Ta Yang Group Holdings Limited — Proxy Solicitation & Information Statement 2016

Aug 12, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR 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 a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Ta Yang Group Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or the 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.

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TA YANG GROUP HOLDINGS LIMITED 大 洋 集 團 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1991)

MAJOR TRANSACTION ACQUISITION OF PROPERTIES

Financial adviser

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A letter from the Board is set out on pages 4 to 13 of this circular.

12 August 2016

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
APPENDIX I	— FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	14
APPENDIX II	— UNAUDITED PRO FORMA STATEMENT OF ASSETS AND
	LIABILITIES OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX III	— PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
APPENDIX IV	— GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33

– i –

DEFINITIONS

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

• ‘‘Acquisition’’

the proposed acquisition of the entire interest in the Target Properties by the Purchaser from the Vendor as contemplated under the Sale and Purchase Agreement

• ‘‘Board’’ board of Directors

• ‘‘Business Days’’

• a day (other than a Saturday, a Sunday, a public holiday and a day on which a tropical cyclone warning signal no. 8 or above or a ‘‘black rainstorm warning signal’’ is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which banks are open for banking business in Hong Kong

• ‘‘COFCO Group’’ China National Cereals, Oils and Foodstuffs Corporation, a PRC state owned enterprise

• ‘‘Company’’

• Ta Yang Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on the main board of the Stock Exchange

• ‘‘Completion’’ completion of the Acquisition

• ‘‘Completion Date’’ the date of Completion

• ‘‘Conditions Precedent’’

• the conditions precedent set out in the Sale and Purchase Agreement, details of which are set out in the subsection headed ‘‘Conditions Precedent’’ in this circular

• ‘‘Consideration’’

• the total consideration payable by the Company for the Acquisition

• ‘‘Director(s)’’ the director(s) of the Company

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘HK$’’

• Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Third Party(ies)’’

• third party independent of and not connected with the Company and its connected persons

• ‘‘Latest Practicable Date’’

• 9 August 2016, being latest practicable date prior to the despatch of this circular for the purpose of ascertaining certain information contained herein

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DEFINITIONS

‘‘Listing Rules’’	the Rules Governing the Listing of Securities on The Stock	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
‘‘MOU’’	memorandum of understanding entered into by	the
	Company and the Vendor on 4 June 2016 in relation to	the
	Acquisition
‘‘PRC’’	The People’s Republic of China
‘‘Purchaser’’	the Company
‘‘Real Estate Sales Contract(s)’’	the sale contract(s) to be entered into by the Purchaser	and
	the Vendor for each unit of the Target Properties, which
	will be submitted to PRC government authorities	for
	approval of transfer of ownership
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘Sale and Purchase Agreement’’	the sale and purchase agreement entered into by	the
	Purchaser and the Vendor on 20 June 2016 (after trading
	hours) in relation to the Acquisition
‘‘SFC’’	the Securities and Futures Commission in Hong Kong
‘‘SFO’’	the Securities and Futures Ordinance (Chapter 571 of	the
	Laws of Hong Kong)
‘‘SGM’’	the special general meeting of the Company to be convened
	by the Company to consider and approve the Sale	and
	Purchase Agreement and the transactions contemplated
	thereunder
‘‘Share(s)’’	share(s) of HK$0.10 each in the share capital of	the
	Company
‘‘Shareholder(s)’’	holder(s) of the Shares of the Company
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘Target Properties’’	building 1, 2, 3 and 5 on Longxi Road, Yalong Bay, Sanya
	City, Hainan Province, PRC, wholly owned by the Vendor
‘‘Valuer’’	Greater China Appraisal Limited, an independent
	professional valuer

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DEFINITIONS

‘‘Vendor’’ Sanya Hongxia Development and Construction Limited (三 亞虹霞開發建設有限公司), a company incorporated in the PRC with limited liability which is indirect non whollyowned by the COFCO Group ‘‘%’’ per cent.

For illustrative purpose of this circular and unless otherwise specified, conversion of RMB into HK$ is based on the exchange rate of RMB1.00 = HK$1.18.

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

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LETTER FROM THE BOARD

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TA YANG GROUP HOLDINGS LIMITED 大 洋 集 團 控 股 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1991)

Executive Directors Ms. Shi Qi Ms. Xu Chendi Mr. Qiu Yonghao Mr. Huang Te-Wei

Non-Executive Directors Mr. Gao Feng Mr. Han Lei Independent Non-Executive Directors Ms. Zhang Lijuan Mr. Yeung Chi Tat Mr. Pak Wai Keung, Martin

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

Principal Place of Business In Hong Kong: Flat 28, 23rd Floor Metro Centre II 21 Lam Hing Street Kowloon Bay, Kowloon Hong Kong

12 August 2016

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION ACQUISITION OF PROPERTIES

INTRODUCTION

The Company announced that on 20 June 2016 (after trading hours), the Company and the Vendor entered into the Sale and Purchase Agreement, pursuant to which the Vendor has agreed to sell, and the Company has agreed to acquire the entire interest in the Target Properties for the total Consideration of approximately RMB357,488,000 (equivalent to approximately HK$421,836,000).

The purpose of this circular is to give you further information regarding: (i) details of the Sale and Purchase Agreement; (ii) unaudited pro forma statement of assets and liabilities of the Group; (iii) report in respect of the valuation of the Target Properties; and (iv) other information as required under the Listing Rules.

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LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT

Date : 20 June 2016 (after trading hours) Parties : (1) the Company as the Purchaser; and

• (2) Sanya Hongxia Development and Construction Limited (三亞虹霞開 發建設有限公司) as the Vendor.

The Vendor is a company incorporated in the PRC with limited liability and its principal activity is properties development. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Vendor and its ultimate beneficial owners are Independent Third Parties.

Assets to be Acquired

The entire interest in the Target Properties, which consists of four hotel buildings with an aggregate of 194 rooms, and a total gross floor area of approximately 16,627.23 square meters.

The Target Properties are located at Sanya Yalong Bay National Resort District, Sanya City, Hainan Province, PRC, a multipurpose leisure project consisting hotels, convention center, villas, bungalows and other ancillary facilities.

Consideration

The Consideration for the Acquisition is approximately RMB357,488,000 (equivalent to approximately HK$421,836,000), which is based on the unit cost for the Target Properties of RMB21,500 per square meter. The Consideration is payable in cash, which shall be satisfied by the Company in the following manner:

1. An initial deposit of RMB20,000,000 (equivalent to approximately HK$23,600,000), has been paid by the Company to the Vendor upon the signing of the MOU;

2. A further RMB15,749,000 (equivalent to approximately HK$18,584,000) has been paid by the Company to the Vendor on 1 July 2016, after signing of the Sale and Purchase Agreement; and

3. The remaining balance of RMB321,739,000 (equivalent to approximately HK$379,652,000), shall be payable by the Company within 45 Business Days upon signing of the Sale and Purchase Agreement.

The total Consideration shall be finalised in accordance with the total gross floor area as stated on the ownership certificates of the Target Properties to be obtained and shall be adjusted accordingly.

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LETTER FROM THE BOARD

The Consideration was determined after arm’s length negotiations between the Company and the Vendor with reference to, among others, the prevailing market price of properties similar to the Target Properties of nearby areas and preliminary valuation report from an independent professional valuer engaged by the Company.

According to the valuation report issued by the Valuer, the value of the Target Properties is RMB368,000,000 (equivalent to approximately HK$434,240,000) as at 15 June 2016. The valuation report is set out in Appendix III to this circular.

The Directors consider that the Consideration is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

Source of Funding

The Company intends to finance the Consideration as to (i) approximately RMB214,493,000 (equivalent to approximately HK$253,102,000) by means of bank loan; (ii) approximately RMB65,534,000 (equivalent to approximately HK$77,330,000) by means of equity financing, including but not limited to placing of new Shares; and (iii) the remaining balance of the Consideration by internal resources of the Group.

As at the Latest Practicable Date (i) the Company is in the process of obtaining application approval from a bank in the PRC for the proposed loan for the Target Properties, the Company expects to obtain the application approval by mid-August 2016; and (ii) the Company is in discussion with potential investors for the proposed placing of new Shares and the indications from the potential investors have been positive. The Company expects to complete the proposed placing of new Shares around mid-August 2016.

In the event that the Company is not able to secure funding from one or more sources mentioned above, the Company will consider other fund raising activities, including but not limited to shareholders loan, which if required, will be non-secured and on normal commercial terms.

Conditions Precedent

Completion is conditional upon the satisfaction of the following conditions:

• (a) the Target Properties had not been leased and no leasing agreement was entered into with any other third party, and no claim having been filed by other third party regarding the leasing of Target Properties;

• (b) all necessary approvals, permits, consents and authorizations (including but not limited to approvals from the Stock Exchange and the SFC) in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder having been obtained;

• (c) the Board and Shareholders having approved the Sale and Purchase Agreement and the transactions contemplated thereunder in accordance with the articles of associations of the Company, relevant laws, regulations and the Listing Rules;

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LETTER FROM THE BOARD

• (d) the Vendor has obtained (if necessary) all necessary approvals from third party or authorities confirmation, exemption or consent for the Sale and Purchase Agreement and the transactions contemplated thereunder;

• (e) the Vendor has fulfilled its obligations specified under ‘‘6. Transfer of ownership of the Target Properties’’ in the Sale and Purchase Agreement, which includes, inter alia, (i) the Vendor shall allow the Company to start renovation and preparation work of the Target Properties and assist the Company to obtain all the approvals in accordance with the laws and regulations of the PRC; (ii) the Vendor shall deliver the Target Properties within 5 Business Days after the Purchaser has satisfied the Consideration in full and that the Vendor warrants the Target Properties to be delivered will satisfy the deliver conditions as stated in the Sale and Purchase Agreement; (iii) the delivery of the Target Properties and its relevant documents, and transfer of ownership registration shall be based on the Real Estate Sales Contracts and laws and regulations of the PRC, and that any tax raised thereof shall be borne by respective parties; and (iv) entering into of the Real Estate Sales Contracts effecting the transfer of the Target Properties; and

• (f) the warranties given by the Vendor remaining true, accurate and not misleading in all material respects upon the Completion Date.

Conditions (e) and (f) above may be waived by the Purchaser. The Vendor shall use its best endeavors to fulfill conditions (d), (e) and (f) and the Purchaser shall use its best endeavors to fulfill condition (b). As at the Latest Practicable Date, the Purchaser has no intention to waive condition (e).

As at the Latest Practicable Date, save for condition (c) which has been satisfied, none of the conditions above has been satisfied or waived.

Except for condition (b), if any condition above has not been fulfilled or waived on or before the Completion Date, the Purchaser will not be obligated to complete the Acquisition. If condition (b) has not been fulfilled within 45 Business Days after the signing of the Sale and Purchase Agreement, the Sale and Purchase Agreement shall lapse and all sums made by the Purchaser to the Vendor in respect of the Acquisition shall be refunded.

Undertaking, Warranties and Indemnity

The Vendor has given customary warranties to the Purchaser under the Sale and Purchase Agreement.

In respect of the Vendor, including but not limited to, its legality and the follow:

• (a) the Vendor is the beneficial owner of the Target Properties.

• (b) there shall be no option and/or agreement to increase the registered share capital of the Vendor and the Vendor shall not grant any rights to third party to set any mortgage, charge, pledge, lien or other security right to the Target Properties.

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LETTER FROM THE BOARD

• (c) prior to Completion, the Vendor shall not conduct any of the followings without consent from the Purchaser: (i) conduct, permit or procure any actions that may breach the warranties and undertakings made by the Vendor; (ii) sell or transfer any interest in the Target Properties; (iii) allow any liens, charges, options, pre-emption or other encumbrances or third party rights to be imposed to the Target Properties; (iv) enter into any agreement regarding the Target Properties which is outside of its ordinary course of business; (v) enter into any cooperation agreement or joint venture agreement with regards of the Target Properties; and (vi) enter into any material investment or any other agreements that may lead to liabilities to be borne by the Vendor.

In respect of the Target Properties, including but not limited to, the follow:

• (a) all information regarding the Target Properties, including but not limited to, the Vendor’s ownership of and rights to occupy the Target Properties as stated in the Sale and Purchase Agreement are true, accurate and not misleading.

• (b) the Vendor has exclusive rights to own and occupy the Target Properties. The Target Properties are free from any encumbrances and the Purchaser shall not be responsible to any liability or guarantee made with regard to the Target Properties prior to Completion.

• (c) there shall be no claim, dispute, notices, orders or litigation which may affect the Target Properties.

• (d) the Target Properties are in compliance with all practicable laws and regulations regarding real estate quality and maintenance in the PRC.

• (e) the Vendor is the beneficial owner of the Target Properties, and has the right to sell and transfer all its interest in the Target Properties.

• (f) there shall be no guarantee, limitation, regulation, clause and any other factors that may have adverse effect on the Target Properties.

• (g) the Vendor has disclosed to the Purchaser, all potential risk identified under the Sale and Purchase Agreement.

In the event that any of the warranties given by the Vendor to the Purchaser is false, misleading or not materialized prior to Completion, the Purchaser shall not be obligated to complete the Acquisition and be released from rights and obligation under the Sale and Purchase Agreement and the Vendor shall compensate all losses incurred by the Purchaser.

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LETTER FROM THE BOARD

The Purchaser has also given customary warranties to the Vendor under the Sale and Purchase Agreement, including but not limited to, the follow:

• (a) the Purchaser shall obtain all necessary approvals and permits required under practicable laws and regulations for the Completion to take place.

• (b) the Purchaser shall bear all expenses, responsibilities, risk and loss in relation to the Target Properties immediately upon Completion.

• (c) the Purchaser shall not enter into any agreement that will constitute any conflict to the Sale and Purchase Agreement.

Completion

Completion shall take place after (i) all the Conditions Precedent have been satisfied or waived (as the case may be); (ii) entering into of the Real Estate Sales Contracts for the Target Properties; (iii) satisfying of rights and obligations under the laws and regulations of the PRC by both parties; and (iv) obtaining of the ownership certificates of the Target Properties.

Event of Delay or Default

In the event that delivery by the Vendor has been delayed, it shall pay the Purchaser a compensation of 0.03% of all sums paid by the Purchaser for each overdue day. If the delivery has been delayed for over 10 Business Days, the Purchaser can (i) request of an immediate delivery of the Target Properties plus a compensation of 0.03% of all sums paid by the Purchaser for each overdue day; or (ii) terminate the Sale and Purchase Agreement, where all sums paid by the Purchaser (without interest) shall be refunded to the Purchaser plus a compensation of RMB20,000,000 (equivalent to approximately HK$23,600,000) shall be paid by the Vendor (if the aforementioned compensation does not cover all the losses of the Purchaser, the Vendor shall also cover all the remaining losses).

In the event that payment by the Purchaser has been delayed, it shall pay the Vendor a compensation of 0.03% of the Consideration not yet paid for each overdue day. If the delivery has been delayed for over 10 Business Days, the Vendor can (i) request of an immediate payment of the remaining Consideration plus a compensation of 0.03% of the Consideration not yet paid for each overdue day; or (ii) terminate the Sale and Purchase Agreement, where all sums paid by the Purchaser (without interest) shall be refunded to the Purchaser plus a compensation of RMB20,000,000 (equivalent to approximately HK$23,600,000) shall be paid by the Purchaser (if the aforementioned compensation does not cover all the losses of the Vendor, the Purchaser, shall also cover all the remaining losses).

INFORMATION OF THE VENDOR

The Vendor is a property development company incorporated in the PRC with limited liability and directly holds the entire interest in the Target Properties. The Vendor is an indirect non wholly-owned subsidiary of Joy City Property Limited (00207.HK), which in turn is non wholly-owned by COFCO Group, who is a leading supplier of agri-products, diversified foodstuffs and services in the PRC. COFCO Group is the controlling shareholder of four other

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LETTER FROM THE BOARD

listed companies in Hong Kong, namely, China Foods Limited (00506.HK), China AgriIndustries Holdings Limited (00606.HK), Mengniu Dairy (02319.HK), CPMC Holdings Limited (00906.HK) and three listed companies in mainland China, namely, COFCO Tunhe Co., Ltd. (600737.SH), Jiugui Liquor Co., Ltd. (000799.SZ) and COFCO Property (Group) Co., Ltd. (000031.SZ).

REASONS FOR AND BENEFITS OF THE POSSIBLE ACQUISITION

As at the Latest Practicable Date, the Group is principally engaged in designing and manufacturing of silicone rubber input devices, mainly used in consumer electronic devices, keypads for computers and notebooks, mobile phone handsets and automotive peripheral products.

Pursuant to the composite document of the Company dated 6 April 2016, the controlling Shareholder intends to conduct a detailed review of the operations and business activities of the Group and formulate business strategies for the Group’s long-term development and will explore other business opportunities for the Group, including the feasibility of diversifying the income stream of the Group into different business areas such as, without limitation to, medical and healthcare industry.

The Directors consider that the Acquisition represents an attractive investment opportunity for the Group to enter into the medical and healthcare business, which has a substantial growth potential. The Company plans to develop the Target Properties into a high-end healthcare holiday resort, providing a one-stop shop for medical and healthcare-related services with world-class technologies. The Company also plans to introduce timeshare concept for the rest of the hotel units, operating them as high-end serviced apartments. It will be leveraging on the adjacent international exhibition center for hosting healthcare related forums and conferences, as well as members’ social events.

It is the intention of the Company that approximately 50% of the Target Properties will be developed into hotel rooms/service apartments for rental, 30% will be developed into high-end residential (apartments) for sales and 20% will be developed for healthcare-related business, such as health check-ups, early intervention treatments of chronic diseases, functional medical treatments and Chinese medicine diagnosis and treatments, etc.

The Company intends to make further improvements of approximately HK$14.8 million on the Target Properties in financial year 2016 to 2017 as follows:

1. Hotel rooms/Service apartments

Decoration of the hotel rooms/service apartments are completed.

First stage development of the Target Properties is intended to be the hotel rooms/ service apartments. The Company will carry out certain leasehold improvements and estimates that it will invest about HK$7.7 million on furniture, electronic appliances, airconditioning etc. which would enable hotel rooms/service apartments to start generating rental income in first quarter of 2017.

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LETTER FROM THE BOARD

2. High-end residential (apartments)

Upon completion of the Acquisition, the Company intends to commence selling about 30% of the Target Properties to the market as high-end residential (apartments). About 10% of the Target Properties is expected to be sold in the third and fourth quarter of 2016, it is a target that the apartments sale will generate a revenue of approximately HK$18.4 million, which covers all of the HK$14.8 million estimated further improvements on hotel rooms/service apartments and healthcare services.

3. Healthcare Services

Second stage development of the Target Properties is intended for medical related services, such as health check-ups, early intervention treatments of chronic diseases, functional medical treatments and Chinese medicine diagnosis and treatments, etc. The Company plans to invest about HK$7.1 million on refurbishments and equipment in fourth quarter in 2016.

The Company will only consider further expansion or acquisition of further medical equipment for the healthcare services, if the proceeds generated from the rental of hotel rooms/service apartments and the sale of high-end residential apartments, as described above, are satisfactory.

• Note: The above are only estimates and not authorized or committed amount, with an intention to provide Shareholders a perspective of the intention only.

It is expected that the Target Properties will generate profits from (i) rental income of hotel rooms/service apartments rental; (ii) sale proceeds of high-end residential (apartments) sales; and (iii) service income from healthcare services, and shall generate adequate cashflow to cover any additional capital expenditure, interest and repayment of the bank loan.

In addition, on 11 July 2016, the Company has entered into a memorandum of understanding with an independent third party, pursuant to which the Company and the third party expressed an intention for cooperation, including but not limited to the possible acquisition of 51% equity interest in Hainan Yiling Hospital Limited, a company principally engaged in the operation and management of a wholly-owned hospital in Chengmai County, Hainan Province, PRC and 51% equity interest in Zechengtang (Beijing) Medical Research Institution, a collectively-owned enterprise principally engaged in provision of online medical services, specialising in providing medical and cosmetic and beauty related services through ‘‘Yiling Medical Cloud Platform (一齡雲平台)’’. The Directors consider that the possible acquisition, if materialise, will improve the utilisation rate of the Target Properties, while the healthcare management and medical service provision business of the target companies shall create synergies with the proposed healthcare services that the Group intends to develop at the Target Properties. As at the Latest Practicable Date, the Company has not entered into any formal agreement and has no concrete development plan in relation to the possible acquisition.

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LETTER FROM THE BOARD

The Board believes that the Acquisition would conform to the current trend of domestic economic development and have a positive impact on the Company’s future business development. In addition, the Acquisition would enable the Company to enter into the real estate and tourism industries in Sanya Yalong Bay, which is believed to continue to grow as a major tourism destination and in particular, a medical tourism destination.

As certain newly appointed Directors possess extensive experience in real estate investment and development, medical healthcare and leisure related business, the Board is of the view that these Directors will be able to contribute to and proactively supervise the operation of the medical healthcare resort project.

The Board believes that the Acquisition can broaden the Group’s business spectrum and will contribute positively to the Group. Having considered all of the factors above, the Directors are of the view that the Acquisition is beneficial and in the best interest of the Company and Shareholders as a whole.

FINANCIAL EFFECT OF THE ACQUISITION

Earnings

Upon Completion, part of the Target Properties would be held for providing hotel and healthcare services and part of it would be held for sale to generate income for the Group and is expected to contribute a positive financial effect on earnings after Completion.

Assets and Liabilities

The Target Properties will be held as property, plant and equipment, prepaid lease payments and properties for sale in the Group after Completion. Upon Completion, the total assets of the Group are expected to increase by approximately RMB357,488,000 (equivalent to approximately HK$421,836,000), representing the sum of the Consideration. On the other hand, the net assets value of the Group is expected to increase by approximately RMB65,534,000 (equivalent to approximately HK$77,330,000), representing the sum of the Consideration less the decrease in cash balances of the Group, increase in bank borrowings and proceeds of proposed placing of new Shares. The increase in net assets value is subject to the completion of the proposed placing of new Shares.

LISTING RULES IMPLICATIONS

As applicable percentage ratios of the Acquisition are more than 25%, the Acquisition constitutes a major transaction for the Company under the Listing Rules and is therefore subject to Shareholders’ approval requirement under Chapter 14 of the Listing Rules.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, as at the Latest Practicable Date, no Shareholder and any of their respective associates have any material interest in the Sale and Purchase Agreement and is required to abstain from voting on the resolution to approve the Sale and Purchase Agreement and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

None of the Directors has a material interest in the Sale and Purchase Agreement and the transactions contemplated thereunder or was required to abstain from voting on the Board resolutions for considering and approving the same.

In accordance with Rule 14.44 of the Listing Rules, in lieu of an approval from the Shareholder at general meeting of the Company, the Company has sought and obtained a written approval in respect of the Acquisition, from Lyton Maison Limited, which holds 436,540,400 Shares, representing 55.63% of the issued share capital of the Company as at the Latest Practicable Date. As no Shareholder is required to abstain from voting, therefore no general meeting will be convened for the purpose of approving the Acquisition as permitted under Rule 14.44 of the Listing Rules.

ADDITIONAL INFORMATION

Your attention is drawn to the financial information of the Group, unaudited pro forma statement of assets and liabilities of the Group, the valuation report of the Target Properties and other general information set out in the appendices to this circular.

Yours faithfully, On behalf of the Board TA YANG GROUP HOLDINGS LIMITED Shi Qi

Chairman and Chief Executive Officer

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

Financial information of the Group for each of the three financial years ended 31 July 2013, 2014 and 2015 are disclosed in the following documents which have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.irasia.com/ listco/hk/tayang):

• (i) annual report of the Company for the year ended 31 July 2013 published on 8 November 2013 (pages 101 to 211);

• (ii) annual report of the Company for the year ended 31 July 2014 published on 12 November 2014 (pages 97 to 207); and

• (iii) annual report of the Company for the year ended 31 July 2015 published on 11 November 2015 (pages 95 to 211).

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 30 June 2016, being the latest practicable date for the purpose of this statement of indebtedness prior to printing of this circular the indebtedness of the Group is as follows:

(i) Bank borrowings

The Group’s bank borrowings of approximately HK$33,282,000 were secured by the Group’s land and buildings located in Hong Kong under medium-term lease with carrying value of approximately HK$7,894,000 and a fixed deposit of approximately HK$41,340,000.

(ii) Contingent Liabilities

The Group did not have any contingent liabilities.

Save as aforesaid or as otherwise disclosed herein, at the close of business on 30 June 2016, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, and term loans (secured, unsecured, guaranteed or not), bank overdrafts, loans or other similar indebtedness, liabilities under acceptance (other than normal trade bills), acceptable credits, hire purchase commitments, mortgages, charges, guarantees or other material contingent liabilities.

The directors of the Company confirmed that, save as disclosed above, there had not been any material changes to the indebtedness and contingent liabilities since 30 June 2016 and up to the Latest Practicable Date.

3. WORKING CAPITAL OF THE GROUP

The Directors expect that the total Consideration of approximately RMB357,488,000 (equivalent to approximately HK$421,836,000) of the Acquisition will be settled (i) as to RMB65,534,000 (equivalent to approximately HK$77,330,000) by the net proceeds from equity

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

fund raising, including but not limited to placing of new Shares; (ii) as to RMB214,493,000 (equivalent to approximately HK$253,102,000) by way of bank borrowings from a bank in the PRC; and (iii) the balance to be financed by internal resources of the Group.

In determining the sufficiency of the working capital of the Group, the Directors have made assumptions that (i) all of the RMB65,534,000 (equivalent to approximately HK$77,330,000) will be raised in full; (ii) bank borrowings of RMB214,493,000 (equivalent to approximately HK$253,102,000) will be duly obtained from a bank in the PRC; (iii) completion of the Acquisition takes place before 22 August 2016; and (iv) that routine general and administrative expenses of the Group remained the same and consistent with historical pattern.

The Company is also currently in the process of obtaining application approval from a bank in the PRC and banking facilities for the borrowings will be available only if all the conditions specified by the bank are satisfied. Thus, whether the Company can obtain the anticipated bank facilities and the amount of and timing of obtaining the bank borrowings are uncertain up to the Latest Practicable Date.

As at the Latest Practicable Date, the Company is in discussion with potential investors for the placing of new Shares and the indications from the potential investors have been positive. The Directors have included the net proceeds from the placing of new Shares in the working capital forecast based on the management’s best estimate. However, the completion of the placing of new Shares is uncertain up to the Latest Practicable Date.

Should the proceeds from the proposed placing of new Shares and bank borrowings to be obtained from a bank be excluded from the working capital forecasts, the Group will not have sufficient working capital for the Group’s requirement for at least 12 months from the date of publication of this circular.

The Directors are of the opinion that, after taking into account the Group’s business prospects, internal resources and based on the assumptions regarding the financing arrangement for the placing of new Shares and bank borrowings as set out above, the working capital available to the Group is sufficient for the Group’s requirements for at least 12 months from the date of publication of this circular.

4. MATERIAL ADVERSE CHANGE

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

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

As at the Latest Practicable Date, the Group is principally engaged in designing and manufacturing of silicone rubber input devices, mainly used in consumer electronic devices, keypads for computers and notebooks, mobile phone handsets and automotive peripheral products.

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 July 2015, the consolidated turnover of the Group decreased by 8.8% to HK$426,200,000 (2014: HK$467,300,000) while loss attributable to equity Shareholders was HK$159,400,000 (2014: HK$220,400,000).

As stated in annual report of the Company, the business of the Group is affected by the ongoing impact of uncertainties in global economy, especially Europe and the PRC, and will continue to constrain overall customer demand. With consumer sentiment remain weak, the Group is expected to consequently operate in an unfavorable business environment. At the same time, rising costs in the PRC operation will continue to adversely affect the Group’s performance. Although the recent depreciation of RMB can slightly release the pressure of increasing cost, it brings more uncertainties to many manufacturers in the PRC. In order to overcome these, the Group will persist to focus the strategy of driving higher profit margin growth with continuing cost improvement and will put more efforts on research and development to improve the products quality, develop application of raw material and products variety and expand customer base and further co-operate with existing customer to develop non-keypad products.

After the change in control of the Company on 29 February 2016, the controlling Shareholder has conducted a detailed review of the operations and business activities of the Group and formulate business strategies for the Group’s long-term development. While the Group will continue its current business in designing and manufacturing of silicone rubber input devices, it will also explore other business opportunities, including the feasibility of diversifying the income stream of the Group into different business areas such as, without limitation to, medical and healthcare industry.

The Directors consider that the Acquisition represents an attractive investment opportunity as (a) it will earn a stream of rental income from the hotel rooms/service apartments and will benefit from long-term capital gains in the event the Target Properties appreciate in value in the future; (b) it will contribute a positive financial impact on earnings from the sale of high end apartments; and (c) it will provide the Group a platform to enter into the medical and healthcare business, which shall generate recurring income and sustainable growth.

The Board believes that the Acquisition will broaden the income base of the Group, it would also conform to the current trend of domestic economic development and have a positive impact on the Company’s future business development. In addition, the Acquisition would enable the Company to enter into the real estate and tourism industries in Sanya Yalong Bay, which is believed to continue to grow as a major tourism destination, and in particular, a medical tourism destination.

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UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

Introduction

Pursuant to the sale and purchase agreement entered into on 20 June 2016 (the ‘‘Sale and Purchase Agreement’’), Ta Yang Group Holdings Limited (the ‘‘Company’’, together with its subsidiaries collectively referred to as the ‘‘Group’’) proposed to acquire four hotel buildings (the ‘‘Target Properties’’) at the consideration of approximately RMB357,488,000 (equivalent to approximately HK$421,836,000) from Sanya Hongxia Development and Construction Limited (the ‘‘Proposed Acquisition’’).

The unaudited pro forma statement of assets and liabilities has been prepared by the directors of the Company in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (‘‘Listing Rules’’) and on the basis of the notes set out below for the purpose of illustrating the financial impact of the Proposed Acquisition on the unaudited condensed consolidated statement of assets and liabilities of the Group as if the Proposed Acquisition had taken place on 31 January 2016 (the ‘‘Unaudited Pro Forma Statement of Assets and Liabilities’’).

The Unaudited Pro Forma Statement of Assets and Liabilities has been prepared in accordance with the accounting policies of the Group under the Hong Kong Financial Reporting Standards, based on the unaudited condensed consolidated statement of financial position of the Group as at 31 January 2016, on which the interim report of the Group has been published on 20 April 2016, after making pro forma adjustments as summarised in the accompanying notes that are directly attributable to the completion of acquisition of the Target Properties (the ‘‘Closing’’), factually supportable and clearly identified as to those having/not having continuing effect on the Group.

The Unaudited Pro Forma Statement of Assets and Liabilities has been prepared for illustrative purpose only and is based on certain assumptions, estimates, uncertainties and other currently available information. Accordingly, and because of its nature, the Unaudited Pro Forma Statement of Assets and Liabilities may not give a true picture of the financial position of the Group following the Closing. Further, the Unaudited Pro Forma Statement of Assets and Liabilities of the Group does not purport to predict the Group’s future financial position.

The Unaudited Pro Forma Statement of Assets and Liabilities should be read in conjunction with the historical financial information of the Group as set out in Appendix I and other financial information included elsewhere in this circular.

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UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

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

Non-current assets Property, plant and equipment Intangible assets Prepaid lease payments Investment properties Available-for-sale financial assets Interests in joint ventures Interests in associates Deposits for acquisition of land use rights Current assets Properties for sale Inventories Trade and other receivables Prepaid lease payments Amount due from an associate Income tax recoverable Held-to-maturity investments Held-for-trading investments Bank balances and cash	Unaudited condensed consolidated statement of assets and liabilities of the Group as at 31 January 2016 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) 72,812 — 123,640 — — — 7,402 — 169,906 91,499 — — 19,407 — — — — — — — — 12,066 — — 203,186 — — 128,290 52,044 — — 139,577 — — 246 — — 65 — — 513 — — 41,691 — — 6,787 — — 173,249 (91,404) — 414,172	Unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 January 2016 HK$’000 196,452 — 177,308 91,499 19,407 — — 12,066
		496,732
		128,290 52,044 139,577 246 65 513 41,691 6,787 81,845
		451,058

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UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

Current liabilities Trade and other payables Derivative financial instruments Income tax payable Secured bank borrowings Consideration payables — Bank borrowings — Share placing Net current assets (liabilities) Total assets less current liabilities Non-current liabilities Deferred income Deferred tax liabilities Net assets	Unaudited condensed consolidated statement of assets and liabilities of the Group as at 31 January 2016 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) 86,826 — — 21,106 — — 21,185 — — 33,282 — — — 253,102 — — 77,330 — 162,399 251,773 454,959 3,763 — — 8,971 — — 12,734 442,225	Unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 January 2016 HK$’000 86,826 21,106 21,185 33,282 253,102 77,330 492,831 (41,773) 454,959 3,763 8,971 12,734 442,225

Notes:

1. The amounts are extracted from the unaudited condensed consolidated statement of financial position of the Company as at 31 January 2016 included in the interim report of the Group for the six months ended 31 January 2016 published on 20 April 2016.

2. Pursuant to the terms and conditions of the Sale and Purchase Agreement, the consideration for the Proposed Acquisition is approximately RMB357,488,000 (equivalent to approximately HK$421,836,000), which shall be subject to adjustments (see Note i).

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UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

For the purpose of preparation of the Unaudited Pro Forma Statement of Assets and Liabilities and for the purpose of illustrating the effects of the Proposed Acquisition, as if it has taken place on 31 January 2016, the directors of the Company assume the final consideration of approximately RMB357,488,000 (equivalent to approximately HK$421,836,000), and will be settled as follows:

• (a) An amount of RMB65,534,000 (equivalent to approximately HK$77,330,000) will be settled by the share placing of 70,300,000 ordinary shares of the Company. For the purpose of the Unaudited Pro Forma Statement of Assets and Liabilities, the directors of the Company assume the placing price of each share to be placed on the completion date will be equal to HK$1.10. The Group is currently in the process of negotiating the terms with the potential investors and the receipts from the placing will be available only if all the terms are satisfied by all relevant parties;

• (b) An amount of RMB214,493,000 (equivalent to approximately HK$253,102,000) will be settled by bank borrowings arranged with a bank in the People’s Republic of China (the ‘‘PRC’’). The Group is currently in the process of obtaining application approval from the bank and banking facilities for the borrowings will be available only if all the conditions specified by the bank are satisfied; and

• (c) An amount of RMB35,749,000 (equivalent to approximately HK$42,184,000) was settled by cash at banks during June and July 2016 and the balance of RMB41,712,000 (equivalent to approximately HK$49,220,000) will be settled by cash at banks.

The above (a) and (b) are assumed by the directors of the Company and not yet finalised as at the date of this statement. The directors of the Company may change the financing arrangement on the Closing. If the above (a) is finalised as at the date of this statement, the amount of HK$77,330,000 will be recognised in equity, otherwise the total amount of HK$330,432,000 is presented as consideration payables in current liabilities.

• Note i: Pursuant to the terms and conditions of the Sale and Purchase Agreement, the final consideration is subject to adjustment and had not yet been determined as at the Latest Practicable Date. The total consideration shall be finalised in accordance with the total gross floor area as stated on the ownership certificates of the Target Properties to be obtained and shall be adjusted accordingly.

• The pro forma adjustment represents the recognition of the cost of the Target Properties by the Group.

Pursuant to the Sale and Purchase Agreement entered into between the Company and Sanya Hongxia Development and Construction Limited (the ‘‘Vendor’’) dated 20 June 2016, the Vendor has agreed to sell, and the Company has agreed to acquire the entire interest in the Target Properties which consist of four buildings with an aggregate of 194 rooms, and a total gross floor area of approximately 16,627.23 square meters at Sanya Yalong Bay National Resort District, Sanya City, Hainan Province, the PRC, under mediumterm leases.

Prior to the Proposed Acquisition, the Target Properties have not yet in operation, and it therefore does not constitute a business. The acquisition is accounted for as an acquisition of assets by the Group.

Assumed that all conditions precedent stated in the Sale and Purchase Agreement can be fulfilled by the Vendor, the directors of the Company prepared a business plan to develop the Target Properties. The Group intends to develop around 20% of the salable area of the Target Properties with a cost of approximately RMB71,866,000 (equivalent to approximately HK$84,802,000) for healthcare-related business. The Group also plans to operate around 50% of the salable area of the Target Properties with a cost of approximately RMB176,901,000 (equivalent to approximately HK$208,744,000) as hotel rooms/service apartments by itself. The directors of the Company have engaged Greater China Appraisal Limited (‘‘GCAL’’), an independent professional valuer, to allocate the cost of land use rights of the Target Properties which is recognised as prepaid lease payments. For the healthcare-related business and hotel rooms/service apartments, the total cost will be further classified as property, plant and equipment of approximately RMB104,780,000 (equivalent to approximately HK$123,640,000) and prepaid lease payments of approximately RMB143,987,000 (equivalent to approximately HK$169,906,000) in accordance with the portion between land and buildings based on allocation performed by GCAL.

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UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

The remaining salable area of the Target Properties with a cost of approximately RMB108,721,000 (equivalent to approximately HK$128,290,000) are classified as properties for sale as the Group intends to hold the rooms for resale purpose. No reallocation of prepaid lease payments on properties for sale will be made.

The directors of the Company conducted an impairment review on the Target Properties as at the Latest Practicable Date, no impairment indicators have been identified.

The building ownership certificate of the Target Properties has not been obtained. If the building ownership certificate of the Target Properties is unable to be obtained, the Company’s rights of using, making profit and disposing of the Target Properties will be affected.

1. The exchange rate adopted for the purpose of the compilation of the Unaudited Pro Forma Statement of Assets and Liabilities is RMB1 to HK$1.18.

2. No other adjustments have been made to the Unaudited Pro Forma Statement of Assets and Liabilities of the Group to reflect any trading results or other transactions of the Group subsequent to 31 January 2016 where applicable.

3. Assume the delivery of the remaining consideration from the Company has been delayed, the Company shall pay the Vendor a compensation of 0.03% of the consideration not yet paid for each overdue day. If the delivery of the remaining consideration has been delayed for over 10 business days, the Vendor can (i) request of an immediate payment of the remaining consideration plus a compensation of 0.03% of the consideration not yet paid for each overdue day; or (ii) terminate the Sale and Purchase Agreement, where all sums paid by the Company (without interest) shall be refunded to the Company plus a compensation of RMB20,000,000 (equivalent to approximately HK$23,600,000) shall be paid by the Company (if the aforementioned compensation does not cover all the losses of the Vendor, the Company shall also cover all the remaining losses).

– 21 –

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

The following is the text of report, prepared for the purpose of incorporation in this circular, received from the independent reporting accountants, SHINEWING (HK) CPA Limited, Certified Public Accountants, Hong Kong.

==> picture [232 x 61] intentionally omitted <==

12 August 2016

The Directors Ta Yang Group Holdings Limited Flat 28, 23/F Metro Centre II 21 Lam Hing Street Kowloon Bay, Kowloon Hong Kong

We have completed our assurance engagement to report on the compilation of unaudited pro forma statement of assets and liabilities of Ta Yang Group Holdings Limited (the ‘‘Company’’) and its subsidiaries (collectively referred to as the ‘‘Group’’) by the directors of the Company for illustrative purposes only. The unaudited pro forma statement of assets and liabilities consists of the unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 January 2016 and related notes as set out on pages 18 to 21 of the circular (the ‘‘Circular’’) issued by of the Company dated 12 August 2016 (the ‘‘Unaudited Pro Forma Statement of Assets and Liabilities’’) in connection with the proposed acquisition of the properties in Sanya City, Hainan Province, the People’s Republic of China (the ‘‘Proposed Acquisition’’). The applicable criteria on the basis of which the directors of the Company have compiled the Unaudited Pro Forma Statement of Assets and Liabilities are described in page 17 to the Circular.

The Unaudited Pro Forma Statement of Assets and Liabilities has been compiled by the directors of the Company to illustrate the impact of the Proposed Acquisition on the Group’s financial position as at 31 January 2016 as if the Proposed Acquisition had taken place at 31 January 2016. As part of this process, information about the Group’s financial position has been extracted by the directors of the Company from the Group’s unaudited condensed consolidated financial statements for the six months ended 31 January 2016, on which an interim report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Statement of Assets and Liabilities

The directors of the Company are responsible for compiling the Unaudited Pro Forma Statement of Assets and Liabilities in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the

– 22 –

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG7’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

Our Independence and Quality Control

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

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

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma Statement of Assets and Liabilities and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Statement of Assets and Liabilities beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’ issued by the HKICPA. This standard requires that the reporting accountant plan and perform procedures to obtain reasonable assurance about whether the directors of the Company have compiled the Unaudited Pro Forma Statement of Assets and Liabilities in accordance with paragraph 29 of Chapter 4 of the Listing Rules and with reference to AG7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Statement of Assets and Liabilities, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Statement of Assets and Liabilities.

The purpose of Unaudited Pro Forma Statement of Assets and Liabilities included in an investment circular is solely to illustrate the impact of the Proposed Acquisition on unadjusted financial information of the Group as if the Proposed Acquisition had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Proposed Acquisition at 31 January 2016 would have been as presented.

– 23 –

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Statement of Assets and Liabilities has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors of the Company in the compilation of the Unaudited Pro Forma Statement of Assets and Liabilities provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• . the related unaudited pro forma adjustments give appropriate effect to those criteria; and

• . the Unaudited Pro Forma Statement of Assets and Liabilities reflects the proper application of those adjustments to the unadjusted statement of assets and liabilities.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Statement of Assets and Liabilities has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Statement of Assets and Liabilities.

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

– 24 –

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

APPENDIX II

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Statement of Assets and Liabilities has been properly compiled on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Statement of Assets and Liabilities as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

SHINEWING (HK) CPA Limited

Certified Public Accountants Chan Wing Kit Practising Certificate Number: P03224 Hong Kong

– 25 –

PROPERTY VALUATION REPORT

APPENDIX III

The following is the text of a letter, a valuation certificate prepared for the purpose of incorporation in this circular received from Greater China Appraisal Limited, an independent valuer, in connection with their valuation as at 15 June 2016 of the Target Properties.

Room 2703, 27/F Shui On Centre 6–8 Harbour Road Wanchai Hong Kong

12 August 2016

The Board of Directors Ta Yang Group Holdings Limited Flat 28, 23rd Floor, Metro Centre II 21 Lam Hing Street Kowloon Bay Kowloon Hong Kong

Dear Sir,

• Re: Valuation of four hotel buildings (known as Building 1, 2, 3 and 5) on Longxi Road (the ‘‘Target Properties’’), ‘‘Yalong Bay Ye Feng Road Southern Land Lot’’, Yalong Bay National Resort District Regulatory Plan C-02 Lot No. 19-21-129, Yalong Bay, Jiyang District, Sanya City, Hainan Province, the People’s Republic of China (the ‘‘PRC’’) 572000

In accordance with the instructions from Ta Yang Group Holdings Limited (the ‘‘Company’’) for us to value the Target Properties, details of which are provided in the enclosed valuation certificate, in the PRC, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of such real property interests as at 15 June 2016 (referred to as the ‘‘valuation date’’).

This letter which forms part of our valuation report explains the basis and methodology of valuation, and clarifies our assumptions made, title investigation of the real properties and the limiting conditions.

I. BASIS OF VALUATION

The valuation is our opinion of the market value which we would define as intended to mean ‘‘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 .

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PROPERTY VALUATION REPORT

APPENDIX III

Market value is understood as the value of an asset or liability estimated without regard to costs of sale or purchase (or transaction) and without offset for any associated taxes or potential taxes.

II. VALUATION METHODOLOGY

The real property interests are valued by comparison method where comparison based on prices realized or market prices of comparable real properties is made. Comparable real properties of similar size, character and location are analyzed and carefully weighed against all the respective advantages and disadvantages of each real property. Adjustments in the prices of the comparable real properties are then made to account for the identified differences between such real properties and the real properties in the relevant factors.

III. ASSUMPTIONS

Our valuation has been made on the assumption that the owner sells the real property interests on the open market in their existing states without the benefit of any deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangement which would serve to increase the value of the real property interests.

As the real properties are held under long term land use rights, we have assumed that the owners of the real property interests have free and uninterrupted rights to use or transfer the real property interests for the whole of the unexpired term of the respective land use rights. In our valuation, we have assumed that the real property interests can be freely disposed of and transferred to third parties on the open market without any additional payment to the relevant government authorities.

All applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined, and considered in the valuation report.

No environment impact study has been ordered or made. Full compliance with applicable national, provincial and local environmental regulations and laws is assumed unless otherwise stated, defined, and considered in the report. It is also assumed that all required licences, consents, or other legislative or administrative authority from any local, provincial, or national government or private entity or organization either have been or can be obtained or renewed for any use which the report covers.

Other specific assumptions of the real properties, if any, have been stated out in the footnotes of the valuation certificate.

IV. TITLESHIP INVESTIGATION

We have been provided with copies of legal documents regarding the real properties. However, due to the current registration system of the PRC, no investigation has been made for the legal title or any liability attached to the real properties.

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PROPERTY VALUATION REPORT

APPENDIX III

In the course of our valuation, we have relied upon the legal opinion given by the Company’s PRC legal advisor — Longan Law Firm (隆安律師事務所) in relation to the legal title to the real properties. All legal documents disclosed in this report, if any, are for reference only and no responsibility is assumed for any legal matters concerning the legal title to the real properties set out in this report.

V. LIMITING CONDITIONS

We have inspected the exterior and, where possible, the interior of the Target Properties. However, no structural survey has been made and we are therefore unable to report as to whether the Target Properties are free from rot, infestation or any other structural defects. Also, no tests were carried out on any of the services.

We have not carried out detailed site measurements to verify the correctness of the areas in respect of the real properties but have assumed that the areas shown on the relevant documents provided to us are correct. Based on our experience of valuation of similar real properties, we consider the assumptions so made to be reasonable. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

No site investigations have been carried out to determine the suitability of the ground conditions or the services for any real property development. Our valuation is made on the basis that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

Having examined all relevant documentation, we have relied to a very considerable extent on the information provided and have accepted advice given to us by the Company on such matters, as relevant, as planning approvals, statutory notices, easements, tenure, occupation, development scheme, construction costs, site and floor areas and in the identification of the real property. We have had no reason to doubt the truth and accuracy of the information provided by the Company. We were also advised by the Company that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

No allowances have been made in our valuation for any charges, mortgages or amounts owing on the real properties valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the real property interests are free of encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

Since the real properties are located in a relatively under-developed market, the PRC, those assumptions are often based on imperfect market evidence. A range of values may be attributable to the real properties depending upon the assumptions made. While we have exercised our professional judgment in arriving at the value, report readers are urged to consider carefully the nature of such assumptions which are disclosed in the valuation report and should exercise caution in interpreting the valuation report.

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PROPERTY VALUATION REPORT

APPENDIX III

VI. OPINION OF VALUE

Our opinion of the market value of the real property interests is set out in the attached valuation certificate.

VII. REMARKS

Our valuation has been prepared in accordance with generally accepted valuation procedures and in compliance with the requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited.

In valuing the real property interests, we have complied with the requirements contained in the HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.

Site inspection of the real properties was conducted in June 2016 by Candice Y. Q. Li (BSc). The real properties were maintained in a reasonable condition commensurate with its age and uses and equipped with normal building services.

Unless otherwise stated, all monetary amounts herein are denominated in the currency of Renminbi (referred to as ‘‘RMB’’).

We enclose herewith our valuation certificate.

This valuation report is issued subject to our General Service Conditions.

Yours faithfully, For and on behalf of

GREATER CHINA APPRAISAL LIMITED

Mr. Gary Man

Registered Professional Surveyor (G.P.) FHKIoD, FRICS, MHKIS, MCIREA Director

Note: Mr. Gary Man is a Chartered Surveyor who has more than 28 years of valuation experience in countries such as The PRC, Hong Kong, Singapore, Vietnam, Philippines and the Asia Pacific region.

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PROPERTY VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Real property interests held partly for investment and partly for sale in the PRC

Real Property

Descriptions and Tenure

Market Value in Particulars of existing state as at Occupancy 15 June 2016

The Target Properties comprise four hotel buildings with an aggregate of 194 rooms located within a composite development, known as Long Xi Yue Shu. The subject development is a multipurpose leisure project which consists of hotels, convention center, villas, bungalows and other ancillary facilities. The Target Properties was completed in about 2015.

Four hotel buildings (known The Target Properties comprise four as Building 1, 2, 3 and 5) hotel buildings with an aggregate of on Longxi Road 194 rooms located within a ‘‘Yalong Bay Ye Feng Road composite development, known as Southern Land Lot’’, Long Xi Yue Shu. The subject Yalong Bay National Resort development is a multipurpose District Regulatory Plan leisure project which consists of C-02 Lot No. 19-21-129, hotels, convention center, villas, Yalong Bay, Jiyang District, bungalows and other ancillary Sanya City, facilities. The Target Properties was Hainan Province, completed in about 2015. the PRC 572000 The Target Properties are located at Yalong Bay National Resort District where a coastal beach, sea sports center, golf course, shopping centers, yacht club and other leisure facilities are provided. The unit prices of similar real properties in the locality are ranging from RMB16,000 to 32,000 per square metre.

Upon our site RMB368,000,000 inspection, the Target Properties are (Renminbi Three currently vacant. Hundred and Sixty Eight Million)

The gross floor area of the Target Properties is approximately 17,051 square metres.

The land use rights of the Target Properties were granted for a term starting from 9 February 2013 and expiring on 9 February 2063 for accommodation, catering, conference and exhibition uses.

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PROPERTY VALUATION REPORT

APPENDIX III

Notes:

• (i) According to a State-owned Construction Land Use Rights Grant Contract (the ‘‘Land Contract’’) entered into between 海南省三亞市國土環境資源局 (translated as ‘‘the Land Environment and Resources Bureau of Sanya City Hainan Province’’) (the ‘‘Land Vendor’’) and 三亞虹霞開發建設有限公司 (translated as ‘‘Sanya Hongxia Development and Construction Limited’’) (‘‘Hongxia Development’’) dated 9 September 2012, the land use rights of land parcels with a total site area of approximately 224,383.41 square metres were contracted to be granted to Hongxia Development at a consideration of RMB406,000,000 for a term of 40 years for holiday reception facilities uses and 50 years for conference and exhibition uses, from the date of the land parcels handed-over. The Land Contract contains, inter alia, the following salient conditions:

Usage of main structure : 2.687038 hectare for holiday reception facilities uses; 19.751303 hectare for conference and exhibition uses Plot ratio : 4 0.40 Total gross floor area : 4 89,753.36 square metres Height restriction : 4 18 metres Building Density : 4 18% Building covenant : Commence construction before 9 May 2013 Completion before 9 May 2015

• (ii) According to a Land Use Right Transfer Supplementary Contract (the ‘‘Land Supplementary Contract’’) dated 4 August 2014 entered into between the Land Vendor and Hongxia Development, the usage of portion of the subject land with a site area of approximately 157,235.55 square metres located within the C-02 lot was changed from conference and exhibition to accommodation and catering uses (Hotel Industry Land) with a land premium of RMB286,011,465.

• (iii) According to a 土地房屋權證 (translated as Land and Housing Rights Certificate) (San Tu Fang (2014) Zi Di 13971 Hao) issued by Sanya City People’s Government dated 21 October 2014, the land use rights of a parcel of land with a site area of approximately 197,511.91 square metres were granted to Hongxia Development for a term expiring on 9 February 2063 for accommodation, catering, conference and exhibition uses. Portion of the land parcel with a site area of approximately 157,235.55 square metres was granted for accommodation and catering uses while the other portion with a site area of approximately 40,280 square metres was granted for conference and exhibition uses.

• (iv) According to a Construction Work Planning Permit (Jian Zi Di 460200201500254 Hao) issued by the Planning Bureau of Sanya City dated 30 September 2015, the construction of a development with a total gross floor area of approximately 124,329.68 square metres has been approved.

• (v) According to a Construction Work Commencement Permit (no.460200201409290301) issued by the Housing and Urban Construction Bureau of Sanya City dated 29 September 2014, permissions have been given for commencement of construction of a development with a total gross floor area of approximately 66,948.4 square metres.

• (vi) According to a Construction Work Completion and Acceptance Record (Bei An Hao [2015]052 Hao), issued by the Housing and Urban Construction Bureau of Sanya City dated 24 November 2015, the construction of a development with a total gross floor area of approximately 124,329.68 square metres has been completed and has passed the acceptance inspection.

• (vii) According to a Commodity Home Pre-sale Permission Certificate (San Fang Yu Xu Zi (Zhan Qi) [2014]50 Hao), permission for pre-sale of real properties with a total gross floor area of approximately 132,538.22 square metres has been given.

• (viii) According to 4 三亞市房屋面積測繪成果報告 (translated as Sanya City Housing Area Survey Result Report), the total gross floor area of the Target Properties is approximately 17,051 square metres and the usage of the Target Properties is for property right hotel (產權式酒店).

• (ix) As advised by the Company, there are no encumbrances, liens, pledges, mortgages against the Target Properties.

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PROPERTY VALUATION REPORT

APPENDIX III

• (x) As advised by the Company, the Company intends to make further improvement on the Target Properties and the estimated cost is about HK$14,800,000 for the financial year 2016 to 2017.

• (xi) According to the Company, it is planned to improve and use the Target Properties as a high-end healthcare holiday resort. It is the intention of the Company that approximately 50% of the Target Properties will be improved and used for hotel/service apartment for rental, 30% will be improved as high-end residential (apartments) for sales and 20% will be improved and used for health-related business.

• (xii) We have been provided with a legal opinion regarding the real property interests issued by the Company’s PRC legal advisor which are summarised below:

• (a) The Target Properties have obtained the Construction Work Planning Permit (Jian Zi Di 460200201500254 Hao) issued by the Planning Bureau of Sanya City, the Construction Work Commencement Permit (no. 460200201409290301), the Construction Work Completion and Acceptance Record (Bei An Hao [2015]052 Hao) and the Commodity Home Pre-sale Permission Certificate (San Fang Yu Xu Zi (Zhan Qi) [2014]50 Hao) issued by the Housing and Urban Bureau of Sanya City, such permit, record and certificate are real and effective;

• (b) Hongxia Development has legally obtained the land use rights of the Target Properties and is legally entitled to occupy, use, transfer, lease and mortgage the land use rights;

• (c) Hongxia Development has already settled the land premium of the Land Contract and the Land Supplementary Contract;

• (d) During the construction of the Target Properties, Hongxia Development has obtained the approval from relevant government departments. The development and construction of the Target Properties by Hongxia Development is legal;

• (e) According to the Property Law of the PRC, the establishment, alteration, transfer and elimination of real property titleship should be registered according to the laws and would be effective after registration. For the real property titleship has not been registered, it would not be effective, unless exceptions otherwise provided under the laws. If parties enter into a contract to establish, alter, transfer or eliminate the real property titleship, unless otherwise provided by laws or the contract, it will immediately take effect once the contract has been entered. Even though the real property titleship has not been registered, the validity of the contract would not be affected. In addition, real property titleship certificate is the proof that the owner enjoys the real property titleship. Hongxia Development is the owner of the Target Properties and has obtained the pre-sale permission of the Target Properties. Hongxia Development has the right to sell the Target Properties legally;

• (f) The building ownership certificate of the Target Properties has not been obtained. Hongxia Development has obtained the relevant documents for applying the building ownership certificate. Hongxia Development has the right to apply for the building ownership certificate according to the laws. The building ownership certificate is expected to be obtained within 2 to 3 months after the sales and purchase agreement of the building has been entered. If the source of Hongxia Development’s land titleship is clear and with a non-controversial titleship, and with all relevant documents available, according to the relevant PRC laws and regulations, there is no legal impediment to obtain the building ownership certificate. If the building ownership certificate of the Target Properties is unable to be obtained, the purchaser’s rights of using, making profit and dispose of the Target Properties will be affected; and

• (g) The Target Properties are not subject to any judicial seizure, mortgage nor freezing of tenure as of 7 June 2016.

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GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date:

Authorised: HK$ 20,000,000,000 Shares 2,000,000,000.00 Issued and fully paid: 784,728,000 Shares 78,472,800.00

All the issued Shares in the capital of the Company rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital.

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

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

3. DISCLOSURE OF INTERESTS

(i) Directors’ and chief executive’s interests and short positions in Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or

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GENERAL INFORMATION

APPENDIX IV

which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange were as follows:

Long position in Shares:

			Approximate
			percentage of
			the Company’s
		Total number	issued share
Name	Nature of interest	of Shares	capital
Ms. Shi Qi	Interest of a controlled	436,540,400	55.63%
	corporationNote
Mr. Huang Te-Wei	Beneficially owned	1,330,000	0.17%

Note: Lyton Maison Limited, a limited company incorporated in the British Virgin Islands solely owned by Ms. Shi Qi, is interested in 436,540,400 Shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under Section 352 of the SFO, or which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO or the Model Code for Securities Transactions by Directors of Listed Companies.

(ii) Persons who have interests or short positions in Shares, underlying Shares and debentures of the Company which are discloseable under Divisions 2 and 3 of Part XV of the SFO

As at the Latest Practicable Date, save as disclosed above, so far as was known to the Directors or chief executive of the Company based on the register maintained by the Company pursuant to Part XV of the SFO, no persons (not being a Director or chief executive of the Company) had any interest, directly or indirectly, or short position in the Shares and underlying Shares of the Company which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, nor were recorded in the register required to be kept by the Company under Section 336 of The SFO, nor were there any persons, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group or held any option in respect of such capital.

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GENERAL INFORMATION

APPENDIX IV

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation (other than statutory compensation).

5. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors or substantial Shareholders or any of their respective associates has engaged in any business or has any interest that competes or may compete with the business of the Group or has any other conflict of interest with the Group.

6. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

As at the Latest Practicable Date:

• (i) none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group; and

• (ii) none of the Directors has or had any direct or indirect interest in any assets which have been acquired or disposed by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 July 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up.

7. LITIGATION

As at the Latest Practicable Date, the Directors were not aware of any litigation or claims of material importance which were pending or threatened against any members of the Group.

8. MATERIAL CONTRACTS

Save for the MOU and the Sale and Purchase Agreement, there is no other material contract (being contracts that were not entered into in the ordinary course of business carried on or intended to be carried on by the Group) had been entered into by member(s) of the Group within the two years immediately preceding the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX IV

9. EXPERTS AND CONSENTS

The following are the qualifications of the experts who had given opinion contained in this circular:

Name Qualification SHINEWING (HK) CPA Limited Certified public accountant Greater China Appraisal Limited Independent professional valuer

Each of SHINEWING (HK) CPA Limited and Greater China Appraisal Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of the text of its letter and/or report and/or the reference to its name in the form and context in which they appear herein.

As at the Latest Practicable Date, none of SHINEWING (HK) CPA Limited and Greater China Appraisal Limited had any shareholding in any member of the Group or the right whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of SHINEWING (HK) CPA Limited and Greater China Appraisal Limited had any direct or indirect interest in any assets which have been, since 31 July 2015 (the date to which the latest published audited consolidated financial statements of the Group were made up), 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.

10. GENERAL

• (i) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box 2681 GT, Grand Cayman KY1-1111, Cayman Islands.

• (ii) The head office and principal place of business of the Company in Hong Kong is at Flat 28, 23rd Floor, Metro Centre II, 21 Lam Hing Street, Kowloon Bay, Kowloon, Hong Kong.

• (iii) The company secretary of the Company is Mr. Chan Oi Fat, who is a fellow member of the Association of Chartered Certified Accountants and Hong Kong Institute of Certified Public Accountants.

• (iv) The English text of this circular shall prevail over their respective Chinese texts in case of inconsistency.

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GENERAL INFORMATION

APPENDIX IV

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours (from 10:00 a.m. to 12:30 p.m. and from 2:00 p.m. to 5:00 p.m.) on Monday to Friday, except for public holidays, at the principal place of business of the Company at Flat 28, 23rd Floor, Metro Centre II, 21 Lam Hing Street, Kowloon Bay, Kowloon, Hong Kong for 14 days from the date of this circular:

• (a) the memorandum and articles of association of the Company;

• (b) the letter from SHINEWING (HK) CPA Limited in respect of the unaudited pro forma financial information of the Group upon the completion of Acquisition as set out in Appendix II to this circular;

• (c) the valuation report issued by the Valuer, the text of which is set out in Appendix III to this circular;

• (d) the written consent referred to in the section headed ‘‘Experts and Consents’’ in this appendix;

• (e) the annual reports of the Company for each of the two years ended 31 July 2014 and 2015;

• (f) the MOU;

• (g) the Sale and Purchase Agreement; and

• (h) this circular.

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