ta yang group holdings limited 團控股有限公...

If you are in any doubt as to any aspect of this circular or as to the action to be taken, youshould consult a licensed securities dealer, bank manager, solicitor, professional accountant orother professional adviser.

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

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

TA YANG GROUP HOLDINGS LIMITED大洋集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1991)

MAJOR TRANSACTIONACQUISITION OF PROPERTIES

Financial adviser

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

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR ATTENTION

12 August 2016

Page

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . 14

APPENDIX II — UNAUDITED PRO FORMA STATEMENT OF ASSETS ANDLIABILITIES OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

APPENDIX III — PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

APPENDIX IV — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

CONTENTS

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

‘‘Acquisition’’ the proposed acquisition of the entire interest in the TargetProperties by the Purchaser from the Vendor ascontemplated under the Sale and Purchase Agreement

‘‘Board’’ board of Directors

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

‘‘COFCO Group’’ China National Cereals, Oils and Foodstuffs Corporation, aPRC state owned enterprise

‘‘Company’’ Ta Yang Group Holdings Limited, a company incorporatedin the Cayman Islands with limited liability, the issuedShares of which are listed on the main board of the StockExchange

‘‘Completion’’ completion of the Acquisition

‘‘Completion Date’’ the date of Completion

‘‘Conditions Precedent’’ the conditions precedent set out in the Sale and PurchaseAgreement, details of which are set out in the subsectionheaded ‘‘Conditions Precedent’’ in this circular

‘‘Consideration’’ the total consideration payable by the Company for theAcquisition

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

‘‘Group’’ the Company and its subsidiaries

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

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

‘‘Independent Third Party(ies)’’ third party independent of and not connected with theCompany and its connected persons

‘‘Latest Practicable Date’’ 9 August 2016, being latest practicable date prior to thedespatch of this circular for the purpose of ascertainingcertain information contained herein

DEFINITIONS

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‘‘Listing Rules’’ the Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited

‘‘MOU’’ memorandum of understanding entered into by theCompany and the Vendor on 4 June 2016 in relation to theAcquisition

‘‘PRC’’ The People’s Republic of China

‘‘Purchaser’’ the Company

‘‘Real Estate Sales Contract(s)’’ the sale contract(s) to be entered into by the Purchaser andthe Vendor for each unit of the Target Properties, whichwill be submitted to PRC government authorities forapproval of transfer of ownership

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

‘‘Sale and Purchase Agreement’’ the sale and purchase agreement entered into by thePurchaser and the Vendor on 20 June 2016 (after tradinghours) in relation to the Acquisition

‘‘SFC’’ the Securities and Futures Commission in Hong Kong

‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong)

‘‘SGM’’ the special general meeting of the Company to be convenedby the Company to consider and approve the Sale andPurchase Agreement and the transactions contemplatedthereunder

‘‘Share(s)’’ share(s) of HK$0.10 each in the share capital of theCompany

‘‘Shareholder(s)’’ holder(s) of the Shares of the Company

‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘Target Properties’’ building 1, 2, 3 and 5 on Longxi Road, Yalong Bay, SanyaCity, Hainan Province, PRC, wholly owned by the Vendor

‘‘Valuer’’ Greater China Appraisal Limited, an independentprofessional valuer

DEFINITIONS

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‘‘Vendor’’ Sanya Hongxia Development and Construction Limited (三亞虹霞開發建設有限公司), a company incorporated in thePRC with limited liability which is indirect non wholly-owned by the COFCO Group

‘‘%’’ per cent.

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

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

DEFINITIONS

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TA YANG GROUP HOLDINGS LIMITED大洋集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1991)

Executive DirectorsMs. Shi QiMs. Xu ChendiMr. Qiu YonghaoMr. Huang Te-Wei

Non-Executive DirectorsMr. Gao FengMr. Han Lei

Independent Non-Executive DirectorsMs. Zhang LijuanMr. Yeung Chi TatMr. Pak Wai Keung, Martin

Registered Office:Cricket SquareHutchins DriveP.O. Box 2681 GTGrand Cayman KY1-1111Cayman Islands

Principal Place of BusinessIn Hong Kong:

Flat 28, 23rd FloorMetro Centre II21 Lam Hing StreetKowloon Bay, KowloonHong Kong

12 August 2016

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTIONACQUISITION OF PROPERTIES

INTRODUCTION

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

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

LETTER FROM THE BOARD

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THE SALE AND PURCHASE AGREEMENT

Date : 20 June 2016 (after trading hours)

Parties : (1) the Company as the Purchaser; and

(2) Sanya Hongxia Development and Construction Limited (三亞虹霞開

發建設有限公司) as the Vendor.

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

Assets to be Acquired

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

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

Consideration

The Consideration for the Acquisition is approximately RMB357,488,000 (equivalent toapproximately HK$421,836,000), which is based on the unit cost for the Target Properties ofRMB21,500 per square meter. The Consideration is payable in cash, which shall be satisfied bythe Company in the following manner:

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

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

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

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


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

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

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

Source of Funding

The Company intends to finance the Consideration as to (i) approximatelyRMB214,493,000 (equivalent to approximately HK$253,102,000) by means of bank loan; (ii)approximately RMB65,534,000 (equivalent to approximately HK$77,330,000) by means ofequity financing, including but not limited to placing of new Shares; and (iii) the remainingbalance of the Consideration by internal resources of the Group.

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

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

Conditions Precedent

Completion is conditional upon the satisfaction of the following conditions:

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

(b) all necessary approvals, permits, consents and authorizations (including but notlimited to approvals from the Stock Exchange and the SFC) in respect of the Saleand Purchase Agreement and the transactions contemplated thereunder having beenobtained;

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


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

(e) the Vendor has fulfilled its obligations specified under ‘‘6. Transfer of ownership ofthe Target Properties’’ in the Sale and Purchase Agreement, which includes, interalia, (i) the Vendor shall allow the Company to start renovation and preparation workof the Target Properties and assist the Company to obtain all the approvals inaccordance with the laws and regulations of the PRC; (ii) the Vendor shall deliverthe Target Properties within 5 Business Days after the Purchaser has satisfied theConsideration in full and that the Vendor warrants the Target Properties to bedelivered will satisfy the deliver conditions as stated in the Sale and PurchaseAgreement; (iii) the delivery of the Target Properties and its relevant documents, andtransfer of ownership registration shall be based on the Real Estate Sales Contractsand laws and regulations of the PRC, and that any tax raised thereof shall be borneby respective parties; and (iv) entering into of the Real Estate Sales Contractseffecting the transfer of the Target Properties; and

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

Conditions (e) and (f) above may be waived by the Purchaser. The Vendor shall use itsbest endeavors to fulfill conditions (d), (e) and (f) and the Purchaser shall use its bestendeavors to fulfill condition (b). As at the Latest Practicable Date, the Purchaser has nointention to waive condition (e).

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

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

Undertaking, Warranties and Indemnity

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

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

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

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


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(c) prior to Completion, the Vendor shall not conduct any of the followings withoutconsent from the Purchaser: (i) conduct, permit or procure any actions that maybreach the warranties and undertakings made by the Vendor; (ii) sell or transfer anyinterest in the Target Properties; (iii) allow any liens, charges, options, pre-emptionor other encumbrances or third party rights to be imposed to the Target Properties;(iv) enter into any agreement regarding the Target Properties which is outside of itsordinary course of business; (v) enter into any cooperation agreement or joint ventureagreement with regards of the Target Properties; and (vi) enter into any materialinvestment or any other agreements that may lead to liabilities to be borne by theVendor.

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

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

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

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

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

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

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

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

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


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

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

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

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

Completion

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

Event of Delay or Default

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

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

INFORMATION OF THE VENDOR

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


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

REASONS FOR AND BENEFITS OF THE POSSIBLE ACQUISITION

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

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

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

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

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

1. Hotel rooms/Service apartments

Decoration of the hotel rooms/service apartments are completed.

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


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2. High-end residential (apartments)

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

3. Healthcare Services

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

The Company will only consider further expansion or acquisition of further medicalequipment for the healthcare services, if the proceeds generated from the rental of hotelrooms/service apartments and the sale of high-end residential apartments, as describedabove, are satisfactory.

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

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

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


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

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

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

FINANCIAL EFFECT OF THE ACQUISITION

Earnings

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

Assets and Liabilities

The Target Properties will be held as property, plant and equipment, prepaid leasepayments and properties for sale in the Group after Completion. Upon Completion, the totalassets of the Group are expected to increase by approximately RMB357,488,000 (equivalent toapproximately HK$421,836,000), representing the sum of the Consideration. On the otherhand, the net assets value of the Group is expected to increase by approximatelyRMB65,534,000 (equivalent to approximately HK$77,330,000), representing the sum of theConsideration less the decrease in cash balances of the Group, increase in bank borrowings andproceeds of proposed placing of new Shares. The increase in net assets value is subject to thecompletion of the proposed placing of new Shares.

LISTING RULES IMPLICATIONS

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

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


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

In accordance with Rule 14.44 of the Listing Rules, in lieu of an approval from theShareholder at general meeting of the Company, the Company has sought and obtained awritten approval in respect of the Acquisition, from Lyton Maison Limited, which holds436,540,400 Shares, representing 55.63% of the issued share capital of the Company as at theLatest Practicable Date. As no Shareholder is required to abstain from voting, therefore nogeneral meeting will be convened for the purpose of approving the Acquisition as permittedunder Rule 14.44 of the Listing Rules.

ADDITIONAL INFORMATION

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

Yours faithfully,On behalf of the Board

TA YANG GROUP HOLDINGS LIMITEDShi Qi

Chairman and Chief Executive Officer


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1. FINANCIAL SUMMARY

Financial information of the Group for each of the three financial years ended 31 July2013, 2014 and 2015 are disclosed in the following documents which have been published onthe websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.irasia.com/listco/hk/tayang):

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

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

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

2. STATEMENT OF INDEBTEDNESS

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

(i) Bank borrowings

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

(ii) Contingent Liabilities

The Group did not have any contingent liabilities.

Save as aforesaid or as otherwise disclosed herein, at the close of business on 30 June2016, the Group did not have any debt securities issued and outstanding, and authorised orotherwise created but unissued, and term loans (secured, unsecured, guaranteed or not), bankoverdrafts, loans or other similar indebtedness, liabilities under acceptance (other than normaltrade bills), acceptable credits, hire purchase commitments, mortgages, charges, guarantees orother material contingent liabilities.

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

3. WORKING CAPITAL OF THE GROUP

The Directors expect that the total Consideration of approximately RMB357,488,000(equivalent to approximately HK$421,836,000) of the Acquisition will be settled (i) as toRMB65,534,000 (equivalent to approximately HK$77,330,000) by the net proceeds from equity

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

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

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

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

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

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

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

4. MATERIAL ADVERSE CHANGE

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

5. FINANCIAL AND TRADING PROSPECT OF THE ENLARGED GROUP

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


– 15 –

For the year ended 31 July 2015, the consolidated turnover of the Group decreased by8.8% to HK$426,200,000 (2014: HK$467,300,000) while loss attributable to equityShareholders was HK$159,400,000 (2014: HK$220,400,000).

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

After the change in control of the Company on 29 February 2016, the controllingShareholder has conducted a detailed review of the operations and business activities of theGroup and formulate business strategies for the Group’s long-term development. While theGroup will continue its current business in designing and manufacturing of silicone rubberinput devices, it will also explore other business opportunities, including the feasibility ofdiversifying the income stream of the Group into different business areas such as, withoutlimitation to, medical and healthcare industry.

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

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


– 16 –

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THEGROUP

Introduction

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

The unaudited pro forma statement of assets and liabilities has been prepared by thedirectors of the Company in accordance with paragraph 29 of Chapter 4 of the RulesGoverning the Listing of Securities on The Stock Exchange of Hong Kong Limited (‘‘ListingRules’’) and on the basis of the notes set out below for the purpose of illustrating the financialimpact of the Proposed Acquisition on the unaudited condensed consolidated statement ofassets and liabilities of the Group as if the Proposed Acquisition had taken place on 31 January2016 (the ‘‘Unaudited Pro Forma Statement of Assets and Liabilities’’).

The Unaudited Pro Forma Statement of Assets and Liabilities has been prepared inaccordance with the accounting policies of the Group under the Hong Kong FinancialReporting Standards, based on the unaudited condensed consolidated statement of financialposition of the Group as at 31 January 2016, on which the interim report of the Group has beenpublished on 20 April 2016, after making pro forma adjustments as summarised in theaccompanying notes that are directly attributable to the completion of acquisition of the TargetProperties (the ‘‘Closing’’), factually supportable and clearly identified as to those having/nothaving continuing effect on the Group.

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

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

APPENDIX II UNAUDITED PRO FORMA STATEMENT OFASSETS AND LIABILITIES OF THE GROUP

– 17 –

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS ANDLIABILITIES OF THE GROUP

Unauditedcondensed

consolidatedstatement ofassets and

liabilities ofthe Group asat 31 January

2016 Pro forma adjustments

Unaudited proforma



2016HK$’000 HK$’000 HK$’000 HK$’000(Note 1) (Note 2) (Note 3)

Non-current assetsProperty, plant and equipment 72,812 — 123,640 196,452Intangible assets — — — —

Prepaid lease payments 7,402 — 169,906 177,308Investment properties 91,499 — — 91,499Available-for-sale financial assets 19,407 — — 19,407Interests in joint ventures — — — —

Interests in associates — — — —

Deposits for acquisition of land use rights 12,066 — — 12,066

203,186 496,732

Current assetsProperties for sale — — 128,290 128,290Inventories 52,044 — — 52,044Trade and other receivables 139,577 — — 139,577Prepaid lease payments 246 — — 246Amount due from an associate 65 — — 65Income tax recoverable 513 — — 513Held-to-maturity investments 41,691 — — 41,691Held-for-trading investments 6,787 — — 6,787Bank balances and cash 173,249 (91,404) — 81,845

414,172 451,058


– 18 –

Unauditedcondensed



2016 Pro forma adjustments

Unaudited proforma



2016HK$’000 HK$’000 HK$’000 HK$’000(Note 1) (Note 2) (Note 3)

Current liabilitiesTrade and other payables 86,826 — — 86,826Derivative financial instruments 21,106 — — 21,106Income tax payable 21,185 — — 21,185Secured bank borrowings 33,282 — — 33,282Consideration payables

— Bank borrowings — 253,102 — 253,102— Share placing — 77,330 — 77,330

162,399 492,831

Net current assets (liabilities) 251,773 (41,773)

Total assets less current liabilities 454,959 454,959

Non-current liabilitiesDeferred income 3,763 — — 3,763Deferred tax liabilities 8,971 — — 8,971

12,734 12,734

Net assets 442,225 442,225

Notes:

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

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


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

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

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

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

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

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

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

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

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

Assumed that all conditions precedent stated in the Sale and Purchase Agreement can be fulfilled by theVendor, the directors of the Company prepared a business plan to develop the Target Properties. The Groupintends to develop around 20% of the salable area of the Target Properties with a cost of approximatelyRMB71,866,000 (equivalent to approximately HK$84,802,000) for healthcare-related business. The Groupalso plans to operate around 50% of the salable area of the Target Properties with a cost of approximatelyRMB176,901,000 (equivalent to approximately HK$208,744,000) as hotel rooms/service apartments by itself.The directors of the Company have engaged Greater China Appraisal Limited (‘‘GCAL’’), an independentprofessional valuer, to allocate the cost of land use rights of the Target Properties which is recognised asprepaid lease payments. For the healthcare-related business and hotel rooms/service apartments, the total costwill be further classified as property, plant and equipment of approximately RMB104,780,000 (equivalent toapproximately HK$123,640,000) and prepaid lease payments of approximately RMB143,987,000 (equivalentto approximately HK$169,906,000) in accordance with the portion between land and buildings based onallocation performed by GCAL.


– 20 –

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

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

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

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

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

6. Assume the delivery of the remaining consideration from the Company has been delayed, the Company shallpay the Vendor a compensation of 0.03% of the consideration not yet paid for each overdue day. If thedelivery of the remaining consideration has been delayed for over 10 business days, the Vendor can (i)request of an immediate payment of the remaining consideration plus a compensation of 0.03% of theconsideration not yet paid for each overdue day; or (ii) terminate the Sale and Purchase Agreement, where allsums paid by the Company (without interest) shall be refunded to the Company plus a compensation ofRMB20,000,000 (equivalent to approximately HK$23,600,000) shall be paid by the Company (if theaforementioned compensation does not cover all the losses of the Vendor, the Company shall also cover allthe remaining losses).


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

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

12 August 2016

The DirectorsTa Yang Group Holdings LimitedFlat 28, 23/F Metro Centre II21 Lam Hing StreetKowloon Bay, KowloonHong Kong

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

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

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

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


– 22 –

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

Our Independence and Quality Control

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

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

Reporting Accountants’ Responsibilities

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

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

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

The purpose of Unaudited Pro Forma Statement of Assets and Liabilities included in aninvestment circular is solely to illustrate the impact of the Proposed Acquisition on unadjustedfinancial information of the Group as if the Proposed Acquisition had been undertaken at anearlier date selected for purposes of the illustration. Accordingly, we do not provide anyassurance that the actual outcome of the Proposed Acquisition at 31 January 2016 would havebeen as presented.


– 23 –

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

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

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

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

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

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


– 24 –

Opinion

In our opinion:

(a) the Unaudited Pro Forma Statement of Assets and Liabilities has been properlycompiled 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 FormaStatement of Assets and Liabilities as disclosed pursuant to paragraph 29(1) ofChapter 4 of the Listing Rules.

SHINEWING (HK) CPA LimitedCertified Public AccountantsChan Wing KitPractising Certificate Number: P03224Hong Kong


– 25 –

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

Room 2703, 27/FShui On Centre6–8 Harbour RoadWanchaiHong Kong

12 August 2016

The Board of DirectorsTa Yang Group Holdings LimitedFlat 28, 23rd Floor, Metro Centre II21 Lam Hing StreetKowloon BayKowloonHong Kong

Dear Sir,

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

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

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

I. BASIS OF VALUATION

The valuation is our opinion of the market value which we would define as intended tomean ‘‘the estimated amount for which an asset or liability should exchange on the valuationdate between a willing buyer and a willing seller in an arm’s-length transaction after propermarketing and where the parties had each acted knowledgeably, prudently and withoutcompulsion’’.

APPENDIX III PROPERTY VALUATION REPORT

– 26 –

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

II. VALUATION METHODOLOGY

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

III. ASSUMPTIONS

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

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

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

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

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

IV. TITLESHIP INVESTIGATION

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


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

V. LIMITING CONDITIONS

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

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

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

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

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

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


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VI. OPINION OF VALUE

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

VII. REMARKS

Our valuation has been prepared in accordance with generally accepted valuationprocedures and in compliance with the requirements contained in Chapter 5 and Practice Note12 of the Rules Governing the Listing of Securities of The Stock Exchange of Hong KongLimited.

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

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

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

We enclose herewith our valuation certificate.

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

Yours faithfully,For and on behalf of

GREATER CHINA APPRAISAL LIMITEDMr. Gary Man

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

Director

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


– 29 –

VALUATION CERTIFICATE

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

Real Property Descriptions and TenureParticulars ofOccupancy

Market Value inexisting state as at

15 June 2016

Four hotel buildings (knownas Building 1, 2, 3 and 5)on Longxi Road‘‘Yalong Bay Ye Feng RoadSouthern Land Lot’’,Yalong Bay National ResortDistrict Regulatory PlanC-02 Lot No. 19-21-129,Yalong Bay, Jiyang District,Sanya City,Hainan Province,the PRC572000

The Target Properties comprise fourhotel buildings with an aggregate of194 rooms located within acomposite development, known asLong Xi Yue Shu. The subjectdevelopment is a multipurposeleisure project which consists ofhotels, convention center, villas,bungalows and other ancillaryfacilities. The Target Properties wascompleted in about 2015.

The Target Properties are located atYalong Bay National Resort Districtwhere a coastal beach, sea sportscenter, golf course, shoppingcenters, yacht club and other leisurefacilities are provided. The unitprices of similar real properties inthe locality are ranging fromRMB16,000 to 32,000 per squaremetre.

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

The land use rights of the TargetProperties were granted for a termstarting from 9 February 2013 andexpiring on 9 February 2063 foraccommodation, catering, conferenceand exhibition uses.

Upon our siteinspection, the TargetProperties arecurrently vacant.

RMB368,000,000

(Renminbi ThreeHundred and Sixty

Eight Million)


– 30 –

Notes:

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

Usage of main structure : 2.687038 hectare for holiday reception facilities uses;19.751303 hectare for conference and exhibition uses

Plot ratio : 4 0.40Total gross floor area : 4 89,753.36 square metresHeight restriction : 4 18 metresBuilding Density : 4 18%Building covenant : Commence construction before 9 May 2013

Completion before 9 May 2015

(ii) According to a Land Use Right Transfer Supplementary Contract (the ‘‘Land Supplementary Contract’’) dated4 August 2014 entered into between the Land Vendor and Hongxia Development, the usage of portion of thesubject land with a site area of approximately 157,235.55 square metres located within the C-02 lot waschanged from conference and exhibition to accommodation and catering uses (Hotel Industry Land) with aland premium of RMB286,011,465.

(iii) According to a 土地房屋權證 (translated as Land and Housing Rights Certificate) (San Tu Fang (2014) Zi Di13971 Hao) issued by Sanya City People’s Government dated 21 October 2014, the land use rights of a parcelof land with a site area of approximately 197,511.91 square metres were granted to Hongxia Development fora term expiring on 9 February 2063 for accommodation, catering, conference and exhibition uses. Portion ofthe land parcel with a site area of approximately 157,235.55 square metres was granted for accommodationand catering uses while the other portion with a site area of approximately 40,280 square metres was grantedfor conference and exhibition uses.

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

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

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

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

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

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


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

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

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

(a) The Target Properties have obtained the Construction Work Planning Permit (Jian Zi Di460200201500254 Hao) issued by the Planning Bureau of Sanya City, the Construction WorkCommencement Permit (no. 460200201409290301), the Construction Work Completion and AcceptanceRecord (Bei An Hao [2015]052 Hao) and the Commodity Home Pre-sale Permission Certificate (SanFang Yu Xu Zi (Zhan Qi) [2014]50 Hao) issued by the Housing and Urban Bureau of Sanya City, suchpermit, record and certificate are real and effective;

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

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

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

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

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

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


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1. RESPONSIBILITY STATEMENT

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

2. SHARE CAPITAL

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

Authorised: HK$

20,000,000,000 Shares 2,000,000,000.00

Issued and fully paid:

784,728,000 Shares 78,472,800.00

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

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

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

3. DISCLOSURE OF INTERESTS

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

As at the Latest Practicable Date, the interests or short positions of the Directors andchief executive of the Company in the Shares, underlying Shares and debentures of theCompany or any of its associated corporations (within the meaning of Part XV of theSFO) which were notified to the Company and the Stock Exchange pursuant to Divisions7 and 8 of Part XV of the SFO (including interests or short positions which they weretaken or deemed to have under such provisions of the SFO), or which were required,pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or

APPENDIX IV GENERAL INFORMATION

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which were required, pursuant to the Model Code for Securities Transactions by Directorsof Listed Companies, to be notified to the Company and the Stock Exchange were asfollows:

Long position in Shares:

Name Nature of interestTotal number

of Shares

Approximatepercentage of

the Company’sissued share

capital

Ms. Shi Qi Interest of a controlledcorporationNote

436,540,400 55.63%

Mr. Huang Te-Wei Beneficially owned 1,330,000 0.17%

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

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

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

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


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4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposedservice contract with any member of the Group which does not expire or is not terminable bysuch member of the Group within one year without payment of compensation (other thanstatutory compensation).

5. COMPETING INTEREST

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

6. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS

As at the Latest Practicable Date:

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

(ii) none of the Directors has or had any direct or indirect interest in any assets whichhave been acquired or disposed by or leased to any member of the Group or areproposed to be acquired or disposed of by or leased to any member of the Groupsince 31 July 2015, being the date to which the latest published audited consolidatedfinancial statements of the Group were made up.

7. LITIGATION

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

8. MATERIAL CONTRACTS

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


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9. EXPERTS AND CONSENTS

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

Name Qualification

SHINEWING (HK) CPA Limited Certified public accountant

Greater China Appraisal Limited Independent professional valuer

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

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

As at the Latest Practicable Date, none of SHINEWING (HK) CPA Limited and GreaterChina Appraisal Limited had any direct or indirect interest in any assets which have been,since 31 July 2015 (the date to which the latest published audited consolidated financialstatements of the Group were made up), acquired or disposed of by or leased to any member ofthe Group, or are proposed to be acquired or disposed of by or leased to any member of theGroup.

10. GENERAL

(i) The registered office of the Company is at Cricket Square, Hutchins Drive, P.O. Box2681 GT, Grand Cayman KY1-1111, Cayman Islands.

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

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

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


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11. DOCUMENTS AVAILABLE FOR INSPECTION

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

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

(b) the letter from SHINEWING (HK) CPA Limited in respect of the unaudited proforma financial information of the Group upon the completion of Acquisition as setout in Appendix II to this circular;

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

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

(e) the annual reports of the Company for each of the two years ended 31 July 2014 and2015;

(f) the MOU;

(g) the Sale and Purchase Agreement; and

(h) this circular.


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ta yang group holdings limited 團 控 股 有 限 公...

Documents

ta yang group holdings limited 團控股有限公...