hmvod Limited - Proxy Solicitation & Information Statement 2017

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 Trillion Grand Corporate Company Limited (the “ Company ”), you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

This circular appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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Trillion Grand Corporate Company Limited 萬泰企業股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8103)

MAJOR TRANSACTION AND RE-ELECTION OF DIRECTOR

A notice convening the extraordinary general meeting of the Company (the “ EGM ”) to be held at Tai Chi Room, 38/F, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on 28 April 2017 at 9:00 a.m. is set out on pages 105 to 106 of this circular. Whether or not you intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible but in any event not less than 48 hours before the time scheduled for the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending or voting in person at the EGM or any adjourned meeting thereof should you so wish.

This circular 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 at http://www.trilliongrand.com. The English version will prevail in case of any inconsistency between the English and Chinese versions of this circular.

13 April 2017

CHARACTERISTICS OF THE GEM

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

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

– i –

			Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM	THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . .	35
APPENDIX II	–	FINANCIAL INFORMATION OF THE TARGET GROUP. . .	40
APPENDIX III	–	UNAUDITED PRO FORMA FINANCIAL
		INFORMATION OF THE ENLARGED GROUP. . . . . . . . .	65
APPENDIX IV	–	VALUATION REPORT OF THE SALE SHARES. . . . . . . . . .	71
APPENDIX V	–	LETTER IN RELATION TO PROFIT FORECAST . . . . . . . .	93
APPENDIX VI	–	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .	97
APPENDIX VII	–	DETAILS OF DIRECTOR PROPOSED
		FOR RE-ELECTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			105

– ii –

DEFINITIONS

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

“Acquisition” the acquisition of the Sale Shares by the Purchaser from the Vendor
“Agreement” the conditional sale and purchase agreement dated 30 December 2016 (as supplemented on 31 March 2017) entered into between the Purchaser and the Vendor in respect of the Acquisition
“Authorizer” Shantou Tourism Bureau*, the government department which is responsible for the tourism development in Shantou in the PRC
“Board” the board of Directors of the Company
“Build-Operate-Transfer Agreements”
the build-operate-transfer agreement dated 2 February 2013, as supplemented by the agreements dated 29 July 2016 and 1 August 2016, entered into by the Project Company A in relation to the development of the Project
“Business Day” any day (other than a Saturday, Sunday or public holiday) on which banks in Hong Kong are generally open for the transaction of normal business
“Company” Trillion Grand Corporate Company Limited (formerly known as Tai Shing International (Holdings) Limited), a company duly incorporated in the Cayman Islands with limited liability, whose shares are listed and traded on the GEM
“Completion” completion of the Acquisition pursuant to the terms and conditions of the Agreement
“Contractor”
Guangdong Province Dong Chu Construction Limited*
（廣東省東楚建設有限公司）
“Consideration”
HK$100,000,000, being the total consideration for the Sale Shares
“Corporate Governance Code”
the code set out in Appendix 15 of the GEM Listing Rules
“Designer” Guangdong New Chang An Construction Design Limited*（廣東新長安建築設計院有限公司）

– 1 –

DEFINITIONS

“Director(s)” the director(s) of the Company
“Enlarged Group” the Group upon Completion of the Acquisition
“EGM” extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving the Acquisition and any adjourned meeting(s) thereof
“GEM” The Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules” the Rules Governing the Listing of Securities on the GEM
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Hong Kong Subsidiary”
Allied Star Creation Limited
“Independent Third Party(ies)”
any person or company and their respective ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, are not connected persons of the Company and are third parties independent of the Company and its connected persons in accordance with the GEM Listing Rules
“Latest Practicable Date”
10 April 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information herein
“Long Stop Date”
31 May 2017 or such later date as the Vendor and the Purchaser may agree in writing
“PRC”
the People’s Republic of China
“Promissory Note”
the promissory note in the aggregate principal amount of HK$100,000,000
“Project”
Build-Operate-Transfer Project of Shantou City Chaoren Port Cultural Park*（汕頭市潮人碼頭文化公園特許經營項目）

– 2 –

DEFINITIONS

“Project Company A” Shantou City Li Chao Tourism Development Limited* （汕頭市麗潮旅遊開發有限公司）
“Project Company B” Shantou City Chaoren Port Yacht Club Limited*（汕頭市潮人碼頭遊艇俱樂部有限公司）
“Property Manager” Lask Vigers Asset Management Limited “Purchaser” Jovial Tycoon Holdings Limited, a company incorporated in the British Virgin Islands and is wholly owned by the Company
“RMB” Renminbi, the lawful currency of the PRC “Sale Shares” 2 ordinary shares of US$1 each in the capital of the Target Company, representing 20% of entire issued capital of the Target Company
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” ordinary share(s) of HK$0.001 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s) “Shareholders’ Agreement” the shareholders’ agreement to be entered into by the Vendor, the Purchaser and the Target Company upon Completion
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Target Company” Billion Ray Investments Limited
“Target Group” the Target Company and its subsidiaries including the HK Subsidiary, the Project Company A and the Project Company B
“US$” United States dollar “Vendor” Sminent International Limited

In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

For identification purpose. English names of the PRC companies and entities in this circular are only literal translation of their official Chinese names.

– 3 –

LETTER FROM THE BOARD

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Trillion Grand Corporate Company Limited 萬泰企業股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8103)

Executive Directors: Mr. Lau Kelly (Chief Executive Officer) Mr. Leung Chung Nam Mr. Wong Kam Kwan

Non-executive Director: Ms. Jim Ka Man

Independent Non-executive Directors:

Dr. Wan Ho Yuen, Terence Ms. Yeung Mo Sheung, Ann Mr. Hau Chi Kit

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

Head office and principal place of business in Hong Kong: Unit B, 29/F CKK Commercial Centre 289-295 Hennessy Road Wanchai Hong Kong 13 April 2017

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION AND RE-ELECTION OF DIRECTOR

INTRODUCTION

Reference is made to the announcements of the Company dated 30 December 2016, 27 January 2017, 17 February 2017, 13 March 2017 and 31 March 2017 in relation to the Acquisition and the announcement of the Company dated 5 January 2017 in relation to appointment of an executive Director. The purpose of this circular is to provide you with further information regarding the Acquisition and more information of the executive Director proposed for re-election, and to give notice of the EGM.

On 30 December 2016 (after trading hours), the Purchaser and the Vendor entered into the Agreement, pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Shares at the Consideration of HK$100,000,000. The Consideration will be satisfied by issuance of the Promissory Note to the Vendor by the Company upon Completion.

– 4 –

LETTER FROM THE BOARD

THE AGREEMENT

Date:

30 December 2016 (as supplemented on 31 March 2017)

Parties: the Purchaser; and

the Vendor.

The Vendor is a company incorporated in the Marshall Islands, whose principal business is investment holding. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor and its ultimate beneficial owners are Independent Third Parties.

Assets to be acquired

Pursuant to the Agreement, the Purchaser has conditionally agreed to purchase and the Vendor has conditionally agreed to sell the Sale Shares, being 2 ordinary shares of US$1.00 each in the capital of the Target Company which representing 20% of its entire issued share capital.

Consideration

The Consideration for the Sale Shares is HK$100,000,000, which will be satisfied by the issuance of the Promissory Note to the Vendor (or its nominee) by the Company upon Completion.

The Consideration was determined after arm’s length negotiation between the parties with reference to the fair value of the Sale Shares amounted to HK$101,000,000 as of 30 November 2016 as assessed by Access Partner Consultancy & Appraisals Limited, an independent valuer appointed by the Company, based on income approach. Further information of compliance with Rule 19.62 of the GEM Listing Rules has been included in the Appendice IV and V to this circular.

As extracted from the valuation report in the Appendix IV to this circular, the following assumptions have been adopted by Access Partner Consultancy & Appraisals Limited to sufficiently support the conclusion of value, including, but not limited to:

General Market Assumptions

There will be no major changes in the political, legal, fiscal, technological, economic and market conditions in the localities in which the Target Group operates or intends to operate, which would adversely affect the revenues attributable to and profitability of the Target Group;

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LETTER FROM THE BOARD

There will be no major changes in the current taxation laws in the localities in which the Target Group 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 material changes in the relevant market return, market risk and exchange rates that would impact the Target Group’s business operation;
There will be no material changes in the Exclusive Right granted by the Shantou government that would impact the Target Group’s business operation;
There will be no material changes in the number of tourists travelling to Shantou that would impact the Target Group’s business operation;
There will be no material changes regarding the outlook of the shopping malls located near the Project operate by the Target Group;
The membership fees, admission fees of the marina club and the museum operate by the Target Group will not differ materially from those of present or expected;
The facilities surrounding the Project location will not differ materially from those of expected;
The rental fees of the shopping malls operated by the Target Group will not differ materially from those of present or expected;
The supply and demand, both domestically and internationally, of the shopping mall, the marina club and Chaoshan Cultural Museum operated by the Target Group will not differ materially from those of present or expected;
The market prices and the relevant costs, both domestically and internationally, of the marina club operated by the Target Group will not differ materially from those of expected; and
The market data, industrial information and statistical figures obtained from publicly available sources and Bloomberg Terminal are true and accurate.

Company-specific Assumptions

The Target Group has obtained all necessary permits, business certificates, licenses and legal approvals to operate the business and all relevant permits, business certificates, licenses and legal approvals to operate the business in the localities in which the Target Group operates or intends to operate would be officially obtained upon expiry;
The Target Group has obtained the Exclusive Right to build the Project over 2.5 years and will operate for 42.25 years and the core operation of the Target Group will not differ materially from those of present or expected;

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LETTER FROM THE BOARD

The information provided and the representations made by the Management with regard to the Target Group’s financial and business affairs are accurate and reliable;
The financial projection in respect of the Target Group have been prepared on a reasonable basis that have been arrived at after due and careful consideration by the Management;
The Target Group currently has, or will have, adequate human capital and capacity required for the marina club, Chaoshan Cultural Museum and shopping boulevard of the Target Group, and the required human capital and capacity will be acquired in a timely manner that will not affect the operation of the Target Group;
The Target Group has acquired, or will acquire, adequate financial capital for the investments in projected capital expenditure and working capital from time to time;
The construction cost of the Project operated by the Target Group will not differ materially from those of present or expected;
The terms of the upcoming rental contracts will not differ materially from those of present or expected;
The senior management of the Target Group will implement only those prospective financial and operational strategies that will maximize the efficiency of the operation of the Target Group;
The senior management of the Target Group has sufficient knowledge and experience in respect of the operation of the Target Group, and the turnover of any director, management or key person will not affect the operation of the Target Group;
The senior management of the Target Group has adopted reasonable and appropriate contingency measures against any human disruption such as fraud, corruption and strike, and the occurrence of any human disruption will not affect the operation of the Target Group;
The senior management of the Target Group has adopted reasonable and appropriate contingency measures against any natural disaster such as fire, flood and hurricane, and the occurrence of any natural disaster will not affect the operation of the Target Group;
There are no undisclosed actual or contingent assets or liabilities, no unusual obligations or substantial commitments, other than in the ordinary course of business and as reflected in the financials, nor any litigation pending or threatened, which would have a material impact on the value of the Target Group as of the Date of Valuation;

– 7 –

LETTER FROM THE BOARD

The Exclusive Right agreement between the Target Group and the Shantou government have been signed in 2013 and the corresponding construction and payment terms will not differ materially from those of present or expected;
The Project under existing plans or contracts will be completed as schedule and it will not arise any legal or financial issue that will affect the operation of the Target Group; and
The property management will be outsourced, and the terms for the Project under contracts will not differ materially from those of present or expected.

In the event actual events do not accord with one or more of the above assumptions, the resulting value may vary substantially from the figure as set out in the valuation report.

The Directors note that the Consideration represents a discount of 1% to the valuation of the Sale Shares. The valuation has taken into account the facts that the Project has not yet been fully constructed and has no operation record. Nonetheless, the valuer reasonably believes that the Project is feasible and profitable, given the existing and proper arrangement for construction (including proposed engagement of the Contractor and the Property Manager), the local demand of yacht terminals in the Shantou City, the supports from the government and relevant feasibility study. In addition, the Directors consider that the settlement of Consideration by the issuance of the Promissory Note would reduce short term capital requirement which is favourable to the Company. Based on the existing financial resources and facilities available to the Target Group, the Company will not finance the construction and daily operation of the Project and does not expect to have further investment in the Target Group. Accordingly, the Directors consider that the Consideration and the terms and conditions of the Agreement are fair and reasonable and are in the interest of the Company and the Shareholders as a whole.

Conditions precedent

Completion shall be conditional upon and subject to:

(i) all necessary consents, waivers, licences and approvals required to be obtained from relevant governmental authority and relevant third party on the part of the Vendor and the companies of the Target Group in respect of the Agreement and the transactions contemplated thereby having been obtained and remain in full force and effect;
(ii) all necessary consents, waivers, licences and approvals required to be obtained from relevant regulatory authorities and relevant third party, including but not limited to those from the Stock Exchange and/or the Securities and Futures Committee, on the part of the Purchaser in respect of the Agreement and the transactions contemplated thereby having been obtained and remain in full force and effect;
(iii) the passing of the necessary resolution(s) by the Shareholders at the EGM approving the Agreement, and the transactions contemplated thereunder;

– 8 –

LETTER FROM THE BOARD

(iv) the obtaining of a PRC legal opinion (in form and substance reasonably satisfactory to the Purchaser) in relation to the transactions contemplated under the Agreement;
(v) the Purchaser being satisfied with the results of a due diligence review and investigation on the Target Group;
(vi) the Purchaser having obtained a final valuation report issued by such professional valuer retained or to be retained by the Company, that indicates that the value of the Sale Shares is not less than HK$100,000,000;

(vii) the warranties of the Agreement remaining true and accurate in all respects;

(viii) the Purchaser being satisfied that there has not been any material adverse change (of effect) in respect of any member of the Target Group since the date of the Agreement;
(ix) the Vendor having delivered to the Purchaser of (a) in respect of the Vendor, a certificate of incumbency issued within 5 Business Days prior to the date of the Completion and a certificate of good standing issued within 5 Business Days prior to the date of the Completion; and (b) in respect of the Target Company, a certificate of incumbency issued within 5 Business Days prior to the date of the Completion and a certificate of good standing issued within 5 Business Days prior to the date of the Completion; and
(x) no “reverse takeover” (as defined under the GEM Listing Rules) having been triggered or ruled by the Listing Division of the Stock Exchange in relation to the transaction contemplated under the Agreement.

The Purchaser may waive the conditions precedent set out in (i), (iv), (v), (vii), (viii) and (ix) above at its discretion. If the conditions have not been satisfied (or, as the case may be, waived by Purchaser) on or before 4:00 p.m. on the Long Stop Date, the Purchaser shall not be bound to proceed with the purchase of the Sale Shares and the Agreement (other than certain clauses) shall from the Long Stop Date become void and of no further effect and all liabilities and obligations of the parties shall cease and determine provided that such termination shall be without prejudice to any rights or remedies of the parties thereto which shall have accrued prior to such termination. In the event the Acquisition has trigger condition (x), the Agreement shall lapse and the respective rights and obligations of the Vendor and the Purchaser under the Agreement shall be released.

As at the Latest Practicable Date, condition (vi) has been fulfilled.

Pursuant to the PRC legal adviser, Shanghai JunYue (Shenzhen) Law Firm, the Acquisition does not require consent, approval or confirmation from any governmental departments. Nevertheless the Project Company A has notified the Authorizer regarding the Acquisition in November 2016 and the Authorizer has not issued any objection as at the Latest Practicable Date.

– 9 –

LETTER FROM THE BOARD

Completion

Subject to the conditions being fulfilled (or, where applicable, waived) under the Agreement, the Completion shall take place at or before 5:00 p.m. on the third Business Day immediately after the fulfillment (or waiver) of all the conditions, or such later date as the Vendor and the Purchaser may agree in writing.

THE SHAREHOLDERS’ AGREEMENT

Pursuant to the Agreement, upon Completion, the Vendor, the Purchaser, the remaining shareholder of the Target Company and the Target Company will enter into the Shareholders’ Agreement to regulate the respective rights and obligations of the shareholders of the Target Company and the arrangements amongst themselves and the Target Company with respect to the ownership, management and operations of the Target Company. The material terms of the Shareholders’ Agreement are summarized below.

Parties

(i) the Vendor;
(ii) the Purchaser;
(iii) the remaining shareholder of the Target Company; and
(iv) the Target Company.

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

Business

Unless the shareholders of the Target Company agree in writing to change the same, the Target Group is and shall continue to be principally engaged in the businesses of developing and managing the Project. Each of the shareholders of the Target Company shall use reasonable endeavors to promote the businesses of the Target Group. The businesses of the Target Group shall be conducted in the best interests of the Target Group on sound commercial profit making principles so as lawfully to generate the maximum maintainable profits available for distribution.

Board of Directors

The board of directors of the Target Company shall consist of not more than three directors, of which one director shall be nominated, appointed and removed as requested by each of the shareholders from time to time. The chairman of the board of directors of the Target Company shall be a director nominated by the Vendor or the remaining shareholder of the Target Company and shall have a casting vote.

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LETTER FROM THE BOARD

Raising of Additional Capital

The board of directors of the Target Company may resolve to raise additional capital from the shareholders of the Target Company by allotting new shares in the capital of the Target Company to its shareholders, and such new shares in the Target Company shall be offered to all shareholders of the Target Company on a pro-rata basis as nearly as practicable to their respective shareholding percentage in the Target Company. In the event any of the shareholders of the Target Company chooses not to subscribe for any new shares in the capital of the Target Company, the other shareholders of the Target Company may elect to subscribe for such unsubscribed new shares.

Disposal of shares and pre-emptive rights

Each of the shareholders of the Target Company agrees with and undertakes to each other that it will not without the prior written consent of all other shareholders of the Target Company sell, transfer, or otherwise dispose or encumber any of its shares in the Target Company.

If any shareholder of the Target Company wishes to transfer its shares in the Target Company, it shall first offer all (but not some only) of its shares in the Target Company to the other shareholders of the Target Company in accordance with the provisions of the Shareholders’ Agreement.

Anti-Dilution

The issue of any new shares in the Target Company shall be offered for subscription in the first instance to the shareholders of the Target Company in proportion as nearly as practicable to their respective shareholding percentage.

Dividends

The shareholders of the Target Company shall procure that 50% of the net profit for each financial year shall be declared as dividends payable to shareholders of the Target Company, unless with prior written consent of all the shareholders to the otherwise.

THE PROMISSORY NOTE

Pursuant to the Agreement, the Company will issue to the Vendor (or its nominee) the Promissory Note upon the Completion to settle the Consideration. Set out below are the principal terms of the Promissory Note:

Issuer:	the Company
Noteholder:	the Vendor (or its nominee)
Principal amount:	HK$100,000,000
Interest:	4% per annum on the outstanding amount of the
	Promissory Note

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LETTER FROM THE BOARD

The interest rate is determined based on the arm-length negotiation between the Company and the Vendor with reference to the cost of borrowing of the Company. The Directors note that the interest rate of 4% is lower than the interest rate of other loan to the Company, including the facility drawn down for the acquisition of a property in 2016. The facility for the property acquisition in 2016 has an annual interest of 12%. Accordingly the Directors consider that this is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Maturity date:

the third anniversary of the date of the Promissory Note or such other date as the Company and the noteholder may agree in writing

Repayment:

The Promissory Note shall be due and repayable to the noteholder (or to such other person as the noteholder may direct by written notice to the Company) on the maturity date

Early redemption:

The Company may prepay all or part of the Promissory Note together with interest accrued thereon on any banking day prior to the maturity date by giving prior written notice of one (1) clear banking day in advance to the noteholder

Transferability:

The noteholder may assign or transfer the Promissory Note or any part thereof to any third party by endorsement with the prior written consent of the Company. Noteholder may not assign the Promissory Note either in part or in whole to any connected persons (as defined in the GEM Listing Rules) of the Company or any of their associates (as defined in the GEM Listing Rules).

The Company intends to repay the outstanding amount of the Promissory Note by its internal resources, dividend generated from the Target Group, and if necessary and appropriate, equity or debt financing. As at the Latest Practicable Date, the Company has not formed any solid funding plans or timeline to settle the Promissory Notes and other debt financing. The Company is of the view that the Acquisition will change the Group’s asset composition, investment portfolio and business performance, which will further impact the Company’s resource generating ability and fund raising opportunity. Upon completion of the Acquisition and issuance of the Promissory Notes, the Company will actively study and form a concrete funding plan which shall comprehensively take into account the dividend proceeds from the Target Group, the business performance of the Group’s other business, the internal resources of the Group and the then available fund raising opportunities of the Company. The Company will make an announcement to inform the Shareholders its funding plan if necessary and in accordance with the GEM Listing Rules.

– 12 –

LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

(i) The Target Company

The Target Company is an investment holding company incorporated in the British Virgin Islands with limited liability and is owned as to 50% by the Vendor and as to 50% by an Independent Third Party. The Target Company is principally engaged in the business of investment holding, and owns the entire issued share capital of the Hong Kong Subsidiary.

(ii) The Hong Kong Subsidiary

The Hong Kong Subsidiary is an investment holding company incorporated in Hong Kong with limited liability and is wholly owned by the Target Company. The Hong Kong Subsidiary is principally engaged in the business of investment holding, and owns the entire issued share capital of the Project Company A.

(iii) The Project Company A and the Project Company B

The Project Company A is an investment holding company incorporated in the PRC with limited liability and is wholly owned by the Hong Kong Subsidiary. The Project Company A owns the entire issued share capital of the Project Company B, which is an investment holding company incorporated in the PRC with limited liability. The Project Company A and the Project Company B are principally engaged in the operation of the Project.

Group structure

Set out below is the shareholding structure of the Target Group before and after the Completion.

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LETTER FROM THE BOARD

(i) As at the Latest Practicable Date and before the Completion:

==> picture [276 x 455] intentionally omitted <==

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

Mr. Lee Yuk Lun
100%
Pico Zeman
Asset Management Limited
100%
Ace Prospect Global Limited Hu Jiabao
100%
The Vendor Far Grow Holdings Limited
50% 50%
The Target Company
100%
The Hong Kong Subsidiary
100%
The Project Company A
100%
The Project Company B
----- End of picture text -----

– 14 –

LETTER FROM THE BOARD

(ii) After the Completion:

==> picture [369 x 455] intentionally omitted <==

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

Mr. Lee Yuk Lun
100%
Pico Zeman
Asset Management Limited
100%
The Company Ace Prospect Global Limited Hu Jiabao
100% 100%
The Purchaser The Vendor Far Grow Holdings Limited
20% 30% 50%
The Target Company
100%
The Hong Kong Subsidiary
100%
The Project Company A
100%
The Project Company B
----- End of picture text -----

After the Completion, the Company will, through the Purchaser, own 20% of the entire issued share capital of the Target Company. The Company’s 20% interest in the Target Company and its subsidiaries will then accounted to interest in an associate of the financial statement of the Group. Financial results of the Target Group will not be consolidated into the financial statements of the Group.

Business overview

The Project is named as Build-Operate-Transfer Project of Shantou City Chaoren Port Cultural Park* （汕頭市潮人碼頭文化公園特許經營項目）. The Project Company A has been granted an exclusive right to build and operate the Project over 42.25 years.

– 15 –

LETTER FROM THE BOARD

(i) The Project

The Project site is at the center of Shantou City, the Guangdong Province, the PRC. It is located in front of the Chao Hai Guan Bell House（潮海關鐘樓）, a historical and cultural heritage listed among the Historical and Cultural Site Protected at the Provincial Level, east to Hai Jun Port（海軍碼頭）, and west to Yuan Xi Di Car and Ferry Port*（原西堤汽車輪渡碼頭）.

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

The Project
----- End of picture text -----

Map of Shantou City and the location of the Project

According to information provided by the Vendor, the Project covers a total area of over 90,000 square meters, including a land area of approximately 55,500 square meters and water area of around 34,500 square meters. It plans to construct buildings with a total floor area of approximately 38,000 square meters, including a yacht terminal, a shopping mall, a business facility, a cultural facility, a public entertainment area and a parking area.

Upon completion of the construction, the Project Company A will be granted an exclusive right to operate the Project, including receiving income from the yacht terminal, the shopping mall, berth and the cultural facility (collectively, the “ Facilities ”).

the yacht terminal has 63 parking berths, and are merged with food and beverage, entertainment, tourism and sea-viewing facilities of the marina club. The yacht terminal is the main part of the Project, and will leased to yacht owners or high income-earner in Shantou City. The Target Group will receive membership fees from the terminal. The admission fee of the membership with berth is going to set at RMB1,200,000 and the admission fee of the membership without berth will be

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set at RMB200,000. The annual membership fee will be RMB200,000 and RMB30,000 for membership with berth and without berth respectively. The number of members without fixed berths is expected to be 250.

the shopping mall is another main part of the Project, and targets to be developed into a landmark shopping mall in the city center of Shantou City. The shopping mall will generate income by leasing to stores or restaurants. There are 5 rental contract(s) signed in 2016, with a contract sum of around RMB380 per month per square metre for the total gross area approximately 5,200 square metre. It is expected that with the rental rates will be RMB430 per square meter on the first floor, and RMB310 per square meter on the second floor. The major operating cost shall be the fee payable to the Property Manager as illustrated in the section “Management” below.
the business facility mainly includes an exhibition mall, which can be leased for wedding, gathering, reporting or press conference.
the cultural facility mainly includes a theater and a museum, which will be used to host chiu-chow opera and to exhibit chiu-chow cultural relics. The Target Group will receive the admission fees from Chaoshan Cultural Museum. It is expected to have 550,000 annual visitors in the first year of operation while the ticket fee is going to set at RMB20 per visitor.

Apart from the fee payable to the Property Manager, other operating expenses are those general expenses such as salary, maintainee cost and food and beverage in relation to the yacht terminal and the cultural facilities which is expected to be approximately 30% of the corresponding revenue.

(ii) Development plan

The Project Company A plans to complete the construction work for the Facilities in 2.5 years, which costs over RMB442,000,000. The Project targets to fully operate in late 2018 or early 2019. The construction for the Facilities is to be financed by borrowing from banks, financial institutions and shareholders. As at the Latest Practicable Date, the Target Group has obtained a loan facility from an outside independent financial institution. The Target Group plans to utilize the loan facility to finance its remaining construction costs for the Facilities, and to repay the loan facility by future income from the Project. Based on the information available, the Directors note that the total construction cost of the Project can be fully financed by such loan facility and the shareholder loan to be provided by the other shareholders of the Target Company and no further funding will be required by the Company.

The Facilities has been designed by Guangdong New Chang An Construction Design Limited（廣東新長安建築設計院有限公司）as the Designer, and is proposed be constructed by Guangdong Province Dong Chu Construction Limited （廣東省東楚建設有限公司） as the Contractor. The Designer has over 20 years’ experience in construction design and urban planning. The Contractor has over 10 years’ experience in the construction, and is qualified as a general contractor of housing construction project*（房屋建築工程施工總承包）, a general

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contractor of public utility （市政公用工程施工總承包） and a professional contractor of building decoration project（建築裝修裝飾工程專業承包）. The Contractor will be responsible for construction works, installment works, outdoor ancillary facilities works, outdoor plantation works, electricity system, port construction, sea bed clearance, indoor decoration, building surface clearance, etc. The Contractor will charge around RMB442 million. According to the development plan and the information available, the Target Group already invested approximately RMB50 million in the Project and the upcoming capital investment will be approximately RMB318 million in 2017 and approximately RMB74 million in 2018. All costs estimated to be incurred and any overrun costs for the construction have been agreed by the Contractor to be covered by the lump sum fee to be paid to it. Accordingly, the Target Group does not expect to have any contingent liabilities regarding the overrun costs that will be borne by the Company.

(iii) Financing plan

The development cost of RMB442 million will be evenly provided by the shareholders of the Target Company (i.e. the Vendor and Far Grow Holdings Limited, the other 50% shareholder). The Vendor has procured a third party, Elegant Mark Investment Limited, to provide the loan facility of HK$300 million. It is expected that future income from the Project will be used to repay the Target Company’s loan facility and shareholder loan.

The major terms of the loan agreement provided by Elegant Mark Investment Limited is as below:

(i) Borrower : the Hong Kong Subsidiary (ii) Lender : Elegant Mark Investment Limited, a money lending license holder in Hong Kong (iii) Facility amount : up to HK$300 million (iv) Interest Rate : 6% per year (v) Term : 3 years upon drawdown of the loan (vi) Purpose of the : for the construction cost of the Project facility

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(vii) Conditions precedent : (a) The borrower may not utilize any amount of the facility under the loan agreement unless the lender has first received from the borrower, in the form and substance acceptable to the lender, all of the following:–

the loan agreement duly executed by the borrower;
� evidence that all authorisations have been obtained and all necessary filings, registrations and other formalities have been or will, as soon as practical, be completed in order to ensure that the loan agreement and such other documents in connection therewith are valid, enforceable and legally binding;
satisfactory due diligence results on the Project on the sole discretion of the lender; and
such other documents, evidence and financial and other information in connection with the loan agreement and the transactions contemplated therein as the lender may reasonably request.
(b) The lender will only be obliged to honour a drawdown of any amount of the facility available if, on the date such drawdown:–
no event of default as stipulated in the loan agreement has occurred or is continuing or would result;
no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, might have a material adverse effect, are current or pending against the borrower;
the lender shall have received sufficient securities or collaterals in the form and substance acceptable to the lender, with fair value of not less than the sum of the drawing as may be required by the lender at its absolute discretion; and

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there has been no material adverse change which may affect the business or financial conditions of the Target Group.

As at the Latest Practicable Date, no amount of the loan facility provided by Elgant Mark Investment Limited has been drawdown.

(iv) Management

The Project Company A has engaged Lask Vigers Asset Management Limited, a professional property and facility manager, as the Property Manager for the daily management of the Project. The Property Manager has over 10 years’ experience in the property and facility management in the PRC. It has been involved in the operation and management of various projects in the PRC, including Zhangjiajie International Tourism Commercial City in Hunan Province, Nanjing Dongfang Wanhui City in Jiangsu Province, Liuzhou Sunshine 100 City Plaza in Guangxi Province and Jianye Headquarter Gulf in Henan Province. The Property Manager will be responsible for maintenance, repair and management of the building, hygiene and clearance of the public area, safeguard of the Project, collection of rent and management fee, etc. The term of the engagement is 10 years, from 1 August 2018 to 1 August 2028. The Property Manager will charge around RMB8 million per year.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, each of the Designer, the Contractor and the Property Manager and their respective ultimate beneficial owners are Independent Third Parties.

In addition to the Property Manager, the Project Company A has already formed a management team for its operation. The management team includes:

Mr. Hu Jiabao, aged 52, is the chairman of the Project Company A. Mr. Hu is the honorary chairman of Shantou Federation of Returned Overseas Chinese（汕頭市歸國華僑聯合會）. Mr. Hu is experienced in the investment area and has an extensive network in Shantou City. Mr. Hu was involved in the Chaozhou Dong Fang Zhi Du Project（潮洲東方之都項目）, a residential and commercial project, in Guangdong Province. Mr. Hu has over 30 years’ experience in corporate and project management, including cooperation with government. His major duty under the Project is to liaise with relevant governmental authorities in relation to the Project and the monitoring of construction work is assigned to the team members below. Mr. Hu is the ultimate beneficial owner of 50% equity interest of the Target Group.

Mr. Du Jianping, aged 60, is the deputy general manager of the Project Company A. Mr. Du is a member of Humanity Resource Research Facilty of Chinese Academy of Management Science （中國管理科學研究院人文資源研究院）, a member of Guangdong Province Tourism Culture Promotion Committee （廣東省旅遊文化傳播委員會）, and a consultant of Shantou City Tourism Council*（汕頭市旅遊協會）. Mr. Du has over 40 years’ experience in the landmark and tourism management. According to the information provided by the Vendor, Mr. Du was involved in the Mount Danxia Project and the Shantou Deep Water Port in Guangdong Province.

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Mr. Wu Hongyu is the responsible officer of the coordination department and is responsible for the construction and management of the Project. Mr. Wu graduated from the Shantou University and is a qualified senior engineer. Mr. Wu has over 20 years’ management experience in construction projects, including the Shantou Junhua Hotel, the Shantou Linbaixin International Exhibition Center and the Yuedong Information Building.

Mr. Jiang Yangfei is the responsible officer of the coordination department and is responsible for cost, quality, progress and financials of the Project. Mr. Jiang graduated from the Guangdong University of Technology and is a qualified senior engineer. Mr. Jiang has over 30 years’ experience in construction management. He was involved in construction of the office building of the Shantou Intermediate People’ Court and the Shantou Government.

Mr. Fang Wenhua is the financial controller and is responsible for the fund planning of the Project. Mr. Fang graduated from the Shantou Radio and Television University and has around 30 years’ experience in financial management.

Save for Mr. Hu, all members of the management team are Independent Third Parties. The management team has no relationship with the Vendor and its associates. The management team will supervise and monitor the work of the Contractor during the construction period of the Project in order to ensure the schedule and budget of the construction can be met. Upon commencement of operation, the management team will also monitor the work of the Property Manager to ensure the operation efficiency of the Project.

The Target Company will build an operation team of more than 30 persons. The operation team will assist the management to supervise and monitor the construction works, and cooperate with the Property Manager to ensure a smooth operation of the Project.

(v) Build-Operate-Transfer Agreements with the government

The Project is operated under the Build-Operate-Transfer Agreements with the Authorizer. Details of the Build-Operate-Transfer Agreements are summarized as follows:

Granting Special Permission of the Project

The Authorizer, in accordance with the Build-Operate-Transfer Agreements, grants the Project Company A the special permission to exclusively invest, build, operate and maintain the Project. The Authorizer cannot grant the special permission of the Project to a third party, whether wholly or partly.
Signing and effecting the Build-Operate-Transfer Agreements between the parties should be regarded as the Authorizer having granted the special permission of the Project to the Project Company A.
The Project Company A is granted the special permission of the Project.

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Special Operation Period

The special operation period of the Project granted by the government is 42.25 years, from the end of the construction period of 2.5 years to the end of the operation period when the Project Company A returns the special permission to the Authorizer.
During the construction period and the special operation period, the Project Company A should be responsible for operation fees, and the investment, construction, operation, maintenance and transferring of the Project, in accordance relevant PRC laws, regulations, rules and standards and the terms of the Build-Operate-Transfer Agreements.

The Ownership Rights of the Project’s Facilities

During the special operation period, all ownership rights of the Project’s facilities should belong to the Project Company A.
The Project Company A should not pledge the Project’s assets, facilities and equipment, either for refinancing the Project or any other purposes.
During the construction period and the operation period, the Authorizer should provide the land, whose purpose is for the Project, to the Project Company A for its use. All other rights of the land, other than for the usage, should always belong to the Authorizer. The Project Company A should not pledge the land for mortgages.

Special Permission of the Project

During the operation period, the Project Company A should not in any ways transfer the special permission of the Project, or lease, pledge or charge the special permission or related benefits to any other third party.
After the Project completes construction and begins commercial operation, and in the case the Project is normally operating, the Project Company A can transfer part or whole of its shares or change its shareholding, provided a confirmation from the Authorizer is granted.

Operation Model of the Project

The Project is operated by a build-operate-transfer model, being that the Project Company is responsible for financing, construction, operation, management, maintenance and debt repayment of the Project.
By the end of the operation period, the Project Company A should, in accordance with the Build-Operate-Transfer Agreements and free of charge, return a complete and normally-operating Project to a nominee of the Shantou Government.

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Investment of the Project

Total construction investment from the Project Company A should not be less than RMB 439 million. The actual investment cost should be audited and confirmed by Shantou City Finance Department （汕頭市財政局）. In the case that the actual investment cost from the Project Company A is less than RMB439 million, the Authorizer has the right to deduct the period of the special permission.

As stipulated under the Build-Operate-Transfer Agreements, the total construction investment from the Project Company A should not be less than RMB439 million. The expected cost of approximately RMB442 million charged by the Contractor is therefore in compliance with the requirements of the Build-Operate-Transfer Agreements.

Operation of the Project

The Project Company A confirms that the general operation mode of the Project should be yacht club, retail store, restaurants, entertainment, in addition of public walking ways, near-water platforms, square, parking slots, etc. The Project Company A should operate the Project strictly under the operation mode, and grant the Authorizer’s agreement before modifying the operation mode.

Rights of the Authorizer

The Authorizer has the rights to review the design of the Project, to supervise or check the quality control, method, operation situation and safety of the Project, and to assist other departments to audit and control the costs.
If the Project or its any part is found to damage the public safety, the Authorizer can restrict the operation of the Project or take any actions, until the Authorizer believes the Project can meet the standards of public safety.
The Authorizer has the rights to check all buildings and facility usage of the Project at any time. If finding any damages, the Authorizer should notify the Project Company A to conduct maintenance works within a time limit. If the Project Company A’s maintenance works is overtime or outside the design requirements, the Authorizer has the right to halt the operation, until the maintenance works are completed.
Any of the following cases, if not caused by the breach of the Authorizer or force majeure, should be a breach of the Project Company A, and the Authorizer has the rights to issue a written notice, which is effective immediately, to the Project Company A to terminate the Build-Operate-Transfer Agreements and withdraw the special permission:
Without a prior written confirmation from the Authorizer or without any justifiable reason, the Project has halted its construction, operation or maintenance for over 15 days;

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The Project Company A has applied for a bankruptcy;
Borrowers or loan providers have declared, in accordance with investment agreements, that the Project Company A has breached agreements and lost its ability to repay loans;
During the early period of the construction period, no building plan has been provided to the Authorizer in accordance with the requirements;
During the construction period, the construction has not followed the building plan reviewed by the Authorizer;
Upon completion of the construction, the total investment cost has not fulfilled the requirements;
The Project’s building have not fulfilled the standards required by the city planning department, and have not been modified as required;
The total investment has not been over RMB150 million during the first year of the construction period;
The construction period has been longer than the requirement of the Authorizer;
The Project Company A has failed to pay tax in time.

Obligation of the Authorizer

During the construction period and the operation period, the Authorizer should assist the Project Company to grant all related permission from the government.
During the construction period and the operation period, the Authorizer should provide the land, whose purpose is for the Project, to the Project Company A for its usage.

Rights of the Project Company A

The Project Company A has the right to construct, operate and maintain the Project.

Obligation of the Project Company A

During the operation period, the Project Company A should normally operate the Project, save for force majeure.

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The Project Company A should be responsible for the financing, construction, operation, management and maintenance of all buildings, green lands, water systems and facilities of the Project. By the end of the operation period, the Project Company A should, free of charge, transfer all buildings, green lands, water systems and facilities of the Project to the Authorizer.
The Project Company A should apply for and be granted all permission as required by the nation, the province and the city.
During the operation period, the Project Company A should guarantee that the area of the public facility be not less than the approved plan. Public facilities and public area should be open to public as required.
The Project Company A should guarantee that number of the public parking slots for yacht club should not be less than 2.
During the operation period, all area, save for the yacht club and certain exhibition halls of the museum, should be freely open to the public.
The Project Company A should pay tax during operation.

As confirmed by the Vendor and as at the Latest Practicable Date, the Project Company A (i) has not breached any of the stated terminating events under the Build-Operate-Transfer Agreement; and (ii) has not received any indications from the Authorizer that it intended to exercise its rights to terminate the Build-Operate-Transfer Agreement. As explained by the Vendor, breach of any term or clause of the Build-Operate-Transfer Agreements may lead to termination of the rights of the Project Company A. Other than this, it was not aware of any circumstances where the rights of the Project Company A to the Project may be terminated.

Financial information

Financial information of the Target Group has been included in the Appendix II to this circular.

FINANCIAL IMPACT OF THE ACQUISITION

Upon completion of the Acquisition, the total assets and the total liabilities of the Group are expected to increase by HK$100,000,000, while the revenue or the profits of the Group remain unchanged. More information of the financial impact of the Acquisition has been included in the Appendix III to this circular.

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INDUSTRY OVERVIEW

As illustrated above, the major income of the Project shall be the rental income from the shopping mall and the income from the yacht terminal and marina club. The Directors note that the relevant industry is promising.

Overview of the retail and rental industry in the PRC

According to National Bureau of Statistics China, the total retail sales rose 10.7% year on year (“ YoY ”) in 2015, of which 87.2% came from the traditional retail sales channel. The retail sales remained healthy in the first six months of 2016 and showed signs of recovery, with a 10.3% YoY growth. Although a number of factors, such as online sales and slowing economy, affected the PRC’s retail sales, a number of new shopping malls in Guangzhou would be launched in 2016, providing approximately 600,000 square metre, for example, K11 and Parc Central. This reveals the market players are still optimistic about future outlook of the retail market.

According to Euromonitor, Guangdong province was the PRC’s largest consumer market in 2015. This reflects that the consumers in Guangdong province has a potential to grow and would further boost the consumption in the future. The consumer income in 2nd tier cities is expected to continue to have a rapid growth in the consumer income not only in the traditional downtown areas but also in the areas adjacent to traditional residential districts as well, according to CBRE Report in 2015.

According to a report from CBRE, a sign of recovery was shown in the second quarter of 2016 and the sales performance and foot traffic improved across several markets while 10 projects were completed in 17 major cities with 1.03 million square meter. The ground floor surged by 0.5% quarter on quarter (“ qoq ”), a slightly faster growth compare to first quarter of 2016. In addition, according to the research report published by Knight Frank regarding the property market in the second quarter of 2016, the rents remained stable for prime retail space and the rental fees per month in Guangzhou reached USD263 while vacancy rate remained below 5% in the second quarter of 2016.

According to CBRE report regarding outlook of the PRC, more leasing demand may possibly come from retailers that address life-style or entertainment needs and sectors like affordable luxury, fast fashion and multi-brand stores. In addition, the growth of income, development of smart phones, effects of the property market rebound, cuts of interest rate in 2015 and full liberalization of the two-child policy are expected to stimulate the consumption in the future. The low inflation rate is also expected to stimulate the growth of the disposable income, especially in the 2nd tier cities.

Overview of yacht marina clubs in the PRC

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Haizhilan China Yacht Market Report* （2015海之藍中國遊艇市場報告）”, there are approximately 2,500 yachts and 62 marina clubs with independent berths in the PRC. Most of the luxurious yachts in the PRC were imported mainly from Europe.

There are a few famous marina clubs in Guangdong Province, for example, Shenzhen Marina Club, Vanke Longcheer Yacht Club （浪騎遊艇會）, Seven Star Yacht Club and Shenzhen Bay Marina Club. Shenzhen Marina Club is a marina club operated in 2006 and located in Shenzhen Dameisha with a total of 175 berths; Vanke Longcheer Yacht Club（浪騎遊艇會）operated in 1998 and located in Shenzhen Dapeng Peninsula with a total of 275 berths; Seven Star Yacht Club operated in 2008 and located in Shenzhen east coast with a total of 230 berths; Shenzhen Bay Marina Club operated in 2000 and located in Shenzhen Bay with a total of 275 berths.

As the number of high income residents in the PRC, in particular the Guangdong Province, is increasing, it is expected the demand for high-end shopping mall, luxurious yachts and berths will rise in the near future and the Directors are optimistic on the future of the Project.

RISK FACTORS

The Company may face certain risk factors in connection with the Acquisition. Major risks include, among other things, the following:

Risks relating to the Group

Difficulties in effectively implementing management and supervision of its investment in the Target Group

The Company will be interested in 20% equity interest in the Target Company upon Completion and can only appoint one of out the three director of the Target Company. Without absolute control over the Target Group, the Company may encounter difficulties in ensuring that the Target Group is effectively and consistently managed like other subsidiaries of the Group as it may take effort for the Target Group to familiarise itself with the operational and corporate governance policies of the Group and follow them in accordance therewith to the Group’s satisfaction so as to ensure that management of the Target Group is conducted in line with the Group’s policies.

The Company is also not always able to effectively detect or prevent on a timely basis operational or management problems, including fraud, bribery and other misconduct, or ensure that information received is accurate, timely or sufficient. If the Company is unable to effectively implement supervision of its investment in the Target Group, its business, results of operations, financial condition and prospects could be materially and adversely affected.

The Board will, through the director to be appointed to the Target Company, closely monitor the development of the Target Group’s business and will seek to ensure that the Target Group is effectively and consistently managed.

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The existing Board has limited experience in running the business of the Project

The Acquisition constitutes an investment in associates of the Group in the new investment sector of yacht terminal, berth facility and shopping mall in Shantou, This is a risk factor as the existing Board have limited experience in running the business of the Project. The existing Board may require additional time to implement measures and adjust to changes resulting from the Acquisition and to manage the risks associated with the business of the Project. If the Company is not able to manage the development of the Target Group successfully or otherwise obtain sufficient resources to support such development, the business, financial condition, results of operations and prospects of the Group may be adversely affected. The Company may also incur costs in recruiting, training and retaining personnel with the proper experience and knowledge to handle new business activities.

To reduce such risk, the Company will rely on the expertise of the management team of the Project Company A and the Property Manager in the operation of the Project.

Risks relating to the Target Group

Competition with other regional terminal operators

The Target Company faces competition from other yacht terminal operators within Guangdong Province and nearby region, such as Shenzhen Marina Club and Shenzhen Bay Marina Club which have almost over 10 years of experience. The business of Target Group may be adversely affected as a result of the competition from surrounding yacht terminal operators in nearby regions. In order to maintain the competitiveness, with the assistance of the professional and experienced management team, the Target Group will provide the most appropriate facilities and services to the customers.

The Company considers that the Target Group’s competition with the surrounding competitors is not keen, as port location is one of the most important factors for the success of a port. Customers always choose a port that is the most convenient for them in order to save the transportation time. The Target Group situates in Shantou which is at the east of Guangdong Province and is closer to Fujian Province. This is an unique advantage over the other competitors to attract the customers in Shantou and Chaochou regions. Therefore it is expected that the Target Group will have a competitive advantage over its potential competitors.

Construction risk

The Target Group is exposed to certain risks in respect of the development and construction of the facilities. The terminals areas are still under construction. Although the Target Group plans to develop the facilities according to the schedule, the actual timing of completion, capacity and the cash flow of the Project may be affected by various factors beyond the control of the Target Group, such as the general economic conditions of Shantou and changes in the business environment. The development of port also faces other risks commonly associated with construction projects including shortages or delays in the supply of labour and materials and equipment, cost overruns, natural disasters, accidents or other unforeseen circumstances. In light of these risks, the construction of the Project may not be

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completed as scheduled and cash flow projections of the Target Group may be subject to unforeseeable changes. Moreover, any delay in this connection may lead to the relevant existing governmental approvals being varied, suspended or revoked, or approvals of other scopes of the projects being reserved, in the absence of cogent reasons acceptable to the authorities concerned. Nevertheless, the Board considers that the engagement of the Contractor which is experienced in the work can limit such construction risk.

Project’s success significantly depends on the key management and additional management

The Project is currently operated by the experienced key management team and the Property Manager and will actively recruit additional appropriate professionals. They will have experience in terminal planning, construction, property management, overall development strategy, marketing, day-to-day operation and management. As the Project is still undergoing construction, if the Project is not successful in retaining and/or attracting key personnel subsequent to the Completion, this may result in loss of construction focus, poor execution of operations and inability to identify and execute potential strategic initiatives. The construction schedule and capital expenditure could be materially and adversely affected.

After Completion, the Group will be entitled to nominate and appoint one director in the board of the Target Company. The Company is confident that it will substantially participate in the decision making processes of the Target Company after the Acquisition. The Target Group will continue to use its best efforts to improve the working environment for its employees.

Risk factors relating to the industry

The Target Group’s results of future operations are affected by economic, financial and political conditions

The Target Group’s results of future operations are affected by the volume of its business which in turn depends on the rental market and domestic income of the region nearby which are outside the Group’s control. In particular, an economic slowdown in the PRC, if any, may materially and adversely affect the Target Group’s financial position and future prospects. Other extraneous factors, such as acts of war, hostilities, epidemics or terrorism, could also lead to a material decline in the rental market and the results of operations of the Target Group will be adversely affected.

To cope with this risk, the Target Group is eager to negotiate for a long-term rental period with the potential tenants of the shopping mall in order to lock up the rental return. In addition, the marina club proposes to receive the membership fee and annual fee in advance to speed up the cash inflow time.

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The normal operations of the Project could be affected by natural disaster or other events beyond control

Similar to many other businesses, the Project’s normal operations could be adversely affected or disrupted by natural disasters (such as earthquake, flood, fire, typhoons or other natural disaster or other force majeure events) or other events including but not limited to equipment failure and strike or lock-out or other industrial action by workers or employers.

The weather condition is a risk for operation of yacht terminals in Shantou. Currently Guangdong province suffers from tropical storms each year, in particular in the summer times. There is a risk that Shantou will be so affected as it is located along the coastal line.

These events would adversely affect the normal operations of the port facility which would, in turn, adversely affect the business of the Target Group. Typhoon and storm lead to shorter operating days and increasing of operating cost. Port facilities may become casualties of sea-level rise, requiring relocations or expensive protective measures, such as sea walls and levees. These could cause disruption to the operation in part or in whole and therefore may materially affect the Target Group’s financial conditions and results of operations.

The industry of the Target Group is capital intensive and failure to maintain sufficient capital may have an adverse impact on its business

The industry of the Target Group is capital intensive as it requires a large sum of capital contribution at early stage, including construction of terminals and shopping mall. However, when the Project commence the operations, there are stable operating cash inflows and no substantial working capital is required.

The Project is currently under construction and it requires sustainable capital expenditure during its construction. If there is any unexpected cost during construction and the Target Group fails to raise sufficient fund, the Project may not have sufficient capital for the construction and its business plan may be adversely affected.

At present the total construction cost of the Project is expected to be fully financed by a loan facility from an external financial institution and the shareholder loan to be provided by the other shareholders of the Target Group.

The Target Group is in a highly regulated industry, subject to regulatory requirements, approvals and licences

Any changes to the laws, regulations and policies governing the port industry in the PRC may have a material adverse effect on the Target Group’s business and operations. The Project is constructed pursuant to the Build-Operate-Transfer Agreements with the Authorizer. If such agreement were revoked or suspended as a result of any changes in laws, regulations or government policies, the construction plan of the Project may be materially and adversely affected. In addition, construction of the Project and facilities is subject to urban planning laws and procedures. The administration and changes of these laws or procedures may adversely affect the implementation of the Target Group’s construction plan.

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Moreover, the Target Group is subject to environmental laws and regulations, including but not limited to regulations on air pollution, noise emissions, water and waste discharge. Any failure of the Target Group to comply with all applicable regulations could lead to substantial penalties, including penalties and administrative orders such as an order to cease construction.

The Company considers that the above risk is not high. As at the Latest Practicable Date, Project Company A has not received any notification of any material violation of any terms of the Build-Operate-Transfer Agreements nor any law and regulations in the PRC.

Risk factors relating to the PRC

The construction and assets of the Target Group are subject to changes in the economic, political and social environment in the PRC

The Project’s operation is solely in Shantou, Guangdong Province, the PRC. Therefore, the results of construction and future prospects of the Target Group are subject to the economic, political and social developments therein. The economy of the PRC differs from the economies of developed countries in many respects, including the amount of government involvement, growth rate, level of development, allocation of resources, capital reinvestment and control of foreign exchange.

The economy of the PRC has been gradually transitioning from a planned economy towards a more market-orientated economy. However, there is no assurance that the PRC government will continue to pursue economic reforms. The PRC government has in recent years implemented a series of measures on, including but not limited to the import-export policies, forestalling threatening inflation and stabilizing PRC’s economy. These measures may benefit the overall PRC’s economy in the long term but may also bring short-term fluctuation.

The constructions and future prospects of the Target Group could also be adversely affected by changes in political, economic and social conditions or the relevant policies of PRC government, such as changes in laws and regulations (or the interpretations thereof), measures which might be introduced to control inflation, changes in the rate or method of taxation and imposition of additional restrictions on currency conversion in the future.

Movements in the exchange rate of the RMB may adversely affect the financial condition and results of the Group

At present, the PRC’s government has some control on the exchange rate of RMB. The value of RMB against other foreign currencies is subject to changes in PRC government’s policies and international economic and political developments.

It is uncertain whether there will be any significant fluctuation of RMB against Hong Kong dollar. If RMB appreciates against Hong Kong dollar, the Company’s results of operations, which are presented in Hong Kong dollars, will increase, and if RMB depreciates

– 31 –

LETTER FROM THE BOARD

in value, the Company’s results of operations will decrease. Any significant change in the exchange rates of RMB against Hong Kong dollar could also affect the value of the Group’s dividends, if any, which would be funded in RMB but paid in Hong Kong dollars.

REASONS FOR AND BENEFITS OF ENTERING INTO THE AGREEMENT

The Company is principally engaged in systems development, professional services, proprietary trading and money lending.

The Company is of the view that the Acquisition represents a good investment opportunity for the Group, as (i) the Project is operated under an exclusive right from the government, and faces little competition from nearby areas; (ii) the Project is located at the center of Shantou City, whose economy and population expand rapidly in recent years; (iii) the Consideration represents a discount to the preliminary assessment of the value of the Project; and (iv) the income stream of the Project is mainly from the leasing fees of the yacht slots and the shopping mall, which is reliable and steady, and has the potential to further increase with the growing property market in Shantou City. The Company believes that the Acquisition can expand the income base of the Group and diversify its business portfolio.

Despite the fact that the Project has not yet commenced construction and has no track record of profitability, the Company is of the view that the Project is both feasible and profitable as (i) the Target Group has recruited a management team, the Designer, the Contractor and the Property Manager to build and operate the Project; (ii) the local government is supportive on the Project; and (iii) demand of the yacht terminals and similar properties is increasing in the Shantou City. On the other hand, the Company understands that there are some risks related to the Project, which have been disclosed in the section headed “Risk Factors”. Hence, the Company believes that it is appropriate to limit the Company’s investment in the Project. Upon completion of the Acquisition, the Company will be interested in 20% of the Project, which will be protected by the Shareholder’s Agreement. Accordingly, the Board is of the view that the Acquisition represents a good opportunity for the Company to participate in the feasible and profitable Project at an acceptable risk level.

As at the Latest Practicable Date and save for the 20% interests to be acquired under the Agreement, the Company has no intention to increase its investment in the Project. As at the Latest Practicable Date, the Company has not intended to, or entered, or proposed to enter, into any agreement, arrangement, understanding or undertaking, whether formal or informal and whether express or implied, and negotiation (whether concluded or not) with an intention to dispose of/downsize the existing businesses of the Group.

In light of the above, the Board is of the view that entering into the Agreement is in the interests of the Company and the Shareholders as a whole.

– 32 –

LETTER FROM THE BOARD

GEM LISTING RULES IMPLICATIONS

As certain applicable percentage ratios exceed 25% but are less than 100%, the Acquisition and transactions contemplated under the Agreement constitute a major transaction for the Company and are therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 19 of the GEM Listing Rules.

The Company will seek approval for, among other things, the Agreement and the transactions contemplated thereunder from the Shareholders at the EGM.

RE-ELECTION OF DIRECTOR

As at the Latest Practicable Date, the Board comprised three executive Directors, namely Mr. Lau Kelly, Mr. Leung Chung Nam and Mr. Wong Kam Kwan, one non-executive Director, namely Ms. Jim Ka Man and three independent non-executive Directors, namely Dr. Wan Ho Yuen, Terence, Ms. Yeung Mo Sheung and Mr. Hau Chi Kit.

In accordance with the code provision A.4.2 of Corporate Governance Code, all Directors appointed to fill a casual vacancy should be subject to election by Shareholders at the first general meeting after appointment. Accordingly, Mr. Wong Kam Kwan will hold office until the EGM and he, being eligible, offers himself for election as Director at the EGM.

A brief biographical details of the aforesaid Director proposed to be re-elected at the EGM are set out in Appendix VII to this circular.

GENERAL

The EGM will be convened and held to approve the Acquisition and re-election of Director. To the best of knowledge, information and belief of the Directors, having made all reasonable enquiries, no Shareholder has an interest in the Acquisition which is materially different from the other Shareholders. Therefore, no Shareholder will be required to abstain from voting at the EGM to approve the Agreement and the transactions contemplated thereunder.

A notice convening the EGM is set out on pages 105 to 106 of this circular. All resolutions proposed at the EGM will be voted on by poll. Whether or not you intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as soon as possible but in any event not less than 48 hours before the time scheduled for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending or voting in person at the EGM or any adjourned meeting thereof should you so wish.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the Acquisition and the re-election of Director is 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 resolutions to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

FURTHER INFORMATION

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

By order of the Board of Trillion Grand Corporate Company Limited Lau Kelly Chairman

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

Details of the financial information of the Group for each of the three financial years ended 31 March 2014, 31 March 2015 and 31 March 2016 and the nine months ended 31 December 2016 respectively have been set out on pages 34 to 111, pages 34 to 107 and pages 32 to 98 of the Company’s annual reports for the financial years ended 31 March 2014, 31 March 2015 and 31 March 2016 and pages 3 to 14 of the Company’s third quarterly report for the nine months ended 31 December 2016 respectively, and are incorporated by reference into this circular. The said reports of the Company have been posted on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company at www.trilliongrand.com.

2. INDEBTEDNESS

STATEMENT OF INDEBTEDNESS AND CONTINGENT LIABILITIES

At the close of business on 28 February 2017, being the latest practicable date prior to this circular for ascertaining certain information relating to the indebtedness statement of the Group, the indebtedness of the Group was as follows:

Bonds

The Group had outstanding bonds with total principal amount of approximately HK$20,332,000.

Amount of HK$10,005,000 is carrying coupon interest of 4.85% per annum and maturity in 15 July 2022. Amount of 527,000 is carrying coupon interest of 4.85% per annum and maturity in 16 July 2022. Amount of HK$9,800,000 is carrying coupon interest of 6% per annum and maturity in 13 September 2019.

Short term loan

The Group had outstanding secured short term loan with total principal amount of approximately HK$128,000,000.

Promissory note

The Group had outstanding promissory note with total principal amount of approximately HK$14,000,000.

The promissory note is carrying coupon interest of 6% per annum and maturity in 22 November 2019.

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revolving loan facility

The Group had been granted a revolving loan facility with the limit amount of HK$76,800,000 at the interest rate of 2% per annum over 1 month Hong Kong Interbank Offered Rate. The facility had been utilised approximately HK$76,643,000 up to 28 February 2017.

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of business, the Group did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorised or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding as at 31 December 2016.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the effects of the Acquisition and the present financial resources, the Company has sufficient working capital for at least twelve months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

As disclosed in the announcement of the Company dated 13 February 2017 for the third quarterly report of the Company of 31 December 2016, the Company is expected to record a loss attributable to owners from continuing operations for the nine months ended 31 December 2016 amounted to approximately HK$27.0 million, as compared with a loss of approximately HK$12.8 million for the same period in 2015. The expected increase in loss was mainly attributable to a record of decrease in other gains, losses and expenses, resulted from reversal of impairment loss in respect of other receivable.

Save as disclosed above, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2016, being the date to which the latest published audited financial statements of the Group were made up.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

System development and professional services

The Company was facing the fierce competition of thermal powered electricity supply market in the People’s Republic of China (“PRC”) in 2016 and management expects this phenomenon will continue in the foreseeable future. This was explained by the PRC government promoting the use of renewable and/or clean energy with direct subsidies and has implemented the benchmark for reduction of omission of carbon dioxide in various cities in the PRC. As a result, the number and amount of new contracts have decreased. However, system development in thermal powered electricity

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

supply industry recorded an increase in revenue compared with the corresponding year in 2015 due to the fact that a number of old projects were completed during the current year. Professional services recorded a decrease in revenue compared with the corresponding year in 2015 due to decrease in demand from existing customers. Gross profit from system development and professional services decreased due to the Company needed to maintain the competitiveness in the market and to maintain the market share.

The Company’s system development business mainly provides installation, maintenance, consulting and software licensing services for the products sold to power plants. The Company currently provides four key products: i) thermal power simulation system, ii) supervisory information system, iii) management information system and iv) information integration platform.

i) Thermal power simulation system is a professional calculation system that can accommodate large scale strong coupling and tiny grained calculations. The system is able to link a series of calculated power plant simulation data to the distribution control system for the purposes of analysis and studies.
ii) Supervisory information system is widely installed in power plant of more than 300MW. Its massive data contains valuable information and resources which requires further excavation.
iii) Management information system in power plants provides all aspects of monitoring, control and management in the operation. The system collects all kinds of information, summary, statistics, analysis, management structures and business processes in order to increase productivity, reduce operating costs and provides decision support.
iv) Information integration platform provides all the foundational building blocks of trusted information, including data integration, data warehousing, master data management, big data and information monitoring.

The Company’s professional services business mainly provides information technology engineering and technical support services to power plants and data centers. The Company currently provides four key services: i) enterprise information planning, ii) data resource planning, iii) comprehensive solution for system integration and iv) training service.

i) Enterprise information planning provides information technology strategy, overall technical architecture, IT infrastructure, information security, application support platform and information technology personnel development services to the customers in the form of status assessment, development planning, project implementation and investment planning.
ii) Data resource planning provides solution to customers for the integration of information from decentralized information systems.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

iii) Comprehensive solution for system integration provides strategy and planning services for wiring, data center construction, host systems and related technical support.
iv) Training service provides training to power plant operation personnel, power unit commissioner, plant production management and technical personnel. Training topics include control and protection of simulation unit boiler, turbine and electrical parts; unit start-up and shutdown; basic working principle of and theoretical knowledge of fluidized bed boiler, pulverized coal boiler, gas turbine and electrical machines.

The Company’s system development contracts signed with customers were executed and completed by five major phases with duration from 12 to 36 months.

i) Contract signing: Before tender is made to customers, the Company will perform budget analysis for costs and time expected to incur. Estimation is based on complexity and specific requirements of the projects, historical data and information, market conditions, quotation of the supplies of goods and services. A contract will be rewarded after the tender process.
ii) Installation: The supplier will deliver the hardware system to the customer sites directly. The Company will then install the system to its required status and location. The customer will inspect the physical conditions of the hardware.
iii) Testing: The Company will perform initial testing and modification of the system at this phase. Testing includes the condition, stability, compatibility, functionality of the system itself and the integration of the system with other decentralized systems used by the customer.
iv) Verification: The customer will perform test run at this phase. Test run coordinate the machines, processes and systems together and through a series of actions under actual or simulated environmental and operating conditions to ascertain its current status and to verify its reliability and functionality.
v) Retention: An average of 12-24 months retention period is given to customer.

Depending on the complexity of the projects and the resources of the Company, the Company outsources some of the system development projects to selected suppliers. The suppliers’ contracts are usually entered after secure of sales contracts with customers.

The Company receives contract value in five phases by means of progress billings. A portion of contract value is received in each of the following phases, (i) contract signing, (ii) installation, (iii) testing, (iv) verification and (v) retention.

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company’s professional services contracts signed with customers were completed with duration from 6 to 24 months. The Company’s professional service income is received when the underlying professional services are rendered where billing is made when each particular service in the contract is delivered.

Proprietary trading business

In relation to the Group’s proprietary trading business, there are big swings on PRC and Hong Kong stock markets due to the Chinese stock market crash. An economic slowdown in PRC are contributing to uncertainty and a higher risk of global economic recovery. This led to the Group suffering losses on change in fair value of its financial assets at fair value through profit or loss. Looking forward, the current valuation of Hong Kong stock market is relatively low compared to other major stock markets such as U.S. and PRC. The possibility of implementation of “Shenzhen-Hong Kong Stock Connect” and inclusion of A-shares into MSCI’s indices will both attract capital inflow into the market and a market re-valuation is likely happened. The Group is actively seeking opportunities in securities investment which would create value and be beneficial to the Group and shareholders as well. The Group also maintains a risk management policy in which key risk factors such as government and politic risk, country risk, price risk, interest rate risk, currency risk and economic risk have been identified and closely monitored.

Money lending business

Though the loan and credit market became very active and intense competition existed during the past few years as a result of the rapid booming housing market in Hong Kong and the global low interest rate environment, the Board is confident that through its long established relationship, history, reputation, network and synergy, the Group is able to participate in the market share of the money lending business and it will become one of the driver of its future profits of the Group. In view of the above, the Board will invest more resources into the business once financing resources have been obtained. In addition to the consumable loan, the Company is planning to offer a variety of loan products to secured mortgage loans to individual, unsecured loan, small and medium sized enterprises loans, debts consolidation loan and corporate loans. Despite the above, the money lending business is suffering from political risk, regulatory risk, credit risk, economic risk and industry risk.

– 39 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

PART A. 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.

10th Floor, 8 Observatory Road, Tsim Sha Tsui, Kowloon, Hong Kong 13 April 2017

The Board of Directors Trillion Grand Corporate Company Limited Unit B, Floor 29th, CKK Commercial Centre, 289-295 Hennessy Road, Wanchai, Hong Kong

Dear Sirs/Madams,

We set out below our report on the financial information relating to Billion Ray Investments Limited (the “ Target Company ”) and its subsidiaries (collectively referred to as the “ Target Group ”) comprising the consolidated statements of financial position of the Target Group as at 31 December 2014, 2015 and 2016, and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Target Company for the year ended 31 December 2014, 2015 and 2016 (the “ Relevant Periods ”), together with the explanatory notes thereto (the “ Financial Information ”), for inclusion in the circular of Trillion Grand Corporate Company Limited (the “ Company ”) dated 13 April 2017 (the “ Circular ”) in connection with the proposed acquisition of 20% equity interests of the Target Company by the Company.

The Target Company was incorporated in the British Virgin Islands (the “ BVI ”) on 23 February 2013 as a limited liability company. The principal activity of the Target Company is investment holding. As at the date of this report, the Target Company has direct interests in the subsidiaries as set out in Note 18.

The Target Company has a financial year end date of 31 December. No statutory audited financial statements have been prepared by the Target Company for the years ended 31 December 2014, 2015 and 2016 as it is not required to issue audited financial statements under the statutory requirements of its place of incorporation.

Director’s Responsibilities

For the purpose of this report, the director of the Target Company has prepared the consolidated financial statements of the Target Group for the Relevant Periods (the “ Underlying Financial Information ”) in accordance with the basis of preparation set out in

– 40 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

note 3 of section II and the accounting policies set out in note 4 of section II which conform with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”), the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Growth Enterprise Market of Stock Exchange of Hong Kong Limited (the “ GEM Listing Rules ”), and for such internal control as the director of the Target Company determines is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

The directors of the Company are responsible for the contents of the Circular in which this report is included.

Reporting Accountant’s Responsibilities

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.

Opinion

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the financial position of the Target Group as at 31 December 2014, 2015 and 2016 and its financial performance and cash flow for the Relevant Periods.

– 41 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

I. FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 6 Other income 8 Administrative expenses Loss from operation Finance costs Loss before income tax 9 Income tax expenses 10 Loss for the years Other comprehensive income/(expense) items that will not be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive expenses for the years	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 – – – 7 1,856 3 (1,803) (3,463) (2,962) (1,796) (1,607) (2,959) – – – (1,796) (1,607) (2,959) – – – (1,796) (1,607) (2,959) 135 (1,356) 2,145 (1,661) (2,963) (814)

The accompanying notes form an integral part of the Financial Information.

– 42 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Notes
ASSETS AND LIABILITIES
Non-current assets
Property, plant and equipment
13
Current assets
Prepayments and other receivables
14
Cash and bank balances
15
Current liabilities
Amounts due to holding companies
16
Net current liabilities
Net liabilities
EQUITY
Equity attributable to owners of
the target company
Share capital
17(a)
Reserves
17(b)
Total equity

As at 31 December
2014
2015
2016
HK$’000
HK$’000
HK$’000
21,653
40,825
50,782
1,919
3,156
3,168
3,706
2,218
2,777
5,625
5,374
5,945
31,553
51,796
64,779
(25,928)
(46,422)
(58,834)
(4,275)
(7,238)
(8,052)
1
1
1
(4,276)
(7,239)
(8,053)
(4,275)
(7,238)
(8,052)

The accompanying notes form an integral part of the Financial Information.

– 43 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

At 1 January 2014 Loss and total comprehensive expenses for the year At 31 December 2014 and 1 January 2015 Loss and total comprehensive expenses for the year At 31 December 2015 and 1 January 2016 Loss and total comprehensive expenses for the year At 31 December 2016	Share capital HK$’000 1 – 1 – 1 – 1	Exchange reserve HK$’000 (21) 135 114 (1,356) (1,242) 2,145 903	Accumulated losses HK$’000 (2,594) (1,796) (4,390) (1,607) (5,997) (2,959) (8,956)	Total HK$’000 (2,614) (1,661) (4,275) (2,963) (7,238) (814) (8,052)

– 44 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities
Loss before income tax
Adjustments for:
Depreciation of property, plant and equipment
Interest income
Operating loss before working capital changes
Increase in prepayments and other receivables
Increase in other payables
Net cash generated from operation
Cash flows from investing activities
Purchase of property, plant and equipment
Payment of construction in progress
Interest received
Net cash used in investing activities
Net decrease in cash and cash equivalents
Effect of foreign exchange rate changes
Cash and cash equivalents at the beginning of
the year
Cash and cash equivalents at the end of the
year,
Represented by cash and bank balances

Year ended 31 December
2014
2015
2016
HK$’000
HK$’000
HK$’000
(1,796)
(1,607)
(2,959)
48
58
75
(7)
(6)
(3)
(1,755)
(1,555)
(2,887)
9,013
(1,237)
(12)
3,955
21,884
11,342
11,213
19,092
8,443
(3)
(356)
−
(11,605)
(20,494)
(13,312)
7
6
3
(11,601)
(20,844)
(13,309)
(388)
(1,752)
(4,866)
428
264
5,425
3,666
3,706
2,218
3,706
2,218
2,777

– 45 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

Billion Ray Investments Limited (the “Target Company”) was incorporated in the British Virgin Islands on 23 February 2013 with limited liability. Its registered office is located at P.O. Box 957, offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The principal activity of the Target Company is investment holding. The Target Group is principally engaged in the operation of build-operate Transfer Project of Shauton City Charoren Port Cutture Park.

Particulars of the companies now comprising the Target Group have been set out in Note 18 to the Financial Information.

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

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Group has applied HKFRSs issued by the HKICPA which are effective for the financial period beginning on 1 January 2016 and consistently applied throughout the Relevant Periods.

New and amendments to HKFRSs in issue but not yet effective

At the date of this report, the Target Group has not early applied the following new and amendments to HKFRSs that have been issued but are not yet effective:

HKFRS 9 Financial Instruments[1] HKFRS 15 Revenue from Contracts with Customers[1] HKFRS 16 Leases[2] Amendments to HKFRS 2 Classification and Measurement of Share-based Payment Transactions[1] Amendments to HKFRS 15 Clarifications to HKFRS 15 Revenue from Contracts with Customers[1] Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor and HKAS 28 its Associate or Joint Venture[3] Amendments to HKAS 7 Disclosure Initiative[4] Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses[4]

1 Effective for annual periods beginning on or after 1 January 2018
2 Effective for annual periods beginning on or after 1 January 2019 3 Effective for annual periods beginning on or after a date to be determined 4 Effective for annual periods beginning on or after 1 January 2017

– 46 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The director of the Target Company anticipate that the application of these new and revised HKFRSs will have no material impact on the consolidated financial statements other than those set out below:

HKFRS 9 (2014) Financial Instruments

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

Key requirements of HKFRS 9 (2014) are described as follows:

All recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principle and interest on the principle outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principle amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to changes in the financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss.
In relation to the impairment of financial assets, HKFRS 9 requires and expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in HKAS 39. Under HKFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an ’economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

The director of the Target Company anticipate that the application of HKFRS 9 in the future may have a material impact on amounts reported in respect of the Target Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 9 until the Target Group undertakes a detailed review.

HKFRS 15 Revenue from Contracts with Customer

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

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

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

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when “control” of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15.

The director of the Target Company anticipate that the application of HKFRS 15 in the future may affect the amounts reported and related disclosures. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until a detailed review has been completed.

The director of the Target Company anticipates that the application of other new and amendments to HKFRSs will have no material impact on the Target Group’s future financial statements.

– 48 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

3. BASIS OF PREPARATION

(a) Statement of compliance

The Financial Information have been prepared in accordance with HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations (hereinafter collectively referred to as “HKFRSs”) issued by the HKICPA and the disclosure requirements of Hong Kong Companies Ordinance. In addition, the Financial Information include applicable disclosures required by the GEM Listing Rules.

(b) Basis of measurement

The Financial Information have been prepared on the historical cost basis.

(c) Functional and presentation currency

The Financial Information are presented in Hong Kong Dollar (“HKD”), which is the same as the functional currency of the Target Company.

(d) Going concern basis

The Financial Information have been prepared on a going concern basis. The Target Company has net current liabilities of approximately HK$25,928,000, HK$46,422,000 and 58,834,000 and net liabilities of approximately HK$ 4,275,000, HK$7,238,000 and HK$8,052,000 as at 31 December 2014, 2015 and 2016 respectively and its continuance in business as going concern is dependent upon the Target Company maintaining future profitable operations. The Financial Information have been prepared on going concern as the holding company has confirmed to provide continuing financial support to the Target Company to enable it to continue as going concern and to settle its liabilities as when they fall due.

4. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies that have been used in the preparation of the Financial Information are summarised below. These policies have been consistently applied to the Relevant Periods unless otherwise stated.

It should be noted that accounting estimates and assumptions are used in preparation of the Financial Information. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Information, are disclosed in Note 5.

4.1 Property, plant and equipment

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

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

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Target Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Depreciation is calculated using the straight-line method to allocate the costs over the estimated useful lives, as follows:

Office equipment 20% per annum Motor vehicles 10% per annum

The assets’ residual values, depreciation method and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

Construction in progress represents buildings under construction, which are stated at cost less any impairment losses, and are not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

4.2 Impairment of non-financial assets

The Target Group’s property, plant and equipment are subject to impairment testing.

For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a CGU). As a result, some assets are tested individually for impairment and some are tested at CGU level.

All individual assets or CGUs with an indefinite useful life and those not yet available for use are tested for impairment at least annually. All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised as an expense immediately for the amount by which the asset’s or CGU’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value, reflecting market conditions, less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of time value of money and the risk specific to the assets.

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the asset’s recoverable amount and only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

4.3 Financial assets

The Target Group’s financial assets include prepayments and other receivables and cash and bank balances.

Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and where allowed and appropriate, re-evaluates this designation at every reporting date.

Financial assets are classified as loans and receivables which are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables are recognised when, and only when, the Target Group becomes a party to the contractual provisions of the instrument. Derecognition occurs when the rights to receive cash flows from the financial assets expire or are transferred and substantially all of the risks and rewards of ownership have been transferred.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

At each reporting date, financial assets are reviewed to determine whether there is any objective evidence of impairment.

Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the company about one or more of the following loss events:

Significant financial difficulty of the debtor;
A breach of contract, such as a default or delinquency in interest or principal payments;
It becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
Significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

Loss events in respect of a group of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from the Target Company of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors in the group and, national or local economic conditions that correlate with defaults on the assets in the Target Company.

If any such evidence exists, the impairment loss is measured and recognised. The amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period in which the impairment occurs.

If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss in the period in which the reversal occurs.

4.4 Cash and cash equivalents

Cash and cash equivalents include cash at banks and in hand, demand deposits with banks and short term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of bank balances and cash as defined above.

4.5 Retirement benefit costs

The employees of the Target Group are required to participate in a central pension scheme operated by the local municipal government. The Target Group is required to contribute a certain percentage of its payroll costs to the central pension scheme.

Contributions are recognised as an expense in profit or loss as employees render services during the year. The Target Group’s obligations under these plans are limited to the fixed percentage contributions payable.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

4.6 Financial liabilities

The Target Group’s financial liabilities include amounts due to holding companies.

Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. All interest related charges, if any are recognised with the Target Group’s accounting policy for borrowing costs.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss.

4.7 Provisions and contingent liabilities

Provisions are recognised when the Target Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

All provision are reviewed at each reporting date and adjusted to reflect the current best estimate.

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

4.8 Government grant

Government grant is not recognised until there is reasonable assurance that the Target Company will comply with the conditions attaching to them and that the grants will be received.

Government grant that is receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Target Group with no future related costs are recognised in profit or loss in the Relevant Periods in which they become receivable.

4.9 Foreign currencies

Transactions entered into by the entities in currencies other than the currency of the primary economic environment in which they operate (the “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the end of Relevant Periods. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income, in which case, the exchange differences are also recognised in other comprehensive income.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

4.10 Taxation

Income tax comprises current and deferred tax.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior Relevant Periods, that are unpaid at the reporting date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in profit or loss.

Deferred tax is calculated using the liability method on temporary differences at the reporting date between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profit, including existing taxable temporary differences, will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from initial recognition of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss.

Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they are enacted or substantively enacted at the end of each Relevant Periods.

Changes in deferred tax assets or liabilities are recognised in the profit or loss, or in other comprehensive income or directly in equity if they relate to items that are charged or credited to other comprehensive income or directly to equity.

Current tax assets and current tax liabilities are presented in net if, and only if,

(a) the Target Company has the legally enforceable right to set off the recognised amounts; and
(b) intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

The Target Company presents deferred tax assets and deferred tax liabilities in net if, and only

if,

(a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and
(b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either: (i) the same taxable entity; or (ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

4.11 Related parties

A party is considered to be related to the Target Group if:

(a) the party is a person or a close member of that person’s family and that person:
(i) has control or joint control of the Target Group;
(ii) has significant influence over the Target Group; or
(iii) is a member of the key management personnel of the Company or of a parent of the Target Company; or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Target Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Target Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Target Company or to the Target Company’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

4.12 Segment reporting

The Target Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the director of the Target Company for their review of the performance of those components. The business components in the internal financial information reported to the director are determined following the Target Group’s major product and service lines.

The Target Group has identified the following reportable segments:

Leasing income segment – Leasing income from the yacht slots and the shopping mall

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Each of these operating segments is managed separately as each of the product and service lines requires different resources as well as marketing approaches.

The measurement policies the Target Group uses for reporting segment results under HKFRS 8 are the same as those used in its consolidated financial statements prepared under HKFRSs, except that rental income, income tax and corporate income and expenses including certain finance costs which are not directly attributable to the business activities of any operating segment are not included in arriving at the operating results of the operating segment.

Segment assets exclude corporate assets which are not directly attributable to business activities of any operating segment are not allocated to a segment, which primarily applies to the LY Target Company’s headquarter.

Segment liabilities exclude corporate liabilities which are not directly attributable to the business activities of any operating segment and are not allocated to a segment.

No asymmetrical allocations have been applied to reportable segments.

5. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATIONS

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

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 year are discussed below:

Impairment of receivables

Assessment for impairment of receivables of the Target Group is based on the evaluation of collectibility and ageing analysis of accounts and on management’s judgement. A considerable amount of judgement and estimates are required in assessing the ultimate realisation of these receivables, including the creditworthiness and the past collection history of each customer and debtor. If the financial condition of the debtors was to deteriorate, resulting in an impairment of their ability to make payments, additional allowance will be required.

Depreciation

The Target Company depreciated the property, plant and equipment on a straight-line basis over the estimated useful lives, starting from the date on which the assets are available for productive use. The estimated useful lives reflect the director’ estimate of the periods that the Target Company intends to derive future economic benefits from the use of the Target Company’s property, plant and equipment.

Income taxes

The Target Company is subject to income taxes in the PRC. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Target Company recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. 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 provision in the period in which such determination is made.

6. REVENUE

The Target Group did not generate revenue during the Relevant Periods.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

7. SEGMENT INFORMATION

The director of the Target Company, being the chief operating decision maker, assesses the performance and allocates the resources of the Target Group as a whole because the Target Group is engaged in single business of development of tourism project. Therefore, the director of the Target Company considers that the Target Group only has one operating segment under the standard of HKFRS 8 “Operating segments”. In this regard, no segment information is presented.

Geographical information

The operations and assets of the Target Group are mainly located in the PRC.

Information about major customers

Since the investment property is under development and no income from development of tourism project is recognised during the Relevant Periods, no major customer is disclosed.

8. OTHER INCOME

An analysis of other income is as follows:

Interest income Government grant	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 7 6 3 – 1,850 – 7 1,856 3	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 7 6 3 – 1,850 – 7 1,856 3
		3

During the year ended 31 December 2015, government grants of approximately HK$1,850,000 were received, where the Target Group had fulfilled the relevant criteria, in respect of certain tourism of projects. The amounts were therefore immediately recognised as other income.

9. LOSS BEFORE INCOME TAX

	Year	ended 31 December	ended 31 December
	2014	2015	2016
	HK$’000	RMB’000	RMB’000
Auditor’s remuneration	5	5	5
Depreciation of property, plant and equipment	48	58	75

10. INCOME TAX EXPENSE

The Target Group is subject to income tax on an entity basis on profit arising in or derived from the PRC. The provision for PRC Enterprise Income Tax is based on the statutory rate of 25% of the assessable profits as determined in accordance with the PRC Corporate Income Tax Law.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

No provision for Hong Kong profits tax has been made as the Target Group had no assessable profits arising in Hong Kong for the Relevant Periods.

	Year	ended 31 December
	2014	2015	2016
	HK$’000	HK$’000	HK$’000
Current tax
– Charge for the year	–	–	–

Reconciliation between income tax expense and accounting profit at applicable tax rates:

Loss before income tax At the PRC’s statutory income tax rate of 25% Expenses not deductible for tax Income tax expenses	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 (1,796) (1,607) (2,959) (449) (402) (740) 449 402 740 – – –	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 (1,796) (1,607) (2,959) (449) (402) (740) 449 402 740 – – –

		(740) 740
		–

11. EMPLOYEE BENEFIT EXPENSES (INCLUDING DIRECTOR’S EMOLUMENTS)

Salaries and wages Social insurance	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 989 932 919 19 17 16 1,008 949 935	Year ended 31 December 2014 2015 2016 HK$’000 HK$’000 HK$’000 989 932 919 19 17 16 1,008 949 935
		935

11.1 Director’s emoluments

The directors of the Target Company did not receive any remuneration from the Target Group during the Relevant Periods.

11.2 Five highest paid individual

The directors of the Target Company considers the presentation of the five highest paid employees information is not meaningful for the purpose of this report.

12. DIVIDEND

No dividend has been paid or declared by the Target Company since the date of its incorporation.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

13. PROPERTY, PLANT AND EQUIPMENT

Cost: As at 1 January 2014 Additions Exchange differences As at 31 December 2014 and 1 January 2015 Additions Exchange differences At 31 December 2015 and 1 January 2016 Additions Exchange differences At 31 December 2016 Accumulated depreciation: As 1 January 2014 Provided for the year As at 31 December 2014 and 1 January 2015 Provided for the year Exchange differences At 31 December 2015 and 1 January 2016 Provided for the period Exchange differences At 31 December 2016 Net carrying amounts: At 31 December 2014 At 31 December 2015 At 31 December 2016	Motor vehicles HK$’000 325 – (7) 318 356 (25) 649 − (43) 606 12 31 43 39 (3) 79 62 (8) 133 275 570 473	Office equipment HK$’000 78 3 (2) 79 – (4) 75 − (5) 70 8 17 25 19 (2) 42 13 (3) 52 54 33 18	Construction in progress HK$’000 10,003 11,605 (284) 21,324 20,494 (1,596) 40,222 13,312 (3,243) 50,291 – – − − − − − − − 21,324 40,222 50,291	Total HK$’000 10,406 11,608 (293) 21,721 20,850 (1,625) 40,946 13,312 (3,291) 50,967 20 48 68 58 (5) 121 75 (11) 185 21,653 40,825 50,782

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

14. PREPAYMENTS AND OTHER RECEIVABLES

Other receivables Prepayments 15. CASH AND BANK BALANCES Cash and bank balances	As 2014 HK$’000 666 1,253 1,919 As 2014 HK$’000 3,706	at 31 December 2015 2016 HK$’000 HK$’000 405 600 2,751 2,568 3,156 3,168 at 31 December 2015 2016 HK$’000 HK$’000 2,218 2,777

As at 31 December 2014, 2015 and 2016, all the cash and bank balances of the Target Group denominated in RMB amounted in to approximately RMB2,958,000, RMB1,854,000 and RMB2,488,000. RMB is not freely convertible into other currencies, however, under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Company is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances is deposited with creditworthy banks with no recent history of default.

16. AMOUNTS DUE TO HOLDING COMPANIES

The amounts were unsecured, interest free and repayable on demand.

17. SHARE IN CAPITAL AND RESERVE

(a) Share in capital

For the purpose of this Financial Information, the share capital at 1 January 2013, 31 December 2014, 2015 and 2016 represented the capital of the Target Company. The share capital of the Target Company as at the end of each reporting period was 1 ordinary share at US$1 dollar (equivalent to HK$8) with authorised share of US$50,000 (equivalent to HK$320,000).

There was no movement in share capital and authorised capital of the Target Company during the Relevant Periods.

(b) Statutory reserve

Pursuant to the relevant PRC rules and regulations, those subsidiaries which are domestic enterprises in PRC are required to transfer no less than 10% of their profits after tax, as determined under PRC accounting regulations, to the statutory reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before the distribution of a dividend to shareholders.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

(c) Capital management

The Target Group’s primary objectives when managing capital are to safeguard the Target Company’s ability to continue as a going concern, so that it can continue to provide returns for equity holders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Target Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher equity holders returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

18. PARTICULARS OF SUBSIDIARIES

Details of the Target Company’s subsidiaries are as follows:

			Proportion	Proportion	of
			ownership interest			Issued and
	Country/		and	voting power		fully paid
	place of		held	by the Target		share
	incorporation/	Class of		Company		capital/	Principal
Name of subsidiary	formation	shares held	2014	2015	2016	quota capital	activities	Auditor
Allied Star Creation	Hong Kong	Ordinary	100%	100%	100%	HK$1	Investment	Elite Partners
Limited				(Direct)			holding	CPA Limited
汕頭市麗潮旅遊開發	PRC	Ordinary	100%	100%	100%	HK$64,657,950	Development	汕頭市金正會計
有限公司				(Indirect)			tourism	師事務所
							project

19. OPERATING LEASE COMMITMENTS

The Target Group did not have any material operating lease commitments as at 31 December 2014, 2015 and 2016.

20. FINANCIAL INSTRUMENT BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the Relevant Periods are as follows:

Financial assets Loans and receivables Prepayment and other receivables Cash and bank balances Financial liabilities At amortised cost Amounts due to holding companies	As 2014 HK$’000 1,919 3,706 5,625 As 2014 HK$’000 31,553	at 31 December 2015 2016 HK$’000 HK$’000 3,156 3,168 2,218 2,777 5,374 5,945 at 31 December 2015 2016 HK$’000 HK$’000 51,796 64,779

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

21. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENT

(a) Financial risk management

The Target Group’s business activities expose it to a variety of financial risks, which include credit risk, liquidity risk and interest rate risk arising in the normal course of its business and financial instruments. Details of the policies on how to mitigate these risks are set out below. The Target Company manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

There has not been any change to the Target Company’s risk exposure relating to financial instruments or the manner in which it manages and measures the risks.

Credit risk

The Target Group did not expose to credit risk from its operating activities.

The credit risk on bank balances is minimal because the counterparties are banks with high credit-rating.

Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value.

The Target Group’s policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants to ensure that it maintains sufficient amount of cash and adequate committed lines of funding to meet its liquidity requirements in the short and longer term.

The remaining contractual maturities at the end of the Relevant Periods of the Target Group’s financial liabilities, which are based on contractual undiscounted cash flows and the earliest date of the Target Group can be required to pay are within one year or on demand.

(b) Fair value measurement

The director’s of the Target Company consider that the fair values of each class of the financial assets and financial liabilities at the end of Relevant Periods approximate to their carrying amounts.

22. RELATED PARTIES TRANSACTION

(a) During the Relevant Periods, the Target Group has the following significant related party transactions with related parties:

Compensation of key management personnel

						Year	ended 31 December
						2014	2015	2016
						HK$’000	HK$’000	HK$’000
Salaries,	allowances	and	benefits	in	kind	38	222	210

23. CONTINGENT LIABILITIES

The Target Group has no significant contingent liability as at 31 December 2014, 2015 and 2016.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 31 December 2016 up to the date of this report.

Yours faithfully, Elite Partners CPA Limited Certified Public Accountants Hong Kong

Yip Kai Yin

Practising Certification Number: P05131

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

PART B. MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

Set out below is the management discussion and analysis on the Target Group for the three years ended 31 December 2014, 2015 and 2016.

Business review

The Target Group is principally engaged in development and operation of the Project.

Financial performance

For the three years ended 31 December 2014, 2015 and 2016, the Project was still under construction, and therefore no revenue was generated. For the three years ended 31 December 2014, 2015 and 2016, the Target Group recorded administrative expenses of approximately HK$1,794,000, HK$3,356,000 and HK$2,959,000, mainly being the staff salary, office expense and other general administration expenses.

Liquidity, financial resources and capital structure

The Target Group’s total assets mainly includes its investment in the Project. As at 31 December 2014, 2015 and 2016, the Target Group recorded a total asset of HK$27,278,000, HK$46,199,000 and HK$56,727,000, of which the investment in property, plant and equipment take a significant portion. The increase represents the development to the construction of certain buildings of the Project.

The Target Group was mainly financed by interest-free and unsecured loans from other inter-group companies. As at 31 December 2014, 2015 and 2016, the gearing ratio of the Target Group, being the total liabilities divided by the total equity, was 7.38, 9.25 and 8.04 respectively. The loans are used for the construction cost and other general working capital of the Target Group. For the three years ended 31 December 2014, 2015 and 2016, the Target Group used debt financing as its major fund resources to finance development of the Project.

Treasury policy and hedging arrangement

For the three years ended 31 December 2014, 2015 and 2016, the Target Group did not have any treasury policy or hedging arrangement.

Significant investment

As at 31 December 2014, 2015 and 2016, the Target Group did not have any significant investment other than the Project.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

Segment information

For the three years ended 31 December 2014, 2015 and 2016, the Target Group operated in only one business segment which is the development and operation of the Project.

Charge of assets

As at 31 December 2014, 2015 and 2016, none of the assets of the Target Group has been charged.

Material acquisitions and disposals

For the three years ended 31 December 2014, 2015 and 2016, the Target Group did not enter into any material transaction to acquire or dispose of its assets.

Contingent liability

As at 31 December 2014, 2015 and 2016, the Target Group did not have any contingent liability.

Capital commitment

Save for the commitment of approximately RMB439 million to develop the Project under the Build-Operate-Transfer Agreement, the Target Group did not have any capital commitment as at 31 December 2014, 2015 and 2016. Details of the Build-Operate-Transfer Agreement are disclosed in the “Letter from the Board” of this circular.

Exposure on foreign currency fluctuation

For the three years ended 31 December 2014, 2015 and 2016, the Target Group only conducted business in the mainland China and had no currency exposure other than Renminbi.

Employee

As at 31 December 2014, 2015 and 2016, the Target Group had 21, 22 and 18 employee respectively.

Future plan

Other than continuously focusing on development and operation of the Project, the Target Group has not formed any other future plan.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

STATEMENT OF UNAUDITED PRO FORMA CONSOLIDATED ASSETS AND LIABILITIES OF THE GROUP

The unaudited pro forma financial information is prepared based on the unaudited condensed consolidated statement of assets and liabilities of the Group as at 30 September 2016 which has been extracted from the Group’s interim report for the six months ended 30 September 2016 issued on 14 November 2016.

The unaudited pro forma financial information is prepared by the Directors bases on the aforesaid historical data after giving effect to the pro forma adjustments described in the accompanying notes.

The unaudited pro forma financial information has been prepared by the Directors based on certain assumptions, estimates and uncertainties for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Group. Accordingly, the unaudited pro forma financial information does not purport to describe the financial position of the Group that would have been attained had the Acquisition been completed on 30 September 2016, nor to predict the future financial position of the Group.

ASSETS Non-current assets Plant and equipment Available-for-sales investments Investment in an associate	Unaudited consolidated assets and liabilities of the Group as at 30 September 2016 Pro forma Adjustment Notes HK$’000 HK$’000 Note 1 3,855 6,600 – 79,758 3 10,455	Unaudited pro forma consolidated assets and liabilities of the Group as at 30 September 2016 HK$’000 3,855 6,600 79,758
		90,213

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Current assets Trade and other receivables Deposit paid for acquisition of investment Deposit of prepayment Amounts due from customers for contract work Financial assets at fair value through profit or loss Pledged bank deposits Bank balance and cash Total assets LIABILITIES Non-current liabilities Bonds Promissory notes Current liabilities Amounts due to customers for contract work Trade and other payables Receipts in advance Short term loan Tax payables Total liabilities	Unaudited consolidated assets and liabilities of the Group as at 30 September 2016 Pro forma Adjustment Notes HK$’000 HK$’000 Note 1 56,797 12,800 2,810 13,116 53,233 359 4,024 143,139 153,594 12,972 – 79,758 3,4 12,972 7,648 87,186 1,229 12,800 4,013 112,876 125,848	Unaudited pro forma consolidated assets and liabilities of the Group as at 30 September 2016 HK$’000 56,797 12,800 2,810 13,116 53,233 359 4,024
		143,139
		233,352

		12,972 79,758
		92,730
		7,648 87,186 1,229 12,800 4,013
		112,876
		205,606

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

The statement of unaudited consolidated assets and liabilities of the Group as at 30 September 2016 are extracted from the published interim report of the Group for the six months ended 30 September 2016.
On 30 December 2016, Jovial Tycoon Holdings Limited (“Purchaser”), wholly owned subsidiary of the Company, entered into an acquisition agreement with Sminent International Limited (“Vendor”) for the acquisition of 20% equity interest in Billion Ray Investments Limited (the “Target Company”) and its subsidiaries (the “Target Group”) (“Acquisition”).

Total consideration for the Acquisition was HK$100,000,000, which shall be satisfied by issuance of promissory note with maturity of 3 years. Assuming the Acquisition was completed on 30 September 2016, the fair value of promissory note was HK$79,758,000.

This represents the cost of interest in an associate which was the fair value of promissory note as if the Acquisition had been completed on 30 September 2016. The fair value of promissory note will be reassessed upon Completion.

The Directors made preliminary assessment, with reference to Hong Kong Accounting Standard 36 “Impairment of Assets” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), as to whether or not there is any indicator of impairment on interest in an associate. The Directors have taken into account, among other things, the valuation of interest in an associate as at 30 November 2016 as assessed by an independent valuer based on income approach as set out in Appendix IV to the Circular. Based on such assessment, the Directors did not identify any impairment indicator in respect of the interests in an associate.

It is the sole responsibility of the Directors of the Company for impairment assessment on interest in an associate and confirmed that they will apply consistent accounting policies and principal assumptions for impairment assessment of interest in an associate in subsequent reporting periods in accordance with the requirement of HKAS 36. The Company also confirmed that the principal auditors will take into account the Company’s basis regarding the assessment of impairment of interest in an associate in future audit on the consolidated financial statements of the Group in accordance with Hong Kong Standards on Auditing issued by HKICPA.

For the purpose of the Unaudited Pro Forma Financial Information, the reporting accountants concurred with the assessment of impairment in associate by the directors of the Company, in accordance with HKAS 36 which was consistent with the accounting policies adopted for the preparation of consolidated financial statements of the Group.

This represents the promissory note amounted to HK$100,000,000 which will be issued upon completion of the Acquisition of 20% of equity interest in the Target Company. The fair value of promissory note of HK$79,758,000 was estimated by using the discount cash flow approach at prevailing market rate of approximately 12.5% per annum. The market rate of 12.5% is principally based on the 3-years Hong Kong risk free rate of 0.57% and the US High Yield Option-Adjusted Spread of 11.87%. Given that the promissory note has a coupon rate of 4% per annum and maturity of 3 years, the fair value of the consideration would be approximately HK$79,758,000. The fair value of the promissory note will have to be reassessed as at the date of Completion.
No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2016.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

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

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants of the Company, Elite Partners CPA Limited, Certified Public Accountants, Hong Kong.

10th Floor, 8 Observatory Road, Tsim Sha Tsui, Kowloon, Hong Kong 13 April 2017

The Board of Directors Trillion Grand Corporate Company Limited Unit B, 29/F, CKK Commercial Centre, 289-295 Hennessy Road, Wanchai, Hong Kong

Dear Sir,

We have completed our assurance engagement to report on compilation of unaudited pro forma financial information of Trillion Grand Corporate Company Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of assets and liabilities as at 30 September 2016 and related note as set out on pages 65 to 67 of the circular issued by the Company dated 13 April 2017 (the “Circular”). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described on page 65 of the Circular.

The unaudited pro forma financial information has been compiled by the Directors to illustrate impact of the proposed acquisition of 20% of equity interests of Billion Ray Investments Limited on the Group’s financial position as at 30 September 2016 as if the transaction had taken place at 30 September 2016. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s condensed consolidated financial statements for the six months ended 30 September 2016, on which a review conclusion has been published.

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 31 of Chapter 7 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of on The Stock Exchange of Hong

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

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”).

Our Independence and Quality Control

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

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

Reporting Accountants’ Responsibilities

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

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

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

The purpose of unaudited pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 September 2016 would have been as presented.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

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

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

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

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

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

Opinion

In our opinion:

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

Your faithfully,

Elite Partners CPA Limited

Certified Public Accountants

Hong Kong

Yip Kai Yin

Practising Certificate Number: P05131

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

The following is the text of a valuation report, prepared for the purpose of incorporation in this circular, received from Access Partner Consultancy & Appraisals Limited, an independent valuer, in connection with their valuation as of 30 November 2016 of 20% equity interest of Billion Ray Investments Limited and its subsidiary.

Unit C, 9/F, Lucky Plaza, 315-321 Lockhart Road, Wanchai, Hong Kong Telephone: +852 2511-2110 E-mail: [email protected] Website: http://www.access-partner.com

13 April 2017

The Board of Directors Trillion Grand Corporate Company Limited Unit B, 29/F., CKK Commercial Centre, 289 Hennessy Road, Wanchai, Hong Kong

Dear Sirs/Madams,

Valuation of 20% Equity Interest of Billion Ray Investments Limited and its subsidiaries as of 30 November 2016

INSTRUCTION

This report has been prepared solely for Trillion Grand Corporate Company Limited (the “Company”), which has engaged Access Partner Consultancy & Appraisals Limited (“Access Partner” or “we”) to perform a valuation of 20% equity interest of Billion Ray Investments Limited (the “Target”) and Shantou City Li Chao Tourism Development Limited （汕頭市麗潮旅遊開發有限公司） (the “Project Company”, together with the Target are collectively referred to the “Target Group”) as of 30 November 2016 (the “Date of Valuation”).

This report states the purpose of valuation, basis of valuation, scope of work, source of information, an overview of the Target Group, an overview of the industry, major assumptions, valuation methodology, sensitivity analysis, limiting conditions, remarks and opinion of value.

1. PURPOSE OF VALUATION

This report is prepared solely for the use of the directors and management of the Company. In addition, Access Partner acknowledges that this report may be made available to the Company for public documentation purpose and used as reference on the Company’s circular dated 13 April 2017 (the “Circular”).

We will not accept any responsibility or liability to any third party to whom in respect of, or arising out of, the contents of this report may be shown.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

2. BASIS OF VALUATION

Our valuation has been based on fair value, which is defined by International Valuation Standards established by the International Valuation Standards Council in 2011 as “the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties”.

3. SCOPE OF WORK

Our valuation conclusion is based on the assumptions stated herein and the information provided by the management of the Company, the management of the Target Group and/or their representative(s) (collectively the “Management”). In the course of our valuation work, we have conducted the following processes to evaluate the reasonableness of the adopted basis and assumptions provided:

Discussed with the Management in relation to the background, development, operations, financial performance and other relevant information of the Target Group;
Reviewed relevant financial information, operational information, financial projection and other relevant data concerning the Target Group;
Reviewed the signed contracts between the Target Group and the government, legal opinions of the build-operate-transfer project (the “Project”) operated by the Target Group, feasibility studies of the Project’s construction, business plan and other relevant documents of the Project, which were provided by the Management;
Performed market research in relation to the economic outlook in general, the specific economic environment and market elements affecting the business, industry and market and obtained relevant statistical figures from public sources;
Examined the relevant basis and assumptions of both the financial and operational information of the Target Group, which were provided by the Management;
Prepared a valuation model to derive the fair value of the Target Group; and
Presented all relevant information on the scope of works, source of information, an overview of the Target Group, an overview of the industry, major assumptions, valuation methodology, sensitivity analysis, limiting conditions, remarks and opinion of value in this report.

We reviewed and examined the relevant legal documents, information and financial projection of the Target Group provided to us by the Management without further verification. We assumed that the information and financial projection have been prepared on a reasonable basis that have been arrived at after due and careful consideration by the Management, and we have no reason to believe that any material fact has been withheld from us. Moreover, we do not warrant that our investigations have revealed all of the matters which an audit or more extensive examination might disclose.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

4. SOURCE OF INFORMATION

For the purpose of our valuation, we have been provided with the information in respect of the Target Group prepared by the Management. The valuation required the consideration of all relevant factors including, but not limited to, the following:

Background of the Target Group’s business operations and relevant corporate information;
Historical financial information of the Target Group;
Financial projection of the Target Group prepared by the Management;
Registrations and legal documents related to the Target Group;
Market information in relation to the Target Group’s industry; and
Economic outlook in the People’s Republic of China (the “PRC”).

We have also conducted research from public sources and carried out site inspection in August 2016 to assess the reasonableness and fairness of the information provided. We have assumed the accuracy of the information provided and relied to a considerable extent on such information in arriving at our opinion.

5. OVERVIEW OF THE TARGET GROUP

The Target

Billion Ray Investments Limited (i.e. the Target) is an investment holding company incorporated in British Virgin Islands with limited liability.

The Target, which indirectly wholly owns Shantou City Li Chao Tourism Development Limited （汕頭市麗潮旅遊開發有限公司） (i.e. the Project Company), is a company which develops and operates tourist attractions.

The Project Company

The Project Company is an investment holding company incorporated in the PRC in 2012 with limited liability which is an indirect wholly owned subsidiary of the Target. The Project Company is principally engaged in the operation of the Project – Shantou City Chaoren Port Cultural Park （汕頭市潮人碼頭文化公園特許經營項目）. According to an exclusive right agreement and a supplemental agreement signed between the Project Company and the Shantou government authority in 2013 and 2016 respected. The Project Company has been granted an exclusive right (the “Exclusive Right”) to build and operate the Project over 42.25 years.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

Description of the Project

In 2013, the Project Company entered into the build-operate-transfer agreement, in Shantou City Chaoren Port Cultural Park, with the government of Shantou City of Guangdong province, in connection with the Shantou Marina Waterfront Project. The Project Company and the local government entered into a supplemental agreement in 2016 to confirm the exclusive operating right for 42.25 years. The Project is supported by local government to revitalize the Old Town District of Shantou, as an integrated project, including commercial, culture, leisure and tourism features. With a total area of over 90,000 square meters, the Project is located at the center of Shantou City, the Guangdong Province, in the PRC, in front of the Chao Hai Guan Bell House（潮海關鐘樓）, east to Hai Jun Port（海軍碼頭）and west to Yuan Xi Di Car and Ferry Port（原西堤汽車輪渡碼頭）. The Project will include a yacht terminal, a shopping mall, a business facility, a cultural facility, a public entertainment and a parking area with a total floor area of approximately 38,000 square meters.

6. INDUSTRY OVERVIEW

6.1 Overview of the Retail Industry in the PRC

According to National Bureau of Statistics China, the total retail sales rose 10.7% year on year (“YoY”) in 2015. The retail sales remained healthy in the first six months of 2016 and showed signs of recovery, with a 10.3% YoY growth. Although a number of factors, such as online sales and slowing economy, affected the PRC’s retail sales, a number of new shopping malls in Guangzhou would be launched in 2016, providing more than 500,000 square metre, for example, K11 and Parc Central. This reveals the market players are still optimistic about future outlook of the retail market.

Figure 1: Retail sales in the PRC

==> picture [336 x 201] intentionally omitted <==

Source: National Bureau of Statistics of China

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APPENDIX IV

VALUATION REPORT OF THE SALE SHARES

According to a report from CBRE, a sign of recovery was shown in the second quarter of 2016 and the sales performance and foot traffic improved across several markets while 10 projects were completed in 17 major cities with 1.03 million square meter. The ground floor surged by 0.5% quarter on quarter (“qoq”), a slightly faster growth compare to first quarter of 2016. In addition, according to the research report published by Knight Frank regarding the property market in the second quarter of 2016, the rents remained stable for prime retail space. According to table 1 below, the rental fees per month in Guangzhou reached USD263 while vacancy rate remained below 5% in the second quarter of 2016.

Table 1: Rents, vacancy rates and yields in second quarter of 2016

City				Rental	Rate	Yield
	_(USD _	_psm _	_per _	month)
Beijing				$190.8	3.0%	5.9%
Shanghai				$259.1	9.6%	6.0%
Guangzhou				$263.4	4.3%	4.8%

Source: Knight Frank

Figures 2: Prime retail rentals from 2010-2016

==> picture [201 x 230] intentionally omitted <==

Source: Knight Frank

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

According to a report from CBRE regarding outlook of the PRC, more leasing demand may possibly come from retailers that address life-style or entertainment needs and sectors like affordable luxury, fast fashion and multi-brand stores. In addition, the growth of income, development of smart phones, effects of the property market rebound, cuts of interest rate in 2015 and full liberalization of the two-child policy are expected to stimulate the consumption in the future. The low inflation rate is also expected to stimulate the growth of the disposable income, especially in the 2nd tier cities.

In order to attract more consumers to spend in the PRC rather than overseas, a more comfortable shopping environment and attentive services are needed to provide to the consumers and this provides a new opportunity for the development of the shopping centre. Continuous upgrading of retail venues continues to emerge due to the continuous evolution of the PRC’s retail layout while the older and traditional department stores are required to rebuild into new style shopping centres by local government policy. Meanwhile, the popularity of shopping centres continue to grow and become the main offline sales channel in the PRC.

According to Figure 3 below, the surrounding areas of the Target Group such as Guangzhou is expected to have a low risk of oversupply for retail, with the new supplies locate in new areas.

Figure 3: Prime Retail New Supply

==> picture [360 x 217] intentionally omitted <==

Source: CBRE Research

The yield of Guangzhou registered 4.8% in the second quarter of 2016 while the forecast yields of Guangzhou and Shenzhen in 2016 are expected to be 4.3% and 4.1% respectively.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

6.2 Overview of Yacht Marina Clubs in the PRC

In the PRC, the number of yacht owners is less than other nations such as United States and United Kingdom. This indicates that the market has a potential growth in the future as the number of rich people continues to grow in the PRC. According to 2015 Haizhilan China Yacht Market Report*（2015海之藍中國遊艇市場報告）, there are approximately 2,500 yachts and 62 marina clubs with independent berths in the PRC. Most of the luxurious yachts in the PRC were imported mainly from Europe.

There are a few famous marina clubs in Guangdong Province, for example, Shenzhen Marina Club （大梅沙灣遊艇會）, Vanke Longcheer Yacht Club （浪騎遊艇會）, Seven Star Yacht Club and Shenzhen Bay Marina Club. Shenzhen Marina Club is a marina club operated in 2006 and located in Shenzhen Dameisha with a total of 175 berths; Vanke Longcheer Yacht Club operated in 1998 and located in Shenzhen Dapeng Peninsula with a total of 275 berths; Seven Star Yacht Club operated in 2008 and located in Shenzhen east coast with a total of 230 berths; Shenzhen Bay Marina Club operated in 2000 and located in Shenzhen Bay with a total of 275 berths.

7. MAJOR ASSUMPTIONS

In conducting our valuation work, the following assumptions have been adopted to sufficiently support our conclusion of value, including, but not limited to:

General Market Assumptions

There will be no major changes in the political, legal, fiscal, technological, economic and market conditions in the localities in which the Target Group operates or intends to operate, which would adversely affect the revenues attributable to and profitability of the Target Group;
There will be no major changes in the current taxation laws in the localities in which the Target Group 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 material changes in the relevant market return, market risk and exchange rates that would impact the Target Group’s business operation;
There will be no material changes in the Exclusive Right granted by the Shantou government that would impact the Target Group’s business operation;
There will be no material changes in the number of tourists travelling to Shantou that would impact the Target Group’s business operation;
There will be no material changes regarding the outlook of the shopping malls located near the Project operate by the Target Group;
For identification purpose, the English name is only liternal translation of the Chinese name.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

The membership fees, admission fees of the marina club (the “Marina Club”) and the museum operate by the Target Group will not differ materially from those of present or expected;
The facilities surrounding the Project location will not differ materially from those of expected;
The rental fees of the shopping malls operated by the Target Group will not differ materially from those of present or expected;
The supply and demand, both domestically and internationally, of the shopping mall, the Marina Club and Chaoshan Cultural Museum operated by the Target Group will not differ materially from those of present or expected;
The market prices and the relevant costs, both domestically and internationally, of the Marina Club operated by the Target Group will not differ materially from those of expected; and
The market data, industrial information and statistical figures obtained from publicly available sources and Bloomberg Terminal are true and accurate.

Company-specific Assumptions

The Target Group has obtained all necessary permits, business certificates, licenses and legal approvals to operate the business and all relevant permits, business certificates, licenses and legal approvals to operate the business in the localities in which the Target Group operates or intends to operate would be officially obtained upon expiry;
The Target Group has obtained the Exclusive Right to build the Project over 2.5 years and will operate for 42.25 years and the core operation of the Target Group will not differ materially from those of present or expected;
The information provided and the representations made by the Management with regard to the Target Group’s financial and business affairs are accurate and reliable;
The financial projection in respect of the Target Group have been prepared on a reasonable basis that have been arrived at after due and careful consideration by the Management;
The Target Group currently has, or will have, adequate human capital and capacity required for the Marina Club, Chaoshan Cultural Museum and shopping boulevard of the Target Group, and the required human capital and capacity will be acquired in a timely manner that will not affect the operation of the Target Group;

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

The Target Group has acquired, or will acquire, adequate financial capital for the investments in projected capital expenditure and working capital from time to time;
The construction cost of the Project operated by the Target Group will not differ materially from those of present or expected;
The terms of the upcoming rental contracts will not differ materially from those of present or expected;
The senior management of the Target Group will implement only those prospective financial and operational strategies that will maximize the efficiency of the operation of the Target Group;
The senior management of the Target Group has sufficient knowledge and experience in respect of the operation of the Target Group, and the turnover of any director, management or key person will not affect the operation of the Target Group;
The senior management of the Target Group has adopted reasonable and appropriate contingency measures against any human disruption such as fraud, corruption and strike, and the occurrence of any human disruption will not affect the operation of the Target Group;
The senior management of the Target Group has adopted reasonable and appropriate contingency measures against any natural disaster such as fire, flood and hurricane, and the occurrence of any natural disaster will not affect the operation of the Target Group;
There are no undisclosed actual or contingent assets or liabilities, no unusual obligations or substantial commitments, other than in the ordinary course of business and as reflected in the financials, nor any litigation pending or threatened, which would have a material impact on the value of the Target Group as of the Date of Valuation;
The agreements in relation to the Exclusive Right between the Target Group and the Shantou government have been signed in 2013 and 2016 respectively and the corresponding construction and payment terms will not differ materially from those of present or expected;
The Project under existing plans or contracts will be completed as schedule and it will not arise any legal or financial issue that will affect the operation of the Target Group; and
The property management will be outsourced, and the terms for the Project under contracts will not differ materially from those of present or expected.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

In the event actual events do not accord with one or more of the above assumptions, the resulting value of the Target Group may vary substantially from the figure as set out in this report.

8. VALUATION METHODOLOGY

In conducting the valuation, we have considered three generally accepted approaches, including income approach, market approach and cost approach.

8.1. General Valuation Approaches

8.1.1 Income Approach

The income approach measures the value of an asset by the present value of its future economic benefits. These benefits can include earnings, cost savings, tax deductions and proceeds from its disposition.

8.1.2 Market Approach

The market approach measures the value of an asset through an analysis of recent sales or offerings of comparable property. Sales and offering prices are adjusted for differences in location, time of sale, utility, and the terms and conditions of sale between the asset being appraised and the comparable properties.

8.1.3 Cost Approach

The cost approach measures the value of an asset by the cost to reproduce or replace it with another of like utility. To the extent that the asset being valued provides less utility than a new asset, the reproduction or replacement cost new would be adjusted to reflect appropriate physical deterioration, functional and economic obsolescence.

8.2. Adopted Approach for the Valuation of the Target Group

Among the abovementioned valuation approaches, the selection of the valuation approach in valuing the Target Group is based on, among other criteria, the quantity and quality of the information provided, accessibility to available data, availability of relevant market information, uniqueness of the Target Group’s business operations and nature of the industry the Target Group is participating, professional judgment and technical expertise.

The income approach was considered to be the most appropriate valuation approach in this valuation, as it takes the future growth potential and firm-specific issues of the Target Group into consideration. Under the income approach, the Discounted Cash Flow (“DCF”) method is adopted.

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APPENDIX IV

8.2.1 The Discounted Cash Flow (“DCF”) Method

The DCF method begins with an estimation of the annual cash flows, which a market participant acquirer would expect the asset to generate over a discrete projection period. The expected debt-free cash flow for each year was determined as follows:

FCF = EBIT (1 – T) + Dep – InvCapex – InvNWC

Where:

FCF = free cash flow EBIT = earnings before income and tax T = tax rate Dep = non-cash items InvCapex = investment in capital expenditure InvNWC = investment in net working capital

The estimated cash flows for each of the years in the discrete projection period are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving the asset’s projected cash flows. The present values of the estimated cash flows are then added to the present value equivalent of the residual value of the asset (if any) at the end of the discrete projection period to arrive at an estimate of the value of the specific asset. The present value of the expected free cash flow was calculated as follows:

PVFCF = FCF1 / (1 + r)[1] + FCF2 / (1 + r)[2] + ... + FCFn / (1 + r)[n]

Where:

PVFCF = present value of free cash flows FCF = free cash flow r = discount rate n = number of year of projections

The key basis of revenue, operating expenses, capital expenditure, and net working capital adopted in the coming 7 years are shown in the following:

8.2.2 Revenue

All of the Target Group’s revenue in the forecast period are expected to derive from the rental income of shopping boulevard, membership fees from the Marina Club and the admission fees from Chaoshan Cultural Museum. In the valuation, the Project plans to be completed by fourth quarter of 2018. The revenue in 2019 is expected to derive solely from the rental income of shopping boulevard, annual membership fees from the Marina Club and the admission fees from Chaoshan Cultural Museum.

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According to the information provided by the Management, there are 5 rental contracts signed in 2016, with a contract sum of around RMB380 per month per square metre for the total gross area approximately 5,200 square metre, representing more than 22% of the leasable area of the shopping boulevard. The occupancy rate of the shopping boulevard is expected to be ranged from 85% to 90% with the rental rates of RMB430 per square metre on the 1[st] Floor, RMB30 per square metre for the management fees, and RMB310 per square metre on the 2[nd] Floor, RMB30 per square metre for the management fees, in the first year of operation.

According to the signed rental contracts, as provided by the Management, the annual rental fee was agreed to increase 8% each year for 60 months. With reference to the policy of Shantou Government in revitalizing the Old Town District of Shantou, the surrounding area of the Project is expected to enjoy a grow period in the coming years. In addition, some of the new shopping, office buildings, e.g. Huarun Wanxiang Cheng（華潤萬象城）, Suning Guangchang（蘇寧廣場）, etc., are going to complete in nearby area, the rental growth rate is expected to increase under the synergy effect. Therefore, as advised by the Management, the rental rate of the shopping boulevard is assumed to grow at 5% for the overall leasable area during the first 5 years after the completion of the construction.

The Marina Club will comprise of 63 yacht berths. The admission fee of the membership with berth, as advised by management, is going to set at RMB 1,200,000 and the admission fee of the membership without berth will be set at RMB200,000. The annual membership fee will be RMB200,000 and RMB30,000 for membership with berth and without berth respectively. This is comparative to the admission fee of the membership of Seven Star Yacht Club and Shenzhen Marina Club with the range of approximately RMB1 million to RMB2 million. The membership is going to pre-sell a year before the completion of the Marina Club building. The number of members of the Marina Club without fixed berths will be 250.

* For identification purpose, the English name is only literal translation of the Chinese name.

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Chaoshan Cultural Museum is expected to have 550,000 annual visitors in the first year of operation which accounted for less than 5% of Chaoshan annual overnight visitors of approximately 14.5 million in 2015 and it is expected to growth with 1% annually; while the ticket fee is going to set at RMB20 per visitor with reference to Guangdong Chaoju Theatre（廣東潮劇院）, the Ancestral Temple in FoShan and Science Centre in Guangdong with the range of RMB20 to RMB60. The table below presents the total revenue generated in the forecast period:

			Year	Ended 31 December	Ended 31 December
(RMB ’000)	2016	2017	2018	2019	2020	2021	2022
Revenue	–	–	125,600	130,247	142,374	148,968	155,874
Shopping Boulevard	–	–	–	99,147	110,228	115,739	121,526
Marina Club	–	–	125,600	20,100	20,703	21,324	21,964
Chaoshan Cultural
Museum	–	–	–	11,000	11,443	11,905	12,384

8.2.3 Operating Expenses

The operating expenses refer to selling, general and administrative expenses. In the valuation, the operating expenses in the forecast period are determined with reference to the percentage of revenue.

For the direct expenses of the property management fees, the company signed a contract with Lask Vigers Asset Management Limited, a company incorporated in 2010 primarily engages in surveying, real estate and property management, and the outsource property management fee is RMB18 per square metre with a total area of approximately 38,010 square meter. The annual property management fee is accounted in the operating expense, as shown in the table below, from 2019 onward once the operation start, and assuming it grows at inflation rate. While the direct expense for the marina club and Chaoshan Cultural Museum are determined to 30% of the revenue in the year of operation which accounts for salaries of the general staffs, food and beverage and other related cost. The table below presents the operating expenses in the forecast period:

(RMB ’000) Operating Expenses	2016 104	2017 1,288	Year Ended 31 December 2018 2019 2020 1,326 35,485 36,699	2021 37,774	2022 38,886

8.2.4 Capital Expenditure

According to the Management, it is expected that the amount of capital expenditure will be material for the construction of the Project in the forecast period. The Target Group already invested approximately RMB37 million as of the Date of Valuation in the Project and the upcoming capital will be invested

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APPENDIX IV

around RMB400 million according to the Shantou City Chaoren Port Cultural Park general schedule（汕頭市潮人碼頭文化園總進度計劃）, which is provided by the Management’s construction consultant. The table below presents the capital expenditure in the forecast period:

			Year	Ended 31 December	Ended 31 December
(RMB ’000)	2016	2017	2018	2019	2020	2021	2022
Capital
Expenditure	14,974	348,447	74,200	2,000	2,060	2,122	2,185

8.2.5 Net Working Capital

The net working capital is considered to be de minimis. As advised by the Management, the number of accounts receivable turnover days and accounts payable turnover days will be 30 and 30 respectively. The table below presents the net working capital in the forecast period:

			Year	Ended 31 December	Ended 31 December
(RMB ’000)	2016	2017	2018	2019	2020	2021	2022
Net Working Capital	(9)	(106)	(109)	8,696	9,609	10,080	10,573
Accounts Receivable	–	–	–	10,705	11,702	12,244	12,812
Accounts Payable	(9)	(106)	(109)	(2,009)	(2,093)	(2,164)	(2,238)

8.2.6 Tax Rate

According to the Management, other than the enterprise tax, the Project needs to pay other types of taxes to tax authorities in the PRC, including value-added tax (“VAT”), city maintenance and construction tax, education surtax, local educational surtax and property tax. According to the information provided by the Management, the VAT is based on 5% of revenue, while the educational surtax and local educational surtax is based on 3% and 2% of VAT respectively. For city maintenance and construction tax, the percentage is based on the city where the Project is located. The city maintenance and construction tax is based on 7% of VAT. The property tax is based on 12% of the rental income.

8.2.7 Discount Rate

The Project develops a complexes area with commercial and cultural properties, i.e. shopping malls, marina club with parking berths, and other peripheral facilities. By managing the complexes, leasing the properties and providing peripheral services, e.g. berths parking services in the complexes, the Project generates cash flow. The Project is, in nature, a real estate development project with operating the investment properties.

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The rate at which the free cash flow is discounted to present value represents the required rate of return for the above investment property. To derive the discount rate, we obtained the required rate of return by referencing to the following sources:

(a) The average capitalization rate of retail properties in Guangzhou with reference to the “ Greater China Real Estate Market Outlook 2016 – Retail Sector ” published by CBRE Ltd.; and “ Greater China Property Market Report Q2 2016 – Prime Retail ” published by Knight Frank Limited was 4.3% – 4.8% plus perpetual growth rate of 3%, i.e. approximately 8%. The 3% represents growth rate of an investment in long-run, which is generally considered to be in line with long-term inflation rate.
(b) The estimated weighted average cost of capital based on selected real estate related companies in the PRC and Hong Kong using the capital asset pricing model (“CAPM”) of approximately 9.0%.

Capitalization Rate

The capitalization rate is the rate of return on an investment property based on the income that the property is expected to generate. It is used to estimate the potential return on the property investment.

Weighted Average Cost of Capital

The weighted average cost of capital (“WACC”) for the Target Group. WACC represents the weighted average return attributable to all of the operating assets of the Target Group. WACC was computed using the formula below:

WACC = Re (E / V) + Rd (D / V) (1 – Tc)

Where:

WACC	=	weighted average cost of capital
Re	=	cost of equity
Rd	=	cost of debt
E	=	value of the firm’s equity
D	=	value of the firm’s debt
V	=	sum of the values of the firm’s equity and debt
Tc	=	corporate tax rate

As a component of WACC, the cost of equity was determined using CAPM. CAPM calculates a required return based on a risk measurement. It describes the relationship between the risk of a particular asset, its market price and the expected return to the investor, that investors required additional return to compensate additional risk associated.

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In the valuation, CAPM was modified to reflect the size premium associated with the Target Group. The cost of equity under the modified CAPM was computed using the formula below:

Re = Rf + � * MRP + RPS

Where:

Re = cost of equity Rf = risk-free rate � = beta coefficient MRP = market risk premium RPS = size premium

In the valuation, the yield rate of the Government Bond Generic Yield 10-year of the PRC of 2.95% as at the Date of Valuation, as extracted from Bloomberg, was adopted as the risk-free rate.

Since the Target Group is not a publicly listed company, it is not possible to determine its beta coefficient directly. Instead, the beta coefficient for the Target Group was determined by the median of the betas of comparable companies (the “Comparable Companies”), with adjustment for differences in corporate tax rates and leverage compositions. As a result, the beta coefficient of the Target Group was calculated as 0.82.

In the valuation, the market risk premium of the PRC as of the Date of Valuation was calculated as the sum of the market risk premium of the United States and the country risk premium of the PRC. The market risk premium of the United States of 6.03% which was determined from long-horizon expected “supply side” United States equity risk premium with reference to “2016 Valuation Handbook – Guide to Cost of Capital” published by Duff & Phelps Corporation and the country risk premium of the PRC of 0.95%, which was determined with reference to ’Country Default Spreads and Risk Premiums’’, published by Professor Aswath Damodaran, who is a well-known author of several widely used academic textbooks on valuation and related subjects, in July 2016. As a result, the market risk premium of the PRC was calculated as 6.98%.

Considering the above mentioned parameters, our analysis suggested a cost of equity before any other risk premium of approximately 8.69%. By adding a size premium of 3.87%, which was determined with reference to “2016 Valuation Handbook – Guide to Cost of Capital”, published by Duff & Phelps Corporation, we arrived at a cost of equity of 12.56%.

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APPENDIX IV

The cost of debt before tax is referenced to the coupon rate, at 6% per annum, of the loan facility, which is going to finance the Project. With the PRC statutory tax rate at 25%, the after tax cost of debt was 4.5%.

The weight of debt and weight of equity were determined by making reference to the median of the weight of debt and weight of equity of the Comparable Companies respectively. The weight of equity was adopted as 52%.

Accounting for the above, the WACC estimated was approximately 9.0% as of the Date of Valuation.

Comparable Companies

The Target Group engages in the Project development, and the Project is a complexes area with commercial and cultural properties with shopping malls, marina club with parking berths, and other peripheral facilities. By managing the complexes, leasing the properties and providing peripheral services, the Project generates cash flow. This is in nature a real estate development project with operating the investment properties.

Due to the fact that there is no company is exactly the same as the Target Group, a set of the Comparable Companies must be selected in valuing the Target Group. To determine the set of the Comparable Companies, we mainly focused on the following perspectives during the selection process from the public resources (e.g. Bloomberg), including:

(i) The companies are principally real estate developers and investors listed in the PRC and Hong Kong, with their business primarily engage in leasing non-residential properties mainly in PRC; and
(ii) Sufficiency of information (such as listing and operating histories, and availability of the financial information to the public).

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

With reference to the business nature and financial information of publicly listed companies that are considered to be comprehensive comparable to the Target Group. Details of the selected companies are as follows:

	Bloomberg
Company Name	Ticker	Business Description
Yuexiu Real Estate	405 HK	Yuexiu Real Estate Investment Trust
Investment Trust		invests in a diverse portfolio of income
		producing properties which are used
		primarily for office, retail, and other
		commercial purposes in China.
SOHO China Limited	410 HK	Soho China Ltd. is a property developer.
		It develops properties in central Beijing
		and Shanghai. Soho China collaborates
		with internationally recognized architects,
		translating their designs into real estate
		which possesses strong appeal to property
		investors and the local businesses and
		customer bases they serve.
Shui On Land Limited	272 HK	Shui On Land Limited engages principally
		in the development, sale, leasing,
		management and ownership of residential,
		office, retail, entertainment and cultural
		properties in the PRC.
Hui Xian Real Estate	87001 HK	Hui Xian Real Estate Investment Trust is
Investment Trust		a real estate investment trust. The trust’s
		sole real estate investment interest at the
		time of its listing is its investment interest
		in the Oriental Plaza in Beijing.
China Jinmao	817 HK	China Jinmao Holdings Group Limited
Holdings Group		invests in and develops real estate projects
Limited		in the Peoples Republic of China.
Maoye Commercial	600828 CH	Maoye Commercial Co., Ltd. operates in
Company Limited		the retail department store, real estate
		development and property management
		sectors.

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VALUATION REPORT OF THE SALE SHARES

APPENDIX IV

	Bloomberg
Company Name	Ticker	Business Description
Golden Eagle Retail	3308 HK	Golden Eagle Retail Group Limited
Group Limited		operates department stores in China. Its
		stores target mid-range and high-end
		market segments in China, and contain
		various functions and amenities such as
		dining, entertainment, beauty and personal
		care, cinemas, and preschool education in
		addition to their core function as an
		international department store.
Springland	1700 HK	Springland International Holdings Ltd.
International		operates retail stores. It operates a chain
Holdings Limited		of department stores and a chain of
		supermarkets. Springland operates in the
		Greater Yangtze River Delta in China.

Source: Bloomberg

We have considered that Shui On Land Limited, being a real estate developer, owns and lease its retail properties in PRC. Based on the abovementioned selection criteria, we consider the above set of the Comparable Companies adopted in the valuation is comparable to the Target Group.

Accounting for the above items, the discount rate of 9.0% was adopted as of the Date of Valuation.

8.2.8 Discount for Lack of Marketability

The concept of marketability deals with the liquidity of an ownership interest, that is, how quickly and easily it can be converted into cash if the owner chooses to sell. Compared to similar interest in public companies, ownership interest in privately held company is not readily marketable. Therefore, the value of a share in a privately held company is usually less than that in a publicly held company. The lack of marketability is a downward adjustment to the value of an investment to reflect its reduced level of marketability.

In the valuation, with reference to the 2016 edition of the “FMV Restricted Stock Study Companion Guide”, published by Business Valuation Resources and it is an all-inclusive online database that provides empirical support to determine discounts for lack of marketability. A discount for lack of marketability of 16.11% was adopted.

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APPENDIX IV

8.2.9 Discount for Lack of Control

The discount for lack of control is an amount or percentage deducted from the pro rata share of value of 100% of an equity interest in a business to reflect the absence of some or all of the powers of control.

In the valuation, a discount for lack of control of 16.7% was adopted as of the Date of Valuation.

9. SENSITIVITY ANALYSIS

By its very nature, valuation work cannot be regarded as an exact science and the conclusions arrived at in many cases will of necessity be subjective and dependent on the exercise of individual judgment. Hence, there is no single indisputable range and generally we cannot provide absolute assurance on a valuation.

Thus, the following sensitivity analyses have been applied to determine the impact of change in discount rate and unit rental rate on the fair value of the Target Group.

Sensitivity Analysis on Discount Rate for the Valuation as of 30 November 2016

	Adopted		Change
	Discount	Fair	in Fair
Change in Discount Rate	Rate	Value	Value
(%)	(%)	(HK$’000)	(%)
+0.50%	9.50%	91,000	-10%
+0.25%	9.25%	96,000	-5%
Base case	9.00%	101,000	–
-0.25%	8.75%	106,000	+5%
-0.50%	8.50%	112,000	+11%

Sensitivity Analysis on Unit Rental Rate for the Valuation as of 30 November 2016

		Adopted Unit
	Adopted Unit	Rental Rate
Change in Unit Rental	Rental Rate	(Second		Change in
Rate	(First Floor)	Floor)	Fair Value	Fair Value
(%)	(RMB/sq.m.)	(RMB/sq.m.)	(HKD’000)	(%)
+5.0%	451.50	325.50	107,000	+6%
+2.5%	440.75	317.75	104,000	+3%
Base case	430.00	310.00	101,000	–
-2.5%	419.25	302.25	98,000	-3%
-5.0%	408.50	294.50	94,000	-7%

Note: Unit rental rate excluding property management fee, RMB30 per square meter.

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APPENDIX IV

10. LIMITING CONDITIONS

The valuation reflects facts and conditions existing at the Date of Valuation. Subsequent events 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 that have been used in formulating this analysis are gathered from reliable sources; yet, no guarantee is made nor liability assumed for their accuracy.

We have relied on information provided by the Management to a considerable extent in arriving at our opinion of value. We have not verified the accuracy of the information provided and have assumed that the aforesaid information is accurate. We have not conducted any further investigations concerning whether all data have been provided to us for our assessment and we have no reason to believe that any material data have been withheld from us.

We would particularly point out that our valuation was based on the information such as the projections made by the Target Group, company background, business nature the Target Group provided to us.

Our conclusion of the value was derived from generally accepted valuation procedures and practices that rely substantially on the use of various assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained.

This report is for the exclusive use of the party to whom it is addressed and for the specific purpose stated in section 1 – Purpose of Valuation, neither the whole nor any part of this report nor any reference thereto may be included in any document, circular or statement without our written approval of the form and context in which it will appear. We will not accept any responsibility or liability to any third party to whom in respect of, or arising out of, the contents of this report may be shown.

11. REMARKS

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

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

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12. OPINION OF VALUE

Based on the investigation and analysis stated above, our scope of work, the valuation method employed, information reviewed and the assumptions adopted, the fair value of 20% equity interest of the Target Group as of 30 November 2016 (i.e. the Date of Valuation), in our opinion, was reasonably stated as HKD101,000,000 (HONG KONG DOLLARS ONE HUNDRED AND ONE MILLION ONLY) .

Yours faithfully, For and on behalf of

Access Partner Consultancy & Appraisals Limited Elvis C. F. Ng

CFA, FRM Director

Note:

Mr. Elvis C. F. Ng is a holder of Chartered Financial Analyst and a certified Financial Risk Manager. He has over eight years’ experience in business valuation, transaction advisory and corporate consultancy in the Asia Pacific Region including Hong Kong, the PRC and Australia, as well as in European, American, Middle-east and African countries.

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LETTER IN RELATION TO PROFIT FORECAST

APPENDIX V

Nuada Limited Unit 1805-08, 18/F OfficePlus @Sheung Wan 93-103 Wing Lok Street Sheung Wan, Hong Kong 洛爾達有限公司香港上環永樂街93-103號協成行上環中心18樓1805-08室

Phone/電話: 2544-9978 Fax/傳真: 2544-0023

Strictly Private & Confidential

13 April 2017

The Board of Directors Trillion Grand Corporate Company Limited Unit B, 29/F, CKK Commercial Centre 289-295 Hennessy Road, Wan Chai, Hong Kong

Dear Sirs,

Trillion Grand Corporate Company Limited (the “Company”) and its subsidiaries (collectively, the “Group”)

Comfort letter on forecast underlying the valuation of 20% equity interest in Billion Ray Investments Limited

We refer to the valuation report prepared by Access Partner Consultancy & Appraisals Limited in relation to the appraisal of the valuation of 20% equity interest in Billion Way Investments Limited and 汕頭市麗潮旅遊開發有限公司 as at 30 November 2016 (the “ Valuation ”). The Valuation is regarded as a profit forecast under Rule 19.61 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “ GEM Listing Rules ”).

The directors of the Company (the “ Directors ”) are responsible for preparation of the forecasts for the period from 1 January 2017 to 31 December 2021 (“ Forecasts ”) after due and careful enquiry in accordance with the basis and assumptions as set out in the Valuation.

We have reviewed the Forecasts upon which the Valuation has been made for which you as the Directors are solely responsible, and have discussed with you and Access Partner Consultancy & Appraisals Limited the information and documents provided by you which formed part of the basis and assumptions upon which the Forecasts have been prepared. We have also considered the letter from Elite Partners CPA Limited dated 13 April 2017 addressed to you as set out in Appendix V to the Company’s circular dated 13 April 2017 regarding the calculations upon which the Forecasts have been made.

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APPENDIX V

LETTER IN RELATION TO PROFIT FORECAST

On the basis of the foregoing, we are satisfied that the forecast upon which the Valuation has been made, for which you as the Directors are solely responsible, has been made after due and careful enquiry by you.

Yours faithfully, For and on behalf of Nuada Limited Michael Wong Vice-president

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LETTER IN RELATION TO PROFIT FORECAST

APPENDIX V

13 April 2017

The Board of Directors Trillion Grand Corporate Company Limited Unit B, Floor 29th, CKK Commercial Centre, 289-295 Hennessy Road, Wanchai, Hong Kong

Dear Sirs,

Trillion Grand Corporate Company Limited (the “Company”) and its subsidiaries (collectively referred to herein as the “Group”) Comfort letter on profit forecast for the five years ending 31 December 2021

We refer to the profit forecast of 汕頭市麗潮旅遊開發有限公司 (“ Target Company ”) for the period from 1 January 2017 to 31 December 2021 on which the discounted cash flow prepared (hereinafter referred to as the “ Underlying Forecast ”) by Access Partner Consultancy & Appraisals Limited was based in respect of the fair value of the Sale Shares of the Target Company by the Company (“ Acquisition ”) as set out in the valuation reports dated at 13 April 2017.

Respective responsibilities of the directors of the Company and the reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Underlying Forecast. The Underlying Forecast has been prepared using a set of assumptions (the “ Assumptions ”), the completeness, reasonableness and validity of which are the sole responsibility of the directors of the Company.

It is our responsibility to draw a conclusion, based on our work on the arithmetical accuracy of the calculations of the Underlying Forecast and to present our conclusion solely to you, as a body, for the purpose of reporting under paragraph 19.62(2) of the GEM Listing Rules and for no other purpose. We are not reporting on the appropriateness and validity of the bases and Assumptions on which the Underlying Forecast are based and our work does not constitute any valuation of the Target Company. The Underlying Forecast does not involve the adoption of accounting policies. The Assumptions used in the preparation of the Underlying Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Underlying Forecast and the variation may be material. We have not reviewed, considered or conducted any work on the completeness, reasonableness and the validity of the Assumptions and thus express no opinion whatsoever thereon. Our work is more limited than that for a reasonable assurance

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LETTER IN RELATION TO PROFIT FORECAST

APPENDIX V

engagement, and therefore less assurance is obtained than in a reasonable assurance engagement. We also accept no responsibility to any other person in respect of, arising out of, or in connection with our work.

Basis of opinion

We carried out our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and with reference to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). Those standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the accounting policies and calculations are concerned, the Company’s directors have properly compiled the Underlying Forecast in accordance with the assumptions made by the directors and as to whether the Profit Forecast is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Company. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

Opinion

In our opinion, so far as the calculations are concerned, the Underlying Forecast has been properly complied in accordance with the bases and assumptions adopted by the Company’s directors.

Yours faithfully, Elite Partners CPA Limited Certified Public Accountants Hong Kong

Yip Kai Yin

Practising Certificate Number: P05131

– 96 –

GENERAL INFORMATION

APPENDIX VI

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 Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST

As at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or deemed to have taken under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

So far as is known to the Directors or chief executives of the Company, the Company had not been notified of any other interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

As at Latest Practicable Date, Mr. Lau Kelly, Mr. Leung Chung Nam and Mr. Wong Kam Kwan being the executive Directors of the Company; and Dr. Wan Ho Yuen, Terence, Ms. Yeung Mo Sheung, Ann, and Mr. Hau Chi Kit, being the independent non-executive Directors of the Company, have entered into service contracts with the Company for an initial term of three years commencing from their dates of appointment, and their employments are subject to the rotation requirements under the articles of association of the Company.

As at Latest Practicable Date, Mr. Jim Ka Man being the non-executive Director of the Company, has entered into service contract with the Company for an initial term of one year commencing from his date of appointment, and his employment is subject to the rotation requirements under the articles of association of the Company.

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GENERAL INFORMATION

APPENDIX VI

Saved as disclosed above, as at the Latest Practicable Date, none of the Directors had any existing or was proposing to enter into any service contracts with the Company or any member of the Group (excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation)).

5. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors, controlling Shareholders or their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group as required to be disclosed pursuant to the GEM Listing Rules.

6. LITIGATION

On 19 February 2016, the Company has been served with a sealed copy of the Writ of Summons (the “ Writ ”) issued by one of the two parties sued in the Injunction Proceedings (the “ Plaintiff ”). Under the statement of claim endorsed on the Writ, the Plaintiff claims against the Company for a total sum of HK$16,600,000 allegedly due on the dishonoured cheques issued by the Company and interest thereon. The Company believes that it has strong merits in defending the Plaintiff’s claims and in counter-claiming such alleged debts are void and unenforceable. Therefore, the Company will vigorously contend the Plaintiff’s claims and will seek legal advice to take all appropriate steps in the legal proceedings to safeguard the Company’s interest.

So far as the Company is aware and save as disclosed above, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and there is no litigation or claim of material importance known to the Directors pending or threatened by or against any member of the Group.

7. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group, which was subsisting and was significant in relation to the business of the Group.

None of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or proposed to be so acquired, disposed of by or leased to any member of the Group since 31 March 2016, being the date to which the latest published audited accounts of the Company were made up, and up to the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX VI

8. QUALIFICATIONS AND CONSENTS OF EXPERTS

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

Name

Qualification

Elite Partners CPA Limited Certified Public Accountants

Access Partner Consultancy & Appraisals Limited

Independent valuer

Nuada Limited a corporation licensed to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Shanghai JunYue (Shenzhen) Law PRC legal adviser Firm

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

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

As at the Latest Practicable Date, each of above experts did not have any interest, either directly or indirectly, in any assets which have been since 31 March 2016 (being the date to which the latest published audited consolidated financial statements of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

9. AUDIT COMMITTEE

As at the Latest Practicable Date, the audit committee of the Board comprised three independent non-executive Directors, namely, Dr. Wan Ho Yuen, Terence, Ms. Yeung Mo Sheung, Ann and Mr. Hau Chi Kit. The audit committee of the Board is chaired by Dr. Wan Ho Yuen, Terence. The background, directorship and past directorship (if any) of each of the members of the audit committee of the Board are set out below.

Dr. Wan Ho Yuen, Terence, aged 48, was appointed as an independent non-executive Director on 31 December 2015. He is currently the director of an accounting firm based in Hong Kong and an independent non-executive Director of Union Asia Enterprise Holdings Limited (Formerly known as Pan Asia Mining Limited), a company listed on the GEM of the Stock Exchange (stock code: 8173) since November 2015. Dr. Wan was an independent

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APPENDIX VI

GENERAL INFORMATION

non-executive Director of China Railsmedia Corporation Limited, a company listed on the Main Board of the Stock Exchange (stock code: 745) from 17 January 2014 to 8 April 2015. Dr. Wan obtained a bachelor of law degree from Tsing Hua University, the PRC in January 2004; and a doctorate degree of philosophy in business administration from Bulacan State University, Philippines in May 2006. Dr. Wan is a certified public accountant (Practicing) of Hong Kong Institute of Certified Public Accountants. Dr. Wan has over 10 years of experiences in taxation advisory, business management and accounting with several professional accounting firms and companies.

Ms. Yeung Mo Sheung, Ann, aged 51, was appointed as an independent non-executive Director on 1 March 2016. She is presently a solicitor of Messrs. Wong & Wong Lawyers, a legal firm in Hong Kong. She is currently an independent nonexecutive director of E Lighting Group Holdings Limited (stock code: 8222) and Merdeka Financial Services Group Limited (stock code: 8163), all being companies whose shares are listed on the GEM of the Stock Exchange. She is also currently an independent non-executive director of Success Universe Group Limited (stock code: 487), whose shares are listed on the Main Board of the Stock Exchange. During the past three years, she was an independent non-executive director of Hao Wen Holdings Limited (stock code: 8019) from January 2011 to July 2014, whose shares are listed on the GEM of the Stock Exchange and Dejin Resources Group Company Limited (stock code: 1163) from September 2013 to August 2015, whose shares are listed on the Main Board of the Stock Exchange. She holds a Bachelor degree of Retail Marketing with honours from the Manchester Metropolitan University in the United Kingdom and a Diploma in Marketing from The Chartered Institute of Marketing. She pursued her further study on legal course and has been awarded a Diploma in Legal Practice from the Manchester Metropolitan University in the United Kingdom in 1998. She has over 16 years of experience in legal field in private practise working with various law firms in Hong Kong.

Mr. Hau Chi Kit, aged 44, was appointed as an independent non-executive Director on 4 March 2016. He is currently an independent non-executive director of China Zenith Chemical Group Limited (stock code: 362) and eForce Holdings Limited (stock code: 943), all being companies whose shares listed on the Main Board of the Stock Exchange. Mr. Hau is a solicitor. He was a barrister-at-law in private practice in Hong Kong from 2001 to 2008. Prior to becoming a barrister, Mr. Hau worked at the Securities and Futures Commission. During the past three years, he was an independent non-executive director of CNC Holdings Limited (stock code: 8356) from May 2011 to May 2015 and Celebrate International Holdings Limited (stock code: 8212) from May to November 2015, all being companies whose shares listed on the GEM of the Stock Exchange.

10. MATERIAL CONTRACTS

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

(a) The Agreement.

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GENERAL INFORMATION

APPENDIX VI

(b) Sale and purchase agreement dated 17 October 2016 made between the Purchaser and the Vendor in relation to the acquisition of 50% equity interest in the Target Company and the termination deed dated 30 December 2016 in relation to the termination of the abovementioned sale and purchase agreement.
(c) Sale and purchase agreement dated 8 August 2016 made between the Company and Sky Field Holdings Limited relating to the acquisition of 2 shares in Cicero Capital Limited at the consideration of HK$128,000,000 by cash. Cicero Capital Limited is interested in a landed property in Hong Kong.
(d) Placing agreement dated 18 July 2016 made between the Company and China Times Securities Limited relating to raising gross proceeds of approximately HK$11.3 million by the placing of 19,870,313 new shares at HK$0.57 per share.
(e) Rescission agreement dated 20 January 2016 made between Sage Choice Inc. and Sharp Aim Limited in relation to the rescission of the sale and purchase of 13 shares in Galaxy Automotive MS Inc.
(f) Sale and purchase agreement dated 20 January 2016 made between Sage Choice Inc. and Sharp Aim Limited in relation to the disposal of 6 shares in Galaxy Automotive MS Inc. at the consideration of HK$5,600,000.
(g) Sale and purchase agreement dated 24 December 2015 made between Trend Brilliant Limited and Nation Wealth Holdings Limited in relation to the disposal of 100% issued share capital of Fullmark Management Limited at the consideration of HK$17,000,000.
(h) Sale and purchase agreement dated 21 December 2015 made between Sage Choice Inc. and Mr. Ip Po Ki in relation to the disposal of 100% issued share capital of Wilco Printing Co., Limited at the consideration of HK$1,611,395.
(i) Placing agreement dated 16 November 2015 made between the Company and Win Wind Securities Limited relating to raising gross proceeds of approximately HK$13.6 million by the placing of 135,724,862 new shares at HK$0.1 per share.
(j) Agreement dated 6 October 2015 made between Sage Choice Inc. and Sharp Aim Limited in relation to the acquisition of 19 shares in Galaxy Automotive MS Inc. at the consideration of HK$17,328,000.
(k) Placing agreement dated 23 July 2015 made between the Company and HEC Securities Limited relating to raising gross proceeds of approximately HK$18.4 million by the placing of 216,644,771 new shares at HK$0.085 per share.
(l) Underwriting agreement dated 17 June 2015 made between the Company and Freeman Securities Limited in relation to the open offer on the basis of 1 offer share for every 2 shares in issue at the subscription price of HK$0.05 per offer

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GENERAL INFORMATION

APPENDIX VI

share, as amended by the supplemental underwriting agreement dated 14 July 2015 and the second supplemental underwriting agreement dated 12 August 2015, which was terminated on 29 October 2015.

(m) Agreement dated 28 April 2015 made between Sage Choice Inc. and Ms. Fung Kar Chung in relation to the acquisition of 100% Wilco Printing Co., Limited at the consideration of HK$1,537,029.

11. GENERAL

(a) The compliance officer of the Company is Mr. Lau Kelly. Mr. Lau has worked with the Hong Kong Police Force for twelve years receiving commendations from Secretary of Civil Service and Secretary of Home Affairs for highly rated performances during his tenure. Mr. Lau has worked with Easy Finance Limited as Principal Consultant from 1 May 2011 to 31 October 2015 responsible for all regulatory and legal compliances.
(b) The company secretary of the Company is Mr. Chung Man Wai, Stephen. Mr. Chung is a member of Hong Kong Institute of Certified Public Accountants.
(c) The registered office of the Company is Cricket Square, Hutchins Drive, P. O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
(d) The head office and principal place of business of the Company in Hong Kong is at Unit B, 29/F, CKK Commercial Centre, 289-295 Hennessy Road, Wanchai, Hong Kong.
(e) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(f) The principal share registrar of the Company is Royal Bank of Canada Trust Company (Cayman) Limited at 4 Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1-1110, Cayman Islands.
(g) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

12. DOCUMENTS FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company in Hong Kong at Unit B, 29/F, CKK Commercial Centre, 289-295 Hennessy Road, Wanchai, Hong Kong during normal business hours on any Business Day from the date of this circular up to and including the date of the SGM:

(a) this circular;
(b) the memorandum of association and articles of association of the Company;

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GENERAL INFORMATION

APPENDIX VI

(c) the annual reports of the Company for the last three years ended 31 March 2016;
(d) the third quarterly report of the Company for the nine months ended 31 December 2016;
(e) the accountants’ report from Elite Partners CPA Limited in respect of the unaudited pro forma financial information of the Enlarged Group;
(f) the valuation report of the Sale Shares;
(g) the material contracts referred to in the section headed “Material Contracts” in this appendix; and
(h) the written consents of the experts as referred to in the section headed “Qualifications and Consents of Experts” in this appendix.

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DETAILS OF DIRECTOR PROPOSED FOR RE-ELECTION

APPENDIX VII

The biographical details of the Director proposed to be re-elected at the EGM are set out as follows:–

EXECUTIVE DIRECTOR

Mr. Wong Kam Kwan (“ Mr. Wong ”), aged 52, joined the Company as an executive Director on 5 January 2017. Mr. Wong has extensive experience in business operation and management in the textile industry. He has been working in management level since 2006. He engaged in his own import and export trading and property agency businesses since 2013. He is currently a managing director of a property agent company.

There is an appointment letter between Mr. Wong and the Company and his appointment is for a fixed term of three years and is subject to retirement and rotation pursuant to the articles of association of the Company. Mr. Wong is entitled to HK$325,000 per annum which has been determined by the Board with reference to his duties and responsibilities with the Company. Mr. Wong has no relationship with any directors, senior management or substantial or controlling shareholder of the Company, nor does he hold any other position with the Company or any of its subsidiaries. Mr. Wong did not hold any other directorship in any public listed companies in the last three years.

As at the Latest Practicable Date, Mr. Wong has no interest in the securities of the Company within the meaning of Part XV of the SFO. There is no information to be disclosed by Mr. Wong pursuant to Rule 17.50(2)(h) to (w) of the GEM Listing Rules and there is no other information that need to be brought to the attention of the Shareholders.

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NOTICE OF THE EGM

==> picture [52 x 52] intentionally omitted <==

Trillion Grand Corporate Company Limited 萬泰企業股份有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8103)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Trillion Grand Corporate Company Limited (the “ Company ”) will be held at Tai Chi Room, 38/F, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on 28 April 2017 at 9:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions as ordinary resolution of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the conditional Sale and Purchase Agreement (as defined in the circular dated 13 April 2017 despatched to the shareholders of the Company), a copy of which has been produced to this meeting and signed by the chairman hereof marked “A” for the purpose of identification, and all transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and
(b) any one director or, if the affixation of the common seal of the Company is necessary, any one Director and the company secretary of the Company or any two Directors or such other person (including a director) or persons as the Board may appoint be and is/are hereby authorised for and on behalf of the Company to approve and execute all documents, instruments and agreements and to do such acts or things deemed by him/her/them to be incidental to, ancillary to or in connection with the matters contemplated in or related to the Sale and Purchase Agreement and transactions contemplated thereunder or incidental thereto and completion thereof as he/she/they may consider necessary, desirable or expedient.”
“ THAT Mr. Wong Kam Kwan be re-elected as an executive director of the Company.”

By order of the Board of Trillion Grand Corporate Company Limited Lau Kelly Executive Director

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NOTICE OF THE EGM

Registered office: Head office and principal place of business in Hong Kong: Cricket Square Unit B, 29/F Hutchins Drive CKK Commercial Centre P. O. Box 2681 289-295 Hennessy Road Grand Cayman KY1-1111 Wanchai Cayman Islands Hong Kong

Notes:

A shareholder entitled to attend and vote at the EGM or any adjourned meeting is entitled to appoint a person or persons as his proxy or proxies to attend and, on a poll, vote instead of him. A proxy need not be a shareholder of the Company.
To be valid, a form of proxy together with the power of attorney or other authority, if any, under which it is signed or a certified copy of such power of attorney or authority, must be deposited at the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, not less than 48 hours before the time appointed for holding the EGM or any adjourned meeting, and in default thereof the form of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiry of 12 months from the date of its execution.
Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the meeting, and in such event the instrument appointing a proxy shall be deemed to be revoked.

As at the date of this notice, the Board comprises the following Directors:

Executive Directors:

Mr. Lau Kelly (Chief Executive Officer) Mr. Leung Chung Nam Mr. Wong Kam Kwan

Non-executive Director:

Ms. Jim Ka Man

Independent Non-executive Directors:

Dr. Wan Ho Yuen, Terence Ms. Yeung Mo Sheung, Ann Mr. Hau Chi Kit

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 page of “Latest Company Announcement” on the GEM website for at least 7 days from the date of its postings and on the website of the Company at http://www.trilliongrand.com.

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AI assistant

hmvod Limited — Proxy Solicitation & Information Statement 2017

51270_rns_2017-04-13_dcfac83a-959b-4f03-b5e2-b61bb7e08a31.pdf

Trillion Grand Corporate Company Limited 萬泰企業股份有限公司

MAJOR TRANSACTION AND RE-ELECTION OF DIRECTOR

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Trillion Grand Corporate Company Limited 萬泰企業股份有限公司

(Stock Code: 8103)

MAJOR TRANSACTION AND RE-ELECTION OF DIRECTOR

INTRODUCTION

THE AGREEMENT

Assets to be acquired

Consideration

General Market Assumptions

LETTER FROM THE BOARD

Company-specific Assumptions

Conditions precedent

Completion

THE SHAREHOLDERS’ AGREEMENT

Parties

Business

Board of Directors

Raising of Additional Capital

Disposal of shares and pre-emptive rights

Anti-Dilution

Dividends

THE PROMISSORY NOTE

LETTER FROM THE BOARD

INFORMATION ON THE TARGET GROUP

Company information

(i) The Target Company

Group structure

LETTER FROM THE BOARD

Business overview

(i) The Project

(ii) Development plan

LETTER FROM THE BOARD

(iii) Financing plan

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(iv) Management

LETTER FROM THE BOARD

(v) Build-Operate-Transfer Agreements with the government

Granting Special Permission of the Project

Special Operation Period

The Ownership Rights of the Project’s Facilities

Special Permission of the Project

Operation Model of the Project

Operation of the Project

Rights of the Authorizer

Obligation of the Authorizer

Rights of the Project Company A

Obligation of the Project Company A

Financial information

FINANCIAL IMPACT OF THE ACQUISITION

INDUSTRY OVERVIEW

Overview of the retail and rental industry in the PRC

Overview of yacht marina clubs in the PRC

LETTER FROM THE BOARD

RISK FACTORS

Risks relating to the Group

LETTER FROM THE BOARD

The existing Board has limited experience in running the business of the Project

Risks relating to the Target Group

Competition with other regional terminal operators

Construction risk

LETTER FROM THE BOARD

Project’s success significantly depends on the key management and additional management

Risk factors relating to the industry

LETTER FROM THE BOARD

Risk factors relating to the PRC

REASONS FOR AND BENEFITS OF ENTERING INTO THE AGREEMENT

GEM LISTING RULES IMPLICATIONS

RE-ELECTION OF DIRECTOR

GENERAL

RECOMMENDATION

FURTHER INFORMATION

hmvod Limited Proxy Solicitation & Information Statement 2017