Go Up Education Technology Limited - Proxy Solicitation & Information Statement 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Wealth Glory Holdings Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, stockbroker 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.

WEALTH GLORY HOLDINGS LIMITED 富譽控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8269)

(I) MAJOR TRANSACTION IN RESPECT OF

(A) THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN EMINENT ALONG LIMITED; AND

(B) THE PROVISION OF FACILITIES TO GOLDENBASE LTD

(II) PLACING OF NEW SHARES UNDER A SPECIFIC MANDATE; (III) INCREASE IN AUTHORISED SHARE CAPITAL; AND

(IV) NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening an extraordinary general meeting (the “EGM”) of the Company to be held at Pacific Room, 2/F., Island Pacific Hotel, 152 Connaught Road West, Hong Kong on Friday, 3 August 2012 at 11:00 a.m. is set out on pages 134 to 136 of this circular. A form of proxy for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong as soon as possible and in any event no later than 48 hours before the time appointed for the holding of the EGM. Completion and return of the enclosed form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment meeting should you so wish.

This circular will remain on the GEM website at www.hkgem.com on the “Latest Company Announcements” page for seven days from the date of its posting and the website of the Company at www.lmfnoodle.com.

18 July 2012

		Page
Characteristics	of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the	Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Appendix I	– Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Appendix II	– Financial Information of the Target Company
	and the Goldenbase Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Appendix III	– Unaudited Pro Forma Financial Information
	of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Appendix IV	– Management Discussion and Analysis of the Target Company
	and the Goldenbase Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Appendix V	– Industry Overview of coal trading business in the PRC. . . . . . . . . . . . . . . 97
Appendix VI	– Regulatory Overview of coal trading business in the PRC. . . . . . . . . . . . . 102
Appendix VII	– Valuation Report of the Hong Kong Company. . . . . . . . . . . . . . . . . . . . . . 107
Appendix VIII	– General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Notice of EGM	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate 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. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

DEFINITIONS

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

“1st Coal Supply Agreement”
a legally binding coal supply agreement dated 7 May 2012 (as supplemented by two supplemental agreements dated 9 May 2012 and 11 May 2012 respectively) entered into among, (i) the Hong Kong Company; (ii) the PRC Company (as the purchaser); (iii) the 1st Supplier (as the supplier); and (iv) Mr. Lin (as the guarantor of the 1st Supplier) pursuant to which the 1st Supplier has agreed to sell and the PRC Company has agreed to buy an aggregate of 6.5 million tonnes of coal (subject to (+/-) 0.3% fluctuation) over the term of the 1st Coal Supply Agreement
“1st Supplier”
青海博海煤炭開發有限公司 (transliterated as Qinghai Bohai Coal Development Co., Ltd.[#] ), a company established in the PRC with limited liability and is principally engaged in coal-related business in the PRC, who is an Independent Third Party
“2nd Coal Supply Agreement”
a legally binding coal supply agreement dated 7 May 2012 (as supplemented by a supplemental agreement dated 9 May 2012) entered into among, (i) the Hong Kong Company; (ii) the PRC Company (as the purchaser); (iii) the 2nd Supplier (as the supplier); and (iv) Mr. Kong (as the guarantor of the 2nd Supplier) pursuant to which the 2nd Supplier has agreed to sell and the PRC Company has agreed to buy 0.5 million tonnes of coal (subject to (+/-) 0.3% fluctuation) each year over the term of the 2nd Coal Supply Agreement
“2nd Supplier”
浙江天臺華日襪業有限公司 (transliterated as Zhejiang Tiantai Huari Socks Co., Ltd.[#] ), a company established in the PRC with limited liability and is principally engaged in garment and coalrelated business in the PRC, who is an Independent Third Party
“Acquisition” the acquisition of the Sale Share pursuant to the Acquisition Agreement
“Acquisition Agreement” the conditional sale and purchase agreement dated 25 May 2012 entered into between the Purchaser and the Vendor relating to the Acquisition
“Announcement” the announcement of the Company published on 25 May 2012 in relation to the Acquisition and the Facilities
“associates” has the meaning ascribed to it under the GEM Listing Rules
“Board”
board of the Directors from time to time

DEFINITIONS

“Borrower / Seychelles Company” Goldenbase Ltd, a limited liability company incorporated in the Republic of Seychelles and is owned as to approximately 33.33% by the Target and as to approximately 66.67% by the Remaining Shareholders
“Business Day”
a day on which licensed banks in Hong Kong are open for normal banking business throughout their normal business hours (excluding Saturday, Sunday or public holiday)
“Coal Operation Certificate”
煤炭經營資格證 (Coal Operation Qualification Certificate) issued by 省級發展和改革委員會 (Provincial Development and Reform Commission) or 省級經濟委員會 (Provincial Economic Committee) for coal operation in China, including the wholesaling and retailing of raw coal and processed coal products and the processing and distribution of coal for civilian use
“Coal Purchase Agreement”
a legally binding coal purchase agreement dated 9 May 2012 (as supplemented by a supplemental agreement dated 11 May 2012) entered into between the PRC Company (as the seller) and the Customer (as the purchaser), pursuant to which the Customer has agreed to buy and the PRC Company has agreed to sell an aggregate of 1.25 million tonnes (subject ot (+/-) 1% fluctuation) of coal during the term of the Coal Purchase Agreement
“Coal Supply Agreements” collectively, the 1st Coal Supply Agreement and the 2nd Coal Supply Agreement
“Company”
Wealth Glory Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM (stock code: 8269)
“Completion” completion of the Acquisition in accordance with the terms and conditions of the Acquisition Agreement
“Completion Date” the date falling three Business Days after the fulfillment or waiver of the conditions precedent set out in the Acquisition Agreement
“connected person(s)” has the meaning ascribed to it under the GEM Listing Rules
“Consideration” the total consideration of HK$100,000,000 to be paid by the Purchaser to the Vendor pursuant to the Acquisition Agreement

DEFINITIONS

“Customer” 山東天物燃料有限公司 (transliterated as Shangdong Tianwu Fuel Co., Ltd.[#] ), an enterprise established in the PRC and is principally engaged in sourcing, storage, logistics and sale of coal, which is a subsidiary of Tianjin Materials and Equipments Group Corporation (former Bureau of Materials), being a state-owned material circulating enterprise, and an Independent Third Party

“Deed of Undertaking”

an irrevocable deed of undertaking to be executed and delivered by each of the Remaining Shareholders in favour of the Purchaser that each of the Remaining Shareholders shall not dispose of or permit or suffer a transfer of the whole or any part of their respective holding in the Goldenbase Shares or any interest therein unless the pre-emptive right procedures as set out in the Deed of Undertaking are complied with, such Deed of Undertaking shall be in a form and substance satisfactory to the Purchaser

“Dividend Undertaking” an irrevocable deed of undertaking to be executed and by the Hong Kong Company, the Seychelles Company and the Remaining Shareholders in favour of the Company, among other matters, that (i) the Hong Kong Company shall declare and distribute a dividend of not less than 20% out of the funds of the Hong Kong Company which are available for dividend or distribution to the Seychelles Company each year; (ii) all the dividends, if any, declared by the Seychelles Company shall be distributed to the Company and the Remaining Shareholders on a pro rata basis forthwith; and (iii) the Remaining Shareholders shall procure the respective directors in the Hong Kong Company and the Seychelles Company to pass the relevant board resolutions and procure the passing of the resolutions by the relevant shareholders of the Hong Kong Company and the Seychelles Company to approve and authorise the making, declaration and payment of such dividend or distribution, such Dividend Undertaking shall be in a form and substance satisfactory to the Purchaser
“Director(s)”

director(s) of the Company from time to time

“EGM”

the extraordinary general meeting of the Company to convened to consider and, if thought fit, approve (i) the Acquisition Agreement and the transactions contemplated thereunder (including but not limited to the terms of the Shareholders’ Agreement, the Dividend Undertaking and the Deed of Undertaking); (ii) the Facility Letter; (iii) the grant of the specific mandate to the Directors for the allotment and issue of the Placing Shares; and (iv) the Increase in Authorised Capital

DEFINITIONS

“Encumbrance” any mortgage, charge, pledge, lien, (otherwise than arising by statute or operation of law), hypothecation or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase or sale-and-leaseback arrangement whatsoever over or in any property, assets or rights of whatsoever nature and includes any agreement for any of the same
“Enlarged Group” the Group and the Target “Facilities” the loan facilities of up to HK$5,000,000 to be provided by the Company to the Borrower pursuant to the Facility Letter
“Facility Letter” the conditional facility Letter dated 25 May 2012, pursuant to which the Company has agreed to provide the Facilities to the Borrower for the purpose of financing its initial working capital of the Target Group upon the Completion
“GEM” the Growth Enterprise Market of the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “Goldenbase/Seychelles Goldenbase Ltd, a limited liability company incorporated in Company” the Republic of Seychelles and is beneficially owned as to approximately 33.33% by the Target and as to approximately 66.67% by the Remaining Shareholders collectively as at the Latest Practicable Date
“Goldenbase Group” Goldenbase and its subsidiary, namely the Hong Kong Company
“Goldenbase Share(s)” the ordinary shares of US$1.00 each in the share capital of the Seychelles Company
“Goldenbase Shareholder(s)” holder(s) of the Goldenbase Share(s) from time to time, being the Target and the Remaining Shareholders as at the Latest Practicable Date
“Group” the Company and its subsidiaries from time to time “Guarantors” Mr. Li Jun Yi and Mr. Hung Man Yuk Dicson, who beneficially own 85% and 15%, respectively, of the issued share capital of the Vendor

DEFINITIONS

“HKGAAP” accounting principles, standards, and practices generally accepted in Hong Kong, including but not limited to Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards, and Interpretations issued by the Hong Kong Institute of Certified Public Accountants
“Hong Kong” Hong Kong Special Administrative Region of the PRC
“Hong Kong Company” Royal Dragon Corporation Limited, a limited liability company incorporated in Hong Kong and is wholly and beneficially owned by the Seychelles Company
“Increase in Authorised Capital” the proposed increase in the authorised share capital of the Company from HK$10,000,000 (divided into 1,000,000,000 Shares) to HK$20,000,000 (divided into 2,000,000,000 Shares) by creating an additional 1,000,000,000 Shares
“Independent Third Party (ies)” any person or company and their respective ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are not connected persons of the Company and are third parties independent of the Company and its connected persons in accordance with the GEM Listing Rules
“Joint Cooperation Agreement” a legally binding master framework joint cooperation agreement dated 1 April 2012 (as supplemented by a supplemental agreement dated 1 April 2012) entered into between the Hong Kong Company and the PRC Company, pursuant to which the Hong Kong Company and the PRC Company agreed to participate in a joint cooperation arrangement to carry out coal trading business in the PRC for an initial term of 3 years
“Latest Practicable Date”
16 July 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular
“Listing Division” the Listing Division of the Stock Exchange
“Mr. Cheung”
Mr. Cheung Siu Chung, being the ultimate beneficial owner of Century Bridge Development Limited, being one of the Remaining Shareholders, and beneficially holds 16,488,000 Shares as at the Latest Practicable Date
“Mr. Lin” Mr. Lin Wei Qing, being the owner of 25% of the registered capital of the 1st Supplier and an Independent Third Party

DEFINITIONS

“Mr. Kong”	Mr. Kong Fan Wen, being the owner of 80% of the registered
	capital of the 2nd Supplier and an Independent Third Party
“Placees”	any person or entity whom the Placing Agent and/or any of its
	agent(s) has procured to subscribe for any of the Placing Shares
	pursuant to and in accordance with the Placing Agreement
“Placing”	the placing, on a best effort basis, of up to an aggregate of
	300,000,000 new Shares to be allotted and issued to the Placees
	pursuant to the terms of the Placing Agreement
“Placing Agent”	Kingsway Financial Services Group Limited, licensed to carry on
	type 1, 2, 4 and 9 regulated activity (dealing in securities, dealing
	in future contracts, advising on securities and asset management)
	under the Securities and Futures Ordinance (Cap. 571 of the Laws
	of Hong Kong)
“Placing Agreement”	the conditional placing agreement dated 12 June 2012 and entered
	into between the Company and the Placing Agent in relation to the
	Placing
“Placing Announcement”	the announcement of the Company published on 12 June 2012 in
	relation to the Placing and the Increase in Authorised Capital
“Placing Price”	the placing price of HK$0.17 per Placing Share
“Placing Shares”	up to an aggregate of 300,000,000 new Shares to be placed under
	the Placing
“Prospectus”	the prospectus of the Company dated 30 September 2010
“PRC Company”	湛江市忠信能源有限公司(transliterated as Zhanjiang Zhongxin
	Energy Co., Ltd.#), a company established in the PRC with limited
	liability and is principally engaged in the trading of coal in the
	PRC
“PRC”	the People’s Republic of China, which for the purpose of this
	circular, excludes Hong Kong, the Macau Special Administrative
	Region of the PRC and Taiwan
“Purchaser”	Silver Summit Investments Limited, a company incorporated in
	the British Virgin Islands with limited liability, an indirect wholly
	owned subsidiary of the Company, and the purchaser to the
	Acquisition Agreement

DEFINITIONS

“Remaining Shareholders”

the shareholders, namely (i) Liu Pui Lan; (ii) Yu Yeung Hoi Stephen; (iii) Kwong Yuk Lap; (iv) Century Bridge Development Limited; and (v) Metal Winner Limited, which in aggregate hold approximately 66.67% of the equity interests in the Seychelles Company, each of such shareholders and their respective ultimate beneficial owners are Independent Third Parties

“Sale Share” 1 share of US$1.00, being the entire issued share capital of the Target as at the date of the Acquisition Agreement which is legally and beneficially owned by the Vendor
“SFO” The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Shareholder(s)” holder(s) of the Share(s) from time to time
“Shareholders’ Agreement” a shareholders’ agreement to be entered into among the Goldenbase Shareholders relating to the Seychelles Company that records the respective rights and obligations of the Goldenbase Shareholders and the arrangements between them with respect to the finance, management and operations of the Seychelles Company, such Shareholders’ Agreement shall be in a form and substance satisfactory to the Purchaser
“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Substantial Shareholder” has the meaning as ascribed thereto under the GEM Listing Rules
“Target” or “Target Company” Eminent Along Limited, a company incorporated in the British Virgin Islands with limited liability which is wholly owned by the Vendor and is the target under the Acquisition
“Target Group” for the purpose of this circular, the Target, the Seychelles Company and the Hong Kong Company
“Valuation” the value of 100% equity interest in the Hong Kong Company as shown in the valuation report prepared by Roma Appraisals Limited which is set out in Appendix VII to this circular, such valuation is prepared in compliance with the requirements of the GEM Listing Rules, on a discounted cash flow method under the income-based approach and such bases and assumptions is agreed by the Vendor and the Purchaser

DEFINITIONS

“Vendor”	Intellect Hero Limited, a company incorporated in the British
	Virgin Islands and is ultimately and beneficially owned as to 85%
	by Mr. Li Jun Yi and as to 15% by Mr. Hung Man Yuk Dicson,
	being the vendor of the Acquisition and an Independent Third
	Party
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Keal”	Kilocalories
“kg”	Kilogram
“km”	Kilometer
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollar(s), the lawful currency of the United States of
	America
“%”	per cent.

The English translation of Chinese names or words in this circular, where indicated, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

Amounts denominated in RMB and US$ in this circular have been converted into HK$ at the rate of HK$1 = RMB0.81 and US$1 = HK$7.80, respectively, for illustration purposes only.

LETTER FROM THE BOARD

WEALTH GLORY HOLDINGS LIMITED 富譽控股有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8269)

Executive Directors:

Ms. Lee Yau Lin, Jenny (Chairman) Mr. Wong Wing Fat (Chief Executive Officer)

Independent non-executive Directors: Mr. Ho Wai Hung Ms. Cheung Kin, Jacqueline Ms. Mak Yun Chu

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 4, 10th Floor Lucky Commercial Centre 103 Des Voeux Road West Hong Kong

18 July 2012

To the Shareholders

Dear Sir or Madam,

(I) MAJOR TRANSACTION IN RESPECT OF

(A) THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN EMINENT ALONG LIMITED; AND

(B) THE PROVISION OF FACILITIES TO GOLDENBASE LTD

(II) PLACING OF NEW SHARES UNDER A SPECIFIC MANDATE; (III) INCREASE IN AUTHORISED SHARE CAPITAL; AND

(IV) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement, of which, the Purchaser, the Vendor and the Guarantors entered into the Acquisition Agreement on 25 May 2012, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Share for the Consideration and the Guarantor has agreed to guarantee the performance by the Vendor of its obligations under the Acquisition Agreement. Further, as disclosed in the Announcement, pursuant to the Facility

LETTER FROM THE BOARD

Letter dated 25 May 2012, the Company has conditionally agreed to provide the Facilities to the Borrower, a company owned as to approximately 33.33% by the Target, of up to HK$5,000,000 for the purpose of financing the initial working capital of the Target Group upon the Completion.

Reference is also made to the Placing Announcement, where the Board announced that on 12 June 2012 (after the close of trading hours of the Stock Exchange), the Company entered into the Placing Agreement with the Placing Agent, pursuant to which the Company has conditionally agreed to place, through the Placing Agent on a best efforts basis, of up to 300,000,000 Placing Shares to the Placees who and whose ultimate beneficial owners will be Independent Third Parties at a price of HK$0.17 per Placing Share. As disclosed in the Placing Announcement, the Board also proposes to increase the authorised share capital of the Company from HK$10,000,000 divided into 1,000,000,000 Shares to HK$20,000,000 divided into 2,000,000,000 Shares by the creation of an additional 1,000,000,000 Shares.

The purpose of this circular is to provide you with, among other matters, (a) the further details of the Acquisition and the transactions contemplated thereunder (including but not limited to the terms of the Shareholders’ Agreement, the Deed of Undertaking and the Dividend Undertaking); (b) the terms of the Facilities; (c) the information of the Target Group; (d) the unaudited pro forma financial information of the Enlarged Group; (e) the valuation report on the Valuation prepared by Roma Appraisals Limited, an independent professional valuer; (f) the details of the Placing; (g) the details of the Increase in Authorised capital; and (h) a notice convening the EGM.

THE ACQUISITION AGREEMENT

Date: 25 May 2012 Parties: Purchaser: Silver Summit Investments Limited, a wholly-owned subsidiary of the Company Vendor: Intellect Hero Limited, an investment holding company incorporated in the British Virgin Islands with limited liability Guarantors: Mr. Li Jun Yi and Mr. Hung Man Yuk Dicson, who beneficially own 85% and 15%, respectively, of the issued share capital of the Vendor

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

Assets to be acquired

Pursuant to the Acquisition Agreement, the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Share, representing the entire issued share capital of the Target as at the Latest Practicable Date.

LETTER FROM THE BOARD

Consideration

The Consideration for the Sale Share is HK$100,000,000 and shall be payable by the Purchaser to the Vendor (or its nominee(s)) by cash on the Completion Date.

It is contemplated by the Company that the Consideration will be settled partly by the internal resources of the Company and partly by the proceeds of the Placing.

The Consideration was determined with reference to the estimation of fair value of 100% equity interest in the Hong Kong Company by Roma Appraisals Limited, an independent professional valuer, which was stated as HK$301,000,000 as at 31 March 2012. As set out in the valuation report in the Appendix VII to this circular, the Valuation is based on the discounted cash flow method under the income-based approach.

The material assumptions used in the Valuation include the following:

The domestic demand for coal in the PRC will be maintained at a steady level within the projection period. With reference to the historical trend of the coal consumption in China, the five-year compound annual growth rate between 2006 and 2010 was 10%. Besides, coal consumption in China is expected to increase steadily over the next ten to twenty years, according to the forecast made by the United States Energy Information Administration. Therefore, it is convincible that a steady domestic demand for coal in China will be achievable;
There will be sufficient quantity of coal supply for the Hong Kong Company and its subsidiaries (if any) within the projection period;
All relevant legal approvals and business certificates or licenses to operate the business in the localities in which the Hong Kong Company operates or intends to operate would be officially obtained and renewable upon expiry;
The projections outlined in the financial information provided are reasonable, reflecting market conditions and economic fundamentals, and will be materialized;
The Hong Kong Company will be operated as planned;
There will be sufficient supply of technical staff in the industry in which the Hong Kong Company operates, and the Hong Kong Company will retain competent management, key personnel and technical staff to support its ongoing operations and developments;
There will be no major change in the current taxation laws in the localities in which the Hong Kong Company operates or intends to operate and that the rates of tax payable shall remain unchanged and that all applicable laws and regulations will be complied with;
There will be no major change in the political, legal, economic or financial conditions in the localities in which the Hong Kong Company operates or intends to operate, which would adversely affect the revenues attributable to and profitability of the Hong Kong Company; and

LETTER FROM THE BOARD

Interest rates and exchange rates in the localities for the operation of the Hong Kong Company will not differ materially from those presently prevailing.

The Consideration was arrived at after arm’s length negotiations between the Vendor and the Purchaser. The Directors have reviewed the valuation report and the associated comfort letters to be issued by the reporting accountants and the financial adviser of the Company as set out in Appendix VII of this circular. Further, based on (i) the Valuation which was stated as HK$301,000,000; (ii) the future business opportunities under the Joint Cooperation Agreement entered into between the Hong Kong Company and the PRC Company; (iii) the positive prospects of the Hong Kong Company in benefiting from the increasing demand of coal in the PRC; (iv) the potential investment return from the Target Group based on the Dividend Undertaking as mentioned in the paragraph headed “Dividend Undertaking” below; (v) the pre-emptive right to acquire further Goldenbase Shares in the Seychelles Company held by the Remaining Shareholders to be given by the Remaining Shareholders in favour of the Target as mentioned in the paragraph headed “Deed of Undertaking” below; and (vi) the Shareholders’ Agreement to be entered into between the Target and the Remaining Shareholders as mentioned in the paragraph headed “Shareholders’ Agreement” below, the Directors (including the independent non-executive Directors) consider that the terms and conditions of the Acquisition Agreement (including the Consideration and the transactions contemplated thereunder, including the terms of the Shareholders’ Agreement, the Dividend Undertaking and the Deed of Undertaking) to be fair and reasonable and on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

As advised by Roma Appraisals Limited, the independent professional valuer of the Company, the discounted cash flow method under the income-based approach focuses on the economic benefits arising from the income capability of a business entity. Having considered the uniqueness of the operation of the Hong Kong Company and the potential profit margins which may be resulted pursuant to the terms of the Joint Cooperation Agreement, the Coal Supply Agreements, the Coal Purchase Agreement and the OffTake Arrangement (as defined below) the Directors consider that the determination of the Consideration with reference to the Valuation is appropriate and is fair and reasonable.

Conditions precedent

Completion is subject to the following conditions having been fulfilled or waived (as the case may be):

(a) the Purchaser being satisfied with the results of the due diligence review to be conducted on the assets, liabilities, operations and affairs of Target Group;
(b) all necessary consents, licences and approvals required to be obtained on the part of the Purchaser, the Vendor and the Target Group in respect of the Acquisition Agreement and the transactions contemplated hereby having been obtained and remain in full force and effect;
(c) the passing by the Shareholders at the EGM approving the Acquisition Agreement and the transactions contemplated thereunder;

LETTER FROM THE BOARD

(d) the obtaining of a PRC legal opinion (in form and substance satisfactory to the Purchaser) from a PRC legal adviser appointed by the Purchaser in relation to, inter alia, the PRC Company, the Joint Cooperation Agreement, the Coal Supply Agreements and the Coal Purchase Agreement;
(e) the Vendor’s warranties remaining true and accurate in all respects;
(f) the obtaining of a valuation report (in form and substance satisfactory to the Purchaser) from a firm of independent professional valuers appointed by the Purchaser showing the Valuation to be not less than HK$300,000,000; and
(g) completion of the Placing.

Save for conditions (a), (b), (c), (d), (f) and (g) which are incapable of being waived, the Purchaser may at its absolute discretion at any time waive in writing condition (e) and such waiver may be made subject to such terms and conditions as are determined by the Purchaser. The Purchaser has no current intention to waive condition (e). As at the Latest Practicable Date, condition (f) is considered fulfilled in light of the Valuation Report set out in Appendix VII to this circular.

Long stop date

If any of the conditions has not been satisfied (or, as the case may be, waived by the Purchaser) on or before 4:00 p.m. on 31 August 2012 or such later date as the Vendor and the Purchaser may agree, the Acquisition Agreement shall cease and determine and neither party shall have any obligations and liabilities under the Acquisition Agreement.

Completion

Completion shall take place at 4:00 p.m. on the third Business Days after all the conditions of the Acquisition Agreement have been fulfilled or waived or such later date as may be agreed between the Vendor and the Purchaser.

Pursuant to the Acquisition Agreement, upon compliance with the conditions precedent set out therein, Completion shall only take place when the Vendor shall deliver or cause to be delivered to the Purchaser as part of the Completion deliverables on the part of the Vendor the duly executed Deed of Undertaking, Dividend Undertaking and Shareholders’ Agreement. The Directors consider that such provisions could ensure that the above agreement and undertakings will be entered into upon Completion and be in the interest of the Company and the Shareholders as a whole.

Upon Completion, the Target will become an indirect wholly-owned subsidiary of the Company and the Seychelles Company will in turn become an associate of the Company, in which the Group will be effectively interested in approximately 33.33% of its equity interests. As such, the Group will be effectively interested in approximately 33.33% of the entire issued capital of the Hong Kong Company upon Completion.

LETTER FROM THE BOARD

Due Diligence

As mentioned in condition (a) under the paragraph headed “Conditions precedent” above, Completion is subject to the Purchaser being satisfied with the results of the due diligence review to be conducted on the Target Group. Prior to entering into the Acquisition Agreement, the Company has conducted the following due diligence works:

(1) conducted interviews with the senior management and representatives of each of the PRC Company, the 1st Supplier, the 2nd Supplier and the Customer;
(2) engaged the PRC legal adviser to (i) perform legal due diligence on the PRC Company and its capacity to conduct coal trading business in the PRC; (ii) perform legal due diligence on each of the 1st Supplier, the 2nd Supplier and the Customer; (iii) preliminarily advise on the validity and legality of the Joint Cooperation Agreement, Coal Supply Agreements and Coal Purchase Agreement;
(3) prepared a profit forecast and cash flow forecast (“Cashflow Forecast”) based on the Joint Cooperation Agreement, the Coal Supply Agreements, the Coal Purchase Agreement and the Off-Take Arrangement and discussed with the relevant professional parties for the reasonableness of the Cashflow Forecast;
(4) engaged a professional valuer to conduct a preliminary estimation (“Estimation”) on the value of the Hong Kong Company;
(5) engaged a financial adviser to review on the assumptions adopted in the Estimation; and
(6) engaged the auditors to review on the accounting policies adopted in the discounted cashflow forecast of the Estimation.

As at the Latest Practicable Date, no unusual findings have been noticed or observed.

Prior to Completion, the Company will perform, including but not limited to, the following additional due diligence works:

(1) to consult the PRC legal adviser to provide updates (if any) on the status of each of the PRC Company, the 1st Supplier, the 2nd Supplier and the Customer and to advise on the validity and legality of each of the Joint Cooperation Agreement, Coal Supply Agreements and Coal Purchase Agreement; and
(2) to obtain and review the latest management accounts of the Target Group on a monthly basis in order to ascertain the state of affairs and financial position of each of the Target, the Seychelles Company and the Hong Kong Company prior to Completion.

LETTER FROM THE BOARD

PRC legal opinion

As mentioned in condition (d) under the paragraph headed “Conditions precedent” above, Completion is subject to the obtaining of a PRC legal opinion (in form and substance satisfactory to the Purchaser) from a PRC legal adviser appointed by the Purchaser in relation to, inter alia, the PRC Company, the Joint Cooperation Agreement, the Coal Supply Agreements and the Coal Purchase Agreement.

It is expected that such PRC legal opinion shall cover, inter alia, (i) the legality and validity of the PRC Company and its capacity to conduct coal trading business in the PRC; (ii) the legality and validity of each of the Joint Cooperation Agreement, the Coal Supply Agreements and the Coal Purchase Agreement; and (iii) the legality of the business operation of the Hong Kong Company under the relevant laws and regulations in the PRC.

Deed of Undertaking

On Completion, the Vendor will procure each of the Remaining Shareholders to execute the Deed of Undertaking in favour of the Purchaser. Pursuant to the Deed of Undertaking, each of the Remaining Shareholders irrevocably and unconditionally undertakes to the Purchaser that he/she/it shall not dispose of or permit or suffer a transfer of the whole or any part of their respective holding in the Goldenbase Shares or any interest therein unless the pre-emptive right procedures as set out in the Deed of Undertaking are complied with. A summary of the pre-emptive right procedures are set out below:

(1) any of the Remaining Shareholders (the “ Proposing Transferor ”) proposing to sell or transfer some or all of the Goldenbase Shares registered in his/her/its name to a bona fide purchaser (“ Purchasing Party ”) shall be obliged to offer to the Target any of his/her/its Goldenbase Shares (the “ Relevant Shares ”) he/she/it proposes to transfer at the Offer Price (as defined below);
(2) in order to ascertain whether the Target is willing to purchase all the Relevant Shares, the Proposing Transferor shall give a notice (the “ Transfer Notice ”) in writing to each of the Company, the Target and the Seychelles Company of such bona fide offer. Every Transfer Notice shall specify, inter alia, (i) the number of the Relevant Shares under such bona fide offer; and (ii) the price that such Purchasing Party offers to purchase the Relevant Shares under such bona fide offer (the “ Offer Price ”);
(3) For a period of 30 days from the date of receipt of the Transfer Notice (the “ Offer Period ”), the Target shall have the right to purchase all or any part of the Relevant Shares at a purchase price per Relevant Share equal to the Offer Price per Relevant Share (the “ Right of First Refusal ”).
(4) The Right of First Refusal of the Target shall be exercisable by delivering a written acceptance notice of exercise (the “ Acceptance Notice ”) within the Offer Period to the Proposing Transferor and the Seychelles Company. The Acceptance Notice shall include a statement of the number of the Relevant Shares that the Target intends to purchase. Failure of the Target to give the Acceptance Notice within the Offer Period shall be deemed to be a waiver of the Target’s Right of First Refusal.

LETTER FROM THE BOARD

(5) Unless the Target elects to purchase all of the Relevant Shares, the Proposing Transferor is entitled to transfer, subject to the tag-along right as provided under the Shareholders’ Agreement, the remaining portion of Relevant Shares not purchased by the Target to a Purchasing Party on the terms and conditions set forth in the Transfer Notice; provided, however, that (i) such sale is bona fide, (ii) the price for such sale of each Relevant Share to such Purchasing Party is not less than the Offer Price per Relevant Share and the sale is on the terms and conditions not more favourable to the Purchasing Party than those set forth in the Transfer Notice and (iii) such sale is made within 90 days from the date of the Transfer Notice. If such a sale does not occur within such 90 day period for any reasons, the restrictions provided for herein shall again become effective, and no transfer or sale of Relevant Shares may be made by the Proposing Transferor thereafter without again making an offer to the Target in accordance with this provision.
(6) The closing of the purchase of all or any of the Relevant Shares by the Target shall be held on the 45th day from the date of the Transfer Notice. At such closing, the Proposing Transferor shall deliver and execute all such documents necessary to effect the transfer of the Relevant Shares being transferred to the Target. Such Relevant Shares shall be free and clear of any Encumbrance. The Target shall deliver at such closing payment in full for the purchase of the Relevant Shares.

Dividend Undertaking

On Completion, the Vendor will also procure the Hong Kong Company, the Seychelles Company and the Remaining Shareholders to execute the Dividend Undertaking in favour of the Company. Pursuant to the Dividend Undertaking, each of the Hong Kong Company, the Seychelles Company and the Remaining Shareholders irrevocably undertakes, among other matters, that (i) the Hong Kong Company shall declare and distribute a dividend of not less than 20% out of the funds of the Hong Kong Company which are available for dividend or distribution to the Seychelles Company each year; (ii) all the dividends, if any, declared by the Seychelles Company shall be distributed to the Target Company and the Remaining Shareholders on a pro rata basis forthwith; and (iii) the Remaining Shareholders shall procure the respective directors in the Hong Kong Company and the Seychelles Company to pass the relevant board resolutions and procure the passing of the resolutions by the relevant shareholders of the Hong Kong Company and the Seychelles Company to approve the making, declaration and payment of such dividend or distribution.

Shareholders’ Agreement

On Completion, the Vendor will also procure the Remaining Shareholders to enter into a Shareholders’ Agreement relating to the Seychelles Company that records the respective rights and obligations of the Goldenbase Shareholders and the arrangements among them with respect to the finance, management and operations of the Seychelles Company. A summary of the terms of the Shareholders’ Agreement are set out as follows:

Business Scope

The Seychelles Company shall act as a special purpose vehicle for holding 100% equity interests in the Hong Kong Company which will engage in the business of coal trading in the PRC (the “ Business ”).

LETTER FROM THE BOARD

Composition of the board of directors of the Seychelles Company

The board of directors of the Seychelles Company shall comprise three directors at maximum, of whom one director shall be appointed at the request of the Target and the other two directors shall be appointed at the request of the Remaining Shareholders collectively.

Proceedings of Directors

No business shall be transacted at the board meeting unless a quorum of two directors is present at the commencement of and throughout the meeting in which at least one of them must be a director nominated by the Target and one of them must be a director nominated by the remaining Shareholders collectively.

The board meeting will be adjourned if the quorum is not met. If at the adjourned meeting a quorum is not present, the meeting shall be adjourned sine die.

Questions or any other matters arising in any meeting of the board of directors of the Seychelles Company shall be decided by a majority of votes. Each director shall have one vote and the chairman of the board meeting shall not be entitled to a second or casting vote.

General Meetings of Shareholders

No business shall be transacted at any general meeting unless a quorum is present at the commencement of and throughout the meeting.

The quorum of a general meeting of the Company shall be the Goldenbase Shareholders with an aggregate of not less than 70% beneficial interests in the issued share capital of the Seychelles Company present in person or by proxy.

The general meeting will be adjourned if the quorum is not met. If at the adjourned meeting a quorum is not present, the meeting shall be adjourned sine die.

Any resolutions are to be decided by a simple majority of votes except where a greater majority is required by the articles of association of the Company, any agreement between the Shareholders or by the Companies Ordinance (Cap. 32, The Laws of Hong Kong).

LETTER FROM THE BOARD

Finance

Subject to the terms and conditions of the Facility Letter, the Target shall procure the Company to provide the Facilities to the Seychelles Company for the purpose of financing the initial working capital of the Target Group.

Save for the Facilities, any future working capital requirements of the Seychelles Company will be met as the board of directors of the Seychelles Company may from time to time resolve, including but not limited to by means of advances and credit from financial institutions and other third party sources on the most favourable terms reasonably obtainable as to interest, repayment and security, or by advances from the Goldenbase Shareholders.

If funds are required to be financed by the Goldenbase Shareholders, such advances will be made by the Goldenbase Shareholders by way of shareholder’s loan in the proportion in accordance with their respective shareholding in the Seychelles Company.

Matters Requiring Unanimous Consent From Goldenbase Shareholders

During the continuance of the Shareholders’ Agreement, the following are matters requiring unanimous consents of the Goldenbase Shareholders:–

(1) the change of the name of the Seychelles Company or the name under which it carries on business or the alternation of the memorandum or articles of association of the Seychelles Company;
(2) the creation or issue of any Goldenbase Shares or grant of any option over or right to acquire any additional Goldenbase Shares or purchase or redeem any Goldenbase Shares or the issue of any warrant, debentures, securities or other obligations convertible into Goldenbase Shares or enter into any agreement to do any of the same;
(3) the consolidation, subdivision or conversion any of its share capital;
(4) passing any resolution the result of which would be its winding up, liquidation or receivership, or making any composition or arrangement with creditors;
(5) the incorporation of any subsidiary or permit the disposal or dilution of its interest, directly or indirectly, in any subsidiary or acquire shares in any company or dispose of any shares in any company or acquire or dispose of any loans or loan capital;

LETTER FROM THE BOARD

(6) the change of the Business or the nature of Business;
(7) consolidating or merging with or the acquisition of any other company. entity or business;
(8) entering into any partnership or joint venture arrangement;
(9) the alteration of the rights attached to any Goldenbase Shares;
(10) the alternation of the composition of the board of directors of the Seychelles Company;
(11) the change of any dividend policy of the Seychelles Company;
(12) the entering into of any transaction with any person by the Seychelles Company other than in the ordinary course of Business;
(13) the entering into of any material contract relating to an amount exceeding HK$1,000,000 by the Seychelles Company;
(14) the lending of any moneys (otherwise than by way of deposit with a bank or other institution the normal business of which includes acceptance of deposits or normal trade credit on commonly acceptable terms), the granting of any credit, the giving of any guarantee or indemnity to any persons;
(15) the borrowing of any moneys from banks, financial institutions or any other persons, or the creation of any contract or obligation to pay money or money’s worth;
(16) the giving of any guarantee or indemnity for or otherwise securing the liabilities or obligations of any person;
(17) the sale, transfer, lease, assignment or otherwise disposition of any material part of its undertaking, property, or assets (or any interest therein) or contracting to do so; and

LETTER FROM THE BOARD

(18) the commencement, defence or settlement of any material litigation, arbitration or other legal proceedings concerning the Seychelles Company.
Disposal and charging of shares

None of the Goldenbase Shareholders shall, except with the prior written consent of the other Goldenbase Shareholder(s), create or permit to subsist any Encumbrance over all or any of the Goldenbase Shares or any interest therein from time to time being held by him.

If any of the Remaining Shareholders proposes to sell or transfer any of its Goldenbase Shares (the “ Transferred Shares ”) by accepting a bona fide offer, such party shall promptly give written notice (the “ Notice ”) to each of the Seychelles Company, the Target and the Purchaser describing in reasonable detail the proposed sale or transfer and in particular, the offer price (the “ Offer Price ”) for the Transferred Shares offered Under such bona fide offer, the Target shall have 30 days (“ Offer Period ”) from the date of receipt of such notice to agree to purchase all or any part of the Transferred Shares at the Offer Price and upon the terms and conditions specified in the Notice (the “ Right of First Refusal ”).

Tag-along rights
If any of the Remaining Shareholders proposes to sell all of the shares held but the Target has not elected to exercise its Right of First Refusal mentioned in paragraph 7 above, then the Target shall have the right, exercisable upon written notice to the transferring party within 15 days after the expiration of the Offer Period to participate in such sale of the shares pursuant to the terms and conditions specified in the Notice.
9, Dividend

The total amount of dividends in respect of any financial year shall be such amount as the board of directors of the Seychelles Company determines to be appropriate having regard to the Seychelles Company’s financial condition and its current and projected cash requirements.

Unless otherwise agreed among the Goldenbase Shareholders, all profits of the Seychelles Company in each financial year, after tax and reserving such amount to meet the working capital requirements of the Seychelles Company, shall: (i) firstly be applied to repay the Facilities provided by the Company pursuant to the Facility Letter

LETTER FROM THE BOARD

and any subsequent shareholders loan provided by the Goldenbased Shareholders to the Seychelles Company; and (ii) after repayment in full of the Facilities and the shareholders loan (if any) referred to in paragraph (i) above, to the extent allowed by applicable laws be distributed in full to the Goldenbase Shareholders by way of dividend on pro rata basis forthwith.

Each of the Remaining Shareholders undertakes with the Target that he will procure the director nominated by them collectively in the Seychelles Company to pass the relevant board resolutions and procure the passing of the resolutions by the Goldenbase Shareholders, whether at a duly convened and constituted meeting of the Goldenbase Shareholders or by way of written resolutions of the Goldenbase Shareholders, to approve and authorise the making, declaration and payment of such dividend or distribution to the Goldenbase Shareholders out of the funds of the Seychelles Company available for dividend or distribution.

Deadlock

In any case of deadlock (the “ Deadlock ”) in terms of matters relating to the affairs of the Company that has been considered or proposed to be considered by a meeting of the Shareholders and/or of the Directors but is not resolved within three (3) months from the date or the first proposed date (whichever is later) of such meeting, each of Goldenbase Shareholders shall prepare and circulate to each other a memorandum or formal statement setting out its position and reasons on the matter in dispute. Each such memorandum or statement shall be considered by the other party who shall respectively use its reasonable endeavours to resolve such dispute.

If the Deadlock is not resolved within 14 Business Days after delivery of the memorandum or statement, then the Goldenbase Shareholders may consider to sell to each other its interest in the Seychelles Company or if it fails, to liquidate the Seychelles Company.

Pursuant to the terms of the Shareholders’ Agreement, the Target shall be able to appoint one director of the Seychelles Company. Subject to Completion and the consent of the candidate, the Company intends to nominate Mr. Yan Aung (“Mr. Yan”) to act as the director of the Seychelles Company and to be one of the management of the Hong Kong Company. Mr. Yan is currently the consultant of the Company and provides general support and advice to the Group in relation to coal trading business in the PRC. The biographical details of Mr. Yan are set out below.

LETTER FROM THE BOARD

Mr. Yan Aung (顏昂), aged 33, was graduated in Hebei University (河北大學) and Renmin University of China (中國人民大學) in Business Administration and Accounting. Mr. Yan has over 7 years of experience in sale, sourcing, trading and production of coal products in the PRC. Given the qualifications and experience of Mr. Yau, the Directors consider that Mr. Yan is suitable and capable of representing the Company as the director of the Seychelles Company.

Information of the Target Group

The Target is incorporated in the British Virgin Islands with limited liability and is wholly and beneficially owned by the Vendor. It is an investment holding company. As at 31 March 2012, the audited net liability value of the Target was HK$13,967 and for the period from 8 March 2012 to 31 March 2012, the audited net loss before and after tax of the Target was HK$13,975.

The Seychelles Company is incorporated in the Republic of Seychelles with limited liability and is owned as to approximately 33.33% by the Target and approximately 66.67% by the Remaining Shareholders. The respective percentage interest of each of the Remaining Shareholders in the Seychelles Company is as follows:

	Percentage holding
Name of Remaining Shareholders	in the Seychelles Company
	(Approximate %)
Century Bridge Development Limited_(Note 1)_	36.67%
Liu Pui Lan	10%
Metal Winner Limited_(Note 2)_	10%
Yu Yeung Hoi Stephen	5%
Kwong Yuk Lap	5%

Notes:

Century Bridge Development Limited is a company incorporated in the British Virgin Islands, the entire issued share capital of which is wholly and beneficially owned by Mr. Cheung.
Metal Winner Limited is a company incorporated in the British Virgin Islands and is owned as to 99% by Mr. Lee Yuk Kwan and 1% by Ms. Lee Yuk Tai respectively.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, save for Mr. Cheung, the ultimate beneficial owner of Century Bridge Development Limited, being one of the Remaining Shareholders and beneficially holds 16,488,000 Shares as at the Latest Practicable Date, representing approximately 2.49% of the entire issued share capital of the Company, the Remaining Shareholders and their respective ultimate beneficial owners are Independent Third Parties.

The Seychelles Company in turn holds 100% equity interest in the Hong Kong Company, a company incorporated in Hong Kong with limited liability. The Hong Kong Company is currently an investment holding company, which will soon commence the business of coal trading in the PRC through the Joint Cooperation Agreement as detailed in the paragraphs below.

LETTER FROM THE BOARD

Information on the Joint Cooperation Agreement

In relation to the coal trading business, the Hong Kong Company has entered into Joint Cooperation Agreement with the PRC Company, pursuant to which the Hong Kong Company and the PRC Company agreed to participate in a joint cooperation arrangement to carry out coal trading business in the PRC for an initial term of 3 years. No consideration has been paid or is payable by the Hong Kong Company in entering into the Joint Cooperation Agreement with the PRC Company.

The PRC Company is a company established in the PRC with limited liability and is principally engaged in the trading of coal in the PRC. The PRC Company is owned as to 99% by Mr. Tam Yiu (譚耀) and 1% by Liu Yu Ying (劉雨瑩) respectively. To the best of the Directors’ knowledge, information and belief, the PRC Company and its ultimate beneficial owners are Independent Third Parties and also third parties independent of each of the Vendor, the Remaining Shareholders, the management of the Hong Kong Company, the 1st and 2nd Suppliers and the Customer. The PRC Company is a licensed entity (with license number 20440802010441) authorised to carry out coal trading business in the PRC. The Coal Operation Certificate of the PRC company is valid from 28 June 2010 to 27 June 2013. Pursuant to the Joint Cooperation Agreement, the PRC Company undertakes that it shall use its best endeavours to procure the renewal of the subject Coal Operation Certificate upon its expiry to ensure the license is legal and valid throughout the term of the Joint Cooperation Agreement. The conditions for the renewal of the Coal Operation Certificate have been set out in the “Regulatory overview of coal trading business in the PRC” in Appendix V to this circular. As advised by the PRC legal adviser of the Company, since the conditions required for Coal Operation Enterprises applying for a renewal shall confirm with those imposed on enterprises when applying for coal operation qualifications, it is not expected that there would any legal impediment to renew the Coal Operation Certificate for the PRC Company.

Pursuant to the terms and conditions of the Joint Cooperation Agreement, the parties agree that all business operations will be carried out by and in the name of the PRC Company and the Hong Kong Company will be responsible for introducing and/or referring coal suppliers and customers to the PRC Company. Further, upon entering into the coal supply agreement(s) between the PRC Company and such coal suppliers introduced by the Hong Kong Company, the Hong Kong Company is required to provide a refundable security deposit to such coal suppliers for and on behalf of the PRC Company. Pursuant to the Joint Cooperation Agreement, the administrative expenditure incurred for the operations of the Hong Kong Company in name of the PRC company shall also be borne by the Hong Kong Company.

Pursuant to the Joint Cooperation Agreement, any profits which arise from the operations of the PRC Company shall first be utilised to settle the amount of Security Deposits (as defined below) provided by the Hong Kong Company to the relevant coal suppliers under the respective Coal Supply Agreements (as defined below). After full recovery of the amount of Security Deposits (without interest) payable by the Hong Kong Company, any remaining profits will be distributed between the Hong Kong Company and the PRC Company. The profit sharing ratio (“Profit Sharing Ratio”) between the Hong Kong Company and the PRC Company is set at 98:2.

LETTER FROM THE BOARD

As advised by the management of the Hong Kong Company, the Profit Sharing Ratio between the Hong Kong Company and the PRC Company was determined based on arm’s length negotiation between both parties. Although the coal trading license is owned by the PRC Company, the management of the Hong Kong Company considers that the high profit sharing ratio which the Hong Kong Company is entitled to is justifiable based on the following factors:

(a) prior to entering into the Joint Cooperation Agreement, the PRC Company is carrying on its coal trading business on its own and there is no previous business relationship or connection amongst the PRC Company, the 1st Supplier, the 2nd Suppliers and the Customer. The management of the Hong Kong Company confirms that all such connections are referred and introduced by the Hong Kong Company.
(b) as stated in the paragraph headed “Coal trading business of Hong Kong Company” below, a new branch office will be set up by the PRC Company in Xining City, Qinghai Province, the PRC, to handle coal suppliers and coal customers introduced and/or referred by the Hong Kong Company. Pursuant to the terms of the Joint Cooperation Agreement, all the corresponding administration expenses incurred for the setting up and operation of such branch office will be borne entirely by the Hong Kong Company.
(c) according to the management of the Hong Kong Company, it is intended that the Hong Kong Company will set up a wholly-owned foreign enterprise (“WOFE”) in the PRC and apply for and/or acquire the Coal Operation Certificate to carrying out the coal trading business in the PRC. However, according to the management of the Hong Kong Company, such process may take about 6 months. Therefore, the entering into of the Joint Cooperation Agreement was a temporary arrangement which allows the Hong Kong Company to conduct coal trading business as soon as practicable. Further, although the coal trading business will be conducted in the name of the PRC Company according to the Joint Cooperation Agreement, all the operations in the branch office of Xining City will be managed and conducted by the staff of the Hong Kong Company. Thus, the 2% profit sharing which the PRC Company is entitled to should be regarded as a handling fee for such temporary arrangement.
(d) as advised by the PRC legal advisors of the Company, the joint cooperation arrangement (including the Profit Sharing Ratio) under the Joint Cooperation Agreement complies with the applicable laws and regulations for coal trading business in the PRC.

Based on the above factors and the contributions of the Hong Kong Company under the Joint Cooperation Agreement, the Directors are of the view that the Profit Sharing Ratio between the Hong Kong Company and the PRC Company under the Joint Cooperation Agreement is fair and reasonable.

Upon the Hong Kong Company’s WOFE has obtained the relevant license for carrying out the coal trading business, the Joint Cooperation Agreement may be terminated in accordance to the terms of the Joint Cooperation Agreement. According to the management of the Hong Kong Company, in order to maximize the potential profits of the Hong Kong Company, the Hong Kong Company intends to terminate the Joint Cooperation Agreement once the Hong Kong Company’s WOFE has obtained the Coal Operation Certificate. Pursuant to the terms of the Joint Cooperation Agreement, no penalty will be imposed on the Hong Kong Company for early termination of the Joint Cooperation Agreement.

LETTER FROM THE BOARD

Information on the Coal Supply Agreements and the Coal Purchase Agreement

In relation to the coal trading business of the Target Group, the following contracts have been entered into:

the 1st Coal Supply Agreement entered into among, (i) the Hong Kong Company; (ii) the PRC Company (as the purchaser); (iii) the 1st Supplier (as the supplier); and (iv) Mr. Lin, being the owner of 25% of the registered capital of the 1st Supplier and an Independent Third Party (as the guarantor of the 1st Supplier), pursuant to which the 1st Supplier has agreed to sell and the PRC Company has agreed to buy an aggregate of 6.5 million tonnes of coal (subject to (+/-) 0.3% fluctuation) over the term of the 1st Coal Supply Agreement. The total quantity of 6.5 million tonnes of coal over the term of the 1st Coal Supply Agreement represents the fixed amount of coal to be acquired by the PRC Company from the 1st Supplier. In the event that the PRC Company does not acquire such quantity of coal under the terms of the 1st Coal Supply Agreement, the 1st Supplier will be entitled to take relevant legal actions against both the PRC Company and the Hong Kong Company (including the rights to claim damages or compensation from the PRC Company) by reason of such breach on the part of the PRC Company under the 1st Coal Supply Agreement. As advised by the PRC legal advisers of the Company, although there is no indemnity clause or other provision which governs the extent of liability of each of the Hong Kong Company and the PRC Company for such damage or loss that may be suffered by 1st Supplier under the 1st Coal Supply Agreements, the extent of liability of each of the Hong Kong Company and the PRC Company is likely to be governed by the Profit Sharing Ratio between the Hong Kong Company and the PRC Company under the Joint Cooperation Agreement.

Among the 6.5 million tonnes of coal to be supplied by the 1st Supplier, 2.5 million tonnes of coal will have an indicative contract price per tonne of RMB25 below the reasonable selling price agreed upon between the PRC Company and its bona fide customers for the sale of coal at the material time (the “ Best Possible Selling Price ”), whereas 4 million tonnes of coal will have an indicative contract price per tonne of RMB22 below the Best Possible Selling Price. The Best Possible Selling Price is determined by the PRC Company and its bona fide customers based on (i) the prevailing market price of the coal; (ii) the quality of the coal; (iii) the location of the delivery; (iv) the payment terms; and (v) the quantity of coal ordered.

Pursuant to the terms of the 1st Coal Supply Agreement, the PRC Company has no obligation to acquire any quantity of coal which exceeds the amount of coal stated in the 1st Coal Supply Agreement. Nevertheless, in order to maximize the potential profit of the Hong Kong Company, it is intended that the PRC Company will base on the Best Possible Selling Price mechanism to acquire for such amount of coal if there is any bona fide customer of such amount of coal.

LETTER FROM THE BOARD

The 1st Coal Supply Agreement has a term of 2.5 years commencing from 7 May 2012 and except in the case of the 1st Supplier, the PRC Company or the Hong Kong Company serve a written notice to the other parties of its intention not to renew the 1st Coal Supply Agreement 30 days prior to the date of expiry of the 1st Coal Supply Agreement, the 1st Supply Agreement will be renewed automatically for another 2.5 years upon its expiration. Pursuant to the 1st Coal Supply Agreement, the Hong Kong Company shall, through the PRC Company, pay in advance an aggregate sum of RMB80 million as the refundable security deposit (the “ 1st Security Deposit ”) within 3 months after the issue of the first delivery notice by the PRC Company, and 1st Security Deposit shall be fully refunded (without interest) upon the expiration of the term of the 1st Coal Supply Agreement. In the event that the PRC Company is unable to obtain and/renew a legally valid licence(s) which is necessary or desirable for carrying out its coal trading business upon its expiry, the 1st Coal Supply Agreement shall be terminated on the date of expiry of the said license and the 1st Supplier shall refund the 1st Security Deposit (without interest) in full to the Hong Kong Company directly within 15 days thereafter.

Pursuant to the 1st Coal Supply Agreement, in the event that the Hong Kong Company’s WOFE has obtained a legally valid license which is necessary for carrying out its coal trading business, the 1st Coal Supply Agreement will be terminated and a new coal supply agreement will be entered into between the 1st Supplier and the WOFE on the same terms as those in the 1st Coal Supply Agreement.

Further, pursuant to the 1st Coal Supply Agreement, Mr. Lin agreed to act as the guarantor of the 1st Coal Supply Agreement to guarantee the performance of the obligations of the 1st Supplier subject to and upon the terms and conditions of the 1st Coal Supply Agreement. Mr. Lin shall be personally liable to any damages and/or losses which the PRC Company and/or the Hong Kong Company may suffer in connection with any breach or default on the part of the 1st Supplier of its obligations under the 1st Coal Supply Agreement.

the 2nd Coal Supply Agreement, entered into among, (i) the Hong Kong Company; (ii) the PRC Company (as the purchaser); (iii) 2nd Supplier (as the supplier); and (iv) Mr. Kong, being the owner of 80% of the registered capital of the 2nd Supplier and an Independent Third Party (as the guarantor of the 2nd Supplier), pursuant to which the 2nd Supplier has agreed to sell and the PRC Company has agreed to buy 0.5 million tonnes of coal (subject to (+/-) 0.3% fluctuation) each year over the term of the 2nd Coal Supply Agreement. The quantity of 0.5 million tonnes of coal each year over the term of the 2nd Coal Supply Agreement represents the fixed amount of coal to be acquired by the PRC Company from the 2nd Supplier. In the event that the PRC Company does not acquire such quantity of coal under the terms of the 2nd Coal Supply Agreement, the 2nd Supplier will be entitled to take relevant legal actions against both the PRC Company and the Hong Kong Company (including the rights to claim damages or compensation from the PRC Company) by reason of such breach on the part of the PRC Company under the 2nd Coal Supply Agreement. As advised by the PRC legal advisers of the Company, although there is no indemnity clause or other provision which governs the extent of liability of each of the Hong Kong Company

LETTER FROM THE BOARD

and the PRC Company for such damage or loss that may be suffered by 2nd Supplier under the 2nd Coal Supply Agreements, the extent of liability of each of the Hong Kong Company and the PRC Company is likely to be governed by the Profit Sharing Ratio between the Hong Kong Company and the PRC Company under the Joint Cooperation Agreement.

The indicative contract price per tonne of coal will be RMB120 below the Best Possible Selling Price. Pursuant to the terms of the 2nd Coal Supply Agreement, the PRC Company has no obligation to acquire any quantity of coal which exceeds the amount of coal stated in the 2nd Coal Supply Agreement. Nevertheless, in order to maximize the potential profit of the Hong Kong Company, it is intended that the PRC Company will base on the Best Possible Selling Price mechanism to acquire for such amount of coal if there is any bona fide customer of such amount of coal.

The 2nd Coal Supply Agreement has a term of 5 years commencing from 7 May 2012 and except in the case of the 2nd Supplier, the PRC Company or the Hong Kong Company serve a written notice to the other parties of its intention not to renew the 2nd Coal Supply Agreement 30 days prior to the date of expiry of the 2nd Coal Supply Agreement, the 2nd Coal Supply Agreement will be renewed automatically for another 5 years upon its expiration. Pursuant to the 2nd Coal Supply Agreement, the Hong Kong Company shall, through the PRC Company, pay in advance a sum of RMB53 million as the refundable security deposit (the “ 2nd Security Deposit ”, together with the 1st Security Deposit, the “ Security Deposits ”) within 3 months after the issue of the first delivery notice by the PRC Company, and 2nd Security Deposit shall be fully refunded (without interest) upon the expiration of the term of the 2nd Coal Supply Agreement. In the event that the PRC Company is unable to obtain/renew a legally valid licence(s) which is necessary or desirable for carrying out its coal trading business upon its expiry, the 2nd Coal Supply Agreement shall be terminated on the date of expiry of the said license and the 2nd Supplier shall refund the 2nd Security Deposit (without interest) in full to the Hong Kong Company directly within 15 days thereafter.

Pursuant to the 2nd Coal Supply Agreement, in the event that the Hong Kong Company’s WOFE has obtained a legally valid license which is necessary for carrying out its coal trading business, the 2nd Coal Supply Agreement will be terminated and a new coal supply agreement will be entered into between the 2nd Supplier and the WOFE on the same terms as those in the 2nd Coal Supply Agreement.

Further, pursuant to the 2nd Coal Supply Agreement, Mr. Kong agreed to act as the guarantor of the 2nd Coal Supply Agreement to guarantee the performance of the obligations of the 2nd Supplier subject to and upon the terms and conditions of the 2nd Coal Supply Agreement. Mr. Kong shall be personally liable to any damages and/or losses which the PRC Company and/or the Hong Kong Company may suffer in connection with any breach or default on the part of the 2nd Supplier of its obligations under the 2nd Coal Supply Agreement.

LETTER FROM THE BOARD

As advised by the PRC legal advisers of the Company, it is not expected that there would be any legal impediment to renew the Coal Operation Certificate for the PRC Company. However, in the event that such Coal Operation Certificate of the PRC Company cannot be renewed, each of the 1st Suppler and 2nd Supplier has to refund the relevant Security Deposits in full to the PRC Company under the respective Coal Supply Agreements. In accessing the credibility of each of the 1st Supplier and 2nd Supplier, the Hong Kong Company has taken into accounts of the following factors:

(1) the coal mines operated by the 1st Supplier and 2nd Supplier;
(2) Mr. Lin and Mr. Kong, who are the guarantors of the respective Coal Supply Agreements, are personally liable to any damages and/or losses which the PRC Company and/or the Hong Kong Company may suffer in connection with any breach on the part of the 1st Suppler or the 2nd Supplier of their respective obligations under the relevant Coal Supply Agreements; and
(3) given the credits terms from each of the 1st Supplier and 2nd Supplier is around 30 to 60 days, the amount owed by the PRC Company to the respective coal suppliers in settlement of the purchase sum will be comparable to the amount of the Security Deposits.

Based on the credit search conducted by the PRC legal advisers of the Company on each of Mr. Lin and Mr. Kong, there is no history of any credit default by either of them. Further, taking into account the respective financial resources and personal assets possessed by each of Mr. Lin and Mr. Kong, the management of the Hong Kong Company and the Directors are satisfied that each of Mr. Lin and Mr. Kong is credible to act as the guarantor of the respective Coal Supply Agreements and provide personal guarantee under the agreements.

Based on the above factors, the management of the Hong Kong Company considers that the risk of non-repayment of the Security Deposit is low.

the Coal Purchase Agreement entered into between the PRC Company and Customer, pursuant to which the Customer has agreed to buy and the PRC Company has agreed to sell an aggregate of 1.25 million tonnes (subject to (+/-) 1% fluctuation) of coal during the term of the Coal Purchase Agreement for the first six months of coal which can be renewed subject to the then indicated price and quantities to be agreed by both parties. In the event that the PRC Company cannot supply such quantity of coal pursuant to the terms of the Coal Purchase Agreement, the Customer will be entitled to take relevant legal actions against the PRC Company (including the rights to claim damages or compensation from the PRC Company) by reason of such breach on the part of the PRC Company under the Coal Purchase Agreement. However, as advised by the PRC legal advisers of the Company, the PRC Company will in turn be entitled to take the corresponding legal actions against the relevant suppliers for such breach of the relevant Coal Supply Agreements in the event of any shortage in coal supply under the relevant Coal Supply Agreements. Therefore, the management of the Hong Kong Company, as well as the Directors, consider that the risk for shortage of coal supply will be shifted to the coal suppliers.

LETTER FROM THE BOARD

The indicative contract price per tonne will be equal to RMB385 (subject to adjustment according to the quality of coal). The indicated contract price of RMB385 per tonne of coal was determined based on (i) the prevailing market price of the coal; (ii) the quality of the coal; (iii) the location of the delivery; (iv) the payment terms; and (v) the quantity of coal ordered. According to the Customer, such indicated price was the best price it offered to the PRC Company and to its existing suppliers and is therefore considered as a fair market price under the terms of the Coal Purchase Agreement.

The Coal Purchase Agreement has a term of 6 months commencing from 15 May 2012 and ending on 30 November 2012. The Customer shall pay in advance a deposit (the “ Advance Deposit ”) in the aggregate sum of RMB65 million to the PRC Company (of which a sum of RMB45 million and RMB20 million shall be payable by the Customer to the PRC Company in August 2012 and September 2012 respectively). The Advance Deposit shall be used to settle the final payment of the purchase price payable by the Customer under the Coal Purchase Agreement.

The Customer is the subsidiary of Tianjin Materials and Equipments Group Corporation (former Bureau of Materials) (“ Tianjin Materials Group ”), which is founded in 1993 and is a state-owned material circulating enterprise with a registered capital of RMB2.46 billion and total assets of RMB61.2 billion. Tianjin Materials Group has 260 companies with total staff of 5,650. In 2010, the total income reached RMB148.6 billion with the total profit of RMB570 million.

Tianjin Materials Group is a trading company which focuses mainly in the fields of metals, energies, minerals, chemical materials, automobile and electromechanical sectors, cotton textiles, wood and building materials, modern logistics and real estate. The domestic business network vastly covers the core and extended regions of China. The international business network covers countries including USA, Germany, Singapore, Hong Kong, Philippines, etc., with gross international trade volumes of US$3 billion.

The Tianjin Materials Group has also established long term and stable partner relations with many leading enterprises in the PRC including Anben Iron & Steel Group, Shougang Group, Jilin Ferroalloy Group Corporation Limited, Huludao Zinc Company, China FAW Group Corporation, Shenhua Group Corporation Limited, etc.

In 2011, Tianjian Materials Group ranked 57th of the top 500 enterprises in the PRC and ranked 27th of the top 500 service enterprises in the PRC.

According to the management of the Hong Kong Company, it is intended that the Coal Purchase Agreement will be renewed in each six-month period in order to determine the then indicated price as the coal price fluctuates over the period. According to the management of the Hong Kong Company, subject to the inspection on the quality of the coal, the Customer intends to purchase all the coals sourced by the PRC Company through the Hong Kong Company (“Off-Take Arrangement”). Based on the written confirmations made by the Customer, the Customer has confirmed that the quality as well as the reserve of coal produced by each of the 1st Supplier and the 2nd Supplier has met the requirements of the Customer.

LETTER FROM THE BOARD

Notes:

(1) As at the Latest Practicable Date, the payment of the Security Deposits is still outstanding. As advised by the management of the Hong Kong Company, the Security Deposits will be partly settled by the Advance Deposit and partly by the payment received from the Customer under the Coal Purchase Agreement upon the delivery of coal by the 1st Supplier and 2nd Supplier. According to the Coal Purchase Agreement, the Customer will be required to settle each purchase amount within 15 working days upon receipt of the invoice issued by the PRC Company from time to time. The management of the Hong Kong Company intends to settle the balance of the Security Deposits by the purchase payment from the Customer as the credit term from the 1st Supplier and 2nd Supplier will be approximately 30 to 60 days. Given the credit terms range from 30 to 60 days, the management of the Hong Kong Company considers that the risk of non-repayment of the Security Deposits will be low.
(2) The respective profit margins in each of the Coal Supply Agreements were determined based on arm’s length negotiation amongst the Hong Kong Company, the PRC Company and the respective coal suppliers. In determining the profit margin in each case, the management of Hong Kong Company has considered (i) the quantity of coal to be supplied; (ii) the size of the operation of the relevant supplier; and (iii) the term of the Coal Supply Agreements (whether it is long term or short term).

As advised by the management of the Hong Kong Company, it is hard to compare the existing profit margin under the Coal Supply Agreements with those of other potential coal suppliers in Qinghai Province, the PRC, as the above factors will vary for different coal suppliers.

For example, under the 2nd Coal Supply Agreement, its indicative contract price per tonne of coal will be RMB120 below the Best Possible Selling Price which is significantly higher than that stated in the 1st Coal Supplies Agreement. According to the management of the Hong Kong Company, the reasons for such difference are that (1) the operating scale of of the coal mine operated by the 2nd Supplier is comparably smaller than those operated by the 1st Supplier; (2) given the smaller operating scale, the 2nd Supplier cannot secure a constant buyer with such large amount of purchase in a long term period of 5 years; and (3) the Hong Kong Company is the largest buyer of the 2nd Supplier. As such, the Hong Kong Company has considerably higher bargaining power in the negotiation process with the 2nd Supplier than that with the 1st Supplier. Therefore, the corresponding profit margin under the 2nd Coal Supply Agreement is significantly higher.

Based on the above, the Directors consider that the profit margins under the respective Coal Supply Agreements are in normal commercial terms and therefore fair and reasonable.

(3) If the Hong Kong Company/PRC Company has more than one customer, besides the selling price(s) offered by such bona fide customers, the Hong Kong Company/PRC Company will also consider (i) the financial background of such customers; (ii) the quantity of coal order; (iii) the payment terms; and (iv) the length of term of the coal purchase contract in determining the Best Possible Selling Price.

Based on above factors, both the 1st Supplier and 2nd Supplier are satisfied that the selling price of RMB385 per tonnes (based on 5,000 kcal/kg) is the Best Possible Selling Price for the period from the date of signing the respective Coal Supply Agreements until 31 November 2012 (being the date when the Coal Purchase Agreement is intended to be renewed under the Off-Take Arrangement) as the coal price may fluctuate by the end of the period.

At the time of renewing the Coal Purchase Agreement under the Off-Take Arrangement, the Hong Kong Company/ PRC Company will assess on whether there is any other bona fide customer which can offer a higher selling price than that provided by the Customer. Nevertheless, they will also assess the factors mentioned in the above paragraph so as to safeguard the business relationship with the Customer in the long run.

(4) Under each of the Coal Supply Agreements, there is no restriction for the respective coal suppliers to sell its products directly to other customers as long as they are able to supply such quantity of coal to the PRC Company pursuant to the terms of the respective Coal Supply Agreements. As mentioned in note (2) above, the indicative contract price in each of the Coal Supply Agreements was determined based on arm’s length negotiation amongst the Hong Kong Company, the PRC Company and the respective coal suppliers with reference to, inter alia, the quantity of coal supplied and the length of term of the relevant Coal Supply Agreements. Given that the PRC Company, through the Hong Kong Company, has secured a long term off-take arrangement with the Customer and there are no previous business relationship between the respective coal suppliers and the Customer, the coal suppliers are thus willing to sell the coal products to the PRC Company below the Best Possible Selling Price instead of selling directly to the Customer.

LETTER FROM THE BOARD

The following charts show the group structure of the Target Group immediately before and immediately after the Completion:

Existing structure of the Target Group immediately before the Completion

==> picture [257 x 186] intentionally omitted <==

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

The Vendor
100%
The Remaining
The Target
Shareholders
33.33% 66.67%
The Seychelles Company
100%
The HongKong Company
----- End of picture text -----

Structure of the Target Group immediately after Completion

==> picture [257 x 235] intentionally omitted <==

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

The Company
100%
The Purchaser
100%
The Remaining
The Target
Shareholders
33.33% 66.67%
The Seychelles Company
100%
The HongKong Company
----- End of picture text -----

LETTER FROM THE BOARD

Coal trading business of Hong Kong Company

Branch Office

Pursuant to the terms of the Joint Cooperation Agreement, the business operation of the Hong Kong Company will be carried out in the name of the PRC Company. According to the PRC legal adviser, such joint cooperation arrangement complies with the applicable regulations for coal trading business in the PRC.

A new branch office will be set up by the PRC Company in Xining City, Qinghai Province, the PRC, to handle coal suppliers and coal customers introduced and/or referred by the Hong Kong Company and the corresponding administration expenses in such branch office will be borne by the Hong Kong Company pursuant to the Joint Cooperation Agreement.

In addition to introduction and/or referral of the coal suppliers and coal customers to the PRC Company, the principal activities of the Hong Kong Company in Xining branch office includes (i) monitoring the production and supply schedule of the coal suppliers to ensure the on-time delivery of customer’s purchase orders; (ii) technical advisory to the coal production procedures to ensure the production efficiency of the coal suppliers; and (iii) periodic testing on the quality of the coal products to ensure quality of the coal produced having met the requirements of the customer.

Coal mines

The coal product supplied by the 1st Supplier will be produced from two separate coal mines operated by the 1st Suppler which are located in Qinghai Province, the PRC with an aggregate areas of approximately 2.23 square kilometers. Given the monthly and total quantity to be supplied under the 1st Coal Supply Agreement is huge, the 1st Supplier has procured a coal trading company (which is a related company from the shareholder of the 1st Supplier) to undertake and guarantee the supply of coal to the PRC Company. In the event that the 1st Supplier cannot fulfill its obligation under the 1st Coal Supply Agreement, such trading company will provide the shortfall of coal supply to the PRC Company. Pursuant to the current production schedule as agreed by the 1st Supplier and the Hong Kong Company, the aggregate amount of coal to be supplied by the 1st Supplier to the Hong Kong Company (through the PRC Company) is approximately 200,000 tonnes per month or a total of 1 million tonnes until the end of November 2012.

The coal product supplied by the 2nd Supplier will be produced from a coal mine which is also located in Qinghai Province, the PRC with a total area of approximately 2.39 square kilometers. Pursuant to the current production schedule as agreed by the 2nd Supplier, the amount of coal to be supplied by the 2nd Supplier to the Hong Kong Company (through the PRC Company) is approximately 50,000 tonnes per month or a total of 250,000 tonnes until the end of November 2012.

Based on the supply of the 1st Supplier and 2nd Supplier, the aggregate coal supplied to the Hong Kong Company is around 1.25 million tonnes until the end of November 2012.

LETTER FROM THE BOARD

The end-users of the thermal coal

Pursuant to the Off-Take Arrangement and the Coal Purchase Agreement as mentioned in the paragraph headed “Information of the Target Group” above, the Customer has agreed to buy and the PRC Company has agreed to sell an aggregate of 1.25 million tonnes of coal during the initial six-month term of the Coal Purchase Agreement. Such quantity was agreed based on the Off-Take Arrangement.

As set out in the paragraph headed “Information of the Target Group”, the Customer, which is a subsidiary of the stated-owned enterprise, is an international trading company and distributor for various products such as metals, energies, minerals, chemical materials, automobile and electromechanical sector, cotton textiles, wood and building materials, modern logistics and real estate. According to the management of the Hong Kong Company, the Customer will distribute the thermal coal sourced by the Hong Kong Company to the end-users, being mainly the state-owned local power plants and the coal processing plants. As advised by the management of Hong Kong Company and the Customer, such endusers of the thermal coal are under the distribution networks of the Customer. Since neither the PRC Company/Hong Kong Company nor the 1st Supplier and 2nd Supplier have established any long-term relationship with such stated-owned entities, it is hard to directly supply the thermal coal to such end users.

As advised by the management of Hong Kong Company, the locations of these end-users of thermal coal are approximately 180 km to 250 km away from the coal mines operated by the 1st Supplier and 2nd Supplier.

Indicative contract price per tonne adopted in the Coal Purchase Agreement

According to the management of Hong Kong Company, the indicative contract price per tonne adopted in the Coal Purchase Agreement was based on the energy level of 5,000kcal per kg of coal to be supplied to the Customer.

Pursuant to the Coal Purchase Agreement, the actual selling price will be determined by the following formula if the energy level of the coal supplied is higher than 5,000 kcal per kg:

==> picture [322 x 26] intentionally omitted <==

Based on the reports from Qinghai Province Coal Products Quality Supervision and Inspection Station (青海省煤炭產品質量監督檢驗站), the average energy level of the coal provided by the 1st Supplier and 2nd Supplier is between 6,400 kcal/kg to 7,200 kcal/kg. Based on the above formula, the expected selling price of the coal per tonne to the Customer shall be approximately RMB492.8 per tonne to RMB554.4 per tonne.

Although the selling price of coal per tonnes may be higher than the initial indicative price of RMB385 per tonnes, the potential profit of the Hong Kong Company arised from the Coal Supply Agreements will not be changed based on the mechanism of Best Possible Selling Price as set out in the paragraph headed “Information of the Target Group”.

LETTER FROM THE BOARD

Coal product

Extending from the positive growth of the PRC’s energy demands and its continued heavy reliance of coal electricity, the Hong Kong Company mainly focuses on the thermal coal segment for power generation use. The figure below shows the various uses of coal based on the carbon/energy content of coal and the moisture content of coal:

==> picture [381 x 258] intentionally omitted <==

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

CARBON/ENERGY CONTENT OF COAL HIGH
HIGH MOISTURE CONTENT OF COAL
Low rank coals Hard coal
47% 53%
Lignite Sub-bituminous Bituminous Anthracite
17% 30% 52% 1%
Thermal Metallurgical
steam coal coking coal
Largely power Power generation Power generation Manufacture of Domestic/
generation Cement manufacture Cement manufacture iron and steel inudstrial
Industrial uses Industrial uses including
smokeless fuel
The Hong Kong Company’s main focus
% OF WORLD RESERVES
USES
----- End of picture text -----

Figure 1 – The Hong Kong Company focuses of the thermal coal segment as it matches the demand requirements of China’s power plants

Source: www.worldcoal.org

According to the management of the Hong Kong Company, the contracted supply of thermal coal (approximately 6,400 kcal/kg to 7,200 kcal/kg) which is classified in the mid-lower end along the full spectrum of the carbon content of coal as shown in Figure 1 above is in the range of preferred coal specifications as demanded by power plants due to cost-efficiency consideration.

Payment terms

Pursuant to Coal Purchase Agreement, the Customer will settle its purchase sum of coal within 15 working days upon 2,000 tonnes of coal having been delivered to the end-users. Pursuant to the Coal Supply Agreements, the Hong Kong Company will settle its purchase sum of coal upon 5,000 tonnes of coal having been delivered under its instruction and it is expected that the credit term of the 1st Supplier and 2nd Supplier will be around 30 to 60 days (on average of 45 days).

LETTER FROM THE BOARD

Operating flow

Upon obtaining the purchase order from the Customer (which should include the delivery location, quantity and quality), the Hong Kong Company will assess the production schedule of the 1st Supplier and 2nd Supplier and decides on which supplier to place the purchase order in order to satisfy the purchase order from the Customer.

Upon the delivery of the coal product to the end user as instructed by the Customer, the coal product will be subject to the quality testing by the end user based on its quality and quantity. A confirmation note after such test will be issued by the end user in respect of the quality and quantity of coal to the suppliers and the Customer respectively.

Based on the confirmation note from the suppliers and the Customer, the Hong Kong Company will issue an invoice to the Customer from time to time when the aggregate delivered quantity (in the book of the Hong Kong Company) has reached 2,000 tonnes. Such invoiced sum in relation to the coal product purchased by the Customer should be settled by the Customer within 15 working days pursuant to the Coal Purchase Agreement.

Each of the suppliers, based on its confirmation note, will issue an invoice to the Hong Kong Company (through the PRC Company) from time to time when the delivered quantity has reached 5,000 tonnes. The Hong Kong Company will cross-check the confirmation note provided by the suppliers and the Customer before its settlement. The Hong Kong Company will withhold the corresponding profits (RMB22 and RMB25 per tonnes for the 1st Supplier and RMB120 per tonnes for the 2nd Supplier) before its settlement to the corresponding supplier in 30 to 60 days (on average 45 days).

In order to ensure the suppliers to meet the delivery on time, the technical staff of the Hong Kong Company will (i) inspect the coal production and supply schedule of the coal mines and (ii) provide technical advice to such coal mines to ensure the production efficiency.

Management of the Hong Kong Company

The Hong Kong Company has a team of experienced staff in the coal industry. Based on the information provided by the Hong Kong Company, the biographical details of its management in relation to the coal trading business as well as their respective management role and positions are set out as follows:

Mr. Cheung

Mr. Cheung has over 10 years of experience in the energy sector. He was the independent non-executive director of Loudong General Nice Resources (China) Holdings Limited (Stock Code: 988), a company listed on the main board of the Stock Exchange which is one of the largest coal and coke producers and non-ferrous metal traders in the PRC. Mr. Cheung holds a Master in Chinese Laws from City University of Hong Kong, a Postgraduate Certificate in Laws (PCLL) from University of Hong Kong and a Bachelor of Laws from University of London. Mr. Cheung is the chief executive officer of the Hong Kong Company.

LETTER FROM THE BOARD

Mr. Wang Jian

Mr. Wang Jian was the assistant general manager in a coal company and was responsible for sourcing and purchasing of coal from other mining companies in Qinghai Province, the PRC. Mr. Wang Jian is the chief operating officer of the Hong Kong Company and will also be responsible for sourcing and purchasing of coal in Qinghai Province, the PRC.

Mr. Wang Sheng Yun

Mr. Wang Sheng Yun is a surveying engineer and was a member in Qinghai Provincial Mineral Resources Bureau No. 4 Surveying Institute in 1980. Mr. Wang Sheng Yun has over 30 years of experience in mining exploration and is familiar with the distribution of resources, topography and landscape, and the minerals quality in Qinghai Province, the PRC. Mr. Wang Sheng Yun will be responsible for quality control and technical advisory in the coal trading business.

Mr. Xin Hao

Mr. Xin Hao has more than 20 years’ experience in areas of the distribution and sales of coal in the coal industry. Mr. Xin holds a Bachelor of Business Administration Degree from Shanxi University. Mr. Xin Hao will be responsible for sale and distribution of coal in the coal trading business.

Mr. Barry Palte

Mr. Palte has 28 years of experience in the areas of Investment Banking and Private Equity. He has worked with both public and private companies and has access to a broad range of clientele in the resources sector. He is very active in the commodities industry and has originated commodities deals in jurisdictions including Australia, Southern Africa, Chile, China and West Africa. Mr. Palte holds a Bachelor of Business Science (Honours) Degree with 1st Class Honours from the University of Cape Town in South Africa. He is also a qualified Actuary and is a Fellow of the Institute and Faculty of Actuaries in the United Kingdom. Mr. Barry Palte will be responsible for general management of coal trading business and also be the head of investment team.

Mr. Jason Lee

Mr. Lee has more than 5 years of experience in sourcing, import/export, and trading physical cargo commodities like coal and iron ore. Mr. Lee is familiar with coal and iron ore supply chain logistics mechanism. Mr. Jason Lee will be responsible for sales and distribution of coal product in the coal trading business.

As mentioned in the paragraph headed “Shareholders’ Agreement” above, the Company intends to hire and appoint additional qualified candidate to join the management team of the Hong Kong Company. Nonetheless, the Company considers that even if the Company could not hire and appoint additional qualified candidate to the management team of the Hong Kong Company, the current management team of the Hong Kong Company has adequate experience and qualification to operate and manage the business operation of the Hong Kong Company.

LETTER FROM THE BOARD

The chart below shows the management of the Hong Kong Company and their respective positions in the Hong Kong Company:

==> picture [409 x 215] intentionally omitted <==

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

Mr. Cheung
Chief Executive Officer
Mr. Wong Jian
Chief Operating Officer
Mr. Wang Sheng Yun Mr. Xin Hao Mr. Jason Lee Mr. Barry Palte
Head of Quality Head of Sales team Head of Investment
Control and Technical Team
Advisory
----- End of picture text -----

Reasons for the Acquisition

The Company is an investment holding company and the Group is principally engaged in the manufacture and sale of fresh and dried noodles. The Group recorded audited consolidated net profit of approximately HK$25.0 million for the year ended 31 March 2011 and the audited consolidated net assets of approximately HK$62.2 million as at 31 March 2011.

The Directors have been identifying further investment opportunities in order to diversify its source of income and maximize the return to the Shareholders. The Target Group and the Vendor were introduced to the Company by Nuada Limited, the financial adviser of the Company, in early May 2012 and the negotiation for the Acquisition commenced thereafter. Prior to the introduction by the financial adviser, save for Mr. Cheung, the ultimate beneficial owner of Century Bridge Development Limited, being one of the Remaining Shareholders and beneficially holds 16,488,000 Shares as at the Latest Practicable Date, representing approximately 2.49% of the entire issued share capital of the Company, the Company has no previous business relationship or connection with each of the Vendor, the Remaining Shareholders, The PRC Company and its beneficial owners the management of the Hong Kong Company, the 1st Supplier and the 2nd Supplier and the Customer. Further, the Directors confirm that there is no side arrangement between the Company, the Vendor, the Remaining Shareholders, the PRC Company and its beneficial owners, the management of the Hong Kong Company, the 1st Supplier and the 2nd Supplier and the Customer.

LETTER FROM THE BOARD

The Directors consider that the Company’s source of income will be diversified based on its investment in the Target and thus the Acquisition represents a good opportunity for the Group to tap into the coal trading business in the PRC and also allow it to diversify its source of income. In determining the potential benefits from the investment in the coal trading business in the PRC, the Board has considered:

(i) the potential profit margin for the operation of the Hong Kong Company based on the Joint Cooperation Agreement, Coal Supply Agreements, the Coal Purchase Agreement and the Off-Take Arrangement;
(ii) the feasibility of the business operation of the Hong Kong Company and its business model (which has been set out in the paragraph headed “Coal trading business of Hong Kong Company in the Letter from the Board);
(iii) the provisions of the Deed of Undertaking, Dividend Undertaking and Shareholders’ Agreement for protecting the interest of the Company as minority shareholder of the Seychelles Company;
(iv) the trend of the increasing coal demand in the PRC (which is supported by the BBIC Report, extracts of which have been set out in the section headed “Industry Overview of Coal Trading Business in the PRC” in Appendix IV of this circular);
(v) the existing business relationship between the Hong Kong Company and the Customer, which is a subsidiary of Tianjin Materials and Equipments Group Corporation (former Bureau of Materials) and the potential long term business relationship between the Hong Kong Company and the Customer in the long run under the off-take Arrangement;
(vi) the experience and competence of the management of the Hong Kong Company; and
(vii) the availability of Company’s expertise in monitoring the operation of the Target Group as mentioned in the paragraph headed “Shareholders’ Agreement” above.

The Directors will always strive to seek opportunities to increase Shareholders’ wealth. After conducting a proper due diligence on the Target Group as mentioned in the paragraph headed “Due Diligence” above and the feasibility studies on the coal trading business in the PRC, the Directors are of the view that the coal trading business is a good business opportunity for the Company. Taking into consideration the trend of the increasing coal demand in the PRC as shown in the “Industry Overview of Coal Trading Business in the PRC” set out in Appendix V to this circular, the Directors are of the view that the coal trading business in the PRC has a good prospect, and thus the Company will be able to benefit from the investment return based on the Dividend Undertaking of the Target Group which will in turn increase the Shareholders’ wealth. Further, in light that the Joint Cooperation Agreement, Coal Supply Agreements, Coal Purchase Agreement and the Off-Take Arrangement has already been entered into by the Hong Kong Company coupled with the fact that the Company will engage additional experienced personnel to manage the coal trading business after Completion of the Acquisition, the Directors consider that there are potentials in the business development of the Target Group.

LETTER FROM THE BOARD

Based on the above factors, the Directors consider that (i) the Acquisition represents an opportunity to tap in the coal trading business in the PRC; (ii) the Group will be able to benefit from the positive prospects of the Target Group in light of the increasing demand of coal in the PRC; and (iii) the Group will be able to benefit from the potential investment return from the Target Group based on the Dividend Undertaking as mentioned in the paragraph headed “Dividend Undertaking” above and under the secured legally binding Joint Cooperation Agreement, Coal Supply Agreements and the Coal Purchase Agreement.

Taking into account the benefits of the Acquisition, the Board is of the view that the terms of the Acquisition are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

Despite the Company’s plan to invest in the coal trading business in the PRC under the Acquisition, the Company’s future business plan of its existing business will be conducted as stated in the Prospectus and will not be affected upon Completion. Further, as at the Latest Practicable Date, the Company has no current intention to acquire further interest in the Target in order to gain control in the Target Group.

THE FACILITY LETTER

Date: 25 May 2012 Parties: Lender: the Company Borrower: Goldenbase Ltd, a company incorporated in the Republic of Seychelles Facility amount: HK$5,000,000

As at the Latest Practicable Date, the Borrower is owned as to approximately 33.33% by the Target and as to approximately 66.67% by the Remaining Shareholders. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, save for Mr. Cheung, the ultimate beneficial owner of Century Bridge Development Limited, being one of the Remaining Shareholders, and beneficially holds 16,488,000 Shares as at the Latest Practicable Date, representing approximately 2.49% of the entire issued share capital of the Company, the other Remaining Shareholders, the Borrower and its ultimate beneficial owners are Independent Third Parties as at the Latest Practicable Date.

Terms of the Facility Letter

Facility period: 1 year Interest rate: 6% per annum Default interest: 8% per annum Security: Nil

LETTER FROM THE BOARD

Purpose of the Facilities:

For the initial working capital of the Target Group

Repayment:

The Borrower shall repay the Facilities drawn together with any unpaid interest accrued thereon under the Facility Letter on the first anniversary of the Facility letter. The Company may at any time serve a written demand on the Borrower to request immediate repayment of the the Facilities drawn together with any interest accrued (the “Repayment Amount”) and the Borrower shall accordingly pay the Repayment Amount within seven (7) Business Days from the date of the written demand.

Conditions precedent

The Facility Letter is subject to, inter alia, the following conditions having been fulfilled or waived (as the case may be):

(a) all necessary consents and approvals required to be obtained on the part of the Company and the Borrower in respect of the Facility Letter and the transactions contemplated hereby having been obtained and remain in full force and effect;
(b) the passing by the Shareholders at the EGM approving the Facility Letter and the transactions contemplated thereunder; and
(c) completion of the Acquisition Agreement.

Information on the Borrower

The Borrower is a company incorporated in the Republic of Seychelles with limited liability and is owned as to approximately 33.33% by the Target and approximately 66.67% by the Remaining Shareholders as at the Latest Practicable Date.

The Borrower in turn holds 100% equity interest in the Hong Kong Company, a company incorporated in Hong Kong with limited liability. The Hong Kong Company is currently an investment holding company, which will soon commence the business of coal trading in the PRC through the Joint Cooperation Agreement as detailed in the paragraphs headed “Information on the Joint Cooperation Agreement” above.

Upon Completion of the Acquisition Agreement, the Target will become an indirect wholly-owned subsidiary of the Company and the Borrower will in turn become an associate of the Company, in which the Group will be interested in approximately 33.33% of its equity interests. As such, the Group will be effectively interested in approximately 33.33% of the entire issued capital of the Hong Kong Company upon Completion.

LETTER FROM THE BOARD

Credibility of the Borrower

Pursuant to the Shareholders’ Agreement to be entered into among the Goldenbase Shareholders, the Target shall be entitled to appoint one director of the Seychelles Company and no business shall be transacted at any board meeting unless a quorum of two directors is present, of whom one shall be a director nominated by the Target. In addition, the Target also has the right to inspect all such documents and information, regarding the business, assets, liabilities, contracts and affairs of the Seychelles Company, including but not limited to the bank statements, books and accounts, contracts, other accounting and legal records of the Seychelles Company. As such, the Directors consider that although the Facilities to be provided by the Company to the Seychelles Company are not secured, the Company will have sufficient power to monitor the affairs of the Seychelles Company to safeguard any misappropriation of funds.

Furthermore, pursuant to the Facility Letter, the Company shall have the overriding right at any time by written notice to the Borrower to demand immediate repayment of the Facilities and all interest accrued thereon. Moreover, based on the Dividend Undertaking as mentioned above, a dividend of not less than 20% out of funds of the Hong Kong Company which are available for dividend or distribution has to be declared and distributed by the Hong Kong Company to the Seychelles Company each year. As such, the Company considers that the risk of non-repayment of the Facilities shall be low.

Reasons for entering into the Facility Letter

The Facilities are intended for the initial working capital of the Target Group. Terms of the Facility Letter were determined after arm’s length negotiations between the Company and the Borrower. The Directors are of the view that since the Borrower will become an associate of the Company upon Completion, support should be given for the purpose of its initial working capital which will facilitate its business development. The Board has considered the following factors for granting the Facilities to the Seychelles Company:

(i) the amount of the Facilities is not substantial as compared to the current financial resources of the Company;
(ii) the interest rate of the Facilities is fair and reasonable as compared to the prevailing interest rate for borrowing;
(iii) the Company will have sufficient power to monitor the affairs of the Seychelles Company; and
(iv) at present, human resources had been provided and given by the Remaining Shareholders.

In such circumstances, the Directors (including the independent non-executive Directors) are of the view that the terms and conditions of the Facility Letter are on normal commercial terms which are fair and reasonable and are in the best interests of the Company and the Shareholders as a whole.

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION AND THE PLACING

Assets

As at 31 March 2012, the audited consolidated total assets of the Group amounted to HK$115.2 million.

As set out in Appendix VI to this circular, assuming completion of the Acquisition and the Placing had taken place on 31 March 2012, the unaudited pro forma consolidated total assets of the Enlarged Group would be HK$165.1 million.

Liabilities

As at 31 March 2012, the audited consolidated total liabilities of the Group amounted to HK$10.5 million.

As set out in Appendix VI to this circular, assuming completion of the Acquisition and the Placing had taken place on 31 March 2012, the unaudited pro forma consolidated total liabilities of the Enlarged Group would be HK$10.7 million.

Earnings

The Group recorded an audited consolidated gain of HK$7.7 million for the year ended 31 March 2012.

Since the Hong Kong Company has not yet commenced business, the Directors consider that there will be no immediate impact on the earning of the Group upon Completion.

RISK FACTORS

The success of the Hong Kong Company relies on the knowledge and experience of the management of the Hong Kong Company

The Target Group has not yet commenced business. As mentioned in the paragraph headed “Shareholders’ Agreement” above, the Company intends to hire and appoint additional qualified candidate to join the management of the Hong Kong Company (the “Management Team”). Nevertheless, the financial performance of the Hong Kong Company is dependent, to a significant extent, on the knowledge and experience of the Management Team. In the event that the Hong Kong Company is unable to retain or secure the qualified personnel in the Management Team, there may be a material adverse impact on the Hong Kong Company’s business operation.

The operation of the Hong Kong Company relies on the Coal Operation Certificate held by the PRC Company

As set out in the paragraph headed “Information of the Target Group”, the PRC Company’s Coal Operation License is valid from 28 June 2010 to 27 June 2013. Pursuant to the Joint Cooperation Agreement, the PRC Company undertakes that it shall use its best endeavours to procure the renewal of

LETTER FROM THE BOARD

the subject certificate upon its expiry to ensure its Coal Operation Certificate is legal and valid throughout the terms of the Joint Cooperation Agreement. In the event that the Coal Operation Certificate of the PRC Company cannot be renewed and the Hong Kong Company (through its WOFE) cannot successfully apply for its new Coal Operation Certificate, the overall business operation of the Target Group will be materially and adversely affected.

The Hong Kong Company has only one customer as at the Latest Practicable Date and the Coal Purchase Agreement only lasts for 6 months

As at the Latest Practicable Date, the Hong Kong Company has only one customer and the Coal Purchase Agreement only lasts for 6 months. In the event that the Coal Purchase Agreement cannot be renewed as provided under the Off-Take Arrangement mentioned in paragraph headed “Information of the Target Group” or the cessation of business relationship between the Hong Kong Company (through the PRC Company) and the Customer, the Hong Kong Company’s business and future profitability will be materially and adversely affected.

The Hong Kong Company has only two suppliers as at the Latest Practicable Date

As at the Latest Practicable Date, the Hong Kong Company has only two suppliers. Although it was confirmed by the Customer that the quality and reserve of the coal produced by each of the 1st Supplier and the 2nd Supplier has met the requirements of the Customer, there is no assurance that the Hong Kong Company will not encounter provided under any interruption, delay or shortage in supply from these two suppliers in the future. In the event that the Hong Kong Company cannot source an alternative supply of coal which can met the requirements of the Customer in a timely manner, its business operation and future profitability may be materially and adversely affected.

The Hong Kong Company’s operation is vulnerable to any significant downturn in the PRC power industry

According to the management of the Hong Kong Company, the major product of the Hong Kong Company is thermal coal (sub-bituminous) which will be used for power generation in power stations. The business prospects of the Hong Kong Company are heavily relied on the continuous demand of thermal coal from the Customer as who will then distribute the thermal coal to the local power stations. In the event that there is any significant downturn in the PRC power industry, the Hong Kong Company’s business and future profitability will be materially and adversely affected.

PLACING OF NEW SHARES UNDER SPECIFIC MANDATE

THE PLACING AGREEMENT

Date: 12 June 2012 (after trading hours)

Parties: (1) Issuer: the Company (2) Placing agent: the Placing Agent

LETTER FROM THE BOARD

The Placing Agent has been appointed to place, on a best effort basis, the Placing Shares at the Placing Price. The Placing Agent is a licensed corporation to carry on business in type 1, 2, 4 and 9 regulated activities (dealing in securities, dealing in future contracts, advising on securities and asset management) under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Placing Agent is Independent Third Parties.

The Placees

The Placing Shares will be placed on a best effort basis to not less than six Placees which will be professional, corporate, institutional and/or individual investors, who and whose ultimate beneficial owners shall be Independent Third Parties. It is not expected that any Placee will become a Substantial Shareholder immediately after completion of the Placing.

None of the Vendor, the Remaining Shareholders, the PRC company and its beneficial owners, the management of the Hong Kong Company, the 1st Supplier and the 2nd Supplier and the Customer nor their respective associates will become a Placee and does not and will not have any relationship with the Placees or the Placing Agent.

Number of Placing Shares

The Placing Shares shall be up to 300,000,000 new Shares, representing approximately 45.29% of the existing issued share capital of the Company as at the date of the Placing Agreement, and approximately 31.17% of the issued share capital of the Company as enlarged by the allotment and issue of the Placing Shares.

The Placing Shares will rank, upon issue, pari passu in all respects among themselves and with the Shares in issue as at the date of allotment and issue of the Placing Shares.

Placing Price

The Placing Price is HK$0.17 per Placing Share. In line with the market practice, the Company will bear all costs and expenses of the Placing. Based on the estimated expenses for the Placing, the net Placing Price is approximately HK$0.165 per Placing Share.

The Placing Price of HK$0.17 per Placing Share represents:

(i) a discount of approximately 0.58% to the closing price of HK$0.171 per Share as quoted on the Stock Exchange on 12 June 2012, being the date of the Placing Agreement;
(ii) a discount of approximately 0.93% to the average of the closing prices of approximately HK$0.1716 per Share as quoted on the Stock Exchange for the last five consecutive trading days prior to the date of the Placing Agreement;
(iii) a premium of 6.25% on the closing price of HK$0.16 per Share as quoted on the Stock Exchange as at the Latest Practicable Date; and

LETTER FROM THE BOARD

(iv) a premium of 7.59% of the net asset value per Share of HK$0.158 per Share of the Company as at 31 March 2012.

The Placing Price was determined and negotiated on an arm’s length basis between the Company and the Placing Agent with reference to, among others, the prevailing market price of the Shares and the liquidity of the Shares. The Directors consider that the Placing Price is fair and reasonable and is in the interests of the Company and the Shareholders as a whole.

Assuming the 300,000,000 Placing Shares are subscribed in full, the aggregate nominal value of the Placing Shares is HK$3,000,000.

Placing commission payable to the Placing Agent

The placing commission payable to the Placing Agent under the Placing Agreement is equal to 2.5% of the aggregate Placing Price of the Placing Shares successfully placed by the Placing Agent under the Placing.

The placing commission payable to the Placing Agent under the Placing Agreement is arrived at after arm’s length negotiations between the Company and the Placing Agent with reference to the prevailing commission charged by other placing agents. The Directors consider that the placing commission is fair and reasonable, in the interests of the Company and the Shareholders as a whole and is in line with the prevailing commission charged by other placing agents.

Rights

The Placing Shares, when allotted and issued, will rank equally in all respects among themselves and with the Shares in issue on the date of allotment and issue of the Placing Shares.

Mandate to issue the Placing Shares

The Placing Shares will be allotted and issued under the specific mandate sought to be granted by the Shareholders to the Directors at the EGM.

Conditions of the Placing

The Placing is conditional upon:

(i) the granting by the Listing Division of the listing of, and permission to deal in, all of the Placing Shares;
(ii) the passing by the Shareholders at the EGM of an ordinary resolution of the Company approving the Placing Agreement and the transactions contemplated thereunder;
(iii) each of the Company and the Placing Agent having obtained all necessary consents and approvals in relation to the Placing from the relevant authorities, if applicable; and
(iv) the completion of the Acquisition Agreement.

LETTER FROM THE BOARD

In the event that the conditions of the Placing is not fulfilled by 31 July 2012 (or such later date as may be agreed by the Placing Agent and the Company), all rights, obligations and liabilities of the parties to the Placing Agreement in relation to the Placing shall cease and determine and none of the parties shall have any claim against any other party in respect of the Placing save for any antecedent breaches.

Completion of the Placing

Completion of the Placing will take place on the fourth Business Day after the fulfillment of the conditions of the Placing or such other date agreed by the Company and the Placing Agent. It is intended that Completion of both the Acquisition and the Placing shall take place on or before 31 July 2012. In the event that Completion shall not take place on or before 31 July 2012, the Company may consider to enter into a supplemental agreement with the Placing Agent to extend the long stop date. The Company will update the Shareholders and the public investors the progress of the Placing and the Acquisition as and when appropriate.

Completion of the Placing is subject to the fulfillment of the conditions precedent in the Placing Agreement. As the Placing may or may not proceed, Shareholders and potential investors are advised to exercise caution when dealing in the Shares.

Termination

The Placing Agent has the right to terminate the Placing Agreement by notice in writing given to the Company at any time prior to 9:00 a.m. on the date of completion of the Placing, if in its absolute opinion, the business or financial or trading position or prospects of the Company or the Group taken as a whole or the success of the Placing would be materially and adversely affected by any of the force majeure events provided in the Placing Agreement.

The Company may, in its reasonable opinion, after consultation with the Placing Agent, terminate the Placing Agreement by notice in writing to the Placing Agent at any time up to 9:00 a.m. on the date of completion of the Placing if there is a breach of the warranties, representations and undertakings given by the Placing Agent in the Placing Agreement and such breach is considered by the Company on reasonable grounds to be material.

Upon termination of the Placing Agreement pursuant to the above mentioned factors, all obligations of the Company and the Placing Agent shall cease and no party of the Placing Agreement shall have any claim against the other party in respect of any matter or thing arising out of or in connection with the Placing Agreement save of any antecedent breach of any obligation under the Placing Agreement.

Application for listing

Application will be made by the Company to the Listing Division of the Stock Exchange for the listing of, and permission to deal in, the Placing Shares.

REASONS FOR THE PLACING

The Company is an investment holding company and the Group is principally engaged in the manufacture and sale of fresh and dried noodles. The Directors have been identifying further investment opportunities in order to diversify its existing business and maximize the return to the Shareholders. Reference is made to the Announcement in relation to the Acquisition. The Directors consider that the

LETTER FROM THE BOARD

Placing will provide funding to meet the capital requirement for the Acquisition which represents a good opportunity for the Group to tap into the coal trading business in the PRC and also allow it to diversify its existing businesses.

The Board also considers that the Placing represents an opportunity to raise capital for the Group while broadening its shareholder and capital base thereby increasing the liquidity of the Shares. As such, the Directors consider that the Placing Agreement is entered into upon normal commercial terms following arm’s length negotiations between the Company and the Placing Agent and that the terms of the Placing Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

USE OF PROCEEDS

Assuming all the Placing Shares were allotted and issued, the gross proceeds of the Placing will amount to HK$51 million and the net proceeds receivable by the Company under the Placing are estimated to be approximately HK$49.6 million after deducting relevant expenses incurred in relation to the Placing. It is presently expected that the net proceeds will be applied towards part of the consideration of the Acquisition.

FUND RAISING ACTIVITY IN PAST 12 MONTHS

The Company has not conducted any fund raising exercise during the past twelve months immediately preceding the date of the Placing Announcement.

CHANGES OF SHAREHOLDING STRUCTURE

As at the Latest Practicable Date, the Company has 662,400,000 Shares in issue. The shareholding structure of the Company as at the Latest Practicable Date and immediately after completion of the Placing is as follows:

Shareholders Conrich Investments Limited Fastray Investments Limited Public Shareholders Placees Mr. Cheung Other public Shareholders Total	As at the Latest Practicable Date Number of Approximate Shares percentage (%) 306,880,000 46.33% 35,840,000 5.41% – – 16,488,000 2.49% 303,192,000 45.77% 662,400,000 100%	Immediately after completion of the Placing Number of Approximate Shares percentage (%) 306,880,000 31.89% 35,840,000 3.72% 300,000,000 31.17% 16,488,000 1.72% 303,192,000 31.50% 962,400,000 100%

LETTER FROM THE BOARD

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

The Board proposes to increase the authorised share capital of the Company from HK$10,000,000 divided into 1,000,000,000 Shares to HK$20,000,000 divided into 2,000,000,000 Shares by the creation of an additional 1,000,000,000 Shares in order to facilitate any future expansion in the share capital of the Company as well as to provide the Company with greater flexibility to raise fund by allotting and issuing Shares in the future, which shall include but not limited to the allotment and issue of the Placing Shares.

The Increase in Authorised Capital is subject to the passing of the relevant ordinary resolution by the Shareholders at the EGM.

As at the Latest Practicable Date, the number of the Company’s authorised Shares is 1,000,000,000, of which, the number of issued Shares is 662,400,000, the number of Shares for outstanding options to be subscribed for is 43,200,000. As such, there will be 294,400,000 Shares remain unissued. Under the Placing, a maximum of up to 300,000,000 Placing Shares will be allotted and issued, therefore the existing number of unissued Shares is insufficient for the Placing.

Save for the new Shares to be issued under the Placing, the Directors have no present intention of issuing any part of the authorised but unissued Shares after the Increase in Authorised Share Capital is completed.

GEM LISTING RULES IMPLICATIONS

Since the relevant percentage ratios (as defined under the GEM Listing Rules) in respect of the Acquisition together with the Facilities are greater than 25% but less than 100%, the Acquisition together with the Facilities constitute a major transaction on the part of the Company pursuant to Rule 19.06(3) of the GEM Listing Rules. Accordingly, the Acquisition, the Facilities and the transactions contemplated respectively thereunder are subject to, among others, the approval of the Shareholders at the EGM.

To the best of the knowledge, information and belief of the Directors, save for Mr. Cheung, the ultimate beneficial owner of Century Bridge Development Limited, being one of the Remaining Shareholders, and beneficially holds 16,488,000 Shares as at the Latest Practicable Date, representing approximately 2.49% of the entire issued share capital of the Company, no Shareholder has a material interest in the transactions contemplated under the Acquisition Agreement, the Facility Letter and the Placing Agreement. As such, save for Mr. Cheung, no shareholder will be required to abstain from voting on the resolution to approve the Acquisition Agreement, the Facility Letter and the Placing Agreement and any vote exercised by the Shareholders taken at the EGM shall be taken by way of poll.

EGM

The EGM will be held at Pacific Room, 2/F., Island Pacific Hotel, 152 Connaught Road West, Hong Kong, on Friday, 3 August 2012 at 11:00 a.m., the notice of which is set out on pages 134 to 136 of this circular, to consider and, if thought fit, approve the ordinary resolution(s) to approve (i) the Acquisition Agreement and the transactions contemplated thereunder (including but not limited to the terms of the Shareholders’ Agreement, the Dividend Undertaking and the Deed of Undertaking); (ii) the Facility Letter; (iii) the grant of the specific mandate to the Directors for the allotment and issue of the Placing Shares; and (iv) the Increase in Authorised Capital.

LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you intend to attend and vote at such meeting, you are requested to complete and return the enclosed form of proxy to the Company’s branch share registrar in Hong Kong, Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

RECOMMENDATION

The Board is of the view that the terms of the Acquisition Agreement, the Facility Letter, the Placing Agreement and the Increase in Authorised Capital are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution(s) approving (i) the Acquisition Agreement and the transactions contemplated thereunder (including but not limited to the terms of the Shareholders’ Agreement, the Dividend Undertaking and the Deed of Undertaking); (ii) the Facility Letter; (iii) the grant of the specific mandate to the Directors for the allotment and issue of the Placing Shares; and (iv) the Increase in Authorised Capital as set out in the notice of the EGM.

FURTHER INFORMATION

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

By order of the Board Wealth Glory Holdings Limited Lee Yau Lin, Jenny Chairman

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. FINANCIAL SUMMARY

Financial Information Incorporated by Reference

The audited consolidated financial statements of the Group for the year ended 31 March 2010, including the notes thereto, has been published in the appendix I to the Prospectus, which are incorporated by reference into this circular.

The audited consolidated financial statements of the Group for the year ended 31 March 2011, including the notes thereto, has been published in the audit report of the Company for the year ended 31 March 2011 (pages 38 to 68), which are incorporated by reference into this circular.

The audited consolidated financial statements of the Group for the year ended 31 March 2012, including the notes thereto, has been published in the audit report of the Company for the year ended 31 March 2012 (pages 36 to 70), which are incorporated by reference into this circular.

The management discussion and analysis of the Group for the year ended 31 March 2010 has been published in pages 176 to 183 under the section headed “Financial information” in the Prospectus, which are incorporated by reference into this circular.

The management discussion and analysis of the Group for the year ended 31 March 2011 has been published in the annual report of the Company for the year ended 31 March 2011 (pages 4 to 12), which are incorporated by reference into this circular.

The management discussion and analysis of the Group for the year ended 31 March 2012 has been published in the annual report of the Company for the year ended 31 March 2012 (pages 4 to 12), which are incorporated by reference into this circular.

The annual reports of the Company and the Prospectus have been published on both the GEM website (www.hkgem.com) and the website of the Company at www.lmfnoodle.com respectively.

II. INDEBTEDNESS

As at the Latest Practicable Date, the Group had no debt securities issued and outstanding, no other borrowing or indebtedness, no mortgage and charges and no contingent liabilities or guarantees.

Save as aforesaid or as otherwise mentioned herein, and apart from intra-group liabilities, the Enlarged Group did not have any other outstanding borrowings, mortgages, charges, debentures, loan capital and overdraft, debt securities or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities at the close of business on 31 May 2012 being the latest practicable date for the purpose of this statement of indebtedness prior to printing of this circular.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as aforesaid, the Directors are not aware of any material changes in the indebtedness and contingent liabilities of the Enlarged Group since 31 May 2012, the date to which the indebtedness statement is made and up to the Latest Practicable Date.

III. WORKING CAPITAL

As at the Latest Practicable Date, the Directors, after due and careful consideration, are of the opinion that the Enlarged Group, following the Completion and taking into account the present internal financial resources available to the Enlarged Group and the net proceeds from the Proposed Placing and in the absence of unforeseen circumstances, will have sufficient working capital for its present requirements for the next 12 months from the date of this circular.

IV. MATERIAL ADVERSE CHANGE

As at the latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2012, the date to which the latest audited financial statements of the Group were made up.

V. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Company is an investment holding company and the Group is principally engaged in the manufacture and sale of fresh and dried noodles.

Due to uncertainty of global economy and downturn in financial market in recent months, the Group has fine tuned and slightly rescheduling the future plans as set out in the prospectus of the Group dated 30 September 2010. The Group will execute its development plans as originally planned. The Group believes expanding domestic sales in the PRC is a critical strategy to the future success of our Group and the Group will continue to seek opportunities in existing business to broaden and maintain the Group’s customers base.

Going forward in the next year, all newly installed production lines will be ready for production and the Group will continue to recruit and train its staff team for production. Evaluation and improvement of operation mode of new production lines will continue to be carried out.

To further expand the overseas markets, the Group will strengthen the current communication channels with existing customers and enlarge the customer base by further exploring business opportunities with potential customers in existing markets and new markets basing on the information gathered from government trade bureaus, the internet, business trips and tradeshows. The Group will also regularly participate tradeshows to enhance the Group’s corporate profile, select suitable locations to set up the new overseas sales offices, recruit new staff for new overseas sales offices and recruit and train new sales and marketing staff.

The Group will continue to develop marketing and brand building in the PRC, improve existing products and develop new tastes, ingredients and appearances to customers to fulfill the customers’ demands and preferences.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Moreover, the Group has started to diversify its existing businesses and tap into the new coal trading business which is expected this new business segment will contribute as an steady revenue stream and maximize the return to the shareholders.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

1. ACCOUNTANTS’ REPORT ON THE TARGET COMPANY

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

==> picture [53 x 53] intentionally omitted <==

==> picture [63 x 46] intentionally omitted <==

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

18 July 2012

The Board of Directors Wealth Glory Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of Eminent Along Limited (the “Target Company”) for the period from 8 March 2012 (date of incorporation) to 31 March 2012 (the “Relevant Period”) for inclusion in the circular dated 18 July 2012 issued by Wealth Glory Holdings Limited (the “Company”) in connection with the proposed acquisition of the entire equity interest in the Target Company (the “Circular”).

The Target Company was incorporated on 8 March 2012 in the British Virgin Islands with limited liability and acts as an investment holding company. The Target Company has adopted 31 March as its financial year end date.

No audited financial statements of the Target Company have been prepared for the Relevant Period as there is no statutory audit requirement in the country of its incorporation. For the purpose of this report, the sole director of the Target Company has prepared the management accounts of the Target Company for the Relevant Period in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “HKFRS Financial Statements”).

We have examined the HKFRS Financial Statements of the Target Company for the Relevant Period and carried out such additional procedures as are necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

The Financial Information has been prepared from the HKFRS Financial Statements in accordance with HKFRSs. No adjustments were considered necessary for the purpose of preparing our report for inclusion in the Circular.

The sole director of the Target Company is responsible for the preparation of the HKFRS Financial Statements. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the HKFRS Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, for the purpose of this report, the Financial Information gives a true and fair view of the state of affairs of the Target Company as at 31 March 2012 and of the Target Company’s results and cash flows for the Relevant Period.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

FINANCIAL INFORMATION

A. STATEMENT OF COMPREHENSIVE INCOME

		Period from
		8 March 2012
		(date of incorporation)
		to 31 March 2012
	Note	HK$
Turnover	6	–
Administrative expenses		(13,975)
Loss before tax		(13,975)
Income tax expense	7	–
Loss for the period and total comprehensive
income for the period	8	(13,975)
Attributable to:
Owners of the Target Company		(13,975)

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

B. STATEMENT OF FINANCIAL POSITION

Note Non-current assets Investments in associates 9 Current liabilities Due to sole director 10 Net current liabilities NET LIABILITIES Capital and reserves Share capital 11 Accumulated losses TOTAL EQUITY	At 31 March 2012 HK$ 260,000 273,967 (273,967) (13,967) 8 (13,975) (13,967)

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

C. STATEMENT OF CHANGES IN EQUITY

		Share	Accumulated
		capital	losses		Total
		HK$	HK$		HK$
	Issues of shares	8	–		8
	Total comprehensive income for the period	–	(13,975)		(13,975)
	At 31 March 2012	8	(13,975)		(13,967)

D.	STATEMENT OF CASH FLOWS
					Period from
					8 March 2012
			(date of incorporation)
			to	31 March 2012
					HK$
	CASH FLOWS FROM OPERATING ACTIVITIES
	Loss before tax and net cash used in operating activities				(13,975)
	CASH FLOWS FROM INVESTING ACTIVITIES
	Investments in associates and net cash used in investing activities				(260,000)
	CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from issue of shares				8
	Increase in amount due to sole director				273,967
	Net cash generated from financing activities				273,975
	NET INCREASE IN CASH AND CASH EQUIVALENTS				–
	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				–
	CASH AND CASH EQUIVALENTS AT END OF	PERIOD			–

	ANALYSIS OF CASH AND CASH EQUIVALENTS
	Cash balance				–

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

E. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

The Target Company was incorporated in the British Virgin Islands with limited liability on 8 March 2012. The address of its registered office is Quastisky Building, P.O. Box 4389, Road Town, Tortola, British Virgin Islands. The principal place of business of the Target Company is Suite 90405, Hing Yip Commercial Centre, 280 Des Voeux Road Central, Hong Kong.

The Target Company is engaged in investment holding.

In the opinion of the sole director of the Target Company, as at 31 March 2012, Intellect Hero Limited, a company incorporated in the British Virgin Islands, is the immediate and ultimate holding company and Mr. Li Jun Yi is the ultimate controlling party of the Target Company.

2. BASIS OF PREPARATION

This Financial Information has been prepared in accordance with HKFRSs, accounting principles generally accepted in Hong Kong and the applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

In the Relevant Period, the Target Company has adopted all the new and revised HKFRSs issued by the HKICPA that are relevant to its operations and effective for its accounting period beginning on 8 March 2012. HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting Standards; and Interpretations. The adoption of these new and revised HKFRSs did not result in significant changes to the Target Company’s accounting policies, presentation of the Target Company’s financial statements and amounts reported for the Relevant Period.

The Target Company has not applied the new HKFRSs that have been issued but are not yet effective. The Target Company has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a material impact on its results of operations and financial position.

The Target Company incurred a loss of HK$13,975 for the period from 8 March 2012 (date of incorporation) to 31 March 2012 and as at 31 March 2012 the Target Company had net current liabilities and net liabilities of HK$273,967 and HK$13,967 respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Target Company’s ability to continue as a going concern. Therefore, the Target Company may be unable to realise its assets and discharge its liabilities in the normal course of business.

This Financial Information has been prepared on a going concern basis, the validity of which depends upon the financial support of the ultimate holding company, at a level sufficient to finance the working capital requirements of the Target Company. The ultimate holding company, Intellect Hero Limited, has confirmed in writing of its intention to continue to support financially the operations of the Target Company and to meet all third party obligations for at least the ensuing

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

twelve months period. The sole director of the Target Company is therefore of the opinion that it is appropriate to prepare the Financial Information on a going concern basis. Should the Target Company be unable to continue as a going concern, adjustments would have to be made to the Financial Information to adjust the value of the Target Company’s assets to their recoverable amounts and to provide for any further liabilities which might arise.

The preparation of Financial Information in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires the sole director of the Target Company to exercise its judgements in the process of applying the accounting policies. The areas involving critical judgements are disclosed in note 4 to the Financial Information.

3. SIGNIFICANT ACCOUNTING POLICIES

This Financial Information has been prepared under the historical cost convention.

The significant accounting policies applied in the preparation of this Financial Information are set out below.

(a) Associates

Associates are entities over which the Target Company has significant influence. Significant influence is the power to participate in the financial and operating policies of an entity but is not control or joint control over those policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Target Company has significant influence.

Investment in an associate is accounted for in the Financial Information by the equity method and is initially recognised at cost. Identifiable assets and liabilities of the associate in an acquisition are measured at their fair values at the acquisition date. The excess of the cost of acquisition over the Target Company’s share of the net fair value of the associate’s identifiable assets and liabilities is recorded as goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment together with the investment at the end of each reporting period when there is objective evidence that the investment is impaired. Any excess of the Target Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in profit or loss.

The Target Company’s share of an associate’s post-acquisition profits or losses is recognised in profit or loss, and its share of the post-acquisition movements in reserves is recognised in the reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Target Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Target Company does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Target Company resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

Unrealised profits on transactions between the Target Company and its associates are eliminated to the extent of the Target Company’s interests in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Target Company.

(b) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Target Company becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Target Company transfers substantially all the risks and rewards of ownership of the assets; or the Target Company neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

(c) Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and shortterm highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value. Bank overdrafts which are repayable on demand and form an integral part of the Target Company’s cash management are also included as a component of cash and cash equivalents.

(d) Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Target Company after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

(e) Other payables

Other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(f) Equity instruments

Equity instruments issued by the Target Company are recorded at the proceeds received, net of direct issue costs.

(g) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit recognised in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

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

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in associates, except where the Target Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Target Company intends to settle its current tax assets and liabilities on a net basis.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(h) Related parties

A related party is a person or entity that is related to the Target Company.

(A) A person or a close member of that person’s family is related to the Target Company if that person:
(i) has control or joint control over the Target Company;
(ii) has significant influence over the Target Company; or
(iii) is a member of the key management personnel of the Target Company or of a parent of the Target Company.
(B) An entity is related to the Target Company if any of the following conditions applies:
(i) The entity and the Target Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company. If the Target Company is itself such a plan, the sponsoring employers are also related to the Target Company.
(vi) The entity is controlled or jointly controlled by a person identified in (A).
(vii) A person identified in (A)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(i) Impairment of assets

At the end of each reporting period, the Target Company reviews the carrying amounts of its assets except investments to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Target Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cashgenerating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(j) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Target Company has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(k) Events after the reporting period

Events after the reporting period that provide additional information about the Target Company’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the Financial Information. Events after the reporting period that are not adjusting events are disclosed in the notes to the Financial Information when material.

4. CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

In the process of applying the accounting policies, the sole director of the Target Company has made the following judgements that have the most significant effect on the amounts recognised in the Financial Information.

Going concern

The Financial Information has been prepared on a going concern basis, the validity of which depends upon the financial support of the ultimate holding company at a level sufficient to finance the working capital requirements of the Target Company. Details are explained in note 2 to the Financial Information.

5. FINANCIAL RISK MANAGEMENT

The Target Company’s activities expose it to a variety of financial risks: liquidity risk and interest rate risk. The Target Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Target Company’s financial performance.

(a) Liquidity risk

The Target Company’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term. The Target Company’s financial liabilities are repayable on demand or within one year.

(b) Interest rate risk

As the Target Company has no significant interest-bearing assets and liabilities, the Target Company’s operating cash flows are substantially independent of changes in market interest rates. Accordingly, no sensitivity analysis has been presented.

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

(c) Categories of financial instruments

	At
	31 March 2012
	HK$
Financial assets:
Loans and receivables (including cash and cash equivalents)	–
Financial liabilities:
Financial liabilities at amortised cost	273,967

(d) Fair values

The carrying amounts of the Target Company’s financial assets and financial liabilities as reflected in the statement of financial position approximate their respective fair values.

6. TURNOVER

The Target Company did not generate any turnover during the Relevant Period.

7. INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax is required since the Target Company has no assessable profit for the Relevant Period.

The reconciliation between the income tax expense and the product of loss before tax multiplied by the Hong Kong Profits Tax rate is as follows:

	Period from
	8 March 2012
	(date of incorporation)
	to 31 March 2012
	HK$
Loss before tax	(13,975)
Tax at Hong Kong Profits Tax rate of 16.5%	(2,306)
Tax effect of expenses that are not deductible	2,306
	–

No provision for deferred taxation has been made in the Financial Information as the tax effect of temporary differences is immaterial to the Target Company.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

8. LOSS FOR THE PERIOD

The Target Company’s loss for the period is stated after charging the following:

		Period from
		8 March 2012
		(date of incorporation)
		to 31 March 2012
		HK$
Auditor’s	remuneration	–
Directors’	remuneration	–

9. INVESTMENTS IN ASSOCIATES

	At
	31 March
	2012
	HK$
Unlisted investments:
Goodwill	260,000

Details of the Target Company’s associates at 31 March 2012 are as follows:

	Place of		Percentage of ownership
	incorporation/	Issued and	interest/voting power/
Name	registration	paid up capital	profit sharing
			Direct Indirect	Principal activities
Goldenbase Ltd (“Goldenbase”)	Republic of Seychelles	Registered capital	33% –	Investment holding
		of US$ 100,000
Royal Dragon Corporation	Hong Kong	1,010,000 ordinary	– 33%	Not yet commenced
Limited		shares of HK$1 each		business

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

Summarised financial information in respect of the Target Company’s associates is set out below:

At 31 March 2012 Total assets Total liabilities Net liabilities Target Company’s share of associates’ net liabilities Period from 8 March 2012 (date of acquisition of Goldenbase) to 31 March 2012 Total revenue Total loss for the period Target Company’s share of associates’ loss for the period	HK$ 44,983 (48,933)
	(3,950)

	–

	–

	–

	–

10. DUE TO SOLE DIRECTOR

The amount due to sole director is unsecured, interest-free and has no fixed terms of repayment.

11. SHARE CAPITAL

Authorised: 50,000 ordinary shares of US$1 each Issued and fully paid: 1 ordinary share of US$1	At 31 March 2012 HK$ 390,000

	8

Upon incorporation, 1 subscriber’s share of US$1 was issued at par for cash to provide the initial working capital of the Target Company.

The Target Company’s objectives when managing capital are to safeguard the Target Company’s ability to continue as a going concern and to maximise the return to the shareholders through the optimisation of the debt and equity balance.

The Target Company currently does not have any specific policies and processes for managing capital.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

12. CONTINGENT LIABILITIES

At 31 March 2012, the Target Company had no significant contingent liabilities.

13. CAPITAL COMMITMENTS

At 31 March 2012, the Target Company had no significant capital commitments.

14. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 31 March 2012.

Yours faithfully, RSM Nelson Wheeler Certified Public Accountants Hong Kong

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

2. ACCOUNTANTS’ REPORT ON THE GOLDENBASE GROUP

==> picture [53 x 53] intentionally omitted <==

==> picture [63 x 47] intentionally omitted <==

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

18 July 2012

The Board of Directors Wealth Glory Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) of Goldenbase Ltd (“Goldenbase”) and its subsidiary (hereinafter collectively referred to as the “Goldenbase Group”) for the period from 2 August 2011 (date of incorporation) to 31 March 2012 (the “Relevant Period”) for inclusion in the circular dated 18 July 2012 issued by Wealth Glory Holdings Limited (the “Company”) in connection with the proposed acquisition of the entire equity interest in Eminent Along Limited (the “Circular”).

Goldenbase was incorporated on 2 August 2011 in the Republic of Seychelles with limited liability and acts as an investment holding company. As at the date of this report, Goldenbase has the following subsidiary:

	Place and date	Issued and fully	Percentage of	Principal
Name of subsidiary	of incorporation	paid share capital	ownership interest	activities
Royal Dragon Corporation	Hong Kong	1,010,000 ordinary	100%	Coal trading
Limited (“Royal Dragon”)	18 January 2010	shares of HK$1 each

All the companies of the Goldenbase Group have adopted 31 March as their financial year end date.

The statutory financial statements of Royal Dragon for the year ended 31 March 2012 have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and were audited by Elite Partners CPA Limited, Certified Public Accountants registered in Hong Kong, in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

No audited financial statements of Goldenbase have been prepared for the Relevant Period as there is no statutory audit requirement in the country of its incorporation. For the purpose of this report, the sole director of Goldenbase has prepared the consolidated financial statements of the Goldenbase Group for the Relevant Period in accordance with HKFRSs issued by the HKICPA (the “HKFRS Financial Statements”).

We have performed our independent audit on the HKFRS Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA and have examined the HKFRS Financial Statements in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The sole director of Goldenbase is responsible for the preparation of the HKFRS Financial Statements. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the HKFRS Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, for the purpose of this report, the Financial Information gives a true and fair view of the state of affairs of Goldenbase and of the Goldenbase Group as at 31 March 2012 and of the Goldenbase Group’s results and cash flows for the Relevant Period.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Period from
		2 August 2011
		(date of incorporation)
		to 31 March 2012
	Note	HK$
Turnover	6	–
Administrative expenses		(783,950)
Loss before tax		(783,950)
Income tax expense	7	–
Loss for the period and total comprehensive income
for the period	8	(783,950)
Attributable to:
Owners of the Goldenbase Group	9	(783,950)

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

B. CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Note Non-current assets Goodwill 10 Current liabilities Other payables NET LIABILITIES Capital and reserves Share capital 12 Accumulated losses 13 TOTAL EQUITY	At 31 March 2012 HK$ 44,983 (48,933) (3,950) 780,000 (783,950) (3,950)

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

C. STATEMENT OF FINANCIAL POSITION

Non-current assets Investment in a subsidiary Current liabilities Other payable NET LIABILITIES Capital and reserves Share capital Accumulated losses TOTAL EQUITY D. CONSOLIDATED STATEMENT OF CHANGES Issues of shares Total comprehensive income for the period At 31 March 2012	Note 11 12 13 IN EQUITY Share Accumulated capital losses HK$ HK$ 780,000 – – (783,950) 780,000 (783,950)		At 31 March 2012 HK$ 10,003 (13,953) (3,950) 780,000 (783,950) (3,950) Total HK$ 780,000 (783,950) (3,950)

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

E. CONSOLIDATED STATEMENT OF CASH FLOWS

	Period from
2 August 2011
(date of incorporation)
to 31 March 2012
	HK$
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax and operating loss before working capital changes	(783,950)
Increase in other payables	3,953
Net cash used in operating activities	(779,997)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in a subsidiary and net cash used in investing activities	(3)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and net cash generated from financing activities	780,000
NET INCREASE IN CASH AND CASH EQUIVALENTS	–
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	–
CASH AND CASH EQUIVALENTS AT END OF PERIOD	–

ANALYSIS OF CASH AND CASH EQUIVALENTS
Cash balance	–

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

F. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL INFORMATION

Goldenbase was incorporated in the Republic of Seychelles with limited liability on 2 August 2011. The address of its registered office is situated at Abacus (Seychelles) Limited, Mont Fleuri, Mahe, Seychelles. The principal place of business of Goldenbase is Suite 904-05, Hing Yip Commercial Centre, 280 Des Voeux Road Central, Hong Kong.

Goldenbase is engaged in investment holding. As at 31 March 2012, the subsidiary has not yet commenced its business.

2. BASIS OF PREPARATION

In the Relevant Period, the Goldenbase Group has adopted all the new and revised HKFRSs issued by the HKICPA that are relevant to its operations and effective for its accounting period beginning on 2 August 2011. HKFRSs comprise Hong Kong Financial Reporting Standards; Hong Kong Accounting Standards; and Interpretations. The adoption of these new and revised HKFRSs did not result in significant changes to the Goldenbase Group’s accounting policies, presentation of the Goldenbase Group’s financial statements and amounts reported for the Relevant Period.

The Goldenbase Group has not applied the new HKFRSs that have been issued but are not yet effective. The Goldenbase Group has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a material impact on its results of operations and financial position.

The Goldenbase Group incurred a loss of HK$783,950 for the period from 2 August 2011 (date of incorporation) to 31 March 2012 and as at 31 March 2012 the Goldenbase Group had net current liabilities and net liabilities of HK$48,933 and HK$3,950 respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Goldenbase Group’s ability to continue as a going concern. Therefore, the Goldenbase Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

This Financial Information has been prepared on a going concern basis, the validity of which depends upon the financial support of a major shareholder, Century Bridge Development Limited, at a level sufficient to finance the working capital requirements of the Goldenbase Group. This major shareholder has confirmed in writing of its intention to continue to support financially the operations of the Goldenbase Group and to meet all third party obligations for at least the ensuing twelve months period. The sole director of Goldenbase is therefore of the opinion that it is appropriate to prepare the Financial Information on a going concern basis. Should the Goldenbase

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

Group be unable to continue as a going concern, adjustments would have to be made to the Financial Information to adjust the value of the Goldenbase Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets as current assets.

The preparation of Financial Information in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires the sole director of Goldenbase to exercise its judgements in the process of applying the accounting policies. The areas involving critical judgements are disclosed in note 4 to the Financial Information.

3. SIGNIFICANT ACCOUNTING POLICIES

This Financial Information has been prepared under the historical cost convention.

The significant accounting policies applied in the preparation of this Financial Information are set out below.

(a) Consolidation

The Financial Information includes the financial statements of Goldenbase and its subsidiary made up to 31 March. A subsidiary is an entity over which the Goldenbase Group has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Goldenbase Group has control.

The subsidiary is consolidated from the date on which control is transferred to the Goldenbase Group. It is de-consolidated from the date the control ceases.

Intragroup transactions, balances and unrealised profits are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the subsidiary have been changed where necessary to ensure consistency with the policies adopted by the Goldenbase Group.

In Goldenbase’s statement of financial position the investment in a subsidiary is stated at cost less allowance for impairment losses. The results of the subsidiary are accounted for by Goldenbase on the basis of dividends received and receivable.

(b) Business combination and goodwill

The acquisition method is used to account for the acquisition of a subsidiary in a business combination. The cost of acquisition is measured at the acquisition-date fair value of the assets given, equity instruments issued, liabilities incurred and contingent consideration. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. Identifiable assets and liabilities of the subsidiary in the acquisition are measured at their acquisition-date fair values.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

The excess of the cost of acquisition over Goldenbase’s share of the net fair value of the subsidiary’s identifiable assets and liabilities is recorded as goodwill. Any excess of Goldenbase’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed to Goldenbase.

In a business combination achieved in stages, the previously held equity interest in the subsidiary is remeasured at its acquisition-date fair value and the resulting gain or loss is recognised in consolidated profit or loss. The fair value is added to the cost of acquisition to calculate the goodwill.

If the changes in the value of the previously held equity interest in the subsidiary were recognised in other comprehensive income (for example, available-for-sale investment), the amount that was recognised in other comprehensive income is recognised on the same basis as would be required if the previously held equity interest were disposed of.

Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is measured at cost less accumulated impairment losses. The method of measuring impairment losses of goodwill is the same as that of other assets as stated in the accounting policy (j) below. Impairment losses of goodwill are recognised in consolidated profit or loss and are not subsequently reversed. Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the acquisition for the purpose of impairment testing.

(c) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the consolidated statements of financial position when the Goldenbase Group becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Goldenbase Group transfers substantially all the risks and rewards of ownership of the assets; or the Goldenbase Group neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(d) Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and shortterm highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value. Bank overdrafts which are repayable on demand and form an integral part of the Goldenbase Group’s cash management are also included as a component of cash and cash equivalents.

(e) Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Goldenbase Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

(f) Other payables

(g) Equity instruments

Equity instruments issued by Goldenbase are recorded at the proceeds received, net of direct issue costs.

(h) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit recognised in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Goldenbase Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investment in a subsidiary, except where the Goldenbase Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Goldenbase Group intends to settle its current tax assets and liabilities on a net basis.

(i) Related parties

A related party is a person or entity that is related to the Goldenbase Group.

(A) A person or a close member of that person’s family is related to the Goldenbase Group if that person:
(i) has control or joint control over the Goldenbase Group;
(ii) has significant influence over the Goldenbase Group; or
(iii) is a member of the key management personnel of Goldenbase or of a parent of Goldenbase.
(B) An entity is related to the Goldenbase Group (reporting entity) if any of the following conditions applies:
(i) The entity and Golenbase are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the Goldenbase Group or an entity related to the Goldenbase Group. If the Goldenbase Group is itself such a plan, the sponsoring employers are also related to the Goldenbase Group.
(vi) The entity is controlled or jointly controlled by a person identified in (A).
(vii) A person identified in (A)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(j) Impairment of assets

At the end of each reporting period, the Goldenbase Group reviews the carrying amounts of its assets except goodwill to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Goldenbase Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(k) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Goldenbase Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

(l) Events after the reporting period

Events after the reporting period that provide additional information about the Goldenbase Group’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the Financial Information. Events after the reporting period that are not adjusting events are disclosed in the notes to the Financial Information when material.

4. CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

In the process of applying the accounting policies, the sole director of the Goldenbase has made the following judgements that have the most significant effect on the amounts recognised in the Financial Information.

Going concern

The Financial Information has been prepared on a going concern basis, the validity of which depends upon the financial support of the major shareholder at a level sufficient to finance the working capital requirements of the Goldenbase Group. Details are explained in note 2 to the Financial Information.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

5. FINANCIAL RISK MANAGEMENT

The Goldenbase Group’s activities expose it to a variety of financial risks: liquidity risk and interest rate risk. The Goldenbase Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Goldenbase Group’s financial performance.

(a) Liquidity risk

The Goldenbase Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term. The Goldenbase Group’s financial liabilities are repayable on demand or within one year.

(b) Interest rate risk

As the Goldenbase Group has no significant interest-bearing assets and liabilities, the Goldenbase Group’s operating cash flows are substantially independent of changes in market interest rates. Accordingly, no sensitivity analysis has been presented.

(c) Categories of financial instruments

	At
	31 March 2012
	HK$
Financial assets:
Loans and receivables (including cash and cash equivalents)	–
Financial liabilities:
Financial liabilities at amortised cost	48,933

(d) Fair values

The carrying amounts of the Goldenbase Group’s financial assets and financial liabilities as reflected in the consolidated statements of financial position approximate their respective fair values.

6. TURNOVER

The Goldenbase Group did not generate any turnover during the Relevant Period.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

7. INCOME TAX EXPENSE

No provision for Hong Kong Profits Tax is required since the Goldenbase Group has no assessable profit for the Relevant Period.

The reconciliation between the income tax expense and the product of loss before tax multiplied by the Hong Kong Profits Tax rate is as follows:

	Period from
	2 August 2011
	(date of incorporation)
	to 31 March 2012
	HK$
Loss before tax	(783,950)
Tax at Hong Kong Profits Tax rate of 16.5%	(129,352)
Tax effect of expenses that are not deductible	129,352
	–

No provision for deferred taxation has been made in the Financial Information as the tax effect of temporary differences is immaterial to the Goldenbase Group.

8. LOSS FOR THE PERIOD

The Goldenbase Group’s loss for the period is stated after charging the following:

		Period from
		2 August 2011
		(date of incorporation)
		to 31 March 2012
		HK$
Auditor’s	remuneration	–
Directors’	remuneration	–

9. LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF GOLDENBASE

The loss for the period attributable to owners of Goldenbase included a loss of HK$783,950 which has been dealt with in the financial statements of Goldenbase for the Relevant Period.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

10. GOODWILL

				HK$
Cost
Arising on acquisition of a subsidiary and at	31	March	2012	44,983

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating unit (“CGU”) that is expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows:

	At
	31 March
	2012
	HK$
Trading of coal
Royal Dragon	44,983

The recoverable amount of the CGU is determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates and budgeted gross margin and turnover. The Goldenbase Group estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. Budgeted gross margin and turnover are based on future operation of the Royal Dragon and expectations on market development.

The Goldenbase Group prepares cash flow forecasts derived from the most recent financial budgets approved by the sole director for the next 4.75 years. The rate used to discount the forecast cash flows for the Goldenbase Group’s trading of coal activities is 10.04%.

11. INVESTMENT IN A SUBSIDIARY

		At
	31	March
		2012
		HK$
Unlisted investments, at cost		10,003

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

12. SHARE CAPITAL

	At
	31 March
	2012
	HK$
Authorised, issued and fully paid:
100,000 ordinary shares of US$1 each	780,000

Upon incorporation, 1 subscriber’s share of US$1 was issued at par for cash to provide the initial working capital of Goldenbase.

On 8 March 2012, Goldenbase issued 99,999 ordinary shares of US$1 each at par for cash fully paid totalling US$99,999 to provide additional working capital.

Goldenbase’s objectives when managing capital are to safeguard Goldenbase’s ability to continue as a going concern and to maximise the return to the shareholders through the optimisation of the debt and equity balance.

Goldenbase currently does not have any specific policies and processes for managing capital.

13. RESERVES

(a) The Goldenbase Group

The amounts of the Goldenbase Group’s reserves and movements therein are presented in the consolidated statements of comprehensive income and consolidated statements of changes in equity.

(b) Goldenbase

				Accumulated losses
				HK$
Loss for the period and at	31	March	2012	(783,950)

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

14. ACQUISITION OF A SUBSIDIARY

On 20 March 2012, Goldenbase acquired the entire issued share capital of Royal Dragon for a cash consideration of HK$3. Royal Dragon has not yet commenced its business during the period.

The fair value of the identifiable liabilities of Royal Dragon acquired as at its date of acquisition is as follows:

Net liabilities acquired:

Other payable Total purchase consideration Goodwill Satisfied by: Cash Net cash outflow arising on acquisition: Cash consideration paid	HK$ 44,980 3
	44,983

	3

	3

If the acquisition had been completed on 2 August 2011, total Goldenbase Group turnover for the period would have been HK$Nil, and loss for the period would have been HK$1,350,760. The proforma information is for illustrative purposes only and is not necessarily an indication of the turnover and results of operations of the Goldenbase Group that actually would have been achieved had the acquisition been completed on 2 August 2011, nor is intended to be a projection of future results.

15. CONTINGENT LIABILITIES

At 31 March 2012, the Goldenbase Group had no significant contingent liabilities.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

16. CAPITAL COMMITMENTS

At 31 March 2012, the Goldenbase Group had no significant capital commitments.

17. SUBSEQUENT EVENTS

The following events took place subsequent to 31 March 2012:

(a) On 1 April 2012, Royal Dragon entered into a legally binding master framework joint cooperation agreement (as supplemented by a supplemental agreement dated 1 April 2012) (collectively the “Joint Cooperation Agreements”) with a PRC coal trading company (the “PRC Co-operator”), pursuant to which Royal Dragon and the PRC Co-operator agreed to participate in the Joint Cooperation Agreements to carry out coal trading business in the PRC for a term of 3 years. Pursuant to the Joint Cooperation Agreements, Royal Dragon is required to provide refundable security deposits to coal suppliers for and on behalf of the PRC Co-operator, and any profit which arise from the operations of the PRC Co-operator shall first be utilised to settle the amounts of security deposits provided by Royal Dragon. After full recovery of the amounts of security deposits payable by Royal Dragon, any remaining profits will be distributed between Royal Dragon and the PRC Co-operator in the ratio of 98:2.
(b) On 7 May 2012, Royal Dragon and the PRC Co-operator entered into a legally binding coal supply agreement (as supplemented by two supplemental agreements dated 9 May 2012 and 11 May 2012 respectively) (collectively “1st Coal Supply Agreements”) with a supplier (the “1st supplier”), pursuant to which the 1st supplier has agreed to sell and the PRC Cooperator has agreed to buy an aggregate of 6.5 million tonnes of coal (subject to (+/-) 0.3% fluctuation) over a term of 2.5 years commencing from 7 May 2012. Pursuant to the 1st Coal Supply Agreements, the PRC Co-operator shall pay in advance an aggregate sum of RMB80 million as the refundable security deposit within 3 months after the issue of the first delivery notice by the PRC Co-operator, and the security deposit shall be fully refunded (without interest) upon the expiration of the term of the 1st Coal Supply Agreements.
(c) On 7 May 2012, Royal Dragon and the PRC Co-operator entered into a legally binding coal supply agreement (as supplemented by a supplemental agreements dated 9 May 2012) (collectively “2nd Coal Supply Agreements”) with a supplier (the “2nd supplier”), pursuant to which the 2nd supplier has agreed to sell and the PRC Co-operator has agreed to buy an aggregate of 2.5 million tonnes of coal (subject to (+/-) 0.3% fluctuation) over a term of 5 years commencing from 7 May 2012. Pursuant to the 2nd Coal Supply Agreements, the PRC Co-operator shall pay in advance an aggregate sum of RMB53 million as the refundable security deposit within 3 months after the issue of the first delivery notice by the PRC Co-operator, and the security deposit shall be fully refunded (without interest) upon the expiration of the term of the 2nd Coal Supply Agreements.

FINANCIAL INFORMATION OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX II

(d) On 9 May 2012, Royal Dragon and the PRC Co-operator entered into a legally binding coal supply agreement (as supplemented by a supplemental agreements dated 11 May 2012) (collectively “Coal Purchase Agreements”) with a state-owned enterprise (the “Customer”), pursuant to which the Customer has agreed to buy and the PRC Co-operator has agreed to sell an aggregate of 1.25 million tonnes of coal (subject to (+/-) 1% fluctuation) over a term of six months commencing from 15 May 2012. Pursuant to the Coal Purchase Agreements, the Customer shall pay in advance an aggregate sum of RMB65 million as the refundable security deposit, of which a sum of RMB45 million and RMB20 million shall be payable by the Customer to the PRC Co-operator in August 2012 and September 2012 respectively.
(e) On 25 May 2012, a facility letter was entered into between Goldenbase and the Company, pursuant to which the Company has conditionally agreed to provide the facilities to Goldenbase of up to HK$5,000,000 for the purpose of financing the initial working capital of Goldenbase upon completion of the acquisition of Eminent Along Limited. The facility amount bears interest at 6% per annum and shall be repaid together with any unpaid interest accrued thereon on the first anniversary of the facility letter.

Details of the aforesaid subsequent events could be found in the announcement of the Company dated 25 May 2012.

18. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Goldenbase or its subsidiary in respect of any period subsequent to 31 March 2012.

Yours faithfully, RSM Nelson Wheeler Certified Public Accountants Hong Kong

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

The accompanying unaudited pro forma statement of assets and liabilities of the Group (the “Statement”) has been prepared to illustrate the effect of the Acquisition, assuming the transaction had been completed as at 31 March 2012, might have affected the financial position of the Group.

The Statement is prepared based on the audited consolidated statement of financial position of the Group as at 31 March 2012 as extracted from the annual report of the Group for the year ended 31 March 2012 and the audited statement of financial position of Eminent Along Limited as at 31 March 2012 as extracted from the Accountants’ Report set out in Appendix II(1) of the Circular after making certain pro forma adjustments resulting from the Acquisition.

The Statement is prepared based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the Statement, it may not give a true picture of the actual financial position of the Group that would have been attained had the Acquisition actually occurred on 31 March 2012. Furthermore, the Statement does not purport to predict the Group’s future financial position.

The Statement should be read in conjunction with the financial information of the Group as set out in Appendix I of the Circular, the financial information of the Eminent Along Limited as set out in Appendix II(1) of the Circular and other financial information included elsewhere in the Circular.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The Group HK$’000 Non-current assets Fixed assets 10,167 Investments in associates – 10,167 Current assets Inventories 686 Trade receivables 17,187 Temporary loan – Prepayments and deposits 522 Bank and cash balances 86,676 105,071 Current liabilities Trade payables 8,162 Accruals and other payables 2,297 10,459 Net current assets/(liabilities) 94,612 Total assets less current liabilities 104,779 Non-current liabilities Deferred tax liabilities 3 NET ASSETS 104,776 Capital and reserves Share capital 6,624 Reserves 98,152 TOTAL EQUITY 104,776	Eminent Along Limited HK$’000 – 260 260 – – – – – – – 274 274 (274) (14) – (14) – (14) (14)	Sub- Pro forma total adjustments HK$’000 HK$’000 Notes 10,167 – 260 100,014 1 10,427 100,014 686 – 17,187 – – 5,000 2 522 – 86,676 (55,400) 3 105,071 (50,400) 8,162 – 2,571 – 10,733 – 94,338 (50,400) 104,765 49,614 3 – 104,762 49,614 6,624 3,000 4 98,138 46,614 1,4 104,762 49,614	Adjusted balance HK$’000 10,167 100,274
			110,441
			686 17,187 5,000 522 31,276
			54,671
			8,162 2,571
			10,733
			43,938
			154,379 3
			154,376
			9,624 144,752
			154,376

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

To record the acquisition of asset which in turn as investments in associates at a consideration of HK$100 million. The fair value of the Eminent Along Limited is determined as its net liabilities of HK$0.014 million as at 31 March 2012 assuming the carrying amounts of the Eminent Along Limited approximate to its fair value.
Pursuant to the facility letter dated 25 May 2012, the Company has conditionally agreed to provide the facilities to the Borrower, a company owned as to 33.33% by Eminent Along Limited, of up to HK$5 million for the purpose of financing the initial working capital of the Target Group upon the completion of acquisition.
The Consideration of the acquisition and facilities granted to Borrower amount to HK$105 million would be settled by net proceeds from the proposed placing of approximately HK$49.6 million and bank balance of the Company of approximately HK$55.4 million.
The Placing shares comprising up to an aggregate of 300,000,000 new shares of HK$0.01 each at the placing price of HK$0.17 per placing share. The gross proceeds of the placing will be amounted to HK$51 million and the net proceeds receivable by the Company are estimated to be approximately HK$49.6 million after deducting relevant placing expenses. The excess of the consideration received over the nominal value of the shares issued, net of placing expenses, in amount of approximately HK$46.6 million was credited to the share premium account.

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. ACCOUNTANTS’ REPORT ON 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 accountants, RSM Nelson Wheeler, Certified Public Accountants, Hong Kong.

==> picture [53 x 53] intentionally omitted <==

==> picture [63 x 47] intentionally omitted <==

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

18 July 2012

The Board of Directors Wealth Glory Holdings Limited

Dear Sirs,

We report on the unaudited pro forma statement of assets and liabilities (the “Statement”) of Wealth Glory Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the proposed acquisition of the entire equity interest in Eminent Along Limited might have affected the assets and liabilities of the Group presented, for inclusion in Appendix III(A) to the circular of the Company dated 18 July 2012 (the “Circular”). The basis of preparation of the Statement is set out on pages 89 to 91 to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibilities solely of the directors of the Company to prepare the Statement in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market 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” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM Listing Rules, on the Statement 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 Statement beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Statement with the directors of the Company. The engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Statement has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Statement as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

The Statement is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 31 March 2012 or any future date.

Opinion

In our opinion:

(a) the Statement has been properly compiled by the directors of the Company 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 Statement as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

RSM Nelson Wheeler

Certified Public Accountants

Hong Kong

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

Set out below is the management discussion and analysis of the Target for the period from 8 March 2012 (date of incorporation of the Target) to 31 March 2012. The following financial information are based on the financial information of the Target as set out in Appendix II to this circular.

Business and financial review

For the period from 8 March 2012 to 31 March 2012, the Target has not commenced business operation. The net loss before tax of the Target of HK$13,975 for such period was mainly incurred for the incorporation expense for the Target.

Liquidity, financial resources and capital structure

As at 31 March 2012, the audited net liability of Target was approximately HK$13,967. The Target had a current liability of HK$273,967 as at 31 March 2012. As at 31 March 2012, the gearing ratio (total borrowings to total assets) of Target was 1.05 during the period under review.

Capital structure

As at 31 March 2012, the issued share capital of the Target was US$1 (equivalent to approximately HK$7.8), comprised 1 issued and fully paid ordinary share of US$1.

Significant investment, material acquisition and disposals

Other than the investment in the Glodenbase Group in amount of HK$260,000 on 20 March 2012, the Target did not have any significant investments, material acquisition or disposal for the period from 8 March 2012 (date of incorporation of the Target) to 31 March 2012.

Employee information

As at 31 March 2012, the Target did not have any employee and no remuneration expenses incurred for the period from 8 March 2012 (date of incorporation of the Target) to 31 March 2012.

Exposure to exchange rate

Since the date of incorporation, the Target has not commenced the business operation. It is expected that most of the transactions, monetary assets and liabilities were denominated in HK$ and Reminbi. The Target did not use any derivative financial instruments for hedging purposes.

Segment information

During the period from 8 March 2012 (date of incorporation of the Target) to 31 March 2012, no operation was conducted and accordingly no segment information has been disclosed.

Charge on group assets

As at 31 March 2012, no asset of Target was pledged.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX IV

Contingent liabilities

As at 31 March 2012, the Target had no significant contingent liabilities.

Future plans

As at the Latest Practicable Date, there are no proposed material investments of the Target.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GOLDENBASE GROUP

Set out below is the management discussion and analysis of the Goldenbase Group for the period from 2 August 2011 (date of incorporation of the Seychelles Company) to 31 March 2012. The following financial information are based on the financial information of the Goldenbase Group as set out in Appendix II to this circular.

Business and financial review

For the period from 2 August 2011 to 31 March 2012, the Goldenbase Group has not commenced business operation. The net loss before tax of the Goldenbase Group of HK$783,950 for such period was mainly incurred for the consultancy fee paid to an Independent Third Party which was used for the business relationship management for any investment opportunities.

As stated in the accountant report of the Goldenbase Group as set out in Appendix II to this circular, the loss for the period would have been HK$1,263,035 if the acquisition of the Hong Kong Company on 2 August 2011. Such additional losses mainly represent the consultancy fee paid to an Independent Third Party, which was paid for establishing business relationship for the Hong Kong Company and the Seychelles Company before 20 March 2012 (being the acquisition date of the Hong Kong Company by the Seychelles Company). No such consultancy fee has been and will be incurred after 20 March 2012.

Upon the acquisition of the Hong Kong Company by the Seychelles Company on 20 March 2012, no such consultancy fee has been incurred thereafter.

Liquidity, financial resources and capital structure

As at 31 March 2012, the audited net liability of Goldenbase Group was approximately HK$3,950. The Goldenbase Group had a current liability of HK$48,933 as at 31 March 2012. As at 31 March 2012, the gearing ratio (total borrowings to total assets) of the Goldenbase Group was 1.09 during the period under review.

Capital structure

As at 31 March 2012, the issued share capital of the Goldenbase Group was US$100,000 (equivalent to approximately HK$780,000), comprised 100,000 issued and fully paid ordinary share of US$1.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY AND THE GOLDENBASE GROUP

APPENDIX IV

Significant investment, material acquisition and disposals

On 20 March 2012, Goldenbase acquired the entire issued share capital of Royal Dragon for a cash consideration of HK$3. The vendors which sold Royal Dragon to Goldenbase on 20 March 2012 are Yip Yung Yin, Yau Yeung and Yau Yik Lam. The Directors confirm that to the best of their knowledge, information and belief having made all reasonable enquiries, each of such vendors is an Independent Third Party and he/she is also a third party independent of each of the Vendor, the Remaining Shareholders, the management of the Hong Kong Company, the 1st Supplier and the 2nd Supplier and the Customer.

Save as disclosed above, the Goldenbase Group did not have any significant investments, material acquisition or disposal for the period from 2 August 2011 (date of incorporation of the Seychelles Company) to 31 March 2012.

Employee information

As the Hong Kong Management Team was established after 31 March 2012, no remuneration expenses had been incurred by the Goldenbase Group for the period from 2 August 2011 (date of incorporation of the Seychelles Company) to 31 March 2012 and the Goldenbase Group did not have any employee as at 31 March 2012.

Exposure to exchange rate

Since the date of incorporation, the Goldenbase Group has not commenced the business operation. It is expected that most of the transactions, monetary assets and liabilities were denominated in HK$ and Reminbi. The Goldenbase Group did not use any derivative financial instruments for hedging purposes.

Segment information

During the period from 2 August 2011 (date of incorporation of the Seychelles Company) to 31 March 2012, no operation was conducted and accordingly no segment information has been disclosed.

Charge on group assets

As at 31 March 2012, no asset of Goldenbase Group was pledged.

Contingent liabilities

As at 31 March 2012, the Goldenbase Group had no significant contingent liabilities.

Future plans

As at the Latest Practicable Date, there are no proposed material investments of the Goldenbase Group.

INDUSTRY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

APPENDIX V

INTRODUCTION

The Hong Kong Company is principally engaged in the coal trading business in the PRC. In order to provide more information to the Shareholders for their better understanding of the coal trading industry, the Company has engaged Beijing Business and Intelligence Consulting Co., Ltd (“BBIC”) to provide an independent research report on the coal trading industry in the PRC (“BBIC Report”) for the preparation of the this industry overview.

BBIC is a research company in the PRC with substantial experience in publishing market reports, business reference books and online information databases. BBIC had been engaged to provide an independent report in coal industry for the purpose of initial public offer of a Hong Kong listed company in 2009.

The industry data and other information contained in this industry overview are based on the BBIC Report and other sources such as World Coal Institute, United States Energy Information Administration, National Bureau of Statistics of China and The 2011 blue book of coal market. Due to possible different collection methods, discrepancies between published information or different statistic approaches, the statistics, industry data and other information relating to the coal trading industry from these sources might have difference amongst themselves. Careful consideration should be given as to how much importance should be placed on such statistics and industry data.

OVERVIEW OF GLOBAL COAL INDUSTRY

Global Coal Reserves

As at the end of 2009, the global coal reserves were approximately 9,256.4 million tonnes. In 2009, over 78.1% of coal reserves are located in the top five countries around the world. The following table shows the coal reserves in the top five countries at the end of 2011:

	Proven Reserves	Percentage
Country	(Million Tonnes)	(%)
United States of America	2,383	28.9%
Russia	1,570	19.0%
China	1,145	13.9%
Australia	762	9.2%
India	586	7.1%

Source: BP Statistical Review of World Energy 2010 and BBIC Report

Due to the enhancement of exploration technology, the global coal reserves detected increases in recent years.

APPENDIX V INDUSTRY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

Global Coal Production

The below diagram shows the historical global coal production volume and growth rate from 2005 to 2011.

==> picture [360 x 215] intentionally omitted <==

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

Change of global coal production volume from 2005 to 2011
90 0.08
7.3%
76.6
80 72.73 0.07
69.41
70 63.98 65.43
61.95 0.06
57.75
60 6.1% 0.05
5.3%
50 4.8%
0.04
40
0.03
30 3.3%
20 2.3% 0.02
10 0.01
0 0.00
2005 2006 2007 2008 2009 2010 2011
global coal production volume (0.1 billion tons) growth rate (%)
----- End of picture text -----*

Source: World Coal Institute and BBIC Report

The figures are based on the estimation from BBIC

According to the BP Statistical Review of World Energy 2011, the PRC’s coal production accounted for approximately 48.3% of the global coal production in 2010, with an increase of 2.7% from approximately 45.6% of the global coal production in 2009.

Global Coal Consumption

The below diagram shows the historical global coal consumption volume and growth rate from 2005 to 2011.

==> picture [367 x 222] intentionally omitted <==

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

Change of global coal consumption volume from 2005 to 2011
74 0.07
6.0% 71.57
72
70.25 0.06
70 69.41
67.94 0.05
68
64.08
66 0.04
64 0.03
61.87 3.6%
62
0.02
60 2.2% 1.9%
58 1.2% 0.01
56 0
2006 2007 2008 2009 2010 2011
global coal consumption volume (0.1 billion tons) growth rate (%)
----- End of picture text -----*

Source: World Coal Institute and BBIC Report

The figures are based on the estimation from BBIC

APPENDIX V INDUSTRY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

According to the BP Statistical Review of World Energy 2011, the PRC was the largest coal consumer of the world in 2010 and the PRC’s coal consumption accounted for approximately 48.2% of the global coal consumption in 2010, with a increase of 1.3% from approximately 46.9% in 2009.

Global coal trading volume

The below diagram shows the historical global coal trading volume and growth rate from 2007 to

==> picture [348 x 210] intentionally omitted <==

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

2007-2011Change of global coal trading volume from 2007 to 2011
10.2 0.08
9.38 9.93
10
0.07
9.7
9.8
0.06
9.6
6.7% 9.4
0.05
9.4
9.2 0.04
9 8.79 0.03
8.8
8.6 0.2% 2.4% 0.02
8.4 3.2% 0.01
8.2 0
2007 2008 2009 2010 2011
global coal trading volume (including ocean transporation growth rate (%)
and land transportation etc.)(0.1 billion tons)
----- End of picture text -----*

Source: United States Energy Information Administration and BBIC Report

As shown in the above diagram, the global coal trading volume increase from approximately 879 million tonnes in 2007 to approximately 993 million tonnes in 2011.

OVERVIEW OF PRC COAL INDUSTRY

PRC Coal Production

The below diagram shows the historical PRC coal production volume and growth rate from 2007 to

==> picture [348 x 211] intentionally omitted <==

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

Change of PRC coal production volume from 2007 to 2011
40 0.12
35.2
35 30.13 32.04
0.10
30 27.56 9.9%
26.15
9.3% 0.08
25
20 0.06
6.3%
15 5.4%
0.04
10
0.02
5
0 0
2007 2008 2009 2010 2011
coal production volume(0.1 billion tons) growth rate (%)
----- End of picture text -----

Source: National Bureau of Statistics of China and the BBIC Report

APPENDIX V INDUSTRY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

The above diagram shows that the five-year compound annual growth rate for coal production in the PRC is approximately 7.7%.

PRC Coal Consumption

The below diagram shows the historical PRC coal consumption volume and growth rate from 2007 to 2011.

==> picture [348 x 210] intentionally omitted <==

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

Change of PRC coal consumption volume from 2007 to 2011
40 14.38% 0.16
34.17
35 31.15 0.14
29.58
30 25.86 0.12
23.93
25 0.10
20 9.70% 0.08
8.08%
15 0.06
10 5.30% 0.04
5 0.02
0 0
2007 2008 2009 2010 2011
coal consumption volume(0.1 billion tons) growth rate (%)
----- End of picture text -----

Source: National Bureau of Statistics of China and the BBIC Report

The above diagram shows that the five-year compound annual growth rate for coal consumption in the PRC is approximately 7.2%.

OVERVIEW ON QINGHAI COAL INDUSTRY

The below diagram shows the historical Qinghai coal production volume and growth rate from 2007 to 2011.

==> picture [348 x 211] intentionally omitted <==

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

statistics of Qinghai coal production volume from 2007 to 2011
2500 45.20% 0.5
0.45
1960.97
1864.03
2000 0.4
32.02% 0.35
1500 1283.77 0.3
1183.03
0.25
896.13
1000 0.2
0.15
500 0.1
8.52%
5.20% 0.05
0 0
2007 2008 2009 2010 2011
Qinghai coal production volume(0.1 billion tons) growth rate (%)
----- End of picture text -----

Source: website of China Coal Resource(“中国煤炭資源网”),National Bureau of Statistics of China and the BBIC Report

100

APPENDIX V INDUSTRY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

The above diagram shows that the five-year compound annual growth rate for coal consumption in the Qinghai Province, the PRC is approximately 21.63%.

COAL CONSUMPTION FOR PRC POWER PLANT

The below diagram shows the historical PRC coal consumption for power plants from 2008 to 2011.

==> picture [367 x 221] intentionally omitted <==

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

PRC coal consumption volume for power plant industry
form 2008 to 2011(10 thousand tons)
180000 169617.5
160000 147129.41
134232.71
140000 123705.71
120000
100000
80000
60000
40000
20000
0
2008 2009 2010 2011
coal consumption volume for power plant industry (10 thousand tons)
----- End of picture text -----

Source: website of China Coal Resource(“中国煤炭資源网”)

The above diagram shows that the four-year compound annual growth rate for coal consumption in the power plant industry in the PRC is approximately 11.09%.

101

REGULATORY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

APPENDIX VI

The Hong Kong Company (through the PRC Company) is engaged in coal trading business in the
PRC. The below is the general regulatory overview for the coal trading operation in the PRC.

1. QUALIFICATIONS REQUIRED FOR ENGAGING COAL OPERATIONS IN THE PRC

Applicable laws and regulations

Enterprises engaging in domestic coal operations in the PRC (hereinafter referred to as “Coal Operation Enterprises”) are subject to relevant laws and regulations, national, local and industrial policies and extensive governmental supervision as applicable in both the PRC and our place of incorporation.

1. Major regulatory authorities

Coal Operation Enterprises engaging in domestic coal operations are subject to supervision and regulations by the following governmental authorities:

1.1 State Council

The State Council is responsible for checking and approving material investment projects in the coal category recognised by the Catalogue of Government Approved Investment Projects (《政府核准的投資項目錄》) attached in Decision of the State Council on Reforming the Investment System (《國務院關於投資體制改革的決定》) promulgated in 2004. The State Council also oversees the healthy and stable development of the coal industry and provides relevant guiding opinions and suggestions.

1.2 The National Development and Reform Commission of the PRC (hereinafter referred to as the “NDRC”)

The NDRC formulates industry policies and investment directions for the coal industry, as well as reviews, approves and examines material coal projects according to the authorities delegated by the State Council. The NDRC is also responsible for the supervision and administration of approved coal operations engaged by the Coal Operation Enterprises. The NDRC also designates departments for the examination of coal operation qualifications by the provincial, autonomous region, municipal government which are responsible for the supervision and administration of coal operations within their respective jurisdiction.

1.3 Ministry of Land and Resources

The Ministry of Land and Resources approves, registers and grants land use rights and mining rights and approves the transfer of such rights. It also administers geological exploration and resources reserves. In addition, it is also responsible for the standardization and supervision of the land and mineral right markets.

102

REGULATORY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

APPENDIX VI

1.4 Ministry of Environmental Protection of the PRC (hereinafter referred to as the “MEP”)

The MEP is responsible for formulating national environment protection directions, policies and regulations. It is in charge of carrying out environmental impact assessments of material economic and technical policies, development plans and material economic development projects. In addition, it is also in charge of examining and assessing the impact on the environment by pollution from the operation of heavy polluting industries.

1.5 China National Coal Industry Association

The China National Coal Industry Association is mainly responsible for formulating relevant industry standards and policies for the coal industry and liaising with the government and providing guidance to the coal industry.

2. Major laws and regulations

Coal Operation Enterprises engaging in domestic coal operations in the PRC are principally subject to the following laws and regulations:

2.1 The Coal Law of the PRC (hereinafter referred to as the “Coal Law”)

On 29 August 1996, the Standing Committee of the National People’s Congress promulgated the Coal Law (with the first amendment being made during the 10th meeting of the 11th Session of the Standing Committee of the National People’s Congress on 27 August 2009, and the second amendment being made during the 20th meeting of the 11th Session of the Standing Committee of the National People’s Congress on 22 April 2011). The Coal Law (as amended) took effect on 1 July 2011.

It aims at promoting a rational utilisation and protection of coal resources, standardising coal production and operating activities, and facilitating and protecting the development of the coal industry.

Pursuant to the Coal Law, enterprises engaging in coal operations shall apply to departments designated by the State Council or provincial, autonomous or municipal people’s government for coal operation qualifications. Such enterprises may engage in coal operations only upon approval and obtaining the business license (the scope of which shall include coal operations). The specific administration measures are formulated by the State Council according to the Coal Law.

103

REGULATORY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

APPENDIX VI

2.2 The Measures for the Regulation of Coal Operations

The NDRC promulgated the Measures for the Regulation of Coal Operations on 27 December 2004, which took effect on 26 January 2005. The measures aim to strengthen the supervision and administration of coal operations by standardising and maintaining coal operation procedures.

Pursuant to the Measures for the Regulation of Coal Operations, China implemented an examination and qualification system for coal operations (with respect to activities such as wholesaling and retailing of raw coal and its processed products and processing and distribution of coal for civilian use); the establishment of a coal operation enterprise is subject to the relevant qualification examination. It also provides for specific regulations on the trading and transportation of coal.

2.3 Environmental Protection Law of the People’s Republic of China (hereinafter referred to as the “Environmental Protection Law”)

The Environmental Protection Law was promulgated by the Standing Committee of the National People’s Congress on 26 December 1989 and became effective on the same day. The Environmental Protection Law is formulated for the purpose of protecting and improving living environment and ecological environment, preventing pollution and other public hazards, safeguarding human health and facilitating the development of modern construction under socialism.

Pursuant to the Environment Protection Law, competent environmental protection authorities formulate the standards for environment quality and emission of pollutants, and supervise and administer enterprises or projects which cause pollution. At the same time, the Environmental Protection Law requires all enterprises and projects that produce pollutants or other hazards to adopt effective measures to control and properly dispose of waste materials.

2.4 Law of the People’s Republic of China on State-Owned Assets of Enterprises (hereinafter referred to as the “State-Owned Assets Law”)

On 28 October 2008, the State-Owned Assets Law was passed at the 5th meeting of the Standing Committee of the 11th National People’s Congress and came into effect on 1 May 2009. The State-Owned Assets Law aims at protecting the interest of state-owned assets and promoting the dominant role of state-owned economy in national economy.

Pursuant to the State-Owned Assets Law, state-owned assets supervision and administration bodies established by the state-owned assets supervision and administration bodies of the State Council and local people’s government in accordance with the requirements of the State Council, or other departments and institutions under the authority of the local people’s government to perform the duties of a contributor (hereinafter referred to as the “Contributors”), may act on behalf of the local people’s government within the

104

REGULATORY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

APPENDIX VI

authorized scope upon state-funded enterprises, including the legally attributable revenue from the assets of such state-funded enterprises and the Contributors’ rights to participate in material decision and election of management, as well as the formulation and participation in the formulation of articles of association under the requirements of laws and administrative regulations. The operation activities of state-funded enterprises shall comply with laws and administrative regulations and be subject to the administration and supervision legally imposed by the government and relevant departments or institutions of the government. State-funded enterprises are also monitored by the public and bear responsibilities to the society and Contributors.

(II) Obtaining, annual review and renewal of coal operation qualifications

1. Obtaining of coal operation qualifications

Pursuant to the Coal Law and Measures for the Regulation of Coal Operations, an enterprise shall apply to departments designated for the examination of coal operation qualifications (the NDRC or provincial departments designated for the examination of coal operation qualifications) for a Coal Operation Certificate, which is valid for three years, before engaging in the processing and sale of coal that is not self-produced or processed.

In order to obtain a Coal Operation Certificate, an enterprise must have:

i. an appropriate registered capital for the scale of its operation;
ii. a fixed place of operation;
iii. appropriate facilities and coal storage commensurate with the scale of its operation;
iv. facilities for the inspection of the quantity, weight and quality of coal that meet the relevant standards;
v. reasonable compliance with national requirements in relation to the overall business planning and environmental protection for coal operations; and
vi. other conditions as stipulated under relevant laws and administrative regulations.

Pursuant to Notice of Strict Compliance with the Measures for the Regulation of Coal Operations on the Examination of Coal Operation Qualifications (《關於認真貫徹<煤炭經營監管辦法>嚴格規範煤炭經營資格審查有關問題的通知》) promulgated by the NDRC on 7 June 2005, the minimum registered capital and area of coal storage facilities for Coal Operation Enterprises engaging in wholesale and retail of coal and processing and distribution of coal for civilian use shall (i) for coal wholesale operations, not be less than RMB5 million and 3,000 sqm respectively; (ii) for coal retail operations, not be less than RMB2 million and 1,500 sqm respectively; (iii) for coal processing and distribution operations for civilian use, not be less than RMB100,000 and 500 sqm respectively.

105

REGULATORY OVERVIEW OF COAL TRADING BUSINESS IN THE PRC

APPENDIX VI

In addition, applicants shall register with the coal operation certificate lawfully obtained to the relevant industry and commerce departments in its place of incorporation and obtain a business license (the scope of which shall include coal operations) before it may engage in coal operations.

2. Annual review of coal operation qualifications

Pursuant to Notice of Commencement of Annual Review and Renewal of Certificates for Coal Operation Qualifications by the National Development and Reform Commission of the PRC ( 《國家發展改革委關於開展煤炭經營資格證年檢及換發啟用新證工作的通知》) promulgated on 4 December 2003 and other laws and regulations, from December 2003 onwards, all Coal Operation Enterprises in the PRC shall participate in the annual review on coal operation qualifications. The substance of the annual review includes:

i. whether there is any change in the conditions required for the obtaining of coal operation qualifications, validity of operation qualifications and whether there is any act of forging, trading, leasing, lending or otherwise transferring coal operation qualifications on the part of enterprises which hold a certificate.
ii. whether the operations are in compliance with the relevant laws and regulations and whether there is any act of adulteration, deficiency, monopoly, price jacking, dumping, overcharging or tax dodge.

Upon examination and satisfaction by departments designated for the examination of coal operation qualifications (the NDRC or provincial departments designated for the examination of coal operation qualifications), Coal Operation Enterprises may continue with their operation activities in the following year.

3. Renewal of coal operation qualifications

Pursuant to the Measures for the Regulation of Coal Operations, Coal Operation Enterprises shall apply to departments designated for the examination of coal operation qualifications (the NDRC or provincial departments designated for the examination of coal operation qualifications) 30 days before the expiry date for renewal.

Conditions required for Coal Operation Enterprises applying for a renewal shall conform with those imposed on enterprises applying for coal operation qualifications, subject to the law file promulgated by the relevant departments designated for the examination of coal operation qualifications (the NDRC or provincial departments designated for the examination of coal operation qualifications).

The Measures for the Regulation of Coal Operations does not restrict or forbid the grant of Coal Operation Certificate to foreign invested enterprises.

106

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

The following is the text of a valuation report on the value of 100% equity interest of the Hong Kong Company, prepared by Roma Appraisals Limited for the purpose of incorporation in the Circular.

(A) VALUATION REPORT

==> picture [145 x 58] intentionally omitted <==

Unit 3806, 38/F, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong Tel (852) 2529 6878 Fax (852) 2529 6806 E‐mail info@roma‐international.com http://www.roma‐international.com

18 July 2012

Wealth Glory Holdings Limited Unit 4,10/F., Lucky Commercial Centre, 103 Des Voeux Road West, Hong Kong

Case Ref: KY/BV897/APR12

Dear Sir/Madam,

Re: Business Valuation of the 100% Equity Interest in Royal Dragon Corporation Limited

In accordance with the instructions from Wealth Glory Holdings Limited (hereinafter referred to as the “Company”) for us to conduct a business valuation on the 100% equity interest in Royal Dragon Corporation Limited (hereinafter referred to as the “Business Enterprise”) as at 31 March 2012 (hereinafter referred to as the “Date of Valuation”).

This report states the purpose and basis of valuation, scope of work, economic and industry overviews, an overview of the Business Enterprise, major assumptions, valuation methodology, limiting conditions, and presents our opinion of value.

1. PURPOSE OF VALUATION

This report is prepared solely for the use of the directors and management of the Company. The Company is a public company listed on the Growth Enterprise Market (“GEM”) of the Stock Exchange of Hong Kong Limited. In addition, Roma Appraisals Limited (hereinafter referred to as “Roma Appraisals”) acknowledges that this report may be made available to the Company for public documentation purpose and include in the Company’s circular only.

Roma Appraisals assumes no responsibility whatsoever to any person other than the Company in respect of, or arising out of, the contents of this report. If others choose to rely in any way on the contents of this report they do so entirely at their own risk.

107

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

2. SCOPE OF WORK

Our valuation conclusion is based on the assumptions stated herein and the information provided by the management of the Company, the management of the Business Enterprise and/or its representative(s) (together referred to as the “Management”).

In preparing this report, we have had discussions with the Management and the Company in relation to the development and prospect of the coal trading industry in China, and the development, operations and other relevant information of the Business Enterprise. As part of our analysis, we have reviewed such financial information and other pertinent data concerning the Business Enterprise provided to us by the Management and the Company and have considered such information and data as attainable and reasonable.

We have no reason to believe that any material facts have been withheld from us, however, we do not warrant that our investigations have revealed all of the matters which an audit or more extensive examination might disclose.

3. ECONOMIC OVERVIEW

3.1 Overview of the Economy in China

According to the National Bureau of Statistics of China, the nominal Gross Domestic Product (“GDP”) in 2011 was RMB47,156 billion, an increase of 17% over the previous year. In the first quarter of 2012, China’s GDP was RMB10,800 billion, which was 8.1% higher than that of the same period last year. China replaced the European Union and became the second largest economy in the world as in 2011, ranked only after the United States, in terms of nominal GDP measured by the International Monetary Fund (“IMF”). Amidst the global financial crisis in late 2008 and the Eurozone debt crisis triggered in 2011, the Chinese economy continued to be supported by the Chinese government through spending in infrastructure and real estates.

Throughout 2009, the global economic downturn reduced foreign demand for Chinese exports for the first time in many years. The government vowed to continue reforming the economy and emphasized the need to increase domestic consumption in order to make China less dependent on foreign exports. China economy rebounded quickly in 2010, outperforming all other major economies with robust GDP growth and the economy remained in strong growth in 2011.

Over the past decade from 2007 to 2011, the average annual growth rate of China’s GDP was flamboyant at 15.48%. Figure 1 further illustrates the nominal GDP from 2007 to 2011 in China.

108

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Figure 1 – China’s Nominal Gross Domestic Product from 2007 to 2011

==> picture [364 x 181] intentionally omitted <==

Source: National Bureau of Statistics of China

3.2 Inflation in China

Tackling inflation problem has long been the top priority of the Chinese government as high prices are considered as one of the causes of social unrest. For such a fast-growing economy, the middle-class’ demand for food and commodities has been rising continuously. Inflation in China has been driven mainly by food prices, which have been stayed high in 2011. The consumer price index demonstrated an uptrend in the first half of 2011. Thanks to the government’s policies in suppressing commodity prices, the inflation slowed in the second half of 2011. Figure 2 shows the year-over-year change in consumer price index of China from January 2011 to March 2012.

Figure 2 – Year-over-year Change in China’s Consumer Price Index from January 2011 to March 2012

==> picture [382 x 183] intentionally omitted <==

==> picture [311 x 6] intentionally omitted <==

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

2011 2012
----- End of picture text -----

Source: Bloomberg

109

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

China’s inflation rate was volatile during the past decade. According to the IMF, the inflation rate in China increased sharply from 2.8% in 2006 to 6.5% in 2007, and then dropped drastically to 1.2% and 1.9% in 2008 and 2009 respectively. The inflation rate rebounded in 2010 to 4.6%. The inflation rate maintained at a similar level in 2011 and reached 4.1%. According to the forecast by the IMF, the long-term inflation rate of China is expected to be around 3.7%. Figure 3 shows the historical trend of China’s inflation rate from 2002 to 2011.

Figure 3 – China’s Inflation Rates from 2002 to 2011

==> picture [380 x 186] intentionally omitted <==

Source: International Monetary Fund

4. INDUSTRY OVERVIEW

4.1 Overview of the Coal Trading Industry in China

China was the largest coal producing country in the world in 2010. According to the United States Energy Information Administration (“EIA”), the production of coal in China was 3,523 million short tons in 2010, a 9% increase over 2009. Production growth was steady over the fiveyear period between 2006 and 2010, with a five-year compound annual growth rate of 8%. Figure 4 shows the coal production of China from 2006 to 2010.

110

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Figure 4 – China’s Coal Production from 2006 to 2010

==> picture [363 x 191] intentionally omitted <==

Source: United States Energy Information Administration

China was also the largest coal consumer of the world in 2010. According to the EIA, China’s coal consumption in 2010 was 3,695 million short tons, representing a 16% increase over 2009. Consumption grew steadily over the five-year period between 2006 and 2010, with a fiveyear compound annual growth rate of 10%. Figure 5 shows the coal consumption of China from 2006 to 2010.

Figure 5 – China’s Coal Consumption from 2006 to 2010

==> picture [360 x 190] intentionally omitted <==

Source: United States Energy Information Administration

According to the estimation of the EIA, coal consumption in China is estimated to increase from 73.8 quadrillion British thermal unit (“Btu”) in 2010 to 113.6 quadrillion Btu in 2035. Figure 6 illustrates the estimated coal consumption in China from 2010 to 2035.

111

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Figure 6 – Estimated Coal Consumption in China from 2010 to 2035 (in quadrillion Btu)

				Year
Country	2010	2015	2020		2025	2030	2035
China	73.8	80.7	85.5		96.4	106.5	113.6

Source: United States Energy Information Administration

As an essential energy industrial sector, China’s coal trading industry has long been placed under state planning. Companies who are interested in such activities are required to follow Chinese government’s direction rather than the market mechanism. In late 2000s, China’s coal trading moved closer to the market mechanism which has been playing a more crucial role in the pricing and allocation of coal products in recent years.

While the business of importing coal was limited to just a handful of players in the past, several new Chinese trading companies have mushroomed in recent years, hoping to profit from the price difference between more expensive domestic supplies and cheaper overseas supplies.

5. THE BUSINESS ENTERPRISE

The Business Enterprise is principally engaged in coal trading business in China. On 1 April 2012, the Business Enterprise has entered into a legally binding master framework joint cooperation agreement (hereinafter referred to as the “Joint Cooperation Agreement”) with 湛江市忠信能源有限公司 (hereinafter referred to as the “PRC Company”). The Business Enterprise and the PRC Company agreed to participate in a joint cooperation arrangement to carry out trading business in the People’s Republic of China (“PRC”) for a term of 3 years.

Through the joint venture with the PRC Company, the Business Enterprise obtains coal through contracts with local mining companies and sells the coal to buyers. As at the Date of Valuation, the Business Enterprise had two supplier contracts together with one buyer contract.

The terms of the two supplier contracts ranged from 2 years to 5 years, and will be automatically renewed upon the termination of the contracts, unless there is written acknowledgement on the termination of the contracts. The two contracts also specified guaranteed pre-tax profits for each tonne of coal sold by the Business Enterprise.

Regarding the buyer contract, the Business Enterprise agreed to supply a total of 1,250,000 tonnes of coal from 15 May 2012 to 30 November 2012 to a state-owned company.

6. BASIS OF VALUATION

Our valuation was conducted on a market value basis. Market value is defined as “the estimated amount for which an asset could be exchanged, or a liability settled, between willing parties in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

112

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

7. INVESTIGATION AND ANALYSIS

Our investigation included discussions with members of the Management of the Company in relation to the development and prospect of the coal trading industry in China, and the development, operations and other relevant information of the Business Enterprises. In addition, we have made relevant inquiries and obtained further information and statistical figures regarding the coal trading industry from external public sources as we considered necessary for the purpose of the valuation.

As part of our analysis, we have reviewed such financial information and other pertinent data concerning the Business Enterprise provided to us by the Management and have considered such information and data as attainable and reasonable. We have also consulted other sources of financial and business information.

The valuation of the Business Enterprise requires consideration of all pertinent factors, which may or may not affect the operation of the business. The factors considered in our valuation include, but are not necessarily limited to, the following:

The nature and prospect of the Business Enterprise;
The financial condition of the Business Enterprise;
The economic outlook in general and the specific economic environment and market elements affecting the business, industry and market;
Relevant licenses and agreements;
The business risks of the Business Enterprise such as the ability in maintaining competent technical and professional personnel; and
Investment returns and market transactions of entities engaged in similar lines of business.

8. VALUATION METHODOLOGY

There are generally three accepted approaches to obtain the market value of the Business Enterprise, namely the Market-Based Approach, Income-Based Approach and Asset-Based Approach. Each of these approaches is appropriate in one or more circumstances, and sometimes, two or more approaches may be used together. Whether to adopt a particular approach will be determined by the most commonly adopted practice in valuing business entities that are similar in nature.

8.1 Market-Based Approach

The Market-Based Approach values a business entity by comparing prices at which other business entities in a similar nature changed hands in arm’s length transactions. The underlying theory of this approach is that one would not pay more than one would have to for an equally desirable alternative. By adopting this approach, the valuer will first look for valuation indication of prices of other similar business entities in companies that have been sold recently.

113

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

The right transactions employed in analyzing indications of values need to be sold at an arm’s length basis, assuming that the buyers and sellers are well informed and have no special motivations or compulsions to buy or to sell.

8.2 Income-Based Approach

The Income-Based Approach focuses on the economic benefits due to the income producing capability of the business entity. The underlying theory of this approach is that the value of the business entity can be measured by the present worth of the economic benefits to be received over the useful life of the business entity. Based on this valuation principle, the Income-Based Approach estimates the future economic benefits and discounts them to their present values using a discount rate appropriate for the risks associated with realizing those benefits.

Alternatively, this present value can be calculated by capitalizing the economic benefits to be received in the next period at an appropriate capitalization rate. This is subject to the assumption that the business entity will continue to maintain stable economic benefits and growth rate.

8.3 Asset-Based Approach

The Asset-Based Approach is based on the general concept that the earning power of a business entity is derived primarily from its existing assets. The assumption of this approach is that when each of the elements of working capital, tangible and intangible assets is individually valued, their sum represents the value of a business entity and equals to the value of its invested capital (“equity and long term debt”). In other words, the value of the business entity is represented by the money that has been made available to purchase the business assets needed.

This money comes from investors who buy stocks of the business entity (“equity”) and investors who lend money to the business entity (“debt”). After collecting the total amounts of money from equity and debt, and converted into various types of assets of the business entity for its operation, their sum equals the value of the business entity.

8.4 Business Valuation

In the process of valuing the Business Enterprise, we have taken into account of the uniqueness of its operation and the nature of the coal trading industry it is participating. Also, we have considered the accessibility to available data and relevant market transactions in choosing among the valuation approaches.

The Market-Based Approach was not adopted in this case because most of the important assumptions of the comparable transactions, such as discount or premium on the transaction prices or considerations, were hidden. The Asset-Based Approach was also not adopted because it could not capture the future earning potential of the Business Enterprise. We have therefore considered the adoption of the Income-Based Approach in arriving at the market value of the Business Enterprise.

114

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

8.4.1 Discounted Cash Flow

Under the Income-Based Approach, we have adopted the discounted cash flow (“DCF”) method, which is based on a simple reversal calculation to restate all future cash flows in present terms. The expected free cash flow for each year was determined as follows:

Expected Free Cash Flow = Net Profit + Depreciation + After-Tax Interest Expenses – Change in Working Capital – Capital Expenditure

The present value of the expected free cash flows was calculated as follows:

PVCF = CF1/(1+r)[1] + CF2/(1+r)[2] + … + CFn/(1+r)[n]

In which PVCF = Present value of the expected free cash flows; CF = Expected free cash flow; r = Discount rate; and n = Number of years.

To adopt this method, we obtained the weighted average cost of capital (“WACC”) for the company as a basic discount rate. The WACC of the Business Enterprise is the minimum required return that the Business Enterprise must earn to satisfy its various capital providers including shareholders and debt holders. WACC calculation takes into account the relative weights of debt and equity. It is computed using the formula below:

WACC = We x Re + Wd x Rd x (1 – Tc)

In which Re = Cost of equity; Rd = Cost of debt; We = Weight of equity value to enterprise value; Wd = Weight of debt value to enterprise value; and Tc = Corporate tax rate.

8.4.2 Cost of Debt

The cost of debt was determined by the expected borrowing rate of the Business Enterprise. Since the interest expenses paid on debts are tax-deductible for the Business Enterprise, the cost of the Business Enterprise to get debt funds is less than the required rate of return of the suppliers of the debt capital. The after-tax cost of debt was calculated by multiplying one minus the corporate tax rate by the cost of debt.

115

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

8.4.3 Cost of Equity

The cost of equity was determined using the Capital Asset Pricing Model (“CAPM”), which describes the relationship between the risk of the Business Enterprise and expected return to investors. It is calculated by the following formula:

Re = Rf + ß x Market Risk Premium + Other Risk Premium

In which Re = Cost of equity; Rf = Risk-free rate; and ß = Beta coefficient.

8.4.4 Discount Rate

The risk-free rate and the betas of the comparable companies were obtained from Bloomberg as at the Date of Valuation.

The risk-free rate of 2.21% adopted was the yield rate of the U.S. 10-year government bond. The equity risk premium of the U.S. adopted was 6.62%. The market risk premium represents the additional return required by an investor as the compensation for investing in equities rather than risk-free assets. The U.S. equity risk premium has been adopted in the view that the U.S. stock market is a broad market that well reflects the behaviour of the market participants as a whole. Therefore, the U.S. risk-free rate has also been adopted coherently in calculating the cost of equity. Since the Business Enterprise is engaged in the coal trading business in the PRC, the cost of equity obtained from the U.S. equity risk premium and risk-free rate have been adjusted by adding the country risk premium of the PRC relative to the U.S. to reflect the difference in country risk between the U.S. and the PRC.

The beta coefficient measures the risk of the Business Enterprise relative to the market. Two listed companies with similar business natures and operations as the Business Enterprise in the coal trading industry have been considered as comparable companies, namely China Qinfa Group Limited (Stock code: 866.HK) and Ming Kei Holdings Limited (Stock code: 8239.HK). The above listed companies were selected mainly with reference to the following selection criteria:

The companies are principally engaged in coal trading business;
The companies have significant portions of their businesses in China; and
The financial information of the companies is available to the public.

Constrained by the scarcity of listed companies principally engaged in coal trading business in China, the two comparable companies adopted were selected on a best effort basis and were deemed as fair and representative with regard to the selection criteria aforementioned.

116

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

We estimated the beta coefficient of 0.75 by re-leveraging the average of the unleveraged beta coefficients of the comparable companies as at the Date of Valuation.

Stocks of smaller companies are usually less liquid and have lower valuations for the same cash flows because they have a higher cost of capital and higher returns on average due to higher size premiums. Therefore, a size premium of 3.89% was adopted based on an internationally recognized size premium study conducted by Ibbotson Associates, Inc., a leading authority on asset allocation with expertise in capital market expectations and portfolio implementation. It is a common market practice to adopt the results of researches and studies concerning the size premium in business valuations in general industries including the coal trading industry, since those researches and studies involved an extensive collection and analysis of historical data.

Besides, as the U.S. equity risk premium has been adopted in calculating the cost of equity and the Business Enterprise is engaged in coal trading business in the PRC, a country risk premium of 1.05% was adopted by calculating the difference between the country risk premium of the PRC of 1.05% and the country risk premium of the U.S. of 0%. The country risk premium figures were with reference to an internationally recognized study conducted by Aswath Damodaran, a finance professor at the Stern School of Business at New York University. It is a common market practice to adopt the results of researches and studies concerning the country risk premium in business valuations in general industries including the coal trading industry, since those researches and studies involved an extensive collection and analysis of historical data.

Since the Business Enterprise is a start-up company and it is uncertain that the Business Enterprise will have sufficient buyer and seller contracts to generate the amount of cash flows as projected. Hence, other risk premium of 4.00% was added to the cost of equity to reflect the uncertainty of the cash flows in the financial projections, arriving at the cost of equity of 16.13%.

The cost of debt of 7.05% adopted was the China above 5-year best lending rate as extracted from Bloomberg as at the Date of Valuation. As advised by the Management, the Business Enterprise intended to operate its coal trading business in the PRC through setting up a whollyowned foreign enterprise (“WOFE”) in the PRC. In short term, the Business Enterprise will rely on the Joint Cooperation Agreement, with a term of 3 years, to operate its coal trading business since the setup of the WOFE takes time for the preparation process. Therefore, it was expected that the Business Enterprise would operate for a period longer than the term of the Joint Cooperation Agreement and hence the China above 5-year best lending rate was adopted. The PRC’s above 5-year best lending rate represents the borrowing rate set by the People’s Bank of China on corporate loans maturing in 5 years or above. As it serves as a market benchmark for the borrowing rate in China, it is fair and reasonable to adopt the China above 5-year best lending rate as the cost of debt of the Business Enterprise.

The debt-to-equity ratio of 103.40% was estimated by taking the average of the debt-toequity ratios of the comparable companies. With the corporate tax rate of China of 25.00%, the after-tax cost of debt was 5.29%.

117

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Accounting for the above items, we concluded the WACC of 10.62% and it was adopted as the discount rate for the Business Enterprise as at the Date of Valuation. We noted that the WACC of the Business Enterprise adopted was higher than those of the aforesaid comparable companies. In view of the comparable companies were publicly listed, they would normally have lower cost of capital than private companies. We considered that the WACC of the Business Enterprise adopted was fair and reasonable.

8.4.5 Marketability Discount

Compared to similar interest in public companies, ownership interest is not readily marketable for closely held companies. Therefore, the value of a share of stock in a privately held company is usually less than an otherwise comparable share in a publicly held company. We adopted a marketability discount of 32.5% with reference to an internationally recognized research article “Why Is the Value of Minority Stock Discounted So Heavily” by LarsonAllen, an international professional service firm with more than fifty years of experience in accounting, consulting and advisory, in arriving at the market value of the Business Enterprise as at the Date of Valuation. It is a common market practice to adopt the results of researches and studies concerning the marketability discount in business valuations in general industries including the coal trading industry, since those researches and studies involved an extensive collection and analysis of historical data.

8.4.6 Sensitivity Analysis

To determine how the different values of an independent variable would impact a particular dependent variable under a given set of assumptions, we carried out a sensitivity analyses on the market value of the Business Enterprise in respect of the discount rate used in the valuation model. The results of the sensitivity analyses were as follows:

Absolute Change in		Market Value of the
Discount Rate	Applied Discount Rate	Business Enterprise
	(%)	(HK$)
+2%	12.62	261,000,000
+1%	11.62	280,000,000
0%	10.62	301,000,000
–1%	9.62	324,000,000
–2%	8.62	348,000,000

9. MAJOR ASSUMPTIONS

We have adopted certain specific assumptions in our valuation and the major ones are as follows:

The domestic demand for coal in China will be maintained at a steady level within the projection period. With reference to the historical trend of the coal consumption in China, the five-year compound annual growth rate between 2006 and 2010 was 10%. Besides, coal consumption in China is expected to increase steadily over the next ten to twenty years, according to the forecast made by the EIA. Therefore, it is convincible that a steady domestic demand for coal in China will be achievable;

118

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

There will be sufficient quantity of coal supply for the Business Enterprise and its subsidiaries within the projection period;
All relevant legal approvals and business certificates or licenses to operate the business in the localities in which the Business Enterprise operates or intends to operate would be officially obtained and renewable upon expiry;
The projections outlined in the financial information provided are reasonable, reflecting market conditions and economic fundamentals, and will be materialized;
The Business Enterprise will be operated as planned;
There will be sufficient supply of technical staff in the industry in which the Business Enterprise operates, and the Business Enterprise will retain competent management, key personnel and technical staff to support its ongoing operations and developments;
There will be no major change in the current taxation laws in the localities in which the Business Enterprise operates or intends to operate and that the rates of tax payable shall remain unchanged and that all applicable laws and regulations will be complied with;
There will be no major change in the political, legal, economic or financial conditions in the localities in which the Business Enterprise operates or intends to operate, which would adversely affect the revenues attributable to and profitability of the Business Enterprise; and
Interest rates and exchange rates in the localities for the operation of the Business Enterprise will not differ materially from those presently prevailing.

10. INFORMATION REVIEWED

Our opinion requires consideration of relevant factors affecting the market value of the Business Enterprise. The factors considered included, but were not necessarily limited to, the following:

Financial statements of the Business Enterprise;
Historical information of the Business Enterprise;
Market trends of the coal trading industry in China;
General descriptions in relation to the Business Enterprise; and
Economic outlook in China.

We have discussed the details with the Management. We have also conducted research from various sources to verify the reasonableness and fairness of information provided and we believe that such information is reasonable and reliable. We have assumed the accuracy of information provided and relied to a considerable extent on such information in arriving at our opinion.

119

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

11. LIMITING CONDITIONS

The valuation reflects facts and conditions existing at the Date of Valuation. Subsequent events or circumstances have not been considered and we are not required to update our report for such events and conditions.

We would particularly point out that our valuation was based on the information such as the company background, business nature and market share of the Business Enterprise provided to us.

To the best of our knowledge, all data set forth in this report are reasonable and accurately determined. The data, opinions, or estimates identified as being furnished by others that have been used in formulating this analysis are gathered from reliable sources; yet, no guarantee is made nor liability assumed for their accuracy.

We have relied to a considerable extent on the historical and/or prospective information provided by the Management and other third parties in arriving at our opinion of value. The information has not been audited or compiled by us. We are not in the position to verify the accuracy of all information provided to us. However, we have had no reason to doubt the truth and accuracy of the information provided to us and to doubt that any material facts have been omitted from the information provided. No responsibilities for the operation and financial information that have not been provided to us are accepted.

We assumed that the Management is competent and perform duties under the company regulation. Also, ownership of the Business Enterprise was in responsible hands, unless otherwise stated in this report. The quality of the Management may have direct impact on the viability of the business as well as the market value of the Business Enterprise.

We have not investigated the title to or any legal liabilities of the Business Enterprise and have assumed no responsibility for the title to the Business Enterprise appraised.

Our conclusion of the market value was derived from generally accepted valuation procedures and practices that rely substantially on the use of various assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. The conclusion and various estimates may not be separated into parts, and/or used out of the context presented herein, and/or used together with any other valuation or study.

We assume no responsibility whatsoever to any person other than the directors and management of the Company in respect of, or arising out of, the content of this report. If others choose to rely in any way on the contents of this report, they do so entirely at their own risk.

No change to any item in any part of this report shall be made by anyone except Roma Appraisals. We have no responsibility for any such unauthorized change. Neither all nor any part of this report shall be disseminated to the public without the written consent and approval of Roma Appraisals through any means of communication or referenced in any publications, including but not limited to advertising, public relations, news or sales media.

This report may not be reproduced, in whole or in part, and utilized by any third parties for any purpose, without the written consent and approval of Roma Appraisals.

120

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

The working papers and models for this valuation are being kept in our files and would be available for further references. We would be available to support our valuation if required. The title of this report shall not pass to the Company until all professional fee has been paid in full.

12. REFERENCES

The list of sources of information cited in this report is stated as follows:

Bloomberg;
International Monetary Fund;
National Bureau of Statistics of China; and
United States Energy Information Administration.

13. REMARKS

Unless otherwise stated, all monetary amounts stated in this valuation report are in Hong Kong Dollars (HK$).

We hereby confirm that we have neither present nor prospective interests in the Company, the Business Enterprise, and their subsidiaries and associated companies, or the values reported herein.

14. OPINION OF VALUE

Based on the investigation and analysis stated above and on the valuation method employed, the market value of 100% equity interest in the Business Enterprise as at the Date of Valuation, in our opinion, was HK$301,000,000 (HONG KONG DOLLARS THREE HUNDRED AND ONE MILLION ONLY) .

Yours faithfully, For and on behalf of

Roma Appraisals Limited

Kelvin Luk	Ken Yue
CVA	CPA
Director	Director

Note:

Mr. Luk is a member of the International Association of Consultants, Valuators and Analysts (IACVA). He has over six years of experience in valuation and consultation related to similar assets or companies engaged in similar business activities worldwide as that of the Business Enterprise.

Mr. Yue is a member of the American Institute of Certified Public Accountants and a fellow member of the Colorado State Society of Certified Public Accountants. He has over eighteen years of experience in accounting, auditing, compliance, valuation and corporate finance.

This report is co-authored by Ms. Angela Kwan, Mr. Terry Hui and Mr. Stephen Chan.

121

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Set out below are the texts of letters in connection with the Valuation which is considered as a profit forecast under Rule 19.61 of the GEM Listing Rules, received from Nuada Limited, the financial adviser, and RSM Nelson Wheeler, the auditors of the Company, for the purpose of inclusion in this circular.

(B) COMFORT LETTERS

(i) Letter from Nuada Limited

==> picture [161 x 41] intentionally omitted <==

Nuada Limited 19th Floor, BLINK, 111 Bonham Strand Sheung Wan, Hong Kong 洛爾達有限公司香港上環文咸東街111號 BLINK 19字樓

Phone/電話: 2544-9975 Fax/傳真: 2581-0532

18 July 2012

The Board of Directors Wealth Glory Holdings Limited Unit 4, 10/F Lucky Commercial Centre 103 Des Voeux Road West Hong Kong

Dear Sirs,

We refer to the discounted cash flow forecast (“Forecast”) underlying the valuation (“Valuation”) of 100% equity interest in Royal Dragon Corporation Limited (“Target Associate”), an associate of Eminent Along Limited, prepared by Roma Appraisals Limited in respect of the appraisal of the fair value of the Target Associate as at 31 March 2012 in connection with the circular of Wealth Glory Holdings Limited (the “Company”) dated 18 July 2012 (the “Circular”). The Valuation which are determined based on the discounted cash flow is regarded as a profit forecast under Rule 19.61 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”).

We have discussed with you the bases and assumption as set out in the Valuation upon which the Forecast has been made. We have also considered the letter dated 18 July 2012 addressed to yourselves from RSM Nelson Wheeler (“Auditors”) regarding the accounting policies and calculations upon which the Forecast has been made.

On the basis of the assumptions and calculations adopted by the Valuer in respect of the Forecast after properly reviewed by the directors of the Company, we are of the opinion that the Forecast, for which the directors of the Company and the Valuer are responsible, has been made after due and careful enquiry. However, we express no opinion on how closely the actual cash flow eventually will correspond with the Forecast.

122

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Our work in connection with the Forecast has been undertaken solely for the strict compliance under Rule 19.62(3) of the GEM Listing Rules and for no other purpose.

Yours faithfully,

For and on behalf of

Nuada Limited Kevin Chan

123

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

(ii) Letter from RSM Nelson Wheeler

==> picture [53 x 53] intentionally omitted <==

==> picture [62 x 47] intentionally omitted <==

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

18 July 2012

The Board of Directors Wealth Glory Holdings Limited

Dear Sirs,

We have examined the principal accounting policies adopted in and the arithmetical accuracy of the calculations of the discounted cash flow forecast (the “Forecast”) underlying the valuation (the “Valuation”) of 100% equity interest in Royal Dragon Corporation Limited (the “Target Associate”), an associate of Eminent Along Limited performed by Roma Appraisals Limited (the “Valuer”) in respect of the appraisal of the fair value of the Target Associate as at the reference date of 31 March 2012 in connection with the circular of Wealth Glory Holdings Limited (the “Company”) to be dated on or about 18 July 2012 (the “Circular”).

Respective responsibilities of directors and RSM Nelson Wheeler

The directors of the Company are responsible for the preparation of the Forecast and the reasonableness and validity of the assumptions based on which the Forecast is prepared (the “Assumptions”).

It is our responsibility to form an opinion based on our reasonable assurance engagement, so far as the accounting policies and the arithmetical accuracy of the calculations are concerned, on whether the Forecast has been properly compiled, in all material respects, in accordance with the Assumptions and on a basis consistent with the accounting policies normally adopted by the Group as set out in the audited consolidated financial statements of the Company for the year ended 31 March 2012 and to report our opinion solely to you, as a body, solely for the purpose in connection with the Circular and for no other purpose. We accept no responsibility to any other person in respect of, arising out of, or in connection with our work.

The Assumptions include hypothetical assumptions about future events and management actions that may or may not necessarily be expected to occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Forecast and the variation may be material. Accordingly we have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and do not express opinion whatsoever thereon.

124

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Basis of opinion

We conducted our reasonable assurance engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” with reference to the procedures under Auditing Guideline 3.341 “Accountants’ Report on Profit Forecasts” issued by the Hong Kong Institute of Certified Public Accountants. Our work was performed solely to assist the directors of the Company to evaluate, so far as the accounting policies and the arithmetical accuracy of the calculations are concerned, whether the Forecast has been properly compiled, in all material respects, in accordance with the Assumptions and on a basis consistent with the accounting policies normally adopted by the Group as set out in the audited consolidated financial statements of the Company for the year ended 31 March 2012.

We planned and performed our reasonable assurance engagement so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give our opinion. Our reasonable assurance engagement included:

a. obtaining an understanding of the principal accounting policies adopted in the preparation of the Forecast through inquiry of persons responsible for financial and accounting matters;
b. comparing the principal accounting policies adopted in the preparation of the Forecast with those adopted in the preparation of the audited consolidated financial statements of the Company for the year ended 31 March 2012;
c. checking the arithmetical calculations relating to the amounts presented in the Forecast; and
d. such other procedures that we considered necessary.

We believe that our reasonable assurance engagement provides a reasonable basis for our opinion.

Our reasonable assurance engagement does not constitute an audit or a review conducted in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the Hong Kong Institute of Certified Public Accountants. Accordingly, we do not express an audit or a review opinion on the Forecast.

125

APPENDIX VII VALUATION REPORT OF THE HONG KONG COMPANY

Opinion

In our opinion, based on the foregoing, so far as the accounting policies and the arithmetical accuracy of the calculations are concerned, the Forecast has been properly compiled, in all material respects, in accordance with the Assumptions and on a basis consistent with the accounting policies normally adopted by the Group as set out in the audited consolidated financial statements of the Company for the year ended 31 March 2012.

Yours faithfully,

RSM Nelson Wheeler

Certified Public Accountants

Hong Kong

126

GENERAL INFORMATION

APPENDIX VIII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particular given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Group. 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 is not misleading or deceptive and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

DIRECTORS’ INTERESTS IN SHARES

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (“SFO”)) as recorded in the register required to be kept by the Company under Section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to the required standard of dealings by directors of the Company as referred to in Rule 5.46 of the GEM Listing Rules, were as follows:-

Aggregate long positions in Shares

			Approximate
		Number of shares	percentage of
Name of Director	Capacity of interests	in interest	interest in shares
Ms. Lee Yau Lin, Jenny	Interest in controlled	310,880,000	46.93%
(“Ms Lee”)(Note 1)	corporation/Beneficial	owner
Mr. Wong Wing Fat	Interest in controlled	39,840,000	6.01%
(“Mr Wong”)(Note 2)	corporation/Beneficial	owner
Mr. Ho Wai Hung	Beneficial owner	400,000	0.06%
(Note 3)
Ms. Cheung Kin, Jacqueline	Beneficial owner	400,000	0.06%
(Note 3)
Ms. Mak Yun Chu	Beneficial owner	400,000	0.06%
(Note 3)

Notes:

Ms. Lee is the beneficial owner of 100% of the issued share capital of Conrich Investments Limited (“Conrich”). Ms Lee is deemed to be interested in, and duplicated the interests of, the 306,880,000 shares held by Conrich under section 316(2) of the SFO. The remaining interests in 4,000,000 Shares are share options granted by the Company to Ms. Lee on 11 July 2011.

127

GENERAL INFORMATION

APPENDIX VIII

Mr. Wong is the beneficial owner of 100% of the issued share capital of Fastray Investments Limited (“Fastray”). Mr Wong is deemed to be interested in, and duplicated the interests of, the 35,840,000 shares held by Fastray under section 316(2) of the SFO. The remaining interests in 4,000,000 Shares are share options granted by the Company to Mr. Wong on 11 July 2011.
These hares in interests are share options granted by the Company to respective Directors on 11 July 2011.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any other interests or short positions in any shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under Section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to Rule 5.46 of the GEM Listing Rules.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARES

As at the Latest Practicable Date, the interests or short positions of every person, other than a Director or chief executive of the Company, in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO were as follows:

Aggregate long positions in Shares

			Approximate
		Number of shares	percentage of
Name of shareholder	Capacity of interests	in interest	interest in shares
Conrich Investments Limited	Beneficial Owner	306,880,000	46.33%
(“Conrich”)(Note 1)
Mr. Leung Kai Tong, Tommy	Family Interest	310,880,000	46.93%
(Note 2)
Fastray Investments Limited	Beneficial Owner	35,840,000	5.41%
(“Fastray”)(Note 3)
Ms. Fu Ching Man_(Note 4)_	Family Interest	39,840,000	6.01%

Notes:

Conrich is an investment holding company incorporated in the British Virgin Islands on 5 January 2010 with limited liability, the entire issued share capital of which is wholly and beneficially owned by Ms. Lee. These Shares in interests are in duplicate the interests held by Ms. Lee and Mr. Leung Kai Tong, Tommy.
Mr. Leung Kai Tong, Tommy is the spouse of Ms Lee and is deemed to be interested in, and duplicated the interests of, all the shares Ms. Lee is interested under Section 316(1) of the SFO.
Fastray is an investment holding company incorporated in the British Virgin Islands on 5 January 2010 with limited liability, the entire issued share capital of which is wholly and beneficially owned by Mr Wong. These Shares in interests are in duplicate the interests held by Mr. Wong and Ms. Fu Ching Man.
Ms. Fu Ching Man is the spouse of Mr Wong and is deemed to be interested in, and duplicated the interests of, all the shares Mr. Wong is interested under Section 316(1) of the SFO.

Save as disclosed above, as at the Latest Practicable Date, no other person had any interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO.

128

GENERAL INFORMATION

APPENDIX VIII

3. MATERIAL CONTRACTS

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

(i) the share swap agreement dated 24 September 2010 entered into between the Company, Mr. Ko King Kwong Johnny (“Mr. Ko”), Mr. Wong Wing Fat (“Mr. Wong”), Ms. Lee Yau Lin Jenny (“Ms. Lee”) and Ms. Poon Wai Kuen Fiona (“Ms. Poon”), pursuant to which the Company acquired the entire issued share capital of Paraburdoo Limited, being a company incorporated in the British Virgin Islands, from Mr. Ko, Mr. Wong, Ms. Lee and Ms. Poon in consideration of the Company allotting and issuing 362,879,999 Shares, 35,840,000 Shares, 26,880,000 Shares and 22,400,000 Shares credited as fully paid up to each of Conrich Invesments Limited (“Conrich”), Fastray Investments Limited (“Fastray”), Flance Investments Limited and Plannet Investments Limited respectively at the direction of Ms. Lee, Mr. Wong, Ms. Poon and Mr. Ko;
(ii) the deed of indemnity dated 30 September 2010 entered into by Conrich, Ms. Lee, Fastray and Mr. Wong (collectively, the “Indemnifiers”) with and in favour of the Company, pursuant to which the Indemnifiers have agreed to provide indemnities on a joint and several basis for, among other matters, (a) all taxation liabilities of the Group incurred before the date on which the Shares first commence trading on GEM (“Listing Date”); (b) all costs, expenses, interests, penalties or other liabilities which any member of the Group may incur in connection with any taxation claims; and (c) all expenses, payments, sums, outgoings, fees, demands, claims, damages, losses, costs, charges, liabilities, fines, penalties and tax which any member of the Group may incur, suffer or accrue as a result of (i) any claim made by the subcontractors of the Group against any member of the Group; (ii) any default, failure or delay of any member of the Group in making contributions towards the housing funds required to be insured or made by any member of the Group under the PRC laws; and (iii) any default, failure or delay in registering, or any non-registration of, any lease entered into by any member of the Group as lessee on or before the Lisitn Date in respect of any leased property located in the PRC;
(iii) the deed of non-competition dated 26 September 2010 entered into by Ms. Lee and Mr. Wong as covenantors (the “Covenantors”) with and in favour of the Company, pursuant to which each of the Covenantors has undertaken to the Company that it/he will not, and will procure that its/his associates will not (a) directly or indirectly be interested or involved or engaged in or acquire or hold an interest in any business which competes or is likely to compete with the Group’s business in Hong Kong, the PRC, Macau and any other country or jurisdiction to which the Group markets or sells its products; or (b) directly or indirectly solicit, interfere with or endeavour to entice away from any member of the Group any person, firm or company who to its or his knowledge is now or has been a customer, supplier or employee of any member of the Group;

129

GENERAL INFORMATION

APPENDIX VIII

(iv) the underwriting agreement dated 30 September 2010 made between, among others, the Company, the executive Directors, Ms. Lee, Mr. Wong, Conrich, Yuanta Securities (Hong Kong) Company Limited, China Merchants Securities (HK) Company Limited and Cheong Lee Securities Limited relating to the placing of 160,000,000 Shares by the Company for cash at the price of HK0.25 per placing share subject to the terms and conditions stated in the Prospectus;
(v) the agreement entered into between an indirectly wholly-owned subsidiary of the Company and Earn Vast Limited in relation to the expansion of production capacity of the Group at the contract price of HK$7,920,000, details of which are set out in the Company’s announcement dated 13 April 2011;
(vi) a placing and subscription agreement dated 29 April 2011 entered into between Conrich Investments Limited, Ms. Lee Yau Lin Jenny, the Company and Yuanta Securities (Hong Kong) Company Limited in relation to the top-up placing and subscription of 110,400,000 shares of the Company at the price of 0.37 per share;
(vii) the Acquisition Agreement;
(viii) the Facility Letter; and
(ix) the Placing Agreement.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group, excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

5. LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any member of the Enlarged Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or substantial Shareholder or any of their respective associates has any interest in business which competes with or may compete with the business of the Group or has any other conflict of interests which any person has or may have with the Group.

130

GENERAL INFORMATION

APPENDIX VIII

7. EXPERTS AND CONSENTS

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

Name

Qualification

RSM Nelson Wheeler Certified Public Accountants

Nuada Limited Corporation licensed under the SFO to carry on type 6 regulated activity Roma Appraisals Limited Independent Professional Valuer Alpha & Leader Law Firm the PRC legal advisers (“Alpha & Leader”)

As at the Latest Practicable Date, each of RSM Nelson Wheeler, Nuada Limited, Roma Appraisals Limited and Alpha & Leader did not have any interests, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2012, the date to which the latest published audited consolidated financial statements of the Group were made up.

As at the Latest Practicable Date, each of RSM Nelson Wheeler, Nuada Limited, Roma Appraisals Limited and Alpha & Leader was not interested beneficially or non-beneficially in any Shares in the Company or any of its subsidiaries or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of RSM Nelson Wheeler, Nuada Limited, Roma Appraisals Limited and Alpha & Leader has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or report and/or reference to its name in the form and context in which it respectively appears.

8. MISCELLANEOUS

(a) Save for disclosed in this circular, there is no contract or arrangement entered into by any member of the Group subsisting at the date of this circular in which any Director is materially interested and which is significant to the business of the Enlarged Group.
(b) As at the Latest Practicable Date, no Directors had any direct or indirect interest in any assets which had been acquired, disposed of by or leased to, or which were proposed to be acquired, disposed of by or leased to, any member of the Group since 31 March 2012, the date to which the latest published audited consolidated financial statements of the Group were made up.

131

GENERAL INFORMATION

APPENDIX VIII

(c) The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands and the head office and principal place of business in Hong Kong is at Unit 4, 10th Floor, Lucky Commercial Centre, 103 Des Voeux Road West, Hong Kong.
(d) The branch share registrar and transfer office of the Company in Hong Kong is Union Registrars Limited at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong.
(e) The company secretary of the Company is Mr. Wong Chun who is a certified public accountant of the Hong Kong Institute of Certified Public Accountants and a member of the Association of Chartered Certified Accountants. He has over 15 years of experience in audit and accounting.
(f) The compliance officer of the Company is Mr. Wong Wing Fat.
(g) The Company established an audit committee pursuant to a resolution of the Directors passed on 26 September 2010 with written terms of reference in compliance with Rule 5.28 and 5.29 of the GEM Listing Rules. The primary duties of the audit committee are mainly to make recommendation to the Board on the appointment and removal of external auditor; review the financial statements and material advice in respect of financial reporting; and oversee internal control procedures of the Company. The audit committee comprises three independent non-executive Directors, namely Mr. Ho Wai Hung, Ms. Cheung Kin, Jacqueline and Ms. Mak Yun Chu. Ms. Mak Yun Chu is the chairman of the audit committee.

Mr. Ho Wai Hung , aged 54, was appointed as an independent non-executive Director on 26 September 2010. Mr. Ho obtained a Non-UK Intermediate Certificate in Food Safety in The Royal Institute of Public Health in Dubai in 2007, an Intermediate Certificate in Hazard Analysis in Chartered Institute of Environmental Health in United Kingdom in 2002, and a Certificate in Food Hygiene and Safety in The Royal Institute of Public Health and Hygiene in United Kingdom in 1998. Mr. Ho is the chief operation manager of Royal China Group (Shanghai) since 2003 and is primarily responsible for formulating and implementing business strategy for the company such that new market is exploited. Prior to joining Royal China Group (Shanghai), Mr. Ho has worked in the catering industry in London, the United Kingdom. Between 1996 and 1998, an established department store in London employed Mr. Ho as a senior sous chef to, amongst others, supervise the operation of its restaurants and monitor compliance of HACCP requirements.

Ms. Cheung Kin, Jacqueline , aged 39, was appointed as an independent non-executive Director on 26 September 2010. Ms. Cheung obtained a bachelor’s degree in Business from the University of Technology, Sydney in 1995 and a Master’s degree in Business Administration (Executive) from the Australian Graduate School of Management (jointly by The University of New South Wales and The University of Sydney) in 2004. Ms. Cheung is a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants and the Australian Society of Certified Practising Accountants, and she has over 10 years of work experience in accounting and auditing. Ms. Cheung is currently a financial controller

132

GENERAL INFORMATION

APPENDIX VIII

of a group which is one of the largest private corporation in the sports and leisure industry in Asia. She is responsible for managing the accounting and company secretary team in Hong Kong and also the group finance team for group consolidation.

Ms. Mak Yun Chu , aged 54, was appointed as an independent non-executive Director on 26 September 2010. Ms. Mak obtained an Endorsement Certificate in Accountancy in Hong Kong Polytechnic University in 1986. Ms. Mak is a fellow of the Association of Chartered Certified Accountants and a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants, and has over 10 years of work experience in accounting and administration. Ms. Mak is also an independent non-executive director of Heng Tai Consumables Group Limited (stock code: 197), a listed company on the Main Board of the Stock Exchange.

(h) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

9. DOCUMENTS FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company in Hong Kong at Unit 4, 10th Floor, Lucky Commercial Centre, 103 Des Voeux Road West, Hong Kong during normal business hours on any Business Day from the date of this circular up to and including the date of the EGM:

(a) the memorandum of association and articles of association of the Company;
(b) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;
(c) the written consent of experts referred to in the paragraph headed “Experts and Consents” in this Appendix;
(d) the accountants’ reports from RSM Nelson Wheeler on the Target and the Goldenbase Group, the text of which are set out in Appendix II to this circular;
(e) the accountants’ report from RSM Nelson Wheeler in respect of the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;
(f) the annual reports of the Company for each of the two financial years ended 31 March 2011 and 31 March 2012;
(g) the valuation report of the Hong Kong Company from Roma Appraisals Limited, the text of which is set out in Appendix VII to this circular;
(h) the letters from RSM Nelson Wheeler and Nuada Limited, the text of which are set out in Appendix VII to this circular; and
(i) this circular.

133

NOTICE OF EGM

WEALTH GLORY HOLDINGS LIMITED 富譽控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8269)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “Meeting”) of the shareholders of Wealth Glory Holdings Limited (the “ Company ”) will be held at Pacific Room, 2/F., Island Pacific Hotel, 152 Connaught Road West, Hong Kong on Friday, 3 August 2012 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT the conditional sale and purchase agreement (“ the Agreement ”) dated 25 May 2012 entered into between (i) Silver Summit Investments Limited (the “ Purchaser ”), a wholly owned subsidiary of the Company, as purchaser, (ii) Intellect Hero Limited (the “ Vendor ”), as vendor, and (iii) Mr. Li Jun Yi and Mr. Hung Man Yuk Dicson (collectively, the “ Guarantors ”), being the ultimate beneficial owners of the Vendor, as guarantors, in relation to the sale and purchase of 1 share (the “ Sale Share ”) of US$1.00, being the entire issued share capital of Eminent Along Limited (the “ Target ”) (a copy of which is marked “A” and produced to the Meeting and signed by the chairman of the Meeting (“ Chairman ”) for identification purpose) and the transactions contemplated thereunder (including but not limited to the terms of the Shareholders’ Agreement, the Deed of Undertaking and the Dividend Undertaking (each as defined in this circular and copies of which are marked “B”, “C” and “D” respectively and produced to the Meeting and signed by the Chairman for identification purpose)) be and are hereby ratified, confirmed and approved and any one or more director(s) (the “ Directors ”) of the Company be and is/are hereby authorised from time to time to do all such acts and things and execute all such documents which he/she/they consider necessary, desirable or expedient for the implementation of and giving effect to the Agreement and the transactions contemplated thereunder (including but not limited to the Shareholders’ Agreement, the Deed of Undertaking and the Dividend Undertaking (each as defined in this circular)).”
“ THAT the conditional facility letter (the “ Facility Letter ”) dated 25 May 2012, pursuant to which the Company has agreed to provide the loan facilities of up to HK$5,000,000 to Goldenbase Ltd (the “ Borrower ”), an associate company of the Target, for the purpose of financing the initial working capital of the Borrower and its group company(ies) (a copy of which is marked “E” and produced to the Meeting and signed by the Chairman for identification purpose), be and is hereby ratified, confirmed and approved and any one or more Director(s) be and is/are hereby authorised from time to time to do all such acts and things and execute all such documents which he/she/they consider necessary, desirable or expedient for the implementation of and giving effect to the Facility Letter and the transactions contemplated thereunder.”

134

NOTICE OF EGM

“ THAT subject to the fulfillment of the terms and conditions set out in the placing agreement dated 12 June 2012 (the “ Placing Agreement ”) entered into between the Company and Kingsway Financial Services Group Limited (a copy of the Placing Agreement having been produced to the meeting and marked “F” and initialed by the Chairman for the purpose of identification) in respect of the placing of up to 300,000,000 new shares of HK$0.01 each in the capital of the Company (the “ Placing Shares ”) at a placing price of HK$0.17 each (the “ Proposed Placing ”):
(i) the Placing Agreement in relation to the Proposed Placing and the matters contemplated thereunder be and are hereby approved, confirmed and ratified;
(ii) the placing of the Placing Shares to the placees pursuant to the Placing Agreement be and is hereby approved and the Directors be and are hereby authorised to allot and issue the Placing Shares pursuant to the Placing Agreement; and
(iii) any one or more of the Directors be and is/are hereby authorised to do all such acts and things and execute all such documents which he/she/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Placing Agreement and the transactions contemplated thereunder.”
“ THAT
(a) the authorised share capital of the Company be and is hereby increased from HK$10,000,000 divided into 1,000,000,000 shares of HK$0.01 each (“ Share(s) ”) in the share capital of the Company to HK$20,000,000 divided into 2,000,000,000 Shares by the creation of an additional 1,000,000,000 new Shares (the “ Increase in Authorised Share Capital ”); and
(b) any Directors be and is/are hereby authorised to do all such acts and things and execute all such documents which he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Increase in Authorised Share Capital.”

By order of the Board Wealth Glory Holdings Limited Lee Yau Lin, Jenny Chairman

Hong Kong, 18 July 2012

135

NOTICE OF EGM

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

Head Office and Principal Place of Business: Unit 4, 10th Floor Lucky Commercial Centre 103 Des Voeux Road West Hong Kong

Notes:

A member entitled to attend and vote at the Meeting convened by the above notice is entitled to appoint one or more proxies to attend and, subject to the provisions of the articles of association of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the Meeting to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of Shares in respect of which each such proxy is so appointed.
A form of proxy for use at the Meeting is enclosed. Whether or not you intend to attend the Meeting in person, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the Meeting or any adjournment thereof, should he so wish.
In order to be valid, the form of proxy must be duly completed and signed in accordance with the instructions printed thereon and deposited together with a power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, and deposit the same at the branch share registrar and transfer office of the Company in Hong Kong, Union Registrars Limited, at 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof.
In the case of joint holders of Shares, any one of such holders may vote at the Meeting, either personally or by proxy, in respect of such Shares as if he was solely entitled thereto, but if more than one such joint holders are present at the Meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such Shares shall alone be entitled to vote in respect thereof.
The register of members of the Company will be closed from Wednesday, 1 August 2012 to Friday, 3 August 2012 (both dates inclusive) during which period no transfer of shares will be registered. In order to qualify for attending and voting at the EGM, all transfers of shares accompanied by the relevant share certificates must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Union Registrars Limited at 18/F, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong for registration not later than 4:00 p.m. on Tuesday, 31 July 2012.

136

AI assistant

Go Up Education Technology Limited — Proxy Solicitation & Information Statement 2012

51358_rns_2012-07-17_611ac8a7-78d8-4ed1-a707-e380b664300b.pdf

WEALTH GLORY HOLDINGS LIMITED 富譽控股有限公司

(I) MAJOR TRANSACTION IN RESPECT OF

(B) THE PROVISION OF FACILITIES TO GOLDENBASE LTD

CONTENTS

CHARACTERISTICS OF GEM

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

The English translation of Chinese names or words in this circular, where indicated, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

WEALTH GLORY HOLDINGS LIMITED 富譽控股有限公司

(I) MAJOR TRANSACTION IN RESPECT OF

(A) THE ACQUISITION OF THE ENTIRE EQUITY INTEREST IN EMINENT ALONG LIMITED; AND

(B) THE PROVISION OF FACILITIES TO GOLDENBASE LTD

(II) PLACING OF NEW SHARES UNDER A SPECIFIC MANDATE; (III) INCREASE IN AUTHORISED SHARE CAPITAL; AND

(IV) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

THE ACQUISITION AGREEMENT

Assets to be acquired

LETTER FROM THE BOARD

Consideration

LETTER FROM THE BOARD

Conditions precedent

LETTER FROM THE BOARD

Long stop date

Completion

LETTER FROM THE BOARD

Due Diligence

LETTER FROM THE BOARD

PRC legal opinion

Deed of Undertaking

LETTER FROM THE BOARD

Dividend Undertaking

Shareholders’ Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Information of the Target Group

LETTER FROM THE BOARD

Information on the Joint Cooperation Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Coal trading business of Hong Kong Company

Branch Office

Coal mines

LETTER FROM THE BOARD

Indicative contract price per tonne adopted in the Coal Purchase Agreement

LETTER FROM THE BOARD

Coal product

Payment terms

LETTER FROM THE BOARD

Operating flow

Management of the Hong Kong Company

Mr. Cheung

Mr. Wang Jian

Mr. Wang Sheng Yun

Mr. Xin Hao

Mr. Barry Palte

Mr. Jason Lee

LETTER FROM THE BOARD

Reasons for the Acquisition

LETTER FROM THE BOARD

LETTER FROM THE BOARD

THE FACILITY LETTER

Go Up Education Technology Limited Proxy Solicitation & Information Statement 2012