THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a 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 南京三寶科技股份有限公司 (Nanjing Sample Technology Co., Ltd.*) (the “Company”), you should at once hand this circular, together with the accompanying proxy forms and reply slips, to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

==> picture [258 x 86] intentionally omitted <==

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 1708)

(1) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER; (2) PROPOSED APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR

AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

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

==> picture [177 x 30] intentionally omitted <==

A notice convening the EGM of the Company to be held at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the People’s Republic of China at 10:00 a.m. on Monday, 15 May 2017 is set out on pages 108 to 110 of this circular.

A proxy form for use at the EGM is enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the Company’s H Shares registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for the holders of the H Shares only) or the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the PRC (for the holders of the Domestic Shares only), as soon as possible but in any event not less than 24 hours before the respective time fixed for holding the EGM or any adjournment thereof. Completion and delivery of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof if you so wish.

This circular will remain on the website of The Stock Exchange of Hong Kong Limited at http://www.hkex.com.hk on the “Latest Company Announcements” page for at least 7 days from the date of its posting.

* For identification purpose only

13 April 2017

	Pages
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . .	23
LETTER FROM EVER-LONG SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
APPENDIX I – VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45
APPENDIX II – LETTERS RELATING TO DISCOUNTED FUTURE
ESTIMATED CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . . . . .	99
APPENDIX III – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .	102
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	108

– i –

DEFINITIONS

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

“Announcement” the announcement issued on 16 February 2017 by the Company in relation to the Disposal
“associate(s)” has the meaning ascribed thereto under the Listing Rules
“BDO China” BDO China Shu Lun Pan Certified Public Accountants (LLP)
“Board” the board of Directors “Company” Nanjing Sample Technology Co., Ltd.*（南京三寶科技股份有限公司）, a joint stock limited company incorporated in the PRC, whose H Shares are listed on the Stock Exchange (Stock Code: 1708)
“Completion” completion of the Disposal
“Consideration” the consideration payable by Sample Group to the Company for the Disposal
“controlling shareholder” has the meaning ascribed thereto under the Listing Rules
“Director(s)” the director(s) of the Company
“Disposal” the proposed disposal of 82.61% equity interest in Jiangsu Cross-border by the Company to Sample Group pursuant to the Equity Transfer Agreement
“Disposal Interest” the 82.61% equity interest in Jiangsu Cross-border owned by the Company, being the subject matter under the Equity Transfer Agreement
“Domestic Share(s)” the ordinary domestic share(s) of nominal value of RMB1.00 each in the share capital of the Company

“EGM” the extraordinary general meeting of the Company to be convened at 10:00 a.m. on Monday, 15 May 2017 for the Independent Shareholders to consider and, if thought fit, approve, among other things, the Transactions

– 1 –

DEFINITIONS

“Equity Transfer Agreement” the equity transfer agreement dated 16 February 2017 entered into between the Company (as vendor) and Sample Group (as purchaser) relating to the conditional transfer of 82.61% equity interest in Jiangsu Cross-border as supplemented on 21 March 2017
“Group” the Company and its subsidiaries
“H Share(s)” the overseas listed foreign invested shares of nominal value of RMB1.00 each in the share capital of the Company, which are listed on the Stock Exchange and subscribed for in Hong Kong dollars
“HK$” Hong Kong Dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee” an independent board committee, comprising all the independent non-executive Directors, to be formed to advise the Independent Shareholders in respect of the Transactions
“Independent Financial Adviser” Ever-Long Securities Company Limited, a corporation or “Ever-Long Securities” licensed to carry out Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance and the independent financial adviser appointed by the Independent Board Committee to advise the Independent Board Committee and the Independent Shareholders in relation to the Transactions
“Independent Shareholders” Shareholders other than Sample Group and its associates
“Independent Third Party(ies)”
third party(ies) independent of and not connected with the Company or any of its connected persons (as defined under the Listing Rules)
“Independent Valuer” or “Jiangsu Jiangsu Hua Xin Asset Valuation Firm, an independent Hua Xin” professional asset valuer appointed by the Company for the Disposal
“Jiangsu Cross-border” or “Cross-border E-Commerce Company”
Jiangsu Cross-border E-Commerce Services Co., Ltd.*
（江蘇跨境電子商務服務有限公司）, a non-wholly owned subsidiary of the Company as at the date of the Announcement

– 2 –

DEFINITIONS

“Latest Practicable Date”	7 April 2017, being the latest practicable date prior to	7 April 2017, being the latest practicable date prior to
	the printing of this circular for the purpose	of
	ascertaining certain information for inclusion in this
	circular
“Listing Rules”	the Rules Governing the Listing of Securities on	the
	Stock Exchange
“Mr. Sha”	Mr. Sha Min（沙敏先生）, the chairman of the Board, an
	executive Director and a controlling Shareholder of	the
	Company
“Mr. Chang”	Mr. Chang Yong（常勇先生）, the vice chairman of	the
	Board and an executive Director
“PRC”	the People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“Sample Group”	Nanjing Sample Technology Group Company Limited*
	（南京三寶科技集團有限公司）, a company established in
	the PRC and a controlling shareholder of the Company
	directly or indirectly holding 158,443,400 Domestic
	Shares of the Company, representing 50.01% of	the
	issued share capital of the Company as at the Latest
	Practicable Date
“Share(s)”	share(s) of RMB 1.00 each of the Company
“Shareholder(s)”	registered holder(s) of the Shares
“SFO”	Securities and Futures Ordinance (Chapter 571 of	the
	Laws of Hong Kong)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Valuation Report”	the valuation report dated 20 December 2016 prepared
	by Jiangsu Hua Xin and as supplemented on 23 March
	2017
“Transactions”	the Disposal, the Equity Transfer Agreement and	the
	transactions contemplated thereunder
“%”	per cent

English names of the companies/entities which are incorporated/established in the PRC in this circular are only translations of their official Chinese names for identification purpose only. In case of inconsistency, the Chinese names prevail.

– 3 –

LETTER FROM THE BOARD

==> picture [258 x 86] intentionally omitted <==

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 1708)

Executive Directors: Mr. Sha Min (Chairman) Mr. Chang Yong Mr. Zhu Xiang

Registered address: No. 10 Maqun Avenue Qixia District, Nanjing City the People’s Republic of China

Non-executive Director:

Mr. Ma Jun

Independent Non-executive Directors: Mr. Shum Shing Kei Mr. Geng Nai Fan Mr. Hu Hanhui

13 April 2017

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF

82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER AND

PROPOSED APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR

1. INTRODUCTION

Reference is made to the announcement of the Company dated 16 February 2017 in relation to, among other things, the Equity Transfer Agreement. The purpose of this circular is, among other things, to give you notice of the EGM and to provide you with information in relation to the Equity Transfer Agreement, the Disposal and certain resolutions to be proposed at the EGM to enable you to make an informed decision on whether to vote for or against those resolutions at the EGM.

* For identification purpose only

– 4 –

LETTER FROM THE BOARD

2. DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER

On 16 February 2017, the Company as vendor and Sample Group as purchaser entered into the Equity Transfer Agreement pursuant to which the Company conditionally agreed to sell and Sample Group conditionally agreed to purchase 82.61% equity interest in Jiangsu Cross-border at a consideration of RMB59,000,000 (equivalent to approximately HK$65,555,555.56). Upon Completion, the Company will cease to have any interest in Jiangsu Cross-border.

Set out below is a summary of the principal terms of the Equity Transfer Agreement.

Equity Transfer Agreement

Date

16 February 2017

Parties

Vendor: The Company Purchaser: Sample Group

Assets to be disposed of

82.61% equity interest in Jiangsu Cross-border

Consideration and payment terms

The consideration for 82.61% equity interest in Jiangsu Cross-border is RMB59,000,000 (equivalent to approximately HK$65,555,555.56), which will be payable by Sample Group by bank transfer within 3 working days after the Equity Transfer Agreement becomes effective (i.e. all conditions precedent have been fulfilled).

Conditions precedent

Completion of the Equity Transfer Agreement is subject to the fulfilment of the following conditions precedent:

(1) the Company having obtained all necessary or appropriate approval, authorisation or consent as required under the Equity Transfer Agreement including the passing of resolution(s) for approving the Transactions by the Independent Shareholders at the Company’s general meeting;

– 5 –

LETTER FROM THE BOARD

(2) approvals of the Equity Transfer Agreement and the transactions contemplated thereunder having been obtained from the relevant PRC government authorities; and
(3) written approval having been obtained from Jiangsu Zhimao Internet Technology Co., Ltd.*（江蘇知貿網絡科技有限公司）foregoing its pre-emptive right to acquire 82.61% equity interest in Jiangsu Cross-border and the approval by the shareholders of Jiangsu Cross-border of the Equity Transfer Agreement and the transactions contemplated thereunder.

None of the conditions precedent set out above is waivable. As at the date of the Latest Practicable Date, the conditions under paragraph 3 above have been satisfied.

If any of the conditions precedent set out above is not satisfied on or before 30 June 2017 (or such later date as the Company and Sample Group may otherwise agree in writing), the Equity Transfer Agreement will lapse and of no further effect and the parties thereto will be released from all obligations under the Equity Transfer Agreement except for any antecedent breach of the Equity Transfer Agreement.

Effective date

The Equity Transfer Agreement will become effective upon satisfaction of all the conditions mentioned under the paragraph headed “Conditions precedent” above.

Basis of the Consideration

The consideration of RMB59,000,000 (equivalent to approximately HK$65,555,555.56) under the Equity Transfer Agreement was determined based on arm’s length negotiations between the Company and Sample Group after taking into account the market value of 82.61% equity interest in Jiangsu Cross-border as at 31 October 2016 as set out in the Valuation Report.

Pursuant to the Valuation Report, the appraised market value of the 82.61% equity interest of Jiangsu Cross-border as at 31 October 2016 (the “ Valuation Date ”) was RMB58,611,629.78. Having considered the valuation of Jiangsu Cross-border as determined by the Independent Valuer in the Valuation Report, the Directors (including the independent non-executive Directors) consider that the consideration is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

– 6 –

LETTER FROM THE BOARD

VALUATION CONDUCTED BY INDEPENDENT VALUER

The Independent Valuer was commissioned by the Company to conduct a valuation on the value of the shareholders’ equity interests in Jiangsu Cross-border, which forms one of the basis for determining the Consideration for the Disposal.

Selection of the approach and methodology for the Valuation Report

According to the Valuation Report, there are three commonly adopted valuation methods for asset valuation, namely market approach, asset base approach and income approach. The Independent Valuer has conducted the Valuation with asset base approach and income approach but finally adopted the income approach after considering the following factors:

(a) Market approach

Market approach is a valuation approach which determines the prices of assets by comparing such assets with comparable listed companies or comparable transaction cases in the market. Given that the Independent Valuer was unable to identify sufficient comparable listed companies or comparable transaction cases (in terms of stage of development, business scope, areas of operation, profitability, etc.) in the market, it consider the market approach inappropriate in the subject valuation.

(b) Asset base approach

(c) Income approach

Income approach is a valuation approach which discounts the expected future revenue of the assets into present value with specific discount rates for the purpose of determining their values. The inherit value of the assets, which means their future profitability, is the basis of the income approach. The Independent Valuer considers that income approach is the most appropriate method as it focuses on the economic benefits generated by the income producing capability of an enterprise. From the selling shareholder’s perspective, it better reflects the value of the equity interest and from the buyer’s perspective, the consideration it is willing to pay is based on the returns on the equity rather than acquisition of the assets.

After reviewing the detailed analysis of the selection of the approach and methodology contained in the Valuation Report, the Directors are of the view that the income approach taken by the Independent Valuer is fair and reasonable given that it better reflects the value of the equity interest, there are not sufficient comparables and Jiangsu Cross-border is not an asset-based company.

– 7 –

LETTER FROM THE BOARD

Profit forecast under the Listing Rules

The appraised value of the 82.61% equity interest of Jiangsu Cross-border under the Valuation Report was prepared using the income approach, through the use of the discounted cash flow method. As a result, such valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules. Therefore, this circular is subject to the requirements under Rules 14.60A and 14.62 of the Listing Rules in relation to profit forecast. The Directors confirmed that they have made the forecast after due and careful enquiry.

Assumptions of valuation

As required under Rule 14.62(1) of the Listing Rules, details of the key assumptions used in determining the market value of 82.61% equity interest in Jiangsu Cross-border upon which the Valuation Report was issued are set out below:

There will be no material changes in the relevant laws, regulations and government policies; nor there will be any material changes in the taxation system including the tax base and tax rate (especially policies on export tariff rebate) or any other material adverse effects as a result of any unpredictable factors or force majeure.
It is assumed that the subject of the valuation is legal and valid, the assets operation of Jiangsu Cross-border is in compliance with the applicable industry and environmental government policies. After realisation of the valuation goal, Jiangsu Cross-border will continue to operate under its existing business model and all of its assets can continue to be used in its location and for the original purpose. The loans of Jiangsu Cross-border can be repaid on time and the operation of Jiangsu Cross-border will not be affected by the pledge created on the account receivables of Jiangsu Cross-border.
It is assumed that there are willing buyers and sellers in the market and both the buyer and the seller have the opportunities and time to obtain sufficient market information. Transactions are carried out voluntarily and reasonably without restriction. The subject of the valuation can be transferred freely in the open market and it does not consider special offer or discount from peculiar buyer.
It is assumed that there will be no material change in operational model, sales policies and cost control system arising from change in shareholding structure and management of Jiangsu Crossborder.
It is assumed that Jiangsu Cross-border will adopt accounting policies in the future that are substantially consistent with those adopted in the preparation of the valuation report.

– 8 –

LETTER FROM THE BOARD

The Independent Valuer and the valuation personnel cannot guarantee the truthfulness, accuracy and completeness (for the needs of valuation) of the information provided by the Group and Jiangsu Cross-border. As such, the valuation work is based on the assumption of the truthfulness, accuracy and completeness of the information provided by the Group and Jiangsu Cross-border.
It is assumed that Jiangsu Cross-border can renew the existing lease agreement(s) at the then reasonable market price upon the expiry of the existing lease agreement(s).
It is assumed that Jiangsu Cross-border’s channels of import and export will continue to exist, and no circumstance will lead to restraint or prohibition being imposed on Jiangsu Cross-border’ channels of import and export for any reason.
Main costs and expenses of Jiangsu Cross-border’s service areas have a stable structure.

Detailed projection schedule of the valuation

Revenue and cost of sales projection

The main business incomes of Jiangsu Cross-border are derived from the export business and integrated service business for cross-border trading and e-commerce. In making the projections, the Independent Valuer has referred to the future development plan of Jiangsu Cross-border as well as the developments of other companies in the same industry and assumed that the current number of employees, financial resources and business operation will continue to maintain as in current conditions. The growth rate of the revenue for the first few years from 2017 to 2019 is expected to have a sharp increase given that Jiangsu Cross-border only commenced its business for a short period of time and it is currently at the growing stage with increasing revenue and customers. Reference was also made to the future development plan of Jiangsu Cross-border in the projection of such growth rate. The growth rate of the revenue for the following years from 2020 to 2023 is expected to slow down gradually given that the revenue and customer growth of Jiangsu Cross-border will no longer be explosive and business has become more routine and stable. Reference was also made to the valuation practice and judgment by the Independent Valuer.

The main business cost of Jiangsu Cross-border is the cost on purchase for the export business. Such cost was calculated based on the projected revenue and a fixed gross profit margin at approximately 0.5% for the export business. The gross profit margin is determined by the business operation condition in the past few years.

– 9 –

LETTER FROM THE BOARD

Details of the main business incomes and main business cost projection from the Valuation Date to the year of 2024 and subsequent years are as shown in the following tables:

Currency Unit: RMB ten thousand

Item projection	2016
/Year	Nov-Dec	2017	2018	2019	2020
Main business
incomes
Export	6,000.00	48,000.00	63,840.00	84,907.20	97,643.28
Integrated service for
cross-border trading
and e-commerce	300.00	2,750.00	3,657.50	4,864.48	5,594.15
Other business
incomes	10.00	40.00	60.00	80.00	100.00
Main business cost
Export	5,970.00	47,760.00	63,520.80	84,482.66	97,155.06
Other business costs	9.60	38.40	57.60	76.80	96.00
					2024 on
Item projection/Year		2021	2022	2023	onwards
Main business incomes
Export	107,407.61		112,777.99	116,161.33	116,161.33
Integrated service for
cross-border trading and
e-commerce		6,153.57	6,461.25	6,655.09	6,655.09
Other business incomes		120.00	150.00	180.00	180.00
Main business cost
Export	106,870.57		112,214.10	115,580.52	115,580.52
Other business costs		115.20	144.00	172.80	172.80

Selling expenses and management expenses projection

(a) Selling expenses projection

Jiangsu Cross-border’s selling expenses mainly include staff salaries, rental and property management fees, transportation expenses and marketing expenses as well as other fees.

– 10 –

LETTER FROM THE BOARD

Staff salaries (for the marketing, operation and sales center): including staff wages, employee benefits, social securitiy costs, housing provident fund costs, etc. When prediction of salaries is being made, the calculation is based on comparing the current situations with the historical data. The salaries are predicted to increase between 3% to 4% per year with reference to the inflation rate;
Rental and property management fees (for the marketing, operation and sales center): the calculation is based on (i) terms of the lease contracts, if specified; or (ii) the predicted rental period, the rental price and property management fee level based on the agreed amount specified in lease contracts up to the calculation period end with an increase of 3% per year;
Transportation expenses: including freight and logistics expenses as specified in the orders. The forecast is made by reference to the percentage it represents to the total revenue based on the historical data, which is approximately 0.1%;
Marketing expenses: including costs for publicity products, exhibition service fees, conference and promotion fees, etc.. Marketing expenses are predicted to increase by approximately 10% per year.

(b) Management expenses projection

Management expenses mainly include research and development expenses, staff salaries, rental and property management fees and consultation fees as well as other fees.

Research and development expenses: mainly consist of staff salaries (for the product technology center). The staff salaries include staff wages, employee benefits, social security costs, housing provident fund costs etc. When the prediction of the salaries is being made, the calculation is based on the historical data. The salaries are predicted to increase between 3% to 4% per year with reference to the inflation rate. Other research and development expenses include certain amortization of fixed assets;
Staff salaries (for the finance department, risk management center and administration and personnel department): including staff wages, employee benefits, social security costs, housing provident fund costs, etc. When prediction of salaries is being made, the calculation will be done by comparing the current situations with the historical data. The salaries are predicted to increase between 3% to 4% per year with reference to the inflation rate;
Rental and property management fees (for the finance department, risk management center and administration and personnel department): the calculation is based on (i) terms of the lease contracts, if specified; or (ii) the predicted rental period, the rental price and property management fee level based on the agreed amount specified in lease contracts up to the calculation period end with an increase of 3% per year;

– 11 –

LETTER FROM THE BOARD

Consultation fees: including fees paid to the auditors, valuers and legal advisers. It is calculated based on an increase of 10% per year;
(c) The result is shown as below:

Currency Unit: RMB ten thousand

Item projection/	2016
Year	Nov-Dec	2017	2018	2019	2020
Selling expenses	255.20	1,341.69	1,421.03	1,509.06	1,588.47
Management
expenses	130.10	761.09	815.66	874.24	936.19
			_Currency _	Unit: RMB ten thousand
					2024 on
Item projection/Year		2021	2022	2023	onwards
Selling expenses		1,661.59	1,725.35	1,787.12	1,787.12
Management expenses		979.57	1,021.83	1,065.88	1,065.88

Other income

Other income of Jiangsu Cross-border, including government grant, gain on disposal of non-current assets and others. As the ratio of other income to the principal operating income each year is irregular and unstable, thus the report does not consider the other income in the calculation process of the future forecast.

Capital expenditures projection

Capital expenditures refer to the expenditures for the increase of production capability and the upgrade of existing fixed assets.

As discussed with the Jiangsu Cross-border’s management, during the forecast period, all capital expenditures of Jiangsu Cross-border are expected to be capital expenditures for maintenance of assets.

– 12 –

LETTER FROM THE BOARD

The result is shown as below:

Currency Unit: RMB ten thousand

	2016
Item projection/Year	Nov-Dec	2017	2018	2019	2020
Capital expenditures	0.50	8.00	15.08	26.88	26.88
			_Currency Unit: _	_RMB ten _	thousand
					2024 on
Item projection/Year		2021	2022	2023	onwards
Capital expenditures		26.88	26.88	26.88	44.42

Finance cost projection

Finance cost mainly includes interest income, interest expenses and handling fees.

The result is shown as below:

Currency Unit: RMB ten thousand

Item projection	2016
/Year	Nov-Dec	2017	2018	2019	2020
Finance cost	34.05	217.35	222.35	225.35	227.35
			_Currency _	Unit: RMB ten thousand
					2024 on
Item projection	/Year	2021	2022	2023	onwards
Finance cost		232.35	235.35	237.35	237.35

Various factors were considered by the Directors in assessing the fairness and reasonableness of the assumptions in relation to the Valuation Report. In relation to the assumptions and forecast relating to revenue growth, the Directors have reviewed the past financial statements and financial data and future development plan of Jiangsu Cross-border and took the view that the assumptions and forecast as to the revenue of Jiangsu Cross-border is fair and reasonable since that (i) the growth rate of the revenue for the first few years from 2017 to 2019 is expected to have a sharp increase given that Jiangsu Cross-border only commenced its business for a short period of time and it is currently at the growing stage with increasing revenue and customers; and (ii) the growth rate of the revenue for the following years from 2020 to 2023 is expected to slow down gradually given that the revenue and customer growth of Jiangsu Cross-border will no longer be explosive and business has become more routine and stable.

In relation to the assumptions and forecast made on cost of sales and expenses, the Directors have reviewed Jiangsu Cross-border’s purchasing policies, human resources policies, existing salaries, number of employees and growth rates of

– 13 –

LETTER FROM THE BOARD

employees in the past years, as well as the breakdown of such expenses (including welfare, social security and housing provident fund) and assessed the fairness based on their management experience and the market standard in the PRC. In relation to the capital expenditures, the Directors have reviewed the historical figures of Jiangsu Cross-border and they were aware that the forecast figures were made on the basis of sustaining the operation of the existing business of Jiangsu Cross-border and did not take into account the new investment which might be required for expanding its business operation. The Directors considered this to be consistent with the strategy of the Group in focusing on its core business of the provision of video security system solutions designated for use in urban traffic monitoring and control sector; customs logistics monitoring sector; and expressway monitoring sector in the PRC. In relation to finance cost, the Directors have reviewed the financial position of Jiangsu Cross-border in the past years and took the view that such costs would remain steady.

Having reviewed the assumptions in relation to the Valuation Report and considered the above factors, the Directors are of the view that the assumptions are necessary and appropriate. The Directors confirmed that the assumptions made by the Independent Valuer in the Valuation Report were made after due and careful enquiry and are fair and reasonable.

BDO China, acting as the reporting accountants of the Company, has examined the calculations of the discounted future estimated cash flows in which the Valuation Report is based, which do not involve the adoption of accounting policies in its preparation.

The Directors confirm that the valuation of 82.61% equity interest of Jiangsu Cross-border in the Valuation Report, which constitutes a profit forecast under Rule 14.61 of the Listing Rules, has been made after due and careful enquiry.

A letter from BDO China in compliance with Rule 14.62(2) of the Listing Rules and a letter from the Board in compliance with Rule 14.62(3) of the Listing Rules are included in Appendix I to this circular.

To the best of the Directors’ knowledge, information and belief, BDO China is an Independent Third Party.

Information on Jiangsu Cross-border

Jiangsu Cross-border is a limited liability company incorporated in the PRC on 23 December 2013. Jiangsu Cross-border is mainly engaged in the export business and the operation of an integrated service platform for cross-border trading and e-commerce. It exports mainly textile and electronic products to various countries and regions, including Hong Kong, South Korea and United States. The integrated service platform offers comprehensive services including logistics, customs clearance, foreign exchange settlement, tax refund, etc. with the aim to promote efficiency in import and export activities for cross-border trading. It serves small and medium foreign trade and cross-border e-commerce enterprises in various sectors across the country, with the majority of which located in the coastal areas of the PRC.

– 14 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, Jiangsu Cross-border is a non wholly-owned subsidiary of the Company and upon Completion, the Company will cease to hold any interest in Jiangsu Cross-border and its subsidiaries and Jiangsu Cross-border together with its subsidiaries will cease to be subsidiaries of the Company.

According to the audited financial statements of Jiangsu Cross-border prepared in accordance with generally accepted accounting principles in the PRC which was audited by the BDO China, the PRC statutory auditor of Jiangsu Cross-border, the net asset value of Jiangsu Cross-border as at 31 December 2015 and 31 October 2016 was RMB48,267,607.87 and RMB51,807,608.53, respectively. The increase in net asset value of Jiangsu Cross-border as at 31 October 2016 compared to the net asset value as at 31 December 2015 was mainly attributable to the increased transaction volumes of Jiangsu Cross-border for the year of 2016 and the subsidies it received from the government. A summary of the financial information of Jiangsu Cross-border for the financial years ended 31 December 2014 and 2015 according to the PRC audited financial statements is set out below:

			As at 31	December
			2014	2015
			RMB	RMB
			million	million
			(audited)	(audited)
Net	profit	before taxation	-1.77	0.16
Net	profit	after taxation	-1.77	0.13

Further financial information on Jiangsu Cross-border is set out as follows:

Revenue

Jiangsu Cross-border derived revenue primarily from two business segments, namely export and integrated service for cross-border trading and e-commerce.

– 15 –

LETTER FROM THE BOARD

The following table sets forth its segment revenue for the periods of 10 months ended 31 October 2015 and 31 October 2016 respectively:

Business segments Export Integrated service for cross-border trading and e-commerce Others Total:	For 10 months ended 31 October 2015 2016 RMB RMB (unaudited) (audited) 19,497,019.88 184,158,059.50 – 15,396,008.74 19,497,019.88 199,554,068.24 2,382.94 278,365.95 19,499,402.82 199,832,434.19	For 10 months ended 31 October 2015 2016 RMB RMB (unaudited) (audited) 19,497,019.88 184,158,059.50 – 15,396,008.74 19,497,019.88 199,554,068.24 2,382.94 278,365.95 19,499,402.82 199,832,434.19
		199,554,068.24

		278,365.95
		199,832,434.19

Each of the segment revenue of Jiangsu Cross-border is recurring revenue.

Other major gain or loss

Other major gain of Jiangsu Cross-border is the gain from the government grant. For the year ended 31 December 2015 and 10 months ended 31 October 2016, Jiangsu Cross-border has received government grants of approximately RMB1.0 million and RMB3.8 million respectively.

Save as disclosed in this circular, Jiangsu Cross-border did not have any other major gain or loss for the year ended 31 December 2015 and 10 months ended 31 October 2016.

Major assets and liabilities

The total assets of Jiangsu Cross-border as of 31 October 2015 and 31 October 2016 was approximately RMB30.9 million and RMB299.9 million and the total liabilities for the same periods was approximately RMB 15.3 million and RMB 248.1 million respectively.

– 16 –

LETTER FROM THE BOARD

The table below sets forth the breakdown of its major assets and liabilities as of the dates indicated:

	As of 31	October
	2015	2016
	RMB	RMB
	(unaudited)	(audited)
Major assets
Cash	11,865,391.66	123,011,282.16
Accounts receivable	15,469,638.31	14,542,971.16
Other receivables	1,006,497.83	86,979,822.22
Other current assets	–	72,688,944.03
Major liabilities
Short term loans	–	198,308,218.43
Accounts payable	14,605,130.47	33,554,445.88
Other payables	422,437.92	14,763,889.32

Significant Changes in revenue and profit

The revenue of Jiangsu Cross-border for the periods of 10 months ended 31 October 2016 increased by approximately 924.81% as compared to the same period in 2015 since the export business and integrated service business only commenced in the last quarter of 2015 and at the beginning of 2016 respectively.

However, as the cost of sale of Jiangsu Cross-border also increased by approximately 873.26% for the periods of 10 months ended 31 October 2016 as compared to the same period in 2015, the gross profit margin only increased by 4.96% despite the significant increase in revenue.

Details of the changes in revenue and profit are set out below:

	For 10 months	ended 31 October
	2015	2016
	RMB	RMB	Percentage
	(unaudited)	(audited)	increase
Revenue	19,499,402.82	199,832,434.19	924.81%
Cost of sale	19,234,728.10	187,203,718.44	873.26%
Gross profit margin	1.36%	6.32%	4.96%
Net profit	-3,200,399.52	3,540,000.66	–
Net profit margin	–	1.77%	–

– 17 –

LETTER FROM THE BOARD

3. REASONS FOR AND BENEFITS OF THE DISPOSAL

The Group would like to focus on optimising the operational efficiency in its principal business activities, namely, monitoring and control sector for urban traffic, customs logistics and expressway. The Company positions itself as a high-technology enterprise providing services to facilitate intelligent city, intelligent traffic and intelligent logistics. As set out above, Jiangsu Cross-border is principally engaged in the export business and the operation of an integrated service platform for cross-border trading and e-commerce. It operates independently from the business of the Company and its businesses are not closely related to the main business of the Company and are not in line with in the future development direction of the Company. The synergy between the Group and Jiangsu Cross-border is minimal. Therefore, the Directors consider that the Disposal would improve the operational efficiency of the principal business of the Group by relocating more resources to the principal businesses of the Group.

As discussed in above paragraph headed “Information on Jiangsu Cross-border” in this circular, Jiangsu Cross-border has low profit margin and its growth rate of net profit does not bear a linear relationship with its growth rate of revenue. Based on the financial information for the 10 months ended 31 October 2015 and 2016, the net profits and profit margin of the Group was adversely affected by Jiangsu Cross-border and it is expected that such adverse effect will further deteriorate following the expansion of scale of Jiangsu Cross-border, which will result in a negative impact on the business positioning and development strategy of the Company.

In light of the above and considering the Company’s development strategy, the Directors considered that Jiangsu Cross-border’s negative impact on the profitability of the Group outweighs its positive contribution and therefore the Disposal is desirable.

On the other hand, based on the PRC financial reporting standards, it is expected that the Group will derive a gain of approximately RMB16,201,734.59 from the Disposal as set out in the paragraph headed “Financial effects of the Disposal” below in this circular. In light of the above, the Directors (including the independent non-executive Directors) consider that, the Equity Transfer Agreement is on normal commercial terms based on arm’s length negotiations between the parties and that the Disposal is fair and reasonable and in the interests of the Group and the Shareholders as a whole.

The Group intends to apply the sale proceeds as its general working capital.

No other party, except for the Sample Group, has indicated an intention to acquire Jiangsu Cross-border and the Directors have not identified any transaction case in the open market. Also, Sample Group is willing to acquire Jiangsu Cross-border at a premium based on the Consideration to be received by the Company. As such, the Company and Sample Group entered into the Equity Transfer Agreement on 16 February 2017.

Sample Group is engaged in domestic e-trading business and it does not have any other similar businesses as Jiangsu Cross-border, which is set out in the above paragraph headed “Information on Jiangsu Cross-border” in this circular.

– 18 –

LETTER FROM THE BOARD

4. FINANCIAL EFFECTS OF THE DISPOSAL

Following Completion, Jiangsu Cross-border together with its subsidiaries will cease to be subsidiaries of the Company and the financial results of Jiangsu Cross-border together with its subsidiaries will cease to be consolidated into those of the Company. Set out below is the financial effects of the Disposal upon the Completion:

Earnings

The Group is expected to record a gain of approximately RMB16, 201,734.59 from the Disposal. Such gain represents the amount by which the Consideration for the Disposal in the sum of RMB59, 000,000 exceeds the net book value of Jiangsu Cross-border in the sum of approximately RMB42,798,265.41, being the audited net asset value of 82.61% equity interest in Jiangsu Cross-border as at 31 October 2016 of approximately RMB 51,807,608.53. The actual gain or loss as a result of the Disposal to be recorded by the Company will be assessed and calculated based on the net book value of Jiangsu Cross-border at the actual completion date and subject to audit and will be assessed after Completion. Upon the Completion, earnings of the Group will increase by the estimated gain from the Disposal of approximately RMB16, 201,734.59. The actual amount of the gain from the Disposal will be calculated based on the carrying amount of the Group’s interest in Jiangsu Cross-border as at the date of the Completion.

Net assets

Upon Completion, the net assets of the Group will be increased by the estimated gain from the Disposal of approximately RMB16, 201,734.59 as mentioned above. The actual amount of the gain from the Disposal will be calculated based on the carrying amount of the Group’s interest in Jiangsu Cross-border as at the date of the Completion.

Given that there will be possible improvement in the Group’s earnings and net assets as a result of the Disposal, we are of the view that the Disposal is in the interests of the Company and the Shareholders as a whole.

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

5. INFORMATION ON THE PARTIES TO THE EQUITY TRANSFER AGREEMENT

The Company is a joint stock company established under the laws of the PRC with limited liability on 30 December 1997, the H Shares of which are listed on the Main Board of the Stock Exchange. The Group is a major developer and provider of video security system solutions in the PRC targeting on government authorities. Its products and system solutions are currently designated for use in (i) urban traffic monitoring and control sector; (ii) customs logistics monitoring sector; and (iii) expressway monitoring sector in the PRC.

– 19 –

LETTER FROM THE BOARD

Sample Group is a limited company established in Nanjing, the PRC with registered capital of RMB333.00 million, and is an investment holding company. As at the Latest Practicable Date, Sample Group holds 158,443,400 Domestic Shares of the Company, representing approximately 50.01% of the issued share capital of the Company.

6. LISTING RULES IMPLICATIONS

Sample Group is the controlling shareholder of the Company and thus a connected person of the Group. Accordingly, the transactions contemplated under the Equity Transfer Agreement constitute connected transaction for the Company under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the Disposal is over 5% but less than 25%, the Disposal constitutes a discloseable transaction for the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

In addition, as at the Latest Practicable Date, Sample Group holds approximately 50.01% of the issued share capital of the Company. By virtue of this shareholding interest, Sample Group is a controlling shareholder of the Company. Therefore, Sample Group is a connected person of the Company and as a result, the Disposal also constitutes a connected transaction for the Company and is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Each of Mr. Sha and Mr. Chang are respectively interested in 60.40% and 38.96% of equity interest in Jiangsu Sample Holding Limited* （江蘇三寶控股有限公司）which in turn owns the entire equity interest in Sample Group. Therefore, each of Mr. Sha and Mr. Chang abstained from voting on the board resolution with respect to the approval of the Equity Transfer Agreement. Save for Mr. Sha and Mr. Chang, none of the Directors has any material interest in the Equity Transfer Agreement or is required to abstain from voting on the relevant Board resolutions to approve the same.

As at the Latest Practicable Date, Sample Group holds approximately 50.01% of the issued share capital of the Company. In view of the interest of Sample Group in the Equity Transfer Agreement, Sample Group and its associates will abstain from voting at the EGM on the resolutions in relation to the Equity Transfer Agreement and the transaction contemplated thereunder.

7. PROPOSED APPOINTMENT OF AN INDEPENDENT NON-EXECUTIVE DIRECTOR

The Board proposes the appointment of Mr. Gao Lihui （高立輝） as an independent non-executive director of the Company. The above proposed appointment of independent non-executive director is subject to the approval of the shareholders of the Company by way of ordinary resolution at the EGM.

– 20 –

LETTER FROM THE BOARD

BACKGROUND OF MR. GAO LIHUI

Mr. Gao Lihui（高立輝）, aged 53. Mr. Gao holds a diploma from 揚州大學商學院 (The Business School of Yangzhou University) in the PRC, a master degree in Business Administration from The School of Business and Economics of Maastricht University in the Netherlands and a doctoral degree in management from 南京大學商學院 (The School of Business of Nanjing University). Mr. Gao is a senior economist. Mr. Gao is currently the chairperson of 聚變資產管理有限公司 (Nanjing Ju Bian Asset Management Limited Company). Prior to that, Mr. Gao had been appointed as the officer of the Jiangsu Province of Bank of China, the deputy manager of the Gulou branch of Bank of Nanjing, the manager of Danfeng Street branch of Bank of Nanjing and the general manager of the Business department of 恒豐銀行公司 (HengFeng Bank).

Mr. Gao has confirmed that he meets the independent Criteria as set out in Rule 3.13 of the Listing Rules.

Save as disclosed above, Mr. Gao did not hold any position in the Company or any of its subsidiaries, nor any directorship in other listed companies in the past three years, and does not have any other major appointments or professional qualifications.

Save as disclosed above, Mr. Gao has no relationship with any directors, senior management or substantial or controlling shareholders of the Company. As at the Latest Practicable Date, Mr. Gao does not have any interest in the shares of the Company within the meaning of Part XV of the SFO.

Subject to the approval at the EGM, Mr. Gao will enter into a service agreement with the Company for a term until 31 December 2018, subject to subject to the retirement and re-election requirements of the Articles of Association of the Company. The emolument for Mr. Gao will be determined by the Company with reference to the emolument of the other independent non-executive directors of the Company as well as his role and responsibilities.

Save for disclosed above, there is no other matters relating to the proposed appointment of Mr. Gao that need to be brought to the attention of the Shareholders and there is no information which requires to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules.

8. EGM

You will find on pages 108 to 110 of this circular a notice of the EGM to be held at 10:00 a.m. on Monday, 15 May 2017 at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the People’s Republic of China.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon. In case of H Shares, the proxy form shall be lodged with the Company’s H Shares Registrar, Computershare Hong Kong Investor Services Limited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time for holding the

– 21 –

LETTER FROM THE BOARD

EGM (or any adjournment thereof). Completion and delivery of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

9. CONCLUSIONS AND RECOMMENDATIONS

The Independent Board Committee comprising all the independent non-executive Directors, namely, Mr. Shum Shing Kei, Mr. Geng Nai Fan and Mr. Hu Hanhui, has been formed to consider the Equity Transfer Agreement, and Ever-Long Securities has been appointed as the Company’s Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Equity Transfer Agreement are fair and reasonable and whether the transactions contemplated under the Equity Transfer Agreement are in the interests of the Company and the Shareholders as a whole.

The Directors (including the independent non-executive Directors) consider that the terms of the Equity Transfer Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the relevant resolution to approve the Equity Transfer Agreement and the transactions contemplated thereunder at the EGM.

The text of the letter from Independent Board Committee is set out on page 23 of this circular and the text of the letter from the Independent Financial Adviser containing its advice is set out on pages 25 to 44 of this circular.

10. OTHER INFORMATION

Your attention is also drawn to the appendices to this circular and the notice of the EGM.

Yours faithfully, For and on behalf of

Nanjing Sample Technology Co., Ltd. Sha Min Chairman

– 22 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [258 x 86] intentionally omitted <==

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 1708)

The following is the text of a letter from the Independent Board Committee, which has been prepared for the purpose of incorporation into this circular, setting out its recommendation to the Independent Shareholders in respect of the terms of the Equity Transfer Agreement and the transaction contemplated thereunder as set out in the Circular.

To the Independent Shareholders

Dear Sir and Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

We have been appointed as members of the Independent Board Committee to advise the Independent Shareholders of Nanjing Sample Technology Co., Ltd.* (the “Company”) in respect of the resolution to approve the transactions contemplated under the Equity Transfer Agreement, details of which are set out in the “Letter from the Board” contained in the circular of the Company (the “Circular”) of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter.

Your attention is drawn to the “Letter from the Board”, the advice of Ever-Long Securities in its capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of whether (i) the terms of the Equity Transfer Agreement are on normal commercial terms, in the ordinary and usual course of business of the Group and fair and reasonable and (ii) the transaction contemplated under the Equity Transfer Agreement are in the interests of the Company and its Independent Shareholders as a whole, as set out in the “Letter from Ever-Long Securities” as well as other additional information set out in other parts of the Circular.

Having taken into account the advice of, and the principal factors and reasons considered by Ever-Long Securities in relation thereto as stated in its letter, we consider that although the Equity Transfer Agreement is not in ordinary and usual course of business of the Group, the terms of the Equity Transfer Agreement and the transaction contemplated thereunder to be on normal commercial terms, fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole.

* For identification purpose only

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM in respect of the transactions contemplated under the Equity Transfer Agreement.

Yours faithfully,

The Independent Board Committee Shum Shing Kei Geng Nai Fan Independent Independent non-executive Director non-executive Director

Hu Hanhui Independent non-executive Director

Nanjing, the PRC, 13 April 2017

– 24 –

LETTER FROM EVER-LONG SECURITIES

The following is the full text of a letter of advice from Ever-Long Securities to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in the Circular.

13 April 2017

==> picture [177 x 29] intentionally omitted <==

Rm. 1011, Hutchison House, 10 Harcourt Road, Central, Hong Kong

To: The Independent Board Committee and the Independent Shareholders of Nanjing Sample Technology Co., Ltd.

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER

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 Disposal, the details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular dated 13 April 2017 issued by the Company to the Shareholders (the “ Circular ”), of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 16 February 2017, the Company as vendor and Sample Group as purchaser entered into the Equity Transfer Agreement, pursuant to which the Company conditionally agreed to dispose and Sample Group conditionally agreed to acquire 82.61% equity interest in Jiangsu Cross-border at a consideration of RMB59,000,000 (equivalent to approximately HK$65,555,555.56).

As disclosed in the Letter from the Board, as one or more of the applicable percentage ratios in respect of the Disposal is over 5% but less than 25%, the Disposal constitutes a disclosable transaction for the Company and is subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules. In addition, as at the Latest Practicable Date, Sample Group held approximately 50.01% of the issued share capital of the Company. By virtue of this shareholding interest, Sample Group is a controlling shareholder of the Company. Therefore, Sample Group is a connected person of the Company and as a result, the Disposal also constitutes a connected transaction for the Company and is subject to the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

– 25 –

LETTER FROM EVER-LONG SECURITIES

Each of Mr. Sha and Mr. Chang are respectively interested in 60.40% and 38.96% of equity interest in Jiangsu Sample Holding Limited* （江蘇三寶控股有限公司）which in turn owns the entire equity interest in Sample Group, a controlling shareholder of the Company. Each of Mr. Sha and Mr. Chang is considered to have a material interest in the Disposal, and therefore had abstained from voting on the relevant Board resolutions approving the Equity Transfer Agreement at the meeting of the Board held on 16 February 2017. Save for Mr. Sha and Mr. Chang, none of the Directors has any material interest in the Equity Transfer Agreement or is required to abstain from voting on the relevant Board resolutions to approve the same.

In view of the interest of Sample Group in the Equity Transfer Agreement, Sample Group and its associates will abstain from voting at the EGM to be convened by the Company to consider and approve the resolutions in relation to the Equity Transfer Agreement and the transaction contemplated thereunder.

The Independent Board Committee, comprising all the independent non-executive Directors, namely, Mr. Hu Hanhui, Mr. Geng Nai Fan and Mr. Shum Shing Kei, has been formed to give recommendation to the Independent Shareholders in respect of the Disposal. We, Ever-Long Securities, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

Ever-Long Securities is not connected with the directors, chief executive and substantial shareholders of the Company or Sample Group or any of their respective subsidiaries or their respective associates and, as at the Latest Practicable Date, did not have any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group and therefore is considered suitable to give independent advice to the Independent Board Committee and the Independent Shareholders. During the last two years, we did not have any engagement with the Company or Sample Group or any of their respective subsidiaries or their respective associates. Apart from normal professional fees for our services to the Company in connection with this appointment, no arrangement exists whereby we will receive any benefits from the Company or the directors, chief executive and substantial shareholders of the Company, Sample Group or any of their respective subsidiaries or their respective associates.

– 26 –

LETTER FROM EVER-LONG SECURITIES

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have considered, among other things, (i) the Circular; (ii) the Equity Transfer Agreement; (iii) the annual report of the Company for the year ended 31 December 2015 (the “ 2015 Annual Report ”); (iv) the interim report of the Company for the six months ended 30 June 2016 (the “ 2016 Interim Report ”); (v) the clarification announcement of the Company dated 16 December 2016 in relation to interim results announcement and interim report for the six months ended 30 June 2016 (the “ Clarification Announcement ”); (vi) the audited financial statements of Jiangsu Cross-border for each of the two years ended 31 December 2014 and 2015 and for the ten months ended 31 October 2016 prepared in accordance with generally accepted accounting principles in the PRC which was audited by BDO China, the reporting accountants of the Company in relation to the Disposal; and (vii) the Valuation Report as set out in Appendix I to the Circular. We have also 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 and the management of the Company (the “ Management ”). We have assumed that all information and representations that have been provided by the Management, 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. 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 Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, 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 herein or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We 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, Jiangsu Cross-border, Sample Group or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Disposal. 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 condition) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after

– 27 –

LETTER FROM EVER-LONG SECURITIES

the Latest Practicable Date or to update, revise or reaffirm our opinion. 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.

We have not conducted any independent evaluation or appraisal of Jiangsu Cross-border, and we have not been furnished with any such evaluation or appraisal save for the Valuation Report of Jiangsu Cross-border prepared by the Independent Valuer. Since we are not experts in valuation, we have relied solely upon the said Valuation Report for the market value of Jiangsu Cross-border as at 31 October 2016 (the “ Valuation ”). Independent Shareholders should also note that the Valuation involves various basis and assumptions and it may be changed if those basis and assumptions are modified.

Where information in this letter of advice has been extracted from published or otherwise publicly available sources, we have ensured that such information has been correctly and fairly extracted, reproduced or presented from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of such information.

PRINCIPAL FACTORS AND REASONS CONSIDERED

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

1. Background of and reasons for the Disposal

Information on the Group

The Group is a major developer and provider of video security system solutions in the PRC targeting on government authorities. Its products and system solutions are currently designated for use in (i) urban traffic monitoring and control sector; (ii) customs logistics monitoring sector; and (iii) expressway monitoring sector in the PRC. As advised by the Management, the Disposal involves the disposal of the Group’s interests in the business segment of cross-border trade and service.

– 28 –

LETTER FROM EVER-LONG SECURITIES

Set out below is the financial information of the Group for each of the two years ended 31 December 2014 and 2015 as extracted from the 2015 Annual Report and each of the six months ended 30 June 2015 and 2016 as extracted from the 2016 Interim Report and the Clarification Announcement:

Operating income – System integration – Intelligent terminal sales – Service business – Cross-border trade and service −Other Total operating income Gross profit – System integration – Intelligent terminal sales – Service business – Cross-border trade and service – Other Total gross profit Net Profit attributable to the shareholders of the Company	For the six months ended 30 June 2016 (unaudited) RMB’000 389,121 102,041 39,150 50,291 7,672 588,275 87,552 29,796 14,273 5,841 6,802 144,264 72,787	For the six months ended 30 June 2015 (unaudited) RMB’000 299,324 70,373 34,612 − 9,606 413,915 90,140 24,357 19,860 – 8,024 142,381 69,768	For the year ended 31 December 2015 (audited) RMB’000 801,936 197,139 109,497 101,093 16,643 1,226,308 209,962 47,193 61,931 5,904 13,257 338,247 164,469	For the year ended 31 December 2014 (audited) RMB’000 659,440 153,239 88,349 − 6,198
				907,226
				191,041 46,720 55,405 – 3,202
				296,368
				137,953

– 29 –

LETTER FROM EVER-LONG SECURITIES

With reference to the 2015 Annual Report, benefited from the rapid growth of income from the system integration business and the new income from the cross-border trade and service business, total operating income of the Group for the year ended 31 December 2015 increased by approximately 35.2% from approximately RMB907.2 million to approximately RMB1,226.3 million. The gross profit margin of the Group for the year ended 31 December 2015 was approximately 27.6%, representing a decrease of approximately 5.1% over the year ended 31 December 2014. The decrease was mainly due to the gross profit margin of cross-border trade and service business being comparatively lower. For the year ended 31 December 2015, gross profit from the Group’s cross-border trade and service business contributed approximately RMB5.9 million or approximately 1.7% of the Group’s total gross profit. The gross profit margin of the Group’s cross-border trade and service business was approximately 5.8%, whereas the overall gross profit margin of the Group’s other business segments (calculated by the exclusion of the cross-border trade and service business segment) was approximately 29.5% for the year ended 31 December 2015. The profit attributable to the shareholders of the Company increased by approximately 19.2%, primarily due to the increase in operating income and the increase in gross profit of the Group during the year ended 31 December 2015 as compared to that of the year ended 31 December 2014.

With reference to the 2016 Interim Report and the Clarification Announcement, the total operating income of the Group increased by approximately 42.1% from approximately RMB413.9 million for the six months ended 30 June 2015 to approximately RMB588.3 million for the six months ended 30 June 2016. It was mainly attributed to the active development of the cross-border trade and service business. The gross profit margin for the six months ended 30 June 2016 decreased from approximately 34.4% to 24.5% as compared with the corresponding period in 2015. Despite substantial increase of the operating income from cross-border trade and service business, its gross profit margin remained low, which has dragged down the Group’s overall gross profit margin. For the six months ended 30 June 2016, gross profit from the Group’s cross-border trade and service business contributed approximately RMB5.8 million or approximately 4.0% of the Group’s total gross profit. The gross profit margin of the Group’s cross-border trade and service business was approximately 11.6%, whereas the overall gross profit margin of the Group’s other business segments (calculated by the exclusion of the cross-border trade and service business segment) was approximately 25.7% for the six months ended 30 June 2016. The profit attributable to the shareholders of the Company amounted to approximately RMB72.8 million for the six months ended 30 June 2016, representing an increase of approximately 4.3% over that of the corresponding period in 2015.

According to the 2016 Interim Report and as advised by the Management, the Group will continue to improve the business model according to the market trend, to give priority to the customers’ satisfaction, and to endlessly optimize the platforms and products to enhance users’ experience so as to increase the influence of the Company in the information technology application service industry.

– 30 –

LETTER FROM EVER-LONG SECURITIES

Information on Sample Group

Sample Group is a limited company established in Nanjing, the PRC with registered capital of RMB333.0 million, and is an investment holding company. As at the Latest Practicable Date, Sample Group held 158,443,400 Domestic Shares of the Company, representing approximately 50.01% of the issued share capital of the Company.

Information on Jiangsu Cross-border

Jiangsu Cross-border is a limited liability company established in the PRC on 23 December 2013. Jiangsu Cross-border is mainly engaged in the export business and the operation of an integrated service platform for cross-border trading and e-commerce. It exports mainly textile and electronic products to various countries and regions, including Hong Kong, South Korea and the United States. The integrated service platform offers comprehensive services including logistics, customs clearance, foreign exchange settlement, tax refund, etc. with the aim to promote efficiency in import and export activities for cross-border trading. It serves small and medium foreign trade and cross-border e-commerce enterprises in various sectors across the country, with the majority of which located in the coastal areas of the PRC.

As at the Latest Practicable Date, Jiangsu Cross-border was a non wholly-owned subsidiary of the Company and upon Completion, the Company will cease to hold any interest in Jiangsu Cross-border and its subsidiaries and Jiangsu Cross-border together with its subsidiaries will cease to be subsidiaries of the Company.

– 31 –

LETTER FROM EVER-LONG SECURITIES

A summary of the audited financial information of Jiangsu Cross-border for each of the two years ended 31 December 2014 and 2015 and for the ten months ended 31 October 2016 prepared in accordance with generally accepted accounting principles in the PRC which was audited by BDO China is set out below:

Operating income – Export – Integrated service for cross-border trading and e-commerce – Technical services – Other Total operating income Gross profit – Export – Integrated service for cross-border trading and e-commerce – Technical services – Other Total gross profit Net Profit/(Loss) before taxation Net Profit/(Loss) after taxation	For the ten months ended 31 October 2016 (audited) RMB’000 184,158 15,396 255 23 199,832 716 11,890 – 23 12,629 4,049 3,540	For the year ended 31 December 2015 (audited) RMB’000 101,093 – – 3 101,096 5,904 – – 2 5,906 163 133	For the year ended 31 December 2014 (audited) RMB’000 – – – – – – – – – – (1,766) (1,766)

As advised by the Management, Jiangsu Cross-border commenced its export business and integrated service business in the second half of 2015 and in the first half of 2016, respectively. For the year ended 31 December 2015 and for the ten months ended 31 October 2016, total operating income of Jiangsu Cross-border were approximately RMB101.1 million and approximately RMB199.8 million, respectively, representing an increase of approximately 97.7%. The increase was mainly attributed to the operating income generated from Jiangsu Cross-border’s export sales. However, due to the business nature of the export trading industry, the gross profit margin of Jiangsu Cross-border’s export business were only 5.8% and 0.4% for the year ended 31 December 2015 and for the ten months ended 31 October 2016, respectively. The increase in total gross profit of Jiangsu Cross-border from approximately RMB5.9

– 32 –

LETTER FROM EVER-LONG SECURITIES

million for the year ended 31 December 2015 to approximately RMB12.6 million for the ten months ended 31 October 2016 was mainly benefited from the new income from its integrated service business.

As at 31 December 2014, 31 December 2015 and 31 October 2016, the net asset value of Jiangsu Cross-border was approximately RMB18.2 million, RMB48.3 million and RMB51.8 million, respectively. The increase in net asset value of Jiangsu Cross-border as at 31 October 2016 compared to the net asset value as at 31 December 2015 was mainly attributable to the increased transaction volumes of Jiangsu Cross-border for the year of 2016 and the subsidies it received from the government.

Reasons for and benefits from the Disposal

The Group would like to focus on optimizing the operational efficiency in its principal business activities, namely, monitoring and control sector for urban traffic, customs logistics and expressway. The Company positions itself as a high-technology enterprise providing services to facilitate intelligent city, intelligent traffic and intelligent logistics. As set out in the paragraph headed “Information on Jiangsu Cross-border”, Jiangsu Cross-border is principally engaged in the export business and the operation of an integrated service platform for cross-border trading and e-commerce. It operates independently from the business of the Company and its businesses are not closely related to the main business of the Company and are not in line with the future development direction of the Company. The synergy between the Group and Jiangsu Cross-border is minimal. Therefore, the Directors consider that the Disposal would improve the operational efficiency of the principal business of the Group by relocating more resources to the principal businesses of the Group.

With reference to the paragraph headed “Information on the Group” above, the gross profit from the Group’s cross-border trade and service business contributed approximately RMB5.9 million and RMB5.8 million, or approximately 1.7% and 4.0%, of the Group’s total gross profit for the year ended 31 December 2015 and for the six months ended 30 June 2016, respectively. The gross profit margin of the Group’s cross-border trade and service business were approximately 5.8% and 11.6% for the year ended 31 December 2015 and for the six months ended 30 June 2016, respectively. The Management are of the view that since the commencement of operation, Jiangsu Cross-border has contributed an insignificant portion to its gross profit while adversely affecting the gross profit margin of the Group. As discussed with the Management, and with reference to the projection of operating income and operating costs used in the Valuation, it is expected that the profit margin of Jiangsu Cross-border will continue to remain low and could further adversely affect the overall profit margin of the Group following the expansion of scale of Jiangsu Cross-border, and the Disposal will improve the overall financial performance of the Group. The proceeds from the Disposal of Jiangsu Cross-border will be used for general working capital.

Having taken into account of (i) the Group’s business development strategy; (ii) the low profit margin of Jiangsu Cross-border; (iii) the projection of operating income and operating costs of Jiangsu Cross-border; and (iv) the insignificant profit derived

– 33 –

LETTER FROM EVER-LONG SECURITIES

from Jiangsu Cross-border, we consider that the entering into the Equity Transfer Agreement is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

2. Terms of the Equity Transfer Agreement

Highlighted below are the principal terms of the Equity Transfer Agreement:

(a) Date: 16 February 2017

(b) Parties:

Purchaser: Sample Group Vendor: the Company Target company: Jiangsu Cross-border

(c) Subject Matter:

The Company conditionally agreed to dispose of and Sample Group conditionally agreed to acquire 82.61% equity interest in Jiangsu Cross-border.

(d) Consideration and payment terms:

The total Consideration for the transfer of 82.61% equity interest in Jiangsu Cross-border is RMB59,000,000 (equivalent to approximately HK$65,555,555.56), which will be payable by Sample Group to the Company within 3 working days after the Equity Transfer Agreement becoming effective by bank transfer to the designated bank account of the Company.

(e) Conditions precedent:

Completion of the Equity Transfer Agreement and the transaction contemplated thereunder is conditional upon, among other things, the fulfillment of a number of conditions precedent which details were set out in the Letter from the Board. If any of the conditions precedent is not satisfied on or before 30 June 2017 (or such later date as the Company and Sample Group may otherwise agree in writing), the Equity Transfer Agreement will lapse and of no further effect and the parties thereto will be released from all obligations under the Equity Transfer Agreement except for any antecedent breach of the Equity Transfer Agreement. None of the conditions precedent is waivable.

(f) Effective date

The Equity Transfer Agreement will become effective upon satisfaction of all the conditions which details were set out in the Letter from the Board.

– 34 –

LETTER FROM EVER-LONG SECURITIES

3. Evaluation of the Consideration for the Disposal

The Consideration was arrived at arm’s length negotiation between the parties to the Equity Transfer Agreement based on normal commercial terms, with reference to the valuation of 82.61% equity interest in Jiangsu Cross-border of RMB58,611,629.78 as at 31 October 2016 (the “ Valuation Date ”) prepared by the Independent Valuer by income approach. Accordingly, the Consideration represents a premium of approximately 0.66% over the Valuation.

We have reviewed the Valuation (including the fairness and reasonableness of the basis and assumptions), sent out an information request list and held a telephone interview to discuss with the Independent Valuer regarding the methodology adopted for and the basis and assumptions used in arriving at the Valuation. In the course of our discussion with the Independent Valuer, we understand that there are three commonly adopted valuation methods for asset valuation, namely market approach, asset base approach and income approach. The Independent Valuer has adopted the income approach after considering the following factors:

(a) Market approach

Market approach is a valuation approach which determines the prices of assets by comparing such assets with comparable listed companies or comparable transaction cases in the market. We consider that the price-to-earnings multiple and price-to-net asset value multiple are two of the most commonly used benchmarks for valuing a company under the market approach. The Consideration represents a price-to-earnings multiple of approximately 16.8 times, which is calculated based on the consideration of 100% of equity interest of Jiangsu Cross-border (i.e. RMB59,000,000 / 82.61% = RMB71,419,924.95) divided by the annualized audited net profit of Jiangsu Cross-border for the period of ten months ended 31 October 2016 (i.e. RMB3,540,000.66 / 10 x 12 = RMB4,248,000.79), and a price-to-net asset value multiple of approximately 1.4 times, which is calculated based on the consideration of 100% of equity interest of Jiangsu Cross-border divided by the audited net asset value of Jiangsu Cross-border as at 31 October 2016. Having considered that a majority of Jiangsu Cross-border’s gross profit for the ten months ended 31 October 2016 was derived from its operation of service platform for cross-border trade and e-commerce in the PRC, the Independent Valuer had attempted to search for listed companies which are engaged in the integrated service business for cross-border trade and e-commerce in the PRC during the course of conducting the market approach. However, given the uniqueness of business model of Jiangsu Cross-border, the Independent Valuer were unable to identify sufficient comparable listed companies or comparable transaction cases (in terms of stage of development, principal place and nature of business, profitability, etc.) in the market. As such, there is no sufficient information to conclude an appraisal using the market approach and they consider the market approach to be inappropriate in the case of the Valuation. Furthermore, as the integrated service business of Jiangsu Cross-border was only commenced in the first half of 2016 and is still at an early stage of development, we are of the view that the market approach could not reflect its potential growth in operating income and net profit.

– 35 –

LETTER FROM EVER-LONG SECURITIES

(b) Asset base approach

Asset base approach is a valuation approach which determines the values of assets using the adjusted net asset value method based on reasonable assessment on assets and liabilities. However, as explained by the Independent Valuer, since they are of the view that the asset base approach does not capture expected returns of the business, the asset base approach was not chosen. Furthermore, as the business model of Jiangsu Cross-border is of trade and service-based, and the assets of Jiangsu Cross-border are mainly (i) cash and bank balances; and (ii) trade and other receivables, which respectively accounted for approximately 41.0% and 33.9% of the total assets of Jiangsu Cross-border as at 31 October 2016, we consider the asset base approach would not be suitable in the case of the Valuation.

(c) Income approach

Income approach is a valuation approach which discounts the expected future revenue of the assets into present value with specific discount rates for the purpose of determining their values. The inherit value of the assets, which means their future profitability, is the basis of the income approach. The Independent Valuer considers that income approach is the most appropriate method in valuing Jiangsu Cross-border as income approach focuses on the economic benefits generated by the income producing capability of an enterprise, and discounts these benefits to its present value using a discount rate appropriate for the risks associated with realizing those benefits.

Given the uniqueness of business model, the early stage of development and the asset-light nature of Jiangsu Cross-border, there are substantial limitations for the market approach or the asset base approach for the Valuation. Having considered the respective downsides of the market approach and the asset base approach, we concur with the views of the Independent Valuer that the income approach is the appropriate and preferred approach for the Valuation. Under the income approach, the discounted cash flow (“ DCF ”) method was adopted.

When applying DCF to estimate the present market value of Jiangsu Cross-border, it is necessary to determine an appropriate discount rate for the assets under review. As advised by the Independent Valuer, Weighted Average Cost of Capital (“ WACC ”) was used as the discount rate in the Valuation. WACC, being the weighted average of the return on equity capital and the return on debt capital, is expressed in the following formula:

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

– 36 –

LETTER FROM EVER-LONG SECURITIES

As shown in the above formula, WACC is mainly comprised of two components, being (i) the cost of equity; and (ii) the cost of debt. As advised by the Independent Valuer, the cost of debt amounts to 4.9%, which was the long-term (over 5-year) lending rate per People’s Bank of China as at the Valuation Date.

With respect to the cost of equity, we were given to understand that the Capital Assets Pricing Model (“ CAPM ”) was used by the Independent Valuer. We understand that the CAPM technique is widely accepted in the investment and financial analysis communities for the purpose of estimating a company’s required rate of return on equity. According to the CAPM, cost of equity is equivalent to the risk-free rate plus the enterprise-specific risk adjustment coefficient plus a linear function of a measure of systematic risk (“ Beta ”) times the market risk premium for the PRC. Based on our discussion with the Independent Valuer, the applied risk-free rate is 3.2%, which was equivalent to the yield to maturity rate of PRC government bonds with remaining maturity of over 10 years as at the Valuation Date. According to the Independent Valuer, Beta, being a measure of the relationship between risk and the aggregate market, was determined after considering comparable companies identified by the Independent Valuer on its best effort and unbiased selection basis. After discussing with the Independent Valuer, we understand that the Independent Valuer had attempted to search for listed companies which are engaged in the integrated service business for cross-border trade and e-commerce in the PRC. However, the Independent Valuer were unable to identify any comparable companies based on the aforesaid criteria and have therefore extended their scope of comparables to those companies which are principally engaged in import, export and domestic trading business. The Independent Valuer considered the following factors when searching for companies to provide appropriate comparison basis: (i) the comparable company should generate a considerable portion (at least 60% of revenue in the latest financial year) of its revenue from the import, export and domestic trading business; and (ii) the majority of the business should be conducted in the PRC as competitive landscape and government policies in other countries may be different. Based on search from RoyalFlush’s iFinD system, the Independent Valuer had identified three A-share listed comparable companies which fulfilled the above selection criteria:

(a) Jiangsu Holly Corporation* （江蘇弘業股份有限公司） (600128.SH) is principally engaged in the export sales of hand-knitting thread, embroidery products, hats, and toys. Its products are mainly exported to Europe, Japan, the United States and Canada;
(b) Shanghai Huitong Energy Co., Ltd.* （上海匯通能源股份有限公司）(600605.SH) is principally engaged in the wind power generation, trading of non-ferrous metal, and property leasing and management in the PRC; and
(c) Shanghai Shenda Co., Ltd.* （上海申達股份有限公司） (600626.SH) is principally engaged in the textile products import and export trading, textile products manufacturing and property management. Its products include apparel, fabrics, yarns and industrial use textile products.

– 37 –

LETTER FROM EVER-LONG SECURITIES

We have interviewed the Independent Valuer to assess the fairness and reasonableness of the Beta and concur with the view of the Independent Valuer that the factors for the Beta used in the Valuation are in line with market practice. As such, we are of the view that it is fair and reasonable to derive Beta from these peer companies.

We note that the Independent Valuer has considered and relied to a considerable extent on the financial forecast provided by Jiangsu Cross-border when preparing the Valuation. As discussed with the Independent Valuer, the Independent Valuer believed that the forecast of those data are reasonable after considering the market trend of the industry and historical performance of Jiangsu Cross-border. We have interviewed the Independent Valuer regarding the basis of projecting financial data of Jiangsu Cross-border and other relevant assumptions. Pursuant to Listing Rule 13.80, in order to review and understand fairness, reasonableness and completeness the relevant assumptions and projections used in the Valuation, we have performed the following steps:

(a) discussed with the Independent Valuer and reviewed on the major items of the projection (including but not limited to the forecast operating income, operating costs, selling expenses and management expenses) provided by Jiangsu Cross-border;
(b) reviewed the projection schedules built by the Independent Valuer and the related breakdowns;
(c) reviewed the historical audited reports of Jiangsu Cross-border for the two years ended 31 December 2015 and for the ten months ended 31 October 2016 and the related financial breakdowns;
(d) discussed with the Independent Valuer and reviewed on the industry trend of foreign trade and cross-border e-commerce in the PRC; and
(e) reviewed other relevant assumptions in the Valuation.

We noted that (i) the historical growth rate of operating income of the Jiangsu Cross-border; (ii) the historical cost structure and growth trend of operating costs of Jiangsu Cross-border; and (iii) the industry trend of foreign trade and cross-border e-commerce in the PRC supported the projection of operating income and operating costs of the Valuation.

– 38 –

LETTER FROM EVER-LONG SECURITIES

Details of the projection of operating income from principal business of Jiangsu Cross-border from the Valuation Date to the year of 2024 and subsequent years are as shown in the following table:

Unit: RMB ten thousand

Operating Income Export Integrated service for cross-border trading and e-commerce Technical services Total	Nov-Dec, Year 2016 6,000.00 300.00 10.00 6,310.00	Year 2017 48,000.00 2,750.00 40.00 50,790.00	Year 2018 63,840.00 3,657.50 60.00 67,557.50	Year 2019 84,907.20 4,864.48 80.00 89,851.68	Year 2020 97,643.28 5,594.15 100.00
					103,337.43

Unit: RMB ten thousand

Operating income Export Integrated service for cross-border trading and e-commerce Technical services Total	Year 2021 107,407.61 6,153.57 120.00 113,681.18	Year 2022 112,777.99 6,461.25 150.00 119,389.24	Year 2023 116,161.33 6,655.09 180.00 122,996.42	Year 2024 and onwards 116,161.33 6,655.09 180.00
				122,996.42

In view of the projection of operating income of Jiangsu Cross-border, we understand the projection from the Valuation is based on the estimation of (i) the sales amount from the export business; and (ii) the service fee to be charged and the transaction volume for the integrated service platform for cross-border trading and e-commerce. For the projected growth rate, the Independent Valuer had made reference to the historical operating income and the future development plan of Jiangsu Cross-border, as well as the developments of other companies in the same industry and that the current number of employees, financial resources and business operation will continue to maintain as in current conditions. The growth rate of the operating income for the first few years from 2017 to 2019 is expected to have a sharp increase given that Jiangsu Cross-border only commenced its business for a short period of time and it is currently at the growing stage with increasing operating income and customers. The growth rate of the operating income for the following years from 2020 to 2023 is expected to slow down gradually given that the operating income and customer growth of Jiangsu Cross-border will no longer be explosive and business has become more routine and stable.

– 39 –

LETTER FROM EVER-LONG SECURITIES

As disclosed in the Valuation Report, the transaction value of cross-border and e-commerce business in the PRC was approximately RMB5.4 trillion in 2015, representing an increase of approximately 28.6% as compared to that in 2014. Due to the current complex and difficult foreign trade conditions, the traditional foreign trade model had problems such as over-reliance on traditional sales, long order cycle and low profit margins. Cross-border e-commerce business is an internet-based emerging business model which allows export enterprises to directly face overseas individuals, wholesalers and retailers, and may effectively reduce the trade links and commodity circulation costs. The cross-border e-commerce industry is encouraged and supported by the PRC government. We concur the projected growth rate of the export, integrated service and technical services operating income of Jiangsu Cross-border is fair and reasonable.

Details of the projection of operating costs from principal business of Jiangsu Cross-border from the Valuation Date to the year of 2024 and subsequent years are as shown in the following table:

Unit: RMB ten thousand

Operating costs Export Technical services Total	Nov-Dec, Year 2016 5,970.00 9.60 5,979.60	Year 2017 47,760.00 38.40 47,798.40	Year 2018 63,520.80 57.60 63,578.40	Year 2019 84,482.66 76.80 84,559.46	Year 2020 97,155.06 96.00
					97,251.06

Operating costs Export Technical services Total	Year 2021 106,870.57 115.20 106,985.77	Year 2022 112,214.10 144.00 112,358.10	Unit: RMB ten thousand Year 2023 Year 2024 and onwards 115,580.52 115,580.52 172.80 172.80 115,753.32 115,753.32	Unit: RMB ten thousand Year 2023 Year 2024 and onwards 115,580.52 115,580.52 172.80 172.80 115,753.32 115,753.32
				115,753.32

The main operating costs of Jiangsu Cross-border are the cost on purchase for the export business. In view of the operating costs, we understand the projection from the Valuation was calculated based on the projected operating income and a fixed gross profit margin at approximately 0.5% for the export business. The gross profit margin is determined by the business operation conditions in the past few years. We have reviewed the historical gross profit margin of Jiangsu Cross-border, and are of the view that the projected operating costs are fair and reasonable.

– 40 –

LETTER FROM EVER-LONG SECURITIES

Details of the projection of selling expenses and management expenses of Jiangsu Cross-border from the Valuation Date to the year of 2024 and subsequent years are as shown in the following table:

Unit: RMB ten thousand

	Nov-Dec,								Year
	Year	Year	Year	Year	Year	Year	Year	Year	2024 and
Items	2016	2017	2018	2019	2020	2021	2022	2023	onwards
Selling expenses	225.20	1,341.69	1,421.03	1,509.06	1,588.47	1,661.59	1,725.35	1,787.12	1,787.12
Management expenses	130.10	761.09	815.66	874.24	936.19	979.57	1,021.83	1,065.88	1,065.88

We understand the selling expenses and management expenses of Jiangsu Cross-border are mainly comprised of staff salaries, rental and property management fees and transportation expenses. The projection from the Valuation is based on either (i) a fixed growth rate; or (ii) a fixed ratio of the operating income. Such projection is based on historical financial data of Jiangsu Cross-border and the discussion with the Management.

Staff salaries are mainly comprised of staff wages, employee benefits, social security costs and housing provident fund costs. As advised by the Independent Valuer, the projected growth rate of staff salaries is estimated based on an increase of 3% to 4% per annum with reference to the inflation rate.

As advised by the Independent Valuer, the projected growth rate of rental and property management fees is estimated based on (i) terms of the lease contracts, if specified; or (ii) the predicted rental period, the rental price and property management fee level based on the agreed amount specified in lease contracts up to the calculation period end with an increase of 3% per annum.

Transportation expenses are mainly comprised of freight and logistics expenses as specified in the orders. As advised by the Independent Valuer, the projected growth rate of transportation expenses is estimated based on the percentage it represents to the total operating income based on the historical data, which is approximately 0.1%.

After reviewing the historical financial data and discussion with the Independent Valuer, we believe the growth of the components of the selling expenses and management expenses are relatively stable and correlated. As a result, we concur the assumption is fair and reasonable.

Given that the Valuation involves the use of income approach – DCF, it is regarded as a profit forecast under Rule 14.61 and 14.62 of the Listing Rules. We understood that BDO China has examined the calculations of the discounted future estimated cash flows in which the Valuation was based. So far as the calculations are concerned, the DCF have been properly complied in all material respects, in accordance with the assumptions set out in the Valuation. Furthermore, the Board has reviewed the principal assumptions and confirmed that the forecast has been made after due and careful inquiries. Letters from the reporting accountants and the Board relating to the Valuation are set out in Appendix II to the Circular, respectively.

– 41 –

LETTER FROM EVER-LONG SECURITIES

Based on the work performed as set out above, we are not aware of any factors which would cause us to doubt the fairness, reasonableness and completeness on the relevant assumptions and projections used in the Valuation.

Pursuant to Listing Rule 13.80, in order to assess the expertise and independence of the Independent Valuer regarding to the Valuation, we have performed the following steps:

(a) obtained and reviewed the terms of engagement (having particular regard to the scope of work, whether the scope of work is appropriate to the opinion required to be given and any limitations on the scope of work which might adversely impact on the degree of assurance given by the Valuation Report);
(b) interviewed the Independent Valuer as to their current or prior relationships with the Company, and their respective shareholders;
(c) reviewed and discussed with the Independent Valuer on its qualification and experience in relation to the preparation of the Valuation; and
(d) enquired into the steps and due diligence measures taken by the Independent Valuer for conducting the Valuation.

Based on the work performed as set out above, we understand that the Independent Valuer is a specialized asset appraisal institution with specific qualifications in the securities business granted by the Ministry of Finance and China Securities Regulatory Commission of the PRC. The clientele of the Independent Valuer includes various listed companies and companies with different business scopes in the PRC and the Independent Valuer have extensive experience in asset valuation, stock valuation and investment valuation. The Independent Valuer have also confirmed that except for its engagement in respect of the Valuation, it has no current or prior relationships with the Group, Sample Group, Jiangsu Cross-border or their respective shareholders. As such, we are satisfied with the terms of engagement of the Independent Valuer and are not aware of any matters that would cause us to question the Independent Valuer’s expertise and independence in conducting the Valuation.

Based on all the work performed as set out above, we consider that we have made adequate assessment on the Valuation in respect to the Valuation Report and the Independent Valuer pursuant Listing Rule 13.80. We are not aware of any factors which would cause us to doubt the fairness and reasonableness of the Valuation. Nevertheless, Shareholders should note that since the Valuation involves various bases and assumptions, it may or may not accurately reflect the true value of Jiangsu Cross-border.

Taking into account that the Consideration represents a premium of approximately 0.66% over the Valuation, whereby Valuation was fairly and reasonably estimated by the Independent Valuer, we are of the opinion that the Consideration is on normal commercial terms and is fair and reasonable so far as the Independent Shareholders are concerned.

– 42 –

LETTER FROM EVER-LONG SECURITIES

4. Possible financial effects of the Disposal

Upon Completion, the Company will cease to hold any interest in Jiangsu Cross-border and its subsidiaries and Jiangsu Cross-border together with its subsidiaries shall cease to be subsidiaries of the Company. Therefore, the profit and loss and assets and liabilities of Jiangsu Cross-border will no longer be consolidated to the accounts of the Company.

(a) Earnings

As stated in the Letter from the Board, the Group is expected to record a gain from the Disposal of approximately RMB16.2 million upon the date of Completion, which is calculated with reference to the audited financial statements of Jiangsu Cross-border as at 31 October 2016. Such gain represents the difference between (i) the audited net assets attributable to the Group associated with its 82.61% equity interest in Jiangsu Cross-border as at 31 October 2016 amounting to approximately RMB42.8 million; and (ii) the consideration for the disposal of 82.61% equity interest in Jiangsu Cross-border amounting to RMB59.0 million.

(b) Net assets

With reference to the 2016 Interim Report and the Clarification Announcement, the unaudited consolidated net assets of the Group as at 30 June 2016 was approximately RMB1,704.8 million. After discussion with the Management, we expect that upon the date of Completion, the consolidated net assets of the Group will be increased by the estimated gain from the Disposal of approximately RMB16.2 million.

Judging from the favorable financial effects in the Group’s earnings and net assets as a result of the Disposal as mentioned in this sub-section, we are of the view that the Disposal is in the interests of the Company and the shareholders as a whole. However, it should be noted that the actual gain or loss arising from the Disposal to be recognized by the Group may be different from the above. The above analyses are for illustrative purposes only and do not purport to represent how the actual financial position of the Group will be on the date of Completion.

– 43 –

LETTER FROM EVER-LONG SECURITIES

RECOMMENDATION

Having considered the principal factors and reasons discussed above, we are of the view that although the Disposal is not in the ordinary and usual course of business of the Group, the Disposal and the terms of the Equity Transfer Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favor of the resolution to be proposed at the EGM to approve the Equity Transfer Agreement and the transaction contemplated thereunder and we recommend the Independent Shareholders to vote in favor of the proposed resolution in this regard.

Yours faithfully, For and on behalf of Ever-Long Securities Company Limited Wilson Cheung Executive Director – Corporate Finance

Note: Mr. Wilson Cheung of Ever-Long Securities Company Limited is a responsible officer licensed to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO. Mr. Cheung has been active in the field of corporate finance advisory for over 13 years, and has been involved in and completed various corporate finance advisory transactions.

The English translation of the Chinese name(s) in this letter, where indicated with * is included for information purpose only and should not be regarded as the official English name(s) of such Chinese name(s).

– 44 –

VALUATION REPORT

APPENDIX I

The following is the text of the valuation report prepared for the purpose of inclusion in this circular received from Jiangsu Hua Xin Asset Valuation Firm.

Valuation Project of 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd. proposed to be transferred by Nanjing Sample Technology Co., Ltd.

Valuation Report

S. H. P. B. Zi. [2016] No. 317

(Volume 1 of 1)

==> picture [59 x 65] intentionally omitted <==

Jiangsu Hua Xin Asset Valuation Firm

December 20, 2016 (supplemented on 23 March 2017)

– 45 –

VALUATION REPORT

APPENDIX I

Valuation project of 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd. proposed to be transferred by Nanjing Sample Technology Co., Ltd.

VALUATION REPORT CONTENTS

The Statement of the Valuer

The Abstract of Valuation Report

The Body of Valuation Report

I. The Entrusting Party, the Valued Target and Other Users of the Valuation Report As Per the Engagement Letter
II. Valuation Purpose
III. The Valued Target and Scope of Valuation
IV. The Types of Value and the Definition
V. The Base Date of Valuation
VI. Valuation Basis
VII. The Methods of Valuation
VIII. The Process and Circumstances of Implementation of the Valuation Procedures
IX. Valuation Assumptions
X. The Conclusion of Valuation
XI. Explanations on Special Matters
XII. Explanation on Restrictions to the
Use of the Valuation Report
XIII. The Valuation Date

– 46 –

VALUATION REPORT

APPENDIX I

Annexures to the Valuation Report:

Letter of undertaking from the signing valuer
Free cash flow forecast statement

– 47 –

VALUATION REPORT

APPENDIX I

THE STATEMENT OF THE VALUER

I. We adhere to the principles of independence, objectivity and impartiality in accordance with the relevant laws, regulations and valuation guidelines in the implementation of this valuation business. Based on the information we collected during the course of practice, the contents of the valuation report are objective and we assume the corresponding legal responsibility for the rationality of the valuation conclusion.
II. The list of the assets and liabilities involved in the valuation are declared by the entrusting party and valued target with signature confirmation. The authenticity, legality and completeness of the information provided and the proper use of the valuation report are the responsibilities of the entrusting party and the related parties.
III. We neither have an existing or expected interest in the target of the valuation report; nor an existing or expected interest in the parties concerned, and we have no prejudice against the parties concerned.
IV. We made field investigation on the target of the valuation project and the assets involved. We have paid necessary attention to the legal ownership of the valued target and its assets involved, examined the legal ownership of the valued target and the assets involved, and truthfully disclosed the problems that have been identified.
V. The analysis, judgment and conclusions of the valuation report issued by us are subject to the assumptions and limitations in the valuation report. The user of the valuation report should take full account of the assumptions, limitations, special instructions and their influences on the valuation conclusion.

– 48 –

VALUATION REPORT

APPENDIX I

Valuation Project of 82.61% equity interest of Jiangsu Cross-border E-Commerce Service Co. Ltd. proposed to be transferred by Nanjing Sample Technology Co., Ltd.

THE ABSTRACT OF VALUATION REPORT

S. H. P. B. Zi. [2016] No. 317

Jiangsu Hua Xin Assets Valuation Firm accepts the commission of Nanjing Sample Technology Co., Ltd. to make valuation on the market value of 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd. (abbreviated as CBECS) on the base date of valuation on October 31, 2016 and the abstract of the valuation report is as follows:

The purpose of valuation: Nanjing Sample Technology Co., Ltd. intends to transfer its 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd., and therefore engages us to evaluate 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd.
The target of valuation: The market value of 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd. on the base date of valuation on October 31, 2016.
The range of valuation: All the assets and liabilities involved in the equity of Jiangsu Cross-border E-Commerce Services Co., Ltd. on the base date of valuation. The audited book value of total assets, liabilities and net assets on the base date of valuation were RMB 290,022,400, RMB 239,821,800 and RMB 50,200,600 respectively.
The base date of valuation: October 31, 2016.
The types of value: Market value under continuous operation.
The method of valuation: The valuation is based on the premise of continuous use and open market, combined with the data collection of the valued target and this project. Taking into account the various factors and the applicability of the valuation method, we conducted the valuation with the asset base approach and income approach, and adopted valuation results of the income approach as the final valuation conclusion.

7. The conclusion of valuation

After valuation, without taking into account the discount due to the lack of equity liquidity and the possible premium on the controlling shareholding, the assessed value of 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd. held by Nanjing Sample Technology Co., Ltd. on the base date of valuation (Oct 31, 2016) was RMB 70.9498 million × 82.61%= RMB 58.6116 million.

– 49 –

VALUATION REPORT

APPENDIX I

8. Validity of the valuation conclusion

This valuation report provides reference only to the economic behavior described in this valuation report. The valuation conclusion is valid for one year from October 31, 2016 to October 30, 2017.

9. Special items that have an impact on the conclusion of the valuation

1. Short-term loan guarantee and pledge

On the base date of valuation, Cross-border E-Commerce Co., Ltd. had shortterm loans related to corporate/personal guarantee and export accounts receivable pledge totaling RMB 148,308,210.43, with the details as follows:

Bank or	Date of		Annual
institution	occurrence	Expiry Date	interest rate	Book value	Remarks
China Everbright Bank	August 1, 2016	November 29, 2016	3.4427%	1,459,016.37	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	1,738,913.88	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	2,492,289.94	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	1,383,123.17	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	952,270.56	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	1,613,643.70	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	102,590.23	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	August 11, 2016	November 9, 2016	3.3176%	676,410.00	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	October 31, 2016	January 27, 2017	3.3837%	3,909,866.25	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
China Everbright Bank	October 31, 2016	January 27, 2017	3.3837%	3,928,589.28	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees

– 50 –

VALUATION REPORT

APPENDIX I

Bank or	Date of		Annual
institution	occurrence	Expiry Date	interest rate	Book value	Remarks
CZBank	August 16, 2016	November 11, 2016	2.5000%	14,152,796.99	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 18, 2016	November 15, 2016	2.5000%	1,826,307.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 18, 2016	November 15, 2016	2.5000%	1,826,307.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 19, 2016	December 16, 2016	2.5000%	279,424.97	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 23, 2016	November 21, 2016	2.5000%	6,026,813.10	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 24, 2016	November 22, 2016	2.5000%	14,475,174.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 29, 2016	November 25, 2016	1.3800%	1,099,551.20	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 29, 2016	November 25, 2016	2.5000%	1,339,291.80	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 29, 2016	November 25, 2016	2.5000%	8,387,484.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	August 31, 2016	November 29, 2016	2.5000%	1,149,897.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	September 2, 2016	December 1, 2016	2.5000%	2,705,640.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee

– 51 –

APPENDIX I

VALUATION REPORT

Bank or	Date of		Annual
institution	occurrence	Expiry Date	interest rate	Book value	Remarks
CZBank	September 6, 2016	December 5, 2016	2.5000%	16,233,840.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
CZBank	September 14, 2016	December 13, 2016	2.5000%	11,498,970.00	Export accounts receivable pledge/
					Nanjing Sample Technology Co., Ltd.
					guarantee
ICBC	September 20, 2016	March 17, 2017	4.3500%	9,900,000.00	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
ICBC	September 2, 2016	February 28, 2017	4.3500%	9,160,000.00	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
ICBC	September 12, 2016	March 7, 2017	4.3500%	9,990,000.00	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
Bank of Jiangsu	October 9, 2016	January 8, 2017	4.7850%	10,000,000.00	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees
Bank of Jiangsu	October 24, 2016	January 23, 2017	4.7850%	10,000,000.00	Nanjing Sample Technology Co., Ltd.
					and Sha Min’s personal guarantees

Nanjing Maohuda Technology Co., Ltd., a subsidiary of Jiangsu Cross-border E-Commerce Services Co., Ltd. has a registered capital of RMB 10 million, actual paid in capital was RMB 2 million on the base date of valuation, with RMB 8 million capital contribution not in place.
As the registration place of Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd. a subsidiary of Jiangsu Cross-border E-Commerce Services Co., Ltd. is in Hong Kong, we are unable to carry out the field investigation procedure due to the time limitation. We use the verified book value of the long-term equity investment as the assessed value based on the relevant information such as financial information and business information collected.

The above content is abstract from the body of the valuation report. For the details of the valuation project and proper understanding of the valuation conclusion, please read the body of the valuation report.

– 52 –

VALUATION REPORT

APPENDIX I

Valuation Project of 82.61% equity interest of Jiangsu Cross-border E-Commerce Services Co., Ltd. proposed to be transferred by Nanjing Sample Technology Co., Ltd.

THE BODY OF VALUATION REPORT

S. H. P. B. Zi. [2016] No. 317

Nanjing Sample Technology Co., Ltd.:

Jiangsu Hua Xin Assets Valuation Firm accepts your entrustment and adopts the asset base method and the income method according to the necessary valuation procedures in line with the relevant laws, regulations and assets valuation criteria, to carry out valuation on the market value of 82.61% equity interest of Jiangsu Crossborder E-Commerce Services Co., Ltd. on the base date of valuation on October 31, 2016. And the valuation is reported as follows.

I. The entrusting party, the valued target and other users of the valuation report as per the engagement letter

The entrusting party for this valuation is Nanjing Sample Technology Co., Ltd., and the valued target is Jiangsu Cross-border E-Commerce Services Co., Ltd.

(I) Entrusting party profile

Name of the entrusting party: Nanjing Sample Technology Co., Ltd.

Type: Corporation limited (Sino-foreign joint venture, listed)

Residence: No. 10 Maqun Avenue, Qixia District, Nanjing City

Legal representative: Sha Min

Registered capital: RMB 316,823,400

Date of incorporation: December 30, 1997

Business term: From December 30, 1997 to **

Unified social credit code: 91320100726074332B

Business scope: Computer network, industrial automation engineering design and installation; electronic product, computer technology development, manufacturing, testing, self-produced product sales, system integration; computer technology consulting and information services, electronic product technical testing and technical services; research and development of basic information collection technology and equipment based on intelligent transportation system

– 53 –

VALUATION REPORT

APPENDIX I

(ITS) (the above do not include the national special control commodity and special approval project) (The business activities of the projects that require approval in accordance with the laws shall be carried out only after the approval of the relevant departments).

(II) Valued target profile

1. Basic Information

Company name: Jiangsu Cross-border E-Commerce Services Co., Ltd. Limited (hereinafter referred to as “Cross-border E-Commerce Company”)

Residence: No. 69 Feitian Avenue, Airport Hub Economic Zone, Jiangning District, Nanjing City

Legal representative: Sha Min

Registered capital: RMB 46 million

Business type: Limited liability company

Date of incorporation: December 23, 2013

Operation period: From December 23, 2013 to December 22, 2033

Unified social credit code: 913201000859618038

Business scope: E-commerce service platform and supporting facilities investment, construction and maintenance; e-commerce consulting services; information technology consulting services; international freight forwarding services; Internet of things R & D and promotion; website construction; software development and sales; self-operation exports and export agency for various kinds of goods and technology (excluding the state restricted company operation or prohibited import and export goods and technology); pre-packaged food, bulk food and dairy sales. (The business activities of the projects that require approval in accordance with the laws shall be carried out only after the approval of the relevant departments)

– 54 –

VALUATION REPORT

APPENDIX I

2. Shareholders and shareholding structure, change of shareholdings and the structure of operation and management of the valued target

(1) Shareholders and shareholding structure, change of shareholdings
- ➀ Cross-border E-Commerce Company was established on December 23, 2013, jointly funded by Nanjing Sample Technology Co., Ltd. and Jiangsu Zhimao Internet Technology Co., Ltd.. The registered capital of Cross-border E-Commerce Company upon incorporation was RMB 20 million, of which Nanjing Sample Technology Co., Ltd. subscribed RMB 12 million, and Jiangsu Zhimao Internet Technology Co., Ltd. subscribed RMB 8 million. On December 19, 2013, Jiangsu Lianda Industrial Certified Public Accountants Co., Ltd. issued the “Jiangsu Lianda Valuation (2013) No. 0168” “Capital Verification Report”, after audit, the registered capital RMB 20 million subscribed by all the shareholders has been received as of December 17, 2013, and each of the shareholders made the subscription by cash.

After the capital contribution the shareholders’ contribution is as follows:

SN Name of Shareholders Method of Contribution 1 Nanjing Sample Technology Co., Ltd. Cash 2 Jiangsu Zhimao Network Technology Co., Ltd. Cash Total	Subscribed capital contribution Paid in capital contribution (RMB'0000) (RMB'0000) 1,200.00 1,200.00 800.00 800.00 2,000.00 2,000.00	Percentage to total registered capital (%) 60.00% 40.00%
		100.00%

➁ In November 2015, the valued target increased the registered capital to RMB 46 million, among which, Nanjing Sample Technology Co., Ltd. subscribed RMB 26 million.

– 55 –

VALUATION REPORT

APPENDIX I

After the capital increase, the shareholding structure of Crossborder E-Commerce Company is as follows:

SN Name of Shareholders Method of Contribution 1 Nanjing Sample Technology Co., Ltd. Cash 2 Jiangsu Zhimao Network Technology Co., Ltd. Cash Total	Subscribed capital contribution Paid in capital contribution (RMB'0000) (RMB'0000) 3,800.00 3,800.00 800.00 800.00 4,600.00 4,600.00	Proportion (%) 82.61% 17.39%
		100.00%

As of the base date of this valuation (October 31, 2016), the shareholding structure of Cross-border E-Commerce Company has remained unchanged.

(2) Organizational structure, management team and personnel

On the base date of valuation, the total number of employees in Cross-border E-Commerce Company was about 130, divided into administration and personnel department, marketing center, operation center, sales center and other departments.

The organizational structure of Cross-border E-Commerce Company is as follows:

==> picture [376 x 205] intentionally omitted <==

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

General manager
Vice general manager
department and personnel Administration Marketing center department Finance center Risk management Operation center center Product technology Sales center
----- End of picture text -----

– 56 –

VALUATION REPORT

APPENDIX I

3. The main accounting policies and tax policies implemented

(1) The accounting system implemented
- ① The “Accounting Standards for Business Enterprises” and its relevant provisions implemented by Cross-border E-Commerce Company.
- ② Fiscal year: One calendar year from January 1 to December 31 of the Gregorian calendar.
- ③ Recording currency: RMB.
- ④ Basis of accounting: Based on accrual basis.
(2) The valued target’s major taxes and tax preferential treatment

Tax categories	Tax rate (%)	Basis
Value added tax	17.00	Taxable sales
Urban construction and maintenance tax	7.00	Turnover tax
Educational expenses and extra charges
of local education	5.00	Turnover tax
Enterprise income tax	25.00	Taxable income

In 2012, Ministry of Finance and the State Administration of Taxation issued Finance and Tax [2012] No. 39 “Notice on the export goods and labor value-added tax and consumption tax policy”: (II) Tax rebate approach. Export enterprises without production capacity (hereinafter referred to as foreign trade enterprises) or other units of export goods services are exempted from value added tax, and the corresponding input tax shall be rebated.

4. The main product or service, business model of the valued target

(1) Main product or service

Cross-border E-Commerce Company is mainly engaged in export business and integrated service for cross-border trading and e-commerce business.

(2) Main business model

Cross-border E-Commerce Company provides customs clearance, foreign exchange, tax refund, logistics, finance and all import and export services required by foreign trade transactions to various small and medium size enterprises through the “Internet +”, with one-stop services so as to facilitate the safe, efficient and convenient foreign trade business of the customers.

– 57 –

VALUATION REPORT

APPENDIX I

5. The assets and liabilities and operations in the past two years

The financial statements of the Cross-border E-Commerce Company from 2014 to 2015 have been audited and approved by the BDO China Shu Lun Pan Certified Public Accountants (Special general partnership) Wuxi Branch, the category of the audit opinion is standard unqualified opinion; the financial statements from January to October, 2016 have been audited and approved by BDO China Shu Lun Pan Certified Public Accountants (Special general partnership), with the issuance of “BDO Report [2016] No. 116615” Audit Report, and the category of the audit opinion is standard unqualified opinion. The financial positions and operating results of the Cross-border E-Commerce Company from the year of 2014 to the base date of the valuation are as follows:

(1) The assets, liabilities and financial positions of Cross-border E-Commerce Company (On the parent company basis)

① Assets and liabilities

		Unit: RMB	ten thousand
Year	December 31,	December 31,	October 31,
Item	2014	2015	2016
Total assets	1,825.59	10,931.50	29,002.24
liabilities	214.14	6,102.97	23,982.18
Net assets	1,823.45	4,828.53	5,020.06
Operating results
		Unit: RMB	ten thousand
Year			January-
Item	FY 2014	FY 2015	October 2016
Operating income	0.00	10,076.99	19,712.16
Total profit	-176.55	18.03	198.20
Net profit	-176.55	15.08	191.53

② Operating results

– 58 –

VALUATION REPORT

APPENDIX I

(2) The assets, liabilities and financial positions of Cross-border E-Commerce Company (On the combined income subject basis)

①	Assets and liabilities Unit:	Assets and liabilities Unit:	RMB	ten thousand
	Year	December 31,	December 31,	October 31,
	Item	2014	2015	2016
	Total assets	1,825.59	10,929.73	29,984.46
	liabilities	214.14	6,102.97	24,803.10
	Net assets	1,823.45	4,826.76	5,181.36
②	Operating results	Unit:	RMB	ten thousand
	Year			January-
	Item	FY 2014	FY 2015	October 2016
	Operating income	0.00	10,109.62	19,983.24
	Total profit	-176.55	16.27	404.87
	Net profit	-176.55	13.31	354.00

6. Analysis on the main business of the valued target

Cross-border E-Commerce Company mainly provides export services and integrated service for cross-border trading and e-commerce business. With the wealth of system development experience and customs authorized data access, the valued target relies on Internet technology to build a integrated professional service platform, and provide one-stop services including customs clearance, foreign exchange, tax refund, logistics, finance and all import and export services required by foreign trade transactions to various small and medium size enterprises.

(1) Analysis on the industry of the valued target and its industry status, competitive advantage and disadvantage

Cross-border E-Commerce Company was founded by Jiangsu Zhimao Internet Technology Co., Ltd. and Nanjing Sample Technology Co., Ltd. jointly. The value target’s business includes 9 categories such as textile, electronics and ect. with cross-border exports of more than 0.3 million orders, covering more than 100 countries and regions.

– 59 –

VALUATION REPORT

APPENDIX I

① Competitive advantages of the valued target
- a. Promote paperless trade and achieve single window, onestop service for foreign trade practitioners: Customs clearance, foreign exchange, tax refund, logistics, finance and all import and export services.
- b. Use the Internet technology, supported by the platform big data, to achieve best in best out with “Internet + foreign trade” and to explore a new economic growth point.
- c. Reduce the operating costs of the enterprise to enhance international competitiveness, to enjoy professional services through the cloud without setting up own customs affairs team so as to reduce operating costs.
② The competitive disadvantage of the valued target
- a. Yangtze River Delta region has relatively developed manufacturing industry, with a large number of foreign trade enterprises; the industry competition is particularly fierce.
- b. Foreign trade export is a service-oriented industry, and the increase in labor costs year by year will further reduce the profit margins of the enterprise.
(2) The relevance of the valued target to the upstream and downstream industries as well as the cyclical, regional and seasonal features of the industry

Cross-border E-Commerce Company’s upstream industries are various types of manufacturers, and the downstream industries are the distributors or consumers.

The cyclical feature of the foreign trade industry changes with the international economy and the domestic economic situation; with certain linkage to the regional development. In the Yangtze River Delta and the southeast coast and other more economically developed areas, the foreign trade volume is relatively high; the industry seasonality is not obvious.

– 60 –

VALUATION REPORT

APPENDIX I

7. The current situation and development prospect of macroeconomics and the industry of the valued target

(1) Macroeconomic situation

In the first three quarters of 2016, China’s overall economic performance was stable and good. China’s gross domestic product (“GDP”) grew 6.7% year-on-year in the third quarter, and the growth rate was equivalent to the first and second quarters. The three major industries maintained steady growth, the agricultural production was basically stable, industrial production was running smoothly, and the service industry maintained relatively rapid development with added value accounting for 52.8% of GDP, 1.6 percentage point higher than that of the same period last year. And the industrial structure continued to improve.

(2) Regional economic situation

In the first three quarters of 2016, the GDP of Jiangsu Province amounted to RMB 5,528.1 billion with an increase of 8.1% year-on-year, calculating based on the comparable prices. Among them, the added value of the primary industry was RMB 215.11 billion with an increase of 0.4%; the added value of the secondary industry was RMB 2,530.80 billion with an increase of 7.4%; the added value of the tertiary industry was RMB 2,782.24 billion with an increase of 9.5%.

In the first three quarters, the economic structural reform of Jiangsu Province was pushed forward robustly, and consumption became the first driver of economic growth. The contribution rate of consumption to GDP growth amounted to 53% in the first three quarters, 7% higher than that of the investment. In respect to industry, the pace of manufacturing sector transforming from low-end to high-end manufacturing was accelerating.

(3) Current status of China’s foreign trade

In 2016, the foreign trade industry development analysis shows that: In the first three quarters of 2016, facing the intricate domestic and international economic situation, China’s economic operation was generally stable with steady progress and robust quality improvement, which was better than expected. Specifically, in the first three quarters, China’s GDP grew 6.7%, and the national economy was running in a reasonable range. According to customs statistics, in the first three quarters of this year, China’s goods import and export trade value was RMB 175.3 trillion with 1.9% down compared to the same period last year (the same below). Among them, the export was RMB 10.06 trillion with 1.6% down; import was RMB 7.47 trillion with 2.3% down; trade surplus was RMB 2.59 trillion with 0.6% more.

– 61 –

VALUATION REPORT

APPENDIX I

(4) China’s foreign trade development
a. International market share continues to increase

In 2015, influenced by the sharp fall of the global trade volume and other factors, China’s export had a shocking decline. However, from the international perspective, China’s export was still better than other major economies, with the export accounting for 13.8% of international market share, 1.5 percentage up compared to the year of 2014, being the fastest increase since the reform and opening up.

b. Commodity structure was further optimized

The added value of China’s exported goods had increased, and the position of its export manufacturing industry in the industrial chain gradually increased. The technological content of the export product continued to improve; equipment manufacturing industry had become a new growth hot spot, with actively expansion to the high-end industries and high value-added products exports. In 2015, China’s exports of electromechanical products were USD 1.31 trillion, remaining unchanged compared to the year of 2014, better than total exports and accounting for 57.6% of total export value, 1.6% up compared to the year of 2014. In the context of sharp decline in imports, China’s imports of advanced equipment, key parts and components were basically stable.

c. New business model had become a new hot spot in foreign trade development

In 2015, China’s general trade exports were USD 121.57 billion, 1.0% up, accounting for 53.4% of total exports value, 2.1 % higher compared to the year of 2014. Processing trade exports were $ 79.779 billion, 9.8% down, accounting for 35.1% of total exports value, 2.7 % down compared to the year of 2014. Cross-border e-commerce, market procurement trade, foreign trade integrated services business and other new business models were flourishing.

– 62 –

VALUATION REPORT

APPENDIX I

(5) Development of cross-border e-commerce business

In the current complex and difficult foreign trade conditions, the traditional foreign trade model had problems such as over-reliance on traditional sales, long order cycle, low profit margins, and etc., crossborder e-commerce business as an Internet-based emerging business model, allows the export enterprises to directly face overseas individual wholesalers, retailers, which has effectively reduced the trade links and commodity circulation costs.

In 2015, China’s cross-border e-commerce business transactions were RMB 5.4 trillion, representing an increase of 28.6% compared to the same period last year. Of which cross-border export transactions amounted to RMB 4.49 trillion, and cross-border import transactions amounted to RMB 907.2 billion. In China’s cross-border e-commerce import and export structure, the exports e-commerce accounted for 83.2%, and imports e-commerce accounted for 16.8%. In recent years, the country has promoted the development of cross-border e-commerce providers, further aiming at supporting the traditional foreign trade enterprises to achieve transformation and upgrading through the Internet channel.

(III) The relationship between the entrusting party and the valued target

The entrusting party of this valuation is Nanjing Sample Technology Co., Ltd., and the valued target is Cross-border E-Commerce Company (including its subsidiary Nanjing K-Tongguan E-Commerce Co., Ltd., Nanjing Maohuda Technology Co., Ltd. and Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd.) The entrusting party holds 82.61% equity interest of Cross-border E-Commerce Company, Cross-border E-Commerce Company holds 100% equity in each of Nanjing K-Tongguan E-Commerce Co., Ltd., Nanjing Maohuda Technology Co., Ltd. and Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd., respectively. The shareholding structure is shown as follows:

– 63 –

VALUATION REPORT

APPENDIX I

Nanjing Sample Technology Co., Ltd.

==> picture [415 x 141] intentionally omitted <==

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

82.61%
Jiangsu Cross-border E-Commerce
Service (Hong Kong) Co., Ltd.
100% 100% 100%
Jiangsu Cross-border
Nanjing K-Tongguan Nanjing Maohuda E-Commerce Service
E-Commerce Co., Ltd. Technology Co., Ltd
(Hong Kong) Co., Ltd.
----- End of picture text -----

(IV) Profile of the other users of the valuation reports agreed upon by the entrusting party in the engagement letter

The users of this valuation report are the entrusting parties, the relevant parties to the economic behavior and the relevant regulatory authorities to which filing is required in accordance with the regulations.

II. Valuation Purpose

The purpose of this valuation is to provide value reference for the proposed transfer of 82.61% equity interest of Cross-border E-Commerce Company by Nanjing Sample Technology Co., Ltd..

III. The Valued Target and Scope of Valuation

(I) The valued target and scope of valuation

The valued target of this project: The market value of the partial shareholders’ interests in Cross-border E-Commerce Company on the base date of valuation on October 31, 2016.

The scope of valuation: All the assets and liabilities of Cross-border E-Commerce Company to which the relevant equity interest relates on the base date of valuation. The net assets of the Cross-border E-Commerce Company on October 31, 2016 have been audited by BDO China Shu Lun Pan Certified Public Accountants (Special general partnership). The audited total book value of the assets is RMB 290,022,400, the total liabilities are RMB 239,821,180, and the total net assets are RMB 50,020,600. Please refer to the following table for details.

– 64 –

APPENDIX I

VALUATION REPORT

	Unit: RMB ten thousand
Item	Book value
Current Assets	25,145.75
Non-current assets	3,856.49
Of which: Financial assets available-for-sale
Held-to-maturity investments
Long-term receivables
Long-term equity investment	3,618.19
Investment properties
Fixed Assets	68.16
Construction in progress	15.00
Project materials
Disposal of fixed assets
Capitalized biological assets
Oil and gas assets
Intangible assets	137.14
Development expenditure
Good-will
Long-term deferred and prepaid expenses
Deferred income tax assets	18.00
Other non-current assets
Total assets	29,002.24
Current Liabilities	23,982.18
Non-current liabilities
TOTAL LIABILITIES	23,982.18
Net assets	5,020.06

As of the base date of valuation (October 31, 2016), the book value of the long-term equity investment of Cross-border E-Commerce Company was RMB 36,181,900, including three wholly owned subsidiaries. Please refer to the following table for details.

– 65 –

VALUATION REPORT

APPENDIX I

Unit: RMB

SN Name of investee Investment date Investment ratio (%) 1 Nanjing K-Tongguan E-Commerce Co., Ltd. Aug.2015 100 2 Nanjing Maohuda Technology Co., Ltd Sept. 2016 100 3 Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd. April 2016 100 Total	Book value Remarks 35,000,000.00 Level 2 (Holding) 1,173,215.59 Level 2 (Holding) 8,723.00 Level 2 (Holding) 36,181,938.59

The valued target and scope of valuation in this project are exactly the same as those of the economic behavior, including the customer resources, personnel advantages and other intangible assets not recorded in the book.

There are no written-off or divestiture of non-performing assets before the valuation, and there are no significant events such as mortgage, pledge, guarantee, litigation and other contingent liabilities of unidentified assets.

(II) Major assets

The office space of the Cross-border E-Commerce Company is leased from its parent company, Nanjing Sample Technology Co., Ltd., and its rented premises were not included in the scope of this valuation.

The major assets of Cross-border E-Commerce Company are monetary funds, receivables, fixed assets and etc. The details of major assets are as follows:

1. Monetary fund

T h e b o o k v a l u e o f m o n e t a r y f u n d o n t h e b a s e d a t e w a s R M B 101,970,426.62, mainly consists of bank deposits.

2. Accounts receivable

The balance of accounts receivable on the base date was RMB 14,992,753.77, with provision for bad debts of RMB 449,782.61 and book value was RMB 14,542,971.16, mainly consists of customers’ receivables.

3. Other receivables

T h e b a l a n c e o f o t h e r r e c e i v a b l e s o n t h e b a s e d a t e w a s R M B 74,560,492.62, with provision for bad debts of RMB 270,338.36 and book value was RMB 74,290,154.26, mainly consists of export tax rebate.

– 66 –

VALUATION REPORT

APPENDIX I

4. The balance of other current assets on the base date was RMB 60,589,863.62, which was the undeclared export tax rebate.

5. Fixed Assets

There was a total of 168 fixed assets (58 items) on the base date, mainly consists of office furniture, notebook computers, printers and other electronic equipment. All equipment was under normal use on the base date with appropriate maintenance.

6. Construction in progress

The balance of the construction in progress was RMB 150,000.00, which consists of 3 developing software.

7. Long-term investment

The long-term equity investment of Cross-border E-Commerce Company at the base date included Nanjing K-Tongguan E-Commerce Co., Ltd., Nanjing Maohuda Technology Co., Ltd. and Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd., with the book value of RMB 36,181,900.

(III) The book record declared by the valued target’s or the unrecorded intangible assets

The intangible assets in the book record declared the valued target include 8 software use rights, with the original recorded value of RMB 1,518,958.24, the book net value was RMB 1,371,358.91. Details are as follows:

Unit: RMB

			Statutory/
			estimated	Original
SN	content or name of the Intangible assets	Date of acquisition	useful life	recorded value	Book value
1	“International supply center bonded mall” website
	development	April 2015	10	49,500.00	41,662.50
2	Qingtian export tax rebate software V1.0/self-
	examination system	June 2015	10	32,991.45	28,317.64
3	“Cross-border trade B2B2C mall” website design	December 2015	10	83,135.92	75,515.12
4	Jiangsu Cross-border K order generating system	July 2015	10	149,056.58	129,182.34
5	Real-time visualization monitoring platform for
	specific tax-exemption equipment	December 2015	10	240,000.00	218,000.00
6	Commodity pre-classification system	December 2015	10	388,000.00	352,433.37
7	Invoicing management system	December 2015	10	408,344.05	370,912.48
8	Invoicing management system/supplement	February 2016	10	167,930.24	155,335.46

– 67 –

VALUATION REPORT

APPENDIX I

On the base date of valuation, the intangible assets recorded by Cross-border E-Commerce Company including the customer resources and personnel advantages, etc., are within the scope of this valuation.

(IV) The type and quantity of off-balance-sheet assets declared by the valued target

As of the base date of valuation, in addition to the intangible assets mentioned above, Cross-border E-Commerce Company had no other off-balance sheet assets.

(V) Reference to the type of assets involved, the amount and the book value (or the assessed value) of the report issued by other bodies.

No report issued by other agencies.

IV. The Types of Value and the Definition

For the purpose of this valuation, this report selects the market value under the premise of continuous operation.

The market value is the amount of the estimated value of the valued target on the base date of valuation under normal and fair trading with willing buyer and willing seller acting reasonably without any coercion.

Continuous operation in this report refers to the production and business activities of the valued target will continue status quo and that no material changes will occur in the foreseeable future.

V. The Base Date of Valuation

The base date of the valuation is October 31, 2016.

The main factors considered in the determination of the base date of assets valuation:

The base date of valuation was adopted as close to the actual date of field investigation by the valuer as possible, so that the valuer can better grasp the conditions of the assets and liabilities included in the valued target on the base date of valuation, so as to facilitate the truthful representation of the present value of valued target on the base date of valuation.
The base date of valuation was adopted as close to the implementation plan of the economic behavior corresponding to the purpose of the valuation as possible, so that the valuation on the base date of valuation would have a higher reference value to both parties to the transaction, and that the valuation conclusion can effectively serve the purpose of the valuation.

– 68 –

VALUATION REPORT

APPENDIX I

The base date of valuation was adopted as the accounting report date which was as close to the implementation plan of the economic behavior corresponding to the purpose of the valuation as possible, so that the valuer can fully understand the overall situation of the assets and liabilities related to the valued target, so as to facilitate the valuer to carry out systematic field investigation, collection of valuation information and other valuation work.

The comprehensive analysis of the above factors is conducted, and by the full communication with the entrusting party, October 31, 2016 is finally selected by the entrusting party as the base date of this valuation. All the price standards in this report are subject to the valid price criteria on the base date of valuation.

VI. Valuation Basis

The main basis of the valuation includes:

(I) The economic behavior basis

“Engagement Letter for Valuation” between the entrusting party and our firm

(II) The legal basis

People’s Republic of China President Decree No. 8 the Company Laws of the People’ s Republic of China (December 28, 2013);
“Enterprise Income Tax Law of the People’s Republic of China” (Adopted at the Fifth Session of the Tenth National People’s Congress on March 16, 2007);
“Accounting Standards for Business Enterprises”;
Other relevant laws and regulations documents.

(III) The Valuation Criteria and Basis

“Fundamental Criteria for Assets Valuation-Basic Criteria”, “Basic Criteria for the Professional Ethics of Assets Valuation” (Finance Enterprise [2004] No. 20);
“Professional Ethics in Asset Valuation-Independence” (CAS [2012] No. 248);

– 69 –

VALUATION REPORT

APPENDIX I

“Guidance and Opinion on the Type of Value in Assets Valuation”, “Assets Valuation Criteria-Valuation Procedures”, “Assets Valuation Criteria – Engagement Letter”, “Assets Valuation Criteria-Working Paper”, “Assets Valuation Criteria-Machinery and Equipment” CAS [2007] No. 189);
“Assets Valuation Criteria-Corporate Value” (CAS [2008] No. 217);
“Assets Valuation Criteria – Valuation Report” (CAS [2007] No. 189, CAS [2011] No. 230);
Other relevant industry specifications.

(IV) The Ownership Basis

The articles of association, capital verification report and equity transfer agreement provided by the valued target;
The proofs of ownership, such as contracts, agreements, proofs of funds (certificates), etc., provided by the valued target related to the acquisition and use of assets and rights;
Other property right certification documents and materials.

(V) The Price Basis

BDO China Shu Lun Pan Certified Public Accountants (Special General Partnership) “BDO Report [2016] No. 116615” “Audit Report” and its appendices;
The base interest rate applicable to the base date announced by the People’s Bank of China;
Purchase of major equipment, invoices, payment vouchers;
Price inquiry records to the manufacturer or its agents;
Cash, fixed asset inventory table, bank statement, bank, creditor, letter of inquiry with debtor feedback;
The valuer’s records on the field investigation of the valued target and other records related to the valuation collected;
The historical financial data provided by the valued target and the forecast data of future earnings;

– 70 –

VALUATION REPORT

APPENDIX I

From the “iFinD”, “Wind Info” terminal query macro, industry and regional market statistical analysis data, the recent bond yields, similar listed companies‘’ financial data and indicators;
Other information related to the valuation of assets.

(VI) Other Information

The “Declaration Schedule of Assets Valuation” and “Profit Forecast Form” provided by the valued target;
The financial statements, balance details, books, accounting vouchers and other financial information on the base date of valuation provided by the valued target;
Interview records of the relevant personnel of the valued target.

VII. The Methods of Valuation

(I) The selection of valuation methods

The basic methods of corporate valuation include income approach, market approach and asset base approach.

The income approach in the corporate valuation refers to the method to determine the value of the valuated target by capitalizing or discounting the expected income. It emphasizes the overall expected profitability of the enterprise. The specific methods commonly used in the income approach include the dividend discount method and cash flow discount method.

The market approach in the corporate valuation refers to the concept of determining the current fair market value of the valuated target by comparing directly the valuated target to the comparable listed companies or comparable transaction cases or making analogical analysis. It has the characteristics that the valuation data is obtained directly from the market, and that the valuation results are easily accepted by the parties to the transaction.

The asset base approach in the corporate valuation refers to the concept of determining the value of the valued target based on its balance sheet on the base date of valuation through reasonable assessment on all the assets and liabilities.

In view of the lack of listed companies comparable to the valued target in terms of the development stage, business scope, operating area, profitability, management level, customer resources and enterprise risk, etc., it is difficult to obtain the relevant indicators and make rationalized amendment. Meanwhile, the

– 71 –

VALUATION REPORT

APPENDIX I

equity trading, acquisition and merger cases of companies in the same industry as the valued target are not available on the current market; hence the market approach cannot be adopted for the valuation. The valuation project was carried out with income approach and asset base approach.

(II) The detailed valuation of the assets and liabilities under the asset base approach

1. Monetary fund

Including cash and bank deposits. It adopts the verified amount as the assessed value.

2. Receivables

Accounts receivable include accounts receivable and other receivables. The valuer verifies the authenticity of the business through random inspection of the relevant business contracts. Letter of enquires will be sent to those accounts receivable with high book value, and alternative examination will be conducted if no reply letter has been received. In this valuation, the prepaid amount of expenses nature was assessed as zero, and for the other receivable, the verified book value was adopted as the assessed value. In this valuation, the provision for bad debts based on aging is assessed as zero, and the losses on bad debt are assessed based on aging analysis comprehensively.

3. Long-term equity investment

The valuer has verified the cause, book value and actual situation of the long-term equity investment, examined information such as the investment agreement, the business license of the investee, the articles of association and the capital verification report to confirm the legality of the parent company’s investment relationship and checked the accounting information and other financial information to verify the reasonability and accuracy of the book value. Based on the basic information of the subsidiaries provided by the valued target, we conducted the overall valuation of the two invested subsidiaries with asset base approach, adopting the same base date of valuation and the same valuation procedures as the parent company. The assessed value of the long-term equity investment was arrived by multiplying the assessed value of net assets by the percentage of the corresponding equity interest. The valuation methods, standards, procedures of assets and liabilities valuation are consistent with those used in valuation of the parent company so as to reasonably and fairly reflect the market value of the long-term equity investments on base date of valuation. As the registration place of Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd. was in Hong Kong, we were unable to carry out the field investigation procedure. Based on the

– 72 –

VALUATION REPORT

APPENDIX I

relevant information such as financial information and business information collected, the verified book value of the long-term equity investment was taken as its assessed value.

4. Fixed assets – Equipment

① Income approach refers to the concept of determination of the value of the target by assessing the expected benefits of capitalization or discount. Since the valued target did not separately measure the income of the equipment to be valued and we also could not obtain rental information for similar equipment in the market, we were not able to conduct the valuation with income approach.
② Market approach refers to the approach of making use of the recent transaction price of the same or similar assets in the market for a direct comparison or analogy analysis, based on the transaction price of the comparable and taking into accountant the differences in functions, market conditions and transaction time between the target and comparable, to determine the value of the target through comparative analysis and quantitative difference adjustment. For the computer, printers and other active trading market equipment we use the market approach to evaluate. As to the equipment for which that we cannot collect sufficient same or similar equipment transaction cases on the market, we use the replacement cost method to assess.
③ The replacement cost method refers to the generic term for various valuation methods whereby firstly the replacement cost of the asset to be valued and secondly various existing depreciation factors in the industry will be estimated and then deducted such results from the replacement cost to obtain the value of the asset to be assessed.

The formula for the cost method is as follows:

Assessed equipment value = equipment replacement cost – physical depreciation – functional depreciation – economic depreciation

The valuer used the useful life method to calculate the physical depreciation of the equipment and has included the functional depreciation in the replacement cost of the equipment. The equipment entrusted to be valued can be used normally and continuously on the original spot and in accordance with the original designed purposes on the base date of valuation and after the purpose of the valuation is achieved, with no signs of economic depreciation, hence, we set the economic depreciation of equipment in this valuation as zero. We simplify the formula for the determination of the assessed value of equipment as follows:

– 73 –

VALUATION REPORT

APPENDIX I

Assessed equipment value = equipment replacement cost × residue ratio

<1> Determination of replacement cost

For equipment the enquiry of current price of which is available, the current purchase price in the market was adopted; for equipment the enquiry of current price of which is not available, the replacement cost was estimated by analogy, making adjustment after the comparison with the similar equipment based on its functions, features and technical parameters.

The equipment to be valued in this valuation are computers, air conditioners and other electronic equipment and the sellers were responsible for free delivery and installation, therefore such costs was not taken into account. Hence, the replacement cost (excluding deductible value added tax) is the market purchase price.

<2> Determination of the residue ratio

Residue ratio was determined through site investigations of the equipment operating conditions and economic useful life analysis by taking into account the equipment maintenance, manufacturing quality, technological transformation and etc..

Residue ratio = [available useful life ÷ (available useful life + used life)]

5. Construction in progress

The construction projects in the this valuation are unfinished software technology development contract, the valuer, after reviewing the relevant contracts, accounting vouchers, and enquiries to technical staff to understand the progress of the project, took the verified book value as the assessed value.

6. Intangible assets-other intangible assets

Other intangible assets declared by Cross-border E-Commerce Company for are software acquired or entrusted to develop; the market approach was adopted for the valuation.

– 74 –

VALUATION REPORT

APPENDIX I

7. Deferred income tax assets

As at the base date of valuation, the deferred income tax assets are the temporary differences arising from the provision for bad debts of accounts receivable. In this valuation, provisions for loss on bad debts and expenses were taken into accounts in accounts receivable and other receivables, therefore the temporary differences thus incurred should be recognized for the deferred income tax assets.

8. Debt valuation

Including current liabilities such as short-term borrowings, accounts payable, other payables, staff salaries, interest payable and taxes payable. According to the declaration form provided by the valued target and the audit report as at the base date of valuation, and after checking the consistency of the break down ledger and general ledger, issuing enquiry letter for large amount of debts and reviewing financial information such as original documents, the verified book value is used as the assessed value.

(III) Valuation model of income approach and determination of main parameters

1. The definition of the income subject

The main business and business model of Nanjing K-Tongguan E-Commerce Co., Ltd., a wholly-owned subsidiary of Cross-border E-Commerce Company are basically the same as Cross-border E-Commerce Company. Therefore, this income approach will include Nanjing K-Tongguan E-Commerce Co., Ltd. into the consolidated scope (hereinafter the consolidated scope is referred to as “Income subject”).

2. Selection of the valuation model

This valuation uses an indirect method to assess the total equity value of the shareholders, i.e., through the assessment of the overall value of the enterprise to obtain the total value of the shareholders. The basic model is: E=B-D (1)

Where,

E: All shareholders’ equity value

B: Overall value of the enterprise;

D: Value of interest bearing debts.

– 75 –

VALUATION REPORT

APPENDIX I

The formula to calculate the overall value of the enterprise is as follows:

==> picture [106 x 11] intentionally omitted <==

Where,

P: Value of the operating assets;
ΣCi: The surplus assets on the base date of valuation, non-operating assets and liabilities and assets not within the income basis.

==> picture [106 x 11] intentionally omitted <==

In the above formula:

C1: Surplus assets refer to those assets not directly related to the enterprise’s income and exceeding that is required for business operations
C2: Non-operating assets refer to those assets not directly related to the production and business activities of the enterprise or not within the income basis, mainly consists of the long-term equity investment that is not within the income basis.

For the valuation of the operating assets on the income basis, the multi period income discount approach was adopted in this valuation, namely defining the future income of the enterprise as the income during the multi projection period. During the multi projection period, the cyclical nature of the industry products and the enterprise’s own development cycle were taken into account comprehensively.

==> picture [116 x 37] intentionally omitted <==

Where: FCFn: The free cash flow for the enterprise in the n-year of the future projected income period;

r: The discount rate;
i: The estimated income life (i = 1, 2, 3..., n).

3. The selection of the main valuation parameters

(1) Determination of income period and projection period

According to the articles of associations and business license of the Cross-border E-Commerce Company: 20 years of operating period, the enterprise was incorporated on December 23, 2013, the agreed business expiry date is December 22, 2033, and the remaining operating period on the base date is about 17 year. Based on the interview with

– 76 –

VALUATION REPORT

APPENDIX I

the management of the valued target, there is no evidence that the legal environment, the market environment and the industry policy of the enterprise may affect the continuous operation of the enterprise. Secondly, the Cross-border E-Commerce Company Limited has the capability to continue to own or obtain the qualification and quality of the continuous operation and is willing to continue to operate. Therefore, this valuation is conducted on the basis of no fixed term.

Considering the cyclical nature of the industry, the enterprise’s own development cycle and the plan of the income subject, it is expected that the income subject will enter a relatively stable development period from 2024. Therefore, the projection period is 7.17 years, i.e. from November, 2016 to the end of 2023, and the income subject is expected to enter into the stable operation period since 2024.

(2) Cash flow basis

This valuation used free cash flow (FCFn) as the income basis. Corporate free cash flow is the cash flow attributable to all investors, including shareholders and debtors of interest bearing debts. The basic definition is: Corporate free cash flow FCFn = net profit + depreciation and amortization + interest after tax of interest bearing debts-capital expenditure-net working capital changes.

(3) Detailed projection schedule of the valuation

① Revenue and cost of sales projection

The main business incomes of Cross-border E-Commerce Company are derived from the export business and integrated service business for cross-border trading and e-commerce. In making the projections, the valuer has referred to the future development plan of Cross-border E-Commerce Company as well as the developments of other companies in the same industry and assumed that the current number of employees, financial resources and business operation will continue to maintain as in current conditions. The growth rate of the revenue for the first few years from 2017 to 2019 is expected to have a sharp increase given that Cross-border E-Commerce Company only commenced its business for a short period of time and it is currently at the growing stage with increasing revenue and customers. Reference was also made to the future development plan of Crossborder E-Commerce Company in the projection of such growth rate. The growth rate of the revenue for the following years from 2020 to 2023 is expected to slow down gradually given that the revenue and customer growth of Cross-border E-Commerce Company will no longer be explosive and business has become more routine and stable. Reference was also made to the valuation practice and judgment by the valuer.

– 77 –

VALUATION REPORT

APPENDIX I

The main business cost of Cross-border E-Commerce Company is the cost on purchase for the export business. Such cost was calculated based on the projected revenue and a fixed gross profit margin at approximately 0.5% for the export business. The gross profit margin is determined by the business operation condition in the past few years.

Details of the main business incomes and main business cost projection from the Valuation Date to the year of 2024 and subsequent years are as shown in the following tables:

Please refer to the following table for detailed projected data:

Unit: RMB ten thousand

			Unit:	RMB ten	thousand
	Nov-Dec,
Operating Income	Year 2016	Year 2017	Year 2018	Year 2019	Year 2020
Export	6,000.00	48,000.00	63,840.00	84,907.20	97,643.28
Integrated service for
cross-border trading and
e-commerce	300.00	2,750.00	3,657.50	4,864.48	5,594.15
Technical services income	10.00	40.00	60.00	80.00	100.00
Total	6,310.00	50,790.00	67,557.50	89,851.68	103,337.43

			Unit:	RMB ten	thousand
					Year 2024
Operating income	Year 2021		Year 2022	Year 2023	and onwards
Export	107,407.61		112,777.99	116,161.33	116,161.33
Integrated service for cross-border
trading and e-commerce		6,153.57	6,461.25	6,655.09	6,655.09
Technical services income		120.00	150.00	180.00	180.00
Total	113,681.18		119,389.24	122,996.42	122,996.42

– 78 –

APPENDIX I

VALUATION REPORT

Operating costs Export Technical services costs Total Operating costs Export Technical services costs Total	Unit: RMB ten thousand Nov-Dec, Year 2016 Year 2017 Year 2018 Year 2019 Year 2020 5,970.00 47,760.00 63,520.80 84,482.66 97,155.06 9.60 38.40 57.60 76.80 96.00 5,979.60 47,798.40 63,578.40 84,559.46 97,251.06 Unit: RMB ten thousand Year 2021 Year 2022 Year 2023 Year 2024 and onwards 106,870.57 112,214.10 115,580.52 115,580.52 115.20 144.00 172.80 172.80 106,985.77 112,358.10 115,753.32 115,753.32	Unit: RMB ten thousand Nov-Dec, Year 2016 Year 2017 Year 2018 Year 2019 Year 2020 5,970.00 47,760.00 63,520.80 84,482.66 97,155.06 9.60 38.40 57.60 76.80 96.00 5,979.60 47,798.40 63,578.40 84,559.46 97,251.06 Unit: RMB ten thousand Year 2021 Year 2022 Year 2023 Year 2024 and onwards 106,870.57 112,214.10 115,580.52 115,580.52 115.20 144.00 172.80 172.80 106,985.77 112,358.10 115,753.32 115,753.32


		115,753.32

② Selling expenses and management expenses projection

Cross-border E-Commerce Company’s selling expenses mainly include staff salaries, rental and property management fees, transportation expenses and marketing expenses as well as other fees.

Staff salaries (for the marketing, operation and sales center): including staff wages, employee benefits, social securitiy costs, housing provident fund costs, etc. When prediction of salaries is being made, the calculation is based on comparing the current situations with the historical data. The salaries are predicted to increase between 3% to 4% per year with reference to the inflation rate;

Rental and property management fees (for the marketing, operation and sales center): the calculation is based on (i) terms of the lease contracts, if specified; or (ii) the predicted rental period, the rental price and property management fee level based on the agreed amount specified in lease contracts up to the calculation period end with an increase of 3% per year;

Transportation expenses: including freight and logistics expenses as specified in the orders. The forecast is made by reference to the percentage it represents to the total revenue based on the historical data, which is approximately 0.1%;

– 79 –

VALUATION REPORT

APPENDIX I

Marketing expenses: including costs for publicity products, exhibition service fees, conference and promotion fees, etc.. Marketing expenses are predicted to increase by approximately 10% per year.

③ Management expenses projection

Management expenses mainly include research and development expenses, staff salaries, rental and property management fees and consultation fees as well as other fees.

Research and development expenses: mainly consist of staff salaries (for the product technology center). The staff salaries include staff wages, employee benefits, social security costs, housing provident fund costs etc. When the prediction of the salaries is being made, the calculation is based on the historical data. The salaries are predicted to increase between 3% to 4% per year with reference to the inflation rate. Other research and development expenses include certain amortization of fixed assets;

Staff salaries (for the finance department, risk management center and administration and personnel department): including staff wages, employee benefits, social security costs, housing provident fund costs, etc. When prediction of salaries is being made, the calculation will be done by comparing the current situations with the historical data. The salaries are predicted to increase between 3% to 4% per year with reference to the inflation rate;

Rental and property management fees (for the finance department, risk management center and administration and personnel department): the calculation is based on (i) terms of the lease contracts, if specified; or (ii) the predicted rental period, the rental price and property management fee level based on the agreed amount specified in lease contracts up to the calculation period end with an increase of 3% per year;

Consultation fees: including fees paid to the auditors, valuers and legal advisers. It is calculated based on an increase of 10% per year;

– 80 –

VALUATION REPORT

APPENDIX I

Please refer to the following table for detailed projected data for selling expenses and management expenses:

Unit: RMB ten thousand

Year Nov-Dec, 2024 and Items Year 2016 Year 2017 Year 2018 Year 2019 Year 2020 Year 2021 Year 2022 Year 2023 thereafter Selling expenses 225.20 1,341.69 1,421.03 1,509.06 1,588.47 1,661.59 1,725.35 1,787.12 1,787.12 Management expenses 130.10 761.09 815.66 874.24 936.19 979.57 1,021.83 1,065.88 1,065.88

④ Finance cost projection

Finance cost mainly includes interest income, interest expenses and handling fees.

Please refer to the following table for detailed projected data:

Unit: RMB ten thousand

Year Nov-Dec, 2024 and Item 2016 Year 2017 Year 2018 Year 2019 Year 2020 Year 2021 Year 2022 Year 2023 thereafter Finance costs 34.05 217.35 222.35 225.35 227.35 232.35 235.35 237.35 237.35

⑤ Other income

Other income of Cross-border E-Commerce Company, including government grant, gain on disposal of non-current assets and others. As the ratio of other income to the principal operating income each year is irregular and unstable, thus the report does not consider the other income in the calculation process of the future forecast.

⑥ Capital expenditures projection

Capital expenditures refer to the expenditures for the increase of production capability and the upgrade of existing fixed assets.

As discussed with the Cross-border E-Commerce Company’s management, during the forecast period, all capital expenditures of Cross-border E-Commerce Company are expected to be capital expenditures for maintenance of assets.

– 81 –

VALUATION REPORT

APPENDIX I

Please refer to the following table for detailed projected data:

Unit: RMB ten thousand

Year Nov-Dec, 2024 and Item 2016 Year 2017 Year 2018 Year 2019 Year 2020 Year 2021 Year 2022 Year 2023 thereafter Capital expenditures 0.50 8.00 15.08 26.88 26.88 26.88 26.88 26.88 44.42

(4) Determination of the discount rate

Discount rate, also known as the expected return on investment, is based on the income approach to determine the valuation of the important parameters. In this valuation, the indirect valuation was adopted to assess the value of the enterprise. According to the principle of matching the income with the discount rate, the WACC model, which is commonly used internationally, was adopted to calculate the weighted average cost of capital as the discount rate.

==> picture [215 x 20] intentionally omitted <==

(1) The cost of equity capital is calculated by the Capital Asset Pricing Model (CAPM), as commonly used internationally. CAPM is the method of estimating the investor’s return requirement and then obtaining such enterprise’s equity return. It can be represented by the following formula:

==> picture [115 x 24] intentionally omitted <==

(2) Rate of return on the debts. As the loan interest rates paid by the valued target are generally lower than the base interest rate of financial institutions as announced by the People’s Bank of China, the loan interest rate of the People’s Bank of China for loans over five years on the base date was adopted as the interest rates to be paid for the interest bearing debts.

– 82 –

VALUATION REPORT

APPENDIX I

4. Non-operating assets, Liabilities and Surplus Assets

The valuer had a discussion with the responsible management and financial staff of Cross-border E-Commerce Company on whether there were surplus and non-operating assets and liabilities. As of the base date of assets valuation on October 31, 2016, the surplus and non-operating assets and liabilities are as follows:

Unit: RMB ten thousand

Item Subject Accounting object Surplus assets Bank deposits Surplus monetary fund Non-operating assets Long-term equity investment Nanjing Maohuda Technology Co., Ltd Long-term equity investment Jiangsu Cross-border E-Commerce Service (Hong Kong) Co., Ltd. Total Non-operating liabilities Short-term borrowings Bank of Shanghai Short-term borrowings ICBC Short-term borrowings China Everbright Bank Short-term borrowings CZBank Short-term borrowings Bank of Jiangsu Total	Book value 8,000.00 117.32 0.87
	118.19

	5,000.00 2,905.00 1,825.67 1,269.33 2,000.00
	13,000.00

5. Interest Bearing Debts

The interest bearing debts refer to the loan and the related interests of the valued target on the base date of valuation. On the base date of valuation, the interest bearing debts of the income subject was RMB 68,308,200.

VIII. The Process and Circumstances of Implementation of the Valuation Procedures

We have implemented the following valuation procedures on the assets and liabilities involved in the valued target from November 30, 2016 to December 5, 2016:

(I) Definition of the basic matters of the valuation

We had a full communication with the client and the valued target to valuation, and defined the user of the valuation report, the scope of valuation and the base date of valuation and other matters.

– 83 –

VALUATION REPORT

APPENDIX I

(II) Conclusion of the Engagement Letter

Subject to certain circumstances, we conducted a comprehensive analysis and assessment of the valued target’s independence and business risk, and assigned a project manager with the professional qualification to deal with the valuation task of this Project.

(III) Preparation of the Valuation Plan

We rapidly formed a valuation team and prepared the specific working plan, and gave training to the valuers and the staff of the enterprise involved in the Project. The Project Manager prepared the valuation plan, including the specific steps of the valuation, the time schedule, the personnel arrangement, technical scheme and other contents, on the basis of the requirements of the Client for this Project.

(IV) On-site Investigation and Verification

The valuer conducted an on-site investigation through interview, confirmation request, verification, inspection and all possible means, to acquire the valuation information, identify the scope of valuation, understand the status quo of the valued target and the ownership of the valued target.

We also instructed the valued target to declare the valuation information, verify the assets and collect valuation information, etc..

1. Instruct the related staff of the enterprise to check the assets and prepare the declaration information

We assigned professionals in the early stage to instruct the valued enterprise to check the assets and make valuation declaration, including preparation of the certificates of title to the valued assets, the information of the engineering contract, the statement of final accounts, and other financial and economic valuation information which reflect the performance, status of the assets, and the detailed historical asset-based expenditure.

2. On-site inspection of the physical assets

According to the assets valuation declaration form, the valuer together with the related staff of the enterprise conducted a check and on-site inspection of the cash, inventory, fixed assets and other declared assets. We adopted different methods of inspection considering the different nature and characteristics of the assets. Meanwhile, we examined the certificate of title of the related assets, identified the quantity, deployment and actual use of the assets. We paid attention to whether there was any non-operational assets and liabilities, or any surplus assets and liabilities.

– 84 –

VALUATION REPORT

APPENDIX I

3. Verification of non-physical current assets and liabilities

In respect of the non-physical current assets and liabilities declared by the enterprise on the base date of valuation, we made verification mainly through checking the general ledger of the enterprise financial accounts, the subsidiary ledgers of the entries, the accounting vouchers and we made verification through a random inspection and confirmation request for the large sum of payment and receipt, bank deposit or loan.

4. Part of the procedures subject to limitation and the substitute procedures

Jiangsu Cross-Border e-commerce Services (Hong Kong)Limited was incorporated in Hong Kong. Due to the limited time of engagement, we could not perform the on-site inspection procedures. Instead we conducted the valuation on the basis of collection of financial commercial and industrial information other relevant documents.

(V) Collection of Valuation Information

We collected the following information through investigation and understanding of the valued enterprise and the local market:

The documentary evidence and information about the ownership of the assets related to the valued target and the scope of valuation;
The history and current business operation of the valued target;
The internal management system, the franchise, formation of the management and the management team and other circumstances of business operation of the unit subject to valuation;
The historical and the future financial forecast information of the valued target;
The macro, local factors and monetary policy affecting the production and business conditions of the valued target;
The transaction information relating to the valued enterprise, the capital market and equity transaction market;
The financial information, share prices and other relevant information of the comparable enterprises.

– 85 –

VALUATION REPORT

APPENDIX I

(VI) Estimate of the Valuation

According to the valued target, the types of value, collection of valuation information, the Valuer adopted appropriate valuation approaches, the corresponding models and parameters to analyse and estimate the preliminary valuation conclusions and through different valuation approaches conducted an analysis of the preliminary valuation conclusions, and determined the finalized valuation conclusion on the basis of a comprehensive appraisal of the reasonableness of and the quality of the data used in the preliminary valuation conclusions.

(VII) Preparation and Submission of the Valuation Report

We drafted the valuation explanations and the assets evaluation report on the basis of the result of evaluation and estimate, and after three levels of examination and approval, we had necessary communication with the client or the relevant parties permitted by the client on the relevant contents of the valuation report, and we formally submitted the asset valuation report subject to the requirement under the letter of engagement for asset valuation.

IX. Valuation Assumptions

(I) General Assumptions

The open market assumption: there are voluntary buyer(s) and seller(s) of equal status; both the buyer(s) and seller(s) have the opportunity and time to acquire adequate market information, and the act of transaction is conducted on voluntary, reasonable, non-coercive and unrestricted conditions; the assets subject to valuation are freely assignable in the open market; without considering the excessive offer or discount of special buyers.
The going concern assumption: it is assumed that the valued project is legal and effective, that operation of the assets complies with the national industrial policy and environmental policy, and that, after realization of the valuation purpose, the enterprise can sustain its business operation with all of its assets to be continually used in the original place and for the original purpose;
It is assumed that there is no other force majeure factor and unforeseeable factor which may have any major adverse impact on the business of the enterprise.

– 86 –

VALUATION REPORT

APPENDIX I

(II) Special assumptions

It is assumed that, after realization of the valuation purpose, the valued enterprise can continue its operation with its current business model; all loans can be normally repaid, and the going concern of the valued enterprise will not be affected by pledge of account receivables;
It is assumed that the accounting policies adopted by the valued target are, in the material aspects, substantially consistent with the accounting policies adopted at the time of preparation of this valuation report;
It is assumed that the basic information and financial information provided by the client and the valued target are true, accurate and complete;
It is assumed that there will be no material change of business model, the sales policy, cost and expense control due to any change of the management or the share structure;
It is assumed that the costs and expenses structure of Cross-border E-Commerce Company will maintain stable during the projection period.
It is assumed that the import and export channel of the valued enterprise can be continued and will not be restricted or banned due to various reasons;
It is assumed that the lease of premises leased by the valued target can be renewed at a reasonable market price upon expiry of such lease;
It is assumed that there will be no material change to the related national laws, regulations, policies, tax base and tax rate currently in effect in the import and export industry, especially the export tariff rebate policy.;
It is assumed that there will be no any adverse impact of any unforeseeable and force majeure factors.

The valuer believes that such assumed conditions are established on the base date of valuation, and the valuation agency and the valuer will not be responsible for any inference of different valuation conclusions due to any change of the assumed conditions when there will be any major change in the future economic environment.

– 87 –

VALUATION REPORT

APPENDIX I

X. The Conclusion of Valuation

(I) Valuation result of the income approach

Upon valuation by the method of discounted cash flow (DCF) through the income approach, and on the premise that no consideration is given to discount as a result of the lack of liquidity and any premium of the controlling shareholding, the total shareholders’ equity of the Cross-border E-Commerce Company. is valued at a market value of RMB 70,949,800 on the base date of valuation.

(II) Valuation result of the asset-based approach

By adopting the asset-based approach of valuation, on October 31, 2016, the base date of valuation, the total book value of all assets of Cross-border E-Commerce Company is RMB 290,022,400 and the valuation is RMB 291,835,200, there is a difference of RMB 1,812,900 and a difference rate of 0.63%; the total book value of all liabilities is RMB 239,821,800 and the valuation is RMB 239,821,800, there is a difference of RMB 0.00 and a difference rate of 0.00%; the book value of the net assets is RMB 50,200,600 and the valuation is RMB 52,013,400, there is a difference of RMB 1,812,900 and a difference rate of 3.61%. The specific compositions are as follows:

– 88 –

VALUATION REPORT

APPENDIX I

A summary statement of the assets valuation results

The Valuation Base Date: October 31, 2016 Item Book value Current Assets 25,145.75 Non-current assets 3,856.49 Of which: Financial assets available-for-sale Held-to-maturity investments Long-term receivables Long-term equity investment 3,618.19 Investment properties Fixed Assets 68.16 Construction in progress 15.00 Project materials Disposal of fixed assets Capitalized biological assets Oil and gas assets Intangible assets 137.14 Development expenditure Good-will Long-term deferred and prepaid expenses Deferred income tax assets 18.00 Other non-current assets TOTAL ASSETS 29,002.24 Current Liabilities 23,982.18 Non-current liabilities TOTAL LIABILITIES 23,982.18 Net assets (owner’s equity) 5,020.06	Valuation 25,145.75 4,037.77 3,782.21 72.43 15.00 150.13 18.00 29,183.52 23,982.18 23,982.18 5,201.34	Unit: RMB 10k Increase or decrease in value Appreciation rate (%) 0.00 0.00 181.29 4.70 164.01 4.53 4.28 6.28 0.00 0.00 13.00 9.48 0.00 0.00 181.29 0.63 0.00 0.00 0.00 0.00 181.29 3.61	Unit: RMB 10k Increase or decrease in value Appreciation rate (%) 0.00 0.00 181.29 4.70 164.01 4.53 4.28 6.28 0.00 0.00 13.00 9.48 0.00 0.00 181.29 0.63 0.00 0.00 0.00 0.00 181.29 3.61
			0.63

			0.00
			0.00

			3.61

– 89 –

VALUATION REPORT

APPENDIX I

Of which, the valuation results of the long-term investment are as follows:

SN Name of investee 1 Nanjing K-Tongguan E-Commerce Co., Ltd. 2 Nanjing Maohuda Technology Co., Ltd 3 Jiangsu Cross-border e-commerce Services (Hong Kong) Ltd. Total	Investment ratio (%) 100% 100% 100%	Book value (RMB) 35,000,000.00 1,173,215.59 8,723.00 36,181,938.59	Valuation (RMB) 36,640,025.08 1,173,305.29 8,723.00 37,822,053.37	Increase or decrease in value 1,640,025.08 89.70 0.00 1,640,114.78	Appreciation rate (%) 4.69 0.01 0.00
					4.53

(III) An analysis of the difference in the results of the two valuation approaches

The total shareholders’ equity valuation arrived by adopting the income approach is RMB 70,949,800 and the total shareholders’ equity valuation arrived by adopting the asset-based approach is RMB 52,013,400, and there is a difference of RMB 18,936,400 with a difference rate of 36.41%. The main reasons for the difference:

The asset-based approach valuation adopts the cost replacement of the assets as the value standard to reflect the socially necessary labor costed by assets input (the construction or acquisition cost) and reflect the market value of the individual assets of the valued enterprise. However, the income approach adopts the prospective earnings of the assets as the value standard to reflect the comprehensive earning power of the assets of the valued enterprise. Such earning power reflects not only the value of all types of the physical assets, but also the value of stable supply channels and customers resources, the sound management team and other resources owned by Cross-border E-Commerce Company. In its current business operation; therefore, it is normal for arriving different conclusions by adopting the two approaches.

(IV) Choosing valuation conclusion

The purpose of this valuation is to provide a reference value for the act of equity transfer of Nanjing Sample Technology Co,. Ltd., and considering from the point of view of the original shareholders, the valuation result of the income approach can better reflect the full equity value of the shareholder; and considering from the transferee, the price for acquiring equity is mainly dependent on the overall future return of the valued enterprise, but not on purchasing its assets, and a higher return means a higher price the transferee is willing to pay, which better matches the idea of the income approach valuation. Therefore, we have chosen the income approach as the valuation conclusion of the pricing reference for this economic behaviour in this valuation report.

– 90 –

VALUATION REPORT

APPENDIX I

Therefore, on the premise of no consideration given to the discount as a result of the lack of liquidity and any premium of controlling shareholding, the valuation of the 82.61% equity of Cross-border E-Commerce Company to be transferred by Nanjing Sample Technology Co., Ltd. is RMB 70,949,800×82.61%=58,611,600 (in words: RMB fifty eight million, six hundred and eleven thousand, six hundred) on October 31, 2016, the base date of valuation.

XI. Explanations on Special Matters

There are the following special matters in the valuation report which may affect the valuation conclusion, the users of the valuation report please give special attention to the following special matters therein which may affect the valuation conclusion thereto:

1. Security for loans

On the base date of valuation, Cross-border E-Commerce Company had shortterm loans related to corporate/personal guarantee and export accounts receivable pledge totaling RMB 148,308,210.43, with the specific situation as follows:

			Annual
Bank or institution	Date of occurrence	Expiry Date	interest rate	Book value	Remarks
China Everbright Bank	August 1, 2016	November 29, 2016	3.4427%	1,459,016.37	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	1,738,913.88	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	2,492,289.94	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	1,383,123.17	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	952,270.56	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	1,613,643.70	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees

– 91 –

APPENDIX I

VALUATION REPORT

			Annual
Bank or institution	Date of occurrence	Expiry Date	interest rate	Book value	Remarks
China Everbright Bank	August 10, 2016	November 8, 2016	3.3160%	102,590.23	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	August 11, 2016	November 9, 2016	3.3176%	676,410.00	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	October 31, 2016	January 27, 2017	3.3837%	3,909,866.25	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
China Everbright Bank	October 31, 2016	January 27, 2017	3.3837%	3,928,589.28	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
CZBank	August 16, 2016	November 11, 2016	2.5000%	14,152,796.99	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 18, 2016	November 15, 2016	2.5000%	1,826,307.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 18, 2016	November 15, 2016	2.5000%	1,826,307.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 19, 2016	December 16, 2016	2.5000%	279,424.97	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 23, 2016	November 21, 2016	2.5000%	6,026,813.10	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 24, 2016	November 22, 2016	2.5000%	14,475,174.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 29, 2016	November 25, 2016	1.3800%	1,099,551.20	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.

– 92 –

APPENDIX I

VALUATION REPORT

			Annual
Bank or institution	Date of occurrence	Expiry Date	interest rate	Book value	Remarks
CZBank	August 29, 2016	November 25, 2016	2.5000%	1,339,291.80	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 29, 2016	November 25, 2016	2.5000%	8,387,484.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	August 31, 2016	November 29, 2016	2.5000%	1,149,897.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	September 2, 2016	December 1, 2016	2.5000%	2,705,640.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	September 6, 2016	December 5, 2016	2.5000%	16,233,840.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
CZBank	September 14, 2016	December 13, 2016	2.5000%	11,498,970.00	Pledge of export account
					receivables/Nanjing Sample
					Technology Co., Ltd.
ICBC	September 20, 2016	March 17, 2017	4.3500%	9,900,000.00	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
ICBC	September 2, 2016	February 28, 2017	4.3500%	9,160,000.00	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
ICBC	September 12, 2016	March 7, 2017	4.3500%	9,990,000.00	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
Bank of Jiangsu	October 9, 2016	January 8, 2017	4.7850%	10,000,000.00	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees
Bank of Jiangsu	October 24, 2016	January 23, 2017	4.7850%	10,000,000.00	Nanjing Sample Technology
					Co., Ltd. and Sha Min’s personal
					guarantees

– 93 –

VALUATION REPORT

APPENDIX I

Subsidiary – The registered capital of Nanjing Maohuda Technology Co., Ltd is RMB 10 million. The actual paid in capital was RMB 2 million on the base date of valuation, with RMB 8 million capital contribution not in place.
As the registration place of Jiangsu Cross-Border E-commerce Services (Hong Kong) Limited. is in Hong Kong, we are unable to carry out the field investigation procedure due to the limit of the entrusted time. According to relevant information such as financial information and business information collected, we use the verified long-term equity investment book value as the assessed value.
We have not considered the impact of the valuation increase or decrease in value and other matters on the taxation matters of the valued target in the valuation result of this valuation report. Valued target’s final tax payment assessment will be made when all levels of the tax authorities make the final assessment.

XII. An Explanation of the Restrictions to the Use of the valuation report

The valuation report is only used for the purpose and use specified in the valuation report;
The valuation report is only used by the users specified in the valuation report;
Any excerpt, quotation or disclosure of the whole or any part of the contents of this valuation report to any public media unless otherwise provided by laws and regulations or otherwise agreed between the related parties shall be subject to review by the valuer;
The valid period for use of this valuation conclusion is one year from October 31, 2016, the base date of valuation to October 30, 2017. After such one year period, another asset valuation shall be made;
The appendixes to this valuation report are an integral part hereof, and the users of this valuation report shall pay full attention thereto.

XIII. The Valuation Report Date

The conclusion of this valuation report was arrived on December 20, 2016.

(Intentionally left blank)

– 94 –

VALUATION REPORT

APPENDIX I

(Intentionally left blank)

Legal representative of the valuation firm: Hu Bin

Valuer: Huang Peiwen

Valuer: Wang Xiaofeng

JIANGSU HUA XIN ASSET VALUATION FIRM DECEMBER 20, 2016

F/22, Sujian Building, 31-1 Yunan Road, Nanjing Tel: 025-84526282 Fax: 025-84410423

– 95 –

VALUATION REPORT

APPENDIX I

ANNEXURES TO THE VALUATION REPORT

– 96 –

VALUATION REPORT

APPENDIX I

LETTER OF UNDERTAKING FROM THE SIGNING VALUER

Nanjing Sample Technology Co., Ltd.:

Upon your entrustment, we have made a valuation on the part of shareholders’ equity interest in Jiangsu Cross-border E-commerce Service Company Limited proposed to be transferred by you with October 31, 2016 as the base date of valuation, and have formed a valuation report. On the premises that the assumptions disclosed in this report are established, we hereby make the following undertakings:

We have the relevant qualification to practice;
The valued target and the scope of valuation are consistent with those specified in the engagement letter;
We have made necessary verification of the assets of the valued target;
We have adopted the valuation approaches in accordance with the valuation standards and the relevant valuation practices;
We have fully considered the factors which may affect the valuation;
The valuation conclusion is reasonable;
The valuation was carried out independently without any interference.

The signing valuer: Huang Peiwen

The signing valuer: Wang Xiaofeng

December 20, 2016

– 97 –

VALUATION REPORT

APPENDIX I

Free Cash Flow Forecast Statement

Unit: RMB ten thousand

		November –
		December								2024
Item		2016	2017	2018	2019	2020	2021	2022	2023	and after
I.	Operating income	6,310.00	50,790.00	67,557.50	89,851.68	103,337.43	113,681.18	119,389.24	122,996.42	122,996.42
	Less: operating costs	5,979.60	47,798.40	63,578.40	84,559.46	97,251.06	106,985.77	112,358.10	115,753.32	115,753.32
	Sales expenses	225.20	1,341.69	1,421.03	1,509.06	1,588.47	1,661.59	1,725.35	1,787.12	1,787.12
	Management expenses	130.10	761.09	815.66	874.24	936.19	979.57	1,021.83	1,065.88	1,065.88
	Operating taxes and surcharges
	Finance costs	34.05	217.35	222.35	225.35	227.35	232.35	235.35	237.35	237.35
	Loss on asset impairment
	Investment income
II.	Operating profit (loss represented by
	“-”)	-58.95	671.47	1,520.07	2,683.57	3,334.36	3,821.90	4,048.62	4,152.75	4,152.75
	Add: non-operating income	–	–	–	–	–	–	–	–	–
	Less: non-operating expenses	–	–	–	–	–	–	–	–	–
III.	Total profit (loss represented by “-”)	-58.95	671.47	1,520.07	2,683.57	3,334.36	3,821.90	4,048.62	4,152.75	4,152.75
	Less: income tax expense		153.13	380.02	670.89	833.59	955.48	1,012.15	1,038.19	1,038.19
IV.	Net profit (loss represented by “-”)	-58.95	518.34	1,140.05	2,012.68	2,500.77	2,866.42	3,036.47	3,114.56	3,114.56
	(+) Depreciation and amortization	7.01	43.27	44.42	44.42	44.42	44.42	44.42	44.42	44.42
	(+) Interest on interest bearing debts after
	tax	21.19	127.16	127.16	127.16	127.16	127.16	127.16	127.16	127.16
	(-) Capital expenditures	0.50	8.00	15.08	26.88	26.88	26.88	26.88	26.88	44.42
	(-) Change in net working capital	-3,109.41	-666.79	4,191.88	5,573.55	3,371.44	2,585.94	1,427.02	901.79	–
V.	Free cash flow (FCFn)	3,078.16	1,347.56	-2,895.33	-3,416.16	-725.97	425.18	1,754.15	2,357.46	3,241.72
	Discount rate	9.60%	9.60%	9.60%	9.60%	9.60%	9.60%	9.60%	9.60%	9.60%
	Years	0.17	1.17	2.17	3.17	4.17	5.17	6.17	7.17	7.17
	Discount coefficient	0.9848	0.8986	0.8199	0.7481	0.6825	0.6227	0.5682	0.5184	5.4003
	Present value of the free cash flow (FCFn)	3,031.49	1,210.89	-2,373.79	-2,555.47	-495.50	264.78	996.71	1,222.18	17,506.32
VI.	Total present value of the free cash
	flow (FCFn)	18,807.61
	Surplus assets	8,000.00
	Non-operating assets	118.19
	Non-operating liabilities	13,000.00
VII.	Overall value of the enterprise	13,925.80
	Interest-bearing debts	6,830.82
VIII.	Value of the entire shareholder equity	7,094.98

Valuer: Jiangsu Hua Xin Asset Valuation Firm

– 98 –

LETTERS RELATING TO DISCOUNTED FUTURE ESTIMATED CASH FLOWS

APPENDIX II

Set out below are the text of the letter from the Board and the text of the letters received from the reporting accountant, BDO China, Certified Public Accountants, both relating to the discounted future estimated cash flows, for, amongst other purposes, incorporation in this circular.

A. LETTER FROM THE BOARD ON DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF 82.61% EQUITY INTEREST OF JIANGSU CROSS-BORDER

The Listing Division

The Stock Exchange of Hong Kong Limited 12th Floor, One International Finance Centre 1 Harbour View Street Central, Hong Kong

13 April 2017

Dear Sirs,

Disclosable and Connected Transaction – Disposal of 82.61% Equity Interest in Jiangsu Cross-border

We refer to the valuation report dated 20 December 2016 prepared by Jiangsu Hua Xin Asset Valuation Firm （江蘇華信資產評估有限公司） (the “Independent Valuer”) and as supplemented on 23 March 2017 in relation to the valuation of the fair value of 82.61% equity interest in Jiangsu Cross-border as at 31 October 2016 (the “Valuation”). As the discount cash flow method was adopted in the Valuation, the Valuation constitutes a profit forecast under Rule 14.61 of the Listing Rules and accordingly, Rules 14.60A and 14.62 of the Listing Rules are applicable.

We have discussed with the Independent Valuer about different aspects including the bases and assumptions upon which the Valuation has been prepared, and reviewed the Valuation for which the Independent Valuer is responsible. We have also considered the report from our reporting accountant, BDO China, regarding whether the Valuation was compiled properly so far as the calculations are concerned.

Pursuant to the requirements of Rule 14.62(3) of the Listing Rules, we are of the opinion that the Valuation prepared by the Independent Valuer has been made after due and careful enquiry and we confirm that we have made the forecast after due and careful enquiry.

Yours faithfully, For and on behalf of the board of directors of

Nanjing Sample Technology Co., Ltd. Zhu Xiang

Executive Director

– 99 –

LETTERS RELATING TO DISCOUNTED FUTURE ESTIMATED CASH FLOWS

APPENDIX II

16 February 2017

B. REPORT FROM REPORTING ACCOUNTANT ON DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF 82.61% EQUITY INTEREST OF JIANGSU CROSS-BORDER

The Board of Directors Nanjing Sample Technology Co., Ltd. (the “Company”) 3112A, 31/F, Shun Tak Centre 168-200 Connaught Road Central Central, Hong Kong

Dear Sirs,

Re: The discloseable and connected transaction regarding disposal of 82.61% equity interest in Jiangsu Cross-border e-Commerce Services Co., Ltd. (“Jiangsu Cross-border”) by Nanjing Sample Technology Co., Ltd. (the “Disposal”)

We report on the calculations of the discounted future estimated cash flows of the Jiangsu Cross-border (“Discounted Future Cash Flows”) in the valuation report dated 20 December 2016 (the “Valuation”) prepared by Jiangsu Hua Xin Asset Valuation Firm（江蘇華信資產評估有限公司）(the “Independent Valuer”), in respect of the market value of 82.61% entire equity interest in Jiangsu Cross-border as at 31 October 2016 in connection with the Disposal.

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

The directors of the Company are solely responsible for the preparation of the Discounted Future Cash Flows in the Valuation. And, the directors have adopted the Valuation prepared by the Independent Valuer with those bases and assumptions stated in the Valuation with input from the Company and the Independent Valuer. Therefore, such Discounted Future Cash Flows are regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

It is our responsibility to report, as required by Rule 14.62 of the Listing Rules, on the accounting policies and calculations of the Discounted Future Cash Flows which the Valuation involved. However, we note that the Discounted Future Cash Flows in the Valuation do not involve the adoption of any accounting policies. Therefore, we have not given any opinion on any accounting policies in respect of the Valuation.

The Discounted Future Cash Flows depend on future events and on a number of bases and assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Consequently, we have not

– 100 –

LETTERS RELATING TO DISCOUNTED FUTURE ESTIMATED CASH FLOWS

APPENDIX II

reviewed, considered or conducted any work on the appropriateness and validity of the bases and assumptions and express no opinion on the appropriateness and validity of the bases and assumptions on which the Discounted Future Cash Flows, and thus the Valuation, are based.

Basis of opinion

We conducted our work in accordance with “Standards on Other Assurance Engagements of PRC Certified Public Accountants No. 3101 – Assurance Engagements other than Audit or Review of Historical Financial Information” and with reference to the procedures under “Standards on Other Assurance Engagements of PRC Certified Public Accountants No. 3111 – Auditing of Prospective Financial Information”. We examined the arithmetical accuracy of the Discounted Future Cash Flows in the Valuation. Our work has been undertaken solely to assist the directors of the Company in evaluating whether the Discounted Future Cash Flows, so far as the calculations are concerned, have been properly compiled and for no other purpose. We accept no responsibility to any other person in respect of, arising out of in connection with our work. Our work does not constitute any valuation of Jiangsu Cross-border.

Opinion

Based on the foregoing, in our opinion, the Discounted Future Cash Flows, so far as the calculations are concerned, have been properly compiled in accordance with the bases and assumptions as cited in the Valuation and adopted by the directors of the Company.

Yours faithfully,

BDO China

Certified Public Accountant

Feng Jianli Practising Certificate No.: 320200280071 Shanghai, China

– 101 –

GENERAL INFORMATION

APPENDIX III

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 OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE OFFICERS OF THE COMPANY

Save as disclosed below, as at the Latest Practicable Date, none of the Directors, supervisors and chief executive officers of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which should be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or which they are deemed to have under such provisions of the SFO), or which were required to be recorded in the register required to be kept pursuant to Section 352 of the SFO, or otherwise required to be notified to the Company pursuant to the required standard of dealings as set out in Appendix 10 of the Listing Rules.

As at the Latest Practicable Date, none of the Directors, supervisors or chief executives of the Company or their spouses or children under 18 years of age were granted or had exercised any right to subscribe for any equity or debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

Long Positions in the Shares

			Approximate
			Percentage of
			the Registered
	Number of		Capital of the
Name of Directors	Shares	Nature of Interest	Company
			(%)
Mr. Sha (Note 1)	1,350,000	Beneficial owner	0.43%
	158,443,400	Interest of controlled	50.01%
		corporation
Mr. Chang (Note 2)	158,443,400	Interest of controlled	50.01%
		corporation

Notes:

(1) Mr. Sha directly holds 1,350,000 Domestic Shares and is indirectly interested in 60.40% of equity interest of Jiangsu Sample Holding Limited （江蘇三寶控股有限公司）(“ Jiangsu Sample* ”) which in turn owns the entire equity interest in Sample Group which in turn owns, directly or indirectly,

– 102 –

GENERAL INFORMATION

APPENDIX III

158,443,400 Domestic Shares. Under the SFO, Mr. Sha is deemed to be interested in all 159,793,400 Domestic Shares. Du Yu（杜予）is the spouse of Mr. Sha. Under the SFO, Du Yu is also deemed to be interested in 159,793,400 Domestic Shares in which Mr. Sha is interested.

Sample Group, directly or indirectly, holds 158,443,400 Domestic Shares, representing 50.01% of the issued share capital of the Company and Sample Group is owned as to 100% by Jiangsu Sample which in turn is held as to 60.04% by Tibet Zhuo Xin Venture Capital Management Co., Ltd.（西藏卓鑫創業投資管理有限責任公司）(“ Tibet Zhuo Xin ”). Tibet Zhuo Xin is owned as to 90% by Shanghai Jiaxin Enterprise Management Center (limited partnership)（上海佳鑫企業管理中心有限合夥） (“ Shanghai Jiaxin ” ) which in turn is beneficially owned as to 99% and 1% by Mr. Sha and his spouse, Du Yu（杜予）. Under the SFO, Mr. Sha is deemed to be interested in the entire equity interest in each of Sample Group, Jiangsu Sample, Tibet Zhuo Xin and Shanghai Jiaxin.

(2) Mr. Chang is indirectly interested in 38.96% of equity interest of Jiangsu Sample which in turn owns the entire equity interest in Sample Group which in turn owns, directly or indirectly, 158,443,400 Domestic Shares. Under the SFO, Mr. Chang is deemed to be interested in all 158,443,400 Domestic Shares.

Sample Group, directly or indirectly, holds 158,443,400 Domestic Shares, representing 50.01% of the issued share capital of the Company and Sample Group is owned as to 100% by Jiangsu Sample which in turn is held as to 38.96% by Tibet Zhuo Cai Venture Capital Management Co., Ltd.（西藏卓財創業投資管理有限責任公司）(“ Tibet Zhuo Cai ”). Tibet Zhuo Cai is owned as to 90% by Shanghai Lianqi Enterprise Management Center (limited partnership)（上海聯啟企業管理中心有限合夥） (“ Shanghai Lianqi ” ) which in turn is beneficially owned as to 99% by Mr. Chang. Under the SFO, Mr. Chang is deemed to be interested in the entire equity interest in each of Sample Group and Jiangsu Sample.

3. DISCLOSURE OF INTEREST OF SUBSTANTIAL SHAREHOLDERS

So far as to the knowledge of the Directors, as at Latest Practicable Date, the following shareholders (other than the Directors, supervisors or chief executive officers of the Company) had interests and short positions in the shares or underlying shares of the Company which should be notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO.

Long position in the Shares

			Approximate
			Percentage of
			the Registered
	Number of		Capital of the
Name of Shareholders	Shares	Nature of Interest	Company
			(%)
Sample Group (Note 1)	158,443,400	Beneficial owner/	50.01%
	Domestic	Interest of controlled
	Shares	corporation
江蘇三寶控股有限公司	158,443,400	Interest of controlled	50.01%
(Note 1)	Domestic	corporation
	Shares

– 103 –

GENERAL INFORMATION

APPENDIX III

			Approximate
			Percentage of
			the Registered
	Number of		Capital of the
Name of Shareholders	Shares	Nature of Interest	Company
			(%)
西藏卓鑫創業投資管理有限	158,443,400	Interest of controlled	50.01%
責任公司_(Note 1)_	Domestic	corporation
	Shares
西藏卓財創業投資管理有限	158,443,400	Interest of controlled	50.01%
責任公司_(Note 1)_	Domestic	corporation
	Shares
上海佳鑫企業管理中心（有	158,443,400	Interest of controlled	50.01%
限合夥）(Note 1)	Domestic	corporation
	Shares
上海聯啟企業管理中心（有	158,443,400	Interest of controlled	50.01%
限合夥）(Note 1)	Domestic	corporation
	Shares
Active Gold Holding	49,545,000	Beneficial owner	15.64%
Limited (Note 2)	Domestic
	Shares
China Tian Yuan	49,545,000	Interest of controlled	15.64%
Finance Group	Domestic	corporation
(Holdings) Limited	Shares
(Note 2)
Jia Tianjiang (Note 2)	49,545,000	Interest of controlled	15.64%
	Domestic	corporation
	Shares
Atlantis Capital	24,997,000	Interest of controlled	7.89%
Holdings Limited	H Shares	corporation
(Note 3)
Liu Yang (Note 3)	24,997,000	Interest of controlled	7.89%
	H Shares	corporation
Riverwood Asset	22,200,000	Investment Manager	7.01%
Management	H Shares
(Cayman) Ltd.
(Note 3)
Fan Qinglong	16,523,000	Beneficial owner &	5.22%
	H Shares	interest of controlled
		corporation

– 104 –

GENERAL INFORMATION

APPENDIX III

Notes:

(1) Sample Group directly holds 153,493,400 Domestic Shares. Sample Group is also interested in 100% of the registered capital of Nanjing Sample Investment Development Company Limited（南京三寶投資發展有限公司）(“ Sample Investment ”), which holds 4,950,000 Domestic Shares and therefore by virtue of the SFO, Sample Group is deemed to be interested in the 4,950,000 Domestic Shares held by Sample Investment. As such, Sample Group is the substantial and the single largest shareholder of the Company. Sample Group is 100% held by Jiangsu Sample which in turn is held by Tibet Zhuo Xin and Tibet Zhuo Cai as to 60.40% and 38.96% equity interests respectively. Tibet Zhuo Xin is in turn held by Shanghai Jiaxin and Nanjing Juge Enterprise Management Center (limited partnership)
（南京聚格企業管理中心（有限合夥））(“ Nanjing Juge ”) as to 90% and 10% equity interests respectively. Mr. Sha, the Chairman of the Company and his spouse, Du Yu（杜予）, respectively held 99% and 1% in each of Shanghai Jiaxin and Nanjing Juge. On the other hand, Tibet Zhuo Cai is in turn held by Shanghai Lianqi and Nanjing Runge Enterprise Management Center (limited partnership)（南京潤格企業管理中心（有限合夥）） (“ Nanjing Runge* ”) as to 90% and 10% equity interests respectively. Mr. Chang, the Vice Chairman of the Company, held 99% in each of Shanghai Lianqi and Nanjing Runge.
(2) Active Gold Holding Limited is indirectly wholly owned by China Tian Yuan Finance Group (Holdings) Limited and Mr. Jia Tianjiang
(3) Atlantis Capital Holdings Limited and Riverwood Asset Management (Cayman) Ltd. are 100% owned by Ms. Liu Yang. Under SFO, Ms. Liu Yang was deemed to have interest in the 24,997,000 Shares in a capacity of interest of controlled corporations.

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or proposed Director of the Company and their respective close associates had any interest in a business, apart from the business of the Company, which competes or may compete with the business of the Company or has any other conflict of interest with the Company which would be required to be disclosed under Rule 8.10 of the Listing Rules.

5. INTEREST IN CONTRACT OR ARRANGEMENT

Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors, supervisors or the proposed Director of the Company had any direct or indirect interest in any contract, transaction or assets which have been acquired or disposed of by, or leased to, or which are proposed to be acquired or disposed of by, or leased to, any member of the Group since 31 December 2015, being the date to which the latest published audited accounts of the Group were made up.

There is no contract or arrangement subsisting as at the Latest Practicable Date in which any of the Directors is materially interested and which is significant to the business of the Group.

6. SERVICE CONTRACT

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

– 105 –

GENERAL INFORMATION

APPENDIX III

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 December 2015, the date to which the latest published audited accounts of the Company were made up.

8. EXPERTS AND CONSENTS

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

Name Qualification Ever-Long Securities Company a licensed corporation licensed to conduct type 1 Limited (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO BDO China Shu Lun Pan certified public accountants Certified Public Accountants (LLP) Jiangsu Hua Xin Asset Valuation a PRC qualified independent valuer Firm

Ever-Long Securities Company Limited, Jiangsu Hua Xin Asset Valuation Firm and BDO China Shu Lun Pan Certified Public Accountants (LLP) are referred to as the “ Experts ” hereinafter.

As at the Latest Practicable Date, none of the Experts had any shareholding in any member of the Group, nor had any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor had any direct or indirect interest in any 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 December 2015, the date to which the latest published audited accounts of the Group was made up.

Each of the Experts has given and has not withdrawn its written consent dated the date of this circular to the issue of this circular with the inclusion of its letter(s) or report(s) in the form and context in which they are included.

– 106 –

GENERAL INFORMATION

APPENDIX III

9. DOCUMENTS FOR INSPECTION

A copy of the following documents will be available for inspection at the office of Cheung & Choy at Rooms 417-418, 4th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong during normal business hours on any weekday (except public holidays) for a period of 14 days from the date hereof:

(a) the Equity Transfer Agreement;
(b) the letter from the Board, the text of which is set out in “Letter from the Board” in this circular;
(c) the letter from the Independent Board Committee, the text of which is set out in “Letter from the Independent Board Committee” in this circular;
(d) the letter from the Independent Financial Adviser, the text of which is set out in “Letter from Ever-Long Securities” in this circular;
(e) the Valuation Report, the text of which is set out in Appendix I of this circular;
(f) the letter from the Board and BDO China on discounted future estimated cash flows in connection with 82.61% equity interest in Jiangsu Cross-border, the text of each is set out in Appendix II to this circular;
(g) the written consents referred to in the paragraph headed “Experts and Consents” in this Appendix; and
(h) this circular.

– 107 –

NOTICE OF EGM

==> picture [258 x 86] intentionally omitted <==

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 1708)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting (the “ EGM ”) of Nanjing Sample Technology Co., Ltd. (the “ Company* ”) will be held at 10:00 a.m. on Monday, 15 May 2017 at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the People’s Republic of China for the purpose of considering and, if thought fit, passing with or without modification or amendment the following resolutions:

ORDINARY RESOLUTIONS

“(1) THAT :

(a) the agreement dated 16 February 2017 as supplemented on 21 March 2017 (the “ Equity Transfer Agreement ”) entered into between the Company and Nanjing Sample Technology Group Company Limited (“ Sample Group ”) (a copy of which is produced to the EGM marked “A” and initialed by the chairman of the EGM for the purpose of identification), and the terms and conditions thereof and the transactions contemplated thereunder and the implementation thereof be and are hereby approved, ratified and confirmed; and
(b) the authorisation to any one of the directors of the Company (the “ Director(s) ”), or any other person authorised by the board of Director(s) (the “ Board ”) from time to time, for and on behalf of the Company, among other matters, to sign, seal, execute, perfect, perform and deliver all such agreements, instruments, documents and deeds, and to do all such acts, matters and things and take all such steps as he or she or they may in his or her or their absolute discretion consider to be necessary, expedient, desirable or appropriate to give effect to and implement the Equity Transfer Agreement and the transactions contemplated thereunder and all matters incidental to, ancillary to or in connection thereto, including agreeing and

– 108 –

NOTICE OF EGM

making any modifications, amendments, waivers, variations or extensions of the Equity Transfer Agreement or the transactions contemplated thereunder be and are hereby approved, ratified and confirmed.”

“(2) To consider and approve the appointment of Mr. Gao Lihui as an independent non-executive director of the Company for a term commencing from the closing of the EGM to 31 December 2018 and to authorize the Board to determine his remuneration.”

By order of the Board **NANJING SAMPLE TECHNOLOGY CO., LTD.* Sha Min** Chairman

Nanjing, PRC 13 April 2017

Notes:

The above mentioned ordinary resolution (1) in relation to the Equity Transfer Agreement shall be approved by independent shareholders as required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Sample Group and its associates will abstain from voting in relation to such resolution. Details regarding such resolution are set out in the circular of the Company dated 13 April 2017.
Any member of the Company (“ Member ”) entitled to attend and vote at the EGM is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a member of the Company. In the case of a joint holding, the form of proxy may be signed by any joint holder, but if more than one joint holder is present at the meeting, whether in person or by proxy, that one of the joint holders whose name stands first on the register of Members in respect of the relevant joint holding shall alone be entitled to vote in respect thereof.
To be valid, a proxy form and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such authority must be delivered to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Center, 183 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) or to the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the People’s Republic of China (in case of holders of Domestic Shares) not less than 24 hours before the time appointed for the holding of the EGM or 24 hours before the time appointed for taking the poll. Delivery of the form of proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Holders of the H Shares or Domestic Shares who intend to attend the EGM are requested to complete the enclosed REPLY SLIP FOR ATTENDANCE AT THE EXTRAORDINARY GENERAL MEETING and return it to the Company’s Hong Kong H Share registrar and transfer office, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) or the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the People’s Republic of China (in case of holders of Domestic Shares) on or before Friday, 5 May 2017. The reply slip may be delivered by hand or by post.
The register of members of the Company will be closed from 5 May 2017 (Friday) to 15 May 2017 (Monday) (both days inclusive), during which period no transfer of Shares will be effected. Shareholders whose names appear on the register of members of the Company on 15 May 2017 (Monday) will be entitled to attend and vote at the EGM convened by the above notice.

– 109 –

NOTICE OF EGM

Members or their proxies shall present identity proof (and form of proxy in case of proxies) upon attending the EGM.

As at the date hereof, the executive Directors are Mr. Sha Min (Chairman), Mr. Chang Yong, Mr. Zhu Xiang; the non-executive Director is Mr. Ma Jun and the independent non-executive Directors are Mr. Shum Shing Kei, Mr. Geng Nai Fan and Mr. Hu Hanhui.

For identification purpose only

– 110 –

AI assistant

Nanjing Sample Technology Company Limited — Proxy Solicitation & Information Statement 2017

50106_rns_2017-04-12_f157013f-1605-4cc1-974d-9db2b16dc314.pdf

(1) DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER; (2) PROPOSED APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR

AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF

82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER AND

PROPOSED APPOINTMENT OF INDEPENDENT NON-EXECUTIVE DIRECTOR

1. INTRODUCTION

2. DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO DISPOSAL OF 82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER

Equity Transfer Agreement

Date

Parties

Assets to be disposed of

Consideration and payment terms

Conditions precedent

Effective date

Basis of the Consideration

VALUATION CONDUCTED BY INDEPENDENT VALUER

Selection of the approach and methodology for the Valuation Report

(a) Market approach

(b) Asset base approach

(c) Income approach

Profit forecast under the Listing Rules

Assumptions of valuation

Detailed projection schedule of the valuation

Revenue and cost of sales projection

LETTER FROM THE BOARD

Selling expenses and management expenses projection

(a) Selling expenses projection

(b) Management expenses projection

Other income

Capital expenditures projection

LETTER FROM THE BOARD

Finance cost projection

LETTER FROM THE BOARD

Information on Jiangsu Cross-border

Revenue

Other major gain or loss

Major assets and liabilities

LETTER FROM THE BOARD

Significant Changes in revenue and profit

3. REASONS FOR AND BENEFITS OF THE DISPOSAL

4. FINANCIAL EFFECTS OF THE DISPOSAL

Earnings

Net assets

5. INFORMATION ON THE PARTIES TO THE EQUITY TRANSFER AGREEMENT

6. LISTING RULES IMPLICATIONS

7. PROPOSED APPOINTMENT OF AN INDEPENDENT NON-EXECUTIVE DIRECTOR

BACKGROUND OF MR. GAO LIHUI

8. EGM

9. CONCLUSIONS AND RECOMMENDATIONS

10. OTHER INFORMATION

DISCLOSEABLE AND CONNECTED TRANSACTION

DISCLOSEABLE AND CONNECTED TRANSACTION PROPOSED DISPOSAL OF 82.61% EQUITY INTEREST IN JIANGSU CROSS-BORDER

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Disposal

Information on the Group

LETTER FROM EVER-LONG SECURITIES

Information on Sample Group

Information on Jiangsu Cross-border

Reasons for and benefits from the Disposal

2. Terms of the Equity Transfer Agreement

(f) Effective date

3. Evaluation of the Consideration for the Disposal

(a) Market approach

LETTER FROM EVER-LONG SECURITIES

(b) Asset base approach

(c) Income approach

LETTER FROM EVER-LONG SECURITIES

LETTER FROM EVER-LONG SECURITIES

4. Possible financial effects of the Disposal

(a) Earnings

Nanjing Sample Technology Company Limited Proxy Solicitation & Information Statement 2017