Go Up Education Technology Limited — Proxy Solicitation & Information Statement 2016

Jul 18, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult 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.

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares or other securities of the Company.

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 RELATION TO THE ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL OF STRATEGY KING HOLDINGS LIMITED

AND

(II) ISSUANCE OF CONSIDERATION SHARES AND CONVERSION SHARES UNDER SPECIFIC MANDATE

AND

(III) NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial adviser

A notice convening an extraordinary general meeting (the “EGM”) of the Company to be held at 17/F., No. 8 Wyndham Street, Central, Hong Kong on Wednesday, 3 August 2016 at 3:30 p.m. (or immediately after the conclusion of the annual general meeting of the Company to be held at 3:00 p.m. on the same day), is set out on pages EGM-1 to EGM-3 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 Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, 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 or any adjournment thereof. 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 thereof, should you so wish.

This circular will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least 7 days from the date of its posting and the website of the Company at www.wealthglory.com.

18 July 2016

CONTENTS

			Page
Characteristics of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			ii
Definitions. . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the	Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
Appendix I	–	Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i - 1
Appendix II	–	Accountants’ Report of the Target Company. . . . . . . . . . . . . . . . . . . . .	ii - 1
Appendix III	–	Accountants’ Report of the Target Subsidiary. . . . . . . . . . . . . . . . . . . .	iii - 1
Appendix IV	–	Unaudited Pro Forma Financial Information
		of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iv - 1
Appendix V	–	Management Discussion and Analysis of the Target Group . . . . . . . . .	v - 1
Appendix VI	–	Valuation Report of the Target Subsidiary. . . . . . . . . . . . . . . . . . . . . . .	vi - 1
Appendix VII	–	Letters in relation to the Valuation Report. . . . . . . . . . . . . . . . . . . . . . .	vii - 1
Appendix VIII	–	General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	viii - 1
Notice of EGM . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM - 1

i

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.

ii

DEFINITIONS

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

• “Acquisition” the acquisition of the Sale Share by the Company pursuant to the Agreement

• “Agreement” the conditional sale and purchase agreement dated 18 Mach 2016 entered into between the Company and the Vendor in respect of the Acquisition

• “Announcement” the announcement of the Company dated 18 March 2016 in relation to the Acquisition

• “associates” has the meaning ascribed to it under the GEM Listing Rules “Board” board of the Directors from time to time “Bondholder(s)” the holder(s) of the Convertible Bonds “Business Day” a day (other than Saturday, Sunday or public holiday or days on which a typhoon signal No.8 or above or black rainstorm warning is hosted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which licensed banks are generally open for general banking business in Hong Kong throughout their normal business hours

• “BVI” the British Virgin Islands ‘‘CAGR’’ compound annual growth rate “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 pursuant to the terms and conditions of the Agreement

• “Completion Date” the date on which Completion take place in accordance with the Agreement, which is within five Business Days after the date of fulfillment (or waiver, as the case may be) of the last of the conditions precedent under the Agreement (or such other date as the Company and the Vendor shall agree)

• “Connected person(s)” has the meaning as ascribed under the GEM Listing Rules

1

DEFINITIONS

• “Consideration” HK$170,000,000, being the total consideration for the Acquisition “Consideration Shares” the 1,752,505,102 new Shares to be allotted and issued to the Vendor at a price of HK$0.073 per Share, credited as fully paid, for the purpose of settling part of the Consideration in the amount of HK$127,932,872.45

• “Conversion Price” the conversion price of HK$0.073 per Conversion Share “Conversion Shares” the 576,262,021 new Shares which may fall to be allotted and issued upon exercise of the conversion rights attaching to the Convertible Bonds by the Vendor

• “Convertible Bonds(s)” convertible bonds of a principal amount of HK$42,067,127.53, to be issued by the Company, in the denomination and integral amounts of HK$1,000,000, pursuant to the Agreement, for the purpose of settling part of the Consideration in the amount of HK$42,067,127.53

• “Director(s)” directors of the Company from time to time “EGM” the extraordinary general meeting of the Company to be convened and held for the Shareholders to consider and, if thought fit, among other things, to approve, the Acquisition and the transactions contemplated thereunder, the allotment and issuance of the Consideration Shares and the Conversion Shares (upon exercise of the conversion rights attached to the Convertible Bonds) under the Specific Mandate

• “Enlarged Group” the Group as enlarged by the Acquisition “GEM” the Growth Enterprise Market of the Stock Exchange

• “GEM Listing Committee” has the meaning ascribed to it in the GEM Listing Rules

• “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “Group” the Company and its subsidiaries

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

2

DEFINITIONS

“Hong Kong”	Hong Kong Special Administrative Region of the PRC
“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
“Independent Valuer”	Colliers International (Hong Kong) Limited, the qualified valuer
	registered in Hong Kong
“Issue Price”	HK$0.073, being the issue price per the Consideration Share
“Latest Practicable Date”	14 July 2016, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining
	information contained in this circular
“Latest Trading Date”	18 March 2016, being the last trading day immediately before
	the entering into the Agreement
“Long Stop Date”	30 September 2016 or such other date as the parties to the
	Agreement may agree
“Maturity Date”	the date falling on the expiry of a 5 years’ period which shall
	commencing from the date of issue of the Convertible Bonds
‘‘MD’’	MD Inc. Limited, a company incorporated in Hong Kong with
	limited liabilities, which is a wholly-owned by the Company
“MOU”	the memorandum of understanding dated 2 March 2016 entered
	into between the Company and the Vendor setting out the
	preliminary understanding in relation to the Acquisition
“Mr. Lam”	Lam Hak Ha, Jasper, the ultimate beneficial owner of the Vendor
“PRC”	the People’s Republic of China, and for the purpose of this
	circular, excludes Taiwan, Hong Kong and the Macau Special
	Administrative Region
“Sale Share”	the entire equity interest in the Target Company
“SFO”	Securities and Futures Ordinance (Cap. 571 of the Laws of Hong
	Kong)

3

DEFINITIONS

“Share(s)”	ordinary share(s) of HK$0.01 each in the issued share capital of
	the Company
“Shareholder(s)”	holder(s) of the Shares
“Share Option(s)”	the share option(s) issued or to be issued by the Company
	under the share option scheme adopted by the Company on 26
	September 2010
“Specific Mandate”	the specific mandate for the allotment and issuance of the
	Consideration Shares and the Conversion Shares (upon exercise
	of the conversion rights attached to the Convertible Bonds) to be
	sought form the Shareholders at the EGM
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeover Code”	the Hong Kong Code on Takeovers and Mergers
“Target Company”	Strategy King Holdings Limited, a company incorporated in the
	BVI with limited liability for investment holding
“Target Group”	collectively, the Target Company and the Target Subsidiary
“Target Subsidiary”	Azure Sea Company Limited, a company incorporated in Hong
	Kong with limited liability which is directly wholly-owned by the
	Target Company, as advised by the Vendor
“Vendor”	Azure Sea Developments Limited, a company incorporated in the
	BVI with limited liability
“%”	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 in this circular have been converted into HK$ at the rate of HK$1 = RMB0.8 for illustration purposes only.

4

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: Mr. Wong Ka Wah, Albert (Chairman) Mr. Hong Sze Lung (Chief Executive Officer) Mr. Kwong Yuk Lap

Non-executive Directors:

Mr. Lau Wan Pui, Joseph Mr. Law Chung Lam, Nelson Mr. Lu Xianglong

Independent non-executive Directors:

Mr. Leung Ka Tin Mr. Tam Chak Chi Mr. Chow Chi Fai

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: 17/F., No. 8 Wyndham Street Central Hong Kong 18 July 2016

To the Shareholders

Dear Sir or Madam,

(I) MAJOR TRANSACTION

IN RELATION TO THE ACQUISITION OF ENTIRE ISSUED SHARE CAPITAL OF STRATEGY KING HOLDINGS LIMITED AND

(II) ISSUANCE OF CONSIDERATION SHARES AND CONVERSION SHARES UNDER SPECIFIC MANDATE

AND

(III) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement whereby the Board announced that on 18 March 2016 (after trading hours of the Stock Exchange), the Company and the Vendor entered into the Agreement, pursuant to which the Vendor has conditionally agreed to sell and the Company has conditionally agreed to purchase the Sale Share, representing the entire equity interest of the Target Company, at the Consideration of HK$170,000,000.

5

LETTER FROM THE BOARD

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 the allotment and issuance of the Consideration Shares and the Conversion Shares (upon exercise of the conversion rights attached to the Convertible Bonds) under the Specific Mandate; (b) the financial and other information of the Target Group; (c) the unaudited pro forma financial information of the Enlarged Group; (d) the valuation report on the Valuation prepared by the Independent Valuer; (e) the details of the issuance of Consideration Shares; (f) the details of the Convertible Bonds and Conversion Shares; and (g) a notice convening the EGM.

BACKGROUND OF THE ACQUISITION

In September 2015, the Company is undergoing the acquisition of MD, a wholly-owned subsidiary acquired by the Company on 12 October 2015. MD is principally engaged in design, manufacture, produce, market, sales and distribution of bags, storage cases for electronic accessories and components, trendy fashion apparels and accessories in Hong Kong and Asian markets. As the original equipment manufacturer (“ OEM ”) and the original design manufacturer (“ ODM ”), MD cooperates with (i) international camera manufacturer, (ii) sports brands; (iii) theme park in Hong Kong, (iv) chains electronical appliances retailer in Hong Kong and (v) a number of celebrity brands from Taiwan which focus on trendy fashion items among the young generations.

As the Company was closing the transaction of the acquisition of MD in September 2015, the Company started to discuss with Mr. Lam to explore the possibility of cooperation in relation to leverage the sales and distribution channel and network of the Target Subsidiary together with MD’s products and other branding resources (the “ Cooperation ”).

Subsequently, on 20 October 2015 after the completion of the acquisition of the MD, the Company followed up with Mr. Lam and carried on the discussion on the Cooperation and to formulate the framework of the Cooperation by way of an acquisition of the Target Company. Detailed discussion was carried throughout November 2015 to the end of February 2016 between the Company and the Vendor. The preliminary terms of the Cooperation were formalized on 2 March 2016 where the MOU in relation of the potential cooperation with the Target Subsidiary was executed and announced on the same date. Upon the finalization of the rest of the legal and commercial terms, on 18 March 2016, the Company entered into the Agreement with the Vendor.

THE AGREEMENT

Date: 18 March 2016

Parties:

Purchaser: the Company Vendor: Azure Sea Developments Limited

6

LETTER FROM THE BOARD

As at the Latest Practicable Date, the ultimate beneficial owner of the Vendor, Mr. Lam is a business consultant of the Company and his engagement is mainly providing advisory service for the Company in relation to the business development relating to the natural resources and commodity trading (by referring potential mine operators and commodity traders in Philippines to the Company) from 1 July 2014 to 30 June 2016, though no project has yet been entered into agreements by the Company during the period. In return of Mr. Lam’s services, the Company has paid HK$1.00 as consideration and granted 12,300,000 Share Options with the subscription price HK$0.27 each to him in July 2014. The said 12,300,000 Share Options have been lapsed on 30 June 2016 upon the cessation of the provision of the said advisory service by Mr. Lam.

As at the Latest Practicable Date, Mr. Lam owns 816,000 Shares. Save as disclosed above, as at the Latest Practicable Date, the Vendor and its ultimate beneficial owner do not hold any Shares or other securities in the Company.

Save as disclosed, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Vendor and its ultimate beneficial owner do not have any relationship with the sellers/purchasers in the Company’s acquisitions/disposals announced/completed in the last 12 months from the Latest Practicable Date.

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

Assets to be acquired

Pursuant to the Agreement, the Vendor has conditionally agreed to sell and the Company has conditionally agreed to purchase the Sale Share, representing the entire equity interest in the Target Company. As advised by the Vendor, the Target Company owns the entire equity interest in the Target Subsidiary.

Consideration

The Consideration for the Acquisition is HK$170,000,000, which will be satisfied upon Completion in the following manners:

• (i) HK$127,932,872.45 by allotment and issuance of the Consideration Shares at the Issue Price of HK$0.073 per Consideration Share to the Vendor;

• (ii) HK$42,067,127.53 by issuance of the Convertible Bonds with a principal amount of not exceeding HK$42,067,127.53 at the Conversion Price of HK$0.073 (subject to the adjustments).

Balance of HK$0.02 of the Consideration will be waived by the Vendor.

7

LETTER FROM THE BOARD

(i) Issue Price

The Issue Price of HK$0.073 per Consideration Share, representing:

• (a) a premium of approximately 12.3% over the closing price of HK$0.065 per Share as quoted on the Stock Exchange on Last Trading Date;

• (b) a premium of approximately 7.99% over the average closing price of HK$0.0676 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Date; and

• (c) a premium of approximately 114.7% over the closing price of HK$0.0340 per share as quoted on the Stock Exchange on the Latest Practicable Date.

• (d) a premium of approximately 34.69% over the audited consolidated net asset value per Share of approximately HK$0.0542 as at 31 March 2016 (based on the Group’s audited consolidated net asset value as at 31 March 2016 of approximately HK$222,694,000 and 4,108,716,000 Shares in issue as at 31 March 2016).

The Consideration Shares to be allotted and issued represent approximately 42.65% of the existing issued share capital of the Company as at the Latest Practicable Date and represent approximately 29.90% of the issued share capital of the Company as enlarged by the allotment and issuance of the Consideration Shares, assuming all the Consideration Shares have been allotted and issued and none of the Convertible Bonds is converted into Conversion Shares. The details of the shareholdings are set out in the paragraph headed “EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY” below.

(ii) Conversion Price

The Conversion Price of HK$0.073 per Conversion Share, representing:

• (a) a premium of approximately 12.3% over the closing price of HK$0.065 per Share as quoted on the Stock Exchange on Last Trading Date;

• (b) a premium of approximately 7.99% over the average closing price of HK$0.0676 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to the Last Trading Date; and

• (c) a premium of approximately 114.7% over the closing price of HK$0.0340 per share as quoted on the Stock Exchange on the Latest Practicable Date.

• (d) a premium of approximately 34.69% over the audited consolidated net asset value per Share of approximately HK$0.0542 as at 31 March 2016 (based on the Group’s audited consolidated net asset value as at 31 March 2016 of approximately HK$222,694,000 and 4,108,716,000 Shares in issue as at 31 March 2016).

8

LETTER FROM THE BOARD

The Convertible Bonds carry the right to convert into Conversion Shares at the Conversion Price of HK$0.073 per Conversion Share (subject to adjustment). Assuming (i) the conversion rights attaching to the Convertible Bond are exercised in full at the Conversion Price of HK$0.073 per Conversion Share and (ii) all the Consideration Shares have been allotted and issued, 576,262,021 new Shares, being the Conversion Shares will fall to be issued to the Vendor, representing approximately 14.03% of the issued capital of the Company as at the Latest Practicable Date and approximately 8.95% of the issued share capital of the Company as enlarged by the allotment and issuance of the Consideration Shares and the Conversion Shares.

The Issue Price and the Conversion Price were determined after arm’s length negotiation between the Vendor and the Company. The Consideration was arrived at after arm’s length negotiations between the parties to the Agreement with reference to (i) the valuation of the 100% equity interest of the Target Subsidiary (the “ Valuation ”) in the value of approximately HK$175,600,000, as at the valuation date of 29 February 2016 prepared by the Independent Valuer; and (ii) the audited net asset value of approximately HK$1,674,000 of the Target Subsidiary as at 29 February 2016.

Between the audited net asset value of the Target Subsidiary and the Valuation, the Board considers the Valuation serves a better basis to assess the business value of the Target Subsidiary as the Valuation has taken the income approach, whereby the value of the Target Subsidiary can be measured by the present worth of the economic benefits to be received, while the audited net asset value of the Target Subsidiary only shows its book value.

In addition, the Directors noted the turnover and the net profit of the Target Subsidiary were approximately HK$36,041,000 and HK$223,000 for the year ended 31 March 2014 and HK$48,564,000 and HK$625,000 for the year ended 31 March 2015 respectively. The growth rate among 2014 and 2015 for the turnover and the net profit was 34.75% and 180.27% respectively. For the 11 months ended 29 February 2016, the turnover and net profit was approximately HK$ 83,801,000 and HK$2,702,000 respectively. The growth rate among 2015 (full year) and 2016 (11 months) for the turnover and the net profit was 72.56% and 332.32% respectively.

After taking into consideration of the absolute value and based on the financial information of the last 35 months (ii) the performance demonstrated by the Target Subsidiary during its past track record, and (iii) the sustainable growth of the video games industry as discussed in the paragraph headed “The Future of Video Game Consoles” in this letter of the Board, the Directors expect the Target Subsidiary’s operation especially on the turnover and net profit will maintain continuous growth in the years to come. For further details of the Target Subsidiary’s industry, please refer to the paragraph headed ‘‘INDUSTRY OVERVIEW’’.

To review the reasonableness of the Valuation and the underlying financial projection prepared by the Vendor, the Company has performed the following due diligence steps regarding the financial projection prepared by the Vendor of the Valuation conducted by the Independent Valuer:

• (i) reviewed the audited financial statements of the Target Subsidiary for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and the management accounts of the Target Subsidiary for the 11 months ended 29 February 2016 provided by the Independent Valuer and noted (a) revenues of the Target Subsidiary had substantially increased from the year ended 31 March 2014 to the 11 months ended 29 February 2016 with an average growth rate of over 60%; (b) the gross profit of the Target Subsidiary had substantially increased from the year ended 31 March 2014 to the 11 months ended 29 February 2016 with an average growth rate over 80%; and (c) the net profit of the Target Subsidiary had substantially increased from the year ended 31 March 2014 to the 11 months ended 29 February 2016 with an average growth rate over 190%.

9

LETTER FROM THE BOARD

• (ii) made enquiries to the management of the Target Subsidiary on the reasons for (i) there is no long term contract entered between the Target Subsidiary and its customers, and (ii) no exclusive supply nor material contract entered between the Target Subsidiary and its suppliers and was satisfied that, due to the short product-cycle nature, it would not be the market practice for the Target Subsidiary to enter into (i) long term contracts with it customers or (ii) exclusive supply or material contracts with its suppliers;

• (iii) reviewed the operation (in particular the marketing information) of the sales and distribution channel for the online and wholesale customers of the Target Subsidiary and carried out a walkthrough study and test on its business model and document flow;

• (iv) interviewed the top three customers and the top two suppliers for the 11 months ended 29 February 2016 on their cooperation and business relationships with the Target Subsidiary;

• (v) interviewed the Independent Valuer and reviewed the financial projection (together with the information and assumptions) and the information as the operating statistics, financial data and other relevant contracts and documents provided by the management of the Target Subsidiary (as set out under the paragraph headed “SOURCES OF INFORMATION” in Appendix VI) in relation to the Valuation provided by the management of the Target Subsidiary and was satisfied with their experience and expertise;

• (vi) reviewed and discussed with the Independent Valuer the assumptions used for the valuation and the approaches used by the Independent Valuer and were satisfied with their work performed and satisfied that the assumptions, rationale in applying the financial projection to the Valuation and the approaches are appropriate and objective in such circumstances; and

• (vii) appointed (1) TC Capital International Limited, as the financial adviser; and (2) Asian Alliance (HK) CPA Limited, as the reporting accountant, to review on behalf of the Board the information used and key assumptions applied by the Independent Valuer in preparing the Valuation Report. Letters from the reporting accountants and the financial adviser are included in the Appendix VII of this Circular as required under Rule 19.62 of the GEM Listing Rules.

As the Vendor or the management of the Target Subsidiary are more familiar with the financial position of the Target Subsidiary, they would be in a better position to prepare the financial projection of the Target Subsidiary. To ensure the information in the financial project of the Target Subsidiary reflects a fair and reasonable financial position of the Target Subsidiary, (1) TC Capital International Limited, as the financial adviser, and (2) Asian Alliance (HK) CPA Limited, as the reporting accountant, are engaged by the Company to review the said the financial projection on behalf of the Board. Therefore, the Company considers that the said financial projection is reasonable and can be used for determining the Consideration.

Having taken into account of the aforesaid work done on the Valuation and the underlying financial projection together with the risk factors as set out in the sections headed “RISK FACTORS” in this letter from the Board and in light of the benefits expected to be brought into after the Acquisition, the Company are of the view the Valuation Report has been reasonably prepared and that the methodology and assumptions adopted for the Valuation are fair and reasonable.

10

LETTER FROM THE BOARD

Even though the Company has never engaged in the video gaming industry, based on the due diligence carried out by the Company and the professionals and having reviewed the information and document of the Target Subsidiary, The Directors consider the Target Subsidiary is (i) engaging in a fast growing business, (ii) operating with a positive and sustainable cashflow for the periods from its date of incorporation to 31 March 2014 and the year ended 31 March 2015. As advised by the Vendor, the negative cashflow from operating activities for the period from 1 April 2015 to 29 February 2016 of approximately HK$2.2 million was because the significant increase in trade receivable from the post Chinese New Year Clearance Sale of HK$3.3 million during the last 7 days before 29 February 2016. All outstanding payments were subsequently received and a positive cash flow of approximately HK$356,000 was noted from the unaudited management account for the year ended 31 March 2016) and (iii) having a continuous profit track record throughout 2014 to 2016 and hence the Board is of the opinion that the adoption of the income approach for the Valuation of the Target Subsidiary is reasonable. The Directors accordingly consider the Consideration, the Issue Price and the Conversion Price and the terms and conditions of the Agreement are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

Source of information provided by the management of the Target Subsidiary (as set out under the paragraph headed “SOURCES OF INFORMATION” in Appendix VI)

• Background of the Target Subsidiary and relevant corporate information;

• Business registration details of the Target Subsidiary provided by the management;

• A cooperation agreement entered between the Target Subsidiary and Beijing Xinchang Xinda Technology Development Co. Ltd. dated 15 March 2016;

• Unaudited financial statements of the Target Subsidiary for the year ended 29 February 2016;

• Audited financial statements of the Target Subsidiary for the year ended 31 March 2014 and 31 March 2015;

• Financial projections of Target Company; and

• Bloomberg database and other reliable sources of market data;

Assumptions used on the Valuation

General assumptions

In determining the market value of the equity interest of the Target Subsidiary, the following principal assumptions have been adopted on the Valuation:

• there will be no material change in the existing political, taxation, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Subsidiary;

• the conditions in which the business is being operated and which are material to revenue and costs of businesses will remain unchanged;

11

LETTER FROM THE BOARD

• the information have been prepared on a reasonable basis after due and careful consideration by the management;

• competent sales administration staff and key personnel (being Mr. Lam) and will be maintained to support the ongoing operation and development of the Target Subsidiary;

• all licenses and permits that is essential for the operation of Target Subsidiary can be obtained and are renewable upon expiry; and

• there are no hidden or unexpected conditions associated with the businesses valued that might adversely affect the reported value. Further, we assume no responsibility for changes in market conditions after the Valuation Date.

Major assumptions adopted in the financial projection prepared by the management:

REVENUE

Revenue is mainly derived from trading of games and console games through existing online platform from the clients by the Target Subsidiary. The Target Subsidiary will provide the online platform for corporate firms (Business to Business) and private customers (Business to Consumer). Trading of games and console games through existing online platform are represented by four segments, which are (i) games software, (ii) games hardware & accessary, (iii) IT products, and (iv) sports shoes & trendy goods.

The projection of the revenue attributable to trading of the above-mentioned four segments for the year ended 31 March 2017 is presented as follows:

• 1) Revenue from games software (HKD 146,211,814) x 60% = HKD87,727,088

• 2) Revenue from games hardware & accessary (HKD 146,211,814) x 30% = HKD43,863,544

• 3) Revenue from IT products (HKD 146,211,814) x 8% = HKD11,696,945

• 4) Revenue from sports shoes & trendy goods (HKD 146,211,814) x 2% = HKD2,924,236

Therefore, the projected revenue from April 2016 to March 2021 is as follows:

For the 12 months ended (HKD)		31-Mar-2017	31-Mar-2018	31-Mar-2019	31-Mar-2020	31-Mar-2021
Net Revenue	(A)=(B)+(C)+(D)+ (E)	146,211,814	219,317,720	307,044,808	368,453,770	405,299,147
Games software	(B)	87,727,088	131,590,632	184,226,885	221,072,262	243,179,488
Games hardware & accessary	(C)	43,863,544	65,795,316	92,113,443	110,536,131	121,589,744
IT products	(D)	11,696,945	17,545,418	24,563,585	29,476,302	32,423,932
Sports shoes & trendy goods	(E)	2,924,236	4,386,354	6,140,896	7,369,075	8,105,983

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LETTER FROM THE BOARD

The projected revenue in financial year (“FY”) 2016/2017 (i.e. HKD146,211,814) implied a revenue growth rate of 60% comparing with the actual revenue in FY2015/2016. The basis for this projected revenue takes reference to the revenue growth rate in recent three years. In FY2015/2016, the revenue growth rate is around 87%, the average revenue growth rate in FY2014/2015 and FY2015/2016 is over 60%, and the average revenue growth rate from FY2013 to FY2016 is around 69%. Although the revenue growth rate in FY2015/2016 is as high as 87%, it is not due to low base effect. By taking into account the absolute amount, the revenue is indeed increased from HKD48,564,00 in FY2015 to over HKD91,000,000 in FY2016.

The basis to estimate the revenue portion attributable to games software, games hardware & accessary, IT products and sports shoes & trendy goods has taken reference to the actual contribution of the above four segments in FY2015/2016.

The revenue growth rates in FY2017/2018, FY2018/2019, FY2019/2020 and FY2020/2021 are projected to be 50%, 40%, 20% and 10% respectively, assuming dwindling growth rate as the business growth of the Target Subsidiary stabilizes.

COST

Value-added tax and Income tax

Tax expenses of around of 16.5% of gross revenue were applied in the discounted cash flow analysis.

Sales & Distribution expenses

Sales & Distribution expense includes (i) carriage outwards; (ii) bank charge; (iii) internet expenses; and (iv) transportation, etc. The percentage of Sales & Distribution expenses to the revenue in the 5-years forecasting period is 0.148%, which has taken reference to the actual percentage in FY 2016 accordingly.

Administrative expenses

Administrative expense includes (i) marketing and miscellaneous expense; (ii) depreciation; (iii) entertainment and gifts expense; and (iv) salaries and staff welfare, etc. The percentage of Administrative expenses to the revenue in the 5-years forecasting period is 1.026%, which has taken reference to the actual percentage in FY2016 accordingly.

Capital expenditure

Management assumed that insignificant capital expenditure would be required for trading of video games, game hardware, accessary, IT products and other trendy goods in the projection period.

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LETTER FROM THE BOARD

WORKING CAPITAL

Due to the nature of online service business, no substantial amount of inventory is required. Thus, only certain account receivable is projected by the Target Subsidiary. Accounts receivable days are the number of days that the revenue from the customer may be outstanding before it is collected. Based on the Target Subsidiary accounting policy adopted, revenue of the selling of the products is recognised and become due once the clients confirmed the order of the receipts through the online website. However, the Target Subsidiary also advised that customers typically need certain time to process the payment instruction for the buying the products, thus, accounts receivable was assumed in the valuation model. As advised by the Target Subsidiary, customers who approached the Target Subsidiary were typically looking for more convenient source of trading games products and fast closing via the internet platform. Therefore, customers generally had tendency to complete the transaction as quickly as possible and the average trade receivable days taken reference from FY2016 was used to derive the expected accounts receivable in the projection period. In FY2016, 73.3% of the trade receivables day was below 30 days, 26.5% was in between 31-90 days, with the remaining 0.2% over 90 days. As a result, the average receivable day adopted in the projection period is 30 days.

TERMINAL VALUE

Having estimated the free cash flow produced over the forecast period from March 2017 to March 2021, we need to come up with a reasonable idea of the value of the Target Subsidiary’s cash flows after that period. There are several ways to estimate a terminal value of cash flows, but one common method is to value the company as a perpetuity using the Gordon Growth Model. The model uses this formula:

Terminal Value = Final Projected Year Cash Flow X (1 + Long-Term Cash Flow Growth Rate)/ (Discount Rate – Long-Term Cash Flow Growth Rate)

LONG-TERM CASH FLOW GROWTH RATE

Long-term cash flow growth rate is assumed to be approximately 3% per year with reference to the historical inflation rate in Hong Kong where the business of the Target Subsidiary is operated.

Conditions precedent

Completion is conditional upon the satisfaction (or waiver, if applicable) of, inter alia, the following conditions precedent:

• i. the GEM Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consideration Shares and the Conversion Shares;

• ii. the passing of the resolution(s) by the Shareholders at the EGM to approve the Agreement and the transactions contemplated thereunder, including but not limited to, the allotment and issuance of the Consideration Shares and the Conversion Shares to the Vendor;

• iii. the Company having been satisfied with the results of the due diligence conducted by the Company on the Target Group;

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LETTER FROM THE BOARD

• iv. no event having occurred since the date of the Agreement to the Completion Date, the consequence of which is to materially and adversely affect the financial position, business or property, results of operations or business prospects of the Target Group;

• v. no material breach of the warranties and the warranties remaining true and accurate in all respects and not misleading at Completion as if repeated at Completion and at all times between the date of the Agreement and Completion, and the Vendor having complied with all of its obligations under the Agreement;

• vi. all licences and consents necessary for the operations of the Target Group remain valid and subsisting up to and after the Completion to the satisfaction of the Company; and

• vii. the Company has received a valuation report on the Target Company prepared by an Independent Valuer appointed by the Company in form and substance satisfactory to the Company.

If the above conditions have not been fulfilled by the Vendor (or waived by the Company, except conditions (i) and (ii), which are not waivable) on or before the Long Stop Date, the Agreement shall lapse and thereafter neither party shall be bound to proceed with the sale and purchase of the Sale Share, save for any antecedent breaches of the terms of the Agreement. As of the Latest Practicable Date, the Company does not have any intention to waive any of the above conditions.

As at the Latest Practicable Date, apart from the conditions (iii) and (vii), all other conditions have not been satisfied.

Completion

Subject to fulfillment (or waiver, as the case may be) of the conditions precedent as stated above on or before the Long Stop Date, the Completion shall take place within five Business Days after the fulfilment (or waiver, as the case may be) of the last of the conditions precedent as stated above.

Upon Completion, the Target Group will become wholly-owned subsidiaries of the Company and the consolidated financial results of the Target Group will be consolidated into the Group’s financial statement.

CONVERTIBLE BONDS

Principal terms of the Convertible Bonds

The following is a summary of the principal terms of the Convertible Bonds:

Principal amount : a principal amount of HK$42,067,127.53. Maturity Date : the date falling on the expiry of a 5 years’ period commencing from the date of issue of the Convertible Bonds. Conversion Price : HK$0.073 per Conversion Share (subject to adjustment).

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LETTER FROM THE BOARD

• Interests : zero%.

Conversion period

• : the period commencing from the date of issuance of the Convertible Bonds and ending on the date which falls on the Business Day immediately before Maturity Date, both dates inclusive.

• Conversion Restriction : No conversion shall be made by the bondholders if such conversion shall trigger off a mandatory offer under Rule 26 of the Takeovers Code on the part of the bondholders who exercise the conversion right or shall cause the public float of the Company unable to meet the requirement under the GEM Listing Rules.

• Conversion Rights : Each bondholders shall have the right, exercisable during the Conversion Period, to convert the whole or any part (in multiples of HK$1,000,000) of the outstanding principal amount of a Convertible Bonds held by such bondholders into such number of Conversion Shares as will be determined by dividing the principal amount of the Convertible Bonds to be converted by the Conversion Price in effect on the date of conversion.

No fraction of a Conversion Share shall be issued on conversion of the Convertible Bonds.

Ranking

• : Shares converted upon exercise of the Conversion Rights shall rank pari passu in all respects with all other existing Shares at the date of conversion and all Conversion Shares shall include rights to participate in all dividends and other distributions.

• Transferability

• : None of the Convertible Bonds (nor any part of the Convertible Bonds) can be transferred without the prior written consent of the Company.

Subject to the abovementioned, any transfer of the Convertible Bonds shall be in respect of the whole or any part (in an amount not less than HK$1,000,000) of the outstanding principal amount of the Convertible Bonds.

Adjustment of

• : (i) consolidation and subdivision;

the Conversion Price

If and whenever there shall be an alteration to the nominal value of the Shares as a result of consolidation or subdivision, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such alteration by the following fraction:–

A

B

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LETTER FROM THE BOARD

where

• A is the nominal amount of one Share immediately after such alteration; and

• B is the nominal amount of one Share immediately before such alteration.

Such adjustment shall become effective from the day on which such consolidation or subdivision becomes effective.

• (ii) capitalization of profits or reserves

If and whenever the Company shall issue any Shares credited as fully paid to the Shareholders by way of capitalization of profits or reserves (including any share premium account and/or capital redemption reserve), other than Shares issued in lieu of the whole or a part of a cash dividend, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately before such issue by the following fraction:–

==> picture [30 x 25] intentionally omitted <==

where

• A is the aggregate nominal amount of the issued Share immediately before such issue; and

• B is the aggregate nominal amount of the issued Share immediately after such issue.

Such adjustment shall become effective from the day of such issue of Shares.

Listing

Redemption

• : No application will be made by the Company for listing of the Convertible Bonds. Application will be made by the Company to the GEM Listing Committee for the listing of, and permission to deal in, the Conversion Shares.

• : Unless previously redeemed, converted, purchased or cancelled, the Company will on the Maturity Date, redeem the Convertible Bonds at 100% of its principal amount.

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LETTER FROM THE BOARD

The Company have the right, at its option, to redeem the whole or any part (in multiples of HK$1,000,000) of the outstanding principal amount of the Convertible Bonds before the Maturity Date by giving notice to the bondholders in respect of part or all of the Convertible Bonds held by the bondholders.

• Event of default : If any event of default set out in the terms and conditions of the Convertible Bonds occurs, the bondholders may give notice to the Company that the Convertible Bonds together with the interest accrued thereon will become immediately due and repayable.

Voting rights

• : Other than meetings of the bondholders, the bondholders will not have any right to attend or vote at any meeting of the Company by virtue of them being Bondholder, and until and unless they have converted all or part of their Convertible Bonds into Shares entitling holders to attend or vote at the meetings of the Shareholders.

Ranking of the Convertible Bonds

The Convertible Bonds constitute general and unsecured obligations of the Company and rank equally among themselves and with all other present and future unsecured and unsubordinated obligations of the Company.

Restriction of the Convertible Bonds

Due to the current conversion restriction of the Convertible Bonds, the Vendor is restricted to increase its shareholding of the Company up to 30% or more through Conversion Shares. As at the Latest Practicable Date, the Vendor has no present intention to convert the Convertible Bonds into the Conversion Shares upon the Completion of the Transaction.

THE SPECIFIC MANDATE

The Consideration Shares and Conversion Shares (which may fall to be allotted and issued upon the exercise of the conversion rights attaching to the Convertible Bonds) will be allotted and issued pursuant to the Specific Mandate to be sought at the EGM.

APPLICATION FOR LISTING

The Company will apply to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Consideration Shares and the Conversion Shares. The Consideration Shares and the Conversion Shares, when allotted and issued, will rank pari passu in all respects with the existing Shares in issue.

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LETTER FROM THE BOARD

INFORMATION ON THE VENDOR AND THE TARGET GROUP

As advised by the Vendor, Mr. Lam is the founder of the Target Group, and the Vendor is a limited liability company incorporated in the BVI and its principal business activity is investment holding. The Target Company is a limited liability company incorporated in the BVI, which principal activity is investment holding.

As advised by the Vendor, the Target Subsidiary is a limited liability company incorporated in Hong Kong by the Vendor on 11 September 2012 and has more than 3 years of operating history, which is directly wholly-owned by the Target Company and its principal activity is trading of games, console games, and games-related accessories and products in Hong Kong.

The following diagram illustrates the corporate structure of the Company and the Target Group immediately after Completion:

==> picture [211 x 341] intentionally omitted <==

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

Company
(Cayman Islands)
100%
Target Company
(BVI)
100%
Target Subsidiary
(Hong Kong)
----- End of picture text -----

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LETTER FROM THE BOARD

Business model of the Target Subsidiary

The Target Subsidiary principally acts as a distributor with the focus in sales and distribution of the console games and relevant games accessories. The distribution channel for wholesale and retail customers are the same, both are via, amongst others, online channels such as Facebook, Yahoo, Taobao (淘寶), eBay, phone or email. Generally, the Target Subsidiary would identify suppliers of those selected products. After evaluating the market demand, it will negotiate to buy in bulk so as to obtain a better discount from the suppliers (as a distributor, the Target Subsidiary can generally obtain a wholesale price from the suppliers on top of the bulk discount). In the event that the Target Subsidiary receives customer’s order of particular items which it has no inventory, upon receipt of such order (regardless online or offline orders) and to avoid stocking up slow-moving products, the Target Subsidiary will place back to back order with the same particulars with the relevant suppliers.

Since games products has a relatively short product life cycle, though the Target Subsidiary would purchase in bulk, based on the market norm in Hong Kong, it would not enter into any purchase and/or offtake agreement nor make any ongoing commitment with its suppliers (in relation to quantity purchased or otherwise) on any particular product. As such, the Target Subsidiary has no contingent liabilities arisen from purchase commitment. Besides, due to short product life cycle of the games products, the Target Subsidiary would review its inventory level at the end of each month, and perform clearance sales on slow-moving stock and unsold item regularly at discount or at cost to ensure the liquidity of the working capital.

The Target Subsidiary operating procedures are (i) regularly reviewing and obtaining the products launching information from the games suppliers; (ii) purchase plan will be made after evaluation of the marketability of the products internally and obtains the pro forma sales form the major customers (wholesalers); (iii) after the purchase plan is made Target Subsidiary will negotiate the bulk discount and the minimum order quantity with the suppliers accordingly, once negotiation is finalized, order will be made; (iv) after the formal purchase order made, products promotion and marketing activities will be launched in the online shopping website and physical marketing promotions activities. Such marketing activities will through various wholesalers on traditional sales and distribution channels also may include online channels and other business network; (v) upon products launching date, logistics services provider will deliver the purchase products to Target Subsidiary’s warehouse and it will firstly deliver to all those pre-ordered wholesale customers and retail customers; and (vi) once the product officially launched, customers will visit the website or directly contact the Target Subsidiary to place orders. All orders (include online and offline) will be collectively handled by the sales administration staff. After the order is confirmed and obtained all the delivery information by the sales administration staff, the Target Subsidiary will prepare delivery after payment arrangement from the customers is confirmed. Based on the current practice, most of the retail customers will appoint delivery agent on their own and most of the wholesale customers will pick up the products from the Target Subsidiary to avoid time delay due to delivery.

Gross profit of the Target Subsidiary is mainly derived from the price difference between the selling price and the purchase price of the Target Subsidiary paid to the suppliers. Through the last three years’ operation, the Target Subsidiary has established good business reputation and relationship among the customers and suppliers.

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LETTER FROM THE BOARD

As advised by the Vendor, there is no restrictions imposed by the product manufacturer to sell the products directly through the online, offline and other distribution channels.

Products

The Target Subsidiary mainly offers games and games-related products to its customers, including (i) games contents, (ii) console games, and (iii) games-related accessories and products.

(i) Games contents (software)

Games contents consist of packaged games providing content. The content is delivered using a physical delivery medium, such as discs.

Games contents are typically developed by the game development studios that publish and manage their games through publishers. In the current global games market, although there are a lot of game content suppliers, the game publishing market is continue to be led by a small number of global publishers, including Activision Blizzard, Capcom, Microsoft, Nintendo, Sega, Sony, Take2, Ubisoft and Warner Bros.

As the Target Subsidiary has its sourcing channel through three key suppliers accounted for a substantial portion of the Target Subsidiary’s total cost of sales for the for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and 11 months ended 29 February 2016, amounted to approximately HK$44,354,000, HK$41,405,000 and HK$63,584,000 respectively, which represent 83.8%, 91.6% and 79.8% of the total cost of sales.

As advised by the Vendor, the Target Subsidiary does not need any authorisation nor have received any refrainment from those suppliers to sales and distribute their products. As further advised by the Vendor, the Target Subsidiary has the legal right to sell the products online and/ or any place other than Hong Kong, subject to the laws of the relevant jurisdiction(s) that the products are sold to. To the best knowledge of the Vendor, those suppliers have appointed authorized/unauthorised online retailers other than the Target Subsidiary.

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LETTER FROM THE BOARD

(ii) Console games (hardware)

The Target Subsidiary sells consoles (such as Xbox One, Playstation 4, etc.) and handhelds (such as 3DS, Playstation Vita, etc.) which is a lightweight, portable video game console. Those console hardware are supplied principally by a limited number of global manufacturers, namely Microsoft, Nintendo and Sony. Sales of hardware are generally driven by (i) the introduction of new consoles; (ii) the launch of new games and content; and (iii) reductions in price as the consoles’s life cycle being mature.

(iii) Games-related accessories and products

The Target Subsidiary sells third-party products designed for consoles, tablets and other devices. Accessories for using with consoles consist primarily of controllers and headsets, with values ranging from HK$10 for basic entry level accessories to HK$1,300 for the top of the range headsets. The Target Subsidiary also offers keyboards, headsets, chargers, adaptors and computer mouse devices, among other accessories for tablets and other devices.

Major customers

As advised by the Vendor, all the major customers of the Target Subsidiary are wholesaler which mainly engaged in retail of trading of games and console games. The numbers of wholesale and retail customers of the Target Subsidiary are as follows:

	Wholesale	Retail
	Customers	Customers
For the period from 11 September 2012
(date of incorporation) to 31 March 2014	5	560
For the year ended 31 March 2015	10	698
For the 11 months ended 29 February 2016	16	827

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LETTER FROM THE BOARD

The total revenue of the Target Subsidiary for the 11 months ended 29 February 2016 was approximately HK$83,801,000 and the top five customers are set out below:

Customer Industry Revenue contribution HK$’000 1 Wholesale distributor 20,938 2 Distributor of major video game suppliers 11,158 3 Distributor of major video game suppliers 7,303 4 Retailer 2,987 5 Retailer 2,568 Others Retailers and end-users 38,847 83,801	% 25.0 13.3 8.7 3.6 3.1 46.3
	100

As advised by the Vendor, Customer 1 was also the top-five customer for both the periods from 11 September 2012 (date of incorporation) to 31 March 2014 and the year ended 31 March 2015.

As advised by the Vendor, none of the top-five customers is related to the Vendor nor any connected person of the Company.

Customer 2 and Customer 3 are two of the top 5 suppliers (i.e. Supplier 4 and Supplier 5, respectively, as stated in the sub-section headed “Major suppliers” below) for the 11 months ended 29 February 2016. As advised by the Vendor, it is the market practice for a distributor in the video game market to have particularly closer relationship with some of the suppliers from whom the distributor can have better terms, such as lower prices, more flexible payment terms and priority in product availability. The Target Subsidiary, Customer 2 and Customer 3 each has its own close suppliers.

Since some games publishers and suppliers have better relationships with the Target Subsidiary, they offer better terms and discounts on specific brands and games products. As such, Customer 2 and Customer 3 may enjoy better terms on their purchase of such games with the Target Subsidiary, instead of making direct purchase with such games publishers, and vice versa.

When the Target Subsidiary directly orders certain brands or games products from those games publishers and suppliers which customer 2 and customer 3 have better relationship with, the Target Subsidiary may not enjoy better terms than ordering the same with Customer 2 and Customer 3.

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LETTER FROM THE BOARD

For the 11 months ended 29 February 2016, trade receivables of the Target Subsidiary was amounted to approximately HK$5,197,000, representing an increase of HK$3,744,000 or 258% as compared with HK$1,453,000 as at 31 March 2015. As advised by the Vendor, it is the Target Subsidiary’s practice to make clearance sale from time to time and in particular at year end. As a result, the accounts of the Target Subsidiary have not reflected any stock held by the Target Subsidiary. The increase in trade receivables was mainly due to the significant increase in sales from the post Chinese New Year clearance sale of approximately HK$3,293,000 for the last 7 days before 29 February 2016 which caused the trade receivables turnover days increased from approximately 8 days for the year ended 31 March 2015 to approximately 13 days for the 11 months ended 29 February 2016. All the trade receivables of HK$5,197,000 has been subsequently settled as at the Latest Practicable Date. As such, the Target Subsidiary has no credit risk issue for the 11 months ended 29 February 2016.

As advised by the Vendor, one of the existing employees of the Target Subsidiary was assigned to handle (as an agent of the Target Subsidiary) all the Target Subsidiary’s sales in Taobao (淘寶) and certain wholesalers.

Since such employee dealt with the customers directly and kept her own accounting records, she was previously classified as a wholesaler of the Target Subsidiary and, based on the aggregate sales amount made from the sales in Taobao (淘寶) and certain wholesalers, she was previously shown as the largest customer of the Target Subsidiary for the eleven months ended 29 February 2016.

Nevertheless, after further discussion with the auditors of the Company and the Vendor, and having verified the documents and information further provided by the Vendor, it is found that transactions handled by such employee throughout the reporting period was of agent nature. In assessing whether such employee is acting as an agent of the Target Subsidiary, the auditors of the Company have taken into accounts the followings:

• (i) such employee has no primary responsibility for providing the goods or services to the customers or for fulfilling the orders placed in Taobao (淘寶);

• (ii) such employee does not bear any inventory risk before or after the customer orders, during delivery or on return;

• (iii) such employee has no power to determine the selling price of products, either directly or indirectly; and

• (iv) such employee bears no customer’s credit risk for the amount receivable from the customers.

Since such employee does not have any exposure to the significant risks and rewards associated with the sale of goods of the Target Subsidiary, the auditors of the Company considered such employee is acting as an agent of the Target Subsidiary.

As such, the Vendor and the auditors of the Company agreed the that the transactions handled by this employee are now being reclassified as the agency sales of the Target Subsidiary and the customers of this existing employee, now treats as the customers of the Target Subsidiary.

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LETTER FROM THE BOARD

As advised by the Company, the Company intends to continue the aforesaid arrangement with this employee of the Target Subsidiary.

Major suppliers

As advised by the Vendor, the Target Subsidiary substantially sourced its products from more than 10 suppliers. The total cost of sales of the Target Subsidiary for the 11 months ended 29 February 2016 was approximately HK$79,722,000 and the top five suppliers are set out below:

Suppliers 1 2 3 4 5 Others	Cost of sales contribution HK$’000 25,998 24,003 13,583 7,812 3,841 4,485 79,722	% 32.6 30.1 17.1 9.8 4.8 5.6
		100

As advised by the Vendor, this is no material agreement entered into between the Target Group and the suppliers of the Target Subsidiary.

As advised by the Vendor, none of the top-five suppliers is related to the Vendor nor any connected person of the Company.

Marketing strategies

The Target Subsidiary’s strategy is to drive profitable growth and enhance value by continuing to build on its experience as a distributor of video games and games accessories in Hong Kong. Based on the Target Subsidiary’s experience, wholesale customers are the major contributors and therefore to ensure the competitiveness, the Target Group continues to focus on ensuring the smoothness of the product supply, logistics and maintain a reasonable discount compare to the retail market price for the wholesale customers.

Since the Target Subsidiary’s incorporation up till 29 February 2016, the Target Subsidiary offers a total of 181 games to its customers respectively, which are sourced from the suppliers through the Target Subsidiary’s business network. The fast growth and success of the Target Subsidiary in the last three financial years was mainly rely on the (i) good business reputation, (ii) the close connection with the supplier, (iii) the experience, insight and knowledge of Mr. Lam of the Target Group in the wholesale and retail games market in Hong Kong.

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LETTER FROM THE BOARD

To maintain the market presence, the Target Subsidiary would carry out marketing promotion through (i) regular meeting with both the suppliers and the wholesaler customers to update the launching of new products and (ii) posting promotion information of its games products on the online channels, such as Facebook and Taobao and (iii) offering promotion and marketing gifts and materials including posters and T-shirts to its customers (both wholesaler and retail customers). The Vendor believes the aforesaid marketing arrangements would enable the Target Subsidiary to maintain the business relationship with its wholesaler customers and also create be an “up-to-date game shop” image for the gamers to the customers, which distinguishes itself from other distributors.

To assess the “up-to-date game shop” image created by the Target Subsidiary, the Company has reviewed the game launch summary, which was provided by the Target Subsidiary, in relation to the timing of game launched throughout the past 35 months and satisfied with the Target Subsidiary’s “upto-date game shop” image after having found that the Target Subsidiary could generally offer new games for sale around the official game launch dates.

Further, the Target Subsidiary has been able to procure timely logistics and reasonable discount from its suppliers, which the Vendor believes is a key competitive advantage for the Target Subsidiary.

In light of (i) repeated orders placed by the customers, (ii) strong relationship with the suppliers; and (iii) no bad debts resulted from non-payment by the customers throughout the past 35 months, the Board is of the opinion that the marketing strategies of the Target Subsidiary on the wholesale customers is effective.

Competitive advantages

The Target Subsidiary distinguishes itself from other distributors (both online and offline) and deal with the competition from other online retailers by the following key competitive strengths:

Strong wholesale client base

The Target Subsidiary has maintained a client database for sales management. The quality services provided by the Vendor (including smoothness of products logistics and ongoing market information posted on online channels) allow the Target Subsidiary to maintain long-term business and working relationships with their wholesale customers. Since the Target Subsidiary purchases the products in bulk, the bulk discount obtained from the suppliers allows the Target Subsidiary to offer a more competitive price for its products to the customers.

Strong relationship with the suppliers

The Vendor believes that the continuous growth of the turnover of the Target Subsidiary demonstrated its distribution ability to its suppliers. The Vendor believes the connection with the suppliers shall focus on (i) establishment of an efficient distribution network, (ii) a continuous growth in purchase orders and (iii) short settlement time, which shall create positive reputation for the Target Subsidiary, hence strengthen the cooperation and supplier relationship.

The Vendor has known Supplier 1 since its incorporation and has established business relationship with Supplier 1 for the supply of games content. In 2014, the Vendor began sourcing from Supplier 3 to diversify the supply of games content and since then Supplier 3 has become one of the major suppliers of the Target Subsidiary.

In 2015, the Vendor started to contact Supplier 2 and explore business dealings with Supplier 2 for the supply of both games content and console games. As advised by the Supplier 1 and Supplier 2 during the due diligence interview, these two Suppliers are satisfied with the overall business relationship with the Target Subsidiary and expect to continue doing business with the Target Subsidiary, despite of its short operation history.

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LETTER FROM THE BOARD

Experienced team

Mr. Lam was graduated from Hong Kong Shue Yan College (currently known as Hong Kong Shue Yan University) in 1995 with a Diploma in English Language and Literature and has a Master of Business Administration postgraduate degree from the University of Lincoln. Prior to his current role as the director of the Target Subsidiary, Mr. Lam was the sales manager of several game trading companies and was responsible for sales and distribution of computer games and software, console games and games related products.

Mr. Lam, has more than 12 years of experience in trading, wholesale and retail of video game in Hong Kong. Mr. Lam also has experience in startup and business development in southeast Asia, such as Taiwan, Malaysia, China and Philippines. The Target Subsidiary will benefit from Mr. Lam’s experience, insight and knowledge of the wholesale and retail gaming market in Hong Kong together with his good relationships with the key suppliers.

In 2006 to 2008 Mr. Lam stationed in Philippines as a business development manager and was responsible to explore new business opportunities and start up new investment. Through these two years of business development, Mr. Lam has built up his personal and business relationship with the local business community and government departments, some of whom have been introduced to the Company by Mr. Lam for potential business cooperation in relation to the natural resources and commodities trading. Due to Mr. Lam’s experience and connection in Philippines and Malaysia, he was engaged as the consultant of the Company to provide advisory service in relation to the business development relating to the natural resources and commodity trading in the region of Southern East Asia.

Apart from Mr. Lam, the Target Subsidiary is supported by a sales administration team of 3 members. 2 of them possess more than 5 years’ experience in the role of sales administrative assistant. Such sales administration team is responsible for providing administrative support and is able to cater for the daily sales operation need.

Set out below are the company secretary and directors who held office for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and 11 months ended 29 February 2016 and up to the date of this Circular are:

Company secretaries of the Target Subsidiary

	Appointed on	Resigned on
Chan Chi Fai David	1 March 2016	N/A
Ho Chi Kee Franky	11 September 2012	29 February 2016
Directors of the Target Subsidiary
	Appointed on	Resigned on
Ng Ka Ming	1 March 2016	N/A
Shiu Shu Ming	1 September 2014	29 February 2016
The Vendor	11 September 2012	N/A

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LETTER FROM THE BOARD

As advised by the Vendor, Mr. Ho Chi Kee, Franky and Mr. Shiu Shu Ming resigned as the director and the company secretary of the Target Subsidiary respectively with effect from 29 February 2016, due to their personal commitments on other businesses.

The Vendor is wholly owned by Mr. Lam and is the director of the Target Subsidiary since its incorporation. The above changes of the directors and company secretary do not have any impact to the Target Subsidiary’s business and operation because none of them is involved in the existing operation of the Target Subsidiary.

In view of the above, the Vendor believes that the business reputation of the Target Subsidiary and its close relationships with key suppliers can enable to Target Subsidiary to ensure its suppliers to continue relying on the Target Subsidiary and not to reach out to seek for other customers, which may affect the stable supply of products to the Target Subsidiary. The marketing arrangements as stated in the sub-paragraph headed “Marketing strategies” and the customers’ reliance, which represents an additional value to the customers. Further, it is the market practise for the Target Subsidiary not to enter into any exclusive supply agreement with its suppliers. It will also translate into commercial support and help the Target Subsidiary to negotiate for better bulk discount.

Expansion and development

Broaden product and service offering

In keeping with the Target Subsidiary’s goal to be the key player of the video gaming industry in Hong Kong, the Target Subsidiary focus on broadening its products line offerings to drive additional value to the consumers and ensure it can accommodate the evolving needs of consumers from Hong Kong and the PRC.

Deliver a better service by improving the sales channel

Although the sale to wholesale customers are the major contributor for the turnover of the Target Subsidiary, the online sales turnover is increased from the year ended 31 March 2014 to the 11 month ended 29 February 2016, amounted to approximately HK$5,122,000 and HK$21,373,000 respectively. In the year ahead, the Target Subsidiary will continue to rationalise and optimise the footprint and planning to further improve its own online selling platform. The website will improve the on-line store capabilities which allow the Target Subsidiary to promote a greater number of products and show rich media content. This will also allow the Target Subsidiary to implement promotions more efficiently.

Diversification of product line

On 15 March 2016, the Target Subsidiary entered into a cooperation agreement (the “ Xinda Agreement ”) with Beijing Xinchang Xinda Technology Development Co. Ltd. (“ Xinda ”), a company incorporated in the PRC in 2006, which provides e-commerce outsourcing, logistics, online distribution and integrated marketing solutions for domestic and international brands. As at the Latest Practicable Date, Xinda owns the operating rights (including the selling rights) of over 50 domestic and international brands. Xinda also provides e-commerce outsourcing and integrated marketing solutions to those brands. Those brands (including international phone manufacturers and apparel brands) offer trendy products including but not limited to home appliances, digital products, computers, toys, mobile phones and clothes. Pursuant to the Xinda Agreement, the Target Subsidiary was appointed as one of the authorized distributors (including online distribution) and was vested with the non-exclusive rights of distribution for the trendy products of the designated brands under the list agreed by Xinda for five years. Under the terms of the Xinda Agreement, the minimum amount of stock provided by Xinda to the Target Subsidiary for each year is targeted at RMB30 million.

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The said RMB30 million distribution target provided by Xinda would constitute approximately 66% of the cost of sales for the year ended 31 March 2015 and such percentage dropped to 37% for the 11 months ended 29 February 2016. The Vendor expects the percentage will continue to drop in the years to come with the expanding operation of the Target Subsidiary. For avoidance of doubt, the sales target of RMB30 million with Xinda is a forecast sales target for the Target Subsidiary and the Target Group would not need to bear any purchase commitment, contingence liability or compensation under the Xinda Agreement.

Due diligence performed on the Target Group

The Group performed due diligence in relation to the Acquisition, including the follows:

• (i) reviewing of audited financial information of the Target Subsidiary for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and the management accounts for the 11 months ended 29 February 2016;

• (ii) analysing and evaluating financial performance and financial position of the Target Subsidiary;

• (iii) reviewing of constitutional documents, licences and permits of the Target Subsidiary;

• (iv) reviewing the business model, management structure and business operation of the Target Subsidiary; and

• (v) having engaged of the reporting accountant to review on the financial information of the Target Subsidiary.

Capital Expenditure

As per the Vendor, the major capital expenditure for the expansion and development of the Target Subsidiary will focus on the developing its own website with which the estimated annual expenditure shall be no more than HK$200,000.

Financial information of the Target Group

As advised by the Vendor, due to (i) the short operational history of the Target Company since its incorporation on 1 January 2016; and (ii) no business activities of the Target Company other than investment holding of the Target Subsidiary, the financial performance of the Target Company is insignificant.

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Set out below are financial information of the Target Subsidiary, as extracted from its audited consolidated financial statements, for the periods from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015, eleven months ended 29 February 2016 and the unaudited consolidated financial statements for the year ended 31 March 2016 provided by the Vendor (for illustration purposes only):

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Revenue Cost of sales Gross profit Other revenue Administrative expenses Profit before tax Income tax expense Profit and total comprehensive income for the period/year Dividends	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 (Audited) 55,560 (52,934) 2,626 193 (2,392) 427 (81) 346 –	For the year ended 31 March 2015 HK$’000 (Audited) 48,564 (45,226) 3,338 196 (2,803) 731 (106) 625 –	For the period from 1 April 2015 to 29 February 2016 HK$’000 (Audited) 83,801 (79,722) 4,079 182 (1,044) 3,217 (515) 2,702 2,000	For the year ended 31 March 2016 HK$’000 (Unaudited) 96,487 90,779 5,708 219 (1,148) 4,779 (515) 4,264 2,000

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STATEMENTS OF FINANCIAL POSITION

NON-CURRENT ASSET Property, plant and equipment CURRENT ASSETS Trade receivables Deposits Amount due from a director Tax prepaid Bank balances CURRENT LIABILITIES Trade payables Receipts in advance Accrued expenses Amount due to a director Tax payable NET CURRENT ASSETS NET ASSETS CAPITAL AND RESERVE Share capital Retained earnings TOTAL EQUITY	At 31 March 2014 HK$’000 (Audited) 113 662 4 – – 3,149 3,815 1,610 252 1,537 101 81 3,581 234 347 1 346 347	At 31 March 2015 HK$’000 (Audited) 76 1,453 4 154 – 3,599 5,210 2,162 422 1,654 – 76 4,314 896 972 1 971 972	At 29 February 2016 HK$’000 (Audited) 41 5,197 4 173 – 1,160 6,534 2,676 565 1,259 – 401 4,901 1,633 1,674 1 1,673 1,674	At 31 March 2016 HK$’000 (Unaudited) 41 3,300 4 173 106 3,956 7,539 3,790 – 39 – – 3,829 3,710 3,751 1 3,750 3,751

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INDUSTRY OVERVIEW

Under the impetus of “Internet +” strategy, there has been a rapid development of e-commerce in the PRC. According to the National Bureau of Statistics of China, online retail sales in 2015 reached approximately RMB3,877 billion, representing an increase of approximately 33.3% from the corresponding period in 2014, among which, online retail sales of tangible goods reached approximately RMB3,242 billion. According to Ministry of Commerce of the PRC, the value of online retail sales in the PRC maintained as the first place in the world and China is the fastest growing and largest-scale nation in online sales of tangible goods.

According to the research data of 中國電子商務研究中心 (China E-Commerce Research Center of the PRC), as of December 2015, the number of China’s online shopping users reached 413 million and the number of China’s mobile online shopping users reached approximately 340 million, representing an increase of approximately 14.3% and 43.9%, respectively, from the corresponding period in 2014.

As advised by the Vendor, approximately 38.9%, 19.7% and 41.8% of total revenue of the Target Subsidiary for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and 11 months ended 29 February 2016 respectively were derived from third party online platform in the PRC. With reference to the research data of China Internet Watch, the e-commerce market in 2018 is expected to reach USD1.57 trillion, and the PRC has become the world’s largest e-commerce market. It is expected that e-commerce is a fast growing industry and the market will expand further. As such, the Vendor expects that there will be an increasing demand for online trading of games, games-related accessories and products which in turn positively affect the business environment of the Target Subsidiary in the future.

To the best knowledge of the Company, the regulatory regime in Hong Kong relating to e-commence is less stringent to the same in the PRC. Therefore, the compliance cost will be lower in Hong Kong. The increasing disposable incomes add to Hong Kong residents’ purchasing power and buying luxury goods online from other countries. According to an article from GO-Globe, entitled ‘‘E-Commerce in Hong Kong – Statistics and Trends’’ and dated 18 May 2015, 80% of Hong Kong consumers use internet to research non-consumable products or transact online and almost 50% of Hong Kong’s online consumers are prepared to spend more online in the next two years.

The Future of Video Game Consoles

According to an article of PricewaterhouseCoopers entitled “Global entertainment and media outlook 2016-2020”, the future of video game industry (including (i) computer games, (ii) console games, (iii) social/casual games and (iv) advertising) has been forecast in the following three segments (global, China and Hong Kong):

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Global

The global video game market was worth US$71.27 billion in 2015 and is expected to grow through the forecast period at 4.8% CAGR to reach US$90.07 billion in 2020. According to the said article, (i) computer gaming revenue will reach US$33.59 billion in 2020, from US$25.19 billion in 2015, at a 5.9% CAGR, (ii) console gaming revenue will reach US$29.71 billion in 2020, up from US$26.34 billion in 2015, at a 2.4% CAGR, (iii) social/casual gaming revenue will reach US$22.12 billion in 2020, up from US$16.80 billion in 2015, at a 5.7% CAGR and (iv) advertising revenue will reach US$4.65 billion in 2020, up from US$2.94 billion in 2015, at a 9.6% CAGR.

In 2020, it is expected (i) computer games will represent at a 37.3% of overall revenue, (ii) console games will represent at a 33.0% of overall revenue, (iii) social/casual games will represent at a 24.6% of overall revenue and (iv) advertising will represent at a 5.1% of overall revenue.

China

The video game market in China was US$8.98 billion in 2015 and it is expected to grow through the forecast period at a CAGR of 7.4% to reach US$12.85 billion in 2020 where: (i) computer gaming revenue will reach US$8.55 billion in 2020, up from US$6.12 billion in 2015, at a 6.9% CAGR, (ii) console gaming revenue will reach US$15 million in 2020, up from US$5 million in 2015, at a 25.4% CAGR, (iii) social/casual gaming revenue will reach US$3.87 billion in 2020, up from US$2.61 billion in 2015, at a 8.1% CAGR and (iv) advertising gaming revenue will reach US$413 million in 2020, up from US$239 million in 2015, at a 11.5% CAGR.

In 2020, it is expected (i) computer games will represent at a 66.5% of overall revenue, (ii) console games will represent at a 0.1% of overall revenue, (iii) social/casual games will represent at a 30.1% of overall revenue and (iv) advertising will represent at a 3.2% of overall revenue. Console games only contribute an insignificant percentage because there was a ban on console games which was subsequently lifted in 2014 while such ban left the console game at disadvantage.

Hong Kong

The video game market in Hong Kong was US$421 million in 2015 and it is expected to grow through the forecast period at a CAGR of 5.7% to reach US$555 million in 2020 where: (i) computer gaming revenue will reach US$231 million in 2020, up from US$167 million in 2015, at a 6.6% CAGR, (ii) console gaming revenue will reach US$227 million in 2020, up from US$1755 million in 2015, at a 5.4% CAGR, (iii) social/casual gaming revenue will reach US$83 million in 2020, up from US$70 million in 2015, at a 3.3% CAGR and (iv) advertising gaming revenue will reach US$14 million in 2020, up from US$8 million in 2015, at a 11.1% CAGR.

In 2020, it is expected (i) computer games will represent at a 41.6% of overall revenue, (ii) console games will represent at a 41.0% of overall revenue, (iii) social/casual games will represent at a 14.9% of overall revenue and (iv) advertising will represent at a 2.5% of overall revenue.

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On the other hand, consumers increasingly adopt new consoles (hardware) and games (software). New products will need to keep up with coming technological advancements, like augmented reality (AR) and virtual reality (VR) headsets, which are expected to fully enter the market starting in 2016. With the likelihood that consumers will adopt new technologies, like ultra-high definition televisions and augmented reality (AR) or virtual reality (VR) headsets, development of consoles will need to find new ways to adapt to this technology. This will mean more advanced versions of existing consoles or shortening the life of this next generation cycle of the consoles.

Based on the above information, the console games industry in global, China and Hong Kong has been forecast to have a growth of 2.4%, 5.4% and 5.4% respectively, the Directors expect that the business of the Target Subsidiary can ride on the sustainable growth of the console games industry and can maintain its growth on turnover and revenue based on the solid customer base, the solid supplier base and the proposed of the industry as stated above.

REASONS FOR AND BENEFITS OF 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; investment in coal trading business; trading of natural resources and commodities; development and promotion of brands, design, manufacture and sale of trendy fashion merchandises and other consumer products; and money lending and secured financing business.

According to the interim report of the Company for the six months ended 30 September 2015, the recent volatility of the local and global stock markets and the fall in oil and minerals prices as well as the uncertainty in the Chinese and global economy all cast negative impact to the financial and investment markets and the Group’s existing operating environment. On the other hand, it may provide favorable condition to the Group in identifying suitable investment opportunities for diversifying the Group’s business at better terms.

As disclosed in the announcement of the Company dated 12 October 2015, the Group completed acquisition of MD which, amongst others, design, manufacture, produce, market, sales and distribution of bags, storage cases for electronic accessories and components, trendy fashion apparels and accessories in Hong Kong and Asia markets and has good connection with celebrities in Taiwan and Hong Kong.

As disclosed in the third quarter financial results for the period ended 31 December 2015 of the Company, MD has been cooperating with a number of celebrity brands from Taiwan which focus on trendy fashion items among the young generations. In particulars, MD has entered into a cooperation agreement with Subcrew International Limited for development and promotion of the brandname “Subcrew” including the design, manufacturing and sale of trendy fashion merchandises under the brandname “Subcrew” in accordance with the terms and conditions thereof. “Subcrew” is a renowned trendy fashion brand specialized in design and sale of trendy apparels and accessories with its main presence in Asia with over 50 sale outlets located in the PRC, Japan and other countries in the South East Asia.

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MD also has a good connection with celebrities through long term cooperation with engagement formulated case by case in Taiwan and Hong Kong. As such, the Acquisition can provide the synergy between the celebrities and the brands whereby both can obtain wider exposure in media and different sales channels to increase recognition of the brand and the celebrities. Subsequent to the acquisition of MD and with the back of the Company, MD kicked off a number of marketing and promotion campaigns in Taiwan and various other cities in the PRC in relation to its products cross-over with the name of certain Taiwan celebrities.

While reviewing the growth of MD’s operation, the Company is keen to seek for business partner to leverage MD’s advantage, especially in design, manufacture, and produce of the trendy products in the Asia region. The Company believes MD’s existing customer base, production ability and distribution network among the Asia region consisted huge business potential.

In the review of the Acquisition, the Board notices while the business operation of MD (with focus on manufacturing and design) and the Target Subsidiary (with focus on distribution) are different, they share similarities in

• (i) the existing major customers are wholesalers; and the target end-users are young generations,

• (ii) the traditional distribution channel through wholesaler is still dominant, but the growth of online sales is catching up

• (iii) the products for distribution are trendy products with relatively short product life cycle

In light of the above similarities (although the Target Subsidiary does not own any register trademark and also does not have any manufacturing plan or proposed capital investment on its own), the Acquisition shall provide synergies for the operations in the Target Subsidiary and MD through

• (i) combine and enlarge customer base in the online and retail customer and provide potential cross selling benefit for both Target Subsidiaries and MD operation on each other’s distribution network in different geographical focus. (Target Subsidiary focus in Hong Kong and MD is covering HK and other Asia Markets)

• (ii) line up the game publishers and select suitable products with MD by crossover of products and brands through MD’s manufacturing capacity and both MD and the Target Subsidiary’s marketing network and distribution (i) dual brands crossover products, (ii) marketing gift, and (iii) promotion material for the Target Subsidiary through utilizing the OEM and ODM capacity of MD; and

• (iii) enhance marketing efficiency through the cross selling products by sharing of marketing budget and resources

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Going forward, the Target Subsidiary will continue to pursue expansion of its market share in the video gaming industry with the above synergies through organic growth for the long-term sustainable growth of the Target Subsidiary.

Notwithstanding, even though the Target Subsidiary does not own any registered trademarks and there is no plan to expand its manufacturing capacities and to make any capital investment in the Target Subsidiary or MD, the Target Subsidiary can explore new business opportunities with MD through facilitating the cooperation between the suppliers of the Target Subsidiary and the brand customers under the OEM and ODM operation of MD for designing and manufacturing dual brands cross over marketing gifts and materials including posters and T-Shirts to its customers (both wholesaler and retails customers).

Moreover, the Directors are of the view that the Acquisition will diversify and broaden the Company’s business into trading of games, console games and entertainment products apart from the existing trading of natural resources and commodities and hence will provide another source of income to the Group. If the cooperation between the suppliers of the Target Subsidiary and the brand customers of MD is successful, MD will be responsible for the manufacturing of dual brands and crossover products on its OEM and ODM operation with the suppliers of the Target Subsidiary, hence limited additional capital in regard is needed. Dual brands product will be a product with two or more brands, while a crossover product will be a product using the core elements of one brand to match with the core elements of the brand it cooperates with.

As a result of such cooperation, more varieties of products (including the marketing gifts and materials, such as posters and T-Shirts to its customers) will be introduced and the Target Subsidiary can benefit from the same.

As of the Latest Practicable Date, no cooperation has yet been formulated.

Given the Target Subsidiary’s (1) solid customer base and strong supplier relationships; (2) the prospect of the industry as stated in the sub-paragraph headed “The Future of Video Game Consoles”; and (3) continuous profit track record throughout 2014 to 2016, the Board believes that the Acquisition can lead the Company to immediately enter into the fast growing industry of gaming without taking years to build up its own client base and distribution network. As the video games products have a short product life cycle, the Target Subsidiary will not enter any exclusive supply agreement with its suppliers, such policy not only ensure financial flexibility to avoid any order commitment in unpopular and slow moving items, it also enable the Target Subsidiary react promptly on the market’s changes and gives more flexibility for the Target Subsidiary to develop a suitable marketing strategy under fast-growing industry. As such, even the Company has never engaged in the video gaming industry, the Board still considers that the Acquisition will expand the product portfolio and customer base of the Group in a timely manner, thereby increasing its profitability and the overall shareholder value of the Company.

Despite (i) the short operating history of the Target Subsidiary; (ii) the Target Subsidiary has not yet developed (but in the course of developing) its own website, and (iii) the risk factors set out in the paragraphs headed “RISK FACTOR”, and (iv) the Consideration represents a substantial price-toearnings ratio of 62.92 (which is calculated by dividing the Consideration by the net profit after taxation of the Target Subsidiary for the period ended 29 February 2016) and price-to-book ratio of 101.56 (which is calculated by dividing the Consideration by the net asset value of the Target Subsidiary as at 29 February 2016), the Directors consider that the Acquisition (which enables the Company to have full control on and revenue contribution from the Target Subsidiary) and the Consideration (which is to be paid by issuing Convertible Bonds and Consideration Shares with no immediate cash outlay by the Group) are fair and reasonable and in the interests of the Company and its shareholders as a whole, taking into account:

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Market share

The Vendor has built a solid reputation in the video games retail industry since its incorporation in 2012, and has become a reputable distributor in the video games segment in Hong Kong. Upon Completion, the Acquisition is expected to immediately give the Company a reputable foothold in the sector.

Mr. Lam’s expertise

As set out in the sub-section on page 27 headed ‘‘Experienced team’, Mr. Lam possesses extensive experience in the video games retail industry, the Company’s existing management and operational expertise will be strengthened especially in the operation of the sales of trendy fashion and consumer products business segment. Upon Completion, all of the existing employees of the Target Subsidiary are expected to continue to work for the Target Subsidiary. The Company does not have to incur significant economic resources in building a new comparable sales administration team for the sales of trendy fashion and consumer products business segment.

Growth opportunity

The Board is of the view that the demand for games and console games is increasing, where consumers look for new products with technological advancements, and the market potential is therefore sizeable. By bringing in the relevant capabilities through the Acquisition, the Company will be equipped with the necessary know-how by Mr. Lam to expand into this fast growing, high value-added services for customers, thus diversify the products portfolio in the sales of trendy fashion and consumer products business segment. As at the Latest Practicable Date, the Target Subsidiary does not own any patent.

Potential synergies through cost-savings

The Company expects to realise synergies between the Target Subsidiary and MD as a result of the Acquisition through, among others, (i) improvement of IT spending and corporate function efficiencies through cost-saving initiatives including shared services; (ii) potential cross-selling benefits from products integration; and (iii) expanded management expertise.

Having considered the above, the Directors consider that the terms of the Acquisition are on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

REASONS FOR ISSUANCE OF CONVERTIBLE BONDS

The Board is of the view that the combination of issuing Consideration Shares and Convertible Bonds to satisfy the Consideration has the benefit of preserving the internal resources and reducing the cash outflow of the Group which will preserve the financial flexibility of the Group for its future development, although they would result in dilution of the interest of the existing Shareholders.

The Directors have considered other pre-emptive fund raising methods such as rights issue and open offer. However, a rights issue or open offer would require the Company to undergo a comparatively lengthy process, which is estimated to take up to approximately four months, in order to (i) identify suitable underwriter(s) and to negotiate terms agreeable to the parties; (ii) prepare the requisite compliance and legal documentation, including but not limited to the underwriting agreement(s), announcement(s) and prospectus(es). As such, the Board is of the view that the lengthy period involved in a rights issue or an open offer may result in the Company being subject to the adverse effects of the current volatile market, and therefore increase the uncertainty in being able to raise the requisite amount of funds.

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Apart from equity financing, the Directors have also considered debt financing, such as bank borrowings, as possible method for the Company to satisfy the Consideration. In this regard, the Directors consider that the use of debt financing (i) may create additional interest burden to the Group, which will affect the Group’s performance; (ii) may subject to, including but not limited to lengthy due diligence due to investigation on pledge asset and negotiations with the banks with regards to the Group’s financial position, capital structure and the then prevailing stock market condition; (iii) and may involve further provision of security, the Directors consider that debt financing is rather uncertain and time consuming as compared to equity financing for the Group to raise additional capital for its future investments and/or business development. Due to these reasons, the Directors consider that debt financing would be relatively uncertain, impracticable and time-consuming as compared to equity financing, such as placement of new Shares, for the Company to obtain additional funding.

Taking into account the benefits and costs of each of the alternatives, the Directors consider that the issuance of the Convertible Bonds is fair and reasonable and in the interest of the Company and the Shareholders.

Upon Completion, the Vendor has no right to nominate directors to the Board pursuant to the Agreement. To the best knowledge of the Company, the Vendor has no right to nominate Director according to the articles of association of the Company. Also, the Vendor has not requested nor indicated his wishes to be appointed as a director of the Company. Having said that, Mr. Lam would be appointed as the director of the Target Subsidiary after Completion. So that the Group can be benefited from Mr. Lam’s experience, insight and knowledge of the Hong Kong retail gaming market to develop the business of the Target Subsidiary. As at the Latest Practicable Date, the Board has no intention to appoint Mr. Lam as a Director upon Completion.

RISK FACTORS

The Target Subsidiary operates in a very competitive market

The Target Subsidiary is facing significant competition from other market players which provide products that are similar to those provided by the Target Subsidiary. The Target Subsidiary competes on the basis of product variety, price, availability of products and content, delivery methods, promotional activities, customer insight and customer support and service. If the Target Subsidiary is not able to compete effectively, it may be unable to enhance or even maintain its overall market share, which could have a material adverse effect on its results of operations and financial condition.

The Target Subsidiary derived a significant portion of its revenue from three wholesale customers and therefore any significant decrease in sales to any of the three major wholesale customers may adversely and materially affect our Group’s business, financial condition and results of operations.

For the 11 months ended 29 February 2016, the Target Subsidiary’s sales to its top three customers accounted for approximately 47% of the Target Subsidiary’s turnover.

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There is no assurance that the Target Subsidiary would be successful in reducing its reliance on a small number of wholesale customers to generate a significant portion of our revenue and preventing the adverse effect on our Group’s business, financial condition and results of operations due to any significant decrease in sales to any of our major customers.

The Target Subsidiary is dependent on its three largest suppliers for the supply of products. Any shortage or delay in the supply of products from them or any change in their existing marketing strategies may materially and/or adversely affect our business and results of operations if we cannot secure alternative sources of supply immediately.

For the 11 months ended 29 February 2016, the Target Subsidiary’s cost of sales to its top three suppliers accounted for approximately 80% of the Target Subsidiary’s cost of sales.

There is no assurance that there will be no deterioration in the Target Subsidiary relationships with these suppliers which may have an impact on its ability to secure future supply of metal materials. Any shortage of or delay in the supply of products by the major suppliers or any change in their existing marketing strategies, such as any sudden reduction in supply volume to us, may affect the Target Subsidiary’s ability to fulfill our customers’ demand. There is no assurance that the Target Subsidiary is able to respond to such shortage or delay in supply or new marketing strategies effectively by finding alternative suppliers on comparable commercial terms within a short period of time and as such, the Target Subsidiary’s customers may choose to source products from alternative suppliers, causing a shortfall in our sales that could materially and adversely affect its business and financial results.

The Target Subsidiary’s business depends on the continuing contributions of Mr. Lam

The Target Subsidiary’s success depends to a large extent on Mr. Lam’s experience, insight and knowledge of the retail gaming market in Hong Kong. Leaving of Mr. Lam could adversely affect the Target Subsidiary’s business, including its relationships with key suppliers, its competitive position and results of operations.

The Target Subsidiary depends on third parties to develop products, particularly consoles and new content

The Target Subsidiary’s business depends heavily on the continued development of advanced software and hardware. If the consoles manufacturers delay the introduction of, or fail to develop new consoles, or if game publishers delay the release of, or fail to develop, new games for current or future generations of consoles, or if new consoles and/or games are neither popular nor otherwise successful, the Target Subsidiary’s business, results of operations and financial condition could be materially adversely affected.

Damage to the reputation of the Target Subsidiary could materially adversely affect its business

The Target Subsidiary’s business and market position is highly dependent on the Target Subsidiary maintaining its reputation and the trust of its customers and suppliers. Failure to deliver products on a timely basis, failure to stock products in quantities sufficient to meet customer demand, poor customer service or support and disruption to IT and information systems, among other things, could damage the reputation of the Target Subsidiary and materially adversely affect its business and results of its operations.

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Because the Target Subsidiary’s operating history is limited and the revenues and income potential of the Target Subsidiary’s businesses is unproven, the Target Subsidiary cannot predict whether it will meet internal or external expectations of future performance.

The Target Subsidiary believes that its future success depends on the Target Subsidiary’s ability to significantly increase revenues from its operations, for which the Target Subsidiary has a limited operating history. Accordingly, the Target Subsidiary’s prospects must be considered in light of the difficulties and other risks customarily encountered by companies in an early stage of development, particularly companies in the new and rapidly evolving gaming industries.

Unexpected network interruption caused by system failures or computer viruses may reduce visitor traffic, reduce revenues and harm the Target Subsidiary’s reputation.

Both the continual accessibility of websites and the performance and reliability of their technical infrastructure are critical to the Target Subsidiary’s reputation and its ability to attract and retain users. Any system failure or performance inadequacy that causes interruptions in the availability of the Target Subsidiary’s services or increases the response time of the Target Subsidiary’s services could reduce user satisfaction and traffic, which would reduce the Target Subsidiary’s websites’ appeal to users. As the number of the Target Subsidiary’s web pages and traffic increase, there can be no assurance that the Target Subsidiary will be able to scale its systems proportionately.

Mitigations of the risks

In order to mitigate the above risks, the Company will conduct the followings:

1. continue to explore more new products and developing marketing strategies so as to increase its competitiveness;

2. broaden the wholesale and retail customers bases of the Target Subsidiary so that the revenue contribution from the top three wholesale customers would decrease in the long run and expand the revenue source to offset the possible difficulties and other risks potentially faced by the Target Subsidiary;

3. look for new suppliers to diversify the potential shortage or delay in supply of products caused by the said three suppliers and thus to also reduce the level of reliance on the existing suppliers;

4. appoint Mr. Lam as the director of the Target Subsidiary after Completion so that the Target Subsidiary can continue to benefit from Mr. Lam’s experience; the Directors also expect Mr. Lam will make continuous contribution to the Company as he will be a substantial shareholder of the Company after Completion;

5. closely monitor the delivery process, stock level of its products, customers feedbacks and IT systems and try to avoid the occurrence of delay in order delivery, out of stock, customers’ dissatisfaction and IT system breakdown, which may lead to the damage to the reputation of the Target Subsidiary; and

6. engage a reliable IT service provider to minimise the chance of any possible system failure.

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FINANCIAL EFFECTS OF THE ACQUISITION

Assets

As at 31 March 2016, the audited consolidated total assets of the Group amounted to HK$272 million.

As set out in Appendix IV to this circular, assuming completion of the Acquisition had taken place on 31 March 2016, the unaudited pro forma consolidated total assets of the Enlarged Group would be HK$454 million.

Liabilities

As at 31 March 2016, the audited consolidated total liabilities of the Group amounted to HK$50 million.

As set out in Appendix IV to this circular, assuming completion of the Acquisition had taken place on 31 March 2016, the unaudited pro forma consolidated total liabilities of the Enlarged Group would be HK$96 million.

Earnings

The Group recorded an audited consolidated loss of HK$50 million for the year ended 31 March 2016.

The Directors expect that the earnings of the Enlarged Group would be enhanced by the income generated from the Target Group after Completion.

As set out in the unaudited pro forma financial information of the Enlarged Group in Appendix IV to the Circular, a goodwill in amount of approximately HK$175 million will arise upon Completion. Such significant amount of goodwill is the result of the significant difference between the Consideration and the net asset of the Target Group and is in accordance with the existing accounting policies of the Company. The nature of such goodwill is a reflection of the expected future economic benefits and future prospects of the Target Company. For the calculation of such goodwill, please refer to notes 1 and 2 to the unaudited pro forma statement of assets and liabilities of the Enlarged Group. The Directors consider that the Company’s accounting treatment and record of such goodwill will be same as those companies with the same accounting policies in the acquisitions in similar nature.

Upon Completion, the Company will adopt the existing accounting policies and principal assumptions for the valuation of the market value of the Target Group and the Board does not anticipate any impairment in the coming financial year of the Company after Completion.

After taking into account of the proceeds from the Disposal, the available credit facilities and the internal resources of the Group, the Group will have sufficient working capital for its present requirements for the next 12 months from the Latest Practicable Date. In view of the existing financial position of the Group, the Company does not intend to conduct any fund raising activities as at the Latest Practicable Date.

41

LETTER FROM THE BOARD

EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

Assuming there will not be any change in the issued share capital of the Company from the Latest Practicable Date up to the Completion, set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) upon Completion and assuming none of the Convertible Bonds is converted into Conversion Shares; and (iii) upon Completion and assuming full conversion of the Convertible Bonds into Conversion Shares:

Vendor Ultimate beneficial owner of the Vendor Public shareholders Total	(i) As at the date of the Latest Practicable Date (ii) Immediately following Completion and assuming none of the Convertible Bonds is converted into Conversion Shares No. of Shares Approximate% No. of Shares Approximate% – – 1,752,505,102 29.90% 816,000 0.02% 816,000 0.01% 4,107,900,000 99.98% 4,107,900,000 70.09% 4,108,716,000 100% 5,861,221,102 100%	(iii) Immediately following Completion and assuming full conversion of the Convertible Bonds into Conversion Shares No. of Shares Approximate% 2,328,767,123 36.18% 816,000 0.01% 4,107,900,000 63.81% 6,437,483,123 100%	(iii) Immediately following Completion and assuming full conversion of the Convertible Bonds into Conversion Shares No. of Shares Approximate% 2,328,767,123 36.18% 816,000 0.01% 4,107,900,000 63.81% 6,437,483,123 100%
			100%

IMPLICATIONS OF THE GEM LISTING RULES

As certain of the applicable percentage ratios (as defined in the GEM Listing Rules) for the Acquisition are more than 25% but less than 100%, the Acquisition constitutes major transaction of the Company and is subject to the reporting, announcement and Shareholders’ approval requirements.

The Company will seek approval for, among other things, the Agreement and the transactions contemplated thereunder, the issuance of the Consideration Shares and Conversion Shares (upon exercise of the conversion rights attached to the Convertible Bonds) under the Specific Mandate from the Shareholders at the EGM.

EGM

In accordance with the GEM Listing Rules, any Shareholder who has a material interest in the Acquisition shall abstain from voting on the resolution(s) to approve the Agreement and the transactions contemplated thereunder at the EGM. As disclosed above, at the Latest Practicable Date, the ultimate beneficial owner of the Vendor is a business consultant of the Company who owns 816,000 Shares, representing approximately 0.02% of the total issued share. Accordingly, the ultimate beneficial owner of the Vendor will be required to abstain from voting on the relevant resolution(s) at the EGM. Save as aforesaid, to the best of knowledge, information and belief of the Directors, having made all reasonable enquiries, no other Shareholder has any material interest in the Acquisition and will be required to abstain from voting on the relevant resolution(s) to approve the Agreement and the transactions contemplated thereunder at the EGM.

42

LETTER FROM THE BOARD

Pursuant to Rule 17.47(4) of the GEM Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. Accordingly, the Company will procure the chairman of the EGM to demand for voting on poll in respect of the ordinary resolution to be proposed at the EGM in accordance with the memorandum of association and the articles of association of the Company and Union Registrars Limited, the branch share registrar of the Company in Hong Kong, will serve as the scrutineer for the vote-taking.

The EGM will be held at 17/F., No. 8 Wyndham Street, Central, Hong Kong, on Wednesday, 3 August 2016 at 3:30 p.m. (or immediately after the conclusion of the annual general meeting of the Company to be held at 3:00 p.m. on the same day), the notice of which is set out on pages EGM-1 to EGM-3 of this circular, to consider and, if thought fit, approve the ordinary resolution(s) to approve the Agreement and the transactions contemplated thereunder, including but not limited to, the allotment and issuance of the Consideration Shares and the Conversion Shares to the Vendor.

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 Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, 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 Agreement are fair and reasonable, on normal commercial terms 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 the Agreement and the transactions contemplated thereunder, including but not limited to, the allotment and issuance of the Consideration Shares, the Convertible Bonds and the Conversion Shares to the Vendor.

FURTHER INFORMATION

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

Shareholders and potential investors should note that completion of the Acquisition is subject to fulfillment of the conditions precedent in the Agreement. As the Acquisition may or may not proceed, Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

By order of the Board Wealth Glory Holdings Limited Wong Ka Wah, Albert Chairman

43

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. FINANCIAL SUMMARY

Financial Information Incorporated by Reference

Details of the financial information of the Group for each of the three financial years ended 31 March 2014, 31 March 2015 and 31 March 2016 respectively have been set out on pages 47 to 113, pages 49 to 119 and pages 45 to 123 of the Company’s annual reports for the financial years ended 31 March 2014, 31 March 2015 and 31 March 2016 respectively, and are incorporated by reference into this circular. The said annual reports of the Company have been posted on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company at www. wealthglory.com.

II. INDEBTEDNESS AND CONTINGENT LIABILITIES

As at the close of business on 31 May 2016, being the latest practicable date for the purpose of this indebtedness statement, the Enlarged Group had outstanding unguaranteed and unsecured bonds with principal amount of approximately HK$20 million, unguaranteed and secured loans from non-controlling shareholders of a subsidiary of the Company with principal amount of HK$20 million which was secured by certain of the Group’s loans receivable and guaranteed and unsecured bank borrowings and overdrafts with carrying amount of approximately HK$1.3 million.

Save as aforesaid or as otherwise mentioned herein, and apart from intra-group liabilities and normal accounts payable in the ordinary course of business, 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 as at the close of business on 31 May 2016, being the latest practicable date for the purpose of this statement of indebtedness prior to printing of this circular.

III. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the Completion and the present financial resources available to the Enlarged Group, including internally generated funds, renewal of loans from non-controlling shareholders of a subsidiary, and other available banking and other facilities, the Enlarged Group will have sufficient working capital to meet its present requirements for at least 12 months from the date of this circular in the absence of unforeseen circumstances.

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 2016, the date to which the latest audited financial statements of the Group were made up.

i – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

V. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is principally engaged in the (i) manufacture and sale of fresh and dried noodles; (ii) investment in coal trading business; (iii) trading of natural resources and commodities; (iv) development and promotion of brands, design, manufacture and sale of trendy fashion merchandises and other consumer products; (v) investment in securities and (vi) money lending and secured financing business.

According to the interim report of the Company for the six months ended 30 June 2015, the recent volatility of the local and global stock markets and the fall in oil and minerals prices as well as the uncertainty in the Chinese and global economy all cast negative impact to the financial and investment markets and the Group’s existing operating environment. On the other hand, it may provide favorable condition to the Group in identifying suitable investment opportunities for diversifying the Group’s business at better terms.

As disclosed in the announcement of the Company dated 12 October 2015, the Group completed acquisition of MD which, amongst others, specializes in sales and distribution of trendy fashion and apparels in Hong Kong and Asia markets and has good connection with celebrities in Taiwan and Hong Kong.

The Directors expect the Acquisition could provide synergies between the Target Subsidiary and MD as (i) the current sales of the Target Subsidiary is solely in Hong Kong and after the Acquisition, the Target Subsidiary could leverage on the sales and distribution network and celebrities connection of MD to grow its business exposure in Taiwan and Hong Kong; and (ii) MD could leverage on the Target Subsidiary’s existing distribution channels to grow its business exposures in Hong Kong. Moreover, the Directors are of the view that the Acquisition will diversify and broaden its business into trading of games, console games and entertainment products apart from the existing trading of natural resources and commodities and hence will provide another source of income to the Group to further enhance the Shareholders’ value.

Upon Completion, the remaining businesses of the Group will consist of (i) sales of trendy fashion and consumer products business; (ii) money lending business; (iii) securities investment business; and (iv) trading of natural resources and commodities (the “ Remaining Business ”).

In respect to the sales of trendy fashion and consumer products business, the Group will continue to cooperate with other trendy fashion brands and as at the Latest Practicable Date, the Group is in negotiation with various brands for the possible production and marketing of cross series of fashion merchandises. Capitalized on the Group’s connection with the aforesaid brands, most of the cooperation will be in the form of profit sharing based on products sold. As such, the Group believes its revenue base will be enhanced whilst would not create heavy pressure on funding needs in acquiring such brands.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Regarding the money lending business, which is capital-driven in nature and is still at an early stage with relatively small size of loan portfolio as compared with other market players, the Group’s observation is that there is a constant demand in the market for this business to grow yet it is subject to the availability of capital. Without injection of new capital, the loan portfolio will grow at slow pace (i.e. by rolling existing loans upon their maturities with new borrowers). Nonetheless, the Group does not plan to expand its money lending business in a rapid manner at the moment in view of the uncertainty of the local properties market given that the majority of loans are secured by properties. The Group will strike a balance between expanding the business and the risks associated from such growth.

For the securities investment business, which invest in listed securities in Hong Kong for the purpose of diversifying the income source of the Group and to optimize the return of short-term idle fund, the Group expects that the size of the securities portfolio will be reduced gradually once the fund is due for deployment in planned fund use purposes including general working capital as well as funding of operations of relevant projects. Save as those publicly disclosed and that disclosed above, the Company does not have any intention, arrangement, agreement, understanding, negotiation to further acquire new assets/businesses.

In respect to the trading of natural resources and commodities business, the Group has no concrete plan for expansion in the next 12 months and the Group will continue to carry out trading of crude palm oil in the form of trade-by-trade basis.

THE DISPOSAL

Reference is made to the announcement of the Company dated 24 March 2016 in relation to the disposal of the entire issued share capital in and the shareholder’s loan due by Paraburdoo Limited (the “ Disposal Announcement ”) which specializes in the noodle business (the “ Disposal ”). Subject to fulfillment (or waiver, as the case may be) of the conditions precedent as stated in the Disposal Announcement, the Company expected that the Disposal will complete in July 2016.

As the Group expects to continue to engage in the Remaining Business after completion of the Disposal, there is no fundamental change in the Company’s existing business. As at the Latest Practicable Date, the Company has no intention to terminate, dispose and/or scale down the Remaining Business of the Company.

i – 3

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

18 July 2016

The Board of Directors Wealth Glory Holdings Limited 17/F., No. 8 Wyndham Street Central, Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “ Financial Information ”) of Strategy King Holdings Limited (“ Strategy King ”), which comprises the statement of financial position as at 29 February 2016, and the statement of profit or loss and other comprehensive income and the statement of changes in equity for the period from 1 January 2016 (date of incorporation) to 29 February 2016 (the “ Relevant Period ”) and a summary of significant accounting policies and other explanatory information. This Financial Information has been prepared by the sole director of Strategy King for inclusion in Appendix II to the circular dated 18 July 2016 (the “ Circular ”) issued by Wealth Glory Holdings Limited (the “ Company ”) in connection with its proposed acquisition of the entire issued share capital of Strategy King (the “ Transaction ”).

Strategy King was incorporated in British Virgin Islands (the “ BVI ”) on 1 January 2016 with limited liability. The addresses of Strategy King’s registered office is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI and its principal place of business is Flat 510, 5/F., Wah Wai Industrial Building, 51-63 Pak Tin Par Street, Tsuen Wan, New Territories. Strategy King is principally engaged in investment holding.

At the date of this report, Strategy King has equity interest in the following subsidiary:

			Proportion of
		Issued	nominal value
	Place and	and fully	of issued
	date of	paid issued	share capital
Name of subsidiary	incorporation	share capital	Directly	Principal activities
Azure Sea Company	Hong Kong	HK$1	100%	Trading of games
Limited	11 September 2012			and console games
(“Azure Sea”)

The financial year end date of Strategy King is 31 March.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

No audited financial statements have been prepared for Strategy King since the date of incorporation as there is no such statutory requirement.

For the purpose of this report, the sole director of Strategy King has prepared the financial statements of Strategy King 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 “ Underlying Financial Statements ”).

We have undertaken an independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA and examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information set out in this report has been prepared from the Underlying Financial Statements. No adjustments was considered necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular. The preparation of the Underlying Financial Statements is the responsibility of the sole director of Strategy King. 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 Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the financial position of Strategy King as at 29 February 2016 and of the financial performance of Strategy King for the Relevant Period.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

FINANCIAL INFORMATION OF STRATEGY KING HOLDINGS LIMITED

The following is the financial information of Strategy King Holdings Limited (“ Strategy King ”) prepared by the sole director of Strategy King as at 29 February 2016 and for the period from 1 January 2016 (date of incorporation) to 29 February 2016 (the “ Relevant Period ”) (the “ Financial Information ”).

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue Administrative expenses Profit before tax Income tax expense 7 Profit and total comprehensive income for the period 8	For the period from 1 January 2016 (date of incorporation) to 29 February 2016 HK$’000 – – – – –

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

STATEMENT OF FINANCIAL POSITION

CURRENT ASSET Amount due from a shareholder NET CURRENT ASSET AND NET ASSET CAPITAL AND RESERVE Share capital Retained earning TOTAL EQUITY STATEMENT OF CHANGES IN EQUITY Issue of share upon incorporation Profit and total comprehensive income for the period At 29 February 2016	Share capital HK$’000 1 – 1	Notes 9 10 Retained earning HK$’000 – – –		At 29 February 2016 HK$’000 1 1 1 – 1 Total HK$’000 1 – 1

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

Strategy King Holdings Limited (“ Strategy King ”) was incorporated in British Virgin Islands (the “ BVI ”) on 1 January 2016 with limited liability. Its holding company is Azure Sea Developments Limited, a company incorporated in BVI with limited liability and its ultimate controlling party is Mr. Lam Hak Ha, Jasper, who is also the director of Strategy King, since 17 March 2016.

Strategy King is principally engaged in investment holding.

The addresses of the registered office of Strategy King is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI and the principal place of business is Flat 510, 5/F., Wah Wai Industrial Building, 51-63 Tin Par Street, Tsuen Wan, New Territories.

The Financial Information is presented in Hong Kong dollar (“HK$”), which is also the functional currency of Strategy King.

Strategy King did not maintain any bank account and all of its transactions were dealt with the current account with the shareholder during the Relevant Period. Accordingly, no statement of cash flows was presented for the said Relevant Period.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

For the purpose of preparing and presenting the Financial Information for the Relevant Period, Strategy King has adopted all the HKFRSs issued by the Hong Kong Institute of Certificate Public Accountants (the “HKICPA”) which are effective for Strategy King’s financial period beginning on 1 January 2016 consistently throughout the Relevant Period.

Strategy King has not early applied the following new and revised HKFRSs that have been issued but are not yet effective during the Relevant Period:

HKFRS 9 Financial Instruments[1] HKFRS 15 Revenue from Contracts with Customers[1] HKFRS 16 Leases[2] Amendments to HKFRS 10 and Sales or Contribution of Assets between an Investor and its Associate or Hong Kong Accounting Standard (“HKAS”) 28 Joint Venture[3]

1 Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted.

2 Effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.

3 Effective date is to be determined. Earlier application is permitted.

The sole director of Strategy King (the “Director”) does not anticipate that the application of the above new and revised HKFRSs will have any significant impact on Strategy King’s financial results and financial position.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This Financial Information presents the financial track record of Strategy King for the period from 1 January 2016 (date of incorporation) to 29 February 2016 and is prepared for the purposes of inclusion in a circular of Wealth Glory Holdings Limited (the “Company”) to its shareholders in relation to the proposed acquisition of the entire issued share capital of Strategy King, using the principal accounting policies which are materially consistent with those of the Company as applied in the Company’s consolidated financial statements for the year ended 31 March 2016.

The Financial Information have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprises Market of the Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The Financial Information has been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

The principal accounting policies are set out below.

Taxation

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

The tax currently payable is based on taxable profit for the period. Taxable loss differs from “profit before tax” as reported in the statement of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other periods and items that are never taxable or deductible. Strategy King’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 temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

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

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Financial instruments

Financial assets are recognised when Strategy King becomes a party to the contractual provisions of the instruments.

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

Financial assets

Strategy King’s financial assets are mainly loan and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Effective interest method

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

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loan and receivable (representing amount due from a shareholder) is measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial asset below).

Impairment of financial assets

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

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest and principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• disappearance of an active market for that financial asset because of financial difficulties.

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

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets.

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

Equity instruments

Equity instruments issued by Strategy King are classified as equity in accordance with the substance of the contractual arrangements and the definitions of an equity instrument.

Equity instruments

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

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Derecognition

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

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

On derecognition of a financial asset other than in its entirety, Strategy King allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of Strategy King’s accounting policies, which are described in Note 3 to the Financial Information, the Director is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Strategy King did not use any critical judgments and estimations in the preparation of the Financial Information.

5.

CAPITAL RISK MANAGEMENT

Strategy King manages its capital to ensure that Strategy King will be able to continue as a going concern while maximising the return to shareholder through the optimisation of the debt and equity balance.

The capital structure of Strategy King consists of equity attributable to owner of Strategy King, comprising share capital and retained earning.

The Director reviews the capital structure on a regular basis. As part of this review, the Director considers the cost of capital and risk associates and takes appropriate actions to adjust Strategy King’s capital structure.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	At
	29 February
	2016
	HK$’000
Financial asset
Loan and receivables:
Amount due from a shareholder	1

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

(b) Financial risk management objectives and policies

Strategy King’s financial instrument includes amount due from a shareholder. Details of the financial instrument is disclosed in respective note. The risk associated with this financial instrument include credit risk. The policies on how to mitigate this risk are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

At 29 February 2016, Strategy King’s maximum exposure to credit risk which will cause a financial loss to Strategy King due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the statement of financial position.

In order to minimise the credit risk, the Director has reviewed the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the Director considers that the Company’s credit risk is significantly reduced.

(c) Fair value measurement of financial instruments

There is no financial instrument measured at fair value on a recurring basis.

The Director considers that the carrying amount of financial asset recorded at amortised cost in the Financial Information approximate its fair value at the end of the Relevant Period.

7. INCOME TAX EXPENSE

No provision of Hong Kong Profits Tax has been made in the Financial Information as Strategy King did not generate any assessable income for the Relevant Period.

8. PROFIT FOR THE PERIOD

Profit for the period has been arrived at after charging: Director’s remuneration Other staff costs – salary and other emoluments – contributions to retirement benefits scheme Total other staff cost Auditor’s remuneration Incorporation expenses	For the period from 1 January 2016 (date of incorporation) to 29 February 2016 HK$’000 – – –
	–
	– –

Note: All expenses of Strategy King are borne by the shareholder for the period from 1 January 2016 (date of incorporation) to 29 February 2016.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

9. AMOUNT DUE FROM A SHAREHOLDER

The amount due from a shareholder is non-trade in nature, unsecured, non-interest bearing and repayable on demand.

Particulars of amount due from a shareholder is disclosed as follows:

Shareholder – Mr. Lam Hak Ha, Jasper SHARE CAPITAL Authorised: Ordinary shares of USD1.00 each Issued and fully paid: Ordinary share of USD1.00 each Shown in the financial statements as	Number of shares 50,000 1	At 29 February 2016 HK$’000 1
		At date of incorporation and 29 February 2016 USD50,000
		USD1
		HK$8

10. SHARE CAPITAL

11. EVENTS AFTER THE END OF THE RELEVANT PERIOD

• i) On 17 March 2016, Strategy King has acquired the entire issued share capital of Azure Sea Company Limited, a company incorporated in Hong Kong with limited liability.

• ii) On 17 March 2016, Mr. Lam Hak Ha, Jasper transferred the share of Strategy King to Azure Sea Developments Limited at the consideration of USD1.

12. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Strategy King have been prepared in respect of any period subsequent to 29 February 2016.

Yours faithfully,

Asian Alliance (HK) CPA Limited Certified Public Accountants (Practising) Lam Chik Tong Practising Certificate Number: P05612

Suites 313-316, 3/F., Shui On Centre 6-8 Harbour Road Wan Chai

Hong Kong

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

18 July 2016

The Board of Directors Wealth Glory Holdings Limited 17/F., No. 8 Wyndham Street Central, Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “ Financial Information ”) of Azure Sea Company Limited (“ Azure Sea ”) which comprises the statements of financial position as at 31 March 2014, 31 March 2015 and 29 February 2016, and the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and eleven months ended 29 February 2016 (the “ Relevant Periods ”) and a summary of significant accounting policies and other explanatory information. This Financial Information has been prepared by the directors of Azure Sea for inclusion in Appendix III to the circular dated 18 July 2016 (the “ Circular ”) issued by Wealth Glory Holdings Limited (the “ Company ”) in connection with its proposed acquisition of the entire issued share capital of Strategy King Holdings Limited (the “ Transaction ”).

Azure Sea was incorporated in Hong Kong on 11 September 2012 with limited liability. The addresses of Azure Sea’s registered office and principal place of business is Flat 510, 5/F., Wah Wai Industrial Building, 51-63 Pak Tin Par Street, Tsuen Wan, New Territories. Azure Sea is principally engaged in trading of games and console games.

The financial year end date of Azure Sea is 31 March.

The statutory financial statements of Azure Sea for the period from 11 September 2012 (date of incorporation) to 31 March 2014 and year ended 31 March 2015 were audited by the respective certified public accountants in Hong Kong during the Relevant Periods are as follows:

	Statutory auditors	for
	the financial period	ended
	31 March
Name of company	2014	2015
Azure Sea	Note	Note

Note:

The statutory financial statements of Azure Sea for the period from 11 September 2012 (date of incorporation) to 31 March 2014 and year ended 31 March 2015 which have been prepared in accordance with the Small and Medium-sized Entity Financial Reporting Framework and Financial Reporting Standard issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) and were audited by Messrs. Lo Shu Hon, certified public accountants registered in Hong Kong.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

For the purpose of this report, the directors of Azure Sea have prepared the financial statements of Azure Sea for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the HKICPA (the “ Underlying Financial Statements ”).

We have undertaken an independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA and examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information set out in this report has been prepared from the Underlying Financial Statements. No adjustments was considered necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular. The preparation of the Underlying Financial Statements is the responsibility of the directors of Azure Sea. 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 Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the financial position of Azure Sea as at 31 March 2014, 31 March 2015 and 29 February 2016, and of the financial performance and cash flows of Azure Sea for the Relevant Periods.

COMPARATIVE FINANCIAL INFORMATION

The unaudited comparative statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of Azure Sea for the eleven months ended 28 February 2015, together with the notes thereon (the “ February 2015 Financial Information ”) have been extracted from Azure Sea’s unaudited financial information for the same period which was prepared by the directors of Azure Sea solely for the purpose of this report. We have reviewed the February 2015 Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our review of the February 2015 Financial Information consisted of making enquiries, primarily of persons responsible for financial and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the February 2015 Financial Information. Based on our review, nothing has come to our attention that causes us to believe that the February 2015 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRSs.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

FINANCIAL INFORMATION OF AZURE SEA COMPANY LIMITED

The following is the financial information of Azure Sea Company Limited (“ Azure Sea ”) prepared by the directors of Azure Sea as at 31 March 2014, 31 March 2015 and 29 February 2016 and for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and eleven months ended 29 February 2016 (the “ Relevant Periods ”) (collectively known as the “ Financial Information ”).

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 7 Cost of sales Gross profit Other revenue 9 Administrative expenses Profit before tax Income tax expense 10 Profit and total comprehensive income for the period/year 11 Dividends 12	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 55,560 (52,934) 2,626 193 (2,392) 427 (81) 346 –	For the year ended 31 March 2015 HK$’000 48,564 (45,226) 3,338 196 (2,803) 731 (106) 625 –	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) 41,364 (38,326) 3,038 174 (2,564) 648 (91) 557 –	For the period from 1 April 2015 to 29 February 2016 HK$’000 83,801 (79,722) 4,079 182 (1,044) 3,217 (515) 2,702 2,000

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

STATEMENTS OF FINANCIAL POSITION

Notes NON-CURRENT ASSET Property, plant and equipment 13 CURRENT ASSETS Trade receivables 14 Deposits Amount due from a director 15 Bank balances 16 CURRENT LIABILITIES Trade payables Receipts in advance Accrued expenses Amount due to a director 15 Tax payable NET CURRENT ASSETS NET ASSETS CAPITAL AND RESERVE Share capital 17 Retained earnings TOTAL EQUITY	At 31 March 2014 HK$’000 113 662 4 – 3,149 3,815 1,610 252 1,537 101 81 3,581 234 347 1 346 347	At 31 March 2015 HK$’000 76 1,453 4 154 3,599 5,210 2,162 422 1,654 – 76 4,314 896 972 1 971 972	At 29 February 2016 HK$’000 41 5,197 4 173 1,160 6,534 2,676 565 1,259 – 401 4,901 1,633 1,674 1 1,673 1,674

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

STATEMENTS OF CHANGES IN EQUITY

Issue of share upon incorporation Profit and total comprehensive income for the period At 31 March 2014 Profit and total comprehensive income for the year At 31 March 2015 Profit and total comprehensive income for the period Dividend paid At 29 February 2016 For the eleven months ended 28 February 2015 At 1 April 2014 Profit and total comprehensive income for the period At 28 February 2015	Share capital HK$’000 1 – 1 – 1 – – 1 (unaudited) Share capital HK$’000 1 – 1	Retained earnings HK$’000 – 346 346 625 971 2,702 (2,000) 1,673 Retained earnings HK$’000 346 557 903	Total HK$’000 1 346 347 625 972 2,702 (2,000) 1,674 Total HK$’000 347 557 904

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES Profit before tax Adjustments for: Depreciation Interest income Operating cash flows before movements in working capital Increase in trade receivables Increase in deposits Increase in amount due from a director Increase in trade payables Increase (decrease) in receipts in advance Increase (decrease) in accrued expenses Cash generated from (used in) operations Income tax paid NET CASH FROM (USED IN) OPERATING ACTIVITIES INVESTING ACTIVITIES Purchase of property, plant and equipment Interest income received NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Issuance of share capital Increase (decrease) in amount due to a director NET CASH FROM (USED IN) FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUVALENTS AT BEGINNING OF THE PERIOD/YEAR CASH AND CASH EQUIVALENTS AT END OF THE PERIOD/YEAR represented by bank balances	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 427 76 (1) 502 (662) (4) – 1,610 252 1,537 3,235 – 3,235 (189) 1 (188) 1 101 102 3,149 – 3,149	For the year ended 31 March 2015 HK$’000 731 37 (1) 767 (791) – (154) 552 170 117 661 (111) 550 – 1 1 – (101) (101) 450 3,149 3,599	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) 648 35 (1) 682 (3,348) – (154) 2,156 (252) 332 (584) (111) (695) – 1 1 – (101) (101) (795) 3,149 2,354	For the period from 1 April 2015 to 29 February 2016 HK$’000 3,217 35 (1) 3,251 (5,744) – (19) 514 143 (395) (2,250) (190) (2,440) – 1 1 – – – (2,439) 3,599 1,160

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

Azure Sea Company Limited (“Azure Sea”) was incorporated in Hong Kong on 11 September 2012 with limited liability. Its holding company is Azure Sea Developments Limited, a company incorporated in British Virgin Islands (“BVI”) with limited liability since incorporation, and changed to Strategy King Holdings Limited (“Strategy King”), a company incorporated in BVI with limited liability since 17 March 2016, and on the same date, Azure Sea Developments Limited became the ultimate holding company of Azure Sea.

Azure Sea is principally engaged in trading of games and console games.

The addresses of the registered office and principal place of business of Azure Sea is Flat 510, 5/F., Wah Wai Industrial Building, 51-63 Pak Tin Par Street, Tsuen Wan, New Territories.

The Financial Information is presented in Hong Kong dollar (“HK$”), which is also the functional currency of Azure Sea.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, Azure Sea has adopted all the HKFRSs issued by the Hong Kong Institute of Certificate Public Accountants (the “HKICPA”) which are effective for Azure Sea’s financial period beginning on 1 April 2015 consistently throughout the Relevant Periods.

Azure Sea has not early applied the following new and revised HKFRSs that have been issued but are not yet effective during the Relevant Periods:

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

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

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

HKFRS 9 Financial Instruments

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

Key requirements of HKFRS 9:

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

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of financial liability designated as fair value through profit or loss is presented in profit or loss.

• In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.

• The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in HKAS 39. Under HKFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the retrospective quantitative effectiveness test has been removed. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

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

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

HKFRS 15 Revenue from Contracts with Customers

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

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

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

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. The Directors anticipate that the application of HKFRS 15 in the future may have a material impact on the amounts reported and disclosures made in Azure Sea’s financial statements. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until Azure Sea performs a detailed review.

HKFRS 16 Leases

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

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

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

Amendments to HKAS 1 Disclosure Initiative

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

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

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

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

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

• (a) when the intangible asset is expressed as a measure of revenue; or

• (b) when it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

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

Annual Improvements to HKFRSs 2012-2014 Cycle

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

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

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

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

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

Except for the above impact, the Directors do not anticipate that the application of the new and revised HKFRSs will have significant impact on Azure Sea’s financial results and financial position.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This Financial Information presents the financial track record of Azure Sea for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and eleven months ended 29 February 2016 and is prepared for the purposes of inclusion in a circular of Wealth Glory Holdings Limited (the “Company”) to its shareholders for the acquisition of Strategy King, using the principal accounting policies which are materially consistent with those of the Company as applied in the Company’s consolidated financial statements for the year ended 31 March 2016.

The Financial Information have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprises Market of the Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The Financial Information has been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

The principal accounting policies are set out below.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Revenue recognition

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

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

• Azure Sea has transferred to the buyer the significant risks and rewards of ownership of the goods;

• Azure Sea retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to Azure Sea; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

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

Leasing

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

Azure Sea as lessee

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

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

Foreign currencies

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

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

Property, plant and equipment

Property, plant and equipment are stated in the statements of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

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

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

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme are recognised as an expense when employees have rendered service entitling them to the contributions.

Taxation

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

The tax currently payable is based on taxable profit for the period/year. Taxable profit differs from “profit before tax” as reported in the statements of profit or loss and other comprehensive income because of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. Azure Sea’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 temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

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

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Financial instruments

Financial assets and financial liabilities are recognised when Azure Sea becomes a party to the contractual provisions of the instruments.

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

Financial assets

Azure Sea’s financial assets are mainly loan and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

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

Interest income is recognised on an effective interest basis for debt instruments.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (representing trade receivables, deposits, amount due from a director and bank balances) are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Impairment of financial assets

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

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest and principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include Azure Sea’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 30 days, observable changes in national or local economic conditions that correlate with default on receivables.

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

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

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

Financial liabilities and equity instruments

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

Equity instruments

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

Financial liabilities

Financial liabilities including trade payables, accrued expenses and amount due to a director are subsequently measured at amortised costs, using the effective interest method.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Effective interest method

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

Interest expense is recognised on an effective interest basis.

Derecognition

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

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

On derecognition of a financial asset other than in its entirety, Azure Sea allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

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

Impairment of tangible assets

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

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

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

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

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Provisions

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

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

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

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Azure Sea did not use any critical judgments and estimations in the preparation of the Financial Information.

5.

CAPITAL RISK MANAGEMENT

Azure Sea manages its capital to ensure that Azure Sea will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. Azure Sea’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of Azure Sea consists of equity attributable to owners of Azure Sea, comprising share capital and retained earnings.

The Directors review the capital structure on a regular basis. As part of this review, the Directors consider the cost of capital and risk associates and takes appropriate actions to adjust Azure Sea’s capital structure.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

Financial assets Loans and receivables: Trade receivables Deposits Amount due from a director Bank balances Financial liabilities Liabilities measured at amortised cost: Trade payables Accrued expenses Amount due to a director	At 31 March 2014 HK$’000 662 4 – 3,149 3,815 1,610 1,537 101 3,248	At 31 March 2015 HK$’000 1,453 4 154 3,599 5,210 2,162 1,654 – 3,816	At 29 February 2016 HK$’000 5,197 4 173 1,160
			6,534
			2,676 1,259 –
			3,935

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

(b) Financial risk management objectives and policies

Azure Sea’s financial instruments include trade receivables, deposits, amount due from (to) a director, bank balances, trade payables and accrued expenses. The risks associated with these financial instruments include market risk (currency risk and interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

Currency risk

Azure Sea has foreign currency purchases which are denominated in United States dollars (“USD”) for the Relevant Periods.

The carrying amounts of Azure Sea’s foreign currency denominated monetary assets and monetary liabilities at the end of Relevant Periods are as follows:

		Asset			Liabilities
	At	At	At	At	At	At
	31 March	31 March	29 February	31 March	31 March	29 February
	2014	2015	2016	2014	2015	2016
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
USD	826	12	1	1,579	2,104	46

No sensitivity anaylsis has prepared for USD because HK$ is pegged to USD and the impact is considered immaterial.

Other than the above, Azure Seaa did not have any significant exposure to risk resulting from changes in foreign currency exchanges rates. Azure Sea currently does not have any policy to hedge its exposure to currency risk.

Interest rate risk

Azure Sea is exposed to cash flow interest rate risk in relation to variable-rate bank balances. For bank balances, the Directors are of the opinion that the impact of interest rate risk is insignificant as they are short-term in nature. Accordingly, no sensitivity analysis is presented.

Credit risk

Azure Sea’s maximum exposure to credit risk which will cause a financial loss to Azure Sea due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the statements of financial position.

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

Azure Sea has concentration of credit risk as 99%, 100% and 69.4% of the total trade receivable as at 31 March 2014, 31 March 2015 and 29 February 2016 respectively was due from the Azure Sea’s largest customer.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

Liquidity risk

In the management of the liquidity risk, Azure Sea monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance Azure Sea’s operations and mitigate the effects of fluctuations in cash flows. Azure Sea finances its working capital requirements mainly by the funds generated from operation.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Azure Sea’s liquidity position is monitored closely by the Directors. All the financial liabilities are noninterest bearing and has remaining contractual maturity of less than 1 year or repayable on demand. The total undiscounted cash flows of financial liabilities based on the earliest date on which Azure Sea can be required to pay approximately its carrying amounts at the end of the reporting period as follows:

Trade payables Accrued expenses Amount due to a director	At 31 March 2014 HK$’000 1,610 1,537 101 3,248	Carrying amounts At 31 March 2015 HK$’000 2,162 1,654 – 3,816	At 29 February 2016 HK$’000 2,676 1,259 –
			3,935

(c) Fair value

There is no financial instrument measured at fair value on a recurring basis.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate their respective fair values at the end of each of the Relevant Periods.

7. REVENUE

An analysis of Azure Sea’s revenue for the period/year is as follows:

		For the
		period from
	11 September			For the		For the
	2012 (date of			period from	period from
	incorporation)		For the	1 April 2014	1	April 2015
		to	year ended	to		to
		31 March	31 March	28 February	29 February
		2014	2015	2015		2016
		HK$’000	HK$’000	HK$’000		HK$’000
				(Unaudited)
Sales of games and console games		55,560	48,564	41,364		83,801

8. SEGMENT INFORMATION

Information reported to the board of directors of Azure Sea (the “ Board ”), being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided. This is also the basis upon which Azure Sea is organised and managed. No operating segments identified by the Board have been aggregated in arriving at the reportable segments of Azure Sea.

Azure Sea has only one operating and reportable segment, represented the trading of games and console games during the Relevant Periods. Since this is only one operating and reportable segment of Azure Sea, no further analysis thereof is presented. All the revenue of Azure Sea are generated from the trading of games and console games with business limited in Hong Kong during the Relevant Periods.

Geographical information

Azure Sea’s operations are located in Hong Kong. All the revenue from external customers of Azure Sea is generated from customers located in Hong Kong. All the non-current assets of Azure Sea are located in Hong Kong.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Information about major customers

Revenues from customers of the corresponding period/year contributing over 10% of the total revenue of Azure Sea are as follows:

		For the
		period from
	11 September			For the		For the
	2012 (date of			period from	period from
	incorporation)		For the	1 April 2014	1	April 2015
		to	year ended	to		to
		31 March	31 March	28 February	29 February
		2014	2015	2015		2016
		HK$’000	HK$’000	HK$’000		HK$’000
				(Unaudited)
Customer A		20,363	19,757	17,415		20,938
Customer B		14,393	9,575	9,575		N/A*
Customer C		10,847	9,705	9,262		N/A*
Customer D		–	–	–		11,158

• The corresponding revenue did not contribute over 10% of the total revenue of Azure Sea.

9. OTHER REVENUE

Interest income Exchange gain	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 1 192 193	For the year ended 31 March 2015 HK$’000 1 195 196	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) 1 173 174	For the period from 1 April 2015 to 29 February 2016 HK$’000 1 181
				182

10. INCOME TAX EXPENSE

Current tax: – Hong Kong Profits Tax Over-provision in prior year/period: – Hong Kong Profits Tax	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 81 – 81	For the year ended 31 March 2015 HK$’000 126 (20) 106	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) 111 (20) 91	For the period from 1 April 2015 to 29 February 2016 HK$’000 535 (20)
				515

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for the Relevant Periods.

The income tax expense for the Relevant Periods can be reconciled to the profit before tax per the statements of profit or loss and other comprehensive income as follows:

Profit before tax Tax at Hong Kong Profits Tax rate at 16.5% Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Tax effect of deductible temporary differences not recognised Over-provision in prior year/period Income tax expense	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 427 70 (1) 1 11 – 81	For the year ended 31 March 2015 HK$’000 731 121 (1) – 6 (20) 106	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) 648 107 (1) – 5 (20) 91	For the period from 1 April 2015 to 29 February 2016 HK$’000 3,217
				531 (1) – 5 (20)
				515

11. PROFIT FOR THE PERIOD/YEAR

Profit for the period/year have been arrived Directors’ remuneration Other staff costs – salaries, wages and other emoluments – contributions to retirement benefits scheme Total other staff costs Auditor’s remuneration Advisory fee Depreciation Incorporation fee Minimum lease payments	For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 at after charging: – 594 31 625 10 1,326 76 4 144	For the year ended 31 March 2015 HK$’000 – 324 23 347 10 1,956 37 – 102	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) – 298 22 320 – 1,793 35 – 93	For the period from 1 April 2015 to 29 February 2016 HK$’000 – 421 28
				449
				10 – 35 – 132

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

12. DIVIDENDS

Dividends for ordinary shareholder of Azure Sea recognised as distribution during the Relevant Periods:

For the period from 11 September 2012 (date of incorporation) to 31 March 2014 HK$’000 Interim dividend – PROPERTY, PLANT AND EQUIPMENT COST At 11 September 2012 (date of incorporation) Additions At 31 March 2014, 31 March 2015 and 29 February 2016 ACCUMULATED DEPRECIATION At 11 September 2012 (date of incorporation) Provided for the period At 31 March 2014 Provided for the year At 31 March 2015 Provided for the period At 29 February 2016 CARRYING VALUES At 31 March 2014 At 31 March 2015 At 29 February 2016	For the year ended 31 March 2015 HK$’000 –	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) –	For the period from 1 April 2014 to 28 February 2015 HK$’000 (Unaudited) –	For the period from 1 April 2015 to 29 February 2016 HK$’000 2,000
				Leasehold improvement HK$’000 – 189
				189
				– 76
				76 37
				113 35
				148
				113
				76
				41

13. PROPERTY, PLANT AND EQUIPMENT

The above item of property, plant and equipment is depreciated on a straight-line basis at the following rates per annum: Leasehold improvement Over shorter of the lease term or 20%

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

14. TRADE RECEIVABLES

	At	At	At
	31 March	31 March	29 February
	2014	2015	2016
	HK$’000	HK$’000	HK$’000
Trade receivables	662	1,453	5,197

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

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

Azure Sea generally allows an average credit period of 0 – 30 days to its customers. The following is an aging analysis of trade receivables presented based on invoice date, which approximates the respective revenue recognition dates.

0 – 30 days 31 – 90 days Over 90 days	At 31 March 2014 HK$’000 8 159 495 662	At 31 March 2015 HK$’000 399 170 884 1,453	At 29 February 2016 HK$’000 3,810 1,376 11
			5,197

Trade receivables that were past due but not impaired relate to customers that have a good track record with Azure Sea. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality. Azure Sea does not hold any collateral over these balances.

Aging of trade receivables which are past due but not impaired are as follows:

0 – 30 days 31 – 90 days Over 90 days	At 31 March 2014 HK$’000 – 261 393 654	At 31 March 2015 HK$’000 170 48 836 1,054	At 29 February 2016 HK$’000 1,376 – 11
			1,387

15. AMOUNT DUE FROM (TO) A DIRECTOR

The amount due from (to) a director is non-trade in nature, unsecured, non-interest bearing and repayable on demand.

Particulars of amount due from a director is disclosed as follows:

	At	At	At
	31 March	31 March	29 February
	2014	2015	2016
	HK$’000	HK$’000	HK$’000
Director
– Azure Sea Developments Limited	–	154	173

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

16. BANK BALANCES

The bank balances carry interest rates as follows:

	At	At	At
	31 March 2014	31 March 2015	29 February 2016
Interest rate per annum	0% – 0.01%	0% – 0.01%	0% – 0.01%
SHARE CAPITAL
		Number of
	ordinary shares		Amount
			HK$
Issued and fully paid:
At 11 September 2012 (date of incorporation), 31 March 2014,
31 March 2015 and 29 February 2016		1	1

17. SHARE CAPITAL

Azure Sea has no authorised share capital and its shares have no par value since the commencement date of the Hong Kong Companies Ordinance, Cap. 622 (i.e. 3 March 2014).

18. RELATED PARTY TRANSACTIONS

In addition to the transactions disclosed elsewhere in the Financial Information, Azure Sea has the following material transactions with related parties during the Relevant Periods:

	For the
	period from
	11 September		For the	For the
	2012 (date of		period from	period from
	incorporation)	For the	1 April 2014	1 April 2015
	to	year ended	to	to
	31 March	31 March	28 February	29 February
	2014	2015	2015	2016
	HK$’000	HK$’000	HK$’000	HK$’000
			(Unaudited)
Rental expense paid to the ultimate
controlling party,
Mr. Lam Hak Ha, Jasper	144	102	93	132

19. MAJOR NON-CASH TRANSACTION

During the period from 1 April 2015 to 29 February 2016, a debtor made a settlement of HK$2,000,000 to Azure Sea Developments Limited to offset the dividend payable.

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APPENDIX III ACCOUNTANTS’ REPORT OF THE TARGET SUBSIDIARY

20. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Azure Sea have been prepared in respect of any period subsequent to 29 February 2016.

Yours faithfully,

Asian Alliance (HK) CPA Limited

Certified Public Accountants (Practising) Lam Chik Tong Practising Certificate Number: P05612

Suites 313-316, 3/F., Shui On Centre 6-8 Harbour Road Wan Chai Hong Kong

iii – 23

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Board of Directors

Wealth Glory Holdings Limited 17/F., No. 8 Wyndham Street Central, Hong Kong

Dear Sirs,

We have completed our assurance engagement to report on the compilation of the unaudited pro forma financial information of Wealth Glory Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of financial position and related notes of the Group, Strategy King Holdings Limited (“Strategy King”) and its subsidiary, Azure Sea Company Limited (“Azure Sea”) (together with the Group hereinafter collectively referred to as the “Enlarged Group”) as at 31 March 2016 (the “Unaudited Pro Forma Financial Information”) as set out on pages iv-5 to iv-6 of Appendix IV to the circular dated 18 July 2016 (the “Circular”) issued by the Company in connection with the proposed acquisition of the entire issued share capital of Strategy King (the “Transaction”). The applicable criteria on the basis of which the Directors have complied the Unaudited Pro Forma Financial Information are described on pages iv-7 to iv-11 of Appendix IV to the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the Transaction on the Group’s financial position as at 31 March 2016 as if the Transaction had taken place at 31 March 2016. As part of this process, information about the Group’s financial position as at 31 March 2016 has been extracted by the Directors from the Company’s audited consolidated financial statements for the year ended 31 March 2016, on which the annual report of the Company for the year ended 31 March 2016 has been published.

The information about the financial position of Strategy King and its subsidiary, Azure Sea (hereinafter collectively referred to as the “Strategy King Group”) as at 29 February 2016 have been extracted by the Directors from the financial information as set out in Appendices II and III, respectively, in the Circular.

DIRECTORS’ RESPONSIBILITIES FOR THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information 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 ” (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

iv – 1

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

OUR INDEPENDENCE AND QUALITY CONTROL

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

The firm applies Hong Kong Standard on Quality Control 1 “ Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements ” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

REPORTING ACCOUNTANT’S RESPONSIBILITIES

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

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

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

The purpose of the Unaudited Pro Forma Financial Information included in the Circular is solely to illustrate the impact of the Transaction on unadjusted financial information of the Group as if the Transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 31 March 2016 would have been as presented.

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly complied on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the Transaction, and to obtain sufficient appropriate evidence about whether:

• the related pro forma adjustments give appropriate effect to those criteria; and

• the Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

iv – 2

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Enlarged Group, the Transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

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

OPINION

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

Asian Alliance (HK) CPA Limited

Certified Public Accountants (Practising)

Lam Chik Tong

Practising Certificate Number: P05612

Suites 313-316, 3/F Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

• 18 July 2016

iv – 3

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

1. Basis of preparation of the Unaudited Pro Forma Financial Information of the Enlarged Group

The following is the unaudited pro forma consolidated statement of financial position of Wealth Glory Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), Strategy King Holdings Limited (“Strategy King”) and its subsidiary, Azure Sea Company Limited (“Azure Sea”) (hereinafter collectively referred to as the “Enlarge Group”) (the “Unaudited Pro Forma Financial Information”), as if the proposed acquisition of the entire issued share capital of Strategy King (the “Transaction”) had been completed on 31 March 2016. Details of the Transaction are set out in the section headed “Letter from the Board” contained in this Circular.

The Unaudited Pro Forma Financial Information has been prepared 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”) for the purpose of illustrating the effect of the Transaction pursuant to the terms of a conditional sale and purchase agreement dated 18 March 2016 entered into between the Group and Azure Sea Developments Limited, to conditionally acquire the entire issued share capital of Strategy King (the “Strategy King Agreement”). Because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not give a true picture of the financial position of the Enlarged Group had the Transaction been completed as of the specified dates or any future date.

The Unaudited Pro Forma Financial Information has been prepared using accounting policies consistent with that of the Group based on i) the audited consolidated statement of financial position of the Group as at 31 March 2016, which has been extracted from the audited consolidated financial statements of the Company for the year ended 31 March 2016 issued on 28 June 2016; and ii) the audited statement of financial position of Strategy King and Azure Sea as at 29 February 2016 as extracted from the accountants’ reports set out in Appendices II and III, respectively, to this Circular, after making pro forma adjustments relating to the Transaction that are (i) directly attributable to the Transaction and not relating to future events and decisions; and (ii) factually supportable based on the terms of the Strategy King Agreement.

The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company based on a number of assumptions, estimates and uncertainties for illustrative purpose only. The Unaudited Pro Forma Financial Information does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Transaction been completed on 31 March 2016, nor purport to predict the future financial position of the Enlarged Group.

The Unaudited Pro Forma Financial Information should be read in conjunction with the historical financial information of the Group as set out in (1) the audited consolidated financial statements of the Company for the year ended 31 March 2016; and (2) other financial information included elsewhere in this Circular.

iv – 4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

2. Unaudited Pro Forma Consolidated Statement of Financial Position of the Enlarged Group

NON-CURRENT ASSETS Property, plant and equipment Interests in subsidiaries Interests in associates Intangible assets Loans receivables Deposits and other receivables Available-for-sale investments Goodwill CURRENT ASSETS Inventories Held-for-trading investments Trade receivables Loans receivables Prepayments, deposits and other receivables Loans to associates Amount due from a director Amount due from a shareholder Cash and cash equivalents CURRENT LIABILITIES Trade payables Accruals and other payables Bank overdrafts Bank borrowings Bonds Other borrowings Tax payable NET CURRENT ASSETS	The Group As at 31 March 2016 HK$’000 (Audited) Note 3(a) 1,448 – 21,784 20,992 5,735 14,740 4,329 34,279 103,307 5,833 83,273 3,774 34,083 12,207 5,754 – – 23,969 168,893 1,883 7,063 255 1,185 10,623 21,062 – 42,071 126,822	Strategy King As at 29 February 2016 HK$’000 (Audited) Note 3(b) – – – – – – – – – – – – – – – – 1 – 1 – – – – – – – – 1	Azure Sea As at 29 February 2016 HK$’000 (Audited) Note 3(c) 41 – – – – – – – 41 – – 5,197 – 4 – 173 – 1,160 6,534 2,676 1,824 – – – – 401 4,901 1,633	Investment in Azure Sea HK$’000 Note 3(d) – 1 – – – – – – 1 – – – – – – – – – – – 1 – – – – – 1 (1)		Pro Forma Adjustments	Pro Forma Adjustments		Reclassification of amounts due from related parties HK$’000 Note 3(h) – – – – – – – – – – – – – 174 – (173) (1) – – – – – – – – – – –	Enlarged Group As at 31 March 2016 HK$’000 (Unaudited) 1,489 – 21,784 20,992 5,735 14,740 4,329 209,614
					Elimination of investment in Azure Sea HK$’000 Note 3(d) – (1) – – – – – – (1) – – – – – – – – – – – – – – – – – – –	Reorganisation cost HK$’000 Note 3(e) – – – – – – – – – – – – – – – – – – – – (1) – – – – – (1) 1	Investment in Strategy King HK$’000 Note 3(f) – 177,010 – – – – – – 177,010 – – – – – – – – – – – – – – – – – – –	Elimination of investment in Strategy King HK$’000 Note 3(g) – (177,010) – – – – – 175,335 (1,675) – – – – – – – – – – – – – – – – – – –
										278,683
										5,833 83,273 8,971 34,083 12,385 5,754 – – 25,129
										175,428
										4,559 8,887 255 1,185 10,623 21,062 401
										46,972
										128,456

iv – 5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bonds Convertible bonds Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	The Group As at 31 March 2016 HK$’000 (Audited) Note 3(a) 230,129 7,040 – 395 7,435 222,694 41,087 181,399 222,486 208 222,694	Strategy King As at 29 February 2016 HK$’000 (Audited) Note 3(b) 1 – – – – 1 1 – 1 – 1	Azure Sea As at 29 February 2016 HK$’000 (Audited) Note 3(c) 1,674 – – – – 1,674 1 1,673 1,674 – 1,674	Investment in Azure Sea HK$’000 Note 3(d) – – – – – – – – – – –		Pro Forma Adjustments	Pro Forma Adjustments		Reclassification of amounts due from related parties HK$’000 Note 3(h) – – – – – – – – – – –	Enlarged Group As at 31 March 2016 HK$’000 (Unaudited) 407,139
					Elimination of investment in Azure Sea HK$’000 Note 3(d) (1) – – – – (1) (1) – (1) – (1)	Reorganisation cost HK$’000 Note 3(e) 1 – – – – 1 – 1 1 – 1	Investment in Strategy King HK$’000 Note 3(f) 177,010 – 42,067 – 42,067 134,943 17,525 117,418 134,943 – 134,943	Elimination of investment in Strategy King HK$’000 Note 3(g) (1,675) – – – – (1,675) (1) (1,674) (1,675) – (1,675)
										7,040 42,067 395
										49,502
										357,637
										58,612 298,817
										357,429 208
										357,637

iv – 6

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

3. Notes to the Unaudited Pro Forma Financial Information of the Enlarged Group

• (a) For the purpose of the preparation of unaudited pro forma consolidated statement of financial position, the amounts are extracted from the audited consolidated financial statements of the Company for the year ended 31 March 2016.

• (b) For the purpose of the preparation of unaudited pro forma consolidated statement of financial position, the amounts are extracted from the audited statement of financial position of Strategy King as at 29 February 2016 as set out in Appendix II to the Circular.

• (c) For the purpose of the preparation of unaudited pro forma consolidated statement of financial position, the amounts are extracted from the audited statement of financial position of Azure Sea as at 29 February 2016 as set out in Appendix III to the Circular.

• (d) The adjustment represents the acquisition of entire issued share capital of Azure Sea by Strategy King. Strategy King has acquired the entire issued share capital of Azure Sea for an aggregate consideration of HK$1 (the “Azure Sea Acquisition”), which has been satisfied by cash and was paid on behalf by the shareholder of Strategy King, Azure Sea Developments Limited (“Azure Sea Developments”).

Upon the completion of the Transaction, Azure Sea would become an indirect owned subsidiary of the Company.

• (e) Since Mr. Lam Hak Ha, Jasper is the ultimate beneficial owner of Strategy King, Azure Sea and Azure Sea Developments, the Azure Sea Acquisition was considered as a business combination under common control before and after completion of the Azure Sea Acquisition. Accordingly, the acquisition of the entire issued share capital of Azure Sea has been accounted for using the principles of merger accounting. In addition, all the cost related to the reorganisation would be borne by Azure Sea Developments, and are credited to the capital reserve as a result.

• (f) The adjustment represents the acquisition of entire issued share capital of Strategy King by the Company. Pursuant to the Strategy King Agreement, the Group has conditionally agreed to acquire the entire issued share capital of Strategy King for an aggregated consideration of HK$170,000,000, which is to be satisfied in the following manners:

Notes Consideration shares (i) Convertible bonds (ii)	HK$’000 134,943 42,067
	177,010

iv – 7

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

• (i) HK$127,932,872.45 is satisfied by allotment and issuance of 1,752,505,102 new shares (“Consideration Shares”) with par value of HK$0.01 each at an issue price of HK$0.073 per Consideration Share. For the purpose of the Unaudited Pro Forma Financial Information, the fair value of the Consideration Shares at the date of completion is assumed to be HK$0.077 which represent the market share price of the Company per Consideration Share on 31 March 2016. As the fair value of the Consideration Shares at the date of completion may be substantially different from the closing price of the Company’s shares at 31 March 2016, the actual fair value of the consideration of the Transaction may be different from those presented in the Unaudited Pro Forma Financial Information.

• (ii) HK$42,067,127.53 is satisfied by issuance of convertible bonds (the ‘‘Convertible Bonds’’) with a principal amount of not exceeding HK$42,067,127.53.

The principal terms of the Convertible Bonds are as follows:

Principal amount: a principal amount of HK$42,067,127.53 Maturity date: the date falling on the expiry of a 5 years’ period commencing from the date of issue of the Convertible Bonds Interests: non-interest bearing Conversion price: HK$0.073 per conversion share (subject to adjustment) Conversion Share: 576,262,021 new ordinary shares which may fall to be allotted and issued upon exercise of the conversion rights attaching to the convertible bonds

• (iii) The balance of HK$0.02 of the consideration will be waived by Azure Sea Developments.

• (g) The adjustment represents the elimination of investment cost in Strategy King.

Under the Hong Kong Financial Reporting Standard 3 (Revised) – Business Combinations , acquisition method of accounting is applied to account for the Transaction. The goodwill arising from the Transaction is derived as follows:

iv – 8

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

Assets and liabilities recognised at the date of the Transaction, based on the audited figures as at 29 February 2016 as stated in the accountants’ reports as set out in Appendices II to III are as follow:

Property, plant and equipment Trade receivables Deposits Amount due from a director Amount due from a shareholder Bank balances Trade payables Accrued expenses Receipts in advance Tax payable	Strategy King HK$’000 – – – – 1 – – – – – 1	Azure Sea HK$’000 41 5,197 4 173 – 1,160 (2,676) (1,259) (565) (401) 1,674	Total HK$’000 41 5,197 4 173 1 1,160 (2,676) (1,259) (565) (401) 1,675

For the purpose of this Unaudited Pro Forma Financial Information of the Enlarged Group, the directors of the Company (the “Directors”) had assessed whether there is any material fair value adjustment of the assets and liabilities being acquired based on their acknowledge of the business of Strategy King and Azure Sea as well as a business valuation in respect of Azure Sea as at 29 February 2016 prepared by an independent professional valuer, Colliers International (Hong Kong) Limited. Based on the current available information, no fair value adjustment should be made.

The fair values of the assets and liabilities being acquired may be subject to change after further assessment by the Directors at the completion of the Transaction.

Goodwill arising on the Transaction:

Consideration transferred Less: Net assets acquired Goodwill	HK$’000 177,010 (1,675) 175,335

Goodwill arising from the Transaction is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable in accordance with the accounting policies of the Group and the requirements of Hong Kong Accounting Standard 36 Impairment of Assets (“HKAS 36”). Goodwill will be allocated to the cash generating units (“CGUs”) that are expected to benefit from the synergies of the Transaction for the purpose of impairment testing. The results of the Enlarged Group may be affected by impairment loss whenever the recoverable amount of CGUs is lower than the carrying amount.

iv – 9

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Based on the existing business model of the Enlarged Group, the Directors have performed the necessary assessment on impairment in accordance with the requirement under HKAS 36. Trading of games and console games operated by Azure Sea is the CGUs for the purpose of impairment testing of the goodwill.

The Directors have conducted a review of the goodwill and appointed an independent professional valuer to assist them to determine the recoverable amount.

The recoverable amount of the goodwill has been determined by using value in use calculation. Value in use was determined by discounting the future cash flows generated from the continuing use of the CGUs. The calculation of the value in use was based on the following key assumptions:

• The cash flow projections were prepared from financial budgets approved by the Directors covering 5 years with a pre-tax discount rate of 14.9%.

• The average growth rate of revenue is 36% per annum.

• Cash flows beyond the 5 years period have been extrapolated using a 3% terminal growth rate.

Based on the above basis and assumptions, no impairment loss have been recognised to the profit or loss as at 31 March 2016 in respect of the goodwill.

Sensitivity to changes in assumptions

For the trading of games and console games, the estimated recoverable amount is equal to its carrying value and, consequently, any adverse change in a key assumption could result in a further impairment loss. The key assumptions for the recoverable amount are discussed below:

The following tables set out the sensitivity of the fair value of 100% equity interest in Strategy King to changes in (i) the pre-tax discount rate; and (ii) the terminal growth rate, assuming all other assumptions remain the same.

Scenario A: Sensitivity of market value to changes in the pre-tax discount rate

			Percentage of
Change in Pre-tax	Applied Pre-tax		Change in
Discount Rate	Discount Rate	Market Value	Market Value
		HK$
–2%	12.9%	210,600,000	19.93%
–1%	13.9%	191,500,000	9.05%
0%	14.9%	175,600,000	0%
+1%	15.9%	162,200,000	-7.63%
+2%	16.9%	150,800,000	-14.12%

iv – 10

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

Scenario B: Sensitivity of market value to changes in the terminal growth rate

Change in	Applied		Percentage of
Terminal	Terminal		Change in
Growth Rate	Growth Rate	Market Value	Market Value
		HK$
–2%	1%	158,400,000	-9.79%
–1%	2%	166,300,000	-5.30%
0%	3%	175,600,000	0%
+1%	4%	186,600,000	6.26%
+2%	5%	199,800,000	13.78%

• (h) The adjustment represented the reclassification of the current accounts with the related parties upon the completion of the Transaction.

• (i) No adjustment has been made to the Unaudited Pro Forma Financial Information for acquisition-related costs (including fees to legal advisors, reporting accountants, valuers, and other expenses) as the Directors determined that such costs are insignificant. The total acquisition-related costs are estimated to be approximately HK$1.1 million.

iv – 11

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

1. BACKGROUND

This section sets out below is the management discussion and analysis of the Target Company for the period from 1 January 2016 (date of incorporation) to 29 February 2016, The Target Subsidiary for the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and the eleven months ended 29 February 2016.

The following financial information is based on the financial information of the Target Company and the Target Subsidiary as set out in Appendices II and III to this circular.

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

• General information

The Target Company was incorporated in the BVI on 1 January 2016 with limited liability.

The principal business activity of the Target Company is investment holding.

•

Financial review

For the period from 1 January 2016 (date of incorporation) to 29 February 2016, the Target Company had no trading activities and therefore generated nil revenue during the period.

• Liquidity, financial position, capital structure and gearing ratio

As at 29 February 2016, the Target Company had no debt.

• Segment information

The Target Company has only one operating and reportable segment for the period from 1 January 2016 (date of incorporation) to 29 February 2016 which is investment holding.

• Employment and remuneration policy

As at 29 February 2016, the Target Company had no employee.

• Contingent liabilities

As at 29 February 2016, the Target Company had no material contingent liabilities.

• Charge on assets

As at 29 February 2016, the Target Company had no outstanding charges or encumbrances on its assets.

v – 1

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

• Foreign exchange exposure

The Target Company is an investment holding company and owned 100% issued share capital of the Target Subsidiary as at the Latest Practicable Date. As substantially all the Target Company’s operating costs and expenses were denominated in Hong Kong dollars, the Target Company’s operation was not exposed to significant foreign currency risk.

• Significant acquisition and disposal

On 17 March 2016, the Target Company acquired the entire issued share capital of the Target Subsidiary.

3. MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET SUBSIDIARY

• General information

The Target Subsidiary is a limited liability enterprise incorporated in Hong Kong on 11 September 2012.

The Target Subsidiary has been principally engaged in the trading of games and console games.

• Financial review

Revenue

For the period from 11 September 2012 (date of incorporation) to 31 March 2014, year ended 31 March 2015 and the eleven months ended 29 February 2016, the Target Subsidiary recorded revenue of approximately HK$55,560,000, HK$48,564,000 and HK$83,801,000 respectively. Such increase in revenue and net profit were in line with the increasing scale of operation of the Target Subsidiary in 2015 which represents an expansion of customer base and network coverage from 6 wholesale customers to 11 wholesale customers when compared to that in 2014.

Administrative expenses

For the period from 11 September 2012 (date of incorporation) to 31 March 2014, the year ended 31 March 2015 and the eleven months ended 29 February 2016, the Target Subsidiary recorded an administrative expenses of approximately HK$2,392,000, HK$2,803,000 and HK$1,044,000 respectively. For the period from 1 April 2015 to 29 February 2016, the significant decrease of the administrative expenses was primarily due to the termination of ongoing online trading advisory services in 11 months ended 29 February 2016 when compared to that of 2015.

v – 2

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

The ongoing online trading advisory services cover the following services:

• (i) assisting and advising the Target Subsidiary in formulating online trading strategies.

• (ii) assisting the Target Subsidiary to coordinates other professional parties include but not limited to marketing company, sourcing agent, trading agent and other professional parties.

• (iii) assisting the Target Subsidiary to connect with relevant parties in respect of the compliance and financial matters, and address questions raised relating to the trading.

Starting from the period of the 11 months ended 29 February 2016, the online trading operation of the Target Subsidiary was managed by Mr. Lam and his sales administration team when the team has accumulated more experience on online trading. Therefore, the termination of the online trading advisory services is not a matter after the completion of the Acquisition.

•

Liquidity, financial position, capital structure and gearing ratio

As at 31 March 2014, 31 March 2015 and 29 February 2016, the Target Subsidiary had (i) trade and other payables of approximately HK$3,581,000, HK$4,314,000, HK$4,901,000 respectively; and (ii) cash and cash equivalents of approximately HK$3,149,000, HK$3,599,000, HK$1,160,000 respectively.

The Target Subsidiary had no gearing as at 31 March 2014, 31 March 2015 and 29 February 2016 and relied on revenue of its business to fund its operation.

The Target Subsidiary did not have any outstanding capital commitments as at 31 March 2014, 31 March 2015 and 29 February 2016.

• Segment information

The Target Subsidiary has one operating and reportable segment, which is trading of games and console games in Hong Kong for the period from 11 January 2012 to 29 February 2016.

• Employment and remuneration policy

As at 31 March 2014, 31 March 2015 and 29 February 2016, the Target Subsidiary had a total of 3 employees. Total staff costs for the period from 11 September 2012 (date of incorporation) to 31 March 2014, the year ended 31 March 2015 and the eleven months ended 29 February 2016 were approximately HK$625,000, HK$347,000 and HK$449,000 and principally comprised salary and retirement benefits scheme contributions. Remuneration for employees is determined in accordance with performance, professional experiences and the prevailing market conditions. Management reviews the employee remuneration policy and arrangement of the Target Subsidiary on a regular basis.

v – 3

APPENDIX V MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

As advised by the Vendor, the existing employees of the Target Subsidiary will remain with the Target Subsidiary after the Completion. These employees help general administration work of the Target Subsidiary including warehouse management, document filing and accounting. They have joined the Target Subsidiary since its incorporation. As they are not senior management of the Target Subsidiary and all key business decisions rests with the Vendor, the operation of the Target Subsidiary will not be severely harmed if they resign.

• Contingent liabilities

As at 31 March 2014, 2015 and 29 February 2016, the Target Subsidiary had no material contingent liabilities.

• Charge on assets

As at 31 March 2014, 2015 and 29 February 2016, the Target Subsidiary Subsidiaries had no outstanding charges or encumbrances on its assets.

• Foreign exchange exposure

The Target Subsidiary mainly operates in Hong Kong with most of the transactions denominated and settled in Hong Kong dollars. Most of the Target Subsidiary’s monetary assets and liabilities are also denominated in Hong Kong dollars. Therefore, the Target Subsidiary considers that it has no significant foreign exchange risk.

• Significant acquisition and disposal

On 17 March 2016, the entire issued share capital of the Target Subsidiary was acquired by the Target Company.

v – 4

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

The following is the text of a Valuation Report prepared for the purpose of incorporation in this circular received from Colliers International (Hong Kong) Ltd., an independent valuer, in connection with its valuation as at 29 February 2016 of 100% equity interest of Azure Sea Company Limited to be acquired by the Company.

005

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Colliers International (Hong Kong) Ltd Valuation & Advisory Services Company Licence No: C-006052

Suite 5701 Central Plaza 18 Harbour Road Wanchai Hong Kong

The Board of Directors

Wealth Glory Holdings Limited 17/F, No.8 Wyndham Street, Central, Hong Kong

14 July 2016

Dear Sir/Madam,

INSTRUCTIONS

In accordance with the instructions received from Wealth Glory Holdings Limited (the “Company”), we have undertaken a valuation exercise to express an independent opinion on the market value of the 100% equity interest (the “Equity Interest”) of Azure Sea Company Limited (the “Target Subsidiary”) as of 29 February 2016 (the “Valuation Date”). Our valuation work was performed subject to the assumptions and limiting conditions described in this report.

This report outlines the purpose of valuation and premise of value, sources of information, identifies the business appraised, describes the valuation methodology, investigation and analysis, assumptions and limiting conditions and presents our opinion of value.

PURPOSE OF VALUATION

The purpose of this valuation is to express an independent opinion on the market value of Equity Interest of the Target Subsidiary as at the Valuation Date. It is our understanding that this valuation is used for internal reference and incorporation into this circular.

vi – 1

APPENDIX VI

VALUATION REPORT OF THE TARGET SUBSIDIARY

PREMISE OF VALUE

Our valuation has been prepared in accordance with the Business Valuation Standards (First Printed 2005) published by the Hong Kong Business Valuation Forum and the International Valuation Standards 2013 published by the International Valuation Standards Council, where applicable.

Our valuation is based on the going concern premise and conducted on a market value basis. Market value is defined as the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

INTRODUCTION

The Company

The Company is a Hong Kong-based investment holding company. It has been listed on the GEM Board of the Stock Exchange of Hong Kong Limited since 14 October 2010 (stock code: 8269). The Company, together with its subsidiaries, is principally engaged in (i) trading of natural resources and commodities; (ii) money lending and secured financing business; (iii) investment holding in coal trading business; (iv) manufacture and sale of fresh and dried noodles; and (v) development and promotion of brands, design, manufacture and sale of trendy fashion merchandise and other consumer products.

Overview of the Target Subsidiary

The Target Subsidiary is a limited liability company incorporated in Hong Kong, which is directly wholly-owned by Strategy King Holdings Limited (“Target Company”), a limited liability company incorporated in the BVI for investment holding, and the principal activity of the Target Subsidiary is trading of games, console games, and games-related accessories and products in Hong Kong. The Target Subsidiary operates under the business model of business to consumer (“B2C”), covering its retail and wholesale trade. B2C is business or transactions being conducted directly between a company and consumers who is the end-users of its products or services. It aims to purchase directly from the manufacturers, and gross margin is derived from the difference between the online selling price set by the Target Subsidiary and the price paid by the Target Subsidiary to the relevant product manufactures.

The Target Subsidiary operating procedures are firstly find suppliers of goods to buy at bulk and then move to present the products in the form of online shopping sales and marketing promotions through various online channels. Once the customers visit the website and select the suitable items, they will pay the goods through online payment platform, the Target Subsidiary will receive orders automatically and then contact the customers to confirm receipt, items will then be mailed to the customer’s shipping address.

vi – 2

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

Competitive Advantage of the Target Subsidiary

The Target Subsidiary can generally obtain a wholesale price from the suppliers in addition with a bulk discount bargained from the suppliers. Though the Target Subsidiary usually purchases in bulk, the Target Subsidiary would review its inventory level at the end of each month and perform clearance sales on slow-moving stock and unsold item regularly at discount or at cost. As a result, although there are other sellers of games, console games, and games-related accessories and products in Hong Kong, the Target Subsidiary can sell at a relatively competitive price and obtain the competitive advantage.

In order to maintain the competitive advantage, The operating procedures carried out by the Target Subsidiary includes (i) reviewing and obtaining the latest games launching information from the game suppliers; (ii) obtaining the pro-forma sales from the major wholesaling customers; (iii) negotiating the bulk discount and the minimum order quantity with the suppliers after a thorough purchase plan is made; (iv) launching products marketing and promotion activities through online shopping website, physical marketing activities, various wholesalers on traditional sales and distribution channels like online channels such as Facebook and Taobao as well as other business network; (v) offering promotion and marketing gifts and materials including posters and T-shirts to both its wholesale and retail customers; (vi) arranging logistics services provider to deliver the new launch products to those customers who preordered swiftly.

Through the last three years’ operation, the Target Subsidiary has established good business reputation and relationship among the customers and the suppliers.

The Target Subsidiary has maintained a solid client database for sales management. The continuous growth of the turnover of the Target Subsidiary has also demonstrated its distribution ability to its suppliers, which creates positive reputation of the Target Subsidiary and hence strengthen the cooperation and the relationship with the supplier. It is believed that the business reputation of the Target Subsidiary and its close relationships with key suppliers will translate into valuable marketing and commercial support. This could ultimately help the Target Subsidiary to negotiate for better bulk discount in its future business cycle.

The diagram illustrates the corporate structure of the group structure after reorganization:

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

Company (Cayman Islands)
100%
Target Company (BVI)
100%
Target Subsidiary (Hong Kong)
----- End of picture text -----

vi – 3

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

Although the Target Subsidiary only sells products in Hong Kong as at the Valuation Date, the products and games it sells are world-wide products, customers outside Hong Kong can also place order with the Target Subsidiary through different selling platforms in the internet. Moreover, the Target Subsidiary is going to broaden its products line offerings to drive additional value to the consumers and ensure it can accommodate the evolving needs of consumers from Hong Kong and the PRC as well. Therefore, we herein present the macroeconomic overview of the PRC and Hong Kong. Additionally, the game industry in global, Mainland China and Hong Kong together with the e-commerce market in Mainland China and Hong Kong will also be analysed and stated in this report.

MACROECONOMIC OVERVIEW OF THE PRC

Gross Domestic Product

According to the released figures, Gross Domestic Product (GDP) in the PRC was RMB67,670.8 billion in 2015, up 6.9% year-on-year. The contributions from primary industries, secondary industries and tertiary industries were RMB6,086.3 billion (up 3.9%), RMB27,427.8 billion (up 6.0%) and RMB34,156.7 billion (up 8.3%) respectively.

Imports and Exports

Exports recorded a slightly decrease due to as the negative atmosphere under uncertainly of the global economic market. The latest figures reveal that the total exports are down by 1.8% to RMB14,135.7 billion in 2015, compared with RMB14,391.2 billion in 2014. In addition, total imports were RMB10,449.2 billion in 2015, a sharp decrease of 13.2% year-on-year and reflecting a trade surplus of RMB3,686.5 billion, which is RMB1,337.6 billion (2014 has a trade surplus RMB2,348.9 billion) higher than previous year’s figure.

Industrial Production

Total value-added from industrial activities gained a single-digit 5.9% year-on-year to RMB22,897.4 billion in 2015, compared to 6.1% growth in the previous year. Weak external demand and economic downturn are the major factors for the loss of momentum in growth. The total value-added from scaled enterprises grew by 6.1%. Nowadays the pillar industries of China include food processing, textiles, communication equipment, special appliances (i.e. equipment designated for a special stage within the whole manufacturing process, characterised by high efficiency and speciality) and motor vehicles.

Fixed Assets Investment

The total fixed assets investment still grew by a significant 10.0% to RMB56,200.0 billion in 2015. The total investments in real estate were RMB9,597.9 billion, up 1.0% year-on-year; in which residential comprises RMB6,459.5 billion, up 0.4% year-on-year; office comprises RMB621.0 billion, up 10.1%; commercial properties comprises the remaining RMB1,460.7 billion, up 1.8% year-on-year.

vi – 4

APPENDIX VI

VALUATION REPORT OF THE TARGET SUBSIDIARY

Retail Sales

Retail sales are regarded as the main driver that has bolstered the position of the PRC as one of the fastest growing economies in the Asian Pacific region. In 2015, total retail sales reached RMB30,093.1 billion, up 10.7% year-on-year. Urban areas provide the majority of growth with total retail sales in urban areas recording RMB25,899.9 billion, up 10.5% year-on-year.

Consumer Price

The Consumer Price Index (“CPI”) in 2015 was 102, representing 1.4% increase compared with 2014 or 1.4% inflation year-on-year. Specifically, the price went up by 1.5% in urban areas and 1.3% in rural areas. The total food cost grew by 2.3%, clothing up by 2.7%; household facilities, articles and maintenance services up by 1.0%; accommodation up by 0.7% and transportation and communication down by 1.7%. In addition, annual disposal income per capita was RMB21,966 up 8.9% year-on-year.

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vi – 5

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

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Source: National Bureau of Statistics of China

Summary

Economy of the PRC still maintains the growth momentum despite the sluggish global economy. GDP growth was 6.6% during the first quarter of 2016 and was in-line with the Government’s target. Retails sales and fixed assets investment still act as the major engines for local economic growth. The Chinese economy is forecasting on average to grow 6.5% in 2016 and 6.2% in 2017 and 2018.

The International Monetary Fund forecasted that the GDP growth of the PRC will be 6.3% in 2016, followed by 6.0% in 2017, which represent sharp slowdowns from 2015 due to huge capital outflows, a slide in the currency and a summer stock market crash.

Generally speaking, China’s economy has maintained within a proper range. The economic structure has been further optimised, the transformation and upgrading fastened, the new impetus accumulated and the people’s life improved. The population and employment situation were generally stable in overall.

Despite the slowing economic growth, the nation’s retail sales are still promising, as reflected from the still remarkable growth during the first quarter of the year. In light of the weak external environment, the government has shifted the economic focus from industrial productions to retail sales in order to maintain economic growth in the coming years.

GENERAL OVERVIEW OF HONG KONG ECONOMY

According to the press release of HKSAR Government in relation to the domestic economic performance in 2015, the economy of Hong Kong grew by 2.4% for 2015 as a whole, compared to 2.6% in 2014. Hong Kong saw subdued export performance amid an austere external environment. Domestic sector showed remarkable resilience while labour market was in full employment. Unemployment rate stayed low throughout the year (2015 year-end: 3.3%). Asset markets highly volatile during the year whereas property market consolidated after September 2015. Inflation eased for the fourth consecutive year. Underlying inflation averaged 2.5% in 2015.

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Looking forward, export outlook of Hong Kong shall be clouded by slow and uneven global economic growth. GDP growth in 2016 will continue to count on domestic demand, underpinned by labour market resilience and hectic infrastructure, and with a notable fiscal boost. It is estimated that the real GDP growth in 2016 will be around 1-2%.

INDUSTRY OVERVIEW

Gaming Industry in global

Global digital video game sales kicked off the year with new high scores after breaking records in 2015. The market for digital games reached an all-time high of $61 billion in 2015 according gaming intelligence firm SuperData Research. Sales of games downloaded to consoles like Xbox and Sony’s PlayStation jumped 30 percent and the console platform drummed up $4 billion in revenue in 2015. On 21 April 2016, Newzoo released the latest quarterly update of its Global Games Market Report. It shows that gamers worldwide will generate a total of $99.6 billion in revenues in 2016, up 8.5% compared to 2015. APAC continues to dominate worldwide, accounting for 47% of the market. China alone accounts for one quarter of all global game revenues. Newzoo expects the global market will eventually reach $106.5 billion, $112.5 billion and $118.6 billion in 2017, 2018 and 2019 respectively, with TV/console gaming at $29.8 billion, 30.4 billion and 30.84 billion.

APAC territory is expected to generate $46.6 billion this year, or 47% of total global game revenues. This growth represents a 10.7% year-on-year increase. Although China is only the world’s third-largest market for video games now, China alone accounts for half of APAC’s revenues, and is expected to reach $24.4 billion this year to cement its place as the largest games market in the world, ahead of the US’s anticipated market size of $23.5 billion. China is of high chance to remain the largest games market for the foreseeable future, growing to $28.9 billion by 2019.

Gaming Industry in China

Gaming companies have long had their eyes on the Chinese market but have faced restrictions since 2000, when Chinese regulators enacted a console ban to prevent what they said were potential adverse effects on China’s youth. On 20 March 2015, the China central government lifted a 14-year ban on foreign video game console sales, Japan’s Sony Corp is set to heat up a belated “console war” in China, as its PlayStation 4 and PlayStation Vita can officially go on sale with the opening of the Shanghai Free Trade Zone (FTZ) in September 2013. It is a remarkable day in the gaming industry of the country. Local governments were also told to submit draft rules allowing the sale of consoles to the country’s Ministry of Commerce. The Culture Ministry would have to approve games before they may be sold.

Besides, the Polygon mentioned that console restrictions in China were loosened in 2015 as well. In fact, Microsoft’s Xbox One, the software giant’s all-in-one games and entertainment system, was the first major console of its kind to be introduced on the mainland in September 2014. The consoles were allowed for sale in the Shanghai FTZ and the trial program was worth it enough for Microsoft to bring the Xbox One to China with another 10 games for sale. Reports said Microsoft sold 100,000 units on the Xbox One’s first day of sale, making a better debut in China than in Japan.

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Xbox, PlayStation and Wii video game console are said to be rather common in the US and European markets. However, due to the Chinese government’s console restrictions in the past years, the growth of the domestic console game market has been slowed down. Nonetheless, 2015 was a milestone year of Chinese gaming industry because of the popularity of smart TV and loosen government policy on video gaming industry.

Gaming Industry in Hong Kong

Video games outgrows traditional toys and games in 2015

Video games registered stable current value growth in 2015, with video games outperforming traditional toys and games. While traditional toys and games was supported by the solid performances of action figures and accessories, construction toys and scientific/educational toys, digital gaming posted even stronger growth. Furthermore, the launching of next generation consoles, namely PlayStation 4 and Xbox One, sustained video games. In particular, console manufacturers significantly increased the range of titles for their new consoles. International manufacturers dominated toys and games in 2015. While the Japanese companies Sony Computer Entertainment Hong Kong and Nintendo (Hong Kong) held the leading positions within video games, Hasbro Hong Kong and Mattel East Asia led traditional toys and games in 2015.

The battle of next-generation consoles continued into 2016, as the top three players within video games intensified their attempts to increase sales. Players increasingly resorted to console-game bundle sales to attract consumer interest. For example, Sony Computer Entertainment Hong Kong and Microsoft Hong Kong launched the FIFA 15 bundle for their PlayStation 4 and Xbox One platforms respectively. Games, especially blockbuster titles such as Battlefield 4 and Call of Duty, tended to be cross-platform versions.

Sony Computer Entertainment Hong Kong led video games in 2014 with a 22% value share. Its leading position stemmed from its wide portfolio of video games, ranging from hand-held to static video games. Its established presence and constant innovation maintained consumer interest. For example, its new static video game console, PlayStation 4, rapidly won over the hearts and minds of gamers in 2014. Over the forecast period, the expected performance stems from continuing innovation from manufacturers, both in terms of hardware and software, to meet the needs of sophisticated gamers. Increasingly, gamers want powerful graphics, speed, personalisation and integrated social capabilities from their video consoles. This is likely to have a positive impact on static video consoles, games for static consoles and PC and console game downloads.

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The Future of Video Game Consoles

The console market for both static and hand-held devices is going through a period of dramatic change. Hand-held consoles continue to decline, as consumers eschew the platform for mobile gaming, while the launch of the Xbox One and PlayStation 4 has reinvigorated static console sales. New products will need to keep up with coming technological advancements, like augmented reality (AR) and virtual reality (VR) headsets, which are expected to fully enter the market starting in 2016. With the likelihood that consumers will adopt new technologies, like ultra-high definition televisions and augmented reality (AR) or virtual reality (VR) headsets, consoles will need to find new ways to adapt to this technology. This will mean new, more advanced versions of existing consoles or shortening the life of this next generation cycle.

Key growth driver going forward

The games industry shows signs of accelerated growth following global alignment of business models and platforms. The biggest driver going forward is the convergence of games and video on a global scale, with e-sports at the epicentre. This trend is transforming games into all-round entertainment franchises, opening up new ways of engagement and complementary revenue streams. This is good news for the games industry, which was already on a healthy growth curve.

E-commerce in the PRC and Hong Kong

The e-commerce mentioned here covers all kinds of products, not limited to video games, as the Target Subsidiary also sells games-related accessories and products besides video games.

E-commerce is referring as electronic commerce; it is the trading or facilitation of trading in products or services using computer networks, such as the Internet. E-commerce draws in technologies such as mobile commerce, electronic funds transfer, supply chain management, internet marketing, online transaction processing, electronic data interchange (“EDI”), inventory management systems, and automated data collection systems.

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E-commerce retail sales in the PRC are expected to increase by 42.1%, accounting for over 40% of the global e- commerce retail sales in 2015. The e-commerce market in 2018 is expected to reach USD1.57 trillion, and the PRC has become the world’s largest e-commerce market. With the development of mobile networks, mobile commerce is booming in the PRC. Although smartphone market in the PRC is comparatively saturated, the smartphone penetration is expected to reach 38.6% in 2015. Mobile commerce in 2015 is predicted to reach US$334 billion, making up about half of total retail e-commerce sales in the PRC.

==> picture [441 x 162] intentionally omitted <==

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

CIW
China Retail E-commerce saies in 2015 China Retail M-commerce saies in 2015
Retail e-commerce sales (billion. dollar) % of Change % of the total retail sales Retail e-commerce sales (billion. dollar) % of the retail e-commerce sales % of the total retail sales
1,568.39 71.5%
66.3%
48.6% 42.1% 55.5% 61.0% 1,410.72
35.6% 1,208.31 38.1% 49.7% 1,039.84
911.25 32.6% 29.8% 4.79% 7.9% 14.5% 19.0% 24.0%
10.9% 737.07
672.01 28.6%
472.91 19.6% 23.8% 505.74
15.9%
12.4% 180.40 333.99
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2019
China Internet Watch China Internet Watch
CIW
----- End of picture text -----

Source: China Internet Watch

Hong Kong benefits from a lack of restrictions from the government where e-commerce is concerned, and also the trend of residents prefer to shop online for their needs in Hong Kong are increasing. Moreover, the increasing disposable incomes add to Hong Kong residents’ purchasing power, and buying luxury goods online from other countries is the latest trend.

It is estimated e-commerce market size in Hong Kong is HKD3.5 billion and the average annual spend per user is HKD535. It also pointed out that four out of five Hong Kong consumers use the internet to research non-consumable products, or transact online occasionally, as 24% of consumers prefer shopping at conventional brick-and mortar stores.

The advance technology not only provides communication technology tools to simplify the way human and business communicate, but also improved the lifestyle as it helps people to break the boundaries of geographical and time limitation on consumer behaviour. As more people nowadays have at least a smart phone on hand, apart from calling and communication, smart phones provide convenience for people to surf the internet anytime anyplace. It is estimated 89% of smartphones users have researched a product or service on their smartphones, 43% of users even have purchased a product or service on smartphone in Hong Kong. In 2013, 66.4% of Hong Kong’s residents shopped online, as compared to 57.9% in 2011. It is believed that 82% of Hong Kong residents will be reached to shop online by 2015. Generally, women are keener online shoppers than men as they purchase more items online, around 6.2 items per women, while men purchase 4.6 items. Besides, the frequency of shopping for women is 4.2 times, which is a bit higher than men 3.2 times.

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Conclusion

In the future, there is no doubt that e-commerce is a fast growing industry and the market will expand further. Increasing demand of online shopping is expected for both genders, especially the market of the men. The current consumers of video games are mostly men. The market for trading of games, games-related accessories and products through online is expected to grow rapidly. Although the rise of mobile games may threaten the sales of video games, there are some limitations for the mobile games and the new technology techniques such as VR may bring the new opportunities to the consoles game industry.

BASIS OF OPINION

The valuation has been prepared in accordance with International Valuation Standards published by the International Valuation Standards Council. The valuation procedures adopted include review of economic and financial conditions of the subject businesses and an assessment of key assumptions, estimates and representations made by the Target Subsidiary. All matters we consider essential to the proper understanding of the valuation are disclosed in this report.

The following factors also form a considerable part of our basis of opinion:

• The economic outlook in general;

• The nature of businesses and history of the operations concerned;

• The financial condition of the Target Subsidiary;

• Investment returns of companies operating in similar lines of business; and

• Financial and business risk of the Target Subsidiary.

We planned and performed our valuation so as to obtain all the information and explanations that we considered necessary in order to provide us with sufficient evidence to express our opinion on the Target Subsidiary.

SOURCES OF INFORMATION

In conducting our valuation of the Equity Interests, we have considered, reviewed and relied upon the following key information provided by the management of the Target Subsidiary (the “Management”) and the public. We relied on the following information in performing this appraisal:

• Background of the Target Subsidiary and relevant corporate information;

• Business registration details of the Target Subsidiary provided by the Management;

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• A cooperation agreement entered between the Target Subsidiary and Beijing Xinchang Xinda Technology Development Co. Ltd. dated 15 March 2016;

• Unaudited financial statements of the Target Subsidiary for the year ended 29 February 2016;

• Audited financial statements of the Target Subsidiary for the year ended 31 March 2014 and 31 March 2015;

• Financial projections of Target Company; and

• Bloomberg database and other reliable sources of market data;

We have held discussion with the Management and conducted research from public sources to assess the reasonableness and fairness of the information provided. We have no reason to doubt the truth and accuracy of the information provided to us by the Management, and we have relied to a considerable extent on the information provided in arriving at our opinion of value. 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.

VALUATION METHODOLOGY

There are three generally accepted approaches to assess the market value of the Target Subsidiary, namely the market approach, the asset approach, and the income approach. Under each approach, a number of methods are available which can be used to assess the value of a business subject. Each method uses a specific procedure to determine the business value. 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 businesses that are similar in nature. It is also common practice to employ a number of valuation methods under each approach. Therefore, no one business valuation approach or method is definitive.

Market Approach

In the market approach, the Guideline Publicly Traded Company method (the “GPTC method”) will be applied to estimate the value of the company. GPTC entails a comparison of the subject company to publicly traded companies. The comparison is generally based on published data regarding the public companies’ stock price and earnings, sales, or revenues, which is expressed as a fraction known as a “multiple.” If the guideline public companies are sufficiently similar to each other and the subject company to permit a meaningful comparison, then their multiples should be similar. The public companies identified for comparison purposes should be similar to the subject company in terms of industry, product lines, market, growth, margins and risk.

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Asset Approach

The Asset 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 debt capital). 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, the sum of such assets equals the value of the business entity.

From a valuation perspective, we will restate the values of all types of assets of a business entity from book values to appropriate standards of value. After the restatement, we can identify the indicated value of the business entity, or, by applying the accounting principle “assets minus liabilities”, to arrive at the value of the equity interest of the business entity.

Income Approach

Income Approach values an asset by reference to the capitalized value of income, cash flows or cost savings that could hypothetically be earned or achieved by a market participant owning the asset. The principle of this approach is that the value of the asset can be measured by the present worth of the economic benefits to be received over the assets life.

This approach estimates the future economic benefits and discounts these benefits to its present value using an appropriate discount rate for all risks associated with realizing those benefits.

SELECTION OF VALUATION APPROACH

Among the three approaches, we consider that the income approach is more appropriate for valuing the Target Subsidiary.

While useful for certain purposes, the asset approach does not take future earning potential of the Target Subsidiary into consideration. Market approach may be difficult to apply as we have not identified sufficient market transactions which are comparable. In this regard, we have considered but decided against using asset and market approach for valuing the Target Subsidiary. We consider income approach to be more appropriate for valuing the Target Subsidiary as it considers future growth potential of the business of Target Subsidiary.

To determine the market value of the Target Subsidiary, we have adopted the discounted cash flow (“DCF”) method, which is one of the income approaches that use the concept of time value of money. By adopting the DCF, we utilize future free cash flow projections and discount them with a discount rate to arrive at a present value.

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VALUATION ASSUMPTIONS AND RATIONALE

General assumptions

In determining the market value of the Equity Interests, the following principal assumptions have been adopted:

• We have assumed that there will be no material change in the existing political, taxation, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Subsidiary;

• We have assumed that the conditions in which the business is being operated and which are material to revenue and costs of businesses will remain unchanged;

• We have assumed that the information have been prepared on a reasonable basis after due and careful consideration by the Management;

• We have assumed that competent sales administration staff and key personnel (being Mr. Lam) will be maintained to support the ongoing operation and development of the Target Subsidiary;

• We have assumed that all licenses and permits that is essential for the operation of Target Subsidiary can be obtained and are renewable upon expiry; and

• We have assumed that there are no hidden or unexpected conditions associated with the businesses valued that might adversely affect the reported value. Further, we assume no responsibility for changes in market conditions after the Valuation Date.

Major assumptions adopted in the financial projection prepared by the Management:

We have discussions with the Management with regard to the background of the Target Subsidiary as well as the business model to generate future revenue of the Target Subsidiary. As a part of due diligence, we have conducted an analysis of the economic overview, industry overview and competitive environment to understand the demand and supply situation. In assessing the basis of the financial projection provided by the Management, we review the operating statistics, financial data and other relevant contracts and documents including those signed agreements relating to financial advisory fees, custody management fees and financing consultancy fees, provided by the Management. We consider that the assumptions of the projection (as provided by the Management) are fair and reasonable. Where appropriate, the most updated information obtained during our valuation justification was used.

Revenue

Revenue is mainly derived from trading of games and console games through existing online platform from the clients by the Target Subsidiary. The Target Subsidiary will provide the online platform for corporate firms (Business to Business) and private customers (Business to Consumer). Trading of games and console games through existing online platform are represented by four segments, which are (i) games software, (ii) games hardware & accessary, (iii) IT products, and (iv) sports shoes & trendy goods.

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The projection of the revenue attributable to trading of the above-mentioned four segments for the year ended 31 March 2017 is presented as follows:

• 1) Revenue from games software (HKD 146,211,814) x 60% = HKD87,727,088

• 2) Revenue from games hardware & accessary (HKD 146,211,814) x 30% = HKD43,863,544

• 3) Revenue from IT products (HKD 146,211,814) x 8% = HKD11,696,945

• 4) Revenue from sports shoes & trendy goods (HKD 146,211,814) x 2% = HKD2,924,236

Therefore, the projected revenue from April 2016 to March 2021 is as follows:

For the 12 months ended (HKD)		31-Mar-2017	31-Mar-2018	31-Mar-2019	31-Mar-2020	31-Mar-2021
Net Revenue	(A)=(B)+(C)+(D)+ (E)	146,211,814	219,317,720	307,044,808	368,453,770	405,299,147
Games software	(B)	87,727,088	131,590,632	184,226,885	221,072,262	243,179,488
Games hardware & accessary	(C)	43,863,544	65,795,316	92,113,443	110,536,131	121,589,744
IT products	(D)	11,696,945	17,545,418	24,563,585	29,476,302	32,423,932
Sports shoes & trendy goods	(E)	2,924,236	4,386,354	6,140,896	7,369,075	8,105,983

The projected revenue in financial year (“FY”) 2016/2017 (i.e. HKD146,211,814) implied a revenue growth rate of 60% comparing with the actual revenue in FY 2015/2016. The basis for this projected revenue takes reference to the revenue growth rate in recent three years. In FY 2015/2016, the revenue growth rate is around 87%, the average revenue growth rate in FY 2014/2015 and FY 2015/2016 is over 60%, and the average revenue growth rate from FY 2013 to FY 2016 is around 69%. Although the revenue growth rate in 2015/2016 is as high as 87%, it is not due to low base effect. By taking into account the absolute amount, the revenue is indeed increased from HKD48,564,00 in FY2015 to over HKD91,000,000 in FY2016.

The basis to estimate the revenue portion attributable to games software, games hardware & accessary, IT products and sports shoes & trendy goods has taken reference to the actual contribution of the above four segments in FY 2015/2016.

The revenue growth rates in FY 2017/2018, FY 2018/2019, FY2019/2020 and FY2020/2021 are projected to be 50%, 40%, 20% and 10% respectively, assuming dwindling growth rate as the business growth of the Target Subsidiary stabilizes.

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Cost

Value-added tax and Income tax

Tax expenses of around of 16.5% of gross revenue were applied in the discounted cash flow analysis.

Sales & Distribution expenses

Sales & Distribution expense includes (i) carriage outwards; (ii) bank charge; (iii) internet expenses; and (iv) transportation, etc. The percentage of Sales & Distribution expenses to the revenue in the 5-years forecasting period is 0.148%, which has taken reference to the actual percentage in FY 2016 accordingly.

Administrative expenses

Administrative expense includes (i) marketing and miscellaneous expense; (ii) depreciation; (iii) entertainment and gifts expense; and (iv) salaries and staff welfare, etc. The percentage of Administrative expenses to the revenue in the 5-years forecasting period is 1.026%, which has taken reference to the actual percentage in FY 2016 accordingly.

Capital expenditure

Management assumed that insignificant capital expenditure would be required for trading of video games, game hardware, accessary, IT products and other trendy goods in the projection period.

Working capital

Due to the nature of online service business, no substantial amount of inventory is required. Thus, only certain account receivable is projected by the Target Subsidiary. Accounts receivable days are the number of days that the revenue from the customer may be outstanding before it is collected. Based on the Target Subsidiary accounting policy adopted, revenue of the selling of the products is recognised and become due once the clients confirmed the order of the receipts through the online website. However, the Target Subsidiary also advised that customers typically need certain time to process the payment instruction for the buying the products, thus, accounts receivable was assumed in the valuation model. As advised by the Target Subsidiary, customers who approached the Target Subsidiary were typically looking for more convenient source of trading games products and fast closing via the internet platform. Therefore, customers generally had tendency to complete the transaction as quickly as possible and the average trade receivable days taken reference from FY 2016 was used to derive the expected accounts receivable in the projection period. In FY 2016, 73.3% of the trade receivables day was below 30 days, 26.5% was in between 31-90 days, with the remaining 0.2% over 90 days. As a result, the average receivable day adopted in the projection period is 30 days.

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Terminal value

Having estimated the free cash flow produced over the forecast period from March 2017 to March 2021, we need to come up with a reasonable idea of the value of the Target Subsidiary’s cash flows after that period. There are several ways to estimate a terminal value of cash flows, but one common method is to value the company as a perpetuity using the Gordon Growth Model. The model uses this formula:

Terminal Value = Final Projected Year Cash Flow X (1 + Long-Term Cash Flow Growth Rate)/ (Discount Rate – Long-Term Cash Flow Growth Rate)

Long-term cash flow growth rate

Long-term cash flow growth rate is assumed to be approximately 3% per year with reference to the historical inflation rate in Hong Kong where the business of the Target Subsidiary is operated.

Valuation procedures and parameters adopted in Income Approach

To determine the market value of the equity interest, we have adopted the discounted cash flow method which uses future free cash flow projections and discounts them with a discount rate to arrive at a present value.

The discounted cash flow method is a method to value the subject entity using the concepts of time value of money. All future cash flow are estimated and discounted to give them a present value. The discount rate used was the required rate of return of the market comparables. The present value of the free cash flow was calculated via the following formula:

PVCF	=	CF1/(1+R)1+ CF2/(1+R)2+ CF3/(1+R)3+ … + CFn/(1+R)n
Where:
PVCF	=	Present value of cash flows
CFn	=	Cash flow
R	=	Discount rate
N	=	Time period

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In the course of our valuation, the cash flows were determined as free cash flows, which were calculated using the following formula:

FCF	=	NI + AD - WC - CAPEX
Where:
FCF	=	Free cash flow
NI	=	Net income
AD	=	Amortization and depreciation
WC	=	Change in working capital
CAPEX	=	Capital expenditures

Discount rate

The discount rate used in this valuation exercise was the weighted average costs of capital (“WACC”), which was computed using the following formula:

WACC	=	(E/V) × Re+ (D/V) × Rd× (1-Tc)
Where:
Re	=	Cost of equity
Rd	=	Cost of debt
E	=	Market value of the Subject Company's equity
D	=	Market value of the Subject Company's debt
V	=	E + D
E/V	=	Percentage of financing that is equity
D/V	=	Percentage of financing that is debt
Tc	=	Tax rate

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As shown in the above formula, the WACC has two components: the cost of equity and the cost of debt. The modified Capital Asset Pricing Model (the “Modified CAPM”) was used for determining the cost of equity. The modified CAPM states that an investor requires excess returns to compensate for any risk that is correlated to the risk in the return from the stock market as a whole but require no excess return for other risks. Risk that are correlated to the risk in the return from the stock market as a whole are referred to as systematic and measured by a parameter called beta, whereas other risks are referred to as a non-systematic. It is calculated as follow:

Re	=	Rf+β(Rm– Rf) + SCRP + CSRP
Where:
Re	=	Cost of equity
Rf	=	Risk-free rate
B	=	Beta coefficient
Rm	=	Expected market return
(Rm– Rf)	=	Market risk premium
SCRP	=	Small company risk premium
SRP	=	Company Specific risk premium

In our valuation, the following parameters were adopted:

Risk-free rate (10-years)1	:	1.32%
Beta coefficient2	:	1.15
Market risk premium3	:	6.59%
Company Specific risk premium4	:	1.00%
Small company risk premium5	:	3.87%
Cost of equity	:	14.10%
Cost of debt6	:	5.00%
Tax rate7	:	16.5%
Debt to equity ratio8	:	0.12
WACC	:	13.02%

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Remarks:

Yield of 10-year risk-free rate in Hong Kong is adopted as of the Valuation Date, from Bloomberg, as the core business of the Target Subsidiary is in Hong Kong;

1. The leveraged beta was calculated from the comparable companies using the following formula: Levered beta = Unlevered beta* 1 + (1 – Tax Rate) × (Debt/Equity). The beta coefficient is estimated from the average betas of a set of comparable companies listed in Hong Kong. The betas of the comparable companies are made reference to the 2-year weekly adjusted betas obtained from Bloomberg. The Target Subsidiary primarily engage in and generate substantially its revenue and profit or loss from trading of games, console games and games-related accessories and products in Hong Kong, China and Asia Pacific. We have attempted to select the listed companies with same principal activities as the Target Subsidiary. However, due to the Target Subsidiary’s uniqueness in its business model, there are no directly comparable companies engaging in trading games, console games and games-related accessories and products in Hong Kong through internet platform but without their own on-line shop/website or trademarks.

Given the above, we therefore expand our review to Korean and the United States listed companies engaging in the provision of e-commerce, online shopping and business to customers’ selling platform. We consider the selection criteria are reasonable and the sample list is fair and representative. As a result, we have adjusted and made reference to the following criteria in choosing the comparable companies:

• The companies are publicly listed in developed market such as Korea and the United States;

• The companies operate their businesses over the world through online social platform; and

• The companies operate in similar businesses as the Target Subsidiary.

The levered beta and the debt to equity ratios of the comparable companies are listed below:

Comparable Company Interpark Corp CJ O Shopping Co ISE Commerce Co Yes24 Co Ltd Zero to Seven In Vipshop Holdings E-commerce C-ADR Mecox Lane-ADR Average:	Beta Coefficient 1.252 0.811 0.919 1.331 1.386 1.705 1.323 0.449	D/E Ratio 0.00 0.87 0.00 0.03 0.00 0.10 0.00 0.00
		0.12

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APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

The profiles of the comparable companies are as follow:

Comparable Company	Ticker	Business
Interpark Corp	108790 KS Equity	Interpark Corp, an on-line retailer, operates an
		Internet-based shopping mall. The Company
		markets and sells a broad range of products such
		as books, clothes, computers and peripherals, live
		event tickets, computer game software, flowers,
		tour packages, and home appliances. Interpark
		also provides web-based hosting services and
		electronic commerce solutions.
CJ O Shopping Co	035760 KS Equity	CJ O Shopping Co., Ltd. retails clothes, kitchen
		utensils, home appliances, and jewellery. The
		Company sells its merchandise through TV home
		shopping channels, catalogs, and the Internet
		shopping mall. CJ O Shopping operates cable
		television business through a subsidiary.
ISE Commerce Co	069920 KS Equity	ISE Commerce Co., Ltd. provides overseas
		online shopping service. The company allows
		customers to buy overseas items with foreign
		registered credit cards acting as buying agent on
		behalf of them. The service also includes local
		language description and delivery.
Yes24 Co Ltd	053280 KS Equity	YES24 Co., Ltd is an on-line retailer. The
		company markets and sells books. The company
		also provides online advertising service.
Zero to Seven In	159580 KS Equity	Zero To Seven Inc. operates an online retail store
		for baby and children’s products. The Company
		offers baby clothing, diapers, toys, baby food,
		furniture, books, cosmetics, bedding, and other
		related products.
Vipshop Holdings	VIPS US Equity	Vipshop Holdings Ltd. retails branded products
		at discount over the Internet. The Company
		retails through flash sales, in which limited
		quantities of an item are sold at deep discount
		for a specified period of time.
E-commerce C-ADR	DANG US Equity	E-Commerce China Dangdang, Inc. is a business-
		to-consumer Internet retailer. The Company sells
		books and other media; beauty and personal care;
		home and lifestyle; baby, children and maternity
		products; and various apparel including jackets,
		shoes, and men’s and women’s apparel.
Mecox Lane-ADR	MCOX US Equity	Mecox Lane Ltd. operates an Internet commerce
		website. The Company retails men’s, women’s
		and children’s apparel and household accessories
		under its own brand and under third party labels.

vi – 21

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

1. The market risk premium is the implied risk premium expected from the market using forecasted growth rates, earnings, dividends, payout ratios and current values. It represents the additional return required by an investor as compensation for investing in equities rather than a risk-free instrument. The adopted risk premium is made reference to the total equity risk premium in the research published by Professor Aswath Damodaran from New York University in January 2016. Aswath Damodaran is a Professor of Finance at the Stern School of Business at New York University, where he teaches corporate finance and equity valuation. He is best known as author of several widely used academic and practitioner texts on valuation, corporate finance and investment management. He has written several books on equity valuation, as well on corporate finance and investments. His research result on equity risk premium is commonly applied by valuers.

2. The Company specific risk premium is the risk premium added to the cost of equity to reflect the additional risk factors specific to the Target Company. The company specific risk factors may include the following:

3. Lack of diversification

4. Customer concentration

5. Poor access to capital

6. Distribution channel

7. Thin management

8. Competition

By considering the additional risk associated with the operation of the Target Subsidiary, a company specific risk premium of 1.00% was adopted in the valuation.

1. Small company risk premium is the additional return required by small company investors to compensate the higher perceived risks of small companies. The small company risk premium is made reference to Ibbotson® SBBI® 2015 Valuation Yearbook. The Ibbotson® SBBI® 2015 Valuation Yearbook is the study of historical capital markets data in the United States. Commonly used by valuers, consultants, and analysts to analyze asset class performance, the yearbook contains the size premia for large- and small-company stocks. The premia in the 2015 Valuation Handbook were calculated using the data sources: (i) Standard and Poor’s, (ii) the Center for Research in Security Prices at the University of Chicago Booth School of Business (CRSP) and (iii) Morningstar – the actual “SBBI” data series are used in the calculations in the 2015 Valuation Handbook;

2. The cost of debt was referenced to the Prime Lending Rate in Hong Kong as at the Valuation Date;

vi – 22

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

1. Current Hong Kong profits tax rate;

2. Debt-to-equity ratio of the comparable companies.

Discount for Lack of Marketability (“DLOM”)

The concept of marketability deals with the liquidity of an ownership interest, that is how quickly and easily it can be converted to cash if the owner chooses to sell. The lack of marketability discount reflects the fact that there is no ready market for shares in privately held companies which are typically not readily marketable compared to similar interest in public companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly held company.

We have made reference to the result of the restricted stock study published in “A Companion Guide to the FMV Restricted Stock Study 2016 Edition” (the “Guide”) by FMV Opinions, Inc., one of the national preeminent firms offering a broad range of financial advisory services to private and public companies. According to the study, 736 private placement transactions of unregistered common stock issued by publicly traded companies from July 1980 through March 2016 were examined. The discount for lack of marketability was the percentage difference between the private placement price per share and the market trading price per share. Although the study does not specify the details of the transactions, the study states that a company’s industry should not in itself have a significant impact on the discount for lack of marketability. The result of the Guide shows that the median marketability discount of those transactions was 16.11%.

The FMV study for marketability discount was adopted by us due to the lack of similar studies in other countries. After reviewing the Guide and performing searches for other research, we are not aware of study showing a conclusive relationship between the marketability discounts and related industries of the private placement transactions. As such, we have no reason to doubt the comparability of the private placement transactions to the Target Subsidiary being valued in terms of the marketability discounts applied.

It is a common market practice to adopt the results of researches and studies concerning the marketability discount in business valuations, since those researches and studies involved an extensive collection and analysis of historical data. Therefore, we were of the opinion that it is fair and reasonable to adopt a marketability discount of 16.11% in estimating the market value of the 100% equity interest in the Target Subsidiary as at the Valuation Date.

CURRENCY

Unless otherwise stated, all monetary figures stated in this report are in Hong Kong Dollars (HKD).

vi – 23

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

SENSITIVITY ANALYSIS

The sensitivity analysis has been prepared to determine the impact of changes in the terminal growth rate and pre-tax discount rate on the value of the Target Subsidiary. The following tables summarize the resulting values of the Target Subsidiary:

Table A: Sensitivity of market value to changes in the pre-tax discount rate

Change in Pre-tax	Applied Pre-tax		Percentage Change
Discount rate	Discount Rate	Market Value (HK$)	in Market Value
–2%	12.9%	210,600,000	19.93%
–1%	13.9%	191,500,000	9.05%
0%	14.9%	175,600,000	0%
+1%	15.9%	162,200,000	–7.63%
+2%	16.9%	150,800,000	–14.12%

Table B: Sensitivity of market value to changes in the terminal growth rate

Change in Terminal	Applied Terminal		Percentage Change
Growth rate	Growth Rate	Market Value (HK$)	in Market Value
–2%	1%	158,400,000	–9.79%
–1%	2%	166,300,000	–5.30%
0%	3%	175,600,000	0%
+1%	4%	186,600,000	6.26%
+2%	5%	199,800,000	13.78%

vi – 24

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

LIMITING CONDITIONS

Our valuation is confidential to you, for your sole use and for the specific purpose stated. We will not accept responsibility to any third party in respect of its contents.

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 information provided by the Management in arriving at our opinion of value. 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.

Our opinion of the market value of the subject in this report is valid only for the stated purpose and only for the effective date of the appraisal. The valuation reflects facts and conditions existing at the date of valuation and subsequent events have not been considered. No responsibility is taken for any changes in the market conditions and no obligation is assumed to revise this report to reflect events or change of government policy or conditions which may occur subsequent to the date hereof.

No opinion is intended to be expressed for matters which require legal or other specialized expertise or knowledge, beyond that customarily employed by appraisers. Our conclusions assume continuation of prudent management of the Target Subsidiary over a reasonable and necessary period of time to maintain the character and integrity of the assets valued.

CONCLUSION OF VALUE

In our opinion, on the basis of the information made available to us, the market value of 100% equity interest in the Target Subsidiary as of 29 February 2016 was reasonably estimated at HKD 175,600,000 (HONG KONG DOLLARS ONE HUNDRED SEVENTY FIVE MILLION AND SIX HUNDRED THOUSAND ONLY) .

This conclusion of value was based on generally accepted valuation procedures and practices that rely extensively on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. While we have exercised our professional judgment in arriving at the appraisal, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of Colliers International (Hong Kong) Limited. You are advised to consider with caution the nature of such assumptions which are disclosed in this report and to exercise caution when interpreting this report.

vi – 25

APPENDIX VI VALUATION REPORT OF THE TARGET SUBSIDIARY

We hereby certify that we have neither present nor prospective interests in the Company or the value reported.

Yours faithfully, for and on behalf of

Colliers International (Hong Kong) Limited

Vincent Cheung Freddie Chan Registered Professional Surveyor (GP) CFA FRM BSc (Hons) MBA MHKIS FRICS BBA-FIN (Hons) Executive Director Associate Director Valuation & Advisory Services – Asia Valuation & Advisory Services

Note:

Mr. Vincent K.C. Cheung holds a Master of Business Administration and he is a Registered Professional Surveyor with over 18 years’ experience in real estate industry and assets valuations sector. His experience on valuations covers Hong Kong, Macau, Taiwan, South Korea, Mainland China, Vietnam, Cambodia and other overseas countries. Mr. Cheung is a member of The Royal Institution of Chartered Surveyors and a member of the Hong Kong Institute of Surveyors. Mr. Cheung is one of the valuers on the “list of property valuers for undertaking valuation for incorporation or reference in listing particulars and circulars and valuations in connection with takeovers and mergers” as well as a Registered Business Valuer of the Hong Kong Business Valuation Forum.

Mr. Freddie W.T. Chan overseas the business valuation services of Colliers International (Hong Kong) Limited.and has over 6 years of professional experiences in banking, finance, corporate advisory and valuation experiences. He is a CFA(r) charterholder and a FRM(r) charterholder who expertizes in corporate and intangible valuation sector. His experience on valuations covers Hong Kong, Mainland China, Australia, United States, Europe and other overseas countries. Mr. Chan is a member of the Hong Kong Society of Financial Analysts as well.

vi – 26

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX VII

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18 March 2016

The Board of Directors

Wealth Glory Holdings Limited 17/F., No. 8 Wyndham Street Central, Hong Kong

Dear Sirs/Madam,

ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF AZURE SEA COMPANY LIMITED

TO THE DIRECTORS OF WEALTH GLORY HOLDINGS LIMITED (THE “COMPANY”)

We have examined the calculations of the discounted future estimated cash flows on which the valuation prepared by Colliers International (Hong Kong) Limited, in respect of Azure Sea Company Limited (the “Target Company”), as at 29 February 2016 (the “Valuation”) is based. The Target Company is a company incorporated in the Hong Kong with limited liability. The Valuation based on the discounted future estimated cash flows 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”) and will be included in the announcement dated 18 March 2016 to be issued by the Company in connection with the proposed acquisition of entire equity interest of Strategy King Holdings Limited.

Directors’ responsibilities for the discounted future estimated cash flows

The directors of the Company (the “Directors”) are responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions determined by the Directors and as set out in the Valuation (the “Assumptions”). This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future estimated cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

Our independence and quality control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which is founded on fundamental principles of integrity, objectively, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 “ Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements ”, and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regularly requirements.

vii – 1

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX VII

Reporting accountant’s responsibility

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the discounted future estimated cash flows on which the Valuation is based and to report solely to you, as a body, as required by Rule 19.62(2) of the GEM Listing Rules, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of our report.

Our engagement was conducted in accordance with Hong Kong Standards on Assurance Engagements 3000 (Revised) “ Assurance Engagements Other Than Audits or Reviews of Historical Financial Information ” issued by HKICPA. This standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain reasonable assurance on whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly complied with the Assumptions. Our work does not constitute any valuation of the Target Company.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies of the Company have been adopted in its preparation. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Valuation and the variation may be material. Accordingly, we have not reviewed, considered or concluded any work on the reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled, in all material respects, in accordance with the Assumptions.

Yours faithfully,

ZHONGLEI (HK) CPA Company Limited

Certified Public Accountants (Practising)

Lam Chik Tong

Practising Certificate Number: P05612

Suites 313-316, 3/F., Shui On Centre 6-8 Harbour Road Wanchai Hong Kong

vii – 2

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX VII

GEM Listing Division

The Stock Exchange of Hong Kong Limited

11/F., One International Finance Centre, 1 Harbour View Street, Central, Hong Kong

18 March 2016

Dear Sirs,

Re: Major Transaction – Acquisition of the entire issued share capital of Azure Sea Company Limited involving issue of consideration shares and convertible bonds under specific mandate

We refer to the valuation report prepared by Colliers International Hong Kong (the “ Independent Valuer ”) in relation the valuation of Azure Sea Company Limited (the “ Target Company ”) as at 29 February 2016 (the “ Valuation ”), the valuation of which constitutes a profit forecast under Rule 19.61 of the GEM Listing Rules. We have discussed with the Independent Valuer about different aspects including the bases and assumptions based upon which the Valuation has been prepared, and reviewed the valuation by the Independent Valuer for which the Independent Valuer is responsible. We have also considered the report from our reporting accountants, ZHONGLEI (HK) CPA Company Limited, regarding whether the discounted future estimated cash flow of the Target Company and the calculations thereof have been properly complied in accordance with the bases and assumptions as set out in the Valuation. On the basis of the foregoing, we are of the opinion that the Valuation has been made after due and careful enquiry of the Board.

Yours faithfully,

For and on behalf of the Board Wealth Glory Holdings Limited Wong Ka Wah, Albert Chairman

vii – 3

LETTERS IN RELATION TO THE VALUATION REPORT

APPENDIX VII

The Board of Directors

Wealth Glory Holdings Limited

17/F., No. 8 Wyndham Street Central, Hong Kong

18 July 2016

Dear Sirs,

We refer to the valuation report dated 31 March 2016 prepared by Colliers International (Hong Kong) Limited (the "Independent Valuer") in relation to the valuation of the net asset value of Azure Sea Company Limited (the "Target Company") as at 29 February 2016 (the "Valuation").

The principal assumptions upon which the Valuation is based are included in "APPENDIX VI – VALUATION OF THE TARGET SUBSIDIARY – VALUATION ASSUMPTIONS AND RATIONALE" of this circular. Capitalised terms used herein shall have the same meanings as those defined in this circular unless the context requires otherwise.

We note that the Valuation has been developed based in part on the discounted cash flow analysis which is regarded as a profit forecast (the "Profit Forecast") under Rule 14.61 of the Listing Rules.

We have discussed with the management of the Company and the Independent Valuer regarding the bases and assumptions of the Profit Forecast and have reviewed the letter dated 18 March 2016 issued by ZHONGLEI (HK) CPA Company Limited, the reporting accountant of the Company, as set out above in this appendix in regards to their work performed on the Profit Forecast.

On the basis of the foregoing, we are of the opinion that the Profit Forecast, for which the Directors are solely responsible, has been made after due and careful enquiry.

Yours faithfully, For and on behalf of

TC Capital International Limited Edward Wu

Chairman

vii – 4

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 executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571, the Laws of Hong Kong) (“ SFO ”)) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which are required, pursuant to the required standard of dealing by the Directors under the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange were as follows:

Aggregate long positions in Shares

		Number of	Approximate
		Shares in	percentage of
	Capacity of	interest	total issued
Name of Directors	interests	(Note)	shares
Mr. Wong Ka Wah, Albert	Beneficial owner	15,405,000	0.37%
Mr. Hong Sze Lung	Beneficial owner	15,405,000	0.37%
Mr. Kwong Yuk Lap	Beneficial owner	4,108,000	0.10%
Mr. Lau Wan Pui, Joseph	Beneficial owner	3,081,000	0.07%
Mr. Law Chung Lam, Nelson	Beneficial owner	2,054,000	0.05%
Mr. Chow Chi Fai	Beneficial owner	1,027,000	0.02%
Mr. Leung Ka Tin	Beneficial owner	1,027,000	0.02%

Note: These interests represented the interests in the underlying shares in respect of the share options granted by the Company to Directors.

viii – 1

APPENDIX VIII

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company or their respective associates had any interests or short positions in the shares, underlying shares of equity derivative and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required to be kept under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the minimum standards of dealing by the Directors of listed issuers as referred to in Rule 5.46 of the GEM Listing Rules.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS IN SHARES

So far as is known to the Directors or chief executives of the Company, as at Latest Practicable Date, the following persons/entities have an interest or a short position in the shares or the underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which would be recorded in the register of the Company required to be kept under section 336 of the SFO, or who will be, directly or indirectly, to be interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any other members of the Group:

Aggregate long positions in Shares

		Number of	Approximate
		Shares in	percentage of
		interest	total issued
Name of shareholder	Capacity of interests	(Note)	Shares
Azure Sea Developments Limited	Beneficial owner	2,328,767,123	56.68%
Mr. Lam Hak Ha Jasper	Interest in controlled corporation/
	Beneficial owner	2,329,583,123	56.70%

Note: Azure Sea Developments Limited is the Vendor of the Sale Shares. Pursuant to the Agreement, the Company shall issue Consideration Shares and Convertible Bonds to the Vendor upon Completion. The 2,328,767,123 Shares represents the aggregate of the Consideration Shares and the Conversion Shares which may fall to be allotted and issued upon exercise of the conversion rights attaching to the Convertible Bonds by the Vendor. The entire issued share capital of Azure Sea Developments Limited was beneficially owned by Lam Hak Ha Jasper (‘‘ Mr. Lam ’’). As at the Latest Practicable Date, Mr. Lam also owns 816,000 Shares.

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.

viii – 2

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) a supplemental agreement dated 15 July 2014 to an agreement dated 1 April 2014 entered into between Nice Glory (China) Limited, an indirectly wholly-owned subsidiary of the Company, and Tianjin Shouchuang Technology Development Limited and Ms. 季潔 (Jijie), in relation to the acquisition of 100% equity interest in 廣州首創投資諮詢有限公司 (translated as Guangzhou Shouchuang Investment Advisory Limited and formerly known as 廣州首創投 資有限公司), at an aggregate Consideration of RMB5,000,000 (equivalent to approximately HK$6,250,000);

• (ii) a termination agreement dated 29 August 2014 entered into between Nice Glory (China) Limited, a directly wholly-owned subsidiary of Eminent Along Limited, an indirectly whollyowned subsidiary of the Company, Eminent Along Limited, 天津首創科技發展有限公司 (translated as Tianjin Shouchuang Technology Development Limited) and Ms. 季潔 (Jijie) in relation to the acquisition of 100% equity interest in the 廣州首創投資諮詢有限公司 (translated as Guangzhou Shouchuang Investment Advisory Limited and formerly known as 廣州首創投資 有限公司);

• (iii) a conditional placing agreement dated 22 August 2014 entered into between the Company and Kingsway Financial Services Group Limited in relation to the placing of up to an aggregate of 237,000,000 new Shares at the price of HK$0.27 per Share;

• (iv) a conditional placing agreement dated 18 September 2014 entered into between the Company and Kingsway Financial Services Group Limited in relation to the placing of up to an aggregate of 317,000,000 new Shares at the price of HK$0.297 per Share;

• (v) a distribution agreement dated 23 September 2014 entered into between Bright Billion Holdings Limited (as a distributor), an indirectly wholly-owned subsidiary of the Company and Sino Partner Global Limited (as a supplier), pursuant to which Bright Billion Holdings Limited was appointed by Sino Partner Global Limited as an authorized distributor to conduct the distribution, marketing and service of Sports car “Gumpert Apollo” in Chengdu, Nanjing, Shijiazhuaung and Guiyang, the PRC at the one-off license fees in an aggregate amount of HK$20,000,000;

• (vi) a conditional placing agreement dated 24 November 2014 entered into between the Company and Kingsway Financial Services Group Limited in relation to the placing of up to an aggregate of 220,000,000 new Shares at the price of HK$0.30 per Share;

• (vii) a conditional placing agreement dated 13 April 2015 entered into between the Company and CNI Securities Group Limited in relation to the placing of up to an aggregate of 162,000,000 new Shares at the price of HK$0.21 per Share;

viii – 3

APPENDIX VIII

GENERAL INFORMATION

• (viii) a sale and purchase agreement dated 23 June 2015 entered into between the Company, Mr. Lu Xianglong, Mr. Zhu Huaipei, Mr. Wu Ruibiao and Mr. Cheung Siu Yu in relation to the sale and purchase of 51% equity interest in the Perfect Worth Investment Limited at an aggregate consideration of HK$204,000,000;

• (ix) a conditional placing agreement dated 9 September 2015 entered into between the Company and Supreme China Securities Limited in relation to the placing of up to an aggregate of 380,000,000 new Shares at the price of HK$0.107 per Share;

• (x) an acquisition agreement dated 23 September 2015 entered into between Silver Summit Investments Limited (“ Silver Summit ”), a wholly-owned subsidiary of the Company, and Mr. Lau Kan Sung Saville (柳勤嵩) and Mr. Lui Ka Yin (呂家賢), in relation to the acquisition of the entire share capital of MD Inc. Limited, at an aggregate Consideration of HK$47,000,000;

• (xi) a disposal agreement dated 23 September 2015 and entered into between Silver Summit, as vendor, and Silver Bright Resources Limited (“ Silver Bright ”), as purchaser, in respect of the disposal of entire issued share capital of Digital Rainbow Holdings Limited and all obligations, liabilities and debts owing or incurred by the Digital Rainbow Holdings Limited and Ease Chance International Limited, at a Consideration of HK$32,000,000, which shall be deemed to have been satisfied and/or made by Silver Summit to the Vendors by the set-off of the payment of an equivalent amount payable by Silver Bright to Silver Summit in respect of the acquisition of the Digital Rainbow sale Shares and the Digital Rainbow Sale Loan pursuant to the disposal agreement;

• (xii) a supplemental agreement dated 30 November 2015 entered into the Company, Mr. Lu Xianglong, Mr. Zhu Huaipei, Mr. Wu Ruibiao and Mr. Cheung Siu Yu in relation to the sale and purchase of 51% equity interest in the Perfect Worth Investment Limited to amend the condition in the sale and purchase agreement dated 23 June 2015;

• (xiii) a supplemental agreement dated 31 December 2015 entered into the Company, Mr. Lu Xianglong, Mr. Zhu Huaipei, Mr. Wu Ruibiao and Mr. Cheung Siu Yu in relation to the sale and purchase of 51% equity interest in the Perfect Worth Investment Limited to amend and add certain terms and further extend the long stop date in the sale and purchase agreement dated 23 June 2015;

• (xiv) the Agreement; and

• (xv) a conditional sale and purchase agreement dated 24 March 2016 entered into between the Company, as vendor and Mr. Wong Ka Chun, as purchaser in respect of the sale of the entire equity interest in Paraburdoo Limited, a wholly-owned subsidiary of the Company, and all obligations, liabilities and debts owing or incurred by Paraburdoo Limited and its subsidiaries to the Company on or at any time prior to the completion whether actual, contingent or deferred and irrespective of whether or not the same is due and payable on completion, at a Consideration of HK$2,000,000.

viii – 4

GENERAL INFORMATION

APPENDIX VIII

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 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 Group.

6. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors 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.

7. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which is significant in relation to the businesses of any member of the Group. As at the Latest Practicable Date, none of the Directors had any interest, directly or indirectly, in any assets which have been, since 31 March 2015 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

8. EXPERTS AND CONSENTS

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

Name Qualification Asian Alliance (HK) CPA Limited (formerly known as Zhonglei (HK) CPA Company Limited) Certified Public Accountants Colliers International (Hong Kong) Limited Independent Professional Valuer TC Capital International Limited A licensed corporation to engage in Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

viii – 5

APPENDIX VIII

GENERAL INFORMATION

As at the Latest Practicable Date, each of Asian Alliance (HK) CPA Limited, Colliers International (Hong Kong) Limited and TC Capital International Limited 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 2016, 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 Asian Alliance (HK) CPA Limited, Colliers International (Hong Kong) Limited and TC Capital International Limited was not interested beneficially or nonbeneficially 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 Asian Alliance (HK) CPA Limited, Colliers International (Hong Kong) Limited and TC Capital International Limited 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.

9. 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 2016, the date to which the latest published audited consolidated financial statements of the Group were made up.

• (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 17/F., No. 8 Wyndham Street, Central, Hong Kong.

• (d) The branch share registrar and transfer office of the Company in Hong Kong is Union Registrars Limited at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong.

• (e) The company secretary of the Company is Mr. Lee Wai Ming who is a fellow member of the Association of Chartered Certified Accountants and a Certified Public Accountant of Hong Kong Institute of Certified Public Accountants. Mr. Lee has 20 years of experience in auditing and finance and possesses in-depth knowledge in Hong Kong accounting standards, taxation and statutory compliances requirements.

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APPENDIX VIII

GENERAL INFORMATION

• (f) The compliance officer of the Company is Mr. Wong Ka Wah, Albert.

• (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. Leung Ka Tin, Mr. Tam Chak Chi and Mr. Chow Chi Fai. Mr. Chow Chi Fai is the chairman of the audit committee.

Mr. Leung Ka Tin

Mr. Leung Ka Tin (“Mr. Leung”), aged 62, was appointed as an independent nonexecutive Director and a member of the Audit Committee in July 2014. Mr. Leung holds a diploma in financial management (a joint program of the Hong Kong Management Association and the Hong Kong Polytechnic University). Mr. Leung has 25 years of management experience in banking, treasury operation, project finance, logistics and human resource management. He was a senior management team member of various financial institutions including First Pacific Group, Nedcor Asia, BfG Germany and Delta Asia Financial Group as well as companies in the logistics and telecommunication sectors including EAS Da Tong Group and Trident Telecom Ventures Limited. Mr. Leung also has extensive experience in the corporate finance field. He served as project head for companies owning gold mines and diamond mines both in the PRC and overseas and is currently the project director of Galaxy Asset Management Limited, a renowned alternative investment company in Hong Kong. Currently, Mr. Leung is an independent non-executive director of KEE Holdings Company Limited (stock code: 2011), the shares of which are listed on the Main Board of the Stock Exchange. He was an executive director of China Kingstone Mining Holdings Limited (stock code: 1380), the shares of which are listed on the Main Board of the Stock Exchange, during the period from 14 July 2015 to 23 December 2015 and was an independent non-executive director of Chanco International Group Limited (Stock code: 264), the shares of which are listed on the Main Board of the Stock Exchange, during the period from 21 September 2015 to 23 December 2015.

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GENERAL INFORMATION

APPENDIX VIII

Mr. Tam Chak Chi

Mr. Tam Chak Chi, aged 39, was appointed as an independent non-executive Director and a member of the Audit Committee, the Nomination Committee and the Remuneration Committee in September 2013. He holds a bachelor’s degree of commerce from the University of Toronto. He has more than 10 years of experience in providing accounting, auditing and financial services and has served various senior positions at various private and listed companies (the shares of which have been listed on the Main Board and the GEM of the Stock Exchange as well as NASDAQ). He is a fellow member of the Hong Kong Institute of Certified Public Accountants and a member of the American Institute of Certified Public Accountants. He was previously an independent non-executive director of Newtree Group Holdings Limited (stock code: 1323), the shares of which are listed on the Main Board of the Stock Exchange and an executive director of Seamless Green China (Holdings) Limited (stock code: 8150) and an independent non-executive director of Sky Forever Supply Chain Management Group Limited (formerly known as Rising Power Group Holdings Limited and China Neng Xiao Technology (Group) Limited) (stock code: 8047), both companies’ share are listed on the GEM of the Stock Exchange. Further, he is currently the chief financial officer of a company listed on GEM of the Stock Exchange.

Mr. Chow Chi Fai

Mr. Chow Chi Fai (“Mr. Chow”), aged 45, was appointed as an independent nonexecutive Director and a member of the Audit Committee, the Nomination Committee and the Remuneration Committee in September 2013. He was re-designated as the chairman of each of the Audit Committee and the Remuneration Committee on 18 November 2013. Mr. Chow is a member of the Hong Kong Institute of Certified Public Accountants. He holds a bachelor’s degree in accountancy from University of South Australia. Mr. Chow is currently the company secretary and financial controller in Sino Resources Group Limited (stock code: 0223), the shares of which are listed 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.

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GENERAL INFORMATION

APPENDIX VIII

10. 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 17/F., No. 8 Wyndham Street, Central, Hong Kong during normal business hours on any Business Day for the period of 14 days 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 Asian Alliance (HK) CPA Limited on the Target Company and the Target Subsidiary, the text of which are set out in Appendices II and III to this circular;

• (e) the accountants’ report from Asian Alliance (HK) CPA Limited in respect of the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix IV to this circular;

• (f) the annual reports of the Company for each of the two financial years ended 31 March 2015 and 31 March 2016;

• (g) the valuation report of the Target Subsidiary from Colliers International (Hong Kong) Limited, the text of which is set out in Appendix VI to this circular;

• (h) the letters in relation to the Valuation Report, the text of which is set out in Appendix VII to this circular; and

• (i) this circular.

viii – 9

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 17/F., No. 8 Wyndham Street, Central, Hong Kong on Wednesday, 3 August 2016 at 3:30 p.m. (or immediately after the conclusion of the annual general meeting of the Company to be held at 3:00 p.m. on the same day) for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

1. “ THAT

2. (a) the conditional sale and purchase agreement dated 18 March 2016 (the “ Agreement ”, details of which are disclosed in the circular of the Company dated 18 July 2016 (the “ Circular ”)) entered into between the Company, as purchaser (the “ Purchaser ”) and Azure Sea Developments Limited, as Vendor (the “ Vendor ”) in relation to, among other matters, the sale and purchase of the entire equity interest in the Target Company (as defined in the Circular), for a total consideration of HK$170,000,000 (a copy of the Agreement is marked “A” and produced to the Meeting and signed by the chairman of the Meeting (the “ Chairman ”) for identification purpose) and the transactions contemplated thereunder be and are hereby ratified, confirmed and approved;

3. (b) the creation and issue of the Convertible Bonds by the Company of up to an aggregate principal amount of HK$42,067,127.53 pursuant to the terms of the Agreement be and are hereby approved;

4. (c) the allotment and issue of the Conversion Shares, as defined in the Circular, (subject to adjustment) in the capital of the Company upon the exercise of the conversion rights attached to the Convertible Bonds be and are hereby approved; and the directors of the Company be and are hereby authorized to allot and issue the Convertible Bonds and the Conversion Shares accordingly;

5. (d) the allotment and issue of the Consideration Shares (as defined in the Circular) credited as fully paid at the Issue Price (as defined in the Circular) to Vendor and/ or their respective nominee(s) in accordance with the terms and conditions of the Agreement and the transactions contemplated thereunder be and is hereby approved; and

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NOTICE OF EGM

• (e) any one director of the Company (the “ Director ”) be and is hereby generally and unconditionally authorized to do all such acts and things, to sign and execute all such documents for and on behalf of the Company by hand, or in the case of execution of documents under seal, to do so jointly with any one of a second Director, a duly authorized representative of the Director or the secretary of the Company, and to take such steps as he may in his absolute discretion considers necessary, appropriate, desirable or expedient to give effect to or in connection with the Acquisition and the transactions contemplated thereunder, including but not limited to the allotment and issue of the Convertible Bonds, the Conversion Shares and the Consideration Shares.”

By order of the Board Wealth Glory Holdings Limited Wong Ka Wah, Albert Chairman

Hong Kong, 18 July 2016

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: 17/F., No. 8 Wyndham Street Central Hong Kong

Notes:

1. Any Shareholder entitled to attend and vote at the Meeting shall be entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a Shareholder 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 of Shares in respect of which each such proxy is so appointed.

2. 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 Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, 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.

3. 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.

4. According to the articles of association of the Company, all proposed resolutions in general meetings of the Company shall be put to vote by way of poll.

5. 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 were 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.

6. The Chinese version of the notice is for reference only. Should there be any discrepancies, the English version will prevail.

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NOTICE OF EGM

1. If Typhoon Signal No. 8 or above, or a “black” rainstorm warning is in effect any time after 12:00 noon on the date of the Meeting, the Meeting will be postponed. The Company will post an announcement on the websites of the Company at www.wealthglory.com and the GEM at www.hkgem.com to notify Shareholders of the date, time and place of the rescheduled meeting.

As at the date of this notice, the Board comprises nine Directors, including three executive Directors, namely Mr. Wong Ka Wah, Albert, Mr. Hong Sze Lung and Mr. Kwong Yuk Lap; three non-executive Directors namely, Mr. Lau Wan Pui, Joseph, Mr. Law Chung Lam, Nelson and Mr. Lu Xianglong and three independent non-executive Directors, namely Mr. Leung Ka Tin, Mr. Tam Chak Chi and Mr. Chow Chi Fai.

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