major and connected transactions in relation to the proposed acquisitions of blue light and its

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

If you have sold or transferred all your shares in NVC Lighting Holding Limited, you should at once hand thiscircular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, stockbroker or otheragent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 2222)

(1) MAJOR AND CONNECTED TRANSACTIONS IN RELATION TOTHE PROPOSED ACQUISITIONS OF BLUE LIGHT

AND ITS SUBSIDIARIESAND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial Advisor to the Company

Deloitte & Touche Corporate Finance Limited

Independent Financial Adviser tothe Independent Board Committee and the Independent Shareholders

A notice convening the extraordinary general meeting of NVC Lighting Holding Limited to be held at Room C3,Admiralty Conference Centre, 1804, 18/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong onWednesday, 18 July 2018 at 10:00 a.m. is set out on pages 157 to 158 of this circular. A form of proxy for use at theEGM is also enclosed. Such form of proxy is also published on the websites of Hong Kong Exchanges and ClearingLimited (http://www.hkexnews.hk) and the Company (http://www.nvc-lighting.com.cn).

Whether or not you are able to attend the EGM, please complete and sign the enclosed form of proxy in accordancewith the instructions printed thereon and return it to the Company’s Hong Kong branch share registrar,Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East,Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for theholding of the EGM (i.e. not later than 10:00 a.m. on Monday, 16 July 2018). Completion and return of the form ofproxy will not preclude Shareholders from attending and voting in person at the EGM if they so wish.

References to time and dates of this circular are to Hong Kong time and dates.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

30 June 2018

Page

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

LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . 23

LETTER FROM GRAM CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

APPENDIX I – FINANCIAL INFORMATION OF THE GROUP . . . . . . 42

APPENDIX II – FINANCIAL INFORMATION OF THE TARGETGROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

APPENDIX III – MANAGEMENT DISCUSSION AND ANALYSIS ONTHE TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . 91

APPENDIX IV – UNAUDITED PRO FORMA FINANCIALINFORMATION OF THE ENLARGED GROUP . . . . 100

APPENDIX VA – VALUATION REPORT ON THE ENTIRE EQUITYVALUE IN BLUE LIGHT. . . . . . . . . . . . . . . . . . . . . . . 110

APPENDIX VB – VALUATION REPORT ON 5% EQUITY VALUEIN WUHU NVC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

APPENDIX VI – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 146

NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

CONTENTS

– i –

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

have the following meanings:

“2017 Audited Net Asset Value” the aggregate combined net assets of the Target Group as

of 31 December 2017 as shown in its audited

accountant’s report for the year ended 31 December 2017

“2018 Actual Net Profit” the aggregate amount of the consolidated net profit of the

Target Group as shown in its audited consolidated

financial statements for the fiscal year ending 31

December 2018

“Acquisition I” the proposed acquisition of a 60% equity interest in Blue

Light contemplated under Sale and Purchase Agreement I

“Acquisition II” the proposed acquisition of a 5% equity interest in Wuhu

NVC contemplated under Sale and Purchase Agreement

II

“Acquisitions” the Previous Acquisition, Acquisition I and Acquisition II

“Blue Light” Blue Light (HK) Trading Co., Limited, a limited

company incorporated in Hong Kong

“Board” the board of Directors

“China” or “PRC” the People’s Republic of China, and for the purpose of

this circular, excluding Hong Kong, Macau Special

Administrative Region and Taiwan

“Company” or “We” NVC Lighting Holding Limited (雷士照明控股有限公司), a company incorporated in the British Virgin Islands

on 2 March 2006 and subsequently redomiciled to the

Cayman Islands on 30 March 2010 as an exempted

company with limited liability under the laws of the

Cayman Islands. The issued Shares of the Company are

listed on the main board of the Stock Exchange

“connected person” has the same meaning ascribed to it under the Listing

Rules

“Director(s)” the director(s) of the Company

DEFINITIONS

– 1 –

“EGM” the extraordinary general meeting to be convened and

held by the Company at Room C3, Admiralty Conference

Centre, 1804, 18/F, Tower 1, Admiralty Centre, 18

Harcourt Road, Admiralty, Hong Kong on Wednesday, 18

July 2018 at 10:00 a.m. to consider and, if thought fit,

approve the Sale and Purchase Agreement I, the Sale and

Purchase Agreement II and the transactions contemplated

thereunder

“Enlarged Group” the Group immediately after the completion of the

Acquisitions

“Excess Profit Reward” the amount of reward payable by the Company to Roman

International in case the 2018 Actual Net Profit of the

Target Group exceeds the Minimum Guaranteed Profit

“Group” the Company and its subsidiaries

“HKD” Hong Kong dollars, the lawful currency of Hong Kong

“Hong Kong” the Hong Kong Special Administrative Region of the

People’s Republic of China

“Huizhou NVC” Huizhou NVC Lighting Technology Company Limited*

(惠州雷士光電科技有限公司), a company incorporated in

the PRC with limited liability which is an indirect

wholly-owned subsidiary of the Company

“Independent Board Committee” the independent committee of the Board comprising Mr.

Lee Kong Wai, Conway, Mr. Wang Xuexian, Mr. Wei

Hongxiong and Mr. Su Ling, established to give advice

and recommendation to the Independent Shareholders on

(i) the Sale and Purchase Agreement I, the Sale and

Purchase Agreement II and the transactions contemplated

thereunder; and (ii) voting at the EGM

“Independent Financial Adviser”

or “Gram Capital”

Gram Capital Limited, a licensed corporation to carry out

Type 6 (advising on corporate finance) regulated activity

under the SFO, being the independent financial adviser to

the Independent Board Committee and the Independent

Shareholders in respect of the Sale and Purchase

Agreement I, the Sale and Purchase Agreement II and the

transactions contemplated thereunder

DEFINITIONS

– 2 –

“Independent Shareholder(s)” Shareholder(s) other than those required to abstain from

voting on the resolution(s) at the EGM under the Listing

Rules

“Independent Valuer” or “JLL” Jones Lang LaSalle Corporate Appraisal and Advisory

Limited, a qualified independent valuer in Hong Kong

“Latest Practicable Date” 28 June 2018, being the latest practicable date for the

purpose of ascertaining certain information referred to in

this circular

“Listing Rules” the Rules Governing the Listing of Securities on the

Stock Exchange

“Minimum Guaranteed Profit” RMB140,000,000

“Percentage Ratios” has the meaning ascribed to it under Chapter 14 of

Listing Rules

“Previous Acquisition” the acquisition of 40% equity interest in Blue Light from

Roman International pursuant to the sale and purchase

agreement entered into between the Company and Roman

International on 16 March 2018

“Previous Sale and Purchase

Agreement”

the sale and purchase agreement dated 16 March 2018 in

relation to the Previous Acquisition

“Proposed Acquisitions” the Acquisition I and the Acquisition II

“Purchase Price Compensation” the amount of compensation payable by Roman

International to the Company in case the 2018 Actual Net

Profit of the Target Group is lower than the Minimum

Guaranteed Profit

“RMB” Renminbi, the lawful currency of the PRC

“Roman International” Roman International (HK) Co., Limited, a limited

company incorporated in Hong Kong

“Sale and Purchase Agreement I” the agreement for the sale and purchase of 60% equity

interest in the Blue Light entered into between the

Company and Roman International dated 23 May 2018

DEFINITIONS

– 3 –

“Sale and Purchase

Agreement II”

the agreement for the sale and purchase of 5% equity

interest in Wuhu NVC entered into between the

Company, Mr. Zhang Peng and Wuhu NVC dated 23 May

2018

“SFO” the Securities and Futures Ordinance, Chapter 571 of the

Laws of Hong Kong

“Share(s)” ordinary share(s) of US$0.0000001 each in the issued

capital of the Company or if there has been a subsequent

subdivision, consolidation, reclassification or

reconstruction of the share capital of the Company,

shares forming part of the ordinary equity share capital of

the Company

“Shareholder(s)” holder(s) of Share(s)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the same meaning ascribed to it under the Listing

Rules

“Target Group” Blue Light and its subsidiaries (including Wuhu NVC)

but excluding Wuhu Lightyear E-Commerce Limited*

(蕪湖光年電子商務有限公司), a wholly-owned

subsidiary of Wuhu NVC which has no operations

“Wuhu NVC” Wuhu NVC Lighting E-Commerce Limited* (蕪湖雷士照明電子商務有限公司), a company incorporated in the

PRC with limited liability and an indirect subsidiary of

Blue Light

“Zhuhai NVC” Zhuhai NVC Technology Limited* (珠海雷士科技有限公司), a company incorporated in the PRC with limited

liability and an indirect subsidiary of the Company

“%” per cent

* Denotes English translation of the name of a Chinese company or entity, or vice versa, and is provided foridentification purposes only.

DEFINITIONS

– 4 –


(Stock code: 2222)

Executive Directors:

WANG DongleiWANG DongmingXIAO YuWANG Keven Dun

Non-executive Directors:

LI HuatingLI Wei

Independent Non-executive Directors:

LEE Kong Wai, ConwayWANG XuexianWEI HongxiongSU Ling

Registered Office:

Cricket Square, HutchinsDrive P.O. Box 2681Grand Cayman, KY1-1111Cayman Islands

Headquarter:

NVC Industrial ParkRuhu TownHuizhou CityGuangdong ProvinceThe People’s Republic of China

Principal Place of Business in

Hong Kong:

Level 54, Hopewell Centre183 Queen’s Road EastHong Kong

Hong Kong, 30 June 2018

To the Shareholders

Dear Sir/Madam,

MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO THEPROPOSED ACQUISITIONS OF THE TARGET GROUP

1. INTRODUCTION

We refer to the announcement of the Company dated 19 March 2018 in relation to the

Previous Acquisition entered into between the Company and Roman International for the

acquisition of 40% equity interest in Blue Light at a consideration of RMB315,000,000.

We also refer to the announcement of the Company dated 23 May 2018 (the

“Announcement”). As disclosed in the Announcement, on 23 May 2018 (after trading hours),

(i) the Company has entered into the Sale and Purchase Agreement I with Roman International,

pursuant to which the Company agreed to acquire, and Roman International agreed to sell, the

LETTER FROM THE BOARD

– 5 –

remaining 60% equity interest held by Roman International in Blue Light at a consideration of

RMB500,000,000, subject to adjustment by the Purchase Price Compensation or the Excess

Profit Reward (as the case may be); and (ii) Zhuhai NVC, a wholly-owned subsidiary of the

Company, has entered into the Sale and Purchase Agreement II with Mr. Zhang Peng, pursuant

to which Zhuhai NVC agreed to acquire, and Mr. Zhang Peng agreed to sell, 5% equity interest

held by Mr. Zhang Peng in Wuhu NVC at a consideration of RMB45,000,000.

The purpose of this circular is to provide the Shareholders with (i) further information on

the Sale and Purchase Agreement I, the Sale and Purchase Agreement II and the transactions

contemplated thereunder; (ii) a letter from the Independent Board Committee containing its

opinion and recommendation to the Independent Shareholders in respect of the Sale and

Purchase Agreement I, the Sale and Purchase Agreement II and the transactions contemplated

thereunder; (iii) a letter of advice from Gram Capital to the Independent Board Committee and

the Independent Shareholders in respect of the Sale and Purchase Agreement I, the Sale and

Purchase Agreement II and the transactions contemplated thereunder; (iv) other information as

required to be disclosed under the Listing Rules; and (v) a notice of the EGM.

2. THE PREVIOUS ACQUISITION

Please refer to the announcement of the Company dated 19 March 2018 for details of the

Previous Sale and Purchase Agreement and the Previous Acquisition.

3. THE PROPOSED ACQUISITIONS

A. Principal terms of the Sale and Purchase Agreement I

Date 23 May 2018

Parties Purchaser: the Company

Seller: Roman International

To the best of the Directors’ knowledge, information and belief

having made all reasonable enquiries, as at the Latest Practicable

Date, Roman International and its ultimate beneficial owner(s) are

third parties independent of the Company.

Assets to beacquired

Pursuant to the Sale and Purchase Agreement I, the Company agrees

to acquire, and Roman International agrees to sell, the remaining

60% equity interest held by Roman International in Blue Light.


– 6 –

Considerationand payment

The initial consideration of the Acquisition I is RMB500,000,000(subject to adjustment by the Purchase Price Compensation or theExcess Profit Reward as set out below), which shall be paid in cashas follows, provided that Roman International has fulfilled itsobligations under the Sale and Purchase Agreement I:

(a) RMB400,000,000 of the initial consideration or in equivalentHKD amount shall be paid by the Company to RomanInternational in cash within 10 business days after completionof the Acquisition I by wiring transfer or other immediatelyavailable payment; and

(b) the rest of the initial consideration, being RMB100,000,000 orHKD in equivalent amount shall be paid by the Company toRoman International in cash within 10 business days after (i)the issuance of the 2018 audited consolidated financialstatements of the Target Group; and (ii) the obtaining of taxclearance certificate (including the tax collection reminderissued by the PRC authorities) by Roman International inrespect of the Acquisition I by wiring transfer or otherimmediately available payment.

“business day” under the Sale and Purchase Agreement I refers to aday other than a Saturday or Sunday on which banks are open forcommercial business in Hong Kong.

The consideration of the Acquisition I was determined after arm’slength negotiations (including the performance of legal and financialdue diligence on the Target Group and discussions around theappropriate purchase price taking into account the results of suchdue diligence) between the Company and Roman International aftertaking into account, (i) the unaudited combined net profit of theTarget Group for the year ended 31 December 2017 and (ii) thepreliminary valuation performed by a third-party valuer using themarket approach. Based on the preliminary valuation, the fair valueof 100% equity value (excluding non-controlling interests) in BlueLight was RMB902,375,130. A copy of the final valuation report isattached in Appendix VA of this circular, in which the financial dataadopted in the valuation model, namely, net income, book value andrevenue was extracted from the Accountant’s Report as disclosed inAppendix II. The fair value of 100% equity value (excludingnon-controlling interests) in Blue Light as at the valuation date of 31March 2018 was RMB1,029,321,120. The difference between thepreliminary valuation and the final valuation was a result of furtherdue diligence conducted by the Company and its advisers on BlueLight (including, among others, update of audit status to financialresults of the Target Group and assessment of selection ofcomparable companies).


– 7 –

The reason for using valuation excluding non-controlling interests as

reference was that the Company indirectly holds 10% equity interest

in Wuhu NVC, a subsidiary of Blue Light, and Mr. Zhang Peng holds

5% equity interest in Wuhu NVC.

The Directors consider that the use of market approach valuation and

the selection of comparable companies based on similarity of

business nature and profitability are appropriate methods to present

a true and fair value of the Target Group for the purpose of

determining the consideration of the Acquisition I for the following

reasons: (i) the Target Group has no reliable future cash flow and

therefore income approach is not an appropriate valuation method;

(ii) legal and financial due diligence has been performed in respect

of the Target Group to the satisfaction of the Company and the

valuation was prepared based on the audited figures (the preliminary

valuation was prepared based on the then audit status subject to final

results of the audit); and (iii) the Company has appointed JLL, a

reputable and qualified independent valuer to perform the valuation.

Purchase PriceCompensationand ExcessProfit Reward

Roman International undertakes to the Company that, if the 2018

Actual Net Profit of the Target Group is lower than the Minimum

Guaranteed Profit, Roman International shall pay the Purchase Price

Compensation in cash as calculated below to the Company within 90

business days after the Target Group issues its 2018 audited

consolidated financial statements.

Purchase Price Compensation = (Minimum Guaranteed Profit –

2018 Actual Net Profit) × 7.5 × 60%

The Company shall comply with the disclosure requirements in Rule

14A.63 of the Listing Rules if the 2018 Actual Net Profit of the

Target Group fails to reach the Minimum Guaranteed Profit.

The Company undertakes to Roman International that, if the 2018

Actual Net Profit of the Target Group exceeds the Minimum

Guaranteed Profit, the Company shall pay the Excess Profit Reward

in cash as calculated below to Roman International within 90

business days after the Target Group issues its 2018 audited

consolidated financial statements.

Excess Profit Reward = (2018 Actual Net Profit – Minimum

Guaranteed Profit) × 7.5 × 60%


– 8 –

The Minimum Guaranteed Profit was determined on normal

commercial terms after arm’s length negotiation (including

evaluation on the 2017 financial result of the Target Group and

industry performance and discussions around the appropriate amount

of the Minimum Guaranteed Profit taking into account the results of

such evaluation) between the Company and Roman International.

The Minimum Guaranteed Profit represents a premium of

approximately 25.9%(Note) of audited net profit of the Target Group

for the year ended 31 December 2017, which reflected confidence of

Roman International in the future earning ability of the Target Group

and does not constitute the anticipated level of future profits of the

Target Group. The multiple of 7.5 was arrived at with reference to

the implied price-earnings ratio of the Target Group pursuant to the

Acquisition I, calculated as the initial consideration of the

Acquisition I (being RMB500,000,000) divided by 60% of the net

profit of the Target Group for the year ended 31 December 2017.

Notwithstanding the provision above, the Company may directly

deduct part or all of the Purchase Price Compensation from the

consideration of the Acquisition I at its sole discretion.

The parties confirmed that each of the Purchase Price Compensation

and the Excess Profit Reward shall not exceed RMB50,000,000,

which was determined on normal commercial terms after arm’s

length negotiation between the Company and Roman International.

As such, the consideration of Acquisition I (after adjustment) would

range from RMB450,000,000 to RMB550,000,000.

Net assetguarantee

Roman International undertakes to the Company that, if the 2017

Audited Net Asset Value of the Target Group is less than

RMB160,000,000, Roman International shall make up (or cause to

be made up) to the Target Group the shortfall between the 2017

Audited Net Asset Value and RMB160,000,000 on or before

completion of the Acquisition I in cash to the Company’s

satisfactory, so as to ensure the audited net asset value of the Target

Group will reach or exceed RMB160,000,000.

The Company shall comply with the disclosure requirements in Rule

14A.63 of the Listing Rules if the 2017 Audited Net Asset Value of

the Target Group fails to reach RMB160,000,000.

Note: (RMB140,000,000/RMB111,173,000 – 1) × 100% = 25.9%


– 9 –

Conditionsprecedent

Completion of the Acquisition I is conditional upon the following

conditions being fulfilled or, as the case may be, waived by the

Company:

(i) the Company has completed the due diligence on the Target

Group with respect to its operation, financial situation and

legal issues, the results of which are to the Company’s

satisfaction. Roman International has caused the Target Group

to make rectification and remedy for each issue detected and

notified by the Company during the foregoing due diligence,

the results of which are to the Company’s reasonable

satisfaction in all aspects;

(ii) all the relevant undertakings remain true and accurate and not

misleading up to the date of completion of Acquisition I;

(iii) Roman International has fulfilled or complied with all the

relevant undertakings and obligations before completion of the

Acquisition I as required under the Sale and Purchase

Agreement I;

(iv) the Board has duly passed the resolution to approve, among

others, the Sale and Purchase Agreement I and the

Acquisition I;

(v) Shareholders of the Company have duly passed the resolutions

to approve, among others, the Sale and Purchase Agreement I

and the Acquisition I in accordance with the requirements

under the Listing Rules;

(vi) all relevant approval, registration, permission, filing, waiver

and renunciation have been duly acquired from the government

authorities or any other third party;

(vii) all the required permission and approval have been made by

any government, authority or regulatory body, with no orders,

law or regulations proposed, promulgated or adopted by any

government, authority or regulatory body to forbid or restrict

the Acquisition I;

(viii) Roman International has provided to the Company (and the

Company accepts) a list of assets, debts, products, business,

commercial contracts and labour contracts which will be

substantially affected by the Acquisition I;


– 10 –

(ix) there has been no material adverse changes since the signing of

the Sale and Purchase Agreement I up to and including the date

of completion of the Acquisition I;

(x) there is no final, pending or potential litigation, investigation,

inspection, order, judgement or decree against Roman

International or any member of the Target Group which will

materially and adversely affect its ability to perform any

obligation under the Sale and Purchase Agreement I;

(xi) a PRC legal opinion to the Company’s satisfaction has been

issued by Roman International’s PRC legal advisor approved

by the Company;

(xii) a Hong Kong legal opinion to the Company’s satisfaction has

been issued by Roman International’s Hong Kong legal advisor

approved by the Company;

(xiii) the Target Group has established a proper legal and operational

structure to the Company’s satisfaction;

(xiv) the 2017 accountant’s reports of the Target Group have been

provided to the Company to its satisfaction;

(xv) the senior management and key personnel of the Target Group

has entered into labour or service agreements, transfer of

intelligence property agreements, confidentiality agreements,

non-competition and non-solicitation agreements with the

Target Group, the content and form of which are to the

Company’s satisfaction; and

(xvi) Roman International and other related parties of the

Acquisition I (except the Company) have duly executed and

provided the Company with related transaction documents.


– 11 –

Completion Completion of the Acquisition I is expected to take place on the fifth

business day after all the conditions precedent as set out above

having been fulfilled or waived by the Company or another date as

the parties may agree in written.

The completion of the Acquisition I shall take place simultaneously

with the completion of the Previous Acquisition. For the avoidance

of doubt, the Previous Acquisition and the Acquisition I are not

inter-dependent or inter-conditional upon each other.

Upon completion of the Previous Acquisition and the Acquisition I,

the Company will hold 100% equity interest in Blue Light and

indirectly hold, in aggregate, 95% equity interest in Wuhu NVC.

Non-competitionrestriction

Roman International undertakes to the Company that it will not, for

a period of three years after the date of the Sale and Purchase

Agreement I, either on its own behalf or jointly with any other

person, directly or indirectly:

(a) approach, canvass, solicit or otherwise act with a view to

enticing away from or seeking in competition with any business

of Blue Light or any member of the Target Group the custom of

any person who at any time during the period of 12 months

preceding the completion of the Acquisition I or at any time

after the completion of the Acquisition I prior to his ceasing to

be engaged by Blue Light or any member of the Target Group

is or has been a customer of Blue Light or any member of the

Target Group and during such period it must not use its

knowledge of or influence over any such customer to or for its

own benefit or the benefit of any other person carrying on

business in competition with Blue Light or any member of the

Target Group or otherwise use its knowledge of or influence

over any such customer to the detriment of Blue Light or any

member of the Target Group;


– 12 –

(b) seek to contract with or engage (in such a way as adversely to

affect the business of Blue Light or any member of the Target

Group as carried on at the date of the Sale and Purchase

Agreement I) any person who has been contracted with or

engaged to manufacture, assemble, supply or deliver products,

goods, materials or services to Blue Light or any member of the

Target Group at any time during the period of 12 months

preceding the date of the Sale and Purchase Agreement I or, at

any time after that, before he ceases to be engaged by Blue

Light or any member of the Target Group;

(c) approach, canvass, solicit, engage or employ or otherwise

endeavour to entice away any person who at any time during

the period of 6 months preceding the completion of the

Acquisition I or (if later) the date of his ceasing to be employed

by Blue Light or any member of the Target Group will be or

will have been an employee, officer, manager, consultant,

subcontractor or agent of Blue Light or any member of the

Target Group with a view to the specific knowledge or skills of

such person being used by or for the benefit of any person

carrying on business in competition with the business carried

on by Blue Light or any member of the Target Group; and

(d) be engaged, concerned or interested, in any capacity, in

carrying on any business in competition with the business

carried on by Blue Light or any member of the Target Group as

carried on at the date of the Sale and Purchase Agreement I in

the territory in which such business was carried on at such date,

including the PRC.

Personalguaranteeagreement

Mr. Kang Baolian, the de facto controller of Roman International

and a third party independent of the Company and its connected

persons, will enter into a personal guarantee agreement with the

Company to its benefits in respect of the obligations and liabilities

of Roman International under the Previous Acquisition and the

Acquisition I, the content and form of which shall be to the

Company’s satisfaction.


– 13 –

B. Principal terms of the Sale and Purchase Agreement II

Date 23 May 2018

Parties Purchaser: Zhuhai NVC

Seller: Mr. Zhang Peng

Target Company: Wuhu NVC

Assets to beacquired

Pursuant to the Sale and Purchase Agreement II, Zhuhai NVC agrees

to acquire, and Mr. Zhang Peng agrees to sell, 5% equity interest

held by Mr. Zhang Peng in Wuhu NVC.

Considerationand payment

The consideration of the Acquisition II is RMB45,000,000,which

shall be paid in cash by wiring transfer in the following manners:

(a) RMB13,500,000 of the consideration shall be paid by the

Company to Mr. Zhang Peng in cash at the date of completion

of the Acquisition II; and

(b) the rest of the consideration, being RMB31,500,000 shall be

paid by the Company to Mr. Zhang Peng in cash within 30

business days after the completion of the Acquisition II,

provided that Mr. Zhang Peng has provided the tax clearance

certificate to the Company’s reasonable satisfaction.

“business day” under the Sale and Purchase Agreement II refers to

a day other than a Saturday or Sunday on which banks are open for

commercial business in the PRC.


– 14 –

The consideration of the Acquisition II was determined after arm’s

length negotiations (including the performance of legal and financial

due diligence on Wuhu NVC and discussions around the appropriate

purchase price taking into account the results of such due diligence)

between Zhuhai NVC and Mr. Zhang Peng after having taken into

account: (i) the unaudited results of Wuhu NVC for the year ended

31 December 2017, and (ii) the preliminary valuation performed by

a third-party valuer using the market approach. Based on the

preliminary valuation, the fair value of 5% equity value in Wuhu

NVC was RMB51,745,000. A copy of the final valuation report is

attached in Appendix VB of this circular, in which the financial data

adopted in the valuation model, namely, net income, book value and

revenue was extracted from the unaudited management account of

Wuhu NVC for the year ended 31 December 2017. The fair value of

5% equity value (excluding non-controlling interests) in Wuhu NVC

as at the valuation date of 31 March 2018 was RMB56,413,190. The

difference between the preliminary valuation and the final valuation

was a result of further due diligence conducted by the Company and

its advisers on Wuhu NVC (including, among others, update of the

financial figures of Wuhu NVC and assessment of selection of

comparable companies).

The reason for using valuation excluding non-controlling interests as

reference was that certain subsidiaries of Wuhu NVC were not

wholly-owned by Wuhu NVC.

The Directors consider that the use of market approach valuation and

the selection of comparable companies based on similarity of

business nature and profitability are appropriate methods to present

a true and fair value of the 5% equity interest in Wuhu NVC for the

purpose of determining the consideration of the Acquisition II for the

following reasons: (i) Wuhu NVC has no reliable future cash flow

and therefore income approach is not an appropriate valuation

method; (ii) legal and financial due diligence has been performed in

respect of Wuhu NVC to the satisfaction of the Company and the

valuation was prepared based on the financial figures of Wuhu NVC

after taking into account the results of such due diligence; and (iii)

the Company has appointed JLL, a reputable and qualified

independent valuer to perform the valuation.


– 15 –

Conditionsprecedent

Completion of the Acquisition II is conditional upon the following

conditions being fulfilled or waived by Zhuhai NVC in writing:

(i) Zhuhai NVC has completed the due diligence on the Wuhu

NVC and its subsidiaries with respect to their operation,

financial situation and legal issues, the results of which are to

the Company’s satisfaction;

(ii) all the relevant undertakings remain true and accurate and not

misleading up to the date of completion of Acquisition II;

(iii) all the undertakings and agreements as set out in the Sale and

Purchase Agreement II has been duly performed by Mr. Zhang

Peng and Wuhu NVC;

(iv) shareholders of Zhuhai NVC or the board of directors of

Zhuhai NVC have/has duly passed the resolution to approve,

among others, the Sale and Purchase Agreement II and the

Acquisition II;

(v) the existing shareholders of Wuhu NVC have duly passed theresolution to approve the Sale and Purchase Agreement II andthe Acquisition II, and have agreed to waive their pre-emptiverights in respect of the Acquisition II;

(vi) all the required permission and approval from governmentauthorities and all relevant consent from third parties have beenobtained by the parties, provided that, if applicable, suchconsents and permission will not materially alter thecommercial terms of the Sale and Purchase Agreement II;

(vii) there has been no material adverse changes in respect of theoperational, financial, management or legal position of WuhuNVC since the signing of Sale and Purchase Agreement II;

(viii) no orders, law or regulations are proposed, promulgated oradopted by any government authority to forbid or restrict theAcquisition II;


– 16 –

(ix) there is no pending or threated litigation, arbitration,administrative penalty or other legal proceedings or anypending or potential action or procedure may be raised by thePRC government authorities against Mr. Zhang Peng, WuhuNVC or any of its subsidiaries, which will materially andadversely affect their ability to perform the obligations underthe Sale and Purchase Agreement II, or substantially andadversely affect the Acquisition II; and

(x) Wuhu NVC has completed relevant administrative registrationand filing of modification and obtained the modified businesslicense, which indicated the 5% equity interests in Wuhu NVChas been held by Zhuhai NVC, and Wuhu NVC has providedthe relevant administrative certificates to Zhuhai NVC.

Completion Completion of the Acquisition II is expected to take place on thefifth business day after all the conditions precedent as set out abovehaving been fulfilled or waived by Zhuhai NVC or another date asthe parties may agree in writing.

Upon completion of the Previous Acquisition, the Acquisition I andthe Acquisition II, the Company will indirectly hold 100% equityinterest in Wuhu NVC.

For the avoidance of doubt, the Acquisitions are not inter-dependentor inter-conditional upon each other.

C. Information about the Target Group

Blue Light is a limited company incorporated in Hong Kong. Its business activities

involve investment holding, design and development of lighting, LED and home appliances,

promotion and communications, technology consulting and international trade.

Wuhu NVC is a limited company incorporated in the PRC. The principal business of

Wuhu NVC and its subsidiaries is the sale and distribution of lighting products through

e-commerce platforms and distribution channels. Wuhu NVC is the main operating subsidiary

of Blue Light.

The total original acquisition cost of 100% equity interest in Blue Light by Roman

International was HKD500,000, being an amount equaling to the registered capital of Blue

Light. The total original acquisition cost of 5% equity interest in Wuhu NVC by Mr. Zhang

Peng was RMB200,000, being an amount equaling to 5% of the registered capital of Wuhu

NVC.


– 17 –

As at the Latest Practicable Date, Blue Light indirectly holds 85% equity interest in Wuhu

NVC, the Company indirectly holds 10% equity interest in Wuhu NVC and Mr. Zhang Peng

directly holds 5% equity interest in Wuhu NVC. Upon completion of the Acquisitions, the

Company will hold 100% equity interest in Blue Light, and indirectly hold 100% equity

interest in Wuhu NVC.

Set out below is the audited combined financial information of the Target Group for the

two years ended 31 December 2016 and 2017, respectively. A copy of the accountant’s report

on the Target Group is attached in Appendix II of this circular.

Financialyear ended

31 December2016

Financialyear ended

31 December2017

RMB in million RMB in million

Profit before tax 65.23 153.47Profit after tax 48.73 111.17

Please refer to Appendix III of this circular for the detailed management discussion and

analysis on the Target Group.

D. Financial Effect of the Proposed Acquisitions

Revenue

Upon completion of the Acquisitions, the Company will directly hold 100% equity

interest in Blue Light and indirectly hold 100% equity interest in Wuhu NVC. The financial

results of the Target Group will be consolidated into the financial statements of the Group. It

is expected that the Company will be able to record additional revenue stream from the Target

Group upon completion of the Acquisitions.

Assets and liabilities

Based on the consolidated financial statements of the Group for the year ended 31

December 2017, the net asset value of the Group as at 31 December 2017 was approximately

RMB3,330.2 million. Based on the unaudited pro forma financial information of the Enlarged

Group as if the Acquisitions had been completed on 31 December 2017 as set out in Appendix

IV to this circular, the total assets of the Enlarged Group would be increased from

approximately RMB5,473.3 million to approximately RMB6,651.8 million and total liabilities

of the Enlarged Group would be increased from approximately RMB2,143.1 million to

approximately RMB3,216.9 million. Accordingly, the net asset value of the Enlarged Group

would be increased from approximately RMB3,330.2 million to approximately RMB3,435.0

million.


– 18 –

As at 30 April 2018, the Company had bank and cash balance (excluding pledged bank

deposit) of RMB846.4 million and available unutilised banking facilities of RMB594.1 million

respectively. Taking into account of the Group’s cash balance and available unutilised banking

facilities, the consideration of the Acquisition I and the Acquisition II will be settled in cash

by the Group.

The unaudited pro forma financial information on the Enlarged Group, illustrating the

financial effects as if the Acquisitions had been completed on 31 December 2017, is set out in

Appendix IV of this circular.

E. Reasons for and Benefits of the Proposed Acquisitions

In the past two years, the profitability of lighting product manufacturers has reduced due

to the sustained increase in costs of certain metal raw material, components and labour. In

2018, in order to strengthen its core competitiveness and achieve sustainable development, the

Group formulated a strategy of gradually transforming from a manufacturing enterprise to a

channel enterprise.

The Company entered into the Previous Acquisition in the view that the Previous

Acquisition would strengthen the Company’s ability to develop and/or cooperate with

online-to-offline sales and distribution channels. The Company has been closely monitoring the

business and financial performance of the Target Group since the Previous Acquisition and has

noted that the Target Group recorded a considerable increase in sales and profit for four months

ended 30 April 2018, as compared to the corresponding period in 2017. The Company believes

it is advisable to further acquire the remaining equity interests in Blue Light and consolidate

the financial results of the Target Group into the Group. Following the Acquisitions, the

Company will continue to expand the variety of its sales and distribution channels and benefit

from the collection, analysis and application of big data in respect of consumer behaviour.

Based on the above, the Directors (including the independent non-executive Directors

whose views have been set out in this circular after taking into consideration the advice of

Gram Capital) consider that the terms of the Sale and Purchase Agreement I, the Sale and

Purchase Agreement II and the transactions contemplated thereunder are on normal commercial

terms and in the ordinary and usual course of the business of the Group, fair and reasonable

and in the interests of the Company and its shareholders as a whole.

F. Information about the Parties

The Company

The Company is a leading supplier of lighting products in the PRC. It designs,

develops, produces, markets and sells a variety of lighting products, with a strong focus

on energy-saving products.


– 19 –

Roman International

Roman International is a limited company incorporated in Hong Kong. Its principal

business activities involve trade and investment of luminaire, luminaire components and

LED lighting products.

Zhuhai NVC

Zhuhai NVC is a limited company incorporated in China. Its principal business

activities mainly involve development, manufacturing and sale of luminaire, lamp, LED

products and applications and home appliances. As at the Latest Practicable Date, the

Company indirectly holds the entire equity interests in Zhuhai NVC.

Mr. Zhang Peng

As at the Latest Practicable Date, Mr. Zhang Peng is the president of the Company.

Mr. Zhang Peng has about 20 years of experience in sales, brand operations and

management. He joined the Group in June 2016.

4. LISTING RULES IMPLICATIONS

As the Acquisitions are expected to be completed within a 12-month period and they all

involve the acquisition of interest in the same group of companies, the Acquisitions will be

aggregated as a series of transactions for the Company pursuant to Rule 14.22 of the Listing

Rules. As one or more of the applicable Percentage Ratios calculated in respect of the

Acquisitions (in aggregate) is more than 25% but less than 100%, the Acquisition I and the

Acquisition II (in aggregate) constitute a major transaction for the Company and are therefore

subject to the reporting, announcement, circular and shareholders’ approval requirements under

Chapter 14 of the Listing Rules.

As at the Latest Practicable Date, Zhuhai NVC is a wholly-owned subsidiary of the

Company, and Mr. Zhang Peng is the president of the Company and is therefore a connected

person of the Company under Chapter 14A of the Listing Rules. Accordingly, the Acquisition

II also constitutes a connected transaction of the Company under the Listing Rules and is

therefore subject to the reporting, announcement, circular and independent shareholders’

approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and

belief having made all reasonable enquiries, Roman International and its ultimate beneficial

owner(s) are third parties independent of the Company and its connected persons. The

Company will voluntarily comply with the reporting, announcement, circular and independent

shareholders’ approval requirements under Chapter 14A of the Listing Rules in respect of the

Acquisition I.


– 20 –

5. INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIALADVISER

The Independent Board Committee, comprising Mr. Lee Kong Wai, Conway, Mr. Wang

Xuexian, Mr. Wei Hongxiong and Mr. Su Ling, all being independent non-executive Directors,

has been established to advise the Independent Shareholders in respect of the Sale and Purchase

Agreement I, the Sale and Purchase Agreement II and the transactions contemplated

thereunder.

Gram Capital has been appointed as the Independent Financial Adviser to provide advice

and recommendation to the Independent Board Committee and the Independent Shareholders

in respect of the Sale and Purchase Agreement I, the Sale and Purchase Agreement II and the

transactions contemplated thereunder.

6. EGM

The resolutions approving the Sale and Purchase Agreement I, the Sale and Purchase

Agreement II and the transactions contemplated thereunder shall be proposed at the EGM.

As at the Latest Practicable Date, Mr. Zhang Peng was interested in 2,611,000 Shares,

representing approximately 0.07% of the total issued share capital of the Company, and is

required to abstain from voting on the resolutions in relation to the Sale and Purchase

Agreement I, the Sale and Purchase Agreement II and the transactions contemplated thereunder

at the EGM. Save for Mr. Zhang Peng, to the best of the Directors’ knowledge, information and

belief and having made all reasonable enquiries, none of Roman International or their

associates is a Shareholder, and no other Shareholders have material interest and are required

to abstain from voting on the resolutions in relation to the Sale and Purchase Agreement I, the

Sale and Purchase Agreement II and the transactions contemplated thereunder at the EGM.

To the best knowledge, information and belief of the Directors, having made all

reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or

understanding entered into by or binding upon Mr. Zhang Peng; and (ii) no obligation or

entitlement of Mr. Zhang Peng as at the Latest Practicable Date, whereby it has or may have

temporarily or permanently passed control over the exercise of the voting right in respect of

its Shares to a third party, either generally or on a case-by-case basis.

A notice convening the EGM to be held at Room C3, Admiralty Conference Centre, 1804,

18/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong on Wednesday, 18

July 2018 at 10:00 a.m. p.m. is set out on pages 157 to 158 of this circular. A form of proxy

for use at the EGM is also enclosed. Such form of proxy is also published on the websites of

Hong Kong Exchanges and Clearing Limited (http://www.hkexnews.hk) and the Company

(http://www.nvc-lighting.com.cn).


– 21 –

Whether or not Shareholders are able to attend the EGM, they are requested to complete

and sign the enclosed form of proxy in accordance with the instructions printed thereon and

return it to the Company’s Hong Kong branch share registrar, Computershare Hong Kong

Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai,

Hong Kong as soon as possible but in any event not less than 48 hours before the time

appointed for the holding of the EGM (i.e. not later than 10:00 a.m. on 16 July 2018).

Completion and return of the form of proxy will not preclude Shareholders from attending and

voting in person at the EGM if they so wish.

7. RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on

page 23 of this circular which contains its recommendation to the Independent Shareholders on

(i) the Sale and Purchase Agreement I, the Sale and Purchase Agreement II and the transactions

contemplated thereunder; and (ii) voting at the EGM. Your attention is also drawn to the letter

of advice from Gram Capital set out on pages 24 to 41 of this circular which contains its

advices to the Independent Board Committee and the Independent Shareholders in relation to


contemplated thereunder.

The Directors (including the independent non-executive Directors whose views have been

set out in this circular after taking into consideration the advice of Gram Capital) consider that


contemplated thereunder are fair and reasonable, on normal commercial terms or better and in

the ordinary and usual course of the business of the Group, and are in the interests of the

Company and the Shareholders as a whole. Accordingly, the Directors (including the

independent non-executive Directors) recommend the Shareholders to vote in favour of the

resolutions to be proposed at the EGM to consider and, if thought fit, approve the Sale and

Purchase Agreement I, the Sale and Purchase Agreement II and the transactions contemplated

thereunder.

No Director has a material interest in the Sale and Purchase Agreement I, the Sale and

Purchase Agreement II and the transactions contemplated thereunder, and therefore none of the

Directors has abstained from voting on the Board resolution approving the Sale and Purchase

Agreement I, the Sale and Purchase Agreement II and the transactions contemplated

thereunder.

Yours faithfully,

For and on behalf of the Board

NVC Lighting Holding LimitedWANG Donglei

Chairman


– 22 –


(Stock code: 2222)

30 June 2018

To the Independent Shareholders

Dear Sir or Madam,

MAJOR AND CONNECTED TRANSACTIONS IN RELATION TO THEPROPOSED ACQUISITIONS OF THE TARGET GROUP

We refer to the circular of the Company dated 30 June 2018 (the “Circular”) to theshareholders, of which this letter forms part. Terms defined in the Circular have the samemeanings in this letter unless the context otherwise requires.

In compliance with the Listing Rules, we have been appointed to advise the IndependentShareholders as to whether, in our opinion, the Sale and Purchase Agreement I, the Sale andPurchase Agreement II and the transactions contemplated thereunder are fair and reasonable sofar as the Independent Shareholders are concerned, are on normal commercial terms or betterand in the ordinary and usual course of the business of the Group, and are in the interests ofthe Company and the Shareholders as a whole. In this connection, Gram Capital has beenappointed as the Independent Financial Adviser to advise the Independent Board Committeeand the Independent Shareholders.

We wish to draw your attention to the letter from the Board set out on pages 5 to 22 ofthe Circular, and the letter from Gram Capital set out on pages 24 to 41 of the Circular whichcontains its opinion in respect of the Sale and Purchase Agreement I, the Sale and PurchaseAgreement II and the transactions contemplated thereunder.

Having taken into account the advice of Gram Capital and its recommendation in relationthereto, we consider that the Sale and Purchase Agreement I, the Sale and Purchase AgreementII and the transactions contemplated thereunder are fair and reasonable so far as theIndependent Shareholders are concerned, are on normal commercial terms or better and in theordinary and usual course of the business of the Group, and are in the interests of the Companyand the Shareholders as a whole. Accordingly, we recommend that you vote in favour of therelevant resolutions set out in the notice of the EGM.

Yours faithfully,Independent Board Committee ofNVC Lighting Holding Limited

LEE Kong Wai, ConwayWANG XuexianWEI Hongxiong

SU Ling

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

– 23 –

Set out below is the text of a letter received from Gram Capital, the Independent Financial

Adviser to the Independent Board Committee and the Independent Shareholders in respect of

the Proposed Acquisitions for the purpose of inclusion in this circular.

Room 1209, 12/F.

Nan Fung Tower

88 Connaught Road Central/

173 Des Voeux Road Central

Hong Kong

30 June 2018

To: The independent board committee and the independent shareholders

of NVC Lighting Holding Limited

Dear Sirs,

MAJOR AND CONNECTED TRANSACTIONSIN RELATION TO THE PROPOSED ACQUISITIONS OF

BLUE LIGHT AND ITS SUBSIDIARIES

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 Proposed

Acquisitions, details of which are set out in the letter from the Board (the “Board Letter”)

contained in the circular dated 30 June 2018 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.

On 16 March 2018, the Company and Roman International entered in to the Previous Sale

and Purchase Agreement, pursuant to which the Company agreed to acquire and Roman

International agreed to sell 40% equity interest in Blue Light at a consideration of RMB315

million (i.e. the Previous Acquisition).

On 23 May 2018, the Company entered into the Sale and Purchase Agreement I with

Roman International, pursuant to which the Company agreed to acquire, and Roman

International agreed to sell, the remaining 60% equity interest held by Roman International in

Blue Light at a consideration of RMB500,000,000, subject to adjustment by the Purchase Price

Compensation or the Excess Profit Reward (as the case may be) (i.e. the Acquisition I).

LETTER FROM GRAM CAPITAL

– 24 –

On the even date, Zhuhai NVC, a wholly-owned subsidiary of the Company, entered into

the Sale and Purchase Agreement II with Mr. Zhang Peng, pursuant to which Zhuhai NVC

agreed to acquire, and Mr. Zhang Peng agreed to sell, 5% equity interest held by Mr. Zhang

Peng in Wuhu NVC (which was held by Blue Light as to 85% and the Company as to 10%)

at a consideration of RMB45,000,000 (i.e. the Acquisition II).

With reference to the Board Letter, the Proposed Acquisitions (in aggregate) constitute

major transactions of the Company and are subject to the reporting, announcement, circular and

shareholders’ approval requirements under Chapter 14 of the Listing Rules. In addition, the

Acquisition II also constitutes a connected transaction of the Company and is therefore subject

to the reporting, announcement, circular and independent shareholders’ approval requirements

under Chapter 14A of the Listing Rules. In respect of the Acquisition I, the Company will

voluntarily comply with the reporting, announcement, circular and independent shareholders’

approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee comprising Mr. LEE Kong Wai, Conway, Mr. WANG

Xuexian, Mr. WEI Hongxiong and Mr. SU Ling (all being independent non-executive

Directors) has been established to advise the Independent Shareholders on (i) whether the

terms of each of the Sale and Purchase Agreement I and Sale and Purchase Agreement II

(collectively, the “Sale and Purchase Agreements”) are on normal commercial terms and are

fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Sale

and Purchase Agreements and transactions contemplated thereunder are in the interests of the

Company and the Shareholders as a whole and are conducted in the ordinary and usual course

of business of the Group; and (iii) how the Independent Shareholders should vote in respect of

the resolution(s) to approve the Sale and Purchase Agreements and the transactions

contemplated thereunder at the EGM. 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

During the past two years immediately preceding the Latest Practicable Date, save as the

engagements of independent financial adviser regarding (i) a major transaction of the Company

(details of which are set out under the announcement of the Company dated 25 April 2018); and

(ii) a possible notifiable and connected transaction of the Company (the “Another IFAEngagements”), we were not aware of any relationships or interests between Gram Capital and

the Company, 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. As the Another IFA Engagements are

independent financial adviser engagements, they do not affect our independence to act as the

Independent Financial Adviser.


– 25 –

Besides that, apart from the advisory fee payable to us in connection with (i) the Another

IFA Engagements; and (ii) our appointment as the Independent Financial Adviser to the

Independent Board Committee and the Independent Shareholders, no arrangement exists

whereby we shall receive any other fees or benefits from the Company.

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 are no undisclosed private

agreements/arrangements or implied understanding with anyone concerning the Acquisitions

and the transactions contemplated thereunder. We consider that we have taken sufficient and

necessary steps on which to form a reasonable basis and an informed view for our opinion in

compliance with Rule 13.80 of the Listing Rules.

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 have not made any independent evaluation or appraisal of the assets and liabilities of

the Group or the Target Group, and we have not been furnished with any such evaluation or

appraisal, save as and except for the valuation report of the Target Group (the “Target GroupValuation Report”) and the valuation report of Wuhu NVC (the “Wuhu NVC ValuationReport”) issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL”) as

contained in Appendix VA and Appendix VB to the Circular, with 31 March 2018 as the

valuation date. Since we are not experts in the valuation of assets or business, we have relied

solely upon the aforesaid valuation reports for the equity value of the Target Group (excluding

non-controlling interests) (the “Target Group Valuation”) and valuation of 5% equity interest

in Wuhu NVC (excluding non-controlling interests) (the “Wuhu NVC Valuation”) as at 31

March 2018.


– 26 –

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, Roman

International, Mr. Zhang Peng, the Target Group or their respective subsidiaries or associates,

nor have we considered the taxation implication on the Group or the Shareholders as a result

of the Acquisitions and the transactions contemplated thereunder. 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.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Sale and Purchase Agreements and the

transactions contemplated thereunder, we have taken into consideration the following principal

factors and reasons:

1. Background of and reasons for the Proposed Acquisitions

Business overview of the Group

With reference to the Board Letter, the Company is a leading supplier of lighting products

in the PRC. It designs, develops, produces, markets and sells a variety of lighting products,

with a strong focus on energy-saving products.


– 27 –

Set out below are the audited consolidated financial information of the Group for the two

years ended 31 December 2017 as extracted from the annual report of the Company for the year

ended 31 December 2017 (the “2017 Annual Report”):

For the year ended31 December 2017


Change from2016 to 2017

RMB’000 RMB’000 %

Revenue 4,063,163 3,806,329 6.75– Luminaire products 2,882,289 2,644,430 8.99

– Lamp products 917,645 942,142 (2.60)

– Lighting electronic

products 263,229 219,757 19.78

Gross profit 1,172,858 1,020,958 14.88Profit for the year 331,600 178,583 85.68

As depicted from the above table, the Group’s revenue increased by approximately 6.75%

for the year ended 31 December 2017 (“FY2017”) as compared to that for the year ended 31

December 2016 (“FY2016”). With reference to the 2017 Annual Report, the aforesaid increase

in the Group’s revenue was mainly attributable to the increase in sales of luminaire products

as a result of the successful transformation of the dual-channel development model of

“commercial and home lighting”. Revenue generated from the PRC represented approximately

69.2% to the total revenue for FY2017 (FY2016: 69.1%).

As advised by the Directors, due to (i) the increase in gross profit margin of the Group;

(ii) the fair value change of the Company’s convertible bonds; and (iii) the reduction of

administrative expenses of the Group, the Group recorded substantial increase in the profit for

FY2017 as compared to that for FY2016.

Information on Roman International

With reference to the Board Letter, Roman International is a limited company

incorporated in Hong Kong. Its principal business activities involve trade and investment of

luminaire, luminaire components and LED lighting products.

Information on Mr. Zhang Peng

With reference to the Board Letter, as at the Latest Practicable Date, Mr. Zhang Peng is

the president of the Company and a connected person. Mr. Zhang Peng has about 20 years of

experience in sales, brand operations and management. He joined the Group in June 2016.


– 28 –

Information on the Target Group

With reference to the Board Letter, Blue Light is a limited company incorporated in Hong

Kong. Its business activities involve investment holding, design and development of lighting,

LED and home appliances, promotion and communications, technology consulting and

international trade.



e-commerce platforms and distribution channels. Wuhu NVC is the main operating subsidiary

of Blue Light.

With reference to the management discussion and analysis on the Target Group as

contained in Appendix III to the Circular, the Target Group did not have business operation for

the period from 23 January 2015 (being the date of incorporation of the Target Company) to

31 December 2015.

On 1 January 2016, Wuhu NVC entered into an exclusive master distribution agreement

with Huizhou NVC, a wholly-owned subsidiary of the Company, pursuant to which, Wuhu

NVC is granted an exclusive right to operate all sales of lighting products under the

NVC-brand on third-party e-commerce platforms and oversee the online distribution business

of NVC-brand lighting products. In particular, responsibilities of Wuhu NVC include, among

others, authorisation of sub-distributors, online brand management, and execution of online

sales channel policies in relation to the online sales of NVC-brand lighting products.

Based on the understanding from the Directors, the Target Group has maintained stable

relationship with its major suppliers and sub-distributors since the commencement of

operation.

As at 31 December 2017, the Target Group operated 39 online stores (including 9 flagship

stores) across 9 major e-commerce platforms, including Tmall (天貓), JD (京東), Suning (蘇寧), Vipshop (唯品會), Gome (國美), Yihaodian (1號店), Dangdang (當當) and Taobao (淘寶),

and carried out sales through 9 TV shopping channels. The Target Group also supplies NVC

Brand products to 43 authorised sub-distributors which operate their own online stores,

establishing a strong online retail presence in the PRC market. As at 31 December 2016 and

31 December 2017, the Target Group had 247 employees and 308 employees, respectively.

In 2017, lighting products under the NVC-brand ranked first on JD, Vipshop and Suning

platforms and ranked second on Tmall platform, in terms of total amount of sales across all

brands of lighting products listed on such platforms.

As at the Latest Practicable Date, Blue Light, the Company and Mr. Zhang Peng

respectively holds 85%, 10% and 5% equity interest in Wuhu NVC. Upon completion of the

Acquisitions, the Company will hold, in aggregate, 100% equity interest in Blue Light, and

indirectly hold 100% equity interest in Wuhu NVC.


– 29 –

Set out below is the Target Group’s group chart as at the Latest Practicable Date:

The Company Roman International

Blue Light

Subsidiary A

Mr. Zhang Peng Huizhou NVC

Wuhu NVC Subsidiary B

Subsidiary C Subsidiary D Subsidiary E Subsidiary F Subsidiary G

Subsidiary H

40%100%

60%

100%

5% 10% 85% 66.67%

100% 100% 100% 100%

100%

50.1%

Set out below are the audited financial information of Target Group as extracted from

combined financial statements of the Target Group as contained in Appendix II to the Circular:



RMB’000 RMB’000

Revenue 893,178 514,885Gross Profit 384,011 194,550Profit for the year 111,173 48,726Profit attributable to owners of

the Target Company 95,002 42,351

According to the above, the Target Group’s revenue (all of which was derived from the

sales of NVC-brand lighting products) increased by approximately 73.5% for FY2017 as

compared to that for FY2016. Based on the Directors’ understanding, the increase in of revenue

from 2016 to 2017 was mainly attributable to (i) the commencement of operation of new online

stores, including a flagship store on JD around the end of 2016, and the engagement of new

sub-distributors; (ii) expansion of product portfolio and deepening of market penetration; and

(iii) increased collaboration with e-commerce platforms in relation to promotional events and

festivals.


– 30 –

Due to (i) a higher proportion of sales being made by the self-operated online stores in

2017 as compared to in 2016, which typically renders a higher gross profit margin; and (ii) the

product portfolio being sold in 2017 bore higher gross profit margin as compared to those sold

in 2016, the Target Group’s profit margin increased from approximately 37.8% in FY2016 to

approximately 43.0% in FY2017.

The audited total assets and net assets of Target Group as at 31 December 2017 were

RMB428.37 million and RMB153.29 million, respectively.

Reasons for and benefits of the Proposed Acquisitions

With reference to the Board Letter, in the past two years, the profitability of lighting

product manufacturers has reduced due to the sustained increase in costs of certain metal raw

material, components and labour. In 2018, in order to strengthen its core competitiveness and

achieve sustainable development, the Group formulated a strategy of gradually transforming

from a manufacturing enterprise to a channel enterprise.

The Company entered into the Previous Acquisition in the view that the Previous

Acquisition will strengthen the Company’s ability to develop and/or cooperate with online-

to-offline sales and distribution channels. The Company has been closely monitoring the

business and financial performance of the Target Group since the Previous Acquisition and has

noted that the Target Group recorded a considerable increase in sales and profit for four months

ended 30 April 2018, as compared to the corresponding period in 2017. The Company believes

it is advisable to further acquire the remaining equity interests in the Target Company and

consolidate the financial results of the Target Group into the Group. Following the

Acquisitions, the Company will continue to expand the variety of its sales and distribution

channels and benefit from the collection, analysis and application of big data in respect of

consumer behavior.

With reference to the 2017 Annual Report, the extensive and well-arranged channel

resources have always been the precious treasure of the Group. In the future, the Group will

use such channel advantages to gradually transform into a channel enterprise. The Group will

plan to (i) realize the mutual integration of online and offline channels by getting through the

online channels; (ii) transform the offline channels and strengthen control of the exclusive

regional distributors, so as to master the initiative power for engineering projects; and (iii)

initiate a new era of strategic transformation of the Group by creating sub-brands or

introducing other matured brands.

As advised by the Directors, upon completion of the Acquisitions, the Target Group is

expected to be the online arm of the Enlarged Group, strengthening the Enlarged Group’s

ability to capture the advantages of online/offline integration, leveraging the Enlarged Group’s

wide-reaching distribution networks and effective distribution model, and maintaining the

market leadership of NVC-brand products.


– 31 –

In light of the reasons for the Proposed Acquisitions above, including (i) the background

and financial performance of the Target Group; and (ii) the Proposed Acquisitions are in line

with the Group’s development plan, we concur with the Directors that the Proposed

Acquisitions are conducted in the ordinary and usual course of business of the Group and are

in the interests of the Company and the Shareholders as a whole.

Principal terms of the Sale and Purchase Agreements

Summarised below are the major terms for the Sale and Purchase Agreements, details of

which are set out under the section headed “The Proposed Acquisitions” of the Board Letter

respectively.

I. Sale and Purchase Agreement I

Date:

23 May 2018

Parties:

(i) the Company (as purchaser);

(ii) Roman International (as seller)

Assets to be acquired

60% equity interest held by Roman International in Blue Light.

Consideration

The initial consideration of the Acquisition I is RMB500,000,000 (the “Blue LightConsideration”) (subject to adjustment by the Purchase Price Compensation or the

Excess Profit Award as set out below), which shall be paid in cash in instalments,

provided that Roman International has fulfilled its obligations under the Sale and

Purchase Agreement I.

With reference to the Board Letter and as confirmed by the Directors, the Blue Light

Consideration was determined after arm’s length negotiations between the Company and

Roman International after having taken into account: (i) the unaudited combined net

profit of the Target Group for the year ended 31 December 2017, and (ii) the preliminary

valuation (excluding non-controlling interests) performed by a third-party valuer using

market approach as at 31 March 2018.


– 32 –

The Target Group Valuation

According to the Target Group Valuation Report, the Target Group Valuation as at

31 March 2018 was approximately RMB1,029,321,120. The Blue Light Consideration of

RMB500 million represented a discount of approximately 19.0% to the valuation of 60%

equity interest in the Target Group (i.e. approximately RMB617.6 million).

For our due diligence purpose, we reviewed and enquired into (i) the terms of

engagement of JLL with the Company; (ii) JLL’s qualification and experience in relation

to the preparation of the Target Group Valuation Report; and (iii) the steps and due

diligence measures taken by JLL for conducting the Valuation. From the mandate letter

and other relevant information provided by JLL and based on our interview with them, we

are satisfied with the terms of engagement of JLL as well as their qualification and

experience for preparation of the Target Group Valuation Report. JLL also confirmed that

they are independent to the Group and the Target Group.

The Target Group Valuation Report was prepared by JLL using market approach. As

confirmed by JLL, market approach is one of the commonly adopted approaches for

valuation of companies and is also consistent with normal market practice.

We have further reviewed and enquired into JLL on the methodology adopted and

the basis and assumptions adopted in arriving at the Valuation in order for us to

understand the Target Group Valuation Report. We also obtained and discussed the

supporting calculation/documents for the key assumptions and parameters under the

Target Group Valuation Report.

We noted that JLL performed a trading multiples analysis which includes the price

to earnings ratio (“PER”), the price to book ratio (“PBR”) and the price to sales ratio

(“PSR”) for the purpose of arriving at the Target Group Valuation. JLL searched for listed

companies in mainboard/SME board of Shanghai Stock Exchange, Shenzhen Stock

Exchange and the Hong Kong Stock Exchange, which are engaged in LED lighting

industry. Details of the comparables (the “Comparables”) are set out under the section

headed “EXHIBIT C – COMPARABLE COMPANIES” in Appendix VA to the Circular.

For our due diligence purpose, we enquired into JLL regarding the basis for the

selection of the Comparables. As advised by JLL, despite that none of the Comparables

are engaged in the same scope of business as the Target Group, i.e. sale and distribution

of lighting products through e-commerce platforms and distribution channels, the

Comparables were selected by JLL after taking into account of following factors,

including:

(i) the Comparables and the Target Group are engaged in the same industry, i.e.

LED lighting industry; and


– 33 –

(ii) revenue of the Comparables generated from, among other things, sale of

lighting products to their respective external clients.

As confirmed by JLL, to the best of their knowledge and experience, the

Comparables are exhaustive, fair and representative.

Having considered the following factors, including:

(i) the experience and reputation of JLL, in particular the person who will sign off

the Target Group Valuation Report has over 20 years of experience in business

valuation (for our due diligence purpose, we obtained the person’s curriculum

vitae);

(ii) the Target Group Valuation Report was prepared by JLL in accordance with

IFRS 13 – Fair Value Measurement and taken into account the International

Valuation Standards issued by the International Valuation Standards Council;

(iii) we searched over website of Shanghai Stock Exchange, Shenzhen Stock

Exchange and the Hong Kong Stock Exchange. To the best of our knowledge,

we were not aware of any company listed in aforesaid stock exchanges engaged

in the same business as the Target Group (i.e. sale and distribution of lighting

products through e-commerce platforms and distribution channels);

(iv) based on our independent research, the Comparables and the Target Group are

engaged in LED lighting industry,

we consider the Comparables are justifiable.

In addition, we also noted that JLL applied a discount of 14.9% for lack of

marketability when arriving at the Target Group Valuation. As advised by JLL, a discount

for lack of marketability (DLOM) is a method used to calculate the value for closely held

and restricted shares. The theory behind DLOM is that discounts exist between the value

of a company’s marketable stock and not marketable stock. As the Target Company is not

a listed company, the ability to convert the business interest into cash is not the same as

the listed companies. As such, a valuation reduction was applied.

According to “Discount for lack of Marketability, Job Aid for IRS Valuation

Professionals 2009”, since the Target Group’s revenue for financial year 2017 was over

$100 million US dollars, average discount of 14.9% is used as a proxy for DLOM as at

the Valuation Date. For our due diligence purpose, we obtained “Discount for lack of

Marketability, Job Aid for IRS Valuation Professionals 2009”.


– 34 –

During our discussion, we did not identify any other major factor which caused us

to doubt the fairness and reasonableness of the methodology, principal bases, assumptions

and parameters adopted for the Target Group Valuation Report.

Nevertheless, Shareholders should note that the Target Group Valuation involves

assumptions and therefore the Valuation may or may not reflect the true market value of

the Target Group accurately.

The Previous Acquisition

On 16 March 2018, the Company and Roman International entered in to the Previous

Sale and Purchase Agreement, pursuant to which the Company agreed to and Roman

International agreed to dispose of 40% equity interest in Blue Light at a consideration of

RMB315 million. The consideration for each percentage of equity interest in Blue Light

was approximately RMB7.875 million (the “Previous Per Unit Consideration”).

Based on the Blue Light Consideration and assets to be purchased pursuant to the

Sale and Purchase Agreement I, the consideration for each percentage of equity interest

in Blue Light was approximately RMB8.3 million (the “Current Per UnitConsideration”).

The Current Per Unit Consideration represented a premium of approximately 5.4%

over the Previous Per Unit Consideration (the “Premium”). As advised by the Directors,

despite that the Current Per Unit Consideration represented a premium over the Previous

Per Unit Consideration, it would be justifiable for such premium due to (i) the substantial

increase in the Target Group’s profit attributable to the owners of the Target Company of

approximately 133% for FY2017 (being the latest available full-year financial

information as at the Latest Practicable Date) as compared to that as at 31 December 2016

(being the latest available full-year financial information as at the date of the Previous

Sale and Purchase Agreement); and (ii) the substantial increase in Target Group’s net

asset valuable attributable to its shareholders as at 31 December 2017 as compared to that

as at 31 December 2016.

Having considered that (i) the Blue Light Consideration represents discount to the

Target Group Valuation; and (ii) the Premium to be justifiable, we are of view that the

Blue Light Consideration is fair and reasonable.


– 35 –

Purchase Price Compensation and Excess Profit Award

Roman International undertakes to the Company that, if the 2018 Actual Net Profitof the Target Group is lower than the Minimum Guaranteed Profit, Roman Internationalshall pay the Purchase Price Compensation in cash as calculated below to the Companywithin 90 business days after the Target Group issues its 2018 audited accountant’sreports.

Purchase Price Compensation = (Minimum Guaranteed Profit – 2018 Actual NetProfit) × 7.5 × 60%

The Company undertakes to Roman International that, if the 2018 Actual Net Profitof the Target Group exceeds the Minimum Guarantee Profit, the Company shall pay theExcess Profit Award in cash as calculated below to Roman International within 90business days after the Target Group issues its 2018 audited accountant’s reports.

Excess Profit Award = (2018 Actual Net Profit – Minimum Guarantee Profit) × 7.5× 60%

With reference to the Board Letter, the Minimum Guaranteed Profit was arrived atafter arm’s length negotiations (including evaluation on the 2017 financial result of theTarget Group and industry performance and discussions around the appropriate amount ofthe Minimum Guaranteed Profit taking into account the results of such evaluation)between the Company and Roman International and does not represent the anticipatedlevel of future profits of the Target Group. As such, we do not doubt the reasonablenessof the basis for determining the Minimum Guaranteed Profit.

Set out below are the Comparables’ historical percentage change in revenue and netprofit from FY2016 to FY2017 for the Shareholders’ information purpose:

Company name (Stock code)

Change inrevenue from2016 to 2017

Change in netprofit from

2016 to 2017

NVC Lighting Holding Limited (2222) 6.75% 85.68%Neo-Neon Holdings Ltd (1868) 8.91% 926.07%Zhejiang Yankon Group Co., Ltd.

(SH600261) 14.68% -10.50%Foshan Electrical and Lighting Co., Ltd.

(SZ000541) 12.88% -30.51%Hengdian Group Tospo Lighting Co., Ltd.

(SH603303) 24.98% -34.58%Foshan Nationstar Optoelectronics Co., Ltd.

(SZ002449) 43.59% 97.52%Opple Lighting Co., Ltd. (SH603515) 27.03% 33.07%

Average 19.83% 152.39%Average (excluding outlier) 19.83% 23.45%


– 36 –

We noted from the above table that the average percentage change in revenue of the

Comparables was approximately 19.83%, while the average percentage change in net

profit was approximately 152.39% or 23.45% excluding the outlier (being Neo-Neon

Holdings Ltd (1868)). Given that based on the Minimum Guaranteed Profit and the Target

Group’s financial information for the year ended 31 December 2017, the Minimum

Guaranteed Profit represented a possible increase of approximately 25.9%(Note) as

compared to its net profit for the year ended 31 December 2017. The possible increase of

approximately 25.9% represented a better financial performance as compared to the

average historical performance of the Comparables. As such, we do not doubt the

reasonableness of the Minimum Guaranteed Profit.

The multiple of 7.5 was arrived at after taking into account the implied price-

earnings ratio of the Target Group (excluding non-controlling interests) pursuant to the

Acquisition I, calculated as the initial consideration of the Acquisition I (being

RMB500,000,000) divided by 60% of the net profit of the Target Group for the year ended

31 December 2017.

Notwithstanding the provision above, the Company may directly deduct part or all

of the Purchase Price Compensation from the second tranche of the consideration of the

Acquisition I (being RMB100,000,000 or HK$ in equivalent amount) at its sole

discretion. The parties confirmed that each of the Purchase Price Compensation and the

Excess Profit Award shall not exceed RMB50,000,000 (the “Limit”), which was

determined on normal commercial terms after arm’s length negotiation between the

Company and Roman International.

We further enquired into the Directors regarding the Limit of RMB50,000,000. As

advised by the Directors, there were no Purchase Price Compensation arrangement and

Excess Profit Award arrangement at the beginning of the negotiation of the Sale and

Purchase Agreement I between the Company and Roman International. However, during

the process of the negotiation, the Company initiated to include purchase price

compensation (without a limit) for the purpose of safeguard the Shareholders’ interests.

Roman International agreed the aforesaid term, subject to a similar arrangement if the

Target Group’s actual net profit for the year ending 31 December 2018 exceeds the

Minimum Guaranteed Profit. In light of the following factors,

(i) should there be no fixed amount to limit the excess profit award arrangement,

the Company may pay substantial excess profit award to Roman International;

and

Note: RMB140,000,000 / RMB111,173,000 – 1 = 25.9%


– 37 –

(ii) based on the preliminary valuation of 100% equity value of the Target Group

(excluding non-controlling interests) of RMB902,375,130, the 60% equity

value of the Target Group was approximately RMB541.4 million, which was

close to the maximum consideration of Acquisition I of RMB550,000,000 after

adjustment,

the Directors considered the Limit to be acceptable.

Having considered that, including:

(i) the Target Group Valuation was arrived based on the Target Group’s financial

performance for FY2017;

(ii) the Purchase Price Compensation arrangement and Excess Profit Award

arrangement reflected the confidence of the Vendors in the future earning

ability of the Target Group; and

(iii) the same adjusted factors were applied to Purchase Price Compensation

arrangement and Excess Profit Award arrangement,

we consider that the Purchase Price Compensation arrangement and Excess Profit Award

arrangement to be acceptable.

Net asset guarantee

Roman International undertakes to the Company that, if the 2017 Audited Net Asset

Value of the Target Group is less than RMB160,000,000 (the “2017 Guaranteed NAV”),

Roman International shall make up (or cause to be made up) to the Target Group the

shortfall between the 2017 Audited Net Asset Value and RMB160,000,000 on or before

completion of the Acquisition I in a manner to the Company’s satisfactory, so as to ensure

the audited net asset value of the Target Group will reach or exceed RMB160,000,000.

As advised by the Directors, as at the date of the Sale and Purchase Agreement I,

based on the unaudited combined financial information of the Target Group, the Target

Group’s net asset value was approximately RMB167.7 million as at 31 December 2017.

As the Company did not expect a material change in the Target Group’s net asset value

as at 31 December 2017 after auditing, the 2017 Guaranteed NAV (which was close to the

then available net asset value of the Target Group as at 31 December 2017) was set.

As at the Latest Practicable Date, according to the 2017 Audited Financial Report,

the Audited Net Assets was RMB153.3 million (which was less than RMB160,000,000).

Therefore, Roman International will make up the shortfall on or before completion of the

Acquisition I.


– 38 –

Other terms of the Sale and Purchase Agreement I, such as conditions precedent,

non-competition restriction, personal guarantee agreement, etc., are set out under the

section headed “The Sale and Purchase Agreement I” of the Board Letter.

II. Sale and Purchase Agreement II

Date:

23 May 2018

Parties:

(i) Zhuhai NVC (as purchaser);

(ii) Mr. Zhang Peng (as seller)

Assets to be acquired

5% equity interest held by Mr. Zhang in Wuhu NVC.

Consideration

The consideration of the Acquisition II is RMB45,000,000 (the “Wuhu NVCConsideration”), which shall be paid by wiring transfer.

With reference to the Board Letter and as advised by the Directors, the Wuhu NVC

Consideration was determined after arm’s length negotiations between Zhuhai NVC and

Mr. Zhang Peng after having taken into account: (i) the historical operating results of

Wuhu NVC, and (ii) the preliminary valuation (excluding non-controlling interests)

performed by a third-party valuer using the market approach as at 31 March 2018.

The Wuhu NVC Valuation

According to the Wuhu NVC Valuation Report, the Wuhu NVC Consideration of

RMB45 million represented a discount of approximately 20.2% to the valuation of 5%

equity interest in Wuhu NVC (i.e. approximately RMB56.4 million).

For our due diligence purpose, we reviewed and enquired into (i) the terms of

engagement of JLL with the Company; (ii) JLL’s qualification and experience in relation

to the preparation of the Wuhu NVC Valuation Report; and (iii) the steps and due

diligence measures taken by JLL for conducting the Valuation. From the mandate letter

and other relevant information provided by JLL and based on our interview with them, we

are satisfied with the terms of engagement of JLL as well as their qualification and

experience for preparation of the Wuhu NVC Valuation Report. JLL also confirmed that

they are independent to the Group and the Wuhu NVC.


– 39 –

The Wuhu NVC Valuation Report was prepared by JLL using the market approach.

As confirmed by JLL, market approach is one of the commonly adopted approaches for

valuation of companies and is also consistent with normal market practice.

We have further reviewed and enquired into JLL on the methodology adopted and

the basis and assumptions adopted in arriving at the Valuation in order for us to

understand the Wuhu NVC Valuation Report. We also obtained and discussed the

supporting calculation/documents for the key assumptions and parameters under the

Wuhu NVC Valuation Report.

We noted that JLL performed a trading multiples analysis which includes the PER,

PBR and PSR for the purpose of arriving at the Target Group Valuation and selected the

Comparables for the purpose of arriving at the Wuhu NVC Valuation. Details of the

Comparables are set out under the section headed “EXHIBIT C – COMPARABLE

COMPANIES” in Appendix VB to the Circular. In addition, JLL also applied a discount

of 14.9% for lack of marketability when arriving at the Wuhu NVC Valuation. Our views

on the Comparables and marketability discount are set out under the section headed

“Target Group Valuation” above.

During our discussion with JLL, 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 Wuhu NVC Valuation Report.

Nevertheless, Shareholders should note that the Wuhu NVC Valuation involves

assumptions and therefore the Wuhu NVC Valuation may or may not reflect the true

market value of Wuhu NVC accurately.

Having considered that the Wuhu NVC Consideration represented a discount to the

Wuhu NVC Valuation, we are of view that the Wuhu NVC Consideration is fair and

reasonable.

Other terms of the Sale and Purchase Agreement II, such as conditions precedent,

completion, etc., are set out under the section headed “The Sale and Purchase Agreement

II” of the Board Letter.

Possible financial effects of the Proposed Acquisitions

With reference to the Board Letter, upon completion, the Company will hold 100% equity

interest in Target Company and the Target Group will become subsidiaries of the Company.

Based on the unaudited pro forma financial information on the Enlarged Group (which

was for the purpose of illustrating the financial impact of the Proposed Acquisitions on the

assets and liabilities of the Group as if the Proposed Acquisitions had been completed on 31

December 2017) as set out in Appendix IV to the Circular, the total assets of the Group as at


– 40 –

31 December 2017 would increase from approximately RMB5.47 billion to approximately

RMB6.65 billion, and its total liabilities as at 31 December 2017 would increase from

approximately RMB2.14 billion to approximately RMB3.22 billion, as a result of the Proposed

Acquisitions.

It should be noted that the aforementioned analysis is for illustrative purposes only and

does not purport to represent how the financial position of the Group will be upon the

completion of the Proposed Acquisitions.

Recommendations

Having taken into consideration the factors and reasons as stated above, we are of the

opinion that (i) the terms of the Sale and Purchase Agreements are on normal commercial terms

and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the

Proposed Acquisitions are conducted in the ordinary and usual course of business of the Group

and are in the interests of the Company and the Shareholders as a whole. 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 EGM to approve the Sale and Purchase

Agreements and 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 LimitedGraham Lam

Managing Director

Note: Mr. Graham Lam is a licensed person registered with the Securities and Futures Commission and aresponsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulatedactivity under the SFO. He has over 20 years of experience in investment banking industry.


– 41 –

FINANCIAL SUMMARY OF THE GROUP

The audited consolidated financial statements of the Group for each of the three years

ended 31 December 2015, 2016, and 2017 are respectively disclosed in pages 140 to 307 of the

annual report of the Company for the year ended 31 December 2015, pages 205 to 399 of the

annual report of the Company for the year ended 31 December 2016 and pages 199 to 404 of

the annual report of the Company for the year ended 31 December 2017, all of which have been

published on the website of the Company (http://www.nvc-lighting.com) and the website of the

Stock Exchange (www.hkexnews.hk):

Quick links to the annual reports of the Company are set out below:

1. Annual report of the Company for the year ended 31 December 2015

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0428/LTN20160428411.pdf





INDEBTEDNESS STATEMENT

At the close of business on 30 April 2018, being the latest practicable date for the purpose

of preparing this indebtedness statement prior to the publication of this circular, the total

indebtedness of the Enlarged Group was as follows:

Borrowings

(i) Secured bank loans of approximately RMB385.3 million secured by the pledge over

certain trade receivables, buildings and bank deposits of the Group.

(ii) Unsecured bank loan of approximately RMB1.0 million.

(iii) Unsecured other borrowings of approximately RMB20.4 million.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– 42 –

Convertible bonds

Convertible bonds with outstanding principal amount of HK$500 million which were

unsecured and the carrying value of the liability component of the convertible bonds as at 30

April 2018 was approximately HK$521.6 million (equivalent to RMB421.4 million).

Pledged assets

(i) Certain land use rights with aggregate carrying amount of approximately RMB46.6million and certain buildings included in property, plant and equipment withaggregate carrying amount of approximately RMB223.0 million and RMB43.8million were pledged for the Group’s applications of assets preservation in certainPRC legal proceedings and bank borrowings respectively.

(ii) Certain trade receivables with aggregate carrying amount of approximately RMB5.6million were pledged to secure bank borrowings.

(iii) Bank deposits with aggregate carrying amounts of approximately RMB400.0million, RMB102.5 million, RMB1.7 million and RMB0.9 million were pledged forbank borrowings, issuing of letters of guarantee, the Group’s applications of assetspreservation in certain PRC legal proceedings, and other banking purposesrespectively.

Contingent liabilities

Guarantees given to banks and a finance company in connection with facilities granted totwo PRC companies and Ms. Wu Lian, an individual amounted to approximately RMB131.5million.

The Group acted as defendant in lawsuits brought by two PRC banks and a PRC financecompany alleging that the Group should assume guarantee liabilities of RMB131.5 million andrelated interests according to guarantee agreements, further details of which are set out undersubsection 7(b) of Appendix VI to the Circular. The directors consider that the likelihood of theGroup sustaining losses from the guarantees is remote, and accordingly no provision for claimsarising from the litigations is considered necessary as at 30 April 2018, save for the relatedlegal and other costs. Based on the respective court judgements, interests are imposed on theprincipal amounts as disclosed above, which are calculated on (i) principal amount ofapproximately RMB62.0 million at 9.9% per annum plus compound interest at 9.9% per annumon unpaid interest since 21 October 2014, amounting to approximately RMB24.3 million as at30 April 2018; (ii) principal amount of approximately RMB34.0 million at four times ofsix-month borrowing rate of the People’s Bank of China since 8 October 2014, amounting toapproximately RMB22.3 million as at 30 April 2018; and (iii) principal amount ofapproximately RMB35.5 million at 0.05% per day since 4 January 2015, amounting toapproximately RMB21.8 million as at 30 April 2018.


– 43 –

For the purpose of this indebtedness statement, foreign currency amounts have beentranslated into RMB at the approximate rates of exchange prevailing as at 30 April 2018.

Save as aforesaid and apart from the intra-group liabilities and normal trade payables, theEnlarged Group did not have, at the close of business on 30 April 2018, any other outstandingborrowings, mortgages, charges, debentures, loan capital or overdraft, debt securities or othersimilar indebtedness, finance leases or hire-purchase commitments, liabilities underacceptances or acceptance credits or any guarantees or other material contingent liabilities.

To the best knowledge of the directors, having made all reasonable enquiries, there hasbeen no material change in indebtedness or contingent liabilities of the Enlarged Group since30 April 2018.

WORKING CAPITAL

The Directors are of the view that, after taking into account of the Enlarged Group’s

presently available financial resources, the Enlarged Group will have sufficient working capital

for its business for at least twelve (12) months from the date of this circular in the absence of

unforeseen circumstances, including but not limited to, unforeseen loss of major customers and

suppliers and unforeseen default of receivables as well as unforeseen increase in country and

regulatory risks.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse

change in the financial or trading position of the Group since 31 December 2017 (being the

date to which the latest published audited consolidated financial statements of the Group made

up).

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As disclosed in the annual report of the Group for the year ended 31 December 2017, the

Group will continue to develop business all over the world, conduct comprehensive and

in-depth reforms in domestic and overseas sales channel expanding as well as internal

management improvement, gradually transform itself from a manufacturing enterprise to a

channel enterprise, devote itself to commercial lighting, home lighting, kitchen & bathroom

and township channels, strive to become the first brand of smart lighting solution provider, and

achieve the ultimate mission of using innovative technology and artistic design to bring people

an infinitely beautiful living experience space.


– 44 –

In 2018, the Group will focus on optimizing and integrating the resources on the three

platforms of R&D, logistics and customer services, on the basis of promoting the four cost

saving measures for reducing R&D cost, manufacturing cost, purchasing cost and labor cost.

In terms of R&D platform, the Group will integrate internal resources to establish the Central

Research Institute. Apart from completing the development of specialized commercial lighting

products and home styled products in cooperation with the Group, the Central Research

Institute will deeply research into the future lifestyle and healthy lighting, carry out upgrade

and transformation of intelligent products and establish intelligent application scenario models,

thereby opening the Group’s new era in developing intelligent lighting. In terms of logistics

platform, the Group will finish planning and layout of 8 logistics warehouses on the principle

of resource optimization and concentrated operation in 2018, and establish then secondary

distribution resource system by combining express delivery and logistics resources, thus

realizing the “Next Day Delivery” of over 80% orders. In addition, the Group will launch the

logistics system in 2018, which will connect through the information flows inside and outside

various regions and refine data exchange platforms to achieve intensification, standardization

and informationization of transport services. In terms of customer service platform, the Group

will gradually promote use of 400 hotline on the basis of the existing standardized call center

in 2018, thus enhancing the systematic degree of business handling process; meanwhile, the

Group will present the after-sales service platform system, so as to complete the development

of user management, order management, service provider management, engineer management

and assistant management modules, optimize the quick response mechanism, and upgrade the

customer satisfaction.

Looking forward, the Board considers to further enhance its distribution business,

through exploring the opportunities to acquire potential business over the world. Save as the

proposed acquisition of 100% equity interest in Elec-Tech Solid State Lighting (HK) Limited

disclosed in the announcement of the Company dated 25 April 2018, the Company has not yet

identified any opportunities for acquisition up to the Latest Practicable Date.


– 45 –

Set out below is the text of a report received from the independent reporting accountant

of the Company, BDO Limited, Certified Public Accountants, Hong Kong, which has been

prepared for the purpose of incorporation in this circular.

ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION OF THETARGET GROUP TO THE DIRECTORS OF NVC LIGHTING HOLDING LIMITED

Introduction

We report on the historical financial information of Blue Light (HK) Trading Co., Limited

(the “Target Company”) and its subsidiaries (together the “Target Group”) set out on pages 49

to 90, which comprises the combined statements of financial position as at 31 December 2015,

2016 and 2017 and the statements of financial position of the Target Company as at 31

December 2015, 2016 and 2017, and the combined statements of profit or loss, the combined

statements of other comprehensive income, the combined statements of changes in equity and

the combined statements of cash flows for the period from 23 January 2015 (date of

incorporation) to 31 December 2015, and each of the two years ended 31 December 2016 and

2017 (the “Track Record Period”) and a summary of significant accounting policies and other

explanatory information (together the “Historical Financial Information”). The Historical

Financial Information set out on pages 49 to 90 forms an integral part of this report, which has

been prepared for inclusion in the circular of NVC Lighting Holding Limited (the “Company”)

dated 30 June 2018 (the “Circular”) in connection with the proposed acquisitions of the equity

interest in the Target Company and 5% equity interest in Wuhu NVC Lighting E-Commerce

Limited.

Directors’ responsibility for the Historical Financial Information

The director of the Target Company is responsible for the preparation of the Historical

Financial Information that gives a true and fair view in accordance with the basis of preparation

and presentation set out in Note 2.1 to the Historical Financial Information, and for such

internal control as the director determines is necessary to enable the preparation of the

Historical Financial Information that is free from material misstatement, whether due to fraud

or error.

The directors of the Company are responsible for the contents of this Circular in which

the Historical Financial Information of the Target Group is included, and such information is

prepared based on accounting policies materially consistent with those of the Company.

APPENDIX II FINANCIAL INFORMATION OF THE TARGET GROUP

– 46 –

Reporting accountant’s 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 (the “HKICPA”). This standard requires that we comply with ethical

standards and plan and perform our work to obtain reasonable assurance about whether the

Historical Financial Information is free from material misstatement.

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 accountant’s 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 accountant considers internal control relevant to the entity’s

preparation of the Historical Financial Information that gives a true and fair view in accordance

with the basis of preparation and presentation set out in Note 2.1 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 director of the Target Company, as well

as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Opinion

In our opinion the Historical Financial Information gives, for the purposes of the

accountant’s report, a true and fair view of the Target Company’s financial position as at 31

December 2015, 2016 and 2017, the Target Group’s financial position as at 31 December 2015,

2016 and 2017 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 2.1

to the Historical Financial Information.


– 47 –

REPORT ON MATTERS UNDER THE RULES GOVERNING THE LISTING OFSECURITIES ON THE STOCK EXCHANGE OF HONG KONG LIMITED AND THECOMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying

Financial Statements as defined on page 49 have been made.

BDO LimitedCertified Public Accountants

Lam Siu FungPractising Certificate no. P05308

Hong Kong

30 June 2018


– 48 –

HISTORICAL FINANCIAL INFORMATION OF TARGET GROUP

Preparation of the Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of thisaccountant’s report. The financial statements of the Target Group for the Track Record Period(also referred to as the “Relevant Periods”), on which the Historical Financial Information isbased, were prepared in accordance with International Financial Reporting Standards (the“IFRSs”) issued by the International Accounting Standards Board (the “IASB”) (the“Underlying Financial Statements”) and were audited by BDO Limited.

The Historical Financial Information is presented in Renminbi (“RMB”) and all valuesare rounded to the nearest thousand (RMB’000) except when otherwise indicated.

I. HISTORICAL FINANCIAL INFORMATION

COMBINED STATEMENTS OF PROFIT OR LOSS

Period from23 January

2015 (date ofincorporation)

to 31 December2015

Year ended 31 DecemberNotes 2016 2017

RMB’000 RMB’000 RMB’000

Revenue 4 – 514,885 893,178Cost of sales – (320,335) (509,167)

Gross profit – 194,550 384,011Other income 5 – 1,250 14,281Administrative expenses (1) (34,073) (63,021)Selling and distribution costs – (95,900) (179,473)Other expenses – (599) (2,932)Finance costs – – (294)Share of results of an associate 12 – – 896

(Loss)/profit before income tax 6 (1) 65,228 153,468Income tax expense 8 – (16,502) (42,295)

(Loss)/profit for the period/year (1) 48,726 111,173

(Loss)/profit attributable to:Owners of the Target Company (1) 42,351 95,002Non-controlling interests – 6,375 16,171

(1) 48,726 111,173


– 49 –

COMBINED STATEMENTS OF OTHER COMPREHENSIVE INCOME



to 31 December2015

Year ended 31 December2016 2017

RMB’000 RMB’000 RMB’000

(Loss)/profit for the period/year (1) 48,726 111,173Other comprehensive incomeItem that may be reclassified subsequently

to profit or loss:

Exchange differences on translation of

foreign operation – (222) 208

Other comprehensive income for

the period/year, net of tax – (222) 208

Total comprehensive income forthe period/year, net of tax (1) 48,504 111,381

Total comprehensive income attributable to:Owners of the Target Company (1) 42,129 95,210Non-controlling interests – 6,375 16,171

(1) 48,504 111,381


– 50 –

COMBINED STATEMENTS OF FINANCIAL POSITION

As at 31 DecemberNotes 2015 2016 2017

RMB’000 RMB’000 RMB’000

ASSETS AND LIABILITIESNon-current assetsProperty, plant and equipment 10 – 1,553 3,296Intangible assets 11 – 1,356 2,236Investment in an associate 12 – – 3,396

– 2,909 8,928

Current assetsInventories 13 – 68,677 81,819Trade and bills receivables 14 – 51,391 101,475Prepayments, deposits and

other receivables 15 447 13,899 84,393Loan receivables 16 – 15,000 68,000Cash and cash equivalents – 125,703 83,754

447 274,670 419,441

Current liabilitiesTrade payables 17 – 140,126 162,041Other payables and accruals 18 1 81,045 68,826Other borrowings 19 – – 21,008Tax payable – 6,858 23,202

1 228,029 275,077

Net current assets 446 46,641 144,364

Total assets less current liabilities 446 49,550 153,292

Net assets 446 49,550 153,292

EQUITYShare capital 20 447 447 447Reserves 21 (1) 42,128 137,338

Equity attributable to owners ofthe Target Company 446 42,575 137,785

Non-controlling interests – 6,975 15,507

Total equity 446 49,550 153,292


– 51 –

STATEMENTS OF FINANCIAL POSITION

As at 31 DecemberNotes 2015 2016 2017

RMB’000 RMB’000 RMB’000

ASSETS AND LIABILITIESNon-current assetInvestment in a subsidiary 26 – 5,228 5,228

Current assetsTrade receivables 14 – 2,184 11,889Deposits and other receivables 15 447 – –Cash and cash equivalents – 343 4,205

447 2,527 16,094

Current liabilitiesTrade payables 17 – – 522Other payables and accruals 18 1 4,958 4,809

1 4,958 5,331

Net current assets/(liabilities) 446 (2,431) 10,763

Total assets less current liabilities 446 2,797 15,991

Net assets 446 2,797 15,991

EQUITYShare capital 20 447 447 447Reserves 21 (1) 2,350 15,544

Total equity 446 2,797 15,991


– 52 –

COMBINED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of the Target CompanyNon-

controllinginterests

Totalequity

Sharecapital

Statutoryreserve

Foreignexchange

reserve

(Accumulatedlosses)/retained

profits TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

As at 23 January 2015(date of incorporation) 447 – – – 447 – 447

Loss and total comprehensiveincome for the period – – – (1) (1) – (1)

As at 31 December 2015 and1 January 2016 447 – – (1) 446 – 446

Profit for the year – – – 42,351 42,351 6,375 48,726Other comprehensive income:Exchange differences on translation

of foreign operation – – (222) – (222) – (222)

Total comprehensive incomefor the year – – (222) 42,351 42,129 6,375 48,504

Transfer to statutory reserve – 6,064 – (6,064) – – –Capital contribution from

non-controlling interests – – – – – 600 600

As at 31 December 2016 and1 January 2017 447 6,064 (222) 36,286 42,575 6,975 49,550

Profit for the year – – – 95,002 95,002 16,171 111,173Other comprehensive income:Exchange differences on translation

of foreign operation – – 208 – 208 – 208

Total comprehensive incomefor the year – – 208 95,002 95,210 16,171 111,381

Business combination – – – – – 4,361 4,361Dividends paid to non-controlling

interest – – – – – (12,000) (12,000)

As at 31 December 2017 447 6,064 (14) 131,288 137,785 15,507 153,292


– 53 –

COMBINED STATEMENTS OF CASH FLOWS

Period from23 January 2015

(date ofincorporation) to

31 December2015


RMB’000 RMB’000 RMB’000

Cash flows from operating activities(Loss)/profit before income tax (1) 65,228 153,468Adjustments for:

Depreciation of property,plant and equipment – 54 513

Amortisation of intangible assets – 61 305Share of results of an associate – – (896)Interest income – (318) (2,410)Interest expense – – 294Impairment of deposits and other receivables – – 33Impairment of inventories – – 2,359

Operating (loss)/profit before working capital changes (1) 65,025 153,666Increase in inventories – (68,677) (11,343)Increase in trade and bills receivables, prepayments, deposits

and other receivables – (65,065) (105,858)Increase/(decrease) in trade payables, other payables and

other accruals 1 221,170 (12,088)

Cash generated from operations – 152,453 24,377Income tax paid – (9,644) (26,341)

Net cash generated from/(used in) operating activities – 142,809 (1,964)

Cash flows from investing activitiesPurchase of property, plant and equipment – (1,607) (672)Purchase of intangible assets – (1,417) (1,151)Net cash inflow for acquisition of a subsidiary – – 267Investment in an associate – – (2,500)Loans advanced – (15,000) (53,000)Interest received – 318 2,410Interest paid – – (239)

Net cash used in investing activities – (17,706) (54,885)

Cash flows from financing activitiesCapital contribution from

non-controlling shareholders – 600 –Borrowings – – 19,900Dividends paid to non-controlling shareholders – – (5,000)

Net cash generated from financing activities – 600 14,900

Net increase/(decrease) in cash and cash equivalents – 125,703 (41,949)Cash and cash equivalents at beginning of the period/year – – 125,703

Cash and cash equivalents at end of the period/year – 125,703 83,754


– 54 –

II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. INFORMATION ABOUT THE TARGET GROUP

(a) Corporate information

The Target Company is a limited liability company incorporated in Hong Kong on 23 January 2015 under theHong Kong Companies Ordinance, Cap. 622. The address of the Target Company’s registered office and the principalplace of business are Unit 4, 7/F, Bright Way Tower, 33 Mong Kok Road, Kowloon, and No. 1 Jin Feng Lu,Xiangzhou, Zhuhai, Guangdong, China, respectively.

The Target Company is an investment holding company and has not carried on any material business since thedate of its incorporation save for the group reorganisation mentioned in (b) below. The Target Company and itssubsidiaries (together, the “Target Group”) are principally engaged in sale and distribution of lighting productsthrough e-commerce platforms and distribution channels (the “Principal Business”).

Through a group reorganisation for the purpose of preparation of the acquisition by the Group, as more fullyexplained in the subsection headed “Reorganisation of the Target Group” in the section headed “ManagementDiscussion And Analysis on the Target Group” in the Circular (the “Reorganisation”), the Target Company becamethe holding company of the companies now comprising the Target Group on 21 January 2016.

(b) Reorganisation

Upon completion of the Reorganisation and as of the date of this report, the Target Company had direct orindirect interests in the following subsidiaries with limited liability:

NameCountry and dateof incorporation

Place of operationand principalactivities

Particulars ofissued and

fully paid upshare capital/

registeredcapital

Effective percentage ofownership interests/

voting rights/profit share

Directly Indirectly

蕪湖蔚藍芯光照明貿易有限公司(“Wuhu Blue Light”)

The People Republic ofChina (the “PRC”),25 May 2016

PRC, Investmentholdings

RMB5,000,000 100% –

蕪湖風雷網絡科技有限公司 PRC, 17 January 2017 PRC, dormant RMB400,000 – 66.7%

蕪湖雷士照明電子商務有限公司(“Wuhu NVC”)

PRC, 4 May 2015 PRC, sale anddistribution oflighting productsthrough e-commerceplatforms anddistribution channels

RMB6,000,000 – 85%

惠州市尚億電子商務有限公司 PRC, 4 July 2014 PRC, sale anddistribution oflighting productsthrough e-commerceplatforms anddistribution channels

RMB4,000,000 – 42.6%

珠海市壹姐網絡科技有限公司 PRC, 18 July 2014 PRC, sale anddistribution oflighting productsthrough e-commerceplatforms anddistribution channels

RMB1,000,000 – 85%

珠海惠銀電子商務有限公司 PRC, 15 April 2015 PRC, sale anddistribution oflighting productsthrough e-commerceplatforms anddistribution channels

RMB1,000,000 – 85%


– 55 –

NameCountry and dateof incorporation

Place of operationand principalactivities

Particulars ofissued and

fully paid upshare capital/

registeredcapital

Effective percentage ofownership interests/

voting rights/profit share

Directly Indirectly

蕪湖奧空電子商務有限公司 PRC, 23 September2014

PRC, sale anddistribution oflighting productsthrough e-commerceplatforms anddistribution channels

RMB1,000,000 – 85%

蕪湖光年電子商務有限公司 PRC, 12 July 2016 PRC, dormant RMB5,000,000 – 85%

惠州市尚佳光電有限公司 PRC, 20 April 2015 PRC, sale anddistribution oflighting productsthrough e-commerceplatforms anddistribution channels

RMB1,000,000 – 42.6%

2.1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

Pursuant to the Reorganisation, the Target Company and Wuhu Blue Light became the holding companies ofWuhu NVC and the subsidiaries now comprising the Target Group.

The Target Group is regarded as a continuing entity resulting from the Reorganisation since the insertion ofnew holding companies at the top of Wuhu NVC has not resulted in any change in economic substance and does notinvolve business combination. For the purpose of this report, the Historical Financial Information has been preparedon a combined basis using the predecessor carrying amounts as if the steps of the Reorganisation for the purposesof establishment of the Target Company and insertion of new holding companies at the top of Wuhu NVC had beencompleted at the beginning of the Relevant Periods.

Upon the completion of the above steps of the Reorganisation, the Target Company holds the equity interests,directly or indirectly, of companies comprising the Target Group. The Historical Financial Information of the TargetGroup for the Relevant Periods has been prepared using the carrying amounts of the financial statements of thecompanies now comprising the Target Group.

The combined statements of profit or loss, combined statements of other comprehensive income, combinedstatements of changes in equity and combined statements of cash flows of the Target Group for the Relevant Periodsinclude the results and cash flows of the companies now comprising the Target Group as if the current group structure,after the completion of the above steps of the Reorganisation, had been in existence throughout the Relevant Periods,or since their respective dates of incorporation, whichever was shorter. The combined statements of financial positionof the Target Group as at 31 December 2016 and 2017 have been prepared to present the state of the affairs of theTarget Group as if the current group structure, after the completion of the above steps of the Reorganisation, had beenin existence as at the respective dates.

All significant intra-group transactions and balances have been eliminated on combination.

The Historical Financial Information has been prepared in accordance with the accounting policies set out inNote 2.2 below which conform to IFRSs issued by the IASB. In addition, the Historical Financial Informationincludes applicable disclosures requirement of the Rules Governing the Listing of Securities on The Stock Exchangeof Hong Kong Limited.

The Historical Financial Information has been prepared under the historical cost convention.

The individual financial statements of each group entity are presented in the currency of the primary economicenvironment in which the entity operates (“functional currency”). The principal activities of the Target Group areexpressed in RMB, and all are rounded to the nearest thousand except when otherwise indicated.

Accordingly, the Target Group uses RMB as its reporting currency.


– 56 –

2.2 APPLICATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Historical Financial Information for the Relevant Periods, theTarget Group has consistently applied all International Financial Reporting Standards, International AccountingStandards (“IASs”) and Interpretations (collectively referred to as the “IFRSs”) issued by the IASB which areeffective for the accounting period commencing from 1 January 2017 throughout the Relevant Periods.

At the date of this report, the following new standards and amendments to standards, potentially relevant tothe Target Group’s Historical Financial Information, have been issued by the IASB, which are not yet effective andhave not been early adopted by the Target Group in preparing this Historical Financial Information:

Annual Improvements to IFRSs 2014-2016 Cycle Amendments to IFRS 1 First-time adoption ofInternational Financial Reporting Standards1

Annual Improvements to IFRSs 2014-2016 Cycle Amendments to IAS 28 Investments in Associatesand Joint Ventures2

Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 3 Business Combinations2

Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 11 Joint Arrangements2

Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IAS 12 Income Taxes2

Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IAS 23 Borrowing Costs2

Amendments to IFRS 2 Classification and Measurement ofShare-Based Payment Transactions1

IFRS 9 Financial Instruments1

Amendments to IFRS 9 Prepayment Features with Negative Compensation2

IFRS 15 Revenue from Contracts with Customers1

Amendments to IFRS 15 Clarifications to IFRS 15 Revenue fromContracts with Customers1

IFRS 16 Leases2

IFRIC 22 Foreign Currency Transactions andAdvance Consideration1

IFRIC 23 Uncertainty Over Income Tax Treatments2

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between anInvestor and its Associate or Joint Venture3

1 Effective for annual periods beginning on or after 1 January 2018

2 Effective for annual periods beginning on or after 1 January 2019

3 The amendments were originally intended to be effective for periods beginning on or after 1 January2016. The effective date has now been deferred/removed. Early application of the amendments of theamendments continue to be permitted.

Annual Improvements to IFRSs 2014-2016 Cycle – Amendments to IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards

The amendments issued under the annual improvements process make small, non-urgent changes to standardswhere they are currently unclear. They include amendments to IFRS 1, First-time Adoption of International FinancialReporting Standards, removing transition provision exemptions relating to accounting periods that had already passedand were therefore no longer applicable.

Annual Improvements to IFRSs 2014-2016 Cycle – Amendments to IAS 28 Investments in Associates and JointVentures

The amendments issued under the annual improvements process make small, non-urgent changes to standardswhere they are currently unclear. They include amendments to IAS 28, Investments in Associates and Joint Ventures,clarifying that a Venture Capital organisation’s permissible election to measure its associates or joint ventures at fairvalue is made separately for each associate or joint venture.


– 57 –

Annual Improvements to IFRSs 2015-2017 Cycle – Amendments to IFRS 3 Business Combinations

The amendment clarifies that a company remeasures its previously held interest in a joint operation that is abusiness when it obtains control of the business. Paragraph 42A is added to clarify this requirement.

Annual Improvements to IFRSs 2015-2017 Cycle – Amendments to IAS 12 Income Tax

The amendment clarifies that a company accounts for all income tax consequences of dividend payments inthe same way as the entity recognised the originating transaction or event that generated the distributable profitgiving rise to the dividend. Paragraph 57A to IAS 12 is added to clarify this point.

Annual Improvements to IFRSs 2015-2017 Cycle – Amendments to IAS 23 Borrowing Costs

The amendment clarifies that when a qualifying asset is ready for its intended use or sale and (some of) therelated specific borrowing remains outstanding, that borrowing is treated as general borrowings. Paragraph 14 of IAS23 is amended to convey this principle.

IFRS 9 – Financial Instruments

IFRS 9 introduces new requirements for the classification and measurement of financial assets. Debtinstruments that are held within a business model whose objective is to hold assets in order to collect contractual cashflows (the business model test) and that have contractual terms that give rise to cash flows that are solely paymentsof principal and interest on the principal amount outstanding (the contractual cash flow characteristics test) aregenerally measured at amortised cost. Debt instruments that meet the contractual cash flow characteristics test aremeasured at fair value through other comprehensive income (“FVTOCI”) if the objective of the entity’s businessmodel is both to hold and collect the contractual cash flows and to sell the financial assets. Entities may make anirrevocable election at initial recognition to measure equity instruments that are not held for trading at FVTOCI. Allother debt and equity instruments are measured at fair value through profit or loss (“FVTPL”).

IFRS 9 includes a new expected loss impairment model for all financial assets not measured at FVTPLreplacing the incurred loss model in IAS 39 and new general hedge accounting requirements to allow entities to betterreflect their risk management activities in financial statements.

IFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilitiesfrom IAS 39, except for financial liabilities designated at FVTPL, where the amount of change in fair valueattributable to change in credit risk of the liability is recognised in other comprehensive income unless that wouldcreate or enlarge an accounting mismatch. In addition, IFRS 9 retains the requirements in IAS 39 for derecognitionof financial assets and financial liabilities.

The director of the Target Company has reviewed the Target Group’s trade and other receivables as at 31December 2017 and anticipates that the application of the expected credit loss model of IFRS 9 in the future willresult in early provision of credit losses which are not yet incurred in relation to the Target Group’s financial assetsand is not likely to have other material impact on the results and financial position of the Target Group based on ananalysis of the Target Group’s exiting business model.

The above assessments were made based on an analysis of the Target Group’s financial assets as at 31December 2017 on the basis of the facts and circumstances that existed at that date. As facts and circumstances maychange during the period leading up to the initial date of application of IFRS 9, which is expected to be 1 January2018, the assessment of the potential impact is subject to change.

Amendments to IFRS 9 – Prepayment Features with Negative Compensation

The amendments clarify that prepayable financial assets with negative compensation can be measured atamortised cost or at FVTOCI if specified conditions are met – instead of at fair value through profit or loss.


– 58 –

IFRS 15 – Revenue from Contracts with Customers

The new standard establishes a single revenue recognition framework. The core principle of the framework isthat an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amountthat reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.IFRS 15 supersedes existing revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contractsand related interpretations.

IFRS 15 requires the application of a five-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 each performance obligation

Step 5: Recognise revenue when each performance obligation is satisfied

IFRS 15 includes specific guidance on particular revenue related topics that may change the current approachtaken under IFRSs. The standard also significantly enhances the qualitative and quantitative disclosures related torevenue.

Management has performed a preliminary assessment and expects that the recognition of sales rebates underIFRS 15 may affect the amount of the transaction price to which the Target Group expects to be entitled in saletransactions. This may result in a significant impact on the Target Group’s financial position and results of operations.Besides, there will be additional disclosure requirement under IFRS 15 upon its adoption. IFRS 15 is effective forannual periods beginning on or after 1 January 2018 and earlier application is permitted.

Amendments IFRS 15 – Clarifications to IFRS 15 Revenue from Contracts with Customers

The amendments to IFRS 15 included clarifications on identification of performance obligations; applicationof principal versus agent; licenses of intellectual property; and transition requirements.

IFRS 16 – Leases

IFRS 16, which upon the effective date will supersede IAS 17 – Leases and related interpretations, introducesa single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term ofmore than 12 months, unless the underlying asset is of low value. Specifically, under IFRS 16, a lessee is requiredto recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liabilityrepresenting its obligation to make lease payments. Accordingly, a lessee should recognise depreciation of theright-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into aprincipal portion and an interest portion and presents them in the statement of cash flows. Also, the right-of-use assetand the lease liability are initially measured on a present value basis. The measurement includes non-cancellable leasepayments and also includes payments to be made in optional periods if the lessee is reasonably certain to exercisean option to extend the lease, or to exercise an option to terminate the lease. This accounting treatment is significantlydifferent from the lessee accounting for leases that are classified as operating leases under the predecessor standard,IAS 17.

In respect of the lessor accounting, IFRS 16 substantially carries forward the lessor accounting requirementsin IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to accountfor those two types of leases differently.

As at 31 December 2017, the Target Group has non-cancellable operating lease commitments of approximatelyRMB1,092,000 as disclosed in Note 23. A preliminary assessment indicates that these arrangements will meet thedefinition of a lease under IFRS 16, and hence the Target Group will recognise a right-of-use asset and acorresponding liability in respect of all these leases unless they qualify for low value or short-term leases upon theapplication of IFRS 16. In addition, the application of new requirements may result in changes in measurement,presentation and disclosure as indicated above. However, it is not practicable to provide a reasonable estimate of thefinancial effect until the director completes a detailed review.


– 59 –

IFRIC 22 – Foreign Currency Transactions and Advance Consideration

The Interpretation provides guidance on determining the date of the transaction for determining an exchangerate to use for transactions that involve advance consideration paid or received in a foreign currency and therecognition of a non-monetary asset or non-monetary liability. The Interpretations specifies that the date of thetransaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expenseor income (or part thereof) is the date on which the entity initially recognises the non-monetary asset or non-monetaryliability arising from the payment or receipt of advance consideration.

HK(IFRIC) – Int 23 – Uncertainty over Income Tax Treatments

The Interpretation supports the requirements of IAS 12, Income Taxes, by providing guidance over how toreflect the effects of uncertainty in accounting for income taxes.

Under the Interpretation, the entity shall determine whether to consider each uncertain tax treatment separatelyor together based on which approach better predicts the resolution of the uncertainty. The entity shall also assumethe tax authority will examine amounts that it has a right to examine and have full knowledge of all relatedinformation when making those examinations. If the entity determines it is probable that the tax authority will acceptan uncertain tax treatment, then the entity should measure current and deferred tax in line with its tax filings. If theentity determines it is not probable, then the uncertainty in the determination of tax is reflected using either the “mostlikely amount” or the “expected value” approach, whichever better predicts the resolution of the uncertainty.

2.3 SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

Subsidiaries other than from reorganisation

The consolidated financial statements comprise the financial statements of the Target Company and itssubsidiaries. Inter-company transactions and balances between group companies together with unrealised profits areeliminated in full in preparing the consolidated financial statements. Unrealised losses are also eliminated unless thetransaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profitor loss.

The results of subsidiaries acquired or disposed of during the reporting period are included in the consolidatedstatement of profit or loss from the dates of acquisition or up to the dates of disposal, as appropriate. Wherenecessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into linewith those used by other members of the Target Group.

Acquisition of subsidiaries or businesses is accounted for using the acquisition method. The cost of anacquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred andequity interests issued by the Target Group, as the acquirer. The identifiable assets acquired and liabilities assumedare principally measured at acquisition-date fair value. The Target Group’s previously held equity interest in theacquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss.The Target Group may elect, on a transaction-by-transaction basis, to measure the non-controlling interests thatrepresent present ownership interests in the subsidiary either at fair value or at the proportionate share of theacquiree’s identifiable net assets. All other non-controlling interests are measured at fair value unless anothermeasurement basis is required by IFRSs. Acquisition-related costs incurred are expensed unless they are incurred inissuing equity instruments in which case the costs are deducted from equity.

When the Target Group loses control of a subsidiary, the profit or loss on disposal is calculated as thedifference between (i) the aggregate of the fair value of the consideration received and the fair value of any retainedinterest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary andany non-controlling interest. Amounts previously recognised in other comprehensive income in relation to thesubsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities weredisposed of.

Subsequent to acquisition, the carrying amount of non-controlling interests that represent present ownershipinterests in the subsidiary is the amount of those interests at initial recognition plus such non-controlling interest’sshare of subsequent changes in equity. Total comprehensive income is attributed to such non-controlling interestseven if this results in those non-controlling interests having a deficit balance.


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Basis of combination and subsidiaries

The Historical Financial Information incorporates the financial statements of the Target Company and itssubsidiaries comprising the Target Group for the Relevant Periods on a combined basis as further detailed in Note2.1.

Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-grouptransactions are eliminated in full in preparing the combined financial statements. Unrealised losses resulting fromintra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is noevidence of impairment.

A subsidiary is an investee over which the Target Company is able to exercise control. The Target Companycontrols an investee if all three of the following elements are present: power over the investee; exposure, or rightsto, variable returns from the investee; and the ability to use its power to affect those variable returns. Control isreassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (otherthan inventories, assets held for sale, deferred tax assets and financial assets), the asset’s recoverable amount isestimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fairvalue less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflowsthat are largely independent of those from other assets or groups of assets, in which case the recoverable amount isdetermined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. Inassessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value of money and the risks specific to the asset. Animpairment loss is charged to profit or loss in the period in which it arises, unless the asset is carried at a revaluedamount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for thatrevalued asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previouslyrecognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverableamount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if therehas been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higherthan the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairmentloss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statementof profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case thereversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revaluedasset.

Related parties

A party is considered to be related to the Target Group if:

(a) the party is a person or a close member of that person’s family and that person

(i) has control or joint control over the Target Group;

(ii) has significant influence over the Target Group; or

(iii) is a member of the key management personnel of the Target Group or of the parent of the TargetCompany;

or

(b) the party is an entity where any of the following conditions applies:

(i) the entity and the Target Group are members of the same group;


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(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellowsubsidiary of the other entity);

(iii) the entity and the Target Group are joint ventures of the same third party;

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

(v) the entity is a post-employment benefit plan for the benefit of employees of either the TargetGroup or an entity related to the Target Group;

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

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

(viii) the entity, or any member of a group of which it is a party, provides key management personnelservices to the Target Group or the Target Company’s parent.

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

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

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

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

Associate

An associate is an entity in which the Target Group has a long term interest of generally not less than 20% ofthe equity voting rights and over which it is in a position to exercise significant influence. Significant influence isthe power to participate in the financial and operating policy decisions of the investee, but is not control or jointcontrol over those policies.

The considerations made in determining significant influence are similar to those necessary to determinecontrol over subsidiaries.

The Target Group’s investment in an associate is stated in the combined statement of financial position at theTarget Group’s share of net assets under the equity method of accounting, less any impairment losses.

The Target Group’s share of the post-acquisition results and other comprehensive income of associate isincluded in the combined statement of profit or loss and combined other comprehensive income, respectively. Inaddition, when there has been a change recognised directly in the equity of the associate, the Target Group recognisesits share of any changes, when applicable, in the combined statement of changes in equity. Unrealised gains andlosses resulting from transactions between the Target Group and its associate are eliminated to the extent of the TargetGroup’s investments in the associate, except where unrealised losses provide evidence of an impairment of the assetstransferred. Goodwill arising from the acquisition of associate is included as part of the Target Group’s investmentsin associate.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses.When an item of property, plant and equipment is classified as held for sale or when it is part of a disposal groupclassified as held for sale, it is not depreciated and is accounted for in accordance with IFRS 5. The cost of an itemof property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the assetto its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairsand maintenance, is normally charged to the statement of profit or loss in the period in which it is incurred. Insituations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in thecarrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are requiredto be replaced at intervals, the Target Group recognises such parts as individual assets with specific useful lives anddepreciates them accordingly.


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Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant andequipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are asfollows:

Computer equipment 5 years with 5% residual valueFurniture and fixtures 5 years with 5% residual valueMotor vehicles 5 years with 5% residual value

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item isallocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful livesand the depreciation method are reviewed, and adjusted if appropriate, at least at each reporting period end.

An item of property, plant and equipment including any significant part initially recognised is derecognisedupon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposalor retirement recognised in the statement of profit or loss in the year the asset is derecognised is the differencebetween the net sales proceeds and the carrying amount of the relevant asset.

Intangible assets (other than goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assetsacquired in a business combination is the fair value at the date of acquisition. The useful lives of intangible assetsare assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortised over theuseful economic life on the straight-line basis and assessed for impairment whenever there is an indication that theintangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset witha finite useful life are reviewed at least at each reporting period end.

Intangible assets with indefinite useful lives are tested for impairment at least annually either individually orat the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset withan indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable.If not, the change in the useful life assessment from indefinite to finite is accounted for on a prospective basis.

Computer software

Computer software is stated at cost less any impairment losses and is amortised on the straight-line basis overits estimated useful lives ranging from five to ten years.

Leases

Leases that transfer substantially all the rewards and risks of ownership of assets to the Target Group, otherthan legal title, are accounted for as finance leases. The Target Group had no finance leases during the RelevantPeriods.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor areaccounted for as operating leases. Where the Target Group is the lessor, assets leased by the Target Group underoperating leases are included in non-current assets, and rentals receivable under the operating leases are credited tothe statement of profit or loss on the straight-line basis over the lease terms. Where the Target Group is the lessee,rentals payable under operating leases net of any incentives received from the lessor are charged to the statement ofprofit or loss on the straight-line basis over the lease terms.

Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss,loans and receivables, held-to-maturity investments and available-for-sale financial investments, or as derivativesdesignated as hedging instruments in an effective hedge, as appropriate. When financial assets are recognisedinitially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financialassets, except in the case of financial assets recorded at fair value through profit or loss.

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


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Subsequent measurement

The subsequent measurement of financial assets depends on the classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost usingthe effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking intoaccount any discount or premium on acquisition and includes fees or costs that are an integral part of the effectiveinterest rate. The effective interest rate amortisation is included in other income and gains in the statement of profitor loss. The loss arising from impairment is recognised in the statement of profit or loss in finance costs for loansand in other expenses for receivables.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets)is primarily derecognised (i.e., removed from the Target Group’s combined statement of financial position) when:

• the rights to receive cash flows from the asset have expired; or

• the Target Group has transferred its rights to receive cash flows from the asset or has assumed anobligation to pay the received cash flows in full without material delay to a third party under a“pass-through” arrangement; and either (a) the Target Group has transferred substantially all the risksand rewards of the asset, or (b) the Target Group has neither transferred nor retained substantially allthe risks and rewards of the asset, but has transferred control of the asset.

When the Target Group has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of theasset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferredcontrol of the asset, the Target Group continues to recognise the transferred asset to the extent of the Target Group’scontinuing involvement in the asset. In that case, the Target Group also recognises an associated liability. Thetransferred asset and the associated liability are measured on a basis that reflects the rights and obligations that theTarget Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lowerof the original carrying amount of the asset and the maximum amount of consideration that the Target Group couldbe required to repay.

Impairment of financial assets

The Target Group assesses at the end of each reporting period whether there is objective evidence that afinancial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurredafter the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset orthe group of financial assets that can be reliably estimated. Evidence of impairment may include indications that adebtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest orprincipal payments, the probability that they will enter bankruptcy or other financial reorganisation and observabledata indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears oreconomic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Target Group first assesses whether impairment existsindividually for financial assets that are individually significant, or collectively for financial assets that are notindividually significant. If the Target Group determines that no objective evidence of impairment exists for anindividually assessed financial asset, whether significant or not, it includes the asset in a group of financial assetswith similar credit risk characteristics and collectively assesses them for impairment. Assets that are individuallyassessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in acollective assessment of impairment.


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The amount of any impairment loss identified is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows (excluding future credit losses that have not yet beenincurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effectiveinterest rate (i.e., the effective interest rate computed at initial recognition).

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognisedin the statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount and isaccrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairmentloss. Loans and receivables together with any associated allowance are written off when there is no realistic prospectof future recovery and all collateral has been realised or has been transferred to the Target Group.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of anevent occurring after the impairment was recognised, the previously recognised impairment loss is increased orreduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to otherexpenses in the statement of profit or loss.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit orloss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net ofdirectly attributable transaction costs.

The Target Group’s financial liabilities include trade and bills payables, other payables and other borrowings.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

After initial recognition, trade and bills payables, other payables and other borrowings are subsequentlymeasured at amortised cost, using the effective interest rate method unless the effect of discounting would beimmaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or losswhen the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or coststhat are an integral part of the effective interest rate. The effective interest rate amortisation is included in financecosts in the statement of profit or loss.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, orexpires.

When an existing financial liability is replaced by another from the same lender on substantially differentterms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated asa derecognition of the original liability and a recognition of a new liability, and the difference between the respectivecarrying amounts is recognised in the statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financialposition if there is a currently enforceable legal right to offset the recognised amounts and there is an intention tosettle on a net basis, or to realise the assets and settle the liabilities simultaneously.


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Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted averagebasis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completionand disposal.

Cash and cash equivalents

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

For the purpose of the combined statements of financial position, cash and cash equivalents comprise cash onhand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past eventand it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliableestimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at theend of the reporting period of the future expenditures expected to be required to settle the obligation. The increasein the discounted present value amount arising from the passage of time is included in finance costs in the statementof profit or loss.

Provisions for product warranties granted by the Target Group on certain products are recognised based onsales volume and past experience of the level of repairs and returns, discounted to their present values as appropriate.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or lossis recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to thetaxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end ofthe reporting period, taking into consideration interpretations and practices prevailing in the countries in which theTarget Group operates.

Deferred income tax is provided, using the liability method, on all temporary differences at the end of thereporting period between the tax bases of assets and liabilities and their carrying amounts for financial reportingpurposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

• when the deferred income tax liability arises from the initial recognition of an asset or liability in atransaction that is not a business combination and, at the time of the transaction, affects neither theaccounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries and associate,when the timing of the reversal of the temporary differences can be controlled and it is probable thatthe temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, the carryforward of unusedtax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxableprofit will be available against which the deductible temporary differences, and the carryforward of unused tax creditsand unused tax losses can be utilised, except:


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• when the deferred tax asset relating to the deductible temporary differences arises from the initialrecognition of an asset or liability in a transaction that is not a business combination and, at the timeof the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries and associate,deferred tax assets are only recognised to the extent that it is probable that the temporary differenceswill reverse in the foreseeable future and taxable profit will be available against which the temporarydifferences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferredtax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and arerecognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or partof the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period whenthe asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off currenttax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxationauthority.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Target Group and therevenue can be measured reliably, on the following bases:

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goodshave been transferred to the buyer, usually on despatch of the goods, provided that the Target Group maintains neithermanagerial involvement to the degree usually associated with ownership, nor effective control over the goods sold.

Other employee benefits

Defined contribution plan for the PRC employees

Pursuant to the relevant PRC laws and regulations, the employees of the Target Group’s subsidiaries operatingin the PRC are required to participate in a central pension scheme operated by the local municipal government. TheTarget Group’s subsidiaries operating in the PRC are required to contribute a certain percentage of the salaries of theiremployees to the central pension scheme. The only obligation of the Target Group with respect to the central pensionscheme is to pay the ongoing required contributions. Contributions are charged to the statement of profit or loss whenthey become payable in accordance with the rules of the central pension scheme.

Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax, except:

(a) where the sales tax incurred on a purchase of assets or services is not recoverable from the taxationauthority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or aspart of the expense item as applicable; and

(b) receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part ofreceivables or payables in the combined statements of financial position.


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Dividends

Final dividends proposed by the director are classified as a separate allocation of share premium within theequity section of the statement of financial position, until they have been approved by the shareholders in a generalmeeting. When these dividends have been approved by the shareholders and declared, they are recognised as aliability.

Interim dividends are simultaneously proposed and declared, because the Target Company’s memorandum andarticles of association grant the director the authority to declare interim dividends. Consequently, interim dividendsare recognised immediately as a liability when they are proposed and declared.

Foreign currencies

The combined financial statements are presented in RMB, which is different from the Target Company’sfunctional currency of Hong Kong Dollar (“HK$”). Each entity in Target Group determines its own functionalcurrency and items included in the financial statements of each entity are measured using that functional currency.Foreign currency transactions recorded by the entities in the Target Group are initially recorded using their respectivefunctional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated inforeign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period.All differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss.

Differences arising on settlement or translation of monetary items are recognised in the statement of profit orloss with the exception of monetary items that are designated as part of the hedge of the Target Group’s netinvestment of a foreign operation. These are recognised in other comprehensive income until the net investment isdisposed of, at which time the cumulative amount is reclassified to the statement of profit or loss. Tax charges andcredits attributable to exchange differences on those monetary items are also recorded in other comprehensiveincome.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using theexchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currencyare translated using the exchange rates at the date when the fair value was measured. The gain or loss arising ontranslation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or losson change in fair value of the item (i.e. translation difference on the item whose fair value gain or loss is recognisedin other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss,respectively).

The functional currencies of the Target Company and certain subsidiaries are currencies other than RMB. Asat the end of the reporting period, the assets and liabilities of these entities are translated into the presentationcurrency at the exchange rates prevailing at the end of the reporting period and their statement of profit or loss aretranslated into RMB at the weighted average exchange rates for the reporting period.

The resulting exchange differences are recognised in other comprehensive income and accumulated in theforeign currency translation reserve, a separate component of equity. On disposal of a subsidiary with a functionalcurrency other than RMB, the component of other comprehensive income relating to that particular subsidiary isrecognised in the combined statements of profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carryingamounts of assets and liabilities arising on acquisition are treated as assets and liabilities of the foreign operation andtranslated at the closing rate.

For the purpose of the combined statements of cash flows, the cash flows of the Target Company and certainsubsidiaries, whose functional currencies are not RMB, are translated into RMB at the exchange rates ruling at thedates of the cash flows. Frequently recurring cash flows of the Target Company and certain subsidiaries, whosefunctional currencies are not RMB, which arise throughout the reporting period are translated into RMB at theweighted average exchange rates for the reporting period.


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3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Historical Financial Information requires management to make judgements, estimatesand assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanyingdisclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates couldresult in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affectedin the future.

Judgement

In the process of applying the Target Group’s accounting policies, management has made the followingjudgement, which has the most significant effect on the amounts recognised in the combined financial statements:

Corporate income taxes

Significant management judgements on the future tax treatment of certain transactions are required indetermining income tax provisions. The Target Group carefully evaluates tax implications of transactions and taxprovisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take intoaccount all changes in tax legislation.

Estimation uncertainty

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

Impairment of non-financial assets other than goodwill

The Target Group has to exercise judgement in determining whether an asset is impaired or the eventpreviously causing the asset impairment no longer exists, particularly in assessing (i) whether an event has occurredthat may affect the asset value or such event affecting the asset value has not been in existence; (ii) whether thecarrying value of an asset can be supported by the net present value of future cash flows which are estimated basedupon the continued use of the asset or derecognition; and (iii) the appropriate key assumption to be applied inpreparing cash flow projections including whether these cash flow projections are discounted using appropriate rates.Changing the assumptions selected by management to determine the level of impairment, including the discount ratesor the growth rate assumptions in the cash flow projections, could affect the net present value used in the impairmenttest significantly.

4. REVENUE AND SEGMENT INFORMATION

Revenue represents trade receipts from sale and distribution of lighting products through the online platformsand distribution channels by the Target Group during the Relevant Periods.



to 31 December2015


RMB’000 RMB’000 RMB’000

Sales of trading lighting products – 514,885 893,178

For the Relevant Periods, the Target Group has one single reportable segment which was promoted andmanaged as a single strategic business unit that is engaged in the sale and distribution of lighting products throughe-commerce platforms and distribution channels. Information reported to the Target Group’s chief operationdecision-maker, for the purpose of resource allocation and assessment performance is focused on the operating resultsof the Target Group as a whole as the Target Group’s resources are integrated and no discrete financial informationis available. Accordingly, no segment analysis is presented.


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Geographical information:

Revenue is based on the location of the customers and non-current assets are based on the physical locationof the assets. All the Target Group’s customers and non-current assets are located in the PRC, and therefore nogeographical information is considered necessary.

5. OTHER INCOME



to 31 December2015


RMB’000 RMB’000 RMB’000

Government grants* – – 9,398Compensation income – 173 1,068Bank interest income – 318 1,335Loan interest income – – 1,075Others – 759 1,405

– 1,250 14,281

* Government grants mainly represent reward of investment received under a concession policy in Anhuiprovince, the PRC.

6. (LOSS)/PROFIT BEFORE INCOME TAX



to 31 December2015


RMB’000 RMB’000 RMB’000

This is arrived at after charging:Auditor’s remuneration – 120 153Depreciation of property, plant and equipment – 54 513Amortisation of intangible assets – 61 305Impairment of inventories – – 2,359Impairment of deposits and other receivables – – 33Minimum lease payments – 1,792 1,361Staff costs (including director’s emoluments)– Wages and salaries – 17,350 26,833– Pension scheme contributions – 1,925 2,944– Other welfare expenses – 330 656

– 19,605 30,433


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7. DIRECTOR’S AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Director’s emoluments

Director’s emoluments disclosed pursuant to Section 383 of the Hong Kong Companies Ordinance (Cap. 622)(the Ordinance) and the Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G)(the Regulation) are as follows:

Period from 23 January 2015 (date of incorporation) to 31 December 2015

Fees

Salaries,allowancesand other

benefits

Contributionsto retirement

benefit scheme TotalRMB’000 RMB’000 RMB’000 RMB’000

Name of directorLiu Yu – – – –

Year ended 31 December 2016

Fees


benefits




Year ended 31 December 2017

Fees


benefits




There was no arrangement under which the director waived or agreed to waive any remuneration during theRelevant Periods.

During the Relevant Periods, no remuneration was paid by the Target Group to the director as an inducementto join or upon joining the Target Group or as compensation for loss of office.


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(b) Five highest paid individuals

Emoluments payable to the five individuals whose emoluments were the highest in the Target Group duringthe Relevant Periods are as follows:



to 31 December2015


RMB’000 RMB’000 RMB’000

Salaries, allowances and other benefits – 1,262 1,981Contributions to retirement benefits scheme – 76 170

– 1,338 2,151

The emoluments of the individuals were within the following bands:

Number of individualsPeriod from23 January


to 31 December2015


Nil to RMB865,000(Nil to HK$1,000,000) – 5 5

During the Relevant Periods, no emoluments were paid by the Target Group to any of the five highest paidemployees as an inducement to join or upon joining the Target Group or as compensation for loss of office.

(c) The emoluments paid or payable to members of senior management (including director) were within thefollowing bands:

Number of individualsPeriod from23 January


to 31 December2015


Nil to RMB865,000(Nil to HK$1,000,000) – 5 5


– 72 –

8. INCOME TAX EXPENSE

No Hong Kong profits tax has been provided as the Target Group did not derive any assessable profits arisingin Hong Kong for the Relevant Periods. Taxes on profits assessable elsewhere have been calculated at the ratesprevailing in the relevant jurisdictions during the Relevant Periods.



to 31 December2015


RMB’000 RMB’000 RMB’000

Current tax – Hong Kong – – –Current tax – the PRC– tax for the period/year – 16,502 40,619– under-provision in respect of prior

period/year – – 1,676

Income tax expense – 16,502 42,295

Reconciliation between income tax expense and accounting (loss)/profit at applicable rates is as follows:



to 31 December2015


RMB’000 RMB’000 RMB’000

(Loss)/profit before income tax (1) 65,228 153,468

Notional tax on profit before income tax,calculated at the rates applicable in the taxjurisdictions concerned – 16,293 38,486

Tax effect of non-taxable income – – (278)Tax effect of non-deductible expenses – 117 2,341Under-provision in prior period/year – – 1,676Tax effect of unrecognised tax losses – 92 70

Income tax expense – 16,502 42,295

Pursuant to the PRC Enterprise Income Tax Law, a 10% withholding tax is levied on dividends declared toforeign investors from the foreign investment enterprises established in the PRC. The requirement is effective from1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if thereis a tax treaty between the PRC and the jurisdiction of the foreign investors. For the Target Group, the applicable taxrate is 10% for the unremitted profits of the PRC subsidiaries. The Target Group is therefore liable for withholdingtaxes on dividends distributed by those subsidiaries established in the PRC in respect of earnings generated from 1January 2008. As at 31 December 2015, 2016 and 2017, the Target Group has not recognised deferred tax liabilitiesof RMBNil, RMB3,629,000 and RMB13,131,000 in respect of temporary differences relating to the unremittedprofits of subsidiaries amounting to RMBNil, RMB36,286,000 and RMB131,310,000 respectively, that would bepayable on the distribution of these retained profits as the Target Company controls the dividend policy of thesesubsidiaries and it is probable that these profits will not be distributed in the foreseeable future. There are no incometax consequences attaching to the payment of dividends by the Target Company to its shareholder.

9. DIVIDENDS

The director of the Target Company does not recommend the payment of a dividend during the RelevantPeriods.


– 73 –

10. PROPERTY, PLANT AND EQUIPMENT

Computerequipment

Furnitureand fixtures

Motorvehicles Total

RMB’000 RMB’000 RMB’000 RMB’000

31 December 2015 and31 December 2016

Cost:At 23 January 2015 (date of

incorporation), 31 December2015 and 1 January 2016 – – – –

Additions 922 492 193 1,607

At 31 December 2016 922 492 193 1,607

Accumulated depreciation:At 23 January 2015 (date of

incorporation), 31 December2015 and 1 January 2016 – – – –

Charged for the year 42 8 4 54

At 31 December 2016 42 8 4 54

Net carrying amount:At 31 December 2015 – – – –

At 31 December 2016 880 484 189 1,553

Computerequipment

Furnitureand fixtures

Motorvehicles Total

RMB’000 RMB’000 RMB’000 RMB’000

31 December 2017Cost:

At 1 January 2017 922 492 193 1,607Additions 670 2 – 672Acquisition from business

combination 378 – 1,206 1,584

At 31 December 2017 1,970 494 1,399 3,863

Accumulated depreciation:At 1 January 2017 42 8 4 54Charged for the year 300 78 135 513

At 31 December 2017 342 86 139 567

Net carrying amount:At 31 December 2017 1,628 408 1,260 3,296


– 74 –

11. INTANGIBLE ASSETS

ComputersoftwareRMB’000

31 December 2015 and 31 December 2016Cost:

At 23 January 2015 (date of incorporation),31 December 2015 and 1 January 2016 –

Additions 1,417

At 31 December 2016 1,417

Accumulated amortisation:At 23 January 2015 (date of incorporation),

31 December 2015 and 1 January 2016 –Charged for the year 61

At 31 December 2016 61

Net carrying amount:At 31 December 2015 –


ComputersoftwareRMB’000

31 December 2017Cost:

At 1 January 2017 1,417Additions 1,151Acquisition from business combination 34


Accumulated amortisation:At 1 January 2017 61Charged for the year 305

At 31 December 2017 366

Net carrying amount:At 31 December 2017 2,236

12. INVESTMENT IN AN ASSOCIATE

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Share of net assets – – 3,396


– 75 –

Particulars of the associate are as follow:

Name

Place ofestablishment/registration andbusiness

Percentage ofownership

interestattributable to

the Target Group Principal activities

北京愛東東物聯科技有限公司(“愛東東”)

PRC/Mainland China

50 Research and development,production and sale ofmagnetic electroniccomponents, lightingelectronics andphotoelectric components

The following table illustrates the summarised financial information in respect of a material associatereconciled to the carrying amount in the combined financial statements:

31 December 2017 愛東東RMB’000

Current assets 14,692Non-current assets, excluding goodwill 465Current liabilities (8,364)

Net assets 6,793

Net assets, excluding goodwill 6,793Proportion of the Target Group’s ownership 50%

Target Group’s share of net assets of the associate, excluding goodwill 3,396

Carrying amount of the investment 3,396

Year ended 31 December 2017 愛東東RMB’000

Revenue 5,660Profit for the year 1,793Total comprehensive income for the year 1,793Share of the associate’s profit for the year 896Share of the associate’s total comprehensive income 896Aggregate carrying amount of the Target Group’s investment in the associate 3,396


– 76 –

13. INVENTORIES

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Finished goods – 68,677 81,819

The impairment of inventories amounted to RMB2,359,000 for the year ended 31 December 2017 was recordedin “Cost of sales” in the combined statements of profit or loss. There were no impairment or reversal of impairmentof inventories in other periods during the Relevant Periods.

14. TRADE AND BILLS RECEIVABLES

The Target Group

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Trade receivables from third parties – 21,922 83,521Trade receivables from related parties – 29,469 14,954

– 51,391 98,475

Bills receivables – – 3,000

– 51,391 101,475

Trade receivables to related parties include the following:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Associate – – 151Entity with significant influence over the Target

Group – 29,469 11,877Fellow subsidiaries of the entity with significant

influence over the Target Group – – 2,926

– 29,469 14,954

Trade receivables of the Target Group represented proceeds receivable from sale of goods. The Target Group’strading terms with its wholesale customers are mainly on credit, except for new customers where payment in advanceis normally required. The credit periods generally range from 30 to 60 days for major customers. Each customer hasa maximum credit limit. The Target Group maintains strict control over its outstanding receivables and has a creditcontrol department to minimise credit risk. Overdue balances are reviewed regularly by senior management. TheTarget Group does not hold any collateral or other credit enhancements over its trade receivable balance.


– 77 –

An aged analysis of the trade receivables as at the end of the reporting period, based on the transaction date,is as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Within 3 months – 28,211 96,1764 to 6 months – 23,180 5,299

– 51,391 101,475

The aged analysis of the trade receivables that are not individually nor collectively considered to be impairedis as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Neither past due nor impaired – 26,081 52,900Less than 2 months past due – 20,794 43,3002 to 6 months past due – 4,516 5,275

– 51,391 101,475

Receivables that were past due but not impaired relate to a number of independent customers that have a goodtrack record with the Target Group. Based on past experience, the director of the Target Company is of the opinionthat no provision for impairment is necessary in respect of these balances as there has not been a significant changein credit quality and the balances are still considered fully recoverable.

The maturity of the bills receivable of the Target Group as at 31 December 2017 is within 6 months.

As at 31 December 2015, 2016 and 2017, the fair value of trade and bills receivables approximates to theircarrying amount largely due to their short-term maturity.

The Target Company

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Trade receivables, net* – 2,184 11,889

* The balance was due from a subsidiary for service fee charged and was eliminated in combination.


– 78 –

15. PREPAYMENTS, DEPOSITS AND OTHER RECEIVALBES

The Target Group

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Prepayments to third parties – 3,405 12,439Prepayments to related parties – – 12,761

– 3,405 25,200

Deposits and other receivables to third parties – 8,856 28,638Deposits and other receivables to related parties 447 1,638 30,588Impairment – – (33)

447 10,494 59,193

447 13,899 84,393

Prepayments to related parties include the following:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Associate – – 1,500Fellow subsidiaries of the entity with significant

influence over the Target Group – – 11,261

– – 12,761

Deposits and other receivables to related parties include the following:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Associate – – 23Shareholder 447 – 3,000Key management personnel – 1,638 27,565

447 1,638 30,588


– 79 –

The movements in provision for impairment of deposits and other receivables are as follows:



to 31 December Year ended 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

At the beginning of the period/year – – –Impairment – – 33

At 31 December – – 33

As at 31 December 2015, 2016 and 2017, the fair values of deposits and other receivables approximate to theircarrying amount largely due to their short-term maturity.

The Target Company

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Deposits and other receivables from relatedparties 447 – –

16. LOAN RECEIVABLES

As at 31 December 2017, the balances represented loans to parties which are unsecured, bear interest rangingfrom 2% to 4% per annum (2016: 4% per annum), and are repayable within one year, out of which RMB58,000,000(2016: RMBNil) was advanced to an entity as at 31 December 2017 which is an investee company of an equity ownerof the Target Company’s subsidiary.

17. TRADE PAYABLES

The Target Group

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Trade payables to third parties – 86,546 129,033Trade payables to related parties – 53,580 33,008

– 140,126 162,041


– 80 –

Trade payables to related parties include the following:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Associate – – 1,471Entity with significant influence over the

Target Group – – 887Subsidiaries of the entity with significant

influence over the Target Group – – 23,050Fellow subsidiaries of the entity with significant

influence over the Target Group – 53,580 7,600

– 53,580 33,008

Trade payables are non-interest-bearing and are normally settled on terms of 30 to 60 days.

An aged analysis of the trade payables as at the end of the reporting period, based on the transaction date, isas follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Less than 1 month – 91,411 63,6792 to 3 months – 37,023 94,941More than 3 months but less than 12 months – 11,692 3,421

– 140,126 162,041

The Target Company

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Trade payables to third parties – – 522

18. OTHER PAYABLES AND ACCRUALS

The Target Group

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Other payables to third parties, advancesfrom customers and accruals 1 78,934 55,481

Amounts due to related parties – 2,111 6,345Dividend payable – – 7,000

1 81,045 68,826

Amounts due to related parties are unsecured, interest-free, and repayable on demand.


– 81 –

The amounts due to related parties are as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Associate – – 8Entity with significant influence over the

Target Group – 2,111 2,111Subsidiaries of the entity with significant

influence over the Target Group – – 4,213Fellow subsidiaries of the entity with significant

influence over the Target Group – – 13

– 2,111 6,345

As at 31 December 2015, 2016 and 2017, the fair values of most of other payables and accruals approximateto their carrying amounts largely due to their short-term maturity.

The Target Company

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Other payables to third parties, advances fromcustomers and accruals 1 4,958 4,809

19. OTHER BORROWINGS

The balances represented borrowings from parties which are unsecured, bear interest ranging from 4% to18.9% per annum, and are repayable within one year, out of which RMB19,900,000 (2016: RMBNil) was advancedfrom an entity as at 31 December 2017 which is an investee company of an equity owner of the Target Company’ssubsidiary.

As at 31 December 2017, the other borrowings’ fair value approximate to their carrying amount largely dueto the short-term maturities.


– 82 –

20. SHARE CAPITAL

Number ofshares Amount

Amountequivalent

HK$ RMB

Authorised:Ordinary shares of HK$1 eachAt 23 January 2015 (date of incorporation)

(Note (a)) 500,000 500,000 447,250

Ordinary shares of no nominal valueAt 31 December 2015, 2016 and 2017 500,000 500,000 447,250

Issued and fully paid:Ordinary sharesAt 23 January 2015 (date of incorporation)

(Note (a)) 500,000 500,000 447,250

Ordinary shares of no nominal valueAt 31 December 2015, 2016 and 2017 500,000 500,000 447,250

Note:

(a) The Target Company was incorporated on 23 January 2015 with an authorised share capital ofHK$500,000 divided into 500,000 ordinary shares. Upon incorporation, 1 ordinary share was issued atHK$1 each to the subscriber to provide the initial capital to the Target Company.

21. RESERVES

The amounts of the Target Group’s reserves and the movements therein for the Relevant Periods are presentedin the combined statements of changes in equity. The nature and purpose of reserves are as follows:

(a) Foreign exchange reserve

Exchange differences arising from the translation of the assets and liabilities of the Target Group’s foreignoperation from its functional currency to the Target Group’s presentation currency (i.e. RMB) are recognised directlyin other comprehensive income and accumulated in the foreign exchange reserve. The reserve is dealt with inaccordance with the accounting policy of foreign currencies set out in Note 2.3 to the Historical FinancialInformation.

(b) (Accumulated losses)/retained profits

This represents cumulative net profits and losses recognised in profit or loss.


– 83 –

(c) Movements of the Target Company’s reserves for the Relevant Periods are as follows:

Foreignexchange

reserve

(Accumulatedlosses)/retained

profits TotalRMB’000 RMB’000 RMB’000

As at 23 January 2015 (date of incorporation)Loss for the period – (1) (1)

As at 31 December 2015 and 1 January 2016 – (1) (1)Profit for the year – 2,253 2,253Other comprehensive income:Exchange differences on translation to

presentation currency 98 – 98

98 2,253 2,351

As at 31 December 2016 and 1 January 2017 98 2,252 2,350Profit for the year – 13,488 13,488Other comprehensive income:Exchange differences on translation to

presentation currency (294) – (294)

(294) 13,488 13,194

As at 31 December 2017 (196) 15,740 15,544

22. RELATED PARTY TRANSACTIONS

Members of key management personnel of the Target Group during the Relevant Periods comprised only thedirector of the Target Company whose emoluments are set out in Note 7.

In addition to the transactions and balances detailed elsewhere in the Historical Financial Information, theTarget Group had the following transactions with related parties during the Relevant Periods:




RMB’000 RMB’000 RMB’000

Entity with significant influence overthe Target GroupPurchase of finished goods – 107,897 2,786Sales of finished goods – – 10,206

Subsidiaries of the entity with significantinfluence over the Target GroupPurchase of finished goods – – 57,878

Fellow subsidiaries of the entity withsignificant influence over the Target GroupPurchase of finished goods – 96,348 82,341Sales of finished goods – – 2,500Logistics services fee – – 7,120

The transactions were made at prices mutually agreed by both parties.


– 84 –

23. OPERATING LEASE COMMITMENTS

The Target Group leases certain of its office properties and warehouses under operating lease arrangements.Leases for properties are negotiated for terms ranging from one to five years. There are no restrictions placed on theTarget Group by entering into these leases. At the end of each of the Relevant Periods, the total future minimum leasepayments of the Target Group under non-cancellable operating leases in respect of these premises are payable asfollows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Within one year – 234 584In the second to fifth years, inclusive – 133 508

– 367 1,092

24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target Group is exposed to a variety of financial risks, as detailed below, which are managed by thedirector of the Target Company:

(a) Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligationunder the terms of the financial instrument and cause a financial loss to the Target Group. The Target Group’sexposure to credit risk is influenced mainly by the individual characteristics of each customer. At the end of each ofthe Relevant Periods, the Target Group has concentration of credit risk at 0%, 9%, 0% as at 31 December 2015, 2016and 2017 arising from the five largest customers, while 0%, 3% and 0% of the trade receivables due from the TargetGroup’s largest customer. The Target Group has policies in place to ensure that services are rendered to customerswith appropriate credit history and performs credit evaluation on new and existing customers, as appropriate.

The Target Group’s bank balances are deposited with banks and financial institutions with good creditstandings. The Target Group has no other significant exposure to credit risk apart from receivables as disclosed inNotes 14, 15 and 16.


– 85 –

(b) Liquidity risk

Liquidity risk relates to the risk that the Target Group will not be able to meet its obligations associated withits financial liabilities. The Target Group’s policy is to regularly monitor its liquidity requirements to ensure that itmaintains sufficient reserves of cash to meet its liquidity requirements in the short and long term.

The maturity profile of the Target Group’s financial liabilities at the end of each of the Relevant Periods, basedon the remaining contractual maturities, is as follows:

Carryingamount

Totalcontractual

undiscountedcash flows

Within oneyear or

on demandRMB’000 RMB’000 RMB’000

As at 31 December 2015Other payables and accruals 1 1 1

1 1 1

As at 31 December 2016Trade payables 140,126 140,126 140,126Other payables and accruals 39,542 39,542 39,542

179,668 179,668 179,668

As at 31 December 2017Trade payables 162,041 162,041 162,041Other payables and accruals 65,671 65,671 65,671Other borrowings 21,008 21,341 21,341

248,720 249,053 249,053

(c) Categories of financial assets and financial liabilities

The carrying amounts of each of the categories of financial instruments at the end of each of the RelevantPeriods are as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Financial assetsTrade and bills receivables – 51,391 101,475Deposits and other receivables 447 10,494 59,193Loan receivables – 15,000 68,000Cash and cash equivalents – 125,703 83,754

447 202,588 312,422

Financial liabilitiesTrade payables – 140,126 162,041Other payables and accruals 1 39,542 65,671Other borrowings – – 21,008

1 179,668 248,720


– 86 –

25. CAPITAL RISK MANAGEMENT

The primary objective of the Target Group’s capital management is to maintain the Target Group’s stability andgrowth. The Target Group regularly reviews and manages its capital structure and makes adjustments to it, taking intoconsideration changes in economic conditions, future capital requirements of the Target Group, current and projectedprofitability and operating cash flows, projected capital expenditure and projected strategic investment opportunities.

The Target Group monitors capital using a gearing ratio, which is net debt divided by total equity attributableto owners of the Target Company. Net debt includes other borrowings less cash and cash equivalents. The TargetGroup’s policy is to maintain a gearing ratio at a reasonable level.

The gearing ratios as at the end of the Relevant Periods were as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Other borrowings – – 21,008Less: Cash and cash equivalents – (125,703) (83,754)Net debt – N/A N/ATotal equity attributable to owners of the

Target Company 446 42,575 137,785Gearing ratio N/A N/A N/A

26. INVESTMENT IN A SUBSIDIARY

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Unlisted investment, at cost – 5,228 5,228

No impairment losses on investment in a subsidiary were recognised as at 31 December 2015, 2016 and 2017.


– 87 –

Details of Wuhu NVC, the Target Group’s principal subsidiary, that has material non-controlling interests areset out below:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Percentage of equity interest held bynon-controlling interests:

Wuhu NVC – 15% 15%




RMB’000 RMB’000 RMB’000

Comprehensive income for the period/yearallocated to non-controlling interests:

Wuhu NVC – 6,430 15,899Others – (55) 272

Capital contribution from non-controllinginterests:

Wuhu NVC – 600 –Others – – 4,361

Dividends paid to non-controlling interests:Wuhu NVC – – (12,000)

Accumulated balances of non-controllinginterests at the reporting dates:

Wuhu NVC – 7,030 10,929Others – (55) 4,578


– 88 –

The following tables illustrate the summarised financial information of the above subsidiary. The amountsdisclosed are before any inter-company elimination:

Wuhu NVC




RMB’000 RMB’000 RMB’000

Revenue N/A 514,886 889,527Total expenses N/A (465,955) (783,536)Profit for the period/year N/A 48,931 105,991Total comprehensive income for the period/year N/A 48,931 105,991

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Current assets N/A 273,163 370,136Non-current assets N/A 2,910 9,618Current liabilities N/A (223,141) (300,831)




RMB’000 RMB’000 RMB’000

Net cash flows generated from/(used in)operating activities N/A 82,328 (42,921)

Net cash flows used in investing activities N/A (3,024) (1,824)Net cash flows generated from/(used in)

financing activities N/A 4,000 (10,600)Net increase/(decrease) in cash and cash

equivalents N/A 83,304 (55,345)

27. COMMITMENTS

The Target Group had no significant capital commitments at the end of each of the Relevant Periods.


– 89 –

28. NOTE TO THE COMBINED STATEMENTS OF CASH FLOWS

Other borrowingsRMB’000

At 1 January 2017 –

Changes from cash flows:Borrowings 19,900

Total changes from financing cash flows: 19,900

Other changes:Business combination 1,108

Total other changes 1,108

At 31 December 2017 21,008

29. EVENT AFTER THE RELEVANT PERIODS

There is no significant event taken place subsequent to 31 December 2017.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company and its

subsidiaries in respect of any period subsequent to 31 December 2017.


– 90 –

Set out below is the management discussion and analysis on the Target Group (as defined

in Appendix II to this circular) for the period from 23 January 2015 (date of incorporation of

the Target Company) to 31 December 2015 and the two years ended 31 December 2016 and

2017 (the “Reporting Period”).

REORGANISATION OF THE TARGET GROUP

During the Reporting Period, the Target Group has carried out a group reorganisation, by

which Blue Light became the holding company of its subsidiaries now comprising the Target

Group (the “Reorganisation”). Upon completion of the Reorganisation and as of the Latest

Practicable Date, the Target Group comprise Blue Light and its subsidiaries. For details of the

member companies of the Target Group, please refer to Note 1(b) of the Accountant’s Report

of the Target Group in Appendix II to this circular.

The Target Company has not been involved in any other business in 2015. Through direct

interest and various entrustment arrangements with the relevant shareholders of Blue Light and

Wuhu NVC, the Company’s PRC legal advisor is of the view that Mr. Kang was the ultimate

legal and beneficial owner of the Target Group since January 2016.

BUSINESS REVIEW

The Target Company was incorporated in Hong Kong with limited liability on 23 January

2015. Its business activities involve investment holding, design and development of lighting,

LED and home appliances, promotion and communications, technology consulting and

international trade.

Wuhu NVC is a company incorporated in the PRC with limited liability and an indirect

subsidiary of the Target Company. Wuhu NVC, together with its subsidiaries, is mainly

engaged in the sales and distribution of lighting products through e-commerce platforms and

distribution channels.

The Target Group did not have business operation for the period from 23 January 2015

to 31 December 2015. On 1 January 2016, Wuhu NVC entered into an exclusive master

distribution agreement with Huizhou NVC, a wholly-owned subsidiary of the Company,

pursuant to which, Wuhu NVC is granted an exclusive right to operate all sales of lighting

products under the NVC-brand on third-party e-commerce platforms and oversee the online

distribution business of NVC-brand lighting products. In particular, responsibilities of Wuhu

NVC include, among others, authorisation of sub-distributors, online brand management, and

execution of online sales channel policies in relation to the online sales of NVC-brand lighting

products.

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS ONTHE TARGET GROUP

– 91 –

Leveraging on the prevalence of e-commerce in recent years, revenue of the Target Group

amounted to approximately RMBnil, RMB514.9 million and RMB893.2 million, respectively,

for the period from 23 January 2015 to 31 December 2015 and the two years ended 31

December 2016 and 2017. The Target Group has generated all revenue from the sales of

NVC-brand lighting products.

The Target Group has maintained stable relationship with its major suppliers and

sub-distributors since the commencement of operation.

For the two years ended 31 December 2016 and 2017, purchases from top five suppliers

amounted to RMB258.8 million and RMB295.9 million, respectively, representing 79% and

48.1% of the Target Group’s total purchases for the respective year.

For the two years ended 31 December 2016 and 2017, sales to top five sub-distributors

amounted to approximately RMB88.5 million and RMB115.5 million, respectively,

representing 43.9% and 51.9% of the Target Group’s total revenue from all sub-distributors for

the respective year.

As of 31 December 2017, the Target Group operated 39 online stores (including 9 flagship

stores) across 9 major e-commerce platforms, including Tmall (天貓), JD (京東), Suning (蘇寧), Vipshop (唯品會), Gome (國美), Yihaodian (1號店), Dangdang (當當) and Taobao (淘寶),

and carried out sales through 9 TV shopping channels. The Target Group also supplies NVC

Brand products to 43 authorised sub-distributors which operate their own online stores,

establishing a strong online retail presence in the PRC market.

In 2017, lighting products under the NVC-brand ranked first on JD, Vipshop and Suning

platforms and ranked second on Tmall platform, in terms of total amount of sales across all

brands of lighting products listed on such platforms.

FINANCIAL REVIEW

Revenue

The Target Group primarily involves in the sales of lighting products through the online

platforms and distribution channels.

Revenue of the Target Group represents trade receipts from selling lighting products

through the online platforms and distribution channels during the Reporting Period.

Revenue of the Target Group amounted to approximately RMBnil, RMB514.9 million and

RMB893.2 million, respectively, for the period from 23 January 2015 to 31 December 2015

and the two years ended 31 December 2016 and 2017.


– 92 –


to 31 December 2015. In 2016, the Target Group started operation of 19 online stores and

supplied products to 30 sub-distributors thus generated revenue of approximately RMB514.9

million. The increase of revenue of 73.5% from 2016 to 2017 was mainly attributable to (i) the

commencement of operation of new online stores, including a flagship store on JD around the

end of 2016, and the engagement of new sub-distributors; (ii) expansion of product portfolio

and deepening of market penetration; and (iii) increased collaboration with e-commerce

platforms in relation to promotional events and festivals.

Cost of sales

Cost of sales of the Target Group represents the purchase cost of lighting products from

the suppliers.

Cost of sales amounted to RMBnil, RMB320.3 million and RMB509.2 million,

respectively, for the period from 23 January 2015 to 31 December 2015 and the two years

ended 31 December 2016 and 2017.


to 31 December 2015. In 2016, the Target Group had a full-year operation and incurred cost

of sales of approximately RMB320.3 million. The increase of cost of sales of 59.0% from 2016

to 2017 was mainly attributable to the increased volume of lighting products purchased by the

Target Group coupled with the increased sales volume.

Gross profit margin


to 31 December 2015 and recorded gross profit margin of approximately 37.8% and 43.0%,

respectively, for the two years ended 31 December 2016 and 2017. The increase in gross profit

margin was mainly attributable to (i) a higher proportion of sales being made by the

self-operated online stores in 2017 as compared to in 2016, which typically renders a higher

gross profit margin; and (ii) the product portfolio being sold in 2017 bore higher gross profit

margin as compared to those sold in 2016.


– 93 –

Other income

Other income mainly comprises government grants, compensation income, bank interest

income, loan interest income and sundry income.

Set out below is a breakdown of the Target Group’s other income for the Reporting

Period:

For the period from23 Jan 2015 (date

of incorporation) to31 December 2015

For the year ended31 December2016 2017

RMB’000 RMB’000 RMB’000

Government grants – – 9,398Compensation income – 173 1,068Bank interest income – 318 1,335Loan interest income – – 1,075Others – 759 1,405

Other income – 1,250 14,281

Other income amounted to approximately RMBnil, RMB1.3 million and RMB14.3

million, respectively, for the period from 23 January 2015 to 31 December 2015 and the two

years ended 31 December 2016 and 2017, respectively.


to 31 December 2015. The significant increase in other income from 2015 to 2016 was mainly

attributable to (i) the government grants of approximately RMB9.4 million received by the

Target Group for the year ended 31 December 2017, which presents reward of investment paid

under a concession policy in Anhui Province, the PRC.

Administrative expenses

Administrative expenses mainly comprise staff costs, consultation fee, packaging

expenses and other administrative expenses.

Administrative expenses amounted to approximately RMB1,000, RMB34.1 million and

RMB63.0 million, respectively, for the period from 23 January 2015 to 31 December 2015 and

the two years ended 31 December 2016 and 2017, respectively.


– 94 –

The significant increase from 2015 to 2016 was mainly due to the increase in staff costs,

consultation fee and packaging expenses in connection to the commencement of operation. The

increase of 85.0% from 2016 to 2017 was mainly due to (i) the increase in consultation fee in

connection with the hiring of third party advisers for optimisation of workflow management

systems, such as the adoption of after-sales and storage systems; and (ii) the increase in staff

costs and other administrative expenses as a result of the expansion of business by the Target

Group in 2017.

Selling and distribution costs

Selling and distribution costs mainly comprise platform surcharges, transportation

expenses and advertisement expenses.

Selling and distribution costs amounted to approximately RMBnil, RMB95.9 million and

RMB179.5 million, respectively, for the period from 23 January 2015 to 31 December 2015

and the two years ended 31 December 2016 and 2017, respectively.

There were no sale activities carried out by the Target Group in 2015. The increase of

87.1% from 2016 to 2017 was mainly attributable to the increase in platform surcharges,

transportation expenses and advertisement expenses in connection to the expansion of business

by the Target Group in 2017.

Finance costs

Finance costs represent interest expenses.

Finance costs amounted to approximately RMBnil, RMBnil and RMB0.3 million,

respectively, for the period from 23 January 2015 to 31 December 2015 and the two years

ended 31 December 2016 and 2017.

The Target Group started to incur finance costs in 2017 as a result of the increase in

interest expenses for the Target Group’s other borrowings from third parties in order to meet

the short-term working capital requirement of the Target Group.

Income tax expenses

The Target Group did not incur income tax expense for the period from 23 January 2015

to 31 December 2015 and incurred income tax expenses of approximately RMB16.5 million

and RMB42.3 million, respectively, for the two years ended 31 December 2016 and 2017. The

increase was mainly attributable to the increase in taxable profits of the Target Group from

2016 to 2017.


– 95 –

LIQUIDITY AND FINANCIAL RESOURCES

Borrowings and Pledge of Assets

As at 31 December 2015 and 2016, the Target Group had no borrowings. As at

31 December 2017, the Target Group’s borrowings comprise interest-bearing loans from third

parties amounted to RMB21.0 million.

As at 31 December 2017, all outstanding other borrowings of the Target Group were

repayable within one year, denominated in RMB, and of fixed contractual interest rate.

As at 31 December 2015, 2016 and 2017, the Target Group did not pledge any of its

assets.

Funding and Treasury Policies

As at 31 December 2015, 2016 and 2017, cash and cash equivalents amounted toapproximately RMBnil, RMB125.7 million and RMB83.8 million, respectively. The decreaseof 33.4% was mainly attributable to the increase in purchases of products and funds used tofinance Target Group’s operations.

The operation of the Target Group were mainly funded by cash flow from its operationsand borrowings. The Target Group will perform periodical review on its business plan andfunding requirements and will consider to seek for debt or equity financing as and whenappropriate. It is expected that the Target Group will have a better access to capital marketssubsequent to the completion of the Acquisitions.

Liquidity Risk Management

Liquidity risk

Liquidity risk relates to the risk that the Target Group will not be able to meet itsobligations associated with its financial liabilities. The Target Group’s policy is to regularlymonitor its liquidity requirements to ensure that it maintains sufficient reserves of cash to meetits liquidity requirements in the short and long term.

Details of the liquidity exposure are set out in the note 24(b) of Accountant’s Report ofthe Target Group in Appendix II to this circular.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2015, 2016 and 2017, the Target Group had nil employees, 247

employees and 308 employees, respectively.


– 96 –

The increase in number of employees in 2016 was primarily due to the commencement

of operation of the Target Group since 1 January 2016. The increase in number of employees

in 2017 was mainly attributable to higher demand of staff in relation to (i) the expansion of

business by the Target Group; (ii) enhancement of professional functions by setting up of

after-sale, product design, marketing, supply chain management, information technology and

other supporting functions; and (iii) talent reserve in light of the Target Group’s future

development plan.

The remuneration for employees of the Target Group comprises wages and salaries,

pension scheme contributions and other welfare and benefits. The Target Group employs,

promotes and remunerates employees based on their qualifications, job nature, performance

evaluation, working experiences and contribution. Remuneration is also determined with

reference to, among others, the market trend.

The total staff costs of the Target Group (including director’s emoluments) amounted to

RMBnil, RMB19.6 million and RMB30.4 million, respectively, for the period from 23 January

2015 to 31 December 2015 and the two years ended 31 December 2016 and 2017. The increase

in staff costs is primarily due to the increase in number of employees for the two years ended

31 December 2017. Average remuneration of employees in operation and supporting functions

have increased from 2016 to 2017, whereas that of employees in customer service function has

demonstrated a moderate decrease, mainly due to a higher proportion of junior staff who have

lower salary level, were hired in 2017.

Defined contribution plan for the PRC employees

Pursuant to the relevant PRC laws and regulations, the employees of the Target Group’s

subsidiaries operating in the PRC are required to participate in a central pension scheme

operated by the local municipal government. The Target Group’s subsidiaries operating in the

PRC are required to contribute a certain percentage of the salaries of their employees to the

central pension scheme.

The only obligation of the Target Group with respect to the central pension scheme is to

pay the ongoing required contributions. Contributions are charged to the statement of profit or

loss when they become payable in accordance with the rules of the central pension scheme.

SIGNIFICANT INVESTMENT, MATERIAL ACQUISITION AND DISPOSAL

Other than the acquisitions of subsidiaries of Wuhu NVC, the Target Group had no

significant investment, material acquisition and disposal during the Reporting Period.


– 97 –

GEARING RATIO

The gearing ratio of the Target Group as at 31 December 2015, 2016 and 2017 are set out

as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Other borrowings – – 21,008Less: Short-term deposits and

cash and cash equivalents

(excluding restricted bank balance) – 125,703 83,754Net debt – N/A N/ATotal equity attributable to owners of

the parent 446 42,575 137,785

Gearing ratio N/A N/A N/A

The Target Group had not made any borrowings for the period from 23 January 2015 to

31 December 2015 and the year ended 31 December 2016. As at 31 December 2017,

interest-bearing loans and borrowings amounted to RMB21.0 million.

CONTINGENT LIABILITIES

As at 31 December 2015, 2016 and 2017, there were no material contingent liabilities of

the Target Group.

COMMITMENTS

Capital Commitment

The Target Group had no significant capital commitments as at 31 December 2015, 2016

and 2017.

Operating Lease Commitments

The Target Group leases certain of its office properties and warehouses under operating

lease arrangement. Lease for properties are negotiated for terms ranging from one to five years.

There are no restrictions placed on the Target Group by entering into these leases.


– 98 –

As at 31 December 2015, 2016 and 2017, the total future minimum lease payments of the

Target Group under non-cancellable operating leases in respect of these premises are payable

as follows:

As at 31 December2015 2016 2017

RMB’000 RMB’000 RMB’000

Within one year – 234 584In the second to fifth years, inclusive – 133 508

– 367 1,092

CORPORATE STRATEGIES AND OUTLOOK FOR FUTURE DEVELOPMENT

Driven by mobile consumer behavior, trusted digital payment systems and supportive

government guidelines and policies, China has emerged as the world leader in e-commerce.

China Electronic Commerce Centre (“CECC”) has stated in a recent report that, for the first

half of 2017, China is home to approximately 516 million online retail shoppers with a total

retail transaction value of approximately RMB3.1 trillion, representing an increase of

approximately 27.1% compared to the same period in 2016. In light of multiple e-commerce

festivals has taken place in the second half of 2017, CECC expected the total retail transaction

value for 2017 to reach approximately RMB7.6 trillion.

Capitalising the increasing e-commerce value penetration and online shopping adoption

of lighting products, the Target Group has recorded speedy growth over the past two years.

Management of the Target Group and the Group are both eyeing at the rising of “New Retail”,

which emphasizes the integration of online and offline retail elements, including products,

services logistics and so on. Upon completion of the Acquisitions, the Target Group is expected

to be the online arm of the Enlarged Group, strengthening the Enlarged Group’s ability to

capture the advantages of online/offline integration, leveraging the Enlarged Group’s wide-

reaching distribution networks and effective distribution model, and maintaining the market

leadership of NVC-brand products.


– 99 –

The information set out in this appendix does not form part of the accountant’s report

prepared by the reporting accountant of the Company, BDO Limited, Certified Public

Accountants, Hong Kong, set out in Appendix II to this circular, and is included herein for

illustrative purpose only.

I. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGEDGROUP

1. INTRODUCTION

The unaudited pro forma combined statement of assets and liabilities of the Enlarged

Group (the “Unaudited Pro Forma Financial Information”) has been prepared in accordance

with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of

Hong Kong Limited (the “Stock Exchange”) (the “Listing Rules”) with reference to

Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in

Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants, for

the purpose of illustrating the financial impact of the acquisitions of equity interest in Blue

Light (HK) Trading Co., Limited (the “Target Company”) and 5% equity interest in Wuhu NVC

Lighting E-Commerce Limited (“Wuhu NVC”) by NVC Lighting Holding Limited (the

“Company”) and its subsidiaries (the “Group”) (the “Proposed Acquisitions”) on the assets and

liabilities of the Group as if the Proposed Acquisitions had been completed on 31 December

2017. The Group, and the Target Company and its subsidiaries (the “Target Group”) are

collectively referred to as the Enlarged Group.

The basis of preparation of the Unaudited Pro Forma Financial Information of the

Enlarged Group is set out below:

(a) The unaudited pro forma combined statement of assets and liabilities of the Enlarged

Group has been prepared based on (i) the consolidated statement of financial

position of the Group as at 31 December 2017 as set out in the published annual

report of the Company for the year ended 31 December 2017 where the auditor has

issued an auditor’s report dated 22 March 2018 with qualified opinion thereon

pertaining to the impairment of other receivables and uncertainties relating to

financial guarantee contracts and provision for loss on financial guarantee contract

on which the auditor was not able to obtain sufficient appropriate audit evidence.

Details of the qualified opinion are set out in the published annual report of the

Company for the year ended 31 December 2017; and (ii) the combined statement of

financial position of the Target Group as at 31 December 2017 as extracted from the

accountant’s report as set out in Appendix II to this circular (the “Circular”).

APPENDIX IV UNAUDITED PRO FORMA FINANCIALINFORMATION OF THE ENLARGED GROUP

– 100 –

(b) After taking into account of the unaudited pro forma adjustments, which are directly

attributable to the Proposed Acquisitions and factually supportable, as described in

the notes thereto to demonstrate how the Proposed Acquisitions might have affected

the assets and liabilities of the Group as if the Proposed Acquisitions had taken place

on 31 December 2017.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in

conjunction with the financial information of the Group set out in the published annual report

of the Company for the year ended 31 December 2017 and other financial information included

elsewhere in the Circular.

The Unaudited Pro Forma Financial Information of the Enlarged Group has been prepared

by the directors of the Company based on a number of assumptions, estimates, uncertainties,

currently available information and are prepared for illustrative purpose only. Because of its

hypothetical nature, the Unaudited Pro Forma Financial Information may not give a true

picture of the assets and liabilities of the Enlarged Group that would have been attained had

the Proposed Acquisitions been completed on 31 December 2017 or any other date.


– 101 –

2. UNAUDITED PRO FORMA COMBINED STATEMENT OF ASSETS ANDLIABILITIES OF THE ENLARGED GROUP

The Groupas at

31 December2017

The TargetGroup as at

31 December2017 Unaudited pro forma adjustments

Unauditedpro forma

EnlargedGroup as at

31 December2017

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(Note 1) (Note 2) (Note 3(a))(Notes 3(b),

3(c) and 3(d)) (Note 4) (Note 5)

NON-CURRENT ASSETSProperty, plant and equipment 619,497 3,296 (197) 622,596Prepaid land lease payments 46,119 – 46,119Goodwill 21,161 – 810,832 831,993Other intangible assets 294,575 2,236 (152) 296,659Investments in associates 54,518 3,396 105,486 (120,842) 42,558Investment in a joint venture 100,000 – 100,000Long term investments 218,026 – 218,026Deferred tax assets 52,258 – 52,258Prepayments 429,961 – 429,961

Total non-current assets 1,836,115 8,928 2,640,170

CURRENT ASSETSInventories 425,384 81,819 19,800 527,003Trade and bills receivables 1,092,554 101,475 (35,079) 1,158,950Prepayments, deposits and other

receivables 397,213 84,393 (17,598) 464,008Loan receivables – 68,000 68,000Income tax recoverable 11,741 – 11,741Other current assets 41,512 – 41,512Held-for-trading investments 88,786 – 88,786Restricted bank balances and

short-term deposits 314,422 – 314,422Cash and cash equivalents 1,265,589 83,754 (6,792) (5,300) 1,337,251

Total current assets 3,637,201 419,441 4,011,673

CURRENT LIABILITIESTrade and bills payables 820,833 162,041 (46,340) 936,534Other payables and accruals 728,749 68,826 746,500 (6,337) 1,537,738Interest-bearing loans and borrowings 24,940 21,008 45,948Government grants 2,012 – 2,012Income tax payable 34,071 23,202 57,273Convertible bonds – derivative

component 11,933 – 11,933Convertible bonds – liability component 421,229 – 421,229

Total current liabilities 2,043,767 275,077 3,012,667

NET CURRENT ASSETS 1,593,434 144,364 999,006

TOTAL ASSETS LESSCURRENT LIABILITIES 3,429,549 153,292 3,639,176

NON-CURRENT LIABILITIESConsideration payable – – 100,000 100,000Government grants 12,112 – 12,112Deferred tax liabilities 87,208 – 4,863 92,071

Total non-current liabilities 99,320 – 204,183

Net assets 3,330,229 153,292 3,434,993


– 102 –

Notes to the Unaudited Pro Forma Financial Information:

1. The balances were extracted from the consolidated statement of financial position of the Group as at 31December 2017 as set out in the published annual report of the Company for the year ended 31 December 2017.

2. The balances were extracted from the combined statement of financial position of the Target Group as at 31December 2017 as set out in Appendix II to the Circular.

3. Pursuant to the share purchase agreement dated 16 March 2018 (“S&P Agreement 1”) and the share purchaseagreement dated 23 May 2018 (“S&P Agreement 2”) entered into between the Company and the seller (the“Seller”), the Group conditionally agreed to purchase and the Seller conditionally agreed to sell 40% equityinterest and 60% equity interest in the Target Company at a cash consideration of RMB315,000,000 andRMB500,000,000 respectively. Furthermore, pursuant to the share purchase agreement dated 23 May 2018(“S&P Agreement 3”) entered into between the Group and Mr. Zhang Peng, the Group conditionally agreed topurchase and Mr. Zhang Peng conditionally agreed to sell his 5% equity interest in Wuhu NVC at aconsideration of RMB45,000,000 (collectively the “Proposed Acquisitions”). Wuhu NVC is a subsidiary of theTarget Company.

Pursuant to S&P Agreement 1, the consideration of RMB315,000,000 shall be paid by the Company to theSeller within 5 business days after completion of the acquisition.

The Seller undertakes to the Company that, if the actual audited net profit of the Target Group for the yearending 31 December 2018 (the “2018 Actual Net Profit”) is lower than the minimum guaranteed profit ofRMB140,000,000 (“Minimum Guaranteed Profit”), the Seller shall pay the difference (the “Purchase PriceCompensation”) in cash as calculated below to the Company within 90 business days after the Target Groupissues its 2018 audited consolidated financial statements.

Purchase Price Compensation = (Minimum Guaranteed Profit – 2018 Actual Net Profit) × 6.4

Pursuant to S&P Agreement 2, for the consideration of RMB500,000,000, RMB400,000,000 of which shall bepaid by the Company to the Seller within 10 business days after completion of the acquisition. The remainingconsideration of RMB100,000,000 shall be paid by the Company to the Seller within 10 business days after(i) the issuance of the 2018 audited consolidated financial statements of the Target Group; and (ii) theobtaining of tax clearance certificate (including the tax collection reminder issued by the PRC authorities) bythe Seller in respect of the acquisition. The Group estimated that the fulfilment of the above conditions (i) and(ii) shall be completed in the first half of 2019 and therefore the amount of RMB100,000,000 is classified asnon-current liabilities had the acquisition taken place on 31 December 2017. The Group also estimated that theeffect of discounting is immaterial. The completion of the S&P Agreement 2 shall take place simultaneouslywith the completion of the S&P Agreement 1.

The Seller undertakes to the Company that, if the 2018 Actual Net Profit is lower than the MinimumGuaranteed Profit, the Seller shall pay the Purchase Price Compensation in cash as calculated below to theCompany within 90 business days after the Target Group issues its 2018 audited consolidated financialstatements.

Purchase Price Compensation = (Minimum Guaranteed Profit – 2018 Actual Net Profit) × 7.5 × 60%

The Company also undertakes to the Seller that, if the 2018 Actual Net Profit exceeds the MinimumGuaranteed Profit, the Company shall pay the excess (“Excess Profit Reward”) in cash as calculated below tothe Seller within 90 business days after the Target Group issues its 2018 audited consolidated financialstatements.

Excess Profit Reward = (2018 Actual Net Profit – Minimum Guaranteed Profit) × 7.5 × 60%

Based on the financial budget of the Target Group for the year ending 31 December 2018, the directors of theCompany considers that the 2018 Actual Net Profit would be close to the Minimum Guaranteed Profit ofRMB140,000,000 and therefore the contingent receivable or payable as at the date of completion of theacquisition would be immaterial.


– 103 –

Pursuant to S&P Agreement 3, for the consideration of RMB45,000,000, RMB13,500,000 of which shall bepaid at the completion date of the acquisition and the remaining consideration of RMB31,500,000 shall be paidwithin 30 business days after the completion of the acquisition.

As at 31 December 2017, the Group owned 10% equity interest in Wuhu NVC and its subsidiaries (the “WuhuNVC Group”).

The pro forma adjustment reflects the followings:

(a) Fair value gain on 10% equity interest in the Wuhu NVC Group

As at 31 December 2017, included in investments in associates in the consolidated statement of financialposition of the Group is the Group’s 10% equity interest in the Wuhu NVC Group with carrying amount ofRMB15,356,000. Upon the completion of the Proposed Acquisitions, the 10% equity interest in the Wuhu NVCGroup is re-measured at fair value and the difference between the fair value and the carrying amount will berecognised in profit or loss.

For the purpose of the preparation of the Unaudited Pro Forma Financial Information and for illustrativepurpose, the recognition of the aforementioned fair value gain is analysed as follows as if the ProposedAcquisitions had taken place on 31 December 2017:

RMB’000

Fair value of 10% equity interest in the Wuhu NVC Group owned bythe Group before the Proposed Acquisitions 120,842

Less: carrying amount of the Group’s 10% equity interest inthe Wuhu NVC Group as at 31 December 2017 (15,356)

Fair value gain 105,486

The fair value of the 10% equity interest in the Wuhu NVC Group is estimated by the directors of theCompany with reference to a valuation performed by Jones Lang LaSalle Corporate Appraisal and AdvisoryLimited, an independent firm of professionally qualified valuers. The fair value will be reassessed on thecompletion date of the Proposed Acquisitions.

(b) Fair value adjustment of the identifiable assets and liabilities of the Target Group

Upon completion of the Proposed Acquisitions, the identifiable assets and liabilities of the Target Groupin the unaudited pro forma combined statement of assets and liabilities of the Enlarged Group will beaccounted for at fair value under the purchase method of accounting in accordance with International FinancialReporting Standard 3 (Revised) “Business Combinations”.


– 104 –

The identifiable assets and liabilities of the Target Group as at the date of the Proposed Acquisitions asif the Proposed Acquisitions had taken place on 31 December 2017 are as follows:

Carryingvalues Fair values

Fair valueadjustments

RMB’000 RMB’000 RMB’000

Property, plant and equipment 3,296 3,099 (197)Intangible assets 2,236 2,084 (152)Investment in an associate 3,396 3,396 –Inventories 81,819 101,619 19,800Trade and bills receivables 101,475 101,475 –Prepayments, deposits and

other receivables 84,393 84,393 –Loan receivables 68,000 68,000 –Cash and cash equivalents 83,754 83,754 –Trade payables (162,041) (162,041) –Other payables and accruals (68,826) (68,826) –Other borrowings (21,008) (21,008) –Deferred tax liabilities – (4,863) (4,863)Tax payable (23,202) (23,202) –

153,292 167,880 14,588Non-controlling interests in subsidiaries of

Wuhu NVC as at 31 December 2017 (4,578) (4,578) –

Net identifiable assets acquired bythe Group 148,714 163,302 14,588

The fair values of the identifiable assets and liabilities of the Target Group are estimated by the directorsof the Company with reference to a valuation performed by Jones Lang LaSalle Corporate Appraisal andAdvisory Limited. Fair values of identifiable assets and liabilities will be reassessed on the completion dateof the Proposed Acquisitions together with the fair value assessment of the deferred tax impact in relation toany fair value adjustments.

(c) Recognition of goodwill in relation to the Proposed Acquisitions

For the purpose of the preparation of the Unaudited Pro Forma Financial Information and for illustrativepurpose, the recognition of goodwill arising from the Proposed Acquisitions is analysed as follows as if theProposed Acquisitions had taken place on 31 December 2017:

RMB’000

Total cash considerations of the Proposed Acquisitions 860,000Add: fair value of 10% equity interest in the Wuhu NVC Group owned by

the Group before the Proposed Acquisitions 120,842

980,842Less: – fair values of the identifiable assets and liabilities of

the Target Group acquired by the Group (Note 3(b)) (163,302)– making up of net asset value of the Target Group undertaken by

the Seller (Note 3(d)) (6,708)

Goodwill 810,832


– 105 –

Since the fair values of the identifiable net assets of the Target Group at the date of the completion ofthe Proposed Acquisitions may be substantially different, the goodwill recognised at the completion date of theProposed Acquisitions may be different from the amount presented above.

The estimated goodwill arising from the Proposed Acquisitions is recognised and no impairment chargeconcerning the above estimated goodwill is considered necessary under the requirements of IAS 36 (as definedbelow). After the completion of the Proposed Acquisitions, the Group will determine at each reporting datewhether the goodwill is impaired in accordance with International Accounting Standard 36 “Impairment ofAssets” (“IAS 36”).

The directors of the Company confirm that consistent accounting policies and principal assumptions willbe applied to assess impairment of goodwill and intangible asset if any, in subsequent reporting periods inaccordance with the requirements under IAS 36.

(d) Making up of net asset value of the Target Group undertaken by the Seller

Pursuant to S&P Agreement 2, the Seller undertakes to the Company that, if the 2017 audited net assetvalue of the Target Group (the “2017 Net Asset Value”) is less than RMB160,000,000, the Seller shall makeup (or cause to be made up) to the Target Group the shortfall between the 2017 Net Asset Value andRMB160,000,000 on or before the completion of the acquisition in a manner to the Company’s satisfaction,so as to ensure the audited net asset value of the Target Group will reach or exceed RMB160,000,000.Assuming that the shortfall of RMB6,708,000, being the difference between the 2017 Net Asset Value ofRMB153,292,000 as shown in the combined statement of financial position of the Target Group as at 31December 2017 as set out in the Appendix II to the Circular and RMB160,000,000, will be made up by theSeller in cash, cash and cash equivalent balances and hence the net assets value of the Target Group willincrease by RMB6,708,000, as if the acquisition had taken place as at 31 December 2017.

4. The unaudited pro forma adjustment represents elimination of the balances between the Group and the TargetGroup as at 31 December 2017.

5. For the purpose of the Unaudited Pro Forma Financial Information, the direct expenses and other professionalservices related to the Proposed Acquisitions are estimated to be approximately RMB5,300,000 according torespective quotations from the professional parties, which should be charged to the profit or loss.

6. The directors of the Company confirm that the basis used in the preparation of the Unaudited Pro FormaFinancial Information will be consistent with the accounting policies of the Group, including the principalaccounting policies and assumptions of the valuation of the identified assets and liabilities of the Target Groupto be consistently adopted in the first set of the financial statements of the Group after the completion of theProposed Acquisitions.

7. Apart from the Proposed Acquisitions, no other adjustments have been made to the Unaudited Pro FormaFinancial Information of the Enlarged Group to reflect any trading results or other transactions of the EnlargedGroup entered into subsequent to 31 December 2017.


– 106 –

The following is the text of a report, prepared for the sole purpose of inclusion in this

circular, received from the independent reporting accountant, BDO Limited, Certified Public

Accountants, Hong Kong.

II. INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THECOMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the directors of NVC Lighting Holding Limited

We have completed our assurance engagement to report on the compilation of unaudited

pro forma financial information of NVC Lighting Holding Limited (the “Company”) and its

subsidiaries (collectively referred to as the “Group”) by the directors of the Company for

illustrative purposes only. The unaudited pro forma financial information consists of the

unaudited pro forma combined statement of assets and liabilities as at 31 December 2017 and

related notes as set out on pages 100 to 106 of Appendix IV to the Company’s circular dated

30 June 2018 (the “Circular”), in connection with the Group’s acquisitions of equity interest

in Blue Light (HK) Trading Co., Limited (the “Target Company”) pursuant to the share

purchase agreements dated 16 March 2018 and 23 May 2018; and acquisition of 5% equity

interest in Wuhu NVC Lighting E-Commerce Limited, a subsidiary of the Target Company,

pursuant to the share purchase agreement dated 23 May 2018 (collectively the “Proposed

Acquisitions”). The Group and the Target Company and its subsidiaries (the “Target Group”)

are collectively referred to as the Enlarged Group. The applicable criteria on the basis of which

the directors of the Company have compiled the unaudited pro forma financial information are

set out in Section I of Appendix IV to the Circular.

The unaudited pro forma financial information has been compiled by the directors of the

Company to illustrate the impact of the Proposed Acquisitions on the Group’s assets and

liabilities as at 31 December 2017 as if the Proposed Acquisitions had taken place at 31

December 2017. As part of this process, information about the Group’s assets and liabilities has

been extracted by the directors of the Company from the consolidated statement of financial

position of the Group as at 31 December 2017 as set out in the published annual report of the

Company for the year ended 31 December 2017.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors of the Company are responsible for compiling the unaudited pro forma

financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of

Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with

reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for

Inclusion in Investment Circulars” (“AG 7”) issued by the Hong Kong Institute of Certified

Public Accountants (the “HKICPA”).


– 107 –

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the “Code of

Ethics for Professional Accountants” issued by the HKICPA, which is founded on fundamental

principles of integrity, objectivity, professional competence and due care, confidentiality and

professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms

that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related

Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive

system of quality control including documented policies and procedures regarding compliance

with ethical requirements, professional standards and applicable legal and regulatory

requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the

Listing Rules, on the unaudited pro forma financial information and to report our opinion to

you. We do not accept any responsibility for any reports previously given by us on any

financial information used in the compilation of the unaudited pro forma financial information

beyond that owed to those to whom those reports were addressed by us at the dates of their

issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance

Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma

Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires

that the reporting accountants plan and perform procedures to obtain reasonable assurance

about whether the directors of the Company have compiled the unaudited pro forma financial

information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG

7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any

reports or opinions on any historical financial information used in compiling the unaudited pro

forma financial information, nor have we, in the course of this engagement, performed an audit

or review of the financial information used in compiling the unaudited pro forma financial

information.

The purpose of unaudited pro forma financial information included in a circular is solely

to illustrate the impact of a significant event or transaction on unadjusted financial information

of the entity as if the event had occurred or the transaction had been undertaken at respective

earlier dates selected for purposes of the illustration. Accordingly, we do not provide any

assurance that the actual outcome of the Proposed Acquisitions at 31 December 2017 would

have been as presented.


– 108 –

A reasonable assurance engagement to report on whether the unaudited pro forma

financial information has been properly compiled on the basis of the applicable criteria

involves performing procedures to assess whether the applicable criteria used by the directors

in the compilation of the unaudited pro forma financial information provide a reasonable basis

for presenting the significant effects directly attributable to the event or transaction, and to

obtain sufficient appropriate evidence about whether:

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

and

• the unaudited pro forma financial information reflects the proper application of

those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgement, having regard

to the reporting accountant’s understanding of the nature of the entity, the event or transaction,

in respect of which the unaudited pro forma financial information has been compiled, and other

relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro

forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a

basis for our opinion.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the

directors of the Company on the basis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial

information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

BDO LimitedCertified Public Accountants

Hong Kong

30 June 2018


– 109 –

30 June 2018

The Board of Directors

NVC Lighting Holding Limited

Cricket Square, Hutchins Drive, P.O. Box 2681

Grand Cayman, KY1-1111 Cayman Islands

Dear Sirs,

In accordance with your instructions, we have undertaken a valuation exercise to

determine an independent opinion on the fair value of 100 percent equity value of Blue Light

(HK) Trading Co., Limited (“Blue Light” or the “Company”) as at 31 March 2018 (the

“Valuation Date”). The report which follows is dated 30 June 2018 (the “Report Date”).

The purpose of this valuation is to express an independent opinion on the fair value of 100

percent equity in of Blue Light (HK) Trading Co., Limited as at the Valuation Date for circular

reference.

Our valuation was carried out on a fair value basis. Fair value is defined as “the price that

would be received to sell an asset, or paid to transfer a liability, in an orderly transaction

between market participants at the measurement date”.

As part of our analysis, we have been furnished with information prepared by the

Company regarding the subject business. We have relied to a considerable extent on such

information in arriving at our opinion of value.

The conclusion of value is based on accepted valuation procedures and practices that rely

substantially on our use of numerous assumptions and our consideration of various factors that

are relevant to the operation of the Company. We have also considered various risks and

uncertainties that have potential impact on the businesses. Further, while the assumptions and

consideration of such matters are considered by us to be reasonable, they are inherently subject

to significant business, economic and competitive uncertainties and contingencies, many of

which are beyond the control of the Company and Jones Lang LaSalle Corporate Appraisal and

Advisory Limited.

APPENDIX VA VALUATION REPORT ON THE ENTIREEQUITY VALUE IN BLUE LIGHT

– 110 –

We do not intend to express any opinion on matters which require legal or other

specialized expertise or knowledge, beyond what is customarily employed by valuers. Our

conclusions assume continuation of prudent management of the Company over whatever period

of time that is reasonable and necessary to maintain the character and integrity of the assets

valued.

Based on the results of our investigation and analysis outlined in the report which follows,

we are of the opinion that the fair value of 100 percent equity value in the Company as at the

Valuation Date is reasonably stated as below:

Valuation Date

Fair Valueof 100%

Equity Value(Excluding

Non-controllingInterests)

Fair Valueof 100%

Equity Value(RMB’000) (RMB’000)

31 March 2018 1,029,321.12 1,201,148.49

The following pages outline the factors considered, methodology and assumptions

employed in formulating our opinions and conclusions. Any opinions are subject to the

assumptions and limiting conditions contained therein.

Yours faithfully,

for and on behalf of

Jones Lang LaSalle Corporate Appraisal andAdvisory LimitedSimon M.K. ChanRegional Director


– 111 –

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

PURPOSE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

BASIS OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

SOURCES OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

MAJOR ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

DISCOUNT FOR LACK OF MARKETABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 117

VALUATION COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

OPINION OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

EXHIBIT A – LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

EXHIBIT B – VALUERS’ PROFESSIONAL DECLARATION . . . . . . . . . . . 124

EXHIBIT C – COMPARABLE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . 125

EXHIBIT D – MARKET APPROACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126


– 112 –

INTRODUCTION

This report has been prepared in accordance with instructions from NVC Lighting

Holding Limited to express an independent opinion of the fair value of 100 percent equity

value in of Blue Light (HK) Trading Co., Limited (“Blue light” or the “Company”) as at 31

March 2018 (the “Valuation Date”). The report which follows is dated 30 June 2018 (the

“Report Date”).

PURPOSE OF VALUATION

Our valuation is normally classified as,

• Internal Reference (for internal usage by the management of the company);

• Accounting Reference (for auditors to consider the accounting implications);

• Circular Reference (for disclosure in the circular to general public).

The purpose of this valuation is for Circular Reference.

BASIS OF VALUE




We have conducted our valuation in accordance with IFRS 13 – Fair Value Measurement

and taken into account the International Valuation Standards issued by the International

Valuation Standards Council. We planned and performed our valuation so as to obtain all the

information and explanations which we considered necessary in order to provide us with

sufficient evidence to express our opinion on the subject asset. We believe that the valuation

procedures we employed provide a reasonable basis for our opinion.

BACKGROUND

Company Background

Blue Light (HK) Trading Co., Limited is a limited company incorporated in Hong Kong.

Its business activities involve investment holding, design and development of lighting, LED

and home appliances, promotion and communications, technology consulting and international

trade.


– 113 –

SOURCES OF INFORMATION

This report was compiled after consideration of all relevant information obtained from the

Company and other public sources. Documents received include, but were not limited to:

• 2017 accountant’s report;

• Corporate structure of the company;

• Company Introduction; and

• Company business registration number and related information.

Other sources of information included:

• We have held discussions with the management of the Company regarding the

operational and the condition of the Company. We believe that the information

provided is reliable.

METHODOLOGY

In arriving at our assessed value, we have considered three generally accepted

approaches, namely, market approach, cost approach and income approach.

Market Approach considers prices recently paid for similar assets, with adjustments

made to market prices to reflect condition and utility of the appraised assets relative to the

market comparative. Assets for which there is an established secondary market may be valued

by this approach.

Benefits of using this approach include its simplicity, clarity, speed and the need for few

or no assumptions. It also introduces objectivity in application as publicly available inputs are

used. However, one has to be wary of the hidden assumptions in those inputs as there are

inherent assumptions on the value of those comparable assets. It is also difficult to find

comparable assets. Furthermore, this approach relies exclusively on the efficient market

hypothesis.

Cost Approach considers the cost to reproduce or replace in new condition the assets

appraised in accordance with current market prices for similar assets, with allowance for

accrued depreciation or obsolescence present, whether arising from physical, functional or

economic causes. The cost approach generally furnishes the most reliable indication of value

for assets without a known secondary market.

Despite the simplicity and transparency of this approach, it does not directly incorporate

information about the economic benefits contributed by the subject asset.


– 114 –

Income Approach is the conversion of expected periodic benefits of ownership into anindication of value. It is based on the principle that an informed buyer would pay no more forthe project than an amount equal to the present worth of anticipated future benefits (income)from the same or a substantially similar project with a similar risk profile.

This approach allows for the prospective valuation of future profits and there arenumerous empirical and theoretical justifications for the present value of expected future cashflows. However, this approach relies on numerous assumptions over a long time horizon andthe result may be very sensitive to certain inputs. It also presents a single scenario only.

Selection of Valuation Approach and Methodology

In our opinion, the income approach and cost approach are inappropriate for valuing theunderlying asset. Firstly, the income approach, technically known as discounted cash flowmethod, devolves the future value of the business into a present market value. We are informedthere is no secured contracts in the Company’s future earnings, and the management of theCompany could not provide a reliable amount of five-year economic income projection. Hence,the forecast of the reliable future cash flow of the Company is not available in this case.Secondly, the cost approach does not directly incorporate information about the economicbenefits contributed by the subject asset. We have therefore relied solely on the marketapproach based on the latest financial year Accountant’s Report in determining our opinion ofvalue. We applied P/E, P/B, and P/S multiples, which are calculated by using comparablecompanies’ financial statements, to determine the fair value of the company and then taken intoaccount of market illiquidity discount as the appropriate adjustments.

MAJOR ASSUMPTIONS

Assumptions considered to have significant sensitivity effects in this valuation have beenevaluated in order to provide a more accurate and reasonable basis for arriving at our assessedvalue.

The following key assumptions in determining the fair value of the equity value have beenmade:

• There will be no material change in the existing political, legal, technological, fiscalor economic conditions, which might adversely affect the business of the Company.

• The operational and contractual terms stipulated in the relevant contracts andagreements will be honored.

• The facilities and systems proposed are sufficient for future expansion in order torealize the growth potential of the business and maintain a competitive edge.

• We have assumed that there are no hidden or unexpected conditions associated withthe assets valued that might adversely affect the reported values. Further, we assumeno responsibility for changes in market conditions after the Valuation Date.


– 115 –

Summary of Market Approach

• Listed comparable companies

We have considered the information of certain listed comparable companies which are

engaged in the similar industry. The table below sets out the relevance of the comparable

companies in terms of businesses, classification and revenue.

ComparableCompany Ticker Classification

%Revenue

Financial Year2017 Reporting

Revenue

NVC Lighting

Holding Ltd.

2222 HK

EQUITY

Electric Lamp

Bulb & Parts

22.58% 4,063 million RMB

Light Fixture 70.94%Electronic Coil 6.48%

Neo-Neon

Holdings

Limited

1868 HK

EQUITY

Light Fixture 94.53% 768 million HKDInvest

Management

5.41%

Zhejiang Yankon

Group Co.,

Ltd.

600261 CH

EQUITY

Light Fixture 100% 4,994 million RMB

Foshan Electrical

& Lighting

Co., Ltd.

000541 CH

EQUITY

Electric Lamp

Bulb & Parts


Electronic

Components

3.38%

Hengdian Group

Tospo Lighting

Co., Ltd.

603303 CH

EQUITY

Commercial

Light Fixture

100% 4,015 million RMB

Foshan

NationStar

Optoelectronics

Co. Ltd.

002449 CH

EQUITY

LED Lighting 100% 3,454 million RMB

OPPLE Lighting

Co., Ltd.

603515 CH

EQUITY



– 116 –

The selection of comparable companies is based on the industry peer of the Company,which is in lighting products industry with sufficient trading volumes and has a reasonablysufficient listing period. Considering the nature of the Company’s business, the number oflisted comparable companies in the exactly same nature of business, distribution of lightingproducts, is limited. We have to expand the screening pool of the comparable companies toinclude companies manufacturing and distribution of lighting products. Please refer to ExhibitC of the valuation report for the comparable companies in terms of detail businessesdescription.

• Multiples of comparable companies as at the Valuation Date

Ticker P/E P/B P/S

2222 HK EQUITY 6.99 0.71 0.541868 HK EQUITY 12.09 1.02 2.18600261 CH EQUITY 19.71 2.41 1.60000541 CH EQUITY 8.79 2.43 1.73603303 CH EQUITY 26.32 2.49 1.38002449 CH EQUITY 22.94 2.61 2.39603515 CH EQUITY 36.53 6.83 3.59Adopted Multiples 19.05 2.64 1.92

Note: Adopted multiples are calculated as mean multiples of comparable companies.

• Financial Data from the Company

FinancialYear 2017

Net income

FinancialYear 2017

Book value

FinancialYear 2017

Revenue(RMB’000) (RMB’000) (RMB’000)

Excluding non-controlling interests 95,002.51 137,785.53 759,201.12Including non-controlling interests 111,173.00 153,292.00 893,178.00

Note: All financial data is referred to the 2017 Accountant’s Report excluding 759,201.12, Revenue excludingnon-controlling interests is provided by the management.

DISCOUNT FOR LACK OF MARKETABILITY

A factor to be considered in valuing closely held companies is the marketability of aninterest in such businesses. Marketability is defined as the ability to convert the businessinterest into cash quickly, with minimum transaction and administrative costs, and with a highdegree of certainty as to the amount of net proceeds. There is usually a cost and a time lagassociated with locating interested and capable buyers of interests in privately-held companies,because there is no established market of readily-available buyers and sellers. All other factorsbeing equal, an interest in a publicly traded company is worth more because it is readilymarketable. Conversely, an interest in a private-held company is worth less because noestablished market exists.


– 117 –

A discount for lack of marketability (DLOM) is a method used to calculate the value for

closely held and restricted shares. The theory behind DLOM is that discounts exist between the

value of a company’s marketable stock and not marketable stock. Therefore, a value reduction

will apply.

The Company do not have IPO Plan as at the Valuation Date, thus we refer to the article

“Discount for lack of Marketability, Job Aid for IRS Valuation Professionals 2009” to derive

the DLOM.

Since the Company’s revenue in financial year 2017 over $100 million US dollars,

average discount of 14.9% is used as a proxy for DLOM as at the Valuation Date.

Reference – Management Planning Study data

Analysis of Restricted Stock Discounts by Revenue Size

Number ofObservations

AverageRevenues

AverageDiscounts

Range of DiscountsRevenues Low High

($ millions)

Under $10 million 14 $6.6 32.9% 2.8% 57.6%$10 – $30 million 11 $22.5 30.8% 15.3% 49.8%$30 – $50 million 10 $33.5 25.2% 5.2% 46.3%$50 – $100 million 8 $63.5 19.4% 11.6% 29.3%Over $100 million (adjusted)* 4 $224.9 14.9% 0.0% 24.1%

Overall sample averages $47.5 27.7% 0.0% 57.6%Totals 47

*Over $100 million

(actual calculation) 2 $187.1 25.1% 0.0% 46.5%Totals 49

Excludes Sudbury Holdings, Inc., whose private placement consisted of 125% of the pre-transaction sharesoutstanding.

Excludes Starrett Housing Corp., which is one of the five most thinly traded companies in the sample.

Sources: Quantifying Marketability Discounts, by Z. Christopher Mercer, ASA, CFA, Peabody Publishing, LP, 1997,Figure 12-1, page 346. Job Aid for IRS Valuation Professionals.

Kumar, N. (2009). How Emerging Giants Are Rewriting the Rules of M&A. Harvard Business Review.


– 118 –

VALUATION COMMENTS

As part of our analysis, we have reviewed financial and business information from public

sources together with such financial information, project documentation and other pertinent

data concerning the project as has been made available to us. Such information has been

provided by the Company. We have assumed the accuracy of, and have relied on such

information. We have relied to a considerable extent on such information provided in arriving

at our opinion of value.

We confirm that we have made relevant searches and enquiries and obtained such further

information as is considered necessary for the purposes of this study.

In arriving at our assessed value, we have only considered the core business of the

Company. We have not made provision for other non-operating cash flow items such as interest

income, exchange rate gain/loss, etc. in the valuation model.


substantially on the use of numerous assumptions and the consideration of many uncertainties,

not all of which can be easily quantified or ascertained. Further, while the assumptions and




Advisory Limited.

RISK FACTORS

• Economic considerations

The PRC economy has experienced significant growth in the past decade, but such growth

has been uneven geographically and rose among different sectors of the economy. There is no

assurance that the expected economic growth will be realized and future social and economic

changes in the PRC will be favorable to the Company. The competition in the industry may

have adverse effect on the operating performance of the Company and hence affect the value

of the business.

• Changes in political, economic and regulatory environment in the PRC

The Company is subject to various laws and regulations governing its operations in the

PRC. Future political and legal changes in the PRC might have either favorable or unfavorable

impacts on the Company.


– 119 –

OPINION OF VALUE


we are of the opinion that the fair value of 100 percent equity value in the as at the Valuation

Date is reasonably stated as below:

Valuation Date

Fair Valueof 100%



Fair Valueof 100%


31 March 2018 1,029,321.12 1,201,148.49

LIMITING CONDITIONS

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

Yours faithfully,




– 120 –

EXHIBIT A – LIMITING CONDITIONS

1. In the preparation of our reports, we relied on the accuracy, completeness and

reasonableness of the financial information, forecast, assumptions and other data

provided to us by the Company/engagement parties and/or its representatives. We did not

carry out any work in the nature of an audit and neither are we required to express an audit

or viability opinion. We take no responsibility for the accuracy of such information. Our

reports were used as part of the Company’s/engagement parties’ analysis in reaching their

conclusion of value and due to the above reasons, the ultimate responsibility of the

derived value of the subject property rests solely with the Company/engagement parties.

2. We have explained as part of our service engagement procedure that it is the director’s

responsibility to ensure proper books of accounts are maintained, and the financial

information and forecast give a true and fair view and have been prepared in accordance

with the relevant standards and companies ordinance.

3. Public information and industry and statistical information have been obtained from

sources we deem to be reputable; however we make no representation as to the accuracy

or completeness of such information, and have accepted the information without any

verification.

4. The management and the Board of the Company/engagement parties have reviewed and

agreed on the report and confirmed that the basis, assumptions, calculations and results

are appropriate and reasonable.

5. Jones Lang LaSalle Corporate Appraisal and Advisory Limited shall not be required to

give testimony or attendance in court or to any government agency by reason of this

exercise, with reference to the project described herein. Should there be any kind of

subsequent services required, the corresponding expenses and time costs will be

reimbursed from you. Such kind of additional work may incur without prior notification

to you.

6. No opinion is intended to be expressed for matters which require legal or other specialised

expertise, which is out of valuers’ capacity.

7. The use of and/or the validity of the report is subject to the terms of engagement

letter/proposal and the full settlement of the fees and all the expenses.

8. Our conclusions assume continuation of prudent and effective management policies over

whatever period of time that is considered to be necessary in order to maintain the

character and integrity of the assets valued.


– 121 –

9. We assume that there are no hidden or unexpected conditions associated with the subject

matter under review that might adversely affect the reported review result. Further, we

assume no responsibility for changes in market conditions, government policy or other

conditions after the Valuation/Reference Date. We cannot provide assurance on the

achievability of the results forecasted by the Company/engagement parties because events

and circumstances frequently do not occur as expected; difference between actual and

expected results may be material; and achievement of the forecasted results is dependent

on actions, plans and assumptions of management.

10. This report has been prepared solely for internal use purpose. The report should not be

otherwise referred to, in whole or in part, or quoted in any document, circular or statement

in any manner, or distributed in whole or in part or copied to any their party without our

prior written consent. We shall not under any circumstances whatsoever be liable to any

third party.

11. This report is confidential to the client and the calculation of values expressed herein is

valid only for the purpose stated in the engagement letter/or proposal as of the

Valuation/Reference Date. In accordance with our standard practice, we must state that

this report and exercise is for the use only by the party to whom it is addressed to and no

responsibility is accepted with respect to any third party for the whole or any part of its

contents.

12. Where a distinct and definite representation has been made to us by party/parties

interested in the assets valued, we are entitled to rely on that representation without

further investigation into the veracity of the representation.

13. You agree to indemnify and hold us and our personnel harmless against and from any and

all losses, claims, actions, damages, expenses or liabilities, including reasonable

attorney’s fees, to which we may become subjects in connection with this engagement.

Our maximum liability relating to services rendered under this engagement (regardless of

form of action, whether in contract, negligence or otherwise) shall be limited to the fee

paid to us for the portion of its services or work products giving rise to liability. In no

event shall we be liable for consequential, special, incidental or punitive loss, damage or

expense (including without limitation, lost profits, opportunity costs, etc.), even if it has

been advised of their possible existence.

14. We are not environmental, structural or engineering consultants or auditors, and we take

no responsibility for any related actual or potential liabilities exist, and the effect on the

value of the asset is encouraged to obtain a professional assessment. We do not conduct

or provide such kind of assessments and have not considered the potential impact to the

subject property.


– 122 –

15. This exercise is premised in part on the historical financial information and future

forecast provided by the management of the Company/engagement parties and/or its

representatives. We have assumed the accuracy and reasonableness of the information

provided and relied to a considerable extent on such information in our calculation of

value. Since projections relate to the future, there will usually be differences between

projections and actual results and in some cases, those variances may be material.

Accordingly, to the extent any of the above mentioned information requires adjustments,

the resulting value may differ significantly.

16. This report and the conclusion of values arrived at herein are for the exclusive use of our

client for the sole and specific purposes as noted herein. Furthermore, the report and

conclusion of values are not intended by the author, and should not be construed by the

reader, to be investment advice or as financing or transaction reference in any manner

whatsoever. The conclusion of values represents the consideration based on the

information furnished by the Company/engagement parties and other sources. Actual

transactions involving the subject assets/business might be concluded at a higher or lower

value, depending upon the circumstances of the transaction and the business, and the

knowledge and motivation of the buyers and sellers at that time.

17. The management or staff of the Company/engagement parties and/or its representatives

have confirmed to us that the transaction or themselves or the parties involved in the

pertained assets or transaction are independent to our firm and JLL in this valuation or

calculation exercise. Should there be any conflict of interest or potential independence

issue that may affect our independency in our work, the Company/engagement parties

and/or its representatives should inform us immediately and we may need to discontinue

our work and we may charge our fee to the extent of our work performed or our manpower

withheld or engaged.


– 123 –

EXHIBIT B – VALUERS’ PROFESSIONAL DECLARATION

The following valuers certify, to the best of their knowledge and belief, that:

• Information has been obtained from sources that are believed to be reliable. All facts

which have a bearing on the value concluded have been considered by the valuers

and no important facts have been intentionally disregarded.

• The reported analyses, opinions, and conclusions are subject to the assumptions as

stated in the report and based on the valuers’ personal, unbiased professional

analyses, opinions, and conclusions. The valuation exercise is also bounded by the

limiting conditions.

• The reported analyses, opinions, and conclusions are independent and objective.

• The valuers have no present or prospective interest in the asset that is the subject of

this report, and have no personal interest or bias with respect to the parties involved.

• The valuers’ compensation is not contingent upon the amount of the value estimate,

the attainment of a stipulated result, the occurrence of a subsequent event, or the

reporting of a predetermined value or direction in value that favours the cause of the

client.

• The analyses, opinions, and conclusions were developed, and this report has been

prepared, in accordance with the International Valuation Standards published by the

International Valuation Standards Council.

• The under mentioned persons provided professional assistance in the compilation of

this report:

Simon M. K. ChanRegional Director

Michael Q. DingLocal Director

Joyce J. XuAssistant Manager

Jenna J.L. WuAnalyst


– 124 –

EXHIBIT C – COMPARABLE COMPANIES

Company Name Ticker Description

NVC Lighting Holding Ltd. 2222 HK NVC Lighting Holding Ltd designs, manufactures anddistributes lighting fixtures.

Neo-Neon Holdings Limited 1868 HK Neo-Neon Holdings Limited is a decorative lighting companystationed in Hong Kong. It engages in the research,development, manufacturing and distribution of lightingproducts including incandescent, LED, decorative andentertainment lighting products.

Zhejiang Yankon Group Co.,Ltd.

600261 CH Zhejiang Yankon Group Co., Ltd. manufactures electronicenergy-saving lamps, energy-saving fluorescence bulbs, andother related lighting systems. The Company sells itsproducts domestically and exports to other countries.

Foshan Electrical &Lighting Co., Ltd.

000541 CH Foshan Electrical and Lighting Co., Ltd. manufactures andmarkets electro-optical products and auxiliary luminaryseries products. The Company’s products include ordinarybulbs, decorative bulbs, iodine-tungsten lamps, bromine-tungsten lamps, automobile lamps, motorcycle lamps, high-tension mercury lamps, high-tension sodium lamps, andother related products.

Hengdian Group TospoLighting Co., Ltd.

603303 CH Hengdian Group Tospo Lighting Co., Ltd. manufactureslighting products. The Company produces and sells compactfluorescent lamp bulbs, LED bulbs, lighting electronics,outdoor luminaries, and more. Hengdian Group TospoLighting markets its products throughout the world.

Opple Lighting Co. Ltd. 603515 CH Opple Lighting Co. Ltd. manufactures lighting products. TheCompany designs, produces, and sells bulbs, lightingfixtures, LED, and other related items around the world.

Foshan NationStarOptoelectronics Co. Ltd.

002449 CH Foshan NationStar Optoelectronics Co. Ltd, specializing inmanufacturing LED and LED applied products, is a hi-techenterprise of China, and a key hi-tech enterprise of theNational Torch Plan. Founded in 1969, with advantages oncapital, distribution channels, R&D, and management, it hasbeen ranked in the list of the famous LED brands.


– 125 –

EXHIBIT D – MARKET APPROACH

Excluding non-controlling interests

Valuation Date 3/31/2018

Comparable Company Ticker P/E P/B P/S

NVC Lighting Holding Ltd. 2222 HK EQUITY 6.99 0.71 0.54Neo-Neon Holdings Limited 1868 HK EQUITY 12.09 1.02 2.18Zhejiang Yankon Group Co., Ltd. 600261 CH EQUITY 19.71 2.41 1.60Foshan Electrical & Lighting Co., Ltd. 000541 CH EQUITY 8.79 2.43 1.73Hengdian Group Tospo Lighting Co., Ltd. 603303 CH EQUITY 26.32 2.49 1.38OPPLE Lighting Co., Ltd. 603515 CH EQUITY 36.53 6.83 3.59Foshan NationStar Optoelectronics Co. Ltd. 002449 CH EQUITY 22.94 2.61 2.39

Source: Bloomberg

Multiples P/E P/B P/S

MAX 36.53 6.83 3.59MEAN 19.05 2.64 1.92MEDIAN 19.71 2.43 1.73MIN 6.99 0.71 0.54

Mean multiples of P/E, P/B, and P/S of comparable companies are adopted to determine 100% equity value.

RMB’000 P/E P/B P/S

Financial Figures

Financialyear 2017

Net income

Financialyear 2017

Book value

Financialyear 2017

Revenue

95,002.51 137,785.53 759,201.12Multiples (MEAN) 19.05 2.64 1.92Target Company 100% equity value

(Before DLOM and Control Premium) 1,810,069 364,147 1,454,412DLOM 14.90% 269,700.31 54,257.97 216,707.45Target Company Fair Value 1,540,368.88 309,889.50 1,237,704.97Average Target Company 100% equity value 1,029,321.12


– 126 –

Including non-controlling interests




Source: Bloomberg





Financial Figures

Financialyear 2017

Net income

Financialyear 2017

Book value

Financialyear 2017

Revenue


(Before DLOM and Control Premium) 2,118,163 405,129 1,711,074DLOM 14.90% 315,606.33 60,364.20 254,950.00Target Company Fair Value 1,802,556.96 344,764.66 1,456,123.85Average Target Company 100% equity value 1,201,148.49


– 127 –

30 June 2018

The Board of Directors

NVC Lighting Holding Limited

Cricket Square, Hutchins Drive, P.O. Box 2681

Grand Cayman, KY1-1111 Cayman Islands

Dear Sirs,

In accordance with your instructions, we have undertaken a valuation exercise to

determine an independent opinion on the fair value of 5 percent equity value of Wuhu NVC

Lighting E-commerce Limited (“Wuhu NVC” or the “Company”) as at 31 March 2018 (the

“Valuation Date”). The report which follows is dated 30 June 2018 (the “Report Date”).

The purpose of this valuation is to express an independent opinion on the fair value of 5

percent equity in Wuhu NVC Lighting E-Commerce Limited as at the Valuation Date for

circular reference.




As part of our analysis, we have been furnished with information prepared by the

Company regarding the subject business. We have relied to a considerable extent on such

information in arriving at our opinion of value.


substantially on our use of numerous assumptions and our consideration of various factors that

are relevant to the operation of the Company. We have also considered various risks and

uncertainties that have potential impact on the businesses. Further, while the assumptions and




Advisory Limited.

APPENDIX VB VALUATION REPORT ON 5% EQUITY VALUE IN WUHU NVC

– 128 –

We do not intend to express any opinion on matters which require legal or other

specialized expertise or knowledge, beyond what is customarily employed by valuers. Our

conclusions assume continuation of prudent management of the Company over whatever period

of time that is reasonable and necessary to maintain the character and integrity of the assets

valued.




Valuation Date

Fair Valueof 5%



Fair Valueof 5%


31 March 2018 56,413.19 56,569.18

The following pages outline the factors considered, methodology and assumptions

employed in formulating our opinions and conclusions. Any opinions are subject to the

assumptions and limiting conditions contained therein.

Yours faithfully,




– 129 –

TABLE OF CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

PURPOSE OF VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

BASIS OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

SOURCES OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

MAJOR ASSUMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

DISCOUNT FOR LACK OF MARKETABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 135

VALUATION COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

OPINION OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

EXHIBIT A – LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

EXHIBIT B – VALUERS’ PROFESSIONAL DECLARATION . . . . . . . . . . . 142

EXHIBIT C – COMPARABLE COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . 143

EXHIBIT D – MARKET APPROACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144


– 130 –

INTRODUCTION

This report has been prepared in accordance with instructions from NVC Lighting

Holding Limited to express an independent opinion of the fair value of 5 percent equity value

in of Wuhu NVC Lighting E-Commerce Limited (“Wuhu NVC” or the “Company”) as at 31

March 2018 (the “Valuation Date”). The report which follows is dated 30 June 2018 (the

“Report Date”).

PURPOSE OF VALUATION

Our valuation is normally classified as,

• Internal Reference (for internal usage by the management of the company);

• Accounting Reference (for auditors to consider the accounting implications);

• Circular Reference (for disclosure in the circular to general public).

The purpose of this valuation is for Circular Reference.

BASIS OF VALUE




We have conducted our valuation in accordance with IFRS 13 – Fair Value Measurement

and taken into account the International Valuation Standards issued by the International

Valuation Standards Council. We planned and performed our valuation so as to obtain all the

information and explanations which we considered necessary in order to provide us with

sufficient evidence to express our opinion on the subject asset. We believe that the valuation

procedures we employed provide a reasonable basis for our opinion.

BACKGROUND

Company Background



e-commerce platforms and distribution channels.


– 131 –

SOURCES OF INFORMATION

This report was compiled after consideration of all relevant information obtained from the

Company and other public sources. Documents received include, but were not limited to:

• 2017 accountant’s report;

• Corporate structure of the company;

• Company Introduction; and

• Company business registration number and related information.

Other sources of information included:

• We have held discussions with the management of the Company regarding the

operational and the condition of the Company. We believe that the information

provided is reliable.

METHODOLOGY

In arriving at our assessed value, we have considered three generally accepted

approaches, namely, market approach, cost approach and income approach.

Market Approach considers prices recently paid for similar assets, with adjustments

made to market prices to reflect condition and utility of the appraised assets relative to the

market comparative. Assets for which there is an established secondary market may be valued

by this approach.

Benefits of using this approach include its simplicity, clarity, speed and the need for few

or no assumptions. It also introduces objectivity in application as publicly available inputs are

used. However, one has to be wary of the hidden assumptions in those inputs as there are

inherent assumptions on the value of those comparable assets. It is also difficult to find

comparable assets. Furthermore, this approach relies exclusively on the efficient market

hypothesis.

Cost Approach considers the cost to reproduce or replace in new condition the assets

appraised in accordance with current market prices for similar assets, with allowance for

accrued depreciation or obsolescence present, whether arising from physical, functional or

economic causes. The cost approach generally furnishes the most reliable indication of value

for assets without a known secondary market.

Despite the simplicity and transparency of this approach, it does not directly incorporate

information about the economic benefits contributed by the subject asset.


– 132 –

Income Approach is the conversion of expected periodic benefits of ownership into anindication of value. It is based on the principle that an informed buyer would pay no more forthe project than an amount equal to the present worth of anticipated future benefits (income)from the same or a substantially similar project with a similar risk profile.

This approach allows for the prospective valuation of future profits and there arenumerous empirical and theoretical justifications for the present value of expected future cashflows. However, this approach relies on numerous assumptions over a long time horizon andthe result may be very sensitive to certain inputs. It also presents a single scenario only.

Selection of Valuation Approach and Methodology

In our opinion, the income approach and cost approach are inappropriate for valuing theunderlying asset. Firstly, the income approach, technically known as discounted cash flowmethod, devolves the future value of the business into a present market value. We are informedthere is no secured contracts in the Company’s future earnings, and the management of theCompany could not provide a reliable amount of five-year economic income projection. Hence,the forecast of the reliable future cash flow of the Company is not available in this case.Secondly, the cost approach does not directly incorporate information about the economicbenefits contributed by the subject asset. We have therefore relied solely on the marketapproach based on the latest financial year Accountant’s Report in determining our opinion ofvalue. We applied P/E, P/B, and P/S multiples, which are calculated by using comparablecompanies’ financial statements, to determine the fair value of the company and then taken intoaccount of market illiquidity discount as the appropriate adjustments.

MAJOR ASSUMPTIONS

Assumptions considered to have significant sensitivity effects in this valuation have beenevaluated in order to provide a more accurate and reasonable basis for arriving at our assessedvalue.

The following key assumptions in determining the fair value of the equity value have beenmade:

• There will be no material change in the existing political, legal, technological, fiscalor economic conditions, which might adversely affect the business of the Company.

• The operational and contractual terms stipulated in the relevant contracts andagreements will be honored.

• The facilities and systems proposed are sufficient for future expansion in order torealize the growth potential of the business and maintain a competitive edge.

• We have assumed that there are no hidden or unexpected conditions associated withthe assets valued that might adversely affect the reported values. Further, we assumeno responsibility for changes in market conditions after the Valuation Date.


– 133 –

Summary of Market Approach

• Listed comparable companies

We have considered the information of certain listed comparable companies which are

engaged in the similar industry. The table below sets out the relevance of the comparable

companies in terms of businesses, classification and revenue.

ComparableCompany Ticker Classification

%Revenue

Financial Year2017 Reporting

Revenue

NVC Lighting

Holding Ltd.

2222 HK

EQUITY

Electric Lamp

Bulb & Parts


Light Fixture 70.94%Electronic Coil 6.48%

Neo-Neon

Holdings

Limited

1868 HK

EQUITY

Light Fixture 94.53% 768 million HKDInvest

Management

5.41%

Zhejiang Yankon

Group Co.,

Ltd.

600261 CH

EQUITY


Foshan Electrical

& Lighting

Co., Ltd.

000541 CH

EQUITY

Electric Lamp

Bulb & Parts


Electronic

Components

3.38%

Hengdian Group

Tospo Lighting

Co., Ltd.

603303 CH

EQUITY

Commercial

Light Fixture

100% 4,015 million RMB

Foshan

NationStar

Optoelectronics

Co. Ltd.

002449 CH

EQUITY

LED Lighting 100% 3,454 million RMB

OPPLE Lighting

Co., Ltd.

603515 CH

EQUITY


The selection of comparable companies is based on the industry peer of the Company,

which is in lighting products industry with sufficient trading volumes and has a reasonably

sufficient listing period. Considering the nature of the Company’s business, the number of


– 134 –

listed comparable companies in the exactly same nature of business, distribution of lighting

products, is limited. We have to expand the screening pool of the comparable companies to

include companies manufacturing and distribution of lighting products. Please refer to Exhibit

C of the valuation report for the comparable companies in terms of detail businesses

description.

• Multiples of comparable companies as at the Valuation Date

Ticker P/E P/B P/S

2222 HK EQUITY 6.99 0.71 0.541868 HK EQUITY 12.09 1.02 2.18600261 CH EQUITY 19.71 2.41 1.60000541 CH EQUITY 8.79 2.43 1.73603303 CH EQUITY 26.32 2.49 1.38002449 CH EQUITY 22.94 2.61 2.39603515 CH EQUITY 36.53 6.83 3.59Adopted Multiples 19.05 2.64 1.92

Note: Adopted multiples are calculated as mean multiples of comparable companies.

• Financial Data from the Company

FinancialYear 2017

FinancialYear 2017

FinancialYear 2017

Net income Book value Revenue(RMB’000) (RMB’000) (RMB’000)

Excluding non-controlling interests 107,802.97 80,367.54 893,177.78Including non-controlling interests 107,802.97 84,529.15 893,177.78

Note: All financial data is referred to the unaudited management accounts of WUHU NVC for the year ended31 December 2017.

DISCOUNT FOR LACK OF MARKETABILITY

A factor to be considered in valuing closely held companies is the marketability of an

interest in such businesses. Marketability is defined as the ability to convert the business

interest into cash quickly, with minimum transaction and administrative costs, and with a high

degree of certainty as to the amount of net proceeds. There is usually a cost and a time lag

associated with locating interested and capable buyers of interests in privately-held companies,

because there is no established market of readily-available buyers and sellers. All other factors

being equal, an interest in a publicly traded company is worth more because it is readily

marketable. Conversely, an interest in a private-held company is worth less because no

established market exists.


– 135 –

A discount for lack of marketability (DLOM) is a method used to calculate the value for

closely held and restricted shares. The theory behind DLOM is that discounts exist between the

value of a company’s marketable stock and not marketable stock. Therefore, a value reduction

will apply.

The Company do not have IPO Plan as at the Valuation Date, thus we refer to the article

“Discount for lack of Marketability, Job Aid for IRS Valuation Professionals 2009” to derive

the DLOM.

Since the Company’s revenue in financial year 2017 over $100 million US dollars,

average discount of 14.9% is used as a proxy for DLOM as at the Valuation Date.

Reference – Management Planning Study data

Analysis of Restricted Stock Discounts by Revenue Size

Number ofObservations

AverageRevenues

AverageDiscounts

Range of DiscountsRevenues Low High

($ millions)

Under $10 million 14 $6.6 32.9% 2.8% 57.6%$10 – $30 million 11 $22.5 30.8% 15.3% 49.8%$30 – $50 million 10 $33.5 25.2% 5.2% 46.3%$50 – $100 million 8 $63.5 19.4% 11.6% 29.3%Over $100 million (adjusted)* 4 $224.9 14.9% 0.0% 24.1%

Overall sample averages $47.5 27.7% 0.0% 57.6%Totals 47

*Over $100 million

(actual calculation) 2 $187.1 25.1% 0.0% 46.5%Totals 49

Excludes Sudbury Holdings, Inc., whose private placement consisted of 125% of the pre-transaction sharesoutstanding.

Excludes Starrett Housing Corp., which is one of the five most thinly traded companies in the sample.

Sources: Quantifying Marketability Discounts, by Z. Christopher Mercer, ASA, CFA, Peabody Publishing, LP, 1997,Figure 12-1, page 346. Job Aid for IRS Valuation Professionals.

Kumar, N. (2009). How Emerging Giants Are Rewriting the Rules of M&A. Harvard Business Review.


– 136 –

VALUATION COMMENTS

As part of our analysis, we have reviewed financial and business information from public

sources together with such financial information, project documentation and other pertinent

data concerning the project as has been made available to us. Such information has been

provided by the Company. We have assumed the accuracy of, and have relied on such

information. We have relied to a considerable extent on such information provided in arriving

at our opinion of value.

We confirm that we have made relevant searches and enquiries and obtained such further

information as is considered necessary for the purposes of this study.

In arriving at our assessed value, we have only considered the core business of the

Company. We have not made provision for other non-operating cash flow items such as interest

income, exchange rate gain/loss, etc. in the valuation model.


substantially on the use of numerous assumptions and the consideration of many uncertainties,

not all of which can be easily quantified or ascertained. Further, while the assumptions and




Advisory Limited.

RISK FACTORS

• Economic considerations

The PRC economy has experienced significant growth in the past decade, but such growth

has been uneven geographically and rose among different sectors of the economy. There is no

assurance that the expected economic growth will be realized and future social and economic

changes in the PRC will be favorable to the Company. The competition in the industry may

have adverse effect on the operating performance of the Company and hence affect the value

of the business.

• Changes in political, economic and regulatory environment in the PRC

The Company is subject to various laws and regulations governing its operations in the

PRC. Future political and legal changes in the PRC might have either favorable or unfavorable

impacts on the Company.


– 137 –

OPINION OF VALUE




Valuation Date

Fair Valueof 5%



Fair Valueof 5%


31 March 2018 56,413.19 56,569.18

LIMITING CONDITIONS

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

Yours faithfully,




– 138 –

EXHIBIT A – LIMITING CONDITIONS

1. In the preparation of our reports, we relied on the accuracy, completeness and

reasonableness of the financial information, forecast, assumptions and other data

provided to us by the Company/engagement parties and/or its representatives. We did not

carry out any work in the nature of an audit and neither are we required to express an audit

or viability opinion. We take no responsibility for the accuracy of such information. Our

reports were used as part of the Company’s/engagement parties’ analysis in reaching their

conclusion of value and due to the above reasons, the ultimate responsibility of the

derived value of the subject property rests solely with the Company/engagement parties.

2. We have explained as part of our service engagement procedure that it is the director’s

responsibility to ensure proper books of accounts are maintained, and the financial

information and forecast give a true and fair view and have been prepared in accordance

with the relevant standards and companies ordinance.

3. Public information and industry and statistical information have been obtained from

sources we deem to be reputable; however we make no representation as to the accuracy

or completeness of such information, and have accepted the information without any

verification.

4. The management and the Board of the Company/engagement parties have reviewed and

agreed on the report and confirmed that the basis, assumptions, calculations and results

are appropriate and reasonable.

5. Jones Lang LaSalle Corporate Appraisal and Advisory Limited shall not be required to

give testimony or attendance in court or to any government agency by reason of this

exercise, with reference to the project described herein. Should there be any kind of

subsequent services required, the corresponding expenses and time costs will be

reimbursed from you. Such kind of additional work may incur without prior notification

to you.

6. No opinion is intended to be expressed for matters which require legal or other specialised

expertise, which is out of valuers’ capacity.

7. The use of and/or the validity of the report is subject to the terms of engagement

letter/proposal and the full settlement of the fees and all the expenses.

8. Our conclusions assume continuation of prudent and effective management policies over

whatever period of time that is considered to be necessary in order to maintain the

character and integrity of the assets valued.


– 139 –

9. We assume that there are no hidden or unexpected conditions associated with the subject

matter under review that might adversely affect the reported review result. Further, we

assume no responsibility for changes in market conditions, government policy or other

conditions after the Valuation/Reference Date. We cannot provide assurance on the

achievability of the results forecasted by the Company/engagement parties because events

and circumstances frequently do not occur as expected; difference between actual and

expected results may be material; and achievement of the forecasted results is dependent

on actions, plans and assumptions of management.

10. This report has been prepared solely for internal use purpose. The report should not be

otherwise referred to, in whole or in part, or quoted in any document, circular or statement

in any manner, or distributed in whole or in part or copied to any their party without our

prior written consent. We shall not under any circumstances whatsoever be liable to any

third party.

11. This report is confidential to the client and the calculation of values expressed herein is

valid only for the purpose stated in the engagement letter/or proposal as of the

Valuation/Reference Date. In accordance with our standard practice, we must state that

this report and exercise is for the use only by the party to whom it is addressed to and no

responsibility is accepted with respect to any third party for the whole or any part of its

contents.

12. Where a distinct and definite representation has been made to us by party/parties

interested in the assets valued, we are entitled to rely on that representation without

further investigation into the veracity of the representation.

13. You agree to indemnify and hold us and our personnel harmless against and from any and

all losses, claims, actions, damages, expenses or liabilities, including reasonable

attorney’s fees, to which we may become subjects in connection with this engagement.

Our maximum liability relating to services rendered under this engagement (regardless of

form of action, whether in contract, negligence or otherwise) shall be limited to the fee

paid to us for the portion of its services or work products giving rise to liability. In no

event shall we be liable for consequential, special, incidental or punitive loss, damage or

expense (including without limitation, lost profits, opportunity costs, etc.), even if it has

been advised of their possible existence.

14. We are not environmental, structural or engineering consultants or auditors, and we take

no responsibility for any related actual or potential liabilities exist, and the effect on the

value of the asset is encouraged to obtain a professional assessment. We do not conduct

or provide such kind of assessments and have not considered the potential impact to the

subject property.


– 140 –

15. This exercise is premised in part on the historical financial information and future

forecast provided by the management of the Company/engagement parties and/or its

representatives. We have assumed the accuracy and reasonableness of the information

provided and relied to a considerable extent on such information in our calculation of

value. Since projections relate to the future, there will usually be differences between

projections and actual results and in some cases, those variances may be material.

Accordingly, to the extent any of the above mentioned information requires adjustments,

the resulting value may differ significantly.

16. This report and the conclusion of values arrived at herein are for the exclusive use of our

client for the sole and specific purposes as noted herein. Furthermore, the report and

conclusion of values are not intended by the author, and should not be construed by the

reader, to be investment advice or as financing or transaction reference in any manner

whatsoever. The conclusion of values represents the consideration based on the

information furnished by the Company/engagement parties and other sources. Actual

transactions involving the subject assets/business might be concluded at a higher or lower

value, depending upon the circumstances of the transaction and the business, and the

knowledge and motivation of the buyers and sellers at that time.

17. The management or staff of the Company/engagement parties and/or its representatives

have confirmed to us that the transaction or themselves or the parties involved in the

pertained assets or transaction are independent to our firm and JLL in this valuation or

calculation exercise. Should there be any conflict of interest or potential independence

issue that may affect our independency in our work, the Company/engagement parties

and/or its representatives should inform us immediately and we may need to discontinue

our work and we may charge our fee to the extent of our work performed or our manpower

withheld or engaged.


– 141 –

EXHIBIT B – VALUERS’ PROFESSIONAL DECLARATION

The following valuers certify, to the best of their knowledge and belief, that:

• Information has been obtained from sources that are believed to be reliable. All facts

which have a bearing on the value concluded have been considered by the valuers

and no important facts have been intentionally disregarded.

• The reported analyses, opinions, and conclusions are subject to the assumptions as

stated in the report and based on the valuers’ personal, unbiased professional

analyses, opinions, and conclusions. The valuation exercise is also bounded by the

limiting conditions.

• The reported analyses, opinions, and conclusions are independent and objective.

• The valuers have no present or prospective interest in the asset that is the subject of

this report, and have no personal interest or bias with respect to the parties involved.

• The valuers’ compensation is not contingent upon the amount of the value estimate,

the attainment of a stipulated result, the occurrence of a subsequent event, or the

reporting of a predetermined value or direction in value that favours the cause of the

client.

• The analyses, opinions, and conclusions were developed, and this report has been

prepared, in accordance with the International Valuation Standards published by the

International Valuation Standards Council.

• The under mentioned persons provided professional assistance in the compilation of

this report:

Simon M. K. ChanRegional Director

Michael Q. DingLocal Director

Joyce J. XuAssistant Manager

Jenna J.L. WuAnalyst


– 142 –

EXHIBIT C – COMPARABLE COMPANIES

Company Name Ticker Description

NVC Lighting Holding Ltd. 2222 HK NVC Lighting Holding Ltd designs, manufactures anddistributes lighting fixtures.

Neo-Neon Holdings Limited 1868 HK Neo-Neon Holdings Limited is a decorative lighting companystationed in Hong Kong. It engages in the research,development, manufacturing and distribution of lightingproducts including incandescent, LED, decorative andentertainment lighting products.

Zhejiang Yankon Group Co.,Ltd.

600261 CH Zhejiang Yankon Group Co., Ltd. manufactures electronicenergy-saving lamps, energy-saving fluorescence bulbs, andother related lighting systems. The Company sells itsproducts domestically and exports to other countries.

Foshan Electrical &Lighting Co., Ltd.

000541 CH Foshan Electrical and Lighting Co., Ltd. manufactures andmarkets electro-optical products and auxiliary luminaryseries products. The Company’s products include ordinarybulbs, decorative bulbs, iodine-tungsten lamps, bromine-tungsten lamps, automobile lamps, motorcycle lamps, high-tension mercury lamps, high-tension sodium lamps, andother related products.

Hengdian Group TospoLighting Co., Ltd.

603303 CH Hengdian Group Tospo Lighting Co., Ltd. manufactureslighting products. The Company produces and sells compactfluorescent lamp bulbs, LED bulbs, lighting electronics,outdoor luminaries, and more. Hengdian Group TospoLighting markets its products throughout the world.

Opple Lighting Co. Ltd. 603515 CH Opple Lighting Co. Ltd. manufactures lighting products. TheCompany designs, produces, and sells bulbs, lightingfixtures, LED, and other related items around the world.

Foshan NationStarOptoelectronics Co. Ltd.

002449 CH Foshan NationStar Optoelectronics Co.Ltd, specializing inmanufacturing LED and LED applied products, is a hi-techenterprise of China, and a key hi-tech enterprise of theNational Torch Plan. Founded in 1969, with advantages oncapital, distribution channels, R&D, and management, it hasbeen ranked in the list of the famous LED brands.


– 143 –

EXHIBIT D – MARKET APPROACH

Excluding non-controlling interests




Source: Bloomberg





Financial Figures

Financialyear 2017

Net income

Financialyear 2017

Book value

Financialyear 2017

Revenue


(Before DLOM and Control Premium) 2,053,955 212,400 1,711,073DLOM 14.90% 306,039.24 31,647.59 254,949.94Target Company Fair Value 1,747,915.40 180,752.34 1,456,123.50Average Target Company 100% equity value 1,128,263.75Average Target Company 5% equity value 56,413.19


– 144 –

Including non-controlling interests




Source: Bloomberg





Financial Figures

Financialyear 2017

Net income

Financialyear 2017

Book value

Financialyear 2017

Revenue


(Before DLOM and Control Premium) 2,053,955 223,398 1,711,073DLOM 14.90% 306,039.24 33,286.37 254,949.94Target Company Fair Value 1,747,915.40 190,112.09 1,456,123.50Average Target Company 100% equity value 1,131,383.66Average Target Company 5% equity value 56,569.18


– 145 –

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full

responsibility, includes particulars given in compliance with the Listing Rules for the purpose

of giving information with regard to the Group. The Directors, having made all reasonable

enquiries, confirm that to the best of their knowledge and belief, the information contained in

this circular is accurate and complete in all material respects and not misleading or deceptive,

and there are no other matters the omission of which would make any statement herein or this

circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors

As at the Latest Practicable Date, none of the Directors or chief executives of the

Company have or are deemed to have interests or short positions in the shares, underlying

shares or debentures of the Company and its associated corporations (within the meaning of

Part XV of the SFO) which were required to be notified to the Company and the Stock

Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short

positions which they were taken or deemed to have under such provisions of the SFO), or

recorded in the register required to be maintained pursuant to Section 352 of Part XV of the

SFO, or which were otherwise required to be notified to the Company and the Stock Exchange

pursuant to the provisions of the Model Code for Securities Transactions by Directors of Listed

Companies of the Listing Rules.

(b) Interests of Directors as director or employee of a substantial shareholder or anysubsidiaries of a substantial shareholder

Mr. WANG Donglei holds 90% equity interest in Wuhu Elec-Tech Investment Co., Ltd.*

(蕪湖德豪投資有限公司), Wuhu Elec-Tech Investment Co., Ltd.* (蕪湖德豪投資有限公司) in

turn holds 16.57% of the shares of ETIC, and ETIC in turn holds 24.30% of the shares

(870,346,000 shares as at 31 December 2017) of the Company. Mr. WANG Donglei is also a

director and chairman of ETIC and holds directorships in a number of subsidiaries of ETIC

Group. Apart from this, Mr. XIAO Yu holds directorships in a number of subsidiaries of ETIC

Group and Mr. LI Huating is a deputy chairman and general manager of ETIC.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors was a

director or employee of a company which had an interest or short position in the Shares or

underlying Shares in the Company which would fall to be disclosed to the Company and the

Stock Exchange under provisions of Divisions 2 and 3 of Part XV of the SFO.

APPENDIX VI GENERAL INFORMATION

– 146 –

(c) Interests of Substantial Shareholders

As the Directors were aware, as at the Latest Practicable Date, the interests or short

positions of the persons, other than a Director or chief executive of the Company, in the shares

or underlying shares or debentures of the Company which were recorded in the register

required to be kept by the Company pursuant to Section 336 of the SFO were as follows:

Name of Shareholder Nature of Interest

Class of

Shares

Number of

Shares

Percentage

of the Total

Shares

Issued

Elec-Tech International

(H.K.) Company Limited

Beneficial owner Ordinary

Shares

870,346,000 (L)

(Note 1)

24.30%

Elec-Tech International Co.,

Ltd.

Interest of corporation

controlled by the

substantial shareholders

Ordinary

Shares

870,346,000 (L)

(Note 2)

24.30%

Haitong International Credit

Company Limited

Security interest in shares Ordinary

Shares

870,346,000 (L) 24.30%

Haitong International

Securities Group Limited


controlled by the


Ordinary

Shares

870,346,000 (L)

(Note 3)

24.30%

Haitong International

Holdings Limited


controlled by the


Ordinary

Shares

870,346,000 (L)

(Note 3)

24.30%

Haitong Securities Co., Ltd. Interest of corporation

controlled by the


Ordinary

Shares

870,346,000 (L)

(Note 3)

24.30%

Guoyuan Investment Fund

Series SPC (Acting on

behalf of Guoyuan

Global Income Fund

Segregated Portfolio)


shares

649,350,649 (L)

(Note 4)

18.13%

Schneider Electric Asia

Pacific Limited


shares

288,371,000 (L) 8.05%

Schneider Electric

Industries SAS


controlled by the


Ordinary

shares

288,371,000 (L)

(Note 5)

8.05%


– 147 –

Name of Shareholder Nature of Interest

Class of

Shares

Number of

Shares

Percentage

of the Total

Shares

Issued

Schneider Electric SE Interest of corporation

controlled by the


Ordinary

shares

288,371,000 (L)

(Note 5)

8.05%

YE Yong Beneficial owner Ordinary

shares

270,227,000 (L) 7.54%

Spouse’s interest Ordinary

shares

7,433,000 (L)

(Note 6)

0.21%

OP Financial Investments

Limited

Security interest in shares Ordinary

Shares

213,887,000 (L) 5.97%

Notes:

1. (L) represents long position.

2. These shares were held by Elec-Tech International (H.K.) Company Limited. As Elec-Tech International(H.K.) Company Limited is a wholly-owned subsidiary of ETIC, ETIC is deemed to be interested in allthese shares.

3. Haitong International Credit Company Limited has a security interest in these shares. As HaitongInternational Credit Company Limited is a wholly-owned subsidiary of Haitong International FinanceCompany Limited, which in turn is a wholly-owned subsidiary of Haitong International (BVI) Limited,which is a wholly-owned subsidiary of Haitong International Securities Group Limited, 62.43% interestof Haitong International Securities Group Limited is held by Haitong International Holdings Limited,and which is a wholly-owned subsidiary of Haitong Securities Co., Ltd., Haitong Securities Co., Ltd.,Haitong International Holdings Limited and Haitong International (BVI) Limited are deemed to beinterested in these shares.

4. These shares represent the maximum number of shares to be issued and allotted upon exercise in fullof the conversion rights attaching to the Convertible Bonds issued by the Company pursuant to thesubscription agreement dated 20 May 2016 and amendment deed dated 4 May 2018 entered into betweenthe Company and Guoyuan Investment Fund Series SPC (acting on behalf of Guoyuan Global IncomeFund Segregated Portfolio).

5. These shares were held by Schneider Electric Asia Pacific Limited. As Schneider Electric Asia PacificLimited is a wholly-owned subsidiary of Schneider Electric Industries SAS, which in turn is awholly-owned subsidiary of Schneider Electric SE, Schneider Electric Industries SAS and SchneiderElectric SE are deemed to be interested in these shares.

6. As these shares are held by Ms. GAO Xia, the spouse of Mr. YE Yong, Mr. YE Yong is deemed to beinterested in these shares.


– 148 –

3. DIRECTOR’S INTERESTS IN COMPETING BUSINESS

Mr. WANG Donglei holds 90% equity interest in Wuhu Elec-Tech Investment Co., Ltd.*

(蕪湖德豪投資有限公司), Wuhu Elec-Tech Investment Co., Ltd.* (蕪湖德豪投資有限公司) in

turn holds 16.57% of the shares of ETIC, and ETIC in turn holds 24.30% of the shares

(870,346,000 shares as at 31 December 2017) of the Company. Mr. WANG Donglei is also a

director and chairman of ETIC and holds directorships in a number of subsidiaries of ETIC

Group. Apart from this, Mr. XIAO Yu holds directorships in a number of subsidiaries of ETIC

Group and Mr. LI Huating is a deputy chairman and general manager of ETIC. To the best

knowledge of the Company, ETIC was established on 14 May 1996 with issued capital of

RMB1,764,720,000 as at 31 December 2017, the shares of which were listed on the Shenzhen

Stock Exchange in June 2004. Based on the preliminary annual result of ETIC dated 13

February 2018 (unaudited and subject to further adjustment), its operating revenue for the year

of 2017 is approximately RMB4,203,131,000, its net loss is approximately RMB896,495,000

and its total assets is approximately RMB14,209,926,000. The principal business of ETIC is

production and sale of small household appliances and LED products, while the Group’s

subsidiaries are principally engaged in the production and sale of lamp products, luminaire

products and lighting electronic products, including a variety of LED lamps, luminaires and

electrical products. As a result, Mr. WANG Donglei, Mr. XiAO Yu and Mr. LI Huating are

deemed to be interested, directly or indirectly, in the business that competes or may compete

with that of the Company and/or its subsidiaries.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or their

respective associates (as defined under the Listing Rules) of the Company was interested in any

business which competes or is likely to compete with the businesses of the Group.

4. DIRECTOR’S INTERESTS IN ASSETS

Reference is made to the announcement dated 14 March 2018 of the Company in relation

to, among others, a non-binding co-operation framework agreement (the “Co-operationFramework Agreement”) entered by the Company with ETIC and Mr. WANG Donglei.

Pursuant to the Co-operation Framework Agreement, subject to entering into definitive

agreements, the Company intends to sell, and ETIC and Mr. WANG Donglei intend to acquire,

directly and indirectly, the Company’s domestic lighting products manufacturing business (the

“Potential Disposal Assets”) which includes but not limited to the entire share capital of

Huizhou NVC Lighting Technology Co., Ltd.* (惠州雷士光電科技有限公司) (the “PotentialDisposal”). The definitive scope of the Target Assets will be subject to further discussions

between the Parties.

Pursuant to the Co-operation Framework Agreement, Mr. WANG Donglei and ETIC

intend to acquire the Potential Disposal Assets. Mr. WANG Donglei indirectly holds equity

interests in ETIC, is a director and chairman of ETIC and holds directorships in a number of


– 149 –

subsidiaries of ETIC Group. Mr. XIAO Yu holds directorships in a number of subsidiaries of

ETIC Group. Mr. LI Huating is a deputy chairman and general manager of ETIC. Therefore,

Mr. WANG Donglei, Mr. XIAO Yu and Mr. LI Huating are deemed to be interested in the

Potential Disposal Assets.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any

interest, direct or indirect, in any assets which had been acquired or disposed of by, or leased

to, any member of the Group or were proposed to be acquired or disposed of by, or leased to,

any member of the Group since 31 December 2017, being the date to which the latest published

audited consolidated financial statements of the Company were made up.

5. DIRECTOR’S SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed

service contracts with any member of the Group which is not determinable by such member of

the Group within one year without payment of compensation (other than statutory

compensation).

6. DIRECTOR’S INTERESTS IN CONTRACTS OR ARRANGEMENTS

Mr. WANG Donglei indirectly holds equity interests in ETIC, is a director and chairman

of ETIC and holds directorships in a number of subsidiaries of ETIC Group. Mr. XIAO Yu

holds directorships in a number of subsidiaries of ETIC Group. Mr. LI Huating is a deputy

chairman and general manager of ETIC. Therefore, Mr. WANG Donglei, Mr. XIAO Yu and Mr.

LI Huating are deemed to be interested in several connected transactions and continuing

connected transactions entered between the Group and ETIC, including (i) the acquisition of

shares of ETIC to the amount of no more than RMB110 million on market by the Company,

details of which were disclosed in the announcement dated 12 June 2017 of the Company; (ii)

a trademark licensing agreement entered between a wholly owned subsidiary of the Group and

ETIC on 22 January 2016, details of which were disclosed in the announcement dated 22

January 2016 of the Company; (iii) a renewed framework finished products and raw materials

purchase agreement entered between the Company and ETIC on 22 January 2016, details of

which were disclosed in the announcement dated 22 January 2016 of the Company; (iv) a

framework sales agreement entered between the Company and ETIC on 14 March 2016, details

of which were disclosed in the announcement dated 14 March 2016 of the Company; (v) two

lease agreements entered between the Company and ETIC on 22 January 2016, details of which

were disclosed in the announcement dated 22 January 2016 of the Company; and (vi) a

transportation and warehousing services framework agreement entered between the Company

and ETIC on 22 December 2017, details of which were disclosed in the announcement dated

22 December 2017 of the Company.

As at the Latest Practicable Date, Mr. WANG Donglei held 60% equity interests in NVC

Singapore. Therefore, Mr. WANG Donglei is deemed to be interested in several continuing

connected transactions entered between the Group and NVC Singapore, including (i) a service

agreement entered between NVC HK and NVC Singapore, details of which were disclosed in


– 150 –

the announcement dated 18 May 2017 of the Company; and (ii) a sales framework agreement

entered between the Company and NVC Singapore, details of which were disclosed in the

announcement dated 22 December 2017 of the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors was

materially interested in any contract or arrangement subsisting and which was significant in

relation to the business of the Group.

7. MATERIAL LITIGATION

(a) The Group as a Plaintiff

A subsidiary of the Company (the “Subsidiary”) entered into several pledge and

guarantee agreements in 2013 and 2014 (the “Pledge and Guarantee Agreements”) with

certain banks in the PRC, providing guarantees to the banks for their loan facilities granted to

certain borrowers. Counter guarantees were provided by one of the borrowers of the bank

loans, namely Chongqing Wu Ji Real Estate Development Co., Ltd. (“Wu Ji”), to the Group.

During 2014, aggregate pledged time deposits of RMB550,924,000 of the Subsidiary had been

withdrawn by the banks due to default of the bank loans under the guarantees of the Subsidiary.

The Group initiated a series of legal proceedings against Mr. WU Changjiang, a former director

and former chief executive officer of the Company, Mrs. WU Lian (spouse of Mr. WU

Changjiang), Mr. WU Xianming, Mrs. CHEN Min, Chongqing Lei Li Jie Industrial

Development Co., Ltd., Wu Ji, Chongqing Jiang Te Surface Treatment Co., Ltd. and Chongqing

Hua Biao Lighting Manufacturing Co., Ltd., in the Intermediate People’s Court of Huizhou for

damages. In addition, as indicated in 8 letters of counter guarantee issued by Wu Ji with dates

in 2013 and 2014, Wu Ji provided counter guarantees to the Group to reimburse any losses for

provision of guarantees on the bank loans borrowed by certain PRC companies under the

Pledge and Guarantee Agreements.

(b) The Group as a Defendant

The Subsidiary also entered into guarantee agreements with another PRC bank in 2013

(the “Guarantee Agreement 1”) and a PRC finance company in 2014 (the “GuaranteeAgreement 2”) respectively, providing guarantees to the PRC bank and the PRC finance

company for their loan facilities granted to their borrowers. Mrs. WU Lian is the borrower of

the loan in relation to the Guarantee Agreement 2.

The outstanding loans of RMB35,497,000 and RMB34,000,000 in relation to the

Guarantee Agreements 1 and 2 were in default in 2015 and 2014 respectively. The PRC bank

and the PRC finance company have taken legal actions against the respective borrowers and the

guarantors (including the Subsidiary and Wu Ji as guarantors) to recover the loan balances and

interests.


– 151 –

For the Guarantee Agreement 1, according to the first court judgement in 2016 and the

final court judgement in May 2017, the Subsidiary is adjudicated to be jointly liable for the

payment to the PRC bank of the outstanding loan, plus interest and costs. The Subsidiary has

filed application of retrial of the PRC court judgements and the commencement of the related

legal proceeding has been accepted by the PRC court in January 2018. In May 2018, the

Company has received the ruling of the PRC court which rejected the Subsidiary’s application

of retrial.

For the Guarantee Agreement 2, according to the first court judgement in 2016 and the

final court judgement in September 2017, the Subsidiary is adjudicated to be jointly liable for

the payment to the PRC finance company of the outstanding loan, plus interest and costs. The

Subsidiary is in the process of applying for protest of the PRC court judgements.

In addition to the above agreements, the Subsidiary entered into a guarantee agreement

(the “Guarantee Agreement 3”) with a PRC bank in 2014, providing guarantee to the bank for

a loan facility granted to its borrower. In addition, the bank loan was secured by the pledge of

a piece of land owned by Wu Ji. The bank loan was in default in 2014 and the bank has taken

legal actions against the borrower and the guarantors (including the Subsidiary) to recover the

bank loan balance and interest. A court order was issued to freeze assets of the guarantors

(including the Subsidiary) in the amount of RMB62,000,000. As a result of the court order,

bank balance of the Subsidiary in the amount of RMB55,396,000 had been frozen by the bank

as at 31 December 2016. According to the first court judgement in 2016 and the final court

judgement in January 2017, the Subsidiary is adjudicated to be jointly liable for the payment

to the PRC bank of RMB60,000,000, plus interest and costs. In February 2017, the frozen bank

balance of the Subsidiary has been withdrawn by the court for the purpose of settlement of the

claim by the PRC bank. During 2017, the Subsidiary filed an application of retrial of the PRC

court judgements in relation to Guarantee Agreement 3 which was rejected by the PRC court.

During 2017, the Subsidiary has filed an application of protest of the PRC court judgements

and the commencement of the related legal proceeding has been accepted by the PRC court in

March 2018. In May 2018, the Subsidiary’s application of protest has been submitted to the

Supreme People’s Procuratorate by the Chongqing People’s Procuratorate.

Save as disclosed above, neither the Company nor any of its subsidiaries was engaged in

any litigation or arbitration or claims of material importance which is known to the Directors

to be pending or threatened by or against either the Company or any of its subsidiaries as at

the Latest Practicable Date.


– 152 –

8. MATERIAL CONTRACTS

Reference is made to the announcement dated 25 April 2018 of the Company in relation

to a legally binding heads of agreement (the “Heads of Agreement”) entered between the

Company and Jadestone China High-technology Industry Investment Fund LP for the proposed

acquisition of 100% equity interest in Elec-Tech Solid State Lighting (HK) Limited, which

constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.

Pursuant to the Heads of Agreement, the total consideration of the proposed major transaction

is RMB900,000,000 to be settled in cash.

Save for the Heads of Agreement, the Sale and Purchase Agreement I and the Sale and

Purchase Agreement II, as at the Latest Practicable Date, no contract, not being contracts

entered into in the ordinary course of business, was entered into by members of the Group

within the two years immediately preceding the date of this circular and ending on the Latest

Practicable Date which is or may be material.

9. MAJOR ACQUISITIONS

Reference is made to the announcement dated 25 April 2018 of the Company in relation

to the Heads of Agreement entered between the Company and Jadestone China High-

technology Industry Investment Fund LP for the proposed acquisition of 100% equity interest

in Elec-Tech Solid State Lighting (HK) Limited, which constitutes a major transaction for the

Company under Chapter 14 of the Listing Rules.

Elec-Tech Solid State Lighting (HK) Limited is a limited company incorporated in Hong

Kong on 31 May 2010. The principal business activities of Elec-Tech Solid State Lighting

(HK) Limited and its subsidiaries involve the design, manufacturing and sale of LED lighting

products to North America markets. Elec-Tech Solid State Lighting (HK) Limited is

headquartered in Hong Kong with offices in the United States (Chicago and Atlanta) and

factories in the PRC (Zhuhai and Wuhu). Pursuant to the Heads of Agreement, the total

consideration of the proposed major transaction is RMB900,000,000 to be settled in cash. The

remuneration payable to and benefits in kind receivable by the directors of Elec-Tech Solid

State Lighting (HK) Limited will not be varied in consequence of the acquisitions mentioned

above.

Save as disclosed in this circular, after the date to which the latest published audited

accounts of the Group have been made up, the Group has not acquired or agreed to acquire or

is proposing to acquire a business or an interest in the share capital of a company whose profits

or assets make or will make a material contribution to the figures in the auditors’ report or next

published accounts of the Group.


– 153 –

10. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinions or advice,

which are contained or referred to in this circular:

Name Qualification

BDO Limited Certified Public Accountants

Gram Capital Limited Licensed corporation to carry out Type 6 (advising on

corporate finance) regulated activity under the SFO

JLL Independent Valuer

As at the Latest Practicable Date, each of BDO Limited, Gram Capital and JLL:

(a) has given and has not withdrawn its written consent to the issue of this circular with

the inclusion of its letter and references to its name, in the form and context in which

it appears;

(b) did not have any shareholding in any member of the Group or the right (whether

legally enforceable or not) to subscribe for or to nominate persons to subscribe for

securities in any member of the Group; and

(c) did not have any direct or indirect interest in any assets which had been since 31

December 2017 (the date to which the latest published audited consolidated

financial statements of the Company were made up), acquired, disposed of by, or

leased to any member of the Group or were proposed to be acquired or disposed of

by, or leased to any member of the Group.


– 154 –

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal

business hours at Level 54, Hopewell Centre 183 Queen’s Road East, Hong Kong from the date

of this circular up to and including the date of the EGM:

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

(b) The Previous Sale and Purchase Agreement;

(c) The Sale and Purchase Agreement I;

(d) The Sale and Purchase Agreement II;

(e) The letter from Gram Capital, the texts of which is set out in this circular;

(f) The accountant’s report on the historical financial information of the Target Group,

the texts of which are set out in Appendix II to this circular;

(g) The accountant’s report on the unaudited pro forma financial information of the

Enlarged Group, the texts of which are set out in Appendix IV to this circular;

(h) The valuation report on the entire equity value of Blue Light, the texts of which are

set out in Appendix VA to this circular;

(i) The valuation report on the 5% equity value of Wuhu NVC, the texts of which are

set out in Appendix VB to this circular;

(j) The Heads of Agreement;

(k) All the agreements and contracts mentioned in the paragraphs headed “Director’s

Interests in Assets”, “Director’s Interests in Contracts or Arrangements” and

“Material Litigation” of Appendix VI to this circular;

(l) The annual reports of the Company for each of the three years ended 31 December

2015, 2016 and 2017, respectively;

(m) The written consents referred to in the paragraphs headed “Experts and Consents”

above in this Appendix; and

(n) This circular.


– 155 –

12. GENERAL INFORMATION

(a) The joint company secretaries of the Company are Ms. Lo Yee Har, Susan (盧綺霞)

and Miss Leung Ching Ching (梁晶晶). Ms. Lo Yee Har, Susan is an Executive

Director of Tricor Services Limited and a fellow member of both The Institute of

Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered

Secretaries. Miss Leung Ching Ching is a Chartered Secretary and an Associate of

both The Hong Kong Institute of Chartered Secretaries and The Institute of

Chartered Secretaries and Administrators in the United Kingdom.

(b) The registered office of the Company is Cricket Square, Hutchins Drive P.O. Box

2681 Grand Cayman, KY1-1111 Cayman Islands.

(c) The headquarter of the Company is NVC Industrial Park, Ruhu Town, Huizhou City,

Guangdong Province, The People’s Republic of China.

(d) The principal place of business in Hong Kong of the Company is Level 54,

Hopewell Centre 183 Queen’s Road East, Hong Kong.

(e) The share registrar and transfer office in the Cayman Islands of the Company is SMP

Partners (Cayman) Limited at Royal Bank House – 3rd Floor, 24 Shedden Road, P.O.

Box 1586, Grand Cayman, KY1-1110, Cayman Islands.

(f) The branch share registrar and transfer office of the Company in Hong Kong is

Computershare Hong Kong Investor Service Limited at 17M Floor, Hopewell

Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

(g) In the event of inconsistency, the English text of this circular shall prevail over the

Chinese text.


– 156 –


(Stock code: 2222)

Notice is hereby given that an extraordinary general meeting (the “EGM”) of NVCLighting Holding Limited (the “Company”) will be held at Room C3, Admiralty ConferenceCentre, 1804, 18/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong onWednesday, 18 July 2018 at 10:00 a.m. for the purpose of considering and, if thought fit,passing, with or without amendments, the following resolutions as ordinary resolutions:

1. “THAT:

(a) the transactions contemplated under the Sale and Purchase Agreement I (asdefined and described in the circular to the shareholders of the Company dated30 June 2018, a copy of which has been produced to the meeting marked “A”and signed by the Chairman of the meeting for the purpose of identification)be and are hereby approved, ratified and confirmed; and

(b) the directors of the Company or any other person authorized by the directorsof the Company be and are hereby authorized to sign, execute, perfect anddeliver all such documents and do all such deeds, acts, matters and things asthey may in their absolute discretion consider necessary or desirable for thepurpose of or in connection with the implementation of the Sale and PurchaseAgreement I and all transactions and other matters contemplated thereunder orancillary thereto, to waive compliance from and/or agree to any amendment.”

2. “THAT:

(a) the transactions contemplated under the Sale and Purchase Agreement II (asdefined and described in the circular to the shareholders of the Company dated30 June 2018, a copy of which has been produced to the meeting marked “B”and signed by the Chairman of the meeting for the purpose of identification)be and are hereby approved, ratified and confirmed; and

(b) the directors of the Company or any other person authorized by the directorsof the Company be and are hereby authorized to sign, execute, perfect anddeliver all such documents and do all such deeds, acts, matters and things asthey may in their absolute discretion consider necessary or desirable for thepurpose of or in connection with the implementation of the Sale and PurchaseAgreement II and all transactions and other matters contemplated thereunder orancillary thereto, to waive compliance from and/or agree to any amendment.”

By Order of the BoardNVC Lighting Holding Limited

WANG DongleiChairman

Hong Kong, 30 June 2018

NOTICE OF EGM

– 157 –

Notes:

1. All resolutions at the meeting (except those relate purely to the procedural or administrative matters, whichshould be taken by a show of hands as the chairman of the extraordinary general meeting (the “Meeting”) maydecide, in good faith) will be taken by a poll pursuant to the Rules Governing the Listing of Securities on TheStock Exchange of Hong Kong Limited (the “Listing Rules”) and the results of the poll will be published onthe websites of Hong Kong Exchanges and Clearing Limited and the Company in accordance with the ListingRules.

2. Any shareholder of the Company entitled to attend and vote at the above Meeting is entitled to appoint a proxy(or more than one proxy if he/she is the holder of two or more shares) to attend and, on a poll, vote on his/herbehalf. A proxy need not be a shareholder of the Company. If more than one proxy is so appointed, the formof proxy shall specify the number of shares in respect of which each such proxy is so appointed. In case ofa poll every shareholder present in person or by proxy shall be entitled to one vote for each share held by him.

3. In order to be valid, the form of proxy together with the power of attorney or other authority, if any, underwhich it is signed or a notarially certified copy of that power of attorney or authority, must be deposited at theCompany’s Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at 17MFloor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any eventnot less than 48 hours before the time appointed for the holding of the Meeting (i.e. not later than 10:00 a.m.on Monday, 16 July 2018). Delivery of the form of proxy shall not preclude a shareholder of the Company fromattending and voting in person at the Meeting and, in such event, the instrument appointing a proxy shall bedeemed to be revoked.

4. The register of members of the Company will be closed from Friday, 13 July 2018 to Wednesday, 18 July 2018(both dates inclusive), during which periods no transfer of shares will be registered. In order to qualify forattending and voting at the Meeting, all transfer documents accompanied by the relevant share certificates mustbe lodged with the Company’s Hong Kong branch share registrar, Computershare Hong Kong Investor ServicesLimited, Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong forregistration before 4:30 p.m. on Thursday, 12 July 2018.

5. References to time and dates of this notice are to Hong Kong time and dates.

6. As at the date of this notice, the Board consists of the following directors:

Executive Directors:WANG DongleiWANG DongmingXIAO YuWANG Keven Dun

Non-executive Directors:LI HuatingLI Wei

Independent Non-executive Directors:LEE Kong Wai, ConwayWANG XuexianWEI HongxiongSU Ling

NOTICE OF EGM

– 158 –

major and connected transactions in relation to the proposed acquisitions of blue light and its

Documents

Transcript of major and connected transactions in relation to the proposed acquisitions of blue light and its