Speedy Global Holdings Limited - Proxy Solicitation & Information Statement 2016

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 licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Speedy Global Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

==> picture [282 x 43] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 540)

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to

The Independent Board Committee and the Independent Shareholders

A notice convening the extraordinary general meeting of the Company to be held at 4/F, Pentahotel Hong Kong, Kowloon, 19 Luk Hop Street, San Po Kong, Kowloon, Hong Kong on 5 September 2016 (Monday) at 11:00 a.m., is set out on pages 60 to 61 of this circular. Whether or not you propose to attend the meeting, you are advised to complete the form of proxy attached to the notice of the extraordinary general meeting in accordance with the instructions printed thereon and return the same to the Company’s share registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding of the extraordinary general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting should you so wish.

19 August 2016

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . .	15
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . .	17
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	35
APPENDIX II — VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
APPENDIX III — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . .	60

– i –

DEFINITIONS

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

‘‘Agreement’’

the agreement dated 15 July 2016 made between the Company and the Purchaser relating to the sale and purchase of 50% issued share capital of the Target

‘‘Board’’ the board of Directors
‘‘close associates’’ has the meaning ascribed to it in the Listing Rules
‘‘Company’’ Speedy Global Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Stock Exchange
‘‘connected persons’’ has the meaning ascribed to it in the Listing Rules
‘‘Consideration’’ the sum of HK$10 payable by the Purchaser to the Company under the Agreement
‘‘Director(s)’’ the director(s) of the Company
‘‘Disposal’’ the disposal of 50% issued share capital of the Target by the Company pursuant to the Agreement
‘‘EGM’’

the extraordinary general meeting of the Company to be convened at 4/F, Pentahotel Hong Kong, Kowloon, 19 Luk Hop Street, San Po Kong, Kowloon, Hong Kong on 5 September 2016 (Monday) at 11:00 a.m. to consider and, if thought fit, approve the Disposal

‘‘Group’’ the Company and its subsidiaries
‘‘HK$’’
the lawful currency for the time being of Hong Kong
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the PRC
‘‘Independent Board Committee’’

an independent board committee of the Company, comprising all the independent non-executive Directors, formed for the purpose of advising the Independent Shareholders in respect of the Disposal

‘‘Independent Financial Adviser’’ or ‘‘Amasse Capital’’

Amasse Capital Limited, a licensed corporation to carry on type 6 (advising on corporate finance) regulated activities under the SFO, being the Independent Financial Adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the Disposal

– 1 –

DEFINITIONS

‘‘Independent Third Party’’
a third party who, to the best of the Directors’ information, knowledge and belief after making reasonable enquiries, is independent of and not connected with the Company and its connected persons
‘‘Independent Shareholders’’
Shareholders other than those who are required under the Listing Rules to abstain from voting on the relevant resolution(s) to be proposed at the EGM to approve the Disposal
‘‘Latest Practicable Date’’
17 August 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
‘‘Listing Rules’’
the Rules Governing the Listing of Securities on The Stock Exchange
‘‘Loan Documents’’
the amended and restated facility agreement dated 7 June 2016 made among various banks as lenders, the Target as borrower, the Company and its various subsidiaries as guarantors and other documents related thereto, for a loan facility of HK$300 million
‘‘Mr. Huang’’ Mr. Huang Chih Shen
‘‘PRC’’
The People’s Republic of China
‘‘PRC Subsidiary’’
鄭州迅宏置業有限公司 (Zhengzhou Xunhong Property Co. Ltd.), a limited liability company incorporated in the PRC
‘‘Purchaser’’
Success Up Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and is wholly owned by Mr. Huang
‘‘SFO’’
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Shareholder(s)’’
the holder(s) of the Shares
‘‘Share(s)’’
ordinary share(s) of HK$0.10 each in the capital of the Company
‘‘Speedy Global Capital’’
Speedy Global Capital Investment (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability
‘‘Speedy Global Clothing’’
Speedy Global Clothing Industry (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability

– 2 –

DEFINITIONS

‘‘Speedy Global Creation’’

Speedy Global Creation (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability

‘‘Speedy Global (HK)’’
Speedy Global Development Limited, a company incorporated in Hong Kong with limited liability
‘‘Speedy Global Industrial’’

Speedy Global Industrial (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability

‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

‘‘Target’’ Speedy Global Development Limited, a company incorporated in the British Virgin Islands and a non-wholly owned subsidiary of the Company
‘‘Target Group’’ together the Target, Speedy Global (HK), Speedy Global Clothing, Speedy Global Industrial, Speedy Global Creation, Speedy Global Capital and PRC Subsidiary

‘‘%’’ per cent.

– 3 –

LETTER FROM THE BOARD

==> picture [282 x 43] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 540)

Executive Directors: Mr. Huang (Chairman and chief executive officer) Mr. Chan Hung Kwong, Patrick Ms. Tang Wai Shan Mr. Au Wai Shing

Independent non-executive Directors: Mr. Wong Ting Kon Ms. Pang Yuen Shan, Christina Mr. Chang Cheuk Cheung, Terence Dr. Chan Chung Bun, Bunny

Registered office: Scotia Centre, 4th Floor P.O. Box 2804, George Town Grand Cayman KY1-1112 Cayman Islands

Head office and principal place of business in the PRC: Nanmian Industrial District Xiagang Village, Changan Town Dongguan PRC

19 August 2016

To the Shareholders

Dear Sir/Madam,

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Company’s announcement dated 15 July 2016 in relation to the disposal by the Company of 50% issued share capital of the Target pursuant to the Agreement.

The purpose of this circular is to provide you with (i) further information of the Disposal; (ii) the recommendation from the Independent Board Committee; (iii) the advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Disposal; and (iv) the notice of the EGM.

– 4 –

LETTER FROM THE BOARD

THE AGREEMENT

Date:

15 July 2016

Parties:

The Company; and
Success Up Holdings Limited as Purchaser.

The Purchaser is principally engaged in investment holdings and is wholly and beneficially owned by Mr. Huang, chairman, executive Director and controlling Shareholder of the Company holding 327,242,688 Shares, representing approximately 54.54% of the total issued share capital, through his controlled corporation. Hence the Purchaser is a connected person of the Company.

Asset to be disposed

One ordinary share of US$1.00 in the Target, being 50% of the total issued share capital of the Target.

Consideration

The Consideration is HK$10 to be paid upon completion of the Agreement.

Basis of Consideration

The Consideration was determined after arm’s length negotiations between the Company and the Purchaser after taking into consideration of (i) the net liabilities position of the Target Group as at 31 May 2016 of approximately HK$22.9 million and (ii) the preliminary indicative equity value of the Target Group as at 31 May 2016 was negative as advised by LCH (AsiaPacific) Surveyors Limited, an independent professional valuer, as the preliminary calculated net asset value of the Target Group based on draft management accounts by using asset-based approach was approximately negative HK$11.2 million.

Based on the preliminary valuation, the preliminary calculated net asset value of the Target Group was negative HK$11.2 million. After the Company providing further information to the valuer, the calculated net asset value of the Target Group is now negative HK$10.0 million.

The calculation was based on the consolidated balance sheet of the Target Group as at 31 May 2016. The value of all types of assets of the Target Group has been restated. In particular, the valuation adjustment from the book value is attributable to the valuation appreciation of the land and buildings. For other assets and liabilities, the book value has been adopted.

– 5 –

LETTER FROM THE BOARD

Based on the valuation, the calculated net asset value of the Target Group was approximately negative HK$10.0 million. Based on the restated amount of the tangible assets of approximately HK$292 million, the adjusted net assets value of the Target Group was approximately negative HK$10.0 million. The difference between this figure and the book value of net liabilities of HK$22.9 million is due to the upside valuation increment of about HK$12.9 million.

The valuation report of the Target Group is set out in Appendix II of this circular. The said valuation does not involve any discounted cash flow or projections of profit, earnings or cash flows which is regarded as profit forecast under Rule 14.61 of the Listing Rules.

The net book value of 50% of the Target Group as at 31 December 2015 was approximately negative HK$7.9 million. Hence the Consideration represents an excess of approximately HK$7.9 million over the net book value of 50% of the Target Group.

Conditions precedent

Completion of the Agreement is conditional upon the followings:

(a) all necessary consents and approvals required to be obtained on the part of the Company and the Purchaser in respect of the Agreement and the transactions contemplated thereunder having been obtained;
(b) all necessary waiver, consent, approval, licence, authorisation, permission, order and exemption (if required) from the relevant governmental or regulatory authorities or other third parties which are necessary in connection with the Agreement and the transactions contemplated thereunder having been obtained;
(c) the passing by the Independent Shareholders of the Company at the EGM to approve the Agreement and the transactions contemplated thereunder;
(d) release and discharge of the Company and its subsidiaries (excluding the Target Group) as guarantors and from all other obligations under the Loan Documents.

The Company and the Purchaser shall use their reasonable endeavours to procure satisfaction of the above conditions as soon as practicable. If the above conditions have not been satisfied on or before 31 October 2016, or such later date as the parties may agree, the Agreement shall cease and determine and neither party shall have any obligations and liabilities towards each other save for any antecedent claims.

As at the Latest Practicable Date, the Target Group has obtained the preliminary consent from a bank for granting of a new loan to repay the existing loan under the Loan Documents which will result in release of the Company and its subsidiaries (excluding the Target Group) from their obligations under the Loan Documents.

– 6 –

LETTER FROM THE BOARD

Completion

Completion of the Agreement shall take place within three business days after the fulfillment of all the conditions set out in the Agreement, or such other date as the parties may agree in writing.

After completion, the Company will no longer hold any interest in the Target which will cease to be a subsidiary of the Company.

INFORMATION ON THE TARGET GROUP

The Target

The Target is a limited company incorporated in the British Virgin Islands and is an investment holding company. The Company currently holds 50% of the issued share capital of the Target which is accounted for as a non-wholly owned subsidiary of the Company. The remaining 50% issued share capital of the Target is held by an Independent Third Party.

Speedy Global Clothing

Speedy Global Clothing is a limited company incorporated in Hong Kong and a direct wholly owned subsidiary of the Target. It has no business activities since incorporation.

Speedy Global Industrial

Speedy Global Industrial is a limited company incorporated in Hong Kong and a direct wholly owned subsidiary of the Target. It has no business activities since incorporation.

Speedy Global Creation

Speedy Global Creation is a limited company incorporated in Hong Kong and a direct wholly owned subsidiary of the Target. It has no business activities since incorporation.

Speedy Global Capital

Speedy Global Capital is a limited company incorporated in Hong Kong and a direct wholly owned subsidiary of the Target. It has no business activities since incorporation.

Speedy Global (HK)

Speedy Global (HK) is a limited company incorporated in Hong Kong and a direct wholly owned subsidiary of the Target. It is an investment holding company.

PRC Subsidiary

PRC Subsidiary is a limited liability company incorporated in the PRC and a direct wholly owned subsidiary of Speedy Global (HK). It is principally engaged in property development and investment at Xinmi City, Zhengzhou, Henan Province, PRC.

– 7 –

LETTER FROM THE BOARD

The following is the structure of the Target Group as at the Latest Practicable Date:

==> picture [297 x 209] intentionally omitted <==

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

Company
50%
Target
100% 100% 100% 100% 100%
Speedy Speedy Speedy Speedy Speedy
Global Global Global Global Global
Clothing Industrial Creation Capital (HK)
100%
PRC
Subsidiary
----- End of picture text -----

As disclosed in the Company’s circular dated 30 April 2015 and 24 August 2015, the only significant assets of the Target Group are three pieces of industrial land at Xinmi City and the construction cost incurred under the first phase development. The first phase development of the land with the construction of 19 blocks of standardized factory buildings of 3-5 storeys with a total construction area of approximately 87,400 square meters is still under progress. No permit for pre-sale has been issued by the relevant authorities and there has not been any sale of the premises involved.

Up to 31 May 2016, the total expenditures on the construction works including capitalised interest costs under the first phase development were approximately HK$179.8 million. The construction works under the first phase development is completed approximately 80%. It is expected that the construction works will be completed by the first quarter of 2017. Since the relevant construction contract was entered into by a subsidiary of the Target, the Disposal will not affect the continuation of such contract.

Set out below is the financial information of the Target Group extracted from its unaudited consolidated accounts for the two years ended 31 December 2014 and 31 December 2015:

					Year ended	Year ended
					31 December	31 December
					2014	2015
					HK$	HK$
Loss	before	and	after	taxation	1,344,000	2,077,000

The unaudited consolidated net liabilities of the Target Group as at 31 December 2015 was approximately HK$15.8 million.

– 8 –

LETTER FROM THE BOARD

REASONS FOR THE DISPOSAL

The Group is principally engaged in (i) the apparel supply chain servicing business which offers a wide range of woven wear and cut-and-sewn knitwear products to a number of owners or agents of global reputable brands; (ii) the apparel retail business operating in the PRC and (iii) the property development and investment.

The Group first entered into the framework investment agreement with Xinmi Government by the end of 2013 regarding the proposed investments in Xinmi City comprising manufacturing plants and related commercial and residential developments. The Chinese economy then was still enjoying a robust growth with a gross domestic production (‘‘GDP’’) growth rate of 7.7% in 2012 and 2013. The Renminbi (the ‘‘RMB’’) was also strong at that time and the exchange rate against the HK$ reached historical high by the end of 2013. Since then the growth rate of Chinese GDP fell to 7.3% in 2014 and 6.9% in 2015. The exchange rate of RMB also reversed its upward trend since the beginning of 2014 and suffered some fluctuations and corrections. During the first half of 2015 the RMB gradually stabilised and maintained a slight drop from the historical high.

However in August 2015, the RMB suffered a sharp and significant depreciation. Since then the RMB has continued to depreciate significantly. The RMB depreciated from about HK$1.25/RMB1.00 in August 2015 to about HK$1.16/RMB1.00 in mid July 2016. The sharp and significant depreciation of the RMB is expected to increase the risks of investments in RMB based assets such as the real estate in the PRC due to the relative depreciation in the value of RMB assets compared with foreign currencies. Anticipation of further depreciation in the RMB will fuel the vicious circle of further depreciation in RMB assets and the RMB. Hence as a result of the unexpected depreciation and the anticipated depreciation of the RMB, the Board is extremely cautious with the prospect of property investments in the PRC, which would be very challenging ad risky.

For the past year, the Chinese economy continued to slow down, especially in the manufacturing sector. According to the Manufacturing Purchasing Managers’ Index (‘‘PMI’’) published by the PRC government, the PMI had been below 50 since August 2015 until March 2016 and went below 50 again in July 2016. Such slowdown in the manufacturing sector is likely to lead to a decrease in demand for industrial premises, whether for self-use or for investment purposes. The continued slowdown in the PRC economy is also likely to have a negative impact on the exchange rate of the RMB, which in turn may further weaken the PRC economy.

– 9 –

LETTER FROM THE BOARD

It may also adversely affect the expected revenue from the sale of the properties due to foreign exchange adjustment. Therefore in November 2015 the Company started to discuss with Dragon Bloom Investments Limited (‘‘Dragon Bloom’’) for the joint development of the properties in order to diversify the risks in undertaking the project. In December 2015 the subscription agreement (the ‘‘Subscription Agreement’’) was entered into with Dragon Bloom for the deemed disposal of 50% interest in the Target.

In between December 2015 and February 2016, the Company also approached three potential investors on possible disposal of the property interests or the interest in the Target Group. Due to the location of the properties and under-development of the surrounding area, those investors expressed no interest in the properties and none of them made an offer.

In about May 2016, the Company enquired with several banks in the PRC for the provision of potential mortgage loans to future buyers of the premises. However most of the banks rejected the proposal due to the unfavourable market conditions for industrial premises.

In around June 2016, the Company has approached Dragon Bloom on whether they are interested in buying the remaining interest in the Target. However they declined our proposal on the ground that they wished to limit their exposure in this particular investment. They also expressed their concern that should the Company transfer the remaining interest in the Target to other third party, such third party should be acceptable to them.

Other than the Purchaser, the Company did not receive any offer from any potential buyer.

The Board considered that the Disposal will enable the Group to avoid the risks and uncertainties associated with the investments in industrial properties and to reserve its resources for other business opportunities.

The Target Group recorded a loss of approximately HK$2.1 million for the year ended 31 December 2015 and a net liability of approximately HK$15.8 million, including a debit exchange reserve of approximately HK$12.2 million, as at 31 December 2015. The Target Group’s business is funded by a bank loan of HK$300 million pursuant to the Loan Documents. The bank loan bears interest at the rate of HIBOR + 2.85%, which fluctuated during the past year. As a result of the anticipated depreciation of the RMB, based on the funding costs of HK$300 million which is denominated in HK$, a depreciation of every 1% in the RMB will result in a loss in foreign exchange of HK$3 million in the Target Group. The Disposal will therefore protect the Group from further foreign exchange loss and will also reduce the Group’s gearing ratio and enhance its financial position. In addition, the Loan Documents contain restrictions on distribution of dividends by the Company such that any distributions in a financial year may not be more than 30% of the net profit after tax for the preceding financial year. The Disposal will therefore facilitate distribution of dividends in the future as the Company may see fit.

Although it was stated in the Company’s circular dated 30 April 2015 (‘‘Acquisition Circular’’) the proposed investment in Xinmi City was supported by the Xinmi Government and the garment industry was one of the principal industries for development in Zhengzhou and had enjoyed significant growth in recent years with relatively low operating costs, due to the

– 10 –

LETTER FROM THE BOARD

slowdown in the manufacturing sector and drop in demand for industrial premises, the market environment and prospect for developing and investing in industrial properties have become unfavourable. The Board originally expected to make use of the low interest HK$ bank loan to fund the development which would not have any material adverse effect on the Group’s working capital requirement. In view of the substantial depreciation in the RMB, it has resulted in significant foreign exchange losses which outweigh the benefits of low borrowing costs.

Based on the valuation of the Target Group, which include revaluation of the real property assets of the Target Group as at 31 May 2016 as disclosed in the valuation report, the calculated net asset value of the Target Group was approximately negative HK$10.0 million. The Disposal will enable the Group to avoid such loss and from any further losses resulting from further depreciation of the RMB and deterioration in the market.

Due to the weak demand for industrial premises and depreciation in the RMB, the Board considered that the prospects and expected return from holding the industrial properties for investment purpose would not be attractive.

Approximately 20% of the first phase development was originally intended for the Group’s own use and the rest for development and investment purposes. After having considered the latest operational requirements of the Group, the Board considered that the existing factory premises employed by the Group would be sufficient for its garment business. The Company will consider leasing additional factory premises including those from the Target Group should the business operations require. Hence the Disposal will not adversely affect the business operation of the Group.

The Company will continue to closely monitor the property market and determine the appropriate investment strategy for the Group’s property investment and development business. The Company will seek any appropriate property investment and development projects if the Company believe that it can magnify Shareholders’ return.

Based on the then economic conditions and market environment at the time of acquisition of the industrial properties and the subsequent changes thereof set out above and in view of the above considerations by the Board in relation to (i) the unexpected risks and uncertainties surrounding the industrial property markets in the PRC, (ii) the difficulties in finding buyers for the remaining interest in the Target Group and (iii) the financial effects of the Disposal on the remaining Group, the Directors consider that they have properly fulfilled their fiduciary duties under Rules 3.08 and 3.09 of the Listing Rules when considering the acquisition and the Disposal.

The Board considers that based on the then economic condition and market environment, the information contained in the Acquisition Circular were accurate and complete in all material respects and not misleading or deceptive and in compliance with Rule 2.13 of the Listing Rules.

The Directors (excluding the independent non-executive Directors who will give their view on the Disposal after taking into account of the advice of the Independent Financial Adviser) are of the view that the terms and conditions of the Disposal are fair and reasonable

– 11 –

LETTER FROM THE BOARD

and is in the interests of the Company and the Shareholders as a whole. Mr. Huang, being materially interested in the Disposal, has abstained from voting at the board meeting approving the Disposal.

Save as set out in the Agreement and/or disclosed herein, there is no other agreement, arrangement or understanding between the Group and Mr. Huang or his associates relating to the Disposal.

FINANCIAL EFFECTS OF THE DISPOSAL

After completion, the Company will no longer hold any interest in the Target which will cease to be a subsidiary of the Company.

Assuming the completion of the Agreement and the Subscription Agreement took place on 31 December 2015, and based on the unaudited consolidated net liabilities of the Target Group as at 31 December 2015 of approximately HK$15.8 million (which comprised of approximately HK$3.6 million of accumulated loss and approximately HK$12.2 million of a debit exchange reserve), the Disposal will (i) decrease the net profit of the Group by approximately HK$4.3 million; (ii) increase the total comprehensive income of the Group by approximately HK$7.9 million; (iii) reduce the Group’s total assets by approximately HK$290 million and (iv) reduce the Group’s total liabilities by approximately HK$305.8 million. The gain on disposal of the Target Group (before the currency translation losses) is approximately HK$7.9 million being the difference between the Consideration and 50% of the net liabilities of the Target Group of approximately HK$7.9 million. However after taking into account of the currency translation losses of approximately HK$12.2 million, there will be a net loss on disposal of approximately HK$4.3 million. However, Shareholders should note that the actual financial effects of the Disposal will be determined based on the consolidated net liabilities of the Target Group immediately upon completion of the Disposal and the review by the Company’s auditors upon finalisation of the consolidated financial statements of the Group.

LISTING RULES IMPLICATIONS

As the relevant percentage ratios under the Listing Rules exceeds 25% but under 75%, the Disposal constitutes a major transaction for the Company and is subject to the reporting, announcement, circular and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The Purchaser is wholly and beneficially owned by Mr. Huang, chairman, executive Director and controlling Shareholder of the Company holding 327,242,688 Shares, representing approximately 54.54% of the total issued share capital, through his controlled corporation. Hence the Purchaser is a connected person of the Company. The Disposal constitutes a connected transaction for the Company and is subject to the reporting, announcement, circular, independent financial advice and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

An Independent Board Committee comprising Mr. Wong Ting Kon, Ms. Pang Yuen Shan, Christina, Mr. Chang Cheuk Cheung, Terence and Dr. Chan Chung Bun, Bunny (all being independent non-executive Directors) has been established to advise the Independent

– 12 –

LETTER FROM THE BOARD

Shareholders (i) as to whether the terms of the Agreement are fair and reasonable so far as the Independent Shareholders are concerned and whether the Disposal is in the interests of the Company and the Shareholders as a whole; and (ii) on whether to vote in favour of the Disposal, after taking into account the recommendation of the Independent Financial Adviser. The letter from the Independent Board Committee is set out on pages 15 to 16 of this circular.

The Company has appointed Amasse Capital Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Agreement and the transactions contemplated thereunder, and to advise the Independent Shareholders on how to vote on the relevant resolutions in the EGM. The letter from Amasse Capital is set out on pages 17 to 34 of this circular.

EGM

A notice convening the EGM is set out on pages 60 to 61 of this circular. All resolutions to be proposed at the EGM will be voted on by poll. A form of proxy for the EGM is enclosed with this circular. Whether or not you are able to attend the meeting, you are advised to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Hong Kong branch share registrar and transfer office of the Company, Tricor Investor Services 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 the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

Mr. Huang, through his controlled corporation Sky Halo Holdings Limited, is interested in 327,242,688 Shares, representing approximately 54.54% of the total issued share capital of the Company. Mr. Huang and his associates are required to abstain from voting on the relevant resolution to approve the Disposal at the EGM. Save as disclosed above, to the best knowledge, information and belief of the Directors and having made reasonable enquiries, no other Shareholder is involved in or interested in the Disposal who is required to abstain from voting on the relevant resolutions to approve the Disposal at the EGM.

RECOMMENDATIONS

The Board (including the independent non-executive Directors whose views are set out in the ‘‘Letter from the Independent Board Committee’’ in this circular after taking into account of the advice from the Independent Financial Adviser) considers that the Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board (including the independent non-executive Directors) recommends the Independent Shareholders to vote in favour of the resolutions to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

Your attention is drawn to the letters from the Independent Board Committee and from the Independent Financial Adviser, respectively, which set out their recommendations in respect of the Agreement and the transactions contemplated thereunder and the principal factors considered by them in arriving at their recommendations.

– 13 –

LETTER FROM THE BOARD

You are advised to read the letter from the Independent Board Committee and the letter from the Independent Financial Adviser mentioned above before deciding how to vote on the resolutions to be proposed at the EGM.

ADDITIONAL INFORMATION

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

Yours faithfully By Order of the Board Speedy Global Holdings Limited Huang Chih Shen Chairman

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [282 x 43] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 540)

19 August 2016

To the Independent Shareholders

Dear Sir/Madam,

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED

We refer to the circular of the Company dated 19 August 2016 (the ‘‘Circular’’) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

We have been appointed by the Board as members of the Independent Board Committee to consider the terms of the Agreement and the transactions contemplated thereunder and to advise the Independent Shareholders as to whether, in our opinion, the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned.

Amasse Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

We also wish to draw your attention to (i) the letter from the Board; (ii) the letter from Amasse Capital; and (iii) the additional information set out in the appendices to this circular.

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Agreement and the transactions contemplated thereunder, and having taken into account the opinion of Amasse Capital and, in particular, the factors, reasons and recommendations as set out in the letter from Amasse Capital on pages 17 to 34 of this circular, we consider that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Company and the Independent Shareholders are concerned, and the Agreement and the transactions contemplated thereunder are in the interests of the Company and the Independent Shareholders. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of

the Independent Board Committee

Mr. Wong Ting Kon Independent nonexecutive Director

Ms. Pang Yuen Mr. Chang Cheuk Shan, Christina Cheung, Terence Independent nonIndependent nonexecutive Director executive Director

Dr. Chan Chung Bun, Bunny Independent nonexecutive Director

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

==> picture [68 x 38] intentionally omitted <==

==> picture [57 x 34] intentionally omitted <==

19 August 2016

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Disposal as contemplated under the Agreement, details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular of the Company dated 19 August 2016 (the ‘‘Circular’’), of which this letter forms a part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context requires otherwise.

On 15 July 2016 after trading hours, the Company and the Purchaser entered into the Agreement pursuant to which the Company has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase 50% of the total issued share capital of the Target at the Consideration of HK$10 in cash. After completion of the Disposal, the Company will no longer hold any interest in the Target and accordingly the Target Group will cease to be subsidiaries of the Company.

The Independent Board Committee comprising all of the independent non-executive Directors has been established for the purpose of considering and advising the Independent Shareholders regarding the terms and conditions of the Disposal as contemplated under the Agreement. We have been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect, and such appointment has been approved by the Independent Board Committee.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors and the management of the Company (the ‘‘Management’’). We have assumed that all information and representations that have been provided by the Management, for which the Directors are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the

– 17 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the representation and confirmation of the Management that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the Disposal. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with the Listing Rules.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular or the Circular as a whole misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided by the Management, nor have we conducted any independent in-depth investigation into the business and affairs of any members of the Group, the counter party(ies) to the Disposal or their respective subsidiaries or associates. We also have not considered the taxation implication on the Group or the Shareholders as a result of the Disposal. We have not carried out any feasibility study on the past, and forthcoming investment decision, opportunity or project undertaken or to be undertaken by the Group. Our opinion has been formed on the assumption that any analysis, estimation, anticipation, condition and assumption provided by the Group are feasible and sustainable. Our opinion shall not be constructed as to give any indication to the validity, sustainability and feasibility of any past, existing and forthcoming investment decision, opportunity or project undertaken or to be undertaken by the Group.

Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company. We expressly disclaims any liability and/or any loss arising from or in reliance upon the whole or any part of the contents of this letter.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

– 18 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS TAKEN INTO CONSIDERATION

In formulating our opinion in respect of the terms and conditions of the Disposal as contemplated under the Agreement, we have taken into consideration the following principal factors and reasons:

1. Information on the Group and the Target Group

1.1 Information on the Group

With reference to the Letter from the Board, the Group is principally engaged in (i) the apparel supply chain servicing business which offers a wide range of woven wear and cut-andsewn knitwear products to a number of owners or agents of global reputable brands; (ii) the apparel retail business operating in the PRC and (iii) the property development and investment.

Set out below is a summary of the financial information of the Group as extracted from the annual report of the Company for the year ended 31 December 2015 (the ‘‘2015 Annual Report’’), details of which are as follows:

	For the year	ended
	31 December
	2014	2015
	HK$’000	HK$’000
	(Audited)	(Audited)
Revenue	1,263,600	1,223,831
Gross profit	160,911	134,899
Profit before tax	39,637	35,235
Profit after tax	24,097	24,830
Profit attributable to owners of the Company	24,097	24,830

For the year ended 31 December 2015, the Group recorded a revenue of approximately HK$1,224 million as compared to a revenue of approximately HK$1,264 million for the year ended 31 December 2014, representing a decrease of approximately 3.2%. The Group has recorded a profit after tax for the year ended 31 December 2015 of approximately HK$25 million as compared to a profit after tax for the year ended 31 December 2014 of approximately HK$24 million, representing an increase of approximately 4.2%.

According to the 2015 Annual Report, we note that the apparel supply chain servicing business of the Group continued to be the core business of the Group and contributed 99.4% of the total revenue of the Group for the year ended 31 December 2015. There was no material fluctuation for the revenue under such business during the year ended 31 December 2015.

We also note that the Group recorded consecutive profits attributable to the Shareholders for the two years ended 31 December 2014 and 2015.

– 19 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Further, we were given by the Management to understand that there will be no material adverse impact on the existing financial performance of the Group upon completion of the Disposal since the Target Group does not have any business activities yet.

1.2 Information on the Target Group

As disclosed in the Company’s circular dated 30 April 2015 and 24 August 2015, the only significant assets of the Target Group are three pieces of industrial land at Xinmi City and the construction cost incurred under the first phase development. The first phase development of the land with the construction of 19 blocks of standardized factory buildings of 3–5 storeys with a total construction area of approximately 87,400 square meters is still under progress. No permit for pre-sale has been issued by the relevant authorities and there has not been any sale of the premises involved.

Up to 31 May 2016, the total expenditures on the construction works including capitalised interest costs under the first phase development of the Target Group were approximately HK$179.8 million. The construction works under the first phase development is approximately 80% completed. It is expected that the construction works will be completed by the first quarter of 2017. Since the relevant construction contract was entered into by a subsidiary of the Target, the Disposal will not affect the continuation of such contract.

Set out below is the financial information of the Target Group extracted from its unaudited consolidated accounts for the two years ended 31 December 2014 and 31 December 2015.

					For the year ended
					31 December
					2014 2015
					HK$ HK$
Loss	before	and	after	taxation	1,344,000 2,077,000

The unaudited consolidated net liabilities of the Target Group as at 31 December 2015 was approximately HK$15.8 million.

As advised by the Management, we note that the said losses of the Target Group were mainly owing to administrative expenses and preliminary setup costs.

– 20 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2. Reasons for the Disposal

As set out in the Letter from the Board, the Group first entered into the framework investment agreement with Xinmi Government by the end of 2013 regarding the proposed investments in Xinmi City comprising manufacturing plants and related commercial and residential developments. The Chinese economy then was still enjoying a robust growth with a gross domestic production (‘‘GDP’’) growth rate of 7.7% in 2012 and 2013. The RMB was also strong at that time and the exchange rate against the HK$ reached historical high by the end of 2013.

Since then the growth rate of Chinese GDP fell to 7.3% in 2014 and 6.9% in 2015. The exchange rate of RMB also reversed its upward trend since the beginning of 2014 and suffered some fluctuations and corrections. During the first half of 2015 the RMB gradually stabilized and maintained a slight drop from the historical high.

Despite the correction in the RMB exchange rate, there was no sign that the RMB will continue to depreciate further in a substantial manner prior to August 2015. In March 2015, the Group succeeded in bidding the three pieces of industrial land in Xinmi City. In July 2015, the Group entered into the construction contracts for the first phase development of the properties. However in August 2015, the RMB suffered a sharp and significant depreciation. Since then the RMB has continued to depreciate significantly. The RMB depreciated from about HK$1.25/ RMB1.00 in August 2015 to about HK$1.16/RMB1.00 in mid July 2016. The sharp and significant depreciation of the RMB is expected to increase the risks of investments in RMB based assets such as the real estate in the PRC due to the relative depreciation in the value of RMB assets compared with foreign currencies. Anticipation of further depreciation in the RMB will fuel the vicious circle of further depreciation in RMB assets and the RMB. Hence as a result of the unexpected depreciation and the anticipated depreciation of the RMB, the Board is extremely cautious with the prospect of property investments in the PRC, which would be very challenging ad risky.

In view of (i) the slowdown in manufacturing activities and the Chinese economy in general and (ii) the significant depreciation and downward trend in the RMB, the Board considered that there may be material adverse impact on the demand for factory premises, making it more risky and challenging to undertake development of industrial property projects. It may also adversely affect the expected revenue from the sale of the properties due to foreign exchange adjustment. Therefore in November 2015 the Company started to discuss with Dragon Bloom Investments Limited (‘‘Dragon Bloom’’) for the joint development of the

– 21 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

properties in order to diversify the risks in undertaking the project. In December 2015 the subscription agreement was entered into with Dragon Bloom for the deemed disposal of 50% interest in the Target.

Although it was stated in the Acquisition Circular that the proposed investment in Xinmi City was supported by the Xinmi Government and the garment industry was one of the principal industries for development in Zhengzhou and had enjoyed significant growth in recent years with relatively low operating costs, due to the slowdown in the manufacturing sector and drop in demand for industrial premises, the market environment and prospect for developing and investing in industrial properties have become unfavourable. The Board originally expected to make use of the low interest HK$ bank loan to fund the development

– 22 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

which would not have any material adverse effect on the Group’s working capital requirement. In view of the substantial depreciation in the RMB, it has resulted in significant foreign exchange losses which outweigh the benefits of low borrowing costs.

Our view on the reasons of the Disposal:

In order for us to assess the economy of the PRC and the industrial activities and development in Henan province where the property of the PRC Subsidiary is located, we have reviewed and conducted analysis on the relevant statistical data published by the National Bureau of Statistics of the PRC. According to the National Bureau of Statistics of the PRC, we note that (i) the gross domestic production in the PRC had recorded approximately

– 23 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RMB48,412 billion, RMB53,412 billion, RMB58,802 billion, RMB63,591 billion and RMB67,671 billion, and a year-on-year growth of approximately 9.5%, 7.7%, 7.7%, 7.3 and 6.9% for the years ended 2011, 2012, 2013, 2014 and 2015 respectively; and (ii) the industrial added value, which represents the industrial activities by monetary value, in Henan province, the PRC had recorded approximately RMB1,195 billion, RMB1,395 billion, RMB1,502 billion, RMB1,494 billion, RMB1,584 billion and RMB1,600 billion, and a year-on-year growth of approximately 20.7%, 16.7%, 7.7%, -0.5%, 5.8% and 1.2% for the years ended 2010, 2011, 2012, 2013, 2014 and 2015 respectively. Details of which are illustrated in the graphs below:

Gross Domestic Production in the PRC

==> picture [412 x 220] intentionally omitted <==

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

80,000 20
67,671
63,591
58,802
60,000 15
53,412
48,412
9.5
40,000 10 %
7.7 7.7
7.3
6.9
20,000 5
0 0
2011 2012 2013 2014 2015
Gross Domestic Production in the PRC
Growth Rate
RMB (billion)
----- End of picture text -----

Source: http://data.stats.gov.cn

– 24 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Industrial Added Value in Henan Province

==> picture [413 x 193] intentionally omitted <==

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

1,600 1,581 1,600 (note) 35.0
1,502 1,494
1,395
30.0
1,195
1,200 25.0
20.7
16.7 20.0
800 15.0 %
7.7
10.0
5.8
400 -0.5 1.2 5.0
0.0
0 -5.0
2010 2011 2012 2013 2014 2015
Industrial Added Value in Henan Province Growth Rate
RMB (billion)
----- End of picture text -----

Source: http://data.stats.gov.cn Note: approximate figures from the PRC Government of Henan Province (http://www.henan.gov.cn)

We note that there had been a general decreasing trend in growth for both gross domestic production in the PRC and industrial added value in Henan province, the PRC. Accordingly, we concur with the Directors that there have been uncertainties over the economy of the PRC and the development of industrial property projects in particular in the Henan Province, the PRC is challenging.

With reference to the Letter from the Board, the Loan Documents contain restrictions on distribution of dividends by the Company such that any distributions in a financial year may not be more than 30% of the net profit after tax for the preceding financial year. We have reviewed the Loan Documents and are of the view that such restrictions may potentially impact on maximizing Shareholders’ return for so long as any relevant liability is outstanding or any related commitment of the Company under the Loan Documents is in force. We were given to understand by the Company that, before completion of the Disposal, a new loan agreement will be entered into by the Target Group, the lenders and Mr. Huang to replace the Loan Documents and as a result, the Company would be released and discharged of the Company and its subsidiaries (excluding the Target Group) as guarantors and from all other obligations under the Loan Documents, which is a condition precedent to the Agreement. As advised by the Management, as at the Latest Practicable Date, the Target Group has obtained preliminary consent from a bank for granting of a new loan to repay the existing loan under the Loan Documents. We were also given to understand by the Management that the Group currently does not have any plan to distribute dividend.

In addition, we have discussed with the Management and noted that up to 31 May 2016, the construction cost incurred for the first phase development of the industrial property projects of the Target Group was approximately HK$179.8 million and it is estimated to further invest approximately HK$52.7 million to complete the development, totaling approximately HK$232.5 million which is principally funded by the loan facility of HK$300 million under

– 25 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Loan Documents (the ‘‘Loan’’). Upon Completion, the Group will be fully discharged from the liabilities and commitment under the Loan Documents where the first installment of the said loan shall be repaid in January 2017.

We have reviewed the exchange rate of RMB from September 2013 to July 2016 and noted that following a sharp depreciation in August 2015, there had been a continuous depreciation trend in RMB and reached a period low in July 2016, details of which are illustrated in the graph below. In this regard, we understand that the Loan is denominated in HK$ and was then converted into RMB by the Company in 2015 for the investment in the development of the properties of the Target Group. As advised by the Management, it is intended by the Company to repay the Loan principally by utilizing the proceeds from the sales of the properties of the Target Group which will be denominated in RMB. As a result, there is a mismatch between a HK$-denominated liability and a RMB-denominated asset. The exchange rate of RMB is currently at a period low and should RMB continue to depreciate, the Group would not only suffer from greater burden on repaying a HK$-denominated loan and larger foreign exchange loss, but also a depreciation in value of the assets of the Target Group.

RMB/HKD Exchange Rate

==> picture [416 x 203] intentionally omitted <==

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

1.29
1.27
1.25
1.23
1.21
1.19
1.17
1.15
2013/09 2013/12 2014/03 2014/06 2014/09 2014/12 2015/03 2015/06 2015/09 2015/12 2016/03 2016/06
HKD
----- End of picture text -----

Further, we understand from the Management that the Company had approached and enquired several major banks in Henan province including but not limited to Industrial and Commercial Bank of China, Bank of Communication and Zhengzhou Bank regarding the provision of potential mortgage loans for the industrial property. However, the Company had not received any favourable response from them mainly due to the uncertain prospect of the industrial sector in the PRC. As a result, we consider that the local bank mortgage policy regarding industrial premises is tightening and it would further hinder the sales of the Target Group’s industrial premises.

We have also reviewed the Manufacturing Purchasing Managers’ Index (‘‘PMI’’) for the past 36 months from August 2013 to July 2016 as published by the National Bureau of Statistics of the PRC* which represents an indication of the economic condition of the

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

manufacturing sector in the PRC. A PMI of more than 50 generally represents expansion of the manufacturing sector when compared to the previous month while a PMI reading under 50 generally represents a contraction, and a reading at 50 generally indicates no change. Details of which are illustrated in the graph below:

Manufacturing Purchasing Managers’ Index in the PRC

==> picture [403 x 221] intentionally omitted <==

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

52
51.5 Entering into the
aquisition agreement
Entering into
dated 25 March 2015
51 the Agreement
50.5
50
49.5
Entering into the
framework investment
49
agreement dated 26
November 2013
48.5
48
Source: http://data.stats.gov.cn
2013/082013/1102013/122014/022014/042014/062014/082014/102014/122015/022015/042015/062015/082015/102015/122016/022016/042016/06
----- End of picture text -----

We note from the above statistics that the PMI had been (i) over 50 in most of the months during the period from August 2013 to July 2015, indicating an expansion in the manufacturing sector in the PRC during such period in general; and (ii) below 50 during the period from August 2015 to July 2016 in majority, indicating a contraction in the manufacturing sector in the PRC during such period in general. We concur with the Directors’ view that the manufacturing and industrial activities in the PRC have been slowing down, in particular starting from the mid of 2015, and leading to a weak demand in the industrial premises in the PRC.

In view of (i) the tight bank mortgage policy relating to the provision of mortgage loans for industrial property as discussed above; and (ii) the contraction in the manufacturing sector in the PRC in general for the past twelve months as indicated by the PMI, we concur with the Directors that there are additional risks and uncertainties associated with the investments in industrial properties of the Target Group and also the profitability from the sale of the industrial properties.

Besides Dragon Bloom, we were given to understand that the Company had also approached three potential investors including private equity real estate funds on the possible disposal of the property interests or the interest in the Target Group before entering into the Agreement. The Company had introduced to these investors the details of the property of the Target Group but none of them had indicated any interest in the Target Group before any terms could be negotiated nor any offer could be made.

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that a small portion of the development of the property of the Target Group was originally intended for the Group’s own use. After having discussed with the Management, we understand that despite 20% of the first phase development was intended for the Group’s own use and future expansion, the Company has given first priority to sell all the industrial properties of the Target Group should they could be sold at a favorable market price after considering the existing factory premises of the Group are sufficient for its existing operation. Accordingly, we concur with the Directors that the Disposal will not have any significant adverse impact on the existing business operations of the Group.

Having considered that:

(i) the loss-making financial results of the Target Group and the additional risks and uncertainties to the profitability from the sale of the industrial properties;
(ii) the decreasing trend in growth for both gross domestic production in the PRC and the industrial added value in Henan province, the PRC;
(iii) the depreciation trend in RMB for the past two years;
(iv) the unfavourable responses from the local banks relating to the provision of mortgage loans as discussed above;
(v) the contraction in the manufacturing sector in the PRC in general for the past twelve months as indicated by the PMI;
(vi) the intention of the Group to avoid the risks and uncertainties associated with the investment in industrial properties;
(vii) the discharge of liabilities and commitment of the Company under the Loan Documents;
(viii)the release from the above-said restrictions on dividend distribution by the Company which will facilitate flexibility in formulating dividend policy of the Company;
(ix) other than the Purchaser, none of the potential buyers that the Company approached had shown interest in the Target Group; and
(x) the potential positive impact on the financial position of the Group as a result of the Disposal as further discussed in the section headed ‘‘5. Possible financial effects of the Disposal’’ below,

we are of the view that the Disposal is in the interests of the Company and the Shareholders as a whole.

3. Principal Terms of the Agreement

Date

15 July 2016 (after trading hours)

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Parties

The Company; and
Success Up Holdings Limited as Purchaser.

Assets to be disposed of

One ordinary share of US$1.00 in the Target, being 50% of the total issued share capital of the Target.

Consideration

The Consideration is HK$10 to be paid upon completion of the Agreement.

Basis of the Consideration

The Consideration was determined after arm’s length negotiations between the Company and the Purchaser after taking into consideration of (i) the net liabilities position of the Target Group as at 31 May 2016 of approximately HK$22.9 million and (ii) the preliminary indicative equity value of the Target Group as at 31 May 2016 was negative as advised by LCH (Asia-Pacific) Surveyors Limited, an independent professional valuer, as the preliminary calculated net asset value of the Target Group based on draft management accounts by using asset-based approach was approximately negative HK$11.2 million.

Based on the preliminary valuation, the preliminary calculated net asset value of the Target Group was negative HK$11.2 million. After providing further information to the valuer by the Company, the calculated net asset value of the Target Group is now negative HK$10.0 million.

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

was approximately negative HK$10.0 million. The difference between this figure and the book value of net liabilities of HK$22.9 million is due to the upside valuation increment of about HK$12.9 million.

The valuation report of the Target Group is set out in Appendix II of the Circular. The said valuation does not involve any discounted cash flow or projections of profit, earnings or cash flows which is regarded as profit forecast under Rule 14.61 of the Listing Rules.

The net book value of 50% of the Target Group as at 31 December 2015 was approximately negative HK$7.9 million. Hence, the Consideration represents an excess of approximately HK$7.9 million over the net book value of 50% of the Target Group.

Having principally considered (i) the loss-making financial results of the Target Group and the additional risks and uncertainties to the profitability from the sale of the industrial properties; (ii) the net liabilities position of the Target Group as at 31 May 2016 of approximately HK$22.9 million; (iii) the potential positive impact on the financial position of the Group as a result of the Disposal as further discussed in the section headed ‘‘5. Possible financial effects of the Disposal’’ below; (iv) the fair market value as reasonably reflected by the Valuation Report as further discussed in the section headed ‘‘4. The valuation report of the Target Group’’ below; and (v) the reasons for the Disposal as above discussed, we are of the view that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

4. The valuation report of the Target Group

We have considered and reviewed, among others, the valuation (the ‘‘Valuation’’) of the Target Group as of 31 May 2016 (the ‘‘Valuation Date’’) as detailed in the valuation report (the ‘‘Valuation Report’’) prepared by LCH (Asia-Pacific) Surveyors Limited (‘‘LCH’’), the texts of which are set out in Appendix II to the Circular, and discussed with LCH regarding the methodology, the principal bases and assumptions adopted for the Valuation. As part of our due diligence, we have assessed the qualification and experience of LCH for its engagement as the independent professional valuer for the Target Group. We note that the valuer of the Valuation Report has over 17 years of experience in property valuation, business valuation and trade-related valuation in the PRC. We are of the view that LCH possesses sufficient experience in performing the Valuation. LCH also confirmed that (i) it is independent from the Company; (ii) all relevant material information provided by the Company had been incorporated in the Valuation Report; and (iii) they were not aware of any serious defects or other matters that would cause it to question the truthfulness or reasonableness of the information provided by the Company. We also understand that LCH has physically inspected the real properties of the Target Group in July 2016. In addition, we have also reviewed the terms of the LCH’s engagement and noted that the scope of work is appropriate to the opinion required to be given and we are not aware of any limitation on the scope of work which might have an adverse impact on the degree of assurance given by the Valuation Report.

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In arriving the market value of the Target Group, we note that LCH has adopted principally the asset-based approach in accordance with the reporting guidelines of the International Valuation Standards 2013 published by the International Valuation Standards Council and applicable Listing Rules.

We have discussed with LCH and understood that (i) according to the information provided to LCH, the PRC Subsidiary is the major operating subsidiary of the Target Group. The PRC Subsidiary is a start-up company and it has been constructing factory buildings since its corporation as at the Valuation Date. After discussion with the Company and the appointed personnel of the Company, LCH was advised that no concrete plan has been formulated for the future operations of the PRC Subsidiary. Due to the high uncertainty of the future economic benefits to be generated by the Target Group to the Target Company, the income approach was considered inappropriate by LCH; and (ii) as the Target Group has not commenced any material operations as at the Valuation Date and a reliable financial analysis cannot be performed in the absence of historical performance, as such, the market approach has not been relied upon by LCH.

We understand from LCH that by employing the adjusted net asset method of the assetbased approach in the Valuation, which is a common approach in valuing investment holding or real estate related company, the assets of the Target Group are analysed, adjusted and appraised individually by LCH. For the purpose of the Valuation, LCH was provided by the Company a copy of the consolidated management accounts of the Target Group as at the Valuation Date. Since the Company has already made accounting adjustments regarding interrelated company entries and impairment loss, LCH has adopted such balance sheets as the latest balance sheets as at the Valuation Date and LCH was advised by the Company that there were no significant differences from the provided management accounts. Under this method and subject to the definition of the Valuation, the summation of the values of the individual appraised assets of the Target Group (both tangible and intangible) represents the total invested capital of the subject business enterprise. By employing the ‘‘assets minus liabilities’’ procedures, the value of the equity interest can be arrived.

With reference to the Valuation Report, we note that the assets of the Target Group comprised of:

Monetary assets such as trade and other receivables, prepayment, cash and cash equivalents, and this amounted to approximately HK$29,806,000 in the book of the Target Group at the Valuation Date;
Tangible assets such as inventories, property, plant and equipment, leasehold land and land use rights, and this amounted to approximately HK$279,332,000 in the book of the Target Group as at the Valuation Date; and
Liabilities such as trade and other payables, short-term and long-term borrowings, and this amounted to approximately HK$332,002,000 in the book of the Target Group as at the Valuation Date.

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As discussed with LCH, we note that current assets included trade and other receivables, prepayments, cash and cash equivalents. Such prepayment mainly represents prepayment of construction fee. As the provided book costs were prepared and reviewed by the accounting personnel of the Company, book costs have been adopted for prepayments, monetary assets and liabilities in the Valuation. We understand from LCH that valuing such items at their book costs is mainly owing to their high liquidity nature and is a general practice in doing so.

The real estate related tangible assets of the Target Group and under development comprised of:

Three adjoining parcels of land known as Lot No. 2015-1, Lot No. 2015-2 and Lot No. 2015-3 and situated at Jinyi Zhiyuncheng, 200 Meters West of Junction of Laodong Street and Daxue South Road, Quliang Industry Cluster Zone, Xinmi, Zhengzhou, Henan Province, the PRC;
A developing industrial development erecting on portion of Lot No. 2015-1 having a site area of approximately 53,012 square meters. Upon completion, the industrial development would have 19 various 3–5 storeys industrial blocks and a total gross floor area of approximately 87,778.18 sq.m.. The first phase development is expected to be completed in the first quarter of 2017; and
The remaining portion of Lot No. 2015-1, the whole of Lot No. 2015-2 and Lot No. 2015-3 are vacant and having a total site area of 148,807.6 sq.m..

In valuing the real property of the Target Group which are classified as property under development, LCH has considered the sale comparison approach by making reference to comparable sales transactions in the locality and also considered the cost incurred and the expected construction cost to complete the development as at the Valuation Date. The market value of the real property was valued in the region of HK$291 million as at the Valuation Date by LCH. We have obtained such comparable sales transactions from LCH and reviewed their transaction nature of these sale transactions. We noted that 16 comparable sales transactions are identified by LCH, while 3 out of these 16 comparable sales transactions are considered to be the most relevant principally based on the locations which are in the same area as and closest to the real property of the Target Group being valued and the industrial nature of the property which is same as the real property of the Target Group, and thus being adopted by LCH for the said valuation under the sale comparison approach. We note that (i) the listing prices of these 3 adopted comparable sales transactions ranged from RMB2,900 to RMB3,100 per sq.m.; and (ii) LCH has applied certain discount in adjusting these prices in the valuation as they are only listed prices and have not yet been transacted, and it is a common practice in doing such adjustment. Based on the above, we concur with LCH that they are fair and representative for comparison purpose.

In valuing the tangible assets of the Target Group which are non-real estate related, LCH considered that due to the insignificant amount of non-real estate related tangible assets and based on agreed procedures, book costs have been adopted for the non-real estate related tangible assets of the Target Group. We have obtained the details of such items from LCH and noted that they are mainly comprised of motor vehicles, office supplies and stationeries,

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

amounting to approximately HK$1.3 million or 0.4% of the total asset value of the Target Group of approximately HK$309.1 million. As advised by LCH, it is a common practice in valuing such items at their book values mainly due to their immaterial characteristics.

By adopting the asset-based approach, the assets owned by the Target Group amounted to approximately HK$322 million as at the Valuation Date. However, with consideration of the book liabilities, which amounted to HK$332 million as at the Valuation Date, the net asset value of the Target Group was negative. Thus, the equity interests of the Target Group are considered by LCH to have no commercial value.

We have (i) considered and reviewed, among others, the valuation of the Target Group as of the Valuation Date in the Valuation Report as prepared by LCH and discussed the methodology, bases and assumptions; (ii) interviewed LCH of its independency, qualification and experience for its engagement; (iii) reviewed the terms of the LCH’s engagement; and (iv) confirmed the independency of LCH. Other information regarding the Valuation has been set out in the Valuation Report in Appendix II to the Circular. After considering the reasons for adopting the above methodology for valuing the Target Group by LCH, we are of the opinion that such valuation methodology and the bases and assumptions adopted are reasonable and acceptable in establishing the indicative equity value of the Target Group.

5. Possible financial effects of the Disposal

With reference to the Letter from the Board, upon completion of the Disposal, the Company will no longer hold any interest in the Target which will cease to be a subsidiary of the Company. For illustrative purpose, assuming the completion of the Agreement and the Subscription Agreement took place on 31 December 2015, and based on the unaudited consolidated net liabilities of the Target Group as at 31 December 2015 of approximately HK$15.8 million (which comprised of approximately HK$3.6 million of accumulated loss and approximately HK$12.2 million of a debit exchange reserve), the Disposal will (i) decrease the net profit of the Group by approximately HK$4.3 million; (ii) increase the total comprehensive income of the Group by approximately HK$7.9 million; (iii) reduce the Group’s total assets by approximately HK$290 million; and (iv) reduce the Group’s total liabilities by approximately HK$305.8 million. The gain on disposal of the Target Group (before the currency translation losses) is approximately HK$7.9 million being the difference between the Consideration and 50% of the net liabilities of the Target Group of approximately HK$7.9 million. However, after taking into account the currency translation losses of approximately HK$12.2 million, there will be a loss on disposal of approximately HK$4.3 million.

5.1 Net asset value

According to the 2015 Annual Report, the net assets of the Group amounted to approximately HK$203.9 million as at 31 December 2015. Based on the unaudited net liabilities of approximately HK$15.8 million of the Target Group as at 31 December 2015 as set out in the Letter from the Board, upon completion of the Disposal, it is expected that there would be an increase in the net assets of the remaining Group to approximately HK$219.7 million as advised by the Management.

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5.2 Earnings

According to the 2015 Annual Report, the Group had recorded a total comprehensive income of approximately HK$2.0 million for the year ended 31 December 2015. Based on the total comprehensive income of approximately HK$7.9 million which represents the difference between the Consideration and 50% of the net liabilities of the Target Group as set out in the Letter from the Board, upon completion of the Disposal, it is expected that there would be an increase in the total comprehensive income of the remaining Group to approximately HK$9.9 million as advised by the Management.

5.3 Gearing ratio

According to the 2015 Annual Report, the Group’s gearing ratio, calculated on the basis of total borrowings net of cash and cash equivalents and term deposits with initial term of over three months as a percentage of total equity, was 44.9%. Based on the unaudited financial information of the Target Group as at 31 December 2015, upon completion of the Disposal, it is expected that the gearing ratio of the Group will be improved to approximately -80.4% as advised by the Management.

It should be noted that the above analyses are for illustrative purpose only and do not purport to represent how the financial position or results of the Group will be upon completion of the Disposal.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the Disposal is not in the ordinary and usual course of business of the Company; (ii) the terms of the Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (iii) the Disposal is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, For and on behalf of Amasse Capital Limited May Tsang Director

for identification purpose only

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

STATEMENT OF INDEBTEDNESS

Indebtedness

As at the close of business on 30 June 2016, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had the following bank borrowings and finance lease liabilities:

Bank borrowings Finance lease liabilities Total borrowings The amounts of bank borrowings are repayable as follows: Within one year Bank borrowings due for repayment after one year* More than 1 year but not exceeding 2 years More than 2 years but not exceeding 5 years	HK$’000 412,365 959
	413,324
	149,862 82,500 180,003
	412,365

The amounts due are based on the scheduled repayment dates set out in the loan agreements without taking into account any repayment on demand clause.

As at 30 June 2016, the total unutilised amount of facilities available to us amounted to approximately HK$395.3 million. On the same date, our total bank borrowings of approximately HK$412.4 million was guaranteed by companies within the Group.

As confirmed by the Directors, there are no material defaults in payment of bank borrowings up to the Latest Practicable Date.

Save as otherwise disclosed above, and apart from intra-group liabilities and normal trade payables and bills payable, the Group did not have, at the close of business on 30 June 2016, any other debt securities issued and outstanding, or authorised or otherwise created but unissued, any other term loans, any other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptance (other than normal trade bills) or acceptance credits or hire purchase commitments, any other mortgages and charges or any guarantees or any finance lease commitments or material contingent liabilities.

Working Capital

The Directors, after due and careful enquiry, are of the opinion that taking into account of the Disposal and the present financial resources available to the Group including but not limited to its internally generated revenue and funds, cash and cash equivalents on hand,

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

banking facilities available to the Group, and in the absence of unforeseen circumstances, the Group has sufficient working capital for its present requirements, that is for at least the next twelve months from the date of this circular.

Material Adverse Change

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2015, the date to which the latest published audited financial statements of the Group were made up.

Financial And Trading Prospect Of The Group

As disclosed in the Company’s annual report for the year ended 31 December 2015, the Directors expect that the business environment of the Group’s apparel supply chain servicing business remains challenging in the year 2016 due to the keen competition. In order to maintain the Group’s competitiveness, the Group will enhance product innovation and creativity to meet fashion trends and maintain premium quality. For production management, the Group will continue to enhance the operating efficiency by simplifying the production processes which results a shorter product delivery time. In addition, the Group will work closely with our customers to consolidate the fabrication in order to obtain better material prices with mass volume which will enhance our cost competitiveness. The Group is offering a competitive price with higher flexibility arrangements to our existing customers in order to secure more long term and committed orders and is also actively looking for new customers for further growth opportunities.

The Directors expect that the retail sentiment in the PRC is still weak and accordingly the Group will adopt a cautious approach in developing the retail business. The Group will retain capital and is looking for other retail business opportunity with a better profitability.

After completion of the Disposal, the Company will no longer hold any interest in the Target which will cease to be a subsidiary of the Company. The Group will still closely monitor the property market and determine the appropriate investment strategy for the Group’s property investment and development business. The Group will seek any appropriate property investment and development projects if the Group believe that it can magnify the Group’s shareholders’ return.

– 36 –

VALUATION REPORT

APPENDIX II

利駿行測量師有限公司

The readers are reminded that the report which follows has been prepared in accordance with the reporting guidelines set by the International Valuation Standards 2013 and published by the International Valuation Standards Council which entitles the valuer to make assumptions which may on further investigation, for instance by the readers’ legal representative, prove to be inaccurate. Any exception is clearly stated below. Headings are inserted for convenient reference only and have no effect in limiting or extending the language of the paragraphs to which they refer. This report is prepared and signed off in English format, translation of this report in language other than English shall only be used as reference and should not be regarded as a substitute for this report. Piecemeal reference to this report is considered to be inappropriate and no responsibility is assumed from our part for such piecemeal reference. Translation of terms in English or in Chinese are for readers’ identification purpose only and have no legal status or implication on the report. It is emphasised that the findings and conclusions presented below are based on the documents and facts known to us at the Latest Practicable Date of this circular. If additional documents and facts are made available to us, we reserve the right to amend this report and its conclusion.

17th Floor Champion Building 287–291 Des Voeux Road Central Hong Kong

19 August 2016

The Board of Directors Speedy Global Holdings Limited Flat B, 13th Floor Wing Chai Industrial Building 27–29 Ng Fong Street San Po Kong, Kowloon Hong Kong

Dear Sirs,

In accordance with the recent instructions given by the present management of Speedy Global Holdings Limited (hereinafter referred to as the ‘‘Instructing Party’’) to appoint LCH (Asia-Pacific) Surveyors Limited as a valuer to undertake an agreed-upon procedure valuation of the possible business enterprise value of Speedy Global Development Limited (hereinafter referred to as the ‘‘Target Company’’) and its subsidiaries (collectively, together with the Target Company, hereinafter referred to as the ‘‘Target Group’’) as at 31 May 2016 (hereinafter referred to as the ‘‘Valuation Date’’) for the Instructing Party’s internal management reference purpose.

We understand that the Instructing Party will refer to our work product (disregarding the form of presentation) as part of its business diligence, and we have not been engaged to make specific purchase or sales recommendations or to give any opinion of value for financing

– 37 –

VALUATION REPORT

APPENDIX II

arrangement. We further understand that the use of our work product will not supplant other due diligence which the Instructing Party should conduct in reaching its business decisions with regard to the Target Group. We need to state that our work is designed solely to provide information that will give a reference to the Instructing Party as part of its internal due diligence process, and our work should not be the only factor to be referenced by the Instructing Party.

INSTRUCTIONS

Business enterprise value is defined as the total value of a business. It comprises monetary assets (net working capital), tangible assets and intangible assets, thereby encompassing all assets of a business enterprise. In other words, the business enterprise value is also equal to the value of its invested capital — common equity, preferred stocks and longterm debts. While there is no universal definition of the term, it is the usual practice for a professional valuer, based on his professional knowledge and experience, to identify the definition for the intended valuation. In this appraisal (the word appraisal has the same meaning of valuation in this report), we were instructed to analyse and to express our opinion of the possible market value of the entire equity interest of the Target Company (hereinafter referred to as the ‘‘Appraised Asset’’) as at the Valuation Date, on a going concern basis, and based on documents and information provided by the appointed personnel of Speedy Global Holdings Limited (hereinafter referred to as the ‘‘Company’’). For the purpose of this valuation, we define the term business enterprise value as the market value of the Appraised Asset.

The term ‘‘Market Value’’ is defined by the International Valuation Standards 2013 (hereinafter referred to as the ‘‘IVS’’) and published by the International Valuation Standards Council as ‘‘the estimated amount for which an asset or liability 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 .

THE TARGET GROUP’S PROFILE

According to the Certificate of Incorporation issued by the Registrar of Corporate Affairs of the British Virgin Islands (hereinafter referred to as the ‘‘BVI’’), pursuant to the BVI Business Companies Act, 2004, the Target Company was incorporated in the BVI as a BVI Business Company on 26 August 2013, with the BVI Company Number 1788126. The registered office of the Target Company is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI. With a registered capital of US$2 and 2 issued shares, the Target Company is principally engaged in investment holding. The Target Company is wholly owned by the Company.

As advised by the Instructing Party, the Target Company, as at the Valuation Date, wholly owned the following subsidiaries which formed the Target Group in this report. They are:

迅捷環球發展有限公司 (translated as Speedy Global Development Limited, formerly known as Speedy Global Development (Hong Kong) Limited and hereinafter referred to as ‘‘SG Development (HK)’’);

– 38 –

VALUATION REPORT

APPENDIX II

迅捷環球服裝產業園(香港)有限公司 (translated as Speedy Global Clothing Industry (Hong Kong) Limited, and hereinafter referred to as ‘‘SG Clothing’’);
迅捷環球創富(香港)有限公司 (translated as Speedy Global Capital Investment (Hong Kong) Limited, and hereinafter referred to as ‘‘SG Capital Investment’’);
迅捷環球創建(香港)有限公司 (translated as Speedy Global Creation (Hong Kong) Limited, and hereinafter referred to as ‘‘SG Creation’’);
迅捷環球實業(香港)有限公司 (translated as Speedy Global Industrial (Hong Kong) Limited, and hereinafter referred to as ‘‘SG Industrial’’); and
鄭州迅宏置業有限公司 (translated as Zhengzhou Xunhong Property Co., Ltd., and hereinafter referred to as the ‘‘PRC Subsidiary’’).

According to the Certificate of Incorporation issued by the Companies Registry of the Hong Kong Special Administrative Region, SG Development (HK) was incorporated in Hong Kong under the Companies Ordinance as a limited company on 5 September 2013. The business registration certificate number of SG Development (HK) is 61993492–000–09–15–3. The registered address of SG Development (HK) is located at Flat B, 13/F, Wing Chai Industrial Building, 27–29 Ng Fong Street, San Po Kong, Kowloon. The nature of business is corporate and the status is body corporate. With a registered capital of HK$10,000 and 10,000 issued shares, SG Development (HK) is an investment holding company, as advised.

According to the Certificate of Incorporation issued by the Companies Registry of the Hong Kong Special Administrative Region, SG Clothing was incorporated in Hong Kong under the Companies Ordinance as a limited company on 26 September 2013. The business registration certificate number of SG Clothing is 62095471–000–09–15–8. The registered address of SG Clothing is located at Flat B, 13/F, Wing Chai Industrial Building, 27–29 Ng Fong Street, San Po Kong, Kowloon. The nature of business is corporate and the status is body corporate. With a registered capital of HK$10,000 and 10,000 issued shares, SG Clothing has no business activities since incorporation, as advised.

According to the Certificate of Incorporation issued by the Companies Registry of the Hong Kong Special Administrative Region, SG Capital Investment was incorporated in Hong Kong under the Companies Ordinance as a limited company on 26 September 2013. The business registration certificate number of SG Capital Investment is 62095675–000–09–15–2. The registered address of SG Capital Investment is located at Flat B, 13/F, Wing Chai Industrial Building, 27–29 Ng Fong Street, San Po Kong, Kowloon. The nature of business is corporate and the status is body corporate. With a registered capital of HK$10,000 and 10,000 issued shares, SG Capital Investment has no business activities since incorporation, as advised.

According to the Certificate of Incorporation issued by the Companies Registry of the Hong Kong Special Administrative Region, SG Creation was incorporated in Hong Kong under the Companies Ordinance as a limited company on 26 September 2013. The business registration certificate number of SG Creation is 62095730–000–09–15–3. The registered

– 39 –

APPENDIX II

VALUATION REPORT

address of SG Creation is located at Flat B, 13/F, Wing Chai Industrial Building, 27–29 Ng Fong Street, San Po Kong, Kowloon. The nature of business is corporate and the status is body corporate. With a registered capital of HK$10,000 and 10,000 issued shares, SG Creation has no business activities since incorporation, as advised.

According to the Certificate of Incorporation issued by the Companies Registry of the Hong Kong Special Administrative Region, SG Industrial was incorporated in Hong Kong under the Companies Ordinance as a limited company on 26 September 2013. The business registration certificate number of SG Industrial is 62095803–000–09–15–0. The registered address of SG Industrial is located at Flat B, 13/F, Wing Chai Industrial Building, 27–29 Ng Fong Street, San Po Kong, Kowloon. The nature of business is corporate and the status is body corporate. With a registered capital of HK$10,000 and 10,000 issued shares, SG Industrial has no business activities since incorporation, as advised.

The PRC Subsidiary is a limited liability company established in the People’s Republic of China (hereinafter referred to as ‘‘China’’ or the ‘‘PRC’’) on 12 May 2015 with a registered capital of RMB100,000,000. The registered address of the PRC Subsidiary is at 鄭州市新密市曲梁產業集聚區 (no English translation). According to a 營業執照 Business License No. 914101003222084881 dated 12 May 2015, the operation term of the PRC Subsidiary is 15 years from 12 May 2015 to 11 May 2030. The business scope of the PRC Subsidiary was restricted to ‘‘在土地編號為新密國用(2015)第045、新密國用(2015)第046、新密國用(2015)第 047號地塊上從事自建工業廠房的銷售、租賃及售後服務；自有物業管理；工業廠房的調研、策劃及諮詢服務；生產和銷售服裝、服飾、鞋子、箱包及皮具製品；自產產品的進出口。’’ 業務和相關配套服務 (no English translation).

After discussion with the Instructing Party, we were given to understand that the Target Company, SG Development (HK), SG Clothing, SG Capital Investment, SG Creation and SG Industrial were either investment holding in nature or did not have material operations as at the Valuation Date.

On 27 July 2015, the PRC Subsidiary, a wholly owned subsidiary of the Company, entered into a construction contract with 河南七建工程集團有限公司 (translated as Henan Qijian Construction Group Co. Ltd. and hereinafter referred to as the ‘‘Contractor’’) pursuant to which the Contractor has agreed to undertake the engineering, construction and installation works relating to the construction of certain factory buildings at Xinmi City, Zhengzhou, Henan Province, the PRC at a total contract price provisionally determined at approximately RMB130.84 million.

VALUATION PROCEDURES ADOPTED

In performing the appraisal, we have adopted the following agreed-upon procedures which were agreed with the Instructing Party prior to the commencement of this engagement. They were:

. to read the supplied materials and based on the content of the materials such as product information, company information, market condition, financial information, and the scale of the going concern of the Target Group to arrive at our conclusion;

– 40 –

VALUATION REPORT

APPENDIX II

. to prepare and submit a list(s) of required document and information regarding the Appraised Asset and the Target Group during the course of valuation. The completeness of the valuation depends on the availability of the required information being supplied by the Instructing Party or the appointed personnel of the Company;
. to review various accounting and financial documents in order to understand the scope of the Appraised Asset and the Target Group;
. to discuss with the Instructing Party or the appointed personnel of the Company to better understand the business model and agreements made by the Target Group;
. to conduct a limited scope on-site inspection to the business operation unit of the Target Group in the PRC. The purpose of the inspection is not to prepare an error free asset schedule; rather, to let us to have a better understanding of the nature of the operation of the Target Group;
. to conduct appropriate research/interview/consultation in order to obtain necessary industry and market information to support our valuation. Subject to the performance of the scope of work of this assignment, the extent of research/interview/consultation is at our discretion;
. to investigate and conduct valuation of the Appraised Asset by using the most appropriate standard of value;
. to conduct valuation of the Appraised Asset by considering the Income Approach, the Market Approach, and the Asset-based Approach; and
. to document our findings and conclusion in our appraisal report.

THE BASIS OF VALUATION AND ASSUMPTIONS

The Appraised Asset is valued on the basis of ‘‘Market Value’’ in continued use or as a going concern. The continued use premise assumes that the Appraised Asset will be used for the purpose for which the Appraised Asset was conceived or is currently used. Implicit in this definition is the fact that a hypothetical willing and able buyer would not pay more to acquire the Appraised Asset than he could reasonably expect to earn in the future from an investment in the Appraised Asset.

Our valuation has been made on the assumptions that, as at the Valuation Date,

the legally interested party in the Appraised Asset has free and uninterrupted rights to assign the Appraised Asset (a part of or the whole of) for the whole of the unexpired terms as granted under the relevant government licences and any premiums/administrative costs payable have already been fully paid;

– 41 –

VALUATION REPORT

APPENDIX II

all the required licenses, certificates, consents, or other legislative or administrative authority from any local, provincial, or national government or private entity or organisation have been or can readily be obtained or renewed on which the valuation contained in our report is based;
the prospective earnings would provide a reasonable return to the Appraised Asset, and that the Target Group has adequate working capital to operate its business from time to time;
the legally interested party in the Appraised Asset has adopted reasonable and necessary security measures and has considered several contingency plans against any disruption (such as change of government policy, cancellation of customers contracts and labour dispute) to the Target Group’s business;
the legally interested party in the Appraised Asset sells its relevant interest in the market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which could serve to increase the value of the Appraised Asset;
the legally interested party in the Appraised Asset has absolute title to its relevant interest;
the Appraised Asset has obtained relevant government’s approvals for the sale of the Appraised Asset or the assets owned by the Target Group and is able to dispose of and transfer free of all encumbrances (including but not limited to the cost of transaction) in the market; and
the Appraised Asset can be freely disposed and transferred free of all encumbrances for its existing uses in the market to both local and overseas purchasers without payment of any premium to the government.

Should any of the above not be the case, it may have adverse impact to the reported findings and conclusion herein.

FACTORS CONSIDERED IN THE VALUATION

The valuation of the Appraised Asset required consideration of a number of pertinent factors affecting the operations of the subject business and its ability to generate future investment returns. The factors considered in the valuation included, but were not limited to, the following:

. the nature of the Appraised Asset such as the remaining life and its characteristics;
. the nature and the going concern business of the Target Group;
. the capability and determination of the management of the Target Group to follow the planned road map of future operations;

– 42 –

VALUATION REPORT

APPENDIX II

. the capability and determination of the management of the Target Group to maintain its relationship with its existing clients and to enhance its service image and connection to explore more customers;
. the capability and determination of the management of the Target Group to continue the existing marketing strategy;
. the capability and determination of the management of the Target Group to produce different types of products and services to attract customers;
. the capability and determination of the management of the Target Group to maintain those granted or to be granted business permit(s) or approval(s) to conduct legal business;
. the commitment of the management of the Target Group to protect the Appraised Asset against any disruption of the normal business of the Target Group;
. the economic and industry data affecting the Target Group and its business;
. market-derived investment returns in similar nature of entities; and
. the risks facing the Target Group and the Appraised Asset.

APPROACH TO VALUE

In the process of valuation, we have considered the three generally accepted business enterprise appraisal approaches to value, namely, the Income Approach, the Market Approach and the Asset-based Approach.

The Income Approach

The Income Approach focuses on the economic benefits generated by the incomeproducing capability of a business enterprise. The underlying theory of this approach is that the value of a business enterprise can be measured by the present worth of the economic benefits to be received over the useful life of the business enterprise. Based on this valuation principle, the Income Approach estimates the future economic benefits and discounts these benefits to its present value using a discount rate suitable for the risks associated with realising those benefits. Alternatively, this can be calculated by capitalising the economic benefits to be received in the next period at an appropriate capitalisation rate. This is subject to the assumption that the business enterprise has been maintaining stable economic benefits and growth rate. The core idea under this approach is that a rational buyer normally will purchase an asset only if the present value of the expected economic benefits is at least equal to the purchase price. Likewise, a rational seller normally will not sell if the present value of the expected economic benefits is more than the selling price. Thus, a sale generally will occur at an amount equal to the economic benefits of the asset being valued.

– 43 –

VALUATION REPORT

APPENDIX II

According to the information provided to us, the PRC Subsidiary is the major operating subsidiary of the Target Group. The PRC Subsidiary is a start-up company and it has been constructing factory buildings since its establishment. After discussion with the Instructing Party and the appointed personnel of the Company, we were advised that no time schedule has been formulated for the future development for the remaining undeveloped land of the PRC Subsidiary. Due to the high uncertainty of the future economic benefits to be generated by the Target Group to the Target Company, the Income Approach was considered inappropriate.

The Market Approach

The Market Approach is basically a comparison method to value a business enterprise by comparison to the prices at which other similar business nature companies or interests changed hands in arm’s-length transactions. The underlying theory of this approach is one would not pay more than one would have to pay for an equally desirable alternative. By using this approach, the valuer will first look for valuation indication from the prices of other similar companies or equity interests in companies that were sold recently. The right transactions used in analysing for valuation indication need to be sold on 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. Then, based on those transactions, multiples (i.e. financial ratios) are derived to apply to the fundamental financial variables of the subject business enterprise and to arrive at an indicated value of the subject business enterprise. The most commonly used multiples are price-to-earnings, price-to-sales (or revenue), price-to-book and price-to-EBITDA (earnings before interest, taxes, depreciation and amortisation) multiple.

There are two methods of the Market Approach known as the Guideline Publicly Traded Company Method (by using similar company daily stock transaction prices) and the Guideline Merged and Acquired Company Method. Both methods need to rely on analysing available similar transacted comparables, and the big difference is on the structure of transactions — daily stock transaction prices in public market or mergers and acquisitions as occurred. In most cases, finding good market comparables is often difficult (particularly for those mergers and acquisitions) for there is no single marketplace where similar assets change hands between buyers and sellers, who are well informed and have no special motivations or compulsions to buy or to sell, are recorded.

We were advised that a reliable financial analysis cannot be performed in the absence of sufficient historical performance of the Target Group, as such, the Market Approach has not been relied upon.

The Asset-based Approach

We then turned to use the Asset-based Approach which is a common approach in valuing investment holding. 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 enterprise and equals to the value of its invested capital (equity and longterm debt). In other words, the value of the business enterprise is represented by the money

– 44 –

VALUATION REPORT

APPENDIX II

that has been collected to purchase the business assets needed. This money comes from investors who buy stocks of the business enterprise (equity) and investors who lend money to the business enterprise (debt). After collecting the total amount of money from equity and debt, and converted into various types of assets of the business enterprise for its operation, their sum equals to the value of the business enterprise.

From a valuation perspective, the valuer will restate (revalue) the value of all types of assets of a business enterprise from book value i.e. historical cost minus depreciation to appropriate standards of value. After the restatement (i.e. valuation or adjustment), the valuer can identify the indicated value of the business enterprise, or by applying the accounting principle ‘‘assets minus liabilities’’ after valued the assets to arrive at the value of the equity interests of the business enterprise. The former is known as Asset Accumulation Method and the latter known as Adjusted Net Asset Method though they are identically the same. There is another method known as Excess Earning Method which is a collective valuation of all intangible assets as a group by capitalised returns over and above a reasonable rate of return on tangible assets and adding the capitalised value of intangibles plus the estimated value of tangible assets to become the value of a business enterprise. However, some practitioners prefer to classify this method as a hybrid method for it combines asset value with a capitalised earnings component.

By employing the Adjusted Net Asset Method of the Asset-based Approach in our valuation, the assets of the Target Group are analysed, adjusted and appraised individually. For the purpose of this appraisal, the appointed personnel of the Instructing Party provided us with a copy of the consolidated management accounts of the Target Group as at 31 May 2016. Since the Company has already made accounting adjustments regarding inter-related company entries and impairment loss, we have adopted the provided balance sheets as the latest balance sheets as at the Valuation Date. Should this not be the case, it will affect the values reported in this report significantly. Based on the balance sheet of the Target Group, we understand that the assets of the Target Group comprised:

Monetary Assets
Tangible Assets
Liabilities

Monetary Assets comprised trade and other receivables, prepayment, cash and cash equivalents, and this amounted to approximately HK$29,806,000 in the book as at the Valuation Date.

Tangible Assets comprised inventories, property, plant and equipment, leasehold land and land use rights, and this amounted to approximately HK$279,332,000 in the book as at the Valuation Date.

Liabilities comprised trade and other payables, short-term and long-term borrowings, and this amounted to approximately HK$332,002,000 in the book as at the Valuation Date.

– 45 –

VALUATION REPORT

APPENDIX II

Under this method and subject to the definition of this appraisal, the summation of the values of the individual appraised assets (both tangible and intangible) represents the total invested capital of the subject business enterprise. By employing the ‘‘assets minus liabilities’’ procedures, the value of the equity interest can be arrived.

VALUATION ANALYSIS

Monetary Assets and Liabilities

Current assets included trade and other receivables, prepayments, cash and cash equivalents. After discussion with the Instructing Party, we were given to understand that prepayment mainly represents prepayment of construction fee. Book costs have been adopted for prepayments, monetary assets and liabilities in our valuation.

Tangible Assets — Real estate related (Property under Development)

The real estate related tangible assets comprise three adjoining parcels of land known as Lot No. 2015–1, Lot No. 2015–2 and Lot No. 2015–3 having a total site area of approximately 201,819.6 square meters (‘‘sq.m.’’) and situated at Jinyi Zhiyuncheng, 200 Meters West of Junction of Laodong Street and Daxue South Road, Quliang Industry Cluster Zone, Xinmi, Zhengzhou, Henan Province, the PRC (鄭州市新密曲梁產業集聚區勞動街與大學南路交叉口以西200米錦藝‧智雲城).

There is a developing industrial development (‘‘Development (Phase 1)’’) erecting on a portion of Lot No. 2015–1 and having a site area of approximately 53,012 sq.m.. Upon completion, the Development (Phase 1) would have 19 various 3–5 storeys (exclude basement) industrial blocks and a total gross floor area of approximately 87,778.18 sq.m. The Development (Phase 1) is expected to be completed in the first quarter of 2017. As at the Valuation Date, construction cost incurred for the Development (Phase 1) was approximately HK$179.8 million. The expected cost to complete the Development (Phase 1) is estimated approximately HK$52.7 million and the estimated capital value of the Development (Phase 1) upon completion is HK$258.3 million, as advised.

Lot No. 2015–2 and Lot No. 2015–3 are 2 parcels of vacant land adjoining to Lot No. 2015–1 and have a total site area of approximately 95,795.6 sq.m. We are advised that there was no time schedule for the development of these 2 parcels of land and the remaining area of Lot No. 2015–1 (together with the 2 parcels of vacant land known as ‘‘Undeveloped Land’’) as at the reported date.

The real property is located at a developing area of Xinmi City with various industrial developments. There are ancillary facilities and developed transportation system in the area.

– 46 –

VALUATION REPORT

APPENDIX II

The right to possess the land is held by the State and the right to use the land has been granted by the State to the PRC Subsidiary via the following ways:

(i) Lot No. 2015–1

Pursuant to a Contract for the Grant of State-owned Land Use Rights dated 1 April 2015 and made between 新密市國土資源局 (translated as Land and Resources Bureau of Xinmi City and hereinafter referred to as ‘‘Xinmi Land Bureau’’) and the Target Company, and a supplementary Contract for the Grant of State-owned Land Use Rights dated 29 June 2015, the land use rights of a parcel of land having a site area of 106,024 sq.m. was granted to the PRC Subsidiary for a term of 50 years for industrial usage at a consideration of RMB39,759,000. According the information provided, the consideration has been fully paid; and

Pursuant to a State-owned Land Use Rights Certificate known as Xinmi Guo Yong (2015) Di 045 Hao (新密國用(2015)第045號) dated 12 October 2015 and issued by the People’s Government of Xinmi City (新密市人民政府), The PRC Subsidiary has the right to use the land having a site area of 106,024.0 sq.m. for a term till 30 April 2065 for industrial usage.

(ii) Lot No. 2015–2

Pursuant to a Contract for the Grant of State-owned Land Use Rights dated 1 April 2015 and made between Xinmi Land Bureau and the Target Company, and a supplementary Contract for the Grant of State-owned Land Use Rights dated 29 June 2015, the land use rights of a parcel of land having a site area of 73,455.80 sq.m. was granted to The PRC Subsidiary for a term of 50 years for industrial usage at a consideration of RMB27,545,925. According the information provided, the consideration has been fully paid; and

Pursuant to a State-owned Land Use Rights Certificate known as Xinmi Guo Yong (2015) Di 046 Hao (新密國用(2015)第046號) dated 12 October 2015 and issued by the People’s Government of Xinmi City (新密市人民政府), The PRC Subsidiary has the right to use the land having a site area of 73,455.80 sq.m. for a term till 30 April 2065 for industrial usage.

(iii) Lot No. 2015–3

Pursuant to a Contract for the Grant of State-owned Land Use Rights dated 1 April 2015 and made between Xinmi Land Bureau and the Target Company, and a supplementary Contract for the Grant of State-owned Land Use Rights dated 29 June 2015, the land use rights of a parcel of land having a site area of 22,339.80 sq.m. was granted to the PRC Subsidiary for a term of 50 years for industrial usage at a consideration of RMB8,377,425. According the information provided, the consideration has been fully paid; and

– 47 –

VALUATION REPORT

APPENDIX II

Pursuant to a State-owned Land Use Rights Certificate known as Xinmi Guo Yong (2015) Di 047 Hao (新密國用(2015)第047號) dated 12 October 2015 and issued by the People’s Government of Xinmi City (新密市人民政府), the PRC Subsidiary has the right to use the land having a site area of 22,339.80 sq.m. for a term till 30 April 2065 for industrial usage.

Pursuant to 3 various Planning Permits for Using Construction Usage Land (建設用地規劃許可證) all dated 14 September 2015 and issued by 新密市城鄉規劃管理局 (translated as Xinmi City Urban and Rural Planning Management Bureau), the PRC Subsidiary is permitted to develop 3 various parcels of land having a total site area of approximately 269,586.99 sq.m. (including road and greenery land) for industrial usage.

Pursuant to a Construction Planning Permit (建設工程規劃許可證) dated 27 April 2016 and issued by Xinmi Planning Bureau, the PRC Subsidiary was permitted to develop standard industrial development (for garment processing) with 19 various 3–5 storeys (exclude basement) industrial blocks having a total gross floor area of approximately 87,778.18 sq.m.

There are three generally accepted approaches in arriving at the market value of a real property on an absolute title basis, namely the Sales Comparison Approach (or known as the Market Approach), the Cost Approach and the Income Approach.

In valuing the real property, we have considered the Sales Comparison Approach by making reference to comparable sales transactions in the locality. We have also considered the cost incurred and the expected construction cost to complete the Development (Phase 1) as at the Valuation Date.

Unless otherwise stated, we have not carried out any valuation on alternative development basis to the subject real property, and the study of possible alternative development options and the related economics do not come within the scope of our work.

The market value of the real property was valued in the region of HK$291 million as at the Valuation Date. Details refer to Exhibit I.

Tangible Assets — Non-real estate related

According to the information provided to us, due to the insignificant amount of non-real estate related tangible assets and based on our agreed procedures, book costs have been adopted for the non-real estate related Tangible Assets.

By adopting the Asset-based Approach, as at the Valuation Date, the assets owned by the Target Group amounted to approximately HK$322 million. However, with consideration of the booked liabilities, which amounted to HK$332 million as at the Valuation Date, the net asset value of the Target Company was negative, thus, no commercial value was reported.

– 48 –

VALUATION REPORT

APPENDIX II

MATTERS THAT MIGHT AFFECT THE VALUE REPORTED

No allowance has been made in our valuation for any charges, mortgages, outstanding premium or amounts owing on the Appraised Asset or the real property. Also, no allowance has been made in our valuation for any expenses or depreciation or taxation, which may be incurred in effecting a sale of the Appraised Asset or the real property. Unless otherwise stated, it is assumed that the Appraised Asset or the real property is free from all encumbrances, restrictions, and outgoings of an onerous nature which could affect its value.

In our valuation, we have assumed that the Appraised Asset or the real property is able to sell and purchase in the market (a part of or the whole of) without any legal impediment (especially from the regulators). Should this not be the case, it will affect the reported value significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability is assumed.

As at the Latest Practicable Date of this circular, we are unable to identify any adverse news against the Appraised Asset or the Target Group which may affect the reported value in our report. Thus, we are not in the position to report and comment on its impact (if any) to the Appraised Asset or the Target Group. However, should it be established subsequently that such news did exist at the Valuation Date, we reserve the right to adjust the value reported herein.

ESTABLISHMENT OF LEGAL TITLES TO THE REAL PROPERTY

Due to the purpose of this engagement and the market value basis of valuation, the Instructing Party or the appointed personnel of the Company provided us the necessary documents to support that the legally interested parties in the property (i.e. the real property) have free and uninterrupted rights to assign, to mortgage or to let the property at its existing use (in this instance, an absolute title), for the whole of the unexpired terms as granted, free of all encumbrances and any premiums payable have already been paid in full or outstanding procedures have been completed, and that the Target Group has the right to occupy and to use the property. Our procedures to value, as agreed with the Instructing Party, did not require us to conduct legal due diligence on the legality and formality on the way that the legally interested party obtained the property from the relevant authorities. We agreed with the Instructing Party that this should be the responsibility of the legal advisor to the Instructing Party. Thus, no responsibility or liability is assumed from our part to the origin and continuity of the titles to the property.

We have been provided with copies of the title documents of the property. We have not examined the original documents to verify the ownership and encumbrances or to ascertain the existence of any amendments, which may not appear on the copies handed to us. All documents disclosed (if any) are for reference only and no responsibility is assumed for any legal matters concerning the legal title and the rights (if any) to the property valued. Any responsibility for our misinterpretation of the documents cannot be accepted.

The land registration system of China forbids us to search the original documents of the property that are filed in the relevant authorities, and to verify legal titles or to verify any material encumbrances or amendment which may not appear on the copies handed to us. We need to state that we are not legal professionals and are not qualified to ascertain the titles and

– 49 –

VALUATION REPORT

APPENDIX II

to report any encumbrances that may be registered against the property. However, we have complied with the requirements as stated in Chapter 5 of the Rules Governing the Listing of Securities on the Main Board of The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and relied solely on the copies of document and the copy of the PRC legal opinions provided by the Instructing Party with regard to the legal title of the property. We are given to understand that the PRC legal opinion was prepared by the Company’s PRC legal adviser, 河南康益律師事務所 (KangYi Law Office) dated August 2016. No responsibility or liability from our part is assumed in relation to those legal opinions.

In our report, we have assumed that the legally interested party in the property has obtained all the approval and/or endorsement from the relevant authorities, and that there would have no legal impediment (especially from the regulators) for the legally interested party to continue its titles in the property. Should this not be the case, it will affect our value in this report significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability from our part is assumed.

INSPECTIONS AND INVESTIGATIONS

We have conducted a limited scope of visual inspection on the subject real property of the Target Group in respect of which we have been provided with such information as we have requested for the purpose of our valuation. We have not inspected those parts of the real property which were covered, unexposed, not being arranged or inaccessible and such parts have been assumed to be in reasonable condition. We cannot express an opinion about or advice upon the condition of uninspected parts and our report should not be taken as making any implied representation or statement about such parts. No structural survey, investigation, test or examination has been made, but in the course of our inspections we did not note any serious defects in the real property inspected. We are not, however, able to report that the inspected real property is free from rot, insect, infestation or any other defects. No tests were carried out to the services (if any) and we are unable to identify those services covered, unexposed or inaccessible.

Our valuation has been made on the assumption that no unauthorised alteration, extension or addition has been made in the premises occupied by the Target Group, and that the inspection and the use of our report do not purport to be a building or conditional survey of the inspected property. We have assumed that the premises are free of rot and inherent danger or unsuitable materials and techniques.

If there is a third party other than the legal interested party in the Appraised Asset proposing to acquire the Appraised Asset or the real property and wants to satisfy them as to the assets of the Target Group of which forms part of the going concern business of the Target Group, then the third party should obtain a relevant surveyor’s detailed inspection and report of their own before deciding whether or not to enter into an agreement for sales and purchase.

We have not carried out on-site measurements to verify the correctness of the areas or specifications of the real property of the Target Group, but have assumed that the areas and specifications shown on the documents and handed to us are correct. All dimensions, measurements and areas are approximations.

– 50 –

VALUATION REPORT

APPENDIX II

Our engagement and the agreed procedures to value did not include an independent land survey to verify the legal boundaries of the real property of the Target Group. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the legal boundaries of the real property of the Target Group that appeared on the documents handed to us. No responsibility from our part is assumed. The appointed personnel of the Company or interested party in the Appraised Asset should conduct their own legal boundaries due diligence work.

We are not aware of the content of any environmental audit or other environmental investigation or soil survey which may have been carried out on the real property of the Target Group. In undertaking our work, we have been instructed to assume that no contaminative or potentially contaminative uses have ever been carried out in the real property. We have not carried out any investigation into past or present uses, either of the real property or of any neighbouring land, to establish whether there is any contamination or potential for contamination to the real property from these uses or sites, and have therefore assumed that none exists. However, should it be established subsequently that contamination, seepage or pollution exists at the real property or on any neighbouring land, or that the premises have been or are being put to a contaminative use, this might reduce the value now reported.

SOURCES OF INFORMATION AND ITS VERIFICATION

For the purpose of valuing the Appraised Asset, we were furnished with various latest financial documents and other documents related to the Appraised Asset on going concern basis. These data have been utilised without further verification. No responsibility or liability is assumed for the accuracy of the provided information.

We have relied solely on the information provided by the Instructing Party or the appointed personnel of the Company without further verification and have fully accepted advice given to us on such matters as planning approvals or statutory notices, procedures to obtain necessary approvals, locations, titles, easements, tenure, occupation, site areas and all other relevant matters.

Our procedures to value did not include undertaking a feasibility study of the proposed expansion of the Target Group. Accordingly we do not express an opinion as to the merit or demerit of any future expansion (if any).

We are not contracted to conduct a due diligence to review the industry property sector in Xinmi City of China, or to undertake feasibility study of any proposed business plan of the Target Group. In the course of appraisal, we have mainly based on the advice given by the Instructing Party or the appointed personnel of the Company and we do not express an opinion as to the merit or demerit of any future expansion of the business.

Information furnished by others, upon which all or portions of our report are based, is believed to be reliable but has not been verified in all cases. Our procedures to value or work do not constitute an audit, review, or compilation of the information provided. Thus, no guaranty is made nor liability assumed for the accuracy of any data, advice, opinions, or estimates identified as being furnished by others which have been used in formulating our report.

– 51 –

VALUATION REPORT

APPENDIX II

When we adopted the work products from other professions, external service/data providers and/or the Instructing Party and/or the appointed personnel of the Company in our valuation, the assumptions and caveats adopted by them in arriving at their opinions also applied in our valuation. The procedures we have taken do not require us to examine all the evidences, like an auditor, in reaching at our opinion. As we have not performed an audit, we are not expressing an audit opinion in our valuation.

We are unable to accept any responsibility for the information that has not been supplied to us by the Instructing Party and the appointed personnel of the Company. We have sought and received confirmation from the Instructing Party and the appointed personnel of the Company that no material factors have been omitted from the information supplied. The report is based upon the assumption of full disclosure between the Instructing Party and the appointed personnel of the Company and us of material and latent facts that may affect the valuation. No responsibility is assumed for withheld information (if any).

Unless otherwise stated, all monetary amounts are in Hong Kong dollars (‘‘HK$’’). The adopted exchange rate was the prevailing rate as at the Valuation Date, at around HK$1.1808 per Renminbi Yuan (RMB) 1. No significant fluctuation in exchange rates have been found between the Valuation Date and the date of this report.

VALUATION RESULTS

Based on the investigation, analysis, stated assumptions, limitations, reasoning and data outlined above, and on the valuation method employed, we concluded that the Appraised Asset has NO COMMERCIAL VALUE as of the Valuation Date, but for financial reporting purpose, a nominal value of HK$1 is proposed. See Exhibit I of this report for the breakdown of Tangible Assets valuations.

LIMITING CONDITIONS

This report is provided strictly for the sole use of the Instructing Party. Neither the whole nor any part of this report or any reference made hereto may be included in any published documents, circular or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent to the publication of this report in the circular for the Company’s shareholders’ references purpose.

Our opinion of value in this report is valid only for the stated purpose at the Valuation Date. We or our personnel shall not be required to give testimony or attendance in court or to any government agency by reason of this report, and we accept no responsibility whatsoever to any other person.

No responsibility is taken for changes in market conditions and no obligation is assumed to revise this report to reflect events or change of government policy or financial condition or other conditions, which occur subsequent to the date hereof.

The opinions expressed in this report have been based on the information supplied to us by the Instructing Party or the appointed personnel of the Company. The readers are reminded that any variance on the assumptions adopted in this valuation, the concluded value will be greatly affected. We do not accept responsibility for any errors or omissions in the supplied

– 52 –

VALUATION REPORT

APPENDIX II

information and do not accept any consequential liability arising from commercial decisions or actions resulting from them.

No action or proceedings for any breach of this engagement shall be commenced against us after the expiry of three years from completion of our services.

Our liability for loss or damage shall be limited to such sum as we ought reasonably to pay having regard to our responsibility for the same on the basis that all other consultants and specialists, where appointed, shall be deemed to have provided to the Instructing Party contractual undertakings in respect of their services and shall be deemed to have paid to the Instructing Party such contribution as may be appropriate having regard to the extent of their responsibility for such loss or damage.

Our liability for any loss or damage arising out of the action or proceedings aforesaid shall, notwithstanding the preceding provisions, in any event be limited to a sum not exceeding the charges paid to us for the portion of services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, loss of profits, opportunity cost etc.), even if it has been advised of their possible existence. For the avoidance of doubt our liability shall never exceed the lower of the sum calculated in accordance with the preceding provisions and the sum provided for in this clause.

The Instructing Party and/or the Company are required to indemnify and hold us and our personnel harmless from any claims, liabilities, costs and expenses (including, without limitation, attorney’s fees and the time of our personnel involved) brought against, paid or incurred by us at a time and in any way based on the information made available in connection with our engagement except to the extent that any such losses, expenses, damages or liabilities are ultimately determined to be the result of gross negligence, misconduct, willful default or fraud of our engagement team in conducting its work. This provision shall survive even after the termination of this engagement for any reason.

STATEMENTS

Our valuation is based on generally accepted appraisal procedures and practices that rely extensively on assumptions and considerations, not all of which can be easily quantified or ascertained exactly. While we have exercised our professional judgement in arriving at the appraisal, the readers are urged to consider carefully the nature of such assumptions which are disclosed in our report and should exercise caution in interpreting our report.

Our valuation is prepared in line with the reporting guidelines as contained in the various valuation standards. The valuation has been undertaken by us, acting as external valuer, qualified for the purpose of the valuation.

We retain a copy of this valuation report together with the data provided by the Instructing Party for this assignment, and these data and documents will, according to the Laws of Hong Kong, be kept for a period of 6 years from the date it provided to us and to be destroyed thereafter. We considered these records confidential, and we do not permit access to them by anyone, with the exception for law enforcement authorities or court order, without the Instructing Party’s authorisation and prior arrangement made with us. Moreover, we will add the Company’s information into our client list for our future reference.

– 53 –

VALUATION REPORT

APPENDIX II

We hereby certify that the fee for this service is not contingent upon our conclusion of value and we have no significant interest in the Appraised Asset, the Target Group or the value reported.

Yours faithfully, For and on behalf of

LCH (Asia-Pacific) Surveyors Limited

Elsa Ng Hung Mui BSc MSc RPS(GP)

Executive Director

Contributing Valuers:

Ivan Chan Chun Ting BSc Kenneth Ching Chuen Yin BSc

Ms Elsa Ng Hung Mui obtained a Master Degree of Science in Finance in 2003. At present, she is a Fellow of the HKIS and a valuer on the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the HKIS (the Hong Kong Institute of Surveyors).

EXHIBIT I

		Valuation
	Book Value	Amount
	(in HK$’000)	(in HK$’000)	Note
Tangible Assets	279,332	292,157
Real Estate Related
Undeveloped Land	71,000	73,876	2
— Land Use Rights		65,892
— Apportionment of tax to the Land		7,984	1
Use Rights
Development (Phase 1)	207,016	216,965	2
Non-real Estate Related Assets	1,316	1,316	1
Notes:

(1) Book value

(2) Valuer’s valuation, adopted exchange rate HK$:RMB — 1.1808

– 54 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Directors’ interests in the Company

At the Latest Practicable Date, the interests and short positions of the Directors or the chief executives of the Company in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) or were required, pursuant to Section 352 of the SFO, to be entered on the register maintained by the Company referred to therein, or which were required, pursuant to Part XV of the SFO or the Model Code for Securities Transactions by Directors of Listed Issuers (the ‘‘Model Code’’) contained in the Listing Rules, to be notified to the Company and the Stock Exchange, were as follows:

			Approximate
			percentage
			of the issued
			share capital
			of the
			Company as
			at the Latest
		Number of	Practicable
Name	Capacity	shares held	Date
Mr. Huang	Interest in controlled	327,242,688	54.54%
	corporation (note)
Chan Hung Kwong Patrick	Beneficial owner	33,031,758	5.51%
Au Wai Shing	Beneficial owner	26,847,366	4.47%
Tang Wai Shan	Beneficial owner	15,428,853	2.57%

Note: Mr. Huang’s interest in 327,242,688 Shares is held through Sky Halo Holdings Limited which is wholly-owned by Mr. Huang.

– 55 –

GENERAL INFORMATION

APPENDIX III

The following is a list of the Directors who, as at the Latest Practicable Date, were also directors or employees of a company which has an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO:

				Approximate
				percentage
				of the issued
				share capital
				of the
			Number of	Company as
		Capacity of	shares held	at the Latest
		Director in	by the	Practicable
Name of Director	Name of Shareholder	Shareholder	Shareholder	Date
Mr. Huang	Sky Halo Holdings	director	327,242,688	54.54%
	Limited

3. SERVICE CONTRACTS

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

4. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors are aware of, none of the Directors nor their respective close associates had any interest in any business which competes or is likely to compete, or is in conflict or is likely to be in conflict, either directly or indirectly, with the business of Group.

5. OTHER INTERESTS OF THE DIRECTORS

As at the Latest Practicable Date:

(a) none of the Directors had any interest, either direct or indirect, in any assets which have, since 31 December 2015 (being the date to which the latest published audited accounts of the Group were made up), been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group; and
(b) none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group which is subsisting as at the date of this circular and is significant in relation to the business of the Group.

– 56 –

GENERAL INFORMATION

APPENDIX III

6. LITIGATION

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

7. MATERIAL CONTRACTS

As at the Latest Practicable Date, the following material contracts (not being contracts entered into in the ordinary course of business) have been entered into by the members of the Group within the two years immediately preceding the issue of this circular:

(a) the facility agreement dated 29 January 2015 made among various banks as lenders, the Target as borrower, the Company and its various subsidiaries as guarantors for the loan facility of HK$300 million;
(b) the confirmations of successful bidding at the listing-for-sale dated 25 March 2015 made between Xinmi Real Estate Service Centre and Speedy Global Development Limited in respect of three pieces of land at Xinmi City for total consideration of RMB75,682,350;
(c) the state construction land use rights grant contracts dated 1 April 2015 in respect of the three pieces of land at Xinmi City;
(d) the construction contract dated 27 July 2015 made between the PRC Subsidiary and Henan Qijian Construction Group Co. Ltd. for a contract price of approximately RMB130.84 million;
(e) subscription agreement dated 7 December 2015 made between the Target, the Company and Dragon Bloom Investments Limited relating to the subscription of 1 share in the Target at the consideration of US$1.00;
(f) the amended and restated facility agreement dated 7 June 2016 made among various banks as lenders, the Target as borrower, the Company and its various subsidiaries as guarantors for the loan facility of HK$300 million; and
(g) the Agreement.

– 57 –

GENERAL INFORMATION

APPENDIX III

8. EXPERT AND CONSENT

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

Name Qualification

Amasse Capital Limited Licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the SFO

LCH (Asia-Pacific) Surveyors Independent professional valuer Limited

As at the Latest Practicable Date, Amasse Capital Limited and LCH (Asia-Pacific) Surveyors Limited had no beneficial interest in the share capital of any member of the Group nor any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group or have any interest, either directly or indirectly, in any assets which have been, since 31 December 2015, being the date to which the latest published audited consolidated accounts of the Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

Amasse Capital Limited and LCH (Asia-Pacific) Surveyors Limited have given and have not withdrawn their written letters of consent to the issue of this circular with the inclusion herein of references to their names in the form and context in which they appear.

9. GENERAL

(a) The company secretary of the Company is Mr. Cheung Kai Yiu. He is a member of the Hong Kong Institute of Certified Public Accountants.
(b) The registered office of the Company is located at Scotia Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman KY1-1112, Cayman Islands.
(c) The principal place of business of the Company is Nanmian Industrial District, Xiagang Village, Changan Town, Dongguan, PRC.
(d) The Hong Kong branch share registrar and transfer of the Company is Tricor Investor Services Limited of Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(e) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

– 58 –

GENERAL INFORMATION

APPENDIX III

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours (i.e. from 9:30 a.m. to 5:00 p.m. on Monday to Friday except public holidays) on any Business Day at the place of business in Hong Kong of the Company at Flat B, 13/F, Wing Chai Industrial Building, 27-29 Ng Fong Street, San Po Kong, Kowloon, Hong Kong for 14 days from the date of this circular:

(a) the memorandum and articles of association of the Company;
(b) the material contracts referred to in the paragraph headed ‘‘Material Contracts’’ in this appendix;
(c) the annual reports of the Company for the year ended 31 December 2013, 31 December 2014 and 31 December 2015 respectively; and
(d) the Company’s circular dated 30 April 2015 and 24 August 2015.

– 59 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [282 x 43] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability) (Stock code: 540)

NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting of Speedy Global Holdings Limited (the ‘‘Company’’) will be held at 4/F, Pentahotel Hong Kong, Kowloon, 19 Luk Hop Street, San Po Kong, Kowloon, Hong Kong on 5 September 2016 (Monday) at 11:00 a.m. to consider and, if thought fit, to pass with or without amendments, the following resolution(s):

ORDINARY RESOLUTION

‘‘THAT

(a) the conditional Agreement as defined in the circular dated 19 August 2016 despatched to the shareholders of the Company (the ‘‘Circular’’), a copy of the Agreement has been produced to this meeting marked ‘‘A’’ and signed by the chairman hereof for the purpose of identification, and all the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(b) any one director of the Company be and is hereby authorised to do all such acts and things as he in his sole and absolute discretion deems necessary, desirable or expedient to implement, give effect to and/or complete the Agreement and the transactions contemplated thereunder and, where required, any amendment of the terms of the Agreement as required by, or for the purposes of obtaining the approval of, relevant authorities or to comply with all applicable laws, rules and regulations.’’

By Order of the Board Speedy Global Holdings Limited Huang Chih Shen

Chairman and Chief Executive Officer

Hong Kong, 19 August 2016

Notes:

A member entitled to attend and vote at the meeting shall be entitled to appoint another person as his proxy to attend and, on a poll, vote in his stead. A member who is the holder of two or more Shares may appoint more than one proxy to represent him and, on a poll, vote on his behalf. A proxy need not be a member of the Company.
In order to be valid, a proxy form together with any power of attorney or other authority (if any) under which it is signed or a certified copy of that power or authority, must be deposited at the share registrar of the Company in Hong Kong, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time for holding the meeting or any adjournment thereof.
Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the meeting, and in such event the instrument appointing a proxy shall be deemed to be revoked.

– 60 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

As at the date of this notice, the executive Directors of the Company are Mr. Huang Chih Shen, Mr. Chan Hung Kwong, Patrick, Ms. Tang Wai Shan, Mr. Au Wai Shing; the independent non-executive Directors are Mr. Wong Ting Kon, Ms. Pang Yuen Shan, Christina, Mr. Chang Cheuk Cheung, Terence and Dr. Chan Chung Bun, Bunny.

– 61 –

AI assistant

Speedy Global Holdings Limited — Proxy Solicitation & Information Statement 2016

49282_rns_2016-08-18_4a4d3d00-b9a3-4954-ad37-d32aa0fe8c92.pdf

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED AND NOTICE OF EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

(Incorporated in the Cayman Islands with limited liability) (Stock code: 540)

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

THE AGREEMENT

Date:

Parties:

Asset to be disposed

Consideration

Basis of Consideration

Conditions precedent

Completion

INFORMATION ON THE TARGET GROUP

The Target

Speedy Global Clothing

Speedy Global Industrial

Speedy Global Creation

Speedy Global Capital

Speedy Global (HK)

PRC Subsidiary

REASONS FOR THE DISPOSAL

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE DISPOSAL

LISTING RULES IMPLICATIONS

EGM

RECOMMENDATIONS

ADDITIONAL INFORMATION

To the Independent Shareholders

Dear Sir/Madam,

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

MAJOR AND CONNECTED TRANSACTION DISPOSAL OF SPEEDY GLOBAL DEVELOPMENT LIMITED

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS TAKEN INTO CONSIDERATION

1. Information on the Group and the Target Group

1.1 Information on the Group

1.2 Information on the Target Group

2. Reasons for the Disposal

Industrial Added Value in Henan Province

Manufacturing Purchasing Managers’ Index in the PRC

3. Principal Terms of the Agreement

Date

Parties

Assets to be disposed of

Consideration

Basis of the Consideration

4. The valuation report of the Target Group

5. Possible financial effects of the Disposal

5.1 Net asset value

5.2 Earnings

5.3 Gearing ratio

RECOMMENDATION

STATEMENT OF INDEBTEDNESS

Indebtedness

Working Capital

Material Adverse Change

Financial And Trading Prospect Of The Group

利駿行測量師有限公司

INSTRUCTIONS

THE TARGET GROUP’S PROFILE

VALUATION REPORT

VALUATION PROCEDURES ADOPTED

THE BASIS OF VALUATION AND ASSUMPTIONS

FACTORS CONSIDERED IN THE VALUATION

APPROACH TO VALUE

The Income Approach

The Market Approach

The Asset-based Approach

VALUATION ANALYSIS

Monetary Assets and Liabilities

Tangible Assets — Real estate related (Property under Development)

Speedy Global Holdings Limited Proxy Solicitation & Information Statement 2016