a substantial amount to the current liabilities of the Group as at 30 September 2020; and
(iii) the Group may not have sufficient funds to redeem the outstanding bonds of approximately HK$48.9 million which would be due and redeemable on or before 30 June 2021, given the Group only had bank balances of approximately HK$2.0 million as at 30 September 2020,

we are of the view that it is reasonable for the Company to utilise the net proceeds of approximately HK$48.0 million from the Rights Issue for redemption of the outstanding bonds issued by the Company.

Settlement of the outstanding professional fee

As at the Latest Practicable Date, the Group had outstanding payment of approximately HK$3.0 million for professional fees payable to professional parties. Such professional fees were incurred for annual audit and interim review of the Group in prior year.

– 43 –

LETTER FROM DONVEX CAPITAL

Upon our request, we obtained a list from the Company showing the calculation of the outstanding payment to the professional parties which had been overdue as at the Latest Practicable Date (the ‘‘List of Outstanding Professional Fee’’). The List of Outstanding Professional Fee is summarised as below:

Nature of outstanding

Nature of outstanding
professional fee Due date Accounting services From July 2020 to December 2020 Legal services From June 2018 to June 2020 Financial printing services From January 2020 to September 2020 Valuation services From April 2019 to December 2020 Corporate secretarial services From March 2020 to October 2020	Amount (HK$’000) 1,113 618 495 400 377
	3,003

We have reviewed the List of Outstanding Professional Fee and selected transactions of over HK$100,000 (the ‘‘Transactions’’). We have also reviewed the details of the respective transaction, including (i) the nature of services; (ii) the amount of services fee; and (iii) the payment terms and due date. As the aggregate amount of the Transactions represented over 50% of the total amount of the outstanding professional fee in the List of Outstanding Professional Fee, we consider they are fair and representative samples.

Based on the Transactions selected, we noted that the respective invoices (i) are mainly in relation to audit, financial printing, and valuation services; and (ii) had been overdue as at the Latest Practicable Date.

Having taken into account:

(i) the tight cash position of the Group as at 30 September 2020 as discussed under section headed ‘‘Redemption of outstanding bonds issued by the Company’’; and
(ii) the Company’s obligation to settle the outstanding professional fee which had been overdue as at the Latest Practicable Date;

we are of the view that it is reasonable for the Company to utilise the net proceeds of approximately HK$3.0 million from the Rights Issue for the settlement of the outstanding professional fee.

– 44 –

LETTER FROM DONVEX CAPITAL

3 Reasons for and benefits of the Rights Issue

3.1 Liquidity to fulfil the repayment obligation

With reference to the Letter from the Board and the interim report of the Company for the six months ended 31 March 2020, the Group mainly had the following repayment obligations:

(i) bonds with outstanding amount of approximately HK$56.2 million, which would be due and redeemable within 1 year as at 30 September 2020; and
(ii) outstanding payment of approximately HK$3.0 million for professional fees payable, which had already been overdue as at the Latest Practicable Date.

Meanwhile, we also noted that the Group only had bank balances of approximately HK$2.0 million as at 30 September 2020.

Taking into consideration of the aforesaid repayment obligation within the next 12 months as well as the Group’s bank and cash balances as at 30 September 2020, we concur with the view of the Directors that the Rights Issue provides a good opportunity for the Group to (i) fulfil the repayment obligation, (ii) strengthen its capital base and (iii) enhance its financial position.

3.2 Suitable source of financing among other fund-raising alternatives

As discussed with the Management, the Management considered other financing alternatives, including (i) debt financing, (ii) placement of new Shares and (iii) open offer. The Company decided to propose the Rights Issue due to the reasons as stated below.

Debt financing

In respect of the debt financing, pursuant to our understanding, the Group may encounter difficulties in obtaining additional financing under the existing financial environment in view of:

(i) the Group recorded net current liabilities and net liabilities as at 30 September 2020;
(ii) the Group incurred net losses continuously for the last five financial years;
(iii) the gearing level of the Group was high as the gearing ratio was approximately 3.47 as at 30 September 2020;

– 45 –

LETTER FROM DONVEX CAPITAL

(iv) the Group had outstanding bank borrowings of approximately HK$20.6 million as at 30 September 2020, among which bank borrowings of approximately HK$8.0 million would be due and repayable within 1 year; and
(v) save for the pipeline and equipment owned by the Group, the Group may not have material assets to charge to the banks as security in order to obtain additional financing from banks.

Placement of new Shares

In respect of the placement of new Shares, the Management considered it would not be an alternative due to the reasons that:

(i) it would lead to immediate dilution in the shareholding interest of existing Shareholders without offering them the opportunity to participate in the enlarged capital base of the Company. The Company has already conducted placement of new Shares in March 2020 and April 2020. Another placement of new Shares at this stage would further dilute the shareholding interest of existing Shareholders; and
(ii) there will be substantial dilution to the shareholding interest of existing Shareholders if the Company would raise approximately HK$58.35 million by way of placement of new Shares, given that the current market capitalisation of the Company was less than HK$20 million as at the Last Trading Day.

We are of the view that placement of new Shares is not in the best interests of the Independent Shareholders, given that:

(i) the above reasons as considered by the Management; and
(ii) as discussed in section headed ‘‘Review on the trading liquidity of the Shares’’, the Daily Trading Volume (as defined below) was relatively thin during the Historical Period (as defined below). In the event the Company raises funds by way of placement of new Shares, a deep discount to the market price has to be set to attract potential investors to participate in the placement, which will also cost substantial dilution to the existing Shareholders and may not be fair and reasonable to the Independent Shareholders.

– 46 –

LETTER FROM DONVEX CAPITAL

Open offer

In respect of the open offer, the Company considered that the Rights Issue would be more favourable and attractive to the Shareholders than an open offer as it would allow Shareholders to have more flexibility in dealing with the Shares and the nil-paid rights.

3.3 Other benefits of the Rights Issue

With reference to the Letter from the Board, the Rights Issue offers all the Qualifying Shareholders an equal opportunity to (i) participate in the enlargement of the capital base of the Company; (ii) enable the Qualifying Shareholders to maintain their proportionate interests in the Company; and (iii) continue to participate in the future development of the Company. In addition, the discount of the Subscription Price to the prevailing market price of the Shares also enhances the attractiveness of the Rights Issue since it is the Company’s objective to encourage the participation of Qualifying Shareholders in the Rights Issue.

On the other hand, Qualifying Shareholders who do not wish to take up their provisional entitlements under the proposed Rights Issue are able to sell the nil-paid rights in the market.

Having taken into consideration:

(i) the liquidity to fulfil the payment obligation of the Group in the next 12 months;
(ii) the difficulties encountered to obtain bank financing due to the Group’s net current liabilities and net liabilities as at 30 September 2020;
(iii) the limit to the size of placement of new Shares under general mandate; and
(iv) the additional flexibility provided from the options in the Rights Issue to the existing Shareholders,

we concur with the view of the Directors that the Rights Issue is the most appropriate fund-raising option under the current circumstances of the Group and is in the interests of the Company and the Shareholders as a whole.

– 47 –

LETTER FROM DONVEX CAPITAL

4 Principal terms of the Rights Issue

4.1 Summary of the key terms

Basis of the Rights Issues : Four (4) Rights Shares for every one (1) Share held on the Record Date
Subscription Price : HK$0.16 per Rights Share Number of Existing Shares in : 91,172,000 Shares issue as at the Latest Practicable Date
Number of Adjusted Shares : 91,172,000 (assuming no change in the upon the Capital number of Shares in issue on or before the Reorganisation becoming Record Date) effective
Number of Rights Shares : Up to 364,688,000 Rights Shares (based on the number of Existing Shares in issue as at the Latest Practicable Date and adjusted for the effect of the Capital Reorganisation, and assuming no change in the number of issued Shares on or before the Record Date)
Aggregate nominal value of : HK$3,646,880 Rights Shares (assuming no the Rights Shares change in the number of Adjusted Shares in issue on or before the Record Date)
Number of Adjusted Shares as : Up to 455,860,000 Adjusted Shares enlarged by the allotment (assuming no change in the number of and issue of the Rights Adjusted Shares in issue on or before the Shares Record Date and that no new Adjusted Shares (other than the Rights Shares) will be allotted and issued on or before completion of the Rights Issue)

Number of Rights Shares 182,344,000 Rights Shares underwritten by the Underwriter

For details of the terms of the Rights Issue, please refer to the section headed ‘‘Proposed Rights Issue’’ in the Letter from the Board.

– 48 –

LETTER FROM DONVEX CAPITAL

4.2 Subscription Price

With reference to the Letter from the Board, the Subscription Price was determined after arm’s length negotiation between the Company and the Underwriter with reference to, among others, (i) the market price of the Shares under the prevailing market conditions, (ii) the latest business performance and financial position of the Group; and (iii) the reasons for and benefits of the proposed Rights Issue as discussed in the section headed ‘‘Reasons for and benefits of the Rights issue and intended use of proceeds’’.

The Subscription Price of HK$0.16 per Rights Share represents:

(a) a discount of approximately 25.58% to the closing price of HK$0.215 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(b) a discount of approximately 20.79% to the closing price of HK$0.202 per Share as quoted on the Stock Exchange on the Last Trading Day (the ‘‘LTD Discount’’);
(c) a discount of approximately 21.95% to the average of the closing prices of HK$0.205 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day;
(d) a discount of approximately 4.76% to the theoretical ex-rights price of HK$0.168 per Share as adjusted for the effect of the Rights Issue, based on the closing price of HK$0.202 per Share as quoted on the Stock Exchange on the Last Trading Day (the ‘‘TERP Discount’’); and
(e) a theoretical dilution effect (as defined under Rule 10.44A of the GEM Listing Rules) represented by a discount of approximately 17.56% (the ‘‘Theoretical Dilution Effect’’), represented by the theoretical diluted price of approximately HK$0.169 per Share to the benchmarked price of approximately HK$0.205 per Share (as defined under Rule 10.44A of the GEM Listing Rules, taking into account the closing price on the Last Trading Day of HK$0.202 per Share and the average of the closing prices of the Shares as quoted on the Stock Exchange for the five previous consecutive trading days prior to the Last Trading Day of approximately HK$0.205 per Share).

– 49 –

LETTER FROM DONVEX CAPITAL

Comparison with historical closing prices

In order to assess the fairness and reasonableness of the Subscription Price, we have performed a review on the daily closing prices and trading volume of the Shares from 21 November 2019 to the Last Trading Day (the ‘‘Historical Period’’) (being a period of approximately 1 year) and compared with the Subscription Price. Given that a one-year review period is adopted for share price assessment, the Historical Period is adequate to illustrate the recent trading performance of the Shares. The Chart 1 below illustrates the daily closing price of the Shares (‘‘Daily Closing Price’’) versus the Subscription Price during the Historical Period:

==> picture [335 x 215] intentionally omitted <==

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

Chart 1: Daily Closing Price vs. Subscription Price
10.000
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
-
Closing Price Subscrip�on price
2019/11/21 2019/12/03 2019/12/13 2019/12/27 2020/01/09 2020/01/21 2020/02/04 2020/02/14 2020/02/26 2020/03/09 2020/03/19 2020/03/31 2020/04/14 2020/04/24 2020/05/08 2020/05/20 2020/06/01 2020/06/11 2020/06/23 2020/07/07 2020/07/17 2020/07/29 2020/08/10 2020/08/20 2020/09/01 2020/09/11 2020/09/23 2020/10/07 2020/10/20 2020/11/02 2020/11/12
----- End of picture text -----

Sources: the website of the Stock Exchange (www.hkex.com.hk)

During the Historical Period, the lowest Daily Closing Price was HK$0.202 recorded on 20 November 2020, while the highest Daily Closing Price was HK$9.700 recorded on 13 December 2019. The average Daily Closing Price was approximately HK$1.248.

As such, we noted that the Subscription Price of HK$0.160 per Rights Share represents (i) a discount of approximately 98.4% to the highest Daily Closing Price; (ii) a discount of approximately 20.8% to the lowest Daily Closing Price; and (iii) a discount of approximately 87.2% to the average Daily Closing Price during the Historical Period.

– 50 –

LETTER FROM DONVEX CAPITAL

Despite the above, we also have the following observations:

(i) During the period commencing from 21 November 2019 to 27 December 2019, the Daily Closing Price was subject to substantial fluctuation with the range from HK$2.600 to HK$9.700, given the Daily Closing Price dropped sharply to HK$2.600 on 27 December 2019 after it reached its highest point at HK$9.700 on 13 December 2019.
(ii) Subsequent to 27 December 2019, the Daily Closing Price had significantly increased up to its second highest point, which was HK$5.800 on 13 January 2020.
(iii) Immediately after reaching its second highest point at HK$5.800, the Daily Closing Price exhibited a downward trend until 18 March 2020. The Daily Closing Price then rebounded to its third highest point at HK$3.200 on 29 March 2020.
(iv) However, the Daily Closing Price dropped sharply to HK$0.720 on 30 March 2020 and remained at a relatively low price up til the Last Trading Day.

The Directors advised us that they are not aware of any particular reasons for the aforesaid share price movement during the period from 21 November 2019 to 30 March 2020 (the ‘‘Unusual Share Price Movement’’), save for (i) the material change of market environment, including but not limited to the outbreak of COVID-19 pandemic, (ii) the announcement in respect of the change of the Directors dated 24 January 2020; and (iii) the announcement in respect of the proposed placing of new shares under general mandate dated 16 March 2020.

==> picture [328 x 190] intentionally omitted <==

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

Chart 2: Daily Closing Price vs. Hang Seng Index
10.000 30,000
9.000
8.000 25,000
7.000
20,000
6.000
5.000 15,000
4.000
3.000 10,000
2.000
5,000
1.000
- -
Closing Price HKSI
2019/11/21 2019/12/04 2019/12/17 2020/01/02 2020/01/15 2020/01/30 2020/02/12 2020/02/25 2020/03/09 2020/03/20 2020/04/02 2020/04/17 2020/05/04 2020/05/15 2020/05/28 2020/06/10 2020/06/23 2020/07/08 2020/07/21 2020/08/03 2020/08/14 2020/08/27 2020/09/09 2020/09/22 2020/10/07 2020/10/21 2020/11/04 2020/11/17
----- End of picture text -----

– 51 –

LETTER FROM DONVEX CAPITAL

In respect of the Unusual Share Price Movement, it was not generally in line with the fluctuation of Hang Seng Index during the respective period, when comparing the Daily Closing Price with Hang Seng Index.

As such, having considered:

(i) the substantial fluctuation of the Daily Closing Price during the period from 21 November 2019 to 30 March 2020 was not generally in line with the trend of Hang Seng Index as illustrated in the Chart 2 above;
(ii) the Daily Closing Price, which had a downward trend during the period from 31 March 2020 to the Last Trading Day (the ‘‘Eight Months Review Period’’) and remained at its lowest position from 31 March 2020 to the Last Trading Day, was of less fluctuation as compared to the Unusual Share Price Movement,

we are of the view that the Eight Months Review Period is more representative and adequate to illustrate the Share price movements to conduct a reasonable comparison between the Daily Closing Price and the Subscription price.

Comparison with recent rights issue transactions

In order to further assess the fairness and reasonableness of the Subscription Price, we have identified 14 companies (the ‘‘Comparables’’) based on the following criteria: (i) companies listed on the GEM; and (ii) companies that had conducted rights issue during the Historical Period. We consider that the list of the Comparables is an exhaustive list and sufficient to provide a fair and representative sample to be taken as a general reference of the prevailing market practices in relation to rights issue under recent market sentiment.

Shareholders should note that the subject companies in the Comparables may have different principal business activities, market capitalisations, profitability and financial positions as compared to those of the Company. Although the circumstances surrounding such Comparables may be different from those relating to the Company, we consider that the Review Period is adequate and fair and reasonable to capture the prevailing market conditions of companies listed on the Stock Exchange conducting rights issue.

– 52 –

LETTER FROM DONVEX CAPITAL

The Comparables listed below have been identified through our research using public information. The major terms of the rights issue conducted by the Comparables are summarised below:

					Theoretical
			Discount of		dilution effect
			subscription	Discount of	(as defined
			price to the	subscription	under Rule
			closing price	price to the	10.44A of the	Underwriting/	Maximum
			on the last	theoretical ex-	GEM Listing	related	dilution on
Company name	Date of		trading day	rights price	Rules)	commission	shareholding	Excess
(stock code)	announcement	Basis of entitlement	%	%	%	%	%	application
							(Note 1)
Asia-Pac Financial Investment	2020-11-05	3 for 1	10.70	3.70	10.30	2.50	75.00	No
Company Limited
(8193)
Wan Cheng Metal Packaging	2020-09-18	3 for 1	19.40	5.70	14.52	Non-	75.00	No
Company Limited						underwritten
(8291)						basis
Aeso Holding Limited	2020-09-03	3 for 1	16.70	4.80	12.50	2.50	75.00	No
(8341)
Royal Century Resources	2020-08-28	2 for 1	25.00	10.00	11.76	2.00	66.67	No
Holdings Limited
(8125)
Wealth Glory Holdings Limited	2020-08-24	5 for 2	11.10	3.60	8.50	2.50	71.43	Yes
(8269)
Beaver Group (Holding)	2020-08-10	1 for 2	28.95	20.59	10.53	5.00	33.33	Yes
Company Limited
(8275)
Greatwalle Inc.	2020-08-05	1 for 3	27.54	21.88	7.25	Fix amount	25.00	Yes
(8315)						HK$200,000
Larry Jewelry International	2020-07-30	5 for 1	29.17	6.59	n/a	5.00	83.33	Yes
Company Limited					(Note 3)
(8351)
Luxey International (Holdings)	2020-07-02	1 for 2	58.30	48.20	19.90	Non-	33.33	Yes
Limited						underwritten
(8041)						basis
Chinese Strategic Holdings	2020-05-26	1 for 2	24.53	17.81	9.90	3.00	33.33	Yes
Limited
(8089)
hmvod Limited	2020-05-19	5 for 1	64.00	22.90	n/a	3.00	83.33	Yes
(8103)					(Note 3)
Shen You Holdings Limited	2020-04-09	1 for 2	12.20	8.50	4.10	3.50	33.33	Yes
(8377)
Merdeka Financial Group	2020-01-12	4 for 1	8.33	1.79	6.67	2.00	80.00	Yes
Limited
(8163)
On Real International Holdings	2019-12-24	1 for 2	61.54	51.61	20.50	4.00	33.33	Yes
Limited
(8245)
		Average	28.39	16.26	11.37	3.18	57.24
		Maximum	64.00	51.61	20.50	5.00	83.33
		Minimum	8.33	1.79	4.10	2.00	25.00
The Company	2020-11-20	4 for 1	21.57	4.76	17.56	3.00	80.00	Yes
						(Note 2)

Sources: the website of the Stock Exchange (www.hkex.com.hk)

– 53 –

LETTER FROM DONVEX CAPITAL

Notes:

Maximum dilution effect of each rights issue is calculated as: (number of rights shares to be issued under the basis of entitlement)/(number of shares held for the entitlement for the rights shares under the basis of entitlement + number of rights shares to be issued under the basis of entitlement).
As set out in the section headed ‘‘The Underwriting Agreement’’ in the Letter from the Board, the Rights Issue is partially underwritten by the Underwriter.
The Comparables did not disclose their theoretical dilution effect in the respective announcement.

As shown in the above table, the discount as represented by the subscription price of the Comparables to:

(i) the respective closing price on the last trading day ranged from approximately 8.33% to approximately 64.00% (the ‘‘LTD Discount Market Range’’), with an average of a discount of approximately 28.39% (the ‘‘LTD Discount Market Average’’); and
(ii) the respective theoretical ex-rights price ranged from approximately 1.79% to approximately 51.61% (the ‘‘TERP Discount Market Range’’), with an average of a discount of approximately 16.26% (the ‘‘TERP Discount Market Average’’).

The theoretical dilution effect of the Comparables ranged from approximately 4.10% to approximately 20.50% (the ‘‘Theoretical Dilution Effect Market Range’’), with an average of approximately 11.37%.

– 54 –

LETTER FROM DONVEX CAPITAL

Review on the trading liquidity of the Shares

We have also reviewed the historical daily trading volume of the Shares (‘‘Daily Trading Volume’’) during the Historical Period and up to 21 January 2021. The results are summarised in the table below:

				Percentage
				of the
				average
				Daily
				Trading
				Volume to
			Average	the total
	Total		Daily	number of
	trading	No. of	Trading	issued
Month/period	volume	trading days	Volume	Shares
	(no. of		(no. of	(Note)
	shares)		shares)
	Approx		Approx	Approx
November 2019 (from
21 November 2019)	3,594,000	7	513,429	0.56%
December 2019	41,663,000	20	2,083,150	2.28%
January 2020	32,406,000	20	1,620,300	1.78%
February 2020	2,031,000	20	101,550	0.11%
March 2020	55,108,000	22	2,504,909	2.75%
April 2020	11,593,000	19	610,158	0.67%
May 2020	21,103,000	20	1,055,150	1.16%
June 2020	14,463,000	21	688,714	0.76%
July 2020	8,727,000	22	396,682	0.44%
August 2020	9,349,000	21	445,190	0.49%
September 2020	31,351,000	22	1,425,045	1.56%
October 2020	12,048,000	18	669,333	0.73%
November 2020	3,302,000	21	157,238	0.17%
December 2020	1,332,000	22	60,091	0.07%
January 2021 (up to
21 January 2021)	794,000	14	56,714	0.06%

Sources: the website of the Stock Exchange (www.hkex.com.hk)

Note: The calculation is based on the average Daily Trading Volume divided by the total number of issued shares of the Company as at the Last Trading Day (i.e. 91,172,000 Shares).

– 55 –

LETTER FROM DONVEX CAPITAL

As illustrated in the table above, the average Daily Trading Volume during the Historical Period ranged from approximately 56,714 Shares to approximately 2,504,909 Shares, representing approximately 0.06% to 2.75% of the total number of issued shares of the Company as at the Last Trading Day.

We also noted that average Daily Trading Volume remained at less than 2.00% of the total number of issued shares of the Company as at the Last Trading Day since April 2020.

In view of (i) the declining trend of the Share price; and (ii) the relatively thin trading volume of the Shares, we consider that it is justifiable for the Subscription Price to be set at a discount to increase the attractiveness of the Rights Issue to the Qualifying Shareholders.

Having taken into consideration the reasons and factors as below:

(i) it is a normal market practice that the subscription price of a rights issue be set at a discount to the price on the last trading day and the theoretical ex-rights price in order to enhance the attractiveness of a rights issue and to encourage the qualifying shareholders to take part in the rights issue;
(ii) the LTD Discount is (1) within the LTD Discount Market Range; and (2) lower than the LTD Discount Market Average;
(iii) the TERP Discount is (1) within the TERP Discount Market Range; and (2) lower than the TERP Discount Market Average;
(iv) the Theoretical Dilution Effect is within the Theoretical Dilution Effect Market Range; and
(v) the Subscription Price is a commercial decision arrived at after considering, among other things, the recent market price of the Shares, the prevailing market conditions, recent rights issue in the market, the amount of funds and capital needs,

we consider that the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

– 56 –

LETTER FROM DONVEX CAPITAL

4.3 Potential dilution effect of the Rights Issue

The Rights Issue will allow all the Qualifying Shareholders the equal opportunity to subscribe for their respective pro-rata provisional entitlement of the Rights Shares and hence avoid dilution in their shareholdings in the Company. Qualifying Shareholders who do not wish to take up their provisional entitlements under the proposed Rights Issue are able to sell the nil-paid rights in the market. However, Qualifying Shareholders who do not wish to take up their provisional entitlements and the Non-Qualifying Shareholders will have their shareholdings in the Company diluted upon completion of the Rights Issue.

Among the Comparables as set out in the sub-section headed ‘‘4.2 Subscription Price’’ above, the maximum dilution effect of the rights issues conducted by the Comparables ranged from approximately 25.00% to 83.33% with an average of approximately 57.24%. The maximum dilution effect of the Rights Issue of approximately 80.00% falls within the range of the Comparables.

However, having considered that:

(i) the shareholding interests of the Qualifying Shareholders who take up their provisional allotments of the Rights Issues in full will not be diluted;
(ii) the proposed Rights Issue offers the Qualifying Shareholders an equal opportunity to subscribe for the Rights Shares for the purpose of maintaining their proportionate interests in the Company at a discount as compared to the historical and prevailing market price of the Shares; and
(iii) the Qualifying Shareholders who do not wish to take up the Rights Shares would have the opportunity to sell their nil-paid Rights Shares in the market,

we are of the view that the dilution effect of the Rights Issue is fair and reasonable so far as the Independent Shareholders are concerned.

4.4 The Underwriting Agreement

On 20 November 2020 (after trading hours), the Company entered into the Underwriting Agreement with the Underwriter, pursuant to which the Underwriter has conditionally agreed to partially underwrite the Underwritten Shares (i.e. 182,344,000 Rights Shares), subject to the terms and conditions of the Underwriting Agreement.

For details of the terms of the Underwriting Agreement, please refer to the section headed ‘‘The Underwriting Agreement’’ in the Letter from the Board.

– 57 –

LETTER FROM DONVEX CAPITAL

The Underwriting Commission

Pursuant to the Underwriting Agreement, the Company shall make the following payments to the Underwriter:

(i) an underwriting commission of 3.0% (the ‘‘Underwriting Commission Rate’’) of the aggregate Subscription Price in respect of the maximum number of Underwritten Shares committed to be underwritten; and
(ii) reasonable legal fees and other reasonable out-of-pocket expenses of the Underwriter in respect of the Rights Issue.

The terms of the Underwriting Agreement, including the Underwriting Commission Rate, were determined after arm’s length negotiation between the Company and the Underwriter with reference to the existing financial position of the Group, the size of the Rights Issue, and the current and expected market condition.

Among the Comparables as set out in the sub-section headed ‘‘4.2 Subscription Price’’ above, the underwriting commission rate of the Comparables ranged from 2.00% to 5.00% with an average of approximately 3.18%. The Underwriting Commission Rate falls within the range of the Comparables and lower than the average of the Comparables. As such, we consider that the Underwriting Commission Rate is fair and reasonable so far as the Independent Shareholders are concerned.

5 Financial impacts of the Rights Issue

It should be noted that below is for illustrative purpose only and does not purport to represent how the financial position of the Company will be upon completion of the Rights Issue.

Net tangible assets

As noted from the unaudited pro forma financial information of the Group as set out in Appendix II to the Circular, the Group recorded net tangible liabilities attributable to owners of the Company of approximately HK$80.2 million as at 30 September 2020. Assuming the completion of the Rights Issue had taken place on 30 September 2020, the unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to the Shareholders would have decreased to approximately HK$25.0 million immediately after the completion of the Rights Issue. Such decrease is attributable to the effect of the net proceeds from the Rights Issue.

– 58 –

LETTER FROM DONVEX CAPITAL

The unaudited consolidated net tangible liabilities attributable to owners of the Company per Share as at 30 September 2020 was approximately HK$0.881, which would decrease to unaudited consolidated net tangible liabilities of approximately HK$0.055 per Share immediately after completion of the proposed Rights Issue.

Working capital

As stated in the Letter from the Board, approximately HK$55.32 million of the net proceeds from the proposed Rights Issue would be used for general working capital of the Group. As such, the working capital position of the Group would improve upon completion of the proposed Rights Issue.

Gearing and liquidity

With reference to the Results Announcement, the gearing ratio of the Group, being calculated as total liabilities divided by total equity, as at 30 September 2020 was approximately 3.47.

Immediately upon completion of the Rights Issue, there would be an increase in the cash level of the Group and the Company would apply (i) approximately HK$48.0 million for the redemption of outstanding bonds issued by the Company; and (ii) approximately HK$3.0 million for the settlement of the outstanding professional fee incurred.

Based on the enhanced cash position, expected decrease in total liabilities and enlarged capital base of the Group upon completion of the Rights Issue, the Group’s gearing ratio and liquidity position is expected to be improved.

Considering the possible benefits of the Rights Issue on the liquidity and the overall financial position of the Company as discussed above, we are of the view that the Rights Issue is in the interest of the Company and the Shareholders as a whole.

RECOMMENDATION

In arriving at our opinion and recommendation in respect of the Rights Issue, we have considered the principal factors and reasons as discussed above and in particular as follows:

(I) The Group recorded net current liabilities position as at 30 September 2020, with bank and cash balance of approximately HK$2.0 million only. The Company would need to seek for fund raisings to (1) redeem the outstanding bonds which would be due on or before 30 June 2021; and (2) settle the overdue payment to the professional parties;

– 59 –

LETTER FROM DONVEX CAPITAL

(II) The Rights Issue is a suitable source of financing as compared to other fund-raising alternatives such as debt financing, placement of new Shares and open offer, as discussed under the above sub-section headed ‘‘3.2 Suitable source of financing among other fund-raising alternatives’’;
(III) All Qualifying Shareholders are offered an equal opportunity to (1) participate in the enlargement of the capital base of the Company; (2) maintain their proportionate interests in the Company; and (3) continue to participate in the future development of the Company. In addition, Qualifying Shareholders who do not intend to accept the Rights Issue provisionally allotted to them can sell their nil-paid Rights Shares;
(IV) The LTD Discount, the TERP Discount and the Theoretical Dilution Effect are within the respective market range of the Comparables. We consider that the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned;
(V) The dilution effect on the shareholding interests of the Shareholders, which will be potentially diluted by up to a maximum 80% following the completion of the Rights Issue, is considered to be acceptable;
(VI) The Underwriting Commission Rate is fair and reasonable so far as the Independent Shareholders are concerned; and
(VII) The Rights Issue is expected to bring a positive financial impact on the Group, in particular improving (1) the new tangible assets; and (2) the gearing and liquidity.

Based on the above, we are of the opinion that, though not entered into in the ordinary and usual course of business of the Group, the terms of the Rights Issue are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant resolution(s) to be proposed at the EGM to approve the proposed Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Donvex Capital Limited Doris Sy Director

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION

Details of the financial information of the Group for each of the three years ended 31 December 2018, 30 September 2019 and 30 September 2020 are disclosed in the annual reports of the Company for the years ended 31 December 2018, 30 September 2019 and 30 September 2020 respectively. These annual reports are published on the website of the Stock Exchange (http://www.hkex.com.hk) and the Company (http://www.globalstrategicgroup.com.hk).

2. INDEBTEDNESS

As at the close of business on 31 January 2021, being the latest practicable date for the purpose of ascertaining information contained in this statement of indebtedness prior to the printing of this circular, the details of the Group’s indebtedness are as follows:

Bank and other borrowings

Bank loan Secured (Note) Unsecured Non-convertible bonds Non-secured Guarantee by a former director of the Company	HK$’000 20,592 3,817 50,882 6,525
	81,816

Note: Bank borrowings of HK$15,747,000 are secured by several properties owned by non-controlling interests of Yichang Biaodian, including Mr. Xiong Songgan (‘‘Mr. Xiong’’), a key management personnel of Yichang Biaodian, and his spouse, and a company held and controlled by Mr. Xiong. The bank borrowings are also jointly guaranteed by non-controlling interests of Yichang Biaodian, including Hubei Biaodian, Mr. Xiong and his spouse and Mr. Li Wanqing.

Bank borrowings of HK$4,845,000 are secured by a property owned by non-controlling interests of Yichang Biaodian, including Mr. Xiong and his spouse. The bank borrowings are also jointly guaranteed by a subsidiary of the Group and the non-controlling shareholders of Yichang Biaodian.

Lease liabilities

The Group measures the lease liabilities at the present value of the remaining lease payments for certain office premises and motor vehicles, discounted by the Group’s incremental borrowing rates under HKFRS 16. As at 31 January 2021, the Group had lease liabilities amounting to approximately HK$977,000.

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disclaimers

Save as aforesaid or otherwise disclosed herein, and apart from intra-group liabilities, normal trade and other payables and contract liabilities, as at 31 January 2021, being the latest practicable date for the purpose of preparing this statement of indebtedness prior to the printing of this circular, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages and charges, hire purchase commitments, material contingent liabilities or guarantees outstanding.

The Directors confirm that, save as disclosed therein, there has not been any material change in the indebtedness, contingent liabilities and commitments of the Group since 31 January 2021.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the followings:

(i) the financial supports from two directors (the ‘‘Guarantors’’) of the Company providing sufficient funds to the Group so that the Group will be able to meet all current obligations as they fall due in the coming twelve months from the date of this circular;
(ii) extension of maturity dates of non-convertible bonds with aggregate principal amounts of approximately HK$33.19 million by one year once the bonds mature; and
(iii) the cash proceeds of approximately HK$55.32 million from the Rights Issue,

the Group has sufficient working capital for its present requirements for at least 12 months from the date of this circular in the absence of any unforeseen circumstances.

The Directors’ opinion is based on, among other things, the assumptions that (i) the Guarantors are able to provide sufficient financial supports to the Group; (ii) successful extension of maturity dates of non-convertible bonds once the bonds mature; and (iii) successful implementation of the Rights Issue.

Reference is made to the Company’s annual report for the year ended 30 September 2020 (the ‘‘2020 Annual Report’’). According to the 2020 Annual Report, the auditor’s report on the Group’s financial statements for the year ended 30 September 2020 contained a paragraph relating to ‘‘Material Uncertainty Related to Going Concern’’ and the audit opinion was not modified in respect of this matter.

I – 2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse changes in the financial or trading position of the Group since 30 September 2020 (being the date to which the latest published audited consolidated financial statements of the Group were made up).

5. TRADING AND FINANCIAL PROSPECTS OF THE GROUP

2020 was a very challenging year for the global economy due to the outbreak of the novel coronavirus, the ongoing trade disputes between China and the U.S., and the uncertainties brought about by the U.S. presidential election. These events have brought a negative impact on the global economy.

Even though the external economic environment continues to be weak, since the target customers for the Group’s key business of natural gas supply is mainly domestic business, the management remains optimistic about the prospects of the natural gas business. In the natural gas supply business, the Group holds the exclusive right to supply natural gas in Yichang, Hubei for 30 years. With this advantage, the number of potential customers has increased correspondingly with the continuous expansion of the industrial park.

The Group will continue to implement diversified investment strategies aimed at identifying suitable investment opportunities with potential of asset appreciation to bring about better return to the Group and the Shareholders. The Group will also continue to adopt and maintain a prudent but proactive investment approach and will closely monitor the performance of the investment portfolios with the goal of maximising the results and value from the investment portfolios to the Shareholders.

As at the Latest Practicable Date, save for the Rights Issue, the Board has no intention or plan to conduct other equity fund raising activities in the next 12 months. The Company will wait for the investment environment and market atmosphere to turn positive and look for suitable investment opportunities. However, if the Group experiences a further substantial deterioration of its financial position and investment performance due to the market fluctuation and that the net proceeds from the Rights Issue may not satisfy such upcoming financing needs, the Board does not rule out the possibility that the Company may conduct further equity fund raising exercises to support such future developments of the Group. The Company will make further announcement(s) in this regard in accordance with the GEM Listing Rules as and when appropriate.

I – 3

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP
Unaudited Pro Forma Statement of Adjusted Consolidated Net Tangible Assets of the Group

The statement of unaudited pro forma adjusted consolidated net tangible assets of the Group prepared in accordance with Paragraph 13 of Appendix 1B and Paragraph 31 of Chapter 7 of the GEM Listing Rules is set out below to illustrate the effects of the Rights Issue on the unaudited consolidated net tangible liabilities of the Group as if the Rights Issue had taken place on 30 September 2020.

The statement of unaudited pro forma adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only, based on the judgements and assumptions of the Directors of the Company, and because of its hypothetical nature, may not give a true picture of the financial position of the Group following the Rights Issue.

The following statement of unaudited pro forma adjusted consolidated net tangible assets of the Group is based on the consolidated net tangible liabilities of the Group as at 30 September 2020, adjusted as described below:

Audited consolidated net tangible liabilities per Existing Share before completion of the Rights Issue (Note 3) Unaudited pro forma adjusted consolidated net tangible liabilities per adjusted share immediately after completion of the Rights Issue (Note 4)	Audited consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2020 (Note 1) HK$’000 (80,288)	Unaudited estimated net proceeds from the Rights Issue (Note 2) HK$’000 55,319	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group as at 30 September 2020 HK$’000 (24,969)
			(HK$0.881)
			(HK$0.055)

II – 1

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

The consolidated net tangible liabilities of the Group attributable to equity holders of the Company at 30 September 2020 of approximately HK$80,288,000 is based on the audited consolidated net liabilities of the Group attributable to the equity holders of the Company at 30 September 2020 of approximately HK$10,201,000 excluding intangible assets and goodwill of approximately HK$69,507,000 and HK$580,000 respectively as shown on the consolidated statement of financial position of the Group at 30 September 2020 as extracted from the financial statements of the Group for the year ended 30 September 2020.
The estimated net proceeds from the Rights Issue are based on 364,688,000 Right Shares at the Subscription Price of HK$0.16 per Rights Share, after deduction of the underwriting fees and other share issue related expenses payable by the Company of approximately HK$1,750,000 and HK$1,281,000 respectively.
The audited consolidated net tangible liabilities per Existing Share before completion of the Rights Issue is determined based on the amount as disclosed in note 1 above, divided by 91,172,000 existing shares immediately before completion of the Right Issue.
The unaudited pro forma adjusted consolidated net tangible liabilities per adjusted share immediately after completion of the Right Issue is determined based on the amount as disclosed in note 1 above, divided by 455,860,000 adjusted shares assuming that the Rights Issue had been completed on 30 September 2020.

II – 2

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountant, RSM Hong Kong, Certified Public Accountants, Hong Kong.

29th Floor

Lee Garden Two 28 Yun Ping Road Causeway Bay Hong Kong

26 March 2021

The Board of Directors

Dear Sirs,

We have completed our assurance engagement to report on the compilation of pro forma financial information of Global Strategic Group Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by the Directors of the Company (the ‘‘Directors’’) for illustrative purposes only. The pro forma financial information consists of the pro forma statement of adjusted consolidated net tangible assets of the Group as at 30 September 2020 and related notes as set out on pages II-1 to II-2 of Appendix II to the investment circular (the ‘‘Circular’’) issued by the Company. The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described on pages II-1 to II-2 of Appendix II to the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the Rights Issue on the Group’s net tangible liabilities as at 30 September 2020 as if the transaction had been taken place at 30 September 2020. As part of this process, information about the Group’s net tangible liabilities has been extracted by the Directors from the Group’s consolidated financial statements as included in the annual report for the year ended 30 September 2020.

II – 3

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Directors’ Responsibility for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 13 of Appendix 1B and paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on the GEM of The Stock Exchange of Hong Kong Limited (the ‘‘GEM Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

The firm applies Hong Kong Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’ issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 31 of Chapter 7 of the GEM Listing Rules and with reference to AG 7 issued by the HKICPA.

II – 4

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 September 2020 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgement, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We make no comments regarding the reasonableness of the amount of net proceeds from the Rights Issue, the application of those net proceeds, or whether such use will actually take place as described under ‘‘Reasons for and benefits of the Rights Issue and intended use of proceeds’’ set out on page 28 of the investment circular.

II – 5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

RSM Hong Kong

Certified Public Accountants Hong Kong

II – 6

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 GEM 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. SHARE CAPITAL

The authorised and issued share capital of the Company

(i) As at the Latest Practicable Date

==> picture [380 x 271] intentionally omitted <==

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

Authorised: HK$
160,000,000 Shares of HK$0.50 each 80,000,000.00
Issued and fully-paid:
91,172,000 Shares of HK$0.50 each 45,586,000.00
Immediately following the Capital Reorganisation having become effective
(assuming no change in the number of issued Shares)
Authorised: HK$
8,000,000,000 Adjusted Shares of HK$0.01 each 80,000,000.00
Issued and fully-paid:
91,172,000 Adjusted Shares of HK$0.01 each 911,720.00
----- End of picture text -----

(ii) Immediately following the Capital Reorganisation having become effective (assuming no change in the number of issued Shares)

III – 1

GENERAL INFORMATION

APPENDIX III

(iii) Immediately following the allotment and issue of the Rights Shares (assuming no change in the number of issued Shares and full acceptable of Rights Shares by all Qualifying Shareholders)

Authorised: 8,000,000,000 Adjusted Shares of HK$0.01 each Issued and fully-paid: 91,172,000 Adjusted Shares immediately following the Capital Reorganisation 364,688,000 Rights Shares to be allotted and issued under the Rights Issue 455,860,000 Adjusted Shares of HK$0.01 each	HK$ 80,000,000.00
	911,720.00
	3,646,880.00
	4,558,600.00

All the Existing Shares in issue are fully-paid and rank pari passu in all respects including all rights as to dividends, voting and return of capital. The Rights Shares, when allotted, issued and fully-paid, will rank pari passu with the Adjusted Shares then in issue in all respects. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid on or after the date of allotment and issue of the fully-paid Rights Shares.

The Rights Shares to be issued will be listed on the Stock Exchange. No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or the Rights Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, there is no arrangement under which future dividends are/ will be waived or agreed to be waived.

As at the Latest Practicable Date, the Company (i) had no other outstanding warrants, options or convertible or exchangeable securities in issue which would otherwise confer any right to subscribe for, convert or exchange into Existing Shares; (ii) there was no share or loan capital of any member of the Group which was under option, or agreed conditionally or unconditionally to be put under option; and (iii) there were no arrangements under which future dividends were waived or agreed to be waived.

III – 2

GENERAL INFORMATION

APPENDIX III

3. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executive’s interests and short positions in shares and underlying shares

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executives of the Company in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (i) would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or 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 to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the GEM Listing Rules, were as follows:

Long and short positions in Shares and underlying Shares

			Approximately	Approximately
		Number of		percentage or
		Shares/		attributable
		underlying		percentage of
Name of Director	Nature of interest	Shares held		shareholding
Mr. Wu Guoming	Beneficial owner	3,687,500	(L)	4.04%

(L) denotes long position

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which (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 or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

As at the Latest Practicable Date, none of the Directors is a director or employee of a company which had, or was deemed to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

III – 3

GENERAL INFORMATION

APPENDIX III

(b) Substantial shareholders’ interests and short positions in shares and underlying shares

As at the Latest Practicable Date, so far as any Directors are aware, the interest or short positions owned by the following parties (other than the Directors or chief executives of the Company) in the Shares, underlying Shares or debentures of the Company which are required to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO or which were required to be recorded in the register of the Company required to be kept under section 336 of the SFO, or who were, directly or indirectly, interested in 10% or more of the issued voting shares of any member of the Group were as follows:

Long and short positions in Shares and underlying Shares

			Approximately	Approximately
		Number of		percentage or
		Shares/		attributable
		underlying		percentage of
Name of Shareholder	Nature of interest	Shares held		shareholding
Hong Kong Hao Yue	Beneficial owner	11,005,500	(L)	12.07%
(Note)

(L) denotes long position

Note:

Hong Kong Hao Yue is owned as to 100% by Mr. Zhang Hai Ping who is deemed to be interested in 11,005,500 Shares pursuant to the Part XV of the SFO.

Saved as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any interests or short positions owned by any persons (other than the Directors or chief executives of the Company) in the Shares or underlying Shares of the Company which were required to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO or which were required to be recorded in the register of the Company required to be kept under Section 336 of the SFO, or who were, directly or indirectly, interested in 10% or more of the issued voting shares of any member of the Group.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or proposed directors of the Company (if any) has any existing or proposed service contracts with any member of the Group which is not determinable by the Company within one (1) year without payment of any compensation (other than statutory compensation).

III – 4

GENERAL INFORMATION

APPENDIX III

5. DIRECTORS’ INTERESTS IN CONTRACT, ASSETS AND ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to any business of the Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been since 30 September 2019 (being the date to which the latest published audited consolidated financial statements of the Group were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or proposed directors of the Company (if any) or their respective associate(s) was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

7. LITIGATION

As at the Latest Practicable Date, the Group has the following litigations:

(a) During the year ended 31 December 2018, Yichang Biaodian entered into disputes with one of its suppliers regarding the quality of work performed by such supplier. Legal proceedings were initiated by the supplier (the ‘‘Yichang Plaintiff’’) and on 14 December 2018, pursuant to the application from the Yichang Plaintiff, the Court in Yichang granted an order to preserve the bank deposits of Yichang Biaodian amounted to approximately RMB478,000 (equivalent to approximately HK$544,000).

On 13 March 2019, the Court issued civil mediation agreement which set out that the Yichang Plaintiff and Yichang Biaodian agreed with the repayment terms in relation to the aforesaid amount. Yichang Biaodian is required to repay RMB200,000 on or before 30 April 2019 and an order could be applied to unfreeze the bank accounts; and Yichang Biaodian was required to settle RMB2,000,000 on or before 30 September 2019 and the remaining outstanding amount on or before 30 March 2020. The Yichang Plaintiff has the rights to apply for a court order to enforce Yichang Biaodian to settle all its debts if it fails to repay RMB2,200,000 to the Yichang Plaintiff on or before 30 September 2019. Amount of RMB8,787,000 (equivalent to approximately HK$10,006,000) are fully provided as liabilities of the Group at 31 December 2018. The restricted bank balance was released on 11 April 2019 upon agreement between the Yichang Plaintiff and Yichang Biaodian.

III – 5

APPENDIX III

GENERAL INFORMATION

On 20 November 2019, the Yichang Plaintiff has exercised its rights to apply for a court order to enforce Yichang Biaodian for settlement of amount overdue. Yichang Biaodian only repaid RMB200,000 up to 30 September 2020. The management of the Group was assessing the possible outcome that bringing to Yichang Biaodian. The Directors considered that as the full amount of the debts of RMB8,587,000 (equivalent to approximately HK$9,828,000) claimed by Yichang Plaintiff are fully provided as liability of the Group as at 30 September 2020, no further liability will be incurred.

(b) During the year ended 30 September 2020, 環球進億貿易（深圳）有限公司 (Global Jinyi Trading (Shenzhen) Co., Ltd.)* has been in dispute with a former director of the Group regarding the ownership of the building located in the PRC. Legal proceedings were initiated by the former director (the ‘‘Shenzhen Plaintiff’’) and on 8 July 2020, pursuant to the application from the Shenzhen Plaintiff, the Court in Shenzhen granted an order to preserve the building.

Save as disclosed above, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration proceedings of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

8. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the qualifications of the experts who have given opinions or advice which are contained in this circular:

Name	Qualifications
RSM Hong Kong	Certified Public Accountants
Donvex Capital	a corporation licensed to carry on Type 6 (advising on
	corporate finance) regulated activity under the SFO

Each of the above experts has given and confirmed that it has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter, report, advice, opinion and/or references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, each of the above experts did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any Shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group.

For identification purposes only

III – 6

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, each of above experts did not have any interest, either directly or indirectly, in any assets which have been since 30 September 2019 (being the date to which the latest published audited consolidated financial statements of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

9. MATERIAL CONTRACTS

The following contract (not being contracts in the ordinary course of business) has been entered into by the members of the Group within the two years immediately preceding the date of this circular and are or may be material:

(a) the Underwriting Agreement.

10. EXPENSES

The expenses in connection with the Rights Issue, including financial advisory fees, underwriting commission, printing, registration, translation, legal and accountancy charges are estimated to be approximately HK$3 million, which are payable by the Company.

11. CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Registered office Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands Head office and principal place Unit A, 11/F., Neich Tower of business in Hong Kong 128 Gloucester Road Wanchai Hong Kong Authorised representatives Wang Wenzhou Unit A, 11/F., Neich Tower 128 Gloucester Road Wanchai Hong Kong Tse Yin Fung Unit A, 8 Floor Tern Centre Tower 2 251 Queen’s Road Central Hong Kong

III – 7

GENERAL INFORMATION

APPENDIX III

Company secretary	Tse Yin Fung
Compliance officer	Wang Wenzhou
Underwriter	Rifa Securities Limited
	Level 7
	28 Hennessy Road
	Hong Kong
Legal advisers to the Company	Michael Li & Co.
	19/F Prosperity Tower
	No. 39 Queen’s Road Central
	Central
	Hong Kong
Independent Financial Adviser	Donvex Capital Limited
to the Independent Board	Unit 2502, 25th Floor,
Committee and the	Carpo Commercial Building
Independent Shareholders	18-20 Lyndhurst Terrace
	Central
	Hong Kong
Auditor	RSM Hong Kong
	Certified Public Accountants
	29/F, Lee Garden Two
	28 Yun Ping Road
	Causeway Bay
	Hong Kong
Principal bankers	Bank of China (Hong Kong) Ltd.
	Agricultural Bank of China
	Hubei Zhijiang Rural Commercial Bank
	Bank of Communications Co., Ltd.
Principal share registrar	The R&H Trust Co. Ltd.
	Windward 1
	Regatta Office Park
	P.O. Box 897
	Grand Cayman KY1-1103
	Cayman Islands

III – 8

GENERAL INFORMATION

APPENDIX III

Hong Kong branch share Tricor Secretaries Limited registrar and transfer office Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

12. PARTICULARS OF THE DIRECTORS AND SENIOR MANAGEMENT

Executive Directors

Mr. Wang Wenzhou (‘‘Mr. Wang’’), aged 48, has over 25 years of experience in textile industry and in-depth knowledge in products operation, import and export trading and supply management. Mr. Wang also has practical experience in corporate operation management. Prior to joining the Company, he was a general manager of 上海安林貿易有限公司 (Shanghai An Lin Trading Limited) and he also worked as a general manager at 上海藍豪服飾有限公司 (Shanghai Lan Hao Clothing Limited).

Mr. Wu Guoming (‘‘Mr. Wu’’), aged 55, has been the executive Director since 30 April 2018. Mr. Wu holds a degree in Business Management from Wuhan University, a degree in Civil Engineering from China University of Petroleum and a degree in Economic Management from Shanghai Jiao Tong University. Mr. Wu was the engineering manager and the deputy general manager at 上海光大建築裝飾工程公司 (Shanghai Guangda Construction Decoration Engineering Company)*. Since 2001, Mr. Wu has been the general manager and the chairman of Shanghai Guangda Basic Engineering Co., Ltd（上海廣大基礎工程有限公司）. Furthermore, Mr. Wu is the director of China Civil Engineering Society（中國土木工程學會）and a construction technology committee member of Chinese Institution of Soil Mechanics and Geotechnical Engineering – China Civil Engineering Society（中國土木工程學會土力學及岩土工程分會）. Mr. Wu has vast experience in business management and construction business development.

Mr. Duan Fanfan (‘‘Mr. Duan’’), aged 37, has been the executive Director since 8 November 2019. Mr. Duan holds a bachelor degree in International Business from Charles Sturt University and a master degree in Professional Accounting from Deakin University. Mr. Duan was General Manager in Victoria & South Australia of Domino’s Pizza Enterprises in Australia. He was granted with various Leadership Awards in the years from 2009 to 2013. He was Chief Executive Officer of ATI International Trading Pty Ltd from 2014 to 2019, specialising in the business development for bilateral import and export trading between China and Australia. Since 2020, Mr. Duan has served as the Chief Executive Officer of 武漢凱銳普信息技術有限公司 (transliterated as Wuhan Kai Rui Pu Information Technology Co., Ltd.), and is committed to promoting the development of smart health management equipment. Mr. Duan has vast experience in retail hospitality services sector and international trading.

For identification purposes only

III – 9

GENERAL INFORMATION

APPENDIX III

Independent Non-executive Directors

Mr. Leung Oh Man, Martin (‘‘Mr. Leung’’), aged 40, has been the independent nonexecutive Director since 16 October 2014. Mr. Leung has been serving as an independent non-executive director of KNT Holdings Limited (a company listed on the Main Board of the Stock Exchange, stock code: 1025) since 31 January 2019. Mr. Leung holds a Bachelor’s Degree of Commerce in Accounting and Finance from the University of Toronto in Canada. Mr. Leung is the general manager of TL Property Consultants International Ltd. (‘‘TLP’’), a consultancy group principally engaged in asset management of real estate sector. Prior to joining TLP, he had worked at a multinational accounting and auditing firm for about 8 years. Mr. Leung is a member of the Hong Kong Institute of Certified Public Accountants and the Hong Kong Institute of Surveyors.

Mr. Sun Zhi Jun (‘‘Mr. Sun’’), aged 53, has been an independent non-executive Director since 24 August 2015. Mr. Sun graduated from Shanghai Medical Instrumentation College in the PRC in 1988. Mr. Sun currently serves as Director of Strategy and Business Development for 邃藍智能科技（上海）有限公司 (transliterated as Deep Voxel Intelligent Technology (Shanghai) Co., Ltd.), a company specialising in artificial intelligence development in the medical field in PRC.

Senior management

Mr. Nip Chi Kin (‘‘Mr. Nip’’), aged 40, is the Financial Controller of the Group since June 2018. Mr. Nip had 20 years’ experience in auditing, accounting and financial field.

13. AUDIT COMMITTEE

As at the Latest Practicable Date, the audit committee of the Board comprises two members, namely Mr. Leung Oh Man, Martin and Mr. Sun Zhi Jun, being all the independent non-executive Directors. The primary duties of the audit committee include the review of the Group’s financial reporting process and the internal control systems as well as risk management of the Group.

14. MISCELLANEOUS

(a) The company secretary of the Company is Mr. Tse Yin Fung (‘‘Mr. Tse’’). Mr. Tse obtained his Bachelor of Laws from City University of Hong Kong in 2011 and was admitted as a solicitor in Hong Kong in 2014. He is now a practicing solicitor in Hong Kong. He also serves as a company secretary of Shineroad International Holdings Limited (stock code: 1587), being a company listed on the Main Board of the Stock Exchange.

III – 10

GENERAL INFORMATION

APPENDIX III

(b) The business address of the Directors, senior management and the company secretary of the Company is the same as the head office and principal place of business of the Company in Hong Kong at Unit A, 11/F., Neich Tower, 128 Gloucester Road, Wanchai, Hong Kong.
(c) The Company’s Hong Kong branch share registrar is Tricor Secretaries Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) As at the Latest Practicable Date, to the best knowledge of the Directors, there was no restriction affecting the remittance of profit or repatriation of capital of the Company into Hong Kong from outside Hong Kong.
(e) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours on any weekday (except for public holidays) at the head office and principal place of business in Hong Kong of the Company at Unit A, 11/F., Neich Tower, 128 Gloucester Road, Wanchai, Hong Kong from the date of this circular up to and including the date of the EGM:

(a) the memorandum and articles of association of the Company;
(b) the annual reports of the Company for the last three years ended 31 December 2018, 30 September 2019 and 30 September 2020;
(c) the unaudited pro forma financial information of the Group, the text of which is set out on pages II-1 to II-6 of this circular;
(d) the letter from the Independent Board Committee, the text of which is set out on pages 35 to 36 of this circular;
(e) the letter of advice from Donvex Capital, the text of which is set out on pages 37 to 60 of this circular;
(f) the written consents of the experts as referred to in the section headed ‘‘Qualifications and consents of experts’’ in this appendix;
(g) the material contracts referred to in the section headed ‘‘Material contracts’’ in this appendix; and
(h) this circular.

III – 11

NOTICE OF EGM

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�� GLOBAL STRATEGIC GROUP LIMITED ��

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8007)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘EGM’’) of the shareholders of Global Strategic Group Limited (the ‘‘Company’’) will be held at 24/F., OfficePlus@Wan Chai, 303 Hennessy Road, Wan Chai, Hong Kong, on Wednesday, 21 April 2021 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolutions as special and ordinary resolutions (as the case may be) of the Company:

SPECIAL RESOLUTION

‘‘THAT subject to and conditional upon (i) an order being made by the Grand Court of the Cayman Islands (the ‘‘Court’’) confirming the Capital Reduction (as defined below); (ii) compliance with any conditions which the Court may impose in relation to the Capital Reduction; (iii) registration by the Registrar of Companies of the Cayman Islands of a copy of the order of the Court confirming the Capital Reduction and the minute approved by the Court containing the particulars required under the Companies Act with respect to the Capital Reduction; and (iv) the GEM Listing Committee (the ‘‘GEM Listing Committee’’) of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Adjusted Shares (as defined below) arising from the Capital Reorganisation (as defined below), with effect from the date on which these conditions are fulfilled (the ‘‘Effective Date’’):
(a) the par value of each of the issued shares (the ‘‘Existing Share(s)’’) of the Company be reduced from HK$0.50 to HK$0.01 per issued Existing Share by cancelling the paid up share capital to the extent of HK$0.49 per issued Existing Share by way of a reduction of capital, so as to form issued shares (the ‘‘Adjusted Share(s)’’) of the Company with par value of HK$0.01 each (the ‘‘Capital Reduction’’);

EGM – 1

NOTICE OF EGM

(b) the credit arising from the Capital Reduction be applied towards offsetting the accumulated loss of the Company as at the Effective Date, thereby reducing the accumulated loss of the Company. The balance of credit (if any) will be transferred to a distributable reserve account of the Company and be applied for such purposes as permitted by all applicable laws, the memorandum and articles of association of the Company and as the board (the ‘‘Board’’) of directors (the ‘‘Directors’’) of the Company considers appropriate;
(c) immediately following the Capital Reduction, each of the authorised but unissued shares of the Company of HK$0.50 each be subdivided into fifty (50) authorised but unissued Adjusted Shares (the ‘‘Share Sub-division’’, together with the Capital Reduction as the ‘‘Capital Reorganisation’’);
(d) immediately following the Capital Reorganisation, the authorised share capital of the Company be changed from HK$80,000,000 divided into 160,000,000 Existing Shares to HK$80,000,000 divided into 8,000,000,000 Adjusted Shares;
(e) each of the Adjusted Shares arising from the Capital Reorganisation shall rank pari passu in all respects with other shares in their respective classes and the Adjusted Shares will have rights and privileges and be subject to the restrictions contained in the memorandum and articles of association of the Company; and
(f) any Director be and is hereby authorised to sign and execute such documents and do all such acts and things and to take such steps as they consider necessary, desirable or expedient in connection with the implementation of or giving effect to the Capital Reorganisation and the transactions contemplated thereunder.’’

ORDINARY RESOLUTION

‘‘THAT conditional upon: (i) the GEM Listing Committee granting or agreeing to grant (subject to allotment) and not having revoked the listing of and permission to deal in the Rights Shares (as defined below) to be allotted and issued to the shareholders of the Company (the ‘‘Shareholders’’) pursuant to the terms and conditions of the Rights Issue (as defined below); and (ii) the underwriting agreement (the ‘‘Underwriting Agreement’’) dated 20 November 2020 and entered into between the Company and Rifa Securities Limited becoming unconditional and not being terminated in accordance with its terms:
(a) the issue by way of rights (the ‘‘Rights Issue’’) of not less than 182,344,000 new shares of HK$0.01 each (each a ‘‘Adjusted Share’’) in the share capital of the Company and not more than 364,688,000 new Adjusted Shares (each a ‘‘Rights Share’’) to the Shareholders (the ‘‘Qualifying Shareholders’’) whose names appear on the register of members of the Company on the date by reference to which entitlements to the Rights Issue are to be determined (the ‘‘Record Date’’) (excluding those shareholders (the ‘‘Non-Qualifying Shareholders’’) of the

EGM – 2

NOTICE OF EGM

Company with registered addresses as shown in the register of members of the Company at the close of business on the Record Date in places outside Hong Kong in respect of whom the Board consider it necessary or expedient not to offer the Rights Shares after making the relevant enquiries regarding the legal restrictions under the laws of the relevant places and the requirements of the relevant regulatory body or stock exchange in those places), in the proportion of four Rights Shares for every one Adjusted Share then held on the Record Date at the subscription price of HK$0.16 per Rights Share and otherwise on the terms and conditions set out in the circular of the Company dated 26 March 2021 be and is hereby approved;

(b) the Underwriting Agreement (a copy of which has been produced to the EGM marked ‘‘A’’ and signed by the chairman of the EGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(c) the Board or a committee thereof be and is hereby authorised to allot and issue the Rights Shares (in both nil-paid form and fully-paid form) pursuant to or in connection with the Rights Issue notwithstanding that the same may be offered, allotted or issued otherwise than pro rata to the Qualifying Shareholders and, in particular, the Directors be and are hereby authorised to make such exclusions or other arrangements in relation to Non-Qualifying Shareholders as they deem necessary or expedient having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong applicable to the Company; and
(d) any Director be and is hereby authorised to sign and execute such documents and do all such acts and things and to take such steps as they consider necessary, desirable or expedient in connection with the implementation of or giving effect to the Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder.’’

By Order of the Board

Global Strategic Group Limited

Wang Wenzhou

Executive Director and Chief Executive Officer

Hong Kong, 26 March 2021

EGM – 3

NOTICE OF EGM

Registered office: Head office and principal place of business Cricket Square in Hong Kong: Hutchins Drive Unit A, 11/F., Neich Tower P.O. Box 2681 128 Gloucester Road Grand Cayman KY1-1111 Wanchai Cayman Islands Hong Kong

Notes:

Any member of the Company entitled to attend and vote at the EGM shall be entitled to appoint another person as his proxy to attend and vote instead of him. On a poll votes may be given either personally or by proxy. A proxy need not be a member of the Company.
The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.
To be valid, the instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, shall be delivered to the office of the Hong Kong branch share registrar and transfer office of the Company, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the EGM (i.e. Monday, 19 April 2021 at 11:00 a.m. (Hong Kong time)) or any adjournment thereof.
No instrument appointing a proxy shall be valid after expiration of 12 months from the date named in it as the date of its execution, except at an adjourned meeting in cases where the EGM was originally held within 12 months from such date.
Where there are joint holders of any shares, any one of such joint holders may vote at the EGM, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at the EGM, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose, seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
Completion and delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the EGM if the member so wish and in such event, the instrument appointing a proxy should be deemed to be revoked.
The Company’s register of members will be closed during the period from Thursday, 15 April 2021 to Wednesday, 21 April 2021, both days inclusive, for the purpose of ascertaining the Shareholders’ entitlement to attend and vote at the EGM. In order to be eligible to attend and vote at the EGM, all duly completed transfer documents accompanied by the relevant share certificates must be lodged for registration with the Company’s Hong Kong branch share registrar and transfer office, Tricor Secretaries Limited located at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:30 p.m. on Wednesday, 14 April 2021.
The voting at the EGM (or any adjournment thereof) shall be taken by way of poll.

EGM – 4

AI assistant

Global Strategic Group Limited — Proxy Solicitation & Information Statement 2021

51213_rns_2021-03-25_ce53ed0f-9969-4db6-a55a-5ab8e893f239.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

GLOBAL STRATEGIC GROUP LIMITED ����������

(I) PROPOSED CAPITAL REORGANISATION;

(II) PROPOSED RIGHTS ISSUE ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON RECORD DATE; AND

(III) NOTICE OF EGM

CHARACTERISTICS OF GEM

PRECAUTIONARY MEASURES FOR THE EGM

VOTING BY PROXY IN ADVANCE OF THE EGM

PREVENTIVE MEASURES AT THE EGM

PRECAUTIONARY MEASURES FOR THE EGM

CONTENTS

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

TERMINATION OF THE UNDERWRITING AGREEMENT

TERMINATION OF THE UNDERWRITING AGREEMENT

DEFINITIONS

the board of Directors

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

GLOBAL STRATEGIC GROUP LIMITED ����������

(Stock Code: 8007)

(I) PROPOSED CAPITAL REORGANISATION;

(II) PROPOSED RIGHTS ISSUE ON THE BASIS OF FOUR RIGHTS SHARES FOR EVERY ONE ADJUSTED SHARE HELD ON RECORD DATE; AND

(III) NOTICE OF EGM

INTRODUCTION

LETTER FROM THE BOARD

PROPOSED CAPITAL REORGANISATION

LETTER FROM THE BOARD

Conditions of the Capital Reorganisation

LETTER FROM THE BOARD

Listing and dealings

Free exchange of certificates for the Adjusted Shares

Reasons for and effects of the Capital Reorganisation

PROPOSED RIGHTS ISSUE

LETTER FROM THE BOARD

Issue statistics

LETTER FROM THE BOARD

Subscription Price

LETTER FROM THE BOARD

Qualifying Shareholders

LETTER FROM THE BOARD

Rights of Overseas Shareholders

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Closure of register of members

Basis of provisional allotment

Fractional entitlements to the Rights Shares

Status of the Rights Shares

Share certificates and refund cheques for the Rights Issue

Application for excess Rights Shares

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Application for listing of the Rights Shares

Conditions of the Rights Issue

THE UNDERWRITING AGREEMENT

The Underwriting Agreement

LETTER FROM THE BOARD

Conditions of the Underwriting Agreement

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE RIGHTS ISSUE AND INTENDED USE OF PROCEEDS

LETTER FROM THE BOARD

CHANGE IN THE SHAREHOLDING STRUCTURE OF THE COMPANY ARISING FROM THE RIGHTS ISSUE

FUND RAISING ACTIVITY IN THE PAST TWELVE MONTHS

LETTER FROM THE BOARD

GEM LISTING RULES IMPLICATIONS

EGM

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

LETTER FROM THE BOARD

GLOBAL STRATEGIC GROUP LIMITED ����������

Global Strategic Group Limited Proxy Solicitation & Information Statement 2021

GLOBAL STRATEGIC GROUP LIMITED ��

GLOBAL STRATEGIC GROUP LIMITED ��

GLOBAL STRATEGIC GROUP LIMITED ��