Ta Yang Group Holdings Limited — Proxy Solicitation & Information Statement 2021

Nov 5, 2021

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 a stockbroker, a licensed securities dealer or other registered institution in securities, 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, stockbroker, licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for 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 DISPOSAL OF PROPERTIES

A letter from the Board is set out on pages 4 to 10 of this circular.

5 November 2021

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
APPENDIX I	— FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . .	I-1
APPENDIX II	— PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	— GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1

– i –

DEFINITIONS

Terms or expressions used in this circular shall, unless the context otherwise requires, have the meanings ascribed to them below:

• ‘‘Agreement’’ the sale and purchase agreement dated 10 September 2021 entered into between the Seller, the Purchaser and the Guarantor relating to the sale and purchase of the Properties

• ‘‘Board’’ the board of Directors of the Company

• ‘‘Business Day’’ a day on which licensed banks in the PRC are open for business throughout their normal business hours

• ‘‘Company’’ Ta Yang Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability, whose Shares are listed on the Main Board of the Stock Exchange

• ‘‘Completion’’ the completion of the Disposal

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules

• ‘‘Consideration’’ the total consideration in the sum of RMB115 million (equivalent to approximately HK$138 million) payable by the Purchaser to the Seller

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

• ‘‘Disposal’’ the disposal of the Properties by the Seller to the Purchaser pursuant to the Agreement

• ‘‘First Instalment’’ first instalment of the Consideration in the amount of RMB70 million paid by the Purchaser

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Guarantor’’ Zhejiang Huzhou Huantaihu Group Co., Ltd.* (浙江湖州環 太湖集團有限公司), a company established in the PRC with limited liability

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC

• ‘‘Huzhou SASAC’’ State-owned Assets Supervision and Administration Commission (Huzhou)* (湖州市人民政府國有資產監督管 理委員會)

• ‘‘Independent Third Party(ies)’’ independent third party(ies) who is(are) not connected with the Company and its connected persons (as defined in the Listing Rules)

– 1 –

DEFINITIONS

• ‘‘Latest Practicable Date’’ 3 November 2021, being the latest practicable date prior to the dispatch of this circular for the purpose of ascertaining certain information contained herein

• ‘‘Lease Agreement’’ a short-term lease agreement to be entered into by the Seller as lessee and the Purchaser as lessor in respect of the lease of the Properties after the Completion

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange

• ‘‘PRC’’ the People’s Republic of China

• ‘‘Properties’’ including the land with total area of approximately 66,679 m[2] and the buildings with total gross floor area of approximately 71,042 m[2] , located at No. 389 Cheng Ye Road, Huzhou City, Zhejiang Province, the PRC

• ‘‘Purchaser’’ Huzhou Jingkai Property Management Co., Ltd.* (湖州經開 物業管理有限公司), a company established in the PRC with limited liability

• ‘‘RMB’’ Renminbi, the lawful currency of the PRC

• ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to time

• ‘‘Seller’’ Huzhou Tayang Electronic Technology Co., Ltd.* (湖州大 洋電子科技有限公司), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Company

• ‘‘Share(s)’’ ordinary 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

• ‘‘Valuation’’ valuation of the Properties as at 31 August 2021, as prepared by the Valuer

• ‘‘Valuer’’ Sino-Infinite Appraisal Limited, an independent valuer

• ‘‘%’’ per cent

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DEFINITIONS

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$1.2.

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

• For identification purposes only

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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 (Chairlady) Mr. Liu Wengang (Chief Executive Officer) Mr. Gao Feng Mr. Cheng Hong

Non-executive Directors: Mr. Han Lei Mr. Chan Tsun Hong Philip

Independent Non-executive Directors: Mr. Lin Bing Mr. Hu Jiangbing Ms. Wang Lina

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

Principal Place of

Business in Hong Kong: 22/F, H Code 45 Pottinger Street Central, Hong Kong

5 November 2021

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION DISPOSAL OF PROPERTIES

INTRODUCTION

Reference is made to the announcement of the Company dated 10 September 2021 in respect of the Disposal. On 10 September 2021, the Seller, the Purchaser and the Guarantor entered into the Agreement pursuant to which the Seller has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Properties at the Consideration of RMB115 million (equivalent to approximately HK$138 million) in cash.

On 10 September 2021, the Company has obtained a written approval from Lyton Maison Limited, the controlling Shareholder holding 796,875,490 Shares with voting rights (representing approximately 60.98% of the 1,306,767,000 Shares with voting rights in issue as at the date of the Agreement and as at the Latest Practicable Date), in respect of the Disposal. Pursuant to Rule 14.44 of the Listing Rules, such written approval from Lyton Maison Limited can be accepted in lieu of holding a general meeting for the purpose of approving the Disposal.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) more details of the Agreement; (ii) the valuation report on the Properties; and (iii) other information as required to be disclosed under the Listing Rules.

THE AGREEMENT

The principal terms of the Agreement are set out below:

Date: 10 September 2021 Parties: the Seller; the Purchaser; and the Guarantor as the guarantor in respect of the payment obligations of the Purchaser under the Agreement.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Purchaser, the Guarantor and their respective ultimate beneficial owners are Independent Third Parties.

Properties to be disposed of

Pursuant to the Agreement, the Seller has conditionally agreed to dispose of and the Purchaser has conditionally agreed to acquire the Properties. For details, please refer to the section headed ‘‘Information on the Properties’’ in this circular.

Consideration and Payment Term

Pursuant to the Agreement, the Consideration for the Properties is RMB115 million (equivalent to approximately HK$138 million). Each of the Seller and the Purchaser shall bear the taxes arising from this Disposal respectively.

The Consideration is payable by the Purchaser in stages:

• (i) RMB70 million (being the First Instalment) in cash within 5 Business Days from the effective date of the Agreement;

• (ii) RMB20 million in cash within 2 months upon the registration of the Properties having been changed to be under the name of the Purchaser;

• (iii) RMB24 million in cash within 2 months upon Completion. During such period, the Seller shall cooperate with the Purchaser in respect of the transition and handover of the matters relating to the Disposal and assignment of existing leases;

• (iv) RMB1 million upon the Seller’s termination of the Lease Agreement, the details of which are set out in the section headed ‘‘Lease Arrangement’’ of this circular.

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LETTER FROM THE BOARD

In respect of the First Instalment, the parties agreed that it would be paid into an escrow account jointly controlled by the Seller and the Purchaser. Upon (i) the Seller completing the release of the mortgage over the Properties, and (ii) the Seller having fully paid its taxes arising from this Disposal in respect of the portion the Seller is responsible for and having obtained the relevant tax receipt, the First Instalment shall be released to the Seller.

As at the Latest Practicable Date, the First Instalment has been released to the Seller.

The Guarantor has agreed to guarantee the payment of the Consideration by the Purchaser.

The Consideration was determined after arm’s length negotiations between the parties, having considered, including but not limited to, the prevailing market value of the Properties with reference to the Valuation as at 31 August 2021. The Valuation was based on market basis and the appraised value of the Properties was approximately RMB104 million (equivalent to approximately HK$125 million) as at 31 August 2021. Furthermore, the Seller has considered that (i) the Consideration represents a premium of approximately 41.2% over the carrying amount of the Properties of approximately HK$97.7 million as at 30 June 2021; and (ii) the Disposal is in line with the Group’s strategies of cost control and resource efficiency. Based on the above, the Directors consider that the Consideration is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Conditions precedent

The Completion of the Disposal will be conditional upon (i) duly signing of the Agreement by the parties thereto; and (ii) the sole shareholder of the Seller having approved the Disposal.

As at the Latest Practicable Date, the conditions (i) and (ii) have been fulfilled.

Completion

Within 15 days from the Purchaser having paid the First Instalment, the Seller should use its best endeavours to assist the Purchaser to complete registration of the Properties under the name of the Purchaser.

Upon completion of the change of registration of the Properties under the name of the Purchaser, the parties shall within 15 days thereof arrange handover of all documents relating to the Properties, including but not limited to the relevant land certificates, checklists, construction particulars and lease agreements, and sign relevant handover documents. The Completion shall take place on the date of signing such handover documents.

As at the Latest Practicable Date, the registration of the Properties have been changed to be under the name of the Purchaser and the parties have arranged for the transition and handover of the matters relating to the Disposal and assignment of existing leases. Therefore, the Completion took place on 26 September 2021.

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LETTER FROM THE BOARD

Lease Arrangement

As the Seller during the transitional period requires to operate on the Properties to continue its production orders and arrange for staff relocation, the parties agreed to enter into the Lease Agreement on a short-term basis. During the such transitional period, the Seller will arrange for termination of its production activities associated with the Properties, and relocation or dismissal of its staff who are appointed by the Seller for management and maintenance of the operation of the production facilities located at the Properties. Based on a preliminary assessment by the management of the Seller, it is expected that the termination of production and relocation or dismissal of staff will be completed by 31 August 2022.

As at the Latest Practicable Date, the Purchaser and the Seller have agreed to the initial two-month rent-free period and that the Seller has a right to terminate the Lease Agreement by giving a two-month’s notice. In respect of the remaining commercial terms of the Lease Agreement, the Seller and the Purchaser have been discussing the detailed terms and conditions of the Lease Agreement.

INFORMATION ON THE PARTIES

The Seller is a company established in the PRC and is principally engaged in the manufacturing and sale of silicone rubber input devices. The Seller is an indirectly whollyowned subsidiary of the Company.

The Purchaser is a company established in the PRC and is principally engaged in the nonresidential property leasing and management. According to the information available to the Company, the Purchaser is 100% owned by the Guarantor.

The Guarantor is a company established in the PRC and is principally engaged in the development, construction, maintenance and management of city infrastructure and ancillary facilities. The Guarantor is ultimately controlled by Huzhou SASAC.

The Group is principally engaged in designing and manufacturing of silicone rubber input devices, and providing healthcare and hotel services.

INFORMATION ON THE PROPERTIES

The Properties mainly comprised the land with site area of approximately 66,679 m[2] and the buildings of the industrial complex with total gross floor area of approximately 71,042 m[2] . There are industrial buildings and structures attaching to the land and the properties (such as roads, fences and drainage), electricity equipment and green areas. The Properties are located at No. 389 Cheng Ye Road, Huzhou City, Zhejiang Province, the PRC, and are for industrial use purpose. As at the date of the Agreement, the Properties were owned by the Seller, and legally registered under the name of the Seller.

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LETTER FROM THE BOARD

As at the date of the Agreement, the Properties are mainly used by the Seller for manufacturing of silicone rubber input devices and certain part of the Properties have been rented out which have generated rental income to the Group. For the year ended 31 December 2020, the sale volume of the orders processed within the Properties were approximately HK$37.9 million, representing approximately 10.7% of the total sale volume of the Group. Upon completion of the Disposal, the Seller will terminate manufacturing processes associated with the Properties, and any future orders received will be proceeded in other production facilities of the Group. The Seller will also assign the existing lease agreement associated with the Properties to the Purchaser. Upon completion of the registration of the Properties under the name of the Purchaser, the right of receiving rental income from such lease agreements will be assigned to the Purchaser.

Based on the unaudited management accounts of the Group as at 30 June 2021, the carrying value of the Properties was approximately HK$97.7 million. For the seventeen months ended 31 December 2019 and the year ended 31 December 2020, the gross rental income attributable to the Properties was approximately HK$5.2 million and approximately HK$13.2 million, respectively. For the seventeen months ended 31 December 2019 and the year ended 31 December 2020, the net rental income attributable to the Properties was approximately HK$4.4 million and approximately HK$10.6 million, respectively.

Based on the Valuation, the Properties had a fair value of approximately RMB104 million (equivalent to approximately HK$125 million) as at 31 August 2021.

As at the date of the Agreement, part of the Properties has been mortgaged to a commercial bank in the PRC as a guarantee for a borrowing of approximately RMB48 million (equivalent to approximately HK$57.6 million). As at the date of the Agreement, the outstanding amount of the borrowing was approximately RMB29.1 million (equivalent to approximately HK$34.9 million). The Seller has agreed to arrange for release of such mortgage within 10 days from the Purchaser having paid the First Instalment.

As at the Latest Practicable Date, the Seller has arranged for the release of the mortgage and the aforementioned borrowing was fully repaid by the Seller to the relevant commercial bank.

REASONS FOR AND BENEFITS OF THE DISPOSAL

As disclosed in the 2020 annual report of the Company, the Group has been pursuing strict cost control and production efficiency for the business of manufacturing and sale of silicone products.

The Properties were acquired by the Group before 2010 with a plan to establish the Group’s production centers in Zhejiang Province, the PRC. The initial plan was to explore the asset-heavy business model of the silicone product, and to diversify the Group’s business portfolios. Based on historical information, performances of the production associated with the Properties has fallen behind the expectation of the Company. In particular, the production capacity of the Properties has not been fully utilized. In light of that the income generated by the Properties may not justify the maintenance and operation costs, the Group has been considering the options to realize the value of the Properties. Among all alternatives, the

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LETTER FROM THE BOARD

Disposal represents an attractive opportunity as (i) the Consideration represents a premium of approximately 41.2% over the carrying amount of the Properties; (ii) the Disposal is able to realize the fair value gain of the Properties at one sale; (iii) based on the information available to the Company, the Purchaser and the Guarantor are reliable counter-parties backed by Huzhou SASAC; and (iv) the Purchaser has agreed on the lease arrangement for the Seller to smoothly terminate the production activities and arrange for the staff relocation, which may significantly reduce the termination costs and minimize the operation disruption to the Group.

Upon completion of the Disposal, the Group will be able to better deploy its resources into more profitable and sustainable production sites (e.g. the core production line located in Dongguan of Guangdong Province). The Disposal represents a promising rationalization opportunity for the Group to optimise its business of manufacturing and sale of silicone products. By terminating the underperforming production lines, the Group is able to improve its profitability and create more return to the Shareholders.

Based on the above, the Directors consider that the terms of the Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECTS OF AND USE OF PROCEEDS FROM THE DISPOSAL

Based on the unaudited management accounts of the Group as at 30 June 2021, the carrying value of the Properties was approximately HK$97.7 million. It is estimated that the Group will realise an unaudited gain from the Disposal of approximately HK$29.3 million, which is calculated based on (i) the Consideration; (ii) the carrying value of the Properties; and (iii) the estimated transaction costs in relation to the disposal of the Properties. This estimated gain to be derived from the Disposal has taken into account the potential tax implication in relation to Disposal. The actual amount of gain from the Disposal to be recorded by the Group is subject to the review and final audit by the auditors of the Company.

Assuming the Disposal had been completed as at 30 June 2021, the total assets of the Group will increase by approximately HK$29.3 million, representing the net gain from the Disposal. On the other hand, the Disposal alone will not have any impact on the total liabilities of the Group. Upon completion of the registration of the Properties under the name of the Purchaser, the Properties will no longer generate rental income for the Group, which is now accounted as other income of the Group. Save for the one-off gain from the Disposal, the Disposal is expected to lower the total earning of the Group.

The net proceeds from the Disposal, after deducting professional fees and the potential tax payable in relation to the Disposal, are estimated to be approximately HK$126.5 million. The Company intends to use the net proceeds as follows: (i) approximately HK$24 million for repayment of existing liabilities of the Group; and (ii) approximately HK$102.5 million for general working capital of the Group (with not more than HK$75 million to be used for payment of the suppliers of the silicone business, and not more than HK$25 million to be used for payment of staff costs and rental expenses) and/or funds for other appropriate opportunities arising from time to time. Such opportunities may include, but not limited to, expanding the product catalog of silicone rubber input devices, or conducting horizontal integration of the silicone product business. The Company will make announcements as and when appropriate in compliance with the requirements of the Listing Rules.

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LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

As one of the applicable percentage ratios in respect of the Disposal as calculated under Rule 14.07 of the Listing Rules exceeds 25% and all applicable ratios are less than 75%, the Disposal constitutes a major transaction of the Company under Chapter 14 of the Listing Rules and is subject to announcement and shareholders’ approval requirements.

To the best of the Directors’ knowledge and information, and having made all reasonable enquiries, no Shareholder has any material interest in the Disposal. As such, no Shareholder is required to abstain from voting if a general meeting of the Company were convened to approve the Disposal. On 10 September 2021, the Company has obtained a written approval from Lyton Maison Limited, the controlling Shareholder holding 796,875,490 Shares with voting rights (representing approximately 60.98% of the 1,306,767,000 Shares with voting rights in issue as at the Latest Practicable Date), in respect of the Disposal. Pursuant to Rule 14.44 of the Listing Rules, such written approval from Lyton Maison Limited can be accepted in lieu of holding a general meeting for the purpose of approving the Disposal.

ADDITIONAL INFORMATION

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

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Agreement are fair and reasonable and the Disposal is in the interest of the Company and the Shareholders as a whole. Although a general meeting will not be convened by the Company to approve the Disposal, if such a general meeting were to be convened by the Company, the Board would recommend the Shareholders to vote in favour of the resolution to approve the Disposal.

Yours faithfully, By order of the Board of Ta Yang Group Holdings Limited Shi Qi Chairlady

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for the financial year ended 31 July 2018, the seventeen months ended 31 December 2019, the financial year ended 31 December 2020 and the six months ended 30 June 2021 are disclosed in the following documents which have been published on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.tayang.com):

• (i) Annual report of the Company for the year ended 31 July 2018 published on 13 November 2018 (pages 77 to 181)

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/1113/ltn20181113685.pdf

• (ii) Annual report of the Company for the seventeen months ended 31 December 2019 published on 15 May 2020 (pages 78 to 197)

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0515/2020051501473.pdf

• (iii) Annual report of the Company for the year ended 31 December 2020 published on 28 April 2021 (pages 72 to 181)

https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0428/2021042800531.pdf

• (iv) Interim report of the Company for the six months ended 30 June 2021 published on 29 September 2021 (pages 4 to 20)

https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0929/2021092900742.pdf

2. INDEBTEDNESS STATEMENT

At the close of business on 30 September 2021, being the latest practicable date of the purpose of this indebtedness statement prior to printing of this circular, the Group had outstanding borrowings of approximately HK$212 million, comprising of bank and other borrowings and lease liabilities.

Bank and other borrowings

As at 30 September 2021, the Group had interest-bearing borrowings of HK$197 million, which was borrowed by the Group and was secured by (i) the Group’s land and building; (ii) the Group’s right-of-use assets; and (iii) the Group’s investment properties.

Lease liabilities

As at 30 September 2021, the Group had total outstanding lease liabilities of approximately HK$15 million.

Contingent liabilities

As at 30 September 2021, the Group did not have any significant contingent liabilities.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade and other payables in the ordinary course of business, the Group did not have any other loan capital, bank overdrafts, loans, debt securities and authorised or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding as at 30 September 2021.

Save as disclosed above, the Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group from 30 September 2021 to the Latest Practicable Date.

3. WORKING CAPITAL

The Directors are of the opinion that, taking into account the existing financial resources and facilities available to the Group, the Group will have sufficient working capital to satisfy its present requirements for the next twelve months from the date of this circular in the absence of unforeseen circumstances.

4. MATERIAL ADVERSE CHANGE

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

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As at the Latest Practicable Date, the Group is principally engaged in manufacturing and sale of silicone rubber and related products and providing healthcare and hotel services.

For the financial year ended 31 December 2020, the Group strives to develop and forge ahead to seize opportunities under the adversity of the raging COVID-19 pandemic, maintaining steady business development and recorded a total turnover of HK$354.2 million.

While actively but prudently exploring potential new businesses, the Group continues to focus on the manufacturing and sale of silicone products as its core business and continue to strengthen its research and development, expand its product lines and optimise its product portfolio in 2021. Meanwhile, the Group’s has been controlling the procurement costs, intensive leverages of production efficiency and product quality, and adopting various measures taken to increase revenue and reduce expenditure, all of these enabled the Group to maintain a relatively favourable gross profit despite the adverse factors of the COVID-19 pandemic and the fierce competition in the market which are expected to continue in the second half of 2021.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The COVID-19 pandemic in 2020 has brought severe tests and challenges to the global economy. However, the Group strongly believes that opportunities lie within the challenges, and that the ability to discover and seize business opportunities in a crisis is the core competency of an enterprise to survive and grow, and even overtake other peers in the industry.

Since the second half of 2020, the pandemic in Mainland China firstly became under control, the performance of the manufacturing industry continued to climb, and the production of the manufacturing industry has become the main driver of increasing the value-added industrial output of Mainland China. In 2021, as different countries started the research and development of vaccines and as the vaccination became commonly available, the global economy is expected to return to normal, and the supply and demand cycle is expected to further recover. With the normalisation of business activities in the market, the profitability level of the manufacturing industry is expected to restore rapidly. Based on the analysis above, the Group believes that the current positive development trend of the manufacturing industry will continue in 2021.

The relations between China and the United States has entered a new phase in 2021. The Group is of the view that while their economic and trade competition and cooperation are on the basis of long-term condition, it is unlikely that the relations between China and the United States will improve significantly in the short term, but the competition between the two countries will not have any material adverse effect on our financial position, operation results and growth prospects.

In terms of the personal protective equipment, while the COVID-19 pandemic will eventually become under control in the near future, the Group expects the global demand for personal protective equipment will remain strong in the long run, and will become commonly used personal daily necessities and even fast-moving consumer goods. On this basis, the Group not only can accelerate the production and sales of its own products, but also can make use of its networks and resources to expand the sales and trading of other products.

The COVID-19 pandemic has also had a significant and profound impact on the way of life of people around the world. More people are spending more time at home, and the demand for household products, including kitchenware and even adult products, has increased significantly, as has the awareness of health and fitness, leading to a strong demand for health products and personal fitness products to be used at home. All these products mentioned require the application of silicone rubber materials. On the one hand, in line with the market trend, the Group will continue to develop the research and development of its own products, launch its own brand of silicone retail products soon and expand its distribution channels including e-commerce on the internet and new retail to accelerate in gaining market share. On the other hand, the Group will continue to seek new business opportunities in advanced manufacturing, smart wearable devices, electronic cigarettes, and medical aesthetics in order to actively pursue more rewarding returns for its Shareholders.

– I-3 –

PROPERTY VALUATION REPORT

APPENDIX II

The following is the text of a letter and a valuation certificate prepared for the purpose of incorporation in this circular received from Sino-Infinite Appraisal Limited, an independent valuer, in connection with their valuation of the Property as at 31 August 2021.

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Suite 2214, 22/F, Miramar Tower, 132 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong

5 November 2021

The Board of Directors Ta Yang Group Holdings Limited 22/F, H Code, 45 Pottinger Street, Central, Hong Kong

Dear Sirs,

• Re: Valuation of an industrial complex located at No. 389 Chengye Road, Nantaihu New Area, Wuxing District, Huzhou City, Zhejiang Province, The People’s Republic of China (the ‘‘PRC’’) (the ‘‘Property’’)

1. INSTRUCTIONS, PURPOSE AND VALUATION DATE

In accordance with your instruction for us to value the Market Value of the Property in which Ta Yang Group Holdings Limited (the ‘‘Company’’) and its subsidiaries (together the ‘‘Group’’) have interests, we confirm that we have made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the Market Value of the Property as at 31 August 2021 for transaction purposes.

2. BASIS OF VALUATION

Our valuation of the Property represents its market value which in accordance with the HKIS Valuation Standards 2020 Edition issued by The Hong Kong Institute of Surveyors (‘‘HKIS’’) is defined 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’’.

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.

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PROPERTY VALUATION REPORT

APPENDIX II

3. VALUATION METHODOLOGIES

We have valued the Property on market basis and on the basis of vacant possession. For the owner-occupied portion and vacant portion of the Property, Direct Comparison Method is adopted where comparison based on prices realized on actual sales or asking prices of comparable properties is made. Comparable properties of similar size, character and location are analyzed and carefully weighed against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of market values.

We have valued the tenanted portion of the Property which is held for investment, on market basis subject to existing tenancies. Income Capitalisation Method is adopted by capitalizing the rental income derived from the existing tenancies, if any, with due provision for the reversionary potential of each constituent portion of the Property at appropriate capitalisation rates. When using Income Capitalisation Method, we have mainly made reference to lettings within the relevant localities because the Property is held for the purpose of investment and comparables letting evidences in the relevant market are adequate.

4. VALUATION ASSUMPTIONS

Our valuation has been made on the assumption that the owner sells the Property on the open market in its existing state without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the value of the Property.

Unless stated as otherwise, we have assumed that the Property has been constructed, occupied and used in full compliance with, and without contravention of all laws, except only where otherwise stated. We have further assumed that, for any use of the Property upon which this valuation is based, all required licenses, permit, certificate and authorizations have been obtained.

We have assumed that all consents, approvals and licences from relevant government authorities for the developments have been obtained without onerous conditions or delays. We have also assumed that the design and construction of the Property are in compliance with the local planning regulations and have been approved by the relevant authorities.

5. TITLE INVESTIGATION

We have been provided with copies of the title documents relating to the Property. Due to the restrictions of the land registration system in the PRC, we have not carried out any land title searches in the PRC. Moreover, we have not inspected the original documents to verify ownership or to ascertain any amendments which may not appear on the copies handed to us. We are also unable to ascertain the title of the Property in the PRC and we have therefore relied on the advice given by the Company or the Company’s legal adviser regarding the interests of the Group in the Property.

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PROPERTY VALUATION REPORT

APPENDIX II

In the course of our valuation, we have relied upon the legal opinion given by the Company’s PRC legal advisor — Shanghai Kingsway Law Firm* (上海金仕維律師事務所) in relation to the legal title to the Property. 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 Property set out in this report.

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

6. LIMITING CONDITIONS

We have not carried out an inspection because of the likelihood of spreading of the coronavirus disease. In accordance with the HKIS Valuation Standards 2020, we have relied on the information and the photos for the Property provided by the Company. We are unable to report and comment on the Property. We have assumed that the Property is finished and maintained in reasonable conditions commensurate its age and use. We are not, however, able to report that the Property is free from rot, infestation or any other structural defects. No tests were carried out to any of the services. All dimensions, measurements and areas are only approximations.

Unless otherwise stated, we have not been able to carry out detailed on-site measurements to verify the site and floor areas of the Property and we have assumed that the areas shown on the copies of documents handed to us are correct.

We have relied to a very considerable extent on the information provided by the Company and have accepted information therein on such matters as planning approvals, statutory notices, easements, tenure, occupation, tenancy details, floor area and the identification of the Property.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Company which are material to the valuation. We have also been advised by the Company that no material fact has been omitted from information so 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 allowance has been made in our valuation for any charges, mortgages or amounts owing on the Property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, we have assumed that the Property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

The conclusion of value is based on generally accepted valuation 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 valuation, you are urged to consider carefully the nature of such assumptions which are disclosed in this report and should exercise caution when interpreting this report.

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PROPERTY VALUATION REPORT

APPENDIX II

This valuation is to be used for the purpose stated herein. Any use or reliance for any other purpose, by you or third parties, is invalid. No reference to our name or our valuation in whole or in part, in any document you prepare and/or distribute to third parties may be made without written consent.

Neither the whole nor any part of this letter and the certified opinion of value attached nor any reference thereto shall be included in any document, circular or statement without prior consent of the form and context in which they will respectively appear. This letter and certified opinion of value are only for the use of the party to whom it is addressed and no responsibility shall be accepted to any third party for the whole or any part of its content.

We hereby certify that we have neither present nor prospective interest in the Company or the value reported.

7. GENERAL SERVICE CONDITIONS

This report is subject to the General Service Conditions which are attached at the end of this report.

8. REMARKS

Unless otherwise stated, all monetary sums stated in our valuations are in Renminbi (‘‘RMB’’), the lawful currency of the PRC.

We enclose herewith ‘‘Property Particulars and Opinion of Value’’.

Yours faithfully For and on behalf of Sino-Infinite Appraisal Limited

C.K. Lee

BSc., MHKIS Consultant

Mr. C.K. Lee is a Corporate Member from the General Practice Division of the Hong Kong Institute of Surveyors. He has over 20 years post qualification experience in the valuation of properties in Hong Kong and the PRC.

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PROPERTY VALUATION REPORT

APPENDIX II

PROPERTY PARTICULARS AND OPINION OF VALUE

Property Held by the Group for Disposal

Property

An industrial complex located at No. 389 Chengye Road, Nantaihu New Area, Wuxing District, Huzhou City, Zhejiang Province, The PRC

Description and tenure

The industrial complex comprises a parcel of land with a site area of approximately 66,679 sq.m. together with various industrial buildings completed in 2007 and 2009, erected thereabove.

The total gross floor area of the buildings of the industrial complex is approximately 71,042.2 sq.m.

The Property comprises 12 blocks of buildings of 1 to 5 storeys in height. The buildings are occupied for production, storage and staff quarter purposes.

Particulars of occupancy

As at the date of valuation, as advised by the Group, the tenanted portion of the Property were subject to various tenancies with the latest expiring date on 30 April 2030 at a total monthly rent of RMB241,984 whilst the remaining portions were vacant or occupied by the Group for manufacturing, storage or staff quarter purposes.

Market Value in existing state as at 31 August 2021 RMB104,000,000

The land use rights of the industrial complex were granted for a term expiring on 6 July 2055 for industrial use.

Notes:

(1) As at the date of valuation, pursuant to a State-owned Land Use Rights Certificate — Hu Tu Guo Yong (2009) No. 2–3607, issued by National Land and Resources Bureau of Huzhou City on 3 April 2009, the land use rights of the industrial complex with a site area of approximately 66,679 sq.m. was held by 湖州大洋電子 科技有限公司 (Huzhou Tayang Electronic Technology Co., Ltd.) (‘‘Ta Yang’’, being the seller of a major transaction of the Company as announced on 10 September 2021) for a term expiring on 6 July 2055 for industrial use.

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PROPERTY VALUATION REPORT

APPENDIX II

• (2) As at the date of valuation, pursuant to 5 Building Ownership Certificates, Hu Fang Quan Zheng Hu Zhou Shi Zi Di Nos.:

• a. 0158506 and 0158507 issued by Planning and Construction Bureau of Huzhou City on 12 March 2007 and

• b. 110007493, 110007494 and 110007495 registered by Planning and Construction Bureau of Huzhou City on 5 and 7 May 2009,

the buildings of the industrial complex with a total gross floor area of approximately 71,042.2 sq.m. were owned by Ta Yang.

• (3) We have valued the owner-occupied portion and vacant portion of the Property by Direct Comparison Method.

• (4) We have valued the tenanted portion of the Property which is held for investment by Income Capitalisation Method.

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

• a. Purchase to a sale and purchase agreement dated 10 September 2021 entered into between Ta Yang and 湖州經開物業管理有限公司 (Huzhou Jingkai Property Management Co., Ltd.) (‘‘Purchaser’’), the Property was sold to the Purchaser;

• b. As at the date of investigation on 22 September 2021, in the past, Ta Yang had obtained the land use right certificate and the building ownership certificates by the way of grant and Ta Yang had legally held the ownership rights of the Property and had the rights to sell and transfer the Property and

• c. Before the date of investigation on 22 September 2021, Ta Yang had a mortgage in respect of the Property and the mortgage was released.

– II-6 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

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

			Approximate
			percentage of
			interests as to
			the issued share
		Total number	capital of the
Name	Nature of interest	of Shares	Company1
Ms. Shi Qi	Interest of a controlled	796,875,490 (L)	60.98%
	corporation2	654,810,600 (S)	50.11%
Mr. Hu Jiangbing	Beneficial owner	1,150,000 (L)	0.09%

(L) represents long position; (S) represents short position

Notes:

1. Based on 1,306,767,000 Shares in issue as at Latest Practicable Date.

2. Lyton Maison Limited, a limited company incorporated in the British Virgin Islands solely owned by Ms. Shi Qi, is interested in 796,875,490 Shares. Of the 796,875,490 Shares held by Lyton Maison Limited, 654,810,600 Shares are charged to Mason Resources Finance Limited, which is indirectly wholly-owned by Mason Group Holdings Limited.

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GENERAL INFORMATION

APPENDIX III

Save as disclosed above and 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 Issuers.

(ii) Substantial Shareholders’ and other persons’ interests and short positions in Shares, underlying Shares and debentures of the Company

As at the Latest Practicable Date, so far as was known to the Directors, the following persons (other than Directors and chief executive of the Company) had an interest 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 and are recorded in the register kept by the Company under Section 336 of the SFO:

			Approximate
			percentage of
			interests as to
			the issued share
		Total number of	capital of the
Name	Nature of interest	Shares	Company1
Lyton Maison	Beneficial owner	796,875,490 (L)	60.98%
Limited		654,810,600 (S)	50.11%
Mason Resources	Person having a security	663,612,600 (L)	50.78%
Finance Limited	interest in Shares
Mason Group	Interest of controlled	663,612,600 (L)	50.78%
Holdings Limited	corporation

(L) represents long position; (S) represents short position

Notes:

1. Based on 1,306,767,000 Shares in issue as at Latest Practicable Date.

2. There was a duplication of interests of 654,810,600 Shares among Lyton Maison Limited, Mason Resources Finance Limited and Mason Group Holdings Limited which represent the same block of Shares.

3. 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).

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GENERAL INFORMATION

APPENDIX III

4. INTERESTS IN OTHER COMPETING BUSINESS

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.

5. INTERESTS IN CONTRACT OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any subsisting contract or arrangement which is significant in relation to the business of the Group as a whole.

6. INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group, since 31 December 2020, being the date to which the latest published audited financial statements of the Company 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 member of the Group.

8. EXPERTS AND CONSENTS

The following are the qualifications of experts who have given their opinions on this circular:

Name Qualification Sino-Infinite Appraisal Limited Independent professional valuer Shanghai Kingsway Law Firm* (上海金仕維 PRC legal advisor 律師事務所)

As at the Latest Practicable Date, each of Sino-Infinite Appraisal Limited and Shanghai Kingsway Law Firm 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, each of Sino-Infinite Appraisal Limited and Shanghai Kingsway Law Firm had no 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.

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GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, each of Sino-Infinite Appraisal Limited and Shanghai Kingsway Law Firm had no direct or indirect interest in any assets which have been, since 31 December 2020 (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.

9. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by members of the Group within the two years preceding the date of this circular and are or may be material:

• (a) the sale and purchase agreement (the ‘‘May SPA’’) dated 11 May 2020 entered into between Ta Yang Medical Investment Limited (大洋醫療投資有限公司, ‘‘Ta Yang Medical Investment’’), a wholly-owned subsidiary of the Company, and Sanya Deyoo Real Estate Investment Services Limited (三亞德佑房地產投資服務有限公 司, ‘‘Sanya Deyoo’’) relating to the sale and purchase of the 100% equity interest in Ta Yang (Hainan) Health Industry Development Limited* (大洋(海南)健康產業發展 有限公司) with a consideration of RMB66,961,600 (equivalent to approximately HK$73,657,760);

• (b) the termination agreement dated 9 September 2020 entered into between Ta Yang Medical Investment and Sanya Deyoo terminating the transactions contemplated under the May SPA;

• (c) the sale and purchase agreement dated 5 July 2021 entered into between the Company as seller and United Crown Century Company Limited (聯冠世紀有限公 司) as purchaser relating to the sale and purchaser of 71% interests in Ta Yang Medical Investment with a consideration of RMB14,771,250 (equivalent to approximately HK$17,725,500); and

• (d) the Agreement.

10. GENERAL

• (a) The secretary of the Company is Mr. Zhou Danqing, who is a Chartered Financial Analyst and Financial Risk Manager charter-holder, and an associate member of both The Hong Kong Chartered Governance Institute (formerly known as The Hong Kong Institute of Chartered Secretaries) and The Chartered Governance Institute (formerly known as The Institute of Chartered Secretaries and Administrators) in the United Kingdom.

• (b) The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681 GT, Grand Cayman, KY1-1111, Cayman Islands. The principal place of business of the Company in Hong Kong is situated at 22/F, H Code, 45 Pottinger Street, Central, Hong Kong.

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GENERAL INFORMATION

APPENDIX III

• (c) The principal share registrar and transfer office of the Company in the Cayman Islands is Royal Bank of Canada Trust Company (Cayman) Limited at 4th Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1-1110, Cayman Islands.

• (d) The Hong Kong branch share registrar and transfer office of the Company is Union Registrars Limited at Suites 3301–04, 33/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong.

• (e) In the event of any inconsistency, the English text of this circular shall prevail over its Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection on the websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.tayanggroup.com) for 14 days from the date of this circular:

• (a) the valuation report prepared by the Valuer in relation to the Properties, the text of which is set out in Appendix II of this circular;

• (b) the written consent referred to in the paragraph headed ‘‘Experts and Consents’’ in this Appendix; and

• (c) the Agreement.

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