Gudou Holdings Limited — Proxy Solicitation & Information Statement 2019

Sep 2, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Gudou Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was affected for transmission to the purchaser or 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 appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of Gudou Holdings Limited.

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GUDOU HOLDINGS LIMITED 古兜控股有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 8308)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE COOPERATION AGREEMENT

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

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Titan Financial Services Limited

Terms defined in the section headed “Definitions” of this circular have the same meanings when used in this cover page, unless the context otherwise requires.

A letter from the Board is set out on pages 4 to 11 and a letter from the Independent Board Committee is set out on pages 12 to 13 of this circular. A letter from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 14 to 32 of this circular.

A notice convening the EGM to be held at 2:00 p.m., Hong Kong on Tuesday, 17 September 2019 at Room 3, 10/F, United Centre, 95 Queensway, Admiralty, Hong Kong, is set out on pages N1 to N2 of this circular. Whether or not you are able to attend the EGM, please complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited of Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or at any adjourned meeting thereof if you so wish and, in such event, the relevant form of proxy shall be deemed to be revoked. This circular is published on the website of The Stock Exchange of Hong Kong Limited at http://www.hkexnews.hk and on the website of the Company at https://www. gudouholdings.com.

2 September 2019

CHARACTERISTICS OF GEM

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

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

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CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . .	12
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . .	14
APPENDIX I — VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
APPENDIX II — GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-1

— ii —

DEFINITIONS

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

• “associates”

has the meaning ascribed thereto in GEM Listing Rules

• “Board”

the board of Directors

• “China Aoyuan”

China Aoyuan Group Limited（中國奧園集團股份有限公 司）, a company incorporated under the laws of the Cayman Islands with limited liability, the shares of which are listed on the Stock Exchange (stock code: 3883) and a substantial Shareholder

• “Company”

Gudou Holdings Limited（古兜控股有限公司）, a company incorporated under the laws of the Cayman Islands with limited liability the shares of which are listed on GEM of the Stock Exchange (stock code: 8308)

• “Connected Person”

has the meaning ascribed thereto in GEM Listing Rules

• “Cooperation Agreement”

• a cooperation and development agreement dated 16 July 2019 and entered into between Guangdong Gudou and GD Aoyuan in relation to the development of the Target Land

• “Director(s)”

• the director(s) of the Company

• “EGM”

• an extraordinary general meeting of the Company to be convened and held for the purpose of considering, and if thought fit, approving the Cooperation Agreement and the transactions contemplated therein

• “GD Aoyuan”

• Guangdong Aoyuan Co., Ltd.*（奧園集團（廣東）有限公司） a company established under the laws of the PRC and an indirect wholly-owned subsidiary of China Aoyuan

• “GEM Listing Rules”

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

• “Group”

• the Company and its subsidiaries

— 1 —

DEFINITIONS

• “Guangdong Gudou”

• Guangdong Gudou Travel Group Company Limited*（廣東古 兜旅遊集團有限公司）

• “Gudou Hotpot Spring Resort”

• Gudou Hotpot Spring Resort（古兜温泉綜合度假村）, the hot spring resort located at Jiangmen City, Guangdong Province, the PRC and operated by the Group

• “Hong Kong”

• the Hong Kong Special Administrative Region of the PRC

• “Independent Board Committee”

• an independent committee of the Board comprising all the independent non-executive Directors, namely Mr. Wu Sai Him, Mr. Chiu Chi Wing and Prof. Wang Dawu

• “Independent Financial Adviser”

• Titan Financial Services Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities as defined under the SFO, the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in relation to the Cooperation Agreement and transactions contemplated therein

• “Independent Shareholder(s)”

• Shareholder(s) other than China Aoyuan and its associates

• “Latest Practicable Date”

• 28 August 2019, being the latest practicable date prior to the printing of this circular to ascertain certain information contained herein

• “PRC”

the People’s Republic of China

• “RMB”

• Renminbi, the lawful currency of the PRC

• “SFO”

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

• “Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company

• “Shareholder(s)” holder(s) of the shares of the Company

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DEFINITIONS

“Share Options” the options granted under the share option scheme conditionally adopted by the Company on 18 November 2016 which became unconditional upon listing of the Shares on GEM of the Stock Exchange on 9 December 2016 for a period of ten years “sq.m.” square metres “Stock Exchange” The Stock Exchange of Hong Kong Limited “subsidiaries” has the meaning ascribed to it in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) “Target Land” the five parcels of land of approximately 67,860.7 sq.m. in total located at the Gudou Hot Spring Resort and legally and beneficially owned by Guangdong Gudou “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent

• The English translation of the Chinese names marked with “*” is for identification purpose only.

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LETTER FROM THE BOARD

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GUDOU HOLDINGS LIMITED 古兜控股有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 8308)

Executive Directors: Registered office: Mr. Hon Chi Ming Clifton House, 75 Fort Street Mr. Huang Zhanxiong P.O. Box 1350 Ms. Zhen Yaman Grand Cayman Mr. Hon Ka Fung KY1-1108 Cayman Islands

Non-executive Director:

Mr. Ruan Yongxi Principal place of business in Hong Kong: Independent non-executive Directors: Unit 1103A, 11/F, COSCO Tower Mr. Wu Sai Him Grand Millennium Plaza Mr. Chiu Chi Wing 183 Queen’s Road Central Prof. Wang Dawu 33 Wing Lok Street, Hong Kong

Hong Kong, 2 September 2019

To the Shareholders

Dear Sir/Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE COOPERATION AGREEMENT

INTRODUCTION

Reference is made to the announcement of the Company dated 16 July 2019 regarding the Cooperation Agreement and transactions contemplated therein.

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LETTER FROM THE BOARD

The purpose of this circular is to provide the Shareholders with, among other things, (i) further details of the Cooperation Agreement and the transactions contemplated therein; (ii) a letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders on the Cooperation Agreement and the transactions contemplated therein; (iii) recommendation of the Independent Board Committee to the Independent Shareholders; and (iv) the notice of the EGM to the Shareholders.

THE COOPERATION AGREEMENT

On 16 July 2019, Guangdong Gudou (an indirect wholly-owned subsidiary of the Company) entered into the Cooperation Agreement with GD Aoyuan, pursuant to which Guangdong Gudou and GD Aoyuan agreed to cooperate with each other for the planning, development and operation of the Target Land.

Summarised below are the principal terms of the Cooperation Agreement:

Date: 16 July 2019

Parties: (a) Guangdong Gudou; and (b) GD Aoyuan

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, GD Aoyuan is an indirect wholly-owned subsidiary of China Aoyuan, which is a substantial Shareholder and thus a Connected Person of the Company. Accordingly, GD Aoyuan is a Connected Person of the Company by virtue of being an associate of China Aoyuan.

Cooperation and investment amount

Pursuant to the Cooperation Agreement, Guangdong Gudou and GD Aoyuan have agreed to cooperate with each other for the joint planning, development and operation of the Target Land. The Target Land, which is legally and beneficially owned by the Group, is located at the Gudou Hot Spring Resort and has a total site area of 67,860.7 sq.m. and an expected gross floor area of 54,380.0 sq.m..

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LETTER FROM THE BOARD

As part of the cooperation and joint arrangement:

• (a) Guangdong Gudou would contribute the Target Land to the joint arrangement, which was valued at approximately RMB146,826,000 as at 31 March 2019 by an independent valuer; and

• (b) GD Aoyuan would be responsible for funding the development, construction and management of the Target Land and the buildings and structures to be erected thereon with a maximum investment amount of RMB342,594,000, which was calculated based on RMB6,300 per sq.m. on an expected gross floor area of 54,380.0 sq.m. By parties’ mutual agreement, it is estimated that approximately RMB6,300 per sq.m. will be utilised as construction costs for erecting the tourism property, facilities and other infrastructures incidental to the erection of tourism property on the Target Land. The construction cost of approximately RMB6,300 per sq.m. was determined with reference to the historical construction cost per sq.m. of the Company’s projects of similar nature within Gudou Hot Spring Resort.

The cooperation and joint arrangement does not involve a disposal of the Target Land by the Group or the setting up of any joint venture entity.

Condition precedent

The commencement of the transactions contemplated under the Cooperation Agreement is conditional upon the passing of resolution(s) by the Independent Shareholders in the EGM to be convened and held for the purpose of approving the Cooperation Agreement and transactions contemplated therein.

Revenue sharing arrangement

Within five business days after satisfaction of the condition precedent, Guangdong Gudou and GD Aoyuan will commence the joint planning and development of the Target Land. Guangdong Gudou and GD Aoyuan are entitled to 30% and 70% of the income derived from the Target Land, respectively, which is determined with reference to their respective investments in the development project on the Target Land, including the market value of the Target Land contributed by Guangdong Gudou as valued by an independent valuer and the amount of capital injection by GD Aoyuan for the development of the Target Land.

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LETTER FROM THE BOARD

Considering that (a) the Target Land has remained undeveloped since it was acquired by the Group; (b) the Group could benefit from China Aoyuan’s experience in property development and management; (c) the construction cost (which includes the day-to-day management and operation cost) of approximately RMB6,300 per sq.m. was determined with reference to the historical construction cost per sq.m. of the Company’s projects of similar nature within Gudou Hot Spring Resort; and (d) the revenue sharing ratio of 30:70 was fixed and determined with reference to the valuation of the Target Land and the estimated and agreed total construction costs for the development project on the Target Land, the Directors are of the view that the revenue sharing arrangement is fair and reasonable. GD Aoyuan’s investment amount is capped at RMB342,594,000 regardless of the actual costs incurred by GD Aoyuan in the development project on the Target Land which could exceed the capped amount.

Termination

If any party fails to perform its obligations or breaches its representations and warranties under the Cooperation Agreement, the other party may terminate the Cooperation Agreement and be entitled to RMB10,000,000 as compensation if the party in default fails to rectify the breaches within 30 days after receiving notice from the other party. In particular, either party shall not enter into any agreement with any third parties in respect of the transactions contemplated under the Cooperation Agreement, failure of which the non-defaulting party will be entitled to a compensation of RMB10,000,000 payable by the other party and a right to terminate the Cooperation Agreement.

PARTICULARS OF THE TARGET LAND

Guangdong Gudou owns five parcels of land with a total site area of 76,189.0 sq.m. according to the land use right certificates（國土證）, of which the Target Land, being its partially developed or undeveloped part, has a total site area of 67,860.7 sq.m. with an expected gross floor area of 54,380.0 sq.m. Further particulars of the Target Land are as follows:

Site area specified in the land use right certificate Status of （國土證） (sq.m.) Approved usages Status mortgage 33,549.0 accommodation and partly developed; mortgaged food and beverage undeveloped part has a site area of 25,220.7 sq.m.

1

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LETTER FROM THE BOARD

	Site area specified
	in the land use
	right certificate			Status of
	（國土證）(sq.m.)	Approved usages	Status	mortgage
2	25,437.0	accommodation and	to be developed	mortgaged
		food and beverage
3	5,677.0	accommodation and	planning stage	mortgaged
		food and beverage
4	6,413.0	accommodation and	to be developed	mortgaged
		food and beverage
5	5,113.0	accommodation and	to be developed	free title
		food and beverage

Under the current tentative development plan, tourism property will be erected on the Target Land as part of the integrated tourism and leisure projects of Gudou Hot Spring Resort. The intended tourism property to be erected on the Target Land are categorised principally as residential units, retail units, parking spaces and other facilities incidental to any of them. The Group originally intended to apply for changing the approved usages from the current accommodation and food and beverage usages to commercial and financial usages to align with the intended development plan. The current tentative development plan of the Target Land was formulated based on the current approved usages of accommodation and food and beverage. It is the agreement of Guangdong Gudou and GD Aoyuan that the application for changing the usages of the Target Land to commercial and financial usages is not a prerequisite for the development plan and it is not a condition precedent to the Cooperation Agreement. The reason for applying for the change of usages was that it may allow more flexibility in the planning and designing of the tourism property to be erected on the Target Land. As at the Latest Practicable Date, since the application for the change of usages had no effect on the Company’s development plan, the Group and GD Aoyuan had decided not to proceed with the application.

REASONS FOR AND BENEFITS OF ENTERING INTO THE COOPERATION AGREEMENT

The Group is principally engaged in the operation and management of Gudou Hot Spring Resort and the development and sale of tourism property within Gudou Hot Spring Resort.

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LETTER FROM THE BOARD

GD Aoyuan is a wholly-owned subsidiary of China Aoyuan, which is a conglomerate enterprise covering various business segments, including property development, health and wellness, cultural tourism and cross-border e-commerce.

The Board considers that having GD Aoyuan to join the development project in respect of the Target Land could (i) ensure sufficient investment funds would be in place to support and further the Group’s strategic planning and development and sale of tourism property within Gudou Hot Spring Resort; and (ii) benefit the development project in respect of the Target Land by leveraging China Aoyuan’s expertise in property development and cultural tourism to create synergy through their established networks and resources in the Guangdong — Hong Kong — Macao Greater Bay Area.

Having considered the above, the Board is of the view that the terms of the Cooperation Agreement and the transactions contemplated therein are fair and reasonable and in the interests of the Shareholders as a whole.

GEM LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under GEM Listing Rules) in respect of the transactions as contemplated under the Cooperation Agreement exceed 5% but less than 25%, the Cooperation Agreement constitutes a discloseable transaction of the Company under Chapter 19 of GEM Listing Rules and are subject to the reporting and announcement requirements under Chapter 19 of GEM Listing Rules.

GD Aoyuan is an indirect wholly-owned subsidiary of China Aoyuan, which is a substantial Shareholder holding 29.18% interest in the Company and thus a Connected Person of the Company. Accordingly, GD Aoyuan is a Connected Person of the Company by virtue of being an associate of China Aoyuan. As the total consideration exceeds HK$10 million, the transactions contemplated under the Cooperation Agreement are subject to the reporting and announcement and independent shareholders’ approval requirements under Chapter 20 of GEM Listing Rules.

None of the Directors have any material interest in the Cooperation Agreement and transactions contemplated therein. Ms. Zhen Yaman, being an executive Director, is an assistant to the general manager of the risk control and compliance centre of Guangdong Aoyuan Jinkong Company Limited* ( 廣東奧園金控有限公司 ), which is a subsidiary of China Aoyuan. Mr. Ruan Yongxi, being a non-executive Director, is also an assistant to the president of China Aoyuan and a director of the Strategic Investment Centre of China Aoyuan. Both of them had elected to abstain from voting on the relevant Board resolution.

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LETTER FROM THE BOARD

E S T A B L I S H M E N T O F I N D E P E N D E N T B O A R D C O M M I T T E E A N D APPOINTMENT OF THE INDEPENDENT FINANCIAL ADVISER

The Board has established the Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Wu Sai Him, Mr. Chiu Chi Wing and Prof. Wang Dawu, to advise the Independent Shareholders in respect of the Cooperation Agreement and to advise the Independent Shareholders on how to vote on the relevant resolution in the EGM taking into account the recommendations of the Independent Financial Adviser.

The Independent Board Committee has approved the appointment of the Independent Financial Adviser as the independent financial adviser of the Company to advise the Independent Board Committee and the Independent Shareholders on the Cooperation Agreement, and to advise the Independent Shareholders on how to vote on the relevant resolution in the EGM.

NOTICE OF EGM AND VOTING ARRANGEMENT

A notice convening the EGM to be held at 2:00 p.m. on Tuesday, 17 September 2019 at Room 3, 10/F, United Centre, 95 Queensway, Admiralty, Hong Kong to consider and, if thought fit, approve the resolution in connection with the Cooperation Agreement and transactions contemplated therein is set out on page N-1 of this circular.

Pursuant to Rule 17.47(4) of GEM Listing Rules, any vote of the Shareholders at a general meeting must be conducted by way of poll. The chairman of the meeting will therefore demand a poll for every resolution put to vote for the EGM in accordance with the articles of association of the Company. An announcement on the poll results of the EGM will be made by the Company after the EGM.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Phoenix Virtue Limited (an indirect wholly-owned subsidiary of China Aoyuan) controlled or was entitled to control over the voting rights in respect of 286,000,000 Shares, representing approximately 29.18% of the issued share capital of the Company, as at the Latest Practicable Date and is considered to be materially interested in the joint arrangement contemplated under the Cooperation Agreement. As a result, Phoenix Virtue Limited will abstain from voting on the relevant resolutions to be proposed at the EGM. Save for Phoenix Virtue Limited, to the best of the Director’s knowledge, no other Shareholder is required to abstain from voting in relation to the resolution to approve the Cooperation Agreement at the EGM.

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LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend and vote at such meeting, you are advised to complete the form of proxy enclosed in accordance with the instructions printed thereon and return to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited of Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned meeting (as the case may be) should you so wish.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 12 to 13 in this circular which contains its recommendation to the Independent Shareholders as to voting at the EGM in relation to the Cooperation Agreement.

Your attention is also drawn to the letter from the Independent Financial Adviser set out on pages 14 to 32 in this circular which contains its advice to the Independent Board Committee and the Independent Shareholders in relation to the Cooperation Agreement.

The Directors (including the independent non-executive Directors) consider that the Cooperation Agreement and the transaction contemplated therein are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Cooperation Agreement.

You are advised to read the letter from the Independent Board Committee and the letter from the Independent Financial Adviser mentioned above before deciding how to vote on the resolution to be proposed at the EGM.

By order of the Board GUDOU HOLDINGS LIMITED Hon Chi Ming Chairman and Executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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GUDOU HOLDINGS LIMITED 古兜控股有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 8308)

2 September 2019

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSABLE AND CONNECTED TRANSACTIONS IN RELATION TO THE COOPERATION AGREEMENT

We refer to the circular of the Company to the Shareholders dated 2 September 2019 (the “ Circular ”), of which this letter forms part. Terms defined in the Circular shall bear the same meanings when used herein unless the context requires otherwise.

We have been appointed to form the Independent Board Committee to consider and advise the Independent Shareholders on whether the Cooperation Agreement and the transactions contemplated therein are fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Shareholders as a whole. The Independent Financial Adviser has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

Your attention is drawn to the letter from the Board and the letter from the Independent Financial Adviser containing its advice to us and the Independent Shareholders as set out in this circular respectively.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered, among other things, the recommendation of the Independent Financial Adviser, we are of the opinion that the Cooperation Agreement and the transactions contemplated therein have been entered into in the ordinary and usual course of business of the Group, and are based on normal commercial terms, and the terms of the Cooperation Agreement are fair and reasonable and in the interest of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant ordinary resolution to be proposed at the EGM.

Mr. Wu Sai Him

Yours faithfully, Mr. Chiu Chi Wing Independent Board Committee

Prof. Wang Dawu

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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

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Titan Financial Services Limited

Suites 3201-02 32/F, COSCO Tower Grand Millennium Plaza 183 Queen’s Road Central Hong Kong

2 September 2019

• To: The independent board committee and the independent shareholders of Gudou Holdings Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE COOPERATION AGREEMENT

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the independent board committee (the “ Independent Board Committee ”) and the independent shareholders (the “ Independent Shareholders ”) of Gudou Holdings Limited (the “ Company ”) in relation to the Cooperation Agreement, details of which are set out in the announcement of the Company dated 16 July 2019 (the “ Announcement ”) and in the letter from the Board (the “ Board Letter ”) contained in the circular dated 2 September 2019 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 16 July 2019, Guangdong Gudou, an indirect wholly-owned subsidiary of the Company, entered into the Cooperation Agreement with GD Aoyuan, an indirect wholly-owned subsidiary of China Aoyuan, pursuant to which Guangdong Gudou and GD Aoyuan had agreed to cooperate with each other for the planning, development and operation of the Target Land.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

With reference to the Announcement and the Board Letter, Guangdong Gudou would contribute the Target Land to the joint arrangement, which was valued at approximately RMB146,826,000 as at 31 March 2019 by an independent professional valuer, LCH (AsiaPacific) Surveyors Limited (“ LCH ”), and GD Aoyuan would be responsible for funding the development, construction and management of the Target Land and the buildings and structures to be built on the Target Land with a maximum investment amount of RMB342,594,000.

As one or more of the applicable percentage ratios (as defined under GEM Listing Rules) in respect of the transaction as contemplated under the Cooperation Agreement exceed 5% but less than 25%, the entering into of the Cooperation Agreement constitutes a discloseable transaction of the Company under Chapter 19 of GEM Listing Rules and is subject to the reporting and announcement requirements under Chapter 19 of GEM Listing Rules.

GD Aoyuan is an indirect wholly-owned subsidiary of China Aoyuan, which is a substantial shareholder and thus a connected person of the Company. Accordingly, GD Aoyuan is a connected person of the Company by virtue of being an associate of China Aoyuan. As the total consideration exceeds HK$10 million, the transaction contemplated under the Cooperation Agreement is subject to the reporting and announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Phoenix Virtue Limited (an indirect wholly-owned subsidiary of China Aoyuan) controlled or was entitled to control over the voting rights in respect of 286,000,000 Shares, representing approximately 29.18% of the issued share capital of the Company, as at the Latest Practicable Date and is considered to be materially interested in the joint arrangement contemplated under the Cooperation Agreement. As a result, Phoenix Virtue Limited will abstain from voting on the relevant resolutions to be proposed at the EGM. Save as Phoenix Virtue Limited, to the best of the Directors’ knowledge, no other Shareholder is required to abstain from voting in relation to the resolution to approve the Cooperation Agreement at the EGM.

Ms. Zhen Yaman, being an executive Director, is an assistant to the general manager of the risk control and compliance centre of Guangdong Aoyuan Jinkong Company Limited* （廣東奧園金控有限公司）, which is a subsidiary of China Aoyuan. Mr. Ruan Yongxi, being the non-executive Director of the Company, is also an assistant to the president of China Aoyuan and a director of the Strategic Investment Center of China Aoyuan. Both of them had elected to abstain from voting on the relevant Board resolution. Save for the abovementioned Directors, none of the other Directors has or is deemed to have a material interest in the Cooperation Agreement.

• For identification purpose

— 15 —

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

INDEPENDENCE DECLARATION

As at the Latest Practicable Date, we, Titan Financial Service Limited, were not aware of any relationship or interest with the Company or any of its respective substantial Shareholders or directors, or any of their respective associates. In the last two years, we have not acted as any financial adviser role to the Company. Apart from normal professional fees paid or payable to us in connection with the current appointment as the Independent Financial Adviser, no arrangements exist whereby we had received or will receive any fees or benefits from the Company, its subsidiaries or their respective controlling Shareholders that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent to act as the Independent Financial Adviser in respect of the transaction contemplated under the Cooperation Agreement.

THE INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Wu Sai Him, Mr. Chiu Chi Wing and Prof. Wang Dawu, has been established to consider and advise the Independent Shareholders on the transaction contemplated under the Cooperation Agreement.

As the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders with regards to (i) whether the Cooperation Agreement was entered into the ordinary and usual course of business of the Company and is in the interests of the Company and its Shareholders as a whole; (ii) whether the terms of the Cooperation Agreement is on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned; and (iii) how the Independent Shareholders should vote in respect of the resolution to approve the transaction under the Cooperation Agreement at the EGM.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have reviewed and relied on the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us by the Company, the Directors and the management of the Company (the “ Management ”), the Cooperation Agreement, the annual reports of the Company for the two years ended 31 December 2017 and 31 December 2018 and the interim reports for the six months ended 30 June 2018 and 30 June 2019. In addition, we have reviewed the valuation reports (the “ Valuation Reports ”) prepared by LCH, an

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

independent professional valuer in respect of the aggregate market value of the Target Land as at 31 March 2019 and 30 June 2019 (the “ Valuations ”), including the methodology of, and the basis and assumptions adopted for, the Valuations. We have assumed that all the statements, information, opinions and representations contained or referred to in the Circular and/or provided to us are true, accurate and complete in all material aspects at the time they were made and continue to be so as at the date of the Circular. The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, have made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material aspects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We have no reason to believe that any statements, information, opinions, or representations relied on by us in forming our opinion are untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the statements, information, opinions or representation provided to us to be untrue, inaccurate or misleading. Our opinion is based on the Directors’ representation and confirmation that there is no undisclosed private agreement/arrangement or implied understanding with anyone concerning the transaction under the Cooperation Agreement.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, Guangdong Gudou, GD Aoyuan and China Aoyuan or any of their respective subsidiaries or associates, nor have we carried out any independent verification of the information supplied. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the date of the Circular. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the date of the Circular or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be constructed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect to the transaction under the Cooperation Agreement, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Cooperation Agreement

1.1 Business overview of the Group

The Group is principally engaged in the operation and management of Gudou Hot Spring Resort and the development and sale of tourism properties within Gudou Hot Spring Resort. According to the annual reports for the two years ended 31 December 2017 and 31 December 2018 and the interim reports for the six months ended 30 June 2018 and 30 June 2019, the Group will continue to operate and grow its business and enhance its “Gudou” brand. The Group will enhance the ambiance and existing facilities of Gudou Hot Spring Resort and continue to explore new business opportunities to provide consultancy services and/ or management services to leisure hotels and resorts and other hot spring resort operators, and embark on new tourism property development projects.

As at 31 December 2018, the Group has a total site area of approximately 650,000 sq.m., offering 62 public hot spring pools with five themed hotel complexes. Along with hot spring resort and hotel operations, the Group has completed six tourism property projects with a total saleable GFA of approximately 145,000 sq.m..

Set out below are the financial information on the Group for the six months ended 30 June 2018 and 30 June 2019 and each of the two years ended 31 December 2017 and 31 December 2018 as extracted from the Company’s 2018 and 2019 interim reports and the Company’s annual reports for the year ended 31 December 2017 and 2018 (“ FY2017 Annual Report ” and “ FY2018 Annual Report ” respectively) respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

						Changes
	For the year ended		Changes	For the six months		from
	31 December		from 2017	ended 30 June		6M2018
	2018	2017	to 2018	2019	2018	to 6M2019
	RMB’000	RMB’000	%	RMB’000	RMB’000	%
	(audited)	(audited)		(unaudited)	(unaudited)
Revenue	248,729	318,529	(21.9)	56,311	65,271	(13.7)
— Property sales	105,997	193,047	(45.1)	14,146	—	N/A
— Room revenue	53,605	49,961	7.3	17,932	21,545	(16.8)
— Admission income	34,518	25,891	33.3	8,317	18,092	(54.0)
— Catering income	27,559	25,985	6.1	9,710	13,876	(30.0)
— Others*	27,050	23,645	14.4	6,206	11,758	(47.2)
Profit/(Loss) for
the period/year	15,570	52,422	(70.3)	(18,558)	(8,475)	(119.0)

		As at	Changes
	As at	31 December	during
	30 June 2019	2018	the period
	RMB’000	RMB’000	%
	(unaudited)	(audited)
Non-current assets	1,023,752	921,170	11.1
Current assets	114,461	188,071	(39.1)
Current liabilities	365,909	275,425	32.9
Non-current liabilities	367,309	411,380	(10.7)
Net current assets/
(liabilities)	(251,448)	(87,354)	(187.8)
Net assets	404,995	422,436	(4.1)

• Others include rental income, massage service income, conference fee income, consultancy service income and other service income.

We noted from the above tables that the Group’s revenue decreased by approximately 21.9% from approximately RMB318.5 million for the year ended 31 December 2017 (“ FY2017 ”) to approximately RMB248.7 for the year ended 31 December 2018 (“ FY2018 ”).

With reference to the 2018 Annual Report, the Group’s tourism property development business recorded a decline of approximately 45.1% from approximately RMB193.0 million for the FY2017 to approximately RMB106.0

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

million for the FY2018 which was mainly due to less gross floor area delivered and sold during the period. Despite the increase in the Group’s room revenue income of approximately 7.3% and admission income of approximately 33.3% during the same period, there was a drop in profit of approximately 70.3% from approximately RMB52.4 million for the FY2017 to approximately RMB15.6 million for the FY2018.

According to the Company’s 2019 interim report, the Group had made a loss of approximately RMB18.6 million for the six months ended 30 June 2019 as compared to a loss of approximately RMB8.5 million for the corresponding period in 2018. The loss was mainly reflecting the decrease in revenue of approximately 13.7% for the six months ended 30 June 2019. The decrease in revenue was mainly attributed to the warmer weather and the decrease in demand for the hot spring resort and hotel operations business. The Group recorded a decrease of approximately 54.0% in admission income and approximately 16.8% in room revenue for the six months ended 30 June 2019 and the cost of sales for the same period was approximately RMB50.5 million, representing an increase of approximately 0.7% from approximately RMB50.1 million in respect of the six months ended 30 June 2018.

1.2 Information on parties for the Cooperation Agreement

Guangdong Gudou is a wholly foreign-owned enterprise established in the PRC and a wholly-owned subsidiary of View Top Holding Limited (“ View Top ”). View Top is a company incorporated in Hong Kong and an indirect whollyowned subsidiary of the Company. Thus, Guangdong Gudou is an indirect wholly-owned subsidiary of the Company. The principal activity of Guangdong Gudou is development and operation of a resort and the development and sales of properties at the resort in the PRC.

GD Aoyuan is an indirect wholly-owned subsidiary of China Aoyuan, which is a substantial Shareholder and thus a connected person of the Company. China Aoyuan is a conglomerate enterprise covering various business segments, including property development, health and wellness, culture tourism and cross-board e-commerce.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

1.3 The PRC property market and outlook

According to the National Bureau of Statistics of China, the PRC’s economy continued to expand and recorded a Gross Domestic Product (“ GDP ”) growth rate (at current price) of approximately 9.7% in 2018, as compared to 2017. The PRC reached a GDP of approximately RMB90,031.0 billion in 2018, representing an increase of approximately 9.7% from the GDP of approximately RMB82,075.4 billion in 2017.

In terms of property market in Guangdong province, the investment in real estate development reached approximately RMB1,441.2 billion in 2018, representing an increase of approximately 19.3% compared with 2017 of approximately RMB1,207.6 billion.

1.4 Reasons for and the benefits of entering into the Cooperation Agreement

With reference to the 2018 Annual Report, the Group is principally engaged in the operation and management of Gudou Hot Spring Resort and the development and sale of tourism properties within Gudou Hot Spring Resort. Tourism property development will continue to be the Company’s focus in 2019. As at 31 December 2018, the Group had completed six tourism property projects with a total saleable GFA of approximately 145,000 sq.m., namely South Asian Villas, Baden Town Villas, Mountain Seaview Vacation Apartments, Joyful Apartments, Mountain Seaview Vacation Residence and Heart of Spring Apartments. The Company expects to continue to sell Heart of Spring Apartments in 2019 and will continue to explore and develop new tourism property development projects both within and outside Gudou Hot Spring Resort. The Board considers that involving GD Aoyuan to join the development project in respect of the Target Land could (i) ensure sufficient investment funds would be in place to support and further the Group’s strategic planning and development and sale of tourism properties within Gudou Hot Spring Resort; (ii) benefit the development project in respect of the Target Land by leveraging China Aoyuan’s expertise in property development and cultural tourism to create synergy through their established networks and resources in the Guangdong-Hong Kong-Macao Greater Bay Area.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having taking into account (i) the principal business of the Group; (ii) the PRC property market outlook as mentioned above and in particular, the Company’s strategy to focus and expand its tourism property development business; (iii) the investment from GD Aoyuan to ensure sufficient fund for the development of the Target Land and (iv) the expected synergy with China Aoyuan by leveraging its expertise and experience in property development and cultural tourism, we concur with the Directors’ view that the proposed Cooperation Agreement was entered into the ordinary course of business and is in the interests of the Company and its Shareholders as a whole.

2. Principal terms of the Cooperation Agreement

Date:

16 July 2019

Parties:

• (i) Guangdong Gudou (an indirect wholly-owned subsidiary of the Company); and

• (ii) GD Aoyuan (an indirect wholly owned subsidiary of China Aoyuan, which is a substantial Shareholder and thus a connected person of the Company)

Subject matter

Pursuant to the Cooperation Agreement, Guangdong Gudou and GD Aoyuan had agreed to cooperate with each other for the planning, development and operation of the Target Land. The Target Land, which is legally and beneficially owned by the Group, is located at the Gudou Hot Spring Resort.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Information of the Target Land

The following table sets forth the information about the Target Land:

	Approved	Location of
	usage	the Land	Site area (sq.m.)
1	Accommodation and food	江門市新會區崖門鎮古斗	33,549.0
	and beverage	村燒炮崗、下河朗和松	(undeveloped
		仔坑	part has a site
			area of 25,220.7)
2	Accommodation and food	崖門鎮古兜村大王公后山	25,437.0
	and beverage	東龍、龍仔
3	Accommodation and food	崖門鎮古斗村委會上河朗	5,677.0
	and beverage
4	Accommodation and food	江門市新會區崖門鎮古斗	6,413.0
	and beverage	村松仔坑
5	Accommodation and food	江門市新會區崖門鎮古斗	5,113.0
	and beverage	村伯公仔
		Undeveloped site area:	67,860.7 sq.m.
		Total site area:	76,189.0 sq.m.

With reference to the Board Letter, the Target Land consists of five parcels of land with a total site area of 76,189.0 sq.m., of which the Target Land, being its partially developed or undeveloped part, has a total site area of 67,860.7 sq.m. with an expected gross floor area of 54,380.0 sq.m.. We have reviewed the land use right certificates of the five parcels of land, the five parcels of land are currently held by Guangdong Gudou and are located at the Gudou Hot Spring Resort.

Under the current tentative development plan, the tourism properties will be erected on the Target Land as part of the integrated toruism and leisure projects of Gudou Hot Spring Resort. The intended tourism properties to be erected on the Target Land are catergorised principally as residential units, retail units, parking spaces and other facilities incidental to any of them. The current tentative development plan of the Target Land was formulated based on the current approved usage of accommodation and food and beverage. It is the agreement of Guangdong Gudou and GD Aoyuan that the application for changing the usage of the Target Land to commercial and financial usages is not a prerequisite for the development plan and it is not a

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

condition precedent to the Cooperation Agreement. The reason for applying for the change of usage is that it may allow more flexibility in the planning and designing of the tourism properties to be erected on the Target Land. As at the Latest Practicable Date, since the application for the change of usage has no effect on the Company’s development plan, the Group and GD Aoyuan had decided not to proceed with the application.

After the enquiry with the Directors and the Company’s PRC legal adviser, GFE Law Office（廣東恆益律師事務所）, we concur with the Director’s view that there will have no effect on the Company’s development plan with the current approved usage of land.

Contribution by the parties under the Cooperation Agreement

• (i) The value of the Target Land

Guangdong Gudou would contribute the Target Land to the joint arrangement, which was valued at approximately RMB146,826,000 and RMB150,090,000 as at 31 March 2019 and 30 June 2019, respectively, by LCH, an independent professional valuer.

The Valuation

As advised by the Management, the Group has engaged LCH to perform the Valuations on the market value of the Target Land as at 31 March 2019 (the “ Valuation Date ”) and a subsequent update on the market value of the Target Land as at 30 June 2019 (the “ Second Valuation Date ”). In order to assess the fairness and reasonableness of the value of the Target Land, we have obtained and enquired with LCH (i) the terms of engagement letter between the Company and LCH in respect of the Valuations; (ii) the relevant qualification and experience of LCH; and (iii) the steps and due diligence measures taken by LCH for preparing the Valuation Reports. We have reviewed the engagement letters between the Company and LCH in respect of the Valuations, and are satisfied that the terms of the engagement letters between the Company and LCH are appropriate to the opinion that LCH is required to provide. We have discussed with LCH in relation to their experiences and were given to understand that Ms. Elsa Ng, the person-in-charge of the Valuations, is a member of the Royal Institution of Chartered Surveyors, Fellow of the Hong Kong Institute of Surveyors and Registered Professional Surveyor of Hong

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Kong SAR (General Practice). She is also an Individual Member (Appraisal) of the China Institute of Real Estate Appraisers and Agents. She has over 25 years’ experience in the valuation of properties including Hong Kong and the PRC. LCH has also confirmed that they are independent to the Company, and/ or any of its respective substantial Shareholders, directors or chief executive, or any of their respective associates. We are of the view that LCH possesses sufficient professional qualifications and independence required to perform the Valuations.

• Valuation methodology

We have discussed with LCH regarding the methodology of the Valuations and were given to understand that they have considered three different generally accepted approaches, namely sales comparison approach, income approach and cost approach, in arriving at the market value of the Target Land as at the Valuation Date and the Second Valuation Date. Considering the inherent characteristics of the Target Land, LCH consider sales comparison approach in this valuation. According to LCH, the sales comparison approach is considered the best approach if there is readily identifiable transaction for properties with similar nature. The sales comparison approach has considered the sales, listing or offerings of similar or substitute properties and related market data close to the Valuation Date and Second Valuation Date. LCH has made reference to the transactions of comparable land transactions in Xinhui District of Jiangmen City and Zhuhai City, the PRC. Adjustment have been made to various factors such as time (including transaction time), land use terms, usage and location factors. We have also noticed the sales comparison approach has been widely adopted by valuers in various valuation reports which have been included in circulars recently issued by listed issuers relating to valuing similar property in both Hong Kong and the PRC on the Stock Exchange.

During the course of our review and discussion with LCH, we have not identified any major factors which would lead us to cast doubt on the fairness and reasonableness of the methodologies used in arriving at the Valuations.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• Assumption

According to the Valuation Reports, LCH has adopted several assumptions in arriving at the Valuations. In particular, we noted that LCH has valued the Target Land under the assumption that the legally interested party in each of the properties has absolute title to its relevant property interest and the Target land can be freely disposed and transferred free of all encumbrances. We have discussed with LCH regarding the assumptions adopted in the Valuations and were given to understand that the land use right certificates had been obtained as at the Valuation Date.

In addition, based on our further discussions with LCH, we understand that all other assumptions in the Valuations are generally adopted in other valuations of similar assets and necessary for LCH to arrive at a reasonable estimated reference value of the Target Land. Accordingly, we consider that the adoption of the assumptions in the Valuations is fair and reasonable.

According to the Valuation Reports, the reference value of the Target Land for the expected development of gross floor area 54,380 sq.m. as at the Valuation Date was approximately RMB146,826,000 and as at the Second Valuation Date was approximately RMB150,090,000. Taking into account of the above, we consider that the valuation base and assumptions adopted by LCH for the valuation methodologies are reasonable and in line with market practice.

(ii) The investment amount of GD Aoyuan

GD Aoyuan would be responsible for funding the development, construction and management of the Target Land and the buildings and structures to be erected thereon with a maximum investment amount of RMB342,594,000, which was calculated based on RMB6,300 per sq.m. on an expected gross floor area of 54,380.0 sq.m. By parties’ mutual agreement, it is estimated that approximately RMB6,300 per sq.m. will be utilized as construction costs for erecting the tourism properties, facilities and other infrastructures incidental to the erection of tourism properties on the Target Land.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As part of our due diligence, we have obtained from the Company, and reviewed (i) two sample tourism property projects conducted by independent third parties commenced in 2015 and 2017 (the “ Project Samples ”) to demonstrate the historic construction cost per sq.m. of the Company of similar project within the Company’s resort; and (ii) three quotations from independent engineering construction or consulting companies for the tourism properties to be erected on the Target Land (the “ Quotation Samples ”), to further substantiate the estimated investment amount of approximately RMB6,300 per sq.m. with references from the current market construction cost per sq.m.. The Directors confirmed that the samples provided are representative sample of contracts in line with the normal course of business of the Group.

• The Project Samples

We have reviewed the details of the two independent third parties contract samples provided by the Company, a summary of the sample contracts are as follows:

					Construction
				Gross area	cost
Project name	Location	Usage	Year	(sq.m.)	(sq.m.)
Mountain Seaview	Gudou Hot Spring	Residential,	2015	27,677	RMB5,040
Vacation	Resort Gudou village	commercial and car
Residence	Yamen Town Xinhui	parks
	District Jiangmen City
	Guangdong Province
Heart of Spring	Gudou Hot Spring	Residential,	2017	21,909	RMB6,335
Apartments	Resort Gudou Village	commercial and car
	Yamen Town Sinhui	parks
	District Jiangmen City
	Guangdong Province
The project to be	Gudou Hot Spring	Residential,	2019	54,380	RMB6,300
commenced under	Resort Gudou Village	commercial, car
the Cooperation	Yamen Town Sinhui	parks and other
Agreement	District Jiangmen City	facilities incidental
	Guangdong Province	to any of them

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Project Samples are provided by the Company and the Company selected the Project Samples based on our selection criteria which included (i) similar project nature and scope; (ii) within the location of Gudou Hot Spring Resort; and (iii) the latest available samples. For the period from 2010 to the Latest Practicable Date, the Company had completed 4 projects in Gudou Hot Spring Resort. However, only the Project Samples satisfied the selection criteria. To justify the Project Samples are fair and representative, we have (i) confirmed with the Directors that the Project Samples have similar nature and scope with the tourism properties to be erected on the Target Land and they are the latest samples available for the purpose of comparing with the project under the Cooperation Agreement; (ii) conducted a telephone interview with the Company’s project manager to understand the details of the Project Samples which included the project nature and scope; and (iii) reviewed the major contracts of the Project Samples which covered most of its total construction cost. The major contracts covered the structure works, concrete works, electrical engineering works, fire engineering works and decoration works. As confirmed by the Directors, the Project Samples are exhaustive based on the selection criteria. Appropriate adjustment has been made in considering the construction cost of the Project Samples listed above, the adjustment included the cost of the land levelling works which will be performed for the Target Land. For the land levelling works, we have (i) obtained the landscape graph from the Company to review the location of the Target Land; (ii) conducted a telephone interview with the Company’s project manager to understand the necessity and scope of the land levelling works for the project of the Target Land; and (iii) reviewed the quotations provided by the independent engineering or construction consulting companies regarding the scope of their work.

Based on the above, we consider that the Project Samples provided by the Company are fair and representative.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• The Quotation Samples

We have reviewed the quotations from the three independent engineering construction or consulting companies, a summary of the quotations are as follows:

Independent engineering
construction or consulting			Date of	Construction
companies	Capacity	Location	quotation	cost (sq.m.)
Company A	General contracting for building	Xinhui District	July 2019	6,422.2
	construction projects	Jiangmen City
Company B	Building construction services,	Yuexiu District	July 2019	6,450.2
	Municipal public works	Guangzhou City
	construction, other construction
	related services
Company C	Market research services;	Yuexiu District	July 2019	6,400.6
	commodity information	Guangzhou City
	consulting services; project
	construction project tendering
	agency services

The Quotation Samples were obtained from the Company based on our selection criteria which included (i) whether they are independent third parties to the Company; and (ii) their capability and experience to carry out the project on the Target Land.

To understand the quotation basis and to verify the (i) existence; (ii) capacity; and (iii) independence of the above independent engineering construction or consulting companies, we have (i) obtained written information and confirmations of the independence from the independent engineering or construction consulting companies; and (ii) conducted background checks on the National Enterprise Credit Information Publicity System, an information disclosure system sponsored by State Administration for Market Regulation to disclose business information of corporations in the PRC. The background checks include business nature, registered capital, date of establishment, shareholding structure of the independent engineering or construction consulting companies. Based on the results of the (i) written information; and (ii) the background checks, we consider that the Quotation Samples provided by the Company are fair and representative. The Directors confirmed that the Quotation Samples are exhaustive.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered the facts that (i) the investment amount of GD Aoyuan is within the range of the Project Samples; and (ii) the construction cost per sq.m. invested by GD Aoyuan is slightly lower than the Quotation Samples, we consider that the investment amount of GD Aoyuan is fair and reasonable.

Revenue sharing arrangement

According to the Board Letter, Guangdong Gudou and GD Aoyuan will commence the joint planning and development of the Target Land under the Cooperation Agreement within five business days after the passing of resolution(s) by the Independent Shareholders in the EGM to be convened and held for the purpose of approving the Cooperation Agreement and the transaction contemplated therein.

Guangdong Gudou and GD Aoyuan are entitled to 30% and 70% of the income derived from the Target Land, respectively, which is determined with reference to their respective investments in the development project on the Target Land, including the market value of the Target Land of approximately RMB146,826,000 contributed by Guangdong Gudou as valued by LCH, an independent professional valuer (the amount equivalent to 30% of the total investment under the Cooperation Agreement) and the amount of investment injected by GD Aoyuan of approximately RMB342,594,000 for the development of the Target Land (the amount equivalent to 70% of the total investment under the Cooperation Agreement). As confirmed by the Directors, the revenue sharing ratio is fixed and mutual agreed by both parties. If there is any subsequent increase in the construction cost of the development of the Target Land, the cost will be borne by GD Aoyuan.

Having considered the fact that (i) the revenue sharing arrangement which is based on the proportion of their investment amounts; (ii) the revenue sharing ratio of 30:70 was fixed and determined with reference to the valuation of the Target Land and the estimated and agreed total construction costs for the development project on the Target Land; (iii) the construction cost of approximately RMB6,300 per sq.m. of the investment amount from GD Aoyuan for funding the development, construction and management of the Target Land is within the range of the Project Samples and slightly lower than that of the Quotation Samples; and (iv) the market value of the Target Land as valued by LCH, an independent professional valuer, we consider that the revenue sharing arrangement is fair and reasonable, and in the interest of the Company and the Shareholers as a whole. GD Aoyuan’s investment amount is capped at RMB342,594,000 regardless of the actual costs incurred by GD Aoyuan in the development project on the Target Land which could exceed the capped amount.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Financial effect of the Cooperation Agreement

Based on our discussion with, and the representation from, the Management, we understand that the following factors have been taken into account when the Company considered the potential impact of the Cooperation Agreement on the financial performance and position of the Group:

(i) Effect on assets and liabilities

Upon completion of the development of the Target Land, it is expected that the total assets and total liabilities of the Group will be increased simultaneously as a result of (i) the increase in assets attributable to the contribution by GD Aoyuan by injecting the funding of maximum investment amount of RMB342,594,000 for the development, construction and management of the Target Land, and (ii) the increase in liabilities due to the construction by GD Aoyuan will be accounted for an amount due to connected party.

(ii) Effect on earnings

Considering the potential increase in sales of tourism properties, it is expected that the Cooperation Agreement will have positive impacts on the future earnings of the Group in the long run.

It should be noted that the analysis above is for illustrative purpose only and do not purport to represent how the financial performance and position of the Group will be after completion of the development of the Target Land.

DISCUSSION AND ANALYSIS

The Group is a hot spring resort and hotel operator and a tourism property developer, and has a substantial portfolio of tourism properties and land reserve. The Group sees opportunities to cooperate with GD Aoyuan to further expand the Group’s tourism property development businesses. To diversify risk to some extent, the Group involves GD Aoyuan for the joint planning, development and operation of the Target Land by entering into the Cooperation Agreement.

GD Aoyuan, being an indirect wholly-owned subsidiary of China Aoyuan, has an extensive expertise and experience in property development which will be valuable to the development of the Target Land. We concur with Directors’ view that there is a benefit and risk sharing for entering into the Cooperation Agreement with GD Aoyuan on the development of the Target Land.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After reviewing the (i) Valuation Reports conducted by LCH, an independent professional valuer; (ii) the terms and historic construction costs of the Project Samples; and (iii) the Quotation Samples from independent engineering construction or consulting companies, we are of the view that the major terms of the Cooperation Agreement are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Cooperation Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Cooperation Agreement is conducted in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Cooperation Agreement and the transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolution in this regard.

Yours faithfully, For and on behalf of TITAN FINANCIAL SERVICES LIMITED Duncan Cheung Jerry Chan Director Director

Mr. Duncan Cheung is a licensed person registered with the Securities and Futures Commission and as a responsible officer of Titan Financial Services Limited to carry out Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). He has over 9 years of experience in corporate finance.

Mr. Jerry Chan is a licensed person registered with the Securities and Futures Commission and as a responsible officer of Titan Financial Services Limited to carry out Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). He has over 10 years of experience in corporate finance.

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VALUATION REPORT

APPENDIX I

==> picture [190 x 48] intentionally omitted <==

The readers are reminded that the report which follows has been prepared in accordance with the reporting guidelines set by the International Valuation Standards 2017 (“ IVS ”) and published by the International Valuation Standards Council. IVS entitles the valuer to make assumptions which may on further investigation, for instance by the readers’ legal representative, prove to be inaccurate. Any exception is clearly stated below. Headings are inserted for convenient reference only and have no effect in limiting or extending the language of the paragraphs to which they refer. Translations of terms in English or in Chinese are for reader’s identification purpose only and have no legal status or implication in this report. This report was prepared and signed off in English format, translation of this report in language other than English shall only be used as a reference and should not be regarded as a substitute for this report. Piecemeal reference to this report is considered to be inappropriate and no responsibility is assumed from our part for such piecemeal reference. It is emphasised that the findings and conclusion presented below are based on the documents and facts known to us at the Latest Practicable Date of this document. If additional documents and facts are made available, we reserve the right to amend this report and its conclusions.

17th Floor Champion Building 287-291 Des Voeux Road Central Hong Kong

2 September 2019

The Board of Directors Gudou Holdings Limited Unit 1103A, 11th Floor, COSCO Tower Grand Millennium Plaza 183 Queen’s Road Central 33 Wing Lok Street Hong Kong

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VALUATION REPORT

APPENDIX I

Dear Sirs,

In accordance with the instructions given by the present management of Gudou Holdings Limited (hereinafter referred to as the “ Instructing Party ”) to us to conduct a valuation of a real property (same as the word property in this report) in which Gudou Holdings Limited (hereinafter referred to as the “ Company ”) and its subsidiaries (collectively, together with the Company hereinafter referred to as the “ Group ”) have interests in the mainland of the People’s Republic of China (hereinafter referred to as the “ PRC ” or “ China ”), we confirm that we have conducted inspections, made relevant enquiries and obtained such further information as we consider necessary to support our findings and our conclusion of value of the property as at each of 31 March 2019 and 30 June 2019 (collectively hereinafter referred to as the “ Valuation Dates ”) for the Instructing Party’s internal management reference purpose. This valuation report comprises the text section and property particulars section. We understand that this report will be included in a Company’s circular for its shareholders’ reference.

We further understand that the use of our work product (regardless of form of presentation) will form part of the Instructing Party’s due diligence but we have not been engaged to make specific sales or purchase recommendations, or to give opinion for any financing arrangement. We further understand that the use of our work product will not supplant other due diligence which the Instructing Party should conduct in reaching its business decision regarding the property valued. Our work is designed solely to provide information that will give the Instructing Party a reference in its due diligence process, and our work should not be the only factor to be referenced by the Instructing Party. Our findings and conclusion of value of the property are documented in this valuation report as at today’s date.

VALUATION OF THE PROPERTY

Basis of Value and Assumptions

According to the IVS, there are two valuation bases, namely, market value basis and valuation bases other than market value. In this engagement, we have provided our value of the property on the market value basis.

The term “Market Value” is defined by the IVS 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”.

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VALUATION REPORT

APPENDIX I

Unless otherwise stated, our valuation of the property has been made on the assumptions, that, as at each of the Valuation Dates:

1. the legally interested party in the property has absolute title to its relevant property interests;

2. the legally interested party in the property has free and uninterrupted rights to assign its relevant property interests for the whole of the unexpired term as granted, and any premiums payable have already been fully paid;

3. the legally interested party in the property sells its relevant property interests in the market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the value of the property interests;

4. the property has obtained relevant government’s approval for the sale of the property and is able to be disposed of and transferred it free of all encumbrances (including but not limited to the cost of transaction) in the market; and

5. the property can be freely disposed and transferred free of all encumbrances at each of the Valuation Dates for its existing use in the market to both local and overseas purchasers without payment of any premium to the government.

Should any of the above not be the case, it will have adverse impact to the value as reported.

Approach to Value

Unless otherwise stated, in valuing the property, we have adopted the sales comparison approach on the assumption that the property was sold with the benefit of vacant possession as at each of the Valuation Dates. The approach considers the sales, listing or offerings of similar or substitute property and related market data to establish a value estimate of a property that a reasonable investor would have to pay for a similar property of comparable utility.

In valuing the property, transactions of comparable land transactions in Xinhui District of Jiangmen City and Zhuhai City have been considered. Adjustments have been made to various factors such as time (including transaction time), land use terms, usage and location factors.

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VALUATION REPORT

APPENDIX I

MATTERS THAT MIGHT AFFECT THE VALUE REPORTED

For the sake of valuation, we have adopted the areas as they appeared in the copies of the documents as provided, and no further verification work has been conducted. Should it be established subsequently that the adopted areas were not the latest approved, we reserve the right to revise our report and the valuation accordingly.

Unless otherwise stated, in our valuation, we have assumed that the property is able to be sold and purchased in the market without any legal impediment (especially from the regulators). Should this not be the case, it will affect the reported value significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability is assumed.

As at the Latest Practicable Date of this document, we are unable to identify any adverse news against the property which may affect the reported findings or value in our work product. Thus, we are not in the position to report and comment on its impact (if any) to the property. However, should it be established subsequently that such news did exist at each of the Valuation Dates, we reserve the right to adjust the findings or value reported herein.

ESTABLISHMENT OF TITLES

Due to the purpose of this engagement, the Instructing Party or the appointed personnel of the Group provided us the necessary documents to support that the legally interested party in the property has free and uninterrupted rights to assign, to transfer, to mortgage, to let or to use the property at its existing use (in this instance, an absolute title), for the whole of the unexpired terms as granted, free of all encumbrances and any premiums payable have already been paid in full or outstanding procedures have been completed, and that the Group has the right to occupy or to use the property. Our agreed procedures to value, as agreed with the Instructing Party, did not require us to conduct legal due diligence on the legality and formality on the way that the legally interested party obtained the property from the relevant authorities. We agreed with the Instructing Party that this should be the responsibility of the legal adviser to the Instructing Party. Thus, no responsibility or liability is assumed from our part to the origin and continuity of the titles to the property.

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APPENDIX I

VALUATION REPORT

We have been provided with copies of the title documents of the property. However, we have not examined the original documents to verify the ownership and encumbrances or to ascertain the existence of any amendments, which may not appear on the copies handed to us. All documents disclosed (if any) are for reference only and no responsibility is assumed for any legal matters concerning the legal titles and the rights (if any) to the property valued. Any responsibility for our misinterpretation of the documents cannot be accepted.

The land registration system of China forbids us to search the original documents of the property that are filed in the relevant authorities, and to verify legal titles or to verify any material encumbrances or amendment which may not appear on the copies handed to us. We need to state that we are not legal professionals and are not qualified to ascertain the titles and to report any encumbrances that may be registered against the property in China. However, we have relied solely on the copies of documents and the copy of the PRC legal opinions provided by the Instructing Party with regard to the legal titles of the property. We are given to understand that the PRC legal opinions were prepared by the Company’s PRC legal adviser, 廣東恆益律師事務所 GFE Law Office in November 2016. According to the legal opinions, no idle land record registered against the property. No responsibility or liability from our part is assumed in relation to those legal opinions.

In our report, we have assumed that the legally interested party in the property has obtained all the approval and/or endorsement from the relevant authorities, and that there would have no legal impediment (especially from the regulators) for the legally interested party to continue its titles in the property. Should this not be the case, it will affect our value in this report significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability from our part is assumed.

INSPECTIONS AND INVESTIGATIONS OF THE PROPERTY

The property was inspected by Sr Elsa Ng in May 2019. We have inspected the exterior, and where possible, the interior of the property in respect of which we have been provided with such information as we have requested for the purpose of our valuation. We have not inspected those parts of the property which were covered, unexposed or inaccessible and such parts have been assumed to be in reasonable condition. We cannot express an opinion about or advice upon the condition of uninspected parts and our work should not be taken as making any implied representation or statement about such parts. No building survey, structural survey, investigation or examination has been made, but in the course of our inspections we did not note any serious defects in the property valued. We are not, however, able to report that the property is free from rot, infestation or any other structural defects. No tests were carried out to the services (if any) and we are unable to identify those services either covered, unexposed or inaccessible.

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VALUATION REPORT

APPENDIX I

We have not carried out on-site measurements to verify the correctness of the areas of the property, but have assumed that the areas shown on the documents and official plans handed to us are correct. All dimensions, measurements and areas are approximations.

Our engagement and the agreed procedures to value the property did not include an independent land survey to verify the legal boundaries of the property. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the legal boundaries of the property that appeared on the documents handed to us. No responsibility from our part is assumed. The Instructing Party or interested party in the property should conduct their own legal boundaries due diligence work.

We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous materials have been used in the construction of the property, or have since been incorporated into the property, and we are therefore unable to report that the property is free from risk in this respect. For the purpose of this valuation, we have assumed that such investigations would not disclose the presence of any such materials to any significant extent.

We are not aware of the content of any environmental audit or other environmental investigation or soil survey which may have been carried out on the property and which may draw attention to any contamination or the possibility of any such contamination. In undertaking our work, we have assumed that no contaminative or potentially contaminative uses have ever been carried out in the property. We have not carried out any investigation into past or present uses, either of the property or of any neighbouring land, to establish whether there is any contamination or potential for contamination to the property from these uses or sites, and have therefore assumed that none exists. However, should it be established subsequently that contamination, seepage or pollution exists at the property or on any neighbouring land, or that the premises have been or are being put to a contaminative use, this might reduce the value now reported.

SOURCES OF INFORMATION AND ITS VERIFICATION

In the course of our work, we have been provided with copies of the documents regarding the property, and these copies have been referenced without further verifying with the relevant bodies and/or authorities. Our agreed procedures to value did not require us to conduct any searches or inspect the original documents to verify ownership or to verify any amendment which may not appear on the copies handed to us. We need to state that we are not legal professionals, therefore, we are not in the position to advise and comment on the legality and effectiveness of the documents provided by the Instructing Party or the appointed personnel of the Group.

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APPENDIX I

VALUATION REPORT

We have relied solely on the information provided by the appointed personnel of the Group or the Instructing Party without further verification, and have fully accepted advice given to us on such matters as planning approvals or statutory notices, locations, titles, easements, tenure, occupation, site and floor areas and all other relevant matters.

For the purpose of this valuation, the scope of our work has been determined by reference to the property list provided by the Instructing Party. All property on the list has been included in our report. The Instructing Party has confirmed to us that the Group has no property interest other than those specified on the list supplied to us.

Information furnished by others, upon which all or portions of our work product are based, is believed to be reliable but has not been verified in all cases. Our agreed procedures to value or work do not constitute an audit, review, or compilation of the information provided. Thus, no warranty is made nor liability assumed for the accuracy of any data, advice, opinions, or estimates identified as being furnished by others which have been used in formulating our work product.

Our valuation has been made only based on the advice and information made available to us. While a limited scope of general inquiries have been made to the local property market practitioners, we are not in a position to verify and ascertain the correctness of the advice given by the relevant personnel. No responsibility or liability is assumed.

When we adopted the work products from other professions, external data providers and the appointed personnel of the Group or the Instructing Party in our valuation, the assumptions and caveats that adopted by them in arriving at their figures also applied in our valuation. The procedures we have taken as agreed do not provide all the evidence that would be required in an audit and, as we have not performed an audit, accordingly, we do not express an audit opinion.

We are unable to accept any responsibility for the information that has not been supplied to us by the appointed personnel of the Group or the Instructing Party. Also, we have sought and received confirmation from the appointed personnel of the Group or the Instructing Party that no materials factors have been omitted from the information supplied. Our analysis and valuation are based upon full disclosure between us and the Instructing Party or the Group of material and latent facts that may affect our works.

We have had no reason to doubt the truth and accuracy of the information provided to us by the appointed personnel of the Group or the Instructing Party. We consider that we have been provided with sufficient information to reach an informed view, and have had no reason to suspect that any material information has been withheld.

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VALUATION REPORT

APPENDIX I

Unless otherwise stated, all monetary amounts are in Renminbi Yuan (“ RMB ”).

OPINION OF VALUE

Based on the above information and assumptions, we are of the opinion that the Market Value of the property held by the Group for internal management reference purpose as at each of the Valuation Dates in its existing states assuming free of all encumbrances was as follows:

As at 31 March 2019 — RENMINBI ONE HUNDRED SIXTY EIGHT MILLION SIX HUNDRED AND FIFTY THOUSAND YUAN ONLY (RMB 168,650,000). The apportioned land value for the expected development of gross floor area 54,380 square meters (“ sq.m. ”) was RENMINBI ONE HUNDRED FORTY SIX MILLION EIGHT HUNDRED AND TWENTY SIX THOUSAND YUAN ONLY (RMB 146,826,000).

As at 30 June 2019 — RENMINBI ONE HUNDRED SEVENTY MILLION SEVEN HUNDRED AND FIFTY THOUSAND YUAN ONLY (RMB 170,750,000) . The apportioned land value for the expected development of gross floor area 54,380 sq.m. was RENMINBI ONE HUNDRED FIFTY MILLION AND NINETY THOUSAND YUAN ONLY (RMB 150,090,000) .

LIMITING CONDITIONS

Our findings or conclusion of value of the property in this report are valid only for the stated purpose and only at each of the Valuation Dates, and for the sole use of the Instructing Party. We or our personnel shall not be required to give testimony or attendance in court or to any government agency by reason of this report, and we accept no responsibility whatsoever to any other person.

Our valuation has been made on the assumption that no unauthorised alteration, extension or addition has been made in the property, and that the inspection and the use of this report do not purport to be a building survey of the property. We have assumed that the property is free of unsuitable materials and techniques.

No responsibility is taken for changes in market conditions and local government policy, and no obligation is assumed to revise this report to reflect events or conditions, which occur or make known to us subsequent to the date hereof.

Neither the whole nor any part of this report or any reference made hereto may be included in any published documents, circular or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent the Company to include this report into a circular for its shareholders’ reference.

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APPENDIX I

VALUATION REPORT

Our liability for loss or damage shall be limited to such sum as we ought reasonably to pay having regard to our responsibility for the same on the basis that all other consultants and specialists, where appointed, shall be deemed to have provided to the Instructing Party contractual undertakings in respect of their services and shall be deemed to have paid to the Instructing Party such contribution as may be appropriate having regard to the extent of their responsibility for such loss or damage.

Our liability for any loss or damage arising out of the action or proceedings aforesaid shall, notwithstanding the preceding provisions, in any event be limited to a sum not exceeding the charges paid to us for the portion of services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, loss of profits, opportunity cost etc.), even if it has been advised of their possible existence. For the avoidance of doubt our liability shall never exceed the lower of the sum calculated in accordance with the preceding provisions and the sum provided for in this clause.

It is agreed that the Instructing Party and the Company are required to indemnify and hold us and our personnel harmless from any claims, liabilities, costs and expenses (including, without limitation, attorney’s fees and the time of our personnel involved) brought against, paid or incurred by us at a time and in any way based on the information made available in connection with our engagement except to the extent that any such losses, expenses, damages or liabilities are ultimately determined to be the result of gross negligence, misconduct, wilful default or fraud of our engagement team in conducting its work. This provision shall survive even after the termination of this engagement for any reason.

STATEMENTS

Our report is prepared in line with the reporting guidelines contained in the IVS. The valuation has been undertaken by us, acting as external valuer, for the purpose of the valuation.

We retain a copy of this report together with the data and documents provided by the Instructing Party for the purpose of this assignment, and these data and documents will, according to the Laws of Hong Kong, be kept for a period of 6 years from the date it provided to us and to be destroyed thereafter. We considered these records confidential, and we do not permit access to them by anyone, with the exception for law enforcement authorities or court order, without the Instructing Party’s authorisation and prior arrangement made with us in writing. Moreover, we will add the Company’s information into our client list for our future reference.

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VALUATION REPORT

APPENDIX I

The analysis and valuation of the property depend solely on the assumptions made in this report and not all of which can be easily quantified or ascertained exactly. Should some or all of the assumptions prove to be inaccurate at a later date, it will affect the reported findings or conclusion of value significantly.

We hereby certify that the fee for this service is not contingent upon our conclusion of values and we have no significant interests in the property, the Group or the value reported.

Yours faithfully,

For and on behalf of

LCH (Asia-Pacific) Surveyors Limited

Elsa Ng Hung Mui B.Sc. M.Sc. R.P.S. (GP) Executive Director

Sr Elsa Ng Hung Mui has been conducting valuation of real property in Hong Kong, Macau and mainland China since 1994. She is a Fellow of The HKIS and a valuer on the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuation in Connection with Takeovers and Mergers published by The Hong Kong Institute of Surveyors.

.

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VALUATION REPORT

APPENDIX I

PROPERTY PARTICULARS

Property held by the Group under long-term title certificates in the PRC and valued on market value basis

Property

Description and tenure

Particulars of occupancy

Five various parcels of land located The property comprises five parcels at Gudou Hot Spring Resort Gudou of land having a total site area of Village approximately 67,860.7 square meters Yamen Town, Xinhui District (“ sq.m. ”). Jiangmen City (See Note 1) Guangdong Province The PRC The property is located at the Gudou 529149 Hot Spring Resort.

As inspected and confirmed by the Instructing Party and the appointed personnel of the Company, portion of the property was vacant and portion of the property was occupied by the Group as a parking lot as at each of the Valuation Dates.

The property is subject to a right to use the land for various terms with the latest term till 19 June 2043 for accommodation and beverage usages. (See Note 1)

Notes:

1. The right to possess the land is held by the State and the right to use the land has been granted by the State to 廣東古兜旅遊集團有限公司 (translated as Guangdong Gudou Travel Group Company Limited and hereinafter referred to as “ Guangdong Gudou ”) via the following ways:

2. i. Pursuant to a Contract for the Grant of State-owned Land Use Rights（國有土地使用權出讓合同） dated 11 July 2002 and made between the Land Resources Bureau of Xinhui City（新會市國土資 源局）and now renamed as the Xinhui Branch of Jiangmen City Land and Resources Bureau（江 門市國土資源局新會分局）and Guangdong Gudou, a parcel of land having a site area of 394,796 sq.m. was granted to Guangdong Gudou for tourism ancillary and greenery usages. The contract covered portion of the land parcels in this property Note 1(iii), (iv), (v) and (vi) below.

3. ii. A parcel of land having a site area of 25,220.7 sq.m.

   • (a) Pursuant to a Contract for the Grant of State-owned Land Use Rights（國有土地使用權 出讓合同） dated 19 June 2003 and made between the Xinhui District Land Resources Bureau of Jiangmen City（江門市新會區國土資源局） and now renamed as the Xinhui Branch of Jiangmen City Land and Resources Bureau（江門市國土資源局新會分局） and 廣東新會古兜溫泉旅遊度假邨有限公司 (the previous name of Guangdong Gudou), a parcel of land having a site area of 63,177 sq.m. was granted to Guangdong Gudou for a term of 40 years for scenery and leisure (swimming pool, barbecue site and children’s playground) usages. The contract covered the land parcels in this property.

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VALUATION REPORT

APPENDIX I

• (b) Pursuant to a State-owned Land Use Rights Certificate known as Xin Guo Yong (2011) Di 04245 Hao（新國用 (2011) 第 04245 號）dated 2 December 2011 and issued by the Jiangmen Municipal People’s Government（江門市人民政府）, Guangdong Gudou has the right to use the land having a site area of 33,549 sq.m. for a term till 19 June 2043 for accommodation and beverage usages. As advised, the property comprises portion of the land having a site area of 25,220.7 sq.m. covered by this certificate.

• iii. A parcel of land having a site area of 25,437 sq.m.

Pursuant to a State-owned Land Use Rights Certificate known as Xin Guo Yong (2011) Di 04244 Hao（新國用 (2011) 第 04244 號 )dated 2 December 2011 and issued by the Jiangmen Municipal People’s Government（江門市人民政府）, Guangdong Gudou has the right to use the land having a site area of 25,437 sq.m. for a term till 12 July 2042 for accommodation and beverage usages.

• iv. A parcel of land having a site area of 5,677 sq.m.

Pursuant to a State-owned Land Use Rights Certificate known as Xin Guo Yong (2011) Di 04249 Hao（新國用 (2011) 第 04249 號 ) dated 2 December 2011 and issued by the Jiangmen Municipal People’s Government（江門市人民政府）, Guangdong Gudou has the right to use the land having a site area of 5,677 sq.m. for a term till 12 July 2042 for accommodation and beverage usages.

• v. A parcel of land having a site area of 6,413 sq.m.

Pursuant to a State-owned Land Use Rights Certificate known as Xin Guo Yong (2011) Di 04254 Hao（新國用 (2011) 第 04254 號 ) dated 2 December 2011 and issued by the Jiangmen Municipal People’s Government（江門市人民政府）, Guangdong Gudou has the right to use the land having a site area of 6,413 sq.m. for a term till 12 July 2042 for accommodation and beverage usages.

• vi. A parcel of land having a site area of 5,113 sq.m.

Pursuant to a State-owned Land Use Rights Certificate known as Xin Guo Yong (2011) Di 04248 Hao（新國用 (2011) 第 04248 號） dated 2 December 2011 and issued by the Jiangmen Municipal People’s Government（江門市人民政府）, Guangdong Gudou has the right to use the land having a site area of 5,113 sq.m. for a term till 6 December 2042 for accommodation and beverage usages.

1. Pursuant to the Xinhui Gudou Hot Spring Resort Outline Zoning Plan issued by the Planning and Survey Design Research Institute of Jiangmen City（江門市規劃勘察設計研究院）, the property is mainly subject to the following development parameters:

			Building
Certificate No.		Site	Height	Greenery
Xin Guo Yong	Plot Ratio	Coverage	Restriction (m)	Area	Usage
(2011) Di 04244 Hao	≤1.0	≤15%	≤16	≥50%	Commercial
(2011) Di 04245 Hao	≤2.0	≤40%	≤60	≥20%	Commercial
(2011) Di 04249 Hao	≤2.0	≤40%	≤100	≥35%	Commercial
(2011) Di 04254 Hao	≤2.0	≤20%	≤60	≥35%	Commercial
(2011) Di 04248 Hao	≤2.0	≤20%	≤60	≥35%	Commercial

1. Pursuant to a copy of the Business Licence（營業執照）dated 16 November 2015, Guangdong Gudou is a limited liability company registered in the PRC for an operational period commencing from 25 October 2001 to 24 October 2051.

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VALUATION REPORT

APPENDIX I

1. According to the legal opinions as prepared by the Company’s PRC legal adviser, 廣東恆益律師事務所 GFE Law Office, in November 2016 the following opinions were noted:

2. i. Guangdong Gudou legally obtained the land use rights of the property by way of land grant, and all the considerations have been paid;

3. ii. Guangdong Gudou was the legally interested party in the land use rights of the property and has the right to transfer, lease and mortgage the land use rights of the property; and

4. iii. construction of hotel or health regimen facilities, subject to obtaining all relevant approvals, including but not limited to construction and planning permits, would not violate the laws, rules and regulations in the PRC.

5. According to the information provided by the Instructing Party or its appointed personnel, we were given to understand that portion of the property was subject to mortgage as at each of the Valuation Dates.

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GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with 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 not misleading or deceptive, and there are no other matters the omission of which would make any statement therein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the following Directors or the chief executive of the Company had or were deemed to have interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) 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 were taken or deemed to have under such provision of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules:

(i) Long position in the Shares

			Percentage of
			the Company’s
Name of		Number of	issued share
Director	Nature of interest	Shares held	capital
Mr. Hon	Interest of controlled	336,500,000	34.34%
Chi Ming	corporation	(Note 1)

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GENERAL INFORMATION

APPENDIX II

• (ii) Interests in the underlying Shares held under equity derivatives

	Number		Exercise
	of Share	Date of	price	Exercise
Name of Director	Options held	grant	per Share	period
			(HK$)
Mr. Hon Chi Ming	4,900,000	5 April 2017	0.62	Subject to the
				vesting
Mr. Huang Zhanxiong	4,900,000	5 April 2017	0.62	schedule in
				Note 2
Ms. Zhen Yaman	2,450,000	5 April 2017	0.62
Mr. Hon Ka Fung	2,450,000	5 April 2017	0.62
Mr. Wu Sai Him	2,450,000	5 April 2017	0.62
Mr. Chiu Chi Wing	2,450,000	5 April 2017	0.62
Prof. Wang Dawu	2,450,000	5 April 2017	0.62

Notes:

1. The Shares were held by Harvest Talent Investments Limited, a company whollyowned by Mr. Hon Chi Ming. Under the SFO, Mr. Hon Chi Ming is deemed to be interested in all the Shares held by Harvest Talent Investments Limited.

2. The Share Options are subject to the vesting schedule below and are exercisable during each exercise period specified below:

Exercise Period Number of underlying Shares subject to the Share Options:

• 5 April 2018 to 25% of the total number of Shares fall to be issued on exercise 4 April 2025 of the Share Options

• 5 April 2019 to 25% of the total number of Shares fall to be issued on exercise 4 April 2025 of the Share Options

• 5 April 2020 to 25% of the total number of Shares fall to be issued on exercise 4 April 2025 of the Share Options

• 5 April 2021 to 25% of the total number of Shares fall to be issued on exercise 4 April 2025 of the Share Options

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GENERAL INFORMATION

APPENDIX II

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) 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 were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Interests of substantial shareholders

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

Long position in the Shares of the Company

			Percentage of
			the Company’s
		Number of	issued share
Name	Capacity	Shares held	capital
Li Wai Ling	Interest held by spouse	336,500,000	34.34%
	(Note 1)
Harvest Talent	Beneficial owner	336,500,000	34.34%
Investments
Limited
Guo Ziwen	Settlor of a	286,000,000	29.18%
	discretionary trust
	(Note 2)

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GENERAL INFORMATION

APPENDIX II

			Percentage of
			the Company’s
		Number of	issued share
Name	Capacity	Shares held	capital
Jiang Miner	Settlor of a	286,000,000	29.18%
	discretionary trust
	(Note 2)
J. Safra Sarasin	Trustee_(Note 2)_	286,000,000	29.18%
Trust Company
(Singapore)
Limited
Asia Square	Interest of controlled	286,000,000	29.18%
Holdings Ltd	corporations_(Note 2)_
Sturgeon Limited	Interest of controlled	286,000,000	29.18%
	corporations_(Note 2)_
Joy Pacific Group	Interest of controlled	286,000,000	29.18%
Limited	corporations_(Note 2)_
Ace Rise Profits	Interest of controlled	286,000,000	29.18%
Limited	corporations_(Note 2)_
China Aoyuan	Interest of controlled	286,000,000	29.18%
	corporations_(Note 2)_
Add Hero Holdings	Interest of controlled	286,000,000	29.18%
Limited	corporations_(Note 2)_
Phoenix Virtue	Beneficial owner	286,000,000	29.18%
Limited

Notes:

1. Ms. Li Wai Ling was the spouse of Mr. Hon Chi Ming. By virtue of the SFO, Ms. Li Wai Ling was deemed to be interested in the Shares in which Mr. Hon Chi Ming is interested.

— II-4 —

GENERAL INFORMATION

APPENDIX II

1. Phoenix Virtue Limited was a company wholly-owned by Add Hero Holdings Limited, which in turn was wholly-owned by China Aoyuan, which in turn was owned as to 52.10% by Ace Rise Profits Limited. Ace Rise Profits Limited was a company held as to 90.00% by Joy Pacific Group Limited, which in turn was wholly-owned by Sturgeon Limited. Sturgeon Limited was a company wholly-owned by Asia Square Holdings Limited, which in turn was a nominee and trustee for J. Safra Sarasin Trust Company (Singapore) Limited. J. Safra Sarasin Trust Company (Singapore) Limited as the trustee held such interests on trust for the beneficiaries of The Golden Jade Trust, which was a discretionary family trust established under the laws and regulations of Singapore. Mr. Guo Ziwen and Ms. Jiang Miner were the settlors of The Golden Jade Trust. By virtue of the SFO, each of Add Hero Holdings Limited, China Aoyuan, Ace Rise Profits Limited, Joy Pacific Group Limited, Sturgeon Limited, Asia Square Holdings Limited, J. Safra Sarasin Trust Company (Singapore) Limited, Mr. Guo Ziwen and Ms. Jiang Miner were all deemed to be interested in the Shares in which Phoenix Virtue Limited was interested.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares (including any interests in options in respect of such share capital), which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, and none of the Directors or proposed Director is a director or employee of the above-mentioned companies.

DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into a service contract or appointment letter with any member of the Group which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any interests in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors or Supervisors had any interest in an assets which have been, since 31 December 2018 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by

— II-5 —

GENERAL INFORMATION

APPENDIX II

or leased to any member of the Group. As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement, subsisting at the date of this circular, which is significant in relation to the business of the Group.

EXPERT AND CONSENT

The following are the qualifications of the experts having given opinions contained in and referred to in this circular:

Name	Qualification
Titan Financial Services	A corporation licensed to carry out Type 1 (dealing in
Limited	securities) and Type 6 (advising on corporate finance)
	regulated activities under the SFO

GFE Law Office ( 廣東恆益 Qualified PRC lawyers 律師事務所 ) (“ PRC Legal Adviser ”)

LCH (Asia-Pacific) Professional surveyor Surveyors Limited (“ Valuer ”)

As at the Latest Practicable Date, the Independent Financial Adviser, PRC Legal Adviser and Valuer had no shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

The Independent Financial Adviser, PRC Legal Adviser and Valuer have given and have not withdrawn their respective written consent to the issue of this circular, with the inclusion of the references to their name and/or their opinions in the form and context in which they are included.

The Independent Financial Adviser, PRC Legal Adviser and Valuer have no direct or indirect interest in any assets which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 December 2018, the date to which the latest published audited consolidated financial statements of the Group were made up.

— II-6 —

GENERAL INFORMATION

APPENDIX II

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited consolidated financial statements of the Group were made up.

MISCELLANEOUS

• (a) The registered office of the Company is situated at Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman, KY1-1108, Cayman Islands.

• (b) The head office and principal place of business of the Company in Hong Kong is Unit 1103A, 11/F, COSCO Tower, Grand Millennium Plaza, 183 Queen’s Road Central, 33 Wing Lok Street, Hong Kong.

• (c) Tricor Investor Services Limited, the Hong Kong branch share registrar and transfer office of the Company, is located at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (d) In the event of any inconsistency, the English language text of this circular shall prevail over the Chinese language text.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (except Saturdays, Sundays and public holidays) at Unit 1103A, 11/F, COSCO Tower, Grand Millennium Plaza, 183 Queen’s Road Central, 33 Wing Lok Street, Hong Kong for a period of 14 days from the date of this circular:

• (a) this circular;

• (b) the Cooperation Agreement;

• (c) the letter from the Independent Financial Adviser as set out in this circular;

• (d) the letter from the Independent Board Committee as set out in this circular;

• (e) the valuation report prepared by Valuer, the summary of which is set out in this circular; and

• (f) the written consents of the Independent Financial Adviser as referred to in this appendix.

— II-7 —

NOTICE OF EGM

==> picture [83 x 72] intentionally omitted <==

GUDOU HOLDINGS LIMITED 古兜控股有限公司

(incorporated in the Cayman Islands with limited liability)

(stock code: 8308)

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the “ Meeting ”) of Gudou Holdings Limited (the “ Company ”) will be held at 2:00 p.m., on Tuesday, 17 September 2019 at Room 3, 10/F, United Centre, 95 Queensway, Admiralty, Hong Kong, for the purpose of considering and, if thought fit, passing with or without modifications, the following ordinary resolution of the Company.

“ THAT :

• (a) the cooperation and development agreement (the “ Cooperation Agreement ”) dated 16 July 2019 entered into between 廣東古兜旅遊集團有限公司 (in English, for identification purpose only, Guangdong Gudou Travel Group Company Limited) (“ Guangdong Gudou ”) and 奧園集團（廣東）有限公司 (in English, for identification purpose only, Guangdong Aoyuan Co., Ltd.) (“ GD Aoyuan ”) pursuant to which Guangdong Gudou and GD Aoyuan had agreed to cooperate with each other for the planning, development and operation of five parcels of land situated at Gudou hot spring resort at Jiangmen City, Guangdong Province, the PRC and operated by the Company and its subsidiaries, be and are hereby confirmed, approved and ratified; and

• (b) the directors of the Company be and are hereby authorised to execute such other documents, do all other acts and things and take such action as they may consider necessary, desirable or expedient to implement and/or give effect to or otherwise in connection with the Cooperation Agreement.”

By order of the Board GUDOU HOLDINGS LIMITED Hon Chi Ming Chairman and Executive Director

Hong Kong, 2 September 2019

— N-1 —

NOTICE OF EGM

Registered office: Clifton House, 75 Fort Street P.O. Box 1350 Grand Cayman KY1-1108 Cayman Islands

Principal place of business in Hong Kong: Unit 1103A, 11/F, COSCO Tower Grand Millennium Plaza 183 Queen’s Road Central 33 Wing Lok Street, Hong Kong

Notes:

1. A member (who is the holder of two or more shares) entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and, on a poll, vote on his/her behalf. A proxy need not be a member of the Company.

2. To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed or a notarial certified copy of such power of attorney or authority, must be deposited with the Hong Kong branch share registrar of the Company, Tricor Investor Services Limited of Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjourned Meeting.

3. The record date for determining the entitlement of the shareholders of the Company to attend and vote at the Meeting will be Wednesday, 11 September 2019. In order to be eligible to attend and vote at the Meeting, unregistered holders of the shares shall ensure that all transfer documents accompanied by the relevant share certificates must be lodged with the Hong Kong branch share registrar of the Company, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Wednesday, 11 September 2019.

4. In the case of joint holders of shares in the Company, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s), seniority being determined by the order in which names stand in the register of members.

5. Completion and return of the form of proxy will not preclude members from attending and voting at the Meeting.

As at the date of this notice, the board of directors of the Company comprises:

Executive Directors:

Mr. Hon Chi Ming Mr. Huang Zhanxiong Ms. Zhen Yaman Mr. Hon Ka Fung

Non-executive Director:

Mr. Ruan Yongxi

Independent non-executive Directors: Mr. Wu Sai Him Mr. Chiu Chi Wing Prof. Wang Dawu

— N-2 —