Weiye Holdings Limited - Proxy Solicitation & Information Statement 2020

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 the action to be taken, you should consult your stockbroker or other 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 together with the accompanying proxy form to the purchaser or the transferee or to the bank, stockbroker, the 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)

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO ENTERING INTO OF LEASE CONTRACTS AND

(2) NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

RAINBOW CAPITAL (HK) LIMITED

A notice convening the SGM of China Tangshang Holdings Limited to be held at 13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong on Friday, 13 March 2020 at 3 p.m. is set out on pages SGM-1 to SGM-3 of this circular. Whether you are able to attend the SGM or not, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting if you so wish and in such event, the form of proxy shall be deemed to be revoked.

25 February 2020

	Page
DEFINITIONS.....................................................................................................	1
LETTER FROM THE BOARD...........................................................................	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE......................	23
LETTER FROM RAINBOW CAPITAL.............................................................	25
APPENDIX I FINANCIAL INFORMATION OF THE GROUP..................	I-1
APPENDIX II VALUATION OF PROPERTY...............................................	II-1
APPENDIX III UNAUDITED PROFIT AND LOSS STATEMENTS OF
THE PROPERTY.................................................................	III-1
APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE GROUP.................................................................	IV-1
APPENDIX V GENERAL INFORMATION...................................................	V-1
NOTICE OF SGM...............................................................................................	SGM-1

— i —

DEFINITIONS

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

“Beijing Mingchuang”

Beijing Mingchuang Business Management Co., Ltd.*（北京名創商業管理有限公司）, a company incorporated under the laws of the PRC with limited liability

“Board” the board of Directors
“BTIT”
Beijing Tian’an Innovation Technology and Estates Limited* ( 北京天安科創置業有限公司 ), a company incorporated under the laws of the PRC with limited liability
“Building 15” Floors 1 to 6, Building No. 15, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Building 32” Floors 1 to 5, Building No. 32, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Building 38” Floors 1 to 5, Building No. 38, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Building 40” Floors 1 to 6, Building No. 40, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Building 41” Floors 1 to 5, Building No. 41, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Building 54” Floors 1 to 6, Building No. 54, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing

— 1 —

DEFINITIONS

“Building 62” Floors 1 to 7, Building No. 62, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Building 63” Floors 1 to 7, Building No. 63, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing
“Company” China Tangshang Holdings Limited, a company incorporated in Bermuda with limited liability, and the issued Shares of which are listed on the Main Board of the Stock Exchange (Stock code: 674)
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“Director(s)” the director(s) of the Company
“Group” the Company and its subsidiaries
“Hong Kong”

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

“Independent Board Committee”
the independent board committee, comprising all of the independent non-executive Directors, namely Mr. Chen Youchun, Ms. Lui Mei Ka and Mr. Zhou Xin, established for the purpose of advising the Independent Shareholders in respect of the transactions contemplated under the Lease Contracts
“Independent Financial Adviser” or “Rainbow Capital”
Rainbow Capital (HK) Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the transactions contemplated under the Lease Contracts
“Independent Shareholders”

shareholders other than the connected person(s) who is/are interested in the relevant transactions

— 2 —

DEFINITIONS

“Latest Practicable Date” 20 February 2020, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Lease Contracts” the Lease Contracts entered into by BTIT (as the lessor) and Beijing Mingchuang (as the lessee) in respect of the Property on 27 December 2019
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“Main Board” the main board maintained and operated by the Stock Exchange
“PRC” the People’s Republic of China, which for the purpose of this circular shall exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“Property”
Building 15, Building 32, Building 38, Building 40, Building 41, Building 54, Building 62 and Building 63
“RMB”
Renminbi, the lawful currency of the PRC
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM”

the 2020 first special general meeting of the Company to be convened and held at 13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong at 3 p.m. on 13 March 2020 or any adjournment, for considering and approving, if appropriate, the transactions contemplated under the Lease Contracts

“SGM Notice”

a notice dated 25 February 2020 convening the SGM as set out on pages SGM-1 to SGM-3 of this circular
“Share(s)”
the ordinary share(s) in the issued share capital of the Company

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DEFINITIONS

“Shareholder(s)” the holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Valuer” APAC Asset Valuation and Consulting Limited, an independent Hong Kong property valuer “%” per cent.

For identification purpose only

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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: Registered office: Mr. Chen Weiwu (Chairman) Clarendon House Mr. Zhou Houjie (Acting Chief Executive Officer) 2 Church Street Hamilton HM11 Independent Non-executive Directors: Bermuda

Mr. Chen Youchun Ms. Lui Mei Ka Head office and principal place of Mr. Zhou Xin business in Hong Kong: 13th Floor, Bupa Centre, 141 Connaught Road West, Hong Kong

25 February 2020

To the Shareholders,

Dear Sirs or Madam,

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO ENTERING INTO OF LEASE CONTRACTS AND

(2) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 27 December 2019 in relation to the entering into of the Lease Contracts.

The purpose of this circular is to provide you details on, among others,

(i) the Lease Contracts;

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LETTER FROM THE BOARD

(ii) the recommendations from the Independent Board Committee to the Independent Shareholders in respect of the transactions contemplated under the Lease Contracts;
(iii) the advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the transactions contemplated under the Lease Contracts; and
(iv) the SGM Notice convening the SGM for the purposes of, inter alia, considering and, if thought fit, passing the resolution relating to the Lease Contracts.

LEASE CONTRACTS

On 27 December 2019, Beijing Mingchuang, an indirect wholly-owned subsidiary of the Company, entered into the Lease Contracts with BTIT, pursuant to which Beijing Mingchuang agreed conditionally to rent the Property, and BTIT agreed conditionally to lease the Property. The principal terms of the Lease Contracts are as follows:

I. Lease Contract for Building 15

Date: 27 December 2019 Parties: Lessor: BTIT Lessee: Beijing Mingchuang

Property: Floors 1 to 6, Building No. 15, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 3,479.33 sq.m. (subject to the on-site examination of the building).

Lease term: From 1 April 2020 to 31 March 2030 Rental: For the first year of the lease, the rental standard is RMB1.51/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB1,917,632.73.

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LETTER FROM THE BOARD

The above rent was determined after arm’s length negotiations between the parties and on normal commercial terms or better, with reference to the prevailing rent of similar properties in the surrounding area. The Group shall pay the rent with its internal funds.

Deposit: The lessee shall pay a deposit of RMB472,840.95 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.

Other expense: The lessee shall be responsible for the utilities charges of RMB5.80/sq.m. per month, air-conditioning charges of RMB1.11/kWh, and water charges of RMB9.00/tonne. For any construction, it shall pay the renovation services fees of RMB5.00/gross sq.m..

Usage: Office, research and development

Condition: The transactions under the lease contract are subject to the obtaining of approval of the shareholders in accordance with the applicable regulations (including the Listing Rules) by the Company.

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

II. Lease Contract for Building 32

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

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LETTER FROM THE BOARD

Property: Floors 1 to 5, Building No. 32, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 2,724.39 sq.m. (subject to the on-site examination of the building).

Lease term:

From 1 April 2020 to 31 March 2030

Rental: For the first year of the lease, the rental standard is RMB1.51/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB1,501,547.55.

Deposit: The lessee shall pay a deposit of RMB370,244.60 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.

Other expense: The lessee shall be responsible for the utilities charges of RMB5.80/sq.m. per month, air-conditioning charges of RMB1.11/kWh, and water charges of RMB9.00/tonne. For any construction, it shall pay the renovation services fees of RMB5.00/ gross sq.m..

Usage: Office, research and development

Condition: The transactions under the lease contract are subject to the obtaining of approval of the shareholders in accordance with the applicable regulations (including the Listing Rules) by the Company.

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

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LETTER FROM THE BOARD

III. Lease Contract for Building 38

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

Property: Floors 1 to 5, Building No. 38, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 2,714.76 sq.m. (subject to the on-site examination of the building).

Lease term: From 15 March 2020 to 14 March 2030

Rental: For the first year of the lease, the rental standard is RMB1.58/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB1,565,602.08.

Deposit: The lessee shall pay a deposit of RMB386,038.87 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.

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LETTER FROM THE BOARD

Usage: Office, research and development Condition: The transactions under the lease contract are subject to the obtaining of approval of the shareholders in accordance with the applicable regulations (including the Listing Rules) by the Company.

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

IV. Lease Contract for Building 40

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

Property: Floors 1 to 6, Building No. 40, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 3,482.82 sq.m. (subject to the on-site examination of the building).

Lease term: From 15 March 2020 to 14 March 2030

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LETTER FROM THE BOARD

Deposit: The lessee shall pay a deposit of RMB495,257.00 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.
Other expense: The lessee shall be responsible for the utilities charges of RMB5.80/sq.m. per month, air-conditioning charges of RMB1.11/kWh, and water charges of RMB9.00/tonne. For any construction, it shall pay the renovation services fees of RMB5.00/gross sq.m..
Usage: Office, research and development
Condition: The transactions under the lease contract are subject to the obtaining of approval of the shareholders in accordance with the applicable regulations (including the Listing Rules) by the Company.

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

V. Lease Contract for Building 41

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

Property: Floors 1 to 5, Building No. 41, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 2,707.89 sq.m. (subject to the on-site examination of the building).

Lease term: From 15 March 2020 to 14 March 2030

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LETTER FROM THE BOARD

Rental:

For the first year of the lease, the rental standard is RMB1.58/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB1,561,640.16.

Deposit: The lessee shall pay a deposit of RMB385,061.96 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.
Other expense: The lessee shall be responsible for the utilities charges of RMB5.80/sq.m. per month, air-conditioning charges of RMB1.11/kWh, and water charges of RMB9.00/tonne. For any construction, it shall pay the renovation services fees of RMB5.00/gross sq.m..

Usage: Office, research and development

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

— 12 —

LETTER FROM THE BOARD

VI. Lease Contract for Building 54

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

Property: Floors 1 to 6, Building No. 54, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 3,437.73 sq.m. (subject to the on-site examination of the building).

Lease term: From 6 May 2020 to 5 May 2030

Rental: For the first year of the lease, the rental standard is RMB1.69/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB2,120,563.76.

Deposit: The lessee shall pay a deposit of RMB522,878.73 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.

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LETTER FROM THE BOARD

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

VII. Lease Contract for Building 62

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

Property: Floors 1 to 7, Building No. 62, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 3,528.82 sq.m. (subject to the on-site examination of the building).

Lease term: From 16 April 2020 to 15 April 2030

Rental: For the first year of the lease, the rental standard is RMB1.62/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB2,086,591.26.

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LETTER FROM THE BOARD

Deposit: The lessee shall pay a deposit of RMB514,501.96 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.
Other expense: The lessee shall be responsible for the utilities charges of RMB5.80/sq.m. per month, air-conditioning charges of RMB1.11/kWh, and water charges of RMB9.00/tonne. For any construction, it shall pay the renovation services fees of RMB5.00/gross sq.m..
Usage: Office, research and development
Condition: The transactions under the lease contract are subject to the obtaining of approval of the shareholders in accordance with the applicable regulations (including the Listing Rules) by the Company.

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

VIII. Lease Contract for Building 63

Date: 27 December 2019

Parties: Lessor: BTIT

Lessee: Beijing Mingchuang

Property: Floors 1 to 7, Building No. 63, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing, with a total rental area of 3,528.82 sq.m. (subject to the on-site examination of the building).

Lease term: From 16 April 2020 to 15 April 2030

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LETTER FROM THE BOARD

Rental:

For the first year of the lease, the rental standard is RMB1.62/sq.m. per day; for the second year, the rental standard is 3.00% above that of the previous year; for each year thereafter, the rental standard is 3.00% above the last rental standard. The total rent for the first year is RMB2,086,591.26.

Deposit: The lessee shall pay a deposit of RMB514,501.96 to the lessor not later than three working days before the commencement of the lease term. After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the property, the lessor has the right to deduct the corresponding repair expense for the damaged part from the rental deposit refund.
Other expense: The lessee shall be responsible for the utilities charges of RMB5.80/sq.m. per month, air-conditioning charges of RMB1.11/kWh, and water charges of RMB9.00/tonne. For any construction, it shall pay the renovation services fees of RMB5.00/ gross sq.m..
Usage: Office, research and development

Sublet: The lessee may sublet the property provided that the consent of the lessor is obtained.

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LETTER FROM THE BOARD

The Company has appointed APAC Asset Valuation and Consulting Limited, an independent valuer, to form an independent view on whether the terms of the Lease Contracts are on normal commercial terms, fair and reasonable. As set out in the fair rent letter (the “Fair Rent Letter”) dated 11 February 2020 issued by the Valuer, after having reviewed the Lease Contracts, the Valuer advised that the rentals and annual rental increment rates for the Property are lower than the market levels, whilst other relevant terms contained in the Lease Contracts, including the rental payment term, rental deposit and lease period, are on normal commercial terms under prevailing market conditions and are considered as fair and reasonable. In the course of giving its opinion on the agreed rentals of the Property, the Valuer has made reference to the asking rentals of comparable properties within the locality and compare the differences of various factors between the Property and the comparable properties, such as location, quality, size, time, etc.

INFORMATION OF THE PROPERTY

The construction cost of the Property by BTIT is as follows:

		Year of
		Completion	Original value
			(RMB)
Building	15	2014	17,169,867
Building	32	2014	13,444,374
Building	38	2014	13,396,852
Building	40	2014	17,187,090
Building	41	2014	13,362,950
Building	54	2017	12,692,546
Building	62	2017	13,028,862
Building	63	2017	13,028,862

The Property is currently being leased out to certain lessees, in particular, Building 15, Building 32, Building 38, Building 40, Building 41, Building 62 and Building 63 are leased to Jinjiwang (Beijing) Technology Development Co., Ltd（金基旺（北京）科技發展有限公司）while Building 54 is leased to Huilin Biotechnology (Beijing) Co., Ltd.（匯麟生物科技（北京）有限公司）. Currently, the Property (excluding Building 54) has been mortgaged to Bank of Beijing.

As of 31 December 2018 and 31 December 2019, the carrying value of the Property is RMB109,361,817 and RMB103,696,247.

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LETTER FROM THE BOARD

Set out below is the unaudited statement of profit or loss on the identifiable net income stream of the Property for the three years ended 31 December 2019:

	For the year ended 31 December	For the year ended 31 December	For the year ended 31 December
	2017	2018	2019
	RMB’000	RMB’000	RMB’000
Revenue	0	9,291	18,451
Profit before income tax expense	0	2,638	7,383
Profit after income tax expense	0	1,844	5,539

In the year of 2017, as BTIT did not derive revenue from the Property, the Property did not have identifiable income stream in the financial year of 2017.

FINANCIAL EFFECTS OF THE LEASE CONTRACTS ON THE GROUP

Under HKAS 40, the Property leased under the Lease Contracts and leased out under operating leases will be recognized as an investment property and the total value for recognizing the Property set out in the Lease Contracts as investment properties is approximately RMB163,900,000, calculated by reference to the valuation prepared by an independent professional valuer by using the income capitalization approach. Upon the commencement of the lease term, the Group will recognize the lease liabilities of RMB100,965,796 in accordance to HKFRS 16 in addition to the investment properties of RMB163,900,000. The lease liabilities is calculated with reference to the aggregated present value of the fixed lease payment. The discount rate applied to the lease liabilities is 9.17% which is the incremental borrowing rate of the Company for the relevant Lease Contracts.

Based on the “Unaudited Pro Forma Financial Information of the Group” as set out in Appendix IV to this circular, the total assets and liabilities of the unaudited pro forma consolidated statement of assets and liabilities of the Group as at 30 September 2019 would be increased to approximately HK$657,099,802 and HK$447,699,049 respectively upon completion of entering into the Lease Contracts, assuming that entering into the Lease Contracts had taken place on 30 September 2019.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Property is currently being leased out to certain lessees. BTIT will terminate the lease contracts with the existing lessees and lease the Property to Beijing Mingchuang, which will subsequently lease the Property to the original lessees.

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LETTER FROM THE BOARD

The Group is currently engaged in the property sub-leasing business with its properties situated in Nanjing and Shenzhen. The Property situates in Beijing, a first-tier city in the Mainland China, with stable lease market and lower business risk. BTIT is willing to work with the Group to diversify the Group’s property sub-leasing business in first-tier cities. Besides, since the rent charged to Beijing Mingchuang by BTIT is lower than the market rates as well as the rent to be charged to the tenants by Beijing Mingchuang, the Group can generate revenue by leasing out the Property at the market rates.

Having considered the above factors, the Board considers that the terms of the Lease Contracts are fair and reasonable and are in the interest of the Company and its shareholders as a whole.

INFORMATION OF THE COMPANY

The Company is a Hong Kong-based investment holding company principally engaged in exhibition and property businesses. The Company has four segments. Exhibition-related business organizes exhibition events and meeting events. Food and beverages represents the sales of food and beverages and restaurant operations. Money lending represents the business of loan to customers, including individuals and corporation, pursuant to the provisions of the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong). Property sub-leasing, property development and investment represents the sub-leasing and development of real estates and the leasing of investment properties.

INFORMATION OF BEIJING MINGCHUANG

Beijing Mingchuang is principally engaged in sales of food; corporate management, hotel management, property management; provision of management services for motor vehicles in public parking lot; design, production, agency and publication of advertisements; financial consulting (provided that no auditing, capital verification, book inspection, valuation, accounting consulting and other businesses subject to special examination and approval shall be conducted, and no corresponding audit report, capital verification report, book inspection report, valuation report and other written materials shall be issued); sales of daily necessities; leasing of office space.

INFORMATION OF BTIT

BTIT is principally engaged in real estate development (for industrial purpose only); technology development, technical consulting, technology transfer, technical services; economic information consulting (excluding special licensed items); provision of business services; property management; and leasing of commercial housings.

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LETTER FROM THE BOARD

APPROVAL OF THE BOARD

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, no Director has a material interest in the Lease Contracts except Mr. Chen Weiwu, the connected Director. Other Directors have unanimously approved the Lease Contracts (the connected Director, namely Mr. Chen Weiwu has abstained from voting) and are of the view that the terms of the Lease Contracts are on normal commercial terms or better and fair and reasonable, and that the Lease Contracts are entered in the ordinary and usual course of business and in the interests of the Company and its shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

The entering into of the Lease Contracts as the lessee will require Beijing Mingchuang to recognize RMB163,900,000 as an investment property, and thus the entering into of the Lease Contracts and the transactions contemplated thereunder will be regarded as an acquisition of asset by the Group. As certain applicable percentage ratios of the Property as deemed acquisition of investment property exceed 25% but all such ratios are below 100%, the Lease Contracts and the transactions contemplated thereunder constitute a major transaction of the Company under Chapter 14 of the Listing Rules and are subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, Mr. Chen Weiwu, the executive director of the Company, is interested in approximately 53.80% of the shares of the Company and is an ultimate controlling shareholder of the Company. As Mr. Chen Weiwu indirectly holds 100% of the equity interest in BTIT, BTIT is a connected person of the Company under Chapter 14A of the Listing Rules. Accordingly, the Lease Contracts and the transactions contemplated thereunder also constitute connected transactions of the Company and are subject to the reporting, announcement, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

OTHER MATTERS

Pursuant to the Listing Rules, an Independent Board Committee comprising all the independent non-executive Directors has been established by the Company to advise the Independent Shareholders on the transactions contemplated under the Lease Contracts. Rainbow Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and Independent Shareholders as to whether the terms of the Lease Contracts are fair and reasonable so far as the Independent Shareholders are

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LETTER FROM THE BOARD

concerned, are on normal commercial terms or better and in the ordinary and usual course of business of the Group, and are in the interests of the Company and Shareholders as a whole.

SGM

An SGM Notice is set out on pages SGM-1 to SGM-3 of this circular. The resolution as set out in the SGM Notice will be proposed at the SGM.

A form of proxy for the SGM is enclosed with this circular. Whether you are able to attend the SGM or not, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the SGM or any adjourned meeting should you so wish and in such event, the form of proxy shall be deemed to be revoked.

In accordance with Rule 13.39(4) of the Listing Rules, all votes of the Shareholders on the proposed ordinary resolution at the SGM shall be taken by poll. The chairman of the SGM will demand that the resolution as set out in the SGM Notice be voted upon by way of poll at the SGM.

To the best of the Director’s knowledge, information and belief and having made all reasonable enquires, other than Mr. Chen Weiwu and his associates who shall abstain from voting at the SGM in respect of the Lease Contracts, none of the Directors or Shareholders has a material interest on the resolution proposed at the SGM, and no Shareholder is required to abstain from voting on any of the resolution at the SGM.

RECOMMENDATION

The Directors believe that the proposed resolution relating to the Lease Contracts are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to be proposed at the SGM.

— 21 —

LETTER FROM THE BOARD

RESPONSIBILITY STATEMENT

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

ADDITIONAL INFORMATION

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

Yours faithfully,

For and on behalf of the Board China Tangshang Holdings Limited Chen Weiwu

Chairman

— 22 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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CHINA TANGSHANG HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

25 February 2020

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO ENTERING INTO OF LEASE CONTRACTS AND (2) NOTICE OF SPECIAL GENERAL MEETING

Reference is made to the circular issued by the Company to the Shareholders dated 25 February 2020 (the “ Circular ”) of which this letter forms a part. Unless the context otherwise specified, capitalized terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed by the Board to advise you on the terms of the Lease Contracts. Rainbow Capital has been appointed as the Independent Financial Adviser to advise you and us in this regard. Details of its advice, together with the principal factors and reasons it has taken into consideration in giving such advice, are set out on pages 25 to 36 of the Circular and the additional information is set out in the appendices thereto.

— 23 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Lease Contracts, and taking into account the independent advice of Rainbow Capital, in particular the principal factors, reasons and recommendations set out in its letter on pages 25 to 36 of the Circular, we consider that the Lease Contracts and the transactions contemplated thereunder are on normal commercial terms or better which are fair and reasonable so far as the Independent Shareholders are concerned and the Lease Contracts are entered into in the ordinary and usual course of business of the Group and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend you to vote in favor of the resolution to be proposed at the SGM to approve the Lease Contracts.

Yours faithfully,

The Independent Board Committee Mr. Chen Youchun Ms. Lui Mei Ka Mr. Zhou Xin

Independent non-executive directors of the Company

— 24 —

LETTER FROM RAINBOW CAPITAL

The following is the full text of a letter of advice from Rainbow Capital (HK) Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Lease Contracts and the transactions contemplated thereunder, which has been prepared for the purpose of incorporation in this circular.

Rainbow Capital (HK) Limited

25 February 2020

To the Independent Board Committee and the Independent Shareholders

China Tangshang Holdings Limited 13th Floor Bupa Centre 141 Connaught Road West Hong Kong

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO THE LEASE CONTRACTS

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Lease Contracts and the transactions contemplated thereunder, details of which are set out in the “Letter from the Board” (the “ Letter from the Board ”) contained in the circular issued by the Company to the Shareholders dated 25 February 2020 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Circular.

On 27 December 2019, Beijing Mingchuang, an indirect wholly-owned subsidiary of the Company, entered into the Lease Contracts with BTIT, pursuant to which Beijing Mingchuang conditionally agreed to rent the Property from BTIT for a term of 10 years. The Property is currently leased out to two lessees (the “ Original Tenants ”) which are independent third parties. BTIT will terminate the lease contracts (the “ Existing Lease Contracts ”) with the Original Tenants and under the Lease Contracts, lease the Property to Beijing Mingchuang which will subsequently lease the Property to the Original Tenants under the same terms and conditions as the Existing Lease Contracts.

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LETTER FROM RAINBOW CAPITAL

As at the Latest Practicable Date, Mr. Chen Weiwu is an executive director and the controlling shareholder of the Company and is interested in approximately 53.80% of the entire issued share capital of the Company. As Mr. Chen Weiwu indirectly holds 100% of the equity interest in BTIT, BTIT is an associate of Mr. Chen Weiwu and therefore a connected person of the Company under Chapter 14A of the Listing Rules.

Pursuant to the new Hong Kong Financial Reporting Standard 16 Lease (“ HKFRS 16 ”), effective for financial statements with annual periods beginning on or after 1 January 2019, the entering into of the Lease Contracts as a lessee will require the Group to recognise the right-of-use assets in its financial statements. Given that the right-of-use assets are for lease out under operating lease to certain lessees, the right-of-use assets shall be accounted as investment properties under Hong Kong Accounting Standard 40 Investment Properties (“ HKAS 40 ”). This will be regarded as deemed acquisition of assets by the Group. As certain applicable percentage ratios exceed 25% but less than 100%, the Lease Contracts and the transactions contemplated thereunder constitute major and connected transactions for the Company, and are subject to the reporting, announcement, circular and independent shareholders’ approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

The Company will seek approval from the Independent Shareholders in respect of the Lease Contracts and the transactions contemplated thereunder by way of a poll at the SGM. In view of the interest above, Mr. Chen Weiwu and his associates are required to abstain from voting in respect of the ordinary resolution approving the Lease Contracts and the transactions contemplated thereunder at the SGM.

The Independent Board Committee, comprising all the three independent non-executive Directors, namely Mr. Chen Youchun, Ms. Lui Mei Ka and Mr. Zhou Xin, has been formed to advise the Independent Shareholders on whether the terms of the Lease Contracts and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole, and advise the Independent Shareholders as to voting. We, Rainbow Capital, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

As at the Latest Practicable Date, we did not have any relationships or interests with the Group and BTIT that could reasonably be regarded as relevant to our independence. In the last two years, there was no engagement between the Group and us. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received any fees or benefits from the Group or BTIT. Accordingly, we are qualified to give independent advice in respect of the Lease Contracts and the transactions contemplated thereunder.

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LETTER FROM RAINBOW CAPITAL

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and all such statements of belief, opinions and intentions of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the management of the Group. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the Circular.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Group, BTIT or their respective substantial shareholders, subsidiaries or associates.

— 27 —

LETTER FROM RAINBOW CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering the Lease Contracts and the transactions contemplated thereunder, we have taken into account the principal factors and reasons set out below:

1. Background to, reasons for and benefits of entering into the Lease Contracts

(i) The Group

The Group is principally engaged in (a) exhibition-related business; (b) property sub-leasing, development and investment business; and (c) financial services business. For the year ended 31 March 2019 and the six months ended 30 September 2019, gross rental income from property sub-leasing business amounted to approximately HK$45.3 million and HK$30.7 million, representing approximately 55.6% and 73.7% of total revenue, respectively. As at the Latest Practicable Date, the Group carried out its property sub-leasing business through certain properties rented from independent third parties in Nanjing and Shenzhen, the PRC, with lease terms ranging from 5 to 20 years. The entering into of the Lease Contracts represents an expansion of the Group’s existing property sub-leasing business.

The Shares are listed on the Stock Exchange and the Company had a market capitalisation of approximately HK$195.1 million as at the Latest Practicable Date.

(ii) The Property

The Property is located at 北京市北京經濟技術開發區經海三路 109 號 (109 Jinghaisanlu, Beijing Economic and Technological Development Area, Beijing, the PRC) which is the only state-level economic and technological development area in Beijing and has developed into the hub of high-technology research or development and manufacturing.

The Property is part of the development of 天驥 • 智谷 (Tianji Zhigu) which is a large-scale industrial development with more than 60 blocks of low-rise and high-rise industrial or office buildings and was completed in three phases between 2013 and 2018.

— 28 —

LETTER FROM RAINBOW CAPITAL

The Property comprises eight blocks of five to seven-storey office buildings with a total gross floor area of approximately 25,604.56 sq.m. As at the Latest Practicable Date, the Property was under various Existing Lease Contracts with expiry dates ranging from August 2023 to July 2028 and was occupied as research centers and ancillary offices.

According to the unaudited profit and loss statements of the Property as set out in Appendix III to the Circular, for the two years ended 31 December 2019, the Property generated (a) total revenue of approximately RMB9.3 million and RMB18.5 million; and (b) total profit before income tax expense of approximately RMB2.6 million and RMB7.4 million, respectively.

(iii) Reasons for and benefits of entering into the Lease Contracts

As set out in the interim report of the Company for the six months ended 30 September 2019, while the Group has continued the efforts to consolidate and realign its businesses to enable the Group to achieve an improvement in its financial position, it has also been exploring and identifying other suitable investment opportunities to enhance its earning potential so as to attain a sustainable growth. In addition, the Group expects to leverage on the experience of its management team in the real estate development industry as well as the resources and networks of its management team in the PRC for its future development in the property sub-leasing, development and investment business sector.

The Group is currently engaged in the property sub-leasing business with properties situated in Nanjing and Shenzhen, the PRC. As disclosed in the Letter from the Board, the entering into of the Lease Contracts allows the Group to diversify its property sub-leasing business into Beijing, a first-tier city in the PRC with stable lease market and lower business risk. Moreover, as the rents to be charged by BTIT to Beijing Mingchuang under the Lease Contracts are lower than the market rates as well as the rents to be charged by Beijing Mingchuang to the Original Tenants, the Group can generate additional revenue through leasing out the Property.

In our view, the sub-leasing of the Property through the entering into of the Lease Contracts will provide an opportunity for the Group to leverage on the experience of its management team in the real estate development industry as well as the resources and networks of its management team in the PRC to diversify its income and earnings stream to achieve sustainable growth, which is consistent with the Group’s stated strategy to seek new investment opportunities to enhance its earning potential.

— 29 —

LETTER FROM RAINBOW CAPITAL

2. The Lease Contracts

Set out below is a summary of the principal terms of the Lease Contracts. Independent Shareholders are advised to read further details of the Lease Contracts as disclosed in the Letter from the Board.

The Property:

Building 15, Building 32, Building 38, Building 40, Building 41, Building 54, Building 62 and Building 63

Lease term: 10 years

Rental:

RMB1.51 to RMB1.69 per sq.m. per day for the first year. Such rental rates will be increased by 3% for each year thereafter. The rent shall be pre-paid by Beijing Mingchuang to BTIT on a quarterly basis.

Rental deposit: Beijing Mingchuang shall pay a deposit equivalent to 90-day rental to BTIT not later than three working days before the commencement of the lease term.

After the lease term expires or the contract is terminated, if there is damage to the leased property, ancillary equipment and facilities, and the items in the handover receipt of the Property, BTIT has the right to deduct the corresponding repair expense for the damaged part from the rental deposit.

Other expenses:

The tenants shall be responsible for the utilities charges, airconditioning charges, water charges and renovation service fees (if any).

Use of the Property: Research centers and ancillary offices

Condition:

The transactions contemplated under the Lease Contracts are subject to the obtaining of approval of the Independent Shareholders in accordance with the applicable regulations (including the Listing Rules) by the Company.

Sublet:

Beijing Mingchuang may sublet the Property provided that the consent of BTIT is obtained.

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LETTER FROM RAINBOW CAPITAL

(i) Basis of the rentals of the Property

As set out in the Letter from the Board, the rentals for the Property as set out above were determined after arm’s length negotiations between the parties with reference to the prevailing rents of similar properties in the surrounding area. We have discussed with the management of the Group the principal terms of the Lease Contracts, as set out in the table above, which the Directors consider to be on normal commercial terms or better.

(ii) Assessment of the principal terms of the Lease Contracts

(a) The Valuer’s view

The Company has appointed the Valuer to form an independent view on whether the terms of the Lease Contracts are on normal commercial terms, fair and reasonable.

As set out in the fair rent letter (the “ Fair Rent Letter ”) dated 11 February 2020 issued by the Valuer, after taking into account the terms of the Lease Contracts, it is of the view that (1) the rentals and annual rental increment for the Property are lower than the market levels; (2) other relevant terms contained in the Lease Contracts, including the rental payment term, rental deposit and lease period, are on normal commercial terms under prevailing market conditions which are fair and reasonable; and (3) the lease period of the Lease Contracts is consistent with normal business practice, especially for companies operating property sub-leasing business which should seek for a relatively longer lease duration to secure the business operation (the “ Valuer’s Opinion ”).

According to the Fair Rent Letter, in assessing the fairness and reasonableness of the terms of the Lease Contracts, the Valuer has adopted the direct comparison approach by making reference to the asking rentals of comparable properties within the locality, subject to appropriate adjustments including but not limited to location, quality, size, time and other relevant factors, given the lack of disclosure of relevant completed lease transactions in the public.

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LETTER FROM RAINBOW CAPITAL

(b) Our due diligence

Assessment of the Valuer’s view

We have conducted an interview with the Valuer to enquire its qualification and experience in assessing the terms of lease agreements in the PRC. The Valuer confirmed that it is a third party independent of the Company and its connected persons. We have also reviewed the terms of engagement of the Valuer, in particular its scope of work. We noted that its scope of work is appropriate to form the opinion required to be given and there are no limitations on the scope of work which might adversely impact on the degree of assurance given by the Valuer in the Fair Rent Letter. We have performed the work as required under note (1)(d) to Rule 13.80 of the Listing Rules in relation to the Valuer and its work as regards the Lease Contracts.

We have also discussed with the Valuer the work it has performed and the methodology, bases and assumptions adopted in arriving at its conclusion in the Fair Rent Letter as to the terms of the Lease Contracts, including the review of the asking rentals of comparable properties and discussion with the Valuer the adjustments made.

In light of the above, we consider that the methodology, bases and assumptions adopted by the Valuer in assessing the terms of the Lease Contracts are fair and reasonable.

Furthermore, we have reviewed the Existing Lease Contracts entered into by BTIT and the Original Tenants between September 2017 and August 2018, and noted that (1) the rents are higher than those to be charged by BTIT to Beijing Mingchuang under the Lease Contracts; (2) the annual rental increment is 5% which is higher than that under the Lease Contracts; (3) the rents are payable in advance on a quarterly basis and a three-month rental deposit is required, which are the same as those under the Lease Contracts; and (4) the lease durations range from 5 to 10 years. These indicate that the terms of the Lease Contracts are on normal commercial terms or better which is consistent with the Valuer’s Opinion. Given that Beijing Mingchuang will enter into new lease agreements (the “ New Lease Contracts ”) with the Original Tenants and lease the Property to the Original Tenants under the same

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LETTER FROM RAINBOW CAPITAL

terms and conditions as the Existing Lease Contracts after termination of the Existing Lease Contracts by BTIT, we consider that the terms of the Existing Lease Contracts are relevant to assessing the fairness and reasonableness of the terms of the Lease Contracts.

Assessment of the 3% annual rental increment

We consider the 3% annual rental increment to be fair and reasonable after taking into account the following factors:

(1) the annual rental increment under the Lease Contracts is lower than the market levels according to the Fair Rent Letter;
(2) the annual rental increment under the Existing Lease Contracts and the New Lease Contracts is 5% which is higher than that under the Lease Contracts; and
(3) according to the World Economic Outlook (October 2019) published by the International Monetary Fund (IMF), the PRC inflation rates during the period from 2021 to 2024 are estimated to be in the range of 2.8% to 3%.

Assessment of the duration of the Lease Contracts

In respect of the duration, each of the Lease Contracts has a term of 10 years. In assessing the reasonableness as regards the duration of the Lease Contracts, we have considered the following factors:

(1) the entering into of the Lease Contracts for a longer term for the Group’s property sub-leasing business is consistent with the Group’s long-term strategy of achieving a sustainable growth through leveraging on the experience of its management team in the real estate development industry as well as the resources and networks of its management team in the PRC;
(2) BTIT will terminate the Existing Lease Contracts and under the Lease Contracts, lease the Property to Beijing Mingchuang which will subsequently lease the Property to the Original Tenants under the same terms and conditions as the Existing Lease Contracts. The Lease Contracts will expire between March 2030 and May

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LETTER FROM RAINBOW CAPITAL

2030 whereas the New Lease Contracts will expire between August 2023 and July 2028. The long-term duration of the Lease Contracts will allow the Group to secure the revenue stream arising from the rental difference between the New Lease Contracts and the Lease Contracts for periods at least up to the expiry dates of the New Lease Contracts;

(3) although the durations of the New Lease Contracts are shorter than that of the Lease Contracts, we consider that a longer duration of the Lease Contracts will provide the Group with a stable and reliable source of investment properties to develop its property sub-leasing business. Upon expiry of the New Lease Contracts, the Group is allowed to continue to use the Property under the Lease Contracts for its property sub-leasing business;
(4) having reviewed the existing lease agreements entered into by the Group and independent third parties for renting of properties for its property sub-leasing business in Nanjing and Shenzhen, the PRC, with lease terms ranging from 5 to 20 years, we consider that the duration of the Lease Contracts is comparable to those of the Group’s existing lease agreements entered into with independent third parties; and
(5) we have also discussed with the Valuer on the duration of the Lease Contracts. As advised by the Valuer, it is common for companies which operate property sub-leasing business to seek for a relatively longer lease duration to secure the business operation. As such, the Valuer stated in the Fair Rent Letter that the lease period of the Lease Contracts is consistent with normal business practice, especially for companies operating property sub-leasing business.

Based on the above, we are of the view that the term of 10 years under each of the Lease Contracts is a normal commercial term for a transaction of this nature and it is normal business practice for contracts of this type to be of such duration.

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LETTER FROM RAINBOW CAPITAL

(c) Our view

On the basis of the above, in particular the Valuer’s view on the terms of the Lease Contracts and the favorable rentals (including annual rental increment) of the Lease Contracts over those of the Existing Lease Contracts and the New Lease Contracts, we consider that the terms of the Lease Contracts are on normal commercial terms or better, with a reasonable length of duration for the Group to implement its stated development strategy, as discussed above.

3. Financial effect on the Group

(i) Right-of-use asset and lease liability

The Lease Contracts are long-term leases for a duration of 10 years. Pursuant to the new HKFRS 16, the entering into of the Lease Contracts as a lessee will require the Group to recognise the right-of-use assets in its financial statements. Given that the right-of-use assets are for lease out under operating lease to certain lessees, the right-of-use assets shall be accounted as investment properties under HKAS 40. A resultant lease liability will be recognised by the Group at the same time. Please refer to the Letter from the Board for details of the accounting treatment of the Lease Contracts.

Based on the unaudited pro forma financial information of the Group set out in Appendix IV to the Circular, the assets and liabilities of the Group will be increased by approximately HK$179.7 million and HK$111.5 million, respectively, primarily reflecting the recognition of the investment properties and the corresponding lease liabilities.

Given that the rents charged under the Lease Contracts are lower than the market levels and those under the New Lease Contracts, the Directors are of the view that the future return to be generated from the Property is expected to contribute positively to the overall profitability of the Group.

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LETTER FROM RAINBOW CAPITAL

(ii) Cash flow

As advised by the Directors, the Group currently intends to finance the future rent payments under the Lease Contracts by the future rental income arising from the New Lease Contracts and/or internal resources of the Group. As at 30 September 2019, the Group had cash and bank balances of approximately HK$162.2 million. The Directors have confirmed that, taking into account the financial resources available to the Group, including internally generated funds and available credit facilities of the Group, the Group will have sufficient working capital for its requirements for at least 12 months from the date of publication of the Circular.

OPINION AND RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that the Lease Contracts and the transactions contemplated thereunder are on normal commercial terms or better which are fair and reasonable so far as the Independent Shareholders are concerned. We further consider that the entering into of the Lease Contracts is in the ordinary and usual course of business of the Group, and in the interests of the Company and the Shareholders as a whole.

We therefore advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Lease Contracts and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of

Rainbow Capital (HK) Limited Larry Choi Managing Director

Mr. Larry Choi is a licensed person and a responsible officer of Rainbow Capital (HK) Limited registered with the Securities and Futures Commission to carry out type 6 (advising on corporate finance) regulated activity under the SFO. He has over ten years of experience in the corporate finance industry.

— 36 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION

The audited consolidated financial statements of the Group for the three financial years ended 31 March 2017, 2018 and 2019, including the independent auditors’ report thereon and the notes thereto, have been disclosed in the respective annual reports of the Company. The auditor of the Company has not issued any qualified opinion on the Group’s consolidated financial statements for the three financial years ended 31 March 2017, 2018 and 2019. The annual reports of the Company for the three financial years ended 31 March 2017, 2018 and 2019, and the interim report for the six months ended 30 September 2019 are published on the websites of HKEXnews (http://www.hkexnews.hk) and the Company (http://www.ts674.com) respectively.

The financial statements of the Group for the year of 2017 are set out from page 64 to 212 in the 2017 Annual Report which was published on 27 July 2017. The 2017 Annual Report is available on the websites of the Stock Exchange (http://www. hkexnews.com) and the Company (http://www.ts674.com) and is accessible via the following hyperlink:

https://www1.hkexnews.hk/listedco/listconews/sehk/2017/0727/ltn20170727549.pdf

The financial statements of the Group for the year of 2018 are set out from page 58 to 200 in the 2018 Annual Report which was published on 27 July 2018. The 2018 Annual Report is available on the websites of the Stock Exchange (http://www. hkexnews.com) and the Company (http://www.ts674.com) and is accessible via the following hyperlink:

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0727/ltn20180727564.pdf

The financial statements of the Group for the year of 2019 are set out from page 59 to 236 in the 2019 Annual Report which was published on 25 July 2019. The 2019 Annual Report is available on the websites of the Stock Exchange (http://www. hkexnews.com) and the Company (http://www.ts674.com) and is accessible via the following hyperlink:

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

The 2019 unaudited interim results are set out from page 18 to 56 in the 2019 Interim Report which was published on 24 December 2019. The 2019 Interim Report is available on the websites of the Stock Exchange (http://www.hkexnews.com) and the Company (http://www.ts674.com) and is accessible via the following hyperlink: https://www1.hkexnews.hk/listedco/listconews/sehk/2019/1224/2019122400239.pdf

— I-1 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. INDEBTEDNESS

Indebtedness

As at the close of business on 31 December 2019, being the latest practicable date for the purpose of preparing this indebtedness statement prior to the printing of this circular, the Group had outstanding borrowing of approximately HK$178.0 million details of which are set out below:

Bills payable Bank borrowing, secured and guaranteed Repayable within one year Repayable between one and within two years Repayable between two and within three years Amount due to related party, unsecured Convertible bonds, unsecured	Approximate HK$ million 3.3

	46.4 4.5 8.4
	59.3

	27.0

	88.4

Note:

As at 31 December 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 December 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.

— I-2 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Guarantees

As at 31 December 2019, an indirect non-wholly owned subsidiary of the Company provided the guarantee in respect of a loan facility from a financial institution in the Peoples’ Republic of China for the principal amount of up to RMB100,000,000 to an independent third party.

Lease liabilities

The Group has adopted HKFRS 16 “Leases” for the accounting period beginning on 1 April 2019. The lease liabilities as at 31 December 2019 were approximately HK$78.0 million.

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

3. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after due and careful enquiry and taking into account the existing bank balances and cash, internal resources, available credit facilities and the effect of the transactions, the Group will have sufficient working capital for its present requirements for a period of 12 months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 March 2019, being the date on which the latest published audited consolidated financial statements of the Group were made up.

— I-3 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

China continued to advance its industrialisation and urbanisation, and deepen the supply-side reform. As the recurrent intensification of the Sino-US trade war may become a normalised phenomenon and exports to the United States may continue to weaken, economic development will be under pressure. However, driven by “The Belt and Road Initiative” and other favorable policies, domestic demand promotion, economic development structure adjustment and other measures to promote highquality economic development will remain as the dominant trend. Therefore, the Directors expect the business environment to remain challenging, but are cautiously optimistic towards the overall outlook of the Group.

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

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 attaining 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.

— I-4 —

VALUATION OF PROPERTY

APPENDIX II

The following is the text of a property valuation report prepared for inclusion in this document, received from APAC Asset Valuation and Consulting Limited, an independent property valuer, in connection with their valuation as at 30 November 2019 of the Property to be acquired by the Group.

==> picture [83 x 83] intentionally omitted <==

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 Directors

China Tangshang Holdings Limited 13/F., Bupa Centre, 141 Connaught Road West, Hong Kong

25 February 2020

Dear Sirs/ Madams,

RD
RE: BLOCK NOS. 15, 32, 38, 40, 41, 54, 62 AND 63, YARD NO. 109, JINHAI 3 ROAD, BEIJING ECONOMIC AND TECHNOLOGY DEVELOPMENT ZONE, DAXING DISTRICT, BEIJING, THE PEOPLE’S REPUBLIC OF CHINA (THE “PROPERTY”)

In accordance with the instructions from China Tangshang Holdings Limited (the “ Company ”) for us to value the Property situated in the People’s Republic of China (the “ PRC ”), we confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Property in their existing state as at 30 November 2019 (the “ valuation date ”) for your internal reference purpose.

BASIS OF VALUATION

Our valuation of the Property is our opinion of its market value which we would define as intended to mean “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

— II-1 —

VALUATION OF PROPERTY

APPENDIX II

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

We are independent of the Company and our valuation is prepared in accordance with the “HKIS Valuation Standards 2017” published by the Hong Kong Institute of Surveyors and the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited.

VALUATION ASSUMPTIONS

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

No allowance has been made in our valuation report for any charge, mortgage or amount owing on the Property nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

VALUATION METHODOLOGY

In valuing the Property, which is subject to various tenancy agreements, we have adopted the Income Capitalization Method. We have made reference to the comparable rental and capitalizagtion rate evidences as available on the relevant market and, valued the Property on the basis of capitalization of the market rental incomes of the Property during the tenancy periods to be acquired by the Company, by the market capitalization rate. The market rent and market capitalization rate are arrived by the Market Approach.

TITLE AND ASSUMPTIONS

We have been provided with copies or extracts of title documents relating to the Property. However, we have not searched the original documents to verify ownership or to ascertain the existence of any amendment which does not appear on the copies handed to us. We do not accept a liability for any interpretation which we have placed on such information which is more properly the sphere of your legal advisers. In course of our valuation, we have made reference to the PRC legal opinion prepared by the Company’s PRC legal adviser, SD & Partners, on the title to the Property. We have prepared our valuation on the assumption that the transferrable land use rights of the Property for a specific land use term at nominal land use fee have been granted to the owner and any land premium payable has already been fully settled.

— II-2 —

VALUATION OF PROPERTY

APPENDIX II

SOURCES OF INFORMATION

We have relied to a very considerable extent on information given by the Company and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of the Property, tenancy agreements, floor areas and all other relevant matters. No on-site measurement has been taken. Dimensions, measurements and areas included in the valuation report are only approximations. We have taken every reasonable care both during inspecting the information provided to us and in making relevant enquiries. We have no reason to doubt the truth and accuracy of the information provided to us by the Company, which is material to our valuation. We were also advised by the Company that no material facts have been omitted from the information provided to us.

SITE INSPECTIONS

Site inspection of the Property was carried out by Kathy Lau (BBA (Hons)), in January 2020. We have inspected the exterior and, where possible, the interior of the Property. We have not inspected those parts of the Property which were covered, unexposed or inaccessible and such parts have been assumed to be in reasonable condition. We have not carried out detailed measurements to verify the correctness of the areas in respect of the Property but have assumed that the areas shown on the title documents handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

In the course of our inspections, we did not notice any serious defects. However, no structural survey has been made and we are therefore unable to report whether the Property is free of rot, infestation or any other structural defects. No tests have been carried out on any of the services.

CURRENCY

Unless otherwise stated, all monetary amounts in our valuation are in Renminbi (RMB).

Our valuation report is attached.

Yours faithfully, For and on behalf of

APAC Asset Valuation and Consulting Limited

Ken Wong

MHKIS, MCIREA, RPS (GP)

Director

Note: Mr. Ken Wong is a Registered Professional Surveyor in General Practice Division with over 19 years valuation experience on properties in Hong Kong and the PRC.

— II-3 —

VALUATION OF PROPERTY

APPENDIX II

VALUATION REPORT

Property to be acquired by the Group in the PRC

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 30 November 2019

Block nos. 15, 32, 38, 40, 41, 54, 62 and 63, Yard No. 109, Jinhai 3rd Road, Beijing Economic and Technology Development Zone, Daxing District, Beijing, the PRC.

Tianji Zhigu ( 天驥智谷 , the “ Development ”) is situated on the northwestern corner of Jinhai 3rd Road and Kangding Street in Beijing Economic and Technology Development Zone, Daxing District of Beijing. Beijing Economic and Technology Development Zone is the only state-level economic and technological development zone in the capital of the PRC and has developed into the hub of high-technology research/development and manufacturing.

As at the valuation RMB163,900,000 date, the Property (Please refer to note (3)) was subject to various tenancy agreements and occupied as research center and ancillary office. Please refer to note (3) below for the details of the tenancy agreements.

The Development is a large-scale industrial development with more than 60 blocks of lowrise and high-rise industrial/office buildings and was completed in three phases between 2013 to 2018.

The Property comprises eight blocks of 5 to 7-storey office buildings of Phases II and III of the Development. According to the information provided, the Property has a total gross floor area of approximately 25,604.56 sq. m.

The land use rights of the Property were granted for a land use term of 50 years commencing from 28 December 2010 and expiring on 27 December 2060 for industrial uses.

Note:

According to Building Ownership Certificate No. X Jing Fang Quan Zheng Kai Zi Di 037690 Hao (X 京房權證開字第 037690 號 ) issued by Beijing Residential and Urban and Rural Construction Committee, 北京天安科創置業有限公司 (the “ Tianan Company ”) has obtained the building ownership of 33 blocks buildings in Yard No. 109, Jinhai 3rd Road, Beijing Economic and Technology Development Zone with a total gross floor area of 126,298.55 sq. m. According to the note of the said Building Ownership Certificate, the building ownership of Block Nos. 6, 13, 28, 30, 31, 33, 34, 36, 37, 45, 46, 50 and 51 has been transferred to other parties.

Block Nos. 15, 32, 38, 40 and 41 (portion of the Property) is included in the said Building Ownership Certificate.

— II-4 —

VALUATION OF PROPERTY

APPENDIX II

According to Reality Title Certificate No. Jing (2018) Kai Bu Dong Chang Quan Di 0020232 Hao ( 京 (2018) 開不動產權第 0020232 號 ) issued by Beijing Planning and State Land Resources Administration Committee on 13 September 2018, the Tianan Company has obtained the title to Block Nos. 52 to 69 an 77 in Yard No. 109, Jinhai 3rd Road, Beijing Economic and Technology Development Zone with a total gross floor area of 108,132.23 sq. m. for a land use term commencing from 28 December 2010 and expiring on 27 December 2060 for industrial uses
According to 8 tenancy agreements all entered into between the Tianan Company and 北京名創商業管理有限公司 (the “ Mingchuang Company ”) on 27 December 2019, the Tianan Company agreed to lease the Property to the Mingchuang Company with the salient terms summarized as below.

		Gross floor area		Rent (RMB/ day/ sq. m.)
Block	No.	(sq. m.)	Tenancy period	(inclusive of VAT of 5%)
15		3,479.33	1 April 2020 to	1.51 for first year and subject to an annual
			31 March 2030	increment of 3 % from the second year
32		2,724.39	1 April 2020 to	1.51 for first year and subject to an annual
			31 March 2030	increment of 3 % from the second year
38		2,714.76	15 March 2020 to	1.58 for first year and subject to an annual
			14 March 2030	increment of 3 % from the second year
40		3,482.82	15 March 2020 to	1.58 for first year and subject to an annual
			14 March 2030	increment of 3 % from the second year
41		2,707.89	15 March 2020 to	1.58 for first year and subject to an annual
			14 March 2030	increment of 3 % from the second year
54		3,437.73	6 May 2020 to	1.69 for first year and subject to an annual
			5 May 2030	increment of 3 % from the second year
62		3,528.82	16 April 2020 to	1.62 for first year and subject to an annual
			15 April 2030	increment of 3 % from the second year
63		3,528.82	16 April 2020 to	1.62 for first year and subject to an annual
			15 April 2030	increment of 3 % from the second year

The use of the Property will be for office, research and development. Upon obtaining the written confirmation from the Tianan Company, the Mingchuang Company can sublet the Property to other parties.

The market value of the Property is based on the tenancy periods of the aforesaid eight tenancy agreements.

According to the PRC legal opinion on the title to the Porperty as provided by the Company:
(i) the Tianan Company is legally established and effectively existing under the PRC law;
(ii) the Tianan Company legally owns the Property and is entitled to occupy, use, make profit from and dispose of (including lease) the Property legally;
(iii) Block Nos. 15, 32, 38, 40 and 41 are subject to a mortgage in favour of Bank of Beijing Co., Ltd. (Zhongguancun Branch); and
(iv) Block Nos. 54, 62, 63 are not subject to any mortgages.

— II-5 —

UNAUDITED PROFIT AND LOSS STATEMENTS OF THE PROPERTY

APPENDIX III

UNAUDITED PROFIT AND LOSS STATEMENTS OF THE PROPERTY

In accordance with Rule 14.69(4)(b)(i) of the Listing Rules, the Company is required to include in this Circular a profit and loss statement for the three preceding financial years on the identifiable net income stream in relation to such assets which must be reviewed by the reporting accountants to ensure that such information has been properly complied and derived from the underlying books and records. During the year ended 31 December 2017, no revenue has been generated from the Property by the landlord. Hence, the Board considered the properties does not constitute a revenue-generating asset with an identifiable net income stream or assets valuation under Rule 14.69(4)(b)(i) for the year ended 31 December 2017.

The unaudited profit and loss statements of identifiable net income stream attributable to each of the properties to be acquired for the years ended 31 December 2017, 2018 and 2019 (the “ Relevant Periods ”) (the “ Unaudited Profit and Loss Statements ”) prepared by the directors of the Company are set out below:

Building 15

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 2,008 2,510 (1,364) (1,597) 644 913

Building 32

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 1,572 1,965 (1,068) (1,250) 504 715

— III-1 —

UNAUDITED PROFIT AND LOSS STATEMENTS OF THE PROPERTY

APPENDIX III

Building 38

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 1,134 2,128 (745) (1,259) 389 869

Building 40

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 1,455 2,730 (955) (1,615) 500 1,115

Building 41

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 1,131 2,123 (743) (1,256) 388 867

— III-2 —

UNAUDITED PROFIT AND LOSS STATEMENTS OF THE PROPERTY

APPENDIX III

Building 54

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 685 2,543 (540) (1,371) 145 1,172

Building 62

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 653 2,226 (619) (1,360) 34 866

Building 63

Revenue Other operating expenses Profit before income tax expense	Year 2017 RMB’000 — — —	ended 31 December 2018 2019 RMB’000 RMB’000 653 2,226 (619) (1,360) 34 866

— III-3 —

UNAUDITED PROFIT AND LOSS STATEMENTS OF THE PROPERTY

APPENDIX III

Pursuant to Rule 14.69(4)(b)(i) of the Listing Rules, the directors of the Company engaged BDO Limited, the reporting accountants of the Company, to perform certain factual finding procedures on the compilation of the Unaudited Profit And Loss Statements as shown above in accordance with Hong Kong Standard on Related Services 4400 “Engagements to perform Agreed-Upon Procedures Regarding Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”). The procedures are performed solely to assist the directors of China Tangshang Holdings Limited (the “ Company ”) in evaluating whether the amounts shown in the Unaudited Profit and Loss Statements have been properly compiled and derived from the underlying books and records for the purpose of satisfying the requirements under Rule 14.67(6)(b)(i) of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited, and are summarised as follows:

To obtain the Unaudited Profit and Loss Statements which were prepared by the management of the Company, and check its arithmetical accuracy for the Relevant Periods; and
In respect of each of the Unaudited Profit and Loss Statements obtained, compare the amounts shown on the Unaudited Profit and Loss Statements with the relevant amounts in the underlying books and records provided by the landlord to the management of the Company for the Relevant Periods.

The reporting accountants’ factual findings are as follows:

With respect to item 1, we obtained the Unaudited Profit and Loss Statements, which were prepared by the management of the Company, and found the amounts in the Unaudited Profit and Loss Statements are arithmetically accurate.
With respect to item 2, we compared the amounts shown on the Unaudited Profit and Loss Statements with the relevant amounts in the underlying books and records provided by the landlord to the management of the Company for the Relevant Periods and found them are in agreement.

The reporting accountants has performed the above agreed-upon procedures set out in the relevant engagement letter with the Company and reported its factual findings based on the agreed-upon procedures to the directors of the Company. Pursuant to the terms of the relevant engagement letter between the Company and the reporting accountants, the reported factual findings should not be used or relied upon by any other parties for any purpose. In the opinion of the directors of the Company, the Unaudited Profit and

— III-4 —

UNAUDITED PROFIT AND LOSS STATEMENTS OF THE PROPERTY

APPENDIX III

Loss Statements have been properly compiled and derived from the underlying books and records. The work performed by the reporting accountants in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements, Hong Kong Standards on Assurance Engagements or Hong Kong Standards on Investment Circular Reporting Engagements issued by the HKICPA and consequently no assurance has been expressed by BDO Limited on the Unaudited Profit and Loss Statements of the Property.

— III-5 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(1) Introduction to Unaudited Pro Forma Financial Information of The Group

The following is an illustrative and unaudited pro forma statement of assets and liabilities of the Group which has been prepared by the directors of the Company 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 on the basis of the notes set out below for the purpose of illustrating the effect of the Group entering into the lease agreements (the “ Transactions ”) as if it had taken place on 30 September 2019. Details of the lease agreements are set out in the letter from the Board contained in this circular.

The unaudited pro forma financial information are prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 30 September 2019 as set out in the Group’s published interim report dated 24 December 2019, after giving effect to the unaudited pro forma adjustments as described in the accompanying notes. A narrative description of the pro forma adjustments of the Transactions that are (i) directly attributable to the transactions; and (ii) factually supportable.

The unaudited pro forma financial information has been prepared by the directors of the Company for illustrative purpose only and is based on a number of assumptions, estimates, uncertainties and currently available information.

Accordingly, the unaudited pro forma financial information does not purport to describe the actual assets and liabilities of the Group that would have been attained has the Transactions been completed on 30 September 2019, nor purport to predict the Group’s future assets and liabilities of operations.

The unaudited pro forma financial information should be read in conjunction with the historical financial information of the Group as set out in the published interim report of the Group for the six months ended 30 September 2019, and other financial information included elsewhere in the Circular.

This unaudited pro forma statement of assets and liabilities has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the assets and liabilities of the Group had the Transactions been completed as at 30 September 2019 or at any future date.

— IV-1 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

(2) Unaudited Pro Forma Consolidated Statement of Assets And Liabilities of The Group as at 30 September 2019

					Unaudited
					Pro Forma
					Consolidated
					Statement of
	The Group				Assets and
	assets and				Liabilities
	liabilities				of the Group
	as at				as at
	30 September				30 September
	2019	Pro forma adjustments			2019
	HK$	HK$	HK$	HK$	HK$
	Note 1	Note 3	Note 4	Note 5
Non-current assets
Property, plant and equipment	5,540,425				5,540,425
Investment properties	192,710,200			179,749,130	372,459,330
Goodwill	201,909				201,909
Intangible assets	496,752				496,752
Rental deposits	—	4,015,376			4,015,376
Deferred tax assets	832,320				832,320
Total non-current assets	199,781,606				383,546,112
Current assets
Inventories	9,972,823				9,972,823
Trade and other receivables	102,135,657				102,135,657
Amounts due from non-
controlling shareholders of
subsidiaries	4,000				4,000
Amounts due from related
parties	3,247,365				3,247,365
Amounts due from fellow
subsidiaries	—				—
Cash and bank balances	162,209,221	(4,015,376)			158,193,845
Total current assets	277,569,066				273,553,690
Total assets	477,350,672				657,099,802

— IV-2 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

					Unaudited
					Pro Forma
					Consolidated
					Statement of
	The Group				Assets and
	assets and				Liabilities
	liabilities				of the Group
	as at				as at
	30 September				30 September
	2019	Pro	forma adjustments		2019
	HK$	HK$	HK$	HK$	HK$
	Note 1	Note 3	Note 4	Note 5
Current liabilities
Trade, bills and other
payables	81,490,806		745,000		82,235,806
Contract liabilities	669,049				669,049
Amounts due to related parties	27,040,427				27,040,427
Bank and other borrowings	48,935,156				48,935,156
Convertible bonds	39,080,748				39,080,748
Lease liabilities	18,682,483			11,119,621	29,802,104
Current tax liabilities	542,536				542,536
Total current liabilities	216,441,205				228,305,826
Net current assets	61,127,861				45,247,864
Total assets less current
liabilities	260,909,467				428,793,976
Non-current liabilities
Convertible bonds	40,736,397				40,736,397
Bank and other borrowings	14,966,575				14,966,575
Lease liabilities	63,312,519			99,609,567	162,922,086
Deferred tax liabilities	768,165				768,165
Total non-current liabilities	119,783,656				219,393,223
Total liabilities	336,224,861				447,699,049
Net assets	141,125,811				209,400,753

— IV-3 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Notes:

The amounts are extracted from the unaudited condensed consolidated statement of financial position of the Group for the six months ended 30 September 2019 set out on pages 20 to 21 of the 2019 published interim report of the Company (“ Interim Condensed Financial Statements ”).
The amount of Renminbi (“ RMB ”) is translated into Hong Kong dollars (“ HK$ ”) at the exchange rate of RMB1 to HK$1.0967, which is the prevailing exchange rate on 30 September 2019.
The adjustment represents the rental deposits of approximately RMB3,661,326 (equivalent HK$4,015,376) payable by the Group upon effective of the lease agreements. This adjustment is expected to have a continuing financial effect on the Group as the rental deposits are refundable upon expiry of the lease agreements.
The adjustment represents the estimated legal and professional fees and other direct expenses directly attributable to the Transactions of approximately HK$745,000. This adjustment is not expected to have a continuing financial effect on the Group.
The pro forma financial information is prepared in a manner consistent with both the format and accounting policies adopted by the Group in its Interim Condensed Financial Statements and therefore the pro forma financial information is materially consistent with the accounting basis used by the Group. Pursuant to Hong Kong Financial Reporting Standard 16 Lease (“ HKFRS 16 ”), which is effective for financial statements with annual periods beginning on or after 1 January 2019, the entering into the Transactions as a lessee will require the Group to recognise the right-of-use assets in its financial statements. Had the adoption of HKFRS 16 for the Transactions been taken into account, lease liabilities will be initially recognised with amount of approximately RMB100,965,796 (equivalent to HK$110,729,188) and the right-of-use assets with amount of approximately RMB163,900,000 (equivalent to HK$179,749,130) will also be initially recognised. The total assets and total liabilities of the unaudited pro forma consolidated statement of assets and liabilities would then be increased by approximately RMB163,900,000 and RMB100,965,796 respectively.

As the Group intends to enter into arrangements to sublease the leased assets to third parties while the original lease contracts are in effect, assuming the subleases have been entered into and are classified as operating leases, the Group, as the intermediate lessor, will continue to account for the lease liabilities and right-of-use assets on the head leases like any other lease in accordance with HKFRS 16.

The right-of-use assets will be presented as investment properties assuming that the right-of-use assets meet the definition of investment property in accordance with HKAS40 Investment Property and a separate line item under non-current assets, whereas the lease liabilities will be presented as a separate line item of which approximately RMB10,139,164 (equivalent to HK$11,119,621) under current liabilities and approximately RMB90,826,632 (equivalent to HK$99,609,567) under non-current liabilities in the unaudited pro forma consolidated statement of assets and liabilities. The calculation of impact of HKFRS 16 for the Transactions have been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the impact to the Group had the Transactions been completed on the actual date of completion.

— IV-4 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

As the Group intends to enter into arrangements to sublease the leased assets to third parties while the original lease contracts are in effect, the following paragraphs, which do not form part of the adjustment in Note 5, describes the accounting assuming the subleases have been entered into and are classified as finance leases. The Group, as the intermediate lessor, will derecognise the right-of-use assets on the head lease at the sublease commencement date and recognise net investments in the subleases and continues to account for the original lease liabilities in accordance with the lessee accounting model in accordance with HKFRS 16. Any difference between the right-of-use assets and the net investments in subleases will be recognised in profit or loss.

The impact of HKFRS 16 for the Transactions have been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the impact to the Group had the Transactions been completed on the actual date of completion.

— IV-5 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

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

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from the reporting accountants of the Company, 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 (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 30 September 2019 and related notes as set out on pages IV-2 to IV-5 of Appendix IV of the Company’s circular dated 25 February 2020 (the “ Circular ”) in connection with the major and connected transactions entering into the lease contracts (the “ Transactions ”). The applicable criteria on the basis of which the directors of the Company have compiled the unaudited pro forma financial information are described on page IV-1 of Appendix IV of the Circular.

The unaudited pro forma financial information has been compiled by the directors of the Company to illustrate the impact of the Transactions on the Group’s assets and liabilities as at 30 September 2019 as if the Transactions had taken place on 30 September 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 Company’s interim report for the six months ended 30 September 2019, on which no audit or review report has been published.

— IV-6 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

Directors’ Responsibility 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 the 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.

— IV-7 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma 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 purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transaction at 30 September 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’ judgment, having regard to the reporting accountants’ understanding of the nature of the entity, 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.

— IV-8 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX IV

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, 25 February 2020

— IV-9 —

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

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

2. 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
		Number of	shareholding
Name of Director	Nature of interest	Shares held	in the Company
Mr. Chen Weiwu_(Note)_	Interest of controlled	579,806,977	53.8%
	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);

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GENERAL INFORMATION

APPENDIX V

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
		Number of	the shareholding
Name of Shareholder	Nature of interest	Shares held	in the Company
Grand Nice International	Beneficial owner	579,806,977	53.8%
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	66,666,666	6.19%
National Corporation	corporations
(“CRNC”)(Note 3)

Notes:

(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.

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GENERAL INFORMATION

APPENDIX V

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 Group within the two years immediately preceding the Latest Practicable Date which are or may be material:

(a) The Lease Contracts;
(b) The framework disposal agreement entered into between the Company as the vendor and True Glory Ventures Limited as the purchaser on 9 February 2018, in relation to the sale and purchase of equity interest of certain target companies (information of which was set out in the announcement of the Company dated 2 April 2018) at the consideration of HKD500,000, details of which are set out in the announcement of the Company dated 9 February 2018;
(c) The subscription agreements entered into between the Company and six individual subscribers 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 announcement of the Company dated 15 August 2018;
(d) The acquisition agreement entered into between 深圳市唐商產業園管理有限公司 (Shenzhen Tangshang Industrial Park Management Co., Ltd.), 深圳市金騏集團有限公司 (Shenzhen Jinqi Group Co., Ltd.), 深圳市金帆投資發展有限公司 (Shenzhen Jinfan Investment Development Co., Ltd.) (“ Shenzhen Jinfan ”), and Mr. Zeng PinLian on 21 May 2019 in relation to the sale and purchase of the 73% equity interest in Shenzhen Jinfan at the consideration of RMB40 million, details of which are set out in the announcement of the Company dated 21 May 2019. On 25 December 2019, the Purchaser and the Vendor entered into a deed of termination (the “ Termination Deed* ”) whereby the parties have mutually agreed to terminate the Acquisition Agreement with effect from the date of the Termination Deed and to release and discharge each other from its respective obligations, duties and liabilities thereunder;
(e) The sale and purchase agreement entered into between Great Regal Limited, Mr. Li Jiexin and 855 Crown Property Investment Co., Ltd. (“ 855 Crown Property ”) on 5 September 2019 in relation to the sale and purchase of the 49% of the equity interest of 855 Crown Property at the consideration of US$1, details of which are set out in the announcement of the Company dated 5 September 2019. On 28 November 2019, the parties to the Acquisition

— V-3 —

GENERAL INFORMATION

APPENDIX V

Agreement entered into a deed (the “ Deed ”) of termination, pursuant to which, the parties mutually irrevocably and unconditionally agreed that, on and with effect from the date of the Deed, the Acquisition Agreement shall terminate and cease to have any effect; and

(f) The guarantee agreement dated 3 September 2019 entered into by Nanjing Yinkun Investment Corporation in favour of Bank of Jiangsu in relation to the loan facility for the principal amount of up to RMB100,000,000 provided by Bank of Jiangsu to Nanjing Ruiyixiang Network Technology Co., Ltd., details of which are set out in the announcement of the Company dated 8 November 2019.

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 Group.

6. DIRECTORS’ SERVICE CONTRACT

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.

— V-4 —

GENERAL INFORMATION

APPENDIX V

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

Rainbow Capital

A corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO
APAC Asset Valuation and Independent professional valuer Consulting Limited

BDO Limited

Certified Public Accountants

(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).

— V-5 —

GENERAL INFORMATION

APPENDIX V

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 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.

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 the date falling on fourteeth day from the date of this circular:

(a) the memorandum of association and bye-laws of the Company;
(b) the material contracts referred to in the section headed “Material Contracts” in this appendix;
(c) the written consent of each of the experts referred to in the section headed “Experts and Consents” in this appendix;
(d) the annual reports of the Company for the three years ended 31 March 2017, 31 March 2018 and 31 March 2019;

— V-6 —

GENERAL INFORMATION

APPENDIX V

(e) the interim report of the Company ended 30 September 2019;
(f) the letter from the Board as set out in this circular;
(g) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 23 to 24 of this circular;
(h) the letter from the Independent Financial Adviser, the text of which is set out on pages 25 to 36 of this circular;
(i) the valuation report in relation to the Property, the text of which is set out in Appendix II of this circular;
(j) the report from BDO Limited on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix IV to this circular;
(k) the Fair Rent Letter dated 11 February 2020 issued by the Valuer; and
(l) this circular.

— V-7 —

NOTICE OF SGM

==> picture [84 x 69] intentionally omitted <==

CHINA TANGSHANG HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 674)

NOTICE OF 2020 FIRST SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the 2020 first special general meeting (the “ Meeting ”) of China Tangshang Holdings Limited (the “ Company ”) will be held at 13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong on Friday, 13 March 2020 at 3 p.m. for the following purposes:

ORDINARY RESOLUTION

To consider and, if thought fit, pass the following resolution (with or without modification) as ordinary resolution of the Company:

“ THAT
(a) the Lease Contracts dated 27 December 2019 (the “ Lease Contracts ”) entered into between Beijing Mingchuang Business Management Co., Ltd. ( 北京名創商業管理有限公司 ) (“ Beijing Mingchuang ”) and Beijing Tian’an Innovation Technology and Estates Limited ( 北京天安科創置業有限公司 ) (“ BTIT ”), pursuant to which Beijing Mingchuang has conditionally agreed to rent and BTIT has conditionally agreed to lease the following properties:
- (a) Floors 1 to 6, Building No. 15, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;
- (b) Floors 1 to 5, Building No. 32, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;
- (c) Floors 1 to 5, Building No. 38, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;
- (d) Floors 1 to 6, Building No. 40, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;

— SGM-1 —

NOTICE OF SGM

(e) Floors 1 to 5, Building No. 41, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;
(f) Floors 1 to 6, Building No. 54, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;
(g) Floors 1 to 7, Building No. 62, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;
(h) Floors 1 to 7, Building No. 63, 109 Jinghaisanlu, Beijing Economic Technological Development Area, Beijing;

and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified.

(b) Any one or more directors of the Company be and are hereby authorised to execute all documents and do all such things and take all such steps which, in his opinion, may be necessary, appropriate, desirable or expedient to implement and/or give effect to the terms of, or the transactions contemplated in and for the completion of the Lease Contracts and to agree to such variation, amendment or waiver in relation thereto.”

By order of the Board of

China Tangshang Holdings Limited Chen Weiwu Chairman

Hong Kong 25 February 2020

Registered office:

Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head office and principal place of business in Hong Kong:

13th Floor, Bupa Centre, No. 141 Connaught Road West, Hong Kong

— SGM-2 —

NOTICE OF SGM

Notes:

(i) For the purpose of determining members who are qualified for attending the Meeting, the register of members of the Company will be closed from Wednesday, 11 March 2020 to Friday, 13 March 2020 (both days inclusive), during which no transfer of the Shares will be effected. In order to qualify for attending the Meeting, all transfers of Shares accompanied by the relevant share certificates must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong by no later than 4:30 p.m. on Tuesday, 10 March 2020.
(ii) A member entitled to attend and vote at the Meeting is entitled to appoint one proxy or, if he/she/it is a holder of two or more Shares may appoint more than one proxy to attend and vote instead of him/her/it. A proxy needs not be a member of the Company.
(iii) Where there are joint holders of any Share, any one of such joint holder may vote at the Meeting, either personally or by proxy, in respect of such Share as if he/she/it was solely entitled thereto, but if more than one of such joint holders be present at the Meeting personally or by proxy, that the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
(iv) To be valid, the instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, must be lodged with the branch share registrar and transfer office of the Company in Hong Kong, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.
(v) Completion and return of the form of proxy will not preclude a member of the Company from attending and voting in person at the Meeting or any adjournment thereof if he/she/it so desires. If a member of the Company attends the Meeting after having deposited the form of proxy, his/her/its form of proxy will be deemed to have been revoked.
(vi) If Typhoon Signal No.8 or above, or a “black” rainstorm warning is in effect any time after 11:00 a.m. on the date of the Meeting, the Meeting will be adjourned. The Company will post an announcement on the website of the Company at http://www.ts674.com and on the HKExnews website of the Stock Exchange at www.hkexnews.hk to notify Shareholders of the date, time and place of the rescheduled meeting.
(vii) Pursuant to Rule 13.39(4) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, all resolution set out in this Notice will be decided by poll at the meeting.

As at the date of this notice, the Executive Directors are Mr. Chen Weiwu (the Chairman) and Mr. Zhou Houjie; and the Independent Non-executive Directors are Mr. Chen Youchun, Ms. Lui Mei Ka and Mr. Zhou Xin.

— SGM-3 —

AI assistant

Weiye Holdings Limited — Proxy Solicitation & Information Statement 2020

50009_rns_2020-02-25_0595b98b-6488-46f7-b9f0-f0f6941aac10.pdf

CHINA TANGSHANG HOLDINGS LIMITED

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO ENTERING INTO OF LEASE CONTRACTS AND

(2) NOTICE OF SPECIAL GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CHINA TANGSHANG HOLDINGS LIMITED

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO ENTERING INTO OF LEASE CONTRACTS AND

(2) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LEASE CONTRACTS

I. Lease Contract for Building 15

LETTER FROM THE BOARD

II. Lease Contract for Building 32

LETTER FROM THE BOARD

LETTER FROM THE BOARD

III. Lease Contract for Building 38

LETTER FROM THE BOARD

IV. Lease Contract for Building 40

LETTER FROM THE BOARD

V. Lease Contract for Building 41

LETTER FROM THE BOARD

LETTER FROM THE BOARD

VI. Lease Contract for Building 54

LETTER FROM THE BOARD

VII. Lease Contract for Building 62

LETTER FROM THE BOARD

VIII. Lease Contract for Building 63

LETTER FROM THE BOARD

LETTER FROM THE BOARD

INFORMATION OF THE PROPERTY

FINANCIAL EFFECTS OF THE LEASE CONTRACTS ON THE GROUP

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

LETTER FROM THE BOARD

INFORMATION OF THE COMPANY

INFORMATION OF BEIJING MINGCHUANG

INFORMATION OF BTIT

LETTER FROM THE BOARD

APPROVAL OF THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

OTHER MATTERS

LETTER FROM THE BOARD

SGM

RECOMMENDATION

RESPONSIBILITY STATEMENT

ADDITIONAL INFORMATION

Yours faithfully,

For and on behalf of the Board China Tangshang Holdings Limited Chen Weiwu

CHINA TANGSHANG HOLDINGS LIMITED

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO ENTERING INTO OF LEASE CONTRACTS AND (2) NOTICE OF SPECIAL GENERAL MEETING

Yours faithfully,

Rainbow Capital (HK) Limited

MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO THE LEASE CONTRACTS

INTRODUCTION

LETTER FROM RAINBOW CAPITAL

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background to, reasons for and benefits of entering into the Lease Contracts

(i) The Group

(ii) The Property

(iii) Reasons for and benefits of entering into the Lease Contracts

2. The Lease Contracts

(i) Basis of the rentals of the Property

(ii) Assessment of the principal terms of the Lease Contracts

LETTER FROM RAINBOW CAPITAL

Assessment of the Valuer’s view

LETTER FROM RAINBOW CAPITAL

Assessment of the 3% annual rental increment

Assessment of the duration of the Lease Contracts

LETTER FROM RAINBOW CAPITAL

LETTER FROM RAINBOW CAPITAL

(c) Our view

3. Financial effect on the Group

(i) Right-of-use asset and lease liability

LETTER FROM RAINBOW CAPITAL

(ii) Cash flow

Weiye Holdings Limited Proxy Solicitation & Information Statement 2020