Weiye Holdings Limited — Proxy Solicitation & Information Statement 2019

Oct 17, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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CHINA TANGSHANG HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF 73% OF THE SHARE EQUITY IN THE TARGET COMPANY

Financial adviser to the Company

Euto Capital Partners Limited

A letter from the Board is set out on pages 4 to 16 of this circular.

18 October 2019

CONTENTS

		Page
Definitions. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
Appendix I	— Financial Information of the Group. . . . . . . . . . . . . . . . . . . .	I-1
Appendix II	— Financial Information of the Target Company. . . . . . . . . . .	II-1
Appendix III	— Unaudited Pro Forma Financial Information
	of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV	— Management Discussion and Analysis
	on the Target Company. . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V	— Valuation Report in Relation to the Fair Value of
	73% Equity Interest in the Target Company. . . . . . . . . . . .	V-1
Appendix VI	— Letter from the Financial Adviser
	in Relation to the Valuation. . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
Appendix VII	— Letter from Reporting Accountants
	in Relation to the Valuation. . . . . . . . . . . . . . . . . . . . . . . . .	VII-1
Appendix VIII	— General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1

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DEFINITIONS

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

• “Acquisition”

• the acquisition of Sale Shares as contemplated under the Acquisition Agreement

• “Acquisition Agreement” the sale and purchase agreement entered into between the Purchaser, the Vendor, the Target Company, and the Remaining Shareholder (as defined in the letter from the Board) on 21 May 2019 in relation to the sale and purchase of the 73% equity interest in the Target Company (including any supplemental agreement thereto from time to time), as more particularly described in the section headed “The Acquisition Agreement” in the letter from the Board under this circular

• “associate(s)” has the meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

• “Business Day(s)”

• any day(s) except Saturday, Sunday or other day on which licensed banks in Hong Kong are open for business throughout their normal business hours

• “Company”

• China Tangshang Holdings Limited (Stock Code: 674), a company incorporated in Bermuda with limited liability whose Shares are listed on the Main Board of the Stock Exchange

• “Completion” completion of the Acquisition in accordance with the terms and conditions of the Acquisition Agreement

• “Completion Date”

• a day falling on the three (3) days following the conditions precedent are fulfilled (or waived, as the case may be)

• “Conditions Precedent”

• the conditions precedent for Completion as set out under the Acquisition Agreement

• “connected person(s)” has the meaning ascribed to it under the Listing Rules

• “Consideration”

• the consideration to be paid by the Purchaser to the Vendor under the Acquisition Agreement

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DEFINITIONS

• “Director(s)”

• the director(s) of the Company

• “Enlarged Group” the Group as enlarged by the consolidation of the Target Company

• “Group” the Company and its subsidiaries

• “HK$ Hong Kong dollar, a lawful currency of Hong Kong

• “Hong Kong”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Third Party(ies)”

• third party(ies) independent of and not connected to the Company and any of its connected persons (as defined in the Listing Rules) or their respective associates

• “Latest Practicable Date”

• 16 October 2019, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Long Stop Date”

• 31 December 2019, the date to which the parties of the Acquisition Agreement have agreed in writing to extend pursuant to the Acquisition Agreement

• “Listing Rules”

• Main Board Rules Governing the Listing of Securities on the Stock Exchange

• “Main Board” the main board maintained and operated by the Stock Exchange

• “Material Adverse Change” any change (or effect) which has a material and adverse effect on the financial position, business or prospects or results of operations, of the Target Company as a whole

• “PRC”

• the People’s Republic of China

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DEFINITIONS

“Purchaser”	深圳市唐商產業園管理有限公司(Shenzhen Tangshang
	Industrial Park Management Co., Ltd.)*, a company
	incorporated in PRC with limited liability and an indirectly
	wholly-owned subsidiary of the Company
“RMB”	Renminbi, the lawful currency of PRC
“Sale Share(s)”	73% of the share equity of the Target Company held by the
	Vendor
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	laws of Hong Kong)
“Share(s)”	ordinary share(s) in the issued share capital of the Company
“Shareholder(s)”	holder(s) of the Share(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subsidiary”	has the meaning attributed to it under the Listing Rules
“Target Company”	深圳市金帆投資發展有限公司(Shenzhen Jinfan Investment
	Development Co., Ltd.)*, a company incorporated in PRC
	with limited liability
“Vendor”	深圳市金騏集團有限公司(Shenzhen Jinqi Group Co., Ltd.)*,
	a company incorporated in PRC with limited liability
“Warranties”	the representations, warranties and undertakings given by
	the Vendor under the Acquisition Agreement
“%”	per cent

• For identification purpose only. The English translation of Chinese names or words in this circular, where indicated, are included for information purpose only and should not be regarded as the official English translation of such Chinese names or words. In the event of any inconsistency, the Chinese name prevails.

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LETTER FROM THE BOARD

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CHINA TANGSHANG HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

Executive Directors: Mr. Chen Weiwu (Chairman) Mr. Zhou Houjie (Acting Chief Executive Officer)

Independent Non-executive Directors:

Mr. Chen Youchun Mr. Chan Chein Kwong William Ms. Lui Mei Ka

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: 13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong.

18 October 2019

To the Shareholders

Dear Sir or Madam,

INTRODUCTION

Reference is made to the announcement of the Company dated 21 May 2019 in relation to, among other things, the entering into the Acquisition Agreement in relation to the sale and purchase of the Sale Shares subject to the terms and conditions therein. Completion of the Acquisition Agreement is conditional upon, among others, the Conditions Precedent as set out in the Acquisition Agreement being satisfied (or waived, as the case may be) on or before the Latest Practicable Date.

The main purpose of this circular is to provide you with, among other things, (i) details of the Acquisition Agreement and the transactions contemplated thereunder; (ii) financial information of the Group; (iii) financial information of the Target Company; and (iv) other information required to be disclosed under the Listing Rules.

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LETTER FROM THE BOARD

THE ACQUISITION AGREEMENT

Date

21 May 2019 (after trading hours of the Stock Exchange)

Parties (1) the Purchaser

(2) the Vendor (3) the Remaining Shareholder

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor and its ultimate beneficial owners and the Remaining Shareholder are Independent Third Parties.

ASSETS TO BE ACQUIRED

As at the Latest Practicable Date, the Vendor held 85% of the share equity in the Target Company, and the remaining share equity of the Target Company was held by one other individual minority shareholder, Mr. Zeng PinLian (the “ Remaining Shareholder ”). By entering into the Acquisition Agreement, the Remaining Shareholder has agreed to give up his preemptive rights to the Sale Shares and agreed with the share transfer contemplated under the Acquisition Agreement.

Subject to the terms and conditions of the Acquisition Agreement, the Vendor has agreed to sell and the Purchaser has agreed to purchase, with effect from Completion Date, the Sale Shares. The Sale Shares, representing 73% of the issued shares of the Target Company held by the Vendor, will be sold free from any encumbrances and together with all rights that attach to such Sale Shares at Completion (including all dividends and distributions declared, paid or made in respect of the Sale Shares on or after the Completion Date).

CONSIDERATION

The Consideration for the acquisition of the Sale Shares is RMB40 million (equivalent to approximately HK$46.6 million), which shall be paid in cash within three business days upon Completion.

Basis of the Consideration

The Consideration was determined on the basis of normal commercial terms, following arms’ length negotiations between the parties to the Acquisition Agreement and with reference to, among other things, (i) the unaudited net asset value of the Target Company as at 31 December 2018; (ii) the adjusted historical financial performance (excluding depreciation on property, plant and equipment) of the Target Company; and (iii) the

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LETTER FROM THE BOARD

estimated identifiable income stream relating to the sub-leasing services of the Building (as defined in the section headed “Information about the Target Company” in the letter from the Board under this circular) pursuant to the remaining terms of the tenancy agreements entered into between the Target Company and the tenants.

In order to assess the fairness and reasonableness of the Consideration based the above criteria, the Company engaged APAC Asset Valuation and Consulting Limited (the “ Valuer ”), an independent valuer, to conduct a valuation (the “ Valuation ”) on the fair value of the 73% equity interest of the Target Company.

As stated in the valuation report (the “ Valuation Report ”) issued by the Valuer in relation to the Valuation, the fair value of the 73% equity interest of the Target Company as at 30 April 2019 was RMB49 million. It is stated in the Valuation Report that the Valuation was assessed using discounted cash flow method under the income approach. For the purpose of the Valuation, the Valuer has derived the future cash flows of the Target Company based on the available information and presently prevailing operating conditions of the business and by taking into consideration other pertinent factors which basically include the followings:

• the market and the business risks of the Target Company;

• the general economic outlook as well as specific investment environment for the business;

• the nature and current financial status of the Target Company;

• the historical performance of the comparable companies;

• the market expectation and required rate of return for similar business; and

• the assumptions as stated in the assumptions of the Valuation Report in Appendix V of this Circular.

After reviewing in details on the Valuation Report and the underlying valuation methodology and assumptions, the Board considered that the Consideration (i.e. RMB40 million), representing a discount of approximately 18.4% to the fair value of the 73% equity interest of the Target Company (i.e. RMB49 million), is fair and reasonable and in the interest of the Company as a whole.

Compliance with Rule 14.62 of the Listing Rules

As mentioned above, the Valuation has adopted income-based approach and discounted cash flow method. As such, the Valuation constitutes a “profit forecast” under Rule 14.61 of the Listing Rules. Rule 14.62 of the Listing Rules is hence applicable.

The principal assumptions, including commercial assumptions, on which the Valuation has been based, are as follows:

• i) the future operating revenue and expenditure of the Target Company will be in accordance with the projection provided by the Target Company;

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LETTER FROM THE BOARD

• ii) the valuation result is substantially dependent on the profit and cash flows forecast provided by the Target Company.

• iii) there will be no major changes in existing political, legal, fiscal or economic conditions in the country or district where the business is in operation;

• iv) there will be no major changes in the current taxation law in the areas in which the Target Company conducting their business, that the rate of tax payable remains unchanged and that all applicable laws and regulations will be complied with;

• v) the inflation, interest rates and currency exchange rate will not differ materially from those presently prevailing;

• vi) the Target Company will retain its key management and technical personnel to maintain its ongoing operations;

• vii) there will be no major business disruptions through international crisis, diseases, industrial disputes, industrial accidents or severe weather conditions that will affect the existing business;

• viii) the Target Company will remain free from claims and litigation against the business or its customers that will have a material impact on value;

• ix) the business is unaffected by any statutory notice and that operation of the business gives, or will give, no rise to a contravention of any statutory requirements;

• x) the business is not subject to any unusual or onerous restrictions or encumbrances; and

• xi) the potential bad debt of the Target Company will not materially affect its business operations.

BDO Limited, the reporting accountants of the Company, have reviewed the calculations of the discounted future cash flows of the Target Company in which the Valuation was based. The Board has reviewed the above principal assumptions and confirmed that the forecast has been made after due and careful enquiry. Letter from BDO Limited is included in the Appendix VII of this circular for the purpose of Rules 14.60A and 14.62 of the Listing Rules.

On the basis of the foregoing, the Company’s financial adviser, Euto Capital Partners Limited, is satisfied that the forecast has been made by the Company after due and careful enquiry. A letter from Euto Capital Partners Limited is included in Appendix VI of this circular as required under Rule 14.62 of the Listing Rules.

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LETTER FROM THE BOARD

The following are the qualifications of the experts who have given their opinions and advices included in this circular:

Name

Qualification

APAC Asset Valuation and Independent professional valuer Consulting Limited BDO Limited Certified Public Accountants Euto Capital Partners A corporation licenced to carry out Type 6 (advising on Limited corporate finance) regulated activities under the SFO

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of BDO Limited, the Valuer and Euto Capital Partners Limited is an Independent Third Party.

Conditions Precedent

The Purchaser shall, and shall procure its agents, forthwith upon the signing of the Acquisition Agreement, to conduct such review regarding the assets, liabilities, operation and affairs of the Target Company as it may reasonably consider appropriate, and the Vendor shall provide and procure the Target Company and its agents to provide such assistance as the Purchaser or its agents may reasonably require in connection with such review.

Completion is conditional upon fulfillment of the followings, inter alia:

• (a) the Purchaser having completed the due diligence in relation to the Target Company and having been satisfied with the results;

• (b) the Purchaser having complied with the requirements under the Listing Rules in respect of the transactions contemplated under the Acquisition Agreement;

• (c) the Purchaser being satisfied, from the date of the Acquisition Agreement and at any time before the Completion, that the Warranties remain true, accurate and not misleading and that no events have occurred that would result in any breach of any of the Warranties or other provisions of the Acquisition Agreement by the Vendor;

• (d) there being no Material Adverse Change up to the Completion; and

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LETTER FROM THE BOARD

• (e) (if applicable) all such waivers, consents or other documents as the parties to the Acquisition Agreement may require in relation to the completion of the transactions contemplated under the Acquisition Agreement having been obtained.

The Purchaser may waive the Conditions Precedent referred to in paragraphs (a), (c) and (d) above at any time before the Long Stop Date by notice in writing to the Vendor. Save as aforesaid, none of the other Conditions Precedent above is capable of being waived.

If the Conditions Precedent are not fulfilled (or waived by the Purchaser) on or before the Long Stop Date, the Acquisition Agreement will terminate automatically, but without prejudice to rights and remedies accrued before termination.

COMPLETION

The parties shall commence completion procedures in PRC upon all Conditions Precedent have been satisfied or waived (or such other time and date as the parties to the Acquisition Agreement may agree in writing).

Upon the Completion, the Purchaser, the Vendor and the Remaining Shareholder will respectively hold 73%, 12%, and 15% of the share equity in the Target Company. Immediately after the Completion, the Target Company will become a non-wholly owned subsidiary of the Company, and the financial results of the Target Company will be consolidated with the results of the Group.

INFORMATION ON THE PARTIES TO THE ACQUISITION AGREEMENT

The Company

The Company is an investment holding company and the Group is principally engaged in exhibition-related business, property sub-leasing, development and investment business, and money lending business.

The Purchaser

The Purchaser is an indirectly wholly-owned subsidiary of the Company established in PRC, which is principally engaged in the business of property leasing, property management, corporate consulting and advisory services in PRC.

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LETTER FROM THE BOARD

The Vendor

The Vendor is a company incorporated in PRC will limited liability and is principally engaged in the business of property management, property leasing, and hotel management in PRC.

The Remaining Shareholder

The Remaining Shareholder is an individual who is an Independent Third Party.

INFORMATION ABOUT THE TARGET COMPANY

The Target Company is a limited company incorporated in Shenzhen, Guangdong province, PRC and is principally engaged in the business of property management, property leasing, estate agency, and domestic trading. The principal operating business of the Target Company is sub-leasing and related services of the Jin Luan International Commercial Building（金鑾國際商務大廈 , the “ Building ”）, which is located in Long Hua District of Shenzhen and near the subway station of Line No. 4 of Shenzhen subway. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries and conducted necessary and reasonable due diligence work, the Target Company did not have any subsidiaries as at the Latest Practicable Date.

FINANCIAL INFORMATION OF THE TARGET COMPANY

Set out below is the financial information of the Target Company for the financial years ended 31 December 2017, 2018 and for the four months ended 30 April 2019 respectively:

			For the four
	For the financial year ended		months ended
	31 December		30 April
	2017	2018	2019
	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(audited)
Revenue	30,599	35,188	10,926
Profit before taxation	5,981	10,006	3,106
Profit after taxation	4,398	8,226	2,229
Total assets	253,697	231,413	223,776

Note:

The audited net assets value of the Target Company as at 31 December 2018 and as at 30 April 2019 were approximately RMB33,910,000 and RMB32,597,000 respectively.

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LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE ACQUISITION

Upon the Completion, the Target Company will become an indirect non-wholly owned subsidiary of the Company, and the financial results, assets and liabilities of the Target Company will be consolidated into the Group’s financial statements.

REASONS FOR AND BENEFITS OF THE ACQUISITION

It has been the Company’s objective to explore suitable investment opportunities in property sub-leasing, investment and development in Hong Kong, PRC and other overseas countries, with an aim to deliver substantial returns for shareholders of the Company through a series of acquisitions and proposed cooperation. The Directors have considered the following reasons and benefits of the Acquisition before entering into the Acquisition Agreement:

1. As mentioned above, the principal business of the Target Company is sub-leasing and related services of the Building. The Target Company has entered into a leasing agreement with the landlord of the Building (the “ Landlord ”) in 2011 (supplemented in 2012, collectively the “ Lease Agreement” ), pursuant to which the Landlord has let the Building to the Target Company for a period of 20 years from 1 April 2013 to 31 March 2033 (with a rental free period from 30 March 2012 to 31 March 2013). During the tenancy, the Target Company shall pay the rental to the Landlord monthly and the Target Company has absolute sub-leasing right to sub-lease any unit(s) in the Building to third parties without the prior consent of the Landlord.

2. The Building has 25 floors in total with gross floor area of approximately 38,387 sq.m and is located in the core area of Long Hua District of Shenzhen and is adjacent to Qing Hu subway satiation with ideal geographical location and convenient transportation. As at the Latest Practicable Date, approximately 32,682 sq.m of the Building has been leased to the sub-lessees by the Target Company. A map extracted from google map illustrating the location of the Building is set out below:

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LETTER FROM THE BOARD

Terms of the Lease Agreement

Under the Lease Agreement, the rental fees which shall be paid by the Target Company to the Landlord are set out below:

Rental Period

Rental Fee (per month)

1	April	2013	–	31	March	2017	RMB1,170,553
1	April	2017	–	31	March	2020	RMB1,264,197
1	April	2020	–	31	March	2023	RMB1,365,332
1	April	2023	–	31	March	2026	RMB1,474,558
1	April	2026	–	31	March	2029	RMB1,592,522
1	April	2029	–	31	March	2032	RMB1,719,923
1	April	2032	–	31	March	2033	RMB1,857,516

Pursuant to the Lease Agreement, the Landlord is not entitled to terminate the Lease Agreement unilaterally within the tenancy period and any adjustment on the monthly rental fee as stated in the Lease Agreement is subject to the prior consent of the Target Company. During the tenancy period, the Target Company shall be responsible for the building management fees (if any) and utilities fees comprising water and electricity fees and telecommunication fees. While no cap was imposed on the amount of building management fees and utilities fees payable, they are charged as described below.

As advised by the management of the Target Company, during the period from the commencement date of the term of the Lease Agreement to the Latest Practicable Date, no building management fees were charged by the Landlord and payable by the Target Company. It is advised by the management of the Target Company that the building management services were provided by the Vendor’s related company, being an Independent Third Party, and the relevant building management fees were therefore charged by that company. Given that such building management fees were borne and directly paid by each of the Subtenants (as defined below), there was no building management fee recongised in the financial statements of the Target Company since its incorporation to the Latest Practicable Date. As regards to the utilities fees, it is agreed between the Landlord and the Target Company that such utilities fees would be payable by the Subtenants based on the actual usage and local municipal standard rates for such electricity, water and telecommunication charges. Same as the above situations, given that the utilities fees were borne and directly paid by each of the Subtenants, no utilities fee was recongised in the financial statements of the Target Company since its incorporation to the Latest Practicable Date.

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LETTER FROM THE BOARD

In the event that building overhaul is required or if the Building has any quality issues (including the main block, outer wall, or roof waterproof work), the Landlord shall bear the maintenance fees and costs for such overhaul or maintenance work.

The Sub-tenancy between the Target Company and the Subtenants

The Target Company commenced sub-leasing the Building in 2016. Set out below are the averaged leased area and the historical occupancy rates of the Building since the Target Company commenced sub-leasing business.

				As at
				30 April
	2016	2017	2018	2019
Averaged leased area (sq.m)	36,890	35,432	33,914	32,682
Occupancy rates	96.1%	92.1%	88.4%	85.2%

The Target Company entered into separate and individual lease agreements (the “ SubLease Agreements ”) with the subtenants (the “ Subtenants ”). Generally, pursuant to the Sublease Agreements, the Subtenants shall bear the building management fees and utilities fees for the leased units comprising water and electricity fees and telecommunication fees.

As advised by the management of the Target Company, the building management fee (if any) was charged by the Target Company to each of the Subtenants based on the actual building management fee charged by an independent building management service provider, which is an Independent Third Party, while the utilities fees were payable by the Subtenants to the relevant units based on the actual usage of each of the shop unit and local municipal standard rates for such electricity, water and telecommunication charges. In light of this, based on the terms of the Lease Agreement and the Sub-Lease Agreements, the Target Company bear neither building management fees nor utilities fees during the tenancy period.

The Subtenants do not have right to early terminate the Sub-Lease Agreements without the prior approval from the Target Company, otherwise the Target Company has absolute rights to forfeit the rental deposits paid by the Subtenants.

The Subtenants mainly comprise of companies, individuals and individual industrial and commercial business（個體工商戶）. In selecting potential subtenants in the Building and subject to the market conditions, the Target Company usually gives priority to those with

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LETTER FROM THE BOARD

mature business model and sustainable income in order to minimise the possibility of their default in the payment of rentals to the Target Company. Further, generally there is no rental free period granted to the Subtenants.

According to the Sub-Lease Agreements, the terms of the Sub-Lease Agreements are ranged from 1 to 5 years. Despite (i) the Target Company has a falling occupancy rate over the last 3 years; and (ii) the existing Sub-Lease Agreements are not able to cover the remaining lease term of the Lease Agreement, the Board has considered and performed the following due diligence work done in order to assess the fairness and reasonableness of the Acquisition:

• (a) the management of the Company performed site visit to the Building. It is noted that the Building is situated at a prime geographical location, adjacent to the Futian District in downtown Shenzhen and surrounded by commercial buildings and shopping centres with a steady flow of visitors to the Building;

• (b) reviewed the occupancy rate of the Building and noted that it was maintained at over 80% during the last 5 years;

• (c) reviewed the Lease Agreement and all the Sub-Lease Agreements and noted that according to the terms of the aforesaid agreements, all the provisions under the aforesaid agreements are legal, valid and binding on the parties and is enforceable under applicable PRC laws and regulations;

• (d) reviewed the Valuation and the underlying cash flow forecast of the Target Company prepared by its management. It is noted that the future cash flow generated by the Target Company was estimated under a prudent basis which is prepared based on (1) the existing terms of the Sub-Lease Agreements and assumed that all the SubLease Agreements and (2) the assumption that all the tenancy relationship would be renewable or replaceable over the remaining terms of the Lease Agreement without material adjustment. No growth rate assumption on the occupancy rate and the rental fee charged by the Target Company is expected under the Valuation; and

• (e) the determination of the Consideration was set at a discount to the result of the Valuation and such discount represents a compensation to the Company in respect of the potential risk demonstrated by the falling occupancy rate of the Building.

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LETTER FROM THE BOARD

Having considered the above, the Board concluded that (i) the Building is situated at a developed district with upgraded transport modes and facilities which is positive to the lease of the Building; (ii) the Consideration represents a buffer to the Company on the potential risk recognised by the falling occupancy rate of the Building; and (iii) the change in ownership of the Target Company will not have any bearing or negative impact on the Lease Agreement or the Sub-Lease Agreements pursuant to the terms of the aforesaid agreements, the Board is of the view that the terms under the Lease Agreements and the Sub-Lease Agreements are fair and reasonable and are in the interests of the Company and its Shareholders as a whole.

Benefits of the Acquisition and the underlying sub-leasing business

As mentioned in the sub-section headed “Basis of the Consideration”, the Board has made reference to the Valuation in order to assess the fairness and reasonable of the Consideration. It is noted by the Board that the Valuation was derived based on the future operating revenue generated from the rental income pursuant to the Sub-Lease Agreements and the operating expenditure (including any capital expenditure which will potentially incurred during the lease term if the Lease Agreement) used in the Target Company. Having considered that the result of the Consideration (i.e. RMB40 million) represents a discount of approximately 18.4% to the results of the Valuation RMB49 million, the Board is of the view that there is a room for it to make a gain through the sub-leasing.

Besides, as set out in the annual report of the Company for the financial year ended 31 March 2019, the Group has continued the efforts to consolidate and realign its businesses to enable the Group to achieve improvements in its financial position. As one of the operating segment of the Group, the Board considered that (i) the sub-leasing business can generate a stable and recurrent income to the Group; (ii) it also enables the Group to expand and widen its presence in the property market and benefits the business development of the Group in the PRC, together with the Consideration which is fair and reasonable as mentioned above, the Board considered that the Acquisition is in line with the principal business direction of the Group.

As such, the Company considers that the Acquisition is in line with the overall business direction of the Group and is a good investment opportunity to develop and expand the Group’s property sub-leasing business in PRC.

Having considered the nature of and the benefits resulting from the Acquisition, the Directors believe that the terms of the Acquisition Agreement are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

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LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Acquisition exceed 25%, but are all less than 100%, the Acquisition constitutes a major transaction of the Company and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

WRITTEN SHAREHOLDERS’ APPROVAL

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, no Shareholders or any of their respective associates have any material interest in the Acquisition. As such, no Shareholders would be required to abstain from voting in favour of the resolution approving the Acquisition. As at the Latest Practicable Date, Grand Nice International Limited, being the controlling shareholder of the Company, held approximately 53.80% of the total issued share capital of the Company. Accordingly, pursuant to Rule 14.44 of the Listing Rules, written Shareholders’ approval is accepted in lieu of holding a general meeting of the Company to approve the terms of, and the transactions contemplated, under the Acquisition Agreement upon satisfaction of the conditions set out under Rule 14.44 of the Listing Rules.

If the Company were to convene a special general meeting for the approval of the Acquisition and voting was required, the Directors would have recommended the Shareholders to vote in favour of such resolutions based on the reasons set out in this letter.

GENERAL INFORMATION

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

By Order of the Board of

China Tangshang Holdings Limited Chen Weiwu

Chairman

— 16 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIx I

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the four financial years ended 31 March 2016, 2017, 2018 and 2019 were set out in the relevant annual reports of the Company posted on the Stock Exchange’s website (http://www.hkexnews.hk) and the Company’s website (http://www.ts674.com). Please also see below quick links to the relevant annual reports:

Annual report of the Company for the year ended 31 March 2019 published on 25 July 2019:

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0725/ltn20190725937.pdf

Annual report of the Company for the year ended 31 March 2018 published on 27 July 2018:

http://www3.hkexnews.hk/listedco/listconews/SEHK/2018/0727/LTN20180727564.pdf

Annual report of the Company for the year ended 31 March 2017 published on 27 July 2017:

http://www3.hkexnews.hk/listedco/listconews/SEHK/2017/0727/LTN20170727549.pdf

Annual report of the Company for the year ended 31 March 2016 published on 27 July 2016:

http://www3.hkexnews.hk/listedco/listconews/SEHK/2016/0727/LTN20160727327.pdf

2. STATEMENT OF INDEBTEDNESS

As at 31 August 2019, being the latest practicable date for the purpose of preparing the indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding borrowings of approximately HK$183.0 million, details of which are set out below:

— I-1 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIx I

Bank borrowings, secured and guaranteed Repayable within one year Repayable between one and two years Amounts due to related parties, unsecured Convertible bonds, unsecured_(Note)_	Approximate HK$’000 48,200 19,373
	67,573
	27,040
	88,373

Note:

As at 31 August 2019, the outstanding principal amounts of the convertible bonds were HK$88,373,040. The convertible bonds with outstanding principal amount of HK$46,341,960, which are non-interest bearing, were issued on 25 July 2017 and will be redeemed on 24 July 2021. The convertible bonds with outstanding principal amount of HK$42,031,080, which are non-interest bearing, were issued on 31 August 2018 and will be redeemed on 31 August 2020.

Securities

As at 31 August 2019, Mr. Yang Lei (a director of certain subsidiaries of the Company), his spouse and a company beneficially owned by Mr. Yang Lei and his spouse (the “ Related Company ”) and a related party respectively provided guarantees for certain bank loans of the Group. Certain assets of Mr. Yang Lei, his spouse, a related party and the Related Company were also pledged to secure the aforesaid bank loans of the Group.

Save as disclosed above and apart from intra-group liabilities and normal trade and other payables, the Enlarged Group did not have any loan capital issued or agreed to be issued, debt securities issued and outstanding, authorised or otherwise created but unissued, bank overdrafts or loans or term loans, other borrowings or other similar indebtedness, liabilities under acceptances, acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities outstanding on 31 August 2019.

— I-2 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIx I

Lease liabilities

The Group had adopted HKFRS 16 “Leases” for accounting period beginning on 1 April 2019 and the Target Company had adopted HKFRS 16 throughout the Track Record Period as stated in note 2 of the Accountants’ Report in Appendix II to this circular. The total lease liabilities of the Enlarged Group as at 31 August 2019 were approximately HK$277 million.

3. WORKING CAPITAL

Taking into account the internally generated funds and the presently available credit facilities, the Directors are of the opinion that the Enlarged Group has, following the entering into of the Acquisition Agreement, sufficient working capital for its present requirements for at least 12 months from the date of this circular, in the absence of unforeseeable circumstances.

4. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

The management team and Board of Directors are highly experienced in the real estate development industry in PRC and possess with significant resources and networks in PRC which the Company expects to be able to leverage for its future development in the property sub-leasing, development and investment business sector.

Looking ahead, the Directors expect the business environment to remain challenging, but are cautiously optimistic towards the overall outlook of the Group. The Group has continued the efforts to consolidate and realign its businesses to enable the Group to achieve improvements in its financial position. The Group is working towards to attain a sustainable growth, and at the same time the Group is also continuously exploring and identifying other suitable investment opportunities (if any) to enhance its earning potential so as to enhance shareholder value as a whole.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there are no material adverse changes in the financial or trading position of the Group since 31 March 2019 (being the date to which the latest published audited consolidated financial statements of the Group were made up).

— I-3 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

The following is the text of a report set out on pages II-1 to II-41, received from the Company’s reporting accountants, BDO Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

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ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF CHINA TANGSHANG HOLDINGS LIMITED

Introduction

We report on the historical financial information of 深圳市金帆投資發展有限公司 (“ Shenzhen Jinfan Investment Development Co., Ltd ”) (the “ Target Company ”) set out on pages II-4 to II-41, which comprises the statements of financial position as at 31 December 2016, 2017 and 2018 and 30 April 2019 and the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows for each of the periods then ended (the “ Track Record Period ”) and a summary of significant accounting policies and other explanatory information (together the “ Historical Financial Information ”). The Historical Financial Information set out on pages II-4 to II-41 forms an integral part of this report, which has been prepared for inclusion in the circular of China Tangshang Holdings Limited (the “ Company ”) dated 18 October 2019 (the “ Circular* ”) in connection with the proposed acquisition of the 73% equity share of the Target Company.

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of Historical Financial Information that is free from material misstatement, whether due to fraud or error.

* For identification only

— II-1 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on the Historical Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

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

Opinion

In our opinion the Historical Financial Information gives, for the purposes of the accountants’ report, a true and fair view of the Target Company’s financial position as at 31 December 2016, 2017 and 2018 and 30 April 2019 and of its financial performance and cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information.

Review of Stub Period Comparative Historical Financial Information

We have reviewed the stub period comparative historical financial information of the Target Company which comprises the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the four

— II-2 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

months ended 30 April 2018 and other explanatory information (together the “Stub Period Comparative Historical Financial Information”). The directors of the Company are responsible for the preparation and presentation of the Stub Period Comparative Historical Financial Information in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Historical Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagement 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express and audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Historical Financial Information, for the purposes of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation and presentation set out in Note 2 to the Historical Financial Information.

Report on Matters under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information and the Stub Period Comparative Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page II-4 have been made.

BDO Limited

Certified Public Accountants

Chan Wing Fai

Practising Certificate Number: P05443

Hong Kong

18 October 2019

— II-3 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

I. HISTORICAL FINANCIAL INFORMATION OF THE TARGET COMPANY

Preparation of the Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The financial statements of the Target Company for the Track Record Period, on which the Historical Financial Information is based, were audited by BDO Limited in accordance with Hong Kong Standards on Auditing (“ HKSAs ”) issued by the HKICPA (“ Underlying Financial Statements ”).

The Historical Financial Information is presented in Renminbi (“ RMB ”)

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 7 Other income and gains or losses, net 8 Depreciation on property, plant and equipment 10 Staff costs 10 Other operating expenses Finance costs 9 Profit before income tax expense 10 Income tax expense 12 Profit and total comprehensive income for the year/period	2016 RMB 33,877,895 (8,076,876) (11,111) (585,284) (2,216,889) (10,387,924) 12,599,811 (2,971,528) 9,628,283	Year ended 31 December 2017 RMB 30,598,574 (3,138,909) (210,788) (669,221) (10,461,284) (10,137,754) 5,980,618 (1,582,833) 4,397,785	2018 RMB 35,188,410 (6,482,154) (314,347) (314,555) (8,211,932) (9,859,457) 10,005,965 (1,780,087) 8,225,878	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 12,815,518 10,926,013 (3,239,442) (2,924,806) (104,591) (126,807) (107,725) (106,268) (1,072,219) (1,441,145) (3,318,445) (3,221,394) 4,973,096 3,105,593 (1,243,274) (690,516) 3,729,822 2,415,077	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 12,815,518 10,926,013 (3,239,442) (2,924,806) (104,591) (126,807) (107,725) (106,268) (1,072,219) (1,441,145) (3,318,445) (3,221,394) 4,973,096 3,105,593 (1,243,274) (690,516) 3,729,822 2,415,077
					3,105,593 (690,516)
					2,415,077

— II-4 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF FINANCIAL POSITION

Notes Non-current assets Property, plant and equipment 14 Investment properties 15 Deferred tax assets 20 Rental deposits 17 Current assets Accounts receivable 16 Prepayments, deposits and other receivables 17 Amount due from immediate holding company 18 Amounts due from related parties 18 Amounts due from fellow subsidiaries 18 Tax recoverable Cash and cash equivalents Current liabilities Bills payable Accruals, deposits received and other payables 19 Receipts in advance Lease liabilities 21 Amounts due to fellow subsidiaries 18 Tax payables	2016 RMB 38,902 229,603,733 3,232,088 3,870,059 236,744,782 1,301,093 10,062,284 23,433,109 11,343 — — 2,291,710 37,099,539 15,000,000 4,824,188 4,705,337 4,751,678 3,692,538 3,857,944 36,831,685	At 31 December 2017 2018 RMB RMB 1,063,922 752,526 223,157,566 215,932,192 3,308,834 3,267,823 3,870,059 3,870,059 231,400,381 223,822,600 721,731 812,348 7,404,729 4,592,701 8,253,652 — 2,996,343 — — — 60,492 — 2,859,750 2,185,015 22,296,697 7,590,064 — — 4,127,481 6,627,404 4,827,407 1,457,006 6,575,104 8,135,807 3,784,633 3,955,305 — 487,376 19,314,625 20,662,898	At 30 April 2019 RMB 822,719 213,323,165 3,412,374 3,870,059
			221,428,317
			668,931 4,336,825 — — 182,053 — 571,910
			5,759,719
			— 8,050,931 1,346,385 9,603,609 — 1,049,091
			20,050,016

— II-5 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

Notes Net current assets/(liabilities) Non-current liabilities Deposits received 19 Lease liabilities 21 Total liabilities Net assets Equity Paid-in capital 22 Reserves 23 Total equity	2016 RMB 267,854 5,995,294 183,483,873 189,479,167 226,310,852 47,533,469 50,000,000 (2,466,531) 47,533,469	At 31 December 2017 2018 RMB RMB 2,982,072 (13,072,834) 4,278,233 4,274,220 178,172,966 172,565,553 182,451,199 176,839,773 201,765,824 197,502,671 51,931,254 33,909,993 50,000,000 50,000,000 1,931,254 (16,090,007) 51,931,254 33,909,993	At 30 April 2019 RMB (14,290,297) 4,014,935 170,526,554 174,541,489 194,591,505 32,596,531 50,000,000 (17,403,469) 32,596,531

— II-6 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF CHANGES IN EQUITY

At 1 January 2016 Profit and total comprehensive income for the year Appropriation to statutory reserve At 31 December 2016 and 1 January 2017 Profit and total comprehensive income for the year Appropriation to statutory reserve At 31 December 2017 and 1 January 2018 Profit and total comprehensive income for the year Appropriation to statutory reserve Deemed distribution to owners of the Company	Paid-in capital (Note 22) RMB 50,000,000 — — 50,000,000 — — 50,000,000 — — —	Statutory surplus reserve (Note 23) RMB 962,133 — 962,828 1,924,961 — 439,778 2,364,739 — 822,588 —	Other reserve (Note 23) RMB — — — — — — — — — (26,247,139)	(Accumulated losses)/ retained earnings (Note 23) RMB (13,056,947) 9,628,283 (962,828) (4,391,492) 4,397,785 (439,778) (433,485) 8,225,878 (822,588) —	Total RMB 37,905,186 9,628,283 —
					47,533,469 4,397,785 —
					51,931,254 8,225,878 — (26,247,139)

— II-7 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

At 31 December 2018 and 1 January 2019 Profit and total comprehensive income for the period Appropriation to statutory reserve Deemed distribution to owners of the Company At 30 April 2019 For the four months ended 30 April 2018 (unaudited) At 1 January 2018 Profit and total comprehensive income for the period Appropriation to statutory reserve At 30 April 2018	Paid-in capital (Note 22) RMB 50,000,000 — — — 50,000,000 50,000,000 — — 50,000,000	Statutory surplus reserve (Note 23) RMB 3,187,327 — 241,508 — 3,428,835 2,364,739 — 372,982 2,737,721	Other reserve (Note 23) RMB (26,247,139) — — (3,728,539) (29,975,678) — — — —	(Accumulated losses)/ retained earnings (Note 23) RMB 6,969,805 2,415,077 (241,508) — 9,143,374 (433,485) 3,729,822 (372,982) 2,923,355	Total RMB 33,909,993 2,415,077 — (3,728,539)
					32,596,531
					51,931,254 3,729,822 —
					55,661,076

— II-8 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF CASH FLOWS

Notes Profit before income tax Adjustment for: Interest income 8 Depreciation on property, plant and equipment 10 Loss on fair value change in investment properties 10 Finance costs 9 Provision/(reversal) of loss allowance for ECL of amount due from immediate holding company 10 Provision/(reversal) of loss allowance for ECL of amounts due from related parties 10 Decrease /(increase) in accounts receivable Decrease/(increase) in prepayments, deposits and other receivables Decrease in finance lease receivables Increase in amounts due from related parties (Decrease)/increase in accruals, deposits received and other payables (Decrease)/increase in receipts in advance Cash generated from operations	2016 RMB 12,599,811 (11,822) 11,111 9,154,267 10,387,924 117,754 57 32,259,102 1,788,575 2,418,321 2,704,631 (10,000) (13,914,999) (3,481,931) 21,763,699	Year ended 31 December 2017 RMB 5,980,618 (9,427) 210,788 7,456,509 10,137,754 (76,278) 15,000 23,714,964 579,362 2,657,555 — (3,000,000) (2,413,768) 122,070 21,660,183	2018 RMB 10,005,965 (3,429) 314,347 7,225,374 9,859,457 (41,476) (15,057) 27,345,181 (90,617) 2,812,028 — — 2,495,910 (3,370,401) 29,192,101	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 4,973,096 3,105,593 (717) (791) 104,591 126,807 3,351,486 3,017,430 3,318,445 3,221,394 — — — — 11,746,901 9,470,433 (536,086) 143,417 440,375 (744,124) — — — — 605,703 1,164,242 (1,456,141) (110,621) 10,800,752 9,923,347	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 4,973,096 3,105,593 (717) (791) 104,591 126,807 3,351,486 3,017,430 3,318,445 3,221,394 — — — — 11,746,901 9,470,433 (536,086) 143,417 440,375 (744,124) — — — — 605,703 1,164,242 (1,456,141) (110,621) 10,800,752 9,923,347
					9,470,433 143,417 (744,124) — — 1,164,242 (110,621)
					9,923,347

— II-9 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

Notes Tax paid Interest received Net cash flows generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment Additions to investment properties Net cash flows used in investing activities Cash flows from financing activities 29 Repayment of bills payable Repayment of lease liabilities Interest paid (Repayment to)/advance from fellow subsidiaries Repayment from/(advance to) immediate holding company Net cash used in financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year/period Cash and cash equivalents at end of year/period	2016 RMB (4,429,905) 11,822 17,345,616 (24,100) (4,520,398) (4,544,498) (30,000,000) (7,791,818) (10,387,924) (247,240) 37,022,360 (11,404,622) 1,396,496 895,214 2,291,710	Year ended 31 December 2017 RMB (5,578,015) 9,427 16,091,595 (1,235,808) (1,010,342) (2,246,150) (15,000,000) (3,487,481) (10,137,754) 92,095 15,255,735 (13,277,405) 568,040 2,291,710 2,859,750	2018 RMB (1,191,208) 3,429 28,004,322 (2,951) — (2,951) — (4,046,710) (9,859,457) 170,672 14,940,611 (28,676,106) (674,735) 2,859,750 2,185,015	Four months ended 30 April 2018 2019 RMB RMB (unaudited) (98,713) (273,352) 717 791 10,702,756 9,650,786 — (197,000) — (408,403) — (605,403) — — (948,292) (571,197) (1,580,102) (3,221,394) 42,415 (4,137,358) (10,821,556) (2,728,539) (13,307,535) (10,658,488) (2,604,779) (1,613,105) 2,859,750 2,185,015 254,971 571,910	Four months ended 30 April 2018 2019 RMB RMB (unaudited) (98,713) (273,352) 717 791 10,702,756 9,650,786 — (197,000) — (408,403) — (605,403) — — (948,292) (571,197) (1,580,102) (3,221,394) 42,415 (4,137,358) (10,821,556) (2,728,539) (13,307,535) (10,658,488) (2,604,779) (1,613,105) 2,859,750 2,185,015 254,971 571,910
					9,650,786
					(197,000) (408,403)
					(605,403)
					— (571,197) (3,221,394) (4,137,358) (2,728,539)
					(10,658,488)
					(1,613,105) 2,185,015
					571,910

— II-10 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. Corporate information

The Target Company was established in the People’s Republic of China (the “ PRC ”) as a limited liability company on 10 January 2009. Its registered office and its principal place of business is located at 廣東省深圳市南山區東濱路濠盛商務中心 16 樓 1601A 單元 . The principal activity of Target Company is property sub-leasing business in the PRC.

In the opinion of the directors of the Target Company (the “ Directors ”), the immediate holding company and the ultimate holding company are 深圳市金騏集團有限公司 and 深圳市盛隆達投 資有限公司 as at 31 December 2016, 2017 and 2018 and 30 April 2019, which are the limited liability companies incorporated in the PRC.

2. Basis of preparation and presentation

The Historical Financial Information has been prepared in accordance with accounting policies set out in Note 4 below which conform with Hong Kong Financial Reporting Standards (“ HKFRSs ”), Hong Kong Accounting Standards (“ HKASs ”) and interpretations (hereinafter collectively referred to as the “ HKFRS ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”). The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

The Historical Financial Information has been prepared under the historical cost basis, except for the investment properties which measured at fair value basis. The measurement bases are fully described in the accounting policies below in Note 4. All HKFRSs effective for accounting period commencing from 1 January 2019 together with the relevant transitional provisions have been adopted by the Target Company in the preparation of the Historical Financial Information throughout the Track Record Period.

The preparation of Historical Financial Information in conformity with HKFRSs requires the use of certain critical accounting assumptions and estimates. It also requires management to exercise its judgement in the process of applying Target Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 5.

As at 30 April 2019, the Target Company reported net current liabilities of RMB14,290,297. The owners the Target Company have confirmed their intention to provide sufficient financial support to the Target Company so as to enable the Target Company to meet all its liabilities and obligations as and when they fall due and to enable the Target Company to continue its businesses for twelve months after the period ended 30 April 2019 respectively if the Proposed Acquisition is not completed, and to the completion date if the Proposed Acquisition is completed. China Tangshang Holdings Limited has also confirmed its intention to provide sufficient financial support to the Target Company so as to enable the Target Company to meet all its liabilities and obligations as and when they fall due and to enable the Target Company to continue its businesses with effective from the completion date of the Proposed Acquisition up to twelve months after the period ended 30 April 2019 if the Proposed Acquisition is completed. Consequently, the Historical Financial Information of the Target Company has been prepared on a going concern basis.

If the going concern basis is not appropriate, adjustments would have to be made to reduce the values of the assets to their realisable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets as current assets.

— II-11 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Impact of issued but are not yet effective HKFRSs

The following new/revised HKFRSs, potentially relevant to the Historical Financial Information, have been issued, but not yet effective and have not been early adopted by the Target Company. The Target Company’s current intention is to apply these changes on the date they become effective.

HKFRS 17 Insurance Contracts2 Amendments to HKFRS 3 Definition of Business1 Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor and its HKAS 23 Associate or Joint Venture3 Amendments to HKAS 1 and Definition of Materials1 HKAS 8 Conceptual Framework for Revised Conceptual Framework for Financial Reporting Financial Reporting 2018 20181

1 Effective for annual periods beginning on or after 1 January 2020

2 Effective for annual periods beginning on or after 1 January 2021

3 No mandatory effective date yet determined but available for adoption

The Target Company has already commenced an assessment of the impact of these new and revised HKFRSs. The directors of the Target Company anticipate that the application of new and revised HKFRSs will have no material impact on the result and the financial position of the Target Company except as described below:

Amendments to HKAS 1 and HKAS 8 – Definition of Materials

Amendments to HKAS 1 and HKAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. The Target Company expects to adopt the amendments prospectively from 1 January 2020. The amendments are not expected to have any significant impact on the Target Company’s financial statements.

4. Summary of significant accounting policies

a) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

The cost of property, plant and equipment includes its purchase price and the costs directly attributable to the acquisition of the items.

— II-12 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Target Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as an expense in profit or loss during the financial period in which they are incurred.

Property, plant and equipment are depreciated so as to write off their cost or valuation net of expected residual value over their estimated useful lives on a straight-line basis. The useful lives, residual value and depreciation method are reviewed, and adjusted if appropriate, at the end of each reporting period. The useful lives are as follows:

Office equipment, furniture and fixtures 3-5 years Motor vehicles 4 years

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

The gain or loss on disposal of an item of property, plant and equipment other than leasehold improvements is the difference between the net sale proceeds and its carrying amount, and is recognised in profit or loss on disposal.

b) Investment properties

Investment properties are buildings which are owned or held by the lessee as right-of-use assets to earn rental income or for capital appreciation, and which are not occupied by the Target Company. It also includes properties that are being constructed or developed for future use as investment properties. Right-of-use assets are classified and accounted for as an investment property when the rest of the definition of investment property is met. The Target Company applies the fair value model to investment property, including right-ofuse assets that meet the definition of investment property.

c) Leasing

The Target Company as lessor

When the Target Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Target Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. As part of this assessment, the Target Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Target Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, no with reference to the underlying asset. If a head lease is a short-term lease to which the Target Company applies the exemption described above, then it classified the sub-lease as an operating lease.

— II-13 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

If an arrangement contains lease and non-lease components, the Target Company applies HKFRS 15 to allocate the consideration in the contract.

The Target Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of the revenue.

The accounting policies applicable to the Target Company as a lessor in the comparable period were not different from HKFRS 16. However, when the Target Company was an intermediate lessor the sub-leases were classified with reference to the underlying asset.

The Target Company as lessee

The Target Company assesses whether a contract is or contains a lease, at inception of a contract. The Target Company recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee at the lease commencement date, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For the leases, the Target Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Target Company uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise:

• fixed lease payments (including in-substance fixed payments), less any lease incentives;

• variable lease payments that depend on an index or rate;

• the amount expected to be payable by the lessee under residual value guarantees;

• the exercise price of purchase options, if the lessee is reasonably certain to exercise the option; and

• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented as a separate line in the statements of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Target Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever

• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

— II-14 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

• the lease payments changes due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).

• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Target Company incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under HKAS 37 “Provisions, contingent liabilities and contingent assets”. The costs are included in the related right-of-use asset unless those costs are incurred to produce inventories.

Right-of-use assets are depreciated over the shorter period of lease term and useful live of the underlying asset. If a lease transfer ownership of the underlying asset or the cost of the right-of-use asset reflects that the Target Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

The Target Company applies HKAS 36 to determine whether the right-of-use asset is impaired and accounts for any identified impairment loss as described above.

As a practical expedient, HKFRS 16 permits a lessee not to separate non-lease components, and instead account for each lease component and any associated non-lease components as a single component. The Target Company has not used this practical expedient.

d) Financial instruments

(i) Financial assets

A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for an item not at fair value through profit or loss (“ FVTPL ”), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Target Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the market place.

Financial assets with embedded derivatives are considered in their entirely when determining whether their cash flows are solely payment of principal and interest.

— II-15 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

Debt instruments

Subsequent measurement of debt instruments depends on the Target Company’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Target Company classifies its debt instruments:

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Financial assets at amortised cost are subsequently measured using the effective interest rate method. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain on derecognition is recognised in profit or loss.

(ii) Impairment loss on financial assets

The Target Company recognises loss allowances for expected credit loss (“ ECL ”) on trade receivables, contract assets, financial assets measured at amortised cost and debt investments measured at FVOCI. The ECLs are measured on either of the following bases: (1) 12 months ECLs: these are the ECLs that result from possible default events within the 12 months after the reporting date: and (2) lifetime ECLs: these are ECLs that result from all possible default events over the expected life of a financial instrument. The maximum period considered when estimating ECLs is the maximum contractual period over which the Target Company is exposed to credit risk.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the difference between all contractual cash flows that are due to the Target Company in accordance with the contract and all the cash flows that the Target Company expects to receive. The shortfall is then discounted at an approximation to the assets’ original effective interest rate.

The Target Company has elected to measure loss allowances for trade receivables and contract assets using HKFRS 9 simplified approach and has calculated ECLs based on lifetime ECLs. The Target Company has established a provision matrix that is based on the Target Company’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

For other debt financial assets, the ECLs are based on the 12-months ECLs. However, when there has been a significant increase in credit risk since origination, the allowance will be based on the lifetime ECLs.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Target Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information analysis, based on the Target Company’s historical experience and informed credit assessment and including forward-looking information.

The Target Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

— II-16 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

The Target Company considers a financial asset to be credit-impaired when: (1) the borrower is unlikely to pay its credit obligations to the Target Company in full, without recourse by the Target Company to actions such as realising security (if any is held); or (2) the financial asset is more than 90 days past due.

Interest income on credit-impaired financial assets is calculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financial asset. For non credit-impaired financial assets interest income is calculated based on the gross carrying amount.

(iii) Write-off policy

The gross carrying amount of a financial asset, lease receivable or contract asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

(iv) Financial liabilities

The Target Company classifies its financial liabilities, depending on the purpose for which the liabilities were incurred. Financial liabilities at fair value through profit or loss are initially measured at fair value and financial liabilities at amortised costs are initially measured at fair value, net of directly attributable costs incurred.

Financial liabilities at amortised cost

Financial liabilities at amortised cost including bills payables, accruals, deposits received and other payables, lease liabilities and amounts due to fellow subsidiaries are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss.

Gains or losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

(v) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability, or where appropriate, a shorter period.

(vi) Derecognition

The Target Company derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKFRS 9.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

— II-17 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

Where the Target Company issues its own equity instruments to a creditor to settle a financial liability in whole or in part as a result of renegotiating the terms of that liability, the equity instruments issued are the consideration paid and are recognised initially and measured at their fair value on the date the financial liability or part thereof is extinguished. If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments are measured to reflect the fair value of the financial liability extinguished. The difference between the carrying amount of the financial liability or part thereof extinguished and the consideration paid is recognised in profit or loss for the year.

e) Cash and cash equivalents

For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short-term highly liquid investments that are readily convertible into known amount of cash, and are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Target Company’s cash management.

f) Revenue recognition

Revenue from rental income under operating leases is recognised on a straight-line basis over the term of the relevant lease.

Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate.

g) Income taxes

Income taxes comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the end of reporting period.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes. Except for recognised assets and liabilities that affect neither accounting nor taxable profits, deferred tax liabilities are recognised for all temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the end of reporting period.

An exception to the general requirement on determining the appropriate tax rate used in measuring deferred tax amount is when an investment property is carried at fair value under HKAS 40 “Investment Property”. Unless the presumption is rebutted, the deferred tax amounts on these investment properties are measured using the tax rates that would apply on sale of these investment properties at their carrying amounts at the reporting date. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all the economic benefits embodied in the property over time, rather than through sale.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income.

— II-18 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

h) Foreign currency

Transactions entered into by the Target Company in currencies other than the functional currency, which is the currency of the primary economic environment in which it operates, are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the end of each reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise.

i) Employee benefits

(i) Post-employment benefits

The employees of the Target Company that operate in the PRC are required to participate in a government-managed retirement benefit schemes. These subsidiaries are required to contribute a fixed cost per employee to the government-managed retirement benefit schemes. The contributions are charged to profit or loss as they become payable.

j) Impairment of assets (other than financial assets)

At the end of each reporting period, the Target Company reviews the carrying amounts of the property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased.

If the recoverable amount (i.e. the greater of the fair value less costs of disposal and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the impairment loss is treated as a revaluation decrease under that HKFRS.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the reversal of the impairment loss is treated as a revaluation increase under that HKFRS.

Value in use is based on the estimated future cash flows expected to be derived from the asset or cash generating unit, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash generating unit.

— II-19 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

k) Borrowing costs

Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalised as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalised. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

l) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Target Company has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

m) Related party

• (a) A person or a close member of that person’s family is related to the Target Company if that person:

• (i) has control or joint control over the Target Company;

• (ii) has significant influence over the Target Company; or

• (iii) is a member of key management personnel of the Target Company or the Target Company’s parent.

• (b) An entity is related to the Target Company if any of the following conditions apply:

• (i) The entity and the Target Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

• (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

• (iii) Both entities are joint ventures of the same third party;

• (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

• (v) The entity is a post-employment benefit plan for the benefit of the employees of the Target Company or an entity related to the Target Company;

— II-20 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (vi) The entity is controlled or jointly controlled by a person identified in (a);

• (vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity); and

• (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Target Company or to the Target Company’s parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

• (i) that person’s children and spouse or domestic partner;

• (ii) children of that person’s spouse or domestic partner; and

• (iii) dependents of that person or that person’s spouse or domestic partner.

5. Critical accounting judgement and estimates

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Target Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Impairment of financial assets at amortised cost

The Target Company recognise a loss allowance for expected credit loss (“ ECLs ”) for financial assets measured at amortised cost. ECLs on these financial assets are estimated using provision matrix based on the Target Company’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the each of the year ended date during the Track Record Period. If the financial condition of the debtors and the general economic conditions were to deteriorate, actual write-offs would be higher than estimates.

(b) Useful life of property, plant and equipment

Management determines the estimated useful lives of the property, plant and equipment and will revise depreciation charges when useful lives differ from previous estimates.

(c) Fair value of investment properties

The fair value of the investment properties are determined by independent valuers on an open market value for existing use basis. In making their judgment, consideration has been given to assumptions that are mainly based on market conditions existing at the end of reporting period, by reference to recent market transactions and appropriate capitalisation rates based on an estimation of the rental income. These estimates are regularly compared to actual market data and actual transactions entered into by the Target Company.

— II-21 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

(d) Deferred taxation of investment properties

For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties that are measured using the fair value model, the Directors have reviewed the Target Company’s investment property and concluded that the investment properties held by the Target Company in the PRC are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, in measuring the Target Company’s deferred taxation on investment properties, the Directors have determined that the presumption that the carrying amounts of investment properties measured using the fair value model are recovered entirely through sale is rebutted.

6. Operating segment information

The Target Company has identified its operating segment based on the regular internal financial information reported to the chief decision makers about allocation of resources to assess the performance of the Target Company’s business.

The principal activity of the Target Company is engaged in property sub-leasing business in the PRC. The Directors consider that this is the only component for internal reporting to the chief decision makers and, accordingly, the only one operating segment under the requirements of HKFRS 8 “Operating Segments”.

All the segment assets and liabilities are located in the PRC.

During the Track Record Period, there is no customer contributed 10% or more to the Target Company’s revenue.

7. Revenue

The principal activity of the Target Company is engaged in property sub-leasing business.

Rental income Finance lease interest income	Year ended 31 December 2016 2017 2018 RMB RMB RMB 33,806,803 30,598,574 35,188,410 71,092 — — 33,877,895 30,598,574 35,188,410	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 12,815,518 10,926,013 — — 12,815,518 10,926,013	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 12,815,518 10,926,013 — — 12,815,518 10,926,013
			10,926,013

— II-22 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

8. Other income and gains or losses, net

Income from early termination of rental agreements Interest income Loss on fair value change in investment properties (Provision)/reversal of loss allowance for ECL of amount due from immediate holding company (Provision)/reversal of loss allowance for ECL of amounts due from related parties Others	Year ended 31 December 2016 2017 2018 RMB RMB RMB 756,117 4,146,383 565,346 11,822 9,427 3,429 (9,154,267) (7,456,509) (7,225,374) (117,754) 76,278 41,476 (57) (15,000) 15,057 427,263 100,512 117,912 (8,076,876) (3,138,909) (6,482,154)	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 74,510 30,732 717 791 (3,351,486) (3,017,430) — — — — 36,817 61,101 (3,239,442) (2,924,806)	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 74,510 30,732 717 791 (3,351,486) (3,017,430) — — — — 36,817 61,101 (3,239,442) (2,924,806)
			(2,924,806)

9. Finance costs

				Four months ended	Four months ended
	Year	ended 31 December		30	April
	2016	2017	2018	2018	2019
	RMB	RMB	RMB	RMB	RMB
				(unaudited)
Interest expenses on lease
liabilities	10,387,924	10,137,754	9,859,457	3,318,445	3,221,394

— II-23 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

10. Profit before income tax expense

Profit before income tax expense is arrived at after charging/(crediting):

Depreciation of property, plant and equipment Staff costs — salaries, wages and other benefits — retirement benefit scheme contribution Loss on fair value change in investment properties Provision/(reversal) of ECL for amount due from immediate holding company Provision/(reversal) of ECL for amounts due from related parties	Year ended 31 December 2016 2017 2018 RMB RMB RMB 11,111 210,788 314,347 551,251 647,934 289,174 34,033 21,287 25,381 585,284 669,221 314,555 9,154,267 7,456,509 7,225,374 117,754 (76,278) (41,476) 57 15,000 (15,057)	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 104,591 126,807 100,617 96,516 7,108 9,752 107,725 106,268 3,351,486 3,017,430 — — — —	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 104,591 126,807 100,617 96,516 7,108 9,752 107,725 106,268 3,351,486 3,017,430 — — — —
			106,268
			3,017,430 — —

11. Directors’ and five highest paid individuals’ remuneration

(a) Directors’ remuneration

Year ended 31 December 2016

Directors Mr. Li You 李友先生 Mr. Ceng Pinlian 曾品連先生 Mr. Zou Guangfu 鄒廣福先生	Fees RMB — — — —	Salaries and other benefits Contribution to defined contribution pension plans RMB RMB — — — — — — — —	Total RMB — — —
			—

— II-24 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

Year ended 31 December 2017

Fees Salaries and other benefits Contribution to defined contribution pension plans RMB RMB RMB Directors Mr. Li You 李友先生 — — — Mr. Ceng Pinlian 曾品連先生 — — — Mr. Zou Guangfu 鄒廣福先生 — — — — — — Year ended 31 December 2018 Fees Salaries and other benefits Contribution to defined contribution pension plans RMB RMB RMB Directors Mr. Li You 李友先生 — — — Mr. Ceng Pinlian 曾品連先生 — — — Mr. Zou Guangfu 鄒廣福先生 — — — — — — Four months ended 30 April 2018 (unaudited) Fees Salaries and other benefits Contribution to defined contribution pension plan RMB RMB RMB Directors Mr. Li You 李友先生 — — — Mr. Ceng Pinlian 曾品連先生 — — — Mr. Zou Guangfu 鄒廣福先生 — — — — — —	Total RMB — — —
	—
	Total RMB — — —
	—
	Total RMB — — —
	—

— II-25 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

Four months ended 30 April 2019

Directors Mr. Li You 李友先生 Mr. Ceng Pinlian 曾品連先生 Mr. Zou Guangfu 鄒廣福先生	Fees RMB — — — —	Salaries and other benefits Contribution to defined contribution pension plans RMB RMB — — — — — — — —	Total RMB — — —
			—

No compensation or any kind of benefit was paid to the Target Company’s directors in respect of their services during the Track Record Period.

(b) Five highest paid individuals

The five highest paid individuals during the Track Record Period included none of the directors. Details of the remuneration of the five highest paid individuals during the Track Record Period are as follows:

Year ended 31 December 2016 2017 2018 RMB RMB RMB Salaries, allowances and benefits in kind 551,251 647,934 289,174 Pension scheme contributions 34,033 21,287 25,381 585,284 669,221 314,555 Their remuneration fell within the following bands: Year ended 31 December 2016 2017 2018 No. of individuals No. of individuals No. of individuals Nil to RMB1,000,000 5 2 3	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 100,617 96,516 7,108 9,752 107,725 106,268 Four months ended 30 April 2018 2019 No. of individuals No. of individuals (unaudited) 3 3

During the Track Record Period, there was no arrangement under which any of the directors or the five highest paid individuals of the Target Company waived or agreed to waive any remuneration and there were no emoluments paid by the Target Company to the directors or any of the five highest paid individuals as an inducement to join or upon joining the Target Company, or as compensation for loss of office.

— II-26 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

12. Income tax expense

Current Tax Corporate Income Tax — PRC — tax for the year/period Deferred tax_(note 20)_ — Tax charge/(credit) for the year/period Income tax expense	For the year ended 31 December 2016 2017 2018 RMB RMB RMB 4,821,278 1,659,579 1,739,076 (1,849,750) (76,746) 41,011 2,971,528 1,582,833 1,780,087	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 1,064,153 835,067 179,121 (144,551) 1,243,274 690,516	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 1,064,153 835,067 179,121 (144,551) 1,243,274 690,516
			690,516

During the Track Record Period, the Target Company is subject to PRC Enterprise Income Tax at 25%.

The income tax expense for the year can be reconciled to the profit before income tax expense per statements of profit or loss and other comprehensive income.

Profit before income tax expense Tax calculated at tax rate of 25% Tax effect of income not taxable for tax purposes Tax effect of expenses not deductible for tax purposes Income tax expense	For the year ended 31 2016 2017 RMB RMB 12,599,811 5,980,618 3,149,952 1,495,155 (2,540,408) (729,451) 2,361,984 817,129 2,971,528 1,582,833	December 2018 RMB 10,005,965 2,501,491 (2,615,779) 1,894,375 1,780,087	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 4,973,096 3,105,593 1,243,274 776,398 (217,040) (599,882) 217,040 514,000 1,243,274 690,516	Four months ended 30 April 2018 2019 RMB RMB (unaudited) 4,973,096 3,105,593 1,243,274 776,398 (217,040) (599,882) 217,040 514,000 1,243,274 690,516
				776,398 (599,882) 514,000
				690,516

13. Dividends

No dividend was paid or declared by the Target Company during the Track Record Period.

— II-27 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

14. Property, plant and equipment

Cost At 1 January 2016 Additions At 31 December 2016 and 1 January 2017 Additions At 31 December 2017 and 1 January 2018 Additions At 31 December 2018 and 1 January 2019 Additions At 30 April 2019 Accumulated depreciation At 1 January 2016 Charge for the year At 31 December 2016 and 1 January 2017 Charge for the year At 31 December 2017 and 1 January 2018 Charge for the year At 31 December 2018 and 1 January 2019 Charge for the period At 30 April 2019 Net book value At 31 December 2016 At 31 December 2017 At 31 December 2018 At 30 April 2019	Office equipment, furniture and fixtures RMB 284,308 24,100 308,408 — 308,408 2,951 311,359 197,000 508,359 258,395 11,111 269,506 4,820 274,326 5,395 279,721 23,823 303,544 38,902 34,082 31,638 204,815	Motor vehicles RMB — — — 1,235,808 1,235,808 — 1,235,808 — 1,235,808 — — — 205,968 205,968 308,952 514,920 102,984 617,904 — 1,029,840 720,888 617,904	Total RMB 284,308 24,100
			308,408 1,235,808
			1,544,216 2,951
			1,547,167 197,000
			1,744,167
			258,395 11,111
			269,506 210,788
			480,294 314,347
			794,641 126,807
			921,448
			38,902
			1,063,922
			752,526
			822,719

— II-28 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

15. Investment properties

At 1 January 2016 Additions Change in fair value At 31 December 2016 Additions Change in fair value At 31 December 2017 Change in fair value At 31 December 2018 Additions Change in fair value At 30 April 2019	RMB 234,237,602 4,520,398 (9,154,267) 229,603,733 1,010,342 (7,456,509) 223,157,566 (7,225,374) 215,932,192 408,403 (3,017,430) 213,323,165

• (a) Investment properties comprise office buildings that are leased to third parties under operating leases. The investment properties include properties that are held as right-of-use assets. The leases of investment properties contain an initial non-cancellable lease term of 21 years.

• (b) At 31 December 2016, 2017 and 2018 and 30 April 2019, the fair value of the investment properties of approximately RMB229,603,733, RMB223,157,566, RMB215,932,192 and RMB213,323,165 respectively is level 3 recurring fair value measurement. The fair value measurement is based on the above properties’ highest and best use, which does not differ from their actual use.

• (c) The Target Company’s investment properties are analysed at their carrying values as follows:

				As at
		As at 31 December		30 April
	2016	2017	2018	2019
	RMB	RMB	RMB	RMB
Investment properties
located in the PRC
Lease	229,603,733	223,157,566	215,932,192	213,323,165

— II-29 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

(d) Below is a summary of a valuation techniques used and key inputs to the valuation of investment properties as at the end of each Track Record Period:

				Range of unobservable	inputs		Relationship
	Valuation	Unobservable		As at 31 December		As at 30 April	of unobservable
Description	techniques	inputs	2016	2017	2018	2019	inputs to fair value
Commercial	Income	(i) Yield	6%	6%	6%	6%	The higher the yield, the lower
properties	Approach						the fair value
		(ii) Growth rate	8%	1.9%	1.5%	1.5%	The higher the growth rate, the
							higher the fair value
		(iii) Occupancy rate	85%	85%	85%	85%	The higher the occupancy rate,
							the higher the fair value

The investment properties are leased to third parties under operating leases, further summary details of which are included in note 25.

16. Accounts receivable

					As at
		As at	31 December		30 April
	2016		2017	2018	2019
	RMB		RMB	RMB	RMB
Accounts receivable	1,301,093		721,731	812,348	668,931

There was no specific credit term granted to the customers. The ageing analysis of accounts receivable based on the invoice date and net of loss allowance at the end of the Track Record Period is as follows:

Within 30 days 31-60 days 61-90 days Over 90 days	As 2016 RMB 1,233,713 — — 67,380 1,301,093	at 31 December 2017 RMB 721,731 — — — 721,731	2018 RMB 812,348 — — — 812,348	As at 30 April 2019 RMB 668,931 — — —
				668,931

Accounts receivable that were past due but not impaired related to customers that have good creditworthiness.

— II-30 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

17. Prepayments, deposits and other receivables

Non-current assets Rental deposits Current assets Deferred rental income Other receivables Prepayments	As 2016 RMB 3,870,059 9,792,215 270,069 — 10,062,284	at 31 December 2017 RMB 3,870,059 5,902,135 783,150 719,444 7,404,729	2018 RMB 3,870,059 4,469,209 123,492 — 4,592,701	As at 30 April 2019 RMB 3,870,059
				4,213,333 123,492 —
				4,336,825

18. Amounts due from/(to) fellow subsidiaries/immediate holding company/related parties

Particulars of amounts due from immediate holding company, fellow subsidiary and related parties are as follows:

Balance at 31 December Maximum outstanding 2016 2016 RMB RMB Amount due from immediate holding company 深圳市金騏集團有限公司 23,433,109 23,550,863 Amounts due from related parties 曾啟繁 (note (i)) — — 深圳市金華軒投資 有限公司 (note (ii)) 9,950 10,000 深圳市金鑾創達投資 有限公司_(note (iii))_ 1,393 1,400 11,343 Amount due from/(to) a fellow subsidiary深圳 市金鑾物業服務有限 公司金鑾國際商務大 廈管理處 (3,662,538) (3,662,538)	Balance at 31 December Maximum outstanding 2017 2017 RMB RMB 8,253,652 23,550,863 2,985,000 3,000,000 9,950 10,000 1,393 1,400 2,996,343 (3,784,633) (3,784,633)	Balance at 31 December Maximum outstanding 2018 2018 RMB RMB — 8,295,128 — 3,000,000 — 10,000 — 1,400 — (3,955,305) (3,955,305)	Balance at 30 April Maximum outstanding during period ended 30 April 2019 2019 RMB RMB — — — — — — — — — 182,053 182,053

— II-31 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note:

• (i) Mr. 曾啟繁 is the key management personnel of the Target Company.

• (ii) Mr. 李友 , one of the directors of the Target Company, is the common director of 深圳市 金華軒投資有限公司 .

• (iii) 深圳市金鑾創達投資有限公司 is controlled by the common controlling shareholder.

At the end of each of the Track Record Period, the amounts are unsecured, interest-free and repayable on demand.

19. Accruals, deposits received and other payables

Non-current liabilities Deposits received Current liabilities Accruals Deposits received Other payables	As 2016 RMB 5,995,294 216,900 3,161,585 1,445,703 4,824,188	at 31 December 2017 RMB 4,278,233 216,900 2,723,499 1,187,082 4,127,481	2018 RMB 4,274,220 233,900 2,663,371 3,730,133 6,627,404	As at 30 April 2019 RMB 4,014,935
				233,900 3,329,849 4,487,182
				8,050,931

20. Deferred Income tax

As at 1 January 2016 Credit to profit or loss As at 31 December 2016 and 1 January 2017 (Charge)/credit to profit or loss As at 31 December 2017 and 1 January 2018 (Charge)/credit to profit or loss As at 31 December 2018 and 1 January 2019 Credit to profit or loss As at 30 April 2019	Temporary differences of expenses RMB 4,620,927 978,107 5,599,034 (843,759) 4,755,275 (417,125) 4,338,150 78,658 4,416,808	Deferred income RMB (3,238,589) 871,643 (2,366,946) 920,505 (1,446,441) 376,114 (1,070,327) 65,893 (1,004,434)	Total RMB 1,382,338 1,849,750
			3,232,088 76,746
			3,308,834 (41,011)
			3,267,823 144,551
			3,412,374

— II-32 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

For the purpose of presentation in statement of financial position, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax assets Deferred tax liabilities	As at 31 December 2016 2017 2018 RMB RMB RMB 5,599,034 4,755,275 4,338,150 (2,366,946) (1,446,441) (1,070,327) 3,232,088 3,308,834 3,267,823	30 April 2019 RMB 4,416,808 (1,004,434) 3,412,374

21. Lease liabilities

Minimum lease payments due — Within 1 year — Between 2 and 5 years — Over 5 years _Less:_Future finance charges Present value of lease liabilities Minimum lease payments due — Within 1 year — Between 2 and 5 years — Over 5 years Present value of lease liabilities _Less:_Amounts due for settlements with 12 months (shown under current portion) Non-current portion

Minimum lease payments As at 31 December As at 30 April 2016 2017 2018 2019 RMB RMB RMB RMB 14,889,432 16,434,561 17,698,758 19,064,090 62,805,291 64,018,911 66,215,565 66,955,874 215,102,280 198,718,296 181,351,278 175,453,046 292,797,003 279,171,768 265,265,601 261,473,010 (104,561,452) (94,423,698) (84,564,241) (81,342,847) 188,235,551 184,748,070 180,701,360 180,130,163 Present value of minimum lease payments As at 31 December As at 30 April 2016 2017 2018 2019 RMB RMB RMB RMB 4,751,678 6,575,104 8,135,807 9,603,609 25,312,836 27,970,413 31,777,427 33,104,178 158,171,037 150,202,553 140,788,126 137,422,376 188,235,551 184,748,070 180,701,360 180,130,163 (4,751,678) (6,575,104) (8,135,807) (9,603,609) 183,483,873 178,172,966 172,565,553 170,526,554

— II-33 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

22. Paid-in capital

As at 1 January 2016, 31 December 2016, 1 January 2017, 31 December 2017, 1 January 2018, 31 December 2018, 1 January 2019 and 30 April 2019

RMB 50,000,000

23. Reserves

The following describes the nature and purpose of each reserve within equity.

Reserves Description and purpose Statutory surplus reserve The appropriation of 10% of profit after income tax expense of the combining entity in the PRC calculated in accordance with the local relevant accounting standards and regulations. The appropriation may cease to apply if the balance of the statutory surplus reserve has reached 50% of the Target Company’s registered capital. The amount is non-distributable but convertible into paid-up capital by means of capitalisation issue. Accumulated losses Cumulative net gains and losses recognised in the statements of profit or loss and other comprehensive income. Other reserve The other reserve represented the deemed distribution to the owners of the Target Company

24. Commitments

As lessor

During the Track Record Period, the Target Company sub-leased its leased property under operating lease arrangements to its tenants. The terms of the leases generally also required that tenants to pay security deposits.

At 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019, the Target Company had total future minimum lease receivables under non-cancellable operating leases with its tenants due as follows:

Less than 1 year Later than 1 year but less than 5 years More than 5 years	As at 31 December 2016 2017 2018 RMB RMB RMB 49,197,292 43,800,893 35,814,678 188,505,791 114,757,921 63,477,247 7,061,530 4,022,980 — 244,764,613 162,581,794 99,291,925	As at 30 April 2019 RMB 30,888,593 48,192,182 —
		79,080,775

— II-34 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

25. Related party transactions

(a) Transaction with related parties

Apart from the ECL loss allowance provided during each of the Track Record Period in note 27(a)(iii) in this report, the Target Company has no other related party transactions during each of the Track Record Period.

(b) Balance with related parties

Apart from the related party balances disclosed elsewhere in this report, the Target Company has no other related party balance as at the end of each Track Record Period.

(c) Key management compensation

There is no remuneration paid for the Directors and other members of key management personnel during each of the Track Record Period.

26. Categories of financial instruments

Financial assets At amortised cost: Accounts receivable Deposits and other receivables Amount due from immediate holding company Amounts due from related parties Amounts due from fellow subsidiaries Cash and cash equivalents Financial liabilities At amortised cost: Bills payable Accruals, deposits received and other payables Lease liabilities Amounts due to fellow subsidiaries	As at 31 December 2016 2017 2018 RMB RMB RMB 1,301,093 721,731 812,348 4,140,128 4,653,209 3,993,551 23,433,109 8,253,652 — 11,343 2,996,343 — — — — 2,291,710 2,859,750 2,185,015 31,177,383 19,484,685 6,990,914 15,000,000 — — 10,819,482 8,405,714 10,901,624 188,235,551 184,748,070 180,701,360 3,692,538 3,784,633 3,955,305 217,747,571 196,938,417 195,558,289	As at 30 April 2019 RMB 668,931 3,993,551 — — 182,053 571,910
		5,416,445
		— 12,065,866 180,130,163 —
		192,196,029

The directors of the Target Company considered that the carrying amounts of financial assets and financial liabilities are approximately to their fair value.

— II-35 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

27. Financial risk management objectives and policies

The main risks arising from the Target Company’s financial instruments in the normal course of the Target Company’s business are credit risk and liquidity risk.

These risks are limited by the Target Company’s financial management policies and practices described below.

(a) Credit risk

The Target Company’s maximum exposure to credit risk is the carrying amounts of cash and bank balances, accounts receivable, deposits and other receivables and amounts due from immediate holding company, related parties and fellow subsidiaries. The Target Company has no concentration of credit risk from third party debtors.

As at 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019, substantially all of the Target Company’s bank deposits were deposited with major financial institutions in the PRC, which management believes are of high-credit-quality without significant credit risk.

(i) Accounts receivable

The Target Company applies the simplified approach to providing ECL prescribed by HKFRS 9, which permits the use of the lifetime expected loss provision for accounts receivable.

Accounts receivable at the end of each reporting period were rental receivables due from the tenants. The ECL on accounts receivable is estimated by reference to past default experience of the debtor and current market condition in relation to each debtor’s exposure. The ECL also incorporates forward-looking information with reference to general macroeconomic conditions that may affect the ability of the debtors to settle receivables. To measure the ECL, the accounts receivable have been grouped based on share credit risk characteristics and the days past due according to the ageing as disclosed in note 16. Expected loss rate of accounts receivable are assessed to be 0.1% as the accounts receivable mainly represent amounts due from tenants with no history of default. For the past due accounts receivable, due to the balances were immaterial, the management of the Target Company considered the loss allowance provision for these balances were immaterial.

(ii) Deposits and other receivables

The management of the Target Company takes into account the historical default experience and forward-looking information, as appropriate, for example the Target Company considers the consistently low historical default rates of counterparties, and concludes that credit risk inherent in the Target Company’s outstanding deposits and other receivables is insignificant. The management of the Target Company has assessed that deposits and other receivables do not have a significant increase in credit risk since initial recognition and risk of default is insignificant, therefore the ECL for these receivables were immaterial under the 12 months expected losses method and no loss allowance provision was recognised during the Track Record Period.

— II-36 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

(iii) Amounts due from immediate holding company, fellow subsidiaries and related parties

The management of the Target Company takes into account the historical default experience and forward-looking information, as appropriate, for example the Target Company considers the consistently low historical default rates of counterparties, and concludes that credit risk inherent in the Target Company’s outstanding balances. The management of the Target Company has assessed that balance do not have a significant increase in credit risk since initial recognition and risk of default is insignificant, therefore the ECL for these receivables were immaterial under the 12 months expected losses method and are all classified as stage 1. A 0.5% of ECL allowance was provided by the Target Company based on the outstanding balances as at the end of each of the Track Record Period.

The ECL loss allowance for the amounts due from immediate holding company and related parties as at 31 December 2016, 2017, 2018 and 30 April 2019 are reconciled to the opening loss allowance is as following:

At 1 January 2016 Provision for loss allowance recognised in profit or loss At 31 December 2016 and 1 January 2017 Reversal of loss allowance recognised in profit or loss At 31 December 2017 and 1 January 2018 Reversal of loss allowance recognised in profit or loss At 31 December 2018 and 30 April 2019	Amount due from immediate holding company RMB — 117,754 117,754 (76,278) 41,476 (41,476) —	Amounts due from related parties RMB — 57 57 15,000 15,057 (15,057) —	Total RMB — 117,811 117,811 (61,278) 56,533 (56,533) —

— II-37 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

(a) Liquidity risk

The contractual maturities of financial liabilities are shown as below:

As at 31 December 2016

Bills payable Accruals, deposits received and other payables Lease liabilities Amounts due to fellow subsidiaries	Carrying amount RMB 15,000,000 10,819,482 188,235,551 3,692,538 217,747,571	Total contractual undiscounted cash flows RMB 15,000,000 10,819,482 188,235,551 3,692,538 217,747,571	Within 1 year or on demand RMB 15,000,000 4,824,188 4,751,678 3,692,538 28,268,404	More than 1 year but less than 2 years RMB — 1,589,541 5,310,907 — 6,900,448	More than 2 years but less than 5 years RMB — 2,675,376 20,001,929 — 22,677,305	More than 5 years RMB — 1,730,377 158,171,037 —
						159,901,414

As at 31 December 2017

Accruals, deposits received and other payables Lease liabilities Amounts due to a fellow subsidiaries	Carrying amount RMB 8,405,714 184,748,070 3,784,633 196,938,417	Total contractual undiscounted cash flows RMB 8,405,714 184,748,070 3,784,633 196,938,417	Within 1 year or on demand RMB 4,127,481 6,575,104 3,784,633 14,487,218	More than 1 year but less than 2 years RMB 1,359,584 5,607,413 — 6,966,997	More than 2 years but less than 5 years RMB 1,620,441 22,363,000 — 23,983,441	More than 5 years RMB 1,298,208 150,202,553 —
						151,500,761

As at 31 December 2018

Accruals, deposits received and other payables Lease liabilities Amounts due to fellow subsidiaries	Carrying amount RMB 10,901,624 180,701,360 3,955,305 195,558,289	Total contractual undiscounted cash flows RMB 10,901,624 180,701,360 3,955,305 195,558,289	Within 1 year or on demand RMB 6,627,404 8,135,807 3,955,305 18,718,516	More than 1 year but less than 2 years RMB 1,584,647 6,847,385 — 8,432,032	More than 2 years but less than 5 years RMB 2,116,637 24,930,042 — 27,046,679	More than 5 years RMB 572,936 140,788,126 —
						141,361,062

— II-38 —

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIx II

As at 30 April 2019

Accruals, deposits received and other payables Lease liabilities	Carrying amount RMB 12,065,866 180,130,163 192,196,029	Total contractual undiscounted cash flows RMB 12,065,866 180,130,163 192,196,029	Within 1 year or on demand RMB 8,050,931 9,603,609 17,654,540	More than 1 year but less than 2 years RMB 2,620,331 7,278,680 9,899,011	More than 2 years but less than 5 years RMB 1,154,604 25,825,498 26,980,102	More than 5 years RMB 240,000 137,422,376
						137,662,376

28. Capital management

The Target Company’s primary objective when managing capital is to safeguard the Target Company’s ability to continue as a going concern and to maximise the return to stakeholders. The Target Company’s capital structure is regularly reviewed and managed by the directors of the Target Company. The Target Company is not subject to externally imposed capital requirements. To maintain or adjust capital structure, the Target Company may adjust dividend payment to shareholders or issue new shares. Adjustments will be made to the capital structure in light of changes in economic conditions affecting the Target Company, and the risk characteristics of the Target Company’s underlying assets.

The capital structure of the Target Company consists of debts, which includes bills payable, amounts due to fellow subsidiaries and cash and bank balances and equity attributable to owners of the Target Company, comprising share capital and reserves. The Target Company’s risk management reviews the capital structure on a semi-annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital.

The net debt to equity ratio at the end of each of the Track Record Period is as follows:

Bills payable Amounts due to fellow subsidiaries _Less:_Cash and cash equivalents Net debt Equity Net debt to equity ratio	As 2016 RMB 15,000,000 3,692,538 (2,291,710) 16,400,828 47,533,469 35%	at 31 December 2017 RMB — 3,784,633 (2,859,750) 924,883 51,931,254 2%	2018 RMB — 3,955,305 (2,185,015) 1,770,290 33,909,993 5%	As at 30 April 2019 RMB — — (571,910)
				(571,910)
				32,596,531
				N/A

— II-39 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

29. Note to statements of cash flows

Reconciliation of liabilities arising from financing activities:

Year ended 31 December 2016 Bills payable Lease liabilities Amounts due to fellow subsidiaries Year ended 31 December 2017 Bills payable Lease liabilities Amounts due to fellow subsidiaries Year ended 31 December 2018 Lease liabilities Amounts due to fellow subsidiaries Four months ended 30 April 2019 Lease liabilities Amounts due to fellow subsidiaries Four months ended 30 April 2018 (unaudited) Lease liabilities Amounts due to fellow subsidiaries	As at 1 January 2016 RMB 45,000,000 196,027,369 3,939,778 244,967,147 As at 1 January 2017 RMB 15,000,000 188,235,551 3,692,538 206,928,089 As at 1 January 2018 RMB 184,748,070 3,784,633 188,532,703 As at 1 January 2019 RMB 180,701,360 3,955,305 184,656,665 As at 1 January 2018 RMB 184,748,070 3,784,633 188,532,703	Financing cash out flow As at 31 December 2016 RMB RMB (30,000,000) 15,000,000 (7,791,818) 188,235,551 (247,240) 3,692,538 (38,039,058) 206,928,089 Financing cash in/(out) flow As at 31 December 2017 RMB RMB (15,000,000) — (3,487,481) 184,748,070 92,095 3,784,633 (18,395,386) 188,532,703 Financing cash in/(out) flow As at 31 December 2018 RMB RMB (4,046,710) 180,701,360 170,672 3,955,305 (3,876,038) 184,656,665 Financing cash in/(out) flow As at 30 April 2019 RMB RMB (571,197) 180,130,163 (4,137,358) (182,053) (4,708,555) 179,948,110 Financing cash in/(out) flow As at 30 April 2018 RMB RMB (948,292) 183,799,778 42,415 3,827,048 (905,877) 187,626,826

— II-40 —

APPENDIx II FINANCIAL INFORMATION OF THE TARGET COMPANY

30. Major non-cash transaction

During the year ended 31 December 2018 and the four months ended 30 April 2019, the Directors of the Target Company has transferred the amount due from immediate holding company of RMB26,247,139 and RMB3,728,539 respectively to other reserve as deemed distribution to the immediate holding company.

31. Subsequent financial statements

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 30 April 2019.

— II-41 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

• A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

The following unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 31 March 2019 (the “ Unaudited Pro Forma Financial Information ”) has been prepared in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect on the assets and liabilities of the Enlarged Group as if the acquisition of 73% share equity of the Target Company by the Group (the “ Acquisition ”) had been completed on 31 March 2019. The Unaudited Pro Forma Financial Information has been prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the Enlarged Group’s assets and liabilities following completion of the Acquisition.

The Unaudited Pro Forma Financial Information has been prepared based on:

• (a) the consolidated statement of financial position of the Group as at 31 March 2019 which has been extracted from the published annual report of the Group for the year ended 31 March 2019;

• (b) the statement of financial position of the Target Company as at 30 April 2019 which has been extracted from Appendix II to this circular; and

• (c) after taking into account of the unaudited pro forma adjustments relating to the Acquisition that are (i) directly attributable to the Acquisition and not relating to future events or decisions; and (ii) factually supportable.

The Unaudited Pro Forma Financial Information is based on a number of assumptions, estimates and uncertainties. Accordingly, the Unaudited Pro Forma Financial Information does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 31 March 2019. The Unaudited Pro Forma Financial Information does not purport to predict the future financial position of the Enlarged Group.

— III-1 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

Assets Non-current assets Goodwill Property, plant and equipment Investment properties Intangible assets Rental deposits Deferred tax assets Total non-current assets Current assets Inventories Trade and other receivables Amounts due from non-controlling shareholders of subsidiaries Amounts due from related parties Amounts due from fellow subsidiaries Cash and bank balances Total current assets Total assets Liabilities Current liabilities Trade, bills and other payables Lease liabilities Amounts due to related parties Bank and other borrowings Convertible bonds Current tax liabilities Total current liabilities Net current assets/(liabilities)	The Group HK$ Note 1	The Target Company Pro Forma adjustments RMB HK$ HK$ HK$ HK$ HK$ Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 — — 29,585,376 822,719 959,126 28,713,904 213,323,165 248,692,146 (248,692,146) — — 38,471,400 3,870,059 4,511,715 3,412,374 3,978,146 (3,978,146) 221,428,317 258,141,133 — — 5,005,756 5,835,710 — — — — 182,053 212,237 571,910 666,733 (46,632,000) 5,759,719 6,714,680 227,188,036 264,855,813 9,397,316 10,955,392 37,922,704 687,000 9,603,609 11,195,887 (11,195,887) — — — — — — 1,049,091 1,223,030 (1,127,312) 20,050,016 23,374,309 (14,290,297) (16,659,629)	The Target Company Pro Forma adjustments RMB HK$ HK$ HK$ HK$ HK$ Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 — — 29,585,376 822,719 959,126 28,713,904 213,323,165 248,692,146 (248,692,146) — — 38,471,400 3,870,059 4,511,715 3,412,374 3,978,146 (3,978,146) 221,428,317 258,141,133 — — 5,005,756 5,835,710 — — — — 182,053 212,237 571,910 666,733 (46,632,000) 5,759,719 6,714,680 227,188,036 264,855,813 9,397,316 10,955,392 37,922,704 687,000 9,603,609 11,195,887 (11,195,887) — — — — — — 1,049,091 1,223,030 (1,127,312) 20,050,016 23,374,309 (14,290,297) (16,659,629)	The Enlarged Group HK$ 29,787,285 78,110,000 — 39,026,594 4,511,715 587,593
	201,909 48,436,970 — 555,194 — 587,593	— 822,719 213,323,165 — 3,870,059 3,412,374	— 959,126 248,692,146 — 4,511,715 3,978,146 258,141,133 — 5,835,710 — — 212,237 666,733 6,714,680 264,855,813 10,955,392 11,195,887 — — — 1,223,030 23,374,309 (16,659,629)
	49,781,666 10,056,155 153,807,743 4,000 3,117,634 — 120,346,740	221,428,317		152,023,187 10,056,155 159,643,453 4,000 3,117,634 212,237 74,381,473
		— 5,005,756 — — 182,053 571,910
	287,332,272 337,113,938 91,007,432 — 27,040,427 43,647,046 45,344,878 542,536	5,759,719		247,414,952 399,438,139 140,572,528 — 27,040,427 43,647,046 45,344,878 638,254
		227,188,036
		9,397,316 9,603,609 — — — 1,049,091
	207,582,319	20,050,016		257,243,133
	79,749,953	(14,290,297)		(9,828,181)

— III-2 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

Total assets less current liabilities Non-current liabilities Lease liabilities Convertible bonds Deposits received Deferred tax liabilities Total non-current liabilities Total liabilities NET ASSETS	The Group HK$ Note 1	The Target Company Pro Forma adjustments RMB HK$ HK$ HK$ HK$ HK$ Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 207,138,020 241,481,504 170,526,554 198,799,857 (198,799,857) — — 4,014,935 4,680,611 — — (7,252,990) 9,617,850 174,541,489 203,480,468 194,591,505 226,854,777 32,596,531 38,001,036	The Target Company Pro Forma adjustments RMB HK$ HK$ HK$ HK$ HK$ Note 2 Note 2 Note 3 Note 4 Note 5 Note 6 207,138,020 241,481,504 170,526,554 198,799,857 (198,799,857) — — 4,014,935 4,680,611 — — (7,252,990) 9,617,850 174,541,489 203,480,468 194,591,505 226,854,777 32,596,531 38,001,036	The Enlarged Group HK$ 142,195,006 — 37,575,609 4,680,611 2,364,860
	129,531,619	207,138,020	241,481,504 198,799,857 — 4,680,611 — 203,480,468 226,854,777 38,001,036
	— 37,575,609 — —	170,526,554 — 4,014,935 —
	37,575,609	174,541,489		44,621,080
	245,157,928	194,591,505		301,864,213 97,573,926
	91,956,010	32,596,531

Notes:

1. The amounts are extracted from the audited consolidated statement of financial position of the Group for the year ended 31 March 2019 set out on pages 69 to 71 of the 2019 published annual report of the Company as set out in Appendix I to this circular.

2. The amounts are extracted from the accountants’ report on the Target Company (as defined in the circular) as set out in Appendix II to this circular and is translated into Hong Kong dollars at the exchange rate of RMB1 to HK$1.1658, which is the prevailing exchange rate on 31 March 2019.

3. The adjustment represents the adoption of the Group’s accounting policy for leases in accordance with HKAS 17 “Leases” on the Target Company since the Target Company adopted the accounting policy for leases in accordance with HKFRS 16 “Leases”.

4. The Group entered into an Acquisition Agreement for acquiring 73% of the issued shares of the Target Company at a cash consideration of RMB40,000,000 (equivalent to HK$46,632,000). Under Hong Kong Financial Reporting Standard 3 (Revised) Business Combinations, the Group will apply the acquisition method to account for the Acquisition in the consolidated financial statements of the Group. The goodwill arising from the Acquisition is calculated as follows:

Net liabilities of the Target Company assumed Intangible asset Goodwill Deferred tax liabilities Non-controlling interests of 27% in the Target Company Consideration for the Acquisition Satisfied by: Cash	HK$ (5,502,010) 38,471,400 29,585,376 (9,617,850) (6,304,916) 46,632,000 46,632,000

— III-3 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

Deferred tax liabilities amounting to approximately HK$9,617,850 is calculated based on the fair value of the intangible asset of approximately HK$38,471,400 multiplied by the People’s Republic of China enterprise income tax rate of 25%.

The valuation of the intangible asset is based on the assumption that there would be no material changes in the existing political, legal, fiscal, taxation and economic conditions in the PRC which is the Target Company located and carrying on its businesses. The valuation methodologies and major assumptions of the intangible asset are as follows:

The intangible asset represented the favorable lease terms which have been identified with fair value of approximately of HK$38,471,400. The Target Company has entered into the lease agreement with 深圳市龍華弓村股份合作公司 in relation to the lease of 金銮國際大厦 . Under the lease agreement, 深圳市龍華弓村股份合作公司 has agreed to lease the 金銮國際大厦 to the Target Company from 1 April 2013 to 31 March 2033. The valuation of the favorable lease terms is prepared by the independent professional valuer and adopted income approach for calculating excess earnings implied from the contract terms and the prevailing market rent rate. The intangible asset is estimated to have a useful life of 14 years.

For the purpose of the preparation of the Unaudited Pro Forma Financial Information, the Directors have assessed whether the intangible asset and goodwill would be impaired as at 31 March 2019 on a pro forma basis in accordance with Hong Kong Accounting Standard 36 (“ HKAS 36 ”) “Impairment of Assets” and concluded that there is no impairment of the intangible asset and goodwill arising on the Acquisition as at 31 March 2019. The Company will adopt consistent principal assumptions and valuation methods as used in the Unaudited Pro Forma Financial Information to assess impairment of the intangible asset and goodwill arising from Acquisition in future financial statements.

The actual amount of the intangible asset and goodwill arising from the Acquisition at the date of completion may be different from that presented above and the difference may be significant.

1. Pursuant to the Acquisition Agreement, a sum of RMB40,000,000 (equivalent to HK$46,632,000) of the Consideration will be satisfied by cash. Renminbi is translated into Hong Kong dollars at the exchange rate of RMB1 to HK$1.1658, which is the prevailing exchange rate on 31 March 2019.

2. The adjustment represents the transaction costs of the Acquisition incurred by the Group including expenses charged by professional parties. The total amount is estimated at HK$687,000.

3. Apart from the above, no adjustments have been made to reflect any trading results or other transactions of the Enlarged Group entered into subsequent to 31 March 2019.

— III-4 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountants, BDO Limited, Certified Public Accountants, Hong Kong.

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

To the directors of China Tangshang Holdings Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of China Tangshang Holdings Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors of the Company for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities of the Group as at 31 March 2019 and related notes as set out on pages III-1 to III-4 of Appendix III of the Company’s circular dated 18 October 2019 (the “ Circular ”) in connection with the proposed acquisition of the 73% issued share capital of 深圳市金帆投資發展有限公司 (Shenzhen Jinfan Investment Development Co., Ltd.) (the “ Target Company ”) (the “ Proposed Acquisition* ”). The applicable criteria on the basis of which the directors of the Company have compiled the unaudited pro forma financial information are described on pages III-1 to III-4 of Appendix III of the Circular.

The unaudited pro forma financial information has been compiled by the directors of the Company to illustrate the impact of the Proposed Acquisition on the Company’s consolidated assets and liabilities as at 31 March 2019 as if the Proposed Acquisition had taken place at 31 March 2019. As part of this process, information about the Group’s assets and liabilities has been extracted by the directors of the Company from the Group’s audited consolidated financial statements for the year ended 31 March 2019.

• For identification purpose only

— III-5 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

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

Our Independence and Quality Control

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

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

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

— III-6 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

For purpose 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 financial information, 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 financial information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purpose of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Proposed Acquisition at 31 March 2019 would have been as presented.

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

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

• the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

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

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

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

— III-7 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIx III

Opinion

In our opinion:

• a. the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;

• b. such basis is consistent with the accounting policies of the Company; and

• c. the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

BDO Limited

Certified Public Accountants

Hong Kong

18 October 2019

— III-8 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

Set out below is the management discussion and analysis of the Target Company for the three years ended 31 December 2016, 2017 and 2018 and for the four months ended 30 April 2018 and 2019 (the “ Relevant Periods ”).

BUSINESS REVIEW

The Target Company is a company established under the laws of the PRC with limited liability on 10 January 2008. It is principally engaged in sub-leasing business for the Jin Luan International Commercial Building located in Shenzhen. The following table sets forth a summary of the Target Company’s statement of profit or loss and total comprehensive income for the years ended 31 December 2016, 2017 and 2018 and for the four months ended 30 April 2018 and 2019:

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Revenue Other income and gains or losses, net Depreciation on property, plant and equipment Staff costs Other operating expenses Finance costs Profit before income tax expense Income tax expense Profit and total comprehensive income for the year/period	Year ended 31 December 2016 2017 2018 RMB RMB RMB 33,877,895 30,598,574 35,188,410 (8,077,876) (3,138,909) (6,482,154) (11,111) (210,788) (314,347) (585,284) (669,221) (314,555) (2,216,889) (10,461,284) (8,211,932) (10,387,924) (10,137,754) (9,859,457) 12,599,811 5,980,618 10,005,965 (2,971,528) (1,582,833) (1,780,087) 9,628,283 4,397,785 8,225,878	Four months ended 30 April 2018 2019 RMB RMB (Unaudited) 12,815,518 10,926,013 (3,239,442) (2,924,806) (104,591) (126,807) (107,725) (106,268) (1,072,219) (1,441,145) (3,318,445) (3,221,394) 4,973,096 3,105,593 (1,243,274) (690,516) 3,729,822 2,415,077	Four months ended 30 April 2018 2019 RMB RMB (Unaudited) 12,815,518 10,926,013 (3,239,442) (2,924,806) (104,591) (126,807) (107,725) (106,268) (1,072,219) (1,441,145) (3,318,445) (3,221,394) 4,973,096 3,105,593 (1,243,274) (690,516) 3,729,822 2,415,077
			3,105,593 (690,516)
			2,415,077

— IV-1 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

REVENUE

Revenue represented the effective rental income from various tenants. For the years ended 31 December 2016, 2017 and 2018 and for the four months ended 30 April 2018 and 2019, the revenue of the Target Company was approximately RMB33,878,000, RMB30,599,000, RMB35,188,000, RMB12,816,000 and RMB10,926,000 respectively.

The decrease of revenue of approximately 9.7% for the year ended 31 December 2017 compared to the year ended 31 December 2016 was primarily attributable to approximately tenants which have early terminated their rental agreements during 2017. The increase of revenue of approximately 15.0% for the year ended 31 December 2018 compared to the year ended 31 December 2017 was primarily attributable to the increased number of approximately 20 tenants of newly-enter rental agreements during last quarter of 2017. The decrease of revenue of approximately 14.7% for the four months ended 30 April 2019 compared to the four months ended 2018 was primarily affected by the termination of tenant in the beginning of 2019 and the adjustment of effective rent, the Target Company got more tenants after 30 April 2019.

DEPRECIATION ON PROPERTY, PLANT AND EQUIPMENT

For the years ended 31 December 2016, 2017 and 2018, the depreciation on property, plant and equipment of the Target Company was amounted to approximately RMB11,000, RMB211,000 and RMB314,000, respectively.

The increase of depreciation as listed above for the year 2017 and 2018 as compared to the corresponding year were primarily attributable to the additions in motor vehicle recognised during the year.

For the 4 months ended 30 April 2019, the depreciation was amounted to approximately RMB127,000, representing an increase of approximately 21.0% as compared to the 4 months ended 30 April 2018. Such a slight increase in the amount recognised was attributable to the additions in office equipment, furniture and fixtures recognised during the period.

OTHER INCOME AND GAINS OR LOSSES, NET

For the Relevant Periods, the other net income and gains or losses was mainly comprised of (i) the income from early termination of rental agreements; (ii) interest income; and (iii) loss on fair value change in investment properties.

— IV-2 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

For the years ended 31 December 2016, 2017 and 2018, the other income and gains or losses, net of the Target Company was recognised as a loss of approximately RMB8,078,000, RMB3,139,000 and RMB6,482,000, respectively.

As stated above, there was a decrease of other net loss of approximately 61.1% for the year 2017 as compared to that of the year 2016. As advised by the Vendor, such a significant decrease was primarily attributable to an increase in the income resulted from an increased number of early rental agreements termination recognised during the year.

Further, there was an increase of other net loss of approximately 106.5% for the year 2018 as compared to that of the year 2017. As advised by the Vendor, such a significant increase was primarily attributable to a decrease in the income from early termination of rental agreements and the increase in loss on fair value changes in investment properties recognised during the year 2018. For the 4 months ended 30 April 2019, the other income and gains or losses, net of the Target Company was recognised at approximately RMB2,925,000, representing an decrease of loss of approximately 9.7% as compared to the corresponding period in 2018. As advised by the Vendor, such an increase was primarily attributable to an increase in gain on fair value changes in investment properties recognised during the period.

OTHER OPERATING ExPENSES

For the Relevant Periods, the other operating expenses was mainly comprised of administrative expenses and distribution costs.

For the years ended 31 December 2016, 2017 and 2018, the other operating expenses of the Target Company was approximately RMB2,217,000, RMB10,461,000 and RMB8,212,000, respectively.

As stated above, there was an increase of the other operating expenses of approximately 371.9% for the year 2017 as compared to that of the year 2016 which was primarily attributable to the increase in selling and marketing expenses for business promotion and the increase in consultancy fee paid for tax planning purpose.

Further, there is a decrease of the other operating expenses of approximately 21.5% for the year 2018 as compared to that of the year 2017. As advised by the Vendor, it was primarily attributable to the decrease in selling and marketing expenses recognised during the year.

— IV-3 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

For the 4 months ended 30 April 2019, the other operating expenses of the Target Company was recognised at approximately RMB1,441,000, representing an increase of approximately 34.4% as compared to the corresponding period in 2018. As advised by the Vendor, such an increase was primarily attributable to an increase of selling and marketing expenses recognised during the period.

PROFIT BEFORE INCOME TAx ExPENSE

For the years ended 31 December 2016, 2017 and 2018, the profit before income tax expense of the Target Company was approximately RMB12,600,000, RMB5,981,000 and RMB10,006,000, respectively.

As stated above, there was a decrease of the profit before income tax expenses of approximately 52.5% for the year 2017 as compared to that of the year 2016. As advised by the Vendor, it was primarily attributable to the decrease in revenue, increase in operating expenses and increase in depreciation recognised during the year as mentioned above.

Further, there is an increase of the profit before income tax expenses of approximately 67.3% for the year 2018 as compared to that of the year 2017. As advised by the Vendor, it was primarily attributable to an increase in revenue, a decrease in operating expenses and finance costs recognised during the year.

For the 4 months ended 30 April 2019, the profit before income tax expenses of the Target Company was recognised at approximately RMB3,106,000, representing a decrease of approximately 37.5% as compared to the corresponding period in 2018. As advised by the Vendor, such a decrease was primarily attributable to a decrease of revenue and the increase of other operating expenses recognised during the period as mentioned above.

PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR/PERIOD

As a result of the factors mentioned above, the profit for the years ended 31 December 2016, 2017 and 2018 was recognised as approximately RMB9,628,000, RMB4,398,000, RMB8,226,000, respectively and the profit for the 4 months periods ended 30 April 2018 and 2019 was approximately RMB3,730,000 and RMB2,415,000 respectively.

— IV-4 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

The following table sets forth a summary of the Target Company’s financial position as at 31 December 2016, 31 December 2017 and 31 December 2018 and 30 April 2019:

Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Net current assets/(liabilities) Net assets	As at 31 December 2016 2017 2018 (audited) (audited) (audited) RMB’000 RMB’000 RMB’000 236,745 231,400 223,823 37,100 22,297 7,590 273,845 253,697 231,413 189,479 182,451 176,840 36,832 19,315 20,663 226,311 201,766 197,503 268 2,982 (13,073) 47,534 51,931 33,910	As at 30 April 2019 (audited) RMB’000 221,428 5,760 227,188 174,541 20,050 194,591 (14,290) 32,597

NON-CURRENT ASSETS

As at 31 December 2016, 2017, 2018 and 30 April 2019, the non-current assets mainly comprise of property, plant and equipment, investment properties and rental deposits. As at 31 December 2016, 2017 and 2018, the total non-current assets were amounted to approximately RMB236,745,000, RMB231,400,000 and RMB223,823,000 respectively.

As stated above, there was a decrease of non-current assets of approximately 2.3% as at 31 December 2017 as compared to the same as at 31 December 2016 and a decrease of approximately 3.3% as at 31 December 2018 as compared to the same as at 31 December 2017. As advised by the Vendor, such a slight decrease in both years were primarily attributable to (i) a decrease in the net book value of the property, plant and equipment resulted from depreciation and (ii) a decrease in the investment properties resulted from recognition of the change in fair value.

— IV-5 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

Further, there was a decrease of approximately 1.1% from approximately RMB223,823,000 as at 31 December 2018 to approximately RMB221,428,000 as at 30 April 2019. It was advised that such a slight decrease was primarily attributable to the same rationale as mentioned above.

CURRENT ASSETS

As at 31 December 2016, 2017, 2018 and 30 April 2019, the current assets mainly comprise of accounts receivable, prepayment, deposits and other receivables, amounts due from immediate holding company and related parties, and cash and cash equivalents. As at 31 December 2016, 2017 and 2018, the total current assets were amounted to approximately RMB37,100,000, RMB22,297,000 and RMB7,590,000, respectively.

As stated above, there was a decrease of current assets of approximately 39.9% as at 31 December 2017 as compared to the same as at 31 December 2016. The decrease in the current assets was primarily attributable to the settlement of the amounts due from immediate holding company during the year and the decrease in prepayments and accounts receivable during the year. Further, it was noted that there was a decrease of current assets of approximately 66.0% as at 31 December 2018 as compared to the same as at 31 December 2017. As advised, such decrease was primarily attributable to settlement of the whole amount of the amount due from immediate holding company and related parties.

In additions, there is a decrease of approximately 24.1% from approximately RMB7,590,000 as at 31 December 2018 to approximately RMB5,760,000 as at 30 April 2019. It was advised that such a decrease was primarily attributable to a decrease of accounts receivable and the decrease in cash and cash equivalents resulted from the repayment of lease liabilities and interest paid during the period.

CURRENT LIABILITIES

As at 31 December 2016, 2017, 2018 and 30 April 2019, the current liabilities mainly comprise of bills payable, accruals, deposits received and other payables, receipts in advance, and amounts due to fellow subsidiaries. As at 31 December 2016, 2017 and 2018, the total current liabilities were amounted to approximately RMB36,832,000, RMB19,315,000 and RMB20,663,000, respectively.

— IV-6 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

As at 31 December 2017, there is a decrease of current liabilities of approximately 47.6% as compared to the same as at 31 December 2016. As advised, such decrease was primarily due to the repayment of bills payable of RMB15 million during the year. Further, there is an increase of approximately 7.0% as at 31 December 2018 as compared to the same as at 31 December 2017. Such a slight increase was primarily due to an increase in lease liabilities and other payables relating to the lease rental repayment fee and the operating expenses as at 31 December 2018.

As at 30 April 2019, the total current liabilities were amounted to approximately RMB20,050,000, representing a decrease of approximately 3.0% as compared to the same as at 31 December 2018. As advised, there is a repayment of amounts due to fellow subsidiaries recognized during the year and resulted in such a decrease in the total current liabilities.

As further noted in the components of the current liabilities, there was a lease liabilities amounted to approximately RMB4,752,000, RMB6,575,000, RMB8,136,000 and RMB9,604,000 as at 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019, respectively. As advised, such lease liabilities represent a present value of the lease payments related to the lease of the Building paid by the Target Company to the Landlord that are not paid at the commencement date, discounted by using the rate implicit in the lease. Simply speaking, it reflected the Target Company’s contractual obligation to make payments to the Landlord throughout the lease term.

As set out in the Lease Agreement, the Landlord has let the Building to the Target Company for a period of 20 years and it was agreed between the Landlord and the Target Company that there would be an adjustment with an increase in the annual rental payment for every 2 to 3 years. Based on the applicable accounting treatment, such lease liabilities would be increased when the actual cash payment is lower than the amortised lease liabilities (using straight line method) at the beginning of the lease term. It is expected such lease liabilities would be gradually recovered when the actual cash payments match with the amortised lease liabilities over the remaining lease terms.

— IV-7 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

CASH FLOW

The following table sets forth a summary of the Target Company’s cash flow data from the consolidated statements of cash flow of the Target Company for the years ended 31 December 2016, 2017, 2018 and the four months ended 30 April 2018 and 2019:

				Four	months
	Year ended 31 December			ended	30 April
	2016	2017	2018	2018	2019
	(audited)	(audited)	(audited)	(unaudited)	(audited)
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Net cash generated from
operating activities	17,346	16,091	28,004	10,703	9,650
Net cash used in investing
activities	(4,544)	(2,246)	(3)	—	(605)
Net cash used in financing
activities	(11,405)	(13,277)	(28,676)	(13,308)	(10,658)
Net changes in cash and cash
equivalents	1,397	568	(675)	(2,605)	(1,613)
Cash and cash equivalents at
end of the year/period	2,292	2,860	2,185	255	572

CASH AND CASH EQUIVALENTS

As at 31 December 2016, 31 December 2017, 31 December 2018, 30 April 2018 and 30 April 2019, cash and cash equivalents of the Target Company was approximately RMB2,292,000, RMB2,860,000, RMB2,185,000, RMB255,000 and RMB572,000, respectively. The bank balances and cash of the Target Company were all denominated in RMB.

CAPITAL MANAGEMENT

The Target Company’s primary objective when managing capital is to safeguard the Target Company’s ability to continue as a going concern and to maximise the return to stakeholders. The Target Company’s capital structure is regularly reviewed and managed by the directors of the Target Company. The Target Company is not subject to externally imposed capital requirements.

— IV-8 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

To maintain or adjust capital structure, the Target Company may adjust dividend payment to shareholders or issue new shares. Adjustments will be made to the capital structure in light of changes in economic conditions affecting the Target Company or its subsidiaries, and the risk characteristics of the Target Company’s underlying assets.

The capital structure of the Target Company consists of debts, which includes bills payable, amounts due to fellow subsidiaries and cash and bank balances and equity attributable to owners of the Target Company, comprising share capital and reserves. The Target Company’s risk management reviews the capital structure on a semi-annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital.

CHARGE ON ASSETS

The Target Company did not have any charge on assets as at 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019.

CAPITAL COMMITMENTS

As at 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019, the Target Company did not have any capital commitments.

ExPOSURE TO RISKS AND HEDGING POLICIES

The main risks arising from the Target Company’s financial instruments are credit risk and liquidity risk. Generally, the Target Company introduces conservative strategies on its risk management.

During the years ended 31 December 2016, 2017, 2018 and the four months ended 30 April 2019, the Target Company (i) did not enter into any bank borrowings; (ii) did not enter into any derivatives or other financial instruments for hedging purposes; (iii) did not hold or issue derivative financial instruments for trading purposes; and (iv) did not have any currency borrowings or other hedging instruments for foreign currency net investments. Substantially all of the Target Company’s revenue and expenses are denominated in RMB. The Target Company also uses RMB as its reporting currency. The Directors do not believe that the Target Company’s operations are currently subject to any significant direct foreign exchange risk and the Target Company did not use any financial instruments to hedge its exposure to such risk.

— IV-9 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

SIGNIFICANT INVESTMENTS HELD

The Target Company did not hold other significant investment for the years ended 31 December 2016, 2017, 2018 and for the four months ended 30 April 2019.

M A T E R I A L A C Q U I S I T I O N S A N D D I S P O S A L S O F S U B S I D I A R I E S , ASSOCIATES AND JOINT VENTURES

The Target Company did not have any material acquisitions or disposals of subsidiaries, associates or joint ventures during the years ended 31 December 2016, 2017, 2018 and for the four months ended 30 April 2019. In addition, the Target Company has no specific future plans for material investments or capital assets.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019 the Target Company had a total of 5, 2, 3 and 3 employees, respectively.

For the years ended 31 December 2016, 2017, 2018 and for the four months ended 30 April 2018 and 2019, the employee benefit expenses of the Target Company was approximately RMB585,000, RMB669,000, RMB315,000, RMB108,000 and RMB106,000 respectively.

STAFF COSTS

For the year ended 31 December 2016, 2017 and 2018, the staff cost of the Target Company was approximately RMB585,000, RMB669,000 and RMB315,000. The increase of approximately 14.4% was primarily had one-off bonus to the staff in 2017. The decrease of approximately 52.9% was primarily no bonus and cut-off salary to staff in 2018.

The salaries and remuneration policies for the Target Company are determined by reference to, among other things, employee title and performance, the financial performance and operating results of the Target Company and the prevailing market rates.

The Target Company has not adopted share option schemes, but it provides training programs for the employees with a view to constantly improving their skills and knowledge.

— IV-10 —

MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET COMPANY

APPENDIx IV

CONTINGENT LIABILITIES

The Target Company did not have any other material contingent liabilities as at 31 December 2016, 31 December 2017, 31 December 2018 and 30 April 2019.

DIVIDEND POLICY

No dividend was paid or declared by the Company during the Target Company during the Track Record Period.

OUTLOOK AND FUTURE PROSPECTS

Taking into account factors such as economic development potential, market capacity, population growth rate and income level, the Directors are optimistic of the development potential of the Shenzhen leasing market in the coming years.

Shenzhen is the fasting growing city and one of the top-tier city in China, as well as one of the seven cities with a population exceeding 10 million people. In addition, Shenzhen is at the centre of the Grand Bay Area, it is expected that the future increase of urbanization rate and population will bring large development potential for the property market in Shenzhen. In light of the cycles of the real estate industry in the past ten years, Shenzhen’s real estate market had been comparatively stable, the volatility of which was comparatively small when compared to the cities in China.

Management believes the commercial leasing market will improve in the future with more business opportunities continue to emerge in Shenzhen.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

18 October 2019

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APAC Asset Valuation and Consulting Limited

5/F, Blissful Building, 243 – 247 Des Voeux Road Central, Hong Kong Tel: (852) 2357 0085 Fax: (852) 2951 0799

The Board of Directors China Tangshang Holdings Limited 13th Floor, Bupa Centre No. 141 Connaught Road West Hong Kong

Dear Sirs,

RE: VALUATION OF THE FAIR VALUE OF 73% EQUITY INTEREST IN SHENZHEN JINFAN INVESTMENT DEVELOPMENT CO., LTD.

In accordance with your instructions, we have undertaken a valuation on behalf of China Tangshang Holdings Limited (“ China Tangshang ”) to determine the Fair Value of 73% equity interest in Shenzhen Jinfan Investment Development Co., Ltd. (the “ Target Company ”) as at 30 April 2019 (the “ Valuation Date ”).

PURPOSE OF VALUATION

The purpose of this valuation is to assist China Tangshang in the determination of Fair Value of the Target Company based on the prospective financial information, underlying assumptions and information provided by the management of the Target Company and China Tangshang (“ Management ”) for internal reference and compliance purpose. No third party shall have the right of reliance on this report and neither receipt nor possession of this report by any third party shall create any express or implied third-party beneficiary rights.

We relied upon completeness, accuracy and fair representation of operational, financial information and business plans in relation to the lease business provided by Management. The Fair Value of the equity of the Target Company is subject to numerous assumptions

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

adopted in the prospective financial information. To the extent that any of these assumptions or facts changed, the result of the Fair Value conclusion would be changed accordingly. Regarding the prospective financial information, it has been represented by the management of China Tangshang and was assumed for the purposes of this opinion that such analysis and forecasts were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of China Tangshang. We can give no assurance that such financial analysis and forecasts can be realized or that actual result will not vary materially from those projected. As agreed with China Tangshang, our valuation is to be performed on the basis that the prospective financial information is expected to be achieved and it can be sustainable in the future. It is expected that China Tangshang will perform independent due diligence on the achievement of projected results by themselves.

VALUATION BASIS

Based on the sales and purchase agreement (“ S&P Agreement ”), China Tangshang agreed to acquire from the Vendor, and the Vendor agreed to sell to the China Tangshang, the Sale Shares, which shall represent the 73% share equity of the Target Company, for consideration in the amount of RMB40 million.

Pursuant to the lease agreement dated 5 June 2012 (“ Lease Agreement ”), the Target Company has obtained the right of use of the Jin Luan International Commercial Building for property management and subleasing business. It is noted that the Lease Agreement would expire by March 2033, and Management could not affirm whether the agreement would be renewed thereafter with certainty.

In light of the above, this exercise is conducted on the presumption that the business activities of the Target Company may not continue by April 2033, and our valuation is based on future cash flows projected by Management from the Valuation Date up to the expiry of the Concession Agreement.

As agreed with China Tangshang, the premise of this valuation is that the prospective financial results of the Target Company are expected to be achieved and is sustainable during the forecast period. It is presumed that China Tangshang will perform the relevant independent due diligence on the achievability of projected results.

The intended use of the Valuation is to serve as basis for the internal reference of the Company and compliance purpose. The ultimate transaction, if happens, and the corresponding acquisition prices would be the results of negotiations between the

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

transacting parties. The responsibility for determining the agreed acquisition price of the Target Company rests solely with China Tangshang. The results of our analysis should not be construed to be a fairness opinion, solvency opinion or an investment recommendation. It is inappropriate to use our valuation report for purpose other than its intended use or by third parties. These third parties should conduct their own investigation and independent assessment of the financial projections and underlying assumptions.

STANDARD OF VALUE

According to International Valuation Standard, our opinion of the Fair Value is defined as “the estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interest of those parties”.

PREMISE OF VALUE

This report is prepared using the premise that the subject company is a going concern. This means that it is presumed that in the future, the assemblage of assets, resources and income producing items will continue to generate cash flow.

ECONOMIC OVERVIEW

As the Target Company is operating within the Chinese economy, its business is affected by economic conditions and market fluctuations in China. We have reviewed the economic condition of China where the Target Asset will derive its future income from.

GDP Growth in China

In 2018, according to the current stage of 13th Five-Year Plan (2016-2020), China focus on the Social security reform which is implemented by controlling risk in the financial sector through using tighten fiscal policy and the housing market restrictions in the first half of year. Therefore, the economy growth is expected to remain moderate in further 2019. In 2018, the real gross domestic products (“ GDP ”) annual growth rate and the inflation rate are at 6.6% and 2.1% respectively. The real GDP annual growth rate decreases to 6.3% in 2019 and is estimated to slightly decrease to 5.7 % in the 2023 as well. The inflation rate rises to 2.3% and is estimated to slightly increase to 3.0% in the 2023.

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VALUATION REPORT IN RELATION TO THE FAIR VALUE OF

APPENDIx V

73% EQUITY INTEREST IN THE TARGET COMPANY

==> picture [429 x 267] intentionally omitted <==

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

In 2018, according to the ADB 1 , services industry and Retails sale consumption
remained the key driver of growth. Although manufacturing investment rises gradually,
the contribution of growth remains unchanged. Therefore, it said domestic demand has
a greater impact on growth than exports and it continues to provide strong support for
domestic consumption in China.
Chart – Real GDP Annual Growth Rate and Inflation of China
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Real GDP Growth Inflation
----- End of picture text -----

Source: World Economic Outlook Database (April 2019), International Monetary Fund

Worldwide GDP

China’s GDP is 1.3407 billion U.S. dollars, ranking second in the world and it is estimated to be closer to the United State’s GDP in the 2024. The projected aggregate GDP of major economies around the globe are summarized in the below table.

Table – Projected GDP of Major Economies from 2018 to 2024

			GDP, current	prices (Billions of U.S	prices (Billions of U.S	Dollars)
	Country	2018A	2019E	2020E	2021E	2022E	2023E	2024E
1.	China	13,407	14,217	15,468	16,807	18,207	19,714	21,310
2.	France	2,775	2,762	2,876	2,982	3,100	3,220	3,354
3.	Germany	4,000	3,964	4,157	4,335	4,527	4,714	4,912
4.	Japan	4,972	5,176	5,495	5,808	6,134	6,476	6,849
5.	UK	2,829	2,829	2,927	3,027	3,142	3,266	3,399
6.	US	20,494	21,345	22,198	23,060	23,923	24,813	25,729
7.	World	84,740	87,265	92,310	97,455	102,843	108,527	114,577

Source: World Economic Outlook Database (April 2019), International Monetary Fund

1 ADB (2018), Asian Development Outlook 2017: Transcending the Middle-Income Challenge (Manila: Asian Development Bank)

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

China’s economy is in the process of being transformed towards to a service-oriented, consumer demand and innovation-driven market. Despite recent market fluctuations arising from disputes between the respective governments of China and the United States, the economic conditions of China are expected to remain stable and steadily growing in the long term.

BRIEF DESCRIPTION OF THE TARGET COMPANY

The Target Company is a limited company incorporated in Shenzhen, Guangdong province, PRC and is principally engaged in the business of property management, property leasing, estate agency, and domestic trading. The principal operating business of the Target Company is sub-leasing and related services of the Jin Luan International Commercial Building( 金鑾國際商務大廈 , the “Building”), which is located in Long Hua District of Shenzhen city and near the subway station of Line No. 4 of Shenzhen subway.

VALUATION METHODOLOGY AND BASIS

We have conducted the Valuation in accordance with the International Valuation Standards. The valuation procedures employed include an assessment of key assumptions, estimates, and representations made by the proprietor or the operator of the Target Company. All the matters we consider essential to the proper understanding of the Valuation are disclosed in our valuation report.

We have been furnished with the information in respect of the projected operations of the subject business provided by management of Target Company and China Tangshang. We have relied substantially on the information provided in the Valuation. The information included, but not limited to, the following:

• Profit and cash flows forecast of the Target Company;

• Financial Information in relation to the Target Company;

• The business risks of the Target Company;

• Relevant licenses and agreements; and

• The economic outlook in general and the specific economic environment and market elements affecting the business, industry and market.

We have assumed that the data and information we obtained in the course of the Valuation, along with the opinions and representations provided to us by the Target Company and China Tangshang are true and accurate and accepted them without independent verification.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

In arriving at our assessed value, we have considered three generally accepted approaches: Market approach, Cost approach and Income Approach.

Market approach: provides an indication of value by comparing the subject asset with identical or similar assets for which price information is available.

Cost approach: provides an indication of value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by construction.

Income approach: provides an indication of value by converting future cash flows to a single current capital value.

The applicability and merits of each approach were considered, and our reasoning for choosing the approach to apply is as follows:

Valuation Approach Application Reasoning for adopting or rejecting

Market approach Rejected

The market approach is rejected because:

— As the Lease Agreement would expire by March 2033, and it is uncertain whether the agreement can be renewed or extended, it is assumed for the sake of prudence that profits and cash flows from the Target Company may not continue after March 2033. On the other hand, the implicit assumption of the market approach is that companies would continue to operate perpetually. Therefore, this approach is not applicable to the Target Company.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

• Valuation Approach Application Reasoning for adopting or rejecting Cost approach Rejected The cost approach is rejected because: — This approach is generally not applicable to ongoing operating business like the Target Company;

• — This approach is not appropriate as it ignores the economic benefits of ownership of the business.

• Income approach Adopted The income approach is adopted because:

• Management is able to provide a set of cash flow forecast with supportable, verifiable and explainable assumptions. These forecasts included projections o f d i f f e r e n t s t r e a m s o f r e v e n u e , costs of revenue, operating expenses, administrative expenses, working capital projection and the expected capital expenditure of the Target Company over the forecast period.

— The income approach can take into account specific factors that affect the business value of the Target Company, such as the specific pricing policies and local government policies. This approach can therefore provide a more accurate representation of the fair value of the equities of the Target Company.

We have adopted the income approach technique known as discounted cash flow method to assess the Fair Value of the 73% equity interest of the Target Company. Under the said method, we have discounted the projected cash flow of the Target Company to present worth based on the cash flows forecast, other relevant documents and information made available to us.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

For the purpose of our valuation, we have derived the future cash flows of the Target Company based on the available information and presently prevailing operating conditions of the business and by taking into consideration other pertinent factors which basically include the followings:

• the market and the business risks of the Target Company;

• the general economic outlook as well as specific investment environment for the business;

• the nature and current financial status of the Target Company;

• the historical performance of the comparable companies;

• the market expectation and required rate of return for similar business; and

• the assumptions as stated in the Assumptions of this report.

As part of our analysis, we are furnished with information prepared by the Target Company that includes the audited and unaudited financial statements and related operational information regarding the subject Assets/Liabilities. We have also conducted personal interviews with senior staff of the Target Company and have relied to a considerable extent on such information in arriving at our value.

DISCOUNT RATE

When evaluating the appropriate discount rate for the Target Company, we have used the Capital Assets Pricing Model (“ CAPM ”). Under the CAPM, the appropriate expected rate of return is the sum of the risk-free return and the equity risk premium required by investors to compensate for the market risk assumed. In addition, the expected rate of return of the business is expected to be affected by other firm specific risk factors that are independent of the general market. Then, we have derived the weighted average of the cost of equity and the cost of debt as proxy for the applicable discount rate (Weighted Average Cost of Capital).

The Weighted Average Cost of Capital (“ WACC ”) was adopted as the discount rate for the valuation. The WACC was computed using the following formula:

==> picture [178 x 25] intentionally omitted <==

where:

D = value of debt capital;

Kd = cost of debt capital (post-tax);

E = value of equity capital; and

Ke = cost of equity capital

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

Capital Structure

Estimation of the WACC of the Target Company involves the consideration of the appropriate capital structure (which is commonly represented by the ratio of debt to equity) that the Target Company would likely adopt over the forecast period for its operations.

The adopted capital structure was determined with reference to the average of debt-toequity ratios of comparable companies, which is perceived as the proxy of industry-average capital structure a market participant would use for the Target Company’s operations.

Cost of Debt (Kd)

The cost of debt capital (Kd) is the current interest rate that the Target Company is expected to pay to finance its projected operations within the capital structure. Since the interest expense of a business is tax deductible, the post-tax cost of debt is derived from the nominal cost of debt multiplied by a factor of (1 – corporate tax rate). The adopted pre-tax cost of debt was determined with reference to the People’s Bank of China over 5-year lending rate of 4.90%, which is the longest available bank lending benchmark rate. This is the long-term expected borrowing rate that the Target Company would be able to receive for its debt financing on a company level. Under the corporate tax rate of 25% in China, the post-tax cost of debt is determined to be 3.68%.

Cost of Equity (Ke)

The cost of equity is estimated using the Capital Asset Pricing Model (CAPM). The CAPM equation (with modifications for perceived additional risk of the Target Company) is as follows:

Ke=Rf+ β1 ( Rm-Rf ) +Rsize

where:

• Ke = Required rate of return on equity;

• Rf = Risk-free rate of return; β1 = Levered Beta;

• (Rm-Rf ) = Equity risk premium; and

• Rsize = Size premium

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

Risk-free Rate of Return (Rf)

The yield on long-term government bonds, which is commonly perceived as risk-free investments in the particular economy, is adopted as a proxy for the risk-free rate of return of the Target Company. In theory, the duration of the selected risk-free security should match the cash flow duration of the projected cash flows being discounted.

In the context of finance and valuation, the term “duration” refers to the weighted average time until all projected cash flows are received by the investors. The duration of cash flows from a business or asset is commonly determined using the following formula:

==> picture [110 x 37] intentionally omitted <==

where:

• DCF = Cash flow duration of the subject asset/business;

• i = Cash flow number;

• PVCFi = Present value of the i^th cash flow amount;

• TPV = Sum of present values of all cash flows;

• ti = Time in years until the i^th cash flow amount is received

Therefore, the cash flow duration of the provided cash flow forecast is calculated to be approximately 15 years. As the operating location of the Target Company is in China, the 10-year China government bond yield of 3.40% was adopted as proxy for the applicable risk-free rate of the Target Company. The duration of the 10-year China government bond is considered to reasonably match the cash flow duration of the subject business.

Levered Beta (β1)

Beta is a measure of systematic risk and is expressed as a function of the relationship between the excess return on an individual security and the return on the market as measured by a broad index.

Betas implied directly from regressions of individual securities and overall market return are also commonly referred to as levered Betas because they reflect the financial leverage of a company’s capital structure. In the course of this analysis, it is necessary to adjust the

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

levered Betas of the comparable companies to reflect the selected capital structure of the Target Company. This adjustment is performed by calculating unlevered Betas for each comparable company. The formula of unlevering Beta is as follows:

==> picture [96 x 33] intentionally omitted <==

where:

==> picture [152 x 27] intentionally omitted <==

Unlevering the Betas removes the effects of debt from the capital structure to reflect a required return on an investment as if the investment is financed entirely by equity. The average of these unlevered Betas is adopted as proxy of the unlevered Beta of the Target Company, which is in turn “re-levered” by incorporating the selected capital structure into the equation. The resulting beta is thus market-based with a specific adjustment to account for the degree of expected financial leverage of the Target Company. The formula for relevering beta is:

==> picture [115 x 22] intentionally omitted <==

Comparable Companies Selection Criteria

As discussed above, a set of comparable companies was required to estimate the capital structure and Beta applicable to the Target Company. We have identified relevant comparable companies listed on the stock exchange in different countries. The selection criteria include: (i) the selected companies are principally engaged in the business, or have significant business divisions in relation to the provision of property management and subleasing and related services with a significant portion of revenue generated from such services; (ii) they have the major income comes from the PRC; (iii) the comparable company’s information must be publicly available; and (iv) other qualitative factors such as adequate historical data, no long suspension period, etc, and we considered that the following companies fulfilled these criteria. The comparable companies were selected exhaustively by our best efforts. It is our view that the sampling of the 7 companies is a good representation of the population of the property management and subleasing industry, and the implied parameters from this sample is indicative of the industry average.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

An extract of the comparable companies and their respective beta included in our discount rate calculation were as follows.

Company Name	Stock Code	Listing location	3-year daily Beta
China World Trade Center Co Ltd	600007:CH	China	0.91
ShenZhen QuanXinHao Co Ltd	000007:CH	China	0.86
Yuexiu Real Estate Investment Trust	00405:HK	Hong Kong	0.55
Hui Xian Real Estate Investment Trust	87001:HK	Hong Kong	0.42
Hang Lung Properties Ltd	00101:HK	Hong Kong	0.87
SOHO China Ltd	00410:HK	Hong Kong	0.89
Spring Real Estate Investment Trust	001426:HK	Hong Kong	0.56

Source: Bloomberg

Equity Risk Premium (Rm – Rf)

The equity risk premium represents the premium realized by investors in common equities over long-term government bonds. This can also be perceived as the excess return required by equity investors to compensate for having to bear the additional risk of equity over risk-free assets. As the operation location of the Target Company is in China, the equity risk premium of China of 8.20% as sourced from the Bloomberg database was adopted to best represent the amount of excess equity risk the Target Company would be subject to.

Size premium (Rsize)

Based on empirical studies on the effect of firm size on assets’ rate of returns including the CRSP Deciles Size Study, the realized total returns on smaller sized companies have usually been greater over a long period of time than the original formulation of the CAPM. This indicates that CAPM does not fully account for the higher returns required for the greater risk faced by smaller companies in the long-term.

The excess return attributable to the firm size of smaller company size is commonly known as a size premium, which is an element commonly considered in discount rate estimation nowadays. The adopted size premium was determined with reference to the micro-cap size premium from the CRSP Deciles Size Study .

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

In light of the above, the discount rate of approximately 10% per annum was determined by the risk free rate of 3.40% (China’s government bond yield sourced from Bloomberg), equity risk premium of 8.20% (China’s market risk premium), estimated beta of the business of 0.80 (based on comparable companies), estimated cost of debt after tax of 3.68% (post-tax over-5-year China best borrowing interest rate), expected debt to equity ratio of 66.59% (based on comparable companies), and company size risk premium of approximately 3.67%.

DISCOUNT FOR LACK OF MARKETABILITY (“DLOM”)

Privately held companies are not readily marketable and would face more difficulty in converting its shares into cash as compared with publicly held companies. A DLOM will be considered in the privately held company in the valuation. We have considered various research studies conducted on the discount for lack of marketability in developed overseas markets to determine discount for lack of marketability of 20%.

The 2018 Stout Restricted Stocks Studies on Determining Discount for Lack of Marketability included an examination of 744 private placement transactions of unregistered common stock, with and without registration rights, issued by publicly traded companies from July 1980 through September 2017. The adopted DLOM is the mean discount implied by these 744 private placement transactions in comparison with the corresponding publicly traded common stocks.

MAJOR ASSUMPTIONS AND BASIS OF CASH FLOW FORECAST

Historical information on pricing policies and operating expenses to maintain the property management and subleasing operation, and forward-looking information on the expected business development in the future served as key basis and assumptions in the cash flow forecast prepared by Management.

Projection Basis of Total Revenue

Based on the historical financial information, the total revenue of the Target Company consisted from rental income.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

The above 3 streams of projected revenues are summarized in the following table.

Year	FY20	FY21	FY22	FY23	FY24	FY25-32
Rental income (RMB’000)	44,733	46,211	47,134	47,630	47,630	47,630-
						11,907
Approx. growth rate	8%	3%	2%	1%	0%	0%

Cost of Revenue

The projected cost of revenue each year comprises operating lease payment, staff cost and other operating expenses. The cost of revenue was historically 28% of total revenue in 2018.

Tax Expenses:

The Target Company would be subject to the 25% corporate tax rate in China. It is also noted that the applicable value-added tax and other regulatory fees have been deducted from the projected gross revenues in the cash flow forecast.

Net Profit Margin:

Based on the above inputs, Management has projected the net profit of the Target Company as follows:

Year	FY20	FY21	FY22	FY23	FY24	FY25-45
Net Profit (RMB’000)	10,269	11,200	10,670	11,804	13,183	12,937-
						1,861
Net Profit Margin	23%	24%	23%	25%	28%	27%-
						16%

The projected net profit margin of the whole company from FY20 to FY33 would range from 23% to 16%.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

Working Capital

We have been furnished with the information in respect of the projected working capital of the subject business provided by management of Target Company and China Tangshang. The working capital projections are prepared in reference to historical operating track records, expectation of the management of Target Company and the business plan which is in line with the above revenue and operating costs projection.

Capital Expenditure:

We have been furnished with the information in respect of the projected capital expenditure of the subject business provided by management of Target Company and China Tangshang. The capital expenditure projections are prepared by Management in accordance with their business plan, which is in line with the above revenue and operating costs projection.

OTHER FACTORS CONSIDERED IN OUR VALUATION

In the course of our valuation, we have taken into consideration of all pertinent factors affecting the business operations of the Target Company. The factors basically include:

• the market and the business risks of the Target Company;

• the general economic outlook as well as specific investment environment for the Target Company;

• the nature and current status of the Target Company;

• the historical performance of the Target Company;

• the assumptions as stated in the Assumptions of this report.

We have been provided with extracts of copies of relevant documents, audited and unaudited financial information relating to the Target Company. We have relied upon the aforesaid information in forming our opinion of the value of the Target Company. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us. We have no reason to doubt the truth and accuracy of the said information which is material to the valuation. We have also been advised by the Target Company that no material fact has been omitted from the information provided. We have also made relevant inquiries and obtained further information as considered necessary for the purpose of this valuation.

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

While we have exercised our professional knowledge and cautions in adopting assumptions and other relevant key factors in our valuation, those factors and assumptions are still vulnerable to the change of the economic environment, competitive uncertainties or any other abrupt alternations of external factors.

ASSUMPTIONS

In the course of this valuation exercise, a number of assumptions and caveats have been made. We have based on the following to arrive at our valuation conclusion.

• We have assumed that the future operating revenue and expenditure of the Target Company will be in accordance with the projection provided by the Target Company;

• The valuation result is substantially dependent on the profit and cash flows forecast provided by the Target Company. While we have briefly discussed with the Target Company the assumptions undertaken in the forecast, the Target Company is ultimately responsible for these assumptions. It is presumed that the Target Company has exercised the necessary due-diligence on profit and cash flow forecast and it is believed by the Target Company that the Target Company can achieve the projected results;

• There will be no major changes in existing political, legal, fiscal or economic conditions in the country or district where the business is in operation;

• There will be no major changes in the current taxation law in the areas in which the company conducting their business, that the rate of tax payable remains unchanged and that all applicable laws and regulations will be complied with;

• The inflation, interest rates and currency exchange rate will not differ materially from those presently prevailing;

• The Target Company will retain their key management and technical personnel to maintain their ongoing operations;

• There will be no major business disruptions through international crisis, diseases, industrial disputes, industrial accidents or severe weather conditions that will affect the existing business;

• The company will remain free from claims and litigation against the business or their customers that will have a material impact on value;

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APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

• The business is unaffected by any statutory notice and that operation of the business gives, or will give, no rise to a contravention of any statutory requirements;

• The business is not subject to any unusual or onerous restrictions or encumbrances; and

• The potential bad debt of the Target Company will not materially affect their business operations.

LIMITING CONDITIONS

We have relied to a considerable extent on the unaudited financial data and other related information provided by the Target Company. We are not in a position to, nor have been instructed to, comment on the lawfulness of the business.

While the achievement of profit and cash flows forecast depends on how well the Target Company would be managed, it should be noted that the Fair Value of the equity of the Target Company is also subject to numerous assumptions adopted in the business plan and prospective financial information. To the extent that any of these assumptions or facts changed, the result of the Valuation would be different. With respect to the prospective financial information regarding the Target Company provided to or otherwise reviewed by or discussed with us, it has been represented by the management of China Tangshang and was assumed for the purposes of this opinion that such analyses and forecasts were reasonably prepared based on assumptions reflecting the best currently available estimates and judgements of the management of China Tangshang as to the expected future results of the operations and financial conditions of the Target Company to which such analyses or forecasts relate. We can give no assurance, however, that such financial analyses and forecasts can be realised or that actual results will not vary materially from those projected.

In accordance with our standard practice, we must state that this report and valuation is for the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents.

Neither the whole, nor any part of this report and valuation, nor any reference thereto may be included in any documents, circular or statement without our written approval of the form and context in which it will appear.

— V-17 —

APPENDIx V VALUATION REPORT IN RELATION TO THE FAIR VALUE OF 73% EQUITY INTEREST IN THE TARGET COMPANY

MANAGEMENT CONFIRMATION OF FACTS

A draft of this report and our calculation has been sent to management of the Target Company. They have reviewed and orally confirmed to us that facts as stated in this report and calculation are accurate in all material respects and that they are not aware of any material matters relevant to our engagement which have been excluded.

REMARKS

Unless otherwise stated, all money amounts are stated in Renminbi.

The conclusion of value is based on accepted valuation procedures and practices that rely on substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Further, while the assumptions and other relevant factors are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Target Company and us.

This report is issued subject to our Assumptions and Limiting Conditions as attached.

OPINION OF THE VALUE

Based on the investigation and analysis stated above and on the method employed, we are of the opinion that the Fair Value of 73% equity interest in the Target Company as at Valuation Date was reasonably stated by the amount of RMB49 million.

Yours faithfully,

For and on behalf of

APAC Asset Valuation and Consulting Limited

Y.M. Leung

ICVS B.B.A

Director

Notes:

Ms. Y.M. Leung is a ICVS and B.B.A degree holder and has over 10 years professional experience in banking and valuation. Her valuation experience covers Hong Kong and Mainland China, including IT, utilities, retail, manufacturing, trading, mining, etc.

— V-18 —

LETTER FROM THE FINANCIAL ADVISER

APPENDIx VI

IN RELATION TO THE VALUATION

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Euto Capital Partners Limited Room 2418, Wing On Centre, 111 Connaught Road Central, Hong Kong

T +852 3106 2393 F +852 3582 4722 www.eutocapital.com

The Board of Directors China Tangshang Holdings Limited 13th Floor, Bupa Centre No. 141 Connaught Road West Hong Kong

18 October 2019

Dear Sirs,

We refer to the valuation report prepared by APAC Asset Valuation and Consulting Limited (the “ Independent Valuer ”) in relation to the valuation (the “ Valuation ”) of the fair value of 73% equity interest in Shenzhen Jinfan Investment Development Co., Ltd.（深 圳市金帆投資發展有限公司）as at 30 April 2019. The principal assumptions upon which the Valuation is based are included in the circular of China Tangshang Holdings Limited (the “ Company ”) dated 18 October 2019 (the “ Circular* ”), of which this letter forms part. Capitalised terms used herein shall have the same meanings as those defined in the Circular unless the context requires otherwise.

We note that the Valuation has been developed based on the discounted cash flow method under the income approach which is regarded as profit forecast (the “ Profit Forecast ”) under Rule 14.61 of the Listing Rules. We have discussed with the management of the Company and the Independent Valuer regarding the bases and assumptions of the Profit Forecast to arrive at the Valuation and have reviewed the letter dated 18 October 2019 issued by BDO Limited, the reporting accountants of the Company, as set out in Appendix VII to the Circular in regard to their work performed on the Profit Forecast. On the basis of the foregoing, we are of the opinion that the Profit Forecast underlying the Valuation, for which the directors of the Company are solely responsible, has been made after due and careful enquiry.

Yours faithfully, For and on behalf of

Euto Capital Partners Limited

Manfred Shiu Director

• For identification propose only

— VI-1 —

APPENDIx VII LETTER FROM REPORTING ACCOUNTANTS IN RELATION TO THE VALUATION

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountants, BDO Limited, Certified Public Accountants, Hong Kong.

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INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE ARITHMETICAL ACCURACY OF THE CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOWS IN CONNECTION WITH THE VALUATION OF 73% EQUITY INTEREST IN SHENZHEN JINFAN INVESTMENT DEVELOPMENT CO., LTD. *（深圳市金帆投資發展有限公司）

To the directors of China Tangshang Holdings Limited

In accordance with our agreed terms of engagement, we have examined the arithmetical accuracy of the calculations of the discounted future estimated cash flows (the “ Underlying Forecast ”) on which the business valuation (the “ Valuation ”) dated 18 October 2019 prepared by APAC Asset Valuation and Consulting Limited in respect of the appraisal of the fair value of 73% equity interest in Shenzhen Jinfan Investment Development Co., Ltd.（深圳市金帆投資發展有限公司） (the “ Target Company ”) as at 30 April 2019 is based. The Valuation is set out in Appendix V to the circular of China Tangshang Holdings Limited (the “ Company ”) dated 18 October 2019 (the “ Circular ”) in connection with the proposed acquisition of 73% equity interest in the Target Company. The Valuation based on the Underlying Forecast is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules* ”).

Directors’ responsibility for the Underlying Forecast

The directors of the Company (the “ Directors ”) are responsible for the preparation of the Underlying Forecast in accordance with the bases and assumptions approved by the Directors, a summary of which is set out in Appendix V to the Circular. This responsibility includes carrying out appropriate procedures relevant to the preparation of the Underlying Forecast for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

• For identification purpose only

— VII-1 —

APPENDIx VII LETTER FROM REPORTING ACCOUNTANTS IN RELATION TO THE VALUATION

Our Independence and Quality Control

We have complied with the independence and other ethical requirements 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.

Our 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” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) 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’ responsibility

Our responsibility is to report, as required by paragraph 29(2) of Appendix 1B of the Listing Rules, on the arithmetical accuracy of the calculations of the Underlying Forecast on which the Valuation is based.

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the arithmetical accuracy of the calculations is concerned, the Directors have properly compiled the Underlying Forecast in accordance with the bases and assumptions as set out in the Valuation. We performed procedures on the arithmetical accuracy and compilation of the Underlying Forecast in accordance with the bases and assumptions. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

— VII-2 —

LETTER FROM REPORTING ACCOUNTANTS IN RELATION TO THE VALUATION

APPENDIx VII

Opinion

In our opinion, based on the foregoing, the Underlying Forecast, so far as the arithmetical accuracy of the calculations is concerned, has been properly compiled in all material respects in accordance with the bases and assumptions approved by the Directors as set out in Appendix V to the Circular.

Other Matters

Without qualifying our opinion, we draw your attention that we are not reporting on the appropriateness and validity of the bases and assumptions on which the Underlying Forecast is based and our work does not constitute any valuation of the Target Company or an expression of an audit or review opinion on the Valuation.

The Underlying Forecast does not involve the adoption of accounting policies. The Underlying Forecast depends on future events and on a number of assumptions which cannot be confirmed and verified in the same way as past results and not all of which may remain valid throughout the period. Our work has been undertaken for the purpose of reporting solely to you under paragraph 29(2) of Appendix 1B of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

BDO Limited

Certified Public Accountants

Hong Kong

18 October 2019

— VII-3 —

GENERAL INFORMATION

APPENDIx VIII

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 Group. 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. DIRECTORS’ AND CHIEF ExECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURE

Long positions in the ordinary shares of the Company

			Approximate
			Percentage
			of interest in
Name of Director	Nature of interest	No. of Shares	the Company
Mr. Chen Weiwu_(Note)_	Interest of controlled	579,806,977 Shares	53.80%
	corporation

Note:

These shares are owned by Grand Nice International Limited which is wholly and beneficially owned by Mr. Chen Weiwu.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executives of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were deemed or taken to have under such provisions of the SFO);

— VIII-1 —

GENERAL INFORMATION

APPENDIx VIII

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, other than the interests of the Directors and chief executive of the Company disclosed in the paragraph headed “Disclosure of Interest” above, the following persons had interests or short position in the shares and underlying Shares as recorded in the register of interests required to be kept by the Company under section 336 of the SFO:

			Approximate
			Percentage
			of interest in
Name of Director	Nature of interest	No. of Shares	the Company
Grand Nice	Beneficial owner	579,806,977 Shares	53.80%
International Limited
(“Grand Nice”)
(Note 1)
Mr. Cheng Yang	Beneficial owner	76,180,000	7.07%
(Note 2)	Interest of the spouse	73,500	0.01%
China Resources	Interest of controlled	66,666,6666	6.19%
National Corporation	corporation
(“CRNC”)(Note 3)

Note:

1. Grand Nice is wholly and beneficially owned by Mr. Chen Weiwu who is an Executive Director and the Chairman of the Company.

2. Mr. Cheng Yang personally owned 76,180,000 shares of the Company and his wife, Ms. Bai Xue, owned 73,500 shares of the Company.

3. To the best knowledge of the Directors, Commotra Company Limited is a wholly-owned subsidiary of China Resources, which is a wholly-owned subsidiary of CRC Bluesky Limited (“ CRCB ”), which is in turn wholly-owned by China Resources Co., Limited, which is in turn wholly-owned by CRNC.

Save as disclosed above, as at the Latest Practicable Date, according to the register of interests required to be kept by the Company under section 336 of the SFO, there was no person who had any interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

— VIII-2 —

GENERAL INFORMATION

APPENDIx VIII

4. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Enlarged Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

• (a) the Acquisition Agreement;

• (b) subscription agreements dated 15 August 2018 in relation to the issue of convertible bonds in an aggregate principal amount of HK$42,031,080, details of which are set out in the Company’s announcement dated 15 August 2018;

• (c) A framework disposal agreement dated 9 February 2018 in relation to disposal of the entire equity interest of the target companies and the sale loans for a total consideration of HK$500,000, details of which are set out in the Company’s announcement dated 9 February 2018;

• (d) a guarantee agreement dated 13 September 2017 entered into between the guarantors (indirect non-wholly owned subsidiaries of the Company) and the lender, pursuant to which the each of the guarantors agreed to guarantee the repayment obligations of a borrower under the loan agreement in respect of the loan facility provided by the lender, details of which are set out in the Company’s announcement dated 27 November 2017; and

• (e) subscription agreements dated 3 July 2017 in relation to the issue of convertible bonds in an aggregate principal amount of HK$46,341,960, details of which are set out in the Company’s announcement dated 3 July 2017.

5. MATERIAL LITIGATION

As at the Latest Practicable Date, there were no litigation or claim of material importance that is known to the Directors to be pending or threatened against the Enlarged Group.

— VIII-3 —

GENERAL INFORMATION

APPENDIx VIII

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into a service agreement with any member of the Group which is not expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

7. DIRECTORS INTEREST IN COMPETING BUSINESSES

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates had any interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group pursuant to Rule 8.10 of the Listing Rules.

8. DIRECTORS’ INTEREST IN ASSETS, CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors had: (i) any direct or indirect interests in any asset which have been since 31 March 2019 (being 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 were proposed to be acquired or disposed of by or lease to any member of the Group; or (ii) any subsisting material interest in any contract or arrangement at the date of this circular which is significant in relation to the business of the Group.

9. ExPERTS AND CONSENTS

• (a) The following is the qualifications of the experts who have provided advice referred to or contained in this circular:

Name Qualification APAC Asset Valuation and Independent professional valuer Consulting Limited BDO Limited Certified Public Accountants Euto Capital Partners A corporation licenced to carry out Type 6 Limited (advising on corporate finance) regulated activities under the SFO

— VIII-4 —

GENERAL INFORMATION

APPENDIx VIII

• (b) As at the Latest Practicable Date, the experts named above had no shareholding interest in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group.

• (c) The experts named above have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their letters of advice and references to their names in the form and context in which the respectively appear.

• (d) As at the Latest Practicable Date, the experts named above did not have 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 which are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2019 (being the date to which the latest published audited financial statements of the Group were made up).

10. GENERAL

• (a) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

• (b) The principal place of business of the Company in Hong Kong is located at 13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong.

• (c) The principal share registrar and transfer office of the Company is MUFG Fund Services (Bermuda) Limited at The Belvedere Building, 69 Pitts Bay Road, Pembroke HM08, Bermuda.

• (d) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Secretaries Limited at Level 54, Hopewell Centre 183 Queen’s Road East, Hong Kong.

• (e) The company secretary of the Company is Hung Hing Hung (“ Mr. Hung ”). Mr. Hung is a member of Hong Kong Institute of Certified Public Accountants.

• (f) This circular is in both English and Chinese. In the event of inconsistency, the English text shall prevail.

— VIII-5 —

GENERAL INFORMATION

APPENDIx VIII

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong is located at 13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong. from the date of this circular up to and including 4 November 2019:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the accountants’ report of the Target Company from the reporting accountants, BDO Limited, the text of which is set out in Appendix II to this circular;

• (c) the report from the reporting accountants, BDO Limited, on unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (d) the material contracts referred to in the section headed “Material Contracts” in this appendix;

• (e) the written consent of each of the experts referred to in the section headed “Experts and Consents” in this appendix;

• (f) the annual reports of the Company for each of the four financial years ended 31 March 2019;

• (g) the letter from the Board as set out in this circular;

• (h) the Valuation Report in relation to the fair value of 73% equity interest in the Target Company, the text of which is set out in Appendix V to this circular;

• (i) the comfort letter from the Financial Adviser in relation to the Valuation, the text of which is set out in Appendix VI to this circular;

• (j) the comfort letter from the Reporting Accountants in relation to the Valuation, the text of which is set out in Appendix VII to this circular; and

• (k) this circular.

— VIII-6 —