Man Sang International : MAJOR AND CONNECTED TRANSACTION RELATING TO ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF DOOF JAPAN AND NOTICE OF SPECIAL GENERAL MEETING

September 10, 2020 at 12:05 am EDT

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Man Sang International Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser(s) or the transferee(s) or to the bank, stockbroker 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.

This circular is for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of the Company.

Man Sang International Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 938)

MAJOR AND CONNECTED TRANSACTION

RELATING TO ACQUISITION OF THE

ENTIRE ISSUED SHARE CAPITAL OF DOOF JAPAN

AND

NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

Independent Financial Adviser to the Independent Board Committee

and the Independent Shareholders

A notice convening a special general meeting of Man Sang International Limited to be held at Suite 2703, 27/F., Shui On Centre, 6-8 Harbour Road Wanchai, Hong Kong on Friday, 25 September 2020 at 4:15 p.m.(or immediately after the conclusion or the adjournment of the annual general meeting of the Company to be held at the same venue and on the same day at 4:00 p.m.), is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for use at the special general meeting is also enclosed with this circular. Such form of proxy is also published on the websites of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk and the Company at www.msil.com.hk.

Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company's branch share registrar and transfer office in Hong Kong, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong as soon as practicable and in any event not later than 48 hours before the time appointed for holding the special general meeting, 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 special general meeting or any adjourned meeting (as the case may be) should you so wish. In such event, the instrument appointing a proxy shall be deemed revoked.

Please see page 1 of this circular for measures being taken to try to prevent and control the spread of the Novel Coronavirus (COVID-19) at the special general meeting, including:

compulsory temperature checks
compulsory wearing of surgical face masks for each attendee
no distribution of corporate gifts or refreshments

Any person who does not comply with the precautionary measures or is subject to any Hong Kong Government prescribed quarantine may be denied entry into the venue of the special general meeting. The Company also encourages its shareholders to consider appointing the chairman of the meeting as its/his/her proxy to vote on the relevant resolutions at the special general meeting as an alternative to attending the meeting in person. Subject to the development of COVID-19, the Company may implement further changes and precautionary measures and may issue further announcement on such measures as appropriate.

10 September 2020

		CONTENTS
			Page
PRECAUTIONARY MEASURES FOR THE SPECIAL GENERAL MEETING . . . .	1
DEFINITIONS .	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	29
LETTER FROM GRAM CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
APPENDIX I	-	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . .	I-1
APPENDIX II	-	FINANCIAL INFORMATION OF THE TARGET GROUP . .	II-1
APPENDIX III	-	MANAGEMENT DISCUSSION AND ANALYSIS OF THE
		TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	-	UNAUDITED PRO FORMA FINANCIAL INFORMATION
		OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	-	VALUATION REPORT OF THE TARGET PROPERTY . . . .	V-1
APPENDIX VI	-	PROPERTY INTEREST, PROPERTY VALUATION AND
		RECONCILIATION OF APPRAISED PROPERTY
		VALUES WITH NET BOOK VALUES . . . . . . . . . . . . . . . . .	VI-1
APPENDIX VII	-	VALUATION REPORT OF THE PLANT AND EQUIPMENT
		OF THE TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-1
APPENDIX VIII -	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1
NOTICE OF SGM . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

- i -

PRECAUTIONARY MEASURES FOR THE SPECIAL GENERAL MEETING

In view of the ongoing Novel Coronavirus ("COVID-19") pandemic and recent requirements, if any, for prevention and control of its spread, the Company will implement the following preventive measures at its special general meeting ("SGM"):

Compulsory body temperature check will be conducted on every shareholder, proxy and other attendee at the entrance of the SGM venue. Any person with a body temperature of over 37.3 degrees Celsius may be denied entry into the SGM venue and be asked to leave the SGM venue.
Shareholders that (a) have travelled, and have been in close contact with any person who has travelled, outside of Hong Kong (as per guidelines issued by the Hong Kong government at www.chp.gov.hk/en/features/102742.html) at any time in the preceding 14 days; (b) are, and have been, in close contact with any person who is, subject to any Hong Kong Government prescribed compulsory quarantine (including home quarantine); (c) are, and have been, in close contact with anyone who has contracted COVID-19, has been tested preliminarily positive of COVID-19 or is suspected of contracting COVID-19; or (d) have any flu-like symptoms, may be denied entry into the SGM venue and be asked to leave the SGM venue.
All shareholders, proxies and other attendees are required to wear surgical face masks inside the SGM venue at all times. Any person who does not comply with this requirement may be denied entry into the SGM venue and be asked to leave the SGM venue.
No refreshments will be served, and there will be no corporate gifts. Seating will be arranged to ensure adequate physical distancing between attendees in order to reduce person-to-person contact.

To the extent permitted under the laws of Hong Kong, the Company reserves the right to deny entry into the SGM venue or require any person to leave the SGM venue in order to ensure the safety of the attendees at the SGM.

In the interest of all stakeholders' health and safety and consistent with recent COVID-19 guidelines for prevention and control, the Company reminds all shareholders that physical attendance in person at the SGM is not necessary for the purpose of exercising voting rights. As an alternative to attending the meeting in person, shareholders are encouraged to consider appointing the chairman of the SGM as their proxy to vote on the relevant resolutions at the SGM by submitting forms of proxy with voting instructions inserted.

The form of proxy is attached to this circular for shareholders who opt to receive printed copies of the Company's corporate communications. Alternatively, the form of proxy can be downloaded from the Company's website at www.msil.com.hk and the website of The Stock Exchange of Hong Kong Limited at www.hkexnews.hk. If you are not a registered shareholder (if your shares are held via banks, brokers, custodians or the Hong Kong Securities Clearing Company Limited), you should consult directly with your banks or brokers or custodians (as the case may be) to assist you in the appointment of proxy.

- 1 -

DEFINITIONS

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

"Acquisition"	the acquisition of the Sale Shares and the Shareholder's
	Loan by the Purchaser from the Vendor pursuant to the
	Acquisition Agreement
"Acquisition Agreement"	the conditional sale and purchase agreement dated 14 July
	2020 entered into between the Purchaser and the Vendor in
	relation to the Acquisition
"Announcement"	the announcement of the Company dated 14 July 2020 in
	relation to, among other things, the Acquisition
"Board"	the board of Directors
"Business Day(s)"	any day (excluding Saturday and Sunday and public
	holidays) on which licensed banks in Hong Kong are
	generally open for business in Hong Kong
"BVI"	the British Virgin Islands
"Company"	Man Sang International Limited, a company incorporated
	in Bermuda with limited liability and the Shares of which
	are listed on the Main Board of the Stock Exchange (Stock
	Code: 938)
"Completion"	the completion of the Acquisition pursuant to the terms and
	conditions contained in the Acquisition Agreement
"Completion Date"	seven Business Days immediately following the date on
	which all conditions are satisfied or waived or such later
	date as the parties to the Acquisition Agreement shall agree
"connected person(s)"	has the meaning ascribed to it in the Listing Rules
"Consideration Shares"	a total of 163,717,121 Shares (subject to the adjustment as
	described in the paragraph headed "Adjustment
	mechanism" in the Announcement) to be allotted and
	issued by the Company to the Vendor (or such other
	person(s) as may be directed by the Vendor) pursuant to the
	Acquisition Agreement as the Consideration at the Issue
	Price
"Director(s)"	the director(s) of the Company

- 2 -

	DEFINITIONS
"Doof Japan"	株式會社多弗* (Tafutsu Kabushiki Kaisha*), a company
	incorporated in Japan with limited liability, which is
	wholly-owned by Mr. Hu
"Equipment Valuation"	the valuation of the plant and equipment of the Target
	Group, which is JPY38,248,800 (equivalent to
	approximately HK$2,730,964) as at 22 June 2020,
	pursuant to the valuation report issued by Vigers Appraisal
	& Consulting Limited
"Enlarged Group"	the Group immediately upon completion of the Acquisition
"Final Consideration"	the amount of JPY848,394,046 (equivalent to
	approximately HK$60,575,335), being the consideration
	payable by the Company to the Vendor for the Acquisition
	(after the adjustment as described in the paragraph headed
	"Adjustment mechanism" in the Announcement) pursuant
	to the Acquisition Agreement
"Group"	the Company and its subsidiaries from time to time
"HK$"	Hong Kong dollars, the lawful currency of Hong Kong
"Hong Kong"	the Hong Kong Special Administrative Region of the PRC
"Ichiki Kogyo"	一木興業合同會社* (Ichiki Kogyo Godo Kaisha*), a
	company incorporated in Japan with limited liability
"Independent Board Committee"	an independent committee of the Board comprising all its
	independent non-executive Directors, established for the
	purpose of advising Independent Shareholders on the
	Acquisition Agreement and the transactions contemplated
	therein (including the allotment and issue of the
	Consideration Shares)
"Independent Financial Adviser"	Gram Capital Limited, a corporation licensed to carry out
or "Gram Capital"	Type 6 (advising on corporate finance) regulated activity
	under the Securities and Futures Ordinance (Chapter 571
	of the Laws of Hong Kong), which has been appointed as
	the independent financial adviser to the Independent Board
	Committee and the Independent Shareholders advising on
	the Acquisition Agreement

- 3 -

	DEFINITIONS
"Independent Shareholders"	the Shareholders, other than those required under the
	Listing Rules to abstain from voting on the resolution(s) to
	be proposed at the SGM, to approve the Acquisition and
	the transactions contemplated therein (including the
	allotment and issue of the Consideration Shares)
"Initial Consideration"	the amount of JPY848,394,046 (equivalent to
	approximately HK$60,575,335), being the consideration
	payable by the Company to the Vendor for the Acquisition
	(before the adjustment as described in the paragraph
	headed "Adjustment mechanism" in the Announcement)
	pursuant to the Acquisition Agreement
"Issue Price"	the issue price of the Consideration Shares at HK$0.370
	per Share
"JPY"	Japanese Yen, the lawful currency of Japan
"Latest Practicable Date"	4 September 2020, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining
	certain information contained herein
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"Longstop Date"	the 180th day immediately following the date on which the
	Acquisition Agreement was executed
"PRC"	the People's Republic of China, which for the purpose of
	this circular excludes, Hong Kong, the Macau Special
	Administrative Region and Taiwan
"Previous Acquisitions"	the acquisition of the entire equity interest in Zhejiang
	Doof Property Management Services Co., Ltd.* (浙江多弗
	物業管理服務有限公司), details of which were disclosed
	in the announcements of the Company dated 13 December
	2019 and 9 March 2020, and the acquisition of the entire
	equity interest in Wenzhou Junshang Decoration Co., Ltd.*
	(溫州君尚裝飾有限公司), details of which were disclosed
	in the announcements of the Company dated 8 May 2020
	and 21 May 2020
"Property Valuation"	the valuation of the Target Property, which is
	JPY1,034,000,000	(equivalent	to	approximately
	HK$73,827,600 as	at 22 June	2020),	pursuant to the

valuation report issued by Vigers Appraisal & Consulting Limited

- 4 -

	DEFINITIONS
"Purchaser"	Decent Start Limited, a company incorporated in the BVI
	with limited liability, which is wholly-owned by the
	Company
"RMB"	Renminbi, the lawful currency of the PRC
"Sale Shares"	the 1,000 shares of Doof Japan legally and beneficially
	owned by the Vendor, representing the entire issued share
	capital of Doof Japan to be acquired by the Purchaser from
	the Vendor pursuant to the Acquisition Agreement
"SFC"	the Securities and Futures Commission of Hong Kong
"SGM"	the special general meeting of the Company to be convened
	and held for, the purpose of considering and, if thought fit,
	approving, among other things, the Acquisition Agreement
"Share(s)"	the ordinary share(s) of HK$0.10 each in the share capital
	of the Company
"Shareholder(s)"	the holder(s) of the Share(s) of the Company
"Shareholder's Loan"	an amount of approximately JPY1,975,537,251 (equivalent
	to approximately HK$141,053,360) which is outstanding,
	repayable upon demand and owing by the Target Group to
	the Vendor as at the date of the Acquisition Agreement and
	at Completion in respect of an interest-free loan made
	available by the Vendor to the Target Group
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Target Group"	Doof Japan, Yoichi Country, Tokyo Doof and Ichiki Kogyo
"Target Property"	the hotel property and gold course located at 2361-1,
	Yoichi Cho, Yoichi Gun, Hokkaido, Japan
"Tokyo Doof"	東京多弗合同會社* (Tokyo Tafutsu Godo Kaisha*), a
	company incorporated in Japan with limited liability
"Vendor" or "Mr. Hu"	Mr. Hu Xingrong, an executive Director and the ultimate
	controlling Shareholder of the Company
"Yoichi Country"	余市鄉村株式會社* (Yoichi Country Kabushiki Kaisha*),
	a company incorporated in Japan with limited liability,
	which is a wholly-owned subsidiary of Doof Japan
"%"	per cent.

- 5 -

DEFINITIONS

For the purpose of this circular, unless the context otherwise requires, conversion of JPY into HK$ is based on the approximate exchange rate of JPY 1 to HK$0.0714. Such exchange rate is for the purpose of illustration only and does not constitute a representation that any amounts in HK$ or JPY have been, could have been or may be converted at such or any other rate or at all.

The names of entities marked with "*" for which no official translation exists are unofficial translations for identification purpose only and should not be regarded as their official translation.

- 6 -

LETTER FROM THE BOARD

Man Sang International Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 938)

Executive Directors:	Registered office:
Mr. HU Xingrong	Clarendon House
Mr. HUANG Xiaohai	2 Church Street
Mr. JIN Jianggui	Hamilton HM11
Mr. LI Zhenyu	Bermuda
Mr. XU Haohao
	Principal place of business:
Independent non-executive Directors:	Unit WF, 25th Floor
Ms. PAU Yee Ling	Eight Commercial Tower
Mr. WONG Kwan Kit	8 Sun Yip Street
Mr. YUEN Hoi Po	Chai Wan, Hong Kong
	10 September 2020
To the Shareholders
Dear Sir or Madam

MAJOR AND CONNECTED TRANSACTION

RELATING TO ACQUISITION OF THE

ENTIRE ISSUED SHARE CAPITAL OF DOOF JAPAN

AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 14 July 2020 in relation to, among other things, the Acquisition.

The purpose of this circular is to provide the Shareholders with, among other things, (i) details of the Acquisition; (ii) the letter of recommendation from the Independent Board Committee to the Independent Shareholders in respect of the Acquisition; (iii) a letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition; (iv) the notice of the SGM; and (v) other information as required under the Listing Rules.

- 7 -

LETTER FROM THE BOARD

References are also made to (i) the announcement of the Company dated 12 April 2016 and the circular of the Company dated 16 June 2016 in relation to an acquisition agreement entered into amongst the Company, Xinli Holdings Limited (as vendor) and Ms. Wang Ming (as guarantor), pursuant to which the Company has conditionally agreed to acquire and Xinli Holdings Limited has conditionally agreed to sell the entire share capital of Gloryear Investments Limited, together with the amounts due and owing to Xinli Holdings Limited, at an aggregate consideration of HK$1,468,000,000; and (ii) the announcement of the Company dated 1 November 2017 and the circular of the Company dated 5 December 2017 in relation to a sale and purchase agreement entered into between Man Sang Enterprise Ltd., a direct wholly-owned subsidiary of the Company and Zhuji Tonghe Jewellery Co. Ltd.*（諸暨市通和珠寶有限公司） ("Zhuji Tonghe"), pursuant to which Zhuji Tonghe has conditionally agreed to purchase and Man Sang Enterprise Ltd. has conditionally agreed to sell, the entire equity interest in Smartest Man Holdings Limited, together with the amount due to the Group, at an aggregate consideration of RMB362,480,000 (equivalent to approximately HK$427,726,000).

A chronology of events in relation to the aforementioned transactions up to when Mr. Hu became a controlling Shareholder of the Company is provided below for information purpose:

Date	Events
8 April 2016	The Company, Xinli Holdings Limited and Ms. Wang Ming
	entered into the acquisition agreement in relation to the
	acquisition of the entire equity interest in Gloryear
	Investments Limited, which consideration was to be
	satisfied by a combination of cash and the issue of
	promissory notes
28 July 2016	The acquisition of the entire equity interest in Gloryear
	Investments Limited was completed and the Promissory
	Notes in the principal amount of HK$1,168 million with
	interest rate of 8% per annum (the "Promissory Notes")
	was issued to Xinli Holdings Limited
14 September 2016	The Company had early redeemed an aggregate principal
	amount of HK$120 million of the Promissory Notes
27 September 2016	The Company had early redeemed an aggregate principal
	amount of HK$120 million of the Promissory Notes
24 October 2016	The Company had early redeemed an aggregate principal
	amount of HK$150 million of the Promissory Notes
1 November 2017	Man Sang Enterprise Ltd. and Zhuji Tonghe entered into
	the sale and purchase agreement in relation to the disposal
	of the entire equity interest in Smartest Man Holdings
	Limited

- 8 -

	LETTER FROM THE BOARD
15 December 2017	Xinli Holdings Limited transferred the Promissory Notes
	in the principal amount of HK$778 million to Total Idea
	International Limited, a company wholly-owned by Mr.
	Hu. At the relevant time, each of Total Idea International
	Limited and Mr. Hu were parties independent of the
	Company and its connected persons
3 January 2018	The disposal of the entire equity interest in Smartest Man
	Holdings Limited was completed
3 April 2018	China DaDi Group Limited, which is wholly-owned and
	ultimately owned by Mr. Hu, acquired an aggregate of
	414,802,041 Shares, representing approximately 21.76%
	of the entire issued share capital of the Company at the
	relevant time from Jin Sheng BoJi (Hong Kong) Limited
	and Twin Success International Limited
6 September 2018	China DaDi Group Limited, as purchaser, and Mr. Cheng
	Chung Hing and Rich Men Limited, as vendors, entered
	into a sale and purchase agreement in relation to the sale
	and purchase of 380,555,108 Shares (the "Sale Shares"),
	representing approximately 19.96% of the entire issued
	share capital of the Company at the relevant time. China
	DaDi Group Limited was required to make a mandatory
	conditional cash offer for all the issued Shares (other than
	those already owned or to be acquired by China DaDi
	Group Limited and parties acting in concert with it)
7 September 2018	The acquisition of the Sale Shares was completed and
	China DaDi Group Limited held an aggregate of
	795,357,149 Shares, representing approximately 41.73%
	of the entire issued share capital of the Company at the
	relevant time

Mr. Hu had many years of experience in corporate management, investment and business development of companies in different industries, especially in property development industry in the PRC. In 2017, Mr. Hu initially came to know about the Company through his contacts in the real estate industry and became aware of the transaction involving the acquisition of the entire equity interest in Gloryear Investments Limited. As advised by Mr. Hu, Mr. Hu subsequently became aware that Ms. Wang Ming, having considered her cash position, liquidity and other real estate interests, had the intention to transfer the Promissory Notes. As advised by Mr. Hu, the Promissory Notes were transferred from Xinli Holdings Limited to Total Idea International Limited on 15 December 2017 following arm's length negotiation between the parties having considered that the Promissory Notes would generate interest income at maturity date. Mr. Hu had made other similar investments involving advancing interest-bearing loans to other parties.

- 9 -

LETTER FROM THE BOARD

As Mr. Hu became more familiar with the Company, Mr. Hu was of the view that he would be able to leverage on his experience and his extensive commercial network to support the Group's business. As such, on 3 April 2018, China DaDi Group Limited acquired an aggregate of 414,802,041 Shares, representing approximately 21.76% of the entire issued share capital of the Company. On 2 May 2018, Mr. Hu was appointed as the chairman of the Board and an executive Director of the Company and was responsible for the business strategy and direction of the Company and for providing leadership for the Board and ensuring proper and effective function of the Board. Mr. Hu was able to obtain an in-depth understanding of the operations of the Company through his appointment as member of the Board. In order to allow China DaDi Group Limited, and in turn Mr. Hu, to consolidate its control in the Company and play a greater role in directing the future development of the Group, which was expected to improve the financial performance of the Group and create greater value for the Shareholders in long term perspective, China DaDi Group Limited further acquired 380,555,108 Shares, representing approximately 19.96% of the entire issued share capital of the Company on 7 September 2018, thereby becoming a controlling Shareholder of the Company.

At the time of the acquisition of Gloryear Investments Limited, Ms. Wang Ming was the sole ultimate beneficial owner and director of Xinli Holdings Limited. At the time of disposal of Smartest Man Holdings Limited, Mr. Chen Yao was the sole ultimate beneficial owner of Zhuji Tonghe. To the best of the Directors' knowledge, information and belief having made all reasonable enquiry, as at all times, each of Xinli Holdings Limited and Zhuji Tonghe, and their respective ultimate beneficial owners, do not have any relationship (business or otherwise, implicit or explicit, expressed or implied) nor have any arrangement, understanding or undertaking (formal or informal, expressed or implied) with, and is a third party independent of, Mr. Hu, the Company and their connected persons.

THE ACQUISITION AGREEMENT

Date

14 July 2020

Parties

Decent Start Limited, as the Purchaser
Mr. Hu, as the Vendor
the Company

As at the Latest Practicable Date, the Vendor is Mr. Hu, an executive Director and the ultimate controlling Shareholder of the Company, and is therefore a connected person of the Company under the Listing Rules.

- 10 -

LETTER FROM THE BOARD

Assets to be acquired

The assets to be acquired under the Acquisition Agreement comprise (i) the Sale Shares, representing the entire issued share capital of Doof Japan as at the Latest Practicable Date; and

the Shareholder's Loan. Upon Completion, Doof Japan will become an indirect wholly-owned subsidiary of the Company.

Yoichi Country is a wholly-owned and major operating subsidiary of Doof Japan. The principal asset of Yoichi Country is the Target Property, which consists of hotel property and 18-hole golf course, details of which are set out in the paragraph headed "Information on the Target Group - Yoichi Country" below. As advised by the Vendor, Yoichi Country was acquired by Doof Japan from Mr. Hiroki Tatsukawa on 10 May 2017 and the original acquisition cost of the equity interests of Yoichi Country was JPY1,200,000,000 (equivalent to approximately HK$85,680,000). To the best of the Directors' knowledge, information and belief having made all reasonable enquiry, Mr. Hiroki Tatsukawa is a third party independent of the Company, its connected persons (including Mr. Hu) and their respective associates, Ms. Wang Ming and Mr. Chen Yao.

Consideration and Payment Terms

Pursuant to the Acquisition Agreement, the Initial Consideration of JPY848,394,046 (equivalent to approximately HK$60,575,335) for acquiring the equity interest in Doof Japan and the Shareholder's Loan shall be satisfied by the Company by the issue and allotment of the Consideration Shares (subject to the adjustment as described in the paragraph headed "Adjustment mechanism" in the Announcement) at the Issue Price of HK$0.370 to the Vendor (or such other person(s) may be directed by the Vendor in writing) within seven business days from the Completion Date.

Pursuant to the adjustment mechanism to the consideration as provided in the Acquisition Agreement and as described in the paragraph headed "Adjustment mechanism" in the Announcement, the Consideration remains unchanged, and the Final Consideration is JPY848,394,046 (equivalent to approximately HK$60,575,335). Accordingly, the Consideration Shares shall comprise 163,717,121 new Shares.

Based on the closing price of the Shares of HK$0.410 per Share as quoted on the Stock Exchange on 14 July 2020, being the date of the Acquisition Agreement, the market value of the Consideration Shares would be approximately HK$67,124,020.

- 11 -

LETTER FROM THE BOARD

Basis of the Consideration

As disclosed in the Announcement, the consideration for the Acquisition was arrived at after arm's length negotiations between the Purchaser and the Vendor and was determined after having taken into account various relevant factors including:

the net liabilities of the Target Group as at 31 March 2020;
the Property Valuation;
the Equipment Valuation;
the Shareholder's Loan; and
a 10.00% discount on the aggregate of the Shareholder's Loan and the adjusted net liabilities of the Target Group.

Audited Adjusted Net Liabilities and the consideration for the Acquisition

In determining the Initial Consideration, the unaudited net liabilities of the Target Group was adjusted to reflect its fair value by taking into account the valuation of the Target Property of approximately JPY1,034,000,000 and the valuation of the plant and equipment of the Target Group of approximately JPY38,248,800 as at 22 June 2020. The Final Consideration, which amounts to JPY848,394,046, is calculated based on the adjustment as described in the paragraph headed "Adjustment mechanism" in the Announcement. The following table demonstrates the calculations of the audited adjusted net liabilities of the Target Group (the "Audited Adjusted Net Liabilities") and the Final Consideration:

		JPY
Audited net liabilities of the Target Group as at 31 March 2020	(1,031,501,000)
Less: Carrying amounts of the property, plant and equipment as
at 31 March 2020	(1,073,625,000
Add: Property Valuation as at 22 June 2020	1,034,000,000
Add: Equipment Valuation as at 22 June 2020	38,248,800
Audited Adjusted Net Liabilities	(1,032,877,200)


Add: The Shareholder's Loan	1,975,537,251
Aggregate of the Shareholder's Loan and the Audited
Adjusted Net Liabilities	942,660,051
Less: 10.00% discount on the aggregate of the Shareholder's


Loan and the Audited Adjusted Net Liabilities		(94,266,005)
Final Consideration		848,394,046

- 12 -

LETTER FROM THE BOARD

The Directors note that the Target Group has net liabilities, which was mainly attributable to the loan from shareholder (i.e. the Vendor) and the Target Group has no third party loans. The Shareholders' Loan was provided by the Vendor to the Target Group for the purpose of acquisition of Yoichi Country by Doof Japan in May 2017 and to support the operation of the Target Group. The nature of the Shareholders' Loan, in substance, is similar to injection of capital to the Target Group. Therefore, when determining the consideration, the net liabilities of the Target Group was adjusted to add back the amount of the Shareholders' Loan, together with the valuation of the property, plant and equipment of the Target Group, so as to reflect the fair value of the key assets of the Target Group. After the Completion, the Group may consider to capitalise the Shareholders' Loan to transform the loan amount into share capital of Doof Japan. It is also noted that the consideration of the Acquisition will be settled by way of issue of new Shares at the Issue Price which was at a discount of approximately 9.76% to the closing price of the Shares of HK$0.410 per Share as quoted on the Stock Exchange on 14 July 2020. Having considered this, 10% discount is also applied to the aggregate of the Shareholder's Loan and the adjusted net liabilities of the Target Group.

The Directors noted that the COVID-19 situation and travel restrictions in Japan has significantly and adversely affected the business of the Target Group. However, the Directors believe that there is growth potential in the hospitality sector in Japan in the long run. Furthermore, as mentioned above, when determining the consideration of the Acquisition, the Group has taken into account of the fair value of the key assets of the Target Group as at 22 June 2020, which was a date after the outbreak of COVID-19 in early 2020. The Directors believe that consideration of the Acquisition has included an updated valuation of the Target Group.

Having considered the above, particularly the fair value of the key assets of the Target Group when determining the Final Consideration, the amount of capital injected by the Vendor in the form of Shareholder's Loan, together with a 10% discount to the aggregate of the Shareholder's Loan and the adjusted net liabilities of the Target Group, which approximates to the discount of the Issue Price when compared to the closing price of the Shares on the date of the Acquisition Agreement, the Directors are of the view that the consideration of the Acquisition (including the 10% discount) is fair and reasonable.

The Consideration Shares

On the basis of the closing prices of the Company of HK$0.410 and HK$0.430 per Share as quoted on the Stock Exchange on 14 July 2020 (being the date of the Acquisition Agreement) and on 4 September 2020 (being the Latest Practicable Date), the market value of the Consideration Shares is approximately HK$67,124,020 and HK$70,398,362, respectively. The Consideration Shares represent approximately 8.00% of the existing issued share capital of the Company as at the Latest Practicable Date, or approximately 7.40% of the enlarged issued share capital of the Company immediately upon Completion (assuming that there will not be any change in the issued share capital of the Company from the Latest Practicable Date up to the Completion Date).

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LETTER FROM THE BOARD

The Issue Price of HK$0.370 per Share was arrived at after arm's length negotiations between the Purchaser and the Vendor having considered, among others, the recent trading prices of the Shares, the issue of placing shares at a discount of approximately 14.63% to the closing price of HK$0.410 per Share on the date of the placing agreement in respect of the Company's recent placing of Shares announced on 24 June 2020, the financial performance of the Group and the current market conditions. In particular, having considered that the Acquisition from the Vendor constitutes a connected transaction of the Company, and that the discount on the Issue Price (to the closing price of the Shares on the date of the Acquisition Agreement) is smaller than the discount on the placing price of the placing shares (to the closing price of the Shares on the date of the placing agreement on 24 June 2020), the Board considers that the Issue Price is fair and reasonable. The Issue Price represents:

a discount of approximately 9.76% to the closing price of the Shares of HK$0.410 per Share as quoted on the Stock Exchange on 14 July 2020, being the date of the Acquisition Agreement;
a discount of approximately 9.09% to the average closing price of the Shares of HK$0.407 per Share for the last 5 trading days up to and including 14 July 2020, being the date of the Acquisition Agreement;
a discount of approximately 10.63% to the average closing price of the Shares of HK$0.414 per Share for the last 10 trading days up to and including 14 July 2020, being the date of the Acquisition Agreement;
a discount of approximately 13.42% to the average closing price of the Shares of approximately HK$0.427 per Share for the last 30 trading days up to and including 14 July 2020, being the date of the Acquisition Agreement;
a discount of approximately 11.60% to the average closing price of the Shares of approximately HK$0.419 per Share for the last 90 trading days up to and including 14 July 2020, being the date of the Acquisition Agreement;
a discount of approximately 11.18% to the average closing price of the Shares of approximately HK$0.417 per Share for the last 180 trading days up to and including 14 July 2020, being the date of the Acquisition Agreement; and
a premium of approximately 49.92% over the audited consolidated net asset value of the Group per Share of approximately HK$0.2468 as at 31 March 2020.

The Consideration Shares, upon issue, shall rank pari passu in all aspects with the existing Shares save that the Consideration Shares will not rank for any dividend or other distribution of the Company declared by reference to a record date prior to the issue date of the Consideration Shares.

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LETTER FROM THE BOARD

The allotment and issue of the Consideration Shares will not result in a change of control of the Company.

Conditions Precedent

Completion of the Acquisition Agreement is conditional upon, among others:

the passing by Independent Shareholders at the SGM by poll of an ordinary resolution to approve: (1) the Acquisition contemplated under the Acquisition Agreement as required by the Listing Rules; and (2) the allotment and issue of the Consideration Shares to the Vendor (or such other person(s) as may be directed by the Vendor in writing) under the Acquisition Agreement;
the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the Consideration Shares;
the obtaining of all necessary authorisations and internal approvals by the Vendor and Doof Japan for conducting the transactions contemplated under the Acquisition Agreement;
the provision of written documents by the Vendor and Doof Japan to the Purchaser certifying that all necessary third party consents and permissions for conducting the transactions contemplated under the Acquisition Agreement have been obtained;
the representations and warranties given by the Vendor and Doof Japan in the Acquisition Agreement remaining true and accurate and not misleading as if they are repeated at any time prior to Completion by reference to the facts and circumstances then existing;
the Purchaser and Doof Japan having fulfilled their respective obligations under the Acquisition Agreement that should be fulfilled on or before the Completion Date;
there has been no material adverse effect on the operations, assets and financial situation of Doof Japan from the date of the Acquisition Agreement up to the Completion Date; and
the obtaining of all necessary authorisations and internal approvals by the Purchaser for conducting the transactions contemplated under the Acquisition Agreement.

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LETTER FROM THE BOARD

The Purchaser shall be entitled to waive the compliance with the conditions (v) to (vii) above and the Vendor shall be entitled to waive the compliance with the condition (viii) above as the parties agreed to retain flexibility to complete the Acquisition notwithstanding that such conditions may be unfulfilled. Conditions (i) to (iv) above may not be waived. If the above conditions are not fulfilled or waived on or before the Longstop Date, the Acquisition Agreement shall terminate and neither party shall have any liability thereunder save for any antecedent breach of the terms of the Acquisition Agreement.

As at the Latest Practicable Date, conditions (iv) and (viii) have been satisfied. The Company expects that all the conditions (including the remaining conditions) will be fulfilled on or before the Completion Date.

Vendor's Undertakings

The Vendor has undertaken to, among other matters:

do all such act to procure the approval of the transfer of the Sale Shares by Doof Japan;
complete the necessary formalities in relation to the transfer of the Sale Shares in accordance with the application laws and regulations;
report to the Purchaser immediately upon aware of any potential litigation, non-compliance or any other matter or circumstances that may have a material adverse impact on the business, assets, liabilities, financial situation, operating results, cashflow or future revenue of Doof Japan;
procure the good faith management of Doof Japan, to operate the business and manage and operate the assets of Doof Japan in substantially same way and not to conduct any important business not in the ordinary and usual course of business, including but not limited to transfer, disposal, leasing, acquisition of material asset or business, new borrowings or other indebtedness, provision of guarantees and undertakings and material expenditures); and
obtain, and procure Doof Japan to obtain, all necessary third party consents and permissions for conducting the transactions contemplated under the Acquisition Agreement.

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LETTER FROM THE BOARD

Completion

Upon compliance with or fulfilment or waiver of all the conditions precedent, Completion shall take place on the Completion Date. Following Completion, Doof Japan will become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the financial statements of the Group.

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

SHAREHOLDING STRUCTURE OF THE COMPANY

Assuming that there will not be any change in the issued share capital of the Company from the Latest Practicable Date up to the Completion Date, set out below is the table of the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the Completion:

	As at the Latest	Immediately after the
	Practicable Date	Completion
		Approximate		Approximate
		percentage of		percentage of
	Number of	total issued	Number of	total issued
	Shares	Shares	Shares	Shares
Name of Shareholders
China DaDi Group Limited
(Note)	1,197,921,245	58.51%	1,361,638,366	61.58%
Other public shareholders	849,354,611	41.49%	849,354,611	38.42%
Total	2,047,275,856	100.00%	2,210,992,977	100.00%

Note: The entire issued share capital of China DaDi Group Limited is wholly-owned by Mr. Hu.

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LETTER FROM THE BOARD

REASONS FOR, AND BENEFITS OF, THE ACQUISITION

The Company is an investment holding company. The Group is principally engaged in property development and investment which covers development, sales and leasing of properties (including serviced apartments, residential apartments and shopping mall).

To continue the momentum of the Group's expansion of its property development and related investment business, the Board considers that the Acquisition offers a good opportunity for the Group to expand into Japan market and enhance its assets portfolio with a potential of capital appreciation in the long run. The principal assets of the Target Group are a hotel with 24 rooms and 10 log houses, and a golf club with an 18-hole golf course located in Yoichi, Japan. The principal business of the Target Group is to manage and operate the hotel and the golf club with 18-hole golf course.

The Directors are optimistic about the prospects of the tourism industry in Japan in the long run. The number of foreign tourists in Japan has grown considerably in recent years from approximately 8.36 million in 2012 to approximately 31.9 million in 2019, representing a compound annual growth rate of approximately 21.08%. Certain major events are set to take place in Japan, including the Tokyo Olympics and Paralympics, as well as the Osaka-Kansai World Expo. The Japanese government aims to attract 60 million foreign tourists by 2030.

The outbreak of COVID-19 in early 2020 has dampened the momentum of inbound tourism in Japan. Following seven consecutive years of growth from 2013 to 2019, 2020 was once anticipated to be a stellar year for Japan tourism on the back of booming inbound demand and the Tokyo Olympics, which, however, have been postponed to 2021 due to the COVID-19 outbreak.

As part of the measures to contain the worldwide outbreak of COVID-19 in early 2020, Japan's borders are currently closed to travelers from more than 150 regions. On 7 April 2020, the Japanese government declared a state of emergency in Tokyo and six other prefectures, pursuant to which local authorities are empowered to carry out measures to halt the spread of COVID-19, including urging residents to stay at home except for essential activities and recommending the closures of businesses and facilities capable of hosting large-scale gatherings.

With the dwindling numbers of new cases of COVID-19, in late May 2020, the Japan government lifted the state of emergency for all of Japan. Domestic flights have gradually resumed and domestic travel restrictions were mostly lifted in mid-June. In order to provide support to the tourism industry and local economy, in July, the Japan government has launched a JPY1.7 trillion "Go to Travel" campaign to encourage domestic tourism and help hospitality operators. As part of the campaign, domestic travelers will be given 50% discounts and coupons of up to JPY20,000 per person per night for accommodation, shopping and eating at travel destinations within Japan, although Tokyo has been excluded due to the city's recent surge in COVID-19 cases.

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LETTER FROM THE BOARD

In order to gradually revive the virus-hit economy and promote international business, Japan is also currently working on a travel bubble. In early July, Japan started entry negotiations with Asian countries and regions, including China, Malaysia, Singapore and Taiwan. On 13 August 2020, Japan and Singapore agreed to ease travel restrictions implemented in response to COVID-19 pandemic from September, targeting businesspeople and expatriates, on condition they take measures to prevent infections.

The outbreak of COVID-19 has brought challenges to the hotel business. The revenue of the Target Group has been significantly and adversely affected from April to July 2020, when compared to the corresponding period in 2019. Although the outbreak of COVID-19 has significantly and adversely affected the revenue of the Target Group during the aforementioned period, the Directors and Vigers Appraisal & Consulting Limited are of the view that given (i) the valuations of the Target Property and plant and equipment of the Target Group are based on a combination of the market and depreciated replacement cost approach and cost approach, respectively; and (ii) the Directors also noted that the land price in Yoichi District, Hokkaido has been relatively stable, and believe that the impact of COVID-19 is only a short term effect, its impact on the valuations of the Target Property and plant and equipment of the Target Group is insignificant. The Directors intend to improve and enhance the facilities of the hotel if the COVID-19 situation allows, so as to increase the attractiveness of the hotel to prepare for rebuild of business volume.

Subject to the Completion, the Directors will review the business and operation of the Target Group. The business model of the Target Group is to manage and operate the resort hotel and the golf club with 18-hole golf course. As the operation of the golf course is subject to seasonality and customers mainly visit golf course from spring to autumn in Hokkaido, Japan, the hotel and the golf club open for about eight months a year. For the three years ended 31 March 2020, unless reservations were received from customers during the remaining four months of the year, the operation of hotel would be temporarily suspended, and the operation of golf club would be temporarily suspended due to the snowy weather conditions. Currently, the hotel and golf club is managed by the local team led by Mr. Wada Shinichi, the general manager of the Target Group. The Group intends to retain the management of the Target Group to manage and operate the hotel and golf club, and supervised by the senior management of the Group.

It is noted that the Target Group recorded gross loss, net loss and net liabilities for each of the three years ended 31 March 2020. The gross loss and net loss were mainly due to the low occupancy rate of the hotel and revenue. The occupancy rate of the hotel for each of the three years ended 31 March 2020 was approximately 13.2%, 17.3% and 18.2%, respectively. The average occupancy rate of the hotel during the winter season in recent years was approximately 10%. The utilisation rate of the golf course for each of the three years ended 31 March 2020 was approximately 50.4%, 52.6% and 52.2%, respectively. Notwithstanding that the Target Group recorded losses and net liabilities for the three years ended 31 March 2020, the assets of the Target Group include a well-equipped resort hotel and golf course, together with vacant land that can be re-developed. Furthermore, the Directors believe that there is significant room to enhance the operation, and turnaround the business. Furthermore, the Target Property has large areas of

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LETTER FROM THE BOARD

woodland, wilderness and other land that could be used for development. The Company conducted feasibility studies and based on field investigation and research, approximately 27,000m2 of the vacant land can be further developed without changing the landscape of the golf course. According to the applicable regulations, if less than 10,000 m2 of the vacant land and woodlands is to be further developed, then the Target Group is not required to file application to the local government. However, if over 10,000 m2 of the vacant land and woodlands is to be further developed, then Target Group is required to file an application to the local government. It is estimated that the processing time will be about six months. Furthermore, the Target Group is required to notify the relevant government department 30 days before the execution of the development of or any changes to the landscape. Besides, based on the field investigation and research, the Target Group may be required to notify and report to the relevant government department before and after the development of the land which involves deforestation. Furthermore, should the deforested area be over one hectare, the Target Group is required to obtain the approval from the local government. In view of the aforementioned regulatory requirements in relation to the development of the vacant land owned by the Target Group and subject to business and operational needs, the Directors may consider, as appropriate, various development options including utilizing land area of not exceeding 7,000 m2 to construct up to 30 additional log houses and stone houses for sale or for expansion of capacity of the hotel. The Directors will review the business potential to further develop the vacant land near the golf course to bring more investment return. In order to turnaround the business, the Group will formulate a business plan to increase the revenue of the Target Group, the occupancy rate and room rate of the hotel, as well as the utilisation rate of the golf course. Set out below is the proposed business plan of the Target Group:

As customers mainly visit golf course from spring to autumn, the hotel and the golf club open for about eight months a year. The Directors believe that there is room for improvement and enhancement in business and operation, such as leveraging on the experience of the Group's management team in management and operation of the golf course to enhance competitiveness, efficiency and utilisation, exploring the possibility to operate as an all-year-round resort, enhancement of the facilities of the hotel including hot spring, skiing and accommodation facilities, and expanding the scope of services to ski enthusiasts in winter. The Group intends to gradually refurbish the hotel and enhance the facilities in around 2021, with an estimated cost of around JPY40 million. The Group will also enhance the hot spring resources in around year 2022, with an estimated cost of around JPY80 million. The Directors believe that the refurbishment of hotel and enhancement of the facilities will increase the attractiveness of the hotel, which may enable the Target Group to improve its occupancy rate and room rate. Having considered that (i) the plan to develop the hotel into ski resort and hot spring can increase the attractiveness of the hotel, and thus allow the hotel to reach the average occupancy rate of resort hotels in Japan, which was around 58% in 2019;
1. there are ski facilities in close proximity to the hotel and the hotel is within travelling time of an hour and a half from the nearest airport, 15 minutes from the nearest train station, one hour from Niseko ski resort, which is one of the most famous ski resort in the world, and half an hour from Kiroro Ski resort; (iii) the business plan

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LETTER FROM THE BOARD

provides an opportunity to increase the room rate of the hotel to a level similar to resort hotels in the surrounding area, which generally could reach the range of JPY20,000 to JPY30,000 before the outbreak of COVID-19; and (iv) the improvement in the staff efficiency and the implementation of the cost control measures through leveraging on the experience of the Group's management in operation of serviced apartments and golf course, the Directors are of the view that the results of the Target Group can be turnaround.

Leveraging on the experience and the network of the Group's management team, the Group's management team can liaise with the travel agents to provide tour groups from overseas to visit the hotel. Furthermore, with the management's experience from managing and operating the golf course, the management can launch golf competitions so as to attract golf enthusiasts from all over the world to visit the golf course. The management can also make use of their network to promote the attractiveness of the golf club with 18-hole golf course as well as the enhanced hotel facilities including hot spring, skiing, and accommodation facilities to the high-net-worth individuals. The Target Group can provide promotion to golf enthusiasts should they visit the golf club as well as staying at hotel. The Directors believe that with the network of the Group's management team as well as the expansion of the customers base including the overseas tour groups and overseas golf enthusiasts, the occupancy rate of the hotel and the utilisation rate of the golf course will then be improved.
The Directors will also further review the marketing strategy of the hotel and golf club. In order to attract golf enthusiasts to visit the golf course, the Target Group will put more effort in marketing and promotions, such as launching golf competitions. Besides attracting golf enthusiasts to visit the golf course, the Target Group will also promote staycations to local golf enthusiasts so as to attract them to stay at the hotel as well. The Directors believe that this will improve the occupancy rate of the hotel as well as the utilisation rate of the golf course. Furthermore, currently, a majority of the customers of the Target Group are local tourists. The Directors note that the number of foreign tourists in Japan has grown considerably in recent years before the outbreak of COVID-19, and believe there is growth potential in the long run amid the Tokyo Olympics and Paralympics, as well as the Osaka-Kansai World Expo. When the COVID-19 pandemic passes, the Target Group will target to enlarge the customer base through leveraging on the potential growth of tourists in Japan as mentioned above. It will put more efforts in promotion and marketing to tours, tourists and golf enthusiasts from overseas, in particular, China, Korea and South East Asia.

Having considered the above, the Directors believe that the Target Group will achieve similar level and turnaround the business after the execution of the business plan and bring in positive return.

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LETTER FROM THE BOARD

The Directors noted the disclaimer of opinion on the financial information of the Target Company by the reporting accountants set out in Appendix II to this circular. The Directors understand that such disclaimer of opinion was mainly due to the net current liabilities of the Target Group as at 31 March 2020 and loss incurred for the year ended 31 March 2020, which, in the opinion of the reporting accountants, indicate the significant extent of uncertainty relating to the ongoing availability of finance to the Target Group. However, as mentioned in Appendix

to this circular, the directors of the Target Company have reviewed the Target Group's cash flow projections covering a period of twelve months from 31 March 2020. Taking into account the continuous financial support from the sole shareholder of the Target Company (i.e. Mr. Hu), in the opinion of the directors of the Target Company, the Target Group will have sufficient working capital to fulfill its financial obligations as and when they fall due in the coming twelve months from 31 March 2020. In addition, the outstanding salaries payable to the Vendor, which is not included in the Shareholder's Loan, is non-interest bearing and shall be settled by cash by the Company when the COVID-19 situation and business of the Target Group improves. The outstanding salaries payable to the Vendor were approximately nil, JPY1.5 million, and JPY 13.1 million as at 31 March 2018, 31 March 2019 and 31 March 2020, respectively. Having considered
(i) the outstanding salaries payable to the Vendor is non-interest bearing; and (ii) it is in the interests of the Company to preserve the relevant cash amounts in view of the COVID-19 situation and until the business of the Target Group improves, the Directors are of the view that the arrangement of settling outstanding salaries payable to the Vendor after Completion is beneficial to the Company and Shareholders as a whole, and therefore the Directors consider such arrangement is fair and reasonable to the Shareholders as a whole. Further, having reviewed the level of salary of the Vendor and having considered the contributions of the Vendor to the Target Group and the roles and responsibilities undertaken by the Vendor as director of the Target Group, as well as the then existing market conditions, the Directors are of the view that such level of salary of the Vendor is fair and reasonable.

The Company will provide continued financial support of approximately JPY 40 million, which is the Target Group's expected funding needs for the next 12 months from 31 March 2020 based on the following assumptions:

the effect of the outbreak of COVID-19 on the operation of the Target Group will continue for the twelve months ending 31 March 2021;
revenue is expected to decrease by approximately 30% for the year ending 31 March 2021 having considered the recent financial performance of the Target Group;
the policies encouraging domestic travelling will be in effect and/or remain unchanged;
the cost of sales and administrative and other expenses for the year ending 31 March 2021 will be in line with the cost of sales and administrative and other expenses for the year ended 31 March 2020;
the credit period and the payable period will remain unchanged;
there will be capital expenditure of approximately JPY40.0 million for refurbishment of the hotel and enhancement of the facilities in around 2021.

Having considered that (i) the Target Group shall be able to take the opportunity to carry out the refurbishment of the hotel and the enhancement of the facilities during the lull period as a result of the ongoing COVID-19 pandemic, and position itself to benefit from the rebound of

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LETTER FROM THE BOARD

the tourism industry when the COVID-19 situation improves; (ii) it is not uncommon in the industry to refurbish the hotel and enhance the facilities during the lull period or low season so as to minimize the disruption to business and operations; (iii) the revenue of the Target Group has shown sign of improvement in August 2020 as compared to that in July 2020; and (iv) the Target Group shall be able to monitor the COVID-19 situation and carry out the refurbishment of the hotel and the enhancement of the facilities in phases, the Directors are of the view that it is a good time, and fair and reasonable for the Company to conduct the Acquisition.

The Directors note that the net current liabilities and net liabilities the Target Group, which amounted to approximately JPY1,859.1 million, and approximately JPY1,031.5 million respectively, were mainly due to the Shareholder's Loan, which amounted to JPY1,914.2 million. The Target Group had no third-party borrowings as at 31 March 2020. The Shareholder's Loan will be acquired by the Group under the Acquisition Agreement. Excluding the Shareholder's Loan, the Target Group would record net current assets and net assets as at 31 March 2020.

Having considered the above, the Directors (including the independent non-executive Directors) consider that the terms and conditions of the Acquisition Agreement and the transactions contemplated there under are fair and reasonable and on normal commercial terms and are in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECT OF THE ACQUISITION

Upon the Completion, the Group will be interested in the entire issued shares of Doof Japan, and each member of the Target Group will become a subsidiary of the Company, whose results, assets and liabilities will be consolidated into the accounts of the Group. As such, the performance of the Target Group will affect the statement of profit or loss of the Group.

The Target Group recorded net loss of approximately JPY678.5 million, JPY185.5 million and JPY177.5 million for each of the three years ended 31 March 2020 respectively. The net loss for FY2018, representing 3.7 times of that for the year ended 31 March 2019, was principally resulted from the impairment of goodwill of approximately JPY245.9 million in FY2018, and the transaction cost of approximately JPY281.5 million incurred when Doof Japan acquired Yoichi Country in 2017. The net loss for the year ended 31 March 2020 decreased slightly by approximately 4.3% was mainly as a result of the increase in revenue from hotel rooms and golf club operation, as well as the decrease in cost of sales, including staff costs, depreciation and amortisation.

For details of the financial performance of the Target Group, please refer to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix IV and paragraph headed "Business and financial review" in "Appendix III - Management discussion and analysis of the Target Group" to this circular.

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LETTER FROM THE BOARD

Assets and liabilities

Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix IV to this circular, if the Acquisition had been completed on 31 March 2020, the total assets and the total liabilities of the Enlarged Group would have increased to approximately HK$4,684.8 million and approximately HK$4,153.5 million, respectively. The net asset value of the Enlarged Group would have increased to approximately HK$531.3 million.

Earnings

Upon completion of the Acquisition, the members of the Target Group will become subsidiaries of the Company and the financial results of the Target Group will be consolidated into the consolidated financial statements of the Group. Further details of the Target Group are set out in "Appendix II - Financial Information of the Target Group" to this circular.

INFORMATION ON THE PARTIES TO THE ACQUISITION AGREEMENT

Information on the Group

The Company is incorporated in Bermuda with limited liability and the Shares are listed on the Main Board of the Stock Exchange. The Group is principally engaged in property development and investment which covers development, sales and leasing of properties. The Purchaser is a wholly-owned subsidiary of the Company established in the BVI with limited liability and is principally engaged in investment holding.

Information on the Vendor

Mr. Hu is an executive Director and ultimate controlling Shareholder of the Company.

INFORMATION ON THE TARGET GROUP

As at the Latest Practicable Date, the Target Group comprises Doof Japan, Yoichi Country, Tokyo Doof and Ichiki Kogyo. As advised by the Vendor, the total original acquisition cost of the equity interests of Yoichi Country, the major operating subsidiary of Doof Japan, by Doof Japan was JPY1,200,000,000 (equivalent to approximately HK$85,680,000).

Doof Japan

Doof Japan is a company incorporated by Mr. Hu, as a founding member, in Japan with limited liability and is an investment holding company which is wholly-owned by Mr. Hu. Mr. Hu contributed, by way of self-owned funds, a total capital amount of JPY10.0 million for the establishment of Doof Japan and no acquisition cost was involved. Doof Japan has a wholly-owned subsidiary, namely Yoichi Country.

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LETTER FROM THE BOARD

Yoichi Country

Set out below are certain key information of the Target Property:

Name:	A-Brand Hotel & Golf Club
Location:	2361-1, Yoichi Cho, Yoichi Gun, Hokkaido, Japan
Mortgage on the Target Property:	Nil
Total gross floor area of the golf	6,440.51 m2
clubhouse and hotel building:
Number of hotel rooms:	24 rooms and 10 log houses
Total gross area of golf course:	923,702.60 m2
Specification of the golf course:	18 holes

Tokyo Doof

Tokyo Doof is a company incorporated on 27 August 2019 in Japan with limited liability and is owned as to approximately 99.9% by Doof Japan and as to approximately 0.1% by Mr. Wada Shinichi, who has been employed and holds the position of the general manager of Yoichi Country since April 2018. Since its establishment, Tokyo Doof has not been engaged in any business operations and does not hold any assets. As a result of the ongoing COVID-19 pandemic, in order to reduce operating costs and expenses, Tokyo Doof has become a dormant company since 9 April 2020.

Ichiki Kogyo

Ichiki Kogyo is a company incorporated on 27 August 2019 in Japan with limited liability and is owned as to approximately 99.9% by Yoichi Country and as to approximately 0.1% by Mr. Wada Shinichi, who has been employed and holds the position of the general manager of Yoichi Country since April 2018. Since its establishment, Ichiki Kogyo has not been engaged in any business operations and does not hold any assets. As a result of the ongoing COVID-19 pandemic, in order to reduce operating costs and expenses, Ichiki Kogyo has become a dormant company since 9 April 2020.

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LETTER FROM THE BOARD

FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below is the key financial information of the Target Group based on its audited consolidated financial statements for the three financial years ended 31 March 2018, 2019 and

2020 as set out in Appendix II to this circular:

	For the year ended 31 March
	2018	2019	2020
	JPY '000	JPY '000	JPY '000
Revenue	128,695	153,742	156,917
(Loss) before tax	(683,259)	(196,523)	(190,592)
(Loss) and total comprehensive loss for the
year	(678,465)	(185,511)	(177,525)
Net (liabilities)	(668,465)	(853,976)	(1,031,501)

Shareholders should read the above information in conjunction with the accountants' report as set out in Appendix II to this circular containing further financial information of the Target Group.

LISTING RULES IMPLICATIONS

As the Acquisition Agreement was entered into within 12 months after completion of the Previous Acquisitions, and the agreements in respect of the Previous Acquisitions and the Acquisition Agreement were entered between a member of the Group and the same connected person and/or his associates, the Acquisition and the Previous Acquisitions are required to be aggregated pursuant to Rules 14.22 and 14A.81 of the Listing Rules.

As the highest of the applicable percentage ratios in respect of the Acquisition and the Previous Acquisitions in aggregate exceeds 25% but is less than 100%, the Acquisition constitutes a major transaction of the Company under Chapter 14 of the Listing Rules. Accordingly, the Acquisition is subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 of the Listing Rules.

The Vendor, Mr. Hu, is an executive Director and ultimate controlling Shareholder of the Company, and is therefore a connected person of the Company under the Listing Rules. The Acquisition from the Vendor also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. Accordingly, the Acquisition is subject to the applicable reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

SGM AND INDEPENDENT BOARD COMMITTEE

The SGM will be convened by the Company at Suite 2703, 27/F., Shui On Centre, 6-8 Harbour Road Wanchai, Hong Kong on Friday, 25 September 2020 at 4:15 p.m.(or immediately after the conclusion or the adjournment of the annual general meeting of the Company to be held at the same venue and on the same day at 4:00 p.m.) for the purposes of considering, and if thought fit, approving the Acquisition Agreement and the transactions contemplated therein (including the allotment and issue of the Consideration Shares). As at the Latest Practicable Date, Mr. Hu is interested in 1,197,921,245 Shares, representing 58.51% of the issued share capital of the Company, and will abstain from voting on the proposed resolutions to approve the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, at the SGM. To the best of the Directors' knowledge, information and belief, having made all reasonable enquiries, no other Shareholder has any material interest in the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, and therefore no other Shareholder is required to abstain from voting at the SGM in respect of the resolutions approving the aforesaid matters.

Pursuant to Rule 13.39(6) of the Listing Rules, the Company has established the Independent Board Committee comprising all its independent non-executive Directors, namely Ms. Pau Yee Ling, Mr. Wong Kwan Kit and Mr. Yuen Hoi Po to advise the Independent Shareholders on the fairness and reasonableness of the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares. None of the members of the Independent Board Committee has any interest or involvement in the transactions contemplated under the Acquisition Agreement.

Gram Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares. The appointment of Gram Capital as the Independent Financial Adviser has been approved by the Independent Board Committee.

The notice of SGM is set out on pages SGM-1 to SGM-3 of this circular. A proxy form for use at the SGM is enclosed herewith. Whether or not you are able to attend the SGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the offices of the Company's branch share registrar and transfer office in Hong Kong, Tricor Secretaries Limited, at 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 fixed for the SGM. The completion and delivery of a form of proxy will not preclude you from attending and voting at the SGM in person.

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LETTER FROM THE BOARD

RECOMMENDATION

Your attention is drawn to the letter of the Independent Board Committee set out on page 29 of this circular. Your attention is also drawn to the letter of advice from Gram Capital to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, set out on pages 31 to 50 of this circular.

The Independent Board Committee, having taken into account the advice of Gram Capital, considers that the terms of the Acquisition Agreement, including the allotment and issue of the Consideration Shares, are fair and reasonable so far as the Independent Shareholders are concerned, and that the Acquisition is in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to be proposed for approving the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, at the SGM.

The Board (including the members of the Independent Board Committee) considers that the terms of the Acquisition Agreement, including the allotment and issue of the Consideration Shares, are fair and reasonable so far as the Independent Shareholders are concerned, and that the Acquisition is in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the relevant resolutions to be proposed as set out in the notice of the SGM.

ADDITIONAL INFORMATION

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

By order of the Board

Man Sang International Limited

Hu Xingrong

Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Man Sang International Limited

(Incorporated in Bermuda with limited liability)

(Stock Code: 938)

MAJOR AND CONNECTED TRANSACTION RELATING TO

ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF DOOF JAPAN

10 September 2020

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular issued by the Company to the Shareholders dated 10 September 2020 (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise you as to whether the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and its Shareholders as a whole.

Gram Capital has also been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect thereof. We wish to draw your attention to the "Letter from the Board" and the "Letter from Gram Capital" set out in the Circular.

Having considered the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, and the principal factors and reasons considered by, and the advice of Gram Capital set out in its letter of advice, we consider that the terms of the Acquisition Agreement, including the allotment and issue of the Consideration Shares, are fair and reasonable so far as the Independent Shareholders are concerned, and that the Acquisition is in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend theIndependent Shareholders to vote in favour of the ordinary resolutions approving the Acquisition Agreement and the transactions contemplated therein, including the allotment and issue of the Consideration Shares, at the SGM.

	Yours faithfully,
	For and on behalf of
	the Independent Board Committee of
	Man Sang International Limited
Ms. Pau Yee Ling	Mr. Wong Kwan Kit	Mr. Yuen Hoi Po

Independent non-executive Directors

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LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and Independent Shareholders in respect of the Acquisition for the purpose of inclusion in the Circular.

Room 1209, 12/F.

Nan Fung Tower

88 Connaught Road Central/

173 Des Voeux Road Central

Hong Kong

10 September 2020

To: The Independent Board Committee and the Independent Shareholders of Man Sang International Limited

Dear Sir/ Madam,

MAJOR AND CONNECTED TRANSACTION

IN RELATION TO

ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF DOOF JAPAN

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, details of which are set out in the letter from the Board (the "Board Letter") contained in the circular dated 10 September 2020 issued by the Company to the Shareholders (the "Circular"), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

With reference to the Board Letter, on 14 July 2020 (after trading hours of the Stock Exchange), the Purchaser, a direct wholly-owned subsidiary of the Company, the Vendor and the Company entered into the Acquisition Agreement, pursuant to which the Purchaser conditionally agreed to acquire and the Vendor conditionally agreed to dispose of the Sale Shares, representing the entire issued share capital of Doof Japan, and the Shareholder's Loan. The Final Consideration in the amount of JPY848,394,046 (equivalent to approximately HK$60,575,335) will be satisfied by the issue and allotment of 163,717,121 Consideration Shares at the Issue Price of HK$0.370 per Consideration Share.

With reference to the Board Letter, the Vendor (i.e. Mr. Hu), is an executive Director and ultimate controlling Shareholder of the Company, and is therefore a connected person of the Company under the Listing Rules. The Acquisition constitutes a major and connected transaction of the Company under Chapter 14 and Chapter 14A of the Listing Rules and is subject to the reporting, announcement, circular and Shareholders' approval requirements under Chapter 14 and Chapter 14A of the Listing Rules.

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LETTER FROM GRAM CAPITAL

The Independent Board Committee comprising Ms. Pau Yee Ling, Mr. Wong Kwan Kit and Mr. Yuen Hoi Po, being all of the independent non-executive Directors, has been formed to advise the Independent Shareholders on (i) whether the terms of the Acquisition Agreement and the transactions contemplated thereunder are on normal commercial terms and are fair and reasonable; (ii) whether the Acquisition is in the interests of the Company and the Shareholders as a whole and is conducted in the ordinary and usual course of the business of the Company; and

how the Independent Shareholders should vote in respect of the resolution(s) to approve the Acquisition Agreement and the transactions contemplated thereunder at the SGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

INDEPENDENCE

As at the Latest Practicable Date, we were not aware of any relationships or interests between Gram Capital and the Company during the past two years immediately preceding the Latest Practicable Date, or any other parties that could be reasonably regarded as hindrance to Gram Capital's independence to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors' representation and confirmation that there is no undisclosed private agreement/arrangement or implied understanding with anyone concerning the Acquisition. We consider that we have taken sufficient and necessary steps (including review of the Group's financial information for each of the two years ended 31 March 2020, the Acquisition Agreement, the Property Valuation Report and the Equipment Valuation Report, and discussion with the Company's management and the Valuer) on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules. Details of our steps taken and analysis are set out in this letter.

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LETTER FROM GRAM CAPITAL

We have not made any independent evaluation or appraisal of the assets and liabilities of the Target Company, and we have not been furnished with any such evaluation or appraisal, save as and except for the valuation report on the Target Property (the "Property Valuation Report") and the valuation report on the Target Group's equipment (the "Equipment") (the "Equipment Valuation Report") as prepared by Vigers Appraisal & Consulting Limited, being an independent professional valuer appointed by the Company (the "Valuer"). Since we are not experts in the valuation of property and equipment, we have relied solely upon the Property Valuation Report and the Equipment Valuation Report for the Property Valuation and the Equipment Valuation respectively.

The Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the 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 the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, the Vendor, the Target Group, or their respective subsidiaries or associates (if applicable), nor have we considered the taxation implication on the Group or the Shareholders as a result of the Acquisition. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, it is the responsibility of Gram Capital to ensure that such information has been correctly extracted from the relevant sources while we are not obligated to conduct any independent in-depth investigation into the accuracy and completeness of those information.

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LETTER FROM GRAM CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Acquisition, we have taken into consideration the following principal factors and reasons:

Information on the Company

With reference to the Board Letter, the Group is principally engaged in property development and investment which covers development, sales and leasing of properties (including serviced apartments, residential apartments and shopping mall).

Set out below is a summary of the audited consolidated financial information on the Group for the two years ended 31 March 2020 as extracted from the Company's annual report for the year ended 31 March 2020 (the "2020 Annual Report"):

	For the year	For the year
	ended	ended
	31 March	31 March	Year on
	2020	2019	year change
	HK$'000	HK$'000	%
Revenue	124,853	159,399	(21.67)
- Sales of properties	109,680	156,721	(30.02)
- Property management services	15,173	2,678	466.58
Gross profit	63,039	61,509	2.49
Loss for the year	(190,842)	(128,976)	47.97

As illustrated in the above table, the Group's revenue for the year ended 31 March 2020 ("FY2020") decreased by approximately 21.67% as compared to that for the year ended 31 March 2019 ("FY2019"). With reference to the 2020 Annual Report, such decrease was a result of decrease in number of apartments sold for FY2020. The Group's gross profit for FY2020 increased by approximately 2.49% as compared to that for FY2019. With reference to the 2020 Annual Report, such increase was mainly due to certain residential apartments sales with higher gross profit margin during FY2020 and the increase in property management fee during FY2020. The Group's loss for FY2020 increased by approximately 47.97% as compared to that for FY2019. With reference to the 2020 Annual Report, such decrease was mainly due to impairment losses on certain assets and increase in selling and administrative expenses and finance costs.

With reference to the 2019 Annual Report and as confirmed by the Directors, save for the development of the Group's existing business, the Company is actively looking for investment and acquisition opportunities that have prospects to diversify the revenue sources of the Group in order to create shareholders' value.

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LETTER FROM GRAM CAPITAL

Information on the Target Group

With reference to the Board Letter, the Target Group comprises Doof Japan, Yoichi Country, Tokyo Doof and Ichiki Kogyo as at the Latest Practicable Date.

Doof Japan is a company incorporated in Japan with limited liability and is an investment holding company which is wholly-owned by Mr. Hu. Doof Japan has a wholly-owned subsidiary, namely Yoichi Country.

Yoichi Country is a company incorporated in Japan with limited liability and is principally engaged in hotel management business and operation of golf course. Yoichi Country holds the entire interest in the Target Property (i.e. hotel property and golf course located at 2361-1, Yoichi Cho, Yoichi Gun, Hokkaido, Japan).

Tokyo Doof is a company incorporated in Japan with limited liability and is owned as to approximately 99.9% by Doof Japan and as to approximately 0.1% by the general manager of Yoichi Country. As at the Latest Practicable Date, it is a dormant company.

Ichiki Kogyo is a company incorporated in Japan with limited liability and is owned as to approximately 99.9% by Yoichi Country and as to approximately 0.1% by the general manager of Yoichi Country. As at the Latest Practicable Date, it is a dormant company.

Set out below is a summary of the audited consolidated financial information of the Target Group for the period for the three financial years ended 31 March 2020 as extracted from the accountants' report of the Target Group as set out in Appendix II to the Circular (the "Accountants' Report"):

	For the year	For the year	For the year
	ended	ended	ended
	31 March	31 March	31 March
	2018	2019	2020
	JPY'000	JPY'000	JPY'000
Revenue	128,695	153,742	156,917
Gross loss	(100,177)	(110,493)	(94,519)
Loss and total comprehensive loss for
the year	(678,465)	(185,511)	(177,525)
	As at	As at	As at
	31 March	31 March	31 March
	2018	2019	2020
	JPY'000	JPY'000	JPY'000
Net liabilities	(668,465)	(853,976)	(1,031,501)

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LETTER FROM GRAM CAPITAL

With reference to the Accountants' Report, the Target Group recorded substantial impairment of goodwill of approximately JPY246 million, transaction cost of approximately JPY281 million related to acquisition of Yoichi Country by Doof Japan in 2017 and administrative and other expenses of approximately JPY57 million, for the financial year ended 31 March 2018 ("FY2018"). Together with the Target Group's gross loss recorded in FY2018 as a result of low hotel occupancy rate, the Target Group recorded substantial loss and total comprehensive loss of approximately JPY678 million in FY2018.

As depicted from the above table, the Target Group's revenue increased by approximately

19% in FY2019 as compared to that for FY2018. Despite the Target Group's increased revenue in FY2019, the Target Group's gross loss increased by approximately 10% in FY2019 as compared to that for FY2018. As advised by the Directors, such increase in the Target Group's gross loss was mainly due to increased investment in staff cost, advertisement and consumables which improved the hotel occupancy rate and golf course utilisation.

Despite the Target Group's increased gross loss in FY2019, the Target Group's loss and total comprehensive loss greatly reduced by approximately 73% in FY2019 as compared to that for FY2018 given the absence of impairment of goodwill and transaction cost related to acquisition of Yoichi Country by Doof Japan.

With further improvement in the hotel occupancy rate, the Target Group's revenue increased by approximately 2% in FY2020 as compared to that for FY2019. The Target Group's gross loss decreased by approximately 14% in FY2020 as compared to that for FY2019 and there was also a slight reduction in the Target Group's loss and total comprehensive loss in FY2020 as compared to that for FY2019.

The Target Group recorded net current liabilities of approximately JPY1,859 million and net liabilities of approximately JPY1,032 million as at 31 March 2020, comprising the Shareholder's Loan of approximately JPY1,914 million.

With reference to the Accountants' Report, in view of the significance of the extent of the uncertainties relating to the continuous financial support to the Target Group, the Company's auditors disclaim their opinion in respect of the historical financial information of the Target Group for FY2020 (the "Accountant's Report Disclaimer").

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LETTER FROM GRAM CAPITAL

Information on the Vendor

With reference to the Board Letter, as at the Latest Practicable Date, the Vendor is Mr. Hu, an executive Director and the ultimate controlling Shareholder of the Company, and is therefore a connected person of the Company under the Listing Rules.

Reasons for and benefits of the Acquisition

With reference to the Board Letter, to continue the momentum of the Group's expansion of its property development and related investment business, the Board considers that the Acquisition offers a good opportunity for the Group to expand into Japan market and enhance its assets portfolio with a potential of capital appreciation in the long run. The principal assets of the Target Group are a hotel with 24 rooms and 10 log houses, and a golf club with an 18-hole golf course located in Yoichi, Japan.

The Directors are optimistic about the prospects of the tourism industry in Japan in the long run. The number of foreign tourists in Japan has grown considerably in recent years. Certain major events are set to take place in Japan, including the Tokyo Olympics and Paralympics, as well as the Osaka-Kansai World Expo. The Japanese government aims to attract 60 million foreign tourists by 2030.

With reference to the Board Letter and as advised by the Directors, subject to the Completion, the Directors will review the business and operation of the Target Group. The business model of the Target Group is to manage and operate the resort hotel and the golf club with 18-hole golf course. As the operation of the golf course is subject to seasonality and customers mainly visit golf course from spring to autumn in Hokkaido, Japan, the golf club and the hotel open for about eight months a year. The Directors believe that there may be room for improvement and enhancement in business and operation, such as leveraging on the experience of the Group's management team in management and operation of golf course to enhance competitiveness, efficiency and utilisation, exploring the possibility to operate as an all-year-round resort, enhancement of the facilities of the hotel including hot spring, skiing and accommodation facilities, and expanding the scope of services to ski enthusiasts in winter. The Group intends to gradually refurbish the hotel and enhance the facilities in around 2021. The Group will also enhance the hot spring resources in around year 2022. The Directors believe that the refurbishment of hotel and enhancement of the facilities will increase the attractiveness of the hotel, which may enable the Target Group to improve its occupancy rate and room rate.

The Directors will also review the marketing strategy of the hotel and golf club. In order to attract golf enthusiasts to visit the golf course, the Target Group will put more effort in marketing and promotions, such as launching golf competitions. Currently, majority of the customers of the Target Group are local tourists. The Directors note that the number of foreign tourists in Japan has grown considerably in recent years before the outbreak of COVID-19, and believe there is growth potential in the long run amid the Tokyo Olympics and Paralympics, as well as the

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LETTER FROM GRAM CAPITAL

Osaka-Kansai World Expo. When the COVID-19 pandemic passes, the Target Group will target to enlarge the customer base through leveraging on the potential growth of tourists in Japan as mentioned above. It will put more efforts in promotion and marketing to tours, tourists and golf enthusiasts from overseas, in particular, the PRC, Korea and South East Asia.

In addition, the Target Property has large areas of woodland, wilderness and other land that could be used for development. The Directors will review the business potential to further develop the vacant land near the golf course, with a view to bring more investment return for the Shareholders.

As advised by the Directors, the Target Group's hotel occupancy rate was approximately 18.2% only for FY2020. There is potential for improvement. In addition, the Target Group's golf club and hotel currently operates for about eight months from spring to autumn. Should the above intended development of the Target Group by the Group be implemented successfully, the Target Group can operate all-year-round and its hotel occupancy rate will increase. Hence, the Target Group's financial performance may be improved. In addition, further development of the Target Group's vacant land may also bring additional return to the Enlarged Group.

With reference to the "Number of visitors to Japan" published by the Japan National Tourism Organization, foreign visitors to Japan doubled in the last decade and reached 10 million people for the first time in 2013, led by an increase of Asian visitors. In 2008, the Japanese government set up the Japan Tourism Agency and set the initial goal to increase foreign visitors to 20 million in 2020. In 2016, having met the 20 million target, the Japanese government revised up its target to 40 million by 2020 and to 60 million by 2030.

With reference to the Hokkaido Comprehensive Development Plan for year 2016-2025 published by the Hokkaido Bureau Ministry of Land, Infrastructure, Transport and Tourism, Hokkaido contributes as one of the most popular destinations of Japan among foreign tourists. Hokkaido has an abundance of natural environment, blessed with beautiful nature and farmlands. Hokkaido also has appealing tourism resources even amongst Asian countries, such as its unique history and cultures as well as safe and high-quality agricultural products. These characteristics make the region enjoy great popularity among tourists. Toward world-class tourist destinations, in addition to bringing out more of Hokkaido's characteristics, the Japanese government will promote the formation of wide-arearound-trip routes, each of which has its own theme and/or story. This will smooth the variations in seasonal travel demands, and spread the economic benefits of in-bound tourism across Hokkaido. In addition, inbound tourists visiting Hokkaido have been rising sharply. Over the coming years, there are more events that could trigger a further increase in foreign tourists visiting Hokkaido, including the Tokyo Olympics and Paralympic Games, the opening of Hokkaido Shinkansen (bullet train) to Sapporo (end of fiscal year 2030). The Japanese government will continue the strategic efforts and engagements to have Hokkaido be received as a world-class tourist destination that attracts people globally.

With reference to the White Paper on Tourism in Japan, 2019 published by the Japan Tourism Agency in June 2019, the year-on-year changes of the total number of guest nights of international visitors in Hokkaido in 2018 as compared to that in 2017 increased by 6.2%.

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LETTER FROM GRAM CAPITAL

According to the Mastercard's Asia Pacific Destinations Index (the "APDI") published on 4 September 2019, Hokkaido was one of the 20 most visited destinations in year 2018. Also, for the second year in a row, Japan is the only market in the APDI to command 25% of Asia Pacific's top 20 destinations.

The above findings demonstrate the potential and prospects of Hokkaido tourism.

With reference to the Board Letter, the outbreak of COVID-19 in early 2020 has dampened the momentum of tourism in Japan. As part of the measures to contain the worldwide outbreak of COVID-19 in early 2020, Japan's borders are currently closed to travelers from numerous countries. On 7 April 2020, the Japanese government declared a state of emergency in Tokyo and six other prefectures. With the dwindling numbers of new cases of COVID-19, in late May 2020, the Japan government lifted the state of emergency for all of Japan. Domestic flights have gradually resumed and domestic travel restrictions were mostly lifted in mid-June. In order to provide support to the tourism industry and local economy, in July, the Japan government launched a JPY1.7 trillion "Go to Travel" campaign to encourage domestic tourism and help hospitality operators. We consider the impact of the COVID-19 on Japanese tourism may be short-term.

Having considered the above, we consider the Company's intended development on the Target Group to be feasible.

Although the Target Group recorded loss and total comprehensive loss for the three financial years ended 31 March 2020 and net liabilities as at 31 March 2020 and there is the Accountant's Report Disclaimer, having considered the followings:

the Group is principally engaged in property development and investment which covers development, sales and leasing of properties (including serviced apartments (hospitality related), residential apartments and shopping mall);
the Company's business strategy to look for investment and acquisition opportunities that have prospects to diversify the revenue sources of the Group in order to create shareholders' value;
the potential and prospects of the Target Group;
the Company's intended development on the Target Group;
the potential and prospects of Hokkaido tourism despite the impact of the COVID-19 which maybe short-term; and
the assignment of the Shareholder's Loan (As a result, the Shareholder's Loan was eliminated under the unaudited pro forma financial information of the Enlarged Group (the "Pro Forma Information") as contained in Appendix IV to the Circular). The amount of the Shareholder's Loan was larger than the Target Group's net current liabilities and net liabilities as at 31 March 2020,

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LETTER FROM GRAM CAPITAL

we concur with the Directors that the Acquisition is conducted under the ordinary and usual course of the business of the Company and is in the interests of the Company and its Shareholders as a whole.

Principal terms of the Acquisition Agreement

Summarised below are the principal terms for the Acquisition Agreement, details of which are set out under the section headed "THE ACQUISITION AGREEMENT" of the Board Letter.

Date:

14 July 2020 (the "Agreement Date")

Parties:

Decent Start Limited, as the Purchaser
Mr. Hu, as the Vendor
the Company

Assets to be acquired

With reference to the Board Letter, the assets to be acquired under the Acquisition Agreement comprise (i) the Sale Shares, representing the entire issued share capital of Doof Japan as at the Latest Practicable Date; and (ii) the Shareholder's Loan. Upon the Completion, Doof Japan will become an indirect wholly-owned subsidiary of the Company.

Consideration

Pursuant to the Acquisition Agreement, the Initial Consideration of JPY848,394,046 (equivalent to approximately HK$60,575,335) for acquiring the equity interest in Doof Japan and the Shareholder's Loan shall be satisfied by the Company by the issue and allotment of the Consideration Shares (subject to the adjustment) at the Issue Price of HK$0.370 to the Vendor (or such other person(s) may be directed by the Vendor in writing) within seven business days from the Completion Date.

With reference to the Board Letter, the consideration of the Acquisition was arrived at after arm's length negotiations between the Purchaser and the Vendor and was determined after having taken into account various relevant factors including:

the net liabilities value of the Target Group as at 31 March 2020;
the Property Valuation;

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LETTER FROM GRAM CAPITAL

the Equipment Valuation;
the Shareholder's Loan; and
a 10.00% discount on the aggregate of the Shareholder's Loan and the adjusted net liabilities of the Target Group (the "Consideration Discount").

With reference to the Board Letter, in determining the Initial Consideration, the unaudited net liabilities of the Target Group was adjusted to reflect its fair value by taking into account the Property Valuation of approximately JPY1,034,000,000 and the Equipment Valuation of approximately JPY38,248,800 as at 22 June 2020. Details of the said adjustment are set out in the below reconciliation from the unaudited net liabilities of the Target Group to the Final Consideration (the "Consideration Reconciliation") as extracted from the Board Letter:

		JPY
Audited net liabilities of the Target Group as at 31 March 2020	(1,031,501,000)
Less: Carrying value of the property, plant and equipment as at
31 March 2020	(1,073,625,000)
Add: Property Valuation as at 22 June 2020	1,034,000,000
Add: Equipment Valuation as at 22 June 2020	38,248,800
Adjusted Net Liabilities
(1,032,877,200)
Add: The Shareholder's Loan		1,975,537,251
Aggregate of the Shareholder's Loan and the Adjusted Net
Liabilities	942,660,051
Less: 10% discount on the aggregate of the Shareholder's Loan

and the Adjusted Net Liabilities		(94,266,005)
Final Consideration		848,394,046

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LETTER FROM GRAM CAPITAL

Adjustment mechanism

Before the Completion, the Initial Consideration shall be adjusted according to the audited adjusted net liabilities of the Target Group (taking into account the finalised Property Valuation and the finalised Equipment Valuation) as follows:

upward based on the difference between the unaudited adjusted net liabilities and the audited adjusted net liabilities, if the unaudited adjusted net liabilities is lesser than the audited adjusted net liabilities. The adjustment shall in aggregate be subject to a maximum cap of JPY100,000,000; or
downward based on the difference between the unaudited adjusted net liabilities and the audited adjusted net liabilities, if the unaudited adjusted net liabilities is greater than the audited adjusted net liabilities.

The number of Consideration Shares shall be equivalent to the consideration of the Acquisition divided by the Issue Price of HK$0.370. In the event that the Initial Consideration is adjusted pursuant to the mechanism above, the number of Consideration Shares shall be adjusted accordingly.

Pursuant to the adjustment mechanism to the consideration as set out above, the consideration of the Acquisition remained unchanged as JPY848,394,046 (equivalent to approximately HK$60,575,335). Accordingly, the Consideration Shares shall comprise 163,717,121 new Shares.

The valuation reports

To assess the fairness and reasonableness of the consideration of the Acquisition, we obtained the Property Valuation Report prepared by the Valuer and noted that the market value of the Target Property in existing state as at 22 June 2020 was JPY1,034,000,000 (equivalent to approximately HK$73,827,600). Details of the Property Valuation Report are set out in Appendix V to the Circular. We also obtained the Equipment Valuation Report prepared by the Valuer and noted that the market value of the Equipment as at 22 June 2020 was JPY38,248,800 (equivalent to approximately HK$2,730,964). Details of the Equipment Valuation Report are set out in Appendix VII to the Circular.

For our due diligence purpose, we reviewed and enquired into (i) the terms of engagement of the Valuer with the Company; (ii) the Valuer's qualification in relation to the preparation of the Property Valuation Report and the Equipment Valuation Report (including reasonable checks to assess the relevant qualifications, experience and expertise of the Valuer (e.g. reviewing the Valuer's company profile and discussing with the Valuer regarding their qualifications and experience)); and (iii) the steps and due diligence measures taken by the Valuer for conducting the Property Valuation Report and the Equipment Valuation Report. From the mandate letter and

- 42 -

LETTER FROM GRAM CAPITAL

other relevant information provided by the Valuer and based on our interview with them, we were satisfied with the terms of engagement of the Valuer as well as their qualification for preparation of the Property Valuation Report and the Equipment Valuation Report. The Valuer also confirmed that they are independent to the Group, the Target Group and the Vendor.

With reference to the Property Valuation Report, the Property Valuation Report was prepared by the Valuer by adopting a combination of the market and depreciated replacement cost approach in assessing the land portion of the Target Property and the buildings and structures standing on the land respectively. In the valuation of the land portion, reference was made to the sales evidence as available to the Valuer in the locality. As the nature of the buildings and structures cannot be valued on the basis of market value, they have therefore been valued on the basis of their depreciated replacement costs. Upon our enquiry, the Valuer advised us that, after having assessed the appropriateness of possible methodologies for different valuation approaches and circumstances and facts specific to the Target Property, the Valuer considered that the aforesaid valuation methodologies are the most appropriate valuation methodologies in the case of the Target Property.

With reference to the Equipment Valuation Report, the Equipment Valuation Report was prepared by the Valuer by adopting the cost approach. Upon our enquiry, the Valuer advised us that, after having assessed the appropriateness of possible methodologies for different valuation approaches and circumstances and facts specific to the Target Property, the Valuer considered that the aforesaid valuation methodology is the most appropriate valuation methodology in the case of the Equipment.

We further reviewed and enquired into the Valuer on the methodologies adopted and the basis and assumptions and parameters adopted in the Property Valuation Report and the Equipment Valuation Report in order for us to understand the Property Valuation Report and the Equipment Valuation Report. We also obtained supporting information on the parameters adopted. During our discussion with the Valuer, we did not identify any major factor which caused us to doubt the fairness and reasonableness of the methodology, principal bases, assumptions and parameters adopted for the Property Valuation Report and the Equipment Valuation Report.

Having considered the Consideration Reconciliation as set out above and our independent work performed on the Property Valuation Report and the Equipment Valuation Report, we are of the view that the Final Consideration is fair and reasonable.

Consideration Shares and Issue Price

As aforementioned, the Final Consideration shall be satisfied by the Company by the issue and allotment of the Consideration Shares of 163,717,121 new Shares at the Issue Price of HK$0.370 to the Vendor (or such other person(s) may be directed by the Vendor in writing) within seven business days from the Completion Date.

With reference to the Board Letter, the Issue Price of HK$0.370 per Share was arrived at after arm's length negotiations between the Purchaser and the Vendor with reference to, among

- 43 -

LETTER FROM GRAM CAPITAL

others, the recent trading prices of the Shares, the issue of placing shares at a discount of approximately 14.63% to the closing price of HK$0.410 per Share on the date of the placing agreement in respect of the Company's recent placing of Shares announced on 24 June 2020 (the

"Placing Discount"), the financial performance of the Group and the current market conditions. In particular, having considered that the Acquisition from the Vendor constitutes a connected transaction of the Company, and that the discount on the Issue Price (to the closing price of the Shares on the date of the Acquisition Agreement) is smaller than the discount on the placing price of the placing shares (to the closing price of the Shares on the date of the placing agreement on 24 June 2020), the Board considers that the Issue Price is fair and reasonable.

The Issue Price represents a discount of approximately 9.76% to the closing price of the Shares of HK$0.410 per Share as quoted on the Stock Exchange on 14 July 2020, being the date of the Acquisition Agreement (the "Agreement Date Discount").

In order to assess the fairness and reasonableness of the Issue Price, we performed the following assessments.

Share price performance

In order to assess the fairness and reasonableness of the Issue Price, we reviewed the daily closing price of the Shares as quoted on the Stock Exchange from 2 July 2019 up to and including the Agreement Date (the "Review Period"), being a period of approximately one year up to and including the Agreement Date. An one-year review period is commonly adopted for share price assessment and we consider the Review Period to be fair and reasonable. The daily closing prices of the Shares are illustrated as follows:

Historical daily closing price per Share

HK$

Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul
2019	2019	2019	2019	2019	2019	2020	2020	2020	2020	2020	2020	2020


					Closing Price				Issue Price

Source: The Stock Exchange's website

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LETTER FROM GRAM CAPITAL

During the Review Period, the lowest and highest closing prices of the Shares as quoted on the Stock Exchange were HK$0.208 recorded on 20 February 2020 and HK$0.620 recorded on 19 July 2019 respectively. The Issue Price of HK$0.370 is (i) within the range of the lowest and highest closing prices of Shares; and (ii) higher than the closing prices of the Shares in 4 days, during the Review Period.

As illustrated in the above diagram, the closing prices of the Shares did not form a continuous and specific trend during the Review Period and there was a sudden drop in the closing prices of the Shares in mid-February 2020 (with recovery thereafter).

Liquidity

Set out below are (i) the number of trading days; (ii) the percentage of the Shares' average daily trading volume (the "Average Volume") as compared to the total number of issued Shares held by the public as at the Agreement Date; and (iii) the percentage of the Average Volume as compared to the total number of issued the Shares as at the Agreement Date, during the Review Period:

		% of the Average
		Volume to total	% of the Average
		number of issued	Volume to total
	No. of trading	Shares held by the	number of issued
	days in each	public as at the	Shares as at the
Month	month	Agreement Date	Agreement Date
		%	%
2019
July	22	0.01	0.01
August	22	0.05	0.02
September	21	0.03	0.01
October	21	0.03	0.01
November	21	0.01	0.003
December	20	0.003	0.001
2020
January	20	0.02	0.01
February	20	0.84	0.35
March	22	0.12	0.05
April	19	0.01	0.005
May	20	0.05	0.02
June	21	0.82	0.34
July (up to and including the
Agreement Date)	9	0.01	0.005

Source: The Stock Exchange's website

Notes:

1. Based on 849,354,611 Shares held by the public as at the Agreement Date.

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LETTER FROM GRAM CAPITAL

2. Based on 2,047,275,856 Shares as at the Agreement Date.

We noted from the above table that the liquidity of the Shares was generally thin during the Review Period. Save for February and June 2020, the Average Volume during the Review Period was below 0.5% of (i) the total number of issued Shares held in public hands; and (ii) the total number of issued Shares, as at the Agreement Date.

Comparables

As part of our analysis, we further identified transactions in relation to acquisition involving the issue of consideration shares (the "Comparables") which were announced by companies listed on the Stock Exchange during the period from 2 January 2020 up to the Agreement Date (being an approximate half-year period up to and including the Last Trading Day). To the best of our knowledge and as far as we are aware of, we found 26 transactions which met the said criteria and they are exhaustive as far as we are aware of. Shareholders should note that the businesses, operations and prospects of the Company are not the same as the subject companies of the Comparables and we have not conducted any independent verification with regard to the businesses and operations of such companies.

			Premium/(discount) of the
			issue price to closing
			price per share on the
			last trading day prior
			to/date of agreement in
		Date of	relation to the respective
Company name (stock code)		announcement	issuance of shares
TL Natural Gas Holdings Limited
(8536)	19 January 2020	6.12
C-MER Eye Care Holdings Limited
(3309)	20 January 2020	(3.64)
GTI Holdings Limited (3344)	6	February 2020	1.25
PacRay International Holdings Limited
(1010)	14	February 2020	2.67
Elegance Commercial and Financial
Printing Group Limited (8391)	21	February 2020	(2.63)
Kerry Logistics Network Limited (636)	24	February 2020	6.61
Worldgate Global Logistics Ltd (8292)	24	February 2020	6.62
Hong Kong Finance Investment Holding
Group Limited (7)		13 March 2020	11.84
F8 Enterprises (Holdings) Group
Limited (8347)		23 March 2020	3.96
Ming Lam Holdings Limited (1106)		23 March 2020	25.00
New Western Group Limited (8242)		25 March 2020	(3.40)

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LETTER FROM GRAM CAPITAL

		Premium/(discount) of the
		issue price to closing
		price per share on the
		last trading day prior
		to/date of agreement in
	Date of	relation to the respective
Company name (stock code)	announcement	issuance of shares
TL Natural Gas Holdings Limited
(8536)	3 April 2020	6.67
Ausnutria Dairy Corporation Ltd (1717)	9 April 2020	0.16
SDM Group Holdings Limited (8363)	17 April 2020	1.35
CA Cultural Technology Group Limited
(1566)	23 April 2020	(1.52)
Asia Grocery Distribution Limited
(8413)	24 April 2020	(64.91)
AL Group Limited (8360)	29 April 2020	37.93
L & A International Holdings Limited
(8195)	11 May 2020	(6.25)
Planetree International Development
Limited (613)	14 May 2020	29.87
Xiaomi Corporation (1810)	21 May 2020	(13.51)
Green Leader Holdings Group Limited
(61)	25 May 2020	8.33
Jiyi Holdings Limited (formerly known
as Jiyi Household International
Holdings Limited) (1495)	4 June 2020	(7.14)
Golden Faith Group Holdings Limited
(2863)	8 June 2020	1.75
Xinming China Holdings Limited
(2699)	17 June 2020	(4.76)
Differ Group Holding Company Limited
(6878)	18 June 2020	(12.09)
China Rongzhong Financial Holdings
Company Limited (3963)	26 June 2020	(8.33)
Maximum		37.93
Minimum (excluding outlier)		(13.51)
Average (excluding outlier)		3.47
The Acquisition		(9.76)

Source: The Stock Exchange's website

- 47 -

LETTER FROM GRAM CAPITAL

We noted from the above table that the issue prices of the Comparables (excluding the case of Asia Grocery Distribution Limited (stock code: 8413) which was considered as outlier) ranged from a discount of approximately 13.51% to a premium of approximately 37.93% with average premium of approximately 3.47% to/over the respective closing prices of the shares on the last trading day prior to/date of agreement in relation to the respective acquisition (the "Discount/Premium Market Range"). As such, the Issue Price, which represents a discount of approximately 9.76% to the closing price of the Shares on the Agreement Date, falls within the Discount/Premium Market Range. Although the Agreement Date Discount is at the low-end of the Discount/Premium Market Range, we consider that it is not exceptional as it is still within the Discount/Premium Market Range. Therefore, we are of the opinion that the Agreement Date Discount is in line with the market practice.

Although the Issue Price was higher than the closing prices of the Shares in only 4 days during the Review Period, having considered

that the Issue Price of HK$0.370 is within the range of the lowest and highest closing prices of Shares during the Review Period;
that it is reasonable to set the Issue Price at discount to justify for the generally thin liquidity of the Shares during the Review Period (thin liquidity may affect the market value of the Shares);
that the Agreement Date Discount falls within the Discount/Premium Market Range; (although the Agreement Date Discount is at the low-end of the Discount/Premium Market Range, we consider that it is not exceptional as it is still within the Discount/Premium Market Range);
that the Agreement Date Discount is smaller than the Placing Discount which was associated with the share placement to independent third parties conducted by the Company within one month prior to the Agreement Date; and
the Consideration Discount which was slightly deeper than the Agreement Date Discount and indicated that the Group is acquiring the Target Group at 10% discount to the Target Group's implied value under the Acquisition (i.e. the aggregate of the Shareholder's Loan and the Adjusted Net Liabilities),

we consider the Issue Price of HK$0.370 to be fair and reasonable.

- 48 -

LETTER FROM GRAM CAPITAL

Other terms of the Acquisition Agreement are set out in the section headed "THE ACQUISITION AGREEMENT" in the Board Letter.

Taking into account the principal terms of the Acquisition Agreement as set out above, we consider that the terms of the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned.

Possible dilution effect on the shareholding interests of the public Shareholders

With reference to the shareholding table in the section headed "SHAREHOLDING STRUCTURE OF THE COMPANY" of the Board Letter, the shareholding interests held by the public would be diluted by approximately 3.07 percentage points as a result of the issue of Consideration Shares. In this regard, taking into account (i) the reasons for and benefits of the Acquisition; and (ii) the terms of the Acquisition being fair and reasonable, we are of the view that the said level of dilution to the shareholding interests of the public Shareholders as a result of the issue of Consideration Shares is justifiable.

Possible financial effects of the Acquisition

The unaudited pro forma financial information of the Enlarged Group (the "Pro Forma Information") is included in Appendix IV to the Circular.

With reference to the 2020 Annual Report, the consolidated total assets and total liabilities of the Group were approximately HK$4.60 billion and HK$4.13 billion as at 31 March 2020 respectively. According to the Pro Forma Information, the unaudited consolidated total assets and total liabilities of the Enlarged Group would be approximately HK$4.68 billion and HK$4.15 billion respectively as if the Acquisition had taken place at 31 March 2020.

It should be noted that the aforementioned analyses are for illustrative purposes only and do not purport to represent how the financial position of the Group will be upon the Completion.

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Acquisition are on normal commercial terms and are fair and reasonable; and (ii) the Acquisition is conducted in the ordinary and usual course of the business of the Company and is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM GRAM CAPITAL

Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Acquisition Agreement and the transactions contemplated thereunder and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully,

For and on behalf of

Gram Capital Limited

Graham Lam

Managing Director

Note: Mr. Graham Lam is a licensed person registered with the Securities and Futures Commission and a responsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 25 years of experience in investment banking industry.

- 50 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Details of the financial information of the Group for each of the three years ended 31 March 2018, 31 March 2019 and 31 March 2020 are disclosed in the annual reports of the Company for the years ended 31 March 2018, 31 March 2019 and 31 March 2020, respectively, together with the relevant notes thereto, which have been published and are available on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.msil.com.hk) as follows:

annual report of the Company for the year ended 31 March 2018 published on 21 June
2018 (pages 64 to 157):
https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0621/ltn20180621378.pdf
annual report of the Company for the year ended 31 March 2019 published on 12 June
2019 (pages 64 to 165):
https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0623/ltn20190623051.pdf
annual report of the Company for the year ended 31 March 2020 published on 29 July
2020 (pages 74 to 197):
https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0729/2020072900627.pdf

- I-1 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS STATEMENT Indebtedness

As at the close of business on 31 July 2020, being the latest practicable date for the purpose of this statement of indebtedness of the Group prior to printing of this circular, the Group had the following indebtedness:

	31 July 2020
		HK$'000
Indebtedness - Bank borrowing	1,391,789
Indebtedness - Other borrowings	113,526
Indebtedness - Promissory notes	1,000,942
Indebtedness - Other indebtedness	6,063
Indebtedness - Lease liabilities	27,063

	2,539,383

Indebtedness - Bank borrowing

The secured bank loan as at 31 July 2020 represents the new bank loan with principal amount of RMB1,244,040,000 obtained during the year ended 31 March 2020 (equivalent to HK$1,380,884,000) with interest payable of approximately RMB9,824,000 (equivalent to approximately HK$10,905,000). The secured bank loan carries a fixed interest rate of 7% per annum, with the interest payable quarterly, and will mature on 30 March 2035. It was secured by certain investment properties under construction, properties under development or held for sale and certain property, plant and equipment.

Indebtedness - Other borrowings

The unsecured loan interest payable as at 31 July 2020 represents the amount of RMB359,000 (equivalent to approximately HK$399,000) from an independent third party to the Group. The principle of the unsecured loan had been fully settled since April 2020. The interest payable was still outstanding, with a maturity date on 20 July 2021.

An unsecured revolving loan facility with an aggregate facility amount of RMB500,000,000 (equivalent to HK$555,000,000) has been granted from Mr. Hu to certain subsidiaries established in the PRC which carries a fixed interest rate of 9% per annum. As at 31 July 2020, unsecured borrowings with aggregate principal had been fully settled since April 2020. The interest payable of RMB42,099,000 (equivalent to approximately HK$46,730,000) was still outstanding, with a maturity date on 6 July 2021.

Another unsecured revolving loan facility has been granted from Mr. Hu to an indirectly wholly-owned subsidiary of the Company amounted to HK$100,000,000, which carries a fixed interest rate of 8% per annum, with maturity date on 6 July 2021. As at 31 July 2020, unsecured borrowing with principal amount of HK$59,664,000 has been drawn down with the interest payable of HK$6,733,000.

- I-2 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Promissory notes

The Group had outstanding promissory notes with aggregate principal amount of HK$778,000,000 with the interest payable of HK$222,942,000 due to Total Idea International Limited, a company wholly-owned by Mr. Hu. As advised by Mr. Hu, the promissory notes were transferred from Xinli Holdings Limited to Total Idea International Limited on 15 December 2017 following arm's length negotiation between the parties having considered that the promissory notes would generate interest income at maturity date. The promissory notes carried fixed interest rate of 8% per annum, and the principal amount and the interest accrued will be repaid at the maturity date on 28 July 2022.

Each of Xinli Holdings Limited and its ultimate beneficial owner do not have any relationship (business or otherwise, implicit or explicit, expressed or implied) nor have any arrangement, understanding or undertaking (formal or informal, expressed or implied) with, and is a third party independent of, Mr. Hu, the Company and their connected persons.

Other indebtedness

The Group had outstanding indebtedness of RMB4,450,000 (equivalent to approximately HK$4,940,000) due to an independent third party to the Group, in which the amount was unguaranteed, unsecured, non-interest bearing and repayable on demand.

Lease liabilities
Lease liabilities of the Group was approximately HK$27,063,000.

As at the close of business on 31 July 2020, the Target Group had aggregate borrowings of approximately JPY1,975,133,000 (equivalent to approximately HK$141,025,000) comprising unsecured shareholder's loan.

Contingent liabilities

As at 31 July 2020, the Enlarged Group had no material contingent liability.

Except as disclosed above and apart from intra-group liabilities, the Enlarged Group did not have, as at 31 July 2020 any other debt securities issued and outstanding, and authorised or otherwise created but unissued, other borrowings and indebtedness, bank overdrafts, acceptance credits, hire purchases commitments, finance lease commitments, mortgages, charges, guarantees or other material contingent liabilities.

3. WORKING CAPITAL

The Directors are of the opinion that, following completion of the Acquisition, taking into the financial resources available to the Enlarged Group, including its internally generated funds, the present available banking facilities of the Enlarged Group, and in the absence of unforeseen circumstances, the Enlarged Group will have sufficient working capital to meet its present requirements for at least 12 months from the date of this circular.

- I-3 -

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Company is an investment holding company. The Group is principally engaged in property development and investment which covers development, sales and leasing of properties.

As disclosed in the annual report of the Company for the year ended 31 March 2020 published on 29 July 2020, the Company has been actively looking to diversify the revenue sources of the Group in order to create shareholders' value. To continue the momentum of the Group's expansion of its property development and related investment business, the Acquisition offers a good opportunity for the Group to expand into Japan market and enhance its assets portfolio with a potential of capital appreciation in the long run.

5. MATERIAL ACQUISITIONS

On 8 May 2020, Wenzhou Rongdong Real Estate Development Co., Ltd.* (溫州榮東房地產開發有限公司), an indirect wholly-owned subsidiary of the Company, entered into a sale and purchase agreement with Mr. Hu Shikuan and Ms. Zhang Tingting in relation to the sale and purchase of the entire equity interests in Wenzhou Junshang Decoration Co., Ltd.* (溫州君尚裝飾有限公司) for a consideration of RMB1. Please refer to the Company's announcements dated 8 May 2020 and 21 May 2020 for more details.

Save as disclosed above and the Acquisition, the Group has not entered into any material acquisitions after 31 March 2020, being the date to which the latest published audited accounts of the Company have been made up, and the aggregate remuneration payable to and benefits in kind receivable by the Directors have not been varied as a consequence of such material acquisitions.

6. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2020, being the date to which the latest published audited consolidated financial statements of the Company were made up.

- I-4 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

The following is the text of a report set out on II-1 to II-3, prepared for the purpose of incorporation in this circular, received from the Company's reporting accountants, SHINEWING (HK) CPA Limited.

ACCOUNTANTS' REPORT ON HISTORICAL FINANCIAL INFORMATION OF THE TARGET GROUP TO THE DIRECTORS OF MAN SANG INTERNATIONAL LIMITED

INTRODUCTION

We were engaged to report on the historical financial information of 株式会社多弗 (the "Target Company") and its subsidiaries (collectively referred to as the "Target Group") set out on pages II-5 to II-47, which comprises the consolidated statements of financial position of the Target Group as at 31 March 2018, 2019 and 2020 and the consolidated statements of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Target Group for each of the years ended 31 March 2018, 2019 and 2020 (the "Track Record Period") and a summary of significant policies and other explanatory information (together, the "Historical Financial Information"). The Historical Financial Information of the Target Group are set out on pages II-5 to II-47 forms an integral part of this report, which has been prepared for inclusion in the circular of Man Sang International Limited (the "Company") dated 10 September 2020 (the "Circular") in connection with the proposed acquisition of the entire equity interest in the Target Company by the Company.

DIRECTORS' RESPONSIBILITIES FOR HISTORICAL FINANCIAL INFORMATION

The director of the Company is responsible for the preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information.

The financial statements of the Target Group for the Track Record Period (the "Underlying Financial Statements"), on which the Historical Financial Information is based, were prepared by the director of the Target Company.

COMPANY'S REPORTING ACCOUNTANTS' RESPONSIBILITY

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

- II-1 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

COMPANY'S REPORTING ACCOUNTANTS' RESPONSIBILITY (CONTINUED)

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants' judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity's preparation of Historical Financial Information that gives a true and fair view in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Target Group, 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 purpose of the accountants' report, a true and fair view of the Target Group's financial position as at 31 March 2018 and 2019, and of the Target Group's financial performance and cash flows for the Track Record Period in accordance with the basis of preparation and presentation set out in note 2 to the Historical Financial Information.

We do not express an opinion on the Historical Financial Information of the Target Group for the year ended 31 March 2020. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to form an audit opinion on this Historical Financial Information for the year ended 31 March 2020.

BASIS FOR DISCLAIMER OF OPINION

As described in note 2 to the Historical Financial Information, the Target Group incurred a net loss from continuing operations of approximately JPY177,525,000 during the year ended 31 March 2020 and as of 31 March 2020, the Target Group had net current liabilities of approximately JPY1,859,132,000 and had net liabilities of approximately JPY1,031,501,000. The Target Group's aggregate borrowings amounted to approximately JPY1,914,155,000 as at 31 March 2020 which will be due for repayment within twelve months from 31 March 2020, while its bank balances and cash amounted to approximately JPY71,658,000 only as at 31 March 2020. The Target Group's ability to continue as a going concern is dependent on the continuous financial support from the sole shareholder of the Target Company.

- II-2 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Should the sole shareholder of the Target Company no longer provide financial support to the Target Group, it might not be able to continue to operate as a going concern, and adjustments would have to be made to reclassify the Target Group's non-current assets and non-current liabilities as current assets and current liabilities respectively, and to write down the carrying values of the Target Group's assets to their recoverable amounts. The effects of these adjustments have not been reflected in the consolidated financial statements. In view of the significance of the extent of the uncertainties relating to the continuous financial support to the Target Group, we disclaim our opinion in respect of the year ended 31 March 2020.

REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OF SECURITIES ON THE GEM OF THE STOCK EXCHANGE AND THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

ADJUSTMENTS

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

DIVIDENDS

We refer to note 14 to the Historical Financial Information which states that no dividends have been declared and paid by the Target Company or its subsidiaries in respect of the Track Record Period.

- II-3 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

NO HISTORICAL FINANCIAL INFORMATION FOR THE GROUP

No statutory financial statements have been prepared for the Target Company since its date

of incorporation.

SHINEWING (HK) CPA Limited

Certified Public Accountants

Lau Kai Wong

Practising Certificate Number: P06623

Hong Kong

10 September 2020

- II-4 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

HISTORICAL FINANCIAL INFORMATION OF DOOF JAPAN GROUP
Preparation of Historical Financial Information

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

The consolidated financial statements of the Target Group for the Track Record Period, on which the Historical Financial Information is based, were audited by SHINEWING (HK) CPA Limited in accordance with Hong Kong Standards on Auditing issued by the HKICPA (the "Underlying Financial Statements").

The Historical Financial Information is presented in Japanese Yen ("JPY") and all values are rounded to the nearest thousand (JPY'000) except when otherwise indicated.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

		Year ended 31 March
	Notes	2018			2019	2020
		JPY'000	JPY'000	JPY'000
Revenue	8	128,695			153,742		156,917
Cost of sales		(228,872)	(264,235)	(251,436)

Gross profit		(100,177)	(110,493)	(94,519)
Other income and gain	10	1,499			2,668		1,660
Impairment of goodwill	17	(245,918)	-	-
Transaction cost related to acquisition of a
subsidiary		(281,480)	-	-
Administrative and other expenses		(57,183)	(88,698)	(97,733)

Loss before tax		(683,259)	(196,523)	(190,592)
Income tax credit	11	4,794			11,012		13,067

Loss and total comprehensive loss for the year	12	(678,465)	(185,511)	(177,525)


Attributable to the owner of the Target Company		(678,465)	(185,511)	(177,525)

- II-5 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
				As at 31 March
	Notes	2018		2019	2020
		JPY'000		JPY'000	JPY'000
Non-current assets
Property, plant and equipment	16	1,212,699		1,145,622		1,073,625
Goodwill	17	-			-		-
		1,212,699		1,145,622		1,073,625
Current assets

Inventories	18	1,863		2,178		1,287
Trade and other receivables	19	18,590		12,906		14,546
Bank balances and cash	20	16,950		26,426		71,658

		37,403		41,510		87,491
Current liabilities

Trade and other payables	21	10,853		28,632		32,468
Amount due to a shareholder	22	1,621,880		1,753,415		1,914,155
Income tax payable		15,761			-	-

		1,648,494			1,782,047		1,946,623
Net current liabilities		(1,611,091)	(1,740,537)	(1,859,132)
Total assets less current liabilities
(398,392)	(594,915)	(785,507)
Non-current liability

Deferred tax liability	23	270,073		259,061		245,994
Net liabilities
	(668,465)	(853,976)	(1,031,501)
Capital and reserve


Share capital	25	10,000		10,000		10,000
Accumulated losses		(678,465)	(863,976)	(1,041,501)

		(668,465)	(853,976)	(1,031,501)

- II-6 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

				Accumulated
	Share capital		losses	Total
		JPY'000		JPY'000	JPY'000
At 1 April 2017	10,000			-	10,000
Loss for the year		-	(678,465)	(678,465)

At 31 March 2018 and 1 April 2018	10,000		(678,465)	(668,465)
Loss for the year		-	(185,511)	(185,511)

At 31 March 2019 and 1 April 2019	10,000		(863,976)	(853,976)
Loss for the year		-	(177,525)	(177,525)

At 31 March 2020	10,000		(1,041,501)	(1,031,501)

- II-7 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Year ended 31 March
		2018		2019	2020
		JPY'000	JPY'000	JPY'000
OPERATING ACTIVITIES
Loss before tax		(683,259)	(196,523)	(190,592)
Adjustments for:
Depreciation of property, plant and equipment	78,517		80,138		72,605
Government subsidy		(101)	(102)	(93)
Bank interest income		(1)	(1)	(1)
Gain on disposal of property, plant and
equipment		-	-	(152)
Impairment of goodwill		245,918		-	-
Transaction cost related to acquisition of a
subsidiary		281,480		-	-
Operating cash flows before movements in

working capital		(77,446)	(116,488)	(118,233)
Decrease (increase) in inventories	593		(315)	891
Decrease (increase) in trade and other receivables	8,593		5,684		(1,640)
(Decrease) increase in trade and other payables	(1,077)	17,779		3,836

Cash used in operations		(69,337)	(93,340)	(115,146)
Income tax paid		-	(15,761)	-
NET CASH USED IN OPERATING
ACTIVITIES		(69,337)	(109,101)	(115,146)
INVESTING ACTIVITIES

Interest received		1		1		1
Net cash outflow from acquisition of a subsidiary	(1,190,071)	-	-
Transaction cost related to acquisition of a
subsidiary		(281,480)	-	-
Acquisition of property, plant and equipment	(64,244)	(13,061)	(687)
Proceed from disposal of property, plant and
equipment		-	-	231
NET CASH USED IN INVESTING
ACTIVITIES		(1,535,794)	(13,060)	(455)

- II-8 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
			Year ended 31 March
		2018	2019	2020
		JPY'000		JPY'000	JPY'000
FINANCING ACTIVITIES
Advances from a shareholder		1,621,880	131,535		160,740
Government subsidy received		101		102		93
CASH FROM A FINANCING ACTIVITIES	1,621,981	131,637		160,833
NET INCREASE IN CASH AND CASH

EQUIVALENTS		16,850	9,476		45,232
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE YEAR	100	16,950		26,426
CASH AND CASH EQUIVALENTS AT END
OF THE YEAR		16,950	26,426		71,658

- II-9 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

1. CORPORATE INFORMATION

The Target Company was incorporated in Japan with limited liability on 12 January 2017. The address of its registered office and its principal place of business 2361-1, Yoichi Cho, Yoichi Gun, Hokkaido, Japan. The sole shareholder of the Target Company is Mr. Hu Xing Rong (Mr. Hu").

The Target Company is an investment holding company while the Target Group is mainly engaged in hotel operation business in Hokkaido, Japan. Particulars of the subsidiaries of the Target Company have been set out in note 15.

The functional currency of the Target Company is Japanese Yen ("JPY") which is also the presentation currency of the Historical Financial Information.

2. BASIS OF PREPARATION

In preparing the Historical Financial Information, the director of the Target Company has given careful consideration to the future liquidity of the Target Group in light of the Target Group's net current liabilities of approximately JPY1,859,132,000 and net liabilities of approximately JPY1,031,501,000 as at 31 March 2020 as well as a loss incurred of approximately JPY177,525,000 for the year ended 31 March 2020.

In view of the above, the director of the Target Company has reviewed the Target Group's cash flow projections prepared by management covering a period of twelve months from 31 March 2020 which have taken into account the continuous financial support from the sole shareholder of the Target Company. In the opinion of the director of the Target Company, the Target Group will have sufficient working capital to fulfill its financial obligations as and when they fall due in the coming twelve months from 31 March 2020. Accordingly, the director of the Target Company is satisfied that it is appropriate to prepare the Historical Financial Information on a going concern basis.

Should the going concern assumption be inappropriate, adjustments may have to be made to reflect the situation that assets may need to be realised at the amounts other than which they are currently recorded in the consolidated statement of financial position as at 31 March 2020. In addition, the Target Group may have to recognise further liabilities that might arise, and to reclassify non-current assets and non-current liabilities as current assets and current liabilities, respectively.

- II-10 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

3. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs")

For the purpose of preparing and presenting the Historical Financial Information for the Track Record Period, the Target Group has adopted all applicable new and revised HKFRS to the Track Record Period.

New and revised HKFRSs issued but not yet effective

The HKICPA has issued the following new standards, amendments and interpretation to existing standards which are not yet effective for accounting period beginning on 1 April 2020 and have not been early adopted:

HKFRS 17	Insurance Contracts2
Amendments to HKFRS 10	Sale or Contribution of Assets between an Investor and its
and HKAS 28	Associate or Joint Venture4
Amendments to HKFRS 3	Definition of a Business5
Amendments to HKFRS 3	Reference to the Conceptual Framework3
Amendments to HKFRS 16	COVID-19-Related Rent Concessions6
Amendments to HKAS 1	Definition of Material1
and HKAS 8
Amendments to HKAS 16	Propery, Plant and Equipment - Proceeds before Intended Use3
Amendments to HKAS 37	Onerous Contracts - Cost of Fulfilling a Contract3
Amendments to HKFRS 9,	Interest Rate Benchmark Reform1
HKAS 39 and HKFRS 7
Conceptual Framework for	Revised Conceptual Framework for Financial Reporting1
Financial Reporting 2018

Effective for annual periods beginning 1 January 2020
Effective for annual periods beginning 1 January 2021
Effective for annual periods beginning 1 January 2022
Effective for annual periods beginning on or after a date to be determined
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
Effective for annual periods beginning on or after 1 June 2020

The director of the Target Company anticipates that the application of the new and revised HKFRSs that had been issued but not yet effective will have no material impact on the results and the financial position of the Target Group.

- II-11 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

4. SIGNIFICANT ACCOUNTING POLICIES

The Historical Financial Information has been prepared in accordance with the accounting policies set out below which conform with HKFRSs. In addition, the Historical Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies Ordinance.

The Historical Financial Information has been prepared on the historical cost basis.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. Details of fair value measurements are explained in the accounting policies set out below.

The principal accounting policies are set out below.

Basis of consolidation

The Historical Financial Information incorporates the financial information of the entities controlled by the Target Company.

Control is achieved where the Target Group has: (i) the power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the Group's returns.

The Target Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Target Group obtains control over the subsidiary and ceases when the Target Group loses control of the subsidiary.

Income and expenses of subsidiaries are included in the consolidated statements of profit or loss and other comprehensive income from the date the Target Group gains control until the date when the Target Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income of subsidiaries are attributed to the owners of the Target Company. Total comprehensive income of subsidiaries is attributed to the owners of the Target Company.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Target Group are eliminated in full on consolidation.

- II-12 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Business combinations

Businesses combinations are accounted for by applying the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Target Group, liabilities incurred by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. Acquisition-related costs incurred to effect a business combination are recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

deferred tax assets or liabilities arising from the assets acquired and liabilities assumed in the business combination are recognised and measured in accordance with HKAS 12 Income Taxes;

Goodwill is measured as the excess of the aggregate of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the Target Group's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the aggregate of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a gain on bargain purchase.

Goodwill

Goodwill arising from a business combination is carried at cost less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Target Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is

- II-13 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal.

Revenue recognition

Revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Target Group uses a 5-step approach to revenue recognition.

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.

The Target Group recognised revenue when (or as) a performance obligation is satisfied, i.e. when "control" of the goods or services underlying the particular performance obligation is transferred to customers.

A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct goods or services that are substantially same.

Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation if one of the following criteria is met:

The customer simultaneously receives and consumes the benefits provided by the Target Group's performance as the Target Group performs;
the Target Group's performance creates and enhances an asset that the customer controls as the asset is created and enhanced; or
the Target Group's performance does not create an asset with an alternative use to the Target Group and the Target Group has an enforceable right to payment for performance completed to date.

- II-14 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct goods or service.

Revenue is measured based on the consideration specified in a contract with a customer, excludes amounts collected on behalf of third parties, discounts and sales related taxes.

Contract assets and contract liabilities

A contract asset represents the Target Group's right to consideration in exchange for goods or services that the Target Group has transferred to a customer that is not yet unconditional. It is assessed for impairment in accordance with HKFRS 9 Financial Instruments. In contrast, a receivable represents the Target Group'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 Group's obligation to transfer goods or services to a customer for which the Target Group has received consideration from the customer. A contract liability would also be recognised if the Target Group has an unconditional right to receive consideration before the Target Group recognises the related revenue. In such cases, a corresponding receivable would also be recognised.

For a single contract with the customer, either a net contract asset or a net contract liability is presented. For multiple contracts, contract assets and contract liabilities of unrelated contracts are not presented on a net basis.

The Target Group recognised revenue from the following major sources:

Hotel and golf club operations

Hotel room revenue, other ancillary services and income from golf club operation are recognised over time by reference to the progress towards complete satisfaction of the relevant performance obligation, as the customer simultaneously receives and consumes the benefits provided by the Target Group's performance as the Target Group performs.

Income from food and beverage is recognised at a point in time when the food and beverage are served.

Sale of goods

Revenue is recognised when goods are delivered which is taken to be the point in time when the customer takes possession of and accepts the goods. Revenue excludes consumption tax or other sales taxes.

- II-15 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Over time revenue recognition: measurement of progress towards complete satisfaction of a

performance obligation

Output method

The progress towards complete satisfaction of a performance obligation is measured based on output method, which is to recognise revenue on the basis of direct measurements of the value of the goods or services transferred to the customer to date relative to the remaining goods or services promised under the contract, that best depict the Target Group's performance in transferring control of goods or services.

Leasing

Definition of a lease

Under HKFRS 16 Leases, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The Target Group as lessor

The Target Group enters into lease agreements as a lessor with respect to some of its buildings. Leases for which the Target Group is a lessor are classified as operating leases.

When a contract includes both lease and non-lease components, the Target Group applies HKFRS 15 Revenue from Contracts with Customers to allocate the consideration under the contract to each component.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

- II-16 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Retirement benefits cost

Payments to the state-managed retirement benefit schemes are recognised as an expense when employees have rendered service entitling them to the contributions.

Short term employee benefits

Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

Taxation

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 before tax as reported in the consolidated statements of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Group'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 Historical Financial Information 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 difference 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 the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, except when the Target Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each 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.

- II-17 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

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 is realised, based on tax rate (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 Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss.

Property, plant and equipment

Freehold land is stated at cost less accumulated impairment losses. No depreciation is provided for freehold land.

Property, plant and equipment including buildings held for use in the supply of goods or services, or for administrative purposes are stated in the consolidated statements of financial position at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to allocate the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Cash and cash equivalents

Bank balances and cash in the consolidated statements of financial position comprise cash at banks and on hand and short-term bank deposits with a maturity of three months or less.

For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of bank balances and cash, as defined above.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in,first-out method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

- II-18 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statements of financial position when a group 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 are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

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.

All recognised financial assets are subsequently measured in their entirety at amortised cost.

Financial assets at amortised cost

The Target Group measures financial assets subsequently at amortised cost if both of the following conditions are met:

the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment.

Amortised cost and 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 relevant periods.

For financial assets other than purchased or originated credit-impaired financial assets (i.e. assets that are credit-impaired on initial recognition), the effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received

- II-19 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses ("ECL"), through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortised cost of a financial asset before adjusting for any loss allowance.

Interest income is recognised using the effective interest method for debt instruments measured subsequently at amortised cost. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for financial assets that have subsequently become credit-impaired (see below). For financial assets that have subsequently become credit impaired, interest income is recognised by applying the effective interest rate to the amortised cost of the financial asset. If, in subsequent reporting periods, the credit risk on the credit impaired financial instrument improves so that the financial asset is no longer credit impaired, interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial asset.

Interest income is recognised in profit or loss and included in the "Other income and gain" line item (note 10).

Impairment of financial assets

The Target Group recognises a loss allowance for ECL on investments in debt instruments that are measured at amortised cost. The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instruments.

The Target Group always recognises lifetime ECL for trade receivables. The ECL on these financial assets are estimated using a provision matrix based on the Target Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate.

For all other financial instruments, the Target Group measures the loss allowance equal to 12-month ECL unless when there has a significant increase in credit risk since initial recognition, the Target Group recognises lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial recognition.

Significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Target Group compares the risk of a default occurring on the

- II-20 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

financial instrument as at the end of each reporting period with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Target Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition:

an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;
significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit default swap prices for the debtor, or the length of time of the extent to which the fair value of a financial asset has been less than its amortised cost;
existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant decrease in the debtor's ability to meet its debt obligations;
an actual or expected significant deterioration in the operating results of the debtor; and
an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.

Irrespective of the outcome of the above assessment, the Target Group presumes that the credit risk has increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the Target Group has reasonable and supportable information that demonstrates otherwise.

Despite the foregoing, the Target Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if i) the financial instrument has a low risk of default, ii) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and iii) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow obligations. the Target Group considers a financial asset to have low credit risk when it has an external credit rating of 'investment grade' as per globally understood definitions.

- II-21 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

The Target Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount becomes past due.

Definition of default

The Target Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that receivables that meet either of the following criteria are generally not recoverable.

when there is a breach of financial covenants by the counterparty; or
information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Target Group, in full (without taking into account any collaterals held by the Target Group).

Irrespective of the above analysis, the Target Group considers that default has occurred when a financial asset is more than 90 days past due unless the Target Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data about the following events:

significant financial difficulty of the issuer or the counterparty;
a breach of contract, such as a default or past due event;
the lender(s) of the counterparty, for economic or contractual reasons relating to the counterparty's financial difficulty, having granted to the counterparty a concession(s) that the lender(s) would not otherwise consider; or
it is becoming probable that the counterparty will enter bankruptcy or other financial reorganisation.

Write-off policy

The Target Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery, e.g.

- II-22 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

when the counterparty has been placed under liquidation or has entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities under the Target Group's recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.

Measurement and recognition of ECL

The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets' gross carrying amount at the end of each reporting period.

For financial assets, the ECL is estimated as the difference between all contractual cash flows that are due to the Target Group in accordance with the contract and all the cash flows that the Target Group expects to receive, discounted at the original effective interest rate.

If the Target Group has measured the loss allowance for a financial instrument at an amount equal to lifetime ECL in the previous reporting period, but determines at the current reporting date that the conditions for lifetime ECL are no longer met, the Target Group measures the loss allowance at an amount equal to 12-month ECL at the current reporting date, except for assets for which simplified approach was used. the Target Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

Derecognition of financial assets

The Target Group 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 party.

On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments issued by a group entity are 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.

- II-23 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Equity instruments

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

Financial liabilities

All financial liabilities are subsequently measured at amortised cost using the 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 relevant periods. 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 amortised cost of a financial liability.

Derecognition of financial liabilities

The Target Group derecognises financial liabilities when, and only when, the Target Group's obligations are discharged, canceled or have expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

Impairment losses on tangible assets

At the end of the reporting period, the Target Group reviews the carrying amounts of its tangible 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, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Target Group 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 unit, or otherwise they are allocated to the smallest group 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 (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

- II-24 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Where an impairment loss subsequently reverses, the carrying amount of the asset (or the cash-generating unit) 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 (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

5. CRITICAL ACCOUNTING JUDGEMENT AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Group's accounting policies, which are described in note 4, the director of the Target Company is required to make judgements, estimates and assumptions about the amounts of assets, liabilities, revenue and expenses reported and disclosures made in the consolidated financial statements. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing 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.

Critical judgement in applying the accounting policies

The following is the critical judgements, apart from those involving estimations (see below), that the director of the Company has made in the process of applying the Target Group's accounting policies and that have the most significant effect on the amounts recognised and disclosures made in the consolidated financial statements.

Going concern consideration

The assessment of the going concern assumption involves making judgements by the director of the Company, at a particular point of time, about the future outcome of events and conditions which are inherently uncertain. The director of the Target Company believes that the liquidity of the Target Group can be maintained in the coming twelve-month period from 31 March 2020 after taking into the considerations as detailed in note 2. The director of the Target Company also believes that the Target Group will have sufficient cash resources to satisfy its future working capital and other financing requirements for the next twelve months from 31 March 2020.

Key sources of estimation uncertainty

The followings 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 resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

- II-25 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account their estimated residual values. The determination of the useful lives and residual values involve management's estimates based on experience about the economic useful lives of the assets and by making reference to market prices of similar assets. the Target Group assesses annual residual values and the useful lives of the property, plant and equipment and if the expectation differs from the original estimates, such a difference may impact the depreciation in the year and the estimate will be changed in the future period.

At as 31 March 2018, 2019 and 2020, the carrying amounts of property, plant and equipment are JPY1,212,699,000, JPY1,145,622,000 and JPY1,073,625,000 respectively.

Estimated impairment of property, plant and equipment

At the end of the reporting period, the management of the Target Group reviews the carrying amounts of the property, plant and equipment and identified if there is any indication for possible impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In assessing whether there is any indication of possible impairment for property, plant and equipment, the Target Group has considered the recoverable amounts with reference to the valuation performed by independent valuer. During the year ended 31 March 2018, 2019 and 2020 no impairment loss on property, plant and equipment was recognised by the Target Group.

Estimated impairment of trade and other receivables

The impairment provisions for trade and other receivables are based on assumptions about ECL. the Target Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, bases on the number of days that an individual receivable is outstanding as well as the Target Group's historical experience and forward-looking information at the end of the reporting period. Changes in these assumptions and estimates could materially affect the result of the assessment and it may be necessary to make additional impairment charge to the consolidated statement of profit or loss and other comprehensive income. The ECL are assessed collectively using a provision matrix with appropriate groupings and/or individually. As at 31 March 2018, 2019 and 2020, the carrying amount of trade and other receivables were approximately JPY18,256,000, JPY12,670,000 and JPY14,200,000 respectively.

- II-26 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of recoverable amount of each cash-generating unit to which the goodwill is allocated, which is determined by higher of fair value less costs of disposal or value in use. As at 31 March 2018, 2019 and 2020, the carrying amount of goowill is nil. During the year ended 31 March 2018, 2019 and 2020, impairment loss on goodwill of approximately JPY245,918,000, nil and nil was recogised respectively by the Target Group. Details of the recoverable amount calculation are disclosed in note 17.

6. CAPITAL RISK MANAGEMENT

The Target Group manages its capital to ensure that entities within the Target Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances. the Target Group's overall strategy remained unchanged during the Track Record Period.

The capital structure of the Target Group consists of amount due to a shareholder, bank balances and cash and equity attributable to owners of the Company, comprising issued share capital and reserves.

The director of the Target Company reviews the capital structure of the Target Group periodically. As part of this review, the director of the Target Company considers the cost of capital and risks associated with each class of capital. Based on recommendations of the director of the Target Company, the Target Group will balance its overall capital structure through new share issues. The director of the Target Company will also consider the raise of additional borrowings as additional capital.

The director of the Target Company also endeavors to ensure the steady and reliable cash flows from the normal business operation.

7. FINANCIAL INSTRUMENTS
a) Categories of financial instruments
			31 March
	2018		2019	2020
	JPY'000	JPY'000	JPY'000
The Target Group
Financial assets
Financial assets at amortised cost	27,187		39,096		85,858
Financial liabilities


Financial liabilities at amortised cost	1,631,068		1,772,911		1,940,852

- II-27 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Financial risk management objectives and policies

The Target Group's major financial instruments include trade and other receivables, trade and other payables, amount due to a shareholder and bank balances and cash.

Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (interest rate risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Interest rate risk

The Target Group is exposed to cash flow interest rate risk in relation to variable-rate bank balances (see note 20). The Target Group currently does not have an interest rate hedging policy. However, management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

As all the Target Group's bank balances were short-term in nature, any change in the interest rate from time to time is not considered to have significant impact to the Target Group's performance.

Credit risk

As at the end of each reporting period, the Target Group's maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets, as stated in the consolidated statements of financial position.

The credit risk of the Target Group mainly arises from bank balances and trade and other receivables. The carrying amounts of these balances represent the Target Group's maximum exposure to credit risk in relation to financial assets.

In order to minimise the credit risk, the management of the Target Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Target Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the director of the Target Company considers that the Target Group's credit risk is significantly reduced.

For trade receivables, the Target Group has applied the simplified approach in HKFRS 9 to measure the loss allowance at lifetime ECL. The Group determines the ECL by using a provision matrix, estimated based on historical credit loss experience, as well as the general economic conditions of the industry in which the debtors operate. In this regard, the director of the Target Company considers that the Target Group's credit risk is significantly reduced.

- II-28 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

For other non-traded related receivables, the Target Group has assessed whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk, the Target Group will measure the loss allowance based on lifetime rather than 12-month ECL.

The Target Group's exposure to credit risk

In order to minimise credit risk, the Target Group has tasked its operation management committee to develop and maintain the Target Group's credit risk grading to categorise exposures according to their degree of risk of default. The operation management committee uses publicly available financial information and the Target Group's own trading records to rate its major customers and other debtors. the Target Group's exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

The Target Group's current credit risk grading framework comprises the following

categories:
		Basis for recognising
Category	Description	ECL
Performing	For financial assets where there has low	12-month ECL
	risk of default or has not been a
	significant increase in credit risk since
	initial recognition and that are not
	credit impaired (refer to as Stage 1)
Doubtful	For financial assets where there has been	Lifetime ECL - not
	a significant increase in credit risk	credit impaired
	since initial recognition but that are not
	credit impaired (refer to as Stage 2)
Default	Financial assets are assessed as credit	Lifetime ECL - credit
	impaired when one or more events that	impaired
	have a detrimental impact on the
	estimated future cash flows of that
	asset have occurred (refer to as Stage
	3)
Write-off	There is evidence indicating that the	Amount is written off
	debtor is in severe financial difficulty
	and the Target Group has no realistic
	prospect of recovery

- II-29 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

The tables below detail the credit quality of the Target Group's financial assets as well as

the Target Group's maximum exposure to credit risk.

			31 March	31 March	31 March
				2018		2019		2020
	Internal	12-month	Gross	Net	Gross	Net	Gross	Net
	credit	or lifetime	carrying	carrying	carrying	carrying	carrying	carrying
	rating	ECL	amount	amount	amount	amount	amount	amount
			JPY'000	JPY'000
Trade receivables	Note	Lifetime	651	651	1,846	1,846	7,330	7,330
		ECL
Other receivables	Performing	12-month	9,586	9,586	10,824	10,824	6,870	6,870
		ECL

Note: The Target Group has applied simplidied approach in HKFRS 9 to measure the loss allowance at lifetime ECL.

In respect of cash and cash equivalents, the Target Group will place its cash at banks and financial institutions with high credit ratings assigned by international credit-rating agencies.

The Target Group's concentration of credit risk by geographical location is mainly in Japan.

Liquidity risk

The Target Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Group's operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilisation of amount due to a shareholder.

The Target Group is exposed to liquidity risk as the Target Group's current liabilities exceeded its current assets by approximately JPY1,859,132,000 and net liabilities of approximately JPY1,031,501,000 as at 31 March 2020 as well as incurred a loss of approximately JPY117,525,000 for the year ended 31 March 2020. The director of the Target Company is of the opinion that the Target Group will have sufficient working capital to meet its financial obligations and the details of which are set out in note 2.

The financial liabilities of the Target Group as at 31 March 2018, 2019 and 2020 are payable on demand or within one year and the undiscounted cash flows are same as the carrying amount.

Fair values

The director of the Target Company considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Historical Financial Information approximate their fair values.

- II-30 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

8. REVENUE

The Target Group are engaged in hotel operation business in Hokkaido, Japan. Revenue represents the consideration expected to be received in respect of the transfer of goods and services and all the sales are conducted in Japan.

	2018	2019	2020
	JPY'000	JPY'000		JPY'000
Revenue from contract with customers
within the scope of HKFRS 15:
- Hotel room	16,567	24,565		28,481
- Food and beverage	36,884	41,732		38,816
- Golf club operation	72,216	84,236		86,270
- Others	3,028	3,209		3,350

	128,695		153,742		156,917

Disaggregation of revenue from contracts with customers by timing of recognition
	2018	2019	2020
	JPY'000	JPY'000		JPY'000
Timing of revenue recognition
At a point in time	42,888	47,344		43,786
Over time	85,807	106,398		113,131

	128,695	153,742		156,917

The revenue from contracts with customers recognised over time amounted to approximately JPY85,807,000, JPY106,398,000 and JPY113,131,000 for the year ended 31 March 2018, 2019 and 2020 respectively mainly consists of hotel room revenue and income from golf club operation.

9. SEGMENT INFORMATION

The Target Group's operating activities are solely derived from the operation of hotel operation business in Japan. The Target Group's chief operating decision maker ("CODM") reviews the overall results of financial position of the Group as a whole prepared based on the same accounting policies. Accordingly, the Target Group has only one single operating segment and no further analysis of this single segment is presented.

Information about major customers

None of the Target Group's customers contributed 10% or more of the Target Group's total revenue during the Track Record Period.

- II-31 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

Geographical information

The Target Company is domiciled in Japan. As all the Target Group's revenue from external customers are derived from and all of the Target Group's non-current assets are located in Japan, hence no information of the Target Group's revenue and non-current assets by geographical location is presented.

10. OTHER INCOME AND GAIN
		Year ended 31 March
	2018	2019	2020
	JPY'000		JPY'000	JPY'000
Bank interest income	1	1		1
Rental income *	862	936		1,317
Gain on disposal of property, plant and
equipment	-		-	152
Government subsidy	101	102		93
Others	535	1,629		97

	1,499	2,668		1,660

No material outgoings had been incurred for the rental income.

11. INCOME TAX CREDIT

		Year ended 31	March
	2018	2019	2020
	JPY'000		JPY'000	JPY'000
Current tax:
Japan Enterprise Income Tax	-		-		-
Deferred tax credit (Note 23)	4,794	11,012		13,067

	4,794	11,012		13,067

Under the Law of the Japan on Enterprise Income Tax ("EIT") and implementation regulation of the EIT Law, the tax rate of the entities established in Japan is approximately 34% during the Track Record Period.

No provision for EIT was made in the Historical Financial Information as the Target Group did not have any assessable profits during the Track Records Period.

- II-32 -

APPENDIX IIFINANCIAL INFORMATION OF TARGET GROUP

The income tax expenses for the Track Record Period can be reconciled to the profit before tax per the consolidated statements of profit or loss and other comprehensive income as follows:

	Year ended 31 March
	2018		2019	2020
	JPY'000	JPY'000	JPY'000
Loss before tax	(683,259)	(196,523)	(190,592)


Tax at the domestic income tax rate	(232,972)	(67,008)	(64,986)
Tax effect of expenses not deductible for tax
purpose	181,384		2,381		241
Tax effect of unrecognised tax loss	46,794		53,615		51,678

Income tax credit	(4,794)	(11,012)	(13,067)
Details of the deferred tax are set out in note 23.

12. LOSS FOR THE YEAR
	Year ended 31 March
	2018		2019	2020
	JPY'000	JPY'000	JPY'000
Loss for the year has been arrived at after
charging:
Directors' emoluments (note 13)	-	7,609		22,321
Salaries, allowances and other benefits

(including directors' emoluments)	78,173		110,144		109,933
Contributions to retirement benefits scheme
(including directors' emoluments)	13,449		13,902		16,484

Total staff costs	91,622		124,046		126,417
Depreciation of property, plant and

equipment	78,517		80,138		72,605
Cost of inventories recognised as an
expense	19,039		22,840		22,690

- II-33 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
13. DIRECTORS' EMOLUMENTS
Details of directors' emoluments are as follows:
Emoluments paid or receivable in respect			Contributions
of a person's services as a director,			to retirement
whether of the Target Company or its				benefits
subsidiaries undertaking:	Fees		scheme	Total
		JPY'000		JPY'000	JPY'000
Year ended 31	March 2018
Mr. Hu Xing Rong	-		-	-
Year ended 31	March 2019


Mr. Hu Xing Rong	7,400		209		7,609
Year ended 31	March 2020

Mr. Hu Xing Rong	21,000		1,321		22,321

The remuneration represents remuneration received from the Target Group by the director of the Target Company in his capacity as a director of the Target Company or subsidiaries during the Track Record Period.

No chief executive was appointed during the Track Record Period.

No director of the Target Company waived or agreed to waive any emolument paid by the Target Group during the Track Record Period. No emoluments were paid by the Target Group to the director of the Target Company as an inducement for joining the Target Group or as compensation for loss of office during the Track Record Period.

14. DIVIDEND

No dividend was paid or proposed by the Target Company or its subsidiaries during Track Record Period, nor has any dividend been proposed since the end of the reporting period.

- II-34 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
15. SUBSIDIARIES OF DOOF JAPAN GROUP
					Equity interest held
	Place and date of		Issued and		31 March	At the date
	incorporation/	Place of	fully paid			of this	Principal

Name of subsidiaries	establishment	operation	share capital	2018	2019	2020	report	activities
Directly held
余市カントリー株式会社	Japan	Japan	JPY310,000,000	100%	100%	100%	100%	Operation of
(Yoichi Country*)	24 March 2003							hotel
東京多弗合同会社	Japan	Japan	JPY8,000,000	N/A	N/A	99.9%	99.9%	Investment
(Tokyo Doof*)	27 August 2019							holding
Indirectly held
一木興業合同会社	Japan	Japan	JPY8,000,000	N/A	N/A	99.9%	99.9%	Investment
(Ichiki Kogyo*)	27 August 2019							holding

No audited financial statements have been prepared for all the subsidiaries since their respective date of incorporation as there is no statutory audit requirements under the relevant rules and regulations in Japan.

* The English name is for identification purpose only

- II-35 -

APPENDIX II				FINANCIAL INFORMATION OF TARGET GROUP
16. PROPERTY, PLANT AND EQUIPMENT
											Land	Buildings &	Equipment &	Motor
	Freehold land	improvements	structure		machinery	vehicles	Total
				JPY'000						JPY'000	JPY'000		JPY'000	JPY'000	JPY'000
COST
At 1 April 2017				-						-	-		-	-	-
Acquisition of a
subsidiary	165,000		665,000		390,546		4,460	1,966		1,226,972
Additions				-						-	11,679		25,988		26,577		64,244

At 31 March 2018	165,000		665,000		402,225		30,448	28,543		1,291,216
Additions				-						-	9,598		3,463		-	13,061

At 31 March 2019	165,000		665,000		411,823		33,911	28,543		1,304,277
Additions				-						-	580		107		-	687
Disposals				-							-		(276)		-	(600)	(876)
At 31 March 2020		165,000			665,000		412,127		34,018		27,943		1,304,088
ACCUMULATED

DEPRECIATION
At 1 April 2017				-						-	-		-	-	-
Charge for the year				-	37,867		23,449	6,325		10,876		78,517

At 31 March 2018				-	37,867		23,449	6,325		10,876		78,517
Charge for the year				-			39,118	24,762			7,726		8,532		80,138
At 31 March 2019				-	76,985		48,211	14,051		19,408		158,655
Charge for the year				-	39,118		24,344	5,447		3,696		72,605
Eliminated on
disposal				-						-	(276)		-	(521)	(797)

At 31 March 2020				-	116,103		72,279	19,498		22,583		230,463
CARRYING

AMOUNTS
At 31 March 2018	165,000		627,133		378,776		24,123	17,667		1,212,699


At 31 March 2019		165,000			588,015		363,612		19,860		9,135		1,145,622

At 31 March 2020	165,000		548,897		339,848		14,520	5,360		1,073,625

- II-36 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

The above items of property, plant and equipment are depreciated on a straight line method over their estimated useful lives at the following rates per annum, taking account into their estimated residual values as follows:

Land improvements	4% - 6.67%
Buildings & structure	2.5% - 10%
Equipment & machinery	20% - 40%
Motor vehicles	20% - 25%
17. GOODWILL
				31 March
		2018		2019	2020
		JPY'000	JPY'000	JPY'000
COST
At 1 April		-	245,918		245,918
Arising on acquisition of a subsidiary	245,918		-	-

At 31 March		245,918		245,918		245,918
IMPAIRMENT
At 1 April		-	245,918		245,918
Impairment loss recognised in profit or loss	245,918		-	-

At 31 March		245,918		245,918		245,918
CARRYING AMOUNTS

At 31 March		-	-	-

For the purposes of impairment testing, goodwill as set out above has been allocated to one individual cash-generating unit, comprising one subsidiary, Yoichi Country, engaged in hotel operation.

Goodwill represents the excess of the fair value of the consideration transferred over the fair value of the net identifiable assets acquired. On the date of acquisition, the recoverable amount of this unit has been determined based on a fair value less cost of disposal of approximately JPY958,782,000 with reference to a valuation performed by an independent valuer. The fair value measurement of Yoichi Country is categorised within level 3 of the fair value hierarchy. As such, management considered that the goodwill so arising should be impaired and hence goodwill of JPY245,918,000 was impaired upon acquisition.

- II-37 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
18. INVENTORIES
				31 March
	2018		2019	2020
		JPY'000	JPY'000	JPY'000
Inventories		1,863		2,178		1,287

19. TRADE AND OTHER RECEIVABLES
				31 March
	2018		2019	2020
		JPY'000	JPY'000	JPY'000
Trade receivables	651		1,846		7,330
Prepayments	334		236		346
Other receivables	17,605		10,824		6,870

	18,590		12,906		14,546

The Target Group allows credit period of 0 to 30 days to its trade customers. The Target Group does not hold any collateral over its trade receivables. In determining the recoverability of trade receivables, the Target Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the end of the reporting period.

The Target Group does not hold any collateral over its trade and other receivables.

- II-38 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

The following is an aged analysis of trade receivables, presented based on the invoice date, which approximates the respective revenue recognition dates at the end of the reporting period.

			31 March
	2018		2019	2020
	JPY'000	JPY'000	JPY'000
Within 30 days	328		1,125		2,020
31 to 60 days	323		721		5,310

Total	651		1,846		7,330

The Target Group applies the simplified approach to recognise ECL on trade receivables prescribed by HKFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the ECL, trade receivables have been grouped based on shared credit risk characteristics by reference to past default and current past due exposure of the debtors, and analysis of the debtor's current financial position. The Target Group considers the historical loss rate in the past, and incorporates forward looking macroeconomic data in calculating the ECL ratio. The following table provides information about the exposure to credit risk and ECL for trade receivables which are assessed individually for credit impaired debtors and collectively for not credit-impaired debtors based on provision matrix:

All of the trade receivables as at 31 March 2018, 2019 and 2020 arose from contracts with customers.

The table below details the credit risk exposure of the trade receivables:

		Gross		Net
		carrying	Loss	carrying
	Description	amount	allowance	amount
		JPY'000	JPY'000	JPY'000
At 31 March 2018
Trade receivables	Lifetime ECL (not credit	651	-	651
	impaired)
At 31 March 2019
Trade receivables	Lifetime ECL (not credit	1,846	-	1,846
	impaired)
At 31 March 2020
Trade receivables	Lifetime ECL (not credit	7,330	-	7,330
	impaired)

- II-39 -

APPENDIX II	FINANCIAL INFORMATION OF TARGET GROUP
			Gross	Impairment
	Average loss		carrying		loss
At 31 March 2018	rate		amount	allowance
	%		JPY'000		JPY'000
Not credit-impaired:
Not yet past due		*	328			-
0 - 30 days past due		*	323			-

			651			-


			Gross	Impairment
	Average loss		carrying		loss
At 31 March 2019	rate		amount	allowance
	%		JPY'000		JPY'000
Not credit-impaired:
Not yet past due		*	1,125			-
0 - 30 days past due		*	721			-

			1,846			-


			Gross	Impairment
	Average loss		carrying		loss
At 31 March 2020	rate		amount	allowance
	%		JPY'000		JPY'000
Not credit-impaired:
Not yet past due		*	2,020			-
0 - 30 days past due		*	5,310			-
			7,330			-

The weighted average expected loss rate is immaterial.

- II-40 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

There has been no change in the estimation techniques or significant assumptions made during the current reporting period.

For the purpose of internal credit risk management of other receivables, the Target Group uses past due information to access whether creit risk has increased significantly since initial recognition. As at 31 March 2018, 2019 and 2020, other receivables has been no significant increase in credit risk since initial recognition. No loss allowance was made during the years ended 31 March 2018, 2019 and 2020 as 12-month ECL is insignificant.

20. BANK BALANCES AND CASH

Bank balances carried interest at prevailing market rates throughout the Track Record Period.

21. TRADE AND OTHER PAYABLES
			31 March
	2018		2019	2020
	JPY'000	JPY'000	JPY'000
Trade payables	760		1,126		35
Other payables	10,093		27,506		32,433

	10,853		28,632		32,468

The following is an aged analysis of trade payables presented based on invoice dates at the end of the reporting periods.

			31 March
	2018		2019	2020
	JPY'000	JPY'000	JPY'000
Within 90 days	140		460		35
91 to 180 days	-	666		-
181 to 365 days	-	-	-
Over 1 year	620		-	-

Total	760		1,126		35

The credit period granted is ranging from 0 to 90 days. the Target Group has financial risk management in place to ensure that all payables are settled within the credit timeframe.

- II-41 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

AMOUNT DUE TO A SHAREHODLER
The amount is unsecured, non-interest bearing and repayable on demand.
DEFERRED TAX LIABILITY

The following is the deferred tax liability recognised and movements thereon during the Track Record Period:

Fair value adjustment of property, plant and equipment

At 1 April 2017

Acquisition of subsidiary

Credit to profit or loss

At 31 March 2018 and 1 April 2018 Credit to profit or loss

At 31 March 2019 and 1 April 2019 Credit to profit or loss

JPY'000

274,867

(4,794)

270,073

(11,012)

259,061

(13,067)

At 31 March 2020	245,994

At 31 March 2018, 2019 and 2020, the Group has estimated unused tax losses of approximately JPY176,075,000, JPY333,317,000 and JPY484,880.000 available for offsetting against future profits. No deferred income tax asset has been recognised in respect of the unused tax losses due to unpredictability of future profit streams. Tax losses of approximately JPY176,080,000, JPY333,317,000 and JPY484,872,000 will be expired in ten years after the relevant accounting year end date.

- II-42 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

24. ACQUISITION OF A SUBSIDIARY

On 10 May 2017, the Target Company acquired 100% of the issued share capital of Yoichi Country for a cash consideration of JPY1,200,000,000 from an independent third party. This acquisition has been accounted for using the acquisition method. The amount of goodwill arising as a result of the acquisition was JPY245,918,000. Yoichi Country is engaged in the operation of hotel in Hokkaido, Japan. Yoichi Country was acquired for the expansion of the Target Company's operation.

Consideration transferred

JPY'000

Cash consideration	1,200,000

Acquisition-related costs amounting to JPY281,480,000 have been excluded from the consideration transferred and have been recognised as an expense and included in administrative and other expenses in the consolidated statement of profit or loss for the year ended 31 March 2018.

Assets acquired and liabilities recognised at the date of acquisition are as follows:

	JPY'000
Property, plant and equipment	1,226,972
Inventories	2,456
Trade and other receivables	17,283
Bank balances and cash	9,929
Trade and other payables	(11,930)
Income tax payable	(15,761)
Deferred tax liability	(274,867)
	954,082

- II-43 -

APPENDIX II

FINANCIAL INFORMATION OF TARGET GROUP

The fair value of trade and other receivables at the date of acquisition amounted to approximately JPY17,283,000 which approximated to their gross contractual amounts at the date of acquisition.

Goodwill arising on acquisition:
	JPY'000
Consideration transferred	1,200,000
Less: net assets acquired	(954,082)

	245,918

Goodwill arose from the acquisition of Yoichi Country because the cost of the combination included premium paid for future business development potential. Such benefit is not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible asset.

None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes. Impairment of goodwill of approximately JPY245,918,000 had been recognised upon completion of an acquisition. Details of impairment of goodwill are set out in note 17.

	JPY'000
Cash consideration paid	1,200,000
Less: cash and cash equivalent balances acquired	(9,929)

	1,190,071

Included in the loss for the year ended 31 March 2018 is JPY151,067,000 (excluding impairment of goodwill of JPY245,918,000) attributable to the additional business generated by Yoichi Country. All the revenue for the year ended 31 March 2018 was generated from the Target Company.

Had the acquisition been completed on 1 April 2017, total group revenue for the year ended 31 March 2018 would have been approximately JPY148,773,000, and loss for the year ended 31 March 2018 would have been approximately JPY689,860,000. The pro forma information is for illustrative purpose only and is not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2017, nor is it intended to be a projection of future results.

- II-44 -

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Man Sang International Limited published this content on 10 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 September 2020 04:04:05 UTC

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2023	Man Sang Widens Fiscal H1 Loss	MT
2023	Man Sang International Limited Reports Earnings Results for the Half Year Ended September 30, 2023	CI

Man Sang Widens Fiscal H1 Loss	Nov. 30	MT
Man Sang International Limited Reports Earnings Results for the Half Year Ended September 30, 2023	Nov. 29	CI
Man Sang International Limited Reports Earnings Results for the Full Year Ended March 31, 2023	23-06-29	CI
Man Sang International's Fiscal Year 2023 Loss Widens	23-06-28	MT
Man Sang International Further Extends Maturity of HK$550 Million Promissory Notes	23-03-14	MT
Man Sang International Limited Announces Change of Principal Place of Business in Hong Kong	23-01-03	CI
Man Sang International Limited Reports Earnings Results for the Half Year Ended September 30, 2022	22-11-29	CI
Man Sang International CEO Resigns	22-08-22	MT
Man Sang International Limited Auditor Raises 'Going Concern' Doubt	22-07-27	CI
Man Sang International Posts Lower FY22 Loss	22-06-24	MT
Man Sang International Limited Reports Earnings Results for the Full Year Ended March 31, 2022	22-06-23	CI
Man Sang Extends Maturity of Nearly $71 Million Promissory Notes	21-12-01	MT
Man Sang International Widens Loss in Fiscal H1	21-11-30	MT
Man Sang International Limited Reports Earnings Results for the Half Year Ended September 30, 2021	21-11-29	CI
Man Sang International : Construction Firm Cancel Majority Stake Acquisition Deal	21-07-13	MT
Man Sang International Limited Announces Consolidated Earnings Results for the Full Year Ended March 31, 2021	21-06-29	CI
Man Sang International : Sets Date for Shareholders to Vote on Stock Consolidation Proposal; Shares Gain 4%	21-02-07	MT
Man Sang International : Unit to Buy Controlling Stake in Two Chinese Residential Sites	21-01-13	MT
Man Sang International : Fiscal H1 Losses Swell 44% on Higher Selling Costs	20-11-26	MT
Man Sang International Limited Announces Unaudited Consolidated Financial Results for the Six Months Ended 30 September 2020	20-11-25	CI
Man Sang International Limited Announces Audited Consolidated Earnings Results for the Full Year Ended March 31, 2020	20-06-22	CI
Man Sang International Limited Reports Unaudited Consolidated Financial Results for the Six Months Ended September 30, 2019	19-11-22	CI
Man Sang International Limited Announces Resignation of Wong Heng Choon as Company Secretary, Chief Financial Officer and Authorised Representative	19-10-18	CI
Man Sang International Limited Announces Change of Principal Place of Business in Hong Kong	19-10-04	CI
Hu Xingrong, Chairman of the Board and an Executive Director of Man Sang International cancelled the acquisition of remaining 58.27% stake in Man Sang International Limited.	19-09-09	CI

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