hmvod Limited — Proxy Solicitation & Information Statement 2013

Feb 27, 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Tai Shing International (Holdings) Limited (“ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser, the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected 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 any securities of Tai Shing International (Holdings) Limited.

Tai Shing International (Holdings) Limited 泰盛國際（控股）有限公司[*]

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8103)

MAJOR TRANSACTION ACQUISITION OF TIRACK HOLDINGS CORPORATION AND NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening the extraordinary general meeting of the Company to be held at 10:00 a.m. on 18 March 2013 at 21/F, Malahon Centre, 10-12 Stanley Street, Hong Kong is set out on pages 105 to 107 of this circular.

Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the meeting to the office of the Company’s branch registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting in person should you so wish.

• for identification purpose only

28 February 2013

CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET (“GEM”) OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE “EXCHANGE”)

GEM has been positioned as a market designed to accommodate companies to which a high investment risk may be attached than other companies listed on the Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

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

– i –

TABLE OF CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . .	26
APPENDIX II	ACCOUNTANTS’ REPORT ON THE TARGET GROUP. . . . . .	29
APPENDIX III	PRO FORMA FINANCIAL INFORMATION OF
	THE ENLARGED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . .	64
APPENDIX IV	VALUATION REPORT ON SHENZHEN TAOAOTO . . . . . . . . .	72
APPENDIX V	LETTER FROM FINANCIAL ADVISER ON
	VALUATION RPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	92
APPENDIX VI	LETTER FROM REPORTING ACCOUNTANT ON
	VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	94
APPENDIX VII	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	96
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . .		105

– ii –

DEFINITIONS

In this circular, unless the context requires otherwise, the expressions as stated below will have the following meanings:

• “Acquisition” the acquisition of the entire issued share capital in the Target together with all shareholder’s loan pursuant to the SP Agreement

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

• “Board” the board of Directors or a duly authorised committee thereof

• “Company” Tai Shing International (Holdings) Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on GEM

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

• “Completion” completion of the transactions contemplated under the SP Agreement

• “Consideration” the consideration of HK$110 million payable by the Company to the Vendor under the SP Agreement

• “Conversion Shares” the Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds

• “Convertible Bonds” the convertible bonds in the agreed form in the principal amount of HK$85 million to be issued by the Company in favour of the Vendor to satisfy part of the Consideration

• “Directors” the directors of the Company and each a “Director”

• “EGM” the extraordinary general meeting of the Company to be convened to approve the Acquisition

• “Enlarged Group” the Group immediately after completion of the Acquisition

• “GEM” The Growth Enterprise Market of the Stock Exchange “GEM Listing Rules” Rules Governing the Listing of Securities on The Growth Enterprise Market of the Stock Exchange

• “Group” the Company and its subsidiaries

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DEFINITIONS

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “HK Subsidiary”

• China Tong Lian Air Services Holdings Limited 中國通 聯航空服務集團有限公司, a company incorporated in Hong Kong with limited liability and a direct wholly-owned subsidiary of the Vanuatu Subsidiary

• “Hong Kong” the Hong Kong Special Administration Region of the People’s Republic of China

• “Latest Practicable Date”

• 26 February 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

• “Independent Third Party(ies)”

• an independent third party, to the best of the Directors’ knowledge, information and belief having made reasonable enquiry, who is not connected with the Company and its connected persons

• “PRC”

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

• “RMB”

• Renminbi, the lawful currency of the PRC

• “Sale Share”

• the 1 ordinary share of US$1.00 each of and in the issued share capital of the Target held and beneficially owned by the Vendor, representing the entire issued share capital of the Target

• “SFO”

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

• “Share(s)”

• share(s) of nominal value of HK$0.05 each in the share capital of the Company

• “Shareholders” registered holders of the Shares

• “Shenzhen Taoaoto” 淘淘通航空服務有限公司 (Taoaoto Air Services Co. Ltd.) (formerly known as 深圳市淘淘通航空服務有限公司 (Shenzhen Taoaoto Air Services Co., Ltd.)), an enterprise incorporated in the PRC and a direct wholly owned subsidiary of the HK Subsidiary

• “SP Agreement” the sale and purchase agreement dated 21 November 2012 made between the Vendor and the Company relating to the sale and purchase of the Sale Share

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DEFINITIONS

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “Takeovers Code” the Code on Takeovers and Mergers

• “Target” Tirack Holdings Corporation, a company incorporated in the Republic of Vanuatu with limited liability and is wholly owned by the Vendor

• “Target Group” the Target, Vanuatu Subsidiary, HK Subsidiary and Shenzhen Taoaoto

• “Valuation Report”

• the valuation report on Shenzhen Taoaoto by B.I. Appraisals Limited, independent valuer as set out in Appendix IV hereto

• “Vanuatu Subsidiary” Yan Shan Asia Corporation, a company incorporated in the Republic of Vanuatu with limited liability and is a 55% owned subsidiary of the Target

• “Vendor”

• Questex Development Inc., a company incorporated in the Republic of Vanuatu and beneficially owned by Mr Zhao Tuanjie

• “%”

• per cent

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LETTER FROM THE BOARD

Tai Shing International (Holdings) Limited 泰盛國際（控股）有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8103)

Executive Directors: Mr. Liu Bo (Chairman) Mr. Han Fangfa Ms. Ju Lijun Ms. Huang Miaochan Mr. Zhang Jinshu

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

Non-executive Director:

Dr. Pan Jin Mr. Dai Yuanxin Ms. Xiao Yongzhen

Principal place of business in Hong Kong: 21/F, Malahon Centre 10-12 Stanley Street Hong Kong

Independent Non-executive Directors:

Mr. Chan Yee Sze Mr. Xu Jingbin Ms. Hu Yun Mr. Tan Heming

28 February 2013

To Shareholders of the Company

Dear Sir or Madam,

MAJOR TRANSACTION ACQUISITION OF TIRACK HOLDINGS CORPORATION AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

The Board announced on 21 November 2012 that the Company and the Vendor entered into the SP Agreement pursuant to which the the Company has conditionally agreed to acquire from the Vendor the entire issued share capital of the Target together with all shareholder’s loan due from the Target to the Vendor as at Completion at the consideration of HK$ 110 million to be paid by a combination of cash and Convertible Bonds.

• for identification purpose only

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, information of the Acquisition and to give you a notice of the EGM at which a resolution will be proposed to consider and, if thought fit, approve the SP Agreement and the transactions contemplated thereunder.

THE SP AGREEMENT

Date: 21 November 2012

Parties:

1. Questex Development Inc. as vendor; and

2. the Company as purchaser.

The Vender is principally engaged in investment holding. To the best information and belief of the Directors after having made all reasonable enquiries, the Vendor and its ultimate beneficial owner are Independent Third Parties.

Assets to be acquired

Under the SP Agreement, the Company has conditionally agreed to acquire from the Vendor the Sale Share, representing the entire issued share capital of the Target, together with all shareholder’s loan due from the Target to the Vendor as at Completion.

Consideration

The consideration for the Acquisition is HK$ 110 million and is to be satisfied by the Purchaser in the following manner:

• (i) HK$15 million in cash has been paid prior to the signing of the SP Agreement;

• (ii) HK$5 million in cash to be paid upon signing of the SP Agreement;

• (iii) HK$5 million in cash to be paid upon Completion; and

• (iv) the balance in the sum of HK$ 85 million to be paid upon Completion by issuing the Convertible Bonds to the Vendor (or its nominee).

The HK$20 million cash already paid was funded by previous equity fund raising activities. The Company intends to fund the remaining HK$5 million cash by equity and/or debt financing. The Consideration was determined after arm’s length negotiations between the Vendor and the Company after taking into consideration of (i) the preliminary indicative market value of 100% equity interest of Shenzhen Taoaoto as at 31 August 2012 of approximately RMB186 million as advised by B.I. Appraisals Limited, an independent valuation firm, (ii) the financial position of the Target Group as shown in the management accounts of the Target Group as at 31 August 2012 and (iii) the outlook of the travel industry in the PRC.

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LETTER FROM THE BOARD

According to the Valuation Report by B.I. Appraisals Limited (the “Valuer”), the market value of 100% of Shenzhen Taoaoto was approximately RMB186 million as at 31 August 2012 (the “Valuation”). The valuation method used was market approach method by applying the median price-to-earnings multiple (“PER”) of comparable companies of 9.3 to the adjusted 12-month net profit of Shenzhen Taoaoto (the “Adjusted Net Profit”) which involves the projection of the net profit of Shenzhen Taoaoto up to February 2013. Hence the Valuation constitutes a profit forecast under Rule 19.61 of the GEM Listing Rules. The major assumptions adopted in the Valuation Report are:

• All relevant legal approvals and business certificates or licenses to operate the business in the localities in which Shenzhen Taoaoto operates or intends to operate would be officially obtained and renewable upon expiry;

• Shenzhen Taoaoto will be operating as planned;

• The projected revenue, which is determined based on the number and amounts of negotiating and estimated new contracts, and which is considered to be fair and reasonable, will be materialized;

• There will be sufficient supply of technical staff in the industry in which Shenzhen Taoaoto operates, and Shenzhen Taoaoto will retain competent management, key personnel and technical staff to support its ongoing operations and developments;

• There will be no major change in the current taxation laws in the localities in which Shenzhen Taoaoto operates or intends to operate and that the rates of tax payable shall remain unchanged and that all applicable laws and regulations will be complied with;

• There will be no major change in the political, legal, economic or financial conditions in the localities in which Shenzhen Taoaoto operates or intends to operate, which would adversely affect the revenues attributable to and profitability of Shenzhen Taoaoto; and

• Interest rates and exchange rates in the localities for the operation of Shenzhen Taoaoto will not differ materially from those presently prevailing.

In assessing the Valuation, the Directors have reviewed the Valuation Report prepared by the Valuer and discussed with and enquired the Valuer about different aspects including the bases and assumptions based upon which the Valuation has been prepared.

Given the business nature of Shenzhen Taoaoto and it is not an asset-based company and its operations have been generating positive earnings, its value derives from its business prospects and income generating ability instead of its asset base. Therefore, the Valuation is not determined based on its net asset value of Shenzhen Taoaoto as it would not reflect the economic benefits of Shenzhen Taoaoto’s business.

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LETTER FROM THE BOARD

In arriving at the Valuation, PER, a commonly used valuation multiple for valuing a company, was adopted by the Valuer. Median PER of comparable companies and Adjusted Net Profit are two of the major components in determining the Valuation.

In arriving at the median PER of comparable companies of 9.3 (the “ Adopted PER ”), the Valuer has identified listed companies with the following selection criteria: (i) principally engaged in air ticketing and hotel reservation businesses; (ii) with sufficiently long trading history; and (iii) with financial information available to public, as comparable companies for estimation. The Valuer has also considered the PERs for listed companies around the world which engaged in similar business as Shenzhen Taoaoto (the “ Industry PER ”). The range of the Industry PERs are diverse, the median Industry PER is around 21 as set out in the Valuation Report. Furthermore, the Valuer has also considered the PERs for those comparables which have principal place of businesses in Asia (the “ Asia PER ”), which are considered to be operated in similar geographical region as Shenzhen Taoaoto, the range of Asia PERs are also diverse, the median Asia PER is around 21 as set out in the Valuation Report. Given (i) the similarity in the business nature and operations of the comparable companies and Shenzhen Taoaoto; (ii) the Adopted PER is at the low end of the range of both Industry PERs and Asia PERs; and (iii) the Adopted PER of 9.3 is much lower than the median Industry PER and the median Asia PER of around 21, the Directors consider the Adopted PER used adopted by the Valuer in determining the Valuation to be justifiable.

In respect of the Adjusted Net Profit, it has been derived based on (i) historical financial information of Shenzhen Taoaoto from 1 March 2012 to 31 August 2012 and (ii) projection of net profit of Shenzhen Taoaoto from 1 September 2012 to 28 February 2013. Revenue projection of Shenzhen Taoaoto (the “ Revenue Forecast ”) is a major component included in net profit projection of Shenzhen Taoaoto which is determined with reference to the existing business model of Shenzhen Taoaoto and its proposed business development strategies as set out in the section headed “Information on the Target Group”.

The Revenue Forecast has been determined by management of Shenzhen Taoaoto with reference to (i) existing franchise agreements; (ii) the number of projected franchise agreements; (iii) the historical airport passenger traffic growth rate in major first tier and second tier cities in the PRC; (iv) the level of competition for similar air ticketing business in such cities; and (v) business plan of Shenzhen Taoaoto as set out in the section headed “Information on the Target Group”. Shenzhen Taoaoto intends to expand its business through franchise network expansion scheme to major cities in the PRC, initially focuses at the first-tier cities, such as Beijing, Shanghai and Tianjin. The Directors have (i) reviewed the business plan, financial information, existing franchise agreements of Shenzhen Taoaoto and the Revenue Forecast; (ii) discussed and enquired the Valuer concerning the assumptions of the Revenue Forecast; (iii) reviewed the operational and market information of Shenzhen Taoaoto; and (iv) discussed with management of Shenzhen Taoaoto regarding its status of negotiation with potential franchisees. Based on the foregoing, the Directors consider the assumptions for the Revenue Forecast to be fair and reasonable.

In view of the above and after taking into account (i) the Valuer’s work performed, factors considered and bases and assumptions adopted by Valuer in arriving at the Valuation (details are set out in the paragraph headed “Business Valuation” of the Valuation Report in

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LETTER FROM THE BOARD

Appendix VI of this circular); (ii) the Valuation was determined using generally accepted valuation approaches in accordance with the professional standard governing valuation; (iii) the personnel carrying out the valuation possess relevant qualification and expertise; (iv) future prospect and its income producing capability of Shenzhen Taoaoto according to its management after taking into account of its proposed business strategies as set out in the section headed “Information on the Target Group”; (v) historical business performance of Shenzhen Taoaoto; and (vi) due and careful enquiry made by the Directors regarding the bases and assumptions used in the Valuation with the Valuer, the Directors consider that the assumptions of the Valuation to be fair and reasonable.

In assessing the fair and reasonableness of the profits projection prepared by the management for the 12 months period during 1 March 2012 to 28 February 2013, the financial adviser to the Company has (i) reviewed the historical financial information of Shenzhen Taoaoto for the period from 1 March 2012 to 31 August 2012; (ii) reviewed the schedule of revenue projection of Shenzhen Taoaoto from 1 September 2012 to 28 February 2013 in connection with projected revenue of signed contracts, contracts under negotiation and estimated new contracts; (iii) discussed and enquired the management on contract signing status and bases of estimating contract amount for estimated new contracts for deriving projected revenue; (iv) discussed and enquired the management on the basis in identifying targeted cities for business expansion of Shenzhen Taoaoto. The management has identified targeted cities with reference to air passenger traffic growth in the PRC in major first tier and second tier cities and level of competition of air ticketing business in those cities; (v) reviewed the schedule of profits projection of Shenzhen Taoaoto; (vi) discussed and enquired with the management for the bases and assumptions adopted in preparing the profits projection of Shenzhen Taoaoto; (vii) reviewed sample of signed contract; and (viii) discussed with management of the business development, operations, affairs and future prospects of Shenzhen Taoaoto. In view of the above, the financial adviser to the Company considers the profits projection of Shenzhen Taoaoto to be fair and reasonable.

According to the Valuation Report, market value of 55% equity interest in Shenzhen Taoaoto is approximately RMB102.3 million (equivalent to approximately HK$124.8 million) as at 31 August 2012. The Consideration represents a discount of approximately 11.9% to the market value of 55% equity interest in Shenzhen Taoaoto.

Given that (i) the valuation approach adopted in the Valuation is a commonly adopted and well recognized methodology in business valuation which indicates the market value of the Target Group; (ii) major bases and assumptions made in connection with the Valuation are fair and reasonable; and (iii) the Consideration represents a discount to the market value of 55% equity interest in Shenzhen Taoaoto according to the Valuation, the Directors consider the Consideration to be fair and reasonable and in the interest of the Shareholders as a whole.

The Valuation Report is set out in Appendix IV to this circular. The letter from Fortune Financial Capital Limited, financial adviser to the Company, on the Valuation Report is set out in Appendix V to this circular. The letter from Elite Partners CPA Limited, reporting accountant of the Company, on the Valuation Report is set out in Appendix VI to this circular.

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LETTER FROM THE BOARD

Conditions precedent

The completion of the SP Agreement is subject to the following conditions precedent:

• (a) the Company being reasonably satisfied with the results of the due diligence review of the assets, liabilities, operations and affairs of the Target Group;

• (b) all necessary consents and approvals required to be obtained on the part of the Vendor, the Target and the Company in respect of the SP Agreement and the transactions contemplated thereby having been obtained;

• (c) all necessary waiver, consent, approval, licence, authorisation, permission, order and exemption (if required) from the relevant governmental or regulatory authorities or other third parties which are necessary in connection with the SP Agreement and the transactions contemplated thereby having been obtained;

• (d) the passing by the shareholders of the Company at the EGM of an ordinary resolution to approve the SP Agreement and the transactions contemplated thereunder including but not limited to the issue of the Convertible Bonds and issue of the Conversion Shares upon conversion of the Convertible Bonds (if and to such extent required under the GEM Listing Rules);

• (e) the obtaining of a PRC legal opinion (in form and substance satisfactory to the Company) in relation to the transactions contemplated under the SP Agreement;

• (f) the warranties by the Vendor set out in the SP Agreement remaining true and accurate in all respects; and

• (g) the Listing Committee of the Stock Exchange granting listing of and permission to deal in the Conversion Shares.

If the above conditions are not satisfied (or as the case may be, waived by the Company in respect of (a), (e) and (f) only) on or before 5:00 p.m. on 30 June 2013, or such later date as the Vendor and the Company may agree, the SP Agreement shall cease and determine and thereafter neither party shall have any obligations and liabilities towards each other hereunder save for any antecedent breaches of the terms hereof. Although the Company is entitled to waive the conditions (a), (e) and (f) above, the Company has no intention of waiving the same and will not do so which would adversely affect the interest of the Company.

As at the Latest Practicable Date, the Directors have conducted appropriate due diligence work and assessments on the Target Group which include:

• engaging legal advisers to conduct legal due diligence on each member of the Target Group;

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LETTER FROM THE BOARD

• engaging an independent valuer to prepare the Valuation Report. The Directors have reviewed the bases and assumptions adopted in the Valuation Report and consider them to be fair and reasonable. The Directors have also assessed the independence and qualifications of the valuer and are satisfied that the valuer is an Independent Third Party and possesses the necessary qualifications to carry out the valuation;

• engaging qualified accountants to conduct an audit on the Target Group’s financial position;

• engaging a financial adviser to advise the Company on the Acquisition;

• reviewing all material contracts entered into by the Target Group;

• researching on the air travel and ticketing market in the PRC and are of the view that the prospects of the same are promising;

• reviewing the business plan and business model of the Target Group including the revenue source, target customers, costs element, strengths and weaknesses;

• conducting site visits on the Target Group’s office in the PRC and meeting and discussing with the key personnel responsible of the Target Group’s management and operation and understanding their views on the affairs and prospects of the Target Group;

• reviewing the financial projections for the Target Group’s business and discussing the same with the reporting accountant and financial adviser.

As at the Latest Practicable Date, the aforesaid due diligence exercises have not revealed any significant issues which will materially and adversely affect the operations or financial conditions of the Target Group.

Completion

Completion shall take place on the third Business Day after the day on which all the conditions precedent of the SP Agreement are satisfied (or the case may be, waived by the Company), or such other date as the Vendor and the Company may agree in writing.

After Completion, the Target will become a wholly owned subsidiary of the Company.

Shareholders Agreement

Upon Completion, the Vendor shall procure the Target and all other shareholders of the Vanuatu Subsidiary to enter into a shareholders agreement (“Shareholders Agreement”) in the agreed form to regulate the respective rights among the Vanuatu Subsidiary’s shareholders. Pursuant to the Shareholders Agreement, the board of directors of the Vanuatu Subsidiary shall consist of 3 directors, of which 2 directors shall be nominated by the Target

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LETTER FROM THE BOARD

and 1 director shall be nominated by Cheerful Holdings Corporation. The quorum for the board meeting shall be any 2 directors. The Company shall procure the Target to nominate the Company’s representatives as directors of the Vanuatu Subsidiary.

Convertible Bonds

The principal terms of the Convertible Bonds are as follows:

Issuer

The Company

Principal amount

HK$85 million

Interest

The Convertible Bonds do not bear any interest.

Maturity

On the 3rd anniversary of the date of issue of the Convertible Bonds.

Conversion price

The conversion price is HK$0.175 per Share, subject to adjustments arising from share consolidation, share subdivision and capitalisation issue as provided in the terms of the Convertible Bonds.

The conversion price represents:

• (a) a discount of approximately 10.26% to the closing price of HK$0.195 per Share as quoted on the Stock Exchange on 21 November 2012, being the date of the SP Agreement;

• (b) a discount of approximately 15.38% to the average closing price of approximately HK$0.2068 per Share as quoted on the Stock Exchange for the 5 consecutive trading days immediately prior to the date of the SP Agreement;

• (c) a premium of approximately 7.36% to the closing price of HK$0.163 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The conversion price was determined after arm’s length negotiations between the Company and the Vendor with reference to, among other things, the recent trend of the Share price performance and the prevailing market price of the Shares.

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LETTER FROM THE BOARD

Conversion

Provided that any conversion of the Convertible Bonds (i) does not trigger a mandatory offer obligation under Rule 26 of the Takeovers Code on the part of the holder of the Convertible Bonds and parties acting in concert with it (as defined under the Takeovers Code) and (ii) does not result in the Company’s non-compliance with the minimum public shareholding requirement under Rule 11.23 or other similar provisions of the GEM Listing Rules, each holder of the Convertible Bonds has the right to convert the whole or part of the outstanding principal amount of the Convertible Bonds (in the amount of HK$100,000 or integral multiples thereof) on any business day after the date of issuance of the Convertible Bonds up to the maturity date.

Ranking of Conversion Shares

The Conversion Shares will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of such Shares.

Transferability

The Convertible Bonds are freely transferable in denominations of the principal amount of HK$100,000 subject to prior notification to the Company, provided that any transfer to a connected person of the Company shall be subject to the consent of the Company and compliance with all requirements of the GEM Listing Rules and/or the Stock Exchange.

Redemption

The Company may redeem the Convertible Bonds at 100% of the principal outstanding amount at any time from the date of issue to the maturity date. Any Convertible Bonds outstanding on the maturity date shall be redeemed by the Company at 100% of the outstanding principal amount.

Listing

No application will be made for the listing of the Convertible Bonds.

Application will be made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Conversion Shares which may fall to be issued upon conversion of the Convertible Bonds.

EFFECT ON THE SHAREHOLDING STRUCTURE

The maximum of 485,714,285 Conversion Shares to be issued upon full conversion of the Convertible Bonds represent approximately:

• (a) 75.90% of the existing issued share capital of the Company of 639,938,145 shares; and

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LETTER FROM THE BOARD

• (b) 43.15% of the issued share capital of the Company as enlarged by the issue of the Conversion Shares upon full conversion of the Convertible Bonds.

The following table sets out the effects of the Conversion Shares on the shareholding structure of the Company based on (i) the issued share capital and shareholding structure of the Company as at the Latest Practicable Date and (ii) assuming conversion in full of the Convertible Bonds into Conversion Shares at the conversion price of HK$0.175 per Share and (iii) assuming conversion of the Convertible Bonds into Conversion Shares at the conversion price of HK$0.175 per Share subject to the conversion restrictions, assuming that no further issue of new Shares after the Latest Practicable Date:

Shareholders Ip Ho Ming (note 1) Vendor Public shareholders Total	As at the Latest Practicable Date No. of Shares % 10,000 0.00 0 0.00 639,928,145 100.00 639,938,145 100.00	Immediately after issue and conversion of all Convertible Bonds at the conversion price of HK$0.175 per Share (note 2) No. of Shares % 10,000 0.00 485,714,285 43.15 639,928,145 56.85 1,125,652,430 100.00	Immediately after issue and conversion of the Convertible Bonds at the conversion price of HK$0.175 per Share subject to the conversion restrictions No. of Shares % 10,000 0.00 272,955,072 29.90 639,928,145 70.10 912,893,217 100.00	Immediately after issue and conversion of the Convertible Bonds at the conversion price of HK$0.175 per Share subject to the conversion restrictions No. of Shares % 10,000 0.00 272,955,072 29.90 639,928,145 70.10 912,893,217 100.00
				100.00

1. Mr Ip Ho Ming is a Director as at the Latest Practicable Date.

2. This column is hypothetical and for illustrative purpose only as the conversion of the Convertible Bonds is subject to the conversion restrictions set out under section “Convertible Bonds” above.

There will not be any change of control of the Company resulting from the completion of the Acquisition or the issuance of the Conversion Shares.

INFORMATION ON THE TARGET GROUP

The Target

The Target is an investment holding company incorporated in the Republic of Vanuatu and is wholly owned by the Vendor. The Target has no business activity other than the holding of 55% equity interest in the Vanuatu Subsidiary.

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LETTER FROM THE BOARD

The Vanuatu Subsidiary

The Vanuatu Subsidiary an investment holding company incorporated in the Republic of Vanuatu and is owned as to 55% by the Target, 35% by Cheerful Holdings Corporation and 10% by Racer Inc. Cheerful Holdings Corporation is wholly owned by Mr Zhao Tuanjie. Racer Inc. and its ultimate beneficial owner are Independent Third Parties.

The Vanuatu Subsidiary has no business activity other than the holding of 100% equity interest in the HK Subsidiary.

The HK Subsidiary

The HK Subsidiary is a company incorporated in Hong Kong and is wholly owned by the Vanuatu Subsidiary. The HK Subsidiary has no business activity other than the holding of 100% equity interest in Shenzhen Taoaoto.

Shenzhen Taoaoto

Shenzhen Taoaoto is a company incorporated in the PRC with limited liability and is wholly owned by the HK Subsidiary. Shenzhen Taoaoto is principally engaged in the sale of air tickets, hotel reservations and travel products online in the PRC.

According to the accountants’s report on the Target Group as set out in Appendix II to this circular, the audited combined loss before and after taxation for the period from 5 February 2010 (date of incorporation) to 31 December 2010 were both approximately HK$2,000. The audited combined loss before and after taxation for the year ended 31 December 2011 were both approximately HK$352,000. The audited combined profit before and after taxation for the eight months ended 31 August 2012 were approximately HK$13.2 million and HK$10.0 million respectively. The audited combined net assets value of the Target Group as at 31 August 2012 was approximately HK$10.8 million.

Principal business activities and business model

The Target Group principally engages in the sale of air tickets, hotel accommodations and other travel related services through Shenzhen Taoaoto as its principal operating company in Shenzhen, PRC.

Products and services

The principal products and services of the Target Group are air tickets and hotel accommodations for business and leisure travellers. Customers can book their air tickets and hotels through the Target Group’s online platform www.taotaotong.com or telephone hotline system 24 hours a day. Customers may also attend at the Target Group’s office in Shenzhen to order their products and services.

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Online platform

Customers search and confirm their desired flights and hotel accommodations through the Target Group’s website www.taotaotong.com. Customers then make payment to the Target Group’s designated bank accounts. Customers may also choose to pay for the hotel upon check-in. After verification of payments, the Target Group will send the e-tickets to the customers by email.

Telephone hotline

Customers enquire and confirm their flights and hotel accommodations with the staff of the Target Group through the telephone hotline. Customers then make payment to the Target Group’s designated bank accounts. Customers may also choose to pay for the hotel upon check-in. After verification of payments, the Target Group will send the e-tickets to the customers by email.

Shenzhen office

Customers visit the Target Group’s office in Shenzhen to order their flights and hotel accommodations. Customers then make payment direct to the Target Group and confirmation of flights and hotel will be given to the customers.

Franchise Scheme

The Target Group has created a franchise scheme to invite potential agents to join the Target Group’s scheme and become its franchisee upon payment of an upfront joining fee to the Target Group. Through the Target Group’s marketing team and marketing activities such as outdoor and media advertising, exhibitions and conventions organized at different regions of the PRC, the Target Group introduces the franchise scheme to the public and attracts interested agents to join the scheme. The franchisees have their own customer network and deal with their customers directly. Customers enquire with the franchisees for air ticket and hotel information. The franchisees then make use of the Target Group’s online or telephone hotline platform to obtain the product information and relate the same to their customers. Customers confirm their order with the franchisees and make payment to the franchisees who in turn confirm the order through the Target Group’s platforms and make payment to the Target Group’s designated bank accounts. Upon receipt of payment from franchisees, the Target Group sends the e-tickets direct to the customers. The franchisee is entitled to commissions from the sales through the Target Group’s platform. The Target Group believes that the franchise scheme will enable the Target Group to expand its sales force quickly and effectively without incurring substantial costs. As at 31 December 2012, the Target Group had 36 franchisees situated in major cities all over the PRC including Shenzhen, Guangzhou, Beijing, Shanghai, Tianjin, Changsha, Wuhan, Chengdu, Chongqing, Xiamen, Fuzhou, Xian, Haikou, Qingdao and Dalian. The franchisees consisted of individual and corporate entities. Most of the franchisees also engaged in other business activities such as travel related business, investment and trading.

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For the eight months ended 31 August 2012, revenue from the joining fees of the franchise scheme contributed over 99% of the total revenue to the Target Group. The revenue from commissions through the online platform, telephone hotline and Shenzhen office accounted for less than 1% of the total revenue.

Suppliers

The Target Group obtains the supply of air tickets from airline companies through China Air Transport Association (“CATA”) or through other CATA agencies. Shenzhen Taoaoto is a member of CATA. It has obtained the China Civil Air Transport Sales Agency Services Certificate for Category 2 Passenger transport and is entitled to sell air tickets for domestic flights in the PRC. Currently the Target Group has entered into cooperation agreements with four airline companies from Guangdong, Sichuan, Yunnan and Hainan and two CATA agencies in Shenzhen for the right to sell air tickets available from these suppliers. All the cooperation agreements are non-exclusive and are for a term of one to two years. The Target Group will continue to broaden its alliance with other airlines and agencies to strengthen its competitiveness.

The Target Group obtains hotel accommodations either directly with the hotels or through other hotel agencies. In order to provide more competitive rates for customers, the Target Group has entered into strategic agreements with over 100 hotels and hotel agencies in most of the first and second tier cities in the PRC including Shenzhen, Shanghai, Beijing, Guangzhou, Tianjin, Wuhan, Xian and Changsha offering special discounts to the Target Group. All the strategic agreements are non-exclusive and are for a term of one year. The Target Group will continue to broaden its alliance with other hotels in order to strengthen its competitiveness.

Revenue and costs

The major revenue of the Target Group comes from (i) the commissions paid by airlines from the sales of air tickets, (ii) commissions paid by hotels from the sales of hotel accommodations and (iii) the joining fees paid by franchisees.

The commissions from air ticket sales are recognized upon confirmation and payment by the customers of the transaction. The commissions receivable by the Target Group will usually be settled one day after the transaction. The revenue from air tickets commissions is largely determined by the volume of sales and the rate of commissions. The rates of commissions from different airlines vary. Generally the airlines will offer better rates for agencies with larger volume of sales.

The commissions from hotel accommodation sales are recognized upon confirmation and payment by the customers of the transaction. The Target Group adopts a credit policy of one month for settlement of commissions from hotel accommodation sales. The revenue from hotel commissions is linked to the volume of sales and the rate of commissions.

The joining fees from franchisees are payable within 6 months after signing of the franchise agreement. The joining fees comprise of a one-off admission fee and the annual service fees for using the Target Group’s online platform. The one-off admission fees are

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recognized upon signing of the franchise agreement. The annual service fees are recognized annually. The revenue from franchise joining fees will depend on the number of franchisees joining the Target Group’s franchise scheme.

Upon receipt of the payments from customers for air tickets, the Target Group will pay to the supplier on the next day after the transaction. For hotel accommodation, the Target Group will pay the relevant hotels on a monthly basis. For commissions payable to franchisees, the Target Group will settle on a monthly basis.

The major components of the Target Group’s operating costs being staff costs, commissions to franchise agents and office rental. The Target Group employs a majority of its staff in maintaining the 24 hours telephone hotline system. The commissions payable to franchisees will be directly proportional to the volume of sales through such franchisees.

Business plan and strategies

By the combination of the online platform and the telephone hotline system, the Target Group aims to create an efficient and comprehensive e-commerce network for suppliers, agents, franchisees and customers for air ticketing, hotel bookings and other travel services.

In view of the importance and benefits of maintaining a comprehensive integrated system of the Target Group for handling great amount of data from the online platform and telephone hotline system for handling the information flow among the customers, agents, franchisees and the suppliers, the Target Group will continue to review, optimize and upgrade its IT infrastructure for strengthening and enhancing its e-commerce capability. In order to enhance the transaction efficiency and stability of the e-commerce network of the Target Group, servers will be established in major cities in the PRC. Furthermore, having considered the growing popularity of internet access through wireless devices, such as smartphones and tablets, the Target Group will conduct research and development in introducing booking applications and platform through wireless devices. In addition, the Target Group will also introduce other secured online payment means for promoting customers confidence in conducting online transactions through the Target Group’s e-commerce network.

The Target Group’s franchise scheme attracts keen agents to join the Target Group’s sales force and provides a major thrust to the Target Group’s expansion in the industry. According to the business plan of the Target Group, in order to build up a business network of the Target Group at a relatively fast pace and to better promote its market recognition and brand awareness, the Target Group will pursue its business expansion through its franchise scheme. Management of the Target Group considers that leveraging on the local knowledge and network of the franchisees, it will enable the Target Group quickly establishing its customer base. However, due to the sharing of commissions with franchisees under the franchise scheme, the profit margin enjoyed by the Target Group will inevitably be further reduced. The Target Group considers that the strong growth in customer base provided by the franchise scheme will compensate for the reduced profit margin. The Target Group will rely on its large customer base to provide a diverse and stable source of commission income notwithstanding the reduced profit margin as a result of the sharing of commission under the franchise scheme.

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The number of franchisees of the Target Group has increased from 19 as at 31 August 2012 to 36 as at 31 December 2012 and the resulting revenue from joining fees of franchisees has increased by approximately 69% from August to December 2012. After analyzing passenger traffic among airports in the PRC, in 2013, the Target Group will continue to extend further its business penetration through franchise scheme primarily in first-tier cities such as Beijing, Shanghai and Tianjin in the PRC. First tier cities have relatively higher per capita income and higher airport passenger traffic for capturing prospective business potential in air ticket and travel industry. After having established its market presence in first-tier cities in the PRC, given the high airport passenger traffic in these cities, it is expected that the commission income of the Target Group from air ticket and hotel accommodation sales will increase substantially and become a significant recurring revenue source of the Target Group. In order to maintain the growth momentum of the Target Group, after gaining foothold in first tier cities, the Target Group will further expand its business penetration in other cities in the PRC which recorded relatively higher growth rate in terms of airport passenger traffic, such as Chongqing, Xiamen, Wuhan, Urumqi and Zhengzhou.

According to its business plan, the Target Group expects to have 79 and 102 franchisees by the end of 2013 and 2014 respectively. Initially the Target Group will rely heavily on the one-off joining fees of the franchise scheme. The revenue from the joining fees of franchisees will plateau after 2013. On the other hand, given the established vast customer base built upon the franchise scheme, the Target Group expects that recurring commission income will increase substantially in 2013 and become the major source of its revenue after 2014.

In establishing the franchise network, the Target Group will conduct marketing activities such as outdoor and media advertising, exhibitions and conventions organized at target cities of the PRC to raise market awareness generally, to introduce the franchise scheme to the public and attract interested agents to join the scheme.

Based on the Target Group’s strong background in air ticketing services, the Target Group will continue to expand its services in hotel bookings and into other new areas of services such as holiday packages, corporate customers and international travels. The Target Group aims to become one of the leaders in providing comprehensive travel services in the PRC.

In order to further strengthen its competitiveness, the Target Group will continue to expand its supplier network for both air tickets and hotel accommodation. Currently the Target Group has entered into cooperation agreements with four medium size airline companies for the supply of air rickets. With the Target Group’s track record of cooperation with these medium size airlines, the Target aims to expand its cooperation with large size leading airlines. The Target Group is currently negotiating with two leading airlines companies based in Beijing and Shanghai for the supply of air tickets. In respect of cooperation with other CATA agencies, the Target Group is currently negotiating with two well-known national agencies for cooperation. It is expected that cooperation with these large scale airlines and agencies will enable the Target Group to provide more diverse choice of products at competitive pricing. In respect of expansion of hotel accommodations suppliers network, the Target Group will focus on expansion of cooperation with 4-star

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hotels located in first tier cities which is in line with the Target Group’s plan to develop its customer base in such cities with higher per capita income and higher airport passenger traffic.

The Target Group has introduced a membership program aiming to promote its business and enhance loyalty of its customers. Under the membership program, customers are invited to join as members upon paying an upfront fee. In return the members will be entitled to enjoy free air tickets, hotel accommodations and other privileges prescribed by the Target Group.

As part of the future expansion plan of the Target Group, it will also consider any suitable targets for acquisitions. Should suitable opportunities arise, through such potential acquisition, the Target Group may benefit from synergies with the potential target company. As at the Latest Practicable Date, it has not yet identified any potential targets for acquisition nor it had drawn up any concrete plansfor such acquisition.

It is intended that the current key management of the Target Group will stay on after Completion. The key personnel of the Target Group are:

Mr Zou Xing Jun (鄒興軍), aged 38, supervisor and head of technical department of Shenzhen Taoaoto. Mr Zou is responsible for overseeing Shenzhen Taoaoto’s computer network system connecting to those of the airline companies and CATA for data exchange which makes airlines information available online through the Shenzhen Taoaoto’s website www.taotaotong.com. Mr Zou has over 16 years of experience working in airline companies in the PRC. Prior to joining the Target Group, Mr Zou was a director of an airline company in the PRC.

Ms Wang Ying (王螢), aged 34, director and administration manager of Shenzhen Taoaoto. Ms Wang is responsible for administration of the Company including human resource management and company secretarial duties. Ms Wang has over 12 years’ experience in administration and human resources management.

Mr Xiong Zi Wen (熊梓文), aged 39, head of marketing department of Shenzhen Taoaoto. Mr Xiong is responsible for business development of the Target Group including sourcing agents to join the Target Group’s franchise scheme and promoting the membership program. Mr Xiong has over 12 years’ experience in marketing. Mr Peng Shi Quan (彭士權), aged 32, manager of technical department of Shenzhen Taoaoto. Mr Peng is responsible for monitoring online transactions of ticketing, synchronizing transactions with the finance department for settlement and enhancing the system according to the requirements of the marketing department. Mr Peng has over 3 year experience as software engineer and project manager.

INDUSTRY OVERVIEW AND COMPETITION

Despite the downturn of the global airline industry, air travel is booming in China. In 2012, China’s domestic aviation passenger market becomes the second largest in the world. In 2011, total number of passengers transported by China’s civil aviation reached 293

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million, about of which 21 million were travelled by international airlines. The total number of passengers transported by China’s civil aviation in 2011 was 9.5% more than that of 268 million in 2010. With the increasing demand of air tickets, online air ticketing will become a commonplace due to its convenience.

Other than several major market leaders such as NASDAQ listed Ctrip.com International Ltd. and eLong, Inc., the majority of the air ticketing agents in the PRC consist of small to medium size enterprises. The Target Group competes with these small to medium size air ticketing agents. The Target Group considers that it has the following competitive strengths:

• (i) the use of an advanced online platform and telephone hotline system to create a comprehensive e-commerce network;

• (ii) experienced management;

• (iii) rapid expansion of sales force by way of the franchise scheme;

• (iv) membership program to boost sales and enhance customer loyalty.

REGULATORY OVERVIEW

The Target Group’s operations are entirely in the PRC. The following is a brief overview of the major PRC laws, rules and regulations relevant to the Target Group’s business:

• Under the Measures for Civil Air Transport Sales Agency Qualification of the PRC（中國民用航空運輸銷售代理資格認可辦法）(promulgated in 2006 and amended in 2008), any enterprise engaging in air transport sales agency activities is required to obtained the certificate of qualification from CATA. There are two categories of sales agency qualification: Category 1 qualification refers carrying on civil air transport sales agency in international flights and/or Hong Kong, Macau and Taiwan; Category 2 qualification refers carrying on civil air transport sales agency in domestic flights other than Hong Kong, Macau and Taiwan.

• The Supplemental Regulation on Internet Sales Activities to the Civil Air Transport Sales Agency Qualification of the PRC（《中國民用航空運輸銷售代理資格 認可辦法》關於互聯網銷售活動的補充規定）provides for additional qualifications for enterprises which has obtained the certificate of qualification from CATA and carry on air transport sales agency activities using the internet or e-commerce network.

• The Labor Contract Law of the PRC（中華人民共和國勞動合同法）(enacted in 2007 and implemented since January 1, 2008) is applicable to enterprises, individual economic organizations, private non-enterprise units and other organizations within the PRC establishing labour relations with workers, making, performing, changing, discharging or terminating labor contracts.

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• Under the Law on Social Insurance of the PRC （中華人民共和國社會保險法）, (effective as of 1 July 2011), the State shall establish basic pension insurance, basic medical insurance, occupational injury insurance, unemployment insurance, maternity insurance and other social insurance system. According to the Law of Social Insurance of the PRC, employers and employees shall pay social insurance contributions in accordance with the law.

• According to the Enterprise Profits Tax of the PRC（中華人民共和國企業所得稅法） which came into effect on 1 January 2008, enterprises incorporated in the PRC shall be subject to the rate of 25% on their income from 1 January 2008 onwards.

RISKS FACTORS IN RELATION TO THE TARGET GROUP’S BUSINESS AND THE ACQUISITION

The Target Group is a start-up business with relatively short track record and there is no assurance that its business will be successfully developed

The Target Group is a new start up and has relatively short track record of revenue generating. The business relationship of the Target Group with its customers is relatively short on average as it has only begun its business operations recently. In light of the short business relationships, there is no assurance that the customers will continue to place orders with the Target Group or that they will not turn to alternative suppliers. Should the Target Group fail to conduct business with its customers on the long term, its business operations and financial performance may be adversely affected.

Reliance on suppliers

Success of the Target Group depends on the range of travel products, namely air tickets and hotel accommodations it can offer to the customers. This is in turn dependent on the Target Group’s ability to source and be granted access to the travel products of its suppliers.

Generally, supply agreements entered by the Target Group with its travel products suppliers are non-exclusive. In the event that the Target Group is unable to maintain satisfactory relationships with its existing travel products suppliers, or if its travel products suppliers establish similar or more favorable relationships with competitors of the Target Group, operating results and business of the Target Group may be adversely affected. An insufficient or untimely supply of air tickets and hotel rooms by the Target Group will affect its ability to meet its customers’ needs, thus it may adversely affect profitability of the Target Group. Moreover, the Target Group’s position in the market may also be adversely affected.

Reliance on external systems and services

The Target Group is dependent on its information technology systems/networks and integration of its systems/networks with those of its travel products suppliers for conducting business. In the event that systems of the Target Group become outdated and cease to be compatible with the systems of its travel products suppliers, or if new technologies which

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the Target Group implements cannot successfully interface with its travel products suppliers in the intended manner or timescale, the delivery of services by the Target Group to its customers may be adversely affected.

Reliance on key management

The Target Group’s operation is dependent on the management, expertise and experience of its key management. If the Target Group is unable to retain these key personnel and key employees or if the Target Group is unable to find replacements of key personnel and key employees with comparable experience and expertise, the business operation of the Target Group may be adversely affected.

Investment in new business sector for the Group

The Acquisition constitutes an investment in a new business sector, being travel services and air ticketing business in PRC, in which the Group has no previous involvement. The new business may pose significant challenges to the Company’s administrative, financial and operational resources and expose the Group to a risk profile which may be different from that of its existing business. Since the Company does not have significant experience in the new business, the operation and future expansion will rely on the expertise of the existing staff of the Target Group.

Competition in the PRC air ticketing industry

The air ticketing industry in which the Target Group operates is subject to rapid change and competition from other air ticketing agents providing similar products. Some of the competitors may have longer operating histories, larger customer bases, larger teams of professional staff, greater brand recognition and greater financial, technical, marketing and other resources than the Target Group. As such, if the Target Group is unable to compete effectively against the existing and potential competitors by maintaining the Target Group’s competitive advantages or to timely respond to the competitors’ pricing strategies, technological advances, strategic partnerships and other initiatives, the Target Group’s results of operations may be adversely affected.

In addition, any increase in competition may adversely affect the Target Group’s market share. Any of these events could have a material adverse effect on the Target Group’s financial condition, results of operations and future prospects.

The Target Group’s results may fluctuate from period to period due to seasonal factors and other factors

The air ticketing and travel industry business is inherently seasonal during the year, whereby sales volume of travel products (air tickets and hotel accommodation) will increase during holiday periods such as Chinese New Year Holiday in February, Labor Day in May and National Day in October each year, and decrease during off-peak times and prices of such travel products are subject to fluctuation between peak seasons and low seasons. Furthermore, travel activities are also subject to various factors such as occurrence of economic downturns, health epidemics, social and political unrests, terrorist activities,

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travel-related accidents and bad weather conditions. Accordingly, the Target Group’s revenue and profitability may vary from period to period due to seasonality of the air ticketing and travel industry and other factors affecting the demand of travel products as stated above. Based on the foregoing, results of operations of the Target Group may be subject to fluctuations from period to period and a comparison of different periods may not be meaningful.

Reliance on the PRC market for the business and operations of the Target Group

PRC is the major market of the Target Group, therefore, the demand for the Target Group’s products is sensitive to the changes in the general economic conditions in the PRC. The Target Group’s results of operation are expected to continue to be dependent to a significant extent on the overall growth of the domestic market in the PRC. Should there be any significant adverse changes in the market conditions of the PRC, it may adversely affect profitability and performance of the Target Group.

In addition, given that the Target Group is operating in the PRC, it will be subject to the economic, political and legal environment of the PRC. The existence of unfavourable government policy in relation to the conduct of business in general or in areas specific to the Target Group’s business in the PRC or failure by the Target Group to comply with laws and regulations governing the Target Group’s business in the PRC and to obtain the necessary licences, approvals and authorizations from relevant PRC government authorities may adversely affect the Target Group’s intended development and future operation in the PRC.

REASONS FOR THE ACQUISITION

The principal activities of the Group are the provision of systems development including maintenance and installation as well as consulting service, provision of professional services including information technology engineering and technical support services and licensing of information management systems targeted at insurance intermediaries.

The Acquisition allows the Group to further expand its business lines by diversifying into the travel services and air ticketing industry in the PRC. With the increasing demand of air tickets, online air ticketing will become a commonplace due to its convenience. In view of the steady increase in domestic civil aviation passenger traffic and tourism expenditures in the PRC, the Company is of the view that the prospects of the Target Group will be promising. The Acquisition will enable the Company to tap into this market segment with encouraging growth potential. The Target Group has a profitable track record and is expected to provide an additional income stream for the Companyand will enhance the profitability of the Group.

As disclosed under the section “RISKS FACTORS IN RELATION TO THE TARGET GROUP’S BUSINESS AND THE ACQUISITION”, there are various risks associated with the Target Group’s business and the Acquisition. To cope with such risks, the Target Group has adopted strategies to build up a solid foundation for expansion such as the franchise scheme to boost sales force and the membership program to attract customers and enhance

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loyalty. The Target Group will continue to broaden its cooperation with airlines, hotels and other travel agencies in major cities to provide a wider range of products at competitive price to meet customers’ needs. The Target Group will also allocate sufficient resources to improve its computer system and online platform to ensure its compatibility and efficiency. In addition, the Target Group has entered into long term employment contract with the key management ranging from 2–4 years. The Target Group will also keep looking for suitable experienced staff to cope with the growing business of the Target Group. The Directors will closely monitor the management and performance of the Target Group and to take prompt and appropriate actions to cope with the new challenge. The Directors consider that the above strategies will help the Company and the Target Group to manage the afore-mentioned risks.

The Directors are of the view that the terms and conditions of the Acquisition are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

After Completion, each member of the Target Group will become a subsidiary of the Company.

FINANCIAL IMPACT OF THE ACQUISITION

Based on the pro forma financial information of the Enlarged Group set out in Appendix III to this circular and the bases and assumptions taken into account in preparing such pro forma financial information, the Group’s total assets and total liabilities would be increased by approximately HK$105.8 million and approximately HK$74.7 million respectively as a result of the Acquisition. The details of the financial effect of the Acquisition on the financial position of the Group together with the bases and assumptions taken into account in preparing the unaudited pro forma financial information are set out, for illustration purpose only, in Appendix III to this circular.

Upon Completion, the Target Group will become subsidiaries of the Company and results of the Target Group will be consolidated into the Enlarged Group’s results. According to the annual report of the Group for the year ended 31 March 2012, the Group recorded an audited consolidated loss attributable to owners of the Company of approximately HK$22.8 million for the year ended 31 March 2012. According to the accountants’ report of the Target Group as set out in Appendix II to this circular, the Target Group recorded an audited combined loss attributable to owners of the Target Company of approximately HK$194,000 for the year ended 31 December 2011 and turnaround to an audited combined profit attributable to owners of the Target Company of approximately HK$5.5 million for the eight months ended 31 August 2012. The Directors consider that the Acquisition will bring positive contribution to the earnings of the Enlarged Group but the quantification of such contribution will depend on the future performance of the Target Group.

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GEM LISTING RULES IMPLICATIONS

Based on the relevant percentage ratios calculations under the GEM Listing Rules, the Acquisition constitutes a major acquisition of the Company and therefore is subject to reporting, announcement and shareholder’s approval requirements under Chapter 19 of the GEM Listing Rules.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, no Shareholder has an interest in the SP Agreement which is materially different from the other Shareholders. Therefore no Shareholder is required to abstain from voting on the resolution to be proposed at the EGM.

THE EGM

A form of proxy for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the EGM to the office of the Company’s branch registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM in person should you so wish.

RECOMMENDATION

The Directors consider that the terms of the SP Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders should vote in favour of the relevant resolution to be proposed at the EGM to approve the SP Agreement.

Yours faithfully, On behalf of the Board Tai Shing International (Holdings) Limited Liu Bo Chairman

The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE-YEAR FINANCIAL INFORMATION

Financial information of the Group for the year ended 31 March 2010, the year 31 March 2011, the year ended 31 March 2012 and six months ended 30 September 2012 are disclosed in the annual reports of the Company for the year 2010, 2011 and 2012 and the interim report of 2012 respectively, which are published on both the GEM website (www.hkgem.com) and the website of the Company (www.equitynet.com.hk/8103/).

2. INDEBTEDNESS STATEMENT

Borrowings

At the close of business on 31 December 2012, being the latest practicable date for the purpose of preparing this statement of indebtedness prior to the printing of this circular, the Enlarged Group had total borrowings amounted to HK$39,947,000 comprising, (i) finance lease payment of approximately HK$2,719,000 were secured by motor vehicles held by the Enlarged Group; (ii) interest-bearing loans from bank of approximately HK$12,228,000 were secured by land and buildings owned by an independent third party; (iii) promissory notes of approximately HK$10,000,000 was unsecured and (iv) liability component of convertible bonds of approximately HK$15,000,000, which were unsecured, transferable and interest free.

Securities and guarantees

As at the close of business on 31 December 2012, the Enlarged Group did not obtain any banking facilities. As at the close of business on 31 December 2012, the Enlarged Group did not provide any corporate guarantees to banks.

Commitments

As at 31 December 2012, the Enlarged Group had operating lease commitments of approximately HK$586,000 in respect of the leases for certain of its office properties.

Contingent liabilities

As at 31 December 2012, the Enlarged Group had contingent liabilities as follows:

• (a) the Group’s bank deposits of approximately HK$1,678,000 were pledged to two banks for bank guarantees for issued to certain customers on the performance of contracts under systems development.

• (b) On 12th March 2012, a High court Action No.1861 of 2011 was commenced by Joint China Value Investment Fund Limited (the “Plaintiffs”) against the Company for a dishonoured cheque in the amount of HK$16,500,000 issued by the Company.

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FINANCIAL INFORMATION OF THE GROUP

• (c) On 19th April 2006, a High court Action No. 858 of 2006 was commenced by Chan Kar Kui, Wong Calvin Ting Chi, Chan Wai Phan, Chan Man Wan and Kwok King Chuen (the “Plaintiffs”) against the Company for specific performance of the agreement entered into between the Plaintiffs and the Company’s former director, To Cho Kei, on behalf of the Company, in around May/June 2000 to purchase from the Plaintiffs all their shareholdings in Epplication.Net Limited (“Epplication.Net”) at a consideration of HK$6,800,000, being twice of the actual amount that the Plaintiffs expended on Epplication. Net by way of transfer or allotment of the shares of the Company of the equivalent value, or alternatively, damages with interests and costs.

Disclaimer

Save as aforesaid and apart from intra-group liabilities, at the close of business on 31 December 2012, the Enlarged Group had no other outstanding mortgages, charges, debentures or other loan capital or bank overdrafts or loans or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, debt securities, guarantees or other material contingent liabilities. Save as aforesaid, the Directors confirm that there has been no material change to the indebtedness and contingent liabilities of the Group since 31 December 2012 and up to the Latest Practicable Date.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the existing cash and bank balances and other internal resources available and also the effect of the Acquisition, the Enlarged Group has sufficient working capital for its present requirements and for at least 12 months from the date of publication of this circular in the absence of unforeseen circumstances.

4. MATERIAL ADVERSE CHANGE

Save as disclosed in the Company’s interim results for 6 months ended 30 September 2012, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2012, being the date to which the latest published audited financial statements of the Group was made up.

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

Upon Completion, the Target Group will become subsidiaries of the Company and the financial information of the Target Group will be consolidated into the consolidated financial statements of the Group. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, net assets recorded by the Group as at 30 September 2012 was approximately HK$351.8 million, the unaudited pro forma net assets of the Enlarged Group will be approximately HK$383.0 million after Completion.

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APPENDIX I

In coming year, after Completion, the Enlarged Group will continue to develop its existing businesses. Business development of the Enlarged Group will continue to be monitored by the management of the Enlarged Group where periodic business performance review will be conducted. Based on the results of the business review, the Enlarged Group will allocate appropriate resources to different business segments of the Enlarged Group depending on the then business environment and performance of each segment with the view of improving its business performance.

Concurrently, the Enlarged Group will continue its business growth strategy in exploring suitable investment opportunities from time to time for diversifying and expanding the business scope of the Group for enhancing its earnings and maximizing its Shareholders’ value.

The Directors consider that the Acquisition will diversify the source of income and will result in an enlarged business portfolio of the Enlarge Group. Upon Completion, the Acquisition will enable the Enlarged Group to broaden its business offering by tapping into a new line of business in travel services and air ticketing industry in the PRC. With the steady increase of domestic civil aviation passenger traffic and tourism expenditures in the PRC, the Directors are optimistic about the prospect of travel services and air ticketing industry in the PRC and hence the demand for online air ticketing due to its convenience. In this connection, the Directors are of the view that the Acquisition will enhance the operation base and future income base of Enlarged Group in view of its promising future.

Furthermore, given the financial performance of the Target Group, the Directors expect that the Acquisition represents an opportunity for the Group to diversify from its existing business to a profitable business which will meet the Group’s business development objectives and bring immediate contributions to the Group for achieving improved return for the Enlarged Group.

In view of the foregoing, the Directors believe that the Acquisition is in the interest of the Company and the Shareholders as a whole.

– 28 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The following is the text of a report received from the reporting accountant, Elite Partners CPA Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this Circular.

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CAREA
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28 February 2013

The Broad of Directors Tai Shing International (Holdings) Limited 21/F Malahon Centre 10-12 Stanley Street Central Hong Kong

Dear Sirs,

We report on the financial information (the “Financial Information”) of Tirack Holdings Limited (the “Target Company”), and its subsidiaries, Yan Shan Asia Corporation (the “Vanuatu Subsidiary”), China Tong Lian Air Services Holdings Limited (the “HK Subsidiary) and 淘淘通航空服務有限公司 (Taoaoto Air Services Co. Ltd.) (formerly known as 深圳市淘淘通航空服務有限公司 (Shenzhen Taoaoto Air Services Co., Ltd.)) (“Shenzhen Taoaoto”) (hereafter collectively referred to as the “Target Group”) which comprises the combined statement of financial position of the Target Group as at 31 December 2010, 2011, and 31 August 2012, and the combined statement of comprehensive income, the combined statement of changes in equity and the combined statement of cash flows of the Target Group for the period from 5 February 2010 to 31 December 2010, the year ended 31 December 2011 and the eight months ended 31 August 2012 (the “Relevant Periods”) and a summary of significant accounting policies and other explanatory information together with the unaudited financial information of the Target Group including the combined statement of comprehensive income, the combined statement of cash flows and the combined statement of changes in equity for the eight months ended 31 August 2011 (the “Corresponding Financial Information”). This Financial Information has been prepared by the directors of the Target Company for inclusion in Appendix II to the circular issued by Tai Shing International (Holdings) Limited (the “Company”) dated 28 February 2013 (the “Circular”) in connection with the proposed acquisition of 100% equity interest in the Target Company by the Company.

The Target Company was incorporated in the Republic of Vanuatu (“Vanuatu”) on 14 August 2012 with limited liability. The Target Company is principally engaged in investment holding, it holds 55% equity interests in the Vanuatu Subsidiary. As at the date of this report, no statutory audited financial statements have been prepared by the Target Company since its incorporation.

– 29 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The Vanuatu Subsidiary is a company incorporated in Vanuatu on 14 August 2012 with limited liability. It is principally engaged in the investment holding, and holds 100% of the HK Subsidiary. As at the date of this report, no statutory audited financial statements have been prepared by the Vanuatu Subsidiary since its incorporation.

The HK Subsidiary is a company incorporated in Hong Kong on 30 September 2010 and its principal activity is investment holding. It holds 100% of Shenzhen Taoaoto. As at the date of this report, no statutory audited financial statements have been prepared by the HK Subsidiary since its incorporation.

Shenzhen Taoaoto is a company established in the People’s Republic of China (the “PRC”) with limited liability on 5 February 2010 and its principal activity is sale of air tickets, hotel reservations and travel products online in the PRC. The statutory financial statements of Shenzhen Taoaoto were prepared in accordance with the accounting principles and regulations applicable to enterprises established in the PRC. These statutory financial statements were audited by 深圳德源會計師事務所 in the PRC for the period from 5 February 2010 (date of incorporation) to 31 December 2010 and year ended 31 December 2011.

For the purpose of this report, the director of the Target Company has prepared the combined financial statements of the Target Group for the Relevant Periods, together with the notes thereto (the “Underlying Financial Statements”) in accordance with HKFRSs issued by the HKICPA. The Financial Information for the Relevant Periods and the 31 August 2011 Corresponding Financial Information are prepared based on the Underlying Financial Statements, with no adjustments made thereon and in accordance with the applicable disclosure provision of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on the Growth Enterprise Market on The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”).

Directors’ Responsibilities for the Financial Information

The director of the Company are responsible for the preparation that gives a true and fair view in accordance with HKFRSs issued by HKICPA, the requirements of the Hong Kong Companies Ordinance and the applicable disclosure provision of the GEM Listing Rules, and for such internal control as the director of the Company determined is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error. The director of the Company is also responsible for the contents of the Circular in which this report is included.

Reporting Accountant’s Responsibilities for the Financial Information

It is our responsibility to form an independent opinion on the Financial Information for the Relevant Periods based on our audit. We conducted our audit in accordance with Hong Kong Standards on Auditing and the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. For the Corresponding Financial Information, our responsibility is to express a conclusion on the financial information based on our review and to report our conclusion to you.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Opinion

In our opinion, for the purpose of this report, the Financial Information gives a true and fair view of the state of affairs of Target Company and of the Target Group as at 31 December 2010, 2011 and 31 August 2012 and of the results and cash flows of the Target Group for the Relevant Periods.

Comparative Financial Information

For the purpose of this report, we have reviewed the Corresponding Financial Information, for which the director of the Company is responsible, in accordance with Hong Kong Standards on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the Corresponding Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as test of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the Corresponding Financial Information.

On the basis of our review which does not constitute an audit, for the purpose of this report, nothing has come to our attention that causes us to believe that the same basis adopted in the Financial Information. Corresponding Financial Information is not prepared, in all material respects, in accordance with the HKFRSs.

– 31 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

A. FINANCIAL INFORMATION

Combined Statement of Comprehensive Income of the Target Group

Notes Turnover 4(a) Other income 4(b) Employee benefits expenses Administrative expenses Profit/(Loss) from operations 6 Finance costs Profit/(Loss) before tax Taxation 8 Profit/(Loss) for the period/year Attributable to: Owners of the Target Company Non-controlling interest Profit/(Loss) for the period/year Other comprehensive (expenses)/ income for the year Exchange difference on translation of the the financial statement of subsidiary in PRC Total comprehensive income/(expenses) for the period/year Attributable to: Owners of the Target Company Non-controlling interest Total comprehensive income/(expenses) for the period/year	Eight months ended 31 August 2012 2011 HK$ HK$ (unaudited) 17,809,458 − 3,947 5 (2,025,072) (90,600) (2,561,944) (24,738) 13,226,389 (115,333) − − 13,226,389 (115,333) (3,262,799) − 9,963,590 (115,333) 5,477,050 (63,433) 4,486,540 (51,900) 9,963,590 (115,333) (22,917) 40,573 9,940,673 (74,760) 5,464,446 (41,118) 4,476,227 (33,642) 9,940,673 (74,760)	Year ended 31 December 2011 HK$ − 85 (185,198) (167,347) (352,460) − (352,460) − (352,460) (193,854) (158,606) (352,460) 35,830 (316,630) (174,147) (142,483) (316,630)	Period from 5 February 2010 (date of incorporation) to 31 December 2010 HK$ − − − (2,275)
			(2,275) −
			(2,275) −
			(2,275)
			(1,251) (1,024)
			(2,275)
			42,000
			39,725
			21,849 17,876
			39,725

– 32 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Combined Statement of Financial Position of the Target Group

Notes ASSETS Non-current assets Plant and equipment 10 Current assets Account receivables 12 Deposits, prepayments and other receivables 13 Amount due from a director 14 Amount due from the ultimate shareholder 15 Cash and bank balances Total assets EQUITY Share capital 16 Exchange reserves Contributed surplus Retained earnings/(Accumulated losses) Total equity attributable to owners of the Target Company Non-controlling interest Total equity LIABILITIES Current liabilities Account payables 17 Accruals and other payables 18 Receipts in advance Provision Deferred income Tax payable Total equity and liabilities Net current assets Total assets less current liabilities Net assets	As at 31 August 2012 HK$ 176,992 22,710,259 623,157 1,712,211 816,828 44,537 25,906,992 26,083,984 8 30,203 625,395 5,281,945 5,937,551 4,863,306 10,800,857 6,838 1,483,149 1,350,126 1,159,688 8,029,039 3,254,287 15,283,127 26,083,984 10,623,865 10,800,857 10,800,857	As at 31 December 2011 2010 HK$ HK$ − − − − − 825 − − 851,677 1,175,636 8,517 353 860,194 1,176,814 860,194 1,176,814 8 8 42,807 23,100 625,395 625,395 (195,105) (1,251) 473,105 647,252 387,079 529,562 860,184 1,176,814 − − 10 − − − − − − − − − 10 − 860,194 1,176,814 860,184 1,176,814 860,184 1,176,814 860,184 1,176,814

– 33 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Statement of Financial Position of the Target Company

Notes ASSETS Non-current assets Interest in a subsidiary 11 Current assets Amount due from the ultimate shareholder Total assets EQUITY Share capital 16 Contributed surplus Accumulated losses Total equity LIABILITIES Current liabilities Accruals and other payables Total equity and liabilities Net current (liabilities)/ assets Total assets less current liabilities Net assets	As at 31 August 2012 HK$ 625,395 − 625,395 8 625,395 (6,500) 618,903 6,492 625,395 (6,492) 618,903 618,903	As at 31 December 2011 2010 HK$ HK$ 625,395 625,395 8 8 625,403 625,403 8 8 625,395 625,395 − − 625,403 625,403 − − 625,403 625,403 8 8 625,403 625,403 625,403 625,403	As at 31 December 2011 2010 HK$ HK$ 625,395 625,395 8 8 625,403 625,403 8 8 625,395 625,395 − − 625,403 625,403 − − 625,403 625,403 8 8 625,403 625,403 625,403 625,403
			8
			625,403
			8 625,395 −
			625,403
			−
			625,403
			8
			625,403
			625,403

– 34 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Combined Statement of Changes in Equity of the Target Group

At 5 February 2010 (date of incorporation) Total comprehensive income for the period At 31 December 2010 and 1 January 2011 Total comprehensive expenses for the year At 31 December 2011 and 1 January 2012 Total comprehensive income for the period At 31 August 2012 At 31 December 2010 and 1 January 2011 Total comprehensive expenses for the period At 31 August 2011 (unaudited)	Share capital HK$ 8 −	Contributed reserve HK$ 625,395 −	Exchange reserves (Accumulated losses)/ Retained earnings Non- controlling interest Total HK$ HK$ HK$ HK$ − − 511,686 1,137,089 23,100 (1,251) 17,876 39,725 23,100 (1,251) 529,562 1,176,814 19,707 (193,854) (142,483) (316,630) 42,807 (195,105) 387,079 860,184 (12,604) 5,477,050 4,476,227 9,940,673 30,203 5,281,945 4,863,306 10,800,857 23,100 (1,251) 529,562 1,176,814 22,315 (63,433) (33,642) (74,760) 45,415 (64,684) 495,920 1,102,054	Exchange reserves (Accumulated losses)/ Retained earnings Non- controlling interest Total HK$ HK$ HK$ HK$ − − 511,686 1,137,089 23,100 (1,251) 17,876 39,725 23,100 (1,251) 529,562 1,176,814 19,707 (193,854) (142,483) (316,630) 42,807 (195,105) 387,079 860,184 (12,604) 5,477,050 4,476,227 9,940,673 30,203 5,281,945 4,863,306 10,800,857 23,100 (1,251) 529,562 1,176,814 22,315 (63,433) (33,642) (74,760) 45,415 (64,684) 495,920 1,102,054	Exchange reserves (Accumulated losses)/ Retained earnings Non- controlling interest Total HK$ HK$ HK$ HK$ − − 511,686 1,137,089 23,100 (1,251) 17,876 39,725 23,100 (1,251) 529,562 1,176,814 19,707 (193,854) (142,483) (316,630) 42,807 (195,105) 387,079 860,184 (12,604) 5,477,050 4,476,227 9,940,673 30,203 5,281,945 4,863,306 10,800,857 23,100 (1,251) 529,562 1,176,814 22,315 (63,433) (33,642) (74,760) 45,415 (64,684) 495,920 1,102,054
	8 −	625,395 −	23,100 19,707
	8 −	625,395 −
	8	625,395	30,203	5,281,945	4,863,306
	8 −	625,395 −	23,100 22,315
	8	625,395	45,415

– 35 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Combined Statement of Cash Flows of the Target Group

Operating activities Profit/ (Loss) from operations Adjustments for: Bank interest income Depreciation of plant and equipment Provision Operating profit/(loss) before working capital changes Increase in account receivables (Increase)/Decrease in deposits, prepayments and other receivables Increase in amount due from a director Decrease in amount due from the ultimate shareholder Increase in account payables Increase in accruals and other payables Increase in deferred income Net cash inflow from operating activities Bank interest received Net cash generated from operating activities Investing activities Payment for the purchase of plant and equipment Net cash used in investing activities Financing activities Issuance of share Net cash generated from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period/ year Effect on foreign exchange rate changes Cash and cash equivalents at end of period/year Analysis of balances of cash and cash equivalents Cash and bank balances	Eight months ended 31 August 2012 2011 HK$ HK$ (unaudited) 13,226,389 (115,333) (37) (5) 23,917 − 1,162,722 − 14,412,991 (115,338) (22,769,666) − (624,787) 836 (1,716,690) − 37,994 123,730 6,856 − 2,840,677 − 8,050,042 − 237,417 9,228 37 5 237,454 9,233 (201,371) − (201,371) − − − − − 36,083 9,233 8,517 353 (63) 223 44,537 9,809 44,537 9,809	Year ended 31 December Period from 5 February 2010 (date of incorporation) to 31 December 2011 2010 HK$ HK$ (352,460) (2,275) (85) − − − − − (352,545) (2,275) − − 842 (803) − − 359,651 3,414 − − 9 − − − 7,957 336 85 − 8,042 336 − − − − − 8 − 8 8,042 344 352 − 123 9 8,517 353 8,517 353	Year ended 31 December Period from 5 February 2010 (date of incorporation) to 31 December 2011 2010 HK$ HK$ (352,460) (2,275) (85) − − − − − (352,545) (2,275) − − 842 (803) − − 359,651 3,414 − − 9 − − − 7,957 336 85 − 8,042 336 − − − − − 8 − 8 8,042 344 352 − 123 9 8,517 353 8,517 353
			(2,275) − (803) − 3,414 − − −
			336 −
			336
			−
			−
			8
			8
			344 − 9
			353
			353

– 36 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

B. NOTES TO THE FINANCIAL INFORMATION

1. CORPORATE INFORMATION OF THE TARGET GROUP

Tirack Holdings Corporation (the “Target Company”) was incorporated in the Republic of Vanuatu as a limited liability company on 14 August 2012. Its registered offices and the principal place of business are located at P.O. Box 157, Port Vila, Vanuatu (1st Floor, The Loft Complex, Lini Highway, Port Vila, Vanuatu), and Room 8-10, 3rd Floor, New Fast Ocean Centre, No. 9 Science Museum Road, Tsim Sha Tsui East, Kowloon, Hong Kong respectively. The Target Company is an investment holding company and the ultimate controlling party and beneficiary of the Target Company is Mr. Zhao Tuanjie (“Mr. Zhao”).

The Target Company and its subsidiaries (collectively the “Target Group”) are principally engaged in the sale of air tickets, hotel reservations and travel products online in the PRC.

Reorganisation

Mr. Zhao owned (i) 100% equity interest of the Target Company and its subsidiaries, Yan Shan Asia Corporation (the “Vanuatu Subsidiary”), China Tong Lian Air Services Holdings Limited (the “HK Subsidiary”); and (ii) 90% equity interest of 淘淘通航空服務有限公司 (Taoaoto Air Services Co. Ltd.) (formerly known as 深圳市淘淘通航空服務有限公司 (Shenzhen Taoaoto Air Services Co., Ltd.)) (“Shenzhen Taoaoto”) for the year and period ended 31 December 2011 and 2010.

Mr. Lin who is an independent third party, owned 10% of Shenzhen Taoaoto.

Pursuant to the reorganisation of the Target Group, Mr. Zhao and Mr. Lin disposed of the entire equity interest in Shenzhen Taoaoto to the HK Subsidiary of the Target Company which is a company 90% directly and indirectly owned by Mr. Zhao, the transfer of shares were taken place on 25th October 2012 (the “Reorganisation”).

2.1 BASIS OF PREPARATION

The Reorganisation is considered as a business combination under common control because the Target Company and Shenzhen Taoaoto are ultimately controlled by the same individual, Mr. Zhao both before and after completion of the Reorganisation. Accordingly, the Reorganisation will be accounted for using the principles of merger accounting.

For the purpose of this report, the Financial Information has been prepared to present the combined statement of financial position, the combined statement of comprehensive income, the combined statement of cash flows and combined statement of changes in equity include the results and cash flow of each combining entities from the earliest date presented or since the date when the combining entities first came under the common control, where this is a shorter period, as if the Target Company has always had interest in Shenzhen Taoaoto.

The preparation of Financial Information in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires management to exercise their judgments in the process of applying the accounting policies. The areas involving critical judgments and areas where assumptions and estimates are significant to the Financial Information, are disclosed in note 3 to the Financial Information.

The accounting policies set out below have been applied consistently to the Relevant Periods presented in the Financial Information.

2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance and the rules Governing the Listing of Securities on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited. The Financial Information has been prepared under the historical cost convention.

– 37 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

For the purpose of preparing and presenting Financial Information for the Relevant Periods, the Target Group has adopted all the applicable HKFRSs which are effective for the beginning of the Relevant Periods.

Standards and Interpretations is issued but not yet adopted

The Target Group has not early applied the following new and revised standards, amendments or interpretations that have been issued and are relevant to these financial statements but not yet effective.

HKFRSs (Amendments) Annual Improvements to HKFRSs 2009-2011Cycle[2] HKFRS 1 (Amendments) Government Loans[2] HKFRS 7 (Amendments) Disclosures – Offsetting Financial Assets and Financial Liabilities[2] HKFRS 7 and HKFRS 9 Mandatory Effective Dates of HKFRS 9 and Transition (Amendments) Disclosure[4] HKFRS 9 Financial Instruments[4] HKFRS 10 Consolidated Financial Statements[2] HKFRS 11 Joint Arrangements[2] HKFRS 12 Disclosure of Interests in Other Entities[2] HKFRS 13 Fair Value Measurement[2] HKFRS 10, HKFRS 11 Combined Financial Statements, Joint Arrangements and HKFRS 12 (Amendments) Disclosure of Interests in Other Entities: Transition Guidance[2] HKAS 1 (Amendments) Presentation of Item of Other Comprehensive Income[1] HKAS 19 (2011) Employee Benefits[2] HKAS 27 (2011) Separate Financial Statements[2] HKAS 28 (2011) Investments in Associates and Joint Ventures[2] HKAS 32 (Amendments) Presentation – Offsetting Financial Assets and Financial Liabilities[3] HK(IFRIC)-Int 20 Stripping Costs in the Production Phase of a Surface Mine[2]

1. Effective for annual periods beginning on or after 1 July 2012

2. Effective for annual periods beginning on or after 1 January 2013

3. Effective for annual periods beginning on or after 1 January 2014

4. Effective for annual periods beginning on or after 1 January 2015

The director of the Target Group anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Target Group in the Relevant Periods of initial application.

Subsidiaries

Subsidiaries are all entities over which the Target Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Target Company controls another entity. Subsidiaries are fully combined from the date on which control is transferred to the Target Company.

The results of subsidiaries acquired or disposed of during the year/ period are included in the combined statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Inter-company transactions, balances, income and expenses between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Target Group.

– 38 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Non-controlling interest in the net assets of combined subsidiaries is presented separately from the Target Group’s entity therein. Non-controlling interest in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Target Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

In the Target Company’s statement of financial position, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted by the Target Company on the basis of dividend received and receivable.

Business combination involving entity under common control

The Financial Information incorporates the financial statements items of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

The combined statement of comprehensive income includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination.

The comparative amounts in the Financial Information are presented as if the entities or businesses had been combined at the end of the previous Relevant Periods or when they first came under common control, whichever is shorter.

Account and other receivables

Account and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of account and other receivables is established when there is objective evidence that the Target Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the different between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the profit or loss.

Financial instruments

i. Financial assets

The Target Group classifies its financial assets as loans and receivables which are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arisen principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. At each balance sheet date subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses.

– 39 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

• ii. Impairment loss on financial assets

Objective evidence that the assets are impaired includes observable data that comes to the attention of the Target Group includes the following loss events:

• significant financial difficulty of the debtors;

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

• granting concession to a debtor because of debtors’ financial difficulty; or

• it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.

An impairment loss is recognised in the profit and loss when there is objective evidence that the assets is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

Impairment losses are reversed in subsequent periods when an increase in asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the assets at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

iii. Financial liabilities

The Target Group classifies its financial liabilities into account payables and other short-term monetary liabilities, which are recognised at amortised cost.

• iv. Derecognition

The Target Group derecognises financial assets where the contractual rights to the future cash flows in relation to the investment expire or where the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

Current assets and current liabilities

Current assets are expected to be realised within twelve months of the end of the financial period or in the normal course of the Target Group’s operating cycle. Current liabilities are expected to be settled within twelve months of the balance sheet date or in the normal course of the Target Group’s operating cycle.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation, which are at least tested annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the

– 40 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment assets are grouped at the lower levels for which there are separately identifiable cash flow (cash-generating units).

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Target Group and when the revenue can be measured reliably, on the following base:

Revenue from sales of air ticket, hotel reservation and travel products is recognised when services are rendered.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.

The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the profit or loss in the period in which it is incurred. In situations where it can be clearly demonstrated that expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the property, plant and equipment, the expenditure is capitalized as an additional cost of that asset.

In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Target Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the combined statement of comprehensive income in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principle estimated useful lives are as follows:

Office equipment 3 years Computer software 3 years

The gain or loss arising from disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit or loss.

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

Operating lease

Leases where substantially all the risks and rewards of ownership of the assets remain with the lessors are accounted for as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the lease periods.

– 41 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Employee benefits

The employees of Shenzhen Taoaoto which operates in the PRC are required to participate in a central pension scheme operated by the local municipal government. Shenzhen Taoaoto is required to contribute certain percentage of its payroll costs to the central pension scheme. The contributions are charged to the combined statement of comprehensive income as they become payable in accordance with the rules of the central pension scheme.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit is the profit for the year, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available which deductible temporary difference can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill (or negative goodwill) or from the initial recognition (other than a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

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

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Provision

A provision is recognised when the Target Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, the amount of a provision is the present value at the balance sheet date of the expenditures expected to be required to settle the obligation.

Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Target Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within control of the Target Group. A contingent asset is not recognised but is disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

– 42 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Related parties

• (a) A person or a close member of that person’s family is related to the Target Group if that person: (i) is a member of the key management personnel of the Target Group or of a parent of the Company; (ii) has control over the Target Group; or (iii) has joint control or significant influence over the reporting entity or has significant voting power in it.

• (b) An entity is related to the Target Group if any of the following conditions applies: (i) the entity and the Target Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); (ii) either entity is an associate or joint venture of the other entity (or of a member of a group of which the other entity is a member); (iii) both entities are joint ventures of a third entity; (iv) either entity is a joint venture of a third entity and the other entity is an associate of the third entity; (v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group. If the reporting entity is itself such a plan, the sponsoring employers are also related to the plan; (vi) the entity is controlled or jointly controlled by a person identified in (a); or (vii) a person identified in (a)(i) has significant voting power in the entity.

Foreign currencies

These financial statements are presented in Hong Kong dollars, which is functional and presentation currency of the Target Company. Each entity in the Target Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the reporting date. All differences arising on settlement or translation of monetary items are taken to combined statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The gain or loss arising on the retranslation of a nonmonetary item is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation differences on item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

The functional currencies of certain overseas subsidiaries are currencies other than Hong Kong dollar. As at the end of the Relevant Periods, the assets and liabilities of these entities are translated into the presentation currency of at the exchange rates ruling at the end of the Relevant Periods and, their statements of comprehensive income are translated into Hong Kong dollars at the weighted average exchange rates for the year.

The resulting exchange differences are included in a separate component of the exchange fluctuation reserve. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the combined statement of comprehensive income.

For the purpose of the combined statements of cash flows, the cash flows of overseas subsidiary is translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

– 43 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The Target Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Useful lives of property, plant and equipment

In accordance with HKAS16, the Target Group estimates the useful lives of property, plant and equipment in order to determine the amount of depreciation expenses to be recorded. The useful lives are estimated at the time the asset is acquired based on historical experience, the expected usage, wear and tear of the assets, as well as technical obsolescence arising from changes in the market demands or service output of the assets. The Target Group also performs annual reviews on whether the assumptions made on useful lives continue to be valid.

Impairment

In considering the impairment losses that may be required for the Target Group’s account receivables, deposits, prepayments and other receivables, amount due from a director and amounts due from ultimate shareholder, the recoverable amounts of these assets have to be determined.

The recoverable amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for these assets may not be readily available. In determining the value in use, expected cash flows generated by the assets are discounted to their present values, which requires significant judgment relating to items such as level of sales volume, selling price and amount of operating costs. The Target Group use all readily available information in determining an amount that is reasonable approximation of recoverable amount. Impairment losses for director’s and the related company’s current account are assessed based on director’s judgment on such credit worthiness.

Income taxes and deferred taxation

Shenzhen Taoaoto is subject to income taxes in the PRC. Significant judgements on the future tax treatment of certain transactions are required in determining income tax provisions. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The Target Group carefully evaluates tax implications of transactions and tax provisions are recorded accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislation.

Deferred tax assets relating to certain temporary differences and tax losses are recognised when management considers to be probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. The outcome of their actual utilisation may be different.

– 44 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

4. TURNOVER AND OTHER INCOME

==> picture [379 x 209] intentionally omitted <==

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

Period from 5
February
2010 (date of
incorporation)
Eight months ended Year ended to
31 August 31 December 31 December
2012 2011 2011 2010
HK$ HK$ HK$ HK$
(unaudited)
(a) Turnover:
Sales of air ticket, hotel reservation and
travel products 17,809,458 − − −
(b) Other income:
Bank interest income 37 5 85 −
Sundry income 3,910 − − −
3,947 5 85 −
Total revenue 17,813,405 5 85 −
----- End of picture text -----

5. SEGMENT INFORMATION

The Target Group has one single reportable segment which was managed as a single strategic business unit that engaged in sale of air tickets, hotel reservations and travel products online in the PRC. Information reported to the Target Group’s chief operating decision maker, for the purpose of resources allocation and assessment performance is focused on the operating results of the Target Group as a whole as the Target Group’s resources are integrated and no discrete financial information is available. Accordingly, no segment analysis is presented.

The Target Group’s operations is principally located in PRC. Accordingly, no geographical segment information is presented.

6. PROFIT/ (LOSS) FROM OPERATIONS

The Target Group’s profit/(loss) from operation is arrived after charging/(crediting):

				Period from 5
				February
				2010 (date of
				incorporation)
	**Eight months **	ended	Year ended	to
	31 August		31 December	31 December
	2012	2011	2011	2010
	HK$	HK$	HK$	HK$
		(unaudited)
Auditors’ remuneration	8,340	−	−	−
Depreciation of property, plant and equipment	23,917	−	−	−
Staff costs (excluding director’s remuneration)
– Salaries and allowances	2,025,072	90,600	185,198	−
Operating lease charge in respect office premises	181,179	−	−	−
Bank interest income	(37)	(5)	(85)	–

– 45 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

7. DIRECTOR’S REMUNERATION

• (a) Director’s remuneration

The remuneration paid and payable of the director of the Target Company during the Relevant Periods are analyzed as follows:

For the period from 5 February 2010 to 31 December 2010

Mr. ZHAO Tuanjie For the year ended 31 December 2011 Mr. ZHAO Tuanjie	Fee HK$ − Fee HK$ −	Salaries and other benefits Retirement benefits scheme contribution HK$ HK$ − − Salaries and other benefits Retirement benefits scheme contribution HK$ HK$ − −	Total HK$ −
			Total HK$ −

For the eight months ended 31 August 2011 (unaudited)

Fee HK$ Mr. ZHAO Tuanjie − For the eight months ended 31 August 2012 Fee HK$ Mr. ZHAO Tuanjie −	Salaries and other benefits Retirement benefits scheme contribution HK$ HK$ − − Salaries and other benefits Retirement benefits scheme contribution HK$ HK$ − −	Total HK$ −
		Total HK$ −

During the Relevant Periods, remunerations of director of the Target Company fall within HK$Nil to HK$1,000,000.

During the Relevant Periods, no amounts have been paid by the Target Company to the director as an inducement to join the Target Company, as compensation for loss of office or as commitment fees to existing director for entering into new services contracts with the Target Company.

– 46 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

There were no arrangements under which director waived or agreed to waive any remuneration during the Relevant Periods.

(b) Five highest paid employees

The five highest paid employees in the Target Group for the period from 5 February 2010 to 31 December 2010, year ended 31 December 2011 and the eight months ended 31 August 2012 included the directors, details for whose remuneration are set out in Note 7(a) above. Details of the remuneration of the remaining five highest paid, non-director employees are as follows:

==> picture [355 x 112] intentionally omitted <==

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

Period from 5
February
2010 (date of
incorporation)
Eight months ended Year ended to
31 August 31 December 31 December
2012 2011 2011 2010
HK$ HK$ HK$ HK$
(unaudited)
Salaries and other benefits 444,036 − 97,879 −
----- End of picture text -----

All of the five individuals with the highest emoluments in the Target Group for the period from 5 February 2010 to 31 December 2010, year ended 31 December 2011 and eight months ended 31 August 2012 were fall within HK$Nil to HK$1,000,000.

During the Relevant Periods, no amount has been paid by the Target Group to any of the five highest paid employees as an inducement to join the Target Group, as compensation for loss of office or as commitment fees to existing director for entering into new services contracts with the Target Group.

8. TAXATION

• (a) No Hong Kong profits tax has been provided for the Relevant Periods as the Target Group did not generate any assessable profits arising in Hong Kong. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries (or jurisdictions) in which the Target Group operates. Under the Corporate Income Tax Law, the PRC Corporate income tax rate is calculated at a rate of 25% on the assessable profits arising from the PRC during the Relevant Periods.

==> picture [355 x 160] intentionally omitted <==

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

Period from 5
February
2010 (date of
incorporation)
Eight months ended Year ended to
31 August 31 December 31 December
2012 2011 2011 2010
HK$ HK$ HK$ HK$
(unaudited)
Current tax
– Hong Kong tax − − − −
– PRC corporate income tax 3,262,799 − − −
− − −
3,262,799
----- End of picture text -----

– 47 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(b) Reconciliation between tax expense and accounting profit at applicable tax rate:

Profit/(Loss) before tax Tax at tax rate prevailing at countries where the Group operates Tax effect of non-deductible expense Tax effect of tax loss recognised	Eight months ended 31 August 2012 2011 HK$ HK$ (unaudited) 13,226,389 (115,333) 3,307,702 (19,029) 2,145 19,029 (47,048) – 3,262,799 −	Year ended 31 December 2011 HK$ (352,461) (88,068) 88,068 – −	Period from 5 February 2010 (date of incorporation) to 31 December 2010 HK$ (2,275)
			(375) 375 –
			−

No provision for deferred tax liabilities has been made as the Target Group and its subsidiaries had no material temporary differences between their tax bases of assets and liabilities and the carrying amounts in the financial statements.

9. EARNINGS/ (LOSS) PER SHARE

No earnings/(loss) per share is presented as the calculation of the basic earnings/(loss) per share is not meaningful for the purpose of this report.

– 48 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

10. PLANT AND EQUIPMENT

At cost: At 5 February 2010 At 31 December 2010 and At 1 January 2011 At 31 December 2011 and At 1 January 2012 Exchange realignment Additions At 31 August 2012 Accumulated depreciation: At 5 February 2010 At 31 December 2010 and At 1 January 2011 At 31 December 2011 and At 1 January 2012 Exchange realignment Charge for the period At 31 August 2012 Net book value: At 31 August 2012 At 31 December 2011 At 31 December 2010	Office equipment HK$ − − − (402) 154,274 153,872 − − − (39) 14,760 14,721 139,151 − −	Computer software HK$ − − − (123) 47,097 46,974 − − − (24) 9,157 9,133 37,841 − −	Total HK$ −
			−
			− (525) 201,371
			200,846
			−
			−
			− (63) 23,917
			23,854
			176,992
			−
			−

11. INTEREST IN A SUBSIDIARY

				As at 31
				August	**As at 31 **	December
				2012	2011	2010
				HK$	HK$	HK$
Unlisted	shares,	at	cost	625,395	625,395	625,395

– 49 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Details of the principal subsidiaries as at 31 December 2010, 2011 and 31 August 2012 are as follows:

			Particular of
		Place of	issued and	Interests
Name	Principal activities	incorporation	registered capital	held
Tirack Holdings Corporation	Investment holding	Republic of	US$ 1	100%
		Vanuatu		(direct)
Yan Shan Asia Corporation	Investment holding	Republic of	US$ 10	55%
		Vanuatu		(indirect)
China Tong Lian Air Services	Investment holding	Hong Kong	HK$ 10,000,000	55%
Holdings Limited				(indirect)
淘淘通航空服務有限公司(Taoaoto	Sale of air tickets,	The People’s	RMB 50,300,000	55%
Air Services Co. Ltd.) (Note)	hotel reservations and	Republic of China		(indirect)
	travel products online

Note: 淘淘通航空服務有限公司 (Taoaoto Air Services Co. Ltd.) was formerly known as “深圳市淘淘通 航空服務有限公司” (Shenzhen Taoaoto Air Services Co., Ltd.).

12. ACCOUNTS RECEIVABLES

An aging analysis of the accounts receivables at the end of each Relevant Periods, based on invoice date and net of provisions, is as follows:

0-90 days 91-180 days	As at 31 August 2012 HK$ 11,866,010 10,844,249 22,710,259	As at 31 December 2011 2010 HK$ HK$ − − − − − −	As at 31 December 2011 2010 HK$ HK$ − − − − − −
			−

The director of the Target Group considered that the fair value of the account receivables were not materially different from their carrying amounts because these amounts had short maturity period on their inception.

There was no impairment loss recognised during the Relevant Periods as all the balances of account receivables were received subsequent to their respective year or period end date. In addition, there were no account receivables that were past due at the end of each Relevant Periods. The Target Group seeks to maintain strict control over its outstanding receivables overdue by regularly monitoring from senior management.

13. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

Deposits and prepayments Other receivables	As at 31 August 2012 HK$ 240,619 382,538 623,157	As at 31 December 2011 2010 HK$ HK$ − 825 − − − 825	As at 31 December 2011 2010 HK$ HK$ − 825 − − − 825
			825

– 50 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

14. AMOUNT DUE FROM A DIRECTOR

			Maximum	As at 31	Maximum	As at 31	Maximum	As at 31
			debit	August	debit	December	debit	December
			balance	2012	balance	2011	balance	2010
			HK$	HK$	HK$	HK$	HK$	HK$
Mr.	Wang	Yintao	1,712,211	1,712,211	−	−	−	−

Amount due from a director is unsecured, interest-free and recoverable on demand.

15. AMOUNT DUE FROM THE ULTIMATE SHAREHOLDER

			Maximum	As at 31	Maximum	As at 31	Maximum	As at 31
			debit	August	debit	December	debit	December
			balance	2012	balance	2011	balance	2010
			HK$	HK$	HK$	HK$	HK$	HK$
Mr.	Zhao	Tuanjie	851,677	816,828	1,175,636	851,677	1,175,636	1,175,636

Amount due from the ultimate shareholder is unsecured, interest-free and recoverable on demand.

16. SHARE CAPITAL

==> picture [380 x 118] intentionally omitted <==

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

As at
31 August As at 31 December
2012 2011 2010
HK$ HK$ HK$
Authorised:
1 ordinary share of US$1 each 8 8 8
Issued and fully paid:
1 ordinary share of US$1 each 8 8 8
----- End of picture text -----

17. ACCOUNTS PAYABLES

An aging analysis of the accounts payable at the end of each Relevant Periods, based on invoice date and net of provisions, is as follows:

0-30 days	As at 31 August 2012 HK$ 6,838 6,838	As at 31 December 2011 2010 HK$ HK$ − − − −	As at 31 December 2011 2010 HK$ HK$ − − − −
			−

The director of the Target Group considered that the fair value of the accounts payables were not materially different from their carrying amounts because these amounts had short maturity period on their inception.

– 51 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

18. ACCRUALS AND OTHER PAYABLES

Accruals Other payables	As at 31 August 2012 HK$ 440,165 1,042,984 1,483,149	As at 31 December 2011 2010 HK$ HK$ − − 10 − 10 −	As at 31 December 2011 2010 HK$ HK$ − − 10 − 10 −
			−

19. OPERATING LEASE ARRANGEMENT

At the end of each Relevant Periods, the Target Group had contracted with landlord for the following future minimum lease payment:

Within one year Later than one year	As at 31 August 2012 HK$ 271,059 − 271,059	As at 31 December 2011 2010 HK$ HK$ − − − − − −	As at 31 December 2011 2010 HK$ HK$ − − − − − −
			−

20. RELATED PARTIES TRANSACTIONS

• (a) At the end of each Relevant Periods, the Target Group had the following balances with related parties:

				As at
				31 August	**As at 31 **	December
				2012	2011	2010
				HK$	HK$	HK$
Amount	due	from	a director	1,712,211	−	−
Amount	due	from	the ultimate shareholder	816,828	851,677	1,175,636

• (b) During the Relevant Periods, the remuneration of directors and other members of key management are as follows:

						Period from 5
						February
						2010 (date of
						incorporation)
			Eight months ended		Year ended	to
				31 August	31 December	31 December
			2012	2011	2011	2010
			HK$	HK$	HK$	HK$
				(unaudited)
Salaries	and	allowance	444,036	−	97,879	−

– 52 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

21. FINANCIAL INSTRUMENTS

The carrying amounts of the Target Group’s financial assets and liabilities by category of financial instruments included in the statement of financial position are as follows:

Financial assets by category – Loan and receivables (including cash and bank balances) Financial liabilities by category – At amortised cost	As at 31 August 2012 HK$ 25,666,373 6,141,325	As at 31 December 2011 2010 HK$ HK$ 860,194 1,175,989 10 −	As at 31 December 2011 2010 HK$ HK$ 860,194 1,175,989 10 −
			−

22. FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES

The Target Group has no written risk management policies and guidelines. The director is responsible to analyse and formulate strategies to manage and monitor the Target Group’s exposure to variety of risks associated with financial instruments which arise from the Target Group’s operating activities. Generally, the Target Group employs conservative strategies regarding its risk management to ensure appropriate measures are implemented on a timely and effective manner. The risks associated with these financial instruments and the policies on how to these risks are mitigated are described as follow:

(a) Market risk

Interest rate risk

The Target Group has no significant interest-bearing assets and liabilities and therefore the interest rate risk is considered as minimal. No sensitivity analysis on interest rate risk has been present accordingly.

(b) Foreign currency risk

The Target Group mainly operates in PRC with most of the transactions denominated in Renminbi (“RMB”). During the Relevant Periods, the exchange rate of RMB was quite stable and the Target Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure should the need arises.

(c) Credit risk

As at end of each Relevant Periods, the Target Group’s maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to perform an obligation by the counterparties, is the carrying amount of the respective recognised financial assets as stated in combined the statement of financial position.

Credit risk on cash and bank balances are mitigated as counterparties are banks or financial institutions with high credit rating. Credit risk on account receivables, deposits and prepayments is minimal as the Target Group performs ongoing credit evaluation on the financial condition of its debtors and tightly monitors the aging of the receivables balances, follow up action is taken in case of overdue balances. In addition, management reviews the recoverable amount of the receivables individually or collectively at each date of the reporting year to ensure that adequate impairment losses are made for irrecoverable amounts.

– 53 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(d) Liquidity risk

Liquidity risk is the risk that the Target Group is unable to meet its current obligations when they fall due. The Target Group closely monitors its liquidity through maintaining sufficient cash and the availability of funding from a fellow subsidiary and through an adequate amount of credit facility.

The relevant maturity groupings on the contractual undiscounted cash flows based on the remaining period at the balance sheet to the contractual maturity date of the Target’s Group’s and the Target’s financial liabilities are analysed in the financial information.

The tables below analyse the Target Group’s and the Target Company’s financial liabilities that will be settled into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual fair value without applying discounted cash flow model based on the earliest date on which the Target Group is required to pay.

At 31 December 2011 Accruals and other payables At 31 August 2012 Account payables Accruals and other payables	Within 1 year HK$ 10 6,838 1,483,149 1,489,987	Target Group Within 2 to 5 years HK$ − − − −	Total undiscounted cash flow HK$ 10 6,838 1,483,149 1,489,987	Target Company Within 1 year Total undiscounted cash flow HK$ HK$ − − 6,492 6,492 − − 6,492 6,492	Target Company Within 1 year Total undiscounted cash flow HK$ HK$ − − 6,492 6,492 − − 6,492 6,492
					6,492 −
					6,492

23. CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The Target Group’s objectives when managing capital are:

• To safeguard the Target Group’s ability to continue as a going concern, so that it continues to provide returns for shareholder and benefits for other stakeholders;

• To support the Target Group’s stability and growth; and

• To provide capital for the purpose of strengthening the Target Group’s risk management capability.

The Target Group actively and regularly reviews and manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Target Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the Relevant Periods.

The Target Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Target Group’s total capital comprises all components of equity and net debt includes account payables, accruals and other payables, and tax payable less cash and bank balances.

– 54 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Account payables Accruals and other payables Tax payable Less: Cash and bank balances Net debts Total capital Total capital and net debt Gearing ratios	As at 31 August 2012 HK$ 6,838 1,483,149 3,254,287 4,744,274 (44,537) 4,699,737 10,800,857 15,500,594 30%	As at 31 December 2011 2010 HK$ HK$ − − 10 − − − 10 − (8,517) (353) N/A N/A 860,184 1,176,814 N/A N/A N/A N/A

24. CAPITAL COMMITMENT AND CONTINGENT LIABILITIES

The Target Group did not have any significant capital commitment and contingent liabilities as at end of the Relevant Periods.

25. SUBSEQUENT EVENTS

No significant events took place subsequent to 31 August 2012.

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Group or its subsidiaries in respect of any period subsequent to 31 August 2012 up to the date of this report. Save as disclosed in this report, no dividend or distribution has been declared or made by the Target Group in respect of any period subsequent to 31 August 2012.

Yours faithfully, Elite Partners CPA Limited

Certified Public Accountants Hong Kong Yip Kai Yin

Practising Certificate Number: P05131

– 55 –

APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Set out below is a discussion and analysis of the Target Group’s results of operation for the period from 5 February 2010 (date of incorporation) to 31 December 2010, year ended 31 December 2011 and for the eight months ended 31 August 2012 (the “Relevant Periods”).

I. Business Scope and Analysis of Operations

1. Corporate information

The Target Company was incorporated in the Republic of Vanuatu (“Vanuatu”) as a limited liability company on 14 August 2012. Its principal activity is investment holding.

Yan Shan Asia Corporation is a company incorporated in Vanuatu on 14 August 2012 with limited liability and its principal activity is investment holding during the Relevant Periods. As at the Latest Practicable Date, the Vanuatu Subsidiary is 55% held by the Target Company.

China Tong Lian Air Services Holdings Limited a company incorporated in Hong Kong on 30 September 2010 and its principal activity is investment holding. As at the Latest Practicable Date, the HK Subsidiary is 100% held by the Vanuatu Subsidiary.

淘淘通航空服務有限公司 (Taoaoto Air Services Co. Ltd.) (formerly known as 深圳市 淘淘通航空服務有限公司 (Shenzhen Taoaoto Air Services Co., Ltd.)) (“Shenzhen Taoaoto”) is a wholly foreign-owned enterprise established in the PRC on 5 February 2010 and principally engaged in the sale of air tickets, hotel reservations and travel products online in the PRC. As at the Latest Practicable Date, Taoaoto is 100% held by the HK Subsidiary.

2. Business Scope

Shenzhen Taoaoto started its operation in early 2012 and has developed an online platform and hotline system for hotel reservations and air ticketing. It runs a membership programme and attracts members with certain rebate. For the purpose of increase its exposure and extend its market share, it franchise the right of use of platform to certain agents in three levels: Ticketing centre, City and Province. Agents are responsible for the marketing and selling activities in certain districts. Shenzhen Taoaoto retained the rights to amend the member’s policy and pricing policy, and have the obligation to provide products and technical advice or services. After our best effort, Shenzhen Taoaoto has business agreements with airline companies and hotels to receive a lower price, discount and commission on each reservation.

Report of National Bureau of Statistics of China shows number of aviation passengers transported had a 10% increase yearly in the year 2009, 2010 and 2011 of 2.31 million, 2.68 million and 2.93 million. The revenue of the domestic travel had

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

breakthrough 1 billion in 2010 with an increase of 14.6% from 2009. It shows the continue increase in demand of aviation products, it is expected that there will be a bright prospect of the aviation ticket industry.

With the success of pioneer enterprises and the continuing growth of the industry, Shenzhen Taoaoto target at civil passengers and traveler and provide surrounding products of hotel reservations. With the use of an advanced online platform and telephone hotline, the related cost to the operations of business was kept minimal.

Shenzhen Taoaoto introduces a franchising mode to expand market and increase its exposure. This made Shenzhen Taoaoto use fewer resources in engaging in the business and operation.

II. Financial Review

1. Revenue

Shenzhen Taoaoto was incorporated on 5 February 2010 and obtained the government approval to change its scope of business to act as an agent to selling air and train tickets, hotel accommodation on 12 March 2012. Before date the government approval, it did not generate any income in the period from its incorporation to March 2012.

As such the period from 5 February 2010 (date of incorporation) to 31 December 2010 (“Period 2010”) and year ended 31 December 2011 (“YE 2011”), the Target Group did not generate any revenue. The net loss for the Period 2010 and YE 2011 were approximately HK$2,275 and HK$352,460 respectively which are entirely attributable to general and administrative expenses incurred.

For the eight months ended 31 August 2012, the Target Group’s revenue of approximately HK$17,809,458 comprised of franchise fees income for registration and supply of services related to online business of ticketing, hotel reservations and selling travel products of approximately HK$17,757,500 and commission income for selling relevant product of approximately HK$51,000.

2. Expenses and costs

The operating profit ratio (being profits before tax as a percentage of revenue) for the eight months ended 31 August 2012 were approximately 74.3. No such ratios have been presented for Period 2010 and YE 2011 as the Target Group has not generated any revenue during such periods.

As the Target Group has not commenced its business in both Period 2010 and YE 2011, there were minimal and insignificant selling & distribution and administrative expenses incurred. For the eight months ended 31 August 2012, the employee benefits expenses and administrative expense were approximately HK$2,025,072 and HK$2,561,944 respectively.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

During the eight months ended 31 August 2012, the administrative expenses increased from approximately HK$24,738 in YE 2011 to HK$2,561,944, such increase was mainly attributable to the increase in marketing expenses.

Staff costs had not yet been incurred during Period 2010 as the Target Group has neither incorporated nor commenced its business yet. During YE 2011 and the eight months ended 31 August 2012, staff cost of the Target Group increased to approximately HK$185,198 and HK$2,025,072 respectively. Such increment was mainly due to expansion of customer services and technical department and thus the number of sales staff increased in order to cope with business expansion. As at 31 August 2012, the number of staff employed by the Target Group was approximately 50.

During the eight months ended 31 August 2012, the Target Group incurred a taxation expense of approximately HK$3,262,799 being enterprise income tax payable to the PRC government.

3. Net profit margin

The net profit margin is not available in Period 2010 and YE 2011 as the Target Group have not yet commenced its business. The net profit margin for the eight months ended 31 August 2012 was approximately 74.2% which is solely contributed by its franchise fee income.

In the eight months ended 31 August 2012, the franchise fee comprise one-off registration fee of approximately HK$17,906,901 and the right of use the online platform of HK$903,407.

The stage of business was in development phase. Shenzhen Taoaoto aimed at broaden its business network. Franchising was its major strategy to obtain market share and build up its brand. As Shenzhen Taoaoto started build up its network in March 2012, it only made small volume of sales and therefore not much commission income was generated in the period ended 31 August 2012. Regarding the sale of air tickets and hotel accommodations, Shenzhen Taoaoto earned commission income on the sales with an average mark up of 5%.

In regard of the unique business model, the costs of Shenzhen Taoaoto mainly comprise of wages for customer services, marketing and technical services, which respresent 44.3% of the total expenses for the eight months ended 31 August 2012. The other direct costs was limited under this business model and provide an advantage of trade surplus for future expansion.

It was expected that at the time its network became mature and have obtained market shares, Shenzhen Taoaoto will be sustainable by relying on the increased volume of market share.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

4. Non-current assets

The non-current assets solely consisted of plant and equipment (“PPE”). PPE were approximately HK$176,992 as at 31 August 2012. As the company has not yet started it business, PPE had a record of HK$Nil in Period 2010 and YE 2011.

During the eight months ended 31 August 2012, there was addition of PPE of approximately HK$201,371 for supporting the future growth of the Target Group. The majority of the PPE investment was resulted from additions of office equipment, computer hardware and software with an amount of approximately HK$201,371.

5. Current assets

As at 31 December 2010, 31 December 2011 and 31 August 2012, the Target Group’s current assets comprised mainly of account receivables, other receivables.

a. Account receivables

As at 31 August 2012, account receivables increased to approximately HK$22,710,259. Debts are usually due from six month from the date of signing the franchising contract.

• b. Prepayment, deposits and other receivables

As at 31 December 2011, prepayment, deposits and other receivables were decreased from approximately HK$825 in 31 December 2010 to HK$Nil, and then increased to approximately HK$623,157 as at 31 August 2012. The increase was attributable to deposits paid to travel agents and air ticket office.

• c. Amount due from the ultimate shareholder

As at 31 August 2012, 31 December 2011 and 31 December 2010, amount due from the ultimate shareholder were approximately HK$816,828, HK$851,677 and HK$1,175,636 respectively. The said balance represented a loan to the ultimate shareholder with interest-free.

6. Current liabilities

As at 31 December 2010, 31 December 2011 and 31 August 2012, current liabilities primarily consisted of trade payables, other payables and accruals, amount due to a shareholder and tax payables.

• a. Account payables

As at 31 August 2012, account payables were approximately HK$6,838. There were principally arisen from general credit terms provided by suppliers in the ordinary course of business.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

b. Accruals and other payables

Accruals and other payables consisted of other payables and other tax payables. Other tax payables represented the local tax expenses arisen from assessment of local tax authorities. As at 31 August 2012, the accruals and other payables have increased from approximately HK$10 as at 31 December 2011 to approximately HK$1,483,149. Such increase was attributable to the increase of other payables from approximately HK$10 as at 31 December 2011 to HK$1,042,984 and the increase of other tax payables of approximately HK$999,792 during the period ended 31 August 2012.

c. Receipts in advance

As at 31 August 2012, receipt in advance were approximately HK$1,350,126. The said balance represented the membership received from members which not yet recognised as revenue according to the nature of such membership fee and accounting policies of the Target Group.

The receipts in advance contributed approximately 8.80% of current liabilities as at 31 August 2012.

d. Provision

Air tickets and hotel accommodations will be presented as a gift to present member every day as set out in the member manual. A provision was provided as at 31 August 2012 with an amount of approximately HK$1,159,688 to the extent of unutilized gifts on present members. As Shenzhen Taoaoto had not yet started it business in Period 2010 and YE 2011, no provision was provided.

e. Deferred income

Deferred income referred to the income from franchising agents. The income split into two parts: one-off registration fee and fee of franchising within a certain period. As the contracts have an effective period of three years, a portion of franchising fee after the right of use the Shenzhen Taoaoto’s online platform after 31 August 2012 were deferred with an amount approximately HK$8,029,039.

f. Tax payable

As at 31 August 2012, tax payables of approximately HK$3,254,287 solely represented PRC enterprise income tax expenses. The fact that no tax expense incurred for the years ended 31 December 2010 and 2011 was due to business has yet to be commenced in the Period 2010 and no income was generated in the YE 2011. As at 31 August 2012, the tax payables were estimated based on the assessable profits arising from the Shenzhen Taoaoto.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

7. Material acquisition and disposals of subsidiaries and associated companies and significant investment held

The Target Group did not have any material acquisitions and disposals of subsidiaries and associated companies during the Relevant Periods and no significant investment was held by the Target Group as at 31 December 2010, 31 December 2011 and 31 August 2012.

8. Future plans for material investment or capital assets

As at 31 December 2010, 31 December 2011 and 31 August 2012, the Target Group had no future plans for material investment or capital assets.

9. Capital commitments

As at 31 December 2010, 31 December 2011 and 31 August 2012, the Target Group had no significant capital commitment and contingent liabilities as at the end of the Relevant Periods.

10. Charge on assets

As at 31 December 2010, 31 December 2011 and 31 August 2012, the Target Group did not have any charges on assets.

III. Liquidity and financial position

The current ratio of the Target Group as at 31 December 2010, 31 December 2011 and 31 August 2012 were approximately 0 time, 86,019.4 times and 1.67 time respectively. The reason of a high current ratio as at 31 December 2010 was due to the fact that the Target Group was just incorporated and thus it did not have much liabilities compared to the capital injection from shareholders.

The current ratio remained at a level of 1.67 times as at 31 August 2012. The management is in the opinion to maintain the level of current assets sufficient to cover the current liabilities. It is normal due to the nature of its business.

IV. Capital structure

In arriving at the gearing ratio of the Target Group, the director of the Target Group considered that net debt should be taken into consideration. As such, gearing ratio of the Target Group is calculated as net debt (being sum of account payables, accruals and other payables adjusted by cash and bank balances) divided by total capital (being equity attributable to owners of the Target Group plus net debt). As at 31 August 2012, the Target Group has net debt amounted to approximately HK$4,699,737 and the equity attributable to owners of the Target Group was approximately HK$10,800,857. Gearing ratio as at 31 August 2012 amounted to approximately 30%. The Target Group has neither debt needed to be repaid immediately nor any interest-bearing liability, the financial risks in relation to the capital structure and source of finance is very minimal. As Shenzhen Taoaoto started

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

operation from the period ended 31 August 2012, it started record liabilities in the statement of financial position. However, the liabilities were arising from normal operation. The Target Group will monitor its capital structure and source of finance by considering the potential benefits arising from new debt and the financial risks that such debt will generate.

V. Number and remuneration of employees, remuneration policy, bonus and share option schemes and training schemes

As at 31 August 2012, the Target Group employed about 50 employees including customers services team, technical team, accounting and administrative staffs in the PRC. The total staff costs and directors’ remuneration for the eight months ended 31 August 2012 were approximately HK$2,025,072. Employees are remunerated based on market and industry practice. The remuneration policy and package of the Target Group’s employees are regularly reviewed.

During the Relevant Periods, the Target Group does not have any share option schemes or training schemes.

VI. Market Risks

1. Credit risk

The maximum exposure to credit risk in the event of the counterparties failed to perform their obligations at the end of the Relevant Periods in relation to each class of recognized financial assets is the carrying amount of those assets in the statements of financial position. The management considers the credit risks on remaining financial assets are minimal.

Credit risk on cash and bank balances are mitigated as counterparties are banks or financial institutions with high credit rating. Credit risk on account receivables, prepayments, deposits and other receivables are minimal as the Target Group performs ongoing credit evaluation on the financial condition of its debtors and tightly monitors the aging of the receivables balances, follow up action is taken in case of overdue balances. In addition, management reviews the recoverable amount of the receivables individually or collectively at each date of the reporting year to ensure that adequate impairment losses are made for the irrecoverable amount.

2. Interest rate risk

As at 31 August 2012, the Target Group did not have any interest-bearing debt or liabilities. Apart from major debt and liabilities as disclosed in the accountant’s report of the Target Group as set out in this appendix, the management considers the interest rate risk is minimal.

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APPENDIX II ACCOUNTANTS’ REPORT ON THE TARGET GROUP

3. Foreign currency risk

Shenzhen Taoaoto which operates in the PRC, is the major subsidiary of the Target Group. Almost all of the transactions of Shenzhen Taoaoto are denominated and settled in its own functional currency, i.e. RMB. As it has both functional and presentational currency denominated in RMB, therefore the Target Group has no significant foreign exchange risk from the operation in PRC that might impact its consolidated result of operations.

While the combined financial statements of the Target Group were presented in HKD, it appears that any monetary financial assets or liabilities of the Target Group denominated in RMB were considered to cause no currency risks to the Target Group if such assets and liabilities denominated RMB were held by Shenzhen Taoaoto.

As a result, the Target Group has not used any financial instruments for hedging against neither fluctuation in interest rate nor foreign currencies as at 31 August 2012.

4. Liquidity risk

The Target Group manages its fund conservatively by maintaining a comfortable level of cash and cash equivalents in order to meet continuous operational need. Liquidity risk is minimal as the Target Group has maintained a sufficient level of cash and bank balances and current assets to meet its financial obligations.

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

I. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from Elite Partners CPA limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

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CAREA
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28 February 2013

The Broad of Directors Tai Shing International (Holdings) Limited 21/F Malahon Center 10-12 Stanley Street Central Hong Kong

We report on the unaudited pro forma statement of assets and liabilities (the “Unaudited Pro Forma Financial Information”) of Tai Shing International (Holdings) Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company, for illustrative purpose only, to provide information about how the proposed acquisition of the entire interest in Tirack Holdings Limited (the “Target Company”) and its subsidiaries, Yan Shan Asia Corporation (the “Vanuatu Subsidiary”), China Tong Lian Air Services Holdings Limited (the “HK Subsidiary”) and Taoaoto Air Services Co., Ltd. (the “Taoaoto”) (hereinafter referred to the “Target Group”) (together with the Group hereinafter referred as the “Enlarged Group”) might have affected the assets and liabilities of the Group presented, for inclusion in Appendix III to the circular of the Company dated 28 February 2013 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 66 to 71 to the Circular.

Respective responsibilities of the directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 ’Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’ issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

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

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Basis of Opinion

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

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

The Unaudited Pro Forma Financial Information for the Enlarged Group is for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Enlarged Group as at 30 September 2012 or any future date.

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly complied by the directors of the Company on the basis stated;

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

• (c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 31 (1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

Elite Partners CPA Limited

Certified Public Accountants

Hong Kong

Yip Kai Yin

Practising Certificate Number: P05131

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

II. UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP

A. Introduction

The accompanying is an illustrative unaudited pro forma consolidated financial information of the Enlarge Group which has been prepared in accordance with paragraph 31(1) of Chapter 7 of the GEM Listing Rules for the purpose of illustrating the effects of the transactions contemplated under the Agreement (the “Acquisition”) as if they had taken place on 30 September 2012. The Target Group together with the Group hereinafter collectively referred to as the “Enlarged Group”.

The Unaudited Pro Forma Financial Information is prepared by the directors based on a number of assumptions, estimates, uncertainties and currently available information, and is provide for illustrative purpose of the effect on the assets and liabilities of the Enlarged Group as if the Acquisition had been completed on 30 September 2012, after making pro forma adjustments relating to the Acquisition that are directly attributable to the transaction and factually supportable.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purpose only and because of its hypothetical nature, it may not give a true picture of the actual financial position, results of operations of the Enlarged Group had the Transaction been completed as at the respective dates to which it is made up to or at any future dates.

B. Unaudited Pro Forma Financial Information of the Enlarged Group

The following is the Unaudited Pro Forma Financial Information of the enlarged Group, assuming that as if the Acquisition had been completed on 30 September 2012.

The unaudited pro forma consolidated statements of financial position of the Enlarged Group as at 30 September 2012 is prepared based on:

• (i) the unaudited consolidated statement of financial position of the Group as at 30 September 2012;

• (ii) the audited combined statement of financial position of the Target Group as at 31 August 2012 as set out in Appendix II to this Circular.

As the Unaudited Pro Forma Financial Information of the Enlarged Group has been prepared for illustrative purpose only and because of its nature, it may not give a true picture of the financial position of the Enlarged Group as at the date to which it is made up to or at any future date.

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Unaudited Pro Forma Consolidated Statement of Assets and Liabilities of the Enlarged Group

ASSETS Non-current assets Property, plant and equipment Goodwill Intangible assets Interests in associates Available-for-sale investments Deposits paid for acquisition of subsidiaries Deposit paid for acquisition of intangible assets Total non-current assets Current assets Inventories Trade and other receivables and prepayments Amounts due from customers for contract work Amounts due from a director Amount due from the ultimate shareholder Financial assets at fair value through profit or loss Pledged bank deposits Bank balances and cash Total current assets Total assets	The Group as at 30 September 2012 HK$’000 (unaudited) 3,878 – 178,851 45,944 25,600 60,000 7,500 321,773 14,264 119,455 18,904 – 563 2,248 8,865 164,299 486,072	The Target Group as at 31 August 2012 Pro forma adjustments Notes HK$’000 HK$’000 177 – 104,746 2(a) – – – – – 177 – 23,333 – 1,712 817 – – 45 (25,000) 2(b) 25,907 26,084	Pro forma Enlarged Group as at 30 September 2012 HK$’000 4,055 104,746 178,851 45,944 25,600 60,000 7,500 426,696 14,264 142,788 18,904 1,712 817 563 2,248 (16,090) 165,206 591,902

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

EQUITY AND LIABILITIES Equity attributable to owners of the Company Issued capital Contributed surplus Exchange reserves Equity component of convertible bonds Reserves Non-controlling interest Total equity Non-current liabilities Obligation under finance leases Promissory notes Convertible bonds Total Non-current liabilities Current liabilities Amounts due to customers for contract work Trade and other payables Receipts in advance Provision Amount due to a substantial shareholder Deferred income Income tax payable Bank borrowings Obligations under finance leases Total current liabilities	The Group as at 30 September 2012 HK$’000 (unaudited) 28,847 – – – 320,322 349,169 2,660 351,829 1,922 10,000 15,000 26,922 21,526 42,150 6,694 31 17,374 – 6,256 12,228 1,062 107,321	The Target Group as at 31 August 2012 Pro forma adjustments Notes HK$’000 HK$’000 1 (1) 2(d) 625 (625) 2(d) 30 (30) 2(d) – 26,260 2(c) 5,282 (5,282) 2(d) 5,938 4,863 10,801 – – 59,424 2(c) – 1,490 1,350 1,160 – 8,029 3,254 – – 15,283	Pro forma Enlarged Group as at 30 September 2012 HK$’000 28,847 – – 26,260 320,322
			375,429
			7,523
			382,952
			1,922 10,000 74,424
			86,346
			21,526 43,640 8,044 1,191 17,374 8,029 9,510 12,228 1,062
			122,604

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Total liabilities Total equity and liabilities Net current assets Total asset less current liabilities Net assets	The Group as at 30 September 2012 HK$’000 (unaudited) 134,243 486,072 56,978 378,751 351,829	The Target Group as at 31 August 2012 Pro forma adjustments Notes HK$’000 HK$’000 15,283 26,084 10,624 10,801 10,801	Pro forma Enlarged Group as at 30 September 2012 HK$’000 208,950
			591,902
			42,602
			469,298
			382,952

Note:

1. On 21 November 2012, the Company (“Purchaser”), entered into an acquisition agreement with Questex Development Inc. (“Vendor”) for the acquisition of 100% of equity interest in the Target Company.

Total consideration for the acquisition of the Target Company amounted to HK$110,000,000, which shall be satisfied by the followings:

• As to HK$15,000,000 for deposits paid to the Vendor prior to signing the acquisition agreement;

• As to HK$5,000,000 for deposits paid to the Vendor upon signing the acquisition agreement;

• As to HK$5,000,000 by way of cash; and

• As to HK$85,000,000 by way of issuance of convertible bonds to the Vendor.

For the purpose of preparing the unaudited pro forma financial information of the Enlarged Group, the consideration was determined after arm’s length negotiations between the Vendor and the Company with reference to a professional valuation as advised by B.I. Appraisals Limited, an independent valuation firm. The valuation method used for the preliminary indicative value was market approach by applying the median price-to-earnings multiple of comparable companies to the adjusted net profit which involved a projection of net profit up to February 2013.

• 2(a) The goodwill arising on the acquisition of 100% equity interest in the Target Company is calculated as follow,

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

100% of net assets of the Target Group as at 31 August 2012 (Note i) Less: Non-controlling interest (Note ii) Sub-total Goodwill Consideration for acquisition of 100% equity interest in Target Group (Note iii)	HK$’000 10,801 (4,863)
	5,938 104,746
	110,684

Notes:

• (i) The net assets value of Target Group, based on the carrying amounts of its assets and liabilities as at 31 August 2012 as if the Acquisition had been completed on 30 September 2012 and assumed the fair value of the assets and liabilities approximate to the carrying amounts, will be adjusted upon completion of the Acquisition with reference to the fair value of its assets, liabilities and contingent liabilities at the that date.

Since the fair value of assets and liabilities of Target Group at the completion date of the Acquisition substantially different from the fair values used in the preparation of this Unaudited Pro Forma Financial Information of the Enlarged Group, the final amounts of the identified net assets (including other intangible assets) and goodwill to be recognised in connection with the Acquisition could be different from the amounts stated herein.

• (ii) Non-controlling interests is calculated based on the proportionate share of fair value of identifiable assets and liabilities of the Target Group attributable to non-controlling shareholders.

The directors have not taken the transaction cost of the Acquisition into account as they consider those amount is insignificant.

• (iii) An analysis of the total cost of the Acquisition of 100% equity interest of Target Group is set out as follows:

Fair value of the consideration for the Acquisition: Cash consideration (note 2(b)) Issuance of convertible bonds (note 2(c)) Total cost of acquisition	HK$’000 25,000 85,684
	110,684

This adjustment will have a continuing effect on the Enlarged Group.

The Directors have assessed whether there is any impairment on the goodwill as at 31 August 2012 in accordance with Hong Kong Accounting Standard (“HKAS”) 36 “Impairment of Assets” issued by the Hong Kong Institute of Certified Public Accountants. An impairment test involves the determination of the recoverable amount of the cash generating unit to which the goodwill has been allocated, being the higher of the cash generating unit’s fair value less costs to sell and its value in use. The recoverable amount of the cash generating unit to which the goodwill has been allocated is determined based on value in use calculation.

In order to determine the value in use of the Target Group’s cash generating unit, the Directors have used the basis of Discount Cash Flow method (the “DCF”). The sources and inputs of such DCF mainly consist of i) Franchise fee income; ii) Commission income; and iii) related operating expenditures. The assumptions used in forecasting the i) franchise fee income are the newly approved pricing table supported by the corresponding business plan while that of ii)

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PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

commission income are using historical track record on the average number of products sold per shop and average selling price of each product of the Target Group in conjunction with the newly signed agreement for the revised commission rate that is going to be charged on each product sold.

The reporting accountants assessed the discount rate used for the above DCF projections by assessing the key assumptions of (a) market risk premium; (b) beta coefficient; and (c) after-tax cost of debt: a) The market risk premium used for determining the discount rate was examined and re-calculated. In addition, independent search on market expected return and risk free rate, being the main component of market risk premium were also performed. b) The adopted beta coefficient used was examined and recalculated. The adopted beta was derived from the average of deleveraged beta coefficients of other proxy companies of which their operations are similar to that of the Target Company. c) The Target Company has no interest bearing debt or borrowings as at the Latest Practicable Date. The after-tax cost of debt assumption is being understood and concurred by the reporting accountants.

The value in use as derived and proposed by the Directors was amounted to approximately HK$104,782,000 which is greater than the goodwill which is calculated at approximately HK$104,746,000. As a result, the Directors concluded that no impairment on such goodwill is provided as at 31 August 2012.

It is the sole responsibility of the directors of the Company to ensure that the Company is adopting and will continue to adopt consistent accounting policies and ensure that the principal assumptions of the valuation for assessment of the impairment of the Enlarged Group’s goodwill are consistent for the annual audit of the Enlarged Group in the future.

The reporting accountants of the Acquisition concurred with the assessment of impairment in goodwill by the directors of the Company, in accordance with HKAS 36, in the Unaudited Pro Forma Financial Information and adoption of consistent accounting policies and principal assumptions in the preparation of consolidated financial statements of the Enlarged Group after the completion of the Acquisition.

• 2(b) This represents cash payment for deposits amounted to HK$25,000,000 paid to Vendor for the acquisition of 100% equity interest in Target Group. Such payment has been satisfied from internal resources of the Group.

This adjustment will not have a continuing effect on the Enlarged Group.

• 2(c) This amount represented the liability and equity components of the Convertible Bonds with principal amount of approximately HK$85,684,000 issued for the Acquisition. It will mature in 3 years from the date of issue.

The fair value assessment of the liability component and the equity component of the Convertible Bonds was performed by B.I. Appraisals Limited, an independent professional valuer, using discounted cash flow method. As at 30 September 2012, the estimated fair values of the liability component and equity component of the Convertible Bonds are approximately HK$59,424,000 and HK$26,260,000 respectively. Fair values of the liability component and the equity component shall be assessed on the date of completion and are therefore subject to change upon completion of the Acquisition.

This adjustment will have a continuing effect on the Enlarged Group.

• 2(d) Elimination of the share capital, reserves of the Target Group.

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VALUATION REPORT ON SHENZHEN TAOAOTO

APPENDIX IV

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28 February 2013

The Board of Directors Tai Shing International (Holdings) Limited 21st Floor, Malahon Centre 10-12 Stanley Street Central Hong Kong

Dear Sirs,

Re: The 100% equity interest in 深圳市淘淘通航空服務有限公司

In accordance with the instructions from Tai Shing International (Holdings) Limited (hereinafter referred to as the “Company”) for us to conduct a business valuation on the 100% equity interest in 深圳市淘淘通航空服務有限公司 (hereinafter referred to as the “Business Enterprise”), we confirm that we have reviewed the information/documents provided by the Company, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value the Business Enterprise as at 31 August 2012 (hereinafter referred to as the “Date of Valuation”).

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

PURPOSE OF VALUATION

This report is being prepared solely for the use of the directors and management of the Company. The Company is a public company listed on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited. In addition, B.I. Appraisals Limited (“B.I. Appraisals”) acknowledges that this report may be made available to the Company for public documentation purpose.

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

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SCOPE OF WORK

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

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

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

ECONOMIC OVERVIEW

� Overview of the Economy in China

According to the National Bureau of Statistics of China, the nominal Gross Domestic Product (“GDP”) in 2011 was RMB 47,156 billion, an increase of 17.4% over the previous year. In the first quarter of 2012, China’s GDP was RMB 10,800 billion, which was 8.1% higher than that of the same period last year. China replaced the European Union and became the second largest economy in the world as in 2011, ranked only after the United States, in terms of nominal GDP measured by the International Monetary Fund (“IMF”). Amidst the global financial crisis in late 2008 and the Eurozone debt crisis triggered in 2011, the Chinese economy continued to be supported by the Chinese government through spending in infrastructure and real estates.

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

Over the past decade from 2002 to 2011, compound annual growth rate of China’s nominal GDP was 15.7% and in the government’s latest plan, it is targeted to grow at 7% for the period from 2011 to 2015. Figure 1 further illustrates the nominal GDP of China from 2007 to 2011.

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

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

billion RMB
50,000 47,156.4
45,000
40,000 40,120.2
34,090.3
35,000
31,404.5
30,000 26,581.0
25,000
20,000
15,000
10,000
5,000
0
2007 2008 2009 2010 2011
----- End of picture text -----

Source: National Bureau of Statistics of China

�

Inflation in China

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

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

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

%
7
6
5
4
3
2
1
0
Jan Mar May Jul Sep Nov Jan Mar May
2011 2012
----- End of picture text -----

Source: Bloomberg

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

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

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

%
7
6
5
4
3
2
1
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-1
----- End of picture text -----

Source: International Monetary Fund

INDUSTRY OVERVIEW

� Worldwide Airline Industry

The airline industry can be separated into four categories by the U.S. Department of Transportation. They are international, national, regional and cargo planes. International planes contain more than 130 seats that have the ability to take passengers just about anywhere in the world. Companies in this category typically have annual revenue of US$ 1 billion or more. National planes comprise 100 to 150 seats and have annual revenues between US$ 100 million and US$ 1 billion. Companies with annual revenues less than US$ 100 million that focus on short haul flights belong to regional airline and cargo airline generally transport goods.

The global airline industry will likely post a second consecutive year of net profit declines, as the impact of a deepening European debt crisis offsets the boost from lower oil prices, stronger-than-expected growth in passenger traffic and an improved freight market. The International Air Transport Association forecasted a US$ 3 billion net profit for the global airline industry in 2012, which is less than half of the US$ 7.9 billion made in 2011, and an even sharper fall from the record US$ 15.8 billion profit for the industry in 2010.

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� China Airline Industry

Despite the downturn of the global airline industry, air travel is booming in China. In 2012, China’s domestic aviation passenger market becomes the second largest in the world, while its international passenger market and international cargo market rank seventh and fourth respectively in the world. China’s airlines accounted for half of all global profits in 2011.

Over the five years through 2012, the revenue of the airline industry in China has been growing at an annual rate of 15% to a total of RMB 90.4 billion. After rapid development in the four years to 2007, growth slowed greatly in 2008 and 2009 due to a series of natural disasters, the global economic crisis, and stricter security checks due to the Beijing Olympic Games. However, as the economy recovered and demand for air travel rose, airlines rebounded strongly. In 2012, China had around 500 airports of all types and sizes in operation, about 400 of which had paved runways and about 178 of which had scheduled passenger flights.

In 2011, total volume travelled by China’s civil aviation reached 57.7 billion metric ton-kilometers, about of which 19.7 billion metric ton-kilometers were travelled by international airlines. The total volume travelled by China’s civil aviation in 2011 was 7.2% more than that of 39 billion metric ton-kilometers in 2010 while passengers’ volume reached 40.4 billion metric ton-kilometers in 2011, which was 12.2% more than that in 2010. Figure 4 shows the total volume travelled by China civil aviation and its growth rate from 2006 to 2011.

Figure 4 – Total Volume Travelled by China’s Civil Aviation and Its Growth Rate from 2006 to 2011

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billion metric ton-kilometers %
70 30
60 25
50
20
40
15
30
10
20
5
10
0 0
2006 2007 2008 2009 2010 2011
----- End of picture text -----

Source: The Civil Aviation Administration of China

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In 2011, total number of passengers transported by China’s civil aviation reached 293 million, about of which 21 million were travelled by international airlines. The total number of passengers transported by China’s civil aviation in 2011 was 9.5% more than that of 268 million in 2010. Figure 5 shows the total number of passengers transported by China’s civil aviation and its growth rate from 2006 to 2011.

Figure 5 – Total Number of Passengers Transported by China’s Civil Aviation and Its Growth Rate from 2006 to 2011

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million %
350 25
300
20
250
15
200
150
10
100
5
50
0 0
2006 2007 2008 2009 2010 2011
----- End of picture text -----

Source: The Civil Aviation Administration of China

� China Air Ticketing Industry

The burgeoning number of passengers transported by China’s civil aviation and the surging total volume travelled by China’s civil aviation since 2006 has pointed to the increasing demand of air tickets. According to National Bureau of Statistics of China, foreign exchange earnings from civil aviation increased by 16.9% year-over-year from US$ 9,808 million in 2010 to US$ 11,470 million in 2011. With the increasing demand of air tickets, online air ticketing will become a commonplace due to its convenience.

According to iResearch statistics, China’s online travel booking agencies’ revenue reached RMB 44 billion in the first quarter of 2012, which was 16.9% higher than that of 2011. The rapid growth of the online travel booking agencies industry could be attributed to the increase in internet usage, rising middle class and increasing income, surging number of credit card holders and growth in tourism.

� China Travel Agency Industry

Firms in the travel agency industry in China mainly provide travel services for businesses, groups and individuals. These services include consultation, travel planning and proposals, scheduling, accommodation and transportation. These services are primarily provided by domestic travel agencies and international travel agencies based in China. This industry does not include tour guide services provided by local operators, nor agencies selling only air or rail tickets.

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During the past five years, capital from the government, public organizations and private sector have invested heavily in tourism project infrastructure in which China has become the world’s fourth most popular destination for international tourists and the most popular within Asia. In recent years, the rapidly growing tourism sector has provided a good market environment for tourism enterprises, including travel agencies. Therefore, the travel agency industry in China is in the growth stage of its life cycle.

According to IBISWorld, a large America publisher of industry research, the five years from 2007 to 2011 saw revenue of China’s travel agency industry increase at an estimated annualized growth rate of 11.2%. It was expected that the growth would be faster in the next few years as the government has positioned the tourism industry as one of the most important strategic industries. According to National Bureau of Statistics of China, the compound annual growth rates of the number of overseas visitor arrivals in China, Chinese outbound visitors and domestic visitors from 2007 to 2011 were 0.7%, 14.4% and 13.2% respectively, which contributed to the increase in number of travel agencies from 18,943 in 2007 to 22,784 in 2010.

Figure 6, figure 7 and figure 8 show the number of overseas visitor arrivals in China, Chinese outbound visitors and domestic visitors from 2007 to 2011 respectively.

Figure 6 – Number of Overseas Visitor Arrivals in China from 2007 to 2011

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

million
138
136
134
132
130
128
126
124
122
2007 2008 2009 2010 2011
----- End of picture text -----

Source: National Bureau of Statistics of China

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Figure 7 – Number of Chinese Outbound Visitors from 2007 to 2011

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

million
75
70
65
60
55
50
45
40
35
2007 2008 2009 2010 2011
----- End of picture text -----

Source: National Bureau of Statistics of China

Figure 8 – Number of Chinese Domestic Visitors from 2007 to 2011

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

million
2,700
2,500
2,300
2,100
1,900
1,700
1,500
2007 2008 2009 2010 2011
----- End of picture text -----

Source: National Bureau of Statistics of China

THE BUSINESS ENTERPRISE

The Business Enterprise is principally engaged in selling air tickets, hotel reservation and travel products online in China. The Business Enterprise makes use of an advanced online platform and a telephone hotline system to create an efficient and comprehensive e-commerce network for suppliers, agents and customers for travel services. In view of the

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steady increase in domestic civil aviation passenger traffic and tourism expenditures in China in recent years, the Company is of the view that the prospects of the Business Enterprise will be promising.

DEFINITION AND BASIS OF VALUATION

The term “Market value”, as used herein, is defined as intended to mean the estimated amount for which an asset could be exchanged, or a liability settled, between willing parties in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

INVESTIGATION AND ANALYSIS

Our investigation included discussions with members of the Management in relation to the development, operations and other relevant information of the Business Enterprise. In addition, we have made relevant inquiries and obtained such further information and statistical figures regarding the economy of China as we considered necessary for the purpose of this valuation.

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

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

• The nature and prospect of the Business Enterprise;

• The financial condition of the Business Enterprise;

• The economic outlook in general and the specific economic environment and market elements affecting the business, the industry and the market;

• Relevant licences and agreements;

• The financial and business risk of the Business Enterprise such as the ability in maintaining competent technical and professional personnel; and

• Investment returns and market transactions of entities engaged in similar lines of business.

APPROACHES TO VALUE

There are generally three accepted approaches to obtain the market value of the Business Enterprise, namely the Market-Based Approach, Income-Based Approach and Asset-Based Approach. Each of these approaches is appropriate in one or more

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circumstances, and sometimes, two or more approaches may be used together. Whether to adopt a particular approach will be determined by the most commonly adopted practice in valuing business entities that are similar in nature.

� Market-Based Approach

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

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

� Income-Based Approach

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

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

� Asset-Based Approach

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

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

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BUSINESS VALUATION

� Method Adopted

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

The Income-Based Approach was not adopted because a lot of assumptions would have to be made and the valuation could be largely influenced by any inappropriate assumptions made. The Asset-Based Approach was not adopted because it could not reflect the market value of the Business Enterprise. We have therefore considered the adoption of the Market-Based Approach in arriving at the market value of the Business Enterprise.

By adopting the Market-Based Approach, we have to determine the appropriate valuation multiples of comparable companies, in which we have considered price-to-sales, price-to-earnings and price-to-book multiples. In this valuation, we have adopted price-to-earnings as we considered it as the most appropriate multiple in calculating the market value of the Business Enterprise. We have carried out searches for listed companies with similar business nature and operations as the Business Enterprise with reference to the following selection criteria:

• The companies are principally engaged in the air ticketing and hotel reservation businesses;

• The trading history of the companies is sufficiently long; and

• The financial information of the companies is available to the public.

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The price-to-earnings multiples of the listed companies were listed as follows:

			Principal	Price-to-
	Stock		Place of	Earnings
Company Name	Code	Company Description	Business	Multiple
China
eLong Inc.	LONG.US	eLong Inc. is an independent	China	69.60
		travel service company with a
		national presence across the
		Peoples’ Republic of China. It
		uses web-based distribution
		technologies and a 24-hour
		nationwide call center to provide
		consumers with travel information,
		and the ability to access hotel
		reservations at discounted rates at
		hotels in major cities across the
		country.
Ctrip.com	CTRP.US	Ctrip.com International, Ltd. is a	China	17.73
International,		consolidator of hotel
Ltd.		accommodations and airline
		tickets in China.
Europe &
America
Region
Travelzoo Inc.	TZOO.US	Travelzoo Inc. provides online	North	15.67
		marketing solutions to the travel	America
		industry. The Company publishes
		deals from travel, entertainment,
		and local companies. It researches,
		evaluates, and tests numerous
		deals and recommends deals
		whose accuracy and availability
		can be confirmed.
Expedia, Inc.	EXPE.US	Expedia, Inc. provides branded	United	12.83
		online travel services for leisure	States
		and small business travelers. It
		offers a wide range of travel
		shopping and reservation services,
		providing real-time access to
		schedule, pricing and availability
		information for airlines, hotels,
		and car rental companies.

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			Principal	Price-to-
	Stock		Place of	Earnings
Company Name	Code	Company Description	Business	Multiple
Priceline.com	PCLN.US	Priceline.com Incorporated enables	United	25.19
Incorporated		consumers to use the Internet to	States
		save money on a variety of
		products and services. Its product
		allows customers to name their
		own price on products or services
		and communicates that demand
		directly to participating sellers or
		to their private databases.
		Participants include domestic and
		international airlines, and hotel
		chains.
Globalink Ltd.	GOBK.US	Globalink Ltd. offers travel	United	31.82
		services over the Internet.	States
Orbitz Worldwide,	OWW.US	Orbitz Worldwide, Inc. offers	United	N/A
Inc.		travel services over the internet.	States
		The company’s website offers
		airline ticket, hotel reservation,
		vacation package, car rental,
		cruise, travel insurance, ground
		transportation, event ticket and
		tour bookings.
Travelplanet.pl SA	TVL.PW	Travelplanet.pl SA offers travel	Poland	297.25
		services over the Internet.
East Asia Region
Star travel Corp.	2719.TT	Star travel Corp. provides travel	Taiwan	49.21
		services over the Internet. Its
		website offers travel information
		search and tour booking. It also
		provides travel e-business
		technology and consulting
		services.
Ikyu Corporation	2450.JP	Ikyu Corporation provides online	Japan	21.53
		travel services for high end hotel,
		Japanese inn reservation and
		restaurant reservation. It also
		operates an auction website and a
		website that looks up conference
		and banquet rooms.

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			Principal	Price-to-
	Stock		Place of	Earnings
Company Name	Code	Company Description	Business	Multiple
H.I.S. Co., Ltd.	9603.JP	H.I.S. Co., Ltd. is a travel agency	Japan	9.30
		dealing with overseas bookings,
		package tours, and air courier
		services. The Company also sells
		discount airline tickets.
Other Region
MakeMyTrip Ltd.	MMYT.US	MakeMyTrip Ltd. offers travel	India	99.24
		services over the Internet. The
		Company operates websites that
		allow travelers to research and
		plan trips and book airline tickets,
		hotels, packages, rail tickets, bus
		tickets, and rental cars. It also
		offers access to travel insurance.
International	ITR.IN	International Travel House	India	7.60
Travel House		Limited specializes in travel and
Limited		tourism related business. The
		group generates revenue through
		the sale of airline tickets, hotel
		reservations, traveler’s checks and
		tour packages.
Asiatravel.com	AST SP	Asiatravel.com Holdings Limited	Singapore	N/A
Holdings		provides hotel and travel
Limited		reservation services through
		websites on the Internet and travel
		offices throughout Asia. It also
		provides website membership,
		tours and transportation packages,
		and electronic-commerce,
		technical and consultancy service.
Wotif.com	WTF.AU	Wotif.com Holdings Ltd. provides	Australia	15.23
Holdings Ltd.		online travel services. Its website
		offers last-minute travel
		accommodation. Its portfolio
		includes hotels, motels, serviced
		apartments, resorts, guesthouses,
		and bed and breakfasts.

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			Principal	Price-to-
	Stock		Place of	Earnings
Company Name	Code	Company Description	Business	Multiple
Webjet Limited	WEB.AU	Webjet Limited provides branded	Australia	20.50
		online travel services for travelers.
		It offers one-stop travel shopping
		and reservation services, providing
		real-time access to schedule,
		pricing, and availability
		information for airlines hotels, and
		major car rental companies.

Source: Bloomberg

The range of the price-to-earnings multiples of the above listed companies was diverse and the median price-to-earnings multiple was 21.02. For those listed companies with principal businesses in the regions of Asia, the median price-to-earnings multiple was 21.53. Given the relative shorter operating history and smaller business scale of the Business Enterprise, we have adopted those listed companies from different regions with the lowest price-to-earnings ratios within the same region as the comparable companies. In addition, we also select listed companies with business scope and background similar to the Business Enterprise. We could only locate two listed companies engaged in air ticketing and hotel reservation businesses in the PRC, namely eLong Inc. and Ctrip.com. Among the listed companies with principal places of businesses within Europe and America, Orbitz Worldwide, Inc. (Stock Code: OWW.US) was considered as more comparable to the Business Enterprise, since it was principally engaged in online travel services, while other listed companies had diversified business activities including marketing, leisure, merchant sales and logistics services. Therefore, Orbitz Worldwide, Inc. (Stock Code: OWW.US) was adopted as the comparable company from the Europe and America category instead of Expedia, Inc. despite it provides no price-to-earnings multiple for reference.

Based on the above and the fact that the principal place of business of the Business Enterprise is in China, four of the above sixteen listed companies, namely H.I.S. Co., Ltd. (Stock Code: 9603.JP), Ctrip.com International, Ltd. (Stock Code: CTRP.US), International Travel House Limited (Stock Code: ITR.IN), and Orbitz Worldwide, Inc. (Stock Code: OWW.US) were adopted as comparable companies and their median price-to-earning multiple was 9.30. Given the median price-to-earnings multiple of the comparable companies of 9.30 was significantly lower and was at the lower end of the range of the price-to-earnings multiples of the listed companies, we considered that the median price-to-earnings multiple of the comparable companies of 9.30 was reasonable and therefore we have adopted the median price-to-earnings multiple of the comparable companies of 9.30 in this valuation.

We have adopted the adjusted net profit of the Business Enterprise based on the financial information of the Business Enterprise as at 31 August 2012. Based on the management accounts of the Business Enterprise as provided by the Management, the actual revenue from 1 March 2012 to 31 August 2012 was RMB 17,653,016. The projected revenue

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from 1 September 2012 to 28 February 2013 would be RMB 18,912,951, based on information of negotiating and projected sales contracts as provided by the Management. Therefore, the adjusted annual revenue was RMB 36,565,967.

By applying the actual gross margin of 99.7%, the adjusted annual gross profit was RMB 36,454,470. The operating profit was obtained with reference to the actual and projected selling expense, management expense and finance expense, arriving at RMB 25,152,298.

Accounting for the actual non-operating incomes and expenses, and the income tax expense estimated by adopting the China corporate tax rate of 25.00%, the adjusted annual net profit was RMB 18,852,988. Since the adjusted annual net profit covered the period between 1 March 2012 and 28 February 2013, the adjusted net profit was discounted at the weighted average cost of capital (“WACC”) of the Business Enterprise of 16.23%, the adjusted net profit adopted was RMB 17,497,740 as at the Date of Valuation.

To arrive at the WACC of the Business Enterprise, the risk-free rate adopted was China 10-year government bond yield of 3.39% as at the Date of Valuation as extracted from Bloomberg. The market expected return of China of 14.29% as at the Date of Valuation as extracted from Bloomberg was adopted to arrive at the market risk premium of 10.90%. The beta coefficient of 0.48 adopted was the average of the beta coefficients of the aforementioned comparable companies. By adding a size premium of 3.89% and other risk premium of 4.00%, the cost of equity adopted was 16.55%. The cost of debt of 6.55% adopted was China above 5-year best lending rate as at the Date of Valuation as extracted from Bloomberg. The debt-to-equity ratio of 2.80% adopted was the average ratios of the aforementioned comparable companies. With China corporate tax rate of 25.00%, we arrived at the WACC of 16.23% as at the Date of Valuation.

Then we applied the median price-to-earnings multiple of 9.30 to the adjusted net profit of the Business Enterprise.

� Marketability Discount

Compared to similar interest in public companies, ownership interest is not readily marketable for closely held companies. Therefore, the value of a share of stock in a privately held company is usually less than an otherwise comparable share in a publicly held company. A discount for lack of marketability (“DLOM”) is an amount or percentage deducted from the value of an ownership interest to reflect the situation of no ready market for the ownership interest in a privately held company.

To estimate the DLOM, a put option pricing model was adopted, which is based on the theory that an investor would need to hedge his position in the underlying stock at a future price to protect his or her investment. This method is based on the idea that if one holds restricted or non-marketable stock and purchases an option to sell those shares at the market price, one has, in effect, purchased marketability for the shares. Thus, the price of the put option divided by the pre-adjusted fair value of the Business Enterprise is the DLOM of the Business Enterprise. The price of the put option was obtained from the dividend-adjusted

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APPENDIX IV

Black Scholes option pricing model, by adopting the average annualized volatility of the comparable companies and assuming a marketing period of approximately 0.5 year. As such, the DLOM adopted in the valuation was 12.25%.

� Control Premium

In addition, as we are considering the market value of the Business Enterprise from the perspective of controlling interest, a control premium of 30% has been adopted to reflect the higher marketability of a controlling interest compared to a minority interest, with reference to an internationally recognized research article “Why Is the Value of Minority Stock Discounted So Heavily” by Larson Allen, in arriving at the market value of the Business Enterprise as at the Date of Valuation.

MAJOR ASSUMPTIONS

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

• All relevant legal approvals and business certificates or licences to operate the business in the localities in which the Business Enterprise operates or intends to operate would be officially obtained and renewable upon expiry.

• The Business Enterprise will be operating as planned.

• The projected revenue, which is determined based on the number and amounts of negotiating and estimated new contracts, and which is considered to be fair and reasonable, will be materialized.

• There will be a sufficient supply of technical staff in the industry in which the Business Enterprise operates.

• The Business Enterprise will retain competent management, key personnel and technical staff to support its ongoing operations and developments.

• There will be no major changes in the current taxation laws in the localities in which the Business Enterprise operates or intends to operate and that the rates of tax payable shall remain unchanged and that all applicable laws and regulations will be complied with.

• There will be no major changes in the political, legal, economic or financial conditions in the localities in which the Business Enterprise operates or intends to operate, which would adversely affect the revenues attributable to and profitability of the Business Enterprise.

• Interest rates and exchange rates in the localities for the operation of the Business Enterprise will not differ materially from those presently prevailing.

– 88 –

VALUATION REPORT ON SHENZHEN TAOAOTO

APPENDIX IV

LIMITING CONDITIONS

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

• Financial statements of the Business Enterprise;

• Historical information of the Business Enterprise;

• Market trends of the air ticketing industry and other dependent industries;

• General descriptions in relation to the Business Enterprise; and

• Economic outlook in China.

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

LIMITING CONDITIONS

This valuation reflects facts and conditions existing at the Date of Valuation. Subsequent events or circumstances have not been considered and we are not required to update our report for such events and conditions. To the best of our knowledge, all data set forth in this report are reasonable and accurately determined. The data, opinions, or estimates identified as being furnished by others which have been used in formulating this analysis are gathered from reliable sources; yet, no guarantee is made nor liability assumed for their accuracy.

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

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

We have not investigated the title to or any legal liabilities against the Business Enterprise. We have assumed no responsibility for the title to the business entity appraised.

– 89 –

VALUATION REPORT ON SHENZHEN TAOAOTO

APPENDIX IV

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

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

No change to any item in any part of this report shall be made by anyone except B.I. Appraisals. We have no responsibility for any such unauthorized change. Neither all nor any part of this report shall be disseminated to the public through any means of communication or referenced in any publications, including but not limited to advertising, public relations, news or sales media.

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

The working papers and models for this valuation are being kept in our files and would be available for further references. We would be available to support our valuation if required.

CURRENCY

Unless otherwise stated, all monetary amounts stated in this valuation report are in Renminbi (RMB).

REMARKS

We hereby confirm that we have neither present nor prospective interests in the Company, the Business Enterprises, its holding companies, subsidiaries and associated company, or the value reported herein.

– 90 –

VALUATION REPORT ON SHENZHEN TAOAOTO

APPENDIX IV

OPINION OF VALUE

Based on the investigation and analysis stated above and on the valuation method employed, we are of the opinion that the market value of the 100% equity interest in the Business Enterprise as at 31 August 2012 was reasonably stated by the amount of RMB186,000,000 (RENMINBI ONE HUNDRED AND EIGHTY SIX MILLION ONLY).

Yours faithfully,

For and on behalf of

B.I. APPRAISALS LIMITED William C. K. Sham

Registered Professional Surveyor (G.P.) Registered Business Valuer China Real Estate Appraiser MRICS, MHKIS, MCIREA Executive Director

– 91 –

LETTER FROM FINANCIAL ADVISER ON VALUATION REPORT

APPENDIX V

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The Board of Directors Tai Shing International (Holdings) Limited 21/F, Malahon Centre 10-12 Stanley Street Hong Kong

28 February 2013

Dear Sirs,

We refer to the circular of Tai Shing International (Holdings) Limited (the “ Company ”) dated 28 February 2013 in relation to the Acquisition which constitutes a major transaction under the GEM Listing Rules (the “ Circular ”). Unless otherwise defined or if the context otherwise requires, all terms defined in the Circular shall have the same meaning when used in this letter.

Fortune Financial Capital Limited (“ FFC ”) hereby confirms that it has reviewed and discussed with the Company, the bases and assumptions adopted in the business valuation of 100% equity interest of Shenzhen Taoaoto (the “ Valuation ”) prepared by B.I. Appraisals Limited, the independent valuer of the Company (the “ Independent Valuer ”), of which profits projection of Shenzhen Taoaoto is involved, therefore the Valuation constitutes profit forecast (the “ Profit Forecast ”) in the course of their work, and has satisfied itself that the bases and assumptions, including, profits projection of Shenzhen Taoaoto (including the revenue projection for arriving at profits projection of Shenzhen Taoaoto) and price-to-earnings multiples adopted for arriving at the Valuation, have been made with due care and objectivity, and on a reasonable basis and that the Profit Forecast has been made by the Directors after due and careful enquiry.

We have not independently verified the computations leading to the Independent Valuer’s determination of the fair value and market value of Shenzhen Taoaoto. We have had no role or involvement and have not provided and will not provide any assessment of the fair value and market value of Shenzhen Taoaoto. Accordingly, save as expressly stated in this letter, we take no responsibility for and express no views, whether expressly or implicitly, on the fair value and market value of Shenzhen Taoaoto as determined by the Independent Valuer and set out in the valuation report issued by the Independent Valuer or otherwise.

FFC further confirms that the assessment, review and discussion carried out by it as described above are primarily based on financial, economic, market and other conditions in effect, and the information made available to us as of the date of this letter and that it has, in arriving at its views, relied on information and materials supplied to it by the Independent Valuer, the Group and Shenzhen Taoaoto and opinions expressed by, and representations of, the employees and/or management of the Independent Valuer, the Group and Shenzhen

– 92 –

LETTER FROM FINANCIAL ADVISER ON VALUATION REPORT

APPENDIX V

Taoaoto. We have assumed that all information, materials and representations so supplied, including all information, materials and representations referred to or contained in the Circular, for which the Directors are wholly responsible, were true, accurate, complete and not misleading at the time they were supplied or made, and remained so up to the date of the Circular and that no material fact or information has been omitted from the information and materials supplied. No representation or warranty, expressed or implied, is made by FFC on the accuracy, truth or completeness of such information, materials, opinions and/or representations. Circumstances could have developed or could develop in the future that, if known to FFC at the time of this letter, would have altered our respective assessment and review. Further, while the qualifications, bases and assumptions adopted by the Independent Valuer are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company and the Independent Valuer.

FFC is acting as financial adviser to the Company in reviewing the Profit Forecast and will receive fees for such advice. FFC and its directors and affiliates will, neither jointly or severally, be responsible to anyone other than the Company for providing advice in connection with the review of the Profit Forecast, nor will FFC, its directors or affiliates, whether jointly or severally, owe any responsibility to anyone other than the Company.

Nothing in this letter should be construed as an opinion or view as to the fair value, market value or any other value of Shenzhen Taoaoto or as an opinion or recommendation to any person as to whether they should acquire Shares or as to how to vote on the Acquisition, the SP Agreement, or other incidental or ancillary documents. Shareholders are recommended to read the Circular with care.

A copy of this letter in its entirety may be reproduced in the circular to be dispatched to the Shareholders on the basis that none of the Company, the Independent Valuer or any other person may reproduce, disseminate or quote this letter (or any part thereof) for any other purpose at any time and in any manner without our prior written consent. In the event of inconsistency, the English text of this letter shall prevail over the Chinese translation of this letter.

Yours faithfully, Fortune Financial Capital Limited

– 93 –

LETTER FROM REPORTING ACCOUNTANT ON VALAUTION REPORT

APPENDIX VI

28 February 2013

The Board of Directors Tai Shing International (Holdings) Limited 21/F Malahon Centre 10-12 Stanley Street Central HONG KONG

Dear Sirs,

Tai Shing International (Holdings) Limited (the “Company”) and its subsidiaries (collectively referred to herein as the “Group”) Comfort letter on Profit forecast of Triack Holdings Corporation (the “Target Company”) and its subsidiaries (collectively referred to herein as the “Target Group”)

We are writing to report on the extent to which we have reviewed the profit forecast of the Target Group for the period from 1 September 2012 to 28 February 2013 (the “Forecast”) to be included in the Company’s Circular dated 28 February 2013 (the “Circular”) issued by the Company in connection with the acquisition of entire share capital of the Target Company (the “Acquisition”). Terms defined in the Circular shall the same meanings when used herein.

It is understood that the Forecast will be used by an independent professional valuer appointed by the Company as the basis for business valuation of the Target Group and this letter is only for your information and for the information of the Company in connection with the Acquisition and that it will not be published, in whole or in part, or referred to in the Circular.

Our opinion was based on the Forecast of the Target Company, for which the director of the Target Company is solely responsible, which were complied on the basis of certain principal assumptions. We conducted our work in accordance with Audit Guideline 3.341 “Accountants’ report on profit forecast” issued by the Hong Kong Institute of Certified Public Accountants.

We have reviewed the history, background and business model of the Target Group. We have reviewed the accounting policies, which have been adopted by the Target Company in the preparation of the Forecast so as to ensure that those accounting policies are acceptable and have been consistently applied in the Forecast. We have reviewed the basis of assumptions, which have been made by the director of the Target Company in the preparation of the Forecast so as to ensure that those assumptions are accurate, reliable and supportable.

– 94 –

LETTER FROM REPORTING ACCOUNTANT ON VALAUTION REPORT

APPENDIX VI

In our opinion, the calculation and accounting policies of the Forecast are concerned, has been properly complied in accordance with the bases and assumptions adopted by the director of the Target Company, as set out in the valuation report to be included in Appendix IV to the Circular, and is presented on a basis consistent in all material respects with the accounting policies currently adopted by the Target Company as set out in Note 2 of the Accountants’ Report dated 28 February 2013, the text of which is set forth in Appendix II to the Circular.

Your faithfully, Elite Partners CPA Limited Certified Public Accountants Hong Kong Yip Kai Yin

Practising Certificate Number: P05131

– 95 –

GENERAL INFORMATION

APPENDIX VII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. SHARE CAPITAL OF THE COMPANY

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

Authorised: 4,000,000,000 ordinary shares of HK$0.05 each Issued and fully paid or credited as fully paid: 639,938,145 ordinary shares of HK$0.05 each	HK$ 200,000,000.00
	HK$ 31,996,907.25

Immediately after Completion and upon full conversion of the Convertible Bonds at the Conversion Price, the authorised and issued share capital of the Company will be as follows:

Authorised: 4,000,000,000 ordinary shares of HK$0.05 each Issued and fully paid or credited as fully paid: 639,938,145 Shares as at Latest Practicable Date 485,714,285 Conversion Shares to be issued upon full conversion of the Convertible Bonds 1,125,652,430 Total	HK$ 200,000,000.00
	HK$ 31,996,907.25 24,285,714.25 56,282,621.50

All Shares currently in issue and the Conversion Shares rank pari passu in all respects with each others, including, in particular, as to dividends, voting rights and return of capital.

– 96 –

GENERAL INFORMATION

APPENDIX VII

3. DISCLOSURE OF INTERESTS

Interests of directors

As at the Latest Practicable Date, the interests and short positions of the Directors or the chief executive of the Company in the shares, underlying shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long positions in the Shares

				Approximate
			Number of	% of total
	Capacity/nature	Number of	underlying	issued share
Name	of interest	shares	shares	capital
Ip Ho Ming	Beneficial owner	100,000	–	0.016%

Save as aforesaid, as at the Latest Practicable Date, none of the Directors or 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 or its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX VII

Interest of substantial shareholders

As far as was known to any Director or chief executive of the Company, as at the Latest Practicable Date, the persons or companies (not being a Director or chief executive of the Company) who had interests or short positions in the Shares or underlying Shares which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly deemed to be interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group were as follows:

Long positions in the Shares

				Approximate
			Number of	% of total
	Capacity/nature	Number of	underlying	issued share
Name	of interest	shares	shares	capital
Wong Kwong Chau	Beneficial owner	1,500,000	60,000,000	9.61%
(Note)

Note: Yu Po Sau, being the spouse of Wong Kwong Chau, is also deemed to be interested in such shares.

Save as aforesaid, as at the Latest Practicable Date, the Directors were not aware of any other person who had an interest or short positions in the Shares or underlying Shares which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or who was interested in 5% or more of the nominal value of any class of share capital, or options in respect of such capital, carrying rights to vote in all circumstances at general meetings of the Company.

4. LITIGATION

On 12th March 2012, a High court Action No.1861 of 2011 was commenced by Joint China Value Investment Fund Limited (the “Plaintiffs”) against the Company for a dishonoured cheque in the amount of HK$16,500,000 issued by the Company.

On 19th April 2006, a High court Action No. 858 of 2006 was commenced by Chan Kar Kui, Wong Calvin Ting Chi, Chan Wai Phan, Chan Man Wan and Kwok King Chuen (the “Plaintiffs”) against the Company for specific performance of the agreement entered into between the Plaintiffs and the Company’s former director, To Cho Kei, on behalf of the Company, in around May/June 2000 to purchase from the Plaintiffs all their shareholdings in Epplication.Net Limited (“Epplication.Net”) at a consideration of HK$6,800,000, being twice of the actual amount that the Plaintiffs expended on Epplication. Net by way of transfer or allotment of the shares of the Company of the equivalent value, or alternatively, damages with interests and costs.

Save as aforesaid, as at the Latest Practicable Date, there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Enlarged Group.

– 98 –

GENERAL INFORMATION

APPENDIX VII

5. SERVICE CONTRACTS

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

6. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors or management shareholder or their respective associates had any business or interest which competes or may compete with the business of the Group, or have or may have any other conflicts of interest with the Group.

7. OTHER INTERESTS OF THE DIRECTORS

As at the Latest Practicable Date:

• (a) none of the Directors had any interest, either direct or indirect, in any assets which have, since 31 March 2012 (being the date to which the latest published audited accounts of the Group were made up), been acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group; and

• (b) none of the Directors was materially interested in any contract or arrangement entered into by any member of the Enlarged Group which is subsisting as at the date of this circular and is significant in relation to the business of the Enlarged Group.

8. MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business of the Enlarged Group) have been entered into by the members of the Enlarged Group after the date of two years immediately preceding the date of this circular, and up to the Latest Practicable Date, and are or may be material:

• (1) the sale and purchase agreement entered into between the Company and Wang Yu Sha dated 11 February 2011 relating to acquisition of the 20% registered capital of 上海萬全保險經紀有限公司 (Shanghai Wanquan Insurance Brokers Limited) at a consideration of HK$30 million;

• (2) the placing agreement entered into between the Company and Kingsway Financial Services Group Limited on 27 April 2011 relating to the placing of up to 439,690,000 Shares;

• (3) the addendum to memorandum of understanding entered into between the Company and the beneficial owner of Fame Thrive Limited dated 6 May 2011 relating to the payment of HK$20 million earnest money;

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GENERAL INFORMATION

APPENDIX VII

• (4) the addendum to memorandum of understanding entered into between the Company and Gold Tycoon Limited dated 17 May 2011 relating to the payment of HK$25 million earnest money;

• (5) the sale and purchase agreement entered into between 鑫約福（上海）貿易有限公司 (Fullmark (Shanghai) Trading Company Limited) and Fei Luxi dated 24 June 2011 relating to the acquisition of 51% in 青島博達保險經紀有限公司 (Qingdao Boda Insurance Brokerage Company Limited) at a consideration of HK$33 million;

• (6) the sale and purchase agreement entered into between the Company and Liang Zhou Hui and Chen Nan dated 2 September 2011 relating to the acquisition of 100% Joint Bridge Investments Limited at a consideration of HK$40 million;

• (7) the placing agreement entered into between the Company and Metro Capital Securities Limited on 23 November 2011 relating to the placing of up to 12,820,000 Shares;

• (8) the placing agreement entered into between the Company and Grand Vinco Capital Limited on 18 January 2012 relating to the placing of Warrants to subscribe up to HK$10,902,200 for the Shares;

• (9) the subscription agreement entered into between the Company and Wong Kwong Chau on 19 April 2012 relating to the subscription of Convertible Note in the principal amount of HK$15,000,000;

• (10) the placing agreement entered into between the Company and Huatai Financial Holdings (Hong Kong) Limited on 6 July 2012 relating to the placing of up to 260,000,000 Shares;

• (11) the placing agreement entered into between the Company and Heng Shan Securities Limited on 4 October 2012 relating to the placing of up to 63,000,000 Shares;

• (12) the SP Agreement;

• (13) the placing agreement entered into between the Company and Heng Shan Securities Limited on 13 December 2012 relating to the placing of up to 24,000,000 Shares;

• (14) the placing agreement entered into between the Company and Heng Shan Securities Limited on 28 December 2012 relating to the placing of up to 250,000,000 Shares and 64,600,000 unlisted warrants.

– 100 –

GENERAL INFORMATION

APPENDIX VII

9. EXPERT AND CONSENT

The followings are the names and the qualifications of the professional advisers who have given opinions or advice which are contained or referred to in this document:

Name Qualification

Fortune Financial Capital Limited A licensed corporation to carry on type 6 (advising on corporate finance) regulated activity under the SFO

Elite Partners CPA Limited

Certified Public Accountants

B. I. Appraisals Limited

Registered Business Valuer

As at the Latest Practicable Date, each of Elite Partners CPA Limited, Fortune Financial Capital Limited and B. I. Appraisals Limited had no beneficial interest in the share capital of any member of the Enlarged Group nor any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group or have any interest, either directly or indirectly, in any assets which have been, since 31 March 2012, being the date to which the latest published audited consolidated accounts of the Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group. Each of Elite Partners CPA Limited, Fortune Financial Capital Limited and B. I. Appraisals Limited has given and has not withdrawn its written letters of consent to the issue of this circular with the inclusion herein of references to its name in the form and context in which they appear.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (i.e. from 9:30 a.m. to 6:00 p.m. on Monday to Friday) at the principal place of business of the Company in Hong Kong at 21/F, Malahon Centre, 10-12 Stanley Street, Hong Kong from 28 February 2013, the date of this circular up to and including 18 March 2013:

• (a) the memorandum and articles of association of the Company;

• (b) the annual reports of the Company for the year ended 31 March 2010, 31 March 2011 and 31 March 2012;

• (c) the accountants’ report on the Target Group set out in Appendix II to this circular;

• (d) the accountants’ report on the unaudited pro forma financial information of the Enlarged Group set out in Appendix III to this circular;

• (e) the Valuation Report set out in Appendix VI to this circular;

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GENERAL INFORMATION

APPENDIX VII

• (f) the letter from Fortune Financial Capital Limited on the Valuation Report set out in Appendix V to this circular;

• (g) the letter from Elite Partners CPA Limited on the Valuation Report set out in Appendix VI to this circular;

• (h) the letters of consent referred to under the paragraph headed “Expert and Consents” in this Appendix;

• (i) the material contracts disclosed in the paragraph under the heading “Material Contracts” in this Appendix.

11. GENERAL

• (a) The compliance officer of the Company is Mr. Liu Bo. Mr. Liu holds a Master of Business Administration from the University of Birmingham and has held various senior positions in the fields of marketing, business strategies and corporate management.

• (b) The company secretary of the Company is Mr. Young Wai Ching, who is a practising member of the Hong Kong Institute of Certified Public Accountants and a member of the Chartered Association of Certified Accountants of the United Kingdom. He has over 16 years working experience in an accounting firm in Hong Kong performing auditing and management functions.

• (c) The registered office of the Company is located at Cricket Square, Hutchins Drive, P. O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

• (d) The head office of the Company is located at 21/F, Malahon Centre, 10-12 Stanley Street, Hong Kong.

• (e) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (f) The Company’s audit committee (“Audit Committee”) comprises of three independent non-executive Directors, namely, Mr. Chan Yee Sze (chairman), Mr. Xu Jingbin and Ms. Hu Yun.

Mr. Chan Yee Sze, aged 37, holds a Bachelor of Arts in Accountancy from Hong Kong Polytechnic University. Mr. Chan is a certified public accountant and the sole proprietor of Stephen YS Chan & Co, which is a firm of certified public accountants. He is a member of Hong Kong Institute of Certified Public Accountants. Mr. Chan has over 14 years of experience in the field of auditing, accounting as well as financial management.

– 102 –

GENERAL INFORMATION

APPENDIX VII

Mr. Xu Jingbin, aged 32, has passed several securities-related examinations organized by the Securities Association of China（中國證券業協會）and the China Futures Association（中國期貨業協會）and has extensive management experience.

Ms. Hu Yun, aged 32, holds a degree of Bachelor of Business Studies from Massey University of New Zealand and has extensive management experience.

The primary duties of the Audit Committee are:

• (i) to consider the appointment of the external auditor, the performance of the external auditors, the audit fee and any questions of resignation or dismissal of the external auditor;

• (ii) review with the Group’s management, external auditors and internal auditors, the adequacy of the Group’s policies and procedures regarding internal controls (including financial, operational and compliance controls) and any statement by the directors on such system to be included in the annual accounts prior to endorsement by the Board;

• (iii) have familiarity, through the individual efforts of its members, with the financial reporting principles and practices applied by the Group in preparing its financial statements;

• (iv) prior to its commencement, review the scope of the external audit, including the engagement letter. The Committee’s review should include an understanding, from the external auditors of the factors considered by them in determining their audit scope. The external auditors’ fees are to be negotiated with management, and presented to the Committee’s review annually;

• (v) review the extent of non-auditservices provided by the external auditors in relation to their independence;

• (vi) review the interim report and annual report prior to approval by the Board, with particular focus on:

• (1) any changes in accounting policies and practices;

• (2) major judgmental areas;

• (3) significant adjustments resulting from the audit;

• (4) compliance with accounting standards;

• (5) compliance with the listing requirements of The Stock Exchange of Hong Kong Limited and legal requirements;

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GENERAL INFORMATION

APPENDIX VII

• (6) the fairness and reasonableness of any connected transaction and the impact of such transaction on the profitability of the Group;

• (7) whether all relevant items have been adequately disclosed in the Group’s financial statements and whether the disclosures give a fair view of the Group’s financial conditions;

• (8) The cash flow position of the Group; and

• (9) to provide advice and comments there on to the Board.

• (vii) review the draft representation letter prior to approval by the Board;

• (viii) review and consider the budget, revised budget prepared by the Board;

• (ix) evaluate the cooperation received by the external auditors, including their access to all requested records, data and information; obtain the comments of management regarding the responsiveness of the external auditors to the Group’s needs; inquire of the external auditors as to whether there have been any disagreements with management which if not satisfactorily resolved would result in the issue of a qualified report on the Group’s financial statements;

• (x) discuss with the external auditors any relevant recommendations arising from the audit; and review the draft management letter including management’s response to the points raised;

• (xi) when the auditors supply a substantial volume of non-audit services to the Group, to keep the nature and extent of such services under review, seeking to balance the maintenance of objectivity and value for money;

• (xii) discuss with management the scope and quality of systems of internal control and risk management;

• (xiii) appraise the Board of significant developments in the course of performing the above duties;

• (xiv) recommend to the Board any appropriate extensions to, or changes, in the duties of the Committee;

• (xv) review the findings of internal investigations into any suspected frauds or irregularities or failures of internal controls or infringement of laws, rules and regulations and management’s response;

• (xvi) (where an internal audit function exists) review the internal audit program, ensure co-ordination between the internal and external auditors, and ensure that the internal audit function is adequately resourced and has appropriate standing within the Group; and

• (xvii) consider other topics, as defined or assigned by the Board from time to time.

– 104 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

Tai Shing International (Holdings) Limited 泰盛國際（控股）有限公司[*]

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8103)

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting of Tai Shing International (Holdings) Limited (“ Company ”) will be held at 10:00 a.m. on 18 March 2013 at 21/F, Malahon Centre, 10-12 Stanley Street, Hong Kong to consider and, if thought fit, approve the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

• (a) the conditional sale and purchase agreement (the “ SP Agreement ”) as defined in the circular dated 28 February 2013 despatched to the shareholders of the Company (the “ Circular ”), a copy of the SP Agreement has been produced to this meeting marked “A” and signed by the chairman hereof for the purpose of identification, and all the transactions contemplated thereby be and are hereby approved, confirmed and ratified;

• (b) the issue of the Convertible Bonds (as defined in the Circular) in accordance with the terms of the SP Agreement be and are hereby approved;

• (c) the issue and allotment by the Company of new shares in the capital of the Company from time to time upon exercise of the conversion rights under the Convertible Bonds (as defined in the Circular) be and are hereby approved;

• (d) any one director of the Company be and is hereby authorised to do all such acts and things as he in his sole and absolute discretion deems necessary, desirable or expedient to implement, give effect to and/or complete the SP Agreement and the transactions contemplated thereunder, including without limitation the issue of the Convertible Bonds, the issue and allotment of new shares in the capital of the Company from time to time upon exercise of the conversion rights under the Convertible Bonds, and, where required, any amendment of the terms of the SP

• for identification purpose only

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Agreement and/or the Convertible Bonds as required by, or for the purposes of obtaining the approval of, relevant authorities or to comply with all applicable laws, rules and regulations.”

By order of the Board Tai Shing International (Holdings) Limited Liu Bo Chairman

Hong Kong, 28 February 2013

Registered Office: Head Office and Principal Place of Cricket Square Business in Hong Kong: Hutchins Drive 21/F, Malahon Centre P.O. Box 2681 10-12 Stanley Street Grand Cayman KY1-1111 Hong Kong Cayman Islands

Notes:

1. Any member of the Company entitled to attend and vote at the meeting may appoint one or more than one proxy to attend and to vote on his behalf. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any share, any one of such persons may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

3. To be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof must be delivered to the office of the branch share registrar of the Company, Computershare Hong Kong Investor Services Limited at Shop 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

4. Whether or not you propose to attend the meeting in person, you are strongly urged to complete and return the form of proxy in accordance with the instructions printed thereon. Completion and return of the form of proxy will not preclude you from attending the meeting and voting in person if you so wish. In the event that you attend the meeting after having lodged the form of proxy, it will be deemed to have been revoked.

5. In compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, the resolution to be proposed at the meeting convened by this notice will be voted on by way of poll.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

As at the date of this notice, the board of directors (“Directors”) of the Company comprises the following:

Executive Directors: Mr. Liu Bo (Chairman) Mr. Han Fangfa Ms. Ju Lijun Ms. Huang Miaochan Mr. Zhang Jinshu

Non-executive Director: Dr. Pan Jin Mr. Dai Yuanxin Ms. Xiao Yongzhen

Independent non-executive Directors: Mr. Chan Yee Sze Mr. Xu Jingbin Ms. Hu Yun Mr. Tan Heming

This notice, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this notice is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this notice misleading.

This notice will remain on the GEM website at http://www.hkgem.com on the “Latest Company Announcements” page for 7 days from the date of its posting and on the website of the Company.

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