Hatcher Group Limited - Proxy Solicitation & Information Statement 2019

THE CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ACTION

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 registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers.

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

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

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VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8365)

(1) MAJOR TRANSACTION IN RELATION TO

THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

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

Vinco Capital Limited

Capitalised terms used in this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 6 to 18 of this circular. A letter from the Independent Board Committee containing its recommendation is set out on pages 19 to 20 of this circular. A letter from Vinco Capital Limited, the Independent Financial Adviser, containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 21 to 44 of this circular.

A notice convening the extraordinary general meeting (the “ EGM ”) to be held at 18/F., Prosperity Tower, 39 Queen’s Road Central, Hong Kong on Tuesday, 15 October 2019 at 10:30 a.m. is set out on pages EGM-1 to EGM-3 of this circular.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy, in accordance with the instructions printed thereon and deposit the same at the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited, Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish.

For identification purposes only

23 September 2019

	Page
CHARACTERISTICS OF GEM OF
THE STOCK EXCHANGE OF HONG KONG LIMITED. . . . . . . . . . . . . . . . .	ii
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . .	19
LETTER FROM VINCO CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP. . . . . . . . .	I-1
APPENDIX II — ACCOUNTANTS’ REPORT OF
THE TARGET COMPANY. . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III — MANAGEMENT DISCUSSION AND
ANALYSIS OF THE TARGET COMPANY. . . . . . . . . . . .	III-1
APPENDIX IV — UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF THE ENLARGED GROUP. . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V — VALUATION REPORT OF THE TARGET COMPANY. . .	V-1
APPENDIX VI — GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

— i —

CHARACTERISTICS OF GEM OF THE STOCK EXCHANGE OF HONG KONG LIMITED

GEM has been positioned as a market designed to accommodate small and midsized companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration.

Given that the companies listed on GEM are generally small and mid-sized companies, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

— ii —

DEFINITIONS

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

“Acquisition” the acquisition of the Sale Shares by the Purchaser from the Seller pursuant to the terms and conditions of the SP Agreement
“associate(s)” has the meaning ascribed to it under the GEM Listing Rules
“Board”
the board of Directors
“Business Days”
a day (other than any Saturday or Sunday) on which banks are opened in Hong Kong to general public business
“Company” VBG International Holdings Limited (stock code: 8365), a company incorporated under the laws of the Cayman Islands and the Shares of which are listed on the GEM
“Completion Date” a date falling within seven (7) Business Days after all the conditions precedent as specified by the SP Agreement have been fulfilled (or waived, where applicable) (or such later date as the parties to the SP Agreement may agree but in any event not later than the Long Stop Date)
“Completion” the completion of the Acquisition in accordance with the terms and conditions of the SP Agreement
“connected person(s)”
has the meaning ascribed to it under the GEM Listing Rules
“Consideration” the consideration of HK$27,000,000 payable by the Purchaser to the Seller for the Acquisition pursuant to the SP Agreement
“Controlling shareholder(s)” has the meaning ascribed to it under the GEM Listing Rules
“Director(s)”
the director(s) of the Company

— 1 —

DEFINITIONS

“EGM” the extraordinary general meeting of the Company to be convened and held at 18/F., Prosperity Tower, 39 Queen’s Road Central, Hong Kong on Tuesday, 15 October 2019 at 10:30 a.m., for the Independent Shareholders to consider and, if thought fit, approve the SP Agreement and the transactions contemplated thereunder “Enlarged Group” the Group as enlarged by the Target Company “GEM” GEM operated by the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “Group” the Company and its subsidiaries from time to time “Guarantor” Cheung I Fai（張貽輝） “HK$” or “HKD” Hong Kong dollar, the lawful currency of Hong Kong “HKFRS” Hong Kong Financial Reporting Standards issued by the HKICPA “HKICPA” Hong Kong Institute of Certified Public Accountants “Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC “IPO” Initial Public Offering “Independent Board an independent committee of the Board established in Committee” compliance with the GEM Listing Rules to advise the Independent Shareholders as regards the terms of the SP Agreement and the transactions contemplated thereunder “Independent Third Parties” third parties independent of the Company and its connected persons

— 2 —

DEFINITIONS

“Independent Financial Adviser” or “Vinco Capital”
Vinco Capital Limited, a licensed corporation registered under the SFO to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the SP Agreement and the transactions contemplated thereunder
“Independent Shareholders” the Shareholders other than Ms. Wan Ho Yan Letty and her associates
“Jayden Wealth”
Jayden Wealth Limited, a company incorporated under the laws of the British Virgin Islands, which is beneficially owned as to 100% of its issued shares by Ms. Wan Ho Yan Letty
“Latest Practicable Date”
16 September 2019, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained therein
“Licences”
the licences (either unconditionally or subject only to condition(s)) of the Target Company granted by the SFC to carry on a business of Type 1 regulated activity (dealing in securities) and Type 4 regulated activity (advising on securities) under the SFO
“Long Stop Date” 31 December 2019
“PRC”
the People’s Republic of China and, for the purpose of this circular, excluding Hong Kong, Macao Special Administrative Region of the People’s Republic of China and Taiwan
“Prospectus” the prospectus of the Company dated 15 May 2017 issued in connection with the listing of the shares of the Company on GEM
“Purchaser”
the Company

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DEFINITIONS

“Sale Shares”

17,000,000 ordinary shares, representing all the issued share(s) in the share capital of the Target Company as at the Completion Date
“Second Supplemental Agreement”
the second supplemental agreement entered into on 26 August 2019 (after trading hours) amongst the Seller, the Purchaser, and the Guarantor in respect of the Acquisition to revise, amongst other things, certain terms in the SP Agreement relating to profit guarantee
“Seller”
Cheung I Fai（張貽輝）
“SFC” the Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance under Cap. 571 of the Laws of Hong Kong
“Share(s)” the ordinary share(s) with par value of HK$0.01 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)
“SP Agreement”

the agreement entered into on 11 June 2019 (after trading hours) amongst the Seller, the Purchaser, and the Guarantor in respect of the Acquisition, as amended and supplemented by the Supplemental Agreement and the Second Supplemental Agreement

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“substantial shareholder”

has the meaning ascribed to it under the GEM Listing Rules

“Supplemental Agreement”
the supplemental agreement entered into on 8 July 2019 (after trading hours) amongst the Seller, the Purchaser, and the Guarantor in respect of the Acquisition to revise, amongst other things, certain terms in the SP Agreement relating to conditions precedent

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DEFINITIONS

“Target Company”	Wealth Link Securities Limited（富滙證券有限公司）, a
	company incorporated under the laws of Hong Kong with
	limited liability and the entire issued share capital of which
	is wholly and beneficially owned by the Seller
“Valuer”	Savills Valuation and Professional Services Limited, an
	independent professional valuer appointed by the Company
	for the valuation of the Target Company
“%”	percentage

— 5 —

LETTER FROM THE BOARD

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VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8365)

Executive Directors: Ms. Wan Ho Yan Letty (Chairperson) Mr. Hui Ringo Wing Kun

Non-executive Director: Mr. Wan Chuen Fai

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

Head office and principal place

Independent non-executive Directors: Mr. Kam Cheuk Fai David Mr. William Robert Majcher Mr. Ho Lik Kwan Luke

of business in Hong Kong: 18/F, Prosperity Tower 39 Queen’s Road Central Hong Kong

23 September 2019

To the Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

(1) INTRODUCTION

Reference is made to the announcements of the Company dated 11 June 2019, 8 July 2019 and 26 August 2019 in relation to the Acquisition.

For identification purposes only

— 6 —

LETTER FROM THE BOARD

On 11 June 2019 (after trading hours), each of the Seller, the Purchaser and the Guarantor entered into the SP Agreement, pursuant to which the Seller has conditionally agreed to sell and the Purchaser has conditionally agreed to acquire the Sale Shares, at a consideration of HK$27,000,000 (subject to adjustment, if any) which shall be settled in cash, and the Guarantor has agreed to guarantee the performance of the obligations of the Seller under the SP Agreement.

On 8 July 2019 (after trading hours), each of the Seller, the Purchaser and the Guarantor entered into the Supplemental Agreement to revise, amongst other things, certain terms in the SP Agreement relating to conditions precedent.

On 26 August 2019 (after trading hours), each of the Seller, the Purchaser, and the Guarantor entered into the Second Supplemental Agreement to revise, amongst other things, certain terms in the SP Agreement relating to profit guarantee.

The purpose of the circular is to provide you with, amongst other things, (i) further information on the SP Agreement; (ii) the valuation report of the Target Company; (iii) the recommendation of the Independent Board Committee; (iv) the advice of the Independent Financial Adviser regarding the terms of the SP Agreement (and the transactions contemplated thereunder); (v) financial information of the Group ; (vi) Accountants’ report of the Target Company ; (vii) the management discussion and analysis of Target Company ; (viii) the unaudited pro forma financial information of the Enlarged Group; and (ix) other information as required to be contained in this circular under the GEM Listing Rules together with a notice of the EGM and a form of proxy.

The key terms and conditions of the SP Agreement and an analysis of the Consideration are summarised as follows:

(2) THE SP AGREEMENT

The principal terms of the Acquisition are summarised as follows;

Date

11 June 2019 (after trading hours)

Parties

(i) the Seller: Cheung I Fai（張貽輝）

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LETTER FROM THE BOARD

(ii) the Purchaser: VBG International Holdings Limited; and
(iii) the Guarantor: Cheung I Fai（張貽輝）

To the best of the Directors’ knowledge, information and belief having made all reasonable enquires, the Seller and the Guarantor is a third party independent of and not connected with the Company and its connected persons as of the date of the transaction.

Assets to be acquired

Pursuant to the SP Agreement, the Purchaser has conditionally agreed to acquire and the Seller has conditionally agreed to sell, the Sale Shares, at a consideration of HK$27,000,000 (subject to adjustment, if any) which shall be settled in cash. Upon Completion, the Target Company will become a wholly-owned subsidiary of the Purchaser and the financial result, assets and liabilities of the Target Company will be consolidated into the accounts of the Group.

The Seller will guarantee the Purchaser the net profit after tax of the Target Company (as discussed in the paragraph headed “ Profit Guarantee ” below) for the period commencing on the Completion Date and ending of the first anniversary of the Completion Date (both days inclusive), as set out in the SP Agreement.

There is no restriction on the Company with respect to any subsequent sale of its equity interest in the Target Company.

Consideration

The Consideration was agreed after arm’s length negotiations between the Seller and the Purchaser having taken into account of various relevant factors including, among other things, the Target Company’s business prospects and market position as well as other factors set out in the section headed “ Basis of the Consideration ” below.

As at 30 June 2019, the Company had a cash holding of HK$26.3 million which was raised from the GEM listing by the Company and intended to be applied to expand our placing and underwriting business as disclosed in the Prospectus. The Company will utilise such cash to finance the payment of the Consideration.

Payment of the Consideration

Subject to the adjustment under sub-section titled “ Adjustment to the Consideration ” below, the Consideration shall be paid in the following manner:

(i) a refundable deposit (the “ Deposit ”) in the amount of HK$10,000,000 was paid by the Purchaser to the Seller on 25 June 2019; and

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LETTER FROM THE BOARD

(ii) the balance of the Consideration, being HK$17,000,000, shall be paid by the Purchaser to the Seller in cash on Completion.

Adjustment to the Consideration

If, the actual cash of the Target Company at Completion (“ Actual Cash ”) as stated in the draft completion accounts of the Target Company shall be less than HK$15 million, there shall be a dollar-for-dollar downward adjustment to the amount of the Consideration which shall be equal to the difference between HK$15 million and the Actual Cash, payable by the Seller to the Purchaser within seven Business Days of the date of Completion. If, the Actual Cash as stated in the draft completion accounts of the Target Company shall be equal to or greater than HK$15 million, there shall be no adjustment to the amount of the Consideration whatsoever.

Conditions precedent

Pursuant to the SP Agreement, Completion is subject to the following conditions being satisfied (or waived, if applicable):

(a) prior approval from the SFC on: (i) the Purchaser becoming a shareholder of the Target Company as a result of any or all the transactions contemplated in and under the SP Agreement; (ii) if necessary, the proposed changes to the business plan filed with the SFC in connection with the SFC’s granting of the Licenses as a result of the execution of the SP Agreement; and (iii) if necessary, the appointment of such person(s) nominated by the Purchaser as Responsible Person(s) of the Target Company, other than the existing Responsible Officer as at the date hereof, as a result of the execution of the SP Agreement;
(b) the SFC having not suspended or withdrawn or revoked any of the Licences;
(c) no investigation, inquiry or disciplinary action by any authority being initiated against the Target Company or its officers or accredited representatives;
(d) the Seller having procured that Target Company having declared and paid dividends, in cash, in an aggregate amount of not more than HK$31,000,000 out of the accrued distributable profits of the Target Company as at 31 May 2019 to the Seller prior to Completion;

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LETTER FROM THE BOARD

(e) the Purchaser is satisfied with the due diligence review on the Target Company;
(f) the Seller having procured that (i) all of the Target Company’s furniture and fixtures be written off from its accounts; (ii) all of the Target Company’s accrued tax liabilities incurred and payable being paid and settled; and (iii) all amounts due from the Target Company’s client(s) being repaid and settled, prior to Completion;
(g) ordinary resolution(s) for approving the SP Agreement and the transactions contemplated hereunder having been duly passed by the shareholders of the Company other than Ms. Wan Ho Yan Letty (“ Ms. Wan ”) and the associates (which term has the meaning ascribed to it under the GEM Listing Rules) of Ms. Wan (the “ Independent Shareholders ”);
(h) no indication from the Stock Exchange having been received to the effect that the listing of shares of the Company will or may be withdrawn or objected to for any reason attributable to the transactions contemplated under the SP Agreement or the Completion;
(i) there having been no material breach of any of the representations, warranties and undertakings given by the Seller under the SP Agreement; and
(j) the issue of a valuation report on the Target Company by a professional independent valuer.

The Purchaser may waive any of the above conditions in (d), (e), (f) and (i) by giving notice in writing to the Seller. As at the date of this circular, save for conditions (e) and (j), none of the above conditions has been satisfied.

Completion

The Seller and the Purchaser shall use (to the extent they are able) their respective best endeavours to procure the fulfilment of the above conditions on or before 1 December 2019 or such other date as the parties to the SP Agreement may agree in writing but in any event not later than the Long Stop Date. If any of the conditions referred to above shall not have been fulfilled (or waived, where applicable) in all respects prior to the Long Stop Date, the SP Agreement shall be terminated automatically, and the Seller shall refund the Deposit to the Purchaser within fourteen (14) Business Days of the date of termination in full without interest.

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LETTER FROM THE BOARD

Assuming Completion takes place within 2019, the Company will disclose in its annual report for the years ending 30 September 2020 or 2021 as to whether or not the performance guarantee and obligations have been met and a brief description of the Target Company’s performance.

Basis of the Consideration

Business prospects and market position of the Target Company

In terms of business prospects, the Company is of the view that the Target Company should benefit from the local securities industry which is expected to maintain its growth and development trend as a result of the increasing capital inflow from the PRC investors and new listings on the Stock Exchange. In terms of market position, considering that (i) the Target Company is a Category C Stock Exchange participant; (ii) whilst the market for Stock Exchange participants serving Category C is relatively fragmented (i.e. no dominant market leader), the Acquisition will enable the Target Company to leverage on the Group’s international and PRC presence; and that (iii) the Target Company has an established clientele comprising individuals and corporations in Asia Pacific region and has the ability to offer a comprehensive securities brokerage service, namely, securities trading, margin financing, and online trading platform, the Company is of the view that the Target Company has a competitive position in the Category C Stock Exchange participant market.

How the Target Company complements the Group’s existing business

As disclosed in the section titled “ FUTURE PLANS AND USE OF PROCEEDS ” of the Prospectus, it is a disclosed plan of the Group to participate in more placing and underwriting transactions as well as offering placing and underwriting services to its IPO clients. During the 2018 and 2019 financial years, although the Group had participated in engagements for placing and underwriting services mandated for its IPO clients, the Group’s involvement was limited to a sub-underwriting role, rather than a lead underwriting role, due to a limited distribution network for placing and underwriting securities. The Company considers that if the Group were able to secure a better distribution network for placing and underwriting business, it would enable the Group to further expand or develop its placing and underwriting business for its IPO clients, thereby generating more income for the Group.

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LETTER FROM THE BOARD

The Company has known the existing directors and responsible officer of the Target Company for a long period of time as the Company and the Target Company have been collaborating on deals involving placing and underwriting of securities. Through discussions, the Company noticed that the Seller was interested in entering into more collaborations with the Company. The Company considered that it could be an opportunity for the Group to expand its placing and underwriting business. Guided by the disclosed business plan, the Company considers that the proposed acquisition of the Target Company will provide the Group with an opportunity to take advantage of the Target Company’s placing and underwriting capabilities and platform through its client network and expand the Group’s distribution channel for placing and underwriting of securities for IPO clients, which complements and is in line with the Group’s disclosed business plan.

Profit Guarantee

Pursuant to the SP Agreement, the Seller guarantees to the Purchaser that the net profit after tax of the Target Company for the period (the “ Period ”) commencing on the Completion Date and ending on the first anniversary of the Completion Date, both days inclusive, shall not be less than HK$2,000,000 (the “ Guaranteed Net Profit ”). The Guaranteed Net Profit will be profits in the ordinary and usual course of business only and exclude any profits and losses arising from merger, acquisition and disposal or any extraordinary or exceptional items of the Target Company.

If, the actual net profit after tax as stated in the Target Company’s management accounts for the Period shall be less than the Guaranteed Net Profit giving rise to a shortfall (“ Sum A ”), the Seller shall pay to the Purchaser a sum (“ Sum B ”) calculated in accordance with the following:

Sum B = Sum A x 13.5

Sum B shall be paid and settled in cash within fourteen (14) Business Days of date of issuance of the Target Company’s management accounts.

If, the Target Company’s actual net profit after tax as stated in the Target Company’s management accounts for the Period shall be zero, the Seller shall pay to the Purchaser a sum equal to the Consideration, being HK$27,000,000, which shall be paid and settled in cash within fourteen (14) Business Days of date of issuance of the Target Company’s management accounts.

If, the Target Company reported a loss as stated in the Target Company’s management accounts for the Period, the Seller shall pay to the Purchaser a sum equal to the Consideration, being HK$27,000,000, which shall be paid and settled in cash within fourteen (14) Business Days of date of issuance of the Target Company’s management accounts.

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LETTER FROM THE BOARD

The Company was given to understand from the Seller that in view of the business opportunities arising from the Acquisition, the prospects for achieving the Guarantee Net Profit is positive based on its project pipeline. The SP Agreement also provides for a guarantee provided by the Guarantor in favour of the Purchaser which covers, amongst other things, the Seller’s performance under the Guarantee Net Profit. The Directors considered that on the basis of the guarantee provided by the Guarantor under the SP Agreement, the Guaranteed Net Profit is reasonably justified and achievable.

Save as disclosed above, the Company is not aware that there was any other consideration(s) that had been taken into account by the Directors in respect of the Acquisition.

Basis of determination of the Guaranteed Net Profit

The Guarantee Net Profit was determined based on arm’s length negotiation among the parties and the assumptions that (i) on the basis of a 13.7 times current price-toearnings multiple (“ P/E Multiple ”) associated with market comparables identified by the Company, being securities firms currently listed on the Stock Exchange, which was then negotiated and agreed at 13.5 times, the Guarantee Net Profit was derived by dividing the Consideration with the 13.5 times P/E Multiple and (ii) should the HK$15 million cash, which will need to be maintained by the Target Company at Completion under the SP Agreement, be excluded from the Consideration, it would give rise to a 6.0 times ex-cash P/E Multiple for the Target Company, which is lower than the current P/E Multiple of market comparables. The Directors considered the above to be fair and reasonable.

(3) GENERAL INFORMATION OF THE COMPANY AND THE TARGET COMPANY

Information on the Company

The Company is an investment holding company and its subsidiaries are principally engaged in provision of corporate finance advisory services, placing and underwriting services and business consultancy services.

Information on the Target Company

The Target Company is incorporated in Hong Kong with limited liability. The Target Company is principally engaged in Type 1 regulated activity (dealing in securities) and Type 4 regulated activity (advising on securities) under the SFO.

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LETTER FROM THE BOARD

(4) FINANCIAL INFORMATION OF THE TARGET COMPANY

Financial information on the Target Company

Set out below is audited financial information of the Target Company for the two years ended 31 March 2019:

	For the year ended 31	For the year ended 31	March
	2019		2018
	(audited)		(audited)
	Approximately	Approximately
	HK$’000	HK$’000
Net (loss)/profit before taxation	(3,142)		61,212
Net (loss)/profit after taxation	(3,085)		51,239
	As at 31	March
	2019		2018
	(audited)		(audited)
	Approximately	Approximately
	HK$’000	HK$’000
Net asset	48,740		65,825

The net loss before and after taxation of the Target Company for the year ended 31 March 2019 were approximately HK$3,142,000 and HK$3,085,000, respectively. The total assets and the net asset value of the Target Company as at 31 March 2019 were approximately HK$97,854,000 and HK$48,740,000, respectively.

(5) FINANCIAL EFFECT OF THE ACQUISITION

Earnings

Upon Completion, the Target Company will become a direct wholly-owned subsidiary of the Company and the financial results of the Target Company will be consolidated in the consolidated financial statements of the Group.

The unaudited net loss after tax of the Group for the six months ended 31 March 2019, as extracted from the interim report dated 7 May 2019 of the Company, was approximately HK$15.2 million.

— 14 —

LETTER FROM THE BOARD

As set out in Appendix II to this circular, the Target Company recorded an audited net loss after tax of approximately HK$3.1 million for the financial year ended 31 March 2019.

The Directors consider that the Acquisition will bring positive contribution to the earnings of the Enlarged Group but the quantification of such contribution will depend on the future performance of the Target Company.

Assets and liabilities

As set out in the unaudited pro forma financial information of the Enlarged Group in Appendix IV to this circular, the net assets of the Enlarged Group would increase from approximately HK$103.6 million to approximately HK$124.6 million as a result of the Acquisition.

Upon Completion, the Enlarged Group’s non-current assets would increase from approximately HK$26.9 million to approximately HK$29.4 million and its non-current liabilities would increase from approximately HK$0.4 million to approximately HK$0.5 million. In addition, the Enlarged Group’s current assets would increase from approximately HK$90.3 million to approximately HK$158.7 million and its current liabilities would increase from approximately HK$13.2 million to HK$63.0 million.

Details of the financial effect of the Acquisition on the financial position of the Enlarged Group together with the bases and assumptions taken into account in preparing the unaudited pro forma financial information of the Enlarged Group are set out, for illustration purpose only, in Appendix IV to this circular.

(6) REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group has considered that (i) the Target Company has secured potential underwriting projects pending confirmation of their engagement of underwriting and placing activities, of which is expected to generate underwriting commissions of approximately HK$26.5 million; and (ii) the Target Company would be able to

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LETTER FROM THE BOARD

utilise its established clientele for these underwriting and placing activities. Taking into account of the Target Company’s historical operating expenses and additional income tax expenses on the expected underwriting commissions, the Guarantee Profit is being considered to be realistic and achievable.

As disclosed in the section titled “ FUTURE PLANS AND USE OF PROCEEDS ” of the Prospectus, it is a disclosed plan of the Group to participate in more placing and underwriting transactions as well as offering placing and underwriting services to its IPO clients. For the year ended 30 September 2018, the Group had participated in engagements for placing and underwriting services. The Board considers that the transaction as contemplated under the SP Agreement, if materialises, will complement the Group’s business plan as it enables the Group to take advantage of the capabilities of the Target Company in the placing and underwriting of securities thereby enabling the Group to participate in more placing and underwriting transactions through the Target Company.

(7) GEM LISTING RULES IMPLICATIONS

The Acquisition is a notifiable transaction under Chapter 19 of the GEM Listing Rules. As one or more of the applicable percentage ratios (as defined under the GEM Listing Rules) in respect of the Acquisition exceed(s) 25% but is/are less than 100%, the Acquisition constitutes a major transaction of the Company and is subject to the notification, announcement and shareholders’ approval requirements under Chapter 19 of the GEM Listing Rules.

As stated in the announcement of the Company dated 8 July 2019, the Company was advised that on 4 July 2019, Ms. Vivian Wan, sister of Ms. Wan Ho Yan Letty, Chairperson and executive Director of the Company, and also an associate of the Controlling Shareholder, married the Seller. In view of such relationship and as a matter of best practice, the Board resolved to, among other things, (a) enter into the Supplemental Agreement pursuant to which conditions precedent, namely, (i) ordinary resolution(s) for approving the SP Agreement and the transactions contemplated hereunder having been duly passed by the shareholders of the Company other than Ms. Wan and the associates of Ms. Wan and (ii) the issue of a valuation report on the Target Company by a professional independent valuer were introduced into the SP Agreement; and (b) to appoint an independent financial adviser for the SP Agreement.

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LETTER FROM THE BOARD

(8) EGM

A notice to convene an EGM to be held at 18/F., Prosperity Tower, 39 Queen’s Road Central, Hong Kong on Tuesday, 15 October 2019 at 10:30 a.m. is set out on pages EGM-1 to EGM-3 of this circular. An ordinary resolution will be proposed to the Independent Shareholders to consider and, if thought fit, to approve, among other matters, the SP Agreement and the transactions contemplated thereunder.

The voting in respect of the SP Agreement and the transactions contemplated thereunder at the EGM will be conducted by way of poll. Ms. Wan and Jayden Wealth, the controlling shareholder holding 352,820,000 Shares, representing 68.75% of the issued share capital of the Company as at the Latest Practicable Date, and its associates are required to abstain from voting in respect of the resolution approving the SP Agreement and the transactions contemplated thereunder at the EGM. Save for the aforesaid and to the Directors’ best knowledge, information and belief and having made all reasonable enquiries, as at the Latest Practicable Date, no other Shareholder has a material interest in the Acquisition and therefore no other Shareholder is required to abstain from voting on the proposed resolution approving the SP Agreement and the transactions contemplated thereunder at the EGM.

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LETTER FROM THE BOARD

(9) CLOSURE OF THE REGISTER OF MEMBERS

For determining the entitlement of the shareholders to attend and vote at the EGM, the register of members of the Company will be closed from Thursday, 10 October 2019 to Tuesday, 15 October 2019, both days inclusive, during which period no transfer of shares of the Company will be registered. In order to be eligible to attend and vote at the EGM, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Wednesday, 9 October 2019.

(10) RECOMMENDATION

The Directors (including the independent non-executive directors whose views are included in the Letter from the Independent Board Committee as set forth on pages 17 to 18 of this circular) consider that the terms of the SP Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive directors) recommend the Independent Shareholders to vote in favour of the ordinary resolution in relation to the SP Agreement and the transactions contemplated thereunder as set out in the notice of the EGM.

(11) ADDITIONAL INFORMATION

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

Yours faithfully,

By order of the Board

VBG International Holdings Limited Hui Ringo Wing Kun

Executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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==> picture [16 x 16] intentionally omitted <==

VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8365)

23 September 2019

To the Independent Shareholders,

Dear Sir or Madam,

(1) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

We refer to the circular of the Company dated 23 September 2019 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter will have the same meanings as defined in the Circular.

We have been appointed as members of the Independent Board Committee to consider the Acquisition and to advise you as to whether, in our opinion, the terms of the SP Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned. Vinco Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

We also wish to draw your attention to (i) the letter from the Board; (ii) the letter from the Independent Financial Adviser; and (iii) the additional information set out in the appendices to the Circular.

For identification purposes only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the SP Agreement and the transactions contemplated thereunder, and having taken into account the opinion of the Independent Financial Adviser and, in particular, the reasons and recommendations as set out in the letter from Vinco Capital from pages 21 to 44 of the Circular, we consider that the terms of the SP Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned, and the Acquisition is in the interests of the Independent Shareholders and the Company as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution which will be proposed at the EGM to approve, among other matters, the SP Agreement and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the

Independent Board Committee of

VBG International Holdings Limited

Mr. Kam Cheuk Fai David Mr. William Robert Majcher Mr. Ho Lik Kwan Luke Independent Non-executive Directors

— 20 —

LETTER FROM VINCO CAPITAL

The following is the text of a letter of advice from Vinco Capital to the Independent Board Committee and the Independent Shareholders in respect of the terms of the SP Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of incorporation in this circular:

Vinco Capital Limited Unit 2610, 26/F., The Center 99 Queen’s Road Central, Hong Kong

23 September 2019

To the Independent Board Committee and the Independent Shareholders of VBG International Holdings Limited

Dear Sirs,

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED

A. INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the SP Agreement and the transactions contemplated thereunder, details of which are set out in the “Letter from the Board” of the circular issued by the Company dated 23 September 2019 (the “ Circular ”) to the Shareholders, of which this letter forms part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

Reference is made to the announcements of the Company dated 11 June 2019, 8 July 2019 and 26 August 2019 (the “ Announcements ”). As set out in the Announcements, the Purchaser, an indirect wholly-owned subsidiary of the Company, the Seller, and the Guarantor entered into the SP Agreement, pursuant to which the Seller has conditionally agreed to sell and the Purchaser has conditionally agreed to acquire the Sales Shares, at a consideration of HK$27,000,000 (subject to adjustment, if any), and the Guarantor has agreed to guarantee the performance of the obligations of the Seller under the SP Agreement. Upon the Completion, the Target Company will become as a direct wholly-owned subsidiaries of the Company.

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LETTER FROM VINCO CAPITAL

On 5 July 2019, the Company was advised that on 4 July 2019, Ms. Vivian Wan, sister of Ms. Wan Ho Yan Letty, Chairperson and executive Director of the Company, and also an associate of the Controlling Shareholder, married the Seller. As a matter of best practice, the Board resolved to, among other things, enter into the Supplementary Agreement pursuant to which the changes referred to above were agreed with the Seller and the Guarantor.

On 26 August 2019 (after trading hours), the Company, each of the Seller and the Guarantor entered into the Second Supplementary Agreement to revise, amongst other things certain terms in the SP Agreement relating to profit guarantee.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Kam Cheuk Fai David, Mr. William Robert Majcher and Mr. Ho Lik Kwan Luke will be established to consider the terms of the SP Agreement and advise the Independent Shareholders as to whether the terms of the SP Agreement and the two supplementary agreements are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

We, Vinco Capital, have been appointed and have been approved by the Independent Board Committee, as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

As the Latest Practicable Date, we are not connected with the Directors, chief executive and substantial shareholders of the Company or any of their respective subsidiaries or their respective associates and, as the Latest Practicable Date, did not have any shareholding, directly or indirectly, in any of their respective subsidiaries or their respective associates and, as at the Latest Practicable Date, did not have any shareholding, directly or indirectly, in any member of the Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group. We were not aware of any relationships or interests between us and the Company or any other parities that could be reasonably be regarded as hindrance to our independence as defined under Rule 13.84 of the Listing Rule to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition. Apart from normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser to the independent non-executive Directors, no arrangement exists whereby we will receive any fees from the Company, its subsidiaries, its associates or their respective substantial shareholders or associates. We have not acted as the independent financial adviser to the Company’s other transactions during the last two years.

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LETTER FROM VINCO CAPITAL

B. BASIS OF OUR OPINION AND RECOMMENDATION

In forming our opinion and recommendation, we have relied on the information, facts and representations contained or referred to in the Circular and the information, facts and representations provided by, and the opinions expressed by the Directors, management of the Company and its subsidiaries. We have assumed that all information, facts, opinions and representations made or referred to in the Circular were true, accurate and complete at the time they were made and continued to be true, accurate and complete as at the date of the Circular and that all expectations and intentions of the Directors, management of the Company and its subsidiaries, will be met or carried out as the case may be. We have no reason to doubt the truth, accuracy and completeness of the information, facts, opinions and representations provided to us by the Directors, management of the Company and its subsidiaries. The Directors have confirmed to us that no material facts have been omitted from the information supplied and opinions expressed. We have no reason to doubt that any relevant material facts have been withheld or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided to us by the Directors, management of the Company and its subsidiaries.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading. We have also sought and received confirmation from the Directors that no material facts have been omitted from the information supplied and opinions expressed.

We have relied on such information and opinions and have not, however, conducted any independent verification of the information provided, nor have we carried out any independent investigation into the business, financial conditions and affairs of the Group or its future prospect.

We consider that we have reviewed all currently available information and documents particularly, (i) the annual report of the Company for the year ended 30 September 2018 (the “Annual Report 2017-2018”), the interim report for the six months ended 31 March 2019 (the “Interim Report 2018-2019”), and the quarterly report for the nine months ended 30 June 2019 (the “Third Quarterly Report 2018-2019”); (ii) the constitutional documents of the Company; (iii) the SP

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LETTER FROM VINCO CAPITAL

Agreement entered into between the Purchaser, Seller and the Guarantor; (iv) the Supplementary Agreement entered into between the Purchaser and the Seller; (v) the Second Supplementary Agreement entered into between the Purchaser, Seller and the Guarantor; (vi) the audited report of Wealth Link Securities Limited for the three years ended 31 March 2019; (vii) the unaudited financial results of Wealth Link Securities Limited for the four months ended 31 July 2019; (viii) the valuation report on Wealth Link Securities Limited prepared by an Independent Valuer; (ix) the estimated cost provided by the Company on setting up a new company to engage in type 1 regulated activity (dealing in securities) and type 4 regulated activity (advising on securities) under the SFO, which are made available to us and enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our advice. Based on the foregoing, we confirm that we have taken all reasonable steps, which are applicable to the Acquisition, as referred to in Rule 13.80 of the Listing Rules (including the notes thereto).

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration in respect of the Acquisition, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

C. PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and Independent Shareholders in respect of the Acquisition, we have considered the principal factors and reasons set out below.

I. Information of the parties

Information of the Group

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LETTER FROM VINCO CAPITAL

Set out the table 1 below is the summary of the financial information of the Group as extracted from the Annual Report 2017-2018 and Third Quarterly Report 2018-2019:

Table 1: Summary of the consolidated financial performance of the Group

Revenue
Corporate finance
advisory services
Placing and
underwriting services
Business consulting
services
Total revenue
Profit/(loss) before
income tax
Net profit/(loss)
attributable to
owners of the
Company for the
year/ period

For the year ended 30
September
For the
nine
months
ended
30 June
For the
nine
months
ended
30 June
2017
2018
2018
2019
(Audited)
(Audited)
(Unaudited)
(Unaudited)
HK$’000
HK$’000
HK$’000
HK$’000
43,977
51,270
25,069
19,468
—
11,123
2,578
6,409
19,352
14,356
1,844
3,492
63,329
76,749
29,491
29,369
21,804
29,345
(4,596)
(18,678)
15,980
24,110
(5,144)
(17,316)

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LETTER FROM VINCO CAPITAL

For the year ended 30 September 2018

For the year ended 30 September 2018, the Group recorded an increase in total revenue of approximately 21.2% from approximately HK$63.3 million to approximately HK$76.7 million primarily attributable to an increase in the overall number of high value transactions (over HK$1 million) handled by the Group from 19 for the year ended 30 September 2017 to 23 for the year ended 30 September 2018. The increase in the Group’s revenue from corporate financial advisory services was primarily attributable to (i) successful completion of two IPO sponsorship projects on GEM and Main Board projects during the year ended 30 September 2018 and substantial completion of one IPO sponsorship project; and (ii) an increase in the total number of engagements for corporate finance advisory services from 50 during the year ended 30 September 2017 to 55 during the year ended 30 September 2018. The increase in the Group’s revenue from placing and underwriting services was mainly attributable to an increase in total number of engagements for placing and underwriting services from nil during the year ended 30 September 2017 to 15 during the year ended 30 September 2018.

The Group’s net profit increased by approximately 50.6% from approximately HK$16.0 million for the year ended 30 September 2017 to approximately HK$24.1 million for the year ended 30 September 2018. The increase was mainly attributable to the increase in revenue as a result of more placing and underwriting engagements and corporate finance advisory engagements that year as mentioned above.

For the nine months ended 30 June 2019

The Group’s revenue decreased slightly by approximately 0.3% from approximately HK$29.5 million for the nine months ended 30 June 2018 to approximately HK$29.4 million for the nine months ended 30 June 2019. Such decrease was attributable to a decrease in contribution from corporate finance advisory services despite an increase in contribution from placing and underwriting services and business consulting services.

The Group’s administrative expenses and other operating expenses increased by approximately 46.0% from approximately HK$33.7 million for the nine months ended 30 June 2018 to approximately HK$49.2 million for the nine months ended 30 June 2019. Such increase was mainly attributable to (i) an increase in staff costs and related expenses by approximately HK$8.7 million

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LETTER FROM VINCO CAPITAL

from approximately HK$25.7 million for the nine months ended 30 June 2018 to approximately HK$34.4 million for the nine months ended 30 June 2019; and (ii) an increase in rental expenses by approximately HK$4.3 million for the nine months ended 30 June 2018 to approximately HK$8.4 million for the nine months ended 30 June 2019.

As a result, the Group recorded a loss of approximately HK$17.3 million for the nine months ended 30 June 2019 as compared with a loss of approximately HK$5.1 million for the nine months ended 30 June 2018.

II. Information of the Target Company

The Target Company is incorporated in Hong Kong with limited liability. The Target Company is principally engaged in type 1 regulated activity (dealing in securities) and type 4 regulated activity (advising on securities) under the SFO.

Set out table 2 below is the summary of the financial information of the Target Company for the three years ended 31 March 2019:

Table 2: Summary of financial information of the Target Company

	For the	year ended 31	March
	2017	2018	2019
	(Audited)	(Audited)	(Audited)
	HK$’000	HK$’000	HK$’000
Revenue
Commission and brokerage income
from securities dealing on:
— The Stock Exchange of Hong
Kong Limited	1,313	4,884	787
— Commission and brokerage
income other than from
securities dealing	1,978	69,338	10,242
— Clearing, settlement and handling
fee	344	568	34

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LETTER FROM VINCO CAPITAL

Revenue from other sources Fair value gain on financial assets Interest income from — Clients — Bank Total revenue (Loss)/profit before taxation Net (loss)/profit Net asset	For the year ended 31 2017 2018 (Audited) (Audited) HK$’000 HK$’000 — — 134 602 1 5 3,770 75,397 (1,966) 61,212 (1,653) 51,239 As at 31 March (Audited) (Audited) HK$’000 HK$’000 14,586 65,825	March 2019 (Audited) HK$’000 100 753 3 11,919 (3,142) (3,085) (Audited) HK$’000 48,740

As confirmed by the Seller, the revenue of the Target Company was mainly derived from Type 1 (dealing in securities) regulated activities and Type 4 (advising on securities) regulated activities under the SFO.

The Target Company recorded an increase in total revenue of approximately HK$71.6 million from approximately HK$3.8 million for the year ended 31 March 2017 to approximately HK$75.4 million for the year ended 31 March 2018, which was mainly due to significant increase in commission and brokerage income other than from securities dealing, being underwriting and placing engagements, of approximately HK$67.4 million. Subsequently, the total revenue decreased by approximately HK$59.1 million for the year ended 31 March 2019 mainly due to decrease in the revenue of both commission and brokerage from securities dealing and underwriting and placing activities as a result of economic downturn and the difficulty of raising fund.

— 28 —

LETTER FROM VINCO CAPITAL

In comparison to the net loss of approximately HK$1.7 million for the year ended 31 March 2017, the Target Company recorded a net profit of approximately HK$51.2 million for the year ended 31 March 2018 which was mainly due to the substantial increase in revenue as mentioned above. The Target Company recorded a net loss of approximately HK$3.1 million for the year ended 31 March 2019 which was mainly attributable to decrease in revenue as a result of economic downturn and the difficult of raising fund as mentioned above.

Upon completion of the Acquisition, the Target Company will become a direct wholly-owned subsidiary of the Company.

III. Principal terms of the Agreement

Set out the table below is the principal terms of the Agreement:

Date : 11 June 2019 (after trading hours) Parties : (1) The Seller: Cheung I Fai（張貽輝）;

(2) The Purchaser: VBG International Holdings Limited; and
(3) The Guarantor: Cheung I Fai（張貽輝）.
Assets to be : Pursuant to the SP Agreement, the Purchaser has acquired conditionally agreed to acquire and the Seller has conditionally agreed to sell, the Sale Shares, at a consideration of HK$27,000,000 (subject to adjustment, if any) which shall be settled in cash. Upon Completion, the Target Company will become a wholly-owned subsidiary of the Purchaser and the financial result, assets and liabilities of the Target Company will be consolidated into the accounts of the Group.

The Seller will guarantee the Purchaser the net profit after tax of the Target Company (as discussed in the paragraph headed “Profit Guarantee” in the Letter from the Board) for the period commencing on the Completion Date and ending of the first anniversary of the Completion Date (both days inclusive), as set out in the SP Agreement.

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LETTER FROM VINCO CAPITAL

There is no restriction on the Company with respect to any subsequent sale of its equity interest in the Target Company.

Consideration : The Consideration was agreed after arm’s length negotiations between the Seller and the Purchaser having taken into account of various relevant factors including, among other things, the Target Company’s business prospects and market position as well as other factors set out in the section headed “Basis of the Consideration” in the Letter from the Board.

As at 30 June 2019, the Company had a cash holding of approximately HK$26.3 million which was raised from the GEM listing by the Company and intended to be applied to expand the Company’s placing and underwriting business as disclosed in the Prospectus. The Company will utilise such cash to finance the payment of the Consideration.

Payment of the Consideration

Subject to the adjustment under sub-section titled “Adjustment to the Consideration” below, the Consideration shall be paid in the following manner:

(i) A r e f u n d a b l e d e p o s i t i n t h e a m o u n t o f HK$10,000,000 was paid by the Purchaser to the Seller on 25 June 2019; and
(ii) the balance of the Consideration, being HK$17,000,000, shall be paid by the Purchaser to the Seller in cash on Completion.

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LETTER FROM VINCO CAPITAL

Adjustment to the Consideration

If, the actual cash of the Target Company at Completion (“ Actual Cash ”) as stated in the draft completion of the Target Company shall be less than HK$15 million, there shall be a dollar-for-dollar downward adjustment to the amount of the Consideration which shall be equal to the difference between HK$15 million and the Actual Cash, payable by the Seller to the Purchaser within seven Business Days of the date of Completion. If the Actual Cash as stated in the draft completion accounts of the Target Company shall be equal to or greater than HK$15 million, there shall be no adjustment to the amount of the Consideration whatsoever.

Conditions : Pursuant to the SP Agreement, Completion is subject to precedent the following conditions being satisfied (or waived, if applicable):
(a) prior approval from the SFC on: (i) the Purchaser becoming a shareholder of the Target Company as a result of any or all the transactions contemplated in and under the SP Agreement; (ii) if necessary, the proposed changes to the business plan filed with the SFC in connection with the SFC’s granting of the Licenses as a result of the execution of the SP Agreement; and (iii) if necessary, the appointment of such person(s) nominated by the Purchaser as Responsible Person(s) of the Target Company, other than the existing Responsible Officer as at the date hereof, as a result of the execution of the SP Agreement;
(b) the SFC having not suspended or withdrawn or revoked any of the Licences;
(c) no investigation, inquiry or disciplinary action by any authority being initiated against the Target Company or its officers or accredited representatives;

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LETTER FROM VINCO CAPITAL

(d) the Seller having procured that Target Company having declared and paid dividends, in cash, in an aggregate amount of not more than HK$31,000,000 out of the accrued distributable profits of the Target Company as at 31 May 2019 to the Seller prior to Completion;
(e) the Purchaser is satisfied with the due diligence review on the Target Company;
(f) the Seller having procured that (i) all of the Target Company’s furniture and fixtures be written off from its accounts; (ii) all of the Target Company’s accrued tax liabilities incurred and payable being paid and settled; and (iii) all amounts due from the Target Company’s client(s) being repaid and settled, prior to Completion;
(g) ordinary resolution(s) for approving the SP Agreement and the transactions contemplated hereunder having been duly passed by the shareholders of the Company other than Ms. Wan Ho Yan Letty (“ Ms. Wan ”) and the associates (which term has the meaning ascribed to it under the GEM Listing Rules) of Ms. Wan (the “ Independent Shareholders ”);
(h) no indication from the Stock Exchange having been received to the effect that the listing of shares of the Company will or may be withdrawn or objected to for any reason attributable to the transactions contemplated under the SP Agreement or the Completion;
(i) there having been no material breach of any of the representations, warranties and undertakings given by the Seller under the SP Agreement; and
(j) the issue of a valuation report on the Target Company by a professional independent valuer.

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LETTER FROM VINCO CAPITAL

The Purchaser may waive any of the above conditions in (d), (e), (f) and (i) by giving notice in writing to the Seller. As at the date of the Circular, save for conditions (e) and (j), none of the other conditions precedent has been satisfied.

Profit guarantee :

Pursuant to the SP Agreement, the Seller guarantees to the Purchaser that the net profit after tax of the Target Company for the period (the “ Period ”) commencing on the Completion Date and ending on the first anniversary of the Completion Date, both days inclusive, shall not be less than HK$2,000,000 (the “ Guaranteed Net Profit ”). The Guaranteed Net Profit will be profits in the ordinary course of business only and exclude any profits and losses arising from merger, acquisition and disposal or any extraordinary or exceptional items of the Target Company.

Sum B = Sum A x 13.5

Sum B shall be paid and settled in cash within fourteen (14) Business Days of date of issuance of the Target Company’s management accounts.

— 33 —

LETTER FROM VINCO CAPITAL

As confirmed by the Directors, the Guaranteed Net Profit was determined through negotiation between the Purchaser and the Seller. The Seller guarantees to the Purchaser that the net profit after tax of the Target Company for the Period commencing on the Completion Date and ending on the first anniversary of the Completion Date, both days inclusive, shall not be less than HK$2,000,000. Both parties have considered (i) that the Target Company have secured potential underwriting projects pending to materialise for their engagement of underwriting and placing activities; and (ii) the Target Company would be able to utilise their established clientele for these underwriting and placing activities.

To assess the fairness and reasonableness of the determination of the Guaranteed Net Profit, we have reviewed supporting documents provided by the Company and have conducted research for justification. With reference to the Target Company’s financial statement for the three years ended 31 March 2019, we noted that the commission and brokerage income from securities dealing of approximately HK$1.3 million, HK$4.9 million and HK$0.8 million respectively. We noted that the interest income of cash and margin finance clients for the two years ended 31 March 2019 was approximately HK$602,000 and HK$753,000 respectively generated from the Target Company’s clientele. We further noted that the commission and brokerage income for the two years ended 31 March 2019 was approximately HK$69.3 million and HK$10.2 million generated from the Target Company’s underwriting and placing activities among their clientele.

As advised by the Directors, the Target Company’s estimated income to be derived from brokerage commission is projected to be HK$281,000 for the year ending 31 March 2020. The Target Company’s estimated income to be derived from interest income of cash and margin finance clients is projected to be approximately HK$796,000 for the year ending 31 March 2020. We further noted that the estimated total revenue of the Target Company for the year ending 31 March 2020 is based on, among others, the applications for initial

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LETTER FROM VINCO CAPITAL

public offering secured and pending for potential underwriting and placing activities. We have collected and reviewed all applications for initial public offering and noted the expected amount of revenue to be generated from the potential underwriting projects.

As advised by the Directors, the Group believes that the Target Company having an established clientele comprising individuals and corporations in Asia Pacific region would be advantageous for the Group’s expansion in their placing and underwriting business. The Directors estimate that the revenue generated from underwriting commissions if all applications materialise would be approximately HK$26.5 million for the year ending 31 March 2020.

Considering if only one potential underwriting project materialises with an average of approximately HK$5.3 million generated from its underwriting and placing activities, together with HK$1.1 million projected to be generated from the Target Company’s brokerage commission and interest income, the Target Company’s estimated income would be approximately HK$6.4 million for the year ending 31 March 2020.

Based on (i) the estimated income if only one potential underwriting project materialises and together with its brokerage commission and interest income projected at approximately HK$6.4 million for the year ending 31 March 2020; (ii) the estimated income if all of the potential underwriting projects materialises and together with its brokerage commission and interest income at approximately HK$27.5 million for the year ending 31 March 2020; and (iii) having noted the Target Company’s clientele to have generated approximately HK$602,000 and HK$753,000 through interest income and approximately HK$69.3 million and HK$10.2 million through underwriting and placing activities for the two years ended 31 March 2019, we are of the view that the estimated income for the year ending 31 March 2020 ranging from approximately HK$6.4 million to HK$27.5 million that was taken into account in determining HK$2.0 million for the year ending 31 March 2020 as the Guaranteed Net Profit is considered acceptable.

Having taken into account that in the event of the actual net profit after tax as stated in the Target Company’s management accounts for the Period commencing on the Completion Date and ending on the first anniversary of the Completion Date shall be zero or reported a loss, the Seller shall pay to the Purchaser a sum of HK$27,000,000, we are of the view that the Company would not be disadvantaged in the aforesaid events when the scenario of Guaranteed Net Profit is deemed inappropriate.

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LETTER FROM VINCO CAPITAL

We have reviewed the terms of historical equity transfer agreements entered into by listed companies on the Stock Exchange and compared them to the principal terms of the Agreement. Given the fact that (i) there is no material difference between the terms of historical equity transfer agreements entered into by listed companies and the terms of the Agreement; and (ii) the Acquisition requires an issuance of a valuation prepared by the Independent Valuer, we are of the view that the above agreed terms under the Agreement is on normal commercial terms, fair and reasonable.

IV. Reasons for and benefits of the Acquisition

As mentioned in the “Letter form the Board” of the Circular, it is a disclosed plan of the Group to participate in more placing and underwriting transactions as well as offering placing and underwriting services to its sponsorship clients. For the year ended 30 September 2018, the Group had participated in engagements for placing and underwriting services. The Board considers that the transaction as contemplated under the SP Agreement, if materialises, will complement the Group’s business plan as it enables the Group to take advantage of the capabilities of the Target Company in the placing and underwriting of securities thereby enabling the Group to participate in more placing and underwriting transactions through the Target Company.

As disclosed in the section titled “Future plans and Use of Proceeds” of the Prospectus, the Group initially intend to participate in more placing and underwriting transactions by leveraging on networking with other professional parties and business contacts. As confirmed by the Directors, the Group believes that the established clientele of the Target Company would consist of a better client network than the Group’s.

The Directors have considered setting up a new company as an alternative to expanding in its placing and underwriting business. We have conducted our independent research and analysis to examine whether the Acquisition is more beneficial to the Company instead of setting up a new company and have full operation in comparison to the Target Company. According to the “Licensing Handbook” issued by the SFC in April 2017, we noted that there are minimum paid-up share capital and liquid capital requirements for the application for licensed corporation. To set up a company with the same licenses as the Target Company, being type 1 regulated activity (dealing in securities) and type 4 regulated activity (advising on securities) under the SFO, a minimum paidup share capital of HK$10.0 million and a minimum liquid capital of HK$3.0

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LETTER FROM VINCO CAPITAL

million are required under the Securities and Futures (Financial Resources) Rules (Cap. 571N of the Laws of Hong Kong). We also noted the other financial costs for setting up a company with the same business nature as the Target Company would include (i) the professional fees in relation to lodging an application to be a licensed corporation; (ii) rental and renovation cost for premises to set up the new company; (iii) purchase of office utilities; and (iv) remuneration for recruiting and attracting suitable Responsible Officers, managers-in-charge, licensed representatives and supporting and operational staff.

Apart from financial costs, additional time would be required if the Company intend to set up a new company and have full operation in comparison to the Target Company. The Directors believe that they would require approximately 12 months for (i) obtaining approval from SFC on the application for type 1 and type 4 regulated activities under the SFO in accordance to the “Licensing Handbook”; (ii) identifying suitable premise to set up the new company’s office; (iii) renovation of the new company’s office space; (iv) identifying and recruiting suitable employees; (v) identifying and negotiating with suitable system providers which would provide facilities and system for the business operation and (vi) a very long period of time to build up a strong clientele.

Having reviewed the cost provided by the Company, we noted that the Company would require an amount which is lower than the Consideration of HK$27.0 million in order to set up a new company at full operation in comparison to the Target Company. Although setting up a new company is estimated to be lower than the consideration of HK$27.0 million for the Target Company, the Directors believe that the Acquisition would enable the Company to save time and in turn allow the Company to generate income through the Target Company and their respective clientele at an earlier stage.

Having considered that (i) the estimated time in setting up a new company and to fully operate at the same standard as the Target Company would take approximately 12 months; (ii) the Group has sufficient knowledge and experience to manage and develop the Target Company; and (iii) the Group will retain the expertise in the Target Company after the Acquisition, we are of the view that the Acquisition is in the interest of the Company and the Shareholders as a whole.

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LETTER FROM VINCO CAPITAL

V. The Consideration of the Acquisition

After taking into account of the Target Company’s business prospects, market position and the profit guarantee, the Consideration has been arrived at after arm’s length negotiations between the Purchaser and the Seller with the requirement of the issuance of a valuation report on the Target Company as at the valuation date by the Independent Valuer, which was appraised by the use of market approach.

As mutually agreed by the Company and the Vendor, Savills Valuation and Professional Services Limited was appointed by the Company to conduct a valuation of the Target Company and had issued a valuation report. According to the valuation report, the valuation of the market value of the equity in Wealth Link as at the valuation date is HK$30,350,000.

Savills Valuation and Professional Services Limited is principally engaged in the provision of valuation and technical advisory services in Hong Kong. We have reviewed the qualification and experience of the Independent Valuer in relation to the conduct of valuation of the Target Company, and note that the Independent Valuer possesses sufficient qualifications and experience of over 10 years in valuing companies similar to the Target Company. The Independent Valuer confirmed that they have previously performed similar valuations on SFC licensed firms including the firms that possess type 1 and 4 SFC licenses. The Independent Valuer is independent to the Group and the Seller and also independent to the shareholders, directors, and any associates of the Group and the Seller.

In assessing the fairness and reasonableness of the appraised value of the Target Company, we have performed due diligence on the valuation report issued by the Independent Valuer by reviewing the valuation report and interviewing the Independent Valuer regarding, among other things, the basis and assumptions made and the methodology adopted by the Independent Valuer in conducting the appraisal for the assets of the Target Company. We understand that the Independent Valuer has adopted market approach for evaluating the value of the Target Company. The Independent Valuer is of the view that an income approach was not appropriate for the valuation as having considered that no long term cash flow projection is available for a sufficient analysis due to the inherent unpredictability on longer term IPO pipeline which is a crucial assumption given the importance of underwriting commission to the Target Company. The Independent Valuer is also of the view that an asset-

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LETTER FROM VINCO CAPITAL

based approach was not appropriate for the valuation due to the asset-light nature of the Target Company’s business. Therefore, the Independent Valuer adopted a market approach for their appraisal on the value of the Target Company.

The market approach provides an indication of value by comparing the asset with identical or comparable (that is similar) assets for which price information is available. In the business valuation context, the market approach valuation shall analyse recent transaction(s) in the equity interest of the valuation subject and/or comparable companies and benchmark the valuation subject with the selected comparable(s). By adopting this approach, the Independent Valuer conducted search and analysis of comparable companies which are Hong Kong based listed securities companies with operation and size similar to the Target Company.

Having discussed with the Independent Valuer, we concur that (i) incomebased approach was not appropriate for the valuation due to the lack of long term cash flow projections as a result of the unpredictability of IPO and respective underwriting commissions; (ii) income-based approach requires a financial projection of at least five years which would involve making more assumptions on remote years; (iii) the Target Company is asset-light due to its nature of business; (iv) asset-based approach could not reflect the market value of the Target Company; and (v) the Target Company recorded a net loss for the year ended 31 March 2019 and considered not to be appropriate to compare its price-to-earnings ratio with comparable companies under the market approach.

Having considered the above, we concur that income-based approach and asset-based approach are not suitable measures in appraising the value of the Target Company. Although the core value of the corporate finance business and money are primarily based on the expertise, experience and the customer network of the responsible officers/staff and there are only limited available comparable companies in the market, due to the inappropriateness of the adoption of income-based approach and asset-based approach, we are of the view that market based approach is the most suitable measure for the Valuation.

Having considered that (i) income-based approach and asset-based approach are not suitable measures for the Valuation; (ii) the Independent Valuer has set reasonable criteria to search for appropriate comparables by adopting the

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LETTER FROM VINCO CAPITAL

market approach; and (iii) the comparables selected for the Valuation are exhaustive based on the Independent Valuer’s best efforts in searching for appropriate comparables, we are of the view that the appraisal result of market approach is fair and reasonable.

VI. Comparison with other companies in the same industry

In addition to the asset valuation conducted by the Independent Valuer, in order to assess the fairness and reasonableness of the acquisition price, we have conducted our own assessment on the market value of the Target Company. As mentioned in the “The Consideration of the Acquisition” of this letter, income-based approach and asset-based approach are not suitable in the valuation of the Target Company. Therefore, we have used market-based approach to assess the fairness of the Valuation conducted by the Independent Valuer. We have identified a population of nine listed companies which has a market capitalisation below HK$300 million (being nearly ten times of the proposed consideration of the Acquisition at HK$27 million) as at the valuation date and are mainly engaged in corporate finance business similar to those of the Target Company (together the “ Comparables ”) which we consider to be exhaustive. Since the Target Company is an asset-light company due to its business nature, we consider that the price to book ratio (the “ P/ B Ratio ”) comparison is not suitable in this case. By considering the marketapproach, having noted that the Target Company recorded a loss for its most recent audited figures for the year ended 31 March 2019, we consider that the price-to-earnings ratio (the “ P/E Ratio ”) comparison is also not suitable in this case. Therefore, we have selected the price-to-revenue (the “ P/S Ratio ”) to assess the fairness of the Consideration for acquiring the Target Company. The P/S Ratio enables comparison of a company’s stock price to its revenue. It is an indicator of the value placed on each dollar of a company’s sales or revenue.

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LETTER FROM VINCO CAPITAL

Set out in the table below are the details of the P/S Ratio comparison of the Comparables and the Acquisition:

Company name	Stock code	P/S Ratio
		(Note 1)
Victory Securities (Holdings) Company Limited	8540	4.3x
PF Group Holdings Limited	8221	2.9x
Astrum Financial Holdings Limited	8333	3.1x
VBG International Holdings Limited	8365	3.3x
Koala Financial Group Limited	8226	2.8x
Cash Financial Services Group Limited	510	2.2x
Orient Securities Holdings Limited	8001	3.7x
Sino Prosper Group Holdings Limited	766	3.2x
GT Group Holdings Limited	263	N/A_(Note 2)_
	Maximum	4.3x
	Average	3.2x
	Median	3.2x
	Minimum	2.2x
Target Company		2.3x
		(Note 3)

Note:

The P/S Ratio as at 28 June 2019 is calculated by dividing the market capitalisation of the Comparables as at 28 June 2019 by their revenue extracted from their public filings.
The P/S Ratio is unavailable due to its negative revenue extracted from their latest annual report.
The implied P/S Ratio is calculated by dividing the acquisition price by its trailing 12 months revenue.

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LETTER FROM VINCO CAPITAL

As shown in the table above, the P/S Ratio of the Comparables range from approximately 2.2x to 4.3x, and the average P/S Ratio of the Comparables is approximately 3.2x. Based on the above scenario, it shows that determination of the Consideration at the P/S Ratio of approximately 2.3x is (i) within the range of the P/S Ratio of the Comparables; and (ii) lower than the average. Having taken into account that (i) the P/S Ratio of the Target Company is within range of the P/S Ratio of the Comparables; and (ii) the P/S Ratio is lower than the average P/S Ratio of the Comparables, we are of the view that the Consideration for the Target Company is determined to be less than the amount of what investors in average have proportionally invested for the respective comparable companies. Therefore, we are of the view that the Consideration for acquiring the Target Company is favourable to the Company and is determined in the interest of the Company and the Shareholders as a whole.

VII. Possible financial effects on the acquisition of the Group

Earnings

As mentioned in the “Letter from the Board”, upon the Completion, the Target Company will become a direct wholly-owned subsidiary of the Company and the financial results of the Target Company will be consolidated in the consolidated financial statements of the Group.

The Directors considers that the Acquisition will complement the Group’s business plan as it enables the Group to take advantage of the capabilities of the Target Company in placing and underwriting of securities thereby enabling the Group to participate in more placing and underwriting transactions through the Target Company.

Working capital

Based on the Annual Report 2017-2018, the Group’s working capital sufficiency (i.e. total current assets of approximately HK$122.3 million, less total current liabilities of approximately HK$16.6 million) as at 30 September 2018 and cash and cash equivalents as at 31 March 2019 amounted

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LETTER FROM VINCO CAPITAL

to approximately HK$105.7 million and HK$57.7 million respectively, representing a current ratio of 7.4 times as at 30 September 2018. The Consideration will be settled in cash. Assume that the value of current assets and current liabilities remain the same, after the settlement of the Consideration, the Group still has working capital sufficiency and cash and cash equivalents of approximately HK$78.7 million and HK$30.7 million, while the Group’s current ratio will be dropped to 5.7 times. Based on the above, we are of the view that the Acquisition will not have any material negative impact on the Group’s working capital requirement and liquidity.

Net asset value

According to the Interim Report 2018/2019, the net asset value of the Group was approximately HK$103.6 million as at 31 March 2019. For the Acquisition, the Group’s cash and cash balance will decrease by approximately HK$27.0 million being the Consideration to the Seller. Assume that the net asset values of the Group and the Target Company remain unchanged, the Group’s net assets value will decrease by approximately 26.1% to approximately HK$76.6 million. Since the decrease in the Group’s net asset value will be minimal after the Acquisition, we are of the view that the Acquisition will not have material impact on the Group’s net asset value.

In light of the foregoing financial effects of the Acquisition on the earnings, working capital, net asset value and gearing position of the Group as a whole, the mentioned above indicates that the Acquisition would have no significant adverse impact on the Group’s financial position. Therefore, we are of the view that while the Group’s cash resources would be reduced, the Acquisition is an effective utilisation of its cash resources which is aimed at positioning the Group for a better growth in the future which, in the long run, is expected to benefit the Group and the Independent Shareholders as a whole.

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LETTER FROM VINCO CAPITAL

D. RECOMMENDATION

Having taken the above principal factors and reasons into consideration, we are of the view that the Acquisition is in the usual and ordinary course of business of the Group, and it is on normal commercial terms and in the interests of the Company and the Independent Shareholders as a whole. We also consider that the terms of the SP Agreement and the transactions contemplated thereunder are fair and reasonable. Therefore, we advise the Independent Shareholders, and the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve, among other things, the SP Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Vinco Capital Limited Alister Chung Managing Director

Note: Mr. Alister Chung is a licensed person registered with the Securities and Future Commission of Hong Kong and a responsible officer of Vinco Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has participated in the provision of independent financial advisory services for various transactions involving companies listed in Hong Kong for over 10 years.

— 44 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for each of the financial years ended 30 September 2017 and 2018 and the six months ended 31 March 2019 are disclosed in the annual reports of the Company for the financial years ended 30 September 2017 (pages 37 to 86), and 2018 (pages 37 to 90) and the interim report of the Company for the six months ended 31 March 2019 (pages 3 to 25), respectively, which are published on both the websites of HKEXnews (www.HKEXnews.hk) and the Company (http://www.vbg-group.com). The auditor of the Company has not issued any qualified opinion on the Group’s consolidated financial statements for the financial years ended 31 March 2017 and 2018.

Quick links

Annual reports of the Company for the financial years ended 30 September 2017 and 2018 and the interim report of the Company for the six months ended 31 March 2019 are available at the following internet links:

https://www1.hkexnews.hk/listedco/listconews/gem/2019/0508/gln20190508003.pdf https://www1.hkexnews.hk/listedco/listconews/gem/2018/1220/gln20181220033.pdf https://www1.hkexnews.hk/listedco/listconews/gem/2017/1220/gln20171220071.pdf

Save as disclosed above, the Board is not aware of any material change in the Company’s operation and financial position since 30 September 2018, being the date on which the latest published audited consolidated financial statements of the Group were made up.

2. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 July 2019, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group has outstanding indebtedness as summarised below:

Borrowings

As at 31 July 2019, being the latest practicable date for the purpose of preparing this indebtedness statement, the Enlarged Group had no borrowings.

As at 31 July 2019, being the latest practicable date for the purpose of preparing this indebtedness statement, the Enlarged Group had no contingent liabilities and capital commitments

— I-1 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Obligations under a finance lease

As at 31 July 2019, the Enlarged Group had outstanding obligations under a finance lease of approximately HK$46,000 secured by charges over a motor vehicle.

Save as otherwise disclosed above, and apart from intra-group liabilities and normal trade and other payables, the Enlarged Group did not have, at the close of business on 31 July 2019, any other debt securities issued and outstanding, or agreed to be issued, bank loans or similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases or hire purchases commitments, capital commitments, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

After taking into account the financial resources available to the Group, including the proceeds from the Investments and the internally generated funds, the Directors, after due and careful enquiry, are of the opinion that the Group will have sufficient working capital for its present requirements for at least the next 12 months from the date of this circular, in the absence of unforeseeable circumstances.

4. MATERIAL ADVERSE CHANGE

References are made to (i) the profit warning announcement of the Company dated 26 April 2019 in respect of the interim results of the Group for the six months ended 31 March 2019; (ii) the interim results announcement of the Company for the six months ended 31 March 2019 dated 7 May 2019; and (iii) the interim report of the Company for the six months ended 31 March 2019 published on the websites of the Stock Exchange and the Company on 7 May 2019 regarding the increase in the loss for the period to approximately HK$15.2 million for the six months ended 31 March 2019 as compared to the loss of approximately HK$1.2 million for the corresponding period in 2018. As disclosed in the aforementioned announcements and interim report, such decrease was primarily attributable to, among other things, the decrease in revenue as a result of an unexpected delay in recognition of revenues from certain corporate finance advisory projects handled by the Group; and increase in staff costs and related expenses and rental expenses resulted from the business expansion.

Please refer to the relevant announcements and interim report of the Company for further details.

— I-2 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as disclosed in this circular, up to and including the Latest Practicable Date, the Directors have not been aware of any material adverse change in the financial or trading position of the Group since 30 September 2018, being the date to which the latest published audited financial statements of the Group were made up to.

5. FINANCIAL AND TRADING PROSPECTS

The Group is principally engaged in the provision of (i) corporate finance advisory services (including sponsorship, compliance advisory, financial advisory and independent financial advisory); (ii) placing and underwriting services; and (iii) business consulting services, to companies listed on the Stock Exchange, non-listed companies and potential listing applicants on the Stock Exchange mainly in Hong Kong, the PRC, Asia and Europe. The Directors confirm that there will be no major changes to the Group’s principal business activities as a result of the Acquisition save as described below. The Target Company is incorporated in Hong Kong with limited liability. The Target Company is principally engaged in Type 1 regulated activity (dealing in securities) and Type 4 regulated activity (advising on securities) under the SFO.

In terms of business prospects, the Company is of the view that the Target Company should benefit from the local securities industry which is expected to maintain its growth and development trend as a result of the increasing capital inflow from the PRC investors and the growing number of new listings on the Stock Exchange. In terms of market position, considering that (i) the Target Company is a Category C Stock Exchange participant; (ii) whilst the market for Stock Exchange participants serving Category C is relatively fragmented (i.e. no dominant market leader), the Acquisition will enable the Target Company to leverage on the Group’s international and PRC presence; and that (iii) the Target Company has an established clientele comprising individuals and corporations in Asia Pacific region and has the ability to offer a comprehensive securities brokerage service, namely, securities trading, margin financing, and online trading platform, the Company is of the view that the Target Company has a competitive position in the Category C Stock Exchange participant market.

— I-3 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Board considers that the transaction as contemplated under the SP Agreement, if materialises, will complement the Group’s business plan as it enables the Group to take advantage of the capabilities of the Target Company in the placing and underwriting of securities thereby enabling the Group to participate in more placing and underwriting transactions through the Target Company.

For details of the business prospects of the Target Company, please refer to the section headed “Management Discussion and Analysis of the Target Company” in Appendix III to this circular.

— I-4 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Set out below is the text of a report received from the independent reporting accountants of the Target Company, KTC Partners CPA Limited, Certified Public Accountants (Practising), Hong Kong, which has been prepared for the purpose of incorporation in this circular.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF VBG INTERNATIONAL HOLDINGS LIMITED

Introduction

We report on the historical financial information of Wealth Link Securities Limited (the “ Target Company ”) set out on pages II-3 to II-39, which comprises the statements of financial position as at 31 March 2017, 2018 and 2019, the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows for each of the years ended 31 March 2017, 2018 and 2019 (together the “ Relevant Periods ”) and a summary of significant accounting policies and other explanatory information (together the “ Historical Financial Information ”). The Historical Financial Information set out on pages II-3 to II-39 forms an integral parts of this report, which has been prepared for inclusion in the circular of VBG International Holdings Limited (the “ Company ”) dated 23 September 2019 (the “ Circular ”) in connection with the proposed acquisition (the “ Acquisition ”) by the Company of entire equity interest in the Target Company.

Directors’ responsibility for the Historical Financial Information

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

Reporting accountants’ responsibility

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

— II-1 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

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

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

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountant’s report, a true and fair view of the financial position of the Target Company as at 31 March 2017, 2018 and 2019 and of the Target Company’s financial performance and cash flows for the Relevant Periods in accordance with the basis of preparation set out in Note 2 to the Historical Financial Information.

Report on matters under the GEM Listing Rules of The Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page II-3 have been made.

Dividends

We refer to Note 21 to the Historical Financial Information which states that dividends have been declared and paid by the Target Company in respect of the Relevant Periods.

KTC Partners CPA Limited

Certified Public Accountants (Practising) Hong Kong, 23 September 2019

Chow Yiu Wah Joseph

Audit Engagement Director Practising Certificate Number: P04686

— II-2 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

HISTORICAL FINANCIAL INFORMATION OF THE TARGET COMPANY

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

The financial statements of the Target Company for the Relevant Periods, on which the Historical Financial Information is based, have been prepared in accordance with the accounting policies which conform with Hong Kong Financial Reporting Standards (“ HKFRS ”) issued by the HKICPA and were audited by KTC Partners CPA Limited in accordance with Hong Kong Standards on Auditing issued by the HKICPA (“ Underlying Financial Statements ”).

The Historical Financial Information is presented in Hong Kong Dollars (“ HK$ ”) and all values are rounded to the nearest thousand HK$ (“ HK$’000 ”) except when otherwise indicated.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Note Revenue 4 Other operating expense (Loss)/Profit before taxation 5 Income tax credit/(expense) 7 (Loss)/Profit for the year Other comprehensive income for the year Total comprehensive (loss)/income for the year	Year 2017 HK$’000 3,770 (5,736) (1,966) 313 (1,653) — (1,653)	ended 31 March 2018 2019 HK$’000 HK$’000 75,397 11,919 (14,185) (15,061) 61,212 (3,142) (9,973) 57 51,239 (3,085) — — 51,239 (3,085)

— II-3 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF FINANCIAL POSITION

Note Non-current assets Plant and equipment 8 Intangible assets 9 Other assets 10 Deferred tax assets 11 Current assets Accounts receivables 12 Deposits, prepayments and other receivables 13 Financial assets at fair value through profit or loss 14 Amount due from a related party 15 Cash and bank balances 16 Current liabilities Accounts payables 17 Other payables and accruals 18 Obligation under finance lease 19 Income tax payable Net current assets Non-current liabilities Obligation under finance lease 19 Deferred tax liabilities 11	At 31 March 2017 2018 HK$’000 HK$’000 1,381 2,372 500 613 205 230 463 — 2,549 3,215 5,166 22,791 618 3,201 — — 21 — 128,149 159,557 133,954 185,549 121,777 112,388 140 283 — 530 — 9,344 121,917 122,545 12,037 63,004 — 228 — 166 — 394	2019 HK$’000 1,574 613 230 —
		2,417
		19,174 1,942 600 — 73,721
		95,437
		39,318 115 228 9,344
		49,005
		46,432
		— 109
		109

— II-4 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

Note Net Assets Equity Share capital 20 Reserves Total equity	At 31 March 2017 2018 HK$’000 HK$’000 14,586 65,825 17,000 17,000 (2,414) 48,825 14,586 65,825	2019 HK$’000 48,740

		17,000 31,740
		48,740

— II-5 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF CHANGES IN EQUITY

Note Balance at 1 April 2016 Total comprehensive loss for the year Issuance of shares Balance at 31 March 2017 Total comprehensive income for the year Balance at 31 March 2018 Total comprehensive loss for the year Dividends 21 Balance at 31 March 2019	Retained profits/ Share (Accumulated capital losses) HK$’000 HK$’000 10,000 (761) — (1,653) 7,000 — 17,000 (2,414) — 51,239 17,000 48,825 — (3,085) — (14,000) 17,000 31,740	Total HK$’000 9,239 (1,653) 7,000 14,586 51,239 65,825 (3,085) (14,000) 48,740

— II-6 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF CASH FLOWS

Note Operating activities (Loss)/Profit before taxation Adjustments for: Depreciation on plant and equipment Fair value gain on financial assets Interest income Loss on disposal of plant and equipment Written off of plant and equipment Operating (loss)/profit before changes in working capital Decrease/(Increase) in accounts receivables Decrease/(Increase) in deposits, prepayments and other receivables Decrease in amounts due from related parties (Increase)/Decrease in accounts payables (Decrease)/Increase in other payables and accruals Net cash (used in)/generated from operating activities Investing activities Purchase of plant and equipment Interest income Purchase of intangible assets Purchase of other assets Proceed from disposal of plant and equipment Purchase of financial assets at fair value through profit or loss	Year 2017 HK$’000 (1,966) 418 — (135) 14 95 (1,574) (5,166) 422 7,285 121,777 134 122,878 (1,575) 135 (500) (205) 88 —	ended 31 March 2018 2019 HK$’000 HK$’000 61,212 (3,142) 770 1,022 — (100) (607) (756) — 6 — 13 61,375 (2,957) (17,625) 3,617 (2,583) 1,259 21 — (9,389) (73,070) 143 (168) 31,942 (71,319) (1,776) (255) 607 756 (113) — (25) — 15 12 — (500)

— II-7 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

Note Net cash generated from/(used in) investing activities Financing activities Issue of share capital Dividend paid (Repayment to)/proceed from finance lease Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents for the year Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 16 Analysis of the balances of cash and cash equivalents Cash and bank balances 16	Year 2017 HK$’000 (2,057) 7,000 — — 7,000 127,821 328 128,149 128,149	ended 31 March 2018 2019 HK$’000 HK$’000 (1,292) 13 — — — (14,000) 758 (530) 758 (14,530) 31,408 (85,836) 128,149 159,557 159,557 73,721 159,557 73,721

— II-8 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

NOTES TO THE FINANCIAL STATEMENTS OF THE TARGET COMPANY

1 GENERAL INFORMATION

Wealth Link Securities Limited (“ the Target Company ”) is a private company incorporated in Hong Kong with limited liability and has been granted a licence by the Securities and Futures Commission under Part V of the Securities and Futures Ordinance for regulated activities of type 1 and 4 since 2 June 2016. The Target Company’s registered office and business address are located at Suite 1504, 15/F., Bangkok Bank Building, 28 Des Voeux Road Central, Hong Kong.

The principal activity of the Target Company is provision of brokerage and investment advisory services.

The Historical Financial Information is presented in Hong Kong dollars (“ HK$ ”), which is the same as the functional currency of the Target Company.

2.1 BASIS OF PREPARATION

The Historical Financial Information has been prepared in accordance with all applicable HKFRSs issued by the HKICPA. HKFRSs comprise Hong Kong Financial Reporting Standards (“ HKFRS ”); Hong Kong Accounting Standards (“ HKAS ”); and Interpretations. The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) and with the requirements of the Hong Kong Companies Ordinance (Cap. 622).

2.2 ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

During the Relevant Periods, the Target Company has adopted all the new and revised HKFRSs issued by the HKICPA that are relevant to its operations and effective during the Relevant Periods.

The Target Company has not early applied the new HKFRSs that have been issued but are not yet effective. The directors anticipate that the new and revised HKFRSs will be adopted in the Historical Financial Information when they become effective.

Amendment to HKFRS 3 Definition of a Business2 Amendment to HKAS 1 and 8 Definition of Material3 HKFRS 16 Leases1 HKFRS 17 Insurance Contracts4 Amendments to HKFRS 10 Sale or Contribution of Assets between an Investor and its and HKAS 28 Associate or Joint Venture5

1 Effective for annual periods beginning on or after 1 January 2019
2 Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 January 2020
3 Effective for annual periods beginning on or after 1 January 2020
4 Effective for annual periods beginning on or after 1 January 2021
5 No mandatory effective date is determined but is available for early adoption

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

— II-9 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

2.3 SIGNIFICANT ACCOUNTING POLICIES

The Historical Financial Information has been prepared under the historical cost convention, except for financial asset at fair value through profit or loss, which have been measured at fair value.

The preparation of financial statements in conformity with HKFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in Note 3.

The significant accounting policies applied in the preparation of the Historical Financial Information are set out below.

(a) Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses if any.

Depreciation is calculated to write off the cost of items of plant and equipment using the straight line method over their estimated useful lives as follows:

—	Leasehold improvement	lower of 20% or lease term
—	Furniture, fixture and office equipment	33.33%
—	Computer equipment and software	33.33%
—	Motor vehicle	20%

Gains or losses arising from the retirement or disposal of an item of plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

(b) Intangible assets

Intangible assets that are acquired by the Target Company are stated in the statement of financial position at cost less accumulated amortisation (where the estimated useful life is other than indefinite) and impairment losses (see Note 9). Expenditure on internally generated such intangible assets are recognised as an expenses in the period in which it is incurred. No amortisation nor impairment losses of intangible assets is charged to profit or loss during the year.

Both the period and method of amortisation and any conclusion that the useful life of an intangible asset is indefinite are reviewed annually.

— II-10 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

(c) Operating lease charges

Where the Target Company has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term.

(d) Foreign currencies

In preparing the Historical Financial Information of the Target Company, transactions in currencies other than the functional currency of the Target Company are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each statement of financial position date, monetary items denominated in foreign currencies are re-translated at the rates prevailing on the year end date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognized in the statement of comprehensive income in the period in which they arise.

(e) Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

(f) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(g) Employee benefits

(i) Short-term employee benefits and contribution to deferred contribution retirement plans

Salaries, annual bonuses, paid annual leave, medical insurance, contribution to deferred contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(ii) Retirement benefits

The Target Company operates a defined contribution Mandatory Provident Fund retirement benefits schemes in Hong Kong (“ the MPF Scheme ”) under the Mandatory Provident Fund Scheme Ordinance, for those employees who are eligible to participate in the MPF Scheme. Both the Target Company and staff are required to contribute 5% of the employee’s relevant income. Contributions from the employer are 100% vested in the employees as soon as they are paid to the relevant MPF Scheme but all benefits derived from the mandatory contributions must be preserved until the employee reaches the retirement age of 65 subject to certain exceptions.

Contributions for the above scheme are charged to the statement of profit or loss as they become payable in accordance with the rules of the scheme. The assets of the scheme are held separately from those of the Target Company and managed by independent professional fund managers.

— II-11 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

(iii) Termination benefits

Termination benefits are recognised at the earlier of when the Target Company can no longer withdraw the offer of those benefits and when it recognises restructuring costs involving the payment of termination benefits.

(h) Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Target Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in statement of profit or loss and other comprehensive income, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

(i) Financial instruments

Accounting policies applied from 1 April 2018

Financial assets

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

— II-12 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

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

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

(i) Debt instruments

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

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

Fair value through other comprehensive income (“ FVOCI ”): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Debt investments at fair value through other comprehensive income are subsequently measured at fair value. Interest income calculated using the effective interest rate method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Fair value through profit or loss (“ FVTPL ”): Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through other comprehensive income, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

(ii) Equity instruments

On initial recognition of an equity investment that is not held for trading, the Target Company could irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-byinvestment basis. Equity investments at fair value through other comprehensive income are measured at fair value. Dividend income are recognised in profit or loss unless the dividend income clearly represents a recovery of part of the cost of the investments. Other net gains and losses are recognised in other comprehensive income and are not

— II-13 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

reclassified to profit or loss. All other equity instruments are classified as FVTPL, whereby changes in fair value, dividends and interest income are recognised in profit or loss.

(iii) Impairment loss on financial assets

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

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the difference between all contractual cash flows that are due to the Target Company in accordance with the contract and all the cash flows that the Target Company expects to receive. The shortfall is then discounted at an approximation to the assets’ original effective interest rate. The Target Company has measured loss allowances for trade receivables and contract assets using HKFRS 9 simplified approach and has calculated ECLs based on lifetime ECLs. The Target Company has established a provision matrix that is based on the Target Company’s historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

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

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

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

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

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

— II-14 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Financial liabilities

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

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in profit or loss.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial liability at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Financial liabilities may be designated upon initial recognition as at fair value through profit or loss if the following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the liabilities or recognising gains or losses on them on a different basis; (ii) the liabilities are part of a group of financial liabilities which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management strategy; or (iii) the financial liability contains an embedded derivative that would need to be separately recorded.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, with changes in fair value recognised in profit or loss in the period in which they arise, except for the gains and losses arising from the Target Company’s own credit risk which are presented in other comprehensive income with no subsequent reclassification to the statement of profit or loss. The net fair value gain or loss recognised in the statement of profit or loss does not include any interest charged on these financial liabilities.

(ii) Financial liabilities at amortised cost

Financial liabilities at amortised cost including trade and other payables, amount due to former directors, other borrowings and amount due to a major shareholder, using the effective interest method. The related interest expense is recognised in profit or loss.

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

Effective interest method

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

— II-15 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Equity instruments

Equity instruments issued by the Target Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

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

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

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

Accounting policies applied until 31 March 2018

Financial assets and financial liabilities are recognised in the statement of financial position when a Target Company entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Target Company’s financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

— II-16 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amount due from related parties and cash and bank balances ) are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

Interest income is recognised on an effective interest basis.

Impairment loss on financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit and loss. When a trade and other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

— II-17 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Financial liabilities and equity instruments

Debt and equity instruments issued by the entity is classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Target Company after deducting all of its liabilities. Equity instrument issued by the Target Company are recognised at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities including trade and other payables are subsequently measured at amortised cost, using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Derecognition

The Target Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Target Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Target Company continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Target Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

On derecognition of a financial asset other than in its entirety, the Target Company allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

— II-18 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

The Target Company derecognises financial liabilities when, and only when, the Target Company’s obligations are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

(j) Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Target Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Target Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Target Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

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

(k) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Target Company has a legal or constructive obligation arising as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

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

— II-19 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

(l) Revenue recognition

Accounting policies applied from 1 April 2018

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Target Company expects to be entitled in exchange for those goods or services, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

Depending on the terms of the contract and the laws that apply to the contract, control of the goods or service may be transferred over time or at a point in time. Control of the goods or service is transferred over time if the Target Company’s performance:

provides all of the benefits received and consumed simultaneously by the customer;
creates or enhances an asset that the customer controls as the Target Company performs; or
does not create an asset with an alternative use to the Target Company and the Target Company has an enforceable right to payment for performance completed to date.

If control of the goods or services transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the goods or service.

When the contract contains a financing component which provides the customer a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amounts receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Target Company and the customer at contract inception. Where the contract contains a financing component which provides a significant financing benefit to the Target Company, revenue recognised under that contract includes the interest expense accreted on the contract liability under the effective interest method. For contracts where the period between the payment and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in HKFRS 15.

(i) Brokerage and commission income

Brokerage and commission income is recognised on a trade date basis when the relevant transactions are executed.

(ii) Placing, underwriting and sub-underwriting income

Placing, underwriting and sub-underwriting commissions are recognised on an accrual basis in accordance with the terms of the underlying agreements.

(iii) Handling fee income

Handling service fees are recognised when the agreed services have been provided.

(iv) Interest income

Interest income is recognised as it accrued using the effective interest method.

— II-20 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Contract assets and liabilities

A contract asset represents the Target Company’s right to consideration in exchange for services that the Target Company has transferred to a customer that is not yet unconditional. In contrast, a receivable represents the Target Company’s unconditional right to consideration, i.e. only the passage of time is required before payment of that consideration is due.

A contract liability represents the Target Company’s obligation to transfer services to a customer for which the Target Company has received consideration (or an amount of consideration is due) from the customer.

Accounting policies applied until 31 March 2018

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Target Company and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:

(i) Brokerage and commission income

Brokerage and commission income is recognised as it accrued in the provision of brokerage services in securities trading during the year.

(ii) Placing, underwriting and sub-underwriting income

Placing, underwriting and sub-underwriting commissions are recognised on an accrual basis in accordance with the terms of the underlying agreements.

(iii) Handling fee income

Handling service fees are recognised when the agreed services have been provided.

(iv) Interest income

Interest income is recognised as it accrued using the effective interest method.

Any other income not mentioned above is recognised whenever it is received and receivable.

(m) Related parties

For the purpose of the Historical Financial Information, related party includes a person and entity as defined below:

(a) A person, or a close member of that person’s family, is related to the Target Company if that person:
(i) has control or joint control over the Target Company;
(ii) has significant influence over the Target Company; or
(iii) is a member of the key management personnel of the Target Company or the Target Company’s parent.

— II-21 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

(b) An entity is related to the Target Company if any of the following conditions applies:
(i) the entity and the Target Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a Target Company of which the other entity is a member).
(iii) both entities are joint ventures of the same third entity.
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company.
(vi) the entity is controlled or jointly controlled by a person identified in (a).
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
(viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.

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

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

In the application of the Target Company’s accounting policies, the directors of the Target Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Useful lives and residual values of plant and equipment

The Target Company’s management determines the estimated useful lives, residual value and related depreciation charges for its plant and equipment. This estimate is based on the historical experience of the actual useful lives of plant and equipment of similar nature and functions. Management will increase the depreciation charge where useful lives are less than previously estimated live and it will write-off or write down technically obsolete or non-strategic assets that have been abandoned or sold. Actual economic lives may differ from estimated useful lives and actual residual values may differ from estimated residual values. Periodic review could result in a change in depreciable lives and residual values and therefore depreciation expense in future periods.

— II-22 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

(b) Impairment of accounts receivables

The Target Company’s management determines impairment of accounts receivables on a regular basis. This estimate is based on the credit history of its customers and current market conditions. If the financial condition of its accounts receivables was to deteriorate so that the actual impairment loss might be higher than expected, the Target Company would be required to revise the basis of making the allowance and its future results would be affected. Management reassesses the impairment of trade receivables at the end of each reporting period. No impairment of accounts receivables was recognised during the Relevant Periods.

(c) Income taxes and deferred taxation

Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Target Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Deferred tax assets relating to certain temporary differences and tax losses are recognised when the management of the Target Company determines it is likely that future taxable profits will be available against the temporary differences or tax losses can be utilised. The outcome of their actual utilisation may be different. When the expectations are different from the original estimates, such differences will impact the recognition of deferred tax assets and income tax charges in the period in which such estimates are changed.

4 REVENUE

An analysis of the Target Company’s revenue is as follows:

Revenue from contracts with customers within the scope of HKFRS 15 Commission and brokerage income from securities dealing on: — The Stock Exchange of Hong Kong Limited — Commission and brokerage income other than from securities dealing — Clearing, settlement and handling fee Revenue from other sources Fair value gain on financial assets Interest income from — Clients — Bank	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 1,313 4,884 787 1,978 69,338 10,242 344 568 34 3,635 74,790 11,063 — — 100 134 602 753 1 5 3 3,770 75,397 11,919	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 1,313 4,884 787 1,978 69,338 10,242 344 568 34 3,635 74,790 11,063 — — 100 134 602 753 1 5 3 3,770 75,397 11,919
		11,063 100 753 3
		11,919

— II-23 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

The Target Company has applied the practical expedient in paragraph 121 of HKFRS 15 and does not disclose information about remaining performance obligation that have original expected duration of one year or less.

Segment information

The Target Company derives all its revenue from the provision of brokerage services in Hong Kong. The chief operating decision maker, being the management of the Target Company, monitors the revenue, results, assets and liabilities of the business as a whole based on the management accounts prepared in accordance with HKFRSs, and considers the assets and liabilities of the business, which included all assets and liabilities as stated in the statements of financial position, and considers the revenue and results of the business which represented revenue and profit for the year/period as stated in the statements of profit or loss and other comprehensive income.

Accordingly, the management of the Target Company has determined that, on the basis of the information used by the chief operating decision maker for the purposes of resources allocation and performance evaluation, the Target Company operates in one operating segment under the requirement of HKFRS 8 Operating Segment .

Furthermore, as all revenue is derived from Hong Kong based on the location of operation of the Target Company, no geographical information is presented.

Revenue from major customers:

Revenue from customers contributing over 10% of total revenue of the Target Company is as follows:

		Year ended 31 March
	2017	2018	2019
	HK$’000	HK$’000	HK$’000
Customer a	N/a 1	N/a 1	6,219
Customer b	N/a 1	13,800	N/a 1
Customer c	N/a 1	17,250	N/a 1
Customer d	1,830	N/a 1	N/a 1

1 The revenue contributed from the customer was not over 10% of the total revenue of the Target Company during the Relevant Periods.

— II-24 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

5 (LOSS)/PROFIT BEFORE TAXATION

(Loss)/Profit before taxation has been arrived at after charging the following:

Auditors’ remuneration Depreciation on plant and equipment Exchange losses, net Minimum lease payments under operating lease in respect of premises Staff costs (including directors’ emoluments, Note 6) — Directors’ emoluments — Salaries, wages and other benefits — Contributions to mandatory provident fund Legal and professional fees — Legal fees — Other professional fees	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 60 75 85 418 770 1,022 — — 1 1,411 1,684 2,114 692 4,028 2,489 1,650 3,557 3,948 81 109 167 2,423 7,694 6,604 156 635 66 244 54 31 400 689 97	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 60 75 85 418 770 1,022 — — 1 1,411 1,684 2,114 692 4,028 2,489 1,650 3,557 3,948 81 109 167 2,423 7,694 6,604 156 635 66 244 54 31 400 689 97
		6,604

		66 31
		97

6 DIRECTORS’ REMUNERATION AND FIVE HIGHEST PAID EMPLOYEES

(a) The emoluments paid to each of the directors of the Target Company are as follows:

For the year ended 31 March 2017

Executive directors Cheung I Fai Lam Fat Charles (Appointed on 12 January 2017) Siu Kai Chi Jimmy (Appointed on 12 April 2016 and resigned on 12 January 2017) Cheung Kam Fai (Resigned on 15 April 2016)	Retirement Salaries and benefit other scheme Fees benefits contributions HK$’000 HK$’000 HK$’000 — 40 — — 230 12 — 380 30 — — — — 650 42	Total HK$’000 40 242 410 —
		692

— II-25 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

For the year ended 31 March 2018

Executive directors Cheung I Fai Lam Fat Charles For the year ended 31 March 2019 Executive directors Cheung I Fai Lam Fat Charles	Retirement Salaries and benefit other scheme Fees benefits contributions HK$’000 HK$’000 HK$’000 — 1,770 15 — 2,218 25 — 3,988 40 Retirement Salaries and benefit other scheme Fees benefits contributions HK$’000 HK$’000 HK$’000 — 1,707 18 — 746 18 — 2,453 36	Total HK$’000 1,785 2,243
		4,028

		Total HK$’000 1,725 764
		2,489

During the Relevant Periods, no remuneration was paid by the Target Company to the directors as an inducement to join or upon joining the Target Company, or as a compensation for loss of office. There was no arrangement under which the directors waived or agreed to waive any remuneration during the Relevant Periods.

(b) Five highest paid employees

The five highest paid employees during the years ended 31 March 2017, 2018 and 2019 included two, two and two directors, respectively, details of whose remuneration are set out in note 6(a) above. Details of the remuneration of the remaining three, three and three non-directors, highest paid employees during the years ended 31 March 2017, 2018 and 2019 are as follows:

Salaries, allowances and benefits in kind Performance-related bonuses Pension scheme contributions	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 1,383 2,286 3,681 105 3,270 345 59 79 90 1,547 5,635 4,116	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 1,383 2,286 3,681 105 3,270 345 59 79 90 1,547 5,635 4,116
		4,116

— II-26 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

The number of the non-directors, highest paid employees whose remuneration fell within the following band is as follows:

		Number of employees
		Year ended 31 March
	2017	2018	2019
Nil to HK$1,000,000	3	3	3

During the Relevant Periods, no emoluments were paid by the Target Company to any of the non-directors, highest paid employees as an inducement to join or upon joining the Target or as compensation for loss of office.

7 INCOME TAX (CREDIT)/EXPENSE

Taxation in the statement of profit or loss and other comprehensive income represents:

Current year provision — Hong Kong Profits Tax Deferred tax (credit)/expense	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 — 9,344 — (313) 629 (57) (313) 9,973 (57)	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 — 9,344 — (313) 629 (57) (313) 9,973 (57)
		(57)

For the years ended 31 March 2017 and 2019, Hong Kong Profits Tax has not been provided for in the financial statements as there was no estimated assessable profit derived from Hong Kong during the year.

For the year ended 31 March 2018, Hong Kong Profits Tax is calculated as 16.5% of the estimated assessable profits.

A reconciliation of the income tax expense applicable to (loss)/profit before taxation using the statutory rate to the income tax expense at the effective tax rate is as follows:

(Loss)/Profit before taxation Tax at the rate of 16.5% Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Tax effect of tax losses not recognised Tax effect of non-taxable income One-off tax deduction Income tax (credit)/expense	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 (1,966) 61,212 (3,142) (324) 10,100 (518) (24) (100) (141) 35 3 224 — — 378 — — — — (30) — (313) 9,973 (57)	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 (1,966) 61,212 (3,142) (324) 10,100 (518) (24) (100) (141) 35 3 224 — — 378 — — — — (30) — (313) 9,973 (57)

		(518) (141) 224 378 — —
		(57)

— II-27 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

8 PLANT AND EQUIPMENT

Cost At 1 April 2016 Additions Disposals Written-off At 31 March 2017 Additions Disposals At 31 March 2018 Additions Disposals Written off At 31 March 2019 Accumulated depreciation At 1 April 2016 Charge for the year Eliminated on disposals Eliminated on written-off At 31 March 2017 Charge for the year Eliminated on disposals At 31 March 2018 Charge for the year Eliminated on disposals Eliminated on written off At 31 March 2019 Carrying amount At 31 March 2017 At 31 March 2018 At 31 March 2019	Motor vehicle HK$’000 — — — — — 1,334 — 1,334 — — — 1,334 — — — — — 130 — 130 268 — — 398 — 1,204 936	Leasehold improvement HK$’000 204 415 — (205) 414 — — 414 — — — 414 68 120 — (110) 78 138 — 216 138 — — 354 336 198 60	Furniture, fixture and office equipment HK$’000 2 865 (2) — 865 397 — 1,262 156 — — 1,418 — 159 (1) — 158 345 — 503 458 — — 961 707 759 457	Computer equipment and software HK$’000 315 295 (144) — 466 45 (28) 483 99 (36) (46) 500 32 139 (43) — 128 157 (13) 272 158 (18) (33) 379 338 211 121	Total HK$’000 521 1,575 (146) (205)
					1,745 1,776 (28)
					3,493 255 (36) (46)
					3,666
					100 418 (44) (110)
					364 770 (13)
					1,121 1,022 (18) (33)
					2,092
					1,381

					2,372

					1,574

At 31 March 2017, 2018 and 2019, the carrying amount of motor vehicle held under finance lease of the Target Company was approximately HK$Nil, HK$1,204,000 and HK$936,000 respectively.

— II-28 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

9 INTANGIBLE ASSETS

Licence of trading right for Exchange Participant Vehicle registration marks	2017 HK$’000 500 — 500	At 31 March 2018 HK$’000 500 113 613	2019 HK$’000 500 113
			613

No impairment loss was made in the license of trading right for exchange participant and vehicle registration marks as the directors consider that the value in use was higher than the carrying amount.

10 OTHER ASSETS

Deposit with the Stock Exchange of Hong Kong Limited — Compensation fund — Fidelity fund — Stamp duty — Guarantee fund — Admission fee	2017 HK$’000 50 50 5 50 50 205	At 31 March 2018 HK$’000 50 50 30 50 50 230	2019 HK$’000 50 50 30 50 50
			230

11 DEFERRED TAX ASSETS/(LIABILITIES)

The movement in deferred tax assets/(liabilities) during the year is as follows:

At 1 April Credited/(Debited) to profit and loss At 31 March	2017 HK$’000 150 313 463	At 31 March 2018 HK$’000 463 (629) (166)	2019 HK$’000 (166) 57
			(109)

— II-29 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

The component of taxable/(deductible) temporary differences at 31 March 2017, 2018 and 2019 are as follows:

Unutilised tax losses Accelerated depreciation allowances Net taxable temporary differences ACCOUNTS RECEIVABLES Accounts receivables — Clearing houses — Cash clients — Margin clients	2017 HK$’000 591 (128) 463 2017 HK$’000 218 4,948 — 5,166	At 31 March 2018 HK$’000 — (166) (166) At 31 March 2018 HK$’000 625 21,922 244 22,791	2019 HK$’000 — (109)
			(109)

			2019 HK$’000 3,594 15,209 371
			19,174

12 ACCOUNTS RECEIVABLES

The aged analysis of accounts receivables from cash clients based on the transaction date and net of impairment losses, is as follows:

0 - 90 days More than 90 days	2017 HK$’000 — 4,948 4,948	At 31 March 2018 HK$’000 20,116 1,806 21,922	2019 HK$’000 1,087 14,122
			15,209

Aging analysis of accounts receivables from cash clients which were past due but not impaired are as follows:

Neither past due nor impaired Less than 1 month past due	2017 HK$’000 — 4,948 4,948	At 31 March 2018 HK$’000 21,922 — 21,922	2019 HK$’000 15,209 —
			15,209

— II-30 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

The allowance for impaired accounts receivables is based on evaluation of collectability and aging analysis of accounts and on management’s judgment, including the credit worthiness and the past collection history of each customer.

Accounts receivables from cash accounts relate to a wide range of customers for whom there was no recent history of default. These receivables are secured by their portfolios of securities. At 31 March 2017, 2018 and 2019, the total market value of their portfolios of securities were approximately HK$13,029,000, HK$58,480,000 and HK$21,004,000 respectively. Based on past experience and current assessment, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are considered fully recoverable.

Margin clients are required to pledge securities collateral to the Target Company in order to obtain credit facilities for securities trading. The amount of credit facilities granted to them is determined by the discounted value of securities accepted by the Target Company. At 31 March 2017, 2018 and 2019, the total market value of securities pledged as collateral in respect of the loans to margin clients were HK$Nil, HK$335,000 and HK$2,219,000 respectively. Margin loans that were past due but not impaired relate to a number of independent customers that have a good track record with the Target Company. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

At 31 March 2017, 2018 and 2019, included in the accounts receivables in respect of transactions in securities undertaken is amount due from a director amounting to HK$388,000, HK$1,635,000 and HK$Nil respectively. The amount is unsecured, interest-bearing of 1% and have payment terms in accordance with the normal course of business.

The settlement term of accounts receivables attributable to the dealing in securities is normally two days after the trade date (T+2). For the cash accounts representing rolling balance cash client receivables, they are repayable on demand after T+2. accounts receivables carry interest varied between 1% and Hong Kong Prime Rate +8%.

13 DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

Rental deposits Prepayments and other receivables	2017 HK$’000 412 206 618	At 31 March 2018 HK$’000 603 2,598 3,201	2019 HK$’000 532 1,410
			1,942

14 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

		At 31 March
	2017	2018	2019
	HK$’000	HK$’000	HK$’000
Financial assets at fair value through profit or loss
comprise:
Listed equity securities in Hong Kong	—	—	600

The listed equity securities is classified within level 1 of the fair value hierarchy.

— II-31 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

15 AMOUNT DUE FROM A RELATED PARTY

Name Relationship Cheung Chun Yee Father of a shareholder The amount is unsecured, interest-free and repayable	2017 HK$’000 21 on demand.	At 31 March 2018 HK$’000 —	2019 HK$’000 —

16 CASH AND BANK BALANCES

(a) General account and cash Cash at bank — general account (b) Cash held on behalf of clients Cash and cash equivalents in the cash flow statement	2017 HK$’000 4,995 123,154 128,149 128,149	At 31 March 2018 HK$’000 52,172 107,385 159,557 159,557	2019 HK$’000 39,024 34,697
			73,721

			73,721

Cash held on behalf of clients

The Target Company maintains segregated deposit accounts with banks and authorised institutions to hold clients’ monies arising from its normal course of business. The Target Company has classified their clients’ monies as cash held on behalf of clients under the current assets section of the statement of financial position and recognised the corresponding trade payable to respective clients on the grounds that they are liable for any loss or misappropriation of their clients’ monies. Cash held on behalf of clients is restricted and governed by the Securities and Futures (Client Money) Rules under the Securities and Future Ordinance.

17 ACCOUNTS PAYABLES

Clients — Margin accounts — Cash accounts	2017 HK$’000 34 121,743 121,777	At 31 March 2018 HK$’000 2,051 110,337 112,388	2019 HK$’000 181 39,137
			39,318

— II-32 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

Accounts payables represents the amount received from and repayable to clients arising from the ordinary course of the Target Company’s securities brokerage business. For more details, please refer to Note 16 “cash held on behalf of clients”.

No aging analysis is disclosed as, in the opinion of directors, such analysis is not meaningful in view of the nature of the transactions.

18 OTHER PAYABLES AND ACCRUALS

Other payables Accruals	2017 HK$’000 — 140 140	At 31 March 2018 HK$’000 164 119 283	2019 HK$’000 — 115
			115

19 OBLIGATIONS UNDER FINANCE LEASES

The Target Company had one motor vehicle held under a finance lease in 2018 and 2019. The lease term was 2 year. Interest rate underlying was fixed at contract date at 1.88% per annum.

At 31 March 2018 and 2019, the Target Company had obligations under finance leases repayable as follows:

	At 31 March	2018	At 31 March	2019
	Present value	Total	Present value	Total
	of the minimum	minimum	of the minimum	minimum
	lease	lease	lease	lease
	payments	payments	payments	payments
	HK$’000	HK$’000	HK$’000	HK$’000
Within 1 year	530	554	228	231
After 1 year but within 2 years	228	231	—	—
	758	785	228	231

_Less:_total future interest
expenses		(27)		(3)
Present value of lease obligations		758		228

At 31 March 2017, the Target Company did not have any obligations under finance leases.

— II-33 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

20 SHARE CAPITAL

		At 31 March
	2017	2018	2019
	HK$’000	HK$’000	HK$’000
Issued and fully paid:
17,000,000 ordinary shares	17,000	17,000	17,000

21 DIVIDENDS AND EARNING PER SHARE

		Year ended 31 March
	2017	2018	2019
	HK$’000	HK$’000	HK$’000
Dividends	—	—	14,000

The dividends represent the interim dividends of HK$0.8235 per share, totaling approximately HK$14,000,000 in respect of the year ended 31 March 2019 to its shareholders.

Subsequent to the end of the reporting period, an interim dividend in respect of the year ending 31 March 2020 of HK$0.59 per ordinary share of an aggregate amount of approximately HK$10,000,000 has been proposed and approved by the directors of the Target Company.

Earnings per share information is not presented as its inclusion, for the purpose of this report, is not considered meaningful.

22 NOTES TO THE STATEMENT OF CASH FLOWS

Changes in liabilities arising from financing activities

The following table shows the Target Company’s changes in liabilities arising from financing activities during the year:

At 1 April 2016 and 31 March 2017 Changes in cash flows At 31 March 2018 Changes in cash flows At 31 March 2019	Obligation Total liabilities under finance from financing lease activities HK$’000 HK$’000 — — 758 758 758 758 (530) (530) 228 228	Obligation Total liabilities under finance from financing lease activities HK$’000 HK$’000 — — 758 758 758 758 (530) (530) 228 228
		758 (530)
		228

23 CONTINGENT LIABILITIES

The Target Company had no significant contingent liabilities at 31 March 2017, 2018 and 2019.

— II-34 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

24 OPERATING LEASE COMMITMENT

The Target Company as lessee

At the end of the reporting period, the Target Company had commitment for future minimum lease payments under non-cancellable operating lease which fall due as follows:

Not later than one year Later than one year	2017 HK$’000 1,439 1,919 3,358	At 31 March 2018 HK$’000 2,039 922 2,961	2019 HK$’000 960 —
			960

The Target Company’s operating lease relates to the office premise and staff quarters with lease terms of thirty six and twenty four months respectively.

25 RELATED PARTY TRANSACTIONS

(a) Compensation of key management personnel

Remuneration for key management personnel of the Target Company, including amounts paid to the Target Company’s directors as disclosed in Note 6 is as follows:

Other emoluments Contributions to mandatory provident fund	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 650 3,988 2,453 42 40 36 692 4,028 2,489	Year ended 31 March 2017 2018 2019 HK$’000 HK$’000 HK$’000 650 3,988 2,453 42 40 36 692 4,028 2,489
		2,489

(b) Balances with related parties:

The outstanding balances with these related parties are disclosed in Note 15.

26 FOREIGN CURRENCY POSITIONS

At 31 March 2017, 2018 and 2019, the Target Company has no material foreign currency positions included in the statement of financial position and had no material commitments to buy or sell foreign currencies.

— II-35 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

27 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and fair value estimation. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

(a) Credit risk

The Target Company’s principal financial assets are accounts receivables, other receivables, financial assets at fair value through profit or loss, amounts due from related parties and bank balances, which represent the Target Company’s maximum exposure to credit risk in relation to financial assets.

The Target Company is exposed to credit risk in the event of the clients failure to perform their obligation. In order to minimise the credit risk, the Target Company has procedures to conduct due diligence of client to understand their financial status and competence in trading the securities and the directors are responsible for approving credit limited of each client. The settlement department is responsible for making calls to clients of the Target Company who do not meet their dealing obligations. In addition, the Target Company reviews the recoverable amount for each individual account receivables at statement of financial position date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regards, the directors of the Target Company consider that the Target Company’s credit risk is effectively controlled.

In respect of amounts receivables from clearing houses, credit risks are considered low as the Target Company normally enters into transactions with clearing houses which are registered with regulatory bodies and enjoy sound reputation in the industry.

The credit risk on bank balances are limited because the counterparties are banks with high credit rating.

(b) Liquidity risk

The Target Company is subject to various statutory liquidity requirements as prescribed by the authorities. The Target Company has put in place monitoring system to ensure that it maintains adequate liquid capital to fund its business commitments and to comply with the Financial Resources Rules.

The Target Company finances its working capital requirements principally by funds generated from operations and it generally operates with a working capital surplus.

The following tables detail the Target Company’s remaining contractual maturity for its financial liabilities. The table have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Target Company can be required to pay.

Accounts payables Other payables and accruals		At 31 March 2017	At 31 March 2017
	Within 1 year or on demand HK$’000 121,777 140 121,917	Over 1 year HK$’000 — — —	Total contractual undiscounted cash flow HK$’000 121,777 140 121,917	Total carrying amount HK$’000 121,777 140
				121,917

— II-36 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

	At 31 March 2018	At 31 March 2018
Within 1 year or on demand HK$’000 112,388 283 530 113,201	Total contractual undiscounted Over 1 year cash flow HK$’000 HK$’000 — 112,388 — 283 228 758 228 113,429 At 31 March 2019		Total carrying amount HK$’000 112,388 283 758
			113,429


Within 1 year or on demand HK$’000 39,318 115 228 39,661	Over 1 year HK$’000 — — — —	Total contractual undiscounted cash flow HK$’000 39,318 115 228 39,661	Total carrying amount HK$’000 39,318 115 228
			39,661

(c) Interest rate risk

The Target Company’s interest bearing assets are mainly cash at banks. Cash at bank earns interest income at floating rates stipulated by the banks from time to time. They earn interest income at market time deposit rates. Fluctuation of market rates does not have significant impact to the operating cash flows.

As the Target Company’s exposure to interest rate risk is not significant, sensitivity analysis is not prepared in this regard.

(d) Currency risk

The Target Company has no material currency risk. It is mainly denominated in Hong Kong dollars, and the exposure to other currency is minimal. No sensitivity analysis is prepared as the fluctuation and impact is considered immaterial.

(e) Equity price risk

The Target Company is exposed to equity price changes arising from listed equity investments classified as financial assets at fair value through profit or loss.

The Target Company’s listed investments are listed on the Stock Exchange of Hong Kong.

— II-37 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

(f) Fair Value and Fair Value Hierarchy of Financial Instruments

Fair value estimation

The fair values of financial assets and financial liabilities are not materially different from their carrying amounts because of the immediate and short term maturity of these financial instruments.

Fair value hierarchy

Except the listed equity securities classified within Level 1 of the fair value hierarchy as stated in Note 14, the Target Company did not have any financial assets or financial liabilities measured at fair value as at 31 March 2017, 2018 and 2019.

During the Relevant Periods, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities.

28 CAPITAL MANAGEMENT

Capital comprises of share capital and reserves stated on the statement of financial position. The Target Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximize shareholder value.

The Target Company manages capital by regularly monitoring its current and expected liquidity requirements rather than using debt/equity ratio analyses.

The Target Company is regulated by the Securities and Future Commission (“ SFC ”) and is required to comply with certain minimum capital requirements according to the Securities and Futures Ordinance. Management monitors, on a daily basis, the company liquid capital to ensure they meet the minimum liquid capital requirements in accordance with the Securities and Futures (Financial Resources) Rules (“ FRR ”). Under the FRR, the Target Company must maintain its liquid capital in excess of HK$3,000,000 or 5% of their total adjusted liabilities whichever is higher. The required information is filed with SFC on a monthly basis. The Target Company has no non-compliance of the capital requirements imposed by FRR during the Relevant Period.

The Target Company monitors capital using a solvency ratio, which is the Target Company’s total liability over its total assets. The ratios at the statement of financial position date were as follows:

Total liabilities Total assets Solvency ratio	2017 HK$’000 121,917 136,503 0.893	At 31 March 2018 HK$’000 122,939 188,764 0.651	2019 HK$’000 49,114 97,854
			0.502

— II-38 —

ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

APPENDIX II

29 FINANCIAL INSTRUMENTS

The carrying amounts of the Target Company’s financial assets and financial liabilities as recognised at 31 March 2017, 2018 and 2019 may be categorised as follows:

Financial assets Financial assets at amortised costs Loans and receivables (including cash and cash equivalents) Financial assets at fair value through profit or loss Financial liabilities Financial liabilities measured at amortised cost	2017 HK$’000 — 133,542 — 133,542 121,917	At 31 March 2018 HK$’000 — 182,348 — 182,348 113,310	2019 HK$’000 92,896 — 600
			93,496

			39,546

30 EVENTS AFTER THE RELEVANT PERIODS

There is no significant events took place subsequent to the Relevant Periods.

31 SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Company have been prepared in respect of any period subsequent to 31 March 2019.

— II-39 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX III

The following management discussion and analysis is based on the financial information of the Target Company for the years ended 31 March 2017, 2018 and 2019 included in the accountants’ report of the Target Company as set out in Appendix II to this circular.

BUSINESS REVIEW

The Target Company is incorporated in Hong Kong with limited liability on 11 June 2015. The Target Company is principally engaged in Type 1 regulated activity (dealing in securities) and Type 4 regulated activity (advising on securities) under the SFO.

FINANCIAL REVIEW

Revenue

For the three years ended 31 March 2017, 2018 and 2019, the Target Company recorded revenue of approximately HK$3.8 million, HK$75.4 million and HK$11.9 million respectively. The substantial increase in the revenue for the year ended 31 March 2018 was mainly due to significant increases in commission and brokerage income other than from securities dealing of approximately HK$67.4 million, subsequently it had decreased by approximately HK$59.1 million during the year ended 31 March 2019 as a result of economic downturn and the difficulty of raising fund.

Operating Expense

For the three years ended 31 March 2017, 2018 and 2019, the Target Company incurred operating expense of approximately HK$5.7 million, HK$14.2 million and HK$15.1 million respectively. The operating expense for the years ended 31 March 2018 increased by approximately HK$8.5 million, it was mainly attributable to increases in staff cost and advertising fee. The operating expense for the years ended 31 March 2019 further increased by approximately HK$0.9 million, it was mainly attributable to increase in donation and advertising fee to enhance the image of the company and draw public attention during the economic downturn, and partially offset by decrease in staff cost.

Profit/Loss for the year

For the two years ended 31 March 2017 and 2019, the Target Company respectively recorded a net loss of approximately HK$1.7 million and HK$3.1 million while for the year ended 31 March 2018 the Target Company recorded a net profit of approximately HK$51.2 million. The substantial increase in the profit for the year ended 31 March 2018 was mainly due to substantial increase in revenue.

— III-1 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX III

LIQUIDITY AND FINANCIAL RESOURCES

a) As at 31 March 2017, 2018 and 2019, the Target Company had net current asset of approximately HK$12.0 million, HK$63.0 million, HK$46.4 million respectively.
b) As at 31 March 2017, 2018 and 2019, the current ratio (defined as total current assets divided by total current liabilities) of the Target Company were approximately 1.10 times, 1.51 times and 1.95 times respectively and the gearing ratio, being the ratio of the total liabilities to total assets, was approximately 0.89 times, 0.65 times, and 0.5 times respectively.
c) The cash and bank balances of the Target Company, as at 31 March 2017, 2018 and 2019 were approximately HK$128.1 million, HK$159.6 million and HK$73.7 million, respectively. For the years ended 31 March 2017 and 2018, the Target Company has generated cash inflow of approximately HK$127.8 million and HK$31.4 million. However, for the year ended 31 March 2019, the Target Company has recorded a net cash outflow of approximately HK$85.8 million, mainly contributed by the decrease in accounts payables.

CAPITAL COMMITMENT

The Target Company had no material capital commitment as at 31 March 2017, 2018 and 2019.

TREASURY POLICY

The Target Company had no formal treasury policy and did not enter into any form of financial arrangement for hedging for the years ended 31 March 2017, 2018 and 2019.

FOREIGN EXCHANGE EXPOSURE

The Target Company’s income and monetary assets and liabilities are denominated in Hong Kong Dollars. The director of the Target Company considered that the foreign exchange exposure of the Target Company is minimal.

— III-2 —

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX III

CONTINGENT LIABILITIES

The Target Company did not have any contingent liabilities as at 31 March 2017, 2018 and 2019.

EMPLOYEES AND REMUNERATION POLICY

Remuneration for employees were maintained at a competitive level and determined with reference to the general market condition and qualifications and experience of the employees concerned. Staff cost for the years ended 31 March 2017, 2018 and 2019 were approximately HK$2.4 million, HK$7.7 million and HK$6.6 million, respectively. As at 31 March 2017, 2018 and 2019, the Target Company had 8, 14 and 14 employees respectively. Remuneration packages comprised salaries and defined contribution pension fund. Apart from pension, discretionary bonus will also be granted to certain employees as awards in accordance with individual performance. The Target Company has no share option scheme.

CHARGES ON COMPANY ASSETS

There was no charge on Target Company’s assets for the years ended 31 March 2017, 2018 and 2019.

SIGNIFICANT INVESTMENT

There was no significant investment held by the Target Company as at 31 March 2017, 2018 and 2019.

FUTURE PLAN FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

The Target Company has no plan for material investments or capital assets as at 31 March 2017, 2018 and 2019.

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES AND AFFILIATED COMPANY

The Target Company had no material acquisitions or disposals of subsidiaries and affiliated companies for the years ended 31 March 2017, 2018 and 2019.

— III-3 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

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

23 September 2019

VBG International Holdings Limited

18/F, Prosperity Tower 39 Queen’s Road Central Hong Kong

Dear Sirs,

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of VBG International Holdings Limited (the “ Company ”) and its subsidiaries (collectively referred to as the “ Group ”) prepared by the directors of the Company (the “ Directors ”) for illustrative purpose only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities at 31 March 2019 and related notes as set out in Appendix IV to the circular in connection with the proposed acquisition of entire issued share capital in Wealth Link Securities Limited (the “ Target Company ”) (the “ Acquisition ”) dated 23 September 2019 (the “ Circular ”). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described in Appendix IV to the Circular.

The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the Acquisition on the Group’s consolidated financial position at 31 March 2019 as if the Acquisition had taken place on 31 March 2019. As part of this process, information about the Group’s unaudited consolidated financial position at 31 March 2019 has been extracted by the Directors from the Group’s interim report for the six months ended 31 March 2019 on which no audit, review or accountant’s report has been published. Information about the financial position of Target Company at 31 March 2019 has been extracted by the Director from Appendix II to the Circular.

— IV-1 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

Directors’ responsibility for the unaudited pro forma financial information

The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on GEM of The Stock Exchange of Hong Kong Limited (the “ GEM 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 ”).

Reporting accountant’s independence and quality control

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

The firm applies Hong Kong Standard on Quality Control 1 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 7.31(7) of the GEM 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 comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph 7.31 of the GEM Listing Rules and with reference to AG 7 issued by the HKICPA.

— IV-2 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

For purpose of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on the unadjusted financial information of the Group 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 events or transactions at 31 March 2019 would have been as presented.

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

the related unaudited pro forma adjustments give appropriate effect to those criteria; and
the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

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

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

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

— IV-3 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules.

Mazars CPA Limited

Certified Public Accountants

Hong Kong

— IV-4 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

B. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. INTRODUCTION

The following is a summary of illustrative unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities at 31 March 2019 in connection with the proposed acquisition of entire issued share capital in Wealth Link Securities Limited (the “ Target Company ”) (the “ Acquisition ”). The unaudited pro forma financial information presented below is prepared to illustrate the financial position of the Group immediately after completion of the Acquisition (the “ Enlarged Group ”) as at 31 March 2019 as if the Acquisition had been completed on 31 March 2019.

The unaudited pro forma financial information is prepared based on the unaudited condensed consolidated statement of financial position of the Group at 31 March 2019 as extracted from the interim report of the Group for the six months ended 31 March 2019 and the audited statement of financial position of Target Company at 31 March 2019 as extracted from Appendix II to the Circular.

The unaudited pro forma financial information is presented after making pro forma adjustments that are directly attributable to the Acquisition and not relating to future events or decisions, factually supportable and clearly identified as to those adjustments which are expected to have/have no continuing effect on the Enlarged Group.

The unaudited pro forma financial information has been prepared by the Directors in accordance with paragraph 7.31(1) of the GEM Listing Rules, for the purposes of illustrating the effect of the Acquisition is based on a number of assumptions, estimates and uncertainties. As a result of these assumptions, estimates and uncertainties, it may not give a true picture of the financial position of the Group had the Acquisition been completed as of 31 March 2019, where applicable, or any future date.

The unaudited pro forma financial information should be read in conjunction with the historical financial information of the Group as set out in the interim report of the Group for the six months ended 31 March 2019 and other financial information included elsewhere in the Circular.

— IV-5 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

2. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

The unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 31 March 2019 has been prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 31 March 2019, which have been extracted from the interim report of the Group for the period then ended and the audited statement of financial position of the Target Company as at 31 March 2019, which have been extracted from Appendix II, after making pro forma adjustments relating to the Acquisition that are directly attributable to the transaction and factually supportable.

The Group as at 31 March 2019 HK$’000 (Note 1) Non-current assets Plant and equipment 2,982 Intangible assets — Goodwill 23,966 Other assets — 26,948 Current assets Financial assets designated at fair value through other comprehensive income 5,648 Financial assets at fair value through profit or loss 315 Accounts receivables 15,498 Deposits, prepayment and other receivables 11,066 Bank balances and cash 57,742 90,269	Target Company as at 31 March 2019 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) 1,574 613 — 230 2,417 — 600 19,174 1,942 73,721 (27,000) 95,437	Enlarged Group as at 31 March 2019 HK$’000 4,556 613 23,966 230
		29,365 5,648 915 34,672 13,008 104,463
		158,706

— IV-6 —

UNAUDITED PRO FORMA FINANCIAL

INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

The Group as at 31 March 2019 HK$’000 (Note 1) Current liabilities Accounts payables — Other payables, receipt in advance and accruals 6,015 Obligation under a finance lease — Income tax payables 7,174 13,189 Net current assets 77,080 Total assets less current liabilities 104,028 Non-current liabilities Deferred tax liabilities 381 NET ASSETS 103,647	Target Company as at 31 March 2019 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) 39,318 780 115 228 9,344 49,005 46,432 48,849 109 48,740	Enlarged Group as at 31 March 2019 HK$’000 40,098 6,130 228 16,518
		62,974 95,732
		125,097
		490
		124,607

— IV-7 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The balances are extracted from the unaudited condensed consolidated statement of financial position of the Group as at 31 March 2019 as set out in the Group’s interim report for the six months ended 31 March 2019.
The balances are extracted from the accountants’ report of the Target Company as at 31 March 2019 as set out in Appendix II to the Circular.
The adjustment represents the total consideration of the Acquisition of HK$27,000,000, which will be settled in cash upon completion of the Acquisition and to be recorded in the bank balances of the Company.

Upon the completion of Acquisition, the Group would acquire the entire issued share capital in the Target Company. The Acquisition is accounted for as an acquisition of a subsidiary. For illustrative purpose, gain on bargain purchase is calculated based on the excess on the Group’s interest in the fair value of net identifiable assets and liabilities of the Target Company over the cost of investment, as follow:

Consideration at fair value payable for the Acquisition at 31 March 2019 Fair value of net identifiable assets and liabilities of the Target Company as at 31 March 2019 Gain on bargain purchase	HK$’000 27,000 (48,740)
	(21,740)

For the purpose of preparation of the unaudited pro forma consolidated statement of assets and liabilities, it is assumed that the fair values of the identifiable assets and liabilities of the Target Company approximates to their respective carrying amounts as at 31 March 2019. The fair values of the identifiable assets and liabilities of the Target Company as at the completion date of the Acquisition will be determined by the Directors by reference to a valuation to be carried out by an independent professional qualified valuer of the Company. The fair values of the identifiable assets and liabilities of the Target Company determined on the completion date may

— IV-8 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX IV

be materially different from their respective values used in the preparation of the unaudited pro forma consolidated statement of assets and liabilities. Accordingly, the final amounts of assets or liabilities and gain on bargain purchase or goodwill, if any, to be recognised in the consolidated financial statements of the Enlarged Group upon completion may be materially different from the amounts adopted in the preparation of this unaudited pro forma consolidated statement of assets and liabilities.

The adjustment represents the estimated acquisition-related costs of approximately HK$780,000, including accountancy, legal, valuation and other professional services related to the Acquisition, which would be recognised in profit or loss. The adjustment has no continuing effect on the consolidated assets and liabilities of the Enlarged Group in subsequent periods.
Save as set out above, the unaudited pro forma consolidated statement of assets and liabilities does not take into account any trading results or other transactions of the Group and the Target Company subsequent to 31 March 2019 as included in the unaudited pro forma consolidated statement of assets and liabilities.

— IV-9 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

The following is the text of a letter with the summary of value received from Savills Valuation and Professional Services Limited, prepared for the purpose of incorporation in the circular, in connection with their valuation as of 30 June 2019 of the Target Company.

==> picture [72 x 72] intentionally omitted <==

Savills Valuation and Professional Services Limited 1208, Cityplaza One 1111 King’s Road, Taikoo Shing Hong Kong T : (852) 2801 6100 F : (852) 2530 0756 EA Licence: C-023750 savills.com

The Directors

VBG International Holdings Limited

18/F, Prosperity Tower, 39 Queen’s Road Central, Hong Kong

23 September 2019

Dear Sirs,

VALUATION OF 100% EQUITY INTEREST IN WEALTH LINK SECURITIES LIMITED

In accordance with your instructions, we have undertaken a valuation on behalf of VBG International Holdings Limited (the “ Company ”) to determine the Fair Value (to be defined below) of 100% equity interest (“ Equity Interest ”) in Wealth Link Securities Limited (“ WLSL ”) as at 30 June 2019 (the “ Valuation Date ”) for transaction purpose and the valuation will also be used in connection with a public document of the Company.

BRIEF DESCRIPTION OF WLSL

WLSL is incorporated in Hong Kong with limited liability. WLSL is principally engaged in Type 1 regulated activity (dealing in securities) and Type 4 regulated activity (advising on securities) under the Securities and Futures Ordinance under Cap. 571 of the Laws of Hong Kong (“ SFO ”) since 2 June 2016. The major revenue is commission from underwriting of Initial Public Offering (“ IPO ”) and brokerage income from securities dealing.

— V-1 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

PURPOSE OF VALUATION AND STANDARD OF VALUE

The purpose of this valuation is to express an independent opinion of the Market Value of 100% equity interest in WLSL as at the Valuation Date stated above for the purpose of incorporation into the Company’s circular in connection with the acquisition of the equity interest of WLSL by the Company or its subsidiaries (“ Acquisition ”).

Our valuation is prepared in accordance with the International Valuation Standards (“ IVS ”) published by International Valuation Standards Council in 2017.

According to International Valuation Standards (“ IVS ”), Market Value is defined 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.”.

We acknowledge that this report may be made available to the Company for public circulation purpose. We however assume no responsibility whatsoever to any person other than the Company in respect of, or arising out of, the contents of this report. If others choose to rely in any way on the contents of this report they do so entirely at their own risk.

SOURCES OF INFORMATION

For the purpose of our valuation, we have relied on the following major documents and information in the valuation analysis. Certain documents and information have been provided by WLSL. Other information are extracted from public sources. We have discussed with the management of the Company and WLSL to assess the reasonableness and fairness of the documents and information adopted by us. While we have satisfied ourselves with the reasonableness and fairness of the documents and information adopted, we expressly disclaim any responsibility or liability for the accuracy of the said documents and information. The major documents and information include but not limited to the following:

Background information of the WLSL’s business operations and relevant corporate information;
WLSL’s Budget for the year ended on 31 December 2019 and 2020 (“ Budget ”);
Basis for the projection of underwriting commission adopted in the Budget;

— V-2 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

Audited financial statements and historical financial information of the WLSL;
The economic outlook in general and the specific economic environment and market elements affecting WLSL and market;
The sales and purchase agreement and the supplementary agreement between the Company and WLSL;
Bloomberg Database.

SCOPE OF WORK PERFORMED

Our scope of work for this valuation included:

Analysis of WLSL’s background, financial and other relevant information of WLSL received from WLSL;
Discussions with the management of WLSL and the Company regarding WLSL’s business operations and the Budget and the Acquisition;
Research for information on comparable companies and other material information;
Select the appropriate valuation approach to value WLSL; and
Compile a valuation report setting out our methodology, assumptions and conclusion.

VALUATION METHODOLOGY AND BASIS

In conducting the valuation, we have considered three generally accepted approaches, including income approach, market approach and cost approach. Each of these approaches is appropriate in one or more circumstances, and sometimes, two or more approaches may be used together. Whether to adopt a particular approach will be determined by the specific characteristics of the subject of the valuation and commonly adopted practice.

Cost approach or Asset approach

According to the IVS, the cost approach provides an indication of value using the economic principle that a buyer will pay no more for an asset than the cost to obtain an asset of equal utility, whether by purchase or by construction, unless undue time,

— V-3 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

inconvenience, risk or other factors are involved. The approach provides an indication of value by calculating the current replacement or reproduction cost of an asset and making deductions for physical deterioration and all other relevant forms of obsolescence

In the business valuation context, cost approach is often presented as asset approach, in which Market Value of the business entity is derived from the sum of Market Value of its existing assets less the Market Value of its liabilities.

The asset approach is considered in the valuation of WLSL. As the major assets are cash and cash equivalent, bank balances held for clients and receivables, and major liabilities are clients’ deposit and amounts due to client, However, we understand that there is only a guarantee on the actual cash at completion of the Acquisition but the net assets value of WLSL is not guaranteed. We also understand that the current statement of financial position does not capture any potential intangible assets that cannot be recognised under the Hong Kong Financial Reporting Standards which may contribute to the value of WLSL. As such, we have not adopted the asset approach.

Income approach

According to the IVS, the income approach provides an indication of value by converting future cash flow to a single current value. Under the income approach, the value of an asset is determined by reference to the value of income, cash flow or cost savings generated by the asset.

In the business valuation context, under income approach, value of the business entity is derived primarily from the present value (“ PV ”) of its future cash flow, typically through the use of discounted cash flow (“ DCF ”) method.

Although there is close relationship between cash flow and value of a company, no longer term cash flow forecast of WLSL beyond 2020 is available to us for our analysis due to the inherent unpredictability on longer term IPO pipeline which is a crucial assumption given the importance of underwriting commission to WLSL, therefore we have not adopted the income approach as the primary approach to estimate the Market Value of WLSL.

Market approach

According to the IVS, the market approach provides an indication of value by comparing the asset with identical or comparable (that is similar) assets for which price information is available.

— V-4 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

In the business valuation context, the market approach valuation shall analyse recent transaction(s) in the equity interest of the valuation subject and/or comparable companies and benchmark the valuation subject with the selected comparable(s).

The market approach is adopted in this valuation as there are sufficient number of Hong Kong based listed securities companies with operation similar to WLSL. We have conducted search and analysis of comparable companies (“ CoCos ”) which will be detailed in the next section.

VALUATION METHODOLOGY AND BASIS

CoCos analysis

In our search of CoCos, we have conducted a search on Bloomberg terminal, and discussed with management of the Company on the selection criteria given their experience and understanding in the securities industry.

Ideally, selected CoCos should be as close to WLSL as possible. However, if we limited to select securities companies that hold only Type 1 and Type 4 licenses under SFO, we could only identify two CoCos, namely Koala Financial Group Limited (“ Koala ”, ticker 8226. HK) and GT Group Holdings Ltd (ticker 263.HK). The limited samples are considered insufficient for valuation analysis purpose.

We have therefore widened our search to include securities companies with other types of licenses under SFO in Hong Kong in our CoCos selection. Although different types of licenses enable the companies to engage in different activities, they are often viewed as licensed securities companies as a whole from a valuation perspective, as disclosed by the Company in their identification of Price-to-Earning ratio (“ P/E ”) multiple at 13.7x in the basis of determination of the guaranteed net profit. Given the relatively small size of WLSL, we have limited our selection of CoCos to companies with market capitalisation below HKD300 million as at the Valuation Date. This is determined with reference to the fact that the proposed consideration in the Acquisition is HKD27 million, and a company with market capitalisation of HKD300 million is already ten times of the size of the Target based on the consideration announced. We further note that size of a securities company may also affect level of valuation as a bigger company is usually viewed as having more resource in attracting a larger investor base. Corporate clients may also consider the size of a securities company in selecting IPO underwriters as larger companies are often perceived to have stronger underwriting capability. 9 companies were identified based on such criteria as follows:

— V-5 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

			Market cap
		Type of	as of 28 June
Company	Ticker	license held	2019
			(HKD million)
GT Group Holdings Ltd	263 HK	1, 4	50
Koala Financial Group Ltd	8226 HK	1, 4	89
Sino Prosper Group Holdings Ltd.	766 HK	1, 4, 9	113
Orient Securities International Holdings	8001 HK	1, 4, 9	134
Limited
Astrum Financial Holdings Ltd	8333 HK	1, 2, 6, 9	162
PF Group Holdings Ltd	8221 HK	1, 9	196
VBG International Holdings Ltd	8365 HK	1, 6	251
Cash Financial Services Group Limited	510 HK	1, 2, 4, 6, 9	253
Victory Securities (Holdings)	8540 HK	1, 2, 4, 9	256
Company Ltd

Source: SFC, Bloomberg

P/E is not adopted as WLSL was loss making in its most recent audited figures for the fiscal year ended 31 March 2019 (i.e. FY2019). Price-to-Book multiple (“ P/B ”) is not adopted as value of a company arises from its ability to generate cash flow and profits as opposed to the level of net assets on hand. Thus, book value and net assets value are not a good indicator of a company’s ability to generate earnings. P/B is also not applicable in the context of the Acquisition as discussed before.

Based on the above, we have chosen to analyse Price-to-Sales multiple (“ P/S ”) in valuing WLSL. Although P/S multiple cannot reflect the difference in profitability among CoCos, it is typically considered when other earnings-based, asset-based or non-financial multiple are not applicable in market approach. Among the nine companies, only eight companies reported positive revenue in the last twelve months available data as at the Valuation Date according to Bloomberg. The negative revenue of GT Group Holdings Ltd is due to sale of investments at fair value through profit or loss which is recognised in the revenue line due to its business nature. Thus, GT Group Holdings Ltd was excluded from the P/S analysis.

— V-6 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

The P/S multiples of those 8 companies as at the Valuation Date are shown below:

			Trailing
			Twelve
		Market	Months
Company	Ticker	cap	revenue	P/S
		(HKD	(HKD
		million)	million)
Victory Securities (Holdings)	8540 HK	256.0	58.9	4.3x
Company Limited
PF Group Holdings Ltd	8221 HK	196.0	67.2	2.9x
Astrum Financial Holdings Ltd	8333 HK	162.4	52.2	3.1x
VBG International Holdings Ltd	8365 HK	251.5	75.1	3.3x
Koala Financial Group Ltd	8226 HK	89.1	32.0	2.8x
Cash Financial Services Group	510 HK	252.7	113.9	2.2x
Limited
Orient Securities International	8001 HK	133.9	36.3	3.7x
Holdings Limited
Sino Prosper Group Holdings Ltd.	766 HK	113.0	35.0	3.2x
Median				3.2x
Average				3.2x

Source: Bloomberg

Based on the data above, we adopted the average P/S at 3.2x (before discount and premium below) as the applicable multiple to WLSL on the FY2019 revenue of HKD11.9 million for valuation purpose.

— V-7 —

VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

Discount and premium

As the shares traded on the public market are marketable non-controlling interest, while the valuation of WLSL for Acquisition purpose represent non-marketable controlling interest, a Discount for Lack of Marketability (“ DLOM ”) and a Control Premium (“ CP ”) are required to adjust the P/E multiple of the CoCos into the applicable basis for our valuation of Equity Interest in WLSL.

DLOM

Marketability is defined as the ability to convert an investment into cash quickly at a known price with minimum transaction cost. Given two identical business interests, a higher price will usually be paid by investors in the market for the asset that can be converted to cash most rapidly, with lower risk of loss in value during the search for a buyer. The difference between these two prices is the DLOM. DLOM is typically applied in the valuation of equity interest in non-publicly traded companies in order to adjust the valuation basis to a non-marketable basis.

Restricted stock study is a source of reference for DLOM by valuation practitioners. The discount was calculated by dividing the difference between the private placement price and the market reference price by the market reference price. The market reference price in the study is represented by the stock price on the agreement date, closing date, announcement date, or the high-low average stock price for the month of the transaction if no date is specified.

According to the data published by Stout Risius Ross, LLC in the 2019 edition of the Stout Restricted Stock Companion guide, the average discount observed is 20.6%. We have adopted a DLOM of 20.6% in arriving at the fair value of WLSL as at the Valuation Date due to the absence of equivalent study in Hong Kong.

CP

Controlling interest in a company is typically considered more valuable than noncontrolling interest due to the ability of a controlling interest to direct managerial and financial decision. The difference between the two is the CP. Conversely, non-controlling interest such as parcel of shares traded in public stock exchange are usually considered to carry a discount for lack of control (“ DLOC ”) in their value compared to controlling interest.

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VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

From an economic point of view, acquirer of publicly listed company often needs to pay a premium price over the public traded stock price in order to induce more existing shareholders to sell so as to purchase a controlling interest in a company. Therefore CP is also interpreted as Market Participant Acquisition Premium (“ MPAP ”) and there are estimates of applicable CP through statistics on the price paid in acquisition over normal pricing of a given security.

In the guidance on “The Measurement and Application of Market Participant Acquisition Premiums” published by The Appraisal Foundation in the USA in 2017, business characteristics influencing the MPAP are set out below:

i. Acquisition activity in the industry
ii. Stage in company life cycle
iii. Market participant attributes
iv. Size of market participants relative to subject entity
v. Balance of information
vi. Capital structure of subject entity
vii. Management objectives
viii. Quality of management
ix. Regulatory factors
x. Corporate bylaws and governing documents
xi. Transaction structure

Based on our discussion with the Company, there is minimal CP or MPAP applicable to the Equity due to the following:

i. The market for Type 1 and 4 holders such as WLSL is fragmented with many similar participants in the market and no significant consolidation taking place;
ii. WLSL and the CoCos are both in a mature industry;

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VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

iii. The Company is a strategic acquirer but there is no indication of control premium from such position;
iv. The Company’s size above WLSL does not imply any existence of control premium;
v. There is no particular imbalance of information which indicate existence of control premium;
vi. There is no indication of existence of control premium from the remaining factors above.

As a result, we have not applied any CP to the P/S in valuing the Equity.

SENSITIVITY ANALYSIS

Under the market approach, value is driven by the applicable revenue and multiple. Therefore the value will change proportionally if the applicable revenue or multiple change.

As the CP and DLOM applied are based on statistics, we have illustrated below the impact to the value of the Equity in different combination of CP and DLOM:

Sensitivity analysis (HKD million)

	15.60% 18.10%	DLOM 20.60% 23.10% 25.60%
0.00% CP 2.50% 5.00% 7.50% 10.00%	32.3 31.3 33.1 32.1 33.9 32.9 34.7 33.7 35.5 34.4	30.3 29.4 28.4 31.1 30.1 29.1 31.9 30.9 29.9 32.6 31.6 30.6 33.4 32.3 31.3

A five percentage point increase in the CP alone results in +5% change in the value of Equity, while a five percentage point increase in DLOM alone results in -6% change in the value of Equity.

REMARKS

Unless otherwise stated, all monetary amounts are stated in Hong Kong Dollar.

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

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VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

ASSUMPTIONS

A number of assumptions have been made in the preparation of the reported figures. The major assumptions are set out below:

WLSL will be able to replenish its IPO pipeline from time to time to earn underwriting commission regularly with sufficient profit and operate as a going concern.
The adopted CP and DLOM are applicable to WLSL.
There will be no major changes in existing political, legal, technological, tax, fiscal or economic conditions in the country or district where the business is in operation;
The long term inflation rate, interest rates and currency exchange rate will not differ materially from those presently prevailing;
WLSL will retain sufficient management and technical personnel to maintain their ongoing operations;
There will be no major business disruptions through international crisis, industrial disputes, industrial accidents or severe weather conditions that will significantly affect the existing business;
WLSL’s businesses are unaffected by any statutory notice and the operation of the business gives, or will give, no rise to a contravention of any statutory requirements. All applicable laws and regulations were and will be complied with;
The business is not and will not be subject to any unusual or onerous restrictions or encumbrances which may render the WLSL’s defaulted against their outstanding commitment or obligations; and
Any potential bad debt of WLSL will not materially significantly affect value of the WLSL.

LIMITING CONDITIONS

We understand that you will perform additional separate due diligence before making any transaction decision related to the WLSL. You will not solely rely on our opinion regarding any transaction related to the WLSL. Our report will be used for internal reference purpose only and cannot replace any managerial decision or judgment of your company’s management. Our work does not constitute any buy or sell recommendation.

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VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

No opinion is intended to be expressed for matters which require legal or other specialised expertise, which is beyond what is customarily expected on valuers’ capacity or expertise. We are not in a position to, nor have been instructed to, comment on the lawfulness of the businesses and the WLSL’s possession of the assets. In the course of our valuation, we have assumed that the assets have obtained all required registration and are freely transferable in the market without any significant obstacles.

We have been provided with extracts of copies of relevant documents and financial information relating to WLSL. We have relied upon the aforesaid information and certain data from various databases in forming our opinion of the Market Value. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us. Our work has relied to a considerable extent on the information provided by the Company and does not constitute an audit and no assurance is given by us to the information supplied to us. Details of our principal information sources are set out in the report and we have satisfied ourselves, so far as possible, that the information presented in our report is consistent with other information which was made available to us in the course of our work. We have made relevant inquiries and obtained further information as we considered necessary for the purpose of this valuation, we however cannot guarantee the reliability or accuracy of the information sources. We have no responsibility to doubt the truthfulness and accuracy of the said information which is material to the valuation. We have also been confirmed by the Company that no material facts related to this valuation have been omitted from the information provided.

The conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. Furthermore, the assumptions adopted are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, WLSL and us. While we have exercised our professional knowledge and cautions in adopting assumptions and other relevant key factors in our valuation, those factors and assumptions are still vulnerable to the change of the business, economic environment, competitive uncertainties or any other abrupt alternations of external factors. We must emphasise that the realisation of any prospective financial information set out

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VALUATION REPORT OF THE TARGET COMPANY

APPENDIX V

within our report is dependent on the continuing validity of the assumptions on which it is based. We accept no responsibility for the realisation of any prospective financial information. Actual results are likely to be different from those shown in the prospective financial information because events and circumstances frequently do not occur as expected, and the differences may be material.

In accordance with our standard practice, we must state that this report and valuation is for the purpose of incorporation into the public announcement and circular of the Company in connection with the Acquisition and the use only of the party to whom it is addressed and no responsibility is accepted to any third party for the whole or any part of its contents.

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

We shall be under no obligation to update our report in respect of events or information which come to our attention subsequent to the date of this report. Notwithstanding this, we reserve the right, should we consider it necessary, to revise our valuation in light of any information which existed at the Valuation Date but which becomes known to us subsequent to the date of this report.

We shall not testify or attend in court due to this exercise, with reference to the valuation described herein. Should there be any further services required, the corresponding expenses and provision of services will be reimbursed from the Company and such additional work may incur without prior notification.

MANAGEMENT CONFIRMATION OF FACTS

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

CONFIRMATION OF INDEPENDENCE

We hereby confirm that we have neither present nor prospective interests in the WLSL, the Company and their respective holding companies, subsidiaries and associated companies, or the value reported herein.

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APPENDIX V VALUATION REPORT OF THE TARGET COMPANY

OPINION OF VALUE

Based on the method employed and analysis stated above, we are of the opinion that the Market Value of the Equity in WLSL as at Valuation Date is HKD30,350,000 (HONG KONG DOLLAR THIRTY MILLION THREE HUNDRED AND FIFTY THOUSAND ONLY.)

Yours faithfully,

For and on behalf of

Savills Valuation and Professional Services Limited

Wiley W.F. Pun

HKICPA CICPA (non-practising) PRM Director

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GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particular given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and is 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 THE SECURITIES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS

(i) Interests in the shares of the Company

As at the Latest Practicable Date, the interests and short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) held by the Directors and chief executives of the Company which have been notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO) or have been entered in the register maintained by the Company pursuant to section 352 of the SFO, or otherwise have been notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules are as follows:

				Approximate
				percentage
				of the issued
				share capital
	Long/		No. of	in the
Name of Director	Short position	Capacity	Shares held	Company
Ms. Wan Ho Yan Letty	Long position	Interests of controlled	352,820,000	68.75%
(Note)		corporation

Note: These 352,820,000 shares are held by Jayden Wealth Limited (“ Jayden Wealth ”), a company incorporated in the British Virgin Islands and wholly owned by Ms. Wan Ho Yan Letty (“ Ms. Letty Wan ”). Therefore, Ms. Letty Wan is deemed to be interested in all the shares held by Jayden Wealth for the purpose of the SFO.

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GENERAL INFORMATION

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(ii) Interests in the shares of an associated corporation of the Company

				Approximate
				percentage
				of the issued
				share capital
	Name of			of the
	associated		Number of	associated
Name of Director	corporation	Capacity	shares held	corporation
Ms. Wan Ho Yan Letty	Jayden Wealth	Beneficial owner	1	100%

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange (i) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provision of the SFO) or (ii) pursuant to section 352 of the SFO, or (iii) pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules.

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

So far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, the following parties (not being the Directors or chief executives of the Company) had interests or short positions 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, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO:

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GENERAL INFORMATION

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(i) Long positions in the shares or underlying shares of the Company:

					Approximate
				Total	percentage
				number of	of the issued
			Number of	shares and	share capital
Name of	Nature of	Number of	underlying	underlying	of the
Shareholder	interests	shares held	shares held	shares held	Company
Jayden Wealth	Beneficial owner	352,820,000	–	352,820,000	68.75%

Note:

Jayden Wealth is wholly owned by Ms. Letty Wan. Under the SFO, Ms. Letty Wan is deemed to be interested in all the shares held by Jayden Wealth.

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any persons (who were not Directors or chief executives of the Company) who had an interest or short position in the Share or underlying Shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

Ms. Wan Ho Yan Letty has entered into a service agreement with the Company as executive Director for an initial term of three years commencing from 26 May 2017 and shall continue thereafter unless and until it is terminated by either party giving to the other party not less than three months’ prior notice in writing.

Mr. Hui Ringo Wing Kun has entered into a service agreement with the Company as executive Director for an initial term of three years commencing from 26 May 2017 and shall continue thereafter unless and until it is terminated by either party giving to the other party not less than three months’ prior notice in writing.

Mr. Wan Chuen Fai has entered into a letter of appointment with the Company as non-executive Director for a term of three years commencing from 26 May 2017 subject to termination by giving not less than three months’ prior notice in writing by one party to another party.

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GENERAL INFORMATION

APPENDIX VI

Each of Mr. Kam Cheuk Fai David and Mr. William Robert Majcher has entered into a letter of appointment with the Company as independent non-executive Director for a term of three years commencing from 26 May 2017 subject to termination by giving not less than three months’ prior notice in writing by one party to another party. Mr. Ho Lik Kwan Luke has entered into a letter of appointment with the Company as independent non-executive Director for a term of three years commencing from 1 December 2017 subject to termination by giving not less than three months’ prior notice in writing by one party to another party.

Each of the appointment of the Directors referred to above is subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the articles of association of the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors has any existing or proposed service contract with any member of the Group which is not expiring nor terminable by the Group within one year without payment of compensation (other than statutory compensation).

5. D I R E C T O R S’ I N T E R E S T I N A S S E T S/C O N T R A C T A N D O T H E R INTERESTS

As at the Latest Practicable Date, save for Ms. Wan Ho Yan Letty and Mr. Wan Chuen Fai’s deemed interest in the SP Agreement, none of the Directors had any direct or indirect interest in any assets which have been acquired, disposed of or leased to or which are proposed to be acquired, disposed of or leased to any member of the Group since 30 September 2018, being the date to which the latest published audited accounts of the Company were made up.

As at the Latest Practicable Date, save for Ms. Wan Ho Yan Letty and Mr. Wan Chuen Fai’s deemed interest in the SP Agreement, none of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Company.

6. COMPETING INTEREST

To the best knowledge of the Directors, as at the Latest Practicable Date, none of (i) the Group’s compliance adviser, Dakin Capital Limited (the “ Compliance Adviser ”), neither itself nor each of its directors, employees and close associates (as referred to in Rule 6A.32 of the GEM Listing Rules); and (ii) the Directors, controlling shareholders of the Company and their respective close associates

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GENERAL INFORMATION

APPENDIX VI

(as defined under the GEM Listing Rules), was interested in any business which competes or is likely to compete either directly or indirectly with the business of the Group (as would be required to be disclosed under the GEM Listing Rules if each of them were a controlling shareholder).

7. INTERESTS OF THE COMPLIANCE ADVISER

Save for the compliance adviser agreement entered into between the Company and the Compliance Adviser, neither the Compliance Adviser nor any of its directors, employees or close associates has any interests in the securities of the Company or any other companies of the Group (including options or rights to subscribe for such securities) pursuant to Rule 6A.32 of the GEM Listing Rules.

8. MATERIAL CONTRACTS

Within the two years immediately preceding the Latest Practicable Date, the following contract (not being contracts entered into in the ordinary course of business) has been entered into by a member of the Group which are or may be material:

(a) An agreement dated 19 December 2017 entered into between BGI Group Limited as vendor and VBG Properties Limited (now known as VBG Overseas Holdings Limited) as purchaser, an indirect wholly-owned subsidiary of the Company, in relation to the acquisition of the entire issued shares of and the shareholder’s loan in Baron Global Financial Canada Ltd. for an aggregate consideration of approximately HK$36.9 million;
(b) the SP Agreement;
(c) the Supplemental Agreement; and
(d) the Second Supplemental Agreement.

9. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any members of the Group.

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GENERAL INFORMATION

APPENDIX VI

10. AUDIT COMMITTEE

The Company has established an audit committee with written terms of reference based on the guidelines recommended by the Hong Kong Institute of Certified Public Accountants and the mandatory provisions in the Corporate Governance Code of the GEM Listing Rules. The primary duties of the audit committee are to review the Company’s annual reports and financial statements, interim reports and quarterly reports and to provide advices and comments thereon to the Board. The audit committee is also responsible for reviewing the accounting principles and practices adopted by the Group and also the auditing, internal control and financial reporting matters.

The Audit Committee currently comprises three independent non-executive Directors, namely Mr. Ho Lik Kwan Luke, as the chairman of the Audit Committee, Mr. Kam Cheuk Fai David and Mr. William Robert Majcher. The primary duty of the Audit Committee is to review and supervise the Company’s financial reporting process, the risk management and internal control systems of the Group and the monitoring of continuing connected transactions. Set out below are their biographical details:

Mr. Ho Lik Kwan Luke

Mr. Ho Lik Kwan Luke (“ Mr. Ho ”), aged 40, was appointed as an independent non-executive Director on 1 December 2017. He is also the chairman of the audit committee of the Company with effect from 13 December 2017, and a member of the nomination and remuneration committees of the Company with effect from 1 December 2017. He is primarily responsible for providing independent advice to the Board in areas including conflict of interest, strategy, performance, resources and standard of conduct of the Company. Mr. Ho has over 13 years of experience in the finance industry focusing on corporate finance. During the period from December 2014 to February 2016, Mr. Ho was a director of Ping An Securities Limited and registered with the Securities and Futures Commission as a responsible officer for Type 6 regulated activity. During the period from September 2016 to May 2019, Mr. Ho was registered with the Securities and Futures Commission as a responsible officer for Type 6 regulated activity for Huabang Corporate Finance Limited, a subsidiary of Huabang Financial Holdings Limited (stock code: 3638), a company listed on the main board of The Stock Exchange of Hong Kong Limited. He was also a consultant of Huabang Securities Limited (formerly known as Qian Hai Securities Limited). At present, Mr. Ho is an executive director of Glory Sun Securities Limited, a subsidiary of Glory Sun Financial Group Limited (stock code: 1282). Mr. Ho obtained a Bachelor degree in Accounting and Financial Management from the

— VI-6 —

GENERAL INFORMATION

APPENDIX VI

University of Sheffield in the United Kingdom in July 2000. He worked in Deloitte Touche Tohmatsu for more than 3 years. At present, he is a member of each of the Hong Kong Institute of Certified Public Accountants and the American Institute of Certified Public Accountants.

Mr. Kam Cheuk Fai David

Mr. Kam Cheuk Fai David (“ Mr. Kam ”), aged 65, was appointed as an independent non-executive Director on 4 May 2017. He is also the chairman of the remuneration committee, and a member of the audit and nomination committees of the Company with effect from 26 May 2017. He is primarily responsible for providing independent advice to the Board in areas including conflict of interests, strategy, performance, resources and standard of conduct of the Company. Mr. Kam has over 30 years of experience in management and banking in Hong Kong and China, having worked for China Construction Bank (Asia) Corporation Limited and Bank of America. Mr. Kam obtained a Master of Business Administration degree from the University of Chicago in June 1978 and a Bachelor of Science in Electrical Engineering from Union College, New York in June 1976.

Mr. William Robert Majcher

Mr. William Robert Majcher (“ Mr. Majcher ”), aged 57, was appointed as an independent non-executive Director on 4 May 2017. He is also the chairman of the nomination committee, and a member of the audit and remuneration committees of the Company with effect from 26 May 2017. He is primarily responsible for providing independent advice to the Board in areas including conflict of interests, strategy, performance, resources and standard of conduct of the Company. From July 1985 to August 2007, Mr. Majcher served in the Royal Canadian Mounted Police (RCMP) and was involved in the detection and prosecution of some publicly reported money laundering cases in the United States of America and Canada as an undercover agent. Mr. Majcher obtained a degree of Bachelor of Commerce from St. Mary’s University, Halifax, Nova Scotia, Canada in May 1984.

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GENERAL INFORMATION

APPENDIX VI

11. QUALIFICATION AND CONSENT OF EXPERTS

The followings are the qualifications of the experts who have given an opinion or advice to the contents of this circular:

Name

Qualifications

Savills Valuation and Professional Services Limited Vinco Capital Limited

Independent Professional valuer

a licensed corporation to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities as defined under the SFO

KTC Partners CPA Limited Certified Public Accountants

Each of the above experts has given and has not withdrawn its written consent to the issuer of this circular with the inclusion of its letters, reports and/or opinion, as the case may be, and references to its name in the form and context in which they respectively appear.

As the Latest Practicable Date, each of the above experts did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As the Latest Practicable Date, each of the above experts did not have, directly or indirectly, any interest in any assets which had since 30 September 2018 (being the date to which the latest published audited consolidated accounts of the Group were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any members of the Group.

12. MISCELLANEOUS

(a) The registered office of the Company is situated at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The head office and principal place of business of the Company is located at 18/F., Prosperity Tower, 39 Queen’s Road Central, Hong Kong.

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GENERAL INFORMATION

APPENDIX VI

(b) The Hong Kong branch share registrar and transfer office of the Company is Tricor Investor Services Limited of Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The company secretary of the Company is Mr. Lo Tsz Kit Harry who is a solicitor admitted in Hong Kong and an associate member of The Hong Kong Institute of Chartered Secretaries.
(d) Mr. Hui Ringo Wing Kun, an executive Director, is the compliance officer of the Company.
(e) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

13. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group as at 30 September 2018, the date to which the latest published audited financial statements of the Group were made up.

14. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours (i.e. from 9:30 a.m. to 5:00 p.m. on Monday to Friday except public holidays) at the principal place of business in Hong Kong of the Company in Hong Kong from the date of this circular up to and including the date of the EGM:

a. the memorandum and articles of association of the Company;
b. the accountants’ report of the Target Company prepared by KTC Partners CPA Limited as set out in Appendix II to this circular;
c. the report on the unaudited pro forma financial information of the Enlarged Group following the completion of the Acquisition as set out in Appendix IV to this circular;
d. the SP Agreement, the Supplemental Agreement and the Second Supplemental Agreement;
e. the letter from the Board, the text of which is set out on pages 6 to 18 of this circular;

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GENERAL INFORMATION

APPENDIX VI

f. the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
g. the letter of recommendation from the Independent Board Committee dated 23 September 2019, the text of which is set out on pages 19 to 20 of this circular;
h. the letter of advice issued by the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders dated 23 September 2019, the text of which is set out on pages 21 to 44 of this circular;
i. the valuation report issued by the Valuer as set out in Appendix V to this circular;
j. the Directors’ service contracts referred to in this circular;
k. the written consents of the experts referred to in the paragraph headed “Qualification and Consent of Experts” in this appendix;
l. the annual report of the Company for the financial year ended 30 September 2018 and the third quarterly report of the Company for the nine months ended 30 June 2019; and
m. this circular.

— VI-10 —

NOTICE OF THE EGM

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==> picture [16 x 16] intentionally omitted <==

VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8365)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of VBG International Holdings Limited (the “ Company ”) will be held at 18/F., Prosperity Tower, 39 Queen’s Road Central, Hong Kong on Tuesday, 15 October 2019 at 10:30 a.m., to consider and, if thought fit, to pass with or without amendments, the following resolution:

ORDINARY RESOLUTION

“ THAT :

(a) approval be and is hereby granted to the Company entering into the sale and purchase agreement dated 11 June 2019 (as amended and supplemented by a supplemental agreement dated 8 July 2019 and a second supplemental agreement dated 26 August 2019) (the “ SP Agreement ”, a copy of which is tabled at the extraordinary general meeting marked “A” and initialled by the Chairman of the meeting for the purpose of identification) between Cheung I Fai as seller, VBG International Holdings Limited as purchaser, and Cheung I Fai as guarantor in relation to the acquisition of the entire issued shares of Wealth Link Securities Limited, and the performance of all the transactions contemplated under the SP Agreement; and
(b) the board of directors of the Company be and is hereby authorised to take all steps and do all acts and things and execute all such documents or agreements or deeds as it considers necessary, appropriate desirable or expedient to implement and give full effect to or in connection with the SP Agreement and the transactions contemplated thereunder.”

By order of the Board

VBG International Holdings Limited Hui Ringo Wing Kun Executive Director

Hong Kong, 23 September 2019

For identification purposes only

— EGM-1 —

NOTICE OF THE EGM

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

Head office and principal place of business

in Hong Kong: 18/F., Prosperity Tower 39 Queen’s Road Central Hong Kong

Notes:

(1) Any member of the Company entitled to attend and vote at the extraordinary general meeting shall be entitled to appoint another person as his/her proxy to attend and vote instead of him/her and so appointed shall have the same right as the member to speak at the extraordinary general meeting. A member who is the holder of two or more shares of the Company may appoint one or more proxies to attend and vote instead of him/her. A proxy need not be a member of the Company.
(2) A form of proxy for use at the extraordinary general meeting is enclosed herewith.
(3) The form of proxy must be signed by you or your attorney duly authorised in writing or, in the case of a corporation, must be under its seal or the hand of an officer, attorney or other person duly authorised.
(4) The form of proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be lodged at the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjourned meeting (as the case may be) and in default the proxy shall not be treated as valid. Completion and return of the form of proxy shall not preclude members from attending and voting in person at the extraordinary general meeting or at any adjourned meeting (as the case may be) should they so wish.
(5) Where there are joint registered holders of any share, any one of such persons may vote at the extraordinary general meeting, either personally or by proxy, in respect of such share as if he/she was solely entitled thereto; but if more than one of such joint holders be present at the extraordinary general meeting personally or by proxy, the vote of that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall be accepted to exclusion of the votes of the other joint holders. Several executors or administrators of a deceased member of the Company in whose name any shares stands shall for this purpose be deemed joint holders thereof.
(6) For determining the entitlement to attend and vote at the extraordinary general meeting, the register of members of the Company will be closed from Thursday, 10 October 2019 to Tuesday, 15 October 2019, both dates inclusive, during which period no transfer of shares will be effected. In order to be eligible to attend and vote at the extraordinary general meeting, all properly completed transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Wednesday, 9 October 2019.

— EGM-2 —

NOTICE OF THE EGM

As at the date of this notice, the executive Directors are Ms. Wan Ho Yan Letty (chairperson), Mr. Hui Ringo Wing Kun, the non-executive Director is Mr. Wan Chuen Fai, the independent non-executive Directors are Mr. Kam Cheuk Fai David, Mr. William Robert Majcher and Mr. Ho Lik Kwan Luke.

— EGM-3 —

AI assistant

Hatcher Group Limited — Proxy Solicitation & Information Statement 2019

51408_rns_2019-09-23_ecd579a1-b55a-4cd3-88fe-df78042ed35e.pdf

VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(1) MAJOR TRANSACTION IN RELATION TO

THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(1) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

(1) INTRODUCTION

LETTER FROM THE BOARD

(2) THE SP AGREEMENT

Date

Parties

Assets to be acquired

Consideration

Payment of the Consideration

Adjustment to the Consideration

Conditions precedent

Completion

LETTER FROM THE BOARD

Basis of the Consideration

Business prospects and market position of the Target Company

How the Target Company complements the Group’s existing business

LETTER FROM THE BOARD

Profit Guarantee

Sum B = Sum A x 13.5

LETTER FROM THE BOARD

Basis of determination of the Guaranteed Net Profit

(3) GENERAL INFORMATION OF THE COMPANY AND THE TARGET COMPANY

Information on the Company

Information on the Target Company

(4) FINANCIAL INFORMATION OF THE TARGET COMPANY

Financial information on the Target Company

(5) FINANCIAL EFFECT OF THE ACQUISITION

Earnings

Assets and liabilities

(6) REASONS FOR AND BENEFITS OF THE ACQUISITION

LETTER FROM THE BOARD

(7) GEM LISTING RULES IMPLICATIONS

(8) EGM

(9) CLOSURE OF THE REGISTER OF MEMBERS

(10) RECOMMENDATION

(11) ADDITIONAL INFORMATION

VBG INTERNATIONAL HOLDINGS LIMITED 建泉國際控股有限公司 *

(1) MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Yours faithfully,

VBG International Holdings Limited

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARES OF WEALTH LINK SECURITIES LIMITED

A. INTRODUCTION

LETTER FROM VINCO CAPITAL

B. BASIS OF OUR OPINION AND RECOMMENDATION

LETTER FROM VINCO CAPITAL

C. PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Information of the parties

Information of the Group

Table 1: Summary of the consolidated financial performance of the Group

LETTER FROM VINCO CAPITAL

For the year ended 30 September 2018

For the nine months ended 30 June 2019

II. Information of the Target Company

LETTER FROM VINCO CAPITAL

III. Principal terms of the Agreement

LETTER FROM VINCO CAPITAL

Payment of the Consideration

Adjustment to the Consideration

LETTER FROM VINCO CAPITAL

LETTER FROM VINCO CAPITAL

IV. Reasons for and benefits of the Acquisition

V. The Consideration of the Acquisition

VI. Comparison with other companies in the same industry

Hatcher Group Limited Proxy Solicitation & Information Statement 2019