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Summary

In this report, we will present concrete evidences Imperial Sierra


showing that majority of the customers of Imperial Company Information
Sierra Group Holdings Limited (Imperial Sierra) do Industry Commercial Property
not have sufficient operating scale to support the Consultancy
disclosed revenue of Imperial Sierra. We also found Target Listing
Hong Kong
that the founder and president of Imperial Sierra to Place
be the son of Mr. Yip Kim Po, who has been jailed Executive Mr. Yip Wik Aric
for seven years for defrauding listed companies in Director Mr. Yeung Sik Keung
the past. We believe Imperial Sierra is just another Non-executive Mr. Ng Chau Leung
fraud planned by Mr. Yip Kum Po. We conclude that Director David
the application proof of Imperial Sierra should be Independent Mr. Wong Yee Shuen
rejected or even returned. Non-executive Wilson
Director Mr. Wu Kin San Alfred
1. Majority of Top Customers have Minimal Mr. Zhang Fei
Operating Scale
We found that majority of top 5 customers disclosed Our Recommendation
by Imperial Sierra to have minimal operating scale, Target Price
few employees, minimal or zero amount of revenue
IPO FAILURE
and tax paid, making us hard to believe these IPO Data
companies can generate large amount of revenue Date of Listing
for Imperial Sierra. Suspicious transactions from Application 3 April 2017
these companies account for 92.2%, 46.2% and Submission
52.6% of revenue in 2014, 2015 and 2016 Sponsor Zhaobangji
respectively. International
Auditor HLB Hodgson Impey
2. Physical Inspection shows Customers Have No Cheng
Operations
We have visited the registered address of the major
customers, and found that majority of the customers
of Imperial Sierra to have no any operations, and we
cannot find their offices in the registered address.
This further confirms our conclusion in Part 1 that By downloading or viewing our report, you
the operation of these customers cannot support agree to our Term of Service. For full
the disclosed revenue of Imperial Sierra. details, please refer to our disclaimer at the
last page of this report.

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3. Effective Controller Mr. Yip Kim Po
Large amount of evidences shows that the president of Imperial Sierra, Mr. Yip Wik, is the son of
Mr. Yip Kim Po, who has been imprisoned for 7 years for frauds in listed companies. The mere two
year of work experiences makes us hard to believe that Mr. Yip Wik is able to found Imperial Sierra
at the age of 24. As Mr. Yip Kim Po has criminal record and cannot be the director of listed
company, we believe Mr. Yip Wik is only a shadow shareholder and director.

4. Net Income in SAIC & Tax Filings Far Smaller than Application Proofs Disclosure
We calculated the implied net income of Imperial Sierras PRC subsidiary through PRC Enterprise
Income Tax expense disclosed by Imperial Sierra, and found that the net income of Yufeng
(Guangdong) Asset Management Co., Ltd. (Yufeng Guangdong), the only PRC subsidiary of
Imperial Sierra, to be much lower than the implied figures. The difference is as high as 75.6% and
86.8% in 2014 and 2015 respectively.

5. Significant Discrepancy in Revenue and Potential Legal Risk


We found that the revenue disclosed on SAIC & Tax filings of Yufeng Guangdong to be much
lower than the revenue disclosed by Imperial Sierra. Although part of the difference may be
explained by third-party payment, we believe that this may be considered as tax evasion and may
violate relevant PRC laws and regulations.

6. Abnormal Growth of Figures in 2016 SAIC & Tax Filings


The figures reported in 2016 SAIC & Tax filings of Yufeng Guangdong has an abnormal growth
rate compared to 2014 and 2015, and there are as much as 24 edit records for its 2016 SAIC filing.
We seriously doubt the authenticity of its reported figures in 2016 SAIC & Tax filings.

7. HKD 80 million of Disappeared Cash


Although Imperial Sierra recorded a positive net income in each of the last three financial years,
its free cash flow is far smaller than the net income. The total difference exceeds HKD 80 million,
which is mostly arising from (i) Amount due from shareholder and (ii) Trade and other receivables.
At the same time, the cash and bank balance of Imperial Sierra is extremely low. Its cash and bank
balance is merely HKD 4,000 at the end of 2015. Its interest rate on cash and bank balance is as
low as 0.03%.

In view of the above, we believe Imperial Sierra to have no operation with commercial
substance. We recommend relevant regulators to start investigate Imperial Sierra and
reconsider its suitability of listing in Hong Kong market.

Note i: Conversions between HKD and RMB in this report are based on exchange rate announced
by the Peoples Bank of China as of respective year end (2013: HKD 1 = RMB 0.78623; 2014: HKD
1 = RMB 0.78887; 2015: HKD 1 = RMB 0.83778; 2016: HKD 1 = RMB 0.89451)

Note ii: All online information contained in this report has already been archived by us. If these
information has already been removed when you read this report, please visit
http://web.archive.org to access the archived version of these information

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Introduction

Imperia Sierra Group is a commercial property consultancy service provider located in PRC and
submitted its listing application on Main Board to Hong Kong Exchange in 2017 April. Its listing
application is still under review as of today. The sponsor for this listing application is Zhaobangji
International.

Exhibit 1: Business Overview of Imperia Sierra

Source: Application Proof of Imperia Sierra, Pg. 1

Majority of the revenue of Imperial Sierra comes from commercial property advisory (planning
and advisory accounts for most of it, followed by leasing advisory and financial advisory). It started
property management business in 2016.

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Exhibit 2: Revenue breakdown of Imperial Sierra

Source: Application Proof of Imperia Sierra, Pg. 6

This is the brief overview of the business of Imperial Sierra. In this research report, we will
investigate Imperial Sierra from different perspectives, including authenticity of its clients,
background of founder and authenticity of its financial statements. We put large amount of time
and efforts to collect evidences which show that majority of its clients have a minimal
operating scale and cannot support the revenue disclosed by Imperia Sierra. We believe
that the application proof of Imperial Sierra should be rejected or even returned.

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1. Majority of Top Customers have Minimal Operating Scale

To verify the authenticity of the business of Imperial Sierra, we have retrieved SAIC filings and tax
filings of the major customer disclosed on its application proof submitted on 2017 Apr 3
(Application Proof). We found that majority of the disclosed top customers have minimal
operating scale, which leads us question the authenticity of the revenue disclosed by Imperial
Sierra.

Exhibit 3: Top 5 Customers disclosed by Imperial Sierra from 2014 to 2016

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Source: Application Proof of Imperia Sierra, Pg. 99-100

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Customer Group A1

According to the Application Proof, Customer Group A1 contains Foshan Nanfang Hongli Trading
Company Limited (Foshan Nanfang) and Guangzhou Yonglefeng Investment Company Limited,
now known as Guangzhou Chaoyu Design Company Limited (Guangzhou Yonglefeng), which
are ultimately controlled by an individual Mr. Wu Jianzhong. Imperial Sierra generated HKD 9,363
thousand and HKD 6,030 thousand of revenue from this customer group in 2014 and 2016
respectively, accounting for 42.7% of revenue in 2014 and 10.4% of revenue in 2016.

We have firstly retrieved the SAIC & Tax filings of Foshan Nanfang, and found that it only has
one to two employee, with a zero revenue from 2013 to 2015 and merely RMB 50,925
revenue in 2016. The total tax paid from 2013 to 2016 is only RMB 1,500. We found it
unbelievable that this company can pay millions of HKD to Imperial Sierra for its service. Please
refer to Appendix I for its full income statement in 2016.

Exhibit 4: Major figures from SAIC & Tax filings of Foshan Nanfang
2013 2014 2015 2016
Total Revenue filed by Foshan Nanfang (RMB 000) 0.000 0.000 0.000 50.925
Total Tax Paid filed by Foshan Nanfang (RMB 000) 0.000 0.000 0.000 1.500
Profit before Tax filed by Foshan Nanfang (RMB 000) 0.000 0.000 0.000 -0.707
Net Income filed by Foshan Nanfang (RMB 000) 0.000 0.000 0.000 -0.707
Employee Number filed by Foshan Nanfang 2 2 2 1
Source: SAIC & Tax filings of Foshan Nanfang

Guangzhou Yonglefeng was established on 28 Feb 2014. We have retrieved the SAIC & Tax filings
of it, and found that it also has only several employees, zero revenue and zero tax paid since
incorporation, and recorded a loss every year. We also found it very unbelievable that that this
company can pay millions of HKD to Imperial Sierra for its service. We believe that Imperial Sierra
has no transactions with commercial substance with this Customer Group A1 at all.

Exhibit 5: Major figures from SAIC & Tax filings of Guangzhou Yonglefeng
2014 2015 2016
Total Revenue filed by Guangzhou Yonglefeng (RMB 000) 0.000 0.000 0.000
Total Tax Paid filed by Guangzhou Yonglefeng (RMB 000) 0.000 0.000 0.000
Profit before Tax filed by Guangzhou Yonglefeng (RMB 000) -4.823 -13.824 -791.627
Net Income filed by Guangzhou Yonglefeng (RMB 000) -4.823 -13.824 -791.627
Employee Number filed by Guangzhou Yonglefeng 3 2 6
Source: SAIC & Tax filings of Guangzhou Yonglefeng

Customer Group A2

According to the Application Proof, for 2014, Customer Group A2 refers to Foshan Sanshui Haian
Metal Company Limited (Foshan Sanshui"), which is ultimately controlled by Mr. Zhao Dongxian.
For 2015, Customer Group A2 refers to Mr. Zhao Dongxian. For 2016, Customer A2 refers to Mr.
Zhao Dengxian, Guangzhou Chaoyu Design Company Limited, Foshan Sanshui, Guangzhou Lishen

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Cultural Media Limited (Lishen Cultural) and Foshan Tianyucheng Property Management Limited
(Foshan Tianyucheng). Imperial Sierras revenue from this customer group is HKD 3,600
thousand, HKD 2,500 thousand and HKD 18,095 thousand in 2014, 2015 and 2016 respectively,
accounting for 16.4%, 5.5% and 31.3% of the revenue in 2014, 2015 and 2016 respectively.

We then checked the information of Foshan Sanshui in National Enterprise Credit Information
Publicity System, and found that it has not filed any SAIC annual filings and is already listed
on abnormal operation list.

Exhibit 6: The reason of Foshan Sanshui being listed on abnormal operation list

Foshan Sanshui Haian Metal Company Limited

Already listed on abnormal operation list

Has not followed Provisional Regulations of Enterprise


Credit Information Rule 8 to disclose annual filings

Source: National Enterprise Credit Information Publicity System

The former entity of Guangzhou Chaoyu Design Company Limited is Guangzhou Yonglefeng
which was already covered in Customer Group A1. It only has several employees, zero revenue
and tax paid since incorporation, and recorded a loss every year.

And the remaining two companies, Lishen Cultural and Foshan Tianyucheng were established
in 2016 Nov and Dec respectively. We have also retrieved the SAIC & Tax filings of these two
companies in 2016, and found that both company only has one employee, not yet started
any operations and all figures are reported as zero in SAIC filings. We seriously doubt that
these inoperative companies can spend HKD 3,600 thousand, HKD 2,500 thousand and HKD
18,095 thousand in 2014, 2015 and 2016 respectively to obtain the service of Imperial Sierra.

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Exhibit 7: Major figures from SAIC & Tax filings of Lishen Cultural
2016
Total Revenue filed by Lishen Cultural (RMB 000) 0.000
Total Tax Paid filed by Lishen Cultural (RMB 000) 0.000
Profit before Tax filed by Lishen Cultural (RMB 000) 0.000
Net Income filed by Lishen Cultural (RMB 000) 0.000
Employee Number filed by Lishen Cultural 1
Source: SAIC & Tax filings of Lishen Cultural

Exhibit 8: Major figures from SAIC & Tax filings of Foshan Tianyucheng
2016
Total Revenue filed by Foshan Tianyucheng (RMB 000) 0.000
Total Tax Paid filed by Foshan Tianyucheng (RMB 000) 0.000
Profit before Tax filed by Foshan Tianyucheng (RMB 000) 0.000
Net Income filed by Foshan Tianyucheng (RMB 000) 0.000
Employee Number filed by Foshan Tianyucheng 1
Source: SAIC & Tax filings of Foshan Tianyucheng

Guangzhou Fengxian Trading Company Limited (Guangzhou Fengxian)

Imperial Sierra generated HKD 4,356 thousand and HKD 3,817 thousand of revenue from
Guangzhou Fengxian, accounting for 19.9% and 8.3% of revenue in 2014 and 2015 respectively.
We have also retrieved the SAIC & Tax filings of Guangzhou Fengxian from 2014 to 2016, and
found out that it only has 2-3 employees, a revenue of at most RMB 180 thousand, a
minimal amount of total tax paid and consistently recorded a minimal profit or a loss. We
cannot understand how a company with a revenue of at most RMB 180,184 can generate millions
of revenue for Imperial Sierra. We do not think that there are any normal commercial activities
between the two companies.

Exhibit 9: Major figures from SAIC & Tax filings of Guangzhou Fengxian
2014 2015 2016
Total Revenue filed by Guangzhou Fengxian (RMB 000) 0.000 180.185 76.214
Total Tax Paid filed by Guangzhou Fengxian (RMB 000) 0.000 2.495 0.874
Profit before Tax filed by Guangzhou Fengxian (RMB 000) 0.000 4.975 -18.646
Net Income filed by Guangzhou Fengxian (RMB 000) 0.000 3.533 -19.194
Employee Number filed by Guangzhou Fengxian 3 2 2
Source: SAIC & Tax filings of Guangzhou Fengxian

Zhuhai Qiaosheng Investment Company Limited (Zhuhai Qiaosheng)

Imperial Sierra generated HKD 2,911 thousand of revenue from Zhuhai Qiaosheng in 2014,
accounting for 13.3% of revenue that year. We have retrieved the SAIC & Tax filings of Zhuhai
Qiaosheng from 2013 to 2016, and found out that it only has one to two employees and has
not reported any operating figures in SAIC filing. Please refer to Appendix II for the full income
statement of it in 2015.

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Exhibit 10: Major figures from SAIC & Tax filings of Zhuhai Qiaosheng
2013 2014 2015 2016
Total Revenue filed by Zhuhai Qiaosheng (RMB 000) 0.000 0.000 0.000 0.000
Total Tax Paid filed by Zhuhai Qiaosheng (RMB 000) 0.000 0.000 0.000 0.000
Profit before Tax filed by Zhuhai Qiaosheng (RMB 000) 0.000 0.000 -24.000 0.000
Net Income filed by Zhuhai Qiaosheng (RMB 000) 0.000 0.000 -24.000 0.000
Employee Number filed by Zhuhai Qiaosheng 2 2 2 1
Source: SAIC & Tax filings of Zhuhai Qiaosheng

Guangdong Aoke Construction Company Limited (Aoke Construction)

Imperial Sierra generated HKD 369 thousand of revenue from Aoke Construction in 2014,
accounting for 1.6% of revenue that year. We have retrieved the SAIC & Tax filings of Aoke
Construction from 2013 to 2016, and found out that indeed it has a decent operating scale that
can support the revenue disclosed by Imperial Sierra. So far this is the only major customer of
Imperial Sierra that has a decent operating scale, but Aoke Construction only generated
revenue for Imperial Sierra in 2014, and with a minimal amount.

Exhibit 11: Major figures from SAIC & Tax filings of Aoke Construction
2013 2014 2015
Total Revenue filed by Aoke Construction (RMB 000) 11,460.440 12,475.000 13,076.100
Total Tax Paid filed by Aoke Construction (RMB 000) 30.802 847.500 821.300
Profit before Tax filed by Aoke Construction (RMB 000) 194.895 148.900 179.700
Net Income filed by Aoke Construction (RMB 000) 164.093 111.900 160.900
Employee Number filed by Aoke Construction 80 73 78
Source: SAIC & Tax filings of Aoke Construction

Guangzhou Mingdu Property Management Limited (Guangzhou Mingdu)

Imperial Sierra generated HKD 14,793 thousand of revenue from Guangzhou Mingdu in 2015,
accounting for 32.4% of revenue that year. We have retrieved the SAIC & Tax filings of Guangzhou
Mingdu from 2014 to 2016, and found out that its revenue is only few hundred thousand, with
a minimal amount of total tax paid and recorded a minimal profit or losses every year.
Similar to Guangzhou Fengxian, we cannot understand how a company with at most RMB 677
thousand of revenue can generate over ten million of revenue for Imperial Sierra. Again, we do
not think that there are any normal commercial activities between the two companies. Please
refer to Appendix III for the full income statement of Guangzhou Mingdu from 2014 to 2016.

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Exhibit 12: Major figures from SAIC & Tax filings of Guangzhou Mingdu
2014 2015 2016
Total Revenue filed by Guangzhou Mingdu (RMB 000) 676.744 497.364 598.716
Total Tax Paid filed by Guangzhou Mingdu (RMB 000) 35.686 29.117 18.671
Profit before Tax filed by Guangzhou Mingdu (RMB 000) 18.096 -186.731 -104.912
Net Income filed by Guangzhou Mingdu (RMB 000) 16.287 -186.731 -104.912
Employee Number filed by Guangzhou Mingdu 14 15 11
Source: SAIC & Tax filings of Guangzhou Mingdu

Guangzhou Xiongyian Trading Company Limited (Xiongyian)

Imperial Sierra generated HKD 6,323 thousand of revenue from Xiongyian in 2016, accounting for
10.8% of revenue that year. We have retrieved the SAIC & tax filings of Xiongyian from 2014 to
2016, and found out that it only has one to two employees, zero revenue and tax paid since
incorporation and consecutive losses. We cannot understand how a company with zero revenue
can generate HKD 6.32 million of revenue for Imperial Sierra.

Exhibit 13: Major figures from SAIC & Tax filings of Xiongyian
2014 2015 2016
Total Revenue filed by Xiongyian (RMB 000) 0.000 0.000 0.000
Total Tax Paid filed by Xiongyian (RMB 000) 0.000 0.000 0.000
Profit before Tax filed by Xiongyian (RMB 000) -17.094 -5.300 -179.738
Net Income filed by Xiongyian (RMB 000) -17.094 -5.300 -179.738
Employee Number filed by Xiongyian 2 2 1
Source: SAIC & Tax filings of Xiongyian

Except Wise Group Development Limited (a Hong Kong company that we are unable to verify),
Mr. Zhao Yun and Mr. Wu Xibi (as individual), we have already shown that all top five customers
of Imperial Sierra from 2014 to 2016 besides Aoke Construction have minimal operating scales
that cannot possibly support the revenue disclosed by Imperial Sierra. 92.2%, 46.2% and 52.6%
of Imperial Sierras sales in 2014, 2015 and 2016 respectively are generated from these
suspicious customers. We believe it is impossible for Imperial Sierra to meet the profit test
requirement after excluding these transactions, and therefore we do not believe Imperial
Sierra is suitable for listing in Hong Kong.

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Exhibit 14: Summary of revenue generated by Imperial Sierra from suspicious customers
2014 2015 2016
Customer Group A1 (HKD 000) 9,363 0 6,030
Customer Group A2 (HKD 000) 3,600 2,500 18,095
Guangzhou Fengxian (HKD 000) 4,356 3,817 0
Zhuhai Qiansheng (HKD 000) 2,911 0 0
Guangzhou Mingdu (HKD 000) 0 14,793 0
Xiongyian (HKD 000) 0 0 6,323
Revenue from above Suspicious Customers (HKD 000) 20,230 21,110 30,448
Total Revenue of Imperial Sierra (HKD 000) 21,941 45,725 57,882
Portion of Revenue from Suspicious Customers 92.2% 46.2% 52.6%
Source: Application Proof of Imperial Sierra and above analysis

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2. Physical Inspection shows Customers Have No Operations

To further verify our conclusion in Part 1, we have appointed third-party investigators to visit the
registered offices of the above customer to verify the authenticity of their business. We obtained
similar conclusion as in Part 1. We found that majority of Imperial Sierras customers to have
no offices in their registered address, further showing that these customers have no
operations at all.

Customer Group A1

Customer Group A1 contains Foshan Nanfang and Yonglefeng (now known as Guangzhou Chaoyu
Design Company Limited). Foshan Nanfang is now known as Foshan Nanfang Hongli Property
Development Company Limited. We firstly went to its registered address at 5th Unit, 3/F, Block C,
Jihua 7th Road No. 25, Chancheng District, Foshan and found that there are no any door plates
there and no signs of Foshan Nanfang operating there.

Exhibit 15: 5th Unit, 3/F, Block C, Jihua 7th Road No. 25, Chancheng District, Foshan

Source: Physical Inspection

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We then went to the registered address of Guangzhou Chaoyu Design Company Limited at Room
B107, 2809, Tiyu East Road No. 140-148, Tianhe District, Gaungzhou, and found that the room
B107 does not exist on 28 Floor and there are no signs of Guangzhou Chaoyu Design Company
Limited in other unites on 28 Floor as well.

Exhibit 16: 28 Floor, Tiyu East Road No. 140-148, Tianhe District, Gaungzhou

Source: Physical Inspection

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Customer Group A2

Customer Group A2 contains Foshan Sanshui, Guangzhou Chaoyu Design Company Limited,
Lishen Cultural and Foshan Tianyucheng. We firstly went to Foshan Sanshuis registered address
at 103, 2nd Block, Wen Ta West Road, Sanshui District, Foshan, and found that there is only a
company called Yongyuan Jingshui Equipment there, and there is no signs of Foshan
Sanshui there.

Exhibit 17: 103, 2nd Block, Wen Ta West Road, Sanshui District, Foshan

Source: Physical Inspection

We have already discussed about the situation of Guangzhou Chaoyu Design Company Limited
in Customer Group A1, and we cannot find its office at the registered address.

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We then went to the registered address of Lishen Cultural at B13-2 Room, 3/F, Zhongshan Middle
Ave No. 1264, Tianhe District, Guangzhou. We found that there are only some empty rooms at
that location, without any offices.

Exhibit 18: B13-2 Room, 3/F, Zhongshan Middle Ave No. 1264, Tianhe District, Guangzhou

Source: Physical Inspection

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We lastly went to the registered address of Foshan Tianyucheng at Room 82, Wanjin Dongyuan
Commercial Third Phase, Baocui North Road No.33, Nanhai District, Foshan, and found that there
is only a property management company with a similar name of Tianyucheng (same
pronunciation in Mandarin but different in Chinese), but the office is empty already and
they seem to be having renovation currently.

Exhibit 19: Room 82, Wanjin Dongyuan Commercial Third Phase, Baocui North Road No.33,
Nanhai District, Foshan

Source: Physical Inspection

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Guangzhou Fengxian Trading Company Limited (Guangzhou Fengxian)

We visited the registered address of Guangzhou Fengxian at Fuquan Street No.72, Haizhu
District, Guangzhou, and found that there are no door plates and no offices there.

Exhibit 20: Fuquan Street No.72, Haizhu District, Guangzhou

Source: Physical Inspection

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Zhuhai Qiaosheng Investment Company Limited (Zhuhai Qiaosheng)

We visited the registered address of Zhuhai Qiaosheng at Room 201-7, Third Unit, Guihai First
Road, Guishan Zhen, Zhuhai District, Xiangzhou, and found that the locations hygiene is very
poor, with only a company called Haishun on second floor and no signs of Zhuhai
Qiaosheng.

Exhibit 21: Room 201-7, Third Unit, Guihai First Road, Guishan Zhen, Zhuhai District, Xiangzhou

Source: Physical Inspection

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Guangdong Aoke Construction Company Limited (Aoke Construction)

We visited the registered address of Aoke Construction at Room 707-709, A1 Building, Yueken
Road No. 611, Tianhe District, Guangzhou, and found the office of Aoke Construction is indeed
there, collaborating with our finding in Part 1. Aoke Construction is the only company that have
normal business operations among Imperial Sierras major customers. However, Aoke
Construction only purchased from Imperial Sierra in 2014, and with an insignificant amount.

Exhibit 22: Room 707-709, A1 Building, Yueken Road No. 611, Tianhe District, Guangzhou

Source: Physical Inspection

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Guangzhou Mingdu Property Management Limited (Guangzhou Mingdu)

We visited Guangzhou Mingdus registered address at Room ABC 142, Ming Hui Xian, Lanyu Third
Street No. 51, Guangzhou Economic and Technological Development Zone, Guangzhou. We
found that the company has already moved to 3rd Floor, B Block, No. 51 and the door plate
states Mingdu Property Management. However, the door was closed and no one was
there:

Exhibit 23: 3rd Floor, B Block, Lanyu Third Street No. 51, Guangzhou Economic and Technological
Development Zone, Guangzhou

Source: Physical Inspection

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Guangzhou Xiongyian Trading Company Limited (Xiongyian)

Lastly we visited Xiongyians registered address at Meat & Vegetable Market, UG, Luyuan Road
No. 49, Yuexiu District, Guangzhou, and found that the floor is now having renovation and
has not started operations. We cannot find any signs of Xiongyian there as well.

Exhibit 24: Meat & Vegetable Market, UG, Luyuan Road No. 49, Yuexiu District, Guangzhou

Source: Physical Inspection

In view of the above inspection result, most major customers of Imperial Sierra do not have
any operations and we cannot find their offices in the registered address, leading us to
question the authenticity of these companies purchases from Imperial Sierra. We believe
the above inspection result further confirmed our findings in Part 1: Except Aoke Construction, all

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sales of Imperial Sierra from these major customers are highly suspicious and are most likely to
be fabricated.

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3. Effective Controller Mr. Yip Kim Po

We noticed that executive director, president and founder of Imperial Sierra Mr. Yip Wik aged only
30 and founded Imperial Sierra one year after his graduation from university in 2010. However,
we are unable to find much information about him on his success story online, making us curious
of his background and identity.

Exhibit 25: Resume of Mr. Yip Wik

Source: Application Proof of Imperial Sierra Pg.118-119

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In the Application Proof, the disclosed residential address of Mr. Yip Wik is Flat A, 35/F, Block 7,
The Leighton Hill, 2B Broadwood road, Causeway Bay, Hong Kong:

Exhibit 26: Residential Address of Mr. Yip Wik

Source: Application Proof of Imperial Sierra Pg. 38

We have then searched the land register of this address from Hong Kongs Land Registry (Please
refer to Appendix IV for the full land register), and found that Victory Honour Development
Limited purchased this property in 2003 at a consideration of HKD 15,861,300, and this property
has been involved in various legal disputes. For example, in 2007, Hong Kong Department of
Justice filed a restraint order against this property. In that writ of summons, the defendants
include Victory Honour Development Limited, Mr. Yip Kim Po, Ms. Fu Ming Hin Gigi and
Ms. Yip Wan Fung (sister of Mr. Yip Kim Po).

Mr. Yip Kim Po is notorious for his crimes in financial market. Mr. Yip Kim Po is the founder of
Ocean Grand Holdings Limited (Ocean Grand Holdings) and Ocean Grand Chemicals Holdings
Limited (Ocean Grand Chemicals). Ocean Grand Holdings was listed in Hong Kong in 1997 (stock
code: 1220, now known as Zhidao International (Holdings) Limited). In 2006, the accounting
scandals of Ocean Grand Holdings and Ocean Grand Chemicals were exposed and RMB 840
million of fund was missing. The trade of the two listed companies was halted immediately
afterwards. Later the two companies disclosed that the cash on hand cannot repay the current
liabilities and appointed a provisional liquidator. After this incident, Mr. Yip Kim Po stayed in
Mainland China until 2007. In 2007, he went back to Hong Kong and was then caught by Hong
Kong police and was accused of numerous charges. In 2010, Mr. Yip Kim Po, his sister and senior
management of Ocean Grand Holdings were charged with using shell companies to fabricate
purchase of machinery, inflating purchase price and defrauding HKD 180 million from Ocean
Grand Holdings. Mr. Yip Kim Po was sentenced by District Court for 7 years of imprisonment, and
was released in 2012 after a reduction in penalty, while his sister Ms. Yip Wan Fung was sentenced
for 6 years of imprisonment.

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Exhibit 27: Land Register or Flat A, 35/F, Block 7, The Leighton Hill, 2B Broadwood road, Causeway
Bay, Hong Kong

Source: Hong Kong Lang Registry

In 2011, Hong Kong Resources filed a summons claiming that the company owned by Mr. Yip Kim
Po and his former wife Ms. Fu Ming Hin purchased the above property in Leighton Hill and another
property in Regalia Bay using the proceeds from fabricated purchase of listed company, and
requested to recover the relevant proceeds and declared that the properties are owned by Hong
Kong Resources. Hong Kong media stated that Mr. Yip Wik is the son of Mr. Yip Kim Po explicitly
in the news:

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Exhibit 28: Hong Kong medias coverage on the summons filed by Hong Kong Resources in 2011

The owner of the property in this case is Victory


Honor Development Ltd. (held collectively by Mr.
Yip Wik, son of Mr. Yip Kim Po, and Ms. Chan Siu
Yan, mother of Mr. Yip Kim Po), and

Source: Oriental Daily, http://orientaldaily.on.cc/cnt/finance/20110720/00202_034.html

In 2014, this property was involved in another legal dispute. A summons was filed by China
Construction Bank (Asia) Corporation Limited, who requested the property to be taken back to
repay outstanding loans. Some Hong Kong media reported this incident and also stated that Mr.
Yip Wik is the son of Mr. Yip Kim Po explicitly:

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Exhibit 29: Hong Kong media coverage on the summons filed by China Construction Bank (Asia)
Corporation Limited in 2014

China Construction Bank (Asia) Corporation


Limited (under China Construction Bank (00939))
filed a summon against former president of Ocean
Grand (01220; now known as Zhidao International)
Mr. Yip Kim Pos familys company (owned by Mr.
Yip Wik, son of Mr. Yip Kim Po and Ms. Chen Xiao
Yin, mother of Mr. Yip Kim Po) and his sister Ms.
Yip Wan Fung in High Court to repay outstanding
debt..

Source: Oriental Daily, http://orientaldaily.on.cc/cnt/finance/20140529/00202_063.html

However, Victory Honour Development Limited still has not repaid the loan in 2016. China
Construction Bank (Asia) Corporation Limited filed another summons to take back the property:

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Exhibit 30: Hong Kong media coverage on the summons filed by China Construction Bank (Asia)
Corporation Limited in 2016

China Construction Bank (00939) again filed a


summons against former executive director of
Ocean Grand (01220; now known as Zhidao
International) Mr. Yip Wan Fung and Victory Honour
Development in High Court to take back the
property in Leighton Hill and repay outstanding
loans.

Source: Oriental Daily,


http://hk.on.cc/hk/bkn/cnt/finance/20160616/bkn-20160616182428003-0616_00842_001.html

In addition to the above legal disputes, another Hong Kong media, Sing Tao Daily, also mentioned
that Mr. Yip Wik is the son of Mr. Yip Kim Po in a news article on the sales of Regalia Bay in 2007:

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Exhibit 31: Hong Kong media coverage on the sales situation of Regalia Bay

Mr. Yip Kim Po already transferred his shares to his son Mr. Yip Wik in June last year

Source: Sing Tao Daily, http://www.singtao.ca/financial/2007-12-27/1198788257d724371.html

Lastly, in the reasons for sentence of Mr. Yip Kim Po being sentenced for 7 years of imprisonment
in 2010, it mentioned that Mr. Yip Kim Po (D1 in the reasons for sentence) has a 24-year-old son
that graduated from California and came back Hong Kong. This matches with the disclosure about
Mr. Yip Wik on Application Proof, which states that Mr. Yip Wip aged 30 and graduated from
University of Southern California.

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Exhibit 32: Excerpt of Reasons for Sentence of Mr. Yip Kim Po being imprisoned for 7 years in 2010

Source: DCCC551/2008, Hong Kongs Legal Reference System

Based on the above evidences, it is very clear that Mr. Yip Wik is the son of Mr. Yip Kim Po. Based
on his merely two years of work experience in Gold Stable International Limited and the wealth
accumulated, and the description of being unemployed from the reasons for sentence, we do not
think it is reasonable for him to have the capability to found Imperial Sierra at the young age of
24. We believe the effective controller of Imperial Sierra is Mr. Yip Kim Po instead. Since he
has criminal record and therefore cannot be appointed as a director of listed company, Mr.
Yip Kim Po can only arrange his son Mr. Yip Wik to be shadow shareholder and director.
With the notorious criminal record of Mr. Yip Kim Po, we do not think Imperial Sierra is
suitable for listing in Hong Kong Main Board.

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4. Net Income in SAIC & Tax Filings Far Smaller than Application Proofs Disclosure

In addition to the suspicious transactions stated in Part 1, we have also retrieved the full financial
statements in SAIC & Tax filings of Yufeng (Guangdong) Asset Management Co., Ltd. (Yufeng
Guangdong), the only PRC subsidiary of Imperial Sierra. We found that the net income filed by
Yufeng Guangdong in 2014 and 2015 is much less than the corresponding figures disclosed
on Application Proof. According to the disclosure of Application Proof, Imperial Sierra had HKD
645 thousand and HKD 1,157 thousand of PRC Enterprise Income Tax expense in 2014 and 2015
respectively. Using the PRC tax rate of 25%, Yufeng Guangdong should record a net profit of HKD
1,935 thousand and HKD 3,471 thousand in 2014 and 2015 respectively.

Exhibit 33: Disclosure of Imperial Sierra on PRC Enterprise Income Tax

Source: Application Proof of Imperial Sierra Pg. I-21

Exhibit 34: Estimation of Imperial Sierras PRC subsidiarys net income based on disclosure of
Application Proof
2014 2015
PRC Enterprise Income Tax (HKD 000) 645 1,157
Implied Profit before Tax of Yufeng Guangdong (HKD 000) 2,580 4,628
Implied Net Income of Yufeng Guangdong (HKD 000) 1,935 3,471
Source: Application Proof of Imperial Sierra

However, from SAIC & Tax filings of Yufeng Guangdong, we found that its net profit in 2014
and 2015 are merely RMB 370 thousand and RMB 390 thousand respectively, with a
significant discrepancy with the implied net income calculated above. The difference in
2014 and 2015 are as high as 75.6% and 86.8% respectively, leading us to question the
authenticity of Imperial Sierras net income.

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Exhibit 35: Comparison of profit before tax and net income filed in SAIC & Tax filings of Yufeng
Guangdong and implied figures from disclosure
2014 2015
Profit before Tax filed by Yufeng Guangdong (RMB 000) 496 513
Implied Profit before Tax of Yufeng Guangdong (RMB 000) 2,035 3,877
Difference (%) 75.6% 86.8%

Net Income filed by Yufeng Guangdong (RMB 000) 372 385


Implied Net Income of Yufeng Guangdong (RMB 000) 1,526 2,908
Difference (%) 75.6% 86.8%
Source: Application Proof of Imperial Sierra, SAIC & Tax filings of Yufeng Guangdong

In addition to above discrepancy, the total tax paid (which includes all kinds of taxes and
therefore should be much higher than enterprise income tax) filed by Yufeng Guangdong in
2014 and 2015 are also much less than the PRC enterprise income tax expense disclosed in
Application Proof, and the difference is as high as 72.9% and 45.4% in 2014 and 2015 respectively,
further collaborating our conclusion above.

Exhibit 36: Comparison between total tax paid filed in SAIC filings and PRC enterprise income tax
expense disclosed on Application Proof
2014 2015
Total Tax Paid filed in SAIC filing (RMB 000) 138 530
PRC Enterprise Income Tax disclosed on Application Proof (RMB 000) 509 969
Difference (%) 72.9% 45.4%
Source: Application Proof of Imperial Sierra, SAIC & Tax filings of Yufeng Guangdong

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Exhibit 37: Income Statement of Yufeng Guangdong in 2014
Income Statement
Yufeng (Guangdong) Asset Management Co., Ltd Unit: Yuan
2014 Dec

Revenue

Profit
before Tax

Net Income
Source: SAIC & Tax filings of Yufeng Guangdong

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Exhibit 38: Income Statement of Yufeng Guangdong in 2015

Yufeng (Guangdong) Asset Management Co., Ltd Income Statement Unit: Yuan
2015 Dec

Revenue

Profit
before Tax

Net Income
Source: SAIC & Tax filings of Yufeng Guangdong

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5. Significant Discrepancy in Revenue and Potential Legal Risk

Except the discrepancy in net income mentioned in Part 4, we also found out that the revenue
disclosed on SAIC & Tax filings of Yufeng Guangdong is much smaller than the revenue
disclosed on Application Proof, with a discrepancy of more than 70%:

Exhibit 39: Revenue filed in SAIC & Tax filings versus revenue disclosed on Application Proof
2014 2015 2016
Revenue filed in SAIC & Tax filings (RMB 000) 3,038 6,715 15,363
Revenue disclosed in Application Proof (RMB 000) 17,309 38,307 51,776
Difference (%) 82.4% 82.5% 70.3%
Source: Application Proof of Imperial Sierra, SAIC & Tax filings of Yufeng Guangdong

We understand that third-party payment may be able to explain part of the differences, but we
cannot find any disclosure on the geographical breakdown in third-party payment in Application
Proof. According to Application Proof, majority of Imperial Sierras services are provided to
PRC clients in PRC, but we found that consistently more than 70% of the revenue of Imperial
Sierra are not booked in its China subsidiary and therefore not liable for PRCs tax. We
believe that such arrangement may be considered as tax evasion and therefore violated
relevant PRC laws and regulations.

Exhibit 40: Imperial Sierras disclosure on third-party payment

Source: Application Proof of Imperial Sierra Pg. 104

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Exhibit 41: Income Statement of Yufeng Guangdong in 2016
Yufeng (Guangdong) Asset Management Co., Ltd Income Statement Unit: Yuan
2016 Dec

Revenue

Source: SAIC & Tax filings of Yufeng Guangdong

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6. Abnormal Growth of Figures in 2016 SAIC & Tax filings

Our calculation in Part 4 does not consider the SAIC & Tax filing of Yufeng Guangdong in 2016,
because we found that the figures filed in 2016 SAIC & Tax filings are all several times of
the figures in 2014 and 2015 with an abnormal growth rate. Profit before tax and net
income increased at an abnormal rate of 1158.4% and 1159.1% respectively, which is
completely not proportionate with the overall growth of business. We suspect that Yufeng
Guangdong filed fabricated figures to SAIC and tax bureau in 2016 as a result of its listing
plan and sponsors requirement (they cannot update past figures in 2014 and 2015 since it
has already been overdue).

Exhibit 42: Growth rate of figures in SAIC & Tax filings of Yufeng Guangdong
2014 2015 2016
Revenue filed by Yufeng Guangdong (RMB 000) 3,038 6,715 15,363
Growth Rate 121.0% 128.8%
Total tax paid filed by Yufeng Guangdong (RMB 000) 138 530 2,612
Growth Rate 283.5% 393.0%
Profit before tax filed by Yufeng Guangdong (RMB 000) 496 513 6,453
Growth Rate 3.4% 1158.4%
Net Income filed by Yufeng Guangdong (RMB 000) 372 385 4,842
Growth Rate 3.4% 1159.1%
Total assets filed by Yufeng Guangdong (RMB 000) 31,952 43,541 96,903
Growth Rate 36.3% 122.6%
Total liabilities filed by Yufeng Guangdong (RMB 000) 20,605 31,810 80,529
Growth Rate 54.4% 153.2%
Total equity filed by Yufeng Guangdong (RMB 000) 11,347 11,731 16,374
Growth Rate 3.4% 39.6%
Source: SAIC & Tax filings of Yufeng Guangdong

At the same time, we found that Yufeng Guangdong has edited its 2016 SAIC filings as much
as 24 times, making us suspicious of the authenticity of its 2016 SAIC filings:

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Exhibit 43: Yufeng Guangdong 2016 SAIC filings edit records

2016 Annual Report (24 Edit Records)

Source: National Enterprise Credit Information Publicity System

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7. HKD 80 million of Disappeared Cash

In order to examine the quality of earnings of Imperial Sierra, let compare its net income and free
cash flow. Net income and free cash flow should match for a healthy company. If a companys free
cash flow is consistently smaller than its net income, then it is a clear red flag. Similar to other
fraud companies, Imperial Sierra has recorded a free cash flow much less than net income despite
the positive net income recorded during the track record period:

Exhibit 44: Difference between Imperial Sierras net income and free cash flow (HKD 000)
Net cash Net cash Difference
Free Cash
Net flows from flows from between Net FCF / Net
Flow
Income operating investing Income and Income (%)
(FCF)
activities activities FCF
2016 33,460 48,579 -45,929 2,650 30,810 7.9%
2015 24,163 11,460 -11,858 -398 24,561 -1.6%
2014 11,204 -7,065 -9,593 -16,658 27,862 -148.7%
Total 68,827 52,974 -67,380 -14,406 83,233 -20.9%
Source: Application Proof of Imperial Sierra

The net income of Imperial Sierra during the track record period is HKD 68,827 thousand,
while its free cash flow during the same period is negative HKD 14,406 thousand. The
difference of HKD 83,233 thousand mostly comes from (i) Amount due form a shareholder
and (ii) Trade and other receivable:

Exhibit 45: Reconciliation of Imperial Sierras Net Income and Free Cash Flow during track record
period (HKD 000)
Adjustment Amount
Increase in amount due from a shareholder 67,711
Increase in trade and other receivables 36,289
Interest income 5,276
Payments for property, plant and equipment 1,180
Placement of pledged bank deposit 1,001
Gain on disposal of a subsidiary 14
Proceeds from disposal of property, plant and equipment -120
Impairment loss recognised on trade receivables -444
Loss on disposal of property, plant and equipment net -601
Increase in trade and other payables -2,033
Interest received -2,392
Depreciation of property, plant and equipment -2,595
Deferred difference in initial recognition of other receivables -2,732
Finance costs -3,832
Income tax paid over income tax expense -13,489
Total 83,233
Source: Application Proof of Imperial Sierra

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Amount due from a shareholder accounts for HKD 67,711 thousand of missing cash, while
trade and other receivable accounts for HKD 36,289 thousand of missing cash. We suspect
that Imperial Sierra used amount due from shareholder and receivables to cover up the
missing cash as a result of fabricated revenue and net income.

At the same time, we found that the cash and bank balance of Imperial Sierra is abnormally low.
Its balance is only HKD 274 thousand and HKD 4 thousand at the end of 2014 and 2015
respectively, which is abnormally low for a company to be listed in Hong Kongs Main Board.
Within the HKD 13,087 thousand of cash and bank balance at the end of 2016, HKD 12,000
thousand and HKD 5,000 thousand comes from issuing of convertible bonds and bank borrowing.
Deducting these items, the actual cash and bank balance of Imperial Sierra at the end of 2016 was
merely HKD 587 thousand, far lower than a listed company with normal operation.

To further verify the authenticity of its cash balance, we have calculated the interest income on its
cash and balance, and found that its interest rate is as low as 0.03%:

Exhibit 46: Average interest income rate on Imperial Sierras cash and bank balance during the track
record period
2014 2015 2016
Interest income on bank deposits (HKD 000) 0 1 2
Cash and bank balance (HKD 000) 274 4 13,087
Average interest rate on cash and bank balance (%) 0.00% 0.72% 0.03%
Source: Application Proof of Imperial Sierra

We believe such a low interest rate is unreasonable, making us to suspect the authenticity of
Imperial Sierras cash and bank balances. The abnormal cash flow of Imperial Sierra reminds us of
the announcement of Ocean Grand Holdings on 24 Jul 2006:

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Exhibit 47: Ocean Grand Holdings Announcement of appointment of provisional liquidators on 24
Jul 2006

Source: Ocean Grand Holdings Announcement on 24 Jul 2006

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Conclusion

Based on above evidences, we believe Imperial Sierra does not have any operation with
commercial substance. We believe Imperial Sierra is just another fraud designed by Mr. Yip Kim
Po after his release from jail, so as to earn the shell price of Hong Kong listed companies. We
do not think Imperial Sierra is suitable for listing, and strongly recommend the Application Proof
of it to be rejected or even returned.

Due to the high premium of shell price in Hong Kong listed market, some companies collude
with sponsors to conduct fraudulent IPO and earn huge profits by selling the companys shares
after lock-up period. Although many companies merely use accounting tricks to meet the profit
test requirement, some companies use transaction without any commercial substance to fabricate
revenue and net income to pass profit test. We believe the fraudulent extent of Imperial Sierra is
the most serious among these companies, since Imperial Sierra does not have any operation with
commercial substance at all.

At the same time, we would like to question the sponsor of this deal, Zhaobangji International, on
whether sufficient due diligence is carried out before submitting Application Proof. We believe
Zhaobangji International should have at least conducted interview with the customers that we
mentioned in Part 1, but has not verified whether the operation scale of these customers can
support the revenue disclosed in Application Proof and has not conducted any physical inspection
as we did. We believe Zhaobongji International has not carried out its duty and responsibility as
a sponsor, and the signing principle of Imperial Sierra (Mr. Fabian Shin or Mr. Edmond Choy)
should be held legally responsible.

Even in the likely event of IPO failure, we also believe that all directors of Imperial Sierra, especially
Mr. Yip Wik and Mr. Yeung Sik Keung, should be prosecuted, to remind directors that they are
collectively and individually responsible for the accuracy of application proof.

It seems that Mr. Yip Kim Po did not draw a lesson from his seven years of imprisonment and still
hoped to commit financial crime by conducting fraudulent IPO in Hong Kong market. Lastly, we
would like to reiterate the saying of Judge Kevin Browne when passing the sentence of Mr. Yip
Kim Po for fraud, conspiracy, and issuing false statement:

Mr. Yip Kim Po is lucky to be judged in District Court that is barred from imposing sentences of
greater than seven years. His sentence was actually too lenient to reflect the seriousness of his
crime.

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Appendix I: Income Statement of Foshan Nanfang in 2016

Foshan Nanfang Hongli Trading Company Limited Income Statement Unit: Yuan
2016 Dec

Revenue

Profit
before Tax

Net Income

Source: SAIC & Tax filings of Foshan Nanfang

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Appendix II: Income Statement of Zhuhai Qiaosheng in 2015

Zhuhai Qiaosheng Investment Company Limited Income Statement Unit: Yuan


2015 Dec

Revenue

Profit
before Tax

Net Income

Source: SAIC & Tax filings of Zhuhai Qiaosheng

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Appendix III: Income Statement of Guangzhou Mingdu from 2014 to 2016

Guangzhou Mingdu Property Management Limited Income Statement Unit: Yuan


2014 Dec

Revenue

Profit
before Tax

Net Income

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Guangzhou Mingdu Property Management Limited Income Statement Unit: Yuan
2015 Dec

Revenue

Profit
before Tax

Net Income

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Guangzhou Mingdu Property Management Limited Income Statement Unit: Yuan
2016 Dec

Revenue

Profit
before Tax

Net Income

Source: SAIC & Tax filings of Guangzhou Mingdu

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Appendix IV: Land Register or Flat A, 35/F, Block 7, The Leighton Hill, 2B Broadwood road, Causeway Bay, Hong Kong

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Source: Hong Kong Land Registry

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