JIA MENG HOLDINGS LIMITED

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker, a licensed dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Jia Meng Holdings Limited (the Company ), you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale 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 responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. JIA MENG HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8101) MAJOR TRANSACTION: ACQUISITION OF THE ENTIRE ISSUE SHARES OF THE TARGET COMPANY AND NOTICE OF EXTRAORDINARY GENERAL MEETING Financial adviser to the Company A letter from the Board is set out on pages 4 to 13 of this circular and a notice convening the EGM to be held at 10:00 a.m. on Thursday, 21 July 2016 at Regus Conference Centre, 35/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you intend to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company s share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time scheduled for the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending or voting in person at the EGM or any adjourned meeting thereof should you so wish. This circular will remain on the GEM website at on the Latest Company Announcements page for at least 7 days from the date of its posting and on the website of the Company at 6 July 2016

2 CHARACTERISTICS OF GEM GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM. i

3 CONTENTS Page DEFINITIONS... 1 LETTER FROM THE BOARD... 4 APPENDIX I FINANCIAL INFORMATION OF THE GROUP... I-1 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY... APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP... II-1 III-1 APPENDIX IV VALUATION REPORT... IV-1 APPENDIX V GENERAL INFORMATION OF THE GROUP... V-1 NOTICE OF EGM... EGM-1 ii

4 DEFINITIONS In this circular, unless the context requires otherwise, the following expressions shall have the following meanings: Acquisition Agreement Announcement Board BVI Company Completion the acquisition of the Sale Share together with the Shareholder s Loan by the Purchaser from the Vendors pursuant to the Agreement the provisional sale and purchase agreement dated 19 May 2016 entered into between the Purchaser and the Vendors for the acquisition of the Sale Share together with the Shareholder s Loan, which was superseded by the Formal Agreement dated 10 June 2016 the announcement of the Company dated 19 May 2016 in relation to the Acquisition the board of Directors the British Virgin Islands Jia Meng Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on the GEM completion of the Acquisition Completion Date 31 August 2016 connected person(s) Consideration Director(s) Enlarged Group EGM Formal Agreement has the meaning ascribed thereto under the GEM Listing Rules HK$158,000,000 being the consideration for the Acquisition director(s) of the Company the Group as enlarged by the Target Company immediately upon Completion the extraordinary general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving the terms of the Agreement and the transactions contemplated thereunder the formal agreement dated 10 June 2016 entered into between the Purchaser and the Vendors for the acquisition of the Sale Share together with the Shareholder s Loan 1

5 DEFINITIONS GEM GEM Listing Rules Group HK$ Hong Kong Independent Valuer Latest Practicable Date PRC Property Purchaser Sale Share SFO Share(s) Shareholder(s) Shareholder s Loan Stock Exchange the Growth Enterprise Market of the Stock Exchange the Rules Governing the Listing of Securities on GEM the Company and its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the PRC B.I. Appraisals Limited, an independent professional valuer appointed by the Company to conduct the valuation on the Property 30 June 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular the People s Republic of China a whole floor of China Insurance Group Building, 141 Des Voeux Road Central, 73 Connaught Road Central and Gilman Street, Hong Kong Aim Extreme Limited, a company incorporated in British Virgin Islands with limited liability and a direct wholly-owned subsidiary of the Company 2 issued shares of the Target Company, representing the entire issued share capital of the Target Company the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ordinary share(s) of HK$0.025 each in the share capital of the Company holder(s) of the Share(s) the loan (if any) owed by the Target to the Vendors as of the Completion Date The Stock Exchange of Hong Kong Limited 2

6 DEFINITIONS Target Company Valuation Report Vendor A Vendor B Vendors Willing Investments Limited, a company incorporated in Hong Kong with limited liability the valuation report on the value of the Property prepared by the Independent Valuer an independent third party an independent third party Vendor A and Vendor B % per cent 3

7 LETTER FROM THE BOARD JIA MENG HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8101) Executive Directors: Registered office: Mr. Hung Cho Sing (Chairman) Cricket Square Mr. Yim Yin Nang Hutchins Drive, P.O. Box 2681 Mr. Wong Siu Ki Grand Cayman KY Mr. Matthew Chung Cayman Islands Independent non-executive Directors: Head office and principal place of Mr. Chan Chun Wing business in Hong Kong: Mr. Fung Kam Man Room 602 Mr. Tang Kin Chor New World Tower Queen s Road Central Central, Hong kong To the Shareholders Dear Sir or Madam, INTRODUCTION 6 July 2016 MAJOR TRANSACTION: ACQUISITION OF THE ENTIRE ISSUE SHARES OF THE TARGET COMPANY AND NOTICE OF EXTRAORDINARY GENERAL MEETING Reference is made to the announcement of the Company dated 19 May 2016 in relation to the acquisition of the entire issued shares of the Target Company. The Board is pleased to announce that on 19 May 2016 (after trading hours), the Purchaser, a direct wholly-owned subsidiary of the Company, and the Vendors entered into the Agreement (which was superseded by the Formal Agreement dated 10 June 2016), pursuant to which the Purchaser has conditionally agreed to purchase and the Vendors have conditionally agreed to sell the Sale Share, representing the entire issued share capital of the Target Company together with the Shareholder s Loan at the Consideration of HK$158,000,000. The purpose of this circular is to provide you with, among other matters, (i) further details of the Acquisition; (ii) other information as required to be disclosed under the GEM Listing Rules; and (iii) the notice of the EGM. 4

8 LETTER FROM THE BOARD THE ACQUISITION The Formal Agreement Date 10 June 2016 Parties (i) Purchaser: Aim Extreme Limited (ii) Vendors: (a) Vendor A; and (b) Vendor B To the best of the Directors knowledge, information and belief having made all reasonable enquiries, (i) the principal business of each of Vendor A and Vendor B is investment holding and (ii) each of Vendor A and Vendor B and its ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons. Assets to be acquired The Vendors have conditionally agreed to sell, and the Purchaser has conditionally agreed to purchase the Sale Share together with the Shareholder s Loan. The Sale Share represents the entire issued share capital of the Target Company. As at the Latest Practicable Date, the Vendors are the legal and beneficial owners of the Sale Share, details of which are set out as follows: Number of Percentage of Name of Vendors Sale Share held Sale Share Vendor A 1 50% Vendor B 1 50% 2 100% 5

9 LETTER FROM THE BOARD Information on the Property The Property is a whole floor of China Insurance Group Building, 141 Des Voeux Road Central, 73 Connaught Road Central and Gilman Street, Hong Kong. The Property is a commercial office building with a gross area of approximately 10,589 square feet. According to the Vendors, (i) the Property has been leased out to third parties independent of the Company and its connected persons under four tenancy agreements as at the Latest Practicable Date and the existing leases shall expire on 31 December 2016, 15 January 2017, 14 February 2017 and 28 February 2017 respectively (the Existing Leases ) and (ii) the aggregate monthly rental pursuant to the Existing Leases is HK$291,580. As at the Latest Practicable Date, the Property is not subject to any mortgage or loan arrangement. Consideration The Consideration payable by the Purchaser to the Vendors is HK$158,000,000 and shall be payable in cash in the following manner: (a) (b) (c) HK$7,500,000 being initial deposit has been paid by the Purchaser to the Vendors upon signing of the Agreement; HK$8,300,000 being further deposit has been paid by the Purchaser to the Vendors on or before 1 June 2016; and HK$142,200,000 being the balance of the Consideration shall be paid by the Purchaser to the Vendors on the Completion Date. The Consideration will be funded by a combination of internal resources of the Group and external borrowings. The Consideration was arrived at after arm s length negotiations between the Vendors and the Purchaser on normal commercial terms with reference to (i) the prevailing market price of similar properties of similar size, character and location and (ii) preliminary valuation of approximately HK$168,000,000 as at 19 May 2016 valued by the Independent Valuer. Conditions precedent Completion is conditional upon the following: (a) the Purchaser has no reasonable objection in its due diligence review on the business, financial, legal and other aspects of the Target Company; 6

10 LETTER FROM THE BOARD (b) (c) (d) (e) the Vendors having a good title to the Sale Share and the Shareholder s Loan, free from all encumbrances, and the Shareholder s Loan being all outstanding indebtedness or liabilities owing by the Target Company to the Vendors; the Vendors having given and proved that the Target Company has a good title to the Property in accordance with Sections 13 and 13A of the Conveyancing and Property Ordinance (Cap.219 of the Laws of Hong Kong) free from all encumbrances; the representations, warranties, undertakings or indemnities made or given by the Vendors under the Formal Agreement remaining true and accurate and not misleading as of the Completion Date by reference to the facts and circumstances subsisting as at the Completion Date; and the approval being obtain from the Shareholders to the entering into and implementation of the transactions contemplated under the Formal Agreement at the EGM by 17 August 2016 or such later date as the parties thereto may agree in writing (the Prescribed Date ). In the event of non-fulfillment of this condition by the Prescribed Date, the Formal Agreement shall become void and of no further effect and the parties shall forthwith at its respective own costs enter into a cancellation agreement of the Formal Agreement and all deposits paid shall within seven (7) business days after the Prescribed Date be refunded to the Purchaser s solicitors on behalf of the Purchaser (as the Purchaser thereby authorizes) but without interest, costs or compensation whereupon the parties thereto shall have no further claims or recourse against each other. The Vendors shall procure that the above conditions precedent (a) to (d) are fulfilled not later than the Completion Date. If any of the above conditions precedent (a) to (d) is not fulfilled (or not waived by the Purchaser) on or before the Completion Date, either the Vendors or the Purchaser shall be at liberty on giving to the other not less than five (5) business days notice in writing to annul the Formal Agreement, in which case the Formal Agreement shall at the expiration of the said notice be annulled. Upon annulment of the Formal Agreement in that event, the Vendors shall within seven (7) business days return the deposit to the Purchaser but without any interest, costs or compensation, and thereafter neither party shall have any claim or recourse against the others thereunder. Up to the Latest Practicable Date, the above conditions precedent (a) and (c) have been fulfilled. Completion Completion shall take place on the Completion Date. Upon Completion, the Target Company will become an indirect wholly-owned subsidiary of the Company, and the financial results of the Target Company will be consolidated with the results of the Group 7

11 LETTER FROM THE BOARD INFORMATION ON THE TARGET COMPANY AND THE VENDORS The Target Company is a company incorporated in Hong Kong with limited liability on 4 May The Target Company is wholly owned by the Vendors. The principal business of the Target Company is investment holding and its principal asset is the Property. Vendor A is a company incorporated in Hong Kong. The principal activity of Vendor A is investment holding. Vendor B is a company incorporated in Hong Kong. The principal activity of Vendor B is investment holding. The audited total asset and net asset of the Target Company as at 31 March 2016 were approximately HK$58,334,000 and HK$13,732,000 respectively. Set out below is the financial information of the Target Company as prepared in accordance with Hong Kong Financial Reporting Standards for the years ended 31 March 2015 and 2016: For the year ended For the year ended 31 March March 2015 HK$ 000 HK$ 000 Approximately Approximately (audited) (audited) Turnover 3,499 3,410 Net profit (before taxation) 2,620 2,521 Net profit (after taxation) 2,189 2,107 INFORMATION ON THE GROUP The Group is principally engaged in (i) design, manufacture and sale of mattresses and soft bed products in the PRC and export of mattresses to overseas markets, (ii) securities investment in Hong Kong and (iii) property investment, and (iv) money lending. The Group acquired the entire issued share capital of a company (the Acquired Company ) in May 2016 at a consideration of HK$2,730,000. The Acquired Company is a licensed money lender in Hong Kong and its principal activity is money lending. As such, the Group commenced its money lending business upon completion of the acquisition of the Acquired Company which took place in 6 May

12 LETTER FROM THE BOARD REASONS FOR AND BENEFITS OF THE ACQUISITION The Group is principally engaged in, among others, property investment and is optimistic about the prospect of the property market in core areas of Hong Kong in the long run that the Acquisition represents a good investment opportunity in commercial property for the Group. The Group intends to hold the Property for its office or investment purposes or lease out the Property for rental income depending on the market circumstances. The Board considers that the Acquisition would enable the Group to generate steady rental income under the Existing Leases which would strengthen the asset and/or income base of the Group and provide capital appreciation potential to the Group. On the above basis, the Board is of the view that the terms of the Formal Agreement and the Acquisition are on normal commercial terms, fair and reasonable and in the interests of the Group and the Shareholders as a whole. As at the Latest Practicable Date, the Company plans to apply approximately HK$1 million for the decoration of the Property after the expiry of the Existing Leases. Save as the above, the Company has no other planned capital investment for the Property. The Acquisition will be financed by a combination of internal resources of the Group (mainly from the net proceeds from the rights issue of the Company as disclosed in the prospectus dated 18 September 2015) and external borrowings. Subsequent to 31 March 2016 and up to 31 May 2016, the Company has applied approximately HK$31.5 million for the acquisition of two properties (please refer to the announcements of the Company dated 30 March 2016 and 19 May 2016 respectively), approximately HK$20.0 million for the development of the money lending business and approximately HK$16.4 million for the development of the securities investment business. The cash and bank balance of the Group was approximately HK$98.3 million as at 31 May 2016, the Company will assess the then cash on hand and the availability of external borrowings for payment of the remaining balance of the Consideration upon Completion. The Company estimates that the external borrowings will be approximately 30% to 40% of the Consideration. The Company expects that the Acquisition will not have any material impact on other segments including the working capital required for those segments. As at the Latest Practicable Date, the Company does not have any intention to downsize or terminate its existing business. As at the Latest Practicable Date, the Company has no concrete plan regarding any potential fund raising activities. FINANCIAL EFFECT OF THE ACQUISITION Upon completion of the Acquisition, the Target Company will become an indirect wholly-owned subsidiary of the Company. Its results, assets and liabilities will therefore be consolidated into the financial statements of the Group. Set out in Appendix III to this circular is the unaudited pro forma 9

13 LETTER FROM THE BOARD financial information of the Enlarged Group which illustrates the financial effects of the Acquisition on the assets and liabilities of the Group assuming the Acquisition has been completed on 31 March Based on the unaudited pro forma financial information of the Enlarged Group in Appendix III to this circular, upon completion of the Acquisition and assuming the Acquisition has been completed on 31 March 2016, the total assets of the Group would increase from approximately HK$294,136,000 to approximately HK$294,551,000 and its total liabilities would increase from approximately HK$51,329,000 to approximately HK$51,930,000. It should be noted that the above financial effects of the Acquisition are for illustration purpose only. The exact financial effects are dependent on the consolidated net assets value of the Target Group on the Completion Date, and are subject to the review by the Company s auditors. RECONCILIATION STATEMENT OF THE VALUES OF THE PROPERTY To comply with the GEM Listing Rules, the Company has engaged an independent property valuer to value the Property. Details of the valuation report are set out in Appendix IV to this circular. Disclosure of the reconciliation of the net book value and the valuation as required under Rule 8.30 of the GEM Listing Rules is set out below: HK$ 000 Valuation of the Property as at 19 May 2016 as set out in the valuation report included in Appendix IV to this circular 168,000 Less: Carrying amount of the Property as at 31 March 2016 (57,919) Valuation surplus as at 31 March ,081 MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY The accountants report of the Target Company for the years ended 31 March 2014, 2015, 2016 was set out in Appendix II to this circular. Set out below is the management discussion and analysis of the Target Company for the corresponding period: Review of business The principal business of the Target Company is investment holding and its principal asset is the Property. 10

14 LETTER FROM THE BOARD Prospect and outlook The recent volatility in the global financial markets and concerns over the slowdown in the economy of Mainland China has an adverse impact on the economy in Hong Kong. The property market has shown signs of correction and prices are expected to gradually decline in the near terms. In addition, the prevailing low mortgage rate which is widely anticipated will continue to give considerable support for property investments. Recent researches indicate that while office vacancy rate might be tight, the average rental for Central district is still expected to have an approximately 8% increase. The Target Company s main investment is a whole floor of a commercial building located in Central, the management is therefore confident that the demand for property will remain strong in the long term. And, this is a good time to invest in real estate when other investment opportunities show less promising prospect. Turnover The Target Company recorded revenue of approximately HK$3,335,237, HK$3,409,691 and HK$3,498,960 for the years ended 31 March 2014, 2015 and 2016, respectively. The increase in revenue throughout the period from 2014 to 2016 was mainly due to the increment of the monthly rental income during the periods. Other income The Target Company recorded other income of approximately HK$506,727, HK$499,770 and HK$725,042 for the years ended 31 March 2014, 2015 and 2016, respectively. The other income represented the building management income charged by the Target Company to cover the building management fee. Administrative expenses The Target Company recorded administrative expenses of approximately HK$1,368,352, HK$1,386,831 and HK$1,604,172 for the years ended 31 March 2014, 2015 and 2016, respectively. The administrative expenses mainly included (i) the building management fee, (ii) rent and rates and (iii) depreciation expenses. Finance costs The Target Company recorded finance costs of approximately HK$22,006, HK$1,260 and nil for the years ended 31 March 2014, 2015 and 2016, respectively. The finance costs mainly included (i) the bank charges and (ii) bank loan interests. 11

15 LETTER FROM THE BOARD Profit for the years The Target Company recorded profit before taxation of approximately HK$2,451,606, HK$2,521,370 and HK$2,619,830 for the years ended 31 March 2014, 2015 and 2016, respectively. The Target Company recorded profit after taxation of approximately HK$2,038,345, HK$2,106,592 and HK$2,188,804 for the years ended 31 March 2014, 2015 and 2016, respectively. Liquidity and financial resources The resources of the Target Company were mainly financed by loans made by its shareholders. As at 31 March 2014, 2015 and 2016, the shareholders loan of the Target Company amounted to HK$49,999,998, HK$46,999,998 and HK$43,999,998 respectively. Gearing ratio As at 31 March 2014, 2015 and 2016, the gearing ratio of the Target Company, calculated as a percentage of the Target Company s total liabilities to its total assets, were approximately 84.5% 80.5% and 76.5% respectively. The total assets of the Target Company mainly comprised of the net book value of the Property and its total liabilities mainly comprised of the shareholders loan. Securities and guarantees As at 31 March 2014, 2015 and 2016, the Target Company had not made any pledge of or created any security over its assets and had not provided any corporate guarantee. Foreign exchange exposure For the years ended 31 March 2014, 2015 and 2016, the operation of the Target Company was principally in Hong Kong and the principal assets and liabilities of the Target Company were denominated in HK$. As such, the Target Company considered that it did not have any material exposure to fluctuations in exchange rate and hence no hedging measures were taken. GEM LISTING RULES IMPLICATIONS As one of the applicable percentage ratios (as defined under the GEM Listing Rules) in respect of the Acquisition exceeds 25% but below 100%, the Acquisition constitutes a major transaction for the Company and is therefore subject to the reporting, announcement, circular and shareholders approval requirements under Chapter 19 of the GEM Listing Rules. 12

16 LETTER FROM THE BOARD EGM The EGM will be convened and held for the purposes of considering and, if thought fit, approving the Acquisition. A notice convening the EGM is set out on pages EGM-1 to EGM-2 of this circular. The voting in relation to the Acquisition at the EGM will be conducted by poll whereby any Shareholders and their close associates (as defined under the GEM Listing Rules) who have a material interest in the Acquisition shall abstain from voting on the resolution in relation to the Acquisition to be proposed at the EGM. To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, no Shareholder and his/her/its close associates (as defined under the GEM Listing Rules) has a material interest in the Acquisition. As such, no Shareholder is required to abstain from voting under the GEM Listing Rules at the EGM approving the Acquisition. You will find the enclosed proxy form for use at the EGM. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed proxy form in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof to the office of the Company s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited of Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong. The completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish. Shareholders and potential investors should note that Completion is subject to the satisfaction or waiver of various conditions as stated in the section headed Conditions precedent of this circular. Shareholders and potential investors are therefore urged to exercise caution when dealing in the Shares. RECOMMENDATION The Directors believe that the terms of the Acquisition are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that all Shareholders to vote in favour of the resolution to be proposed at the EGM. ADDITIONAL INFORMATION Your attention is also drawn to the additional information set out in the appendices to this circular. The English text of this circular, the notice of the EGM and the form of proxy for use at the EGM shall prevail over the Chinese text in case of inconsistency. By order of the Board Jia Meng Holdings Limited Wong Siu Ki Executive Director 13

17 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 1. FINANCIAL SUMMARY OF THE GROUP The financial information of the Group for each of the three financial years ended 31 March 2014, 2015 and 2016 were disclosed in the annual reports of the Company for the years ended 31 March 2014 (pages 24 to 63), 2015 (pages 29 to 81) and 2016 (pages 33 to 87). The aforementioned financial information of the Group has been published on both the website of the Stock Exchange ( and the website of the Company ( jmbedding.com). Please refer to the hyperlinks as stated below: (i) 2016 annual report: (ii) 2015 annual report: (iii) 2014 annual report: 2. STATEMENT OF INDEBTEDNESS As at the close of business on 31 May 2016, being the latest practicable date for the purpose of this statement of indebtedness prior to printing of this circular, the indebtedness of the Enlarged Group was as follow: Interest-bearing bank borrowings The Enlarged Group had an outstanding principal of bank borrowings of approximately HK$35,413,000 which was secured by the Enlarged Group s leasehold land and building with a net carrying value of HK$8,012,000 and HK$3,119,000 respectively as at 31 May 2016 and was guaranteed by a subsidiary of the Company (A restricted bank account with a balance of RMB53,005 were also pledged to secure this bank borrowings). The interest-bearing bank borrowings are bearing floating interest rate at 1.14% per annum over benchmark interest rate and repayable within one year. Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Enlarged Group did not have any outstanding indebtedness, any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, hire purchases commitments, guarantees or other material contingent liabilities at the close of business on 31 May I-1

18 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 3. WORKING CAPITAL The Directors, after due and careful consideration, are of the opinion that, in the absence of unforeseeable circumstances, after taking into account the Enlarged Group s business prospects, the financial resources available to the Enlarged Group including internally generated funds and the available credit facilities, and the effect of the Acquisition, the working capital available to the Enlarged Group is sufficient for the Enlarged Group s requirements for at least 12 months from the date of this circular. 4. MATERIAL ADVERSE CHANGE As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2016, being the date to which the latest published audited financial statements of the Group was made up. 5. BUSINESS REVIEW AND FINANCIAL AND TRADING PROSPECTS Continuing with the economic downward pressure from both domestic and global market, the Group anticipates a challenging market for the mattress sales business. In view of the above, the Group is dedicated to improve its sales channel and network to maintain its sales volume. On the other hand, the management will also devote more effort on retaining existing customers through sales discount and relationship building. The target is to shorten the receivables cycle and improve the recoverability of these trade receivables. The securities investment segment has also started to generate income. For property investment business, the management is optimistic toward the price of Hong Kong s property in the future. The management will continue to adopt a diversification strategy and identify new business to broaden income source and maximise the return to the Shareholders. I-2

19 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY The following is the text of a report received from the reporting accountant, Elite Partners CPA Limited, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this Circular. 6 July 2016 The Board of Directors Jia Meng Holdings Limited Room 602, New World Tower 1, Queen s Road Central, Hong Kong Dear Sirs, 10 th Floor, 8 Observatory Road, Tsim Sha Tsui, Kowloon, Hong Kong We set out below our report on the financial information relating to Willing Investments Limited (the Target Company ) which comprises the statements of financial position as at 31 March 2014, 2015 and 2016, statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Target Company for the years ended 31 March 2014, 2015 and 2016 (the Relevant Periods ), together with the explanatory notes thereto (the Financial Information ). This Financial Information has been prepared by the directors of the Target Company for inclusion in Appendix II to the circular issued by Jia Meng Holdings Limited (the Company ) dated 6 July 2016 (the Circular ) in connection with the proposed acquisition of equity interests of the Target Company by the Company. The Target Company is incorporated in the Hong Kong on 4 May 2007 with limited liability. It principally engaged in property investment. The address of the registered office is Room 2301, 23/F, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong. The statutory financial statements of the Target Company were prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ). The statutory financial statements for the years ended 31 March 2014, 2015 and 2016 were audited by BDO Limited. For the purpose of this report, the directors of the Target Company have prepared the Financial Information for the Relevant Periods in accordance with HKFRS issued by the Hong Kong Institute of Certified Public Accountant ( HKICPA ) (the Underlying Financial Statements ). The Financial Information for the Relevant Periods are prepared based on the Underlying Financial Statements, with no adjustments made thereto, and in accordance with the applicable requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the Listing Rules ). II-1

20 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY Directors Responsibilities The directors of the Target Company are responsible for the preparation of the Financial Information that gives a true and fair view in accordance with HKFRSs issued by the HKICPA, the requirements of the Hong Kong Companies Ordinance and the applicable disclosure provision of the Listing Rules, and for such internal control as the directors of the Target Company determine is necessary to enable the preparation of the 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 the Circular in which this report is included. Reporting Accountant s Responsibilities It is our responsibility to form an independent opinion on the Financial Information for the Relevant Periods based on our audit. We conducted our audit in accordance with Hong Kong Standards on Auditing and the Auditing Guideline Prospectuses and the Reporting Accountant issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. Opinion In our opinion, for the purpose of this report, the Financial Information give a true and fair view of the state of affairs of the Target Company affairs as at 31 March 2014, 2015 and 2016 and of their financial performance and cash flows for the Relevant Periods then ended in accordance with HKFRS. II-2

21 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY I. FINANCIAL INFORMATION STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the years ended 31 March Notes HK$ HK$ HK$ Turnover 8 3,335,237 3,409,691 3,498,960 Other income 9 506, , ,042 Administrative expenses (1,368,352) (1,386,831) (1,604,172) Finance costs 10 (22,006) (1,260) Profit before income tax 11 2,451,606 2,521,370 2,619,830 Income tax expenses 13 (413,261) (414,778) (431,026) Profit and total comprehensive income for the year 2,038,345 2,106,592 2,188,804 II-3

22 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY STATEMENTS OF FINANCIAL POSITION As at 31 March Notes HK$ HK$ HK$ Non-current assets Property, plant and equipment 14 Investment properties 15 59,547,148 58,733,203 57,919,258 59,547,148 58,733,203 57,919,258 Current assets Account and other receivables 176, , ,449 Amount due from related partnership , , ,036 Prepaid taxation 8,481 3,753 Cash and bank balances 235,087 10,744 10,344 1,188, , ,582 Total assets 60,735,238 59,144,536 58,333,840 Current liabilities Other payables , , ,356 Bank loan ,697 Amounts due to shareholders 16 49,999,998 46,999,998 43,999,998 Income tax payable 17,759 51,298,148 47,600,854 44,601,354 Net current liabilities 50,110,058 47,189,521 44,186,772 Net assets 9,437,090 11,543,682 13,732,486 Capital and reserve Share capital Retained earnings 9,437,088 11,543,680 13,732,484 Total equity 9,437,090 11,543,682 13,732,486 II-4

23 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY STATEMENT OF CHANGES IN EQUITY For the years ended 31 March 2014, 2015 and 2016 Share Retained capital earnings Total HK$ HK$ HK$ At 1 April ,398,743 7,398,745 Results and total comprehensive income for the year 2,038,345 2,038,345 At 31 March 2014 and 1 April ,437,088 9,437,090 Results and total comprehensive income for the year 2,106,592 2,106,592 At 31 March 2015 and 1 April ,543,680 11,543,682 Results and total comprehensive income for the year 2,188,804 2,188,804 At 31 March ,732,484 13,732,486 II-5

24 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY STATEMENT OF CASH FLOW For the year ended 31 March HK$ HK$ HK$ Cash flows from operating activities Profit before income tax expense 2,451,606 2,521,370 2,619,830 Adjustments for: Interest expense 22,006 1,260 Interest income (53) (13) Depreciation of investment properties 813, , ,945 Operating profit before changes in working capital 3,287,504 3,336,562 3,433,775 Decrease in account and other receivables 50,257 54,270 (728) Decrease/(increase) in amount due from related partnership (216,486) 506,625 (7,651) Increase/(decrease) in other payables (16,474) 13, Cash generated from operations 3,104,801 3,910,619 3,425,896 Income tax paid (427,917) (441,018) (426,296) Net cash generated from operating activities 2,676,884 3,469,601 2,999,600 Cash flows from investing activities Interest received Net cash used in investing activities Cash flow from financing activities Repayment of shareholders loan (3,000,000) (3,000,000) Repayment of bank loan (2,834,878) (692,697) Interest paid (22,006) (1,260) Net cash generated from financing activities (2,856,884) (3,693,957) (3,000,000) Net decrease in cash and cash equivalents (179,947) (224,343) (400) Cash and cash equivalents at the beginning of the year 415, ,087 10,744 Cash and cash equivalents at the end of the year, represented by cash and bank balances 235,087 10,744 10,344 II-6

25 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY II. NOTES TO THE FINANCIAL INFORMATION 1. General The Target Company was incorporated in Hong Kong on 4 May 2007 as a limited liability company. The address of its registered office and its principal place of business is Room 2301, 23/F, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong. The Target Company is engaged in business of property investment. The Financial Information is presented in Hong Kong dollars ( HK$ ), which is also the functional currency of the Target Company. HK$ is the currency of the primary economic environment in which the Target Company operates. 2. Basic of preparation As at 31 March 2014, 2015 and 2016, the Target Company had net current liabilities of HK$50,110,058, HK$47,189,521 and HK$44,186,772, respectively. The Financial Information has been prepared by the directors of the Target Company on a going concern basis as the shareholders have agreed to provide financial support to the Target Company to maintain as a going concern and not to demand for any repayment of the amounts due to the shareholders of HK$49,999,998, HK$46,999,998 and HK$43,999,998 as at 31 March 2014, 2015 and 2016 until the Target Company is in a financial position to do so. In addition, after the completion of the Acquisition, the Company has agreed to provide adequate funds for the Target Company to meet its liabilities as they fall due. Accordingly, the directors of the Target Company are of the opinion that it is appropriate to prepare the Financial Information on a going concern basis. The Financial Information does not include any adjustments relating to the carrying amounts and reclassification of assets and liabilities that might be necessary should the Target Company be unable to continue as a going concern. II-7

26 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 3. Application of new and revised HKFRSs For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Company has consistently adopted HKFRSs, HKAS, amendments and interpretations which are effective for the Target Company s financial period beginning on 1 April 2013 throughout the Relevant Periods. New and revised HKFRSs in issue but not yet effective HKFRS 9 (2015) Financial Instruments 2 HKFRS 15 Revenue from Contracts with Customers 2 Amendments to HKFRSs Annual Improvements to HKFRSs Cycle 1 Amendments to HKAS 1 Disclosure Initiative 2 Amendments to HKFRS 11 Accounting for Acquisition of Interests in Joint Operations 2 Amendments to HKFRS 10, Investment Entities: Applying the HKFRS 12 and Consolidation Exception 1 HKAS 28 (2011) Amendments to HKFRS 10 Sale or Contribution of Assets between an Investor and HKAS 28 (2011) and its and Associate or Joint Venture 3 Amendments to HKAS 16 Clarification of Acceptable Methods of and HKAS 38 Depreciation and Amortisation 1 Amendments to HKAS 16 Agriculture: Bearer Plants 1 and HKAS 41 Amendments to HKAS 27 Equity Method in Separate Financial Statements 1 1) 2) 3) Effective for annual periods beginning on or after 1 January 2016, with earlier application permitted. Effective for annual periods beginning on or after 1 January 2018, with earlier application permitted. Effective for annual periods beginning on or after a date to be determined. HKFRS 15 Revenue from contracts with customers In July 2015, HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and the related interpretations when it becomes effective. II-8

27 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation. Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15. The directors of the Target Company anticipate that the application of HKFRS 15 in the future may have a material impact on the amounts reported and disclosures made in the Target Company s Financial Information. However, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Target Company performs a detailed review. 4. Summary of significant accounting policies 4.1 Property, plant and equipment Property, plant and equipment are stated at acquisition cost less accumulated depreciation and impairment losses. The gain or loss arising on the retirement of disposal is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Target Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred. II-9

28 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY Depreciation is calculated using the straight-line method to allocate the costs over the estimated useful lives, as follows: Leasehold improvements over the term of the lease The assets residual values, depreciation method and useful lives are reviewed, and adjusted if appropriate, at each reporting date. 4.2 Investment properties Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is recognised so as to write off the cost of investment properties over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method as follows: Leasehold land Buildings over the term of the lease 50 years An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the property is derecognised. 4.3 Impairment losses on tangible assets At the end of the reporting period, the Target Company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Target Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating unit, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. II-10

29 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or the cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or the cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately. 4.4 Financial instruments Financial assets and financial liabilities are recognised when the Target Company becomes a party to the contractual provisions of the instruments. Financial assets loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables including trade and bill receivables, other receivable, amount due from a director, amounts due from subsidiaries, amounts due from related companies and cash and bank balances are measured at amortised cost using the effective interest method, less any impairment. Financial liabilities Financial liabilities are recognised in the statement of financial position when the Target Company becomes a party to the contractual provision of the instrument. Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Financial liabilities including amount due to the shareholder, other borrowings and accruals and deposit received are subsequently measured at amortised cost, using the effective interest method. II-11

30 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY Effective interest method The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Interest expense is recognised on an effective interest basis. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Target Company are recognised at the proceeds received, net of direct issue costs. Derecognition A financial liability is derecognised when, and only when, the Target Company s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 4.5 Trade and other receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less allowance for impairment of doubtful debts, except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts. 4.6 Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value, net of transaction costs incurred. Interest-bearing borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. II-12

31 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 4.7 Trade and other payables Trade and other payables are initially recognised at fair value. Trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost. 4.8 Cash and cash equivalents Cash and cash equivalents include cash at banks and in hand, demand deposits with banks and short term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of bank balances and cash as defined above. 4.9 Leasing Rental income from operating lease is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term Borrowing cost All borrowing costs are recognised in profit or loss in the period in which they are incurred Revenue recognition Revenue is measured at the fair value of the consideration received or receivable for services rendered in the normal course of business. Rental and building management fee income from properties letting under operating leases is recognised on a straight-line basis over the terms of relevant lease. Interest income is accrued on a time basis on the principal outstanding at the applicable interest rate. II-13

32 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 4.12 Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the period. Taxable profit differs from loss before tax as reported in the statement of profit or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Company s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liabilities is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Current and deferred income taxes are recognised in profit or loss. II-14

33 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 4.13 Provisions and contingent liabilities Provisions are recognised when the Target Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. All provision are reviewed at each reporting date and adjusted to reflect the current best estimate. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or nonoccurrence of one or more future uncertain events not wholly within the control of the Target Company is also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote Related parties (a) A person, or a close member of that person s family, is related to the Target Company if that person: (i) (ii) (iii) has control or joint control over the Target Company; has significant influence over the Target Company; or is a member of the key management personnel of the Target Company or the Target Company s parent. II-15

34 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY (b) An entity is related to the Target Company if any of the following conditions applies: (i) (ii) (iii) (iv) (v) (vi) The entity and the Target Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). Both entities are joint ventures of the same third party. One entity is a joint venture of a third entity and the other entity is an associate of the third entity. The entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company. The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Target Company or to the Target Company s parent. Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. II-16

35 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 5. Critical accounting judgements and key sources of estimation uncertainty In the application of accounting policies, which are described in note 4, the directors of the Target Company is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying accounting policies The following is the critical judgment that the directors of the Target Company has made in the process of applying the entity s accounting policies and that has the most significant effect on the amounts recognised in the Financial Information. Going concern consideration The assessment of the going concern assumption involves making a judgement by the directors of the Target Company, at a particular point of time, about the future outcome of events or conditions which are inherently uncertain. The directors of the Target Company consider that the Target Company has the ability to continue as a going concern and the major events or conditions, which may give rise to liquidity risk, that individually or collectively may cast significant doubt about the going concern assumption are set out in note 2. Key sources of estimation uncertainty Impairment of investment property At 31 March 2016, the directors of the Target Company review the carrying amounts of the investment property of HK$57,919,258 and identifies there is indication that those assets may suffer an impairment loss. Accordingly, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. The estimates of the recoverable amount of the investment property is determined using fair value less cost of disposal, by comparing the recent market transactions of identical properties situated nearby. Based on the estimated recoverable amounts, no impairment loss has been recognised in respect of the investment property at 31 March II-17

36 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY Depreciation and estimated useful life of investment property Investment property is depreciated on a straight-line basis over the shorter of its lease term or estimated useful life. The determination of the useful life involves management s estimation based on the Target Company s business model and its asset management policy. The directors of the Target Company assesses the useful life of the investment property annually and if the expectation differs from the original estimates, such differences may impact the depreciation in the year and the estimates will be changed in the future period. At 31 March 2016, the carrying amount of investment property is HK$57,919,258 net of accumulated depreciation of HK$7,778, Capital risk management The Target Company manages its capital to ensure that the Target Company will be able to continue as a going concern while maximising the return to the shareholder through the optimisation of the debt and equity balance. The Target Company s overall strategy remains unchanged throughout the Relevant Periods. The capital structure of the Target Company consists of amount due to the shareholder, other borrowings and equity attributable to owner of the Target Company, comprising share capital and reserve. The directors of the Target Company reviews the capital structure on a regular basis. As part of this review, the directors of the Target Company considers the cost of capital and the risks associated with each class of capital. Based on the recommendations of the directors of the Target Company, the Target Company will balance its overall capital structure through the payment of dividends, issuance of new shares as well as the issue of new debts or the repayment of existing debts. 7. Financial Instrument (a) Categories of financial instruments HK$ HK$ HK$ Financial assets Loans and receivables Account and other receivables 176, , ,449 Amount due from related partnership 776, , ,036 Cash and bank balances 235,087 10,744 10,344 1,188, , ,829 II-18

37 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY HK$ HK$ HK$ Financial liabilities Financial liabilities measured at amortised cost Other payables 587, , ,356 Amount due to shareholders 49,999,998 46,999,998 43,999,998 50,587,692 47,600,854 44,601,354 (b) Financial risk management objectives and policies The Target Company is exposed through its operation to the following risks from its use of financial instruments: Liquidity risk Credit risk The policy for each of the above risks is described in more detail below: (i) Liquidity risk The Target Company actively manages operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. The Target Company s financial liabilities are current in nature and payable within one year or on demand or according to trade credit term. Therefore, the contractual undiscounted cash flows of the Target Company s financial liabilities are less than one year at the end of the reporting period. At 31 March 2014, 2015 and 2016, it had significant net current liabilities of HK$50,110,058, HK$47,189,521 and HK$44,186,772 respectively. Shareholders of the Target Company have confirmed their intention to provide continual financial support to the Target Company so as to enable to meet liabilities as and when they fall due and will not demand repayment from the Company unless it is financially capable to do so. II-19

38 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY (ii) Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Target Company. The Target Company is exposed to credit risk from accounts and other receivables, cash and bank balances. Although the bank deposits are concentrated on certain counterparties, the credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. 8. Turnover Turnover represents gross rental from investment properties. 9. Other income HK$ HK$ HK$ Bank interest income Building management fee income 499, , ,242 Others 6,917 Rate received 185, , , , Finance costs HK$ HK$ HK$ Interest on bank borrowings wholly repayable within five years 22,006 1,260 II-20

39 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 11. Profit before income tax Profit before income tax is arrived at after charging/(crediting): HK$ HK$ HK$ Auditors remuneration 45,500 50,500 45,000 Depreciation of investment properties 813, , ,945 Rental income from investment properties less direct outgoing (2,835,480) (2,909,934) (2,773,918) 12. Directors emoluments The directors, who are considered to be the key management personnel, did not receive or will not receive any fees or emoluments in respect of its services rendered to the Target Company during the years ended 31 March 2014, 2015 and Income tax expenses HK$ HK$ HK$ Current taxation 413, , ,026 Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profits arising in Hong Kong during the periods. The income tax expense for the year can be reconciled to the profit per the statement of comprehensive income as follows: HK$ HK$ HK$ Profit before income tax 2,451,606 2,521,370 2,619,830 Tax at the applicable tax rate 404, , ,272 Tax effect of income that are not taxable (9) (2) Tax effect of deductible temporary difference not recognised 18,754 18,754 18,754 Tax relief (10,000) (20,000) (20,000) 413, , ,026 No provision for deferred taxation has been recognized in the financial statements as there are no significant temporary differences. II-21

40 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 14. Property, plant and equipment Leasehold improvements HK$ Cost: At 1 April 2013, 31 March 2014, 2015 and ,900 Accumulated depreciation: At 1 April 2013, 31 March 2014, 2015 and ,900 Net book value: At 1 April 2013, 31 March 2014, 2015 and Investment properties HK$ Cost: At 1 April 2013, 31 March 2014, 2015 and ,697,287 Accumulated depreciation: At 1 April ,336,194 Charge for the year 813,945 At 1 April ,150,139 Charge for the year 813,945 At 1 April ,964,084 Charge for the year 813,945 At 31 March ,778,029 Net book value: At 31 March ,919,258 At 31 March ,733,203 At 31 March ,547,148 II-22

41 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY Note: (i) (ii) Investment properties are located in Hong Kong and held under long-term lease. In the opinion of the directors of the Target Company, the fair value of the investment properties at 31 March 2014, 2015 and 2016 is approximately HK$132,443,000, HK$132,737,000 and HK$158,000,000, respectively, which is determined by referring to the market price of the properties. 16. Amount(s) due from related partnership/due to shareholders The amounts are unsecured, interest-free and repayable on demand. 17. Other payables HK$ HK$ HK$ Accruals 46,000 52,500 53,000 Deposits received 541, , , , , , Bank loan HK$ HK$ HK$ Secured borrowings (note) 692,697 Note: As at 31 March 2014, the bank loan was secured investment properties as set out in note 15 with a carrying amount of HK$59,547,148. The bank loan had been fully repaid in July The bank loan interest was charged at 0.8% over one/ three/six-moth Hong Kong Interbank Offered Rate (HIBOR) but not exceeding prime rate minus 2.5%. The effective interest rates (which are equal to contractual interest rates) on the bank loan is 1.04% per annum. II-23

42 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 19. Share capital Number of shares Amount HK$ Authorised: 10,000 ordinary shares of HK$1 each At 31 March 2013, 31 March 2014 and 1 April ,000 10,000 The concept of authorised share capital is abolished on 3 March 2014 (note 1) (10,000) (10,000) At 31 March 2015 and 31 March 2016 Issued and fully paid: At 31 March 2013, 31 March 2014, 1 April 2014, 31 March 2015 and 31 March Note 1 The Hong Kong Companies Ordinance, Cap. 622 came into effect on 3 March Under Section 135 of the Hong Kong Companies Ordinance, shares in a company do not have nominal value. Accordingly, the concept at authorised share capital is abolished. The no nominal value regime applies to the Target Company. 20. Operating leases At the end of the reporting period, the minimum rent receivables under non-cancellable operating leases are receivable as follows: HK$ HK$ HK$ Not later than one year 1,956,782 2,257,296 1,956,782 Later than one year and not later than five years 1,665,134 1,956,782 3,922,430 1,956,782 II-24

43 APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY 21. Related Party Transactions Details of directors emoluments are given in note 12 to the financial statements. Other significant related party transaction is as follows: Type of transactions Transaction amount HK$ HK$ HK$ Rental income and building management fee income received from a related partnership 1,425,257 1,425,257 1,526,819 The director of the Target Company, Mr. So Hop Shing, is a partner of the related partnership. III. SUBSEQUENT FINANCIAL STATEMENTS As at the date of this report, no audited financial statements have been prepared by the Target Company in respect of any period subsequent to 31 March Yours faithfully, Elite Partners CPA Limited Certified Public Accountants Hong Kong, 6 July 2016 Siu Jimmy Practising Certificate Number: P05898 II-25

44 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP The following is the text of a report, prepared for the sole purpose of inclusion in this Circular from the independent reporting accountants of the Target Company, Elite Partners CPA Limited, Certified Public Accountants. 6 July 2016 The Board of Directors Jia Meng Holdings Limited Room 602, New World Tower 1, Queen s Road Central, Hong Kong Dear Sirs, 10 th Floor, 8 Observatory Road, Tsim Sha Tsui, Kowloon, Hong Kong We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information (the Unaudited Pro Forma Financial Information ) of Jia Meng Holdings Limited (the Company ) and its subsidiaries (hereinafter 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 consolidated statement of assets and liabilities as at 31 March 2016 and related notes as set out on pages 5 to 8 in Appendix III of the circular of the Company dated 6 July 2016 (the Circular ). The applicable criteria on the basis of which the Directors of the Company have compiled the Unaudited Pro Forma Financial Information are described on page 4 in Appendix III to the Circular. The Unaudited Pro Forma Financial Information has been complied by the Directors of the Company to illustrate the impact of the proposed acquisition of 100% equity interests in Willing Investments Limited (the Target Company ) on the Group s consolidated statement of financial position as at 31 March 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 7.31 of the Rules Governing the Listing of Securities on Growth Enterprises Market of the Stock Exchange of Hong Kong Limited (the GEM Listing Rules ) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars ( AG 7 ) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). III-1

45 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP Reporting Accountant s Responsibilities Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owned 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 accountant complies with ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the directors of the Company have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Listing Rules and with reference to AG 7 issued by the HKICPA. The purpose of Unaudited Pro Forma Financial Information included in the Circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 31 March 2016 or 1 April 2016 would have been as presented. For the 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. 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 of the Company 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 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 Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances. III-2

46 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP 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) (b) (c) the Unaudited Pro Forma Financial Information on the Enlarged Group has been properly compiled by the directors of the Company on the basis stated; such basis is consistent with the accounting policies of the Group; and the pro forma adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information on the Enlarged Group as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules. Yours faithfully, Elite Partners CPA Limited Certified Public Accountants Hong Kong Siu Jimmy Practising Certificate Number: P05898 III-3

47 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP B. UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED GROUP Introduction The accompanying unaudited pro forma financial information (the Unaudited Pro Forma Financial Information ) of the Enlarged Group (as defined in this circular) has been prepared by the Directors (as defined in this circular) in accordance with Rule 7.31 of The Rules Governing the Listing of Securities on Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, for illustrative purposes only, to provide information about how the proposed Acquisition (as defined in this circular) as detailed in the Letter from the Board included in this circular might have affected the financial position of the Group as if the Acquisition had been completed on 31 March 2016 in respect of the unaudited pro forma statement of financial position of the Enlarged Group. The unaudited pro forma statement of assets and liabilities of the Enlarged Group has been prepared based on: (i) the audited consolidated statement of financial position of the Group as at 31 March 2016, which was extracted from the published annual report of the Company for the year ended 31 March 2016; and (ii) the audited statement of financial position of the Target Company as at 31 March 2016, which was extracted from the accountant s report thereon set out in Appendix II to this circular, and adjusted on a pro forma basis to reflect the effect of the Acquisition as explained in the accompanying notes that are directly attributable to the Acquisition and not relating to future events or decisions, and are factually supportable. The accompanying Unaudited Pro Forma Financial Information of the Enlarged Group is prepared by the Directors based on a number of assumptions, estimates, uncertainties and currently available information. As a result of these assumptions, estimates, uncertainties, the accompanying Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to describe the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on the dates indicated herein. Furthermore, the accompanying Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to predict the financial position of the Enlarged Group. The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with the financial information of the Group as set out in the published annual report of the Company for the year ended 31 March 2016, the accountants report of the Target Company as set out in Appendix II to this circular respectively, the Company s announcement dated 19 May 2016 and other financial information included elsewhere in this circular. III-4

48 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP (B) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP I. Unaudited pro forma consolidated statement of assets and liabilities of the Enlarge Group as at 31 March 2016 Target The Group Company as at 31 as at 31 March March The Pro forma Enlarged (Audited) (Audited) Sub-total adjustments Group HK$ 000 HK$ 000 HK$ 000 HK$ 000 Notes HK$ 000 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 5,745 5,745 5,745 Prepaid premium for land leases 8,012 8,012 8,012 Investment properties 19,000 57,919 76, , ,000 Deferred tax assets Total non-current assets 33,449 57,919 91, ,449 Current assets Inventories 2,111 2,111 2,111 Financial assets at fair value through profit or loss 13,679 13,679 13,679 Trade and other receivables 70, ,209 70,209 Tax recoverable Amount due from a related partnership Cash and cash equivalents 174, ,477 (158,000) 3 16,477 Total current assets 260, , ,102 Total assets 294,136 58, , ,551 III-5

49 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP Target The Group Company as at 31 as at 31 March March The Pro forma Enlarged (Audited) (Audited) Sub-total adjustments Group HK$ 000 HK$ 000 HK$ 000 HK$ 000 Notes HK$ 000 Current liabilities Trade and other payables 10, ,266 11,266 Amounts due to shareholders 44,000 44,000 (44,000) 3 Bank loan 36,048 36,048 36,048 Tax payables 1,203 1,203 1,203 Total current liabilities 47,916 44,601 92,517 48,517 Net current assets/(liabilities) 212,771 (44,186) 168,585 54,585 Total assets less current liabilities 246,220 13, , ,034 Non-current liabilities Deferred income 3,157 3,157 3,157 Deferred tax liabilities Total non-current liabilities 3,413 3,413 3,413 Total liabilities 51,329 44,601 95,930 51,930 NET ASSETS 242,807 13, , ,621 III-6

50 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP 1. The amounts are extracted from the audited consolidated statement of financial position of the Group as at 31 March 2016 as set out in the Company s published annual report for the ended 31 March The audited consolidated statement of financial positions of Target Company as at 31 March 2016 are extracted from the Accountants Report on Target Company as set out in Appendix II to this circular. 3. Pursuant to the Agreement, the consideration of the Acquisition includes the consideration for acquisition of the entire share capital in and shareholder s loan to the Target Company. According to the Agreement, the consideration is HK$158,000,000 excluding the shareholder s loan of the Target Company as at the completion date. It is assumed that the pro forma cash consideration of HK$158,000,000 will be paid by the Group s cash. Details of the identifiable assets and liabilities of Target Company to be accounted for the unaudited pro forma statement of assets and liabilities of the Enlarged Group and the calculation are as follows: Carrying Fair value amount adjustment Fair value HK$ 000 HK$ 000 HK$ 000 Investment property 57, , ,000 Account and other receivables Amount due from related partnership Tax recoverable 4 4 Cash and bank balances Other payables (601) (601) Amount due to shareholders (44,000) (44,000) 13, , ,814 III-7

51 APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP Deficits of the consideration over the net carrying value of the assets and liabilities of the Target Company, amounting to HK$9,812,000 has been recognised in the retained profits as the investment properties acquired are stated at their fair value as at 31 March It is assumed that the fair value of the net identifiable assets as at the completion date is equal to the carrying amount of the net assets acquired as at 31 March Since the cost allocation to the individual identifiable assets and liabilities is not complete and the fair values of identifiable assets and liabilities of the Target Company acquired may change at the actual date of completion of the Acquisition, the amount allocated to investment properties recognised by the Group may be different. 4. Apart from the above, no other adjustments have been made to reflect any trading result or other transactions of the Group and the Target Company entered into subsequent to 31 March Unless otherwise stated, the adjustments above were not expected to have a continuing effect on the Enlarged Group. III-8

52 APPENDIX IV VALUATION REPORT The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this circular received from B.I. Appraisals Limited, an independent property valuer, in connection with its opinion of market value of the Property as at 19 May Unit 1301, 13th Floor, Tung Wai Commercial Building, Nos Gloucester Road, Wan Chai, Hong Kong Tel: (852) Fax: (852) [email protected] Website: The Board of Directors Jia Meng Holdings Limited Room 602, New World Tower Queen s Road Central Central Hong Kong Dear Sirs, 6 July 2016 Re: 23 rd Floor, China Insurance Group Building, 141 Des Voeux Road Central, 73 Connaught Road Central and Gilman Street, Hong Kong In accordance with the instructions from Jia Meng Holdings Limited (hereinafter referred to as the Company ) for us to carry out a valuation of the property interest in the captioned property (hereinafter referred to as the Property ), we confirm that we have carried out inspection, conducted land searches at the Land Registry, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the property interest as at 19 May 2016 (hereinafter referred to as the Date of Valuation ). It is our understanding that this valuation document is to be used by the Company for disclosure purpose. This letter, forming part of our valuation report, identifies the property interest being valued, explains the basis and methodology of our valuation and lists out the assumptions and title investigation which we have made in the course of our valuation, as well as the limiting conditions. BASIS OF VALUATION Our valuation of the property interest is our opinion of its market value which we would define as intended to mean the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. IV-1

53 APPENDIX IV VALUATION REPORT Our valuation has been carried out in accordance with The HKIS Valuation Standards 2012 Edition published by The Hong Kong Institute of Surveyors and under generally accepted valuation procedures and practices, which are in compliance with the requirements set out in Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. VALUATION METHODOLOGY In valuing property interest, which is held for investment by its owner, we have adopted the Investment Method by capitalizing the rental income at market derived yields with due allowance for the reversionary potential of the Property. VALUATION ASSUMPTIONS Our valuation has been made on the assumption that such property interest is sold in the open market without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement that would serve to affect its value. In addition, no account has been taken of any option or right of pre-emption concerning or effecting a sale and no forced sale situation in any manner is assumed in our valuation. No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property interest nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interest is free from encumbrances, restrictions and outgoings of an onerous nature that could affect its value. TITLE INVESTIGATION We have carried out title searches at the Land Registry for the property interest. However, we have not examined the original documents to verify the ownership and to ascertain the existence of any amendments that may not appear on the copies handed to us. All documents have been used for reference only. We assume no responsibility for matters legal in nature nor do we render any opinion as to the title to the property interest that is assumed to be good and marketable. LIMITING CONDITIONS The Property was inspected on 19 May 2016 by Mr. Ken W. C. Tsang, an assistant manager of our firm who is a technical staff having more than 13 years of experience in the inspection and valuation of properties in Hong Kong and in the People s Republic of China. We have inspected the exterior and, where possible, the interior of the Property. In the course of our inspection, we did not note any serious defects. However, no structural survey has been made and we are therefore unable to report whether the Property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services. We have not conducted any on-site measurements to verify the correctness of the floor areas of the Property but have assumed that the areas shown on the documents furnished to us are correct. Dimensions, measurements and areas included in the valuation certificate attached are based on information contained in the documents provided to us by the Company and are, therefore, only approximations. IV-2

54 APPENDIX IV VALUATION REPORT We have relied to a considerable extent on the information and advice given or made available to us by the Company and the relevant government authorities on such matters as planning approvals, statutory notices, easements, tenures, particulars of occupancy, tenancy agreements and all other relevant matters. We have not seen original planning consents and have assumed that the Property is erected, occupied and used in accordance with such consents. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We were also advised by the Company that no material facts have been omitted from the information provided. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld. CURRENCY Unless otherwise stated, all monetary amounts stated in this report are in Hong Kong Dollars (HK$). REMARKS We hereby confirm that we have neither present nor prospective interests in the Company, the property interest and its owner, or the value reported herein. Our valuation certificate is enclosed herewith. Yours faithfully, For and on behalf of B.I. APPRAISALS LIMITED William C. K. Sham Registered Professional Surveyor (G.P.) China Real Estate Appraiser MRICS, MHKIS, MCIREA Executive Director Notes: (1) Mr. William C. K. Sham is a qualified valuer on the approved List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the Hong Kong Institute of Surveyors. Mr. Sham has over 30 years experience in the valuation of properties in Hong Kong and has over 15 years experience in the valuation of properties in the People s Republic of China and the Asia Pacific regions. (2) Inspection of the Property was carried out on 19 May 2016 by Mr. Ken Tsang, Assistant Manager. Mr. Tsang obtained the Degree of Associate of Science in Facilities Management from City University of Hong Kong in 2007 and has more than 13 years experience in the inspection and valuation of properties in Hong Kong and the People s Republic of China. IV-3

55 APPENDIX IV VALUATION REPORT VALUATION CERTIFICATE Property Description and tenure Particulars of occupancy Capital value in existing state as at 19 May rd Floor, China Insurance Group Building, 141 Des Voeux Road Central, 73 Connaught Road Central and Gilman Street, Hong Kong 1120/44680th shares of and in The Remaining Portion of Marine Lot No. 395 and the Extension thereto China Insurance Group Building, formerly known as International Building, is a 33-storey (inclusive of a basement level) commercial building completed in about It is located on the northeastern side of Des Voeux Road Central and is bounded by Gilman Street on the northwest and Connaught Road Central on the northeast within Sheung Wan District. The Property is tenant-occupied under four tenancies for terms due to expire on various dates during the period from 31 December 2016 to 28 February The current total monthly rent of the Property is approximately HK$291,580. (See Note 3 and 4 below) HK$168,000,000 The Property comprises the whole of 23rd Floor of the subject development. Currently, it is sub-divided into 4 office units, designated as Units 2301, 2302, 2303 and The saleable area of the Property is approximately 8,569 square feet. Marine Lot No. 395 is held under is held under a Government Lease for a term of 999 years from 14 July The Government Rent payable for Marine Lot No. 395 is HK$246 per annum. IV-4

56 APPENDIX IV VALUATION REPORT Notes: 1) The registered owner of the Property is Willing Investments Limited, via an assignment dated 31 August 2007, registered vide Memorial No ) The subject building lies within an area currently zoned as Commercial on the Approved Sai Ying Pun & Sheung Wan Outline Zoning Plan No. S/H3/29 gazetted on 27 September ) The tenant of Unit 2301, who is a monthly tenant, shall have an option at any time during the monthly tenancy to give the landlord not less than 1-month notice in writing to early terminate the said monthly tenancy; whereas both the landlord and respective tenants of the remaining three units shall be entitled to give not less than six calendar months notice in writing to the other party expiring at the end of any calendar month early terminating the respective tenancies. 4) The monthly rentals for Unit 2301 and 2303 are exclusive of management fees, rates and government rent; whereas those for Unit 2302 and 2304 are exclusive of management fees and rates. IV-5

57 APPENDIX V GENERAL INFORMATION OF THE GROUP 1. RESPONSIBILITY STATEMENT This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM 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 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) Director s and chief executive s interests in the Company As at the Latest Practicable Date, the interests and short positions of the Directors or chief executives of the Company in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), (i) which would have 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 (ii) which were required to be entered in the register referred to therein pursuant to section 352 of the SFO; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to standard of dealings by Directors as referred to in Rules 5.46 to 5.67 of the GEM Listing Rules, were as follows: Approximately percentage of Name Nature of interest Number of Shares interests Mr. Wong Siu Ki Beneficial owner 12,000,000 Shares 0.52% Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any 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) (i) 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 (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to standard of dealings by Directors as referred to in Rules 5.46 to 5.67 of the GEM Listing Rules. V-1

58 APPENDIX V GENERAL INFORMATION OF THE GROUP (b) Substantial Shareholders and other persons interests in Shares and underlying Shares So far as is known to the Directors and chief executive of the Company, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares, debentures or underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO and section 336 of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Company or had any options in respect of such Shares. 3. DIRECTORS INTERESTS IN CONTRACT AND ARRANGEMENTS As at the Latest Practicable Date: (a) (b) none of the Directors had any interest, either direct or indirect, in any assets which have, since 31 March 2016 (being the date to which the latest published audited financial statements of the Group was made up), been acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group; and none of the Directors was materially interested in any contract or arrangement entered into by any member of the Enlarged Group which is subsisting as at the Latest Practicable Date and is significant in relation to the business of the Enlarged Group. 4. LITIGATION As at the Latest Practicable Date, none of the members of the Enlarged Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Enlarged Group. 5. DIRECTORS COMPETING INTERESTS As at the Latest Practicable Date, none of the Directors, controlling Shareholders or their respective close associates had any interests in businesses which competed or might compete with the businesses of the Enlarged Group or had any other conflict of interests with the Enlarged Group. V-2

59 APPENDIX V GENERAL INFORMATION OF THE GROUP 6. DIRECTORS SERVICE CONTRACTS As at the Latest Practicable Date, none of the Directors had entered into any service contract with any member of the Enlarged Group (excluding contracts expiring or determinable by the employer within one year without payment of any compensation (other than statutory compensation)). 7. EXPERTS AND CONSENTS The following is the qualification of the experts who have given opinion or advice which is contained in this circular: Name Elite Partners CPA Limited B.I. Appraisals Limited Qualifications Certified Public Accountants Independent valuer As at the Latest Practicable Date, each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its reports and/or its letters dated 6 July 2016 and/or references to its name and/or its advice in the form and context in which they respectively appear. As at the Latest Practicable Date, each of the above experts did not have any beneficial interest in the share capital of any member of the Enlarged Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group or have any interest, either directly or indirectly, in any assets which have been, since 31 March 2016 (being the date to which the latest published audited financial statements of the Group was made up), acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group. 8. MATERIAL CONTRACTS The following contracts (not being contracts in the ordinary course of business) have been entered into by the members of the Enlarged Group within the two years immediately preceding the date of this circular and up to the Latest Practicable Date and are or may be material: I. The Group (a) the conditional placing agreement dated 28 November 2014, entered into between the Company (as the issuer) and SBI China Capital Financial Services Limited (as placing agent) in relation to the placing of 80,000,000 shares of the Company at HK$0.213 per placing share for a maximum net proceeds of approximately HK$16.34 million; V-3

60 APPENDIX V GENERAL INFORMATION OF THE GROUP (b) (c) (d) (e) (f) (g) the conditional placing agreement dated 9 April 2015, entered into between the Company (as the issuer) and the CNI Securities Group Limited (as placing agent) in relation to the placing of 96,400,000 shares of the Company at HK$0.154 per placing share for a maximum net proceeds of approximately HK$14.23 million; on 20 April 2015, Grandeur Industries Limited ( Grandeur ), a wholly owned subsidiary of the Company, entered into a memorandum of understanding (the MOU ) with a prospective seller. Pursuant to the MOU, Grandeur has agreed to pay a sum of HK$15,000,000 in cash to the prospective seller upon the signing of the MOU as earnest money for the possible acquisition of the entire equity interest of a target company which is principally engaged in retailing branded mattresses through various furniture outlets in Hong Kong. The MOU was terminated on 19 October 2015; the conditional acquisition agreement dated 21 April 2015, entered into between Colorful Focus Limited (as purchaser), a wholly-owned subsidiary of the Company, the vendor and the warrantor, in relation to the acquisition of entire issued share capital of China Universal Limited at the consideration of HK$24,000,000; the underwriting agreement dated 9 June 2015 (as amended and supplemented by the supplemental agreement dated 22 July 2015) entered into between the Company and CNI Securities Group Limited as underwriter in relation to the underwriting of not less than 1,735,200,000 rights shares and not more than 1,741,200,000 rights shares at the subscription price of HK$0.08 per rights share for a net proceeds of not less than approximately HK$131.5 million and not more than approximately HK$132.0 million; on 22 December 2015, Prudent Success Limited ( Prudent Success ), a whollyowned subsidiary of the Company, entered into a memorandum of understanding (the December MOU )with two prospective vendors. Pursuant to the December MOU, Prudent Success has agreed to pay a sum of HK$1,000,000 in cash to the prospective vendors upon the signing of the December MOU as earnest money for the possible acquisition of the entire equity interest of a target company which is principally engaged in securities brokerage business in Hong Kong. The December MOU was terminated on 3 February 2016; the sales and purchase agreement dated 30 December 2015, entered into between Colorful Focus Limited (as vendor), a wholly-owned subsidiary of the Company, the Company (as guarantor) and Wise Link International Limited (as purchaser), in relation to the disposal of entire issued share capital of Full Profit Property Services Company Limited, an indirect wholly-owned subsidiary of the Company, at the consideration of HK$6,000,000; V-4

61 APPENDIX V GENERAL INFORMATION OF THE GROUP (h) (i) (j) (k) (l) (m) the provisional sales and purchase agreement dated 4 March 2016, entered into between Excellent Shine Limited (as purchaser), an indirect wholly-owned subsidiary of the Company and a vendor in relation to the acquisition of a property located at Ground Floor, No. 240 Reclamation Street, Kowloon, Hong Kong at the consideration of HK$19,000,000; the sales and purchase agreement dated 7 March 2016, entered into between Colorful Focus Limited (as vendor), a wholly-owned subsidiary of the Company and Wise Link International Limited (as purchaser), in relation to the disposal of the entire issued share capital of China Universal Limited at the consideration of HK$25,900,000; the provisional sales and purchase agreement dated 30 March 2016, entered into between Natural Yield Investment Limited (as purchaser), a direct wholly-owned subsidiary of the Company and Chung Po Aquatic Products Company Limited (as vendor) in relation to the acquisition of a property located at 15th Floor, Universal House, Nos.229 and 230 Gloucester Road, Hong Kong at the consideration of HK$16,500,000; the sales and purchase agreement dated 6 May 2016, entered into between Raise Steady Limited (as purchaser), a direct wholly-owned subsidiary of the Company and a vendor in relation to the acquisition of the entire issued share capital of a target company at the consideration of HK$2,730,000. The target company is principally engaged in money lending business; the Agreement; and the Formal Agreement. II. The Target Company No material contracts have been entered into by the Target Company within the two years immediately preceding the date of this circular and up to the Latest Practicable Date which are or may be material. 9. MISCELLANEOUS (a) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands. (b) (c) The head office and principal place of business of the Company in Hong Kong is Room 602, New World Tower 1, Queen s Road Central, Central, Hong Kong. The secretary of the Company is Mr. Wong King Chung, who is a member of Hong Kong Institute of Certified Public Accountants. V-5

62 APPENDIX V GENERAL INFORMATION OF THE GROUP (d) (e) (f) The compliance officer of the Company is Mr. Wong King Chung. The branch share registrar and transfer office of the Company in Hong Kong is Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong. This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail. 10. AUDIT COMMITTEE The primary duties of the audit committee of the Company are to review and supervise the financial reporting process and internal control system of the Company, nominate and monitor external auditors, review quarterly report of the compliance department s findings, meet with external auditor regularly and provide advices and comments to the Directors. As at the Latest Practicable Date, the audit committee of the Company comprised of three independent non-executive Directors, namely, Mr. Chan Chun Wing (chairman of the audit committee), Mr. Fung Kam Man and Mr. Tang Kin Chor. Brief biographies of the independent nonexecutive Directors are set out below: Mr. Chan Chun Wing ( Mr. Chan ), aged 46, was appointed as an independent nonexecutive Director on 23 May He holds a bachelor degree of economics from Macquarie University (Australia). Mr. Chan is a fellow member of the Hong Kong Institute of Certified Public Accountants. He has worked with one of the Big Four CPA firms in his early career, and has subsequently worked as a financial controller and other managerial role across different industries and business segments. He is now a partner and shareholder of a long established sport equipment manufacturing and trading company in Hong Kong. Mr. Fung Kam Man ( Mr Fung ), aged 52, was appointed as an independent non-executive Director on 1 April He obtained a bachelor s degree in Business Administration from The Chinese University of Hong Kong in 1987 and the degree of Master of Science in Financial Management from the University of London in Mr. Fung has been certified as a Project Management Professional by the Project Management Institute. He is a certified financial planner certified by the Institute of Financial Planners of Hong Kong Limited and the Chinese Institute of Certified Financial Planner. Mr. Fung has over 20 years of experience in the continuing education and vocational training field. He is now the head of projects of the Asian Gemmological Institute and Laboratory Limited and the executive administrator of the Chinese Institute of Certified Financial Planner. Mr. Tang Kin Chor ( Mr. Tang ), aged 57, was appointed as an independent non-executive Director on 11 April 2016, has over 20 years of working experience in the securities industry including equity sales and fund management. Mr. Tang is now an associate director of Celestial Securities Limited, a registered exchange participant of the Stock Exchange, and a columnist. V-6

63 APPENDIX V GENERAL INFORMATION OF THE GROUP 11. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be made available for inspection during normal business hours at the head office and principal place of business in Hong Kong of the Company at Room 602, New World Tower 1, Queen s Road Central, Central, Hong Kong from the date of this circular up to and including the date of the EGM: (a) (b) (c) (d) (e) (f) (g) (h) the memorandum and articles of association of the Company; the annual reports of the Company for each of the two years ended 31 March 2015 and 2016; the accountants report from Elite Partners CPA Limited on the financial information of the Target Company, the text of which is set out in Appendix II to this circular; the accountants report from Elite Partners CPA Limited on the unaudited pro forma financial information on the Enlarged Group, the text of which is set out in Appendix III to this circular; the valuation report on the Property prepared by B.I. Appraisals Limited, the text of which is set out in Appendix IV to this circular the written consents referred to in the paragraph headed Experts and consent in this appendix; the material contracts as referred to in the paragraph headed Material contracts in this appendix; and this circular. V-7

64 NOTICE OF EGM JIA MENG HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8101) NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Jia Meng Holdings Limited (the Company ) will be held at 10:00 a.m. on Thursday, 21 July 2016 at Regus Conference Centre, 35/F, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as ordinary resolution: THAT: ORDINARY RESOLUTION (a) (b) the Formal Agreement as defined in the circular of the Company dated 6 July 2016 despatched to the shareholders of the Company, a copy of which has been produced to this meeting marked A and initialled by the chairman of the EGM for the purpose of identification, and all the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and any one director of the Company (the Director ) be and is hereby authorized to do all such acts and things as the Director in his/her sole and absolute discretion deems necessary, desirable or expedient to implement, give effect to and/or complete the Formal Agreement and the transactions contemplated thereunder, where required, any amendment of the terms of the Formal Agreement as required by, or for the purposes of obtaining the approval of, relevant authorities or to comply with all applicable laws, rules and regulations. By order of the Board Jia Meng Holdings Limited Wong Siu Ki Executive Director Hong Kong, 6 July 2016 Registered Office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive Room 602 P.O. Box 2681 New World Tower 1 Grand Cayman, KY Queen s Road Central Cayman Islands Central Hong Kong EGM-1

65 NOTICE OF EGM Notes: 1. Any shareholder entitled to attend and vote at the extraordinary general meeting shall be entitled to appoint another person as his/her proxy to attend and vote instead of him/her. A shareholder who is the holder of two or more shares may appoint more than one proxy to represent him/her and vote on his/her behalf. A proxy need not to be a shareholder of the Company. 2. In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof, must be deposited at the Company s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong not less than 48 hours before the time appointed for the extraordinary general meeting (or any adjournment thereof). 3. Completion and delivery of a form of proxy shall not preclude a shareholder from attending and voting in person at the extraordinary general meeting and in such event, the instrument appoint a proxy shall be deemed to be revoked. 4. Where there are joint holders of any shares, any one of such joint holder may vote, either in person or by proxy in respect of such shares as if he/she was solely entitled hereto; but if more than one of such joint holders be present at the extraordinary general meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company. 5. A form of proxy for use at the extraordinary general meeting is attached herewith. 6. Any voting at the extraordinary general meeting shall be taken by poll. 7. The form of proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under its seal or under the hand of an officer, attorney or other person authorized to sign the same. As at the date of this notice, the executive Directors are Mr. Hung Cho Sing, Mr. Yim Yin Nang, Mr. Wong Siu Ki and Mr. Matthew Chung; and the independent non-executive Directors are Mr. Chan Chun Wing, Mr. Fung Kam Man and Mr. Tang Kin Chor. EGM-2