PegBio Co., Ltd. - Proxy Solicitation & Information Statement 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in MISSION CAPITAL HOLDINGS LIMITED (the “Company”), you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Shares or other securities in the Company.

(Incorporated in Bermuda with limited liability) (Stock Code: 1141)

(1) MAJOR ACQUISITIONS IN RELATION TO ACQUISITION OF EACH OF THE TARGET COMPANIES;

(2) ISSUANCE OF SHARES UNDER SPECIFIC MANDATE; AND
(3) NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

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HEC Securities Limited

A notice convening the SGM (as defined herein) of Mission Capital Holdings Limited (the “Company”) to be held at Plaza III, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong at 10:30 a.m. on Tuesday, 15 September 2015 is set out on pages 171 to 173 of this circular.

Whether or not you intend to attend the SGM, you are requested to complete and return the form of proxy enclosed with this circular in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible, but in any event, not less than forty-eight (48) hours before the time appointed for holding the SGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

26 August 2015

* For identification purpose only

		PAGES	PAGES
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			9
APPENDIX I	—	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . .	50
APPENDIX II	—	ACCOUNTANTS’ REPORTS OF
		THE TARGET COMPANIES. . . . . . . . . . . . . . . . . . . . . . . .	57
APPENDIX III	—	UNAUDITED PRO FORMA FINANCIAL
		INFORMATION OF THE ENLARGED GROUP. . . . . . . . .	131
APPENDIX IV	—	VALUATION OF THE TARGET COMPANIES. . . . . . . . . . . .	139
APPENDIX V	—	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .	162
NOTICE OF SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			171

– i –

DEFINITIONS

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

“Accounts Date”

31 May 2015

“Acquisitions”

the acquisition of the Target Sales Shares 1 and Target Shareholder’s Loan 1 in accordance with the S&P Agreement 1, and the acquisition of the Target Sales Shares 2 and Target Shareholder’s Loan 2 in accordance with the S&P Agreement 2

“Acquisition of Trading of Assets”

the acquisition of trading assets from Qualipak Development Limited by the Company, details of which are included in the announcement of the Company dated 17 February 2015

“Agreements” S&P Agreement 1 and S&P Agreement 2
“Business Day”

a day (other than a Saturday, Sunday or a public holiday) on which banks are open for business in Hong Kong

“Bonus Warrant(s)”

warrant(s) proposed to be issued by the Company to subscribe for new Shares at an initial subscription price of HK$0.1 per new Share, subject to adjustment

“Bonus Warrant Issue”

the proposed bonus issue of Bonus Warrants by the Company to the Shareholders, details of which are included in the announcement of the Company dated 1 December 2014 and the circular of the Company dated 19 December 2014

“Company”

Mission Capital Holdings Limited (Stock Code: 1141), a company incorporated in Bermuda with limited liability, the Shares of which are listed on the main board of the Stock Exchange

“Completions”

the Completion 1 and Completion 2

– 1 –

DEFINITIONS

“Completion 1”
“Completion 2”
“Completion Date”
“Considerations”
“Consideration 1”
“Consideration 2”
“Consideration Shares”
“Consideration Shares 1”

completion of the sale and purchase of Target Sale Shares 1 and Target Shareholder’s Loan 1 pursuant to the S&P Agreement 1

completion of the sale and purchase of Target Sale Shares 2 and Target Shareholder’s Loan 2 pursuant to the S&P Agreement 2

means the third Business Day after the date on which all of the conditions shall have been satisfied or waived by the parties hereto (or such other date as the parties hereto may agree from time to time) and when Completion 1 or Completion 2 shall take place

Consideration 1 and Consideration 2

the aggregate consideration payable by the Purchaser to the Vendors 1 for the acquisition of Target Sale Shares 1 and Target Shareholder Loans 1 under the S&P Agreement 1

the aggregate consideration payable by the Purchaser to the Vendor 2 for the acquisition of Target Sale Shares 2 and Target Shareholder Loans 2 under the S&P Agreement 2

the Consideration Shares 1 and Consideration Shares 2

the 2,106,000,000 new ordinary shares to be issued and allotted by the Purchaser at the issue price of HK$0.25 per share to the Vendors 1 pursuant to the Specific Mandate as partial payment of the Consideration 1

– 2 –

DEFINITIONS

“Consideration Shares 2”

the 494,000,000 new ordinary shares to be issued and allotted by the Purchaser at the issue price of HK$0.25 per share to the Vendor 2 pursuant to the Specific Mandate as partial payment of the Consideration 2

“Directors” directors of the Company
“Enlarged Group”
the Group as enlarged upon Completion together with the Target Companies
“Group” the Company and its subsidiaries
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“Independent Third Party(ies)”
a party and, if applicable, the ultimate beneficial owner of the party who is not fallen into the definition of connected persons of the Company under Chapter 14A of the Listing Rules and independent of the connected persons of the Company and their associates (as defined in the Listing Rules)
“Issue Price”
the issue price of HK$0.25 per Consideration Share
“Last Trading Day” 6 May 2015
“Latest Practicable Date” 25 August 2015
“Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

“Long Stop Date”
the last day of six calendar months from the date of the Agreements or such other later date as shall be agreed by the parties in writing

– 3 –

DEFINITIONS

“MOU”

“MOU Consideration”

“Proposed Issue”

“Promissory Notes”
“Promissory Notes 1”
“Promissory Notes 2”

“PRC”

“Purchaser”

the memorandum of understanding dated 6 May 2015 entered into between the Purchaser and the Vendors relating to a possible sale and purchase of all the shares in each of the Target Companies and relevant shareholders’ loans

the aggregated consideration of acquiring 100% share capital of each of the Target Companies as detailed in the MOU

the issue of the Company’s Shares to Willie International Holdings Limited, details of which are included in the announcement of the Company dated 17 March 2015

the Promissory Notes 1 and Promissory Notes 2

the 3 years 2.5% promissory note with aggregate principal amount of up to HK$445,500,000 to be issued by the Purchaser in favour of the Vendors 1 at Completion 1 as partial payment of the Consideration 1

the 3 years 2.5% promissory note with aggregate principal amount of up to HK$104,500,000 to be issued by the Purchaser in favour of the Vendor 2 at Completion 2 as partial payment of the Consideration 2

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

the Company

– 4 –

DEFINITIONS

“S&P Agreement 1”

the conditional sale and purchase agreement dated 7 May 2015 entered into between the Purchaser and the Vendors 1 in relation to the sale and purchase of the Target Sale Shares 1 and Target Shareholder’s Loan 1, representing the 81% shareholding of the issued share capital of each of the Target Companies

“S&P Agreement 2”
the conditional sale and purchase agreement dated 11 May 2015 entered into between the Purchaser and the Vendor 2 in relation to the sale and purchase of the Target Sale Shares 2 and Target Shareholder’s Loan 2, representing the 19% shareholding of the issued share capital of each of the Target Companies
“SFO” the Securities and Futures Ordinance (CAP. 571 of the Laws of Hong Kong)
“SFC” the Securities and Future Commission of Hong Kong
“SF Audited Accounts” the audited accounts of Skyway Futures for the accounting period ended the Accounts Date (comprising an audited statement of financial position and statement of profit or loss and other comprehensive income and expense statements where applicable)
“SF Sale Shares” SF Sale Shares 1 and SF Sale Shares 2
“SF Sale Shares 1” 8,100,000 ordinary shares with no par value issued by Skyway Futures and registered in the names of the Vendors 1 respectively, representing 81% of the issued share capital of Skyway Futures
“SF Sale Shares 2” 1,900,000 ordinary shares with no par value issued by Skyway Futures and registered in the names of the Vendor 2 respectively, representing 19% of the issued share capital of Skyway Futures

– 5 –

DEFINITIONS

“SF Shareholder’s Loans”

“SGM”

“Shareholder(s)”
“Share(s)”
“Skyway Futures”
“Skyway Securities”

“Specific Mandate”

“SS Sale Shares”

all of the outstanding shareholder’s loans owing by Skyway Futures to the Vendors 1 and Vendor 2 or any of them as at Completions

the special general meeting of the Purchaser to be convened for the purpose of considering and, if thought fit, approving Agreements and the transactions contemplated hereunder, the grant of the Specific Mandate and the issue of the Promissory Notes

holders of Shares

ordinary shares of HK$0.01 each in the share capital of the Company

means SKYWAY FUTURES LIMITED (天順期貨有限公司), a private limited company incorporated in Hong Kong and a corporation licensed under the SFO to carry out Type 2 (dealing in futures contracts) regulated activity

means SKYWAY SECURITIES INVESTMENT LIMITED (天順證券投資有限公司), a private limited company incorporated in Hong Kong and a corporation licensed under the SFO to carry out Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities

the specific mandate to be sought from the Shareholders at the SGM for the allotment and issue of the Consideration Shares

SS Sale Shares 1 and SS Sale Shares 2

– 6 –

DEFINITIONS

“SS Sale Shares 1” 210,600,000 ordinary shares with no par value issued by Skyway Securities and registered in the names of the Vendors 1 respectively, representing 81% of the issued share capital of Skyway Securities
“SS Sale Shares 2” 49,400,000 ordinary shares with no par value issued by Skyway Securities and registered in the names of the Vendor 2 respectively, representing 19% of the issued share capital of Skyway Securities
“SS Audited Accounts” the audited accounts of Skyway Securities for the accounting period ended the Accounts Date (comprising an audited statement of financial position and statement of profit or loss and other comprehensive income and expense statements where applicable)
“SS Shareholder’s Loans” all of the outstanding shareholder’s loans owing by Skyway Securities to the Vendors 1 and Vendor 2 or any of them as at Completion
“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Target Companies”
Skyway Securities and Skyway Futures
“Target Sale Shares 1”
the SF Sale Shares 1 and the SS Sale Shares 1 to be assigned pursuant to the S&P Agreement 1
“Target Sale Shares 2”
the SF Sale Shares 2 and the SS Sale Shares 2 to be assigned pursuant to the S&P Agreement 2
“Target Shareholder’s Loans 1” t h e S F S h a r e h o l d e r ’s L o a n s a n d t h e S S Shareholder’s Loans owed by the Target Companies to Vendors 1 to be assigned pursuant to the S&P Agreement 1
“Target Shareholder’s Loans 2” the SF Shareholder’s Loans and the SS Shareholder’s Loans owed by the Target Companies to Vendor 2 to be assigned pursuant to the S&P Agreement 2

– 7 –

DEFINITIONS

“Valuation Report” the valuation report on 100% equity interest of the Target Companies prepared by Roma Appraisals Limited, an independent valuer, as set out in Appendix IV hereto “Vendors” Vendors 1 and Vendor 2 “Vendor 2” YIU KA FUNG SUSAN “Vendors 1” the 1st Vendor, the 2nd Vendor, the 3rd Vendor and the 4th Vendor are collectively referred to as the “Vendors 1” “1st Vendor” LAM HOI SZE (林海四) “2nd Vendor” NG SIU FAN “3rd Vendor” LEE CHAU MAN ADA “4th Vendor” LIN HAIMIAO “Vendors’ Entitlement Ratio” means the ratio based on which the Consideration 1 are to be split and paid to each of the Vendors 1 as set out in S&P Agreement 1 “Vendors’ Warranties” means the warranties, representations, undertakings and obligations of the Vendors contained in the S&P Agreement 1 (or S&P Agreement 2, as the case may be) “Warranty Claim” any claim by the Purchaser or its nominee (or any person deriving title from it) in connection with the Vendors’ Warranties “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent

– 8 –

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability) (Stock Code: 1141)

Executive Directors: Registered office: Mr. Suen Yick Lun Philip Clarendon House (Acting Chairman and Managing Director) 2 Church Street Mr. Tam Tak Wah Hamilton HM 11 Mr. Ng Kwok Leung Bermuda Independent Non-executive Directors: Principal place of business Dr. Leung Shiu Ki Albert in Hong Kong: Mr. Man Wai Chuen Suite 903, 9th Floor Mr. Siu Siu Ling Robert Great Eagle Centre Mr. Chan Kwan Pak 23 Harbour Road Mr. Siu Gee Tai Wanchai, Hong Kong 26 August 2015

To the Shareholders Dear Sir or Madam,

(1) MAJOR ACQUISITIONS IN RELATION TO ACQUISITION OF EACH OF THE TARGET COMPANIES;

(2) ISSUANCE OF SHARES UNDER SPECIFIC MANDATE; AND (3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Company’s announcement dated 11 May 2015 in relation to, among other things, the Agreements and the transactions contemplated thereunder, the grant of the Specific Mandate and the issue of the Promissory Notes.

* For identification purpose only

– 9 –

LETTER FROM THE BOARD

MOU

On 6 May 2015 (after trading hours of the Stock Exchange), the Purchaser and the Vendors entered into MOU. The principal term of the MOU is that the Purchaser has the intention to acquire 100% of the share capital of each of the Target Companies for an aggregated MOU Consideration of HK$1,200,000,000 which will be satisfied by issuance of new ordinary shares of the Purchaser and an unsecured 3 years promissory note with principal amount of HK$550,000,000 to be issued by the Purchaser.

THE ACQUISITIONS

On 7 May 2015, the Purchaser and the Vendors 1 entered into the S&P Agreement 1, pursuant to which the Purchaser conditionally agreed to purchase from the Vendors 1, and the Vendors 1 conditionally agreed to sell to the Purchaser, the Target Sale Shares 1 representing the 81% shareholding of the issued share capital of each of the Target Companies and Target Shareholder’s Loans 1 at a total consideration of HK$972,000,000, which will be satisfied by (i) issue of Consideration Shares 1 and (ii) issue of Promissory Note 1. And further on 11 May 2015, the Purchaser and the Vendors 2 entered into the S&P Agreement 2, pursuant to which the Purchaser conditionally agreed to purchase from the Vendor 2, and the Vendor 2 conditionally agreed to sell to the Purchaser, the Target Sale Shares 2 representing the remaining 19% shareholding of the issued share capital of each of the Target Companies and Target Shareholder’s Loans 2, at a total consideration of HK$228,000,000, which will be satisfied by (i) issue of Consideration Shares 2, and (ii) issue of Promissory Notes 2. Both the issue prices of the Consideration Shares 1 and Consideration Shares 2 are HK$0.25 per share respectively.

The principal activities of Skyway Securities are provision of brokerage services and securities margin financing to clients. The principal activities of Skyway Futures are provision of futures and options contracts dealing services to clients.

The purpose of this circular is to provide the Shareholder, among other things, (i) further details of the Acquisitions; (ii) the financial information of the Target Companies; (iii) a valuation report of 100% equity interests in the Target Companies to be prepared by an independent valuer; and (iv) a notice convening the SGM.

– 10 –

LETTER FROM THE BOARD

THE ACQUISITIONS

The S&P Agreement 1

Date

7 May 2015

Parties

Purchaser: Mission Capital Holdings Limited Vendor: Vendors 1

To the best knowledge, information and belief of the Directors having made all reasonable enquiry and so far as the Directors are aware, the Vendors 1 and their respective associates are Independent Third Parties.

Assets to be acquired

Pursuant to the S&P Agreement 1, the Purchaser has conditionally agreed to acquire and the Vendors 1 have conditionally agreed to sell the Target Sale Shares 1, representing the 81% shareholding of the issued share capital of each of the Target Companies as at the date of this circular and the Target Shareholder’s Loans 1.

Consideration 1

The Consideration 1 for the sale and purchase of the Target Sale Shares 1 and the Target Shareholder’s Loans 1 payable by the Purchaser to the Vendors 1 shall be HK$972,000,000.

The Consideration 1 shall be satisfied by the Purchaser to the Vendors 1 on Completion, partly by the issue of Consideration Shares 1 and partly by the Promissory Notes 1 and in the manner as follows:–

(a) the Consideration Shares 1 of 2,106,000,000 Shares shall be issued and allotted by the Purchaser to each of the Vendors 1 or their respective nominee(s) in proportion to the Vendors’ Entitlement Ratio but no fractional shares will be issued and any such fractional shares will be rounded down to the nearest integral; and

– 11 –

LETTER FROM THE BOARD

(b) the Purchaser shall issue the Promissory Notes 1 to each of the Vendors 1 with the aggregate principal amount of HK$445,500,000 to be split among each of the Vendors 1 in proportion to the Vendors’ Entitlement Ratio.

The following describes the existing shareholding of each of the Vendors 1 and Vendor 2 in Skyway Securities:

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

1 [st] Vendor 2 [nd] Vendor 3 [nd] Vendor 4 [th] Vendor Vendor 2
(63.15%) (9%) (4.23%) (4.62%) (19%)
Skyway Securities
----- End of picture text -----

The allocation of the Consideration Shares 1 and Promissory Notes 1 among Vendors 1 are based on the Vendors’ Entitlement Ratio, which are set out as below,

	Consideration	Promissory
Vendor	Shares 1 allocated	Notes 1 allocated
		(HK$)
1stVendor	1,642,048,200	347,356,350
2ndVendor	233,976,600	49,495,050
3rdVendor	109,933,200	23,255,100
4thVendor	120,042,000	25,393,500

The Consideration 1 was arrived at after arm’s length negotiations between the Purchaser and the Vendors 1. In arriving at the Consideration 1, the Directors have taken into consideration of various factors including: (i) the audited consolidated net asset value of the Target Companies; (ii) the financial status and prospects of the Target Companies including its historical profit and operation records; and (iii) the market comparable of the similar companies. In (iii) the Directors have used their commercial judgement in tandem with discussion with professionals including potential valuers on how similar companies would be valued in accordance with the size of its operations and business, previous track record and its growth history.

– 12 –

LETTER FROM THE BOARD

The Directors had also reviewed the EV-to-EBIT ratio of listed companies with their bulk of operation in brokerage businesses, including listed companies such as Cinda International Holdings Ltd with EV-to-EBIT of 68.71, China Everbright Limited with EV-to-EBIT 26.39, Shenyin Wanguo HK Limited with EV-to-EBIT 61.57, Upbest Group Limited with EV-to-EBIT 29.00 and Quam Limited with EV-to-EBIT 24.47, Target Companies with EV-to-EBIT 26.62 and came to the conclusion that the considerations paid for the Target Companies are reasonable. The reason the Company has picked these five companies as a comparison as this is their view that these companies are most similar to the Target Companies based on the information that the Company has on hand at the time of negotiation for the Considerations. The Company had subsequently appointed Roma Appraisals Limited as their valuer to reaffirm that such view is in line with the market for companies such as the Target Companies.

In view of the above, the Directors (including the independent non-executive Directors) consider that the Consideration 1 is fair and reasonable and the S&P Agreement 1 is on normal commercial terms and fair and reasonable, and the entering into of the S&P Agreement 1 is in the interests of the Company and the Shareholders as a whole.

The Vendors 1 have jointly and severally guaranteed, warranted and represented to the Purchaser that the aggregate audited net asset values of the Target Companies as at the Accounts Date as shown in SF Audited Accounts and SS Audited Accounts (the “Audited NAV”) shall be not less than HK$300,000,000 (the “Guaranteed NAV”). If the Audited NAV is less than the Guaranteed NAV, then there shall be a downward adjustment in the Consideration 1 in the manner as follows:–

(a) the principal amount of the Promissory Notes 1 to be issued by the Purchaser pursuant to S&P Agreement 1 shall be reduced by the amount calculated as follows:–

(the difference between the Guaranteed NAV and the Audited NAV) x 4 x 81%

(b) if amount referred to in (a) above exceeds the maximum principal amount of the Promissory Notes 1 (i.e. HK$445,500,000), then the Vendors 1 shall pay the deficit in cash to the Purchaser as liquidated damages on Completion 1.

There shall be no upward adjustment in the Consideration 1 if the Audited NAV exceeds the Guaranteed NAV.

– 13 –

LETTER FROM THE BOARD

As at 31 May 2015, the audited net assets of Skyway Securities and the Skyway Futures were HK$344,021,000 and HK$10,489,000 respectively, which has met the demand of the Guaranteed NAV.

According to the Directors, the reduction of the Promissory Notes 1 by 4 times of the shortfall between the Guaranteed NAV and the Audited NAV was arrived at under a normal commercial negotiation. The Directors take the view that the scale of reduction would more than compensate the Company if such shortfall arises.

PROFIT GUARANTEE

The Vendors 1 have jointly and severally guaranteed, warranted and represented to the Purchaser that the average of the two years’ aggregate audited net profits before tax of the Target Companies for the two financial years ended 31 December 2015 and 31 December 2016 respectively shall be not less than HK$120,000,000 per financial year (the “Profit Guarantee”). The audited net profits countable in the Profit Guarantee include all profits of the Company and not just those from ordinary course of business. It is not expected that there will be extraordinary gains arising for the remaining period of the Profit Guarantee period.

In the event of breach or non-fulfilment of the Profit Guarantee, the Vendors 1 shall pay the Purchaser an amount in cash in Hong Kong dollars as liquidated damages within 7 Business Days of the date when the audited financial statements of the Target Companies for the second financial year ended 31 December 2016 are made available to the Vendors 1 in accordance with the following formula:

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WHEREAS:

(a) means HK$120,000,000
(b) means the average of the two years’ aggregate audited net profits before tax of the Target Companies for the two financial years ended 31 December 2015 and 31 December 2016 respectively

The 10 times shortfall compensation again is a result of commercial negotiation which the Directors consider will be advantageous to the Company and enhances the attractiveness of the Acquisitions. The ratio was offered by the Vendors as their confidence of achieving such profits.

– 14 –

LETTER FROM THE BOARD

Conditions precedent

Completion 1 is subject to and conditional upon the fulfilment and satisfaction, at or prior to the Long Stop Date, of each of the following conditions precedent:–

(a) the results of the legal and financial due diligence conducted by the Purchaser over the Target Companies, including but not limited to the affairs, business, assets, liabilities, operations, records, financial position, value of assets, accounts, results, legal and financial structure of each of the Target Companies, being completed to the reasonable satisfaction of the Purchaser at its sole discretion;
(b) the Purchaser having convened the SGM at which resolutions shall have been passed by its Shareholders, by way of a poll to approve the S&P Agreement 1 and the transactions contemplated thereunder, the grant of the Specific Mandate and the issue of the Promissory Notes 1 in accordance with the Listing Rules;
(c) the Listing Committee of the Stock Exchange granting approval for the listing of and permission to deal in the Consideration Shares 1;
(d) the approval by the SFC for the change of the substantial shareholders (as defined under the SFO) of each of Skyway Securities and Skyway Futures having been obtained;
(e) if applicable, the obtaining of all consents from government or regulatory authorities or third parties which are necessary in connection with the execution and performance of this Agreement and any of the transaction contemplated hereunder; and
(f) the Vendors’ Warranties shall remain to be true and correct in all material respects and there has not been any material breach of the Vendors’ Warranties.

If the conditions set out above have not been fulfilled or waived on or before the Long Stop Date for whatever reason, the S&P Agreement 1 shall cease and determine, and in such event, neither party shall have any obligations and liability towards each other hereunder save for any antecedent breaches of the terms hereof.

– 15 –

LETTER FROM THE BOARD

In relation to the S&P Agreement 1:–

(i) None of the conditions precedent set out above have been fulfilled up to date;
(ii) Only the conditions precedent (a) & (f) may be waived by the Company.
(iii) The Company has no intention to waive either of the conditions precedent (a) & (f).

The S&P Agreement 2

Date

11 May 2015

Parties

Purchaser: Mission Capital Holdings Limited Vendor: Vendor 2

To the best knowledge, information and belief of the Directors having made all reasonable enquiry and so far as the Directors are aware, the Vendor 2 and her associates are an Independent Third Party.

Assets to be acquired

Pursuant to the S&P Agreement 2, the Purchaser has conditionally agreed to acquire and the Vendor 2 has conditionally agreed to sell the Target Sale Shares 2 representing the 19% shareholding of the issued share capital of each of the Target Companies as at the date of this circular and the Target Shareholder’s Loans 2.

Consideration 2

The Consideration 2 for the sale and purchase of the Target Sale Shares 2 and the Target Shareholder’s Loans 2 payable by the Purchaser to the Vendor 2 shall be HK$228,000,000.

– 16 –

LETTER FROM THE BOARD

The Consideration 2 shall be satisfied by the Purchaser to the Vendor 2 on Completion partly by the issue of Consideration Shares 2 and partly by the Promissory Notes 2 and in the manner as follows:–

(a) the Purchaser shall issue and allot Consideration Shares 2 of 494,000,000 Shares to the Vendor 2 or her nominee(s); and
(b) the Purchaser shall issue the Promissory Notes 2 to the Vendor 2 with the principal amount of HK$104,500,000.

The Consideration 2 was arrived at after arm’s length negotiations between the Purchaser and the Vendor 2. In arriving at the Consideration 2, the Directors have taken into consideration of various factors including: (i) the audited consolidated net asset value of the Target Companies; (ii) the financial status and prospects of the Target Companies including its historical profit and operation records; and (iii) the market comparable of the similar companies. In (iii) the Directors have used their commercial judgement in tandem with discussion with professionals including potential valuers on how similar companies would be valued in accordance with the size of its operations and business, previous track record and its growth history.

The Directors had also reviewed the EV-to-EBIT ratio of listed companies with their bulk of operation in brokerage businesses, including listed companies such as Cinda International Holdings Ltd with EV-to-EBIT of 68.71, China Everbright Limited with EV-to- EBIT 26.39, Shenyin Wanguo HK Limited with EV-to-EBIT 61.57, Upbest Group Limited with EV-to-EBIT 29.00 and Quam Limited with EV-to-EBIT 24.47, Target Companies with EV-to-EBIT 26.62 and came to the conclusion that the considerations paid for the Target Companies are reasonable. The reason the Company has picked these five companies as a comparison as this is their view that these companies are most similar to the Target Companies based on the information that the Company has on hand at the time of negotiation for the Considerations. The Company had subsequently appointed Roma Appraisals Limited as their valuer to reaffirm that such view is in line with the market for companies such as the Target Companies.

In view of the above, the Directors (including the independent non-executive Directors) consider that the Consideration 2 is fair and reasonable and the S&P Agreement 2 is on normal commercial terms and fair and reasonable, and the entering into of the S&P Agreement 2 is in the interests of the Company and the Shareholders as a whole.

– 17 –

LETTER FROM THE BOARD

The Vendor 2 has guaranteed, warranted and represented to the Purchaser that the aggregate audited net asset values of the Target Companies as at the Accounts Date as shown in SF Audited Accounts and SS Audited Accounts (the “Audited NAV”) shall be not less than HK$300,000,000 (the “Guaranteed NAV”). If the Audited NAV is less than the Guaranteed NAV, then there shall be a downward adjustment in the Consideration 2 in the manner as follows:–

(a) the principal amount of the Promissory Notes 2 to be issued by the Purchaser pursuant to S&P Agreement 2 shall be reduced by the amount calculated as follows:–
(the difference between the Guaranteed NAV and the Audited NAV) x 4 x 19%
(b) if amount referred to in (a) above exceeds the maximum principal amount of the Promissory Notes 2 (i.e. HK$104,500,000), then the Vendor 2 shall pay the deficit in cash to the Purchaser as liquidated damages on Completion.

There shall be no upward adjustment in the Consideration 2 if the Audited NAV exceeds the Guaranteed NAV.

As at 31 May 2015, the audited net assets of Skyway Securities and the Skyway Futures were HK$344,021,000 and HK$10,489,000 respectively, which has met the demand of the Guaranteed NAV.

PROFIT GUARANTEE

The Vendor 2 has guaranteed, warranted and represented to the Purchaser that the average of the two years’ aggregate audited net profits before tax of the Target Companies for the two financial years ended 31 December 2015 and 31 December 2016 respectively shall be not less than HK$120,000,000 per financial year (the “Profit Guarantee”). The audited net profits countable in the Profit Guarantee include all profits of the Company and not just those from ordinary course of business. It is not expected that there will be extraordinary gains arising for the remaining period of the Profit Guarantee period.

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LETTER FROM THE BOARD

In the event of breach or non-fulfilment of the Profit Guarantee, the Vendor 2 shall pay the Purchaser an amount in cash in Hong Kong dollars as liquidated damages within 7 Business Days of the date when the audited financial statements of the Target Companies for the second financial year ended 31 December 2016 are made available to the Vendor 2 in accordance with the following formula:

==> picture [114 x 10] intentionally omitted <==

WHEREAS:

(a) means HK$120,000,000
(b) means the average of the two years’ aggregate audited net profits before tax of the Target Companies for the two financial years ended 31 December 2015 and 31 December 2016 respectively

The 10 times shortfall compensation again is a result of commercial negotiation which the Directors feel will be advantageous to the Company and enhances the attractiveness of the Acquisitions. The ratio was offered by the Vendors as their confidence of achieving such profits.

Conditions precedent

Completion 2 is subject to and conditional upon the fulfilment and satisfaction, at or prior to the Long Stop Date, of each of the following conditions precedent:–

(a) the results of the legal and financial due diligence conducted by the Purchaser over the Target Companies, including but not limited to the affairs, business, assets, liabilities, operations, records, financial position, value of assets, accounts, results, legal and financial structure of each of the Target Companies, being completed to the reasonable satisfaction of the Purchaser at its sole discretion;
(b) the Purchaser having convened the SGM at which resolutions shall have been passed by its Shareholders, by way of a poll to approve the S&P Agreement 2 and the transactions contemplated thereunder, the grant of the Specific Mandate and the issue of the Promissory Notes 2 in accordance with the Listing Rules;

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LETTER FROM THE BOARD

(c) the Listing Committee of the Stock Exchange granting approval for the listing of and permission to deal in the Consideration Shares 2;
(d) the approval by the SFC for the change of the substantial shareholders (as defined under the SFO) of each of Target Companies having been obtained;
(e) if applicable, the obtaining of all consents from government or regulatory authorities or third parties which are necessary in connection with the execution and performance of this Agreement and any of the transaction contemplated hereunder; and
(f) the Vendors’ Warranties shall remain to be true and correct in all material respects and there has not been any material breach of the Vendors’ Warranties.

If the conditions set out above have not been fulfilled or waived on or before the Long Stop Date for whatever reason, the S&P Agreement 2 shall cease and determine, and in such event, neither party shall have any obligations and liability towards each other hereunder save for any antecedent breaches of the terms hereof.

In relation to the S&P Agreement 2:–

(iv) None of the conditions precedent set out above have been fulfilled up to date;
(v) Only the conditions precedent (a) & (f) may be waived by the Company.
(vi) The Company has no intention to waive either of the conditions precedent (a) & (f).

Long stop date

If the conditions precedent have not been fulfilled or waived on or before the Long Stop Date for whatever reason, the S&P Agreement 1 and S&P Agreement 2 shall cease and determine, and in such event, neither party shall have any obligations and liability towards each other hereunder save for any antecedent breaches of the terms hereof.

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LETTER FROM THE BOARD

Completion

Completions shall take place on or before 11:00 a.m. on the Completion Date at the office of the Purchaser after all the conditions of the S&P Agreement 1 and S&P Agreement 2 have been fulfilled or waived or such later date as may be agreed between the Vendors 1, Vendor 2 and the Purchaser respectively. Upon Completions, each of the Target Companies will become an indirect wholly owned subsidiary of the Company and therefore, the accounts of each of the Target Companies will be consolidated into the consolidated financial statements of the Group.

The completion of S&P Agreement 1 and the completion of S&P Agreement 2 are not inter-conditional. However, since all the conditions precedent of these two agreements are substantially the same, it is expected that the 1 & 2 Completion could take place at the same time.

INFORMATION OF THE COMPANY

The Company principally engages in supply and procurement of commodities, provision of finance, securities investment and real estate business.

INFORMATION OF EACH OF THE TARGET COMPANIES

Skyway Securities is a private limited company incorporated in Hong Kong. Skyway Securities is a licensed corporation under SFO with the following regulated activities: (i) Type 1: Dealing in securities; and (ii) Type 4: Advising on securities.

The principal activities of Skyway Securities are provision of brokerage services and securities margin financing to clients. Skyway Securities also provides ancillary services including applications for new issues and nominee services such as collection of cash and scrip dividends. Skyway Securities, revenue mainly comprises (i) commission income arising from securities, futures and options brokerage services; and (ii) interest income from margin financing services.

The consolidated net assets of Skyway Securities as at 31 December 2014 was approximately HK$372,118,000.

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LETTER FROM THE BOARD

The consolidated net profit before and after taxation of the Skyway Securities for each of the years ended 31 December 2013 and 2014 are set out below:

	Year ended	Year ended
	31 December 2013	31 December 2014
	(audited)	(audited)
	approximately	approximately
Net profits before taxation	HK$33,372,000	HK$34,931,000
	approximately	approximately
Net profits after taxation	HK$29,459,000	HK$29,212,000

Skyway Futures is a private limited company incorporated in Hong Kong. Skyway futures is a licensed corporation under SFO with the following regulated activity: Type 2: Dealing in futures contracts.

The principal activities of Skyway Futures are provision of futures and options contracts dealing services to clients.

The net assets of Skyway Futures as at 31 December 2014 was approximately HK$10,181,000.

The net profit before and after taxation of Skyway Futures for each of the years ended 31 December 2013 and 2014 are set out below:

	Year ended	Year ended
	31 December 2013	31 December 2014
	(audited)	(audited)
	approximately	approximately
Net profits before taxation	HK$250,000	HK$447,000
	approximately	approximately
Net profits after taxation	HK$250,000	HK$407,000

Skyway Securities commenced business in January 2008 and Skyway Future follows in August 2008. Since then, they have strived to provide quality personal account management and customer services towards its clients with a view to meeting their demand and expectation.

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LETTER FROM THE BOARD

Each of the Target Companies will become an indirect wholly-owned subsidiary of the Company and the financial information of each of the Target Companies will be consolidated into the accounts of the Company upon Completions.

Group chart of Target Companies before Completion :

1stVendor 63.15%	2ndVendor 9.0%	3rdVendor 4.23%	4thVendor 4.62%	Vendor 2 19.00%
100% Skyway Securities Investment Limited Skyway Credit Service Limited

1stVendor 62.40%	2ndVendor 9.0%	3rdVendor 4.80%	4thVendor 4.8%	Vendor 2 19.00%
Skyway Futures Limited

Group chart of Target Companies after Completion :

==> picture [327 x 197] intentionally omitted <==

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

The Company
100% 100%
Skyway Securities
Skyway Futures Limited
Investment Limited
100%
Skyway Credit Service Limited
----- End of picture text -----

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LETTER FROM THE BOARD

Background and experience of the Directors of the Target Companies

Mr. LAM Hoi Sze (林海四) (“Mr. Lam”), the chairman of the Target Companies.

Mr. Lam is one of the original founders of Skyway Securities in July 2007 and is closely associated with its development and expansion over the years. In 2010, Mr. Lam oversaw the establishment of Skyway Futures. At the Target Companies, Mr. Lam is responsible for formulating major corporate strategies and related strategic planning as well as the overall management and business development of the Target Companies.

Mr. Lam holds a bachelor degree from the Lingnan (University) College, Zhongshan University (中山大學嶺南(大學)學院), majoring in international trade and finance. Prior to his involvement in the Target Companies, Mr. Lam has garnered over 15 years of experience in real estate development. He was the chairman of the board of directors of a private PRC real estate development company based in Shantou, Guangdong, between August 1996 and January 2008 where he was primarily responsible for all aspects of the management of its real estate development, construction and leasing businesses.

As one of the Vendors, Mr. Lam will be interested in 1,642,048,200 Shares and HK$347,356,350 in principal amount of the Promissory Notes of the Company.

Mr. HO Shu Shun (何樹信) (“Mr. Ho”), a director of Skyway Securities and its Responsible Officer of Skyway Securities under Type 1 (dealing in securities) and Skyway Futures under Type 2 (dealing in futures contracts) regulated activity.

Mr. Ho originally joined the Skyway Securities in July 2007 as a director of Skyway Securities. He was the general manager and Responsible Officer of Skyway Securities under Type 1 (dealing in securities) regulated activity between January 2008 and February 2011. He left in February 2011 and rejoined as the general manager of Skyway Securities in October 2011. He was later appointed as a director of Skyway Securities and its Responsible Officer of Skyway Securities under Type 1 (dealing in securities) and Skyway Futures under Type 2 (dealing in futures contracts) regulated activity. At the Target Companies, Mr. Ho is responsible for overseeing the overall operations of the Target Companies.

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LETTER FROM THE BOARD

Mr. Ho received his Bachelor of Business Administration degree in Banking and Finance from the Open University of Hong Kong (香港公開大學) in 2005 and is a member of the Association of Chartered Certified Accountants (特許公認會計師公會). He has over 10 years of experience in financial services industry. Prior to joining the Target Companies, Mr. Ho had served in other securities companies. From April 2002 to October 2006, he was employed as the financial controller of Eureka Securities Limited. From April 2003 to April 2004, he served as a Licensed Representative of Eureka Securities Limited under a number of regulated activities.

Mr. LO Tin Po (羅天保) (“Mr. Lo”), senior executive of the Target Companies and a Responsible Officer of Skyway Futures under Type 2 (dealing in futures contracts) regulated activity and a Responsible Officer of Skyway Securities under Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activity.

Mr. Lo joined the Target Companies in March 2010. He has been a Responsible Officer of Skyway Futures under Type 2 (dealing in futures contracts) regulated activity since August 2010. He has been a Responsible Officer of Skyway Securities under Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activity since May 2011 and October 2011 respectively. At the Target Companies, Mr. Lo is responsible for the management of daily operations of the Target Companies’ securities and futures and options brokerage businesses focusing on sales and business development.

Mr. Ho has over 20 years of experience and expertise in securities and futures products trading. He acted as a unit manager of dealing and floor trader of securities firms prior to his appointment by the Companies. From June 1996 to May 2004, he was employed as a floor trader & settlement clerk at SPS Commodities Limited. From May 2004 to October 2009, he was a unit manager of dealing for Bright Smart Group. From November 2009 to March 2010, he acted as a floor trader at Fulbright Securities Limited.

Ms. LEUNG Ying Mui (梁影梅) (“Ms. Leung”), the financial controller of the Target Companies.

Ms. Leung joined the Target Companies on 6 December 2010 and is responsible for the Target Companies’ financial management, supervision of accounting systems and settlement system.

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LETTER FROM THE BOARD

Ms. Leung obtained a Bachelor of Business Administration (Honours) degree in Accountancy from the City University of Hong Kong (香港城市大學) in 2008. Ms. Leung is a member of the Hong Kong Institute of Certified Public Accountants (香港會計師公會). Prior to her appointment, she was a senior associate (audit) at BDO Limited from September 2008 to December 2010.

Ms. So Regina Ka Ying (蘇家盈) (“Ms. So”), the accounting manager of the Target Companies.

Ms. So joined the Target Companies on 1 January 2012 and is responsible for the supervision and coordination of financial and accounting activities of the Target Companies, including FRR preparation and monitoring.

Ms. So obtained a Bachelor of Commerce major in Accounting from the University of Canterbury in New Zealand in 2008. She is a member of the Certified Public Accountants of Australia.

Skyway Securities Investment Limited

Director	Date of appointment
Lam Hoi Sze	8/28/2012
Ho Shu Shun	11/1/2011
So Regina Ka Ying	7/17/2014
Leung Ying Mui	7/17/2014
Lo Tin Po	7/22/2014

Skyway Futures Limited
Director	Date of appointment
Lo Tin Po	3/29/2010
Lam Hoi Sze	8/28/2012

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LETTER FROM THE BOARD

Review of Hong Kong Financial Markets

Hong Kong is a major international financial center for the world being the third largest in Asia and the seventh largest worldwide by the end of December 2014. Financial services industry is an important player for the Hong Kong economy and its contribution to Hong Kong GDP is significant, accounting for approximately 16% in 2008. While having its up and downs in syndrome with the turbulence of the world financial markets, the financial markets in Hong Kong exhibited an obvious grow trend if viewed from a long term perspective. Due to a strong regulatory and supervisory framework characterized by independence and open free market as well as being active and liquid, Hong Kong enjoys a solid foundation to develop and respond positively to market opportunities and challenges. There are few legal restraints on capital flow in Hong Kong as well as enjoying a tax friendly environment.

The diversification of investment products are the main attractiveness of Hong Kong’s platform. Among products that are newly offered, the increased range of exchangetraded funds (“ETFs”) provides Hong Kong investors with increased geographical exposure, including mainland China, India and other emerging markets. While the existence of complex financial products exposes customers to higher risk levels, Hong Kong is rapidly evolving by improving financial standards and regulations in response to financial crisis and strengthening financial education.

A total of 1,775 companies were listed on the Stock Exchange of Hong Kong Limited as at March 2015, with a total capitalization of HK$26,742 billion. In addition, Hong Kong ranked as the world’s largest initial public offering (“IPO”) market in 2011.

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LETTER FROM THE BOARD

The increasing presence of China has an influential impact on Hong Kong’s financial services industry. Being the most liquid overseas market for mainland China, Hong Kong plays the role in raising capital for Chinese enterprises. The majority of mainland companies seeking overseas listings have their listings in Hong Kong. As at year end of 2011, 640 mainland companies were listed on the Stock Exchange, with a market capitalization of US$1,246 billion that represents 55% of the total market capitalization. Under the China’s 12th Five-year Plan, mainland China was expected to support Hong Kong as offshore Renminbi center and fund management center. Along with the expanded Renminbi trade settlement scheme, Hong Kong successfully introduced more Renminbi-denominated financial products and services into its local market, including trade finance and Renminbi bonds. On top of that, an expected rise in dual-listing of stocks and ETFs is going to reinforce Hong Kong’s financial services industry. On 17 November 2014, Shanghai-Hong Kong Stock Connect (滬港通) was launched by the Shanghai Stock Exchange and the Hong Kong Stock Exchange. It is a cross-boundary investment channel that investors in each market are able to trade shares on the other market using their local brokers and clearing houses. This would further facilitate the development of the financial services industry in Hong Kong.

Implications on the Target Companies

As can be seen the Target Companies are in a most promising industry and can benefit from the industry-wide natural growth. The Target Companies with its strong connections in China can enjoy enormously with the continual loosening of controls in money flow from China and the closer cooperation and relationship between China financial markets and that of Hong Kong.

The takeover of the Target Companies by the Company will place the Target Companies in even stronger competitive position as they can enjoy better contacts as well as stronger capital base and increased capital raising capabilities whether thru debt or equity.

As at 31 July 2015, Skyway Securities have a total of over 3,000 clients and Skyway Futures have a total of over 300 clients. Based on information from the SFC, average daily turnover on the Hong Kong Stock Exchange for the 15 months from 1 January 2014 to 31 March 2015 was HK$72,760 million. For the corresponding period, the daily trading volume recorded by Skyway Securities was HK$53 million and basing on the above, the market share enjoyed by Skyway Securities for that period was approximately 0.07%.

According to the information from the Stock Exchange in relation to the Information for All Exchange Participants, Skyway Securities has a total market share of approximately 0.0468% for the period from 01 January 2015 to 30 June 2015. The total number of Stock Exchange participants during these six months period was 491 and Skyway Securities ranked 141 among all participants for that period.

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LETTER FROM THE BOARD

Hong Kong is a major international financial center, comprising a vast integrated network of institutions and markets which provide a wide range of products and services to local and international customers and investors. Hong Kong financial markets are characterized by a high degree of liquidity and operate under effective and transparent regulations. The securities’ market is one of the mainstays for the Hong Kong economy and as such is a very large market with many participants. In view of that perspective, the market share of Skyway Securities is respectable and given the size of the market and its ensuing endless potential, Skyway Securities’ management believes that Skyway Securities has great scope for potential future growth.

The business model employed by the Target Companies is to target the growing retail component in the securities trading business. The target aims to acquire additional business through better service and greater convenience to its clients. With its senior management’s roots and heritage from China and thus deriving great knowledge and connections from there, the Target Companies particularly place emphasis on sourcing business from investors originating from China. With the increasing deregulation and easing of restrictions on money and investment flow from China to Hong Kong, the Target Companies have further sharpened their focus on this source of business.

While great efforts have been made to aggressively broaden its customer base, the Target Companies are well aware of the business risks of the Hong Kong securities markets resulting from the current more and more fluid trading environment brought on by the increasing internalization of the Hong Kong market. In this regard, the Target Companies maintain a rigorous compliance and monitoring regime and to balance any risk-taking with its financial base.

Management Discussion and Analysis of Target Companies

The Accountants’ Report of the Target Companies for the years ended 31 December 2012, 2013, 2014 and five months ended 31 May 2015 was set out in Appendix II to this circular. Set out below is the management discussion and analysis of the Target Companies for the corresponding period:

Review of business

Skyway Securities

The principal activities of Skyway Securities are provision of brokerage services and securities margin financing to clients. The Skyway Securities also provides ancillary services including applications for new issues and nominee services such as collection of cash and scrip dividends. The Skyway Securities, revenue mainly comprises (i) commission income arising from securities, futures and options brokerage services; and (ii) interest income from margin financing services.

Skyway Futures

The principal activities of Skyway Futures are provision of futures and options contracts dealing services to clients.

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LETTER FROM THE BOARD

Prospect and outlook

Skyway Securities

Skyway Securities will become an indirect wholly-owned subsidiary of the Company and the financial information of Skyway Securities will be consolidated into the accounts of the Company upon Completions.

Skyway Futures

Skyway Futures will become an indirect wholly-owned subsidiary of the Company and the financial information of Skyway Futures will be consolidated into the accounts of the Company upon Completions.

Financial revenue

Skyway Securities

Skyway Securities had revenue for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 of approximately HK$48,729,000, HK$46,193,000, HK$57,184,000 and HK$19,461,000, HK$33,798,000 respectively, which represented the revenue generated from brokerage commission from dealing in securities, underwriting, sub-underwriting, placing and subplacing commission and interest income from clients.

The revenue decreased by approximately 5.2% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The decrease was mainly due to the decrease in the brokerage commission from dealing in securities and interest income from clients.

The revenue increased by approximately 23.79% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The increase was mainly due to the increase in the brokerage commission from dealing in securities.

The revenue increased by approximately 73.67% for the five month ended 31 May 2015, as compared to the five month ended 31 May 2014. The increase was mainly due to the increase in the brokerage commission from dealing in securities and Interest income from clients.

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LETTER FROM THE BOARD

Skyway Futures

Skyway Futures had revenue for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 of approximately HK$563,000, HK$1,173,000, HK$1,757,000 and HK$707,000, HK$747,000 respectively, which represented the revenue generated from brokerage commission from dealing in futures and options contracts.

The revenue increased by approximately 108.35% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The increase was mainly due to the increase in the brokerage commission from dealing in futures and options contracts.

The revenue increased by approximately 49.79% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The increase was mainly due to the increase in the brokerage commission from dealing in futures and options contracts.

The revenue increased by approximately 5.66% for the five month ended 31 May 2015, as compared to the five month ended 31 May 2014. The increase was mainly due to the increase in the brokerage commission from dealing in futures and options contracts.

Other income

Skyway Securities

Skyway Securities had recorded other revenue for the three financial years ended 31 December 2012, 2013 and 2014 and each of the five months ended 31 May 2014 and 2015 of approximately HK$761,000, HK$1,037,000, HK$3,211,000 and HK$1,182,000 and HK$263,000 respectively which mainly comprised of sundry income.

Skyway Futures

Skyway Futures had recorded other revenue for the three financial years ended 31 December 2012, 2013 and 2014 and each of the five months ended 31 May 2014 and 2015 of approximately HK$0, HK$1,000, HK$10,000 and HK$2,000 and HK$9,000 respectively which mainly comprised of interest from clients.

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LETTER FROM THE BOARD

Administrative expenses

Skyway Securities

Skyway Securities had recorded administrative expenses of approximately HK$24,400,000, HK$12,765,000, HK$12,102,000 and HK$5,345,000 and HK$5,437,000 for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 respectively, which mainly comprised of staff costs, depreciation of property and equipment, commission expenses and legal and professional fees.

The administrative expenses decreased by approximately 47.68% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The decrease was mainly due to the decrease in legal and professional fees.

The administrative expenses decreased by approximately 5.19% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The decrease was mainly due to the decrease in legal and professional fees.

Skyway Futures

Skyway Futures had recorded administrative expenses of approximately HK$145,000, HK$333,000, HK$679,000 and HK$391,000 and HK$192,000 for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 respectively, which mainly comprised of commission expenses and depreciation.

The administrative expenses increased by approximately 129.66% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The increase was mainly due to the increase in commission expenses.

The administrative expenses increased by approximately 103.9% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The increase was mainly due to the increase in commission expenses.

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LETTER FROM THE BOARD

Other operating expenses

Skyway Securities

Skyway Securities had recorded other operating expenses of approximately HK$9,975,000, HK$8,648,000, HK$9,251,000 and HK$3,531,000 and HK$4,716,000 for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 respectively, which mainly comprised of operating lease expenses, operating lease management fee, stock quote and market data charges, settlement and clearing expenses and system and network maintenance fee.

The other operating expenses decreased by approximately 13.30% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The decrease was mainly due to the decrease in operating lease expenses and stock quote and market data charges.

The other operating expenses increased by approximately 6.97% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The increase was mainly due to the increase in operating lease expenses and operating lease management fee.

Skyway Futures

Skyway Futures had recorded other operating expenses of approximately HK$718,000, HK$586,000, HK$637,000 and HK$171,000 and HK$190,000 for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 respectively, which mainly comprised of operating expenses.

The other operating expenses decreased by approximately 18.38% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The decrease was mainly due to the decrease in system and network maintenance fee.

The other operating expenses increased by approximately 8.7% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The increase was mainly due to the increase in system and network maintenance fee.

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LETTER FROM THE BOARD

Finance costs

Skyway Securities

The Skyway Securities recorded finance costs of approximately HK$2,986,000, HK$3,187,000, HK$4,785,000 and HK$1,634,000, HK$3,736,000 for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 respectively which were incurred representing the interest expenses for the outstanding Borrowings and bank overdrafts wholly repayable within five years.

The finance costs increased by approximately 6.73% for the year ended 31 December 2013, as compared to the year ended 31 December 2012. The increase was mainly due to the increase in bank borrowings.

The finance costs increased by approximately 50.14% for the year ended 31 December 2014, as compared to the year ended 31 December 2013. The increase was mainly due to the increase in bank borrowings and bank overdrafts.

The finance costs increased by approximately 128.64% for the five months ended 31 May 2015, as compared to the five months ended 31 May 2014. The increase was mainly due to the increase in bank borrowings and bank overdrafts.

Skyway Futures

The Skyway Futures recorded finance costs of approximately HK$9,000, HK$5,000, HK$4,000 and HK$2,000, HK$3,000 for the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015 respectively which were incurred representing the interest expenses.

Profit for the year

Skyway Securities

During the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015, the Skyway Securities recorded net profit of approximately HK$14,253,000, HK$29,459,000, HK$29,212,000 and HK$6,758,000, HK$37,625,000 respectively. The increase in the profit for the years ended 31 December 2012 and 2013 and the five months ended 31 May 2014 and 2015 respectively were due to the increase in share of profit of a joint venture and decrease in legal and professional fees.

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LETTER FROM THE BOARD

Skyway Futures

During the financial year ended 31 December 2012, Skyway Futures recorded a net loss of approximately HK$309,000. During the two financial years ended 31 December 2013, 2014 and the five months ended 31 May 2014 and 2015, Skyway Futures recorded net profit of approximately HK$250,000, HK$407,000 and HK$145,000, HK$308,000 respectively. The increase in the profit for the years ended 31 December 2013, 2014 and the five months ended 31 May 2014 and 2015 were due to the increase in revenue of brokerage commission.

Liquidity and financial resources

Skyway Securities

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, Skyway Securities had net current assets of approximately HK$239,385,000, HK$254,970,000, HK$279,335,000 and HK$338,730,000 respectively. The current ratio (being current assets over current liabilities) as at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015 were approximately 2.45 times, 2.77 times, 2.48 times and 1.88 times respectively. The increase in current ratio from 2012 to 2013 were mainly due to the decrease in bank overdrafts and increase in bank balances.

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, Skyway Securities had net assets of approximately HK$313,447,000, HK$342,906,000, HK$372,118,000 and HK$344,021,000 respectively. The debt ratio (being total liabilities over total assets) as at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015 were approximately 0.35 times, 0.30 times, 0.34 times and 0.53 times respectively. The decrease in the debt ratio from 2012 to 2013 was mainly due to the decrease in bank overdrafts. The increase in the debt ratio for from 2013 to 2014 and further to 2015 was mainly due to the increase in borrowings and bank overdrafts.

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LETTER FROM THE BOARD

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, the bank balances of the Skyway Securities amounted to approximately HK$46,975,000, HK$45,441,000, HK$67,436,000 and HK$129,269,000 respectively, which were mainly denominated in Hong Kong dollars. As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, the Skyway Securities had outstanding bank borrowings amounted to approximately HK$57,948,000, HK$60,000,000, HK$70,000,000 and HK$100,000,000 respectively and were jointly and severally guaranteed by a director and some of the shareholders of the Skyway Securities. The average effective interest rate on unsecured and guaranteed bank loans was approximately 2.53%, 2.39% and 2.35% per annum at 31 December 2012, 2013 and 2014 respectively.

The Skyway Securities had amounts due to shareholders of approximately HK$11,000,000 as at 31 December 2014. All of these amounts were unsecured, noninterest bearing and will be fully settled with the next 12 months’ from the end of reporting period.

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, bank overdrafts with carrying amount of approximately HK$53,977,000, HK$34,132,000, HK$39,173,000 and HK$85,279,000 respectively. The average effective interest rate was approximately 3.99%, 4.78% and 5.00% per annum at 31 December 2012, 2013 and 2014 respectively. The bank overdrafts were denominated in Hong Kong dollars.

Skyway Futures

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, the Skyway Futures had net current assets of approximately HK$7,297,000, HK$7,571,000, HK$7,986,000 and HK$8,378,000 respectively. The current ratio (being current assets over current liabilities) as at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015 were approximately 2.64 times, 1.99 times, 1.41 times and 1.29 times respectively. The decrease in current ratio for the year ended 31 December 2013 was mainly due to the decrease in bank balance in house accounts.

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, the Skyway Futures had net assets of approximately HK$7,297,000, HK$7,571,000, HK$7,986,000 and HK$8,378,000 respectively. The debt ratio (being total liabilities over total assets) as at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015 were approximately 0.32 times, 0.44 times, 0.66 times and 0.73 times respectively. The increase in the debt ratio for the year ended 31 December 2013 was mainly due to the decrease in bank balance in house accounts. The increase in the debt ratio for the year ended 31 December 2014 was mainly due to the increase in accounts payable.

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LETTER FROM THE BOARD

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, the bank balances of the Skyway Futures amounted to approximately HK$9,538,000, HK$8,161,000, HK$13,396,000 and HK$20,855,000 respectively, which were mainly denominated in Hong Kong dollars.

Capital structure

Skyway Securities

As at 31 December 2012, 2013 and 2014, the Skyway Securities had the same total number of issued shares of 260,000,000 shares and share capital of HK$1 each.

During the year of 31 December 2012, Skyway Securities declared a dividend of HK$6,240,000. As for the years ended 31 December 2013 and 2014 respectively, Skyway Securities did not declare or pay any dividend.

Skyway Futures

As at 31 December 2012, 2013 and 2014, Skyway Futures had the same total number of issued shares of 10,000,000 shares and share capital of HK$1 each.

As for 31 December 2012, 2013 and 2014, Skyway Futures did not declare or pay any dividend.

Treasury policies

Skyway Securities

During the three financial years ended 31 December 2012, 2013, 2014 and each of the five months ended 31 May 2014 and 2015, Skyway Securities usually financed its working capital through internal funds and bank loans. To manage liquidity risk, the management of Skyway Securities closely monitors the liquidity position to ensure that the liquidity structure of Skyway Securities’ assets, liabilities and commitments can meet its funding requirements.

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LETTER FROM THE BOARD

Skyway Futures

During the three financial years ended 31 December 2012, 2013, 2014 and the five months ended 31 May 2014 and 2015, Skyway Futures usually financed its working capital through internal funds. To manage liquidity risk, the management of Skyway Futures closely monitors the liquidity position to ensure that the liquidity structure of Skyway Futures’ assets, liabilities and commitments can meet its funding requirements.

Gearing ratio

Skyway Securities

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, the gearing ratios of Skyway Securities which were calculated by dividing net debt (being total borrowings of Skyway Securities less cash and bank balances of Skyway Securities) by total equity attributable to holders of Skyway Securities were 0.21, 0.14, 0.11 and 0.16 respectively.

Skyway Futures

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2015, Skyway Futures had no outstanding borrowings and as a result, there have no gearing ratio’s for Skyway Futures for the aforementioned periods.

Capital expenditures

Skyway Securities

For the years ended 31 December 2012, 2013, 2014, and the five months ended 31 May 2015, capital expenditure of approximately HK$180,000, HK$0, HK$461,000 and HK$47,000 were incurred respectively representing the expenditures on property and equipment.

Skyway Futures

For the years ended 31 December 2012, 2013, 2014, and the five months ended 31 May 2015, capital expenditure of approximately HK$0, HK$137,000, HK$0 and HK$0 were incurred respectively representing the expenditures on equipment.

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LETTER FROM THE BOARD

Employees and remuneration policies

Skyway Securities

As at 31 December 2012, 2013, 2014 and the five months ended 31 May 2014 and 2015, the total number of employees of Skyway Securities were 46, 49, 43, 43 and 48 respectively. The staff costs for the three financial years ended 31 December 2012, 2013, 2014 and the five months ended 31 May 2014 and 2015 were approximately HK$9,960,000, HK$8,956,000, HK$9,221,000, HK$3,529,000 and HK$3,519,000 respectively.

Skyway Securities participates in the Mandatory Provident Fund scheme established under the Mandatory Provident Fund Ordinance in December 2000.

Skyway Futures

The employees of Skyway Futures are nearly same with the related company, Skyway Securities Investment Limited, in respect of their services to Skyway Futures and Skyway Securities. The employees received emoluments and contribution to the MPF Scheme from Skyway Securities. No apportionment has been made as it is impracticable to apportion this amount between their services to Skyway Futures and Skyway Securities.

Foreign exchange exposure

Skyway Securities

The cash and bank balances of Skyway Securities were mainly denominated in Hong Kong dollars. The business operation of Skyway Securities had been primarily conducted in Hong Kong dollars. During each of the three financial years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, the impact of fluctuations in foreign currency on Skyway Securities were generally minimal and Skyway Securities did not have any foreign currency hedging policy. Skyway Securities does not use financial instruments for hedging purpose. No foreign currency net investments are hedged by currency borrowings or other hedging instruments.

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LETTER FROM THE BOARD

Skyway Futures

The cash and bank balances of Skyway Futures were mainly denominated in Hong Kong dollars. The business operation of Skyway Futures had been primarily conducted in Hong Kong dollars. During each of the three financial years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2014 and 2015, the impact of fluctuations in foreign currency on Skyway Futures were generally minimal and Skyway Futures did not have any foreign currency hedging policy. Skyway Futures does not use financial instruments for hedging purpose. No foreign currency net investments are hedged by currency borrowings or other hedging instruments.

Contingent liabilities

Skyway Securities

As at 31 May 2015, Skyway Securities did not have any contingent liabilities.

Skyway Futures

As at 31 May 2015, Skyway Futures did not have any contingent liabilities.

Pledge of assets

Skyway Securities

As at 31 December 2012, 2013 and 2014 and five months ended 31 May 2015, marketable securities provided by margin clients amounting to approximately HK$212,978,000, HK$171,027,000, HK$240,896,000 and HK$376,649,000 respectively were pledged to secure the general backing facilities granted by the banks.

Skyway Futures

As at 31 December 2012, 2013 and 2014 and five months ended 31 May 2015, no assets were pledged.

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LETTER FROM THE BOARD

Future plans for material investment and capital assets and new business

Skyway Securities

As at the Last Practicable Date, Skyway Securities had no future plan for material investment and capital assets and new business.

Skyway Futures

As at the Last Practicable Date, Skyway Futures had no future plan for material investment and capital assets and new business.

The Target Companies have seen a steady progress in its businesses and operations for the periods reported in the accountants’ reports. It’s revenue had grown from HK$48,729,000 in the year ended 31 December 2012 to HK$57,184,000 in year ended 31 December 2014 and the average annual growth rate was approximately 5.48%. The corresponding figures for profits are HK$14,253,000 and HK$29,212,000 respectively and the average annual growth rate was approximately 27.02%. The revenue for the unaudited five month ended in 31 May 2015 and the audited five months figure for the five months ended 31 May 2014 are HK$33,798,000 and HK$19,461,000 respectively. The corresponding figures for profits are HK$37,625,000 and HK$6,758,000 respectively. Comparing the five months revenue for each of the years ended in 31 May 2014 and 2015, the revenue growth rate is approximately 73.67% and the profit growth rate is approximately 456.75%. The Target Companies believe that such performance will likely be enhanced in the future with better business environment as discussed under the section “Business Prospects”.

Major risks of the Target Companies’ business

1) In the current environment where money laundering is a major concern particularly for the financial services, there could be risks for inadvertent and/or deliberate infringement. To mitigate this, the Target Companies need a carefully constructed compliance rules and enforcement;
2) The financial market can be subjected to unpredictable turbulence and as such is outside of any possible controls. To mitigate this, the Target Companies need to have clear forward planning for unforeseen emergencies and to maintain a strong and liquid capital base and always avail themselves of diversified funding sources;

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LETTER FROM THE BOARD

3) Strong competitive market. There are many entities offering similar services to that of the Target Companies. To ensure that the Target Companies stay ahead of the competition, the Target Companies need to provide superior services both in terms of scope and performance. To achieve this, the Target Companies have to maintain strong capital base, retain good human resources and to provide superior system and environment; and
4) Risks relating to the provision of credit. Margin financing is a key component and an integral part of the Target Companies’ businesses. To mitigate risks associated with financing activities, the Target Companies have developed stringent credit evaluation and monitoring procedure. It is important such are strictly enforced, adhered to and supervised.

The Target Companies believe that the Acquisitions will offer it additional windows of opportunities through greater ability to raise capital and financing as well as the connections, particular to listed companies, made available to the Target Companies by the Company. With additional resources and connections, the Target Companies will be more aggressive towards underwriting and in addition will target to add a range of new activities including fund management and financial advisory services. Recently, in June 2015, the Target Companies have commenced trading securities for their own account. The management of the Target Company anticipates that this line of proprietary trading in the future will develop to become a significant contributor to the Target Companies’ turnovers and profits.

THE CONSIDERATION SHARES

Upon Completions, the Company shall allot and issue a total of 2,600,000,000 Consideration Shares at the Issue Price.

The Consideration Shares represent (i) approximately 27.47% of the existing issued Share capital of the Company as at the date of this circular; and (ii) approximately 21.55% of the issued Share capital of the Company as enlarged by the allotment and issue of all the Consideration Shares.

The Issue Price of HK$0.25 per Consideration Share represents:

(i) a discount of approximately 19.35% to the closing price of HK$0.310 per Share as quote on the Stock Exchange on 6 May 2015, being the Last Trading Date;

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LETTER FROM THE BOARD

(ii) a discount of approximately 18.30% over the average closing price of approximately HK$0.306 per Share as quoted on the Stock Exchange for the five trading days immediately prior to the Lasting Trading Date.
(iii) a premium of approximately 47.06% to the closing price of HK$0.170 per Share as quoted on the Stock Exchange on 25 August 2015, being the Latest Practicable Date; and
(iv) a premium of approximately 33.40% to the average closing price of HK$0.1874 per Share for the last five consecutive trading days immediately prior to the Latest Practicable Date as quoted on the Stock Exchange.
(v) a discount of approximately 31.13% to the Company’s net asset value per Share of approximately HK$0.363 as at 31 March 2015.

The Consideration Shares are to be issued by the Company under Specific Mandate sought from the Shareholders at the SGM. The Consideration Shares, when allotted and issued, will rank pari passu in all respects with all the Shares then in issue.

The Issue Price was arrived at after arm’s length negotiation between the parties to the S&P Agreement 1 and S&P Agreement 2 after taking into account the prevailing market price of the Shares. The Directors consider that the Issue Price is fair and reasonable.

An application will be made to the Stock Exchange by the Company for the listing of, and permission to deal in, the Consideration Shares.

PROMISSIORY NOTES 1

The terms of the Promissory Notes 1 have been negotiated on an arm’s length basis and the principal terms of which are as follows:

Issuer: the Company Principal amount: HK$445,500,000 Issue date: Completion Date Maturity date: third anniversary of the date of initial issue of the Promissory Notes 1

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LETTER FROM THE BOARD

Interest:

The Promissory Notes 1 bear interest at the rate of 2.5% per annum and calculated on a 365-days/year basis over the principal amount at such sum as may be outstanding from time to time.

Application for listing: No application will be made for the listing of the Promissory Notes 1 on any Stock Exchange.

The interest rate of 2.5% per annum was determined after arm’s length commercial negotiation between the parties with reference to prevailing market condition, financial position of the Company. The Directors believe that the interest rate of the Promissory Notes of 2.5% per annum is fair and reasonable for debt securities of similar nature and maturity. The Directors have made such after referencing similar market comparable in the range of 0% to 9% per annum. In view of the above, the Directors consider the terms of the Promissory Notes 1 are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

PROMISSIORY NOTES 2

The terms of the Promissory Notes 2 have been negotiated on an arm’s length basis and the principal terms of which are as follows:

Issuer: the Company Principal amount: HK$104,500,000 Issue date: Completion Date Maturity date: third anniversary of the date of initial issue of the Promissory Notes 2 Interest: The Promissory Notes 2 bear interest at the rate of 2.5% per annum and calculated on a 365-days/year basis over the principal amount at such sum as may be outstanding from time to time. Application for listing: No application will be made for the listing of the Promissory Notes 2 on any Stock Exchange.

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LETTER FROM THE BOARD

The interest rate of 2.5% per annum was determined after arm’s length commercial negotiation between the parties with reference to prevailing market condition, financial position of the Company. The Directors believe that the interest rate of the Promissory Notes of 2.5% per annum is fair and reasonable for debt securities of similar nature and maturity. The Directors have made such after referencing similar market comparable in the range of 0% to 9% per annum. In view of the above, the Directors consider the terms of the Promissory Notes are fair and reasonable and in the interest of the Company and its Shareholders as a whole.

REASONS FOR THE ACQUISITIONS

The Company principally engages in supply and procurement of commodities, provision of finance, securities investment and real estate business. As aforementioned, one of the Company’s principal lines of businesses is financial services encompassing money lending and securities trading. The Directors are of the view that, the Acquisitions would strongly complement the Company’s financial services activities and provide both synergistic benefits as well as a way to establish both vertical and horizontal integration of its securities trading.

The Company also believes the timing of the Acquisitions coincides well with the business cycle of the financial services in Hong Kong with the recent loosening of regulation on investments from China to Hong Kong. Such de-regulation has significantly improves the sentiment of the Hong Kong financial market with large amount of money pouring into and as a result spikes in both the share prices of listed vehicles and the turnover recorded at the Stock Exchange in Hong Kong. This certainly bodes well for the business and performance of service providers in the financial services sectors such as each of the Target Companies. Furthermore, the Directors believe that the Target Companies will benefit from the takeover by the Company, as the Company can assist the Target Companies to broaden contacts with Hong Kong listed companies. It is expected that the Target Companies can venture into new activities such as providing corporate finance advisory services and increased underwriting businesses. Conversely, the Target Companies can help the Company in further development of the provision of finance business as the Target Companies may introduce clients who are looking for finance other than margin financing to the Company. The Directors therefore believe the Acquisitions are in the best interest of the Company and its Shareholders as a whole.

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LETTER FROM THE BOARD

FINANCIAL IMPACT OF THE ACQUISITION

Based on the pro forma financial information of the Enlarged Group set out in Appendix III to this circular and the bases and assumptions taken into account in preparing such pro forma financial information, the Group’s total assets and total liabilities would be increased by approximately HK$1,201 million and approximately HK$898 million respectively as a result of the Acquisitions. The details of the financial effect of the Acquisitions on the financial position and results of the Group together with the bases and assumptions taken into account in preparing the unaudited pro forma financial information are set out, for illustration purpose only, in Appendix III to this circular.

Upon Completion, the entities comprising Target Companies will become subsidiaries of the Company and results of the Target Companies will be consolidated into the Enlarged Group’s results. According to the annual report of the Group for the year ended 31 March 2015, the Group recorded an audited consolidated profit attributable to shareholders of the Company of approximately HK$487 million for the year ended 31 March 2015. According to the accountants’ reports of the Target Group as set out in Appendix II to this circular, the Target Companies recorded an audited consolidated profit attributable to shareholders of the Target Company of approximately HK$30 million for the year ended 31 December 2014. The Directors consider that the Acquisitions will bring positive contribution to the earnings of the Enlarged Group but the quantification of such contribution will depend on the future performance of the Target Companies.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

The following chart sets out the shareholding structure of the Company, (i) as at the date of this circular; (ii) immediately after issurance of the Consideration Shares at the Completion Date; and (iii) immediately after issurance of the Consideration Shares at the Completion Date, the Bonus Warrants fully exercised and fully issued and allotted new shares under the Share Option Scheme:

Substantial Shareholders Senworth Limited Consideration Shares 1st Vendor_(Note 1) 2nd Vendor 3rd Vendor 4th Vendor(Note 2)_ Vendor 2 Bonus Warrants holders Share Options Scheme Other Shareholders	As at the Latest Practicable Date Number of Shares Percentage (approx.) 1,215,010,000 12.84 306,000,000 3.23 10,090,000 0.11 299,820,000 3.17 7,633,215,898 80.65 9,464,135,898 100.00	Immediately after insurance of the Consideration Shares at Completion Date Number of Shares Percentage (approx.) 1,215,010,000 10.07 1,948,048,200 16.15 233,976,600 1.94 120,023,200 1.00 419,862,000 3.48 494,000,000 4.09 7,633,215,898 63.27 12,064,135,898 100.00	Immediately after insurance of the Consideration Shares at the Completion Date, the Bonus Warrants fully exercised and fully issued and allotted new shares under the Share Option Scheme Number of Shares Percentage (approx.) 1,215,010,000 9.60 1,948,048,200 15.40 233,976,600 1.85 120,023,200 0.95 419,862,000 3.32 494,000,000 3.90 159,059,955 1.26 427,835,050 3.38 7,633,215,898 60.34 12,651,030,903 100.00	Immediately after insurance of the Consideration Shares at the Completion Date, the Bonus Warrants fully exercised and fully issued and allotted new shares under the Share Option Scheme Number of Shares Percentage (approx.) 1,215,010,000 9.60 1,948,048,200 15.40 233,976,600 1.85 120,023,200 0.95 419,862,000 3.32 494,000,000 3.90 159,059,955 1.26 427,835,050 3.38 7,633,215,898 60.34 12,651,030,903 100.00
				100.00

Note:

306,000,000 shares was held by Liu Yuelan, 1st Vendor’s sister.
298,820,000 shares was held by Chen Xiangru, 4th Vendor’s spouse.

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LETTER FROM THE BOARD

To the best knowledge of the Directors, the Bonus Warrants holders and Share Option holders are Independent Third Parties to the Company.

IMPLICATIONS OF THE ACQUISITIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios under Rule 14.07 of the Listing Rules in respect of the Acquisitions exceeds 25% but below 100%, the Acquisitions constitute a major transaction of the Company under Chapter 14 of the Listing Rules, and is therefore subject to the reporting, circular and Shareholders’ approval requirements thereunder.

To the best of the knowledge, information and belief of the Directors, no Shareholder has a material interest in the transactions contemplated under the Agreements. As such, no Shareholder will be required to abstain from voting on the resolution(s) to approve, among other things, the Agreements and the transactions contemplated thereunder and the grant of the Specific Mandate and the issue of the Promissory Notes.

SGM

A notice convening the SGM is set out on pages 171 to 173 of this circular. The SGM will be convened for the purpose of considering and, if deemed appropriate, approving, among other things, the Agreements and the transactions contemplated thereunder and the grant of the Specific Mandate and the issue of the Promissory Notes.

A form of proxy for use at the SGM is enclosed. Whether or not you intend to attend the SGM, you are requested to complete and return the form of proxy enclosed with this circular in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible, but in any event, not less than forty-eight (48) hours before the time appointed for holding the SGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish.

The ordinary resolution proposed to be approved at the SGM will be taken by poll and an announcement will be made by the Company following the conclusion of the SGM to inform the Shareholders of the results.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Agreements, the transactions contemplated thereunder and the grant of the Specific Mandate and the issue of the Promissory Notes 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 Shareholders to vote in favour of the relevant resolutions to be proposed at the SGM.

As the Completions are subject to the fulfilment of certain conditions precedent, the issue of this circular should not be regarded in any way as implying that the Acquisitions will be completed. Therefore, the Shareholders and investors in general should exercise caution when dealing in the Shares.

By order of the Board Mission Capital Holdings Limited Suen Yick Lun Philip Acting Chairman and Managing Director

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY OF THE GROUP

The following is a summary of certain financial information of the audited consolidated results for the three financial years ended 31 March 2013, 2014 and 2015, as extracted from the annual reports of the Company for each of the three years ended 31 March 2013, 2014 and 2015. Save as disclosed on the face of the financial information below, there were no items which were extraordinary or exceptional because of size, nature or incidence for the audited consolidated results for the three financial years ended 31 March 2013, 2014 and 2015.

Extracts of the financial results for 3 years ended 31 March 2015

	For the	year ended 31	March
	2015	2014	2013
	HK$’000	HK$’000	HK$’000
	(Audited)	(Audited)	(Audited)
Revenue	300,700	1,369,188	757,600
Profit/(loss) before taxation	551,402	417,153	(68,099)
Taxation	(64,345)	(70)	(1,025)
Profit/(loss) for the period/year
from continuing operations	487,057	417,083	(69,124)
Profit/(loss) for the period/year
from discontinued operation			7,930
Profit/(loss) for the period/year	487,057	417,083	(61,194)
Earnings/(loss) per Share
attributable to owners of the
Company
From continuing and discontinued
operations
Basic (Hong Kong cents per	10.40 10.74 (restated)		(2.05)
Share)
Diluted (Hong Kong cents per	10.35 10.64 (restated)		(2.05)
Share)
From continuing operations
Basic (Hong Kong cents per	10.40 10.74 (restated)		(2.33)
Share)
Diluted (Hong Kong cents per	10.35 10.64 (restated)		(2.33)
Share)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Extracts of the financial position for 3 years ended 31 March 2015

		As at 31 March
	2015	2014	2013
	HK$’000	HK$’000	HK$’000
	(Audited)	(Audited)	(Audited)
Non-current assets	349,496	20,169	21,152
Current assets	2,370,249	1,864,970	1,286,389
Current liabilities	179,635	145,290	80,998
Total assets less current liabilities	2,540,110	1,739,849	1,226,543
Non-current liabilities	211,375	146,424	95,906
Net assets	2,328,735	1,593,425	1,130,637

(i) the financial information of the Group for the year ended 31 March 2015 is disclosed from pages 31 to 89 in the financial results of the Company for the year ended 31 March 2015 published on 24 July 2015 (It can be accessed on the website of the Stock Exchange at http://www.hkexnews. hk/listedco/listconews/SEHK/2015/0626/LTN201506261239.pdf);
(ii) the financial information of the Group for the year ended 31 March 2014 is disclosed from pages 30 to 113 in the annual report of the Company for the year ended 31 March 2014 published on 24 July 2014 (It can be accessed on the website of the Stock Exchange at http://www.hkexnews. hk/listedco/listconews/SEHK/2014/0724/LTN20140724456.pdf);
(iii) the financial information of the Group for the year ended 31 March 2013 is disclosed from pages 34 to 115 in the annual report of the Company for the year ended 31 March 2013 published on 29 July 2013 (It can be accessed on the website of the Stock Exchange at http://www.hkexnews. hk/listedco/listconews/SEHK/2013/0729/LTN20130729274.pdf); and

All of the financial information as mentioned above are also available on the website of the Company at http://www.missioncapital.com.hk

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. INDEBTEDNESS STATEMENT OF THE ENLARGED GROUP

As at the close of business on 30 June 2015, being the latest practicable date for the purpose of preparing this indebtedness statement prior to the printing of this circular, the total indebtedness of the enlarged group is as follows:

Borrowings

As at the close of business on 30 June 2015, the Enlarged Group had total borrowings of approximately HK$393.9 million, which include unguaranteed and unsecured notes with carrying amount of HK$151.1 million (the nominal value is HK$150.00 million carried at 5% per annum and will mature in 2019 and 2020), guaranteed and secured bank overdrafts of HK$107.8 million and guaranteed and secured term loans of HK$135 million. Certain term loans and certain bank overdrafts are secured by marketable securities and certain bank overdrafts are secured by a property owned by the controlling shareholder of the Target Companies. All bank overdrafts and term loans are guaranteed by shareholders of the Target Companies. Certain bank overdrafts are also guaranteed by a director and a related company which is beneficially owned by shareholders of the Target Companies.

Financial guarantees

As at the close of business on 30 June 2015, the Company had a corporate guarantee to a bank in respect of a banking facility granted to its subsidiary. In addition, the Company also had a corporate guarantee to a licensed securities broker in respect of margin facilities granted to its subsidiaries. As at the close of business on 30 June 2015, margin facilities were not utilized.

The lending bank has confirmed that, upon the Completion, all old facilities to the respective companies will be cancelled and any and all cross guarantees that may exist at that time will be permanently released. There were separate facilities granted by the lending bank to each of these former associate companies with Skyway Securities providing a corporate guarantee in support of these said facilities. Upon the Completion and the ensuing release of the guarantee, these former associated companies no longer have any relationship with Target Companies or the Company, other than sharing a common shareholder and a common director, namely Mr. Lam Hoi Sze.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Facilities

As at the close of business on 30 June 2015, the Enlarged Group had an aggregate available bank and margin facilities of approximately HK$1,547.9 million, comprising bank facilities of approximately HK$861 million in which approximately HK$242.8 million was utilized and margin facilities (from a licensed securities broker) of approximately HK$686.9 million which are not yet utilized.

Disclaimer

Save as aforesaid, apart from intra-group and normal trade and other payables, the Group did not have any outstanding bank overdrafts, loans, debt securities, borrowings or other similar indebtedness, liabilities under acceptances and acceptance credits, debentures, mortgages, charges, finance lease, hire purchases commitments, which were either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities at the close of business on 30 June 2015.

To the best knowledge of the Directors, having made all reasonable enquires there has been no material change in indebtedness or contingent liabilities of the Group since 30 June 2015 and up to the Latest Practicable Date.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the proposed Acquisition and financial resources available to the Enlarged Group, including cash and bank balances as well as the available facilities, the Enlarged Group will have sufficient working capital to satisfy the requirements for at least the next 12 months from the date of this Circular.

4. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2015, being the date to which the latest published audited financial statements of the Group was made up.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. BUSINESS PROSPECTUS

Supply and Procurement

The Group’s supply and procurement segment continued to focus on the sourcing, transporting and supplying of metal minerals and recyclable metal materials during the year under review. When compared to last year, the segment recorded a 80.1% decrease in revenue to approximately HK$269.0 million (2014: approximately HK$1,352.3 million) and segment loss of approximately HK$2.2 million which turned from a segment profit of approximately HK$23.6 million in last year. The declines in the segment’s revenue and profit were principally attributed to the decreased volume of metal minerals transacted during the year under review, which was in turn mainly a result of dropping in demand for building materials following the slowdown of property sector in the People’s of Republic of China.

The commodity market has recently shown increased volatility with the sharp decline in oil price being a prime sample. Such swings substantially increase potential risks but also brings with it many opportunities. The Company will adopt a cautious approach but will also be ready to pounce whenever good opportunities arise.

Securities Investment

During the year under review, the segment revenue, which included dividend income from investment in listed equity securities, and interest income from investment in convertible bonds and interest bearing notes of approximately HK$28.8 million increased by approximately 433.3% from approximately HK$5.4 million as compared to the prior year. As a whole, the segment profit of approximately HK$625.2 million in the current year increased by 49.8% from approximately HK$417.3 million in the prior year. The increase in profit was mainly attributable to:

(1) net gains on investments at fair value through profit or loss of approximately HK$596.4 million, increased by 44.8% from approximately HK$411.9 million compared to the prior year; and
(2) an increase in dividend income from investment in listed equity securities by approximately HK$23.5 million, from approximately HK$4.6 million to approximately HK$28.1 million compared to the prior year.

– 54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31 March 2015, the Group’s securities portfolio mainly constituted of listed equity securities in conglomerate company, pharmaceutical company, infrastructure company, property company, mining and resources company, industrial materials company, consumer electronics company, healthcare services company, agricultural machinery company, apparels and accessories company, automobile retailing company, financial services company, semiconductors company, and movies and entertainment company. There was no material change in the Group’s securities portfolio except that it included the listed equity securities in banking company and construction company in last year.

The Company is encouraged by the recent performance of its securities investment and remains positive towards the general security environment for the near future.

Money Lending Business

The interest income and segment profit generated by the Group’s financing segment dropped by 74.8% to approximately HK$2.9 million (2014: approximately HK$11.5 million) and 75.7% to approximately HK$2.7 million (2014: approximately HK$11.1 million) respectively comparing to the prior year. It was mainly due to the comparatively lower average amount of loans lent to borrowers and the decrease in number of borrowers. The loan portfolio held by the Group amounted to approximately HK$120.0 million (2014: approximately HK$42.2 million) at the year end.

To promote mutual opening up of the capital markets in Shanghai and Hong Kong, a Shanghai-Hong Kong Stock Connect Scheme (the “Scheme”) was launched on 17 November 2014 which is a cross-border trading arrangement for investors in Shanghai and Hong Kong to trade and settle shares listed in Hong Kong and Shanghai Stock Exchanges through their exchange and clearing houses. It is positively expected the Scheme will stimulate the financial market and strengthen the link with investors in future. Furthermore, the interest rate will be rising in the near future, however, the Group remains positive towards the economy in Hong Kong. Looking ahead, the Group will continually enhance its existing businesses and will seek potential investment and business opportunities to enhance the value of the Shareholders of the Company and the Company as a whole. As at the Latest Practicable Date, the Company has not entered into any acquisition agreement or has identified any target for development of money lending business and commodity trading business.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

While the Group will seek money-lending opportunities whenever the risk and return seems favorable, the Group however will devote its major attention to high yield end of the market in particular. It will also be more aggressive towards loans with higher amounts per deal that would enhance return through the savings in administration costs per deal.

EVENTS AFTER 31 MARCH 2015 BEING THE DATE ON WHICH THE LATEST PUBLISHED AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP WERE MADE UP

As disclosed in the announcement of the Company dated 16 February 2015, Million Brilliance Limited (“Million Brilliance”), an indirect wholly-owned subsidiary of the Company entered into the conditional agreement with Qualipak Development Limited (“Qualipak Development”) pursuant to which Million Brilliance agreed to purchase sale shares in Empire New Assets Limited (“Empire New Assets”), a company incorporated in the British Virgin Islands, representing entire issued share capital of Empire New Assets, and assignment of the Loan of HK$32,216,000 at a consideration of HK$90,000,000. The consideration is satisfied by (i) HK$10,100,000 payable in cash and (ii) HK$79,900,000 payable by issue of 850,000,000 consideration shares in the Company. Empire New Assets is principally engaged in holding of property. The shares in Empire New Assets acquired are classified as property held for sale purposes for the Company and 850,000,000 shares were allotted under general mandate to the nominee of Qualipak Development. The acquisition of trading assets was completed on 20 May 2015. The trading assets were subsequently disposed to an independent third party at a consideration of HK$95,000,000 on 24 June 2015. A trading profit of HK$5,000,000 was recorded for the transaction of the acquisition and disposal of the trading assets.

– 56 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

The following is the text of a report received from the reporting accountants, Deloitte Touche Tohmatsu, Hong Kong, prepared for the purpose of incorporation in this circular.

==> picture [68 x 52] intentionally omitted <==

26 August 2015

The Directors

Mission Capital Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) related to Skyway Securities Investment Limited (the “Target Co 1”) and its subsidiary (hereinafter collectively referred to as the “Target Gp 1”) for each of the three years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015 (the “Relevant Periods”), for inclusion in the circular issued by Mission Capital Holdings Limited (the “Company”) dated 26 August 2015 (the “Circular”) in connection with the proposed acquisition of the entire issued capital and the shareholder’s loan of the Target Co 1 from the Vendors 1 and Vendor 2 as defined in the Circular (the “Acquisition”).

The Target Co 1 is a private limited company incorporated in Hong Kong and is a license corporation under the Hong Kong Securities and Futures Ordinance with the following regulated activities: (i) Type 1: Dealing in securities; and (ii) Type 4: Advising on securities. The principal activities of the Target Co 1 are provision of brokerage services and securities margin financing to clients.

During the Relevant Periods and as at the date of this report, the Target Co 1 has direct interests in the following subsidiary:

		Issued and
	Place of	fully paid up	Percentage of issued		share	capital
Name of subsidiaries	incorporation	share capital	and voting	rights held by	the Target Co 1		Principal activities
						At the
			At 31 December			date of
			2012	2013	2014	the report
			%	%	%	%
Directly owned
Skyway Credit Service	Hong Kong	HK$1,000,000	N/A	N/A	100	100	Inactive (Incorporated
Limited							in October 2014)

* The Financial Information represents the individual statements of profit or loss and other comprehensive income, individual statements of changes in equity and individual statements of cash flows for the two years ended 31 December 2012 and 2013 and individual statements of financial position of Target Co 1 as at 31 December 2012 and 2013 respectively.

– 57 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

We have been the auditors of the Target Co 1 for the three years ended 31 December 2012, 2013 and 2014.

For the purpose of this report, the directors of the Target Co 1 have prepared the financial information of the Target Gp 1 for the Relevant Periods, in accordance with the Hong Kong Financial Reporting Standards (the “HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). The Underlying Financial Statements were audited by us in accordance with the Hong Kong Standards on Auditing issued by the HKICPA. We have also examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information of the Target Co 1 for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements. No adjustments are deemed necessary to the Underlying Financial Statements in preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of the Target Co 1 who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information, and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the financial position of the Target Gp 1 as at 31 December 2012, 2013 and 2014 and 31 May 2015 and of the Target Gp 1’s financial performance and cash flows for the Relevant Periods.

– 58 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

The comparative individual statement of profit or loss and other comprehensive income, individual statement of changes in equity and individual statement of cash flows of the Target Gp 1 for the five months ended 31 May 2014, together with the notes thereon (the “May 2014 Financial Information”) have been extracted from the Target Gp 1’s unaudited individual financial information for the same period, which was prepared by the directors of the Target Co 1 solely for the purpose of this report. We have reviewed the May 2014 Financial Information in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our review of the May 2014 Financial Information consisted of making enquires, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the May 2014 Financial Information. Based on our review, nothing has come to our attention that causes us to believe that the May 2014 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRSs.

– 59 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

(A) FINANCIAL INFORMATION OF THE TARGET GP 1
INDIVIDUAL/CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

NOTES Revenue 7 Other income 7 Share of profit (loss) of an associate/a joint venture Other losses 8 Staff costs 9 Depreciation of property and equipment 15 Commission expenses Finance costs 10 Legal and professional fees Other operating expenses Profit before taxation 11 Income tax expense 12 Profit and total comprehensive income for the year/period Profit and total comprehensive income attributable to: Owners of the Target Co 1 Basic earnings per share (HK cents) 13	Five months Year ended 31 December ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 48,729 46,193 57,184 19,461 33,798 761 1,037 3,211 1,182 263 6,307 10,742 674 (1,680) 20,796 (419) – – – – (9,960) (8,956) (9,221) (3,529) (3,519) (1,124) (538) (467) (210) (154) (1,597) (2,145) (2,184) (957) (1,734) (2,986) (3,187) (4,785) (1,634) (3,736) (11,719) (1,126) (230) (649) (30) (9,975) (8,648) (9,251) (3,531) (4,716) 18,017 33,372 34,931 8,453 40,968 (3,764) (3,913) (5,719) (1,695) (3,343) 14,253 29,459 29,212 6,758 37,625 14,253 29,459 29,212 6,758 37,625 0.05 0.11 0.11 0.03 0.15	Five months Year ended 31 December ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 48,729 46,193 57,184 19,461 33,798 761 1,037 3,211 1,182 263 6,307 10,742 674 (1,680) 20,796 (419) – – – – (9,960) (8,956) (9,221) (3,529) (3,519) (1,124) (538) (467) (210) (154) (1,597) (2,145) (2,184) (957) (1,734) (2,986) (3,187) (4,785) (1,634) (3,736) (11,719) (1,126) (230) (649) (30) (9,975) (8,648) (9,251) (3,531) (4,716) 18,017 33,372 34,931 8,453 40,968 (3,764) (3,913) (5,719) (1,695) (3,343) 14,253 29,459 29,212 6,758 37,625 14,253 29,459 29,212 6,758 37,625 0.05 0.11 0.11 0.03 0.15
		40,968 (3,343)
		37,625
		37,625

		0.15

– 60 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

INDIVIDUAL/CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

NOTES Non-current assets Intangible assets 14 Property and equipment 15 Rental deposits Interests in an associate/ a joint venture 28(a) Other assets 16 Amounts due from an associate/a joint venture 24 Deferred tax 22 Current assets Accounts receivable 17 Prepayments, deposits and other receivables 18 Amounts due from shareholders 18 Taxation recoverable Bank balances – Segregated accounts 18 – House accounts 18 Current liabilities Accounts payable 19 Accrued liabilities and other payables Amount due to a shareholder 18 Taxation payable Borrowings 20 Bank overdrafts 20 Net current assets Total assets less current liabilities Capital and reserve Share capital 21 Other reserve 25 Retained earnings Total equity	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 460 460 460 1,408 870 864 208 735 984 45,029 55,771 56,445 285 362 584 26,651 29,717 33,425 21 21 21 74,062 87,936 92,783 334,203 274,775 309,659 921 577 460 21,852 78,474 90,035 392 21 – 46,218 44,321 59,910 757 1,120 7,526 404,343 399,288 467,590 51,844 49,086 64,183 1,189 1,100 2,140 – – 11,000 – – 1,759 57,948 60,000 70,000 53,977 34,132 39,173 164,958 144,318 188,255 239,385 254,970 279,335 313,447 342,906 372,118 260,000 260,000 260,000 38,722 38,722 38,722 14,725 44,184 73,396 313,447 342,906 372,118	As at 31 May 2015 HK$’000 460 757 984 – 3,069 – 21
		5,291
		516,009 543 75,904 – 108,685 20,584
		721,725
		189,970 2,644 – 5,102 100,000 85,279
		382,995
		338,730
		344,021
		260,000 – 84,021
		344,021

– 61 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

INDIVIDUAL/CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

NOTES At 1 January 2012 Dividends paid 27 Profit and total comprehensive income for the year Deemed contribution from the controlling shareholder relating to the acquisition of an associate 25, 28(b) At 31 December 2012 Profit and total comprehensive income for the year At 31 December 2013 Profit and total comprehensive income for the year At 31 December 2014 Profit and total comprehensive income for the period Waiver of an amount due from the controlling shareholder 25 Dividends paid At 31 May 2015 At 1 January 2014 Profit and total comprehensive income for the period At 31 May 2014 (unaudited)	Share capital HK$’000 260,000 – – – 260,000 – 260,000 – 260,000 – – – 260,000 260,000 – 260,000	Retained profits HK$’000 6,712 (6,240) 14,253 – 14,725 29,459 44,184 29,212 73,396 37,625 – (27,000) 84,021 44,184 6,758 50,942	Other reserve HK$’000 – – – 38,722 38,722 – 38,722 – 38,722 – (38,722) – – 38,722 – 38,722	Total HK$’000 266,712
				(6,240) 14,253 38,722
				313,447
				29,459
				342,906
				29,212
				372,118
				37,625 (38,722) (27,000)
				344,021

				342,906 6,758
				349,664

– 62 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

INDIVIDUAL/CONSOLIDATED STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES Cash flows from operating activities Profit before taxation Adjustments for: Depreciation of property and equipment Interest income from authorised institutions Interest expenses Loss on disposal of property, plant and equipment Share of profits(loss) of associate/joint venture Movements in working capital Decrease (increase) in other assets Decrease (increase) in rental deposits (Increase) decrease in bank balances – segregated accounts (Increase) decrease in accounts receivable Decrease (increase) in prepayments, deposits and other receivables Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities and other payables Cash generated from operations Interest paid Interest received Income taxes paid NET CASH (USED IN) GENERATED FROM OPERATING ACTIVITIES	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 18,017 33,372 34,931 1,124 538 467 (1) – – 2,986 3,187 4,785 419 – – (6,307) (10,742) (674) 16,238 26,355 39,509 29 (77) (222) 485 (527) (249) (19,431) 1,897 (15,589) (95,667) 59,428 (34,884) 2,682 344 117 15,489 (2,758) 15,097 320 (89) 1,040 (79,855) 84,573 4,819 (2,986) (3,187) (4,785) 1 – – (2,955) (3,542) (3,939) (85,795) 77,844 (3,905)	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 8,453 40,968 210 154 – – 1,634 3,736 – – 1,680 (20,796) 11,977 24,062 (272) (2,485) – – (7,828) (48,775) (42,172) (206,350) (112) (83) 8,457 125,787 101 504 (29,849) (107,340) (1,634) (3,736) – – – – (31,483) (111,076)

– 63 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

NOTES INVESTING ACTIVITIES Purchase of property and equipment Repayment from shareholders Advances to shareholders Advance to an associate/joint venture Repayment from an associate/ joint venture NET CASH GENERATED (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Advances from shareholders Repayment of borrowings Proceeds from borrowings Dividends paid NET CASH GENERATED FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD ANALYSIS OF CASH AND CASH EQUIVALENTS Bank balances – House accounts 18 Bank overdrafts 20	Five months Year ended 31 December ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (174) – (461) (52) (47) 87,937 109,608 84,509 3,000 150,901 (100,391) (166,230) (96,070) (10,000) (117,870) (26,651) (3,066) (3,708) (1,483) – – – – – 33,425 (39,279) (59,688) (15,730) (8,535) 66,409 – – 11,000 – 8,619 (109,477) (122,515) (95,000) (15,000) – 120,580 124,567 105,000 55,000 30,000 (6,240) – – – (27,000) 4,863 2,052 21,000 40,000 11,619 (120,211) 20,208 1,365 (18) (33,048) 66,991 (53,220) (33,012) (33,012) (31,647) (53,220) (33,012) (31,647) (33,030) (64,695) 757 1,120 7,526 673 20,584 (53,977) (34,132) (39,173) (33,703) (85,279)	Five months Year ended 31 December ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (174) – (461) (52) (47) 87,937 109,608 84,509 3,000 150,901 (100,391) (166,230) (96,070) (10,000) (117,870) (26,651) (3,066) (3,708) (1,483) – – – – – 33,425 (39,279) (59,688) (15,730) (8,535) 66,409 – – 11,000 – 8,619 (109,477) (122,515) (95,000) (15,000) – 120,580 124,567 105,000 55,000 30,000 (6,240) – – – (27,000) 4,863 2,052 21,000 40,000 11,619 (120,211) 20,208 1,365 (18) (33,048) 66,991 (53,220) (33,012) (33,012) (31,647) (53,220) (33,012) (31,647) (33,030) (64,695) 757 1,120 7,526 673 20,584 (53,977) (34,132) (39,173) (33,703) (85,279)
		66,409
		8,619 – 30,000 (27,000)
		11,619
		(33,048) (31,647)
		(64,695)

		20,584 (85,279)

– 64 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

NOTES TO FINANCIAL INFORMATION OF THE TARGET GP 1

1. GENERAL

The Target Co 1 is a private limited company incorporated in Hong Kong. The Target Co 1 has its registered office and principal place of business at Room 3302, 33/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong. Mr. Lam Hoi Sze is the controlling shareholder of the Target Co 1 (the “Controlling Shareholder”).

The financial information are presented in Hong Kong dollars, which is the same as the functional currency of the Target Co 1.

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

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Co 1 has consistently applied the Hong Kong Accounting Standards (“HKASs”), HKFRSs, amendments and interpretations (hereinafter collectively referred to as the “HKFRSs”) which are effective for the accounting period beginning on 1 January 2015 throughout the Relevant Periods.

The Target Co 1 has not early applied the following new and revised HKFRSs that have been issued but are not yet effective.

HKFRS 9 Financial instruments[1] HKFRS 15 Revenue from contracts with customers[2] Amendments to HKFRS 11 Accounting for acquisitions of interests in joint operations[3] Amendments to HKFRS 10 and HKAS 28 Sale or contribution of assets between an investor and its associate or joint venture[3] Amendments to HKAS 16 and HKAS 38 Clarification of acceptable methods of depreciation and amortisation[3] Amendments to HKAS 16 and HKAS 41 Agriculture: Bearer plants[3] Amendments to HKAS 1 Disclosure initiative[3] Amendments to HKAS 27 Equity method in separate financial statements[3] Amendments to HKFRS 10, HKFRS 12 Investment entities: Applying the consolidation exception[3] and HKAS 28 Amendments to HKFRSs Annual improvements to HKFRSs 2012 – 2014 cycle[3]

1 Effective for annual periods beginning on or after 1 January 2018

2 Effective for annual periods beginning on or after 1 January 2017

3 Effective for annual periods beginning on or after 1 January 2016

Except as described below, the directors of the Target Co 1 do not anticipate that the application of the new and revised HKFRSs will have material impact on the Financial Information.

– 65 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

HKFRS 9 Financial instruments

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

All recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at FVTOCI. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.
In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.
The new general hedge accounting requirements retain the three types of hedge accounting. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an “economic relationship”. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

– 66 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

The directors of the Target Co 1 anticipate that the application of HKFRS 9 in the future may result in early provision of credit losses based on the expected credit loss model for financial assets measured at amortised cost. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

HKFRS 15 Revenue from contracts with customers

In July 2014, HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 “Revenue”, HKAS 11 “Construction contracts” and the related interpretations” when it becomes effective.

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

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

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

The directors of the Target Co 1 anticipate that the application of HKFRS 15 in the future may have an impact on the amounts reported and disclosures. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Target Gp 1 performs a detailed review.

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with the following accounting policies which conform with HKFRSs. The Financial Information have been prepared on the historical cost basis, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Target Gp 1 takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial information is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

– 67 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

In addition, for financial reporting purposes, fair value measurements are categorised into Levels 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Basis of consolidation

The Financial Information incorporate the financial statements of the Target Co 1 and its subsidiaries. Control is achieved when the Target Co 1:

has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.

The Target Co 1 reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Target Co 1 obtains control over the subsidiary and ceases when the Target Co 1 loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the individual/consolidated statement of profit or loss and other comprehensive income from the date the Target Co 1 gains control until the date when the Target Co 1 ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Target Gp 1’s accounting policy.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between member of the Target Gp 1 are eliminated in full on consolidation.

Interests in an associate and a joint venture

An associate is an entity over which the Target Gp 1 has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractual agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

– 68 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

The results and assets and liabilities of associates or joint ventures are incorporated in the Financial Information using the equity method of accounting. Under the equity method, investments in an associate or a joint venture is initially recognised in the individual/consolidated statements of financial position at cost or deemed cost (see below) and adjusted thereafter to recognise the Target Gp 1’s share of the profit or loss and other comprehensive income of the associate or joint venture, less any identified impairment loss. When the Target Gp 1’s share of losses of an associate or a joint venture equals or exceeds its interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Target Gp 1’s net investment in the associate or joint venture), the Target Gp 1 discontinues recognising its share of further losses. An additional share of losses are recognised only to the extent that the Target Gp 1 has incurred legal or constructive obligations or made payments on behalf of that associate or joint venture.

An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate indirectly from the controlling shareholder of the Target Co 1, the excess of the Target Gp 1’s share of the net fair value of the identifiable assets and liabilities of the associate over the consideration paid/payable is accounted for as deemed capital contribution and credited to other reserve.

The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 “Impairment of Assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

The Target Gp 1 discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business.

Revenue arising from financial services is recognised on the following basis:

Commission income for brokerage business is recognised as income on a trade date basis.
Underwriting, sub-underwriting, placing and sub-placing commissions are recognised as income in accordance with the terms of the underlying agreement or deal mandate when the relevant significant act has been completed.
Interest income from clients is recognised on a time proportion basis, by reference to the principal amounts outstanding and the effective interest rates applicable.

Interest income from authorised institutions is recognised on a time proportion basis, taking into account the principal amounts outstanding and the effective interest rates applicable.

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APPENDIX II

Service fees are recognised when the relevant services are rendered.

Intangible assets

Intangible assets represent the rights to trade on The Stock Exchange of Hong Kong Limited (the “SEHK”) (the “trading rights”). The trading rights have an indefinite useful life and are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment of tangible and intangible assets below).

Gains or losses arising from derecognition of the trading rights are measured at the difference between the sales proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.

Property and equipment

Property and equipment are stated in the individual/consolidated statements of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with effect of any changes in estimate accounted for on a prospective basis.

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset is recognised in profit or loss.

Financial instruments

Financial assets and financial liabilities are recognised on the individual/consolidated statements of financial position when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Target Gp 1’s financial assets comprise financial assets classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for loans and receivables.

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APPENDIX II

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including accounts receivable, deposits and other receivables, amount due from shareholders, subsidiary and associate/joint venture and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss of financial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

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

The carrying amount of the loans and receivables is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an account receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Target Gp 1 after deducting all of its liabilities.

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APPENDIX II

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities (including accounts payable, amounts due to a shareholder, other payables, borrowings and bank overdrafts) are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Target Co 1 are recorded at the proceeds received, net of direct issue costs.

Derecognition

The Target Gp 1 derecognises a financial asset only when the contractual rights to the cash flows from the asset expire.

Financial liabilities are derecognised when the obligations specified in the relevant contract are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Offsetting a financial asset and a financial liability

A financial asset and a financial liability is offset and the net amount presented in the individual/ consolidated statements of financial position when, and only when the Group currently has legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statements of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Co 1’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.

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APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the asset is realised or the liability is settled, based on tax rate (and tax laws) that have been enacted or substantially enacted by the end of the reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Target Co 1 expects, at the end of each reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly to equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Target Gp 1 as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Benefits received and receivable as an incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Employee benefits

In the reporting period in which an employee has rendered services, the Target Gp 1 recognises the employee benefits expenses for those services in profit or loss.

Payments to the Mandatory Provident Fund Scheme are recognised as an expense when employees have rendered service entitling them to the contributions.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Impairment losses on tangible and intangible assets

At the end of each reporting period, the Target Gp 1 reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In addition, intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Gp 1’s accounting policies, which are described in note 3, the directors of the Target Co 1 are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty

The following is the key assumption concerning the future, and other key sources of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Estimated impairment of accounts receivable

When there is objective evidence of impairment loss, the Target Gp 1 takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise.

As at 31 December 2012, 2013 and 2014 and 31 May 2015, the carrying amount of accounts receivable was HK$334,203,000, HK$274,775,000, HK$309,659,000 and HK$516,009,000 respectively. No impairment was provided for the year ended 31 December 2012, 2013 and 2014 and five months ended 31 May 2015.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

5. CAPITAL RISK MANAGEMENT

The Target Gp 1 manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Target Gp 1’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Target Gp 1 consists of equity attributable to owners of the Target Co 1 (comprising issued share capital and retained earnings).

The management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Target Gp 1 manages its overall capital structure through the payment of dividend and issuance of shares.

The Target Co 1 is registered by the Hong Kong Securities and Futures Commission (the “SFC”) and is subject to the liquid capital requirements under the Hong Kong Securities and Futures (Financial Resources) Rules (the “SF(FR)R”) adopted by the SFC. Under the SF(FR)R, a regulated entity must maintain liquid capital (assets and liabilities adjusted as determined by the SF(FR)R) in excess of HK$3 million or 5% of the total adjusted liabilities, whichever is higher. The Target Co 1 has complied with the liquid capital requirements imposed by the SF(FR)R during the Relevant Periods.

6. FINANCIAL INSTRUMENTS

Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	As 2012 HK$’000 430,556 163,839	at 31 December 2013 2014 HK$’000 HK$’000 429,533 501,761 143,421 184,563	As at 31 May 2015 HK$’000 722,388

			376,608

Financial risk management objectives and policies

The Target Gp 1’s major financial instruments include accounts receivable, amounts due from shareholders and an associate/a joint venture, bank balances, deposits and other receivables, accounts payable, other payables, bank overdrafts and borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management of the Target Gp 1 manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Market risk

Currency risk

It is the Target Gp 1’s policy to operate in local currencies as far as possible to minimise currency risks. The Target Gp 1’s principal business is conducted in Hong Kong dollars which is also the functional currency of the Target Gp 1. Since the impact of foreign exchange exposure is minimal, no hedging against foreign currency exposure has been carried out by the management.

Cash flow interest rate risk

The Target Gp 1 is exposed to cash flow interest rate risk in relation to accounts receivable, borrowings and bank overdrafts. The Target Gp 1 has no fixed-rate instruments and hence is not exposed to fair value interest rate risk. It is the Target Gp 1’s policy to keep its borrowings at floating interest rates so as to minimise the fair value interest rate risk. Bank balances are excluded from the interest rate sensitivity analysis as they are not sensitive to the change in market interest rates.

The Target Gp 1’s cash flow interest rate risk is mainly relating to the fluctuation of HIBOR or best lending rate arising from the Target Gp 1’s interest bearing financial instruments. The Target Gp 1’s exposures to interest rates on financial assets and financial liabilities are detailed below.

Financial instruments which are interest-bearing in nature

Assets Accounts receivable Liabilities Borrowings Bank overdrafts	As 2012 HK$’000 276,335 57,948 53,977	at 31 December 2013 2014 HK$’000 HK$’000 270,504 305,836 60,000 70,000 34,132 39,173	As at 31 May 2015 HK$’000 490,788

			100,000 85,279

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Interest rate sensitivity

The sensitivity analysis below has been determined based on the exposure to cash flow interest rates for the financial instruments at the end of each reporting period. The analysis is prepared assuming the financial instruments outstanding at the end of each reporting period were outstanding for the whole year and all other variables were held constant throughout the respective year. As at 31 December 2012, 2013 and 2014 and 31 May 2015, 50 basis points change represents management’s assessment of the possible change in interest rates.

==> picture [399 x 125] intentionally omitted <==

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

Year ended 31 December Five months ended 31 May
2012 2013 2014 2014 2015
Change in basis Change in basis Change in basis Change in basis Change in basis
points points points points points
+50 –50 +50 –50 +50 –50 +50 –50 +50 –50
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(unaudited) (unaudited)
Increase (decrease) in profit for
the year/period 688 (688) 737 (737) 821 (821) 271 (271) 572 (572)
----- End of picture text -----

Credit risk

The Target Gp 1’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations in the relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statement of financial position.

In addition, the Target Co 1 issued financial guarantees to a bank in respect of banking facility granted to its associate/joint venture. During the year ended 31 December 2012, 2013 and 2014 and five months ended 31 May 2015, the maximum amount that could be required to be paid if the guarantee was called upon on entirety was HK$231,931,000, HK$231,931,000, HK$28,000,000 and HK$28,000,000 respectively.

The Target Gp 1’s credit risk is primarily attributable to the accounts receivable due from clients and clearing houses arising from ordinary course of business of securities brokerage services. Management has a credit policy and a team to monitor the credit risk on an on-going basis.

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APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

In order to manage the credit risk in the accounts receivable due from clients, individual credit evaluation are performed on all clients including cash and margin clients. Accounts receivable from cash clients generally settled in two days after trade date, credit risk arising from the accounts receivable due from cash clients is considered minimal. For margin clients, the Target Gp 1 normally obtains liquid securities as collateral based on the margin requirements. The margin requirement is closely monitored on a daily basis by the designated team. In addition, the Target Gp 1 reviews the recoverable amount of each individual receivable at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Target Gp 1 consider that the credit risk is significantly reduced. Market conditions and adequacy of securities collateral and margin deposits of each margin account are monitored by management on a daily basis. Margin calls and forced liquidation are made where necessary.

In respect of accounts receivable from clearing houses, credit risks are considered low as the Target Co 1 normally enters into transactions with clearing houses which are registered with regulatory bodies.

The Target Gp 1 were exposed to a concentration of credit risk on its amounts due from a shareholders as at 31 December 2012, 2013 and 2014 and 31 May 2015. The management of the Target Co 1 assessed the credit risk by reviewing the repayment from the shareholders during and after the reporting period and considered the related default risk was not significant.

The Target Gp 1’s concentration of credit risk by geographical locations is mainly in Hong Kong. As at 31 December 2012, 2013 and 2014 and 31 May 2015, the Target Gp 1 has concentration risk on its accounts receivable as the balance with the largest client represent 20%, 15%, 16% and 9% respectively, of the total accounts receivable from cash and margin clients and the three largest clients represent 44%, 40%, 39% and 22% respectively, of the accounts receivable from cash and margin clients. The Target Gp 1 has no other significant concentration risk.

Bank balances are placed in various authorised institutions with high credit ratings and the directors of the Target Co 1 consider the credit risk for such financial assets is minimal.

Liquidity risk

Internally generated cash flows, borrowings and bank overdrafts are the sources of funds to finance the operations of the Target Gp 1. The Target Gp 1’s banking facilities are subject to floating rates and are renewable annually. The Target Gp 1’s liquidity risk management includes arranging standby banking facilities and diversifying the funding sources. The Target Gp 1 regularly reviews its major funding positions to ensure adequate financial resources will be available to meet its financial obligations.

The Target Gp 1 has available unutilised banking facilities of approximately HK$212,023,000, HK$235,868,000, HK$220,827,000 and HK$179,721,000 as at 31 December 2012, 2013 and 2014 and 31 May 2015 respectively.

Liquidity table

The following tables detail the Target Gp 1’s remaining contractual maturity for its non-derivative financial liabilities based on agreed repayment terms. The tables have been drawn up based on the undiscounted cash flows of financial liabilities, based on the earliest date on which the Target Gp 1 can be required to pay.

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APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

Weighted average effective interest rate % At 31 December 2012 Non-derivative financial liabilities Accounts payable – Other payables – Borrowings_(note 1) 2.53 Bank overdrafts 3.99 Financial guarantees to a bank(note 2) – At 31 December 2013 Non-derivative financial liabilities Accounts payable – Other payables – Borrowings(note 1) 2.39 Bank overdrafts 4.78 Financial guarantees to a bank(note 2) – At 31 December 2014 Non-derivative financial liabilities Accounts payable – Other payables – Borrowings(note 1) 2.35 Bank overdrafts 5.00 Amounts due to shareholders – Financial guarantees to a bank(note 2) – At 31 May 2015 Non-derivative financial liabilities Accounts payable – Other payables – Borrowings(note 1) 2.36 Bank overdrafts 5.08 Financial guarantees to a bank(note 2)_ –	On demand or less than 1 month HK$’000 51,844 70 57,948 53,977 231,931 395,770 49,086 204 60,000 34,132 28,000 171,422 64,183 207 70,000 39,173 11,000 28,000 212,563 189,970 1,359 100,000 85,279 28,000 404,608	Total undiscounted cash flow HK$’000 51,844 70 57,948 53,977 231,931 395,770 49,086 204 60,000 34,132 28,000 171,422 64,183 207 70,000 39,173 11,000 28,000 212,563 189,970 1,359 100,000 85,279 28,000 404,608	Total carrying amount at reporting date HK$’000 51,844 70 57,948 53,977 –
			163,839

			49,086 204 60,000 34,132 –
			143,422

			64,183 207 70,000 39,173 11,000 –
			184,563

			189,970 1,359 100,000 85,279 –
			376,608

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Notes:

Borrowings with a repayment on demand clause were classified under “on demand or less than 1 month” in the above tables. Taking into account the Target Gp 1’s financial position, the directors of the Target Co 1 do not believe that the banks will exercise their discretionary rights to demand immediate repayment. The directors of the Target Co 1 believe that such bank loans will be repaid within one year after the reporting date in accordance with the scheduled repayment dates set out in the loan agreements. As at 31 December 2012, 2013 and 2014 and 31 May 2015, the aggregate principal and interest cash outflows will amount to approximately HK$57,973,000, HK$60,023,000, HK$70,032,000 and HK$100,045,000 respectively.
The amounts included above for financial guarantee contracts are the maximum amounts the Target Gp 1 could be forced to settle under the guarantee arrangement as disclosed in note 31(b). Based on expectations at the end of each reporting period, Target Gp 1 considers that it is more likely than not that such an amount will not be payable under the arrangement. However, this estimate is subject to change depending on the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial receivables held by the counterparty which are guaranteed suffer credit losses.

Fair value measurements of financial instruments

The directors of the Target Co 1 consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial information approximate their fair values.

7. REVENUE AND OTHER INCOME

The Target Gp 1 is principally engaged in the provision of brokerage services and securities margin financing to clients during the Relevant Periods. Total income recognised during the Relevant Periods is as follows:

Revenue Brokerage commission from dealing in securities Underwriting, sub-underwriting, placing and sub-placing commission Interest income from clients Other income Interest income from authorised institutions Sundry income Total revenue and other income	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 12,748 12,458 21,614 47 32 3,036 35,934 33,703 32,534 48,729 46,193 57,184 1 – – 760 1,037 3,211 761 1,037 3,211 49,490 47,230 60,395	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 6,814 16,019 11 739 12,636 17,040 19,461 33,798 – – 1,182 263 1,182 263 20,643 34,061	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 6,814 16,019 11 739 12,636 17,040 19,461 33,798 – – 1,182 263 1,182 263 20,643 34,061
			33,798

			– 263
			263
			34,061

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

8. OTHER LOSSES

	Year	ended 31 December		Five months ended 31 May	Five months ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Loss on disposal of plant and equipment	(419)	–	–	–	–

9. (a) STAFF COSTS (INCLUDING DIRECTORS’ EMOLUMENTS)

Wages and salaries Staff benefits Retirement benefits scheme contributions	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 9,555 8,551 8,789 6 5 4 399 400 428 9,960 8,956 9,221	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 3,359 3,364 – – 170 155 3,529 3,519	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 3,359 3,364 – – 170 155 3,529 3,519
			3,519

The Target Gp 1 participates in the Mandatory Provident Fund Scheme (the “MPF Scheme”) established under the Mandatory Provident Fund Ordinance in December 2000. The assets of which are held in separate trustee-administered funds.

Both the Target Gp 1 and the employees contribute a fixed percentage of the relevant payroll to the MPF Scheme. The contribution amount is capped at HK$1,500 per employee per month (2012 and 2013: HK$1,250, 2014: HK$1,250 before 1 June 2014 and HK$1,500 with effect from 1 June 2014).

The Target Gp 1’s contributions to the MPF Scheme are expensed as incurred.

(b) DIRECTORS’ EMOLUMENTS

During the year ended 31 December 2012, 2013 and 2014, five months ended 31 May 2014 (unaudited) and 31 May 2015, the directors received emoluments and contributions to the MPF Scheme, amounting HK$1,415,000 and HK$28,000, HK$1,424,000 and HK$30,000, HK$1,774,000 and HK$50,000, HK$537,000 and HK$12,000, HK$787,000 and HK$30,000, respectively, in respect of their services to the Target Gp 1 and Skyway Futures Limited, its related company. No allocation to the related company has been made as the directors consider that it is impracticable to apportion this amount between their services to the Target Co 1 and the related company.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

10. FINANCE COSTS

	Year	ended 31 December		Five months ended 31 May	Five months ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Interest on:
Borrowings and bank overdrafts wholly
repayable within five years	2,986	3,187	4,785	1,634	3,736

11. PROFIT BEFORE TAXATION

	Year	ended 31 December	ended 31 December	Five months	ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Profit before taxation has been arrived at after
charging the following:
Auditor’s remuneration	379	447	441	–	–
Operating leases expenses	4,715	3,871	4,406	1,817	1,914
Operating leases management fee	433	425	441	184	195
Settlement and clearing expenses	750	771	713	248	311
System and network maintenance fee	775	680	681	283	276
Entertainment expenses	94	54	41	9	14
Stock quote and market data charges	1,478	1,097	1,002	386	551

12. INCOME TAX EXPENSE

The amount of tax charged to the individual/consolidated statements of profit or loss and other comprehensive income represents:

Current tax – Hong Kong Profits Tax Deferred tax – Current year/period_(note 22)_	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 4,006 3,913 5,719 (242) – – 3,764 3,913 5,719	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 1,695 3,343 – – 1,695 3,343	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 1,695 3,343 – – 1,695 3,343
			3,343

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for the Relevant Periods.

The tax charge for the year/period can be reconciled to the profit before taxation per the individual/ consolidated statement of profit or loss and other comprehensive income as follows:

– 82 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

Profit before taxation Calculated at Hong Kong Profits Tax rate of 16.5% Tax effect of share of (profit) loss of an associate/a joint venture Tax effect of expenses not deductible for tax purpose Tax effect of temporary difference not recognised Others Tax charge for the year/period	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 18,017 33,372 34,931 2,972 5,506 5,763 (1,041) (1,772) (101) 1,930 146 1 (87) 79 61 (10) (46) (5) 3,764 3,913 5,719	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 8,453 40,968 1,395 6,760 277 (3,432) – – 28 15 (5) – 1,695 3,343	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 8,453 40,968 1,395 6,760 277 (3,432) – – 28 15 (5) – 1,695 3,343
			6,760 (3,432) – 15 –
			3,343

13. EARNINGS PER SHARE

The calculation of basic earnings per share attributable to owners of the Target Co 1 is based on the following data:

Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 Earnings Earnings for the year attributable to owners of the Target Co 1 14,253 29,459 29,212 Year ended 31 December 2012 2013 2014 ’000 ’000 ’000 Number of shares Number of ordinary shares for the purposes of basic earnings per share 260,000 260,000 260,000	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 6,758 37,625 Five months ended 31 May 2014 2015 ’000 ’000 (unaudited) 260,000 260,000

No diluted earnings per share is presented as there was no potential ordinary shares outstanding during the Relevant Periods.

14. INTANGIBLE ASSETS

	HK$’000
COST AND CARRYING VALUE
At 1 January 2012, 31 December 2012, 31 December 2013 and
31 December 2014 and 31 May 2015	460

– 83 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

The amount represents trading rights that confer eligibility of the Target Gp 1 to trade on the SEHK. The trading right has no foreseeable limit to the period that the Target Gp 1 can use to generate net cash flows. As a result, the trading right is considered by the management of the Target Gp 1 as having an indefinite useful life because it is expected to contribute to net cash inflows indefinitely. The trading right will not be amortised until its useful life is determined to be finite. It will be tested for impairment annually and whenever there is an indication that it may be impaired.

At 31 December 2012, 2013 and 2014 and 31 May 2015, the management of the Target Gp 1 determined that there is no impairment of its trading right based on its value is use.

15. PROPERTY AND EQUIPMENT

Leasehold improvements HK$’000 COST At 1 January 2012 1,357 Additions 98 Disposals (855) At 31 December 2012 and 2013 600 Additions – At 31 December 2014 600 Additions – At 31 May 2015 600 DEPRECIATION At 1 January 2012 429 Charge for the year 578 Disposals (757) At 31 December 2012 250 Charge for the year 200 At 31 December 2013 450 Charge for the year 150 At 31 December 2014 600 Charge for the period – At 31 May 2015 600 CARRYING VALUES At 31 May 2015 – At 31 December 2014 – At 31 December 2013 150 At 31 December 2012 350	Furniture, fixtures and equipment HK$’000 493 – (285) 208 – 208 – 208 108 94 (120) 82 42 124 32 156 12 168 40 52 84 126	Computer equipment HK$’000 2,199 82 (274) 2,007 461 2,468 47 2,515 741 452 (118) 1,075 296 1,371 285 1,656 142 1,798 717 812 636 932	Total HK$’000 4,049 180 (1,414)
			2,815 461
			3,276 47
			3,323
			1,278 1,124 (995)
			1,407 538
			1,945 467
			2,412 154
			2,566
			757

			864

			870

			1,408

– 84 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

The property and equipment are depreciated on a straight-line basis at the following rates per annum:

Leasehold improvements Over the shorter of lease term and two years Furniture, fixtures and equipment 20% Computer equipment and software 20%

16. OTHER ASSETS

Statutory deposits and other deposits with clearing house ACCOUNTS RECEIVABLE Accounts receivable arising from the ordinary course of business of securities brokerage services dealing in securities transactions_(Note a):_ – Clearing house – Cash clients – Margin clients	As 2012 HK$’000 285 As 2012 HK$’000 56,049 5,349 272,805 334,203	at 31 December As at 31 May 2013 2014 2015 HK$’000 HK$’000 HK$’000 362 584 3,069 at 31 December As at 31 May 2013 2014 2015 HK$’000 HK$’000 HK$’000 – 1,121 13,585 13,206 21,967 34,123 261,569 286,571 468,301 274,775 309,659 516,009	at 31 December As at 31 May 2013 2014 2015 HK$’000 HK$’000 HK$’000 362 584 3,069 at 31 December As at 31 May 2013 2014 2015 HK$’000 HK$’000 HK$’000 – 1,121 13,585 13,206 21,967 34,123 261,569 286,571 468,301 274,775 309,659 516,009

			As at 31 May 2015 HK$’000 13,585 34,123 468,301
			516,009

17. ACCOUNTS RECEIVABLE

The Target Gp 1 seeks to maintain tight control over its outstanding accounts receivable and has procedures and policies to assess its clients’ credit quality and defines credit limits for each client. All client acceptances and credit limit are approved by designated approvers according to the clients’ credit worthiness.

– 85 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

The accounts receivable is summarised as follows:

Neither past due nor impaired_(Note b) Past due but not impaired(Note c) Impaired Less: Allowance for impairment(Note d)_	As 2012 HK$’000 330,673 3,530 – 334,203 – 334,203	at 31 December 2013 2014 HK$’000 HK$’000 265,840 290,394 8,935 19,265 – – 274,775 309,659 – – 274,775 309,659	As at 31 May 2015 HK$’000 493,522 22,487 –
			516,009 –
			516,009

The ageing analysis of cash clients based on trade date is summarised as follows:

Less than one month More than one month and within three months More than three months Total	As 2012 HK$’000 5,038 173 138 5,349	at 31 December 2013 2014 HK$’000 HK$’000 9,807 10,263 2,273 7,436 1,126 4,268 13,206 21,967	As at 31 May 2015 HK$’000 23,509 7,431 3,183
			34,123

The Target Gp 1 offset certain accounts receivable and accounts payable when the Target Gp 1 currently has a legally enforceable right to set off the balances; and intends to settle on a net basis, or to realise the balances simultaneously. Details are set out in note 29.

Details of Target Gp 1’s policy on credit risk are set out in note 6.

– 86 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

The aging analysis for accounts receivable which were past due but not impaired is summarised as follows:

Within one month past due More than one month and within three months past due More than three months past due	As 2012 HK$’000 3,219 173 138 3,530	at 31 December 2013 2014 HK$’000 HK$’000 5,537 7,561 2,272 7,436 1,126 4,268 8,935 19,265	As at 31 May 2015 HK$’000 11,873 7,431 3,183
			22,487

Notes:

(a) The normal settlement terms of accounts receivable from clients and clearing house, except for accounts receivable due from margin clients, arising from the ordinary course of business of securities brokerage services are two trading days after the trade date.

Accounts receivable due from cash clients are secured by clients’ securities, which are publicly traded equity securities listed in Hong Kong. The fair values of the securities as at 31 December 2012, 2013 and 2014 and 31 May 2015 approximate HK$15,696,000, HK$54,035,000, HK$318,831,000 and HK$634,074,000 respectively. As at 31 December 2012, 2013, 2014 and 31 May 2015, 91%, 85%, 72% and 92% of the balance were secured by sufficient collateral on an individual basis. Management has assessed the market value of the pledged securities of each individual customer that has shortfall as at the year end, and considered that no impairment allowance is necessary. Further details are disclosed in note 29(a). Accounts receivable arising from the cash clients relate to a wide range of customers for whom there was no recent history of default. Based on past experience, management believes that no allowance for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are considered fully recoverable. No securities of cash client can be repledged by the Target Gp 1 and the corresponding securities held can be sold at the Target Gp 1’s discretion to settle any outstanding amounts of the cash clients that are past due. Cash client receivables which were past due but not impaired bear interest at interest rates by reference to Hong Kong prime rate plus certain basis points based on management’s discretion.

Accounts receivable due from margin clients are repayable on demand and carry interest at Hong Kong Prime Rate plus 4% to 8% per annum during the year ended 31 December 2012, 2013, 2014 and five months ended 31 May 2015. They are generally included in “Neither past due nor impaired” category. The fair values of the pledged securities as at 31 December 2012, 2013 and 2014 and 31 May 2015 approximate HK$557,142,000, HK$517,232,000, HK$899,104,000 and HK$1,475,124,000 respectively. Securities are assigned with specific margin ratios for calculating their margin values. Additional funds or collateral are required if the amount of accounts receivable outstanding exceeds the eligible margin value of securities deposited. As at 31 December 2012, 2013, 2014 and 31 May 2015, 82%, 86%, 84% and 93% of the balance were secured by sufficient collateral on an individual basis. Management has assessed the market value of the pledged securities of each individual customer that has margin shortfall as at the year end, and considered that no impairment allowance is necessary. Further details are disclosed in note 29(a). The collateral held can be repledged by the Target Gp 1 up to 140% of the margin receivable amounts in the search of short-term financing, if necessary. The amount of collateral being repledged by the Target Gp 1 as at 31 December 2012, 2013 and 2014 and 31 May 2015 could be referred to note 20. The corresponding collateral held can be sold at the Target Gp 1’s discretion to settle any outstanding amounts owed by the margin clients.

– 87 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

(b) Included in the amount that is neither past due nor impaired are accounts receivable due from cash clients arising from the pending trades executed within two days before year/period end date and accounts receivables due from margin clients. The receivable are from a wide range of individual customers for whom there was no recent history of default.
(c) Included in the amount that is past due but not impaired are accounts receivable due from cash clients which are past due at the end of each reporting period for which the Target Gp 1 has not provided for any impairment loss.
As at 31 December 2012, 2013 and 2014 and 31 May 2015, for cash client receivables which are past due but not impaired amounting to HK$3,530,000, HK$8,935,000, HK$19,265,000 and HK$22,487,000 respectively, no impairment loss was provided as the amounts are related to number of independent customers that have a good track with the Target Gp 1 and considered recoverable during the year/period.
(d) The Target Gp 1 has a policy for determining the allowance for impairment of accounts receivable without sufficient collateral based on the evaluation of collectibility and aging analysis of accounts and on management’s judgement including the creditworthiness, collateral and the past collection history of each client.
In determining the recoverability of the accounts receivable, the Target Gp 1 considers any change in the credit quality of the accounts receivable from the date the credit was initially granted up to the reporting date and the fair values of the collateral held.

No allowance for impairment is provided during the Relevant Periods.

Included in accounts receivable arising from the business of dealing in securities are amounts due from certain directors and shareholders. The details are as follows.

A. Controlling shareholder, also a director and his close family members

Close family members of the controlling shareholder Close family members of the controlling shareholder	Balance at 1 January 2012 HK$’000 630 Balance at 1 January 2013 HK$’000 1,300	Balance at 31 December 2012 Maximum amount outstanding during the year HK$’000 HK$’000 1300 19,243 Balance at 31 December 2013 Maximum amount outstanding during the year HK$’000 HK$’000 4,080 6,917	Market value of pledged securities at 31 December 2012 HK$’000 686

			Market value of pledged securities at 31 December 2013 HK$’000 2,455

– 88 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

Balance at 1 January 2014 HK$’000 Controlling shareholder Mr. Lam Hoi Sze – Close family members of the controlling shareholder 4,080 4,080 Balance at 1 January 2015 HK$’000 Controlling shareholder Mr. Lam Hoi Sze 2,169 Close family members of the controlling shareholder 1,858 4,027 Other directors Balance at 1 January 2013 HK$’000 Mr. Lok Siu Kee (resigned on 18 July 2014) – Balance at 1 January 2014 HK$’000 Mr. Lok Siu Kee (resigned on 18 July 2014) 62	Balance at 31 December 2014 Maximum amount outstanding during the year HK$’000 HK$’000 2,169 2,168 1,858 18,065 4,027 20,233 Balance at 31 May 2015 Maximum amount outstanding during the period HK$’000 HK$’000 6,554 8,180 25,122 11,653 31,676 19,833 Balance at 31 December 2013 Maximum amount outstanding during the year HK$’000 HK$’000 62 629 Balance at 31 December 2014 Maximum amount outstanding during the year HK$’000 HK$’000 N/A 471	Market value of pledged securities at 31 December 2014 HK$’000 2,325 –
		2,325

		Market value of pledged securities at 31 May 2015 HK$’000 5,978 5,667
		11,645

		Market value of pledged securities at 31 December 2013 HK$’000 39

		Market value of pledged securities at 31 December 2014 HK$’000 240

B. Other directors

– 89 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

C. Other shareholders

Close family members of other shareholders Other shareholders	As 2012 HK$’000 – 8,541 8,541	at 31 December 2013 2014 HK$’000 HK$’000 23,348 – 9,100 1,525 32,448 1,525	As at 31 May 2015 HK$’000 1,962 5,014
			6,976

18. OTHER FINANCIAL ASSETS AND LIABILITIES

Prepayments, deposits and other receivables

The prepayments, deposits and other receivables arose from the normal course of operations. They are non-interest bearing and in the opinion of the directors, the amounts are expected to be settled within the next 12 months from the end of each reporting period.

Amounts due from/to shareholders

Amounts due from/to shareholders arose from the finance arrangement with shareholders. They are noninterest bearing, unsecured and repayable on demand. The management of the Target Co 1 expected that the amount due from/to shareholders will be fully settled within the next 12 months from the end of each reporting period.

As at 31 December 2012, 2013 and 2014 and 31 May 2015, amounts due from the controlling shareholder is HK$6,852,000, HK$63,474,000, HK$84,035,000 and HK$75,904,000 respectively. The amount is unsecured, interest free, and repayable on demand. The maximum amount outstanding during the year ended 31 December 2012, 2013, 2014 and five months ended 31 May 2015 is HK$65,256,000, HK$77,974,000, HK$77,974,000 and HK$114,423,000 respectively.

– 90 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Bank balances

The amounts comprise cash held by the Target Gp 1 in banks at market interest rates.

From the Target Gp 1’s ordinary business, it receives and holds money deposited by clients in the course of the conduct of the regulated activities. These clients’ monies are maintained in segregated bank accounts at market interest rates. The Target Gp 1 has recognised the corresponding accounts payable to respective clients as the Target Gp 1 does not have a currently enforceable right to offset those payables with the deposits placed. As at 31 December 2012, 2013 and 2014 and 31 May 2015, the segregated accounts with authorised institutions in relation to its brokerage business totaling HK$46,218,000, HK$44,321,000, HK$59,910,000 and HK$108,685,000 respectively.

19. ACCOUNTS PAYABLE

Accounts payable arising from the ordinary course of business of securities brokerage services_(Note)_: – Cash clients – Margin clients – Clearing house	As 2012 HK$’000 28,997 22,715 132 51,844	at 31 December 2013 2014 HK$’000 HK$’000 23,873 42,259 22,054 21,805 3,159 119 49,086 64,183	As at 31 May 2015 HK$’000 68,902 80,797 40,271
			189,970

Included in accounts payables arising from the business of dealing in securities are amounts due from certain related parties. The details are as follows.

Close family members of the controlling shareholder, also a director Other directors Other shareholders Close family members of other shareholders	As 2012 HK$’000 24 71 3,712 5,195 9,002	at 31 December 2013 2014 HK$’000 HK$’000 34 46 111 5,710 6,385 5,247 2,561 3,173 9,091 14,176	As at 31 May 2015 HK$’000 46 1,203 11 11
			1,271

Note:

The accounts payable balances are arising from the ordinary course of business of securities brokerage services and are normally settled in two trading days after the trade date except for the money held on behalf of clients at the segregated bank accounts which are repayable on demand. No aging analysis is disclosed as, in the opinion of directors, an aging analysis does not give additional value in view of the nature of these businesses.

– 91 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

20. BORROWINGS AND BANK OVERDRAFTS

At 31 December 2012, 2013 and 2014 and 31 May 2015, bank borrowings were repayable as follows:

Borrowings classified as current liabilities Bank loans with a repayable on demand clause, secured Bank overdrafts with a repayable on demand clause, secured Bank loans with a repayable on demand clause – Within one year Bank overdrafts with a repayable on demand clause – Within one year	As at 31 December 2012 2013 HK$’000 HK$’000 57,948 60,000 53,977 34,132 As at 31 December 2012 2013 HK$’000 HK$’000 57,948 60,000 53,977 34,132	2014 HK$’000 70,000 39,173 2014 HK$’000 70,000 39,173	As at 31 May 2015 HK$’000 100,000

			85,279

			As at 31 May 2015 HK$’000 100,000

			85,279

The bank loans and bank overdrafts carry interest at HIBOR plus a spread or Hong Kong Prime Rate minus certain basis points and are repayable on demand. As at 31 December 2012, 2013 and 2014 and 31 May 2015, marketable securities provided by margin clients amounting to approximately HK$212,978,000, HK$171,027,000, HK$240,896,000 and HK$376,649,000 respectively were pledged to secure the general banking facilities granted by the banks. One of the bank borrowings is secured over a property owned by the associate/joint venture as at 31 December 2012, 2013 and 2014. After the disposal of joint venture to the controlling shareholder, the property continued to secure the bank borrowings as at 31 May 2015. The controlling shareholders, a shareholder and a director, who resigned on 2 July 2014, have also provided joint and several personal guarantees in respect of such facilities.

– 92 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

21. SHARE CAPITAL

The movements of authorised and issued share capital of the Target Co 1 during the Relevant Periods are as follows:

Ordinary shares of HK$1 each At 1 January 2012, 31 December 2012 and 2013 At 31 December 2014 and 31 May 2015_(Note)_ Ordinary shares of HK$1 each At 1 January 2012, 31 December 2012, 2013 and 2014 and 31 May 2015	Authorised Number of shares Amount ’000 HK$’000 500,000 500,000 – – Issued and fully paid Number of shares Amount ’000 HK$’000 260,000 260,000	Authorised Number of shares Amount ’000 HK$’000 500,000 500,000 – – Issued and fully paid Number of shares Amount ’000 HK$’000 260,000 260,000
		–
		fully paid Amount HK$’000 260,000

Note: Under the Hong Kong Companies Ordinance (Cap. 622), with effect from 3 March 2014, the concept of authorised share capital no longer exists and the Target Co 1’s shares no longer have a par value. There is no impact on the number of shares in issue or the relative entitlement of any of the shareholders as a result of this change.

22. DEFERRED TAX

The following are the deferred assets (liabilities) recognised and the movements thereon during the Relevant Periods:

At 1 January 2012 Credit to profit or loss At 31 December 2012 Credit to profit or loss At 31 December 2013 Credit to profit or loss At 31 December 2014 Credit to profit or loss At 31 May 2015	Accelerated tax depreciation HK$’000 (221) 242
	21 –
	21 –
	21 –
	21

– 93 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

23. STATEMENTS OF FINANCIAL POSITION OF THE TARGET CO 1

NOTES Non-current assets Intangible assets Property and equipment Rental deposits Investment in a subsidiary Interests in an associate/a joint venture Other assets Amounts due from an associate/ a joint venture Deferred tax Current assets Accounts receivable Prepayments, deposits and other receivables Amounts due from shareholders Taxation recoverable Bank balances – Segregated accounts – House accounts Current liabilities Accounts payable Accrued liabilities and other payables Amount due to a shareholder Amounts due to a subsidiary Taxation payable Borrowings Bank overdrafts Net current assets Total assets less current liabilities Capital and reserve Share capital 21 Other reserve 25 Retained earnings 26 Total equity	As 2012 HK$’000 460 1,408 208 – 38,722 285 26,651 21 67,755 334,203 921 21,852 392 46,218 757 404,343 51,844 1,189 – – – 57,948 53,977 164,958 239,385 307,140 260,000 38,722 8,418 307,140	at 31 December 2013 2014 HK$’000 HK$’000 460 460 870 864 735 984 – 1,000 38,722 38,722 362 584 29,717 33,425 21 21 70,887 76,060 274,775 309,659 577 460 78,474 90,035 21 – 44,321 59,910 1,120 7,526 399,288 467,590 49,086 64,183 1,100 2,140 – 11,000 – 1,000 – 1,759 60,000 70,000 34,132 39,173 144,318 189,255 254,970 278,335 325,857 354,395 260,000 260,000 38,722 38,722 27,135 55,673 325,857 354,395	As at 31 May 2015 HK$’000 460 757 984 1,000 – 3,069 – 21
			6,291
			516,009 543 75,904 – 108,685 20,584
			721,725
			189,970 2,644 – 997 5,102 100,000 85,279
			383,992
			337,733
			344,024
			260,000 – 84,024
			344,024

– 94 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

24. AMOUNTS DUE FROM AN ASSOCIATE/A JOINT VENTURE

The amounts due from an associate/a joint venture are unsecured, non-interest bearing, and repayable on demand.

25. OTHER RESERVE

At 1 January 2012 Deemed contribution from the controlling shareholder relating to the acquisition of an associate (note a) At 31 December 2012, 2013 and 2014 Waiver of an amount due from the controlling shareholder_(Note b)_ At 31 May 2015	THE TARGET CO 1 HK$’000 – 38,722
	38,722 (38,722)
	–

Notes:

(a) Deemed contribution from the controlling shareholder represents difference between the share of net fair value of the identifiable assets and liabilities of the associate attributable to the Target Gp 1 and the consideration paid.
(b) Pursuant to a special resolution of the shareholders passed on 31 May 2015, the shareholders approved to waive an amount due from the controlling shareholder amounting to HK$38,722,000. The waiver of an amount due from the controlling shareholder by the Target Co 1 is accounted for as a deemed distribution recognised in other reserve.

26. RETAINED EARNINGS OF THE TARGET CO 1

Balance at beginning of reporting period Profit for the year/period Dividend paid Balance at end of reporting period	As 2012 HK$’000 6,712 7,946 (6,240) 8,418	THE TARGET CO 1 at 31 December 2013 2014 HK$’000 HK$’000 8,418 27,135 18,717 28,538 – – 27,135 55,673	As at 31 May 2015 HK$’000 55,673 55,351 (27,000)
			84,024

– 95 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

27. DIVIDENDS

Other than deemed distribution resulted from waiver of an amount due from the controlling shareholder amounting to HK$38,722,000 as disclosed in note 25, dividends are recognised as distribution in the Relevant Periods as follows.

Dividends recognised as distribution: 2011 Final – HK$0.024 per share 2014 Final – HK$0.104 per share	As 2012 HK$’000 6,240 –	THE TARGET CO 1 at 31 December 2013 2014 HK$’000 HK$’000 – – – –	As at 31 May 2015 HK$’000 –

			27,000

Subsequent to the Relevant Periods, an interim dividend of HK$0.16923 per ordinary share, payable to the shareholders of the Target Co 1 was declared on 17 August 2015.

28. INVESTMENT IN AN ASSOCIATE/A JOINT VENTURE

(a) Interests in an associate/a joint venture

Details of the Target Gp 1’s interests in an associate/a joint venture are as follows:

Cost of investment in an associate/ a joint venture of the Target Co 1 (unlisted) Share of post-acquisition profits and other comprehensive income, net of dividends received Carrying amount of the Target Gp 1’s Interests in Great Well Properties Limited	As 2012 HK$’000 38,722 6,307 45,029	THE TARGET CO 1 at 31 December 2013 2014 HK$’000 HK$’000 38,722 38,722 17,049 17,723 55,771 56,445	As at 31 May 2015 HK$’000 – –
			–

– 96 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

					Proportion	Proportion
			Principal		of ownership	of voting
	Form of	Place of	place of	Class of	interest held	rights held
Name of entity	entity	incorporation	operation	shares held	by the Group	by the Group	Principal activities
Great Well Properties	Incorporated	Hong Kong	Hong Kong	Ordinary	50%	50%(note 1)	Investment holding
Limited							(note 2)

The associate/joint venture is accounted for using the equity method in the Financial Information.

The summarised financial information in respect of the Group’s associate/joint venture is set out below:

Current assets Non-current assets Current liabilities Revenue Fair value gain of investment property Total comprehensive income (expense) for the year/period	As at 31 December As at 31 May 2012 2013 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 58,524 50,300 37,329 – 318,781 347,801 356,759 – (287,246) (286,560) (281,199) – Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) – – – – – 95,000 30,000 10,000 – 45,000 (note 3) 92,005 21,483 1,348 (3,359) 41,593	As at 31 May 2015 HK$’000 –

		–

		–

No dividends received from the associate/joint venture during the Relevant Periods.

Reconciliation of the above summarised financial information to the carrying amount of the interest in the associate/joint venture recognised in the individual/consolidated financial statements:

Net assets of the associate/joint venture Proportion of the Target Gp 1’s ownership interest in Great Well Properties Limited Carrying amount of the Target Gp 1’s interest in Great Well Properties Limited	As 2012 HK$’000 90,059 50% 45,029	at 31 December 2013 2014 HK$’000 HK$’000 111,541 112,889 50% 50% 55,771 56,445	As at 31 May 2015 HK$’000 – –
			–

– 97 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

Note 1: Since the dates of acquisition (disclosed in note 28(b)), the Target Gp 1 was able to exercise significant influence over Great Well Properties Limited as Great Well Properties Limited is owned by the Target Co 1 and two other investors and the Target Co 1 had the power to appoint 50% of the directors of the Company under the Articles of Association of that Company. Starting from 23 October 2014 (disclosed in note 28(c)) until the date of disposal (disclosed in note 28(d)), the Group was able to exercise joint control over Great Well Properties Limited.
Note 2 The associate (then became joint venture in year 2014), Great Well Properties Limited, had been 50% owned by the Target Co 1 since its acquisitions on 31 August 2012 and 7 September 2012 until the disposal on 4 May 2015 as disclosed in note 28(b), (c) and (d). Great Well Properties Limited and its 100% owned subsidiary, Metro Victor Limited invests in a property in Hong Kong and is financed by bank borrowing and its own equity.
Note 3 In respect of the share of profit from Great Well Properties Limited of HK$20.8 million as presented in the consolidated statements of profit or loss and other comprehensive income for the five months period ended 31 May 2015, the profit of Great Well Properties Limited was mainly contributed from the fair value gain amounting to $45 million of an investment property in Hong Kong held by its subsidiary, Metro Victor Limited.
(b) Acquisition of an associate

On 31 August 2012 and 7 September 2012, the Target Co 1 acquired 30% and 20% of the issued share capital of Great Well Properties Limited for consideration of HK$3 and HK$2 respectively. The share of net fair value of the identifiable assets and liabilities of the associate attributable to the Target Gp 1 is assessed to be HK$38,722,000 and is regarded as the deemed cost of investment in the associate. The excess over the consideration paid/payable is regarded as deemed contribution from the controlling shareholder of the Target Co 1, and is recognised as a credit to other reserve. The Target Co 1 has the power to exercise significant influence over this company as it has board representation and participates in key operating, financing and investing decisions at the company.

(c) Change from an associate to a joint venture

The controlling shareholder acquired 50% of the issued share capital of Great Well Properties Limited from the two other investors on 23 October 2014, since then, the Target Co 1 is considered as having joint ‘‘de facto’’ control with its controlling shareholder over Great Well Properties Limited and the interest in Great Well Properties Limited is then accounted for interest in a joint venture. The change did not result in change in accounting treatment as the Target Gp 1 continued to account for its investment in Great Well Properties Limited using equity method of accounting.

(d) Disposal of a joint venture

On 4 May 2015, the Target Co 1 disposed Great Well Properties Limited for a total consideration of HK$77,241,000 to the controlling shareholder, who has control over the Target Co 1.

No gain or loss on disposal of a joint venture is recognised for the five months period ended 31 May 2015 as there was no difference between the sales consideration and the carrying amount of the joint venture at the Target Co 1’s individual/consolidated statement of financial position on the date of disposal.

The process of the disposal was settled through the amount due from the controlling shareholder.

– 98 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

29. OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The disclosures set out in the tables below include financial assets and financial liabilities that are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments that are either:

offset in the Target Gp 1’s individual/consolidated statements of financial position; or
not offset in the Target Gp 1’s individual/consolidated statements of financial position as the offsetting criteria are not met.

Under the agreement of continuous net settlement made between the Target Gp 1 and Hong Kong Securities Clearing Company Limited (“HKSCC”), the Target Gp 1 has a legally enforceable right to set off the money obligations receivable and payable with HKSCC on the same settlement date and are settled simultaneously. In addition, the Target Gp 1 has a legally enforceable right to set off all clients accounts receivable and payable at any time without prior notice to clients and the Target Gp 1 intends to settle these balances on a net basis.

Except for above, amounts due from/to HKSCC that are not to be settled on the same date, accounts receivable and payable from clients not intends to settle on a net basis, financial collateral including cash and securities received by the Target Gp 1, deposit placed with HKSCC do not meet the criteria for offsetting in the individual/consolidated statement of financial position since the right of set-off of the recognised amounts is only enforceable following an event of default.

(a) Financial assets subject to offsetting, enforceable master netting arrangements or similar agreements

Type of financial assets Accounts receivables from – Cash clients – Margin clients – Clearing house Total	At 31 December 2012 Gross amounts of recognised financial assets Gross amounts of recognised financial liabilities offset in the individual statement of financial position Net amounts of financial assets presented in the individual statement of financial position Related amounts not set off in the individual statement of financial position Financial instrument Collateral received HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 13,177 (7,828) 5,349 – (5,195) 334,724 (61,919) 272,805 – (253,682) 74,867 (18,818) 56,049 – – 422,768 (88,565) 334,203 – (258,877)	Net amount HK$’000 154 19,123 56,049
		75,326

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APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

At 31 December 2013

	At 31 December 2013
Type of financial assets Accounts receivables from – Cash clients – Margin clients – Clearing house Total Type of financial assets Accounts receivables from – Cash clients – Margin clients – Clearing house Total Type of financial assets Accounts receivables from – Cash clients – Margin clients – Clearing house Total	Gross amounts of recognised financial assets Gross amounts of recognised financial liabilities offset in the individual statement of financial position Net amounts of financial assets presented in the individual statement of financial position Related amounts not set off in the individual statement of financial position Financial instrument Collateral received HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 25,611 (12,405) 13,206 – (11,892) 272,987 (11,418) 261,569 – (246,731) 25,492 (25,492) – – – 324,090 (49,315) 274,775 – (258,623) At 31 December 2014 Gross amounts of recognised financial assets Gross amounts of recognised financial liabilities offset in the consolidated statement of financial position Net amounts of financial assets presented in the consolidated statement of financial position Related amounts not set off in the consolidated statement of financial position Financial instrument Collateral received HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 46,668 (24,701) 21,967 – (19,908) 299,313 (12,742) 286,571 – (255,274) 31,690 (30,569) 1,121 (109) – 377,671 (68,012) 309,659 (109) (275,182) At 31 May 2015 Gross amounts of recognised financial assets Gross amounts of recognised financial liabilities offset in the consolidated statement of financial position Net amounts of financial assets presented in the consolidated statement of financial position Related amounts not set off in the consolidated statement of financial position Financial instrument Collateral received HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 118,338 (84,215) 34,123 – (32,884) 528,740 (60,439) 468,301 – (442,567) 159,164 (145,579) 13,585 (6) – 806,242 (290,233) 516,009 (6) (475,451)	Net amount HK$’000 1,314 14,838 –
		16,152

		Net amount HK$’000 2,059 31,297 1,012
		34,368

		Net amount HK$’000 1,239 25,734 13,579
		40,552

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

The item ‘‘collateral received’’ represents the securities pledged in the clients’ account which are not recognised in the individual/consolidated statements of financial position of Target Gp 1. The amounts are capped at the lower of the market value of securities and the net receivable amounts on a client by client basis.
(b) Financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreements

Type of financial liabilities Accounts payable to – Cash clients – Margin clients – Clearing house Total Type of financial liabilities Accounts payable to – Cash clients – Margin clients – Clearing house Total	At 31 December 2012 Gross amounts of recognised financial liabilities Gross amounts of recognised financial assets offset in the individual statement of financial position Net amounts of financial liabilities presented in the individual statement of financial position Related amounts not set off in the individual statement of financial position Financial instrument Collateral pledged HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 36,825 (7,828) 28,997 – – 84,634 (61,919) 22,715 – – 18,950 (18,818) 132 – (110) 140,409 (88,565) 51,844 – (110) At 31 December 2013 Gross amounts of recognised financial liabilities Gross amounts of recognised financial assets offset in the individual statement of financial position Net amounts of financial liabilities presented in the individual statement of financial position Related amounts not set off in the individual statement of financial position Financial instrument Collateral received HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 36,278 (12,405) 23,873 – – 33,472 (11,418) 22,054 – – 28,651 (25,492) 3,159 – (362) 98,401 (49,315) 49,086 – (362)	Net amount HK$’000 28,997 22,715 22
		51,734

		Net amount HK$’000 23,873 22,054 2,797
		48,724

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APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

At 31 December 2014

	At 31 December 2014
Type of financial liabilities Accounts payable to – Cash clients – Margin clients – Clearing house Total Type of financial liabilities Accounts payable to – Cash clients – Margin clients – Clearing house Total	Gross amounts of recognised financial liabilities Gross amounts of recognised financial assets offset in the consolidated statement of financial position Net amounts of financial liabilities presented in the consolidated statement of financial position Related amounts not set off in the consolidated statement of financial position Financial instrument Collateral pledged HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 66,960 (24,701) 42,259 – – 34,547 (12,742) 21,805 – – 30,688 (30,569) 119 (109) (10) 132,195 (68,012) 64,183 (109) (10) At 31 May 2015 Gross amounts of recognised financial liabilities Gross amounts of recognised financial assets offset in the consolidated statement of financial position Net amounts of financial liabilities presented in the consolidated statement of financial position Related amounts not set off in the consolidated statement of financial position Financial instrument Collateral pledged HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 153,117 (84,215) 68,902 – – 141,236 (60,439) 80,797 – – 185,850 (145,579) 40,271 (6) (2,819) 480,203 (290,233) 189,970 (6) (2,819)	Net amount HK$’000 42,259 21,805 –
		64,064

		Net amount HK$’000 68,902 80,797 37,446
		187,145

The gross amounts of the recognised financial assets and financial liabilities and their net amounts as presented in the Target Gp 1’s individual/consolidated statements of financial position, both of which have been disclosed in the above tables, are measured at amortised cost.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

30. SEGMENT REPORTING

The Chairman of the Target Co 1, being the chief operating decision maker (“CODM”), for the purposes of resource allocation and assessment of segment performance, considers that the Target Gp 1 operated in one single operating segment of securities broking and margin financing during the Relevant Periods and all of its assets and liabilities as at the end of the Relevant Periods were located in Hong Kong. Segment information is presented as below.

Segment revenue and results

The following is an analysis of the Target Gp 1’s revenue and results by reportable and operating segments:

Segment revenue Segment profit Unallocated profit/loss: Share of profit (loss) of an associate/a joint venture Profit before taxation	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 48,729 46,193 57,184 11,710 22,630 34,257 6,307 10,742 674 18,017 33,372 34,931	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 19,461 33,798 10,133 20,172 (1,680) 20,796 8,453 40,968	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 19,461 33,798 10,133 20,172 (1,680) 20,796 8,453 40,968

			20,172 20,796
			40,968

Segment assets and liabilities

The following is an analysis of the Target Gp 1’s assets and liabilities by reportable and operating segments:

Segment assets Unallocated assets_(note)_ – Interest in an associate/a joint venture – Amounts due from an associate/a joint venture Consolidated total assets	As 2012 HK$’000 405,725 45,029 26,651 477,405	at 31 December As at 2013 2014 31 May 2015 HK$’000 HK$’000 HK$’000 401,736 470,503 727,016 55,771 56,445 – 29,717 33,425 – 487,224 560,373 727,016	at 31 December As at 2013 2014 31 May 2015 HK$’000 HK$’000 HK$’000 401,736 470,503 727,016 55,771 56,445 – 29,717 33,425 – 487,224 560,373 727,016
			727,016

Note: The balance includes interests in an associate/a joint venture and amounts due from an associate/ a joint venture as disclosed in notes 24 and 28(a).

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Information reported to the CODM is identical to the Target Gp 1’s liabilities as presented in the individual/ consolidated statements of financial position.

Information about major customers

A summary of revenue earned from external customers which individually contributed over 10% of the Target Co 1’s revenue during each of the Relevant Period is set out below:

	Year	ended 31 December		Five months ended 31 May	Five months ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Customer A	7,044	4,733	N/A1	N/A1	N/A1
Customer B	5,444	5,242	N/A1	N/A1	4,853
Customer C	N/A1	N/A1	N/A1	2,646	N/A1
Customer D	N/A1	N/A1	N/A1	2,092	N/A1

1 The corresponding revenue did not contribute over 10% of the total revenue of the Target Gp 1.

31. COMMITMENTS

(a) Commitments under operating leases

During the year/period, the Target Gp 1 had commitments for future minimum lease payments under non-cancellable operating leases in respect of office premises which fall due as follows:

Within one year In the second to fifth years inclusive	As 2012 HK$’000 3,897 1,511 5,408	at 31 December As at 31 May 2013 2014 2015 HK$’000 HK$’000 HK$’000 5,290 4,773 4,772 6,299 3,358 1,370 11,589 8,131 6,142	at 31 December As at 31 May 2013 2014 2015 HK$’000 HK$’000 HK$’000 5,290 4,773 4,772 6,299 3,358 1,370 11,589 8,131 6,142
			6,142

Operating lease payments represent rentals payable by the Target Gp 1 for certain of its office properties. Rentals are fixed for lease terms of 3 years (2012 and 2013: 3 years).

(b) Guarantees

On 18 December 2012, 2 May 2013 and 1 January 2015, the Target Co 1 issued financial guarantee of HK$231,931,000, HK$28,000,000 and HK$28,000,000 respectively to a bank in respect of a banking facility granted to an associate/a joint venture. As at 31 December 2012, 2013 and 2014, the amount that could be required to be paid if the guarantee was called upon entirely was HK$231,566,000, HK$28,000,000 and HK$28,000,000 respectively. As disclosed in note 28(d), the joint venture was disposed to the controlling shareholder in 2015, the financial guarantee issued by the Target Co 1 is still valid as at 31 May 2015. Subsequent to the end of the Relevant Periods, the bank agrees to release the financial guarantee temporarily for 3 months with effect from 3 August 2015, subject to the following conditions:

– 104 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

the Target Co 1 placing sufficient funds for 3 months loan repayments for Great Well Properties Limited and its subsidiary totaling HK$3.9 million before the temporary release of the financial guarantee;
cancellation of certain banking facilities with all outstanding loans from the Target Co 1 (of which the outstanding loan amount from the Target Co 1 was HK$30 million as at 31 May 2015) and Great Well Properties Limited and its subsidiary fully repaid with 7 days from the date of announcement of successful acquisition of the Target Co 1 by Mission Capital Holdings Limited;
new unlimited corporate guarantee to be granted by the Target Co 1 to guarantee the general banking facilities granted to Great Well Properties Limited within 3 days from the date of announcement of unsuccessful acquisition of the Target Co 1 by Mission Capital Holdings Limited; and
the Target Co 1 placing sufficient funds for another 3 months loan repayments for Great Well Properties Limited and its subsidiary totaling HK$3.9 million when the acquisition of the Target Co 1 by Mission Capital Holdings Limited is not completed on or before 3 October 2015.

Subsequently on 19 August 2015, Great Well Properties Limited, instead of Target Co 1, placed HK$3.9 million to the bank and the financial guarantee is released temporarily accordingly.

The amount that could be required to be paid if the guarantee was called upon on entirely was HK$28,000,000 as at 31 May 2015. The directors of the Target Co 1 consider that the fair values of the guarantee contracts at grant dates are not significant.

– 105 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

32. RELATED PARTY TRANSACTIONS

In addition to the transactions, balances and commitments disclosed elsewhere in the Financial Information, the Target Gp 1 had the following transactions with related parties:

Commission and interest income earned from: Controlling shareholder, also a director and his close family members Other shareholders and their close family members Other directors Commission expenses paid to: Other directors Rental and management fees expenses paid to: A related company_(note)_	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 133 297 374 3,233 2,735 1,911 – 25 29 3,366 3,057 2,314 146 97 141 455 – –	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 178 1,331 1,327 258 9 15 1,514 1,604 81 16 – –	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 178 1,331 1,327 258 9 15 1,514 1,604 81 16 – –
			1,604

			16

			–

Staff cost and rental expenses of a related company, Skyway Futures Limited of which Mr. Lam Hoi Sze is the controlling shareholder, is borne by the Target Gp 1.

Note: During the year ended 31 December 2012, rental and management expenses were paid by the Target Gp 1 to a related company. The related company was held by the controlling shareholder of the Target Co 1, which he holds 50% equity interest and the remaining 50% equity interest was held by Mr. Lam’s sister. Monthly rental and management expenses represent the amounts paid and payable under the rental agreements entered into between the related company and the property owners in respect of office premise occupied by the Target Gp 1.

Compensation of key management personnel

Key management personnel of the Target Co 1 are the directors of the Target Co 1. The remuneration of directors is shown in note 10 to the financial statements.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

33. MAJOR NON-CASH TRANSACTIONS

During the period ended 31 May 2015, the Target Gp 1 has the following material non-cash transactions.

i) Amounts due to two shareholders totalling HK$19,619,000 was assigned to the controlling shareholder;
ii) Sales proceeds of HK$77,241,000 arising from the disposal of Great Well Properties Limited is credited to other reserve as deemed contribution from the controlling shareholder;
iii) The waiver of an amount due from the controlling shareholder amounting to HK$38,722,000.

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Gp 1, the Target Co 1 or any of its subsidiaries have been prepared in respect of any period subsequent to 31 May 2015 and up to the date of this report.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

– 107 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

==> picture [68 x 52] intentionally omitted <==

26 August 2015

The Directors

Mission Capital Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) related to Skyway Futures Limited (the “Target Co 2”) for each of the three years ended 31 December 2012, 2013 and 2014 and the five months ended 31 May 2015 (the “Relevant Periods”), for inclusion in the circular issued by Mission Capital Holdings Limited (the “Company”) dated 26 August 2015 (the “Circular”) in connection with the proposed acquisition of the entire issued capital and the shareholder’s loan of the Target Co 2 from the Vendors 1 and Vendor 2 as defined in the Circular (the “Acquisition”).

The Target Co 2 is a private limited Target Co 2 incorporated in Hong Kong and is a license corporation under the Hong Kong Securities and Futures Ordinance dealing with the Type 2: Dealing in futures regulated activities. The principal activity of the Target Co 2 is provision of futures and options contracts dealing services to clients.

We have been the auditors of the Target Co 2 for the three years ended 31 December 2012, 2013 and 2014.

For the purpose of this report, the directors of the Target Co 2 have prepared the financial information of the Target Co 2 for the Relevant Periods, in accordance with HKFRSs issued by the HKICPA (the “Underlying Financial Statements”). The Underlying Financial Statements were audited by us in accordance with the Hong Kong Standards on Auditing issued by the HKICPA. We have also examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information of the Target Co 2 for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements. No adjustments are deemed necessary to the underlying Financial Statements in preparing our report for inclusion in the Circular.

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APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

The Underlying Financial Statements are the responsibility of the directors of the Target Co 2 who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information, and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target Co 2 as at 31 December 2012, 2013 and 2014 and 31 May 2015 and of the Target Co 2’s results and cash flows for the Relevant Periods.

The comparative statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows of the Target Co 2 for the five months ended 31 May 2014, together with the notes thereon (the “May 2014 Financial Information”) have been extracted from the Target Co 2’s unaudited financial information for the same period, which was prepared by the directors of the Target Co 2 solely for the purpose of this report. We have reviewed the May 2014 Financial Information in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. Our review of the May 2014 Financial Information consisted of making enquires, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the May 2014 Financial Information. Based on our review, nothing has come to our attention that causes us to believe that the May 2014 Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRSs.

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

(A) FINANCIAL INFORMATION OF THE TARGET CO 2

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

NOTES Revenue 7 Other income 7 Commission expenses Depreciation 13 Finance costs Other operating expenses (Loss) profit before taxation 9 Income tax expense 10 (Loss) profit and total comprehensive (expense) income for the year/period Basic earnings per share (HK cents) 11	Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 563 1,173 1,757 707 747 – 1 10 2 9 563 1,174 1,767 709 756 (85) (260) (592) (355) (179) (60) (73) (87) (36) (13) (9) (5) (4) (2) (3) (718) (586) (637) (171) (190) (309) 250 447 145 371 – – (40) – (63) (309) 250 407 145 308 (0.03) 0.02 0.04 0.01 0.03	Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 563 1,173 1,757 707 747 – 1 10 2 9 563 1,174 1,767 709 756 (85) (260) (592) (355) (179) (60) (73) (87) (36) (13) (9) (5) (4) (2) (3) (718) (586) (637) (171) (190) (309) 250 447 145 371 – – (40) – (63) (309) 250 407 145 308 (0.03) 0.02 0.04 0.01 0.03
		756 (179) (13) (3) (190)
		371 (63)
		308

		0.03

– 110 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

STATEMENTS OF FINANCIAL POSITION

NOTES Non-current assets Intangible asset 12 Equipment 13 Statutory deposit 14 Current assets Accounts receivable 15 Tax recoverable Deposits and other receivables Bank balances – House accounts 16 – Segregated accounts 16 Current liabilities Accounts payable 17 Tax payable Accrued liabilities Net current assets Net assets Capital and reserve Share capital 18 (Accumulated losses) retained profit Total equity	As at 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 500 500 500 128 192 105 1,599 1,511 1,590 2,227 2,203 2,195 2,151 6,994 13,957 8 – – 62 33 33 7,296 4,625 3,098 2,242 3,536 10,298 11,759 15,188 27,386 4,314 7,452 19,177 – – 40 148 165 183 4,462 7,617 19,400 7,297 7,571 7,986 9,524 9,774 10,181 10,000 10,000 10,000 (476) (226) 181 9,524 9,774 10,181	As at 31 May 2015 HK$’000 500 92 1,519
		2,111
		15,956 – 33 3,800 17,055
		36,844
		28,363 103 –
		28,466
		8,378
		10,489

		10,000 489
		10,489

– 111 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

STATEMENTS OF CHANGES IN EQUITY

At 1 January 2012 Loss and total comprehensive expense for the year At 1 January 2013 Profit and total comprehensive income for the year At 31 December 2013 Profit and total comprehensive income for the year At 31 December 2014 Profit and total comprehensive income for the period At 31 May 2015 At 1 January 2014 Profit and total comprehensive income for the period At 31 May 2014 (unaudited)	Accumulated Share losses/ capital retained profit HK$’000 HK$’000 10,000 (167) – (309) 10,000 (476) – 250 10,000 (226) – 407 10,000 181 – 308 10,000 489 10,000 (226) – 145 10,000 (81)	Total HK$’000 9,833 (309)
		9,524 250
		9,774 407
		10,181 308
		10,489

		9,774 145
		9,919

– 112 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES (Loss) profit before taxation Adjustments for: Interest income Depreciation of equipment Operating cash flows before movements in working capital Movements in working capital: (Increase) decrease in statutory deposit Decrease (increase) in accounts receivable Decrease in deposits and other receivables (Increase) decrease in bank balances - segregated accounts (Decrease) increase in accounts payable Increase (decrease) in accrued liabilities and other payables Cash used in operations Interest received Income tax (paid) refunded NET CASH (USED IN) FROM OPERATING ACTIVITIES INVESTING ACTIVITY Purchase of equipment	Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (309) 250 447 145 371 – (1) (10) (2) (9) 60 73 87 36 13 (249) 322 524 179 375 (99) 88 (79) (5) 71 1,639 (4,843) (6,963) 1,311 (1,999) – 29 – – – (1,524) (1,294) (6,762) 859 (6,757) (116) 3,138 11,725 (4,169) 9,186 5 17 18 (15) (183) (344) (2,543) (1,537) (1,840) 693 – 1 10 2 9 (8) 8 – – – (352) (2,534) (1,527) (1,838) 702 – (137) – – –	Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (309) 250 447 145 371 – (1) (10) (2) (9) 60 73 87 36 13 (249) 322 524 179 375 (99) 88 (79) (5) 71 1,639 (4,843) (6,963) 1,311 (1,999) – 29 – – – (1,524) (1,294) (6,762) 859 (6,757) (116) 3,138 11,725 (4,169) 9,186 5 17 18 (15) (183) (344) (2,543) (1,537) (1,840) 693 – 1 10 2 9 (8) 8 – – – (352) (2,534) (1,527) (1,838) 702 – (137) – – –
		375 71 (1,999) – (6,757) 9,186 (183)
		693 9 –
		702
		–

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ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

NET CASH USED IN INVESTING ACTIVITY NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD ANALYSIS OF CASH AND CASH EQUIVALENTS Bank balances – house accounts	Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) – (137) – – – (352) (2,671) (1,527) (1,838) 702 7,648 7,296 4,625 4,625 3,098 7,296 4,625 3,098 2,787 3,800 7,296 4,625 3,098 2,787 3,800	Year ended 31 December Five months ended 31 May 2012 2013 2014 2014 2015 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) – (137) – – – (352) (2,671) (1,527) (1,838) 702 7,648 7,296 4,625 4,625 3,098 7,296 4,625 3,098 2,787 3,800 7,296 4,625 3,098 2,787 3,800
		702 3,098
		3,800

		3,800

– 114 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

NOTES TO FINANCIAL INFORMATION

1. GENERAL

The Target Co 2 is a private limited company incorporated in Hong Kong. The Target Co 2 has its registered office and principal place of business at Room 3302, 33/F, The Lee Garden, 33 Hysan Avenue, Causeway Bay, Hong Kong. Mr. Lam Hoi Sze is the controlling shareholder of the Target Co 2 (the “Controlling Shareholder”).

The financial statements are presented in Hong Kong dollars, which is also the functional currency of the Target Co 2.

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

Application of new and revised HKFRSs

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Co 2 has consistently applied the Hong Kong Accounting Standards (“HKASs”), HKFRSs, amendments and interpretations (hereinafter collectively referred to as the “HKFRSs”) which are effective for the accounting period beginning on 1 January 2015 throughout the Relevant Periods.

The Target Co 2 has not early applied the following new and revised HKFRSs that have been issued but are not yet effective.

HKFRS 9 Financial instruments[1] HKFRS 15 Revenue from contracts with customers[2] Amendments to HKFRS 10 Sale or contribution of assets between an investor and its and HKAS 28 associate or joint venture[3] Amendments to HKAS 16 Clarification of acceptable methods of depreciation and and HKAS 38 amortisation[3] Amendments to HKAS 16 Agriculture: Bearer plants[3] and HKAS 41 Amendments to HKAS 1 Disclosure initiative[3] Amendments to HKAS 27 Equity method in separate financial statements[3] Amendments to HKFRS 10, Investment entities: Applying the consolidation exception[3] HKFRS 12 and HKAS 28 Amendments to HKFRSs Annual improvements to HKFRSs 2012 – 2014 cycle[3]

1 Effective for annual periods beginning on or after 1 January 2018

2 Effective for annual periods beginning on or after 1 January 2017

3 Effective for annual periods beginning on or after 1 January 2016

The directors of the Target Co 2 do not anticipate that the application of the new and revised HKFRSs will have material impact on the Financial Information.

– 115 –

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APPENDIX II

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with the following accounting policies which conform with HKFRSs. The Financial Information have been prepared on the historical cost basis as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Target Co 2 takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

The principal accounting policies are set out below.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in normal course of business.

Commission income for futures and options contracts dealing services is recognised as income on trade date basis.

Interest income from clients is recognised on a time proportion basis, by reference to the principal amounts outstanding and the effective interest rates applicable.

Intangible asset

Intangible asset represents a right to trade on The Hong Kong Futures Exchange Limited (“HKFE”) (the “trading right”). The trading right has indefinite useful life and is carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment of tangible and intangible assets below).

Gains or losses arising from derecognition of the trading right is measured at the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss when the asset is derecognised.

Equipment

Equipment is stated in the statements of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with effect of any changes in estimate accounted for on a prospective basis.

– 116 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

An item of equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of equipment is determined as the difference between the sales proceeds and the carrying amount of the asset is recognised in profit or loss.

Leasing

The Target Co 2 as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Financial instruments

Financial assets and financial liabilities are recognised on the statements of financial position when the Target Co 2 becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Target Co 2’s financial assets comprised financial assets classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method

Income is recognised on an effective interest basis for loans and receivables.

– 117 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including accounts receivable, deposits and other receivables and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the financial assets have been affected.

Objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

The carrying amount of the loans and receivables is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an accounts receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by the Target Co 2 are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Target Co 2 after deducting all of its liabilities. Equity instruments issued by the Target Co 2 are recognised at the proceeds received, net of direct issue costs.

– 118 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities (representing accounts payable) are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Target Co 2 are recorded at the proceeds received, net of direct issue costs.

Derecognition

The Target Co 2 derecognises a financial asset only when the contractual rights to the cash flows from the asset expire.

On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Financial liabilities are derecognised financial when the obligations specified in the relevant contract are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘(loss) profit before taxation’ as reported in the statements of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Co 2’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period.

– 119 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is realised, based on tax rate (and tax laws) that have been enacted or substantially enacted by the end of each reporting period. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow from the manner in which the Target Co 2 expects, at the end of each reporting period, to recover or settle the carrying amount of its assets and liabilities.

Impairment losses on tangible and intangible assets

At the end of each reporting period, the Target Co 2 reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In addition, intangible assets with indefinite useful lives are tested for impairment annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

4. KEY SOURCE OF ESTIMATION UNCERTAINTY

The following is the key assumption concerning the future, and other key source of estimation uncertainty at the end of each reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Income taxes

As at 31 December 2012, 2013 and 2014 and five months ended 31 May 2015, the Target Co 2 had unused estimated tax losses of approximately HK$475,000, HK$289,000, HK$Nil and HK$Nil available for offset against future profits. No deferred tax asset has been recognised in respect of such tax losses due to unpredictability of future profit streams. The unused tax losses can be carried forward indefinitely.

For the years ended 31 December 2013 and 2014, the charge for the year to Hong Kong Profits Tax has been relieved by approximately HK$30,000 and HK$48,000, respectively as a result of tax losses brought forward from previous years.

– 120 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

5. CAPITAL RISK MANAGEMENT

The Target Co 2 manages its capital to ensure that the Target Co 2 will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Target Co 2’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Target Co 2 consists of equity attributable to owners of the Target Co 2 (comprising issued share capital and retained earnings).

The management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Target Co 2 manages its overall capital structure through the payment of dividends and issuance of shares.

The Target Co 2 is registered with Hong Kong Securities and Futures Commission (the “SFC”) and is subject to liquid capital requirements under the Hong Kong Securities and Futures (Financial Resources) Rules (the “SF(FR)R”) adopted by the SFC. Under the SF(FR)R, a regulated entity must maintain its liquid capital (assets and liabilities adjusted as determined by the SF(FR)R) in excess of HK$3 million or 5% of its total adjusted liabilities, whichever is higher. The Target Co 2 has complied with the liquid capital requirements imposed by the SF(FR)R during the Relevant Periods.

6. FINANCIAL INSTRUMENTS

Categories of financial instruments Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	As 2012 HK$’000 11,751 4,314	at 31 December 2013 2014 HK$’000 HK$’000 15,188 27,386 7,452 19,177	As at 31 May 2015 HK$’000 36,844

			28,363

Financial risk management objectives and policies

The Target Co 2’s major financial instruments include accounts receivable, deposits and other receivables, accounts payable and bank balances. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 121 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

Market risk

Currency risk

It is the Target Co 2’s policy to operate in local currency as far as possible to minimise currency risks. The Target Co 2’s principal businesses are conducted in Hong Kong dollars which is also the functional currency of the Target Co 2. The Target Co 2 undertakes certain transactions denominated in USD. The directors consider the exchange rate of Hong Kong dollar against USD is relatively stable under the current pegged rate system in Hong Kong. In the opinion of the directors, the Target Co 2 is not subjected to significant risk in respect of its USD exposure.

Cash flow interest rate risk

The Target Co 2 has insignificant interest bearing financial instruments other than bank balances and as a result does not have any significant exposure to cash flow interest rate risk. Bank balances are excluded from interest rate risk analysis as they are not sensitive to the change in market interest rates.

Credit risk

As at 31 December 2012, 2013, 2014 and five months ended 31 May 2015, the Target Co 2’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statements of financial position.

The Target Co 2’s concentration of credit risk by geographical locations is mainly in Hong Kong. The Target Co 2’s major debtors are Hong Kong Futures Exchange Clearing Corporation (“HKCC”) and Ping An of China Futures (Hong Kong) Company Limited.

Bank balances are placed in various authorised institutions with high credit ratings and the directors of the Target Co 2 consider the credit risk for such is minimal.

Liquidity risk

Internally generated cash flow is the source of fund to finance the operations of the Target Co 2. The Target Co 2 regularly reviews its major funding positions to ensure adequate financial resources will be available to meet its financial obligations. The Target Co 2’s financial liabilities are all repayable on demand.

Fair value

The fair value of financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors of the Target Co 2 consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

– 122 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

7. REVENUE AND OTHER INCOME

Revenue Brokerage commission from dealing in futures and options contracts on HKFE Other income Interest income from clients Total revenue and other income	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 563 1,173 1,757 – 1 10 563 1,174 1,767	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 707 747 2 9 709 756	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 707 747 2 9 709 756
			756

8. DIRECTORS’ EMOLUMENTS

The directors received emoluments and contributions to the MPF Scheme from the Target Co 2’s related company, Skyway Securities Investment Limited, in respect of their services to the Target Co 2 and the related company. No apportionment has been made as the directors of Target Co 2 consider that it is impracticable to apportion this amount between their services to the Target Co 2 and the related company.

9. (LOSS) PROFIT BEFORE TAXATION

				Five months	Five months
	Year	ended 31 December		ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
(Loss) profit before taxation has been
arrived at after charging the following:
Auditor’s remuneration	166	167	174	–	–
Depreciation of equipment	60	73	87	36	13
System and network maintenance fee	347	249	307	142	115

– 123 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

10. INCOME TAX EXPENSE

The amount of tax charged to the statement of profit or loss and other comprehensive income represents:

				Five months	Five months
	Year	ended 31 December		ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Current tax
– Hong Kong Profits Tax	–	–	40	–	63

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for the year.

The tax charge can be reconciled to the (loss) profit before taxation per the statements of profit or loss and other comprehensive income as follows:

(Loss) profit before taxation Calculation at Hong Kong Profits Tax rate of 16.5% Tax effect of tax losses not recognised Tax effect of deductible temporary difference not recognised Utilisation of tax losses not recognised previously Tax charge for the year/period	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 (unaudited) (309) 250 447 (51) 41 74 41 – – 10 (11) 14 – (30) (48) – – 40	Five months ended 31 May 2014 2015 HK$’000 HK$’000 145 371 24 61 – – 6 2 (30) – – 63	Five months ended 31 May 2014 2015 HK$’000 HK$’000 145 371 24 61 – – 6 2 (30) – – 63

			61 – 2 –
			63

– 124 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

11. EARNINGS PER SHARE

The calculation of basic earnings per share attributable to owners of the Target Co 2 is based on the following data:

(Loss)/Earnings (Loss)/Earnings for the year attributable to owners of the Target Co 2 Number of shares Number of ordinary shares for the purposes of basic earnings per share	Year ended 31 December 2012 2013 2014 HK$’000 HK$’000 HK$’000 (309) 250 407 Year ended 31 December 2012 2013 2014 ’000 ’000 ’000 10,000 10,000 10,000	Five months ended 31 May 2014 2015 HK$’000 HK$’000 (unaudited) 145 308 Five months ended 31 May 2014 2015 ’000 ’000 (unaudited) 10,000 10,000

No diluted earnings per share is presented as there was no potential ordinary shares outstanding during the Relevant Periods.

12. INTANGIBLE ASSET

	HK$’000
Cost and carrying value
At 31 December 2012, 31 December 2013, 31 December 2014 and 31 May 2015	500

The amount represents trading right that confer eligibility of the Target Co 2 to trade on HKFE. The trading right has no foreseeable limit to the years that the Target Co 2 can use to generate net cash flows. As a result, the trading right is considered by the management of the Target Co 2 as having an indefinite useful life because it is expected to contribute to net cash inflows indefinitely. The trading right will not be amortised until its useful life is determined to be finite. It will be tested for impairment annually and whenever there is an indication that it may be impaired.

At 31 December 2012, 2013 and 2014 and 31 May 2015, the directors of the Target Co 2 considered that there is no impairment of trading right based on its value in use.

– 125 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

13. EQUIPMENT

COST At 1 January 2012 and 31 December 2012 Addition At 31 December 2013, 31 December 2014 and 31 May 2015 DEPRECIATION At 1 January 2012 Charge for the year At 31 December 2012 Charge for the year At 31 December 2013 Charge for the year At 31 December 2014 Charge for the period At 31 May 2015 CARRYING VALUES At 31 May 2015 At 31 December 2014 At 31 December 2013 At 31 December 2012	Computer equipment HK$’000 300 137
	437
	112 60
	172 73
	245 87
	332 13
	345
	92

	105

	192

	128

The equipment is depreciated on a straight-line basis at the rate of 20% per annum.

14. STATUTORY DEPOSIT

Statutory deposit represent deposits with clearing house. They are non-interest bearing.

Under the arrangement with HKFE Clearing Corporation Limited (“HKCC”), the statutory deposit could be used to set off against accounts payable to HKCC.

– 126 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

15. ACCOUNTS RECEIVABLE

Accounts receivable arising from the ordinary course of business of dealing in futures and options contracts: – HKCC – A broker	As 2012 HK$’000 2,073 78 2,151	at 31 December 2013 2014 HK$’000 HK$’000 224 2,218 6,770 11,739 6,994 13,957	As at 31 May 2015 HK$’000 2,369 13,587
			15,956

Under the settlement arrangement with HKCC, all open positions held at HKCC are treated as if they were closed out and re-opened at the relevant closing quotation as determined by HKCC. Profits or losses arising from this “mark-to-market” settlement arrangement are included in accounts receivables with HKCC.

In accordance with the agreement with the broker, mark-to-market profits or losses are treated as if they were settled and are included in accounts receivables with a broker.

The accounts receivable are neither past due nor impaired.

Accounts receivable from HKCC and brokers represent transactions arising from the business of dealing.

Details of Target Co 2’s policy on credit risk are set out in note 6.

16. BANK BALANCES

The amounts comprise cash held by the Target Co 2 in banks at market interest rate.

From the Target Co 2’s ordinary business, it receives and holds money deposited by clients in the course of the conduct of the regulated activities. These clients’ monies are maintained in segregated bank accounts. The Target Co 2 has recognised the corresponding account payables to respective clients as the Target Co 2 does not have a currently enforceable right to offset those payables with the deposits placed. As at 31 December 2012, 2013, 2014 and 31 May 2015, the segregated accounts with authorised institutions in relation to its brokerage business totalling HK$2,242,000, HK$3,536,000, HK$10,298,000 and HK$17,055,000 respectively.

17. ACCOUNTS PAYABLE

				As at
	As at 31 December			31 May
	2012	2013	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000
Accounts payable arising from the
ordinary course of dealing in futures
and options contracts:
– Clients	4,314	7,452	19,177	28,363

– 127 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

Settlement arrangements with clients follow the same settlement mechanism with HKCC or a broker as disclosed in note 15 and profits or losses arising from mark-to-market settlement arrangement are included in accounts payables with clients.

Accounts payable to clients are non-interest bearing. The settlement terms of accounts payable are one day after trade day.

18. SHARE CAPITAL

==> picture [399 x 146] intentionally omitted <==

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

Number of shares Share Capital
31.12.2012 31.12.2013 31.12.2014 31.5.2015 31.12.2012 31.12.2013 31.12.2014 31.5.2015
‘000 ‘000 ‘000 ‘000 HK$’000 HK$’000 HK$’000 HK$’000
Authorised
– 100,000,000 Ordinary Shares of
HK$1 each 100,000 100,000 Note Note 100,000 100,000 Note Note
Issued and fully paid
– Ordinary Shares with no
par value 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
----- End of picture text -----

Note: Under the Hong Kong Companies Ordinance (Cap. 622), with effect from 3 March 2014, the concept of authorised share capital no longer exists and the Target Co 2’s shares no longer have a par value. There is no impact on the number of shares in issue or the relative entitlement of any of the shareholders as a result of this transition.

19. SEGMENT REPORTING

The chairman of the Target Co 2, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance, considers that the Target Co 2 operated in one single operating segment of futures and options contracts dealing during the Relevant Periods and all of its assets and liabilities as at the end of the Relevant Periods were located in Hong Kong. Information reported to the chief operating decision maker is identical to the Target Co 2’s assets and liabilities, revenue and results as presented in the Financial Information.

– 128 –

APPENDIX II

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

Information about major customers

A summary of revenue earned from external customers which individually contributed over 10% of the Target Co 2’s revenue during each of the Relevant Period is set out below:

					Five months	Five months
	Year ended		31 December		ended 31 May
	2012		2013	2014	2014	2015
	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000
					(unaudited)
Customer A	112		174	N/A1	N/A1	217
Customer B	62		253	441	N/A1	N/A1
Customer C	59		N/A1	N/A1	N/A1	N/A1
Customer D	N/A1		230	468	468	N/A1
Customer E	N/A1		N/A1	263	N/A1	N/A1

1 The corresponding revenue did not contribute over 10% of the total revenue of the Target Co 2.

No other single customers contributed 10% or more to the Target Co 2’s revenue during Relevant Periods.

20. RELATED PARTY TRANSACTION

During the year/period, the Target Co 2 entered into the following transaction with related party:

				Five months	Five months
	Year	ended 31 December		ended 31 May
	2012	2013	2014	2014	2015
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Commission income from a director	–	10	41	10	–

Staff cost and rental expenses are borne by a related company, Skyway Securities Investment Limited of which Mr. Lam Hoi Sze is the controlling shareholder.

Compensation of key management personnel

Key management personnel of the Target Co 2 are the directors of the Target Co 2. The remunerations of directors are borne by the Target Co 2’s related company, Skyway Securities Investment Limited.

– 129 –

ACCOUNTANTS’ REPORTS OF THE TARGET COMPANIES

APPENDIX II

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Co 2 have been prepared in respect of any period subsequent to 31 May 2015 and up to the date of this report.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

– 130 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. I N T R O D U C T I O N T O T H E U N A U D I T E D P R O F O R M A F I N A N C I A L INFORMATION OF THE ENLARGED GROUP

INTRODUCTION

The following unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group (the “Unaudited Pro Forma Consolidated Statement of Assets and Liabilities”) has been prepared in accordance with paragraph 4.29 of the Listing Rules for the purpose of illustrating the effect of the proposed Acquisitions as if the Acquisitions had been completed on 31 March 2015.

The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities is prepared based on (i) the consolidated statement of financial position of the Group as at 31 March 2015 which has been extracted from the Group’s annual report for the year then ended published on 26 June 2015; and (ii) the audited consolidated statement of financial position of the Skyway Securities and Skyway Futures as at 31 May 2015 as extracted from the accountants’ reports thereon set out in Appendix II to this circular, after making pro forma adjustments relating to the Acquisitions that are (i) directly attributable to the Acquisitions; and (ii) factually supportable as if the Acquisitions had been undertaken at 31 March 2015.

The Unaudited Pro Forma Consolidated Statement of Assets and Liabilities has been prepared by the directors of the Company based on a number of assumptions, estimates and uncertainties for illustrative purposes only and because of its nature, it may not give a true picture of the financial position of the Enlarged Group. Accordingly, the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities does not purport to describe the financial position of the Enlarged Group that would have been attained had the Acquisitions been completed at 31 March 2015, nor purport to predict the future financial position of the Enlarged Group at any future date.

– 131 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

The Group as at 31 March 2015 HK$’000 (Audited) Note 1 Non-current assets Property, plant and equipment 96 Available-for-sale investments 349,400 Goodwill – Contingent consideration – Intangible assets – Deposits – Other assets – Deferred tax – 349,496 Current assets Trade and bills receivable 11,974 Prepayments, deposits and other receivables 17,497 Loans receivable 120,000 Tax recoverable 50 Investments at fair value through profit or loss 2,203,143 Cash and bank balances 17,585 2,370,249	Skyway Securities as at 31 May 2015 HK$’000 (Audited) Note 2 757 – – – 460 984 3,069 21 5,291 516,009 76,447 – – – 129,269 721,725	Skyway Futures as at 31 May 2015 HK$’000 (Audited) Note 2 92 – – – 500 1,519 – – 2,111 15,956 33 – – – 20,855 36,844	Pro Forma Pro forma adjustments Total for the Enlarged Group HK$’000 HK$’000 HK$’000 Note 3 Note 4 – – 945 – – 349,400 437,747 – 437,747 903 – 903 – – 960 – – 2,503 – – 3,069 – – 21 438,650 – 795,548 – – 543,939 – – 93,977 – – 120,000 – – 50 – – 2,203,143 – (3,500) 164,209 – (3,500) 3,125,318	Pro Forma Pro forma adjustments Total for the Enlarged Group HK$’000 HK$’000 HK$’000 Note 3 Note 4 – – 945 – – 349,400 437,747 – 437,747 903 – 903 – – 960 – – 2,503 – – 3,069 – – 21 438,650 – 795,548 – – 543,939 – – 93,977 – – 120,000 – – 50 – – 2,203,143 – (3,500) 164,209 – (3,500) 3,125,318
				795,548
				543,939 93,977 120,000 50 2,203,143 164,209
				3,125,318

– 132 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group as at 31 March 2015 HK$’000 (Audited) Note 1 Current liabilities Trade and bills payable 2,590 Other payables and accruals 18,917 Borrowing 158,128 Tax payable – 179,635 Net current assets 2,190,614 Total assets less current liabilities 2,540,110 Non-current liabilities Notes payable 146,375 Promissory notes – Deferred tax liabilities 65,000 211,375 Net assets 2,328,735	Skyway Securities as at 31 May 2015 HK$’000 (Audited) Note 2 189,970 2,644 185,279 5,102 382,995 338,730 344,021 – – – – 344,021	Skyway Futures as at 31 May 2015 HK$’000 (Audited) Note 2 28,363 – – 103 28,466 8,378 10,489 – – – – 10,489	Pro Forma Pro forma adjustments Total for the Enlarged Group HK$’000 HK$’000 HK$’000 Note 3 Note 4 – – 220,923 – – 21,561 – – 343,407 – – 5,205 – – 591,096 – (3,500) 2,534,222 438,650 (3,500) 3,329,770 – – 146,375 486,360 – 486,360 – – 65,000 486,360 – 697,735 (47,710) (3,500) 2,632,035	Pro Forma Pro forma adjustments Total for the Enlarged Group HK$’000 HK$’000 HK$’000 Note 3 Note 4 – – 220,923 – – 21,561 – – 343,407 – – 5,205 – – 591,096 – (3,500) 2,534,222 438,650 (3,500) 3,329,770 – – 146,375 486,360 – 486,360 – – 65,000 486,360 – 697,735 (47,710) (3,500) 2,632,035
				591,096
				2,534,222
				3,329,770
				146,375 486,360 65,000
				697,735
				2,632,035

– 133 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

The figures are extracted from the audited consolidated statement of financial position of the Group as at 31 March 2015, as set out in the annual report of the Company for the year ended 31 March 2015 published on 26 June 2015.
The adjustment represents the inclusion of the assets and liabilities of Skyway Securities and Skyway Futures, as extracted from respective accountants’ reports as set out in Appendix II to this circular.
The adjustment reflects the Acquisitions by the Group under the sale and purchase agreements and recognition of pro forma goodwill of HK$437,747,000 arising from Acquisitions. The Acquisitions are accounted for using acquisition method of accounting in accordance with Hong Kong Financial Reporting Standard 3 “Business Combinations”. For the purpose of preparing the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities of the Enlarged Group, the pro forma fair values of the identifiable assets and liabilities (other than goodwill) of Skyway Securities and Skyway Futures as at 31 March 2015 are assumed to be the same as their carrying amounts as at 31 May 2015 as if the Acquisitions had been completed as at 31 March 2015. The recognition of pro forma goodwill arising on the Acquisitions as if the Acquisitions had been completed as at 31 March 2015 is as follows:

Consideration_(note a) Less: Pro forma fair value of identifiable net assets acquired(note b) Pro forma goodwill arising on the Acquisitions(note c)_	HK$’000 792,257 354,510
	437,747

(a) The amount represents the total consideration of the Acquisitions. Pursuant to the sale and purchase agreements dated 7 May 2015 and 11 May 2015, the total consideration of the Acquisitions should be settled in the following manner:
(i) issuing an aggregation of 2,600,000,000 new ordinary shares (the “Consideration Shares”) of the Company;
(ii) issuing promissory notes with total face value of HK$550,000,000; and
(iii) contingent consideration arrangement.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The fair value of the Consideration Shares of HK$306,800,000 was determined by reference to the published closing market price of HK$0.118 per Share at 31 March 2015 as if the Acquisition had been completed on 31 March 2015 and is subject to actual fair value at the date of completion of the Acquisitions. The Promissory Notes with total face value of HK$550,000,000 shall be issued on completion of the Acquisitions which bear interest at 2.5% per annum with a maturity of 3 years. The fair values of the Promissory Notes in aggregation of HK$486,360,000 at 31 March 2015 are based on the valuation carried out by Roma Appraisals Limited, an independent professional valuer not connected with the Group. The fair values of the liability components of the Promissory Notes by discounting the estimated contractual cash flows over the remaining contractual terms of the Promissory Notes at the discount rates that appropriately reflect the riskiness of the Promissory Notes. The contingent consideration arrangement represents the profit guarantee and net asset values guarantee jointly and severally made by the vendors pursuant to the sales and purchase agreements. The fair value of the contingent consideration of HK$903,000 at 31 March 2015 is estimated based on the valuation carried out by Roma Appraisals Limited, an independent professional valuer not connected with the Group using the income approach. The fair value of the net asset value guarantee is with reference to the unaudited management accounts of the Target Companies as at 31 March 2015 and audited financial statements of the Target Companies as at 31 May 2015. The fair value of the Profit Guarantee is determined by using the probabilistic method with reference to the projected net profits before tax of the Target Companies for the two financial years ended 31 December 2015 and ending 31 December 2016 and probability of different scenario estimated by the Management after taking into account the discount rates that appropriately reflect the riskiness of the Profit Guarantee. The fair values of Promissory Notes, Profit Guarantee and net asset values guarantee are subject to the change at actual completion date.

(b) The identifiable assets and liabilities, including assets and liabilities not recognised by Skyway Securities and Skyway Futures, will be measured at fair value at the actual completion date of the Acquisitions in accordance with the requirement of HKFRS 3 ‘‘Business Combinations’’, the amount of goodwill to be recognised in connection with the Acquisitions at the completion date are therefore subject to changes and also depends on the fair value of the ordinary shares, promissory notes and contingent consideration at the date of completion of the Acquisitions.
(c) For the purpose of the preparation of the Unaudited Pro Forma Consolidated Statement of Assets and Liabilities of the Enlarged Group, the Directors have assessed whether the pro forma amount of goodwill may be impaired, on a pro forma basis, in accordance with HKAS 36 “Impairment of Assets” and concluded that there is no impairment of such goodwill with reference to the business valuation of 100% equity interest in the Target Companies as at 31 May 2015 carried out by Roma Appraisals Limited, an independent professional valuer not connected with the Group, as set out in Appendix IV to this Circular.
The amount represents the payment of expenses that are directly attributable to the Acquisitions, which is assumed to be approximately HK$3,500,000.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

TO THE DIRECTORS OF MISSION CAPITAL HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of pro forma financial information of Mission Capital Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the pro forma statement of assets and liabilities as at 31 March 2015 and related notes as set out in Appendix III of the circular issued by the Company dated 26 August 2015 (the “Circular”). The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described in Appendix III of the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisitions of the entire issued share capital of Skyway Securities Investment Limited and Skyway Futures Limited (the “Acquisitions”) on the Group’s financial position as at 31 March 2015 as if the proposed Acquisitions had taken place at 31 March 2015. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s consolidated financial statements for the year ended 31 March 2015 on which an audit report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountants comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

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

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Acquisitions at 31 March 2015 would have been as presented.

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

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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

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

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

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

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

26 August 2015

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APPENDIX IV

The following is the text of a letter prepared for incorporation in this circular received from Roma Appraisals Limited, an independent valuer, in connection with its valuation of the Target Companies as at 31 May 2015.

==> picture [96 x 56] intentionally omitted <==

Unit 3806, 38/F, China Resources Building 26 Harbour Road, Wan Chai, Hong Kong Tel (852) 2529 6878 Fax (852) 2529 6806 E-mail [email protected] http://www.roma-international.com

26 August 2015

Mission Capital Holdings Limited

Suite 903, Great Eagle Centre, 23 Harbour Road, Wan Chai, Hong Kong

Case Ref: KY/BV2729/MAY15

Dear Sir/Madam,

RE: BUSINESS VALUATION OF 100% EQUITY INTERESTS IN SKYWAY SECURITIES INVESTMENT LIMITED AND SKYWAY FUTURES LIMITED

In accordance with the instructions from Mission Capital Holdings Limited (hereinafter referred to as the “Company”), we have conducted a business valuation of 100% equity interest in Skyway Securities Investment Limited (hereinafter referred to as “Skyway Securities”) and Skyway Futures Limited (hereinafter referred to as “Skyway Futures”) (together referred to as the “Target Companies”). We are pleased to report that we have made relevant enquiries and obtained other information which we considered relevant for the purpose of providing our valuation as at 31 May 2015 (hereinafter referred to as the “Date of Valuation”).

This report states the purpose of valuation, scope of work, economic and industry overviews, an overview of the Target Companies, basis of valuation, investigation and analysis, valuation methodology, major assumptions, information reviewed, limiting conditions, remarks and presents our opinion of values.

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APPENDIX IV

1. PURPOSE OF VALUATION

This report is prepared solely for the use of the directors and management of the Company. The Company is a public company listed on the Main Board of the Stock Exchange of Hong Kong Limited. In addition, Roma Appraisals Limited (“Roma Appraisals”) acknowledges that this report may be made available to the Company for public documentation purpose and included in the Company’s circular only.

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

2. SCOPE OF WORK

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

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

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

3. ECONOMIC OVERVIEW

3.1 Overview of the Economy in Hong Kong

Hong Kong has long been a free market economy highly dependent on international trade and finance. For this reason, it was heavily exposed to the global economic turmoil that began in 2008 which resulted in a sharp drop of the nominal gross domestic product (“GDP”) of Hong Kong in the first quarter of 2009. Since then, the economy of Hong Kong has been recovering. According to Bloomberg, the nominal GDP of Hong Kong in 2014 was approximately HK$2,246 billion, a 5.3% increase over 2013. Figure 1 and figure 2 illustrate the trend of Hong Kong’s nominal GDP over the past few quarters.

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APPENDIX IV

Figure 1 – Hong Kong’s Quarterly Nominal GDP from the First Quarter of 2012 to the First Quarter of 2015

HKD million

==> picture [381 x 245] intentionally omitted <==

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

600,000
550,000
500,000
450,000
400,000
350,000
300,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015
Source:Bloomberg
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Figure 2 – Year Over Year Percentage Change of Hong Kong’s Quarterly Nominal GDP from the First Quarter of 2012 to the First Quarter of 2015

==> picture [381 x 263] intentionally omitted <==

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

%
10
8
6
4
2
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2013 2014 2015
Source:Bloomberg
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APPENDIX IV

According to the International Monetary Fund (“IMF”), the inflation rate in 2014 was 3.9%, while the long-term inflation rate is expected to be around 3.5%. Figure 3 shows the historical trend of Hong Kong’s inflation rate from 2005 to 2014.

Figure 3 – Hong Kong’s Inflation Rate from 2005 to 2014

==> picture [380 x 228] intentionally omitted <==

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

%
6
5
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-1
-2
-3
----- End of picture text -----

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

Source: IMF
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APPENDIX IV

4. INDUSTRY OVERVIEW

4.1 Overview of the Financial Services Industry in Hong Kong

Hong Kong is one of the most vibrant international financial centers in the world and financial services industry plays an important role in the local economy. According to Hong Kong Census and Statistics Department, financial services sector contributed 16% of Hong Kong’s nominal GDP in 2008, which almost doubled the value in 1998. Although the financial industry experienced severe setback in 2008 due to financial tsunami, it followed with a strong revival in 2009. Due to a strong regulatory and supervisory framework characterized by independence and open free market, Hong Kong enjoys a solid foundation to develop and respond positively to market opportunities and challenges.

Hong Kong enjoys an active and liquid securities market as well. No control over capital movements and capital gains has been placed. The diversification of investment products are the main attractiveness of Hong Kong’s platform. Among products that are newly offered, the increased range of exchange-traded funds (“ETFs”) provides Hong Kong investors with increased geographical exposure, including mainland China, India and other emerging markets. While the existence of complex financial products exposes customers to higher risk levels, Hong Kong is rapidly evolving by improving financial standards and regulations in response to financial crisis and strengthening financial education.

4.2 The Securities Market in Hong Kong

According to Hong Kong Trade Development Council, Hong Kong stock market was the third largest in Asia and the seventh largest around the globe as at December 2014. A total of 1,775 companies were listed on the Stock Exchange of Hong Kong Limited as at March 2015, with a total capitalization of HK$26,742 billion. In addition, Hong Kong ranked as the world’s largest initial public offering (“IPO”) market in 2011. Figure 4 and figure 5 demonstrate market capitalizations of the world’s top stock exchanges as at March 2015 and highlights of the Hong Kong stock market from 2009 to 2014.

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APPENDIX IV

Figure 4 – Market Capitalizations of the World’s Top Stock Exchanges as at March 2015

			Market
	Worldwide		Capitalization
Stock Exchange	Ranking	Ranking in Asia	(US$ billion)
United States (NYSE Euronext)	1		19,523.19
United States (Nasdaq OMX)	2		7,173.50
Japan (Japan Exchange Group)1	3	1	4,810.36
China (Shanghai)	4	2	4,783.20
United Kingdom (London Stock
Exchange Group)2	5		4,236.22
Europe (NYSE Euronext)3	6		3,465.70
Hong Kong4	7	3	3,448.70
China (Shenzhen)	8	4	3,025.12
Canada (Toronto)5	9		1,963.97
Germany (Deutsche Börse)	10		1,882.52
India (Bombay)	11	5	1,623.11
Switzerland	12		1,577.52
Australia	13	6	1,319.44
Korea	14	7	1,306.68
Northern Europe (NASDAQ OMX
Nordic Exchange)6	15		1,275.33

Source: Securities and Futures Commission of Hong Kong

1 Comprises Tokyo Stock Exchange and Osaka Securities Exchange
2 Comprises London Stock Exchange and Borsa Italiana
3 Comprises Euronext Amsterdam, Euronext Brussels, Euronext Lisbon and Euronext Paris 4 Includes GEM
5 Includes TSX Venture
6 Comprises Copenhagen, Helsinki, Iceland, Stockholm, Tallinn, Riga and Vilnius Stock Exchanges

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APPENDIX IV

Figure 5 – Highlights of the Hong Kong Stock Market from 2009 to 2014

			Growth Enterprise	Growth Enterprise	Market
	Main	Board	(“GEM”)
	Number	Market	Number	Market
	of Listed	Capitalization	of Listed	Capitalization
As at end	Companies	(HK$ billion)	Companies	(HK$	billion)
2009	1,145	17,769	174		105
2010	1,244	20,942	169		135
2011	1,326	17,453	170		85
2012	1,368	21,872	179		78
2013	1,451	23,909	192		134
2014	1,548	24,892	204		179

Source: Securities and Futures Commission of Hong Kong

Due to the financial turmoil in 2012, the average daily turnover of the stock market in Hong Kong dropped by 22.8% from HK$69,732 million in 2011 to HK$53,851 million in 2012. As the crisis gradually relieved by the end of 2012, the average daily turnover of the Hong Kong stock market in 2013 rebounded by 16.2% to HK$62,560 million. In 2014, the average daily turnover further inclined to HK$69,456 million by 11.0% from 2013. Figure 6 and figure 7 illustrate the average daily turnover of the Hong Kong stock market from 2009 to 2014 and from the first quarter of 2014 to the first quarter of 2015 respectively.

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APPENDIX IV

Figure 6 – Average Daily Turnover of the Hong Kong Stock Market from 2009 to 2014

==> picture [379 x 229] intentionally omitted <==

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million HK$
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
2009 2010 2011 2012 2013 2014
----- End of picture text -----

Source: Securities and Futures Commission of Hong Kong Note: The figures include both the Main Board and GEM

Figure 7 – Average Daily Turnover of the Hong Kong Stock Market from the First Quarter of 2014 to the First Quarter of 2015

For the Period 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1

Average Daily Turnover (HK$ million) 68,319 57,457 70,871 80,728 86,427

Source: Securities and Futures Commission of Hong Kong

Note: The figures include the Main Board and GEM

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APPENDIX IV

4.3 China’s Influence on Financial Services Industry in Hong Kong

The increasing presence of China has an influential impact on Hong Kong’s financial services industry. Being the most liquid overseas market for mainland China, Hong Kong plays the role in raising capital for Chinese enterprises. The majority of mainland companies seeking overseas listings have their listings in Hong Kong. As at year end of 2011, 640 mainland companies were listed on the Stock Exchange of Hong Kong Limited, with a market capitalization of US$1,246 billion that represents 55% of the total market capitalization. Under the China’s 12th Five-year Plan, mainland China was expected to support Hong Kong as offshore Renminbi center and fund management center. Along with the expanded Renminbi trade settlement scheme, Hong Kong successfully introduced more Renminbi-denominated financial products and services into its local market, including trade finance and Renminbi bonds. On top of that, an expected rise in dual-listing of stocks and ETFs is going to reinforce Hong Kong’s financial services industry.

On 17 November 2014, Shanghai-Hong Kong Stock Connect (滬港通) was launched by the Shanghai Stock Exchange and the Hong Kong Stock Exchange. It is a cross-boundary investment channel that investors in each market are able to trade shares on the other market using their local brokers and clearing houses. This would further facilitate the development of the financial services industry in Hong Kong.

5. OVERVIEW OF THE TARGET COMPANIES

5.1 Skyway Securities

Skyway Securities is a private limited company incorporated in Hong Kong. Skyway Securities is a licensed corporation under the Securities and Futures Ordinance (“SFO”) (CAP. 571 of the Laws of Hong Kong) with the following regulated activities: (i) Type 1: Dealing in securities; and (ii) Type 4: Advising on securities.

The principal activities of Skyway Securities are provision of brokerage services and securities margin financing to clients.

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APPENDIX IV

5.2 Skyway Futures

Skyway Futures is a private limited company incorporated in Hong Kong. Skyway Futures is a licensed corporation under the Hong Kong SFO with the following regulated activity: Type 2: Dealing in futures contracts.

The principal activities of Skyway Futures are provision of futures and options contracts dealing services to clients.

6. BASIS OF VALUATION

Our valuation was based on going concern premise and conducted on a market value basis. According to the International Valuation Standards established by the International Valuation Standards Council in 2011, market value is defined as “the estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

7. INVESTIGATION AND ANALYSIS

Our investigation included discussions with members of the Management in relation to the development, operations and other relevant information of the Target Companies. In addition, we have made relevant inquiries and obtained further information and statistical figures regarding the economy and financial services industry in Hong Kong as we considered necessary for the purpose of the valuation.

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

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

The natures and prospects of the Target Companies;
The financial conditions of the Target Companies;

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APPENDIX IV

The economic outlook in general and the specific economic environment and market elements affecting the business, industry and market;
Relevant licenses and agreements;
The business risks of the Target Companies such as the ability in maintaining competent technical and professional personnel; and
Investment returns and market transactions of entities engaged in similar lines of business.

8. VALUATION METHODOLOGY

There are generally three accepted approaches to obtain the market values of the Target Companies, namely the Market-Based Approach, Income-Based Approach and Asset-Based Approach. Each of these approaches is appropriate in one or more circumstances, and sometimes, two or more approaches may be used together. Whether to adopt a particular approach will be determined by the most commonly adopted practice in valuing business entities that are similar in nature.

8.1 Market-Based Approach

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

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

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APPENDIX IV

8.2 Income-Based Approach

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

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

8.3 Asset-Based Approach

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

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

8.4 Business Valuation

In the process of valuing the Target Companies, we have taken into account of the uniqueness of the Target Companies’ operations and the nature of the financial services industry they are participating.

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VALUATION OF THE TARGET COMPANIES

The Income-Based Approach was not adopted because a lot of assumptions would have to be made and the valuation could be largely influenced by any inappropriate assumptions made. The Asset-Based Approach was also not adopted because it could not capture the future earning potential of the Target Companies and therefore it could not reflect the market values of the Target Companies. For the Market-Based Approach, it is applicable for stable companies with sufficient track records. We therefore considered that the adoption of the Market-Based Approach in arriving at the market values of the Target Companies to be appropriate.

By adopting the guideline public company method under the Market-Based Approach, we have to determine the appropriate valuation multiples of comparable companies, in which we have considered price-to-sales (“P/S”), price-to-earnings (“P/E”), price-to-book (“P/B”) and enterprise value-to-earnings before interest and taxes (“EV-toEBIT”) multiples.[7] However, P/S multiple was not adopted since it cannot capture the differences in cost structure across companies. P/B multiple was not adopted because it cannot reflect the true values of the companies which do not possess significant fixed assets. EV-to-EBIT multiple was preferable to P/E multiple since EV-to-EBIT multiple is capital structure-neutral by including debt and taking earnings before the payment of interest. Therefore, we have adopted EV-to-EBIT multiple in the valuation for the Target Companies. We adopted several listed companies with business scopes and operations similar to those of the Target Companies as comparable companies. The comparable companies were selected mainly with reference to the following selection criteria:

The companies are principally engaged in brokerage and/or margin financing businesses in Hong Kong;
The companies have sufficient listing and operating histories; and
The financial information of the companies, including their EV-to-EBIT multiples, is available to the public.

7 Enterprise Value = Market Capitalization – Cash & Equivalents + Preferred Equity + Minority Interest + Total Debt, sourced from Bloomberg.

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VALUATION OF THE TARGET COMPANIES

According to the aforementioned selection criteria and under best-effort basis, ten comparable companies listed in Hong Kong were adopted. Details of the exhaustive list of the comparable companies adopted were illustrated as follows:

				Market
				Capitalization
				as at the
		Listing		Date of
Company Name	Stock Code	Location	Business Description	Valuation
				(HK$ million)
Get Nice Holdings	64.HK	Hong Kong	Get Nice Holdings Ltd. offers	3,489
Ltd.			entertainment and financial
			s e r v i c e s . T h e c o m p a n y
			operates a hotel, spa and
			lifesquare mall in Macau, and
			offers brokerage services for
			securities, futures, options,
			mutual funds, unit trusts, and
			insurance linked investment
			plans in Hong Kong.
Sun Hung Kai & Co.	86.HK	Hong Kong	Sun Hung Kai & Co. Limited	17,749
Limited			o p e r a t e s t h r o u g h i t s
			subsidiaries in the following
			business segments: Wealth
			Management and Brokerage,
			C a p i t a l M a r k e t s , A s s e t
			Management, Consumer
			F i n a n c e a n d P r i n c i p a l
			Investments. The group also
			offers online financial services
			and online financial information
			distribution services.

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VALUATION OF THE TARGET COMPANIES

				Market
				Capitalization
				as at the
		Listing		Date of
Company Name	Stock Code	Location	Business Description	Valuation
				(HK$ million)
Cinda International	111.HK	Hong Kong	Cinda International Holdings	1,257
Holdings Ltd.			Ltd. acquires, manages and
			disposes of non-performing
			assets, and offers gold and
			silver spot trading services.
			The company acquires non-
			performing assets in local and
			foreign currencies, collects
			debts, leases, transfers and
			restructures assets, sponsors
			stock listings, and underwrites
			bonds and stocks.
China Everbright	165.HK	Hong Kong	China Everbright Limited,	51,990
Limited			through its subsidiaries,
			provides investment banking,
			c o m m e r c i a l b a n k i n g ,
			c o r p o r a t e f i n a n c e , a n d
			investment advisory services.
			The company also invests
			in properties and provides
			i n s u r a n c e , b r o k e r a g e ,
			secretarial, and money lending
			services.
Shenyin Wanguo HK	218.HK	Hong Kong	Shenyin Wanguo HK Limited,	6,353
Limited			through its subsidiaries,
			provides loan-financing,
			securities, futures and equity
			options trading and dealing,
			underwriting, and corporate
			advisory services.

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VALUATION OF THE TARGET COMPANIES

				Market
				Capitalization
				as at the
		Listing		Date of
Company Name	Stock Code	Location	Business Description	Valuation
				(HK$ million)
Upbest Group	335.HK	Hong Kong	Upbest Group Limited, through	3,393
Limited			its subsidiaries, provides
			a wide range of financial
			services including securities
			broking, margin financing, loan
			financing, corporate finance
			advisory, futures broking, and
			asset management.
Haitong International	665.HK	Hong Kong	Haitong International Securities	43,658
Securities Group			Group Ltd., through its
Ltd.			subsidiaries, offers corporate
			finance, asset management,
			and brokerage services.
			The company serves global
			and local institutional and
			corporate clients.
Emperor Capital	717.HK	Hong Kong	Emperor Capital Group Ltd. is	3,564
Group Ltd.			a financial services company.
			T h e c o m p a n y p r o v i d e s
			b r o k e r a g e s e r v i c e s f o r
			securities, futures and options,
			margin and initial public offer
			financings, and loans and
			advances to its clients.

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VALUATION OF THE TARGET COMPANIES

				Market
				Capitalization
				as at the
		Listing		Date of
Company Name	Stock Code	Location	Business Description	Valuation
				(HK$ million)
Quam Limited	952.HK	Hong Kong	Quam Limited, through its	2,699
			subsidiaries, provides financial
			services including financial
			advisory, securities broking,
			and margin financing. The
			c o m p a n y a l s o p ro v i d e s
			financial information and
			services through the Internet.
Bright Smart	1428.HK	Hong Kong	Bright Smart Securities and	7,539
Securities and			Commodities Group is a
Commodities			brokerage firm. The company
Group			specializes in trading futures
			contracts on exchanges in the
			United States and Singapore.
Source: Bloomberg

– 155 –

VALUATION OF THE TARGET COMPANIES

APPENDIX IV

The EV-to-EBIT multiples of the aforementioned comparable companies are listed as follows:

		EV-to-EBIT
Company Name	Stock Code	Multiple
Get Nice Holdings Ltd.	64.HK	6.18
Sun Hung Kai & Co. Limited	86.HK	12.01
Cinda International Holdings Ltd.	111.HK	68.71
China Everbright Limited	165.HK	26.39
Shenyin Wanguo HK Limited	218.HK	61.57
Upbest Group Limited	335.HK	29.00
Haitong International Securities Group Ltd.	665.HK	23.54
Emperor Capital Group Ltd.	717.HK	13.57
Quam Limited	952.HK	24.47
Bright Smart Securities and Commodities Group	1428.HK	15.49
	Median:	24.00

Source: Bloomberg

The EV-to-EBIT multiple of 24.00 adopted was the median of the EV-toEBIT multiples of the above comparable companies as at the Date of Valuation as extracted from Bloomberg. The trailing 12-month earnings before interest and taxes of Skyway Securities and Skyway Futures from June 2014 to May 2015 based on financial information of the Target Companies in Appendix II were HK$49,332,000 and HK$678,000 respectively (hereinafter referred to as the “Adjusted EBITs”). Then, we obtained the market values of Skyway Securities and Skyway Futures by applying the median EV-to-EBIT multiple to the Adjusted EBITs and then adding back their net cash or debt balances respectively.

– 156 –

VALUATION OF THE TARGET COMPANIES

APPENDIX IV

8.5 Marketability Discount and Control Premium

Compared to similar interest in public companies, ownership interest is not readily marketable for closely held companies. Therefore, the value of a share of stock in a privately held company is usually less than an otherwise comparable share in a publicly held company. With reference to the 2015 edition of the FMV Restricted Stock Study Companion Guide, a marketability discount of 16.11% was adopted in arriving at the market values of the Target Companies as at the Date of Valuation.

In addition, as we are considering the values of the Target Companies from the perspective of controlling interest, a control premium of 25.00% has been adopted to reflect the higher marketability of a controlling interest compared to a minority interest with reference to the Mergerstat Control Premium Study (1st Quarter 2015).

8.6 Calculations Details

The calculation details of Skyway Securities using the EV-to-EBIT multiple were illustrated as follows:

Adjusted EBIT (HK$)	49,332,000
Multiplied by: Median EV-to-EBIT Multiple	24.00
Enterprise Value before Appling Marketability Discount and
Control Premium (HK$)	1,184,101,196
Add: Net Cash/(Debt) (HK$)	-56,010,000
Market Value before Appling Marketability Discount and
Control Premium (HK$)	1,128,091,196
Adjusted for Marketability Discount	(1 – 16.11%)
Adjusted for Control Premium	(1 + 25.00%)
Market Value Obtained from EV-to-EBIT Multiple (HK$)	1,182,944,631
Rounded Value (HK$)	1,183,000,000

Note: The totals may not sum due to rounding.

– 157 –

VALUATION OF THE TARGET COMPANIES

APPENDIX IV

The calculation details of Skyway Futures using the EV-to-EBIT multiple were illustrated as follows:

Adjusted EBIT (HK$)	678,000
Multiplied by: Median EV-to-EBIT Multiple	24.00
Enterprise Value before Appling Marketability Discount and
Control Premium (HK$)	16,273,831
Add: Net Cash/(Debt) (HK$)	20,855,000
Market Value before Appling Marketability Discount and
Control Premium (HK$)	37,128,831
Adjusted for Marketability Discount	(1 – 16.11%)
Adjusted for Control Premium	(1 + 25.00%)
Market Value Obtained from EV-to-EBIT Multiple (HK$)	38,934,220
Rounded Value (HK$)	39,000,000

Note: The totals may not sum due to rounding.

9. MAJOR ASSUMPTIONS

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

The valuation was mainly based on the financial information of the Target Companies in Appendix II from June 2014 to May 2015;
The Target Companies will be operated and developed as planned by the Management;
All relevant legal approvals and business certificates or licences to operate the business in the localities in which the Target Companies operate or intend to operate would be officially obtained and renewable upon expiry;
There will be sufficient supply of technical staff in the industry in which the Target Companies operate, and the Target Companies will retain competent Management, key personnel and technical staff to support its ongoing operations and developments;
There will be no major change in the current taxation laws in the localities in which the Target Companies operate or intend to operate and that the rates of tax payable shall remain unchanged and that all applicable laws and regulations will be complied with; and

– 158 –

VALUATION OF THE TARGET COMPANIES

APPENDIX IV

Interest rates and exchange rates in the localities for the operation of the Target Companies will not differ materially from those presently prevailing.

10. INFORMATION REVIEWED

Our opinion requires consideration of relevant factors affecting the market values of the Target Companies. The factors considered included, but were not necessarily limited to, the following:

Audited financial statements of the Target Companies for the years ended December 2012, 2013 and 2014;
Financial information of the Target Companies in Appendix II of the Company’s circular;
Historical operational information of the Target Companies;
General descriptions in relation to the Target Companies;
Market trends of the financial services industry in Hong Kong; and
Economic outlook in Hong Kong.

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

11. LIMITING CONDITIONS

The valuation reflects facts and conditions existing at the Date of Valuation. Subsequent events or circumstances have not been considered and we are not required to update our report for such events and conditions.

We would particularly point out that our valuation was based on the information such as the company backgrounds, business natures and financial information of the Target Companies provided to us.

– 159 –

APPENDIX IV

VALUATION OF THE TARGET COMPANIES

To the best of our knowledge, all data set forth in this report are reasonable and accurately determined. The data, opinions, or estimates identified as being furnished by others that have been used in formulating this analysis are gathered from reliable sources; yet, no guarantee is made nor liability assumed for their accuracy.

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

We assumed that the Management is competent and perform duties under the company regulation. Also, ownerships of the Target Companies were in responsible hands, unless otherwise stated in this report. The quality of the Management may have direct impact on the viability of the businesses as well as the market values of the Target Companies.

We have not investigated the title to or any legal liabilities of the Target Companies, and have assumed no responsibility for the title to the Target Companies appraised.

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

We assume no responsibility whatsoever to any person other than the directors and the Management in respect of, or arising out of, the content of this report. If others choose to rely in any way on the contents of this report, they do so entirely at their own risk. The title of this report shall not pass to the Company until all professional fee has been paid in full.

– 160 –

VALUATION OF THE TARGET COMPANIES

APPENDIX IV

12. REMARKS

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

We hereby confirm that we have neither present nor prospective interests in the Company, the Target Companies, their associated companies or the values reported herein.

13. OPINION OF VALUE

Based on the investigation and analysis stated above and on the valuation method employed, the market values of 100% equity interests in the Target Companies as at the Date of Valuation, in our opinion, were reasonably stated as below:

Market Values of the Target Companies as at 31 May 2015

HK$

Skyway Securities 1,183,000,000 Skyway Futures 39,000,000

Yours faithfully, For and on behalf of

Roma Appraisals Limited

– 161 –

APPENDIX V

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

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

Authorized:		HK$
100,000,000,000	ordinary shares of HK$0.01 each	1,000,000,000.00
Issued and fully paid or	credited as fully paid:	HK$
9,464,135,898	ordinary shares of HK$0.01 each	94,641,358.98

Immediately after the Completion (assuming no further issue of new Shares or repurchase of Shares from the Latest Practicable Date to Completion other than the issue of the Consideration Shares) will be as follows:

Authorized:		HK$
100,000,000,000	ordinary shares of HK$0.01 each	1,000,000,000.00
Issued and fully paid or	credited as fully paid:	HK$
9,464,135,898	ordinary shares of HK$0.01 each	94,641,358.98
2,600,000,000	Consideration Shares to be issued	26,000,000.00
12,064,135,898	Total	120,641,358.98

– 162 –

APPENDIX V

GENERAL INFORMATION

All the Consideration Shares when allotted, issued and fully paid, will rank pari passu in all respect with each other, including, in particular, as to dividends, voting rights and capital, and with all the Shares in issue as at the date of allotment and issue of the Consideration Shares.

The Consideration Shares to be issued will be listed on the Stock Exchange. No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or the Consideration Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, there were no arrangement under which future dividends are waived or agreed to be waived.

As at the Latest Practicable Date, the Company has no other derivatives, outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

3. DISCLOSURE OF INTERESTS

(I) Directors’ Interests

(a) Interests and/or short positions of the Directors and chief Executives

As at the Latest Practicable Date, none of the Directors or the chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have taken under such provisions of the SFO); or (b) were required pursuant to section 352 of the SFO to be entered in the register referred to therein; or (c) were required, pursuant to the Model Code to be notified to the Company and the Stock Exchange.

– 163 –

GENERAL INFORMATION

APPENDIX V

(II) Shareholder’s Interests

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the persons (“Substantial Shareholders”) (other than the Directors or the chief executive of the Company) who had an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provision of Divisions 2 and 3 of Part XV of the SFO or who were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital are set out below:

Substantial Shareholders of other members of the Group

				Approximate
				percentage of
				the Company’s
	Capacity and nature	Number of		issued share
Name of shareholders	of interests	shares held	Total interests	capital
Senworth Limited	Interest of controlled	1,215,010,300	1,215,010,300	12.84%
	corporation
China Jinhai International Group	Interest of controlled	891,613,191	891,613,191	9.42%
Limited	corporation

Save as disclosed above, the Company had not been notified of any other relevant interests or short positions in the Shares and underlying Shares of the Company as at the Latest Practicable Date as required pursuant to section 336 of the SFO.

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company are not aware of any other persons (not being a Director or chief executive of the Company) who had, or was deemed to have, an interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or had any options in respect of such capital.

– 164 –

GENERAL INFORMATION

APPENDIX V

4. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, there is no contract or arrangement entered into by a related party subsisting in which a Director is materially interested and significant in relation to the business of the Company.

As at the Latest Practicable Date, none of the Directors or proposed Directors or expert has, directly or indirectly, any interest in any assets which have since 31 March 2015 (being the date to which the latest published audited accounts of the Company were made up) been acquired or disposed of by or leased to any member of the Company, or were proposed to be acquired or disposed of by or leased to any member of the Company.

5. LITIGATION

As at the Latest Practicable Date, neither the Company nor any member of the Enlarged Group was engaged in any litigation or arbitration or claim of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any member of the Enlarged Group.

6. SHARE OPTION SCHEME

The Company adopted the share option scheme on 24 September 2012 and refreshed the scheme mandate limit under the share option scheme at the annual general meeting of the Company held on 30 September 2014. On 2 March 2015, the Company announced that, the Company offered to grant an aggregate of 427,835,050 share options to subscribe for the ordinary shares of the Company under the share option scheme. None of the grantees, or any of their respective associates (as defined in the Listing Rules), is a director, chief executive or substantial shareholder of the Company.

7. MATERIAL ADVERSE CHANGES

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial position or trading position of the Company since 31 March 2015, being the date to which the latest published audited financial statements of the Company were made up.

– 165 –

GENERAL INFORMATION

APPENDIX V

8. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors or substantial Shareholders (as defined in the Listing Rules) and their respective associates was interested in any business apart from the Company’s business which competes or is likely to compete, either directly or indirectly, with the Company’s businesses.

9. SERVICES CONTRACTS

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

10. DISCLOSURE OF OTHER INTEREST

As at the Latest Practicable Date:

a) none of the Directors was materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Enlarged Group; and
b) none of the Directors in this appendix had any direct or indirect interest in any assets which had been, since 31 March 2015 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Enlarged Group, or were proposed to be acquired, disposed of by, or leased to any member of the Enlarged Group.

– 166 –

GENERAL INFORMATION

APPENDIX V

11. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinions and advices, which are contained in this circular:

Name Qualification

HEC Securities Limited

A licensed corporation to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO

Messrs. Deloitte Touche Tohmatsu

Certified Public Accountants

Roma Appraisals Limited Independent valuer (collectively, the “Experts”)

As at the Latest Practicable Date, each of the Experts:

(a) was not interested, either directly or indirectly, in any assets which have been acquired or disposed of by or leased to any member of the Company or are proposed to be acquired or disposed of by or leased to any member of the Company since 31 March 2015, being the date to which the latest published audited consolidated accounts of the Company were made up; and
(b) did not have any shareholding in any member of the Company or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Company.

Each of the Experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its reports and/or its letters and/or references to its name and/or its advice in the form and context in which they respectively appear.

– 167 –

APPENDIX V

GENERAL INFORMATION

12. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business of the Enlarged Group, were entered into by the members of the Enlarged Group during the period commencing two years preceding the date of this circular and are or may be material:

(a) a subscription agreement entered into between Xin Corporation (HK) Limited (an indirect wholly-owned subsidiary of the Company) and HEC Capital Limited on 30 June 2014, pursuant to which Xin Corporation (HK) Limited subscribed for 38,000,000 shares in HEC Capital Limited for a consideration of HK$228.00 million.
(b) the underwriting agreement dated 18 December 2014 entered into between the Company and HEC Securities Limited in relation to the underwriting arrangement in respect of the open offer.
(c) a share subscription agreement entered into between Merton Holdings Limited (a wholly-owned subsidiary of the Company) and Cordoba Homes Limited (“CHL”) (Note) on 6 January 2015, pursuant to which Merton Holdings Limited subscribed for 22,000,000 shares in CHL for a consideration of HK$103.40 million which was satisfied by cash from internal resources and cash from sale of securities. As at the Latest Practicable Date, the subscription has been completed.
(d) a share subscription agreement entered into between the Company and Willie International Holdings Limited (“Willie”) on 17 March 2015, pursuant to which the Company agreed to subscribe for 1,250,000,000 new shares of Willie for a total consideration of HK$150,000,000 and the Company agreed to issue 1,500,000,000 new shares of the Company to Willie for a total consideration of HK$150,000,000.
(d) a conditional sale and purchase agreement entered into between the Company and a number of third parties independents on 7 May 2015, pursuant to which the Company agreed to purchase a total of 81% shareholding of a group of target companies and target shareholder’s loans for a total consideration of HK$972,000,000.

– 168 –

APPENDIX V

GENERAL INFORMATION

(e) a conditional sale and purchase agreement entered into between the Company and a third party independent on 11 May 2105, pursuant to which the Company agreed to purchase a total of 19% shareholding of a group of target companies and target shareholder’s loan for a total consideration of HK$228,000,000.
(f) a share subscription agreement entered into between the Company and Freewill Holdings Limited (“Freewill”) on 2 July 2015, pursuant to which the Company agreed to subscribe for 80,000,000 new shares of Freewill for a total consideration of HK$440,000,000.

Note : To the best knowledge of the Directors, HEC Capital Limited was the holding company of CHL before the subscription.

13. MISCELLANEOUS

(a) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and the principal place of business of the Company in Hong Kong is situated at Suite 903, 9th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong.
(b) The company secretary of the Company is Mr. Suen Yick Lun Philip, a fellow member of both the HKICPA and the CPA Australia who was appointed on 2 July 2014.
(c) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Tengis Limited, Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(d) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

– 169 –

APPENDIX V

GENERAL INFORMATION

14. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of the Company at Suite 903, 9th Floor, Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong during normal business hours on any weekday other than public holidays, up to and including the date of the SGM:

(a) the memorandum of association and the bye-laws of the Company;
(b) the annual reports of the Company for the financial years ended 31 March 2013, 2014 and 2015;
(c) the accountants’ reports on the Target Companies, the text of which is set out in Appendix II to this circular;
(d) the letter on the unaudited pro forma financial information of the Enlarged Group issued by Messrs. Deloitte Touche Tohmatsu set out in Appendix III to this circular;
(e) the Valuation Report, the text of which is set out in Appendix IV to this circular;
(f) the consent letters referred to in the paragraph under the heading “Experts and Consents” in this appendix to this circular;
(g) the material contracts disclosed in the paragraph under the heading “Material Contracts” in this appendix to this circular;
(h) a copy of each circular of the Company pursuant to the requirements set out in Chapter 14 and Chapter 14A of the Listing Rules which has been issued since 31, March 2015 (being the date to which the latest published audited accounts of the Group were made up) (if any); and
(i) this circular.

– 170 –

NOTICE OF SPECIAL GENERAL MEETING

(Incorporated in Bermuda with limited liability)

(Stock Code: 1141)

NOTICE IS HEREBY GIVEN that an special general meeting of Mission Capital Holdings Limited (the “Company”) will be held at Plaza III, Lower Lobby, Novotel Century Hong Kong, 238 Jaffe Road, Wanchai, Hong Kong at 10:30 a.m. on Tuesday, 15 September 2015 for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“THAT:
(a) the S&P Agreement 1 (as defined in the circular dated 26 August 2015 despatched to the Shareholders of the Company (the “Circular”) a copy of which has been produced to the SGM marked as “A” and signed by the chairman of the SGM for the purpose of identification) a copy of which has been produced to the meeting and marked as “B” and signed by the chairman of the SGM for the purpose of identification and the terms and conditions thereof be and are hereby approved, confirmed and ratified;
(b) issue of the Promissory Notes 1 (as defined in the Circular) pursuant to the terms and conditions of the S&P Agreement 1 be and is hereby approved;
(c) the allotment and issue of the Consideration Shares 1 (as defined in the Circular), credited as fully paid pursuant to the terms and conditions of the S&P Agreement 1 be and is hereby approved;
(d) all other transactions contemplated under the S&P Agreement 1 be and are hereby approved; and

* For identification purpose only

– 171 –

NOTICE OF SPECIAL GENERAL MEETING

(e) any one Director be and is hereby authorised to do such acts and deeds in his sole and absolute discretion and opinion deemed expedient and appropriate to implement and effect the S&P Agreement 1 and the transactions contemplated thereunder.”
“THAT:
(a) the S&P Agreement 2 (as defined in the Circular) a copy of which has been produced to the meeting and marked as “C” and signed by the chairman of the SGM for the purpose of identification and the terms and conditions thereof be and are hereby approved, confirmed and ratified;
(b) issue of the Promissory Notes 2 (as defined in the Circular) pursuant to the terms and conditions of the S&P Agreement 2 be and is hereby approved;
(c) the allotment and issue of the Consideration Shares 2 (as defined in the Circular), credited as fully paid pursuant to the terms and conditions of the S&P Agreement 2 be and is hereby approved;
(d) all other transactions contemplated under the S&P Agreement 2 be and are hereby approved; and
(e) any one Director be and is hereby authorised to do such acts and deeds in his sole and absolute discretion and opinion deemed expedient and appropriate to implement and effect the S&P Agreement 2 and the transactions contemplated thereunder.”

By order of the Board

Mission Capital Holdings Limited Suen Yick Lun Philip

Acting Chairman and Managing Director

Hong Kong, 26 August 2015

– 172 –

NOTICE OF SPECIAL GENERAL MEETING

Notes:

(1) Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A member of the Company who is the holder of two or more shares may appoint more than one proxy to represent him/her and vote on his/her behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member of the Company who is an individual or a member of the Company which is a corporation is entitled to exercise the same powers on behalf of the member of the Company which he/she or they represent as such member of the Company could exercise.
(2) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his/her attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without further evidence of the fact.
(3) The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding special general meeting or adjourned meeting thereof at which the person named in the instrument proposes to vote, and in default the instrument of proxy shall not be treated as valid.
(4) Delivery of an instrument appointing a proxy shall not preclude a member of the Company from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked.
(5) Where there are joint holders of any share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

– 173 –

AI assistant

PegBio Co., Ltd. — Proxy Solicitation & Information Statement 2015

50676_rns_2015-08-26_3f9310e9-71a7-4e6d-8bb2-3de7bc169fe4.pdf

(1) MAJOR ACQUISITIONS IN RELATION TO ACQUISITION OF EACH OF THE TARGET COMPANIES;

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(2) ISSUANCE OF SHARES UNDER SPECIFIC MANDATE; AND (3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

MOU

THE ACQUISITIONS

THE ACQUISITIONS

The S&P Agreement 1

Date

Parties

Assets to be acquired

Consideration 1

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

PROFIT GUARANTEE

WHEREAS:

Conditions precedent

LETTER FROM THE BOARD

The S&P Agreement 2

Date

Parties

Assets to be acquired

Consideration 2

LETTER FROM THE BOARD

LETTER FROM THE BOARD

PROFIT GUARANTEE

LETTER FROM THE BOARD

WHEREAS:

Conditions precedent

LETTER FROM THE BOARD

Long stop date

LETTER FROM THE BOARD

Completion

INFORMATION OF THE COMPANY

INFORMATION OF EACH OF THE TARGET COMPANIES

LETTER FROM THE BOARD

Background and experience of the Directors of the Target Companies

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Skyway Securities Investment Limited

LETTER FROM THE BOARD

Review of Hong Kong Financial Markets

LETTER FROM THE BOARD

Implications on the Target Companies

LETTER FROM THE BOARD

Management Discussion and Analysis of Target Companies

Review of business

Skyway Securities

Skyway Futures

LETTER FROM THE BOARD

Prospect and outlook

Skyway Securities

Skyway Futures

Financial revenue

Skyway Securities

LETTER FROM THE BOARD

Skyway Futures

Other income

Skyway Securities

Skyway Futures

LETTER FROM THE BOARD

Administrative expenses

Skyway Securities

Skyway Futures

LETTER FROM THE BOARD

Other operating expenses

Skyway Securities

PegBio Co., Ltd. Proxy Solicitation & Information Statement 2015