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 State Energy Group International Assets Holdings Limited (the “ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee, or to the bank, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

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STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 918)

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE AND NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

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Independent Financial Adviser to

the Independent Board Committee and the Independent Shareholders

A notice convening the special general meeting of the Company (the “ SGM ”) to be held at Room 6808, 68th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Friday, 26 February 2021 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular.

Whether or not you are able to attend and vote at the SGM in person, you are requested to read the notice and to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s Hong Kong branch share registrar, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than forty-eight (48) hours before the time appointed for holding of the SGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy shall not preclude you from attending and voting in person at the SGM or any adjournment thereof (as the case may be) should you so wish and in such event, the form of proxy shall be deemed to be revoked.

PRECAUTIONARY MEASURES FOR THE SPECIAL GENERAL MEETING Measures will be taken to prevent and control the spread of the novel coronavirus at the SGM, including: • compulsory body temperature checks and health declarations • recommended wearing of a surgical face mask for each attendee • no distribution of corporate gift or refreshment Any person who does not comply with the precautionary measures or is subject to any Hong Kong Government prescribed quarantine may be denied entry into the meeting venue. For further details, please refer to page 4 of this circular. The Company reminds Shareholders that they may appoint the chairman of the meeting as their proxy to vote on the relevant resolution(s) at the SGM as an alternative to attending the SGM in person.

8 February 2021

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Precautionary Measures for the Special General Meeting . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Letter from Gram Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix I — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SGM-1

−i −

DEFINITIONS

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

“Acquisition” the proposed acquisition by the Company (or its nominee(s)) of the Remaining Shares from the Vendor pursuant to the terms and conditions of the Agreement
“Agreement” the sale and purchase agreement dated 18 January 2021 and entered into between the Company and the Vendor in relation to the Acquisition
“Always Profit” Always Profit Development Limited, a company incorporated in the BVI with limited liability and controlling shareholder of the Company
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“Board” the board of Directors
“Business Day(s)” any day (excluding Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours
“BVI” the British Virgin Islands
“Company” State Energy Group International Assets Holdings Limited, a company incorporated under the laws of Bermuda with limited liability and the Shares of which are listed on the Main Board of the Stock Exchange (stock code: 918)
“Completion” completion of the Acquisition in accordance with the terms and conditions of the Agreement
“Completion Date” the date on which Completion takes place
“connected person(s)” has the meaning ascribed to thereto under the Listing Rules
“Consideration” the maximum consideration for the sale and purchase of the Remaining Shares of up to HK$16.4 million
“Consideration Shares” the new Shares to be allotted and issued by the Company at the Issue Price to satisfy the Consideration (including the Incentive Shares)
“Director(s)” the director(s) of the Company
“First Equity” First Equity Global Limited, a company incorporated in the BVI with limited liability and a wholly-owned subsidiary of the Company

−1 −

DEFINITIONS

“Group”
“GZ Tianze”
“Hong Kong”
“Independent Board Committee”
“Independent Financial Adviser” or “Gram Capital”
“Independent Shareholder(s)”
“Issue Price”
“Last Trading Day”
“Latest Practicable Date”
“Listing Rules”
“Long Stop Date”
“Mr. Tian”
“Mr. Zhang”

the Company and its subsidiaries

廣州天澤商務有限公司 (Guangzhou Tianze Shangwu Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Target Company

the Hong Kong Special Administrative Region of the PRC

the independent committee of the Board, comprising all the independent non-executive Directors, namely Mr. Chow Hiu Tung, Mr. Zhao Hangen and Ms. Yang Yanli, established to advise the Independent Shareholders in respect of the terms of the Agreement and the transactions contemplated thereunder (including the issue of the Consideration Shares pursuant to the Specific Mandate)

Gram Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition under the Agreement

Shareholder(s) other than the Vendor and its associates and all other Shareholders who are interested in the Agreement and the transactions contemplated thereunder
the issue price of the Consideration Shares of HK$0.381 per Consideration Share
15 January 2021, being the last trading day on which the Shares were traded on the Stock Exchange immediately prior to the date of the Agreement
3 February 2021, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information in this circular
the Rules Governing the Listing of Securities on the Stock Exchange
30 April 2021, or such later date as the Vendor and the Company may agree in writing
Mr. Tian Wenxi, a Director of the Company
Mr. Zhang Jinbing, a Director of the Company and the sole beneficial owner of Always Profit

−2 −

DEFINITIONS

“PRC”	the People’s Republic of China which, for the purpose of this
	circular, excludes Hong Kong, Macau Special Administrative
	Region of the PRC and Taiwan
“Remaining Shares”	40 ordinary shares in the Target Company, representing 40%
	of the total issued share capital of the Target Company as at
	the date of the Agreement and at Completion
“SGM”	the special general meeting of the Company to be convened
	and held for the Independent Shareholders to consider and, if
	thought fit, approve, among other things, the Agreement and
	the transactions contemplated thereunder (including the issue
	of the Consideration Shares pursuant to the Specific
	Mandate)
“Share(s)”	ordinary share(s) of HK$0.1 each in the issued share capital
	of the Company
“Shareholder(s)”	the holder(s) of the issued Shares
“Specific Mandate”	the specific mandate for the allotment and issue of the
	Consideration Shares, which is subject to the approval by the
	Independent Shareholders
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Target Company”	GBR (HK) Limited, a company incorporated in Hong Kong
	with limited liability
“Target Group”	the Target Company and its subsidiary
“Vendor”	Wenxi Investment Management Co., Ltd, a company
	incorporated in the BVI with limited liability and wholly
	owned by Mr. Tian
“HK$”	Hong Kong dollar(s), the lawful currency for the time being
	of Hong Kong
“%”	per cent.

For identification purposes only. The Chinese names of the respective individuals and entities have been translated into English in this circular. In the event of any discrepancies between the Chinese names and the corresponding English translation, the Chinese names prevail.

If there is any inconsistency in this circular between the Chinese and English versions, the English version shall prevail.

−3 −

PRECAUTIONARY MEASURES FOR THE SPECIAL GENERAL MEETING

We care about the health of our Shareholders, staff and stakeholders which is of paramount importance. In view of the ongoing COVID-19 pandemic, the Company will implement the following precautionary measures at the SGM to protect attending Shareholders, staff and stakeholders from the risk of infection:

(i) Compulsory body temperature checks will be conducted for every Shareholder, proxy or other attendee at the meeting venue entrance. Any person whose body temperature is over 37.4 degrees Celsius may be denied entry into the meeting venue or be required to leave the meeting venue;
(ii) Each attendee shall declare whether (a) he/she has travelled outside Hong Kong within the 14-day period immediately before the date of SGM; and (b) he/she is subject to any Hong Kong Government prescribed quarantine. Anyone who responds positively to any of these questions or is wearing a wristband for compulsory quarantine may be denied entry into the meeting venue or be required to leave the meeting venue;
(iii) The Company encourages each attendee inside the meeting venue to wear self-prepared surgical face mask throughout the meeting and to maintain a safe distance from other attendees; and
(iv) No refreshment will be served, and there will be no corporate gift.

In addition, the Company reminds all Shareholders that physical attendance in person at the meeting for the purpose of exercising voting rights is not necessary. Shareholders may appoint the chairman of the meeting as their proxy to vote on the relevant resolution(s) at the meeting instead of attending the meeting in person, by completing and returning the proxy form attached to this circular.

If any Shareholder has any question relating to precautionary measures of the meeting, please contact the Company’s branch share registrar, Tricor Abacus Limited, as follows:

Address: Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong Email: [email protected]

Tel: (852) 2980 1333 Fax: (852) 2810 8185

−4 −

LETTER FROM THE BOARD

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STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 918)

Executive Directors:

Mr. Zhang Jinbing (Chairman) Mr. Tian Wenxi Mr. Wu Tingjun

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Independent Non-executive Directors:

Mr. Chow Hiu Tung Ms. Yang Yanli Mr. Zhao Hangen

Principal place of business in Hong Kong:

Unit 13, 5/F, Tower 1 Harbour Centre 1 Hok Cheung Street Hung Hom, Hong Kong

8 February 2021

To the Shareholders,

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

INTRODUCTION

Reference is made to the announcement of the Company dated 18 January 2021 in relation to the Acquisition which constitutes a discloseable transaction under Chapter 14 of the Listing Rule and a connected transaction of the Company under Chapter 14A of the Listing Rules, involving the issue of the Consideration Shares pursuant to the Specific Mandate. On 18 January 2021 (after the Stock Exchange trading hours), the Company and the Vendor entered into the Agreement, pursuant to which the Company has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, the

−5 −

LETTER FROM THE BOARD

Remaining Shares at a maximum consideration of HK$16.4 million. The Target Company is currently a 60%-owned subsidiary of the Company and the Target Group is principally engaged in the provision of marketing and promotional services. Following Completion, the Target Company will become a wholly-owned subsidiary of the Company.

The SGM will be convened for the Independent Shareholders to consider, and if thought fit, among other things, to approve the Agreement and the transactions contemplated thereunder and the grant of the Specific Mandate for the allotment and issue of the Consideration Shares.

The purpose of this circular is to provide the Shareholders with, among other things, (i) details of the Agreement and the transactions contemplated thereunder (including the allotment and issue of the Consideration Shares pursuant to the Specific Mandate); (ii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Agreement and the transactions contemplated thereunder; (iii) a letter from Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Agreement and the transactions contemplated thereunder; (iv) the notice convening the SGM and a proxy form; and (v) other information as required under the Listing Rules.

THE AGREEMENT

Date

18 January 2021

Parties

(i) the Company; and
(ii) the Vendor.

As at the Latest Practicable Date, the Vendor held 40% of the issued share capital of the Target Company and is wholly-owned by Mr. Tian, who is a Director. As the Vendor is an associate of Mr. Tian, it is a connected person of the Company under Rule 14A.07(4) of the Listing Rules.

Assets to be acquired

Pursuant to the Agreement, the Company has conditionally agreed to acquire (or procure its nominee(s) to acquire), and the Vendor has conditionally agreed to sell, the Remaining Shares, representing 40% of the entire issued shares capital of the Target Company, free from encumbrances and together with all rights attached thereto as at the Completion Date.

−6 −

LETTER FROM THE BOARD

Consideration

The Consideration of HK$16.4 million shall be satisfied by the Company to the Vendor in the following manner:

(i) as to HK$9.84 million by the allotment and issue of 25,826,771 Consideration Shares by the Company, to be credited as fully paid, to the Vendor (or its nominee(s)) upon Completion;
(ii) as to HK$3.28 million by the allotment and issue of 8,608,923 Consideration Shares (the “ First Batch Incentive Shares ”) by the Company, to be credited as fully paid, to the Vendor (or its nominee(s)) within 14 days following the issue of the audited consolidated financial statements of the Target Group for the year ending 31 March 2021 (which shall be issued on or before 30 June 2021) if the consolidated profit after tax of the Target Group (excluding the profit generated from the provision of services by the Target Group to other companies in the Group and the profit generated from activities not in its ordinary and usual course of business) (the “ PAT ”) for the year ending 31 March 2021 is not less than HK$8.20 million; and
(iii) as to HK$3.28 million by the allotment and issue of 8,608,923 Consideration Shares (the “ Second Batch Incentive Shares ”, together with the First Batch Incentive Shares, collectively the “ Incentive Shares ”) by the Company, to be credited as fully paid, to the Vendor (or its nominee(s)) within 14 days following the issue of the audited consolidated financial statements of the Target Group for the year ending 31 March 2022 (which shall be issued on or before 30 June 2022) if the PAT for each of the two years ending 31 March 2021 and 2022 is not less than HK$8.20 million and HK$9.84 million respectively.

The Consideration was arrived at after arm’s length negotiations between the Company and the Vendor having taken into account (i) the financial and operating performance of the Target Group; (ii) the business development and future prospects of the Target Group; (iii) a price-to-earnings multiple of up to five (5) times as agreed between the Company and the Vendor and the unaudited consolidated net profit after tax of the Target Group in the trailing twelve months from 1 January 2020 to 31 December 2020 of approximately HK$8.2 million; and (iv) the reasons for and benefits of the Acquisition as set out in the paragraph headed “Reasons for and benefits of the Acquisition” below.

Consideration Shares

The Consideration Shares comprised a maximum of 43,044,617 Shares, representing approximately 4.6% of the existing issued share capital of the Company as at the Latest Practicable Date and approximately 4.4% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares (assuming there will not be any other issue or repurchase of Shares prior to Completion).

The Consideration Shares will be issued by the Company pursuant to the Specific Mandate. The Company will seek the grant of the Specific Mandate from the Independent Shareholders at the SGM. An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

−7 −

LETTER FROM THE BOARD

The Consideration Shares, when allotted and issued, shall be credited as fully paid and at all times rank pari passu among themselves and with the Shares in issue as at the date of issue of the Consideration Shares, except that they shall not be entitled to receive any dividend, distribution or entitlement declared, paid or made by reference to a record date prior to the date of allotment and issue of the Consideration Shares (as the case may be).

The Issue Price of HK$0.381 per Consideration Share was determined after arm’s length negotiations between the parties to the Agreement with reference to, among other things, the recent trading prices of the Shares, which represents:

(i) the average of the closing prices of the Shares as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day of HK$0.381 per Share;
(ii) a premium of approximately 4.4% over the closing price of HK$0.365 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 8.2% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day of approximately HK$0.415 per Share;
(iv) a premium of approximately 133.7% to the closing price of HK$0.163 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(v) a premium of approximately 677.6% over the unaudited consolidated net asset value per Share of approximately HK$0.049 as at 30 September 2020 (which is calculated by dividing the unaudited consolidated equity attributable to equity holders of the Company as at 30 September 2020 of approximately HK$37,672,000 as shown in the Company’s interim report by 775,406,000 Shares then in issue).

Conditions precedent

Completion is conditional upon the satisfaction or waiver (as the case may be) of the following conditions:

(i) the Vendor having obtained the approval of the Vendor’s board of directors in relation to the Agreement and the transactions contemplated thereunder;
(ii) the Company having obtained the approval of the Board (including the independent non-executive Directors) in relation to the Agreement and the transactions contemplated thereunder;
(iii) the passing of all necessary resolutions by the Independent Shareholders at a duly convened SGM to approve, including but not limited to, the Agreement and the transactions contemplated under the Agreement including the allotment and issue of the Consideration Shares;

−8 −

LETTER FROM THE BOARD

(iv) the Stock Exchange granting approval for the listing of, and permission to deal in, the Consideration Shares;
(v) the Company and the Vendor having fulfilled their respective obligations and duly performed their respective duties as stipulated in the Agreement; and
(vi) the representations and warranties given in the Agreement remaining true and accurate between the date of the Agreement and the Completion Date.

The parties to the Agreement shall use their best endeavours to fulfill all conditions precedent. Conditions (iii) and (iv) may not be waived. Conditions (v) and (vi) may only be waived by the Company if the Board considers that such non-conformities are negligible and will not materially and adversely affect the subject matter, that is, the Remaining Shares and the transactions contemplated under the Agreement, or the assets, liabilities, financial results of operations, financial conditions, business or prospects of the Target Group. If any of the above conditions have not been fulfilled or waived (other than conditions (iii) and (iv) which may not be waived) on or before the Long Stop Date, the Agreement shall, without prejudice to the rights or remedies of any of the parties to the Agreement in respect of claims arising out of any antecedent breach of the Agreement, become void and of no further effect. As at the Latest Practicable Date, conditions (i) and (ii) have been satisfied.

Lock-up provision

The Vendor shall not, and shall procure its nominee(s) not to sell, transfer or dispose of any Consideration Shares before 31 December 2022. The Consideration Shares, prior to their release to the Vendor at the end of the aforesaid lock-up period, will be held in escrow by the Company.

Completion

Completion shall take place on the seventh (7th) Business Day following the fulfilment (or waiver if applicable) of the conditions precedent or such other date as the parties to the Agreement shall agree in writing.

As at the Latest Practicable Date, the Company, through a wholly-owned subsidiary, held 60% of the issued share capital of the Target Company. Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company.

INFORMATION OF THE VENDOR

The Vendor is a company incorporated under the laws of the BVI and is principally engaged in investment holding, with the 40% equity interests in the Target Company as its principal asset. The Vendor is wholly owned by Mr. Tian who is a Director.

−9 −

LETTER FROM THE BOARD

INFORMATION OF THE TARGET COMPANY AND THE TARGET GROUP

Principal business

The Target Group is principally engaged in the provision of marketing and promotional services, which include (i) marketing and brand building, design and execution; (ii) agency services of outdoor billboards and screens; (iii) designing and organising large-scale events; and (iv) production and publication of advertisements on internet and new media. It commenced provision of the above services to external customers since January 2020.

The business of the Target Group was developed from the experience accumulated by the marketing team of the Group in developing marketing and promotional campaigns for the Group’s garment business of sale and distribution of licensed products under the brands named “ACCAPI” and “Super X”. To cope with the Target Group’s expansion plan to provide its services to external customers, the Group invited Mr. Tian to join the Group and transferred 40% of the issued share capital of the Target Company to a company wholly owned by Mr. Tian (i.e. the Vendor) at a consideration of HK$24,000 in December 2019 to jointly develop the Target Group’s business. The aforementioned consideration of HK$24,000 was determined based on the then net asset value of the Target Group where the Target Group has minimal operation before the transferral of 40% of the issued share capital of the Target Company to Mr. Tian. The Target Group began to offer marketing and promotional services in online and offline platforms for external customers since January 2020 and completed over 20 projects up to 31 December 2020. Clients of the Target Group include, among others, brands of garment, consumer products, insurance agency services, property development and e-commerce services.

Mr. Tian has over 20 years of knowledge and experience in brand management, marketing and promotional services and strategic planning, operation and business management in the marketing, trading and cultural and tourism industries in the PRC. Mr. Tian has been working for and is holding directorship at 廣州萬燕集團有限公司 (Guangzhou Wanyan Group Co., Ltd.) since 2014, including but not limited to being a director and the chief executive officer at 廣州萬燕文化傳媒股份有限公司 (Guangzhou Wanyan Culture & Media Co., Ltd.), a company listed on the National Equities Exchange and Quotations from December 2016 to August 2018, which is principally engaged in market research, advertising, brand strategy promotion, brand effectiveness evaluation, theatrical performance business and film and television business.

−10 −

LETTER FROM THE BOARD

Group structure

Set out below is the structure of the Target Group as at the Latest Practicable Date and immediately prior to Completion:

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

The Company
100%
First Equity The Vendor
60% 40%
The Target Company
100%
GZ Tianze
----- End of picture text -----

Set out below is the structure of the Target Group immediately after Completion:

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

The Company
100%
First Equity
40% 60%
The Target Company
100%
GZ Tianze
----- End of picture text -----

−11 −

LETTER FROM THE BOARD

Financial information

Set out below is a summary of the consolidated financial information of the Target Group for the period from 16 January 2019 (date of incorporation of the Target Company) to 31 March 2020 and for the nine months ended 31 December 2020 based on its unaudited consolidated management accounts:

	For the period from
	16 January 2019 (date
	of incorporation of the	For the nine
	Target Company) to	months ended
	31 March 2020	31 December 2020
	(unaudited)	(unaudited)
	approximately	approximately
	HK$’000	HK$’000
Revenue	12,113	29,801
Net profit before taxation	4,992	5,875
Net profit after taxation	3,880	4,409

The unaudited total asset value and net asset value of the Target Group as at 31 December 2020 as shown in the unaudited consolidated management accounts of the Target Group were approximately HK$18.0 million and HK$8.8 million respectively.

REASONS FOR AND BENEFITS FOR THE ACQUISITION

The Group is principally engaged in (i) the sourcing, subcontracting, marketing and sales of garments and sportswear products; (ii) the provision of marketing services; and (iii) property investment.

As explained in the section headed “Information on the Target Company and the Target Group” above, the Target Group commenced its marketing and promotional services business as a joint venture with Mr. Tian at the outset. During the first year of its operations, the Target Group achieved satisfactory performances in terms of establishing its client base, generating positive financial returns and securing pipeline projects. The Directors are positive about the development potential and prospects of the Target Group and consider it in the interests of the Company and the Shareholders to consolidate ownership in the Target Company through the Acquisition. As mentioned in the announcement of the Company dated 4 December 2020 (the “ Resumption Announcement ”), following resumption of trading of the Shares on 7 December 2020, the Group will continue developing its existing businesses, in particular the Group will continue to enhance its market presence for the Target Group and approach potential customers in other industry sectors through business referrals and its business network. The Acquisition is, in the opinion of the Directors, in line with the aforesaid business plan of the Group.

−12 −

LETTER FROM THE BOARD

As mentioned in the Resumption Announcement, the Group had limited cash resources on hand and is indebted to the controlling Shareholders and a related company, of which the Company intends to conduct a pre-emptive issue to raise fund for the settlement. As disclosed in the interim report for the six months ended 30 September 2020 of the Company, the cash and cash equivalents amounted to approximately HK$19.3 million, representing only approximately 5.8% of the total assets of the Group. To improve the Company’s financial position as mentioned above, the Company announced on 20 January 2021 that it entered into of a placing and subscription agreement with GLAM Capital Limited, as the placing agent (the “ Placing Agent ”), and Always Profit, as the vendor, pursuant to which Always Profit would subscribe 155,080,000 Shares (the “ Top-up Subscription ”) upon the successful placing of 155,080,000 Shares by Always Profit to not less than six independent placees (the “ Placing ”) through the Placing Agent. Completion of the Top-Up Subscription took place on 3 February 2021. The net proceeds from the Top-Up Subscription would be approximately HK$71.1 million, which shall be fully applied to partially repay the outstanding loans due to Always Profit and Chong Kin Group Holdings Limited in the approximate sum of HK$174.9 million as of 30 September 2020.

The Consideration is determined based on up to a five times’ earnings multiple. Such multiple was agreed after arm’s length negotiations between the parties to the Agreement with reference to earnings multiples of listed companies engaging in similar businesses as the Target Group, and having taken into consideration the much smaller scale of the Target Group as compared to these comparable companies as well as the short operating history of the Target Group. As such, the Board considers that the Consideration is fair and reasonable, and in the interest of the Company and its Shareholders as a whole. In light of the indebtedness of the Group, the future cash needed for the business plan and the then low cash level of the Company as mentioned above, the Company negotiated with Mr. Tian for the full settlement of the Consideration by way of issue of the Consideration Shares, which will not require cash outflow from the Group as well as serve to align Mr. Tian’s interest with that of the Company. Furthermore, the Consideration is structured with a fixed sum and a contingent element to provide incentive for Mr. Tian to continue to contribute to the business development of the Target Group following Completion, and the lock-up provision of the Consideration Shares is designed to retain Mr. Tian’s service in the Group. Should the PAT of the Target Group for the year ending 31 March 2021 and 2022 not meet the respective benchmark growth stipulated in the Agreement, the Group will not be required to issue the relevant batch Incentive Shares to the Vendor.

In view of the above, the Board considers that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and is in the ordinary and usual course of business of the Company and that the Agreement is on normal commercial terms and in the interests of the Company and the Shareholders as a whole. The Board is also in view that the Issue Price, which was determined based on the average closing price of the Shares as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day, is fair and reasonable. Mr. Tian, who has a direct interest in the Acquisition, has abstained from voting at the Board meeting in approving the Agreement and the transactions contemplated thereunder.

Further announcement(s) shall be made by the Company if there is any material development in the pre-emptive issue or other financing plans of the Group as and when appropriate and in compliance with the Listing Rules.

−13 −

LETTER FROM THE BOARD

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

The shareholding structures of the Company (i) as at the Latest Practicable Date; (ii) immediately following Completion; (iii) after Completion and assuming the issue of the First Batch Incentive Shares; and (iv) after Completion and assuming the issue of the First and Second Batch Incentive Shares, assuming there will not be any other issue or repurchase of Shares prior to Completion, are set out as follows:

Shareholders Mr. Zhang Always Profit (Note) The Vendor Public Shareholders Total	As at the Latest Practicable Date No. of Shares Approximate % 594,000 0.1 403,008,493 43.3 403,602,493 43.4 — — 526,883,507 56.6 930,486,000 100.0	Immediately following the Completion No. of Shares Approximate % 594,000 0.1 403,008,493 42.1 403,602,493 42.2 25,826,771 2.7 526,883,507 55.1 956,312,771 100.0	After Completion and assuming the issue of the First Batch Incentive Shares No. of Shares Approximate % 594,000 0.1 403,008,493 41.8 403,602,493 41.9 34,435,694 3.5 526,883,507 54.6 964,921,694 100.0	After Completion and assuming the issue of the First and Second Batch Incentive Shares No. of Shares Approximate % 594,000 0.1 403,008,493 41.4 403,602,493 41.5 43,044,617 4.4 526,883,507 54.1 973,530,617 100.0	After Completion and assuming the issue of the First and Second Batch Incentive Shares No. of Shares Approximate % 594,000 0.1 403,008,493 41.4 403,602,493 41.5 43,044,617 4.4 526,883,507 54.1 973,530,617 100.0
					41.5 4.4 54.1
					100.0

Note: Always Profit is wholly owned by Mr. Zhang who is a Director and the Chairman of the Board.

FINANCIAL EFFECT OF THE ACQUISITION

As at the Latest Practicable Date, the Target Company was a subsidiary of the Company with its financial results being consolidated into the consolidated accounts of the Group. After completion of the Acquisition, the Target Company will continue to be a subsidiary of the Company, and the assets and liabilities and the financial results of the Target Group will continue to be consolidated to the consolidated accounts of the Group. The Company is of the view that the Acquisition will not have any impact on the total assets and total liabilities of the Group and it is expected that the Acquisition will not have material effect on the earnings of the Group immediately after the Acquisition.

EQUITY FUND RAISING ACTIVITIES DURING THE PAST TWELVE MONTHS PERIOD IMMEDIATELY PRECEDING THE LATEST PRACTICABLE DATE

The Company completed the Top-Up Subscription on 3 February 2021 while the Placing was completed on 25 January 2021. The net proceeds from the Top-Up Subscription would be approximately HK$71.1 million (further details are disclosed in the Company’s announcements of 20 January 2021, 26 January 2021 and 3 February 2021).

Save as disclosed above, the Company has not engaged in any other fund raising activities involving issuance of the Company’s equity securities in the past 12 months immediately preceding the Latest Practicable Date.

−14 −

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, the Vendor was wholly owned by Mr. Tian, who is a Director. As the Vendor is an associate of Mr. Tian, it is a connected person of the Company under Rule 14A.07(4) of the Listing Rules. Accordingly, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. In addition, as one or more of the applicable percentage ratios (as defined under the Listing Rules) calculated pursuant to Rule 14.07 of the Listing Rules in respect of the Acquisition exceed 5% but all applicable percentage ratios are less than 25%, the Acquisition also constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. The Acquisition is therefore subject to the notification and announcement, circular and independent shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

The Consideration Shares will be issued under the Specific Mandate to be sought from the Independent Shareholders at the SGM.

The SGM will be convened and held for the purpose of considering and, if thought fit, approving the Agreement and the transactions contemplated thereunder and the grant of the Specific Mandate for the allotment and issue of the Consideration Shares by way of poll. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Mr. Tian and his associates do not hold any Shares as at the date of this announcement. Accordingly, none of the Shareholders had a material interest in the Acquisition and the issue of the Consideration Shares pursuant to the Specific Mandate, and no Shareholder would be required to abstain from voting at the SGM.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Chow Hiu Tung, Mr. Zhao Hangen and Ms. Yang Yanli, has been established to advise the independent Shareholders on matters in relation to the terms of the Agreement and the transactions contemplated thereunder (including the issue of the Consideration Shares pursuant to the Specific Mandate). Gram Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders thereon.

SGM

The SGM will be convened by the Company at which resolutions will be proposed to seek approval from the Independent Shareholders for the Agreement and the transactions contemplated thereunder and the grant of the Specific Mandate for the allotment and issue of the Consideration Shares by way of poll. A notice convening the SGM to be held at Room 6808, 68th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Friday, 26 February 2021 at 10:00 a.m. is set out on page SGM-1 and SGM-2 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not the Shareholders are able to attend the SGM, the Shareholders are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the office of the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited, Level 54, Hopewell Centre,

−15 −

LETTER FROM THE BOARD

183 Queen’s Raod East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude the Shareholders from attending and voting in person at the SGM or any adjournment thereof should the Shareholders so wish.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. Accordingly, the Company will procure the chairman of the SGM to demand for voting on poll in respect of the ordinary resolution to be proposed at the SGM in accordance with the memorandum of association and the bye-laws of the Company and Union Registrars Limited, the branch share registrar of the Company in Hong Kong, will serve as the scrutineer for the vote-taking.

RECOMMENDATION

Having considered the above-mentioned benefits to the Group and the advice of Gram Capital, the Directors (including the independent non-executive Directors) consider that the terms of the Agreement, are on normal commercial terms and the issue of Consideration Shares under Specific Mandate are in the interests of the Company and the Shareholders as a whole and they are fair and reasonable to the Company. Accordingly, the Directors (including the independent non-executive Directors) recommend the Shareholders and the Independent Shareholders (as the case may be) to vote in favour of the ordinary resolutions to be proposed at the SGM to approve the Agreement, the transactions contemplated thereunder and the issue of the Consideration Shares under the Specific Mandate.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information contained in the appendices to this circular.

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

Your faithfully, By Order of the Board Zhang Jinbing Chairman

−16 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [70 x 69] intentionally omitted <==

STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 918)

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: Unit 13, 5/F, Tower 1 Harbour Centre 1 Hok Cheung Street Hung Hom, Hong Kong

8 February 2021

To the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED

INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

We refer to the circular dated 8 February 2021 of the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Capitalized terms used herein shall have the same meaning as those defined in this circular unless the context otherwise requires.

We have been appointed as the members of the Independent Board Committee to consider the Agreement, the transactions contemplated thereunder (including the issue of the Consideration Shares pursuant to the Specific Mandate), and to advise the Independent Shareholders as to whether the terms of the Agreement and the transactions contemplated thereunder (including the issue of the Consideration Shares pursuant to the Specific Mandate) are fair and reasonable so far as the Independent Shareholders are concerned.

−17 −

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Upon taking into account the recommendation of Gram Capital, we consider that (i) the terms of the Acquisition are on normal commercial terms and are fair and reasonable; and (ii) the Acquisition is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the Acquisition.

Yours faithfully,

Chow Hiu Tung Independent Non-executive Director

Zhao Hangen Independent Non-executive Director

Yang Yanli Independent Non-executive Director

−18 −

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition for the purpose of inclusion in the Circular.

Room 1209, 12/F. Nan Fung Tower 88 Connaught Road Central/ 173 Des Voeux Road Central Hong Kong

8 February 2021

To: The independent board committee and the independent shareholders of State Energy Group International Assets Holdings Limited

Dear Sir/ Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 8 February 2021 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

With reference to the Board Letter, on 18 January 2021 (after the Stock Exchange trading hours), the Company and the Vendor entered into the Agreement, pursuant to which the Company has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, 40% of the total issued share capital of the Target Company (i.e. the Remaining Shares) at a maximum consideration of HK$16.4 million. The Consideration shall be satisfied by the allotment and issue of a maximum of 43,044,617 Consideration Shares by the Company to the Vendor (or its nominee(s)) at the issue price of HK$0.381 per Consideration Share, credited as fully paid, under the Specific Mandate to be sought at the SGM. The Target Company is a 60%-owned subsidiary of the Company as at the Latest Practicable Date. Following Completion, the Target Company will become a wholly-owned subsidiary of the Company.

−19 −

LETTER FROM GRAM CAPITAL

With reference to the Board Letter, the Acquisition constitutes a discloseable and connected transaction of the Company and is subject to the notification and announcement, circular and independent shareholders’ approval requirements under the Listing Rules.

The Independent Board Committee comprising Mr. Chow Hiu Tung, Mr. Zhao Hangen and Ms. Yang Yanli (all being independent non-executive Directors) has been established to advise the Independent Shareholders on (i) whether the terms of the Acquisition are on normal commercial terms and are fair and reasonable; (ii) whether the Acquisition is in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote in respect of the resolution to approve the Acquisition at the SGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

INDEPENDENCE

We were not aware of any relationships or interests between Gram Capital and the Company during the past two years immediately preceding the Latest Practicable Date, or any other parties that could be reasonably regarded as hindrance to Gram Capital’s independence to act as the Independent Financial Adviser.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreement/arrangement or implied understanding with anyone concerning the Acquisition. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

The Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the 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 the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement therein or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

−20 −

LETTER FROM GRAM CAPITAL

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

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Acquisition, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Acquisition

Business overview of the Group

With reference to the Board Letter, the Group is principally engaged in (i) the sourcing, subcontracting, marketing and sales of garments and sportswear products; (ii) the provision of marketing services; and (iii) property investment.

Set out below are the consolidated financial information of the Group for the six months ended 30 September 2019, the six months ended 30 September 2020 and each of the two years ended 31 March 2019 and 2020 as extracted from the Company’s interim report for the six months ended 30 September 2020 (the “ 2020/21 Interim Report ”) and the Company’s annual report for the year ended 31 March 2020 (the “ 2019/20 Annual Report ”), respectively:

	For the year	For the year
	ended	ended	Year-on-year
	31 March 2020	31 March 2019	change
	(audited)	(audited)
	HK$’000	HK$’000	%
Revenue	210,179	96,434	117.95
- Garment business	194,239	90,763	114.01
- Property investment	3,898	5,671	(31.26)
- Marketing services	12,042	Nil	N/A
Profit/(loss) attributable to equity holders
of the Company for the year	9,376	(28,249)	N/A

−21 −

LETTER FROM GRAM CAPITAL

The Group recorded revenue of approximately HK$210.18 million for the year ended 31 March 2020 (“ FY2019/20 ”), representing an increase of approximately 117.95% as compared to that for the year ended 31 March 2019 (“ FY2018/19 ”). For FY2019/20, revenue from the garment business, property investment, and marketing and promotion services contributed approximately 92.42%, 1.85% and 5.73% of the Group’s total revenue respectively.

The Group recorded profit attributable to equity holders of the Company of approximately HK$9.38 million for FY2019/20, as compared to loss attributable to equity holders of the Company approximately HK$28.25 million recorded for FY2018/19. With reference to the 2019/20 Annual Report and as advised by the Directors, such turnaround from loss to profit was mainly due to the increase of gross profits of garment business, contribution from newly introduced marketing and promotion business, the decrease of administrative expenses and the increase of fair value of investment properties.

	For the six	For the six
	months ended	months ended
	30 September	30 September	Year-on-year
	2020	2019	change
	(unaudited)	(unaudited)
	HK$’000	HK$’000	%
Revenue	108,480	88,208	22.98
- Garment business	92,078	86,601	6.32
- Property investment	2,161	1,607	34.47
- Marketing services	14,241	Nil	N/A
Profit attributable to equity holders of the
Company for the period	6,590	452	1,357.96

The Group recorded revenue of approximately HK$108.48 million for the six months ended 30 September 2020 (“ HY2020/21 ”), representing an increase of approximately 22.98% as compared to that for the six months ended 30 September 2019 (“ HY2019/20 ”). For HY2020/21, revenue from the garment business, property investment, and marketing and promotion services contributed approximately 84.88%, 1.99% and 13.13% of the Group’s total revenue respectively.

The Group recorded profit attributable to equity holders of the Company of approximately HK$6.59 million for HY2020/21, representing an increase of approximately 1,357.96% as compared to that for HY2019/20. With reference to the 2020/21 Interim Report and as advised by the Directors, such increase in profit was principally attributable to the increase in revenue and profit contribution from the Group’s garment business in connection with the distribution of garment and sportswear products in Hong Kong and the PRC for the licensed brand “ACCAPI”.

With reference to the 2020/21 Interim Report, as at 30 September 2020, the Group had cash and cash equivalents and net assets of approximately HK$19.29 million and HK$40.32 million respectively.

−22 −

LETTER FROM GRAM CAPITAL

Information on the Vendor

With reference to the Board Letter, the Vendor is principally engaged in investment holding, with the 40% equity interests in the Target Company as its principal asset. The Vendor is wholly owned by Mr. Tian who is a Director.

Information on the Target Group

With reference to the Board Letter, the Target Group is principally engaged in the provision of marketing and promotional services, which include (i) marketing and brand building, design and execution; (ii) agency services of outdoor billboards and screens; (iii) designing and organising large-scale events; and (iv) production and publication of advertisements on internet and new media. It commenced provision of the above services to external customers since January 2020. The business of the Target Group was developed from the experience accumulated by the marketing team of the Group in developing marketing and promotional campaigns for the Group’s garment business of sale and distribution of licensed products under the brands named “ACCAPI” and “Super X”. To cope with the Target Group’s expansion plan to provide its services to external customers, the Group invited Mr. Tian to join the Group and transferred 40% of the issued share capital of the Target Company to a company wholly owned by Mr. Tian (i.e. the Vendor) at a consideration of HK$24,000 in December 2019 to jointly develop the Target Group’s business. The aforementioned consideration of HK$24,000 was determined based on the then net asset value of the Target Group where the Target Group has minimal operation before the transferral of 40% of the issued share capital of the Target Company to Mr. Tian. The Target Group began to offer marketing and promotional services in online and offline platforms for external customers since January 2020 and completed over 20 projects up to 31 December 2020. Clients of the Target Group include, among others, brands of garment, consumer products, insurance agency services, property development and e-commerce services.

According to the Board Letter, Mr. Tian has over 20 years of knowledge and experience in brand management, marketing and promotional services and strategic planning, operation and business management in the marketing, trading and cultural and tourism industries in the PRC. Mr. Tian has been working for and is holding directorship at 廣州萬燕集團有限公司 (Guangzhou Wanyan Group Co., Ltd.) since 2014, including but not limited to being a director and the chief executive officer at 廣州萬燕文化傳媒股份有限公司 (Guangzhou Wanyan Culture & Media Co., Ltd.), a company listed on the National Equities Exchange and Quotations from December 2016 to August 2018, which is principally engaged in market research, advertising, brand strategy promotion, brand effectiveness evaluation, theatrical performance business and film and television business.

−23 −

LETTER FROM GRAM CAPITAL

	For the period
	from 16 January
	2019 (date of
	incorporation of
	the Target	For the nine
	Company) to	months ended
	31 March 2020	31 December 2020
	(unaudited)	(unaudited)
	Approximately	Approximately
	HK$’000	HK$’000
Revenue	12,113	29,801
Net profit before taxation	4,992	5,875
Net profit after taxation	3,880	4,409

According to the Board Letter, the unaudited total asset value and net asset value of the Target Group as at 31 December 2020 as shown in the unaudited consolidated management accounts of the Target Group were approximately HK$18.0 million and HK$8.8 million respectively.

Reasons for and benefits of the Acquisition

As mentioned in the section above, revenue from marketing and promotion services contributed approximately 5.73% and 13.13% of the Group’s total revenue for FY2019/20 and HY2020/21 respectively. As advised by the Directors, the Group’s revenue from marketing and promotion services was generated by the Target Group.

With reference to the Board Letter, the Target Group commenced its marketing and promotional services business as a joint venture with Mr. Tian at the outset. During the first year of its operations, the Target Group achieved satisfactory performances in terms of establishing its client base, generating positive financial returns and securing pipeline projects. The Directors are positive about the development potential and prospects of the Target Group and consider it in the interests of the Company and the Shareholders to consolidate ownership in the Target Company through the Acquisition (the Consideration of which will be fully settled by way of issue of the Consideration Shares, which will not require cash outflow from the Group and will serve to align Mr. Tian’s interest with that of the Company).

−24 −

LETTER FROM GRAM CAPITAL

As mentioned in the Company’s announcement dated 4 December 2020 regarding the fulfilment of resumption conditions and resumption of trading, following resumption of trading of the Shares, the Group would continue developing its existing businesses. As regards the marketing and promotional services business, the Group would continue to enhance its market presence and approach potential customers in other industry sectors through business referrals and its business network. The Group intended to utilise the cross-selling opportunities between the garment business and the marketing and promotional services business whereby the Group will promote “ACCAPI” and “Super X” products to its customers in the marketing and promotional services business which are engaged in garment-related business with a view to broadening the distributor network of the garment business, and promote the marketing and promotional services business to its distributors and potential distributors in the garment business.

With reference to a report published by the Qianzhan Industry Institute (前瞻產業研究院) dated 4 June 2020 (note: according to the website of Qianzhan Industry Institute, Qianzhan Industry Institute is an industry consultant established in 1998 which provides industry analysis for corporates, government and institutes), the total revenue of the PRC advertising industry amounted to approximately RMB867 billion in 2019, representing a compounded annual growth rate of approximately 9.77% during the five years from 2015 to 2019. In 2019, revenue from internet advertising amounted to approximately RMB437 billion in PRC, representing approximately 50% of total industry revenue. According to a report published by ASKCI Consulting Co., Ltd. (中商產業研究院) (note: according to the website of ASKCI Consulting Co., Ltd., ASKCI Consulting Co., Ltd. is an industry consulting service provider in PRC with over 20 years of experience) dated 1 December 2020, despite that the PRC advertising industry was expected to record total revenue of approximately RMB810 billion for 2020 (representing a decrease of approximately 6.62% as compared to that for 2019), the total revenue was expected to increase to approximately RMB880 billion in 2021 (representing an increase of approximately 8.64% as compared to that for 2020 and an increase of approximately 1.45% as compared to that for 2019). In light of the above, we consider the marketing and promotion market in the PRC to be generally positive in the near term (“ Our Industry Due Diligence ”).

Having considered the above, in particular, (i) that the marketing and promotion services revenue generated by the Target Group was one of the sources of the Group’s revenue for FY2019/20 and HY2020/21; (ii) that the Acquisition (i.e. the consolidation of ownership in the Target Company) is in line with the Group’s plan to develop its existing marketing and promotional services business; (iii) Our Industry Due Diligence; and (iv) that it is reasonable for the Group to consolidate the entire interest in the Target Company and take full control of its development, we concur with the Directors that the Acquisition is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole.

−25 −

LETTER FROM GRAM CAPITAL

2. Principal terms of the Acquisition

Set out below are the principal terms of the Agreement as extracted from the Board Letter:

Date:

18 January 2021

Parties:

The Company; and the Vendor

Assets to be acquired:

Consideration:

The Consideration of HK$16.4 million shall be satisfied by the Company to the Vendor in the following manner:

(i) as to HK$9.84 million by the allotment and issue of 25,826,771 Consideration Shares by the Company, to be credited as fully paid, to the Vendor (or its nominee(s)) upon Completion;
(ii) as to HK$3.28 million by the allotment and issue of 8,608,923 Consideration Shares (i.e. the First Batch Incentive Shares) by the Company, to be credited as fully paid, to the Vendor (or its nominee(s)) within 14 days following the issue of the audited consolidated financial statements of the Target Group for the year ending 31 March 2021 (which shall be issued on or before 30 June 2021) if the consolidated profit after tax of the Target Group (excluding the profit generated from the provision of services by the Target Group to other companies in the Group and the profit generated from activities not in its ordinary and usual course of business) (i.e. the PAT) for the year ending 31 March 2021 is not less than HK$8.20 million; and
(iii) as to HK$3.28 million by the allotment and issue of 8,608,923 Consideration Shares (i.e. the Second Batch Incentive Shares) by the Company, to be credited as fully paid, to the Vendor (or its nominee(s)) within 14 days following the issue of the audited consolidated financial statements of the Target Group for the year ending 31 March 2022 (which shall be issued on or before 30 June 2022) if the PAT for each of the two years ending 31 March 2021 and 2022 is not less than HK$8.20 million and HK$9.84 million respectively.

−26 −

LETTER FROM GRAM CAPITAL

Consideration Shares:

The Consideration Shares comprise a maximum of 43,044,617 Shares, representing approximately 4.6% of the issued share capital of the Company as at the Latest Practicable Date and approximately 4.4% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares (assuming there will not be any other issue or repurchase of Shares prior to Completion).

The Consideration Shares will be issued by the Company under the Specific Mandate. The Company will seek the grant of the Specific Mandate from the Independent Shareholders at the SGM.

Lock-up provision:

For further detailed terms of the Agreement, please refer to the section headed “THE AGREEMENT” of the Board Letter.

Analysis on the Consideration

With reference to the Board Letter, the Consideration was arrived at after arm’s length negotiations between the Company and the Vendor having taken into account (i) the financial and operating performance of the Target Group; (ii) the business development and future prospects of the Target Group; (iii) a price-to-earnings multiple of five times as agreed between the Company and the Vendor and the unaudited consolidated net profit after tax of the Target Group in the trailing twelve months from 1 January 2020 to 31 December 2020 of approximately HK$8.2 million; and (iv) the reasons for and benefits of the Acquisition as set out in the paragraph headed “REASONS FOR AND BENEFITS OF THE ACQUISITION” of the Board Letter.

−27 −

LETTER FROM GRAM CAPITAL

To further assess the fairness and reasonableness of the Consideration, we performed the trading multiple analysis which includes the price to earning ratio (“ PER ”). We searched for listed companies in Hong Kong, which engage in similar marketing and promotion business as Target Company and derived more than 50% of their turnover from such business segment based on their respective latest published annual financial information. As public data on comparable transactions was not readily available, we did not include analysis on comparable transactions. To the best of our knowledge and endeavour and as far as we are aware of, we found 7 companies which meet our selection criteria and they are exhaustive (the “ Comparable Company/(ies) ”).

		PER
Company name (Stock Code)	Year-end date	*(note 1)*
Adtiger Corporations Limited (1163)	31 December 2019	30.97
Bright Future Technology Holdings Limited (1351)	31 December 2019	28.85
Ruicheng (China) Media Group Limited (1640)	31 December 2019	2.40
Doumob (1917)	31 December 2019	27.15
Guru Online (Holdings) Limited (8121)	31 March 2020	N/A (note 2)
Icon Culture Global Company Limited (8500)	31 December 2019	N/A (note 2)
Activation Group Holdings Limited (9919)	31 December 2019	17.66
	Maximum (excluding	30.97
	outlier) *(note 4)*
	Minimum (excluding	17.66
	outlier) *(note 4)*
	Average (excluding	26.16
	outlier) *(note 4)*
The Acquisition		5.00 *(note 3)*

The Acquisition

Notes:

The PERs of the Comparable Companies were calculated based on their respective latest published annual financial information, their respective closing prices as quoted on the Stock Exchange and the number of total issued shares as at the date of Agreement, and RMB: HK$ exchange rate of 1:1.195.
The subject company recorded loss attributable to equity holders for the latest financial year.
The PER of the Acquisition was calculated based on the Consideration and the unaudited consolidated net profit after tax of the Target Group in the trailing twelve months from 1 January 2020 to 31 December 2020 of approximately HK$8.2 million.
Excluding Ruicheng (China) Media Group Limited (1640) which has substantially lower PER than those of other Comparable Companies.

−28 −

LETTER FROM GRAM CAPITAL

We noticed from the above table that the PERs of the Comparable Companies (excluding outlier) ranged from approximately 17.66 times to 30.97 times, with an average of approximately 26.16 times. The implied PER of the Acquisition is lower than within the said PER range of the Comparable Companies (excluding outlier). Accordingly, we are of the view that the Consideration is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

Analysis on the Issue Price

With reference to the Board Letter, the Issue Price of HK$0.381 per Consideration Share was determined after arm’s length negotiations between the parties to the Agreement with reference to, among other things, the recent trading prices of the Shares, which represents:

(i) the average of the closing prices of the Shares as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day of HK$0.381 per Share;
(ii) a premium of approximately 4.4% over the closing price of HK$0.365 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 8.2% to the average of the closing prices of the Shares as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day of approximately HK$0.415 per Share;
(iv) a premium of approximately 133.7% over the closing price of HK$0.163 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(v) a premium of approximately 677.6% over the unaudited consolidated net asset value per Share of approximately HK$0.049 as at 30 September 2020 (which is calculated by dividing the unaudited consolidated equity attributable to equity holders of the Company as at 30 September 2020 of approximately HK$37,672,000 as shown in the 2020/21 Interim Report by 775,406,000 Shares then in issue).

−29 −

LETTER FROM GRAM CAPITAL

In order to assess the fairness and reasonableness of the Issue Price, we reviewed the daily closing price of the Shares as quoted on the Stock Exchange from 20 January 2020 up to and including the Last Trading Day (the “ Review Period ”), being a period of approximately one year prior to the date of the Agreement. The comparison of daily closing prices of the Shares and the Issue Price is illustrated as follows:

==> picture [465 x 243] intentionally omitted <==

Source: The Stock Exchange’s website Note: During the Review Period, trading in Shares was suspended from 20 January 2020 to 6 December 2020.

During the Review Period, the highest and lowest closing prices of the Shares as quoted on the Stock Exchange were HK$0.50 recorded on 28 December 2020, 31 December 2020 and 5 January 2021 and HK$0.242 recorded on 15 December 2020 respectively. The Issue Price of HK$0.381 is within the closing price of the Shares as quoted on the Stock Exchange during the Review Period.

During the Review Period, trading in Shares was suspended from 20 January 2020 to 6 December 2020. The closing price of Shares fluctuated following the resumption of trading in Shares on 7 December 2020. The closing price of Shares decreased from HK$0.28 on 7 December 2020 to the lowest at HK$0.242 on 15 December 2020 and increased to the peak at HK$0.50 on 28 December 2020. The closing price of Shares decreased again in early January 2021, from HK$0.50 on 5 January 2021 to HK$0.36 on 13 January 2021. The closing price of Shares remained stable at HK$0.37 on 14 January 2021 and HK$0.365 on 15 January 2021, and then increased to HK$0.425 on 18 January 2021.

As part of our analysis, we further identified transactions in relation to the issue of consideration shares (to be listed on the Stock Exchange) as part of acquisition consideration which were announced by companies listed on the Stock Exchange from 19 October 2020 up to 18 January 2021, being a period of three months prior to the date of the Agreement (the “ Issue Comparables ”). To the best of our knowledge and as far as we are aware of, we found 11 transactions which met the said criteria and they are exhaustive.

−30 −

LETTER FROM GRAM CAPITAL

			Premium/
			(discount) of
			the issue price
			over/to the
			average of the
		Premium/	closing price
		(discount) of	per share for
		the issue price	the last five
		over/to closing	consecutive
		price per	trading days
		share on the	prior to the
		date of	date of
		agreement in	agreement in
		relation to the	relation to the
	Date of	respective	respective
Company name (stock code)	announcement	issue of shares	issue of shares
		%	%
Vongroup Limited (318)	22 October 2020	(15.09)	(15.41)
HangKan Group Limited (8331)	23 October 2020	14.29	26.32
HengTen Networks Group Limited (136)	26 October 2020	(9.09)	(9.64)
		(note)
7Road Holdings Limited (797)	9 November 2020	(0.37)	Nil
		(note)
China Hanking Holdings Limited (3788)	12 November 2020	2.56	(0.62)
Elife Holdings Limited (223)	27 November 2020	29.87	36.99
SDM Group Holdings Limited (8363)	7 December 2020	Nil	(0.09)
China Fordoo Holdings Limited (2399)	14 December 2020	(19.70)	(18.71)
Yeahka Limited (9923)	24 December 2020	Nil	3.59
CA Cultural Technology Group Limited	28 December 2020	6.84	3.82
(1566)
Jiayuan International Group Limited	13 January 2021	5.10	6.45
(2768)
Maximum		29.87	36.99
Minimum		(19.70)	(18.71)
Average		1.31	2.97
The Acquisition		(10.35)	Nil

Note: Based on the closing price per share of the company on the last trading day prior to the date of agreement in relation to the transaction

−31 −

LETTER FROM GRAM CAPITAL

As shown above, the issue prices of the Issue Comparables ranged from (i) a discount of approximately 19.70% to a premium of approximately 29.87% to/over the respective closing price per share on the date of agreement in relation to the respective issue of shares (the “ Agreement Date Discount/Premium Market Range ”); and (ii) a discount of approximately 18.71% to a premium of approximately 36.99% to/over the respective average closing price per share for the last five consecutive trading days immediately prior to the date of agreement in relation to the respective issue of shares (the “ 5-days Average Discount/Premium Market Range ”). The Issue Price, which represents (i) a discount of approximately 10.35% to the closing price of the Shares on the date of Agreement and (ii) the average closing price of the Shares as quoted on the Stock Exchange for the five consecutive trading days prior to the date of Agreement, falls within the Agreement Date Discount/Premium Market Range and the 5-days Average Discount/Premium Market Range respectively.

Having considered that (i) the Issue Price of HK$0.381 is within the closing price of the Shares as quoted on the Stock Exchange during the Review Period; (ii) the Issue Price falls within the Agreement Date Discount/Premium Market Range; and (iii) the Issue Price falls within the 5-days Average Discount/Premium Market Range, we consider the Issue Price to be fair and reasonable.

The allotment of Incentive Shares and the lock-up provision

With reference to the Board Letter, the Consideration is structured with a fixed sum and contingent elements to provide incentive for Mr. Tian to continue to contribute to the business development of the Target Group following Completion, and the lock-up provision of the Consideration Shares is designed to retain Mr. Tian’s service in the Group. Should the PAT of the Target Group for the years ending 31 March 2021 and 2022 not meet the respective benchmark as stipulated in the Agreement, the Group will not be required to issue the relevant batch of Incentive Shares to the Vendor. We are of the view that such terms are in the interest of the Company and are fair and reasonable.

Taking into account the above, we consider that the terms of the Acquisition are on normal commercial terms and are fair and reasonable.

3. Effect on shareholding structure of the Company

With reference to the shareholding table in the section headed “EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY” of the Board Letter, the shareholding interests of the public Shareholders would be diluted by approximately 2.5 percent point after Completion (upon the issue of the Consideration Shares). In this regard, taking into account (i) the reasons for and benefits of the Acquisition; and (ii) the terms of the Acquisition being fair and reasonable, we are of the view that the said level of dilution to the shareholding interests of the public Shareholders as a result of the issue of Consideration Shares is acceptable.

−32 −

LETTER FROM GRAM CAPITAL

4. Possible financial effects of the Acquisition

With reference to the Board Letter, as at the Latest Practicable Date, the Target Company is a subsidiary of the Company with its financial results being consolidated into the consolidated accounts of the Group. After completion of the Acquisition, the Target Company will continue to be a subsidiary of the Company, and the assets and liabilities and the financial results of the Target Group will continue to be consolidated to the consolidated accounts of the Group. With reference to the 2020/21 Interim Report, the unaudited consolidated net asset value of the Group was approximately HK$40.32 million as at 30 September 2020. As confirmed by the Directors, the Acquisition would have no material effect on the net asset value of the Group.

It should be noted that the aforementioned analyses are for illustrative purposes only and do not purport to represent how the financial position of the Group will be upon Completion.

RECOMMENDATION

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

Yours faithfully, For and on behalf of Gram Capital Limited Graham Lam Susanna Ho Managing Director Director

Notes:

Mr. Graham Lam is a licensed person registered with the Securities and Futures Commission and a responsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 25 years of experience in investment banking industry.

Ms. Susanna Ho is a licensed person registered with the Securities and Futures Commission and a responsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. She has over 15 years of experience in investment banking industry.

For identification purpose only

−33 −

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(i) Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company or any associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company and/or their associates in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules (the “ Model Code ”), to be notified to the Company and the Stock Exchange were as follows:

Interests in the Shares of the Company

			Approximate
			percentage of
			the issued
			share capital
		Number of	of the
Director	Capacity/Nature of interest	Shares	Company
Mr. Zhang	Interest in controlled corporation	403,602,493(L)	43.4%
	and beneficial owner (Note)	(Note)

Notes:

(1) The letter “L” denotes a long position in the Shares.
(2) Mr. Zhang is the sole beneficial owner of Always Profit. Mr. Zhang was deemed to be interested in 403,008,493 Shares held by Always Profit pursuant to the SFO.

−I-1 −

GENERAL INFORMATION

APPENDIX I

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company were interested in or were deemed to have interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have such provisions of the SFO); or (ii) were required, pursuant to section 352 of Part XV of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

(ii) Interests of substantial Shareholders

As at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, the following persons, other than a Director or chief executive of the Company, had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group:

			Approximate
			percentage of
			the issued
			share capital
		Number of	of the
Name of Shareholders	Capacity/Nature of interests	Shares	Company
Always Profit	Beneficial owner	403,008,493(L)	43.3%
Mr. Zhang	Interest of controlled corporation	403,602,493(L)	43.4%
	and beneficial owner

Notes:

(1) The letter “L” denotes a long position in the shares.
(2) Mr. Zhang is the sole beneficial owner of Always Profit. Mr. Zhang was deemed to be interested in 403,008,493 Shares held by Always Profit pursuant to the SFO.

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the Directors or chief executive of the Company, no person (other than a Director or chief executive of the Company) had, or were taken or deemed to have interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any option in respect of such capital.

−I-2 −

GENERAL INFORMATION

APPENDIX I

3. DIRECTORS’ SERVICES CONTRACTS

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

4. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have been named in this circular or have given opinions, letters or advice contained in this circular:

Name Qualification

Gram Capital Limited

A licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

Gram Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion therein of its letter and/or references to its names, in the form and context in which they are included.

As at the Latest Practicable Date, Gram Capital was not beneficially interested in the share capital of any member of the Group nor had any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for any securities in any member of the Group, nor did it have any interest, either directly or indirectly, in the assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group, since 31 March 2020, being the date to which the latest published audited consolidated financial statements of the Group were made up.

5. COMPETING INTERESTS

As at the Latest Practicable Date, save as disclosed in this circular, none of the Directors and their respective associates was interested in any business apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with the business of the Group.

6. DIRECTORS’ INTEREST IN ASSETS, CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, save as disclosed in this circular, none of the Directors had any interest, directly or indirectly, in any asset which, since 31 March 2020, being the date to which the latest published audited financial statements of the Group were made up, had been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

Save as disclosed in this circular, there was no contract or arrangement subsisting at the Latest Practicable Date in which any Director was materially interested and which was significant in relation to the business of the Group.

−I-3 −

GENERAL INFORMATION

APPENDIX I

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2020, being the date to which the latest published audited consolidated financial statements of the Group were made up.

8. GENERAL

(i) The company secretary of the Company is Ms. Lee Eva, who is a practising solicitor in Hong Kong.
(ii) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
(iii) The head office and principal place of business of the Company is situated at Unit 13, 5/F, Tower 1, Harbour Centre, 1 Hok Cheung Street, Hung Hom, Hong Kong.
(iv) The Hong Kong share registrar of the Company is Tricor Abacus Limited, located at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(v) In the event of inconsistency, the English text shall prevail over the Chinese text.
(vi) Translated English names of Chinese entities for which no official English translation exists are unofficial translations for identification purpose only and should not be regarded as the official English translation of the Chinese names.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at Units E-F, 17th Floor, China Overseas Building, 139 Hennessy Road, Wanchai, Hong Kong during normal business hours on any week day (except public holidays) for the period of 14 days from the date of this circular:

(i) the memorandum of association and bye-laws of the Company;
(ii) the annual reports of the Company for each of the two financial years ended 31 March 2019 and 2020;
(iii) the interim report of the Company for the six months ended 30 September 2020;
(iv) the letter of recommendation dated 8 February 2021 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 17 to 18 of this circular;
(v) the letter of advice dated 8 February 2021 from Gram Capital to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 19 to 33 of this circular;

−I-4 −

GENERAL INFORMATION

APPENDIX I

(vi) the written consents referred to in the paragraph headed “Experts and Consents” in this appendix;
(vii) the Agreement; and
(viii) this circular.

−I-5 −

NOTICE OF SGM

==> picture [70 x 69] intentionally omitted <==

STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 918)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of State Energy Group International Assets Holdings Limited (the “ Company ”) will be held at the Company’s principal place of business in Hong Kong at Room 6808, 68th Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on Friday, 26 February 2021 at 10:00 a.m. for the purpose of considering and, if thought fit, passing (with or without modifications) the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

the sale and purchase agreement (the “ Agreement ”) dated 18 January 2021 (a copy of which has been produced to the SGM marked “A” and signed by the chairman of the SGM for the purpose of identification) entered into among the Company and Wenxi Investment Management Co., Ltd in relation to the acquisition of 40 ordinary shares GBR (HK) Limited, representing 40% of the total issued share capital of the GBR (HK) Limited, together with the transactions contemplated thereunder (including the issue of the Consideration Shares pursuant to the Specific Mandate) be and are hereby approved, confirmed and ratified.

The board of directors of the Company be and is hereby authorised to do all such acts and things and execute all such documents which it considers necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Agreement and the transactions contemplated thereunder (including the issue of the Consideration Shares pursuant to the Specific Mandate).”

By Order of the Board

State Energy Group International Assets Holdings Limited Zhang Jinbing Chairman

Hong Kong, 8 February 2021

−SGM-1 −

NOTICE OF SGM

Notes:

A form of proxy for use at the meeting is enclosed herewith.
Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him in accordance with the Company’s bye-laws. A proxy need not be a member of the Company but must be present in person to represent the member.
To be valid, a form of proxy, together with the power of attorney (if any) or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority must be lodged with the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Completion and return of the form of proxy will not preclude members from attending and voting in person at the meeting or any adjournment thereof (as the case may be) should they so wish, and in such event, the instrument appointing a proxy shall be revoked.
The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer or attorney duly authorised.
Shareholders whose name appear on the Company’s register of members on Monday, 22 February 2021, being the last registration date and record date, will be eligible for attending and voting at the SGM. In order to be eligible for attending and voting at the SGM, all transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Abacus Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. (Hong Kong Time) on Monday, 22 February 2021.

−SGM-2 −

AI assistant

Luye Pharma Group Limited — Proxy Solicitation & Information Statement 2021

50431_rns_2021-02-08_bf5c9386-63ef-48a0-9a52-36fecef121c8.pdf

STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE AND NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

DEFINITIONS

DEFINITIONS

STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

Executive Directors:

Independent Non-executive Directors:

Principal place of business in Hong Kong:

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

INTRODUCTION

THE AGREEMENT

Date

Parties

Assets to be acquired

Consideration

Consideration Shares

Conditions precedent

Lock-up provision

Completion

INFORMATION OF THE VENDOR

INFORMATION OF THE TARGET COMPANY AND THE TARGET GROUP

Principal business

Group structure

Financial information

REASONS FOR AND BENEFITS FOR THE ACQUISITION

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY

FINANCIAL EFFECT OF THE ACQUISITION

EQUITY FUND RAISING ACTIVITIES DURING THE PAST TWELVE MONTHS PERIOD IMMEDIATELY PRECEDING THE LATEST PRACTICABLE DATE

LISTING RULES IMPLICATIONS

SGM

RECOMMENDATION

ADDITIONAL INFORMATION

STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED

INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE REMAINING ISSUED SHARE CAPITAL IN GBR (HK) LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE

INTRODUCTION

INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Acquisition

Business overview of the Group

Information on the Vendor

Information on the Target Group

Reasons for and benefits of the Acquisition

2. Principal terms of the Acquisition

Analysis on the Consideration

The Acquisition

Analysis on the Issue Price

The allotment of Incentive Shares and the lock-up provision

3. Effect on shareholding structure of the Company

4. Possible financial effects of the Acquisition

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(i) Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company or any associated corporations

APPENDIX I

(ii) Interests of substantial Shareholders

3. DIRECTORS’ SERVICES CONTRACTS

4. EXPERTS AND CONSENTS

Name Qualification

5. COMPETING INTERESTS

6. DIRECTORS’ INTEREST IN ASSETS, CONTRACTS AND OTHER INTERESTS

7. MATERIAL ADVERSE CHANGE

8. GENERAL

9. DOCUMENTS AVAILABLE FOR INSPECTION

STATE ENERGY GROUP INTERNATIONAL ASSETS HOLDINGS LIMITED 國能集團國際資產控股有限公司

ORDINARY RESOLUTION

“ THAT

By Order of the Board

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Luye Pharma Group Limited Proxy Solicitation & Information Statement 2021