Jiashili Group Limited — Proxy Solicitation & Information Statement 2019

Nov 11, 2019

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your Shares in Jiashili Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no 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.

嘉士利集團有限公司

Jiashili Group Limited

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(incorporated in the Cayman Islands with limited liability)

(Stock code: 1285)

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE MASTER PURCHASE AGREEMENT

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as defined under the section headed ‘‘Definitions’’ of this circular.

A letter from the Board is set out on pages 4 to 10 of this circular. A letter from the Independent Board Committee containing its advice to the Independent Shareholders is set out on pages 11 to 12 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 13 to 26 of this circular.

A notice convening the EGM to be held at 3 p.m. on Thursday, 28 November 2019 at 10/F., United Centre, 95 Queensway, Admiralty, 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 advised to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and deposit it with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) if you so wish.

12 November 2019

CONTENT

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . .	11
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . .	13
APPENDIX — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

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

• ‘‘Annual Cap(s)’’ the proposed annual maximum aggregate value for the purchase of the Pasta Products by the Group from Guangdong Kangli under the Master Purchase Agreement for the period from the Commencement Date to 31 December 2019, the year ending 31 December 2020 and the year ending 31 December 2021, respectively

• ‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules

• ‘‘Board’’ the board of Directors

• ‘‘BVI’’ the British Virgin Islands

• ‘‘Commencement Date’’ the date immediately after the fulfilment of the condition set out in the Master Purchase Agreement

• ‘‘Company’’ Jiashili Group Limited (嘉士利集團有限公司), a company incorporated under the laws of the Cayman Islands with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange (stock code: 1285)

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules

• ‘‘controlling has the meaning ascribed to it under the ListingRules shareholder(s)’’

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

• ‘‘EGM’’ an extraordinary general meeting of the Company to be convened at 3 p.m. on Thursday, 28 November 2019 at 10/F., United Centre, 95 Queensway, Admiralty, Hong Kong for the purpose of considering, and if thought fit, approving the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps)

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Guangdong Jiashili’’ Guangdong Jiashili Food Group Co., Limited (廣東嘉士利食品 集團有限公司) (formerly known as Kaiping Jiashili Food Company Limited (開平市嘉士利食品有限公司)), a limited liability company established in the PRC on 8 June 2005 and an indirect wholly-owned subsidiary of the Company

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DEFINITIONS

• ‘‘Guangdong Kangli’’ Guangdong Kangli Food Company Limited (廣東康力食品有限 公司), a limited liability company established in the PRC on 24 September 1998 and wholly-owned by Guangdong Zhongchen Industrial Group Company Limited (廣東中晨實業集團有限公 司)

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China

• ‘‘Independent Board the independent committee of the Board comprising all the Committee’’ independent non-executive Directors, namely Mr. Kam Robert, Ms. Ho Man Kay and Mr. Ma Xiaoqiang, established to advise the Independent Shareholders on the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps)

• ‘‘Independent Financial Lego Corporate Finance Limited, a corporation licensed to carry Adviser’’ out Type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps)

• ‘‘Independent the Shareholders other than Mr. Huang and his associates Shareholder(s)’’

• ‘‘Kaiyuan’’ Kaiyuan Investments Limited (開元投資有限公司), a company incorporated under the laws of the BVI with limited liability and a controlling shareholder of the Company, and the ultimate controlling shareholder of which is Mr. Huang

• ‘‘Latest Practicable Date’’

• 7 November 2019, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• ‘‘Master Purchase the master purchase agreement dated 17 October 2019 (after Agreement’’ trading hours) entered into between Guangdong Jiashili (for itself and on behalf of its subsidiaries) and Guangdong Kangli in relation to the purchase of the Pasta Products by the Group from Guangdong Kangli

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DEFINITIONS

‘‘Mr. Huang’’	Mr. Huang Xianming (黃銑銘), an executive Director, the
	chairman and a controlling shareholder of the Company
‘‘Parties’’	collectively, Guangdong Jiashili and Guangdong Kangli, being
	the parties to the Master Purchase Agreement
‘‘Pasta Products’’	certain pasta and related products
‘‘PRC’’	the People’s Republic of China which, for the purpose of this
	circular, exclude Hong Kong, the Macau Special Administrative
	Region and Taiwan
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘SFO’’	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
‘‘Share(s)’’	the ordinary share(s) of HK$0.01 each in the share capital of the
	Company
‘‘Shareholder(s)’’	the holder(s) of the Shares
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘%’’	per cent

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LETTER FROM THE BOARD

嘉士利集團有限公司 Jiashili Group Limited

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(incorporated in the Cayman Islands with limited liability)

(Stock code: 1285)

Executive Directors: Mr. Huang Xianming (Chairman) Mr. Tan Chaojun (Vice chairman and Chief executive officer) Mr. Chen Songhuan

Non-executive Director: Mr. Lin Xiao Independent non-executive Directors: Mr. Kam Robert Ms. Ho Man Kay Mr. Ma Xiaoqiang

Registered office: Cricket Square Hutchins Drive PO Box 2681 Grand Cayman, KY1-1111 Cayman Islands

Headquarters in the PRC: No. 18 Gangkou Road, Changsha Kaiping Guangdong PRC

Principal place of business in Hong Kong Flat 10A, 14/F Splendid Centre 100 Larch Street Kowloon Hong Kong

12 November 2019

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE MASTER PURCHASE AGREEMENT

INTRODUCTION

Reference is made to the announcement of the Company dated 17 October 2019 in relation to the entering into of the Master Purchase Agreement between Guangdong Jiashili (for itself and on behalf of its subsidiaries) and Guangdong Kangli, pursuant to which the

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LETTER FROM THE BOARD

Group agreed to purchase the Pasta Products from Guangdong Kangli. The entering into of the Master Purchase Agreement and the transactions contemplated thereunder constitute a continuing connected transactions of the Company, and are subject to the reporting, announcement, annual review, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The purpose of this circular is to provide you with (i) further information on the details of the Master Purchase Agreement, the transactions contemplated thereunder and the Annual Caps; (ii) the letter of advice from the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; (iv) the notice of the EGM; and (v) other information as required under the Listing Rules.

MASTER PURCHASE AGREEMENT

Principal terms

Date: 17 October 2019 (after trading hours) Parties: Guangdong Jiashili (for itself and on behalf of its subsidiaries); and Guangdong Kangli Term: From the Commencement Date to 31 December 2021 (both days inclusive)

Pursuant to the terms of the Master Purchase Agreement and subject to the terms and conditions of each relevant purchase order, the Group agreed to purchase the Pasta Products from Guangdong Kangli during the term of the Master Purchase Agreement.

Guangdong Kangli also agreed to share its existing client resources, for both wholesale and retail sales clients from the pasta sector, with the Group.

Pricing basis

Pursuant to the terms of the Master Purchase Agreement, the Parties agreed to enter into separate purchase orders in respect of each purchase of the Pasta Products to specify the details of each purchase including but not limited to the quantities, purchase prices, specifications and quality standard of the Pasta Products, and other relevant terms related to that purchase. There is no minimum purchase commitment imposed on the Group.

The price of each purchase of the Pasta Products shall be separately determined on an order-by-order basis by the Parties based on the following principles: (i) the purchase price shall be determined after arm’s length negotiation between the Parties and shall be in accordance with normal and reasonable commercial terms; (ii) the purchase price shall take into account the production costs of the Pasta Products as well as the prevailing market price of similar pasta products; and (iii) the purchase price shall not be higher than those imposed by Guangdong Kangli on other independent customers in respect of the sale of similar Pasta Products.

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LETTER FROM THE BOARD

Based on the aforesaid principles, the Group will adopt the following pricing measures to determine the purchase price of the Pasta Products. Before each purchase, the procurement team of the Group (the ‘‘Procurement Team’’) will (i) make enquiries with other independent suppliers in the market and obtain at least three quotations on the prices of pasta products of similar specification, quantity and quality, and (ii) request Guangdong Kangli to provide the pricing terms of the Pasta Products listed in its recent sales invoices entered into between Guangdong Kangli as supplier and its other independent customers, as well as the breakdown of production costs of the Pasta Products. Having conducted a comparison, the Procurement Team will make recommendation to the management of the Group, which will then review and consider the results of comparison. The management of the Group will instruct the Procurement Team to conduct further negotiations where necessary and contract with the supplier who provides the best commercial terms. In the event that Guangdong Kangli would be able to offer the best commercial terms, the Group shall ensure that the purchase price of the Pasta Products shall not be higher than those imposed by Guangdong Kangli on other independent customers prior to placing an order with Guangdong Kangli.

Having considered the above pricing measures, the Directors are of the view that the purchase price of the Pasta Products would be on normal commercial terms which are fair and reasonable.

Conditions precedent

The Master Purchase Agreement is conditional upon the Independent Shareholders’ approval having been obtained in accordance with the Listing Rules in respect of the Master Purchase Agreement and the transactions contemplated thereunder.

Renewal

Subject to the compliance with the requirements of the Listing Rules, the Parties may negotiate for extension of and variations to the terms of the Master Purchase Agreement upon its expiry.

Termination

The Master Purchase Agreement can be terminated in the following circumstances:

• (i) by mutual consent of the Parties;

• (ii) by giving the other party not less than three months’ prior written notice;

• (iii) the Master Purchase Agreement is not renewed by the Parties upon its expiry;

• (iv) upon liquidation or dissolution of either party; or

• (v) any transaction contemplated under the Master Purchase Agreement is in breach of the requirements under the Listing Rules, to such extent that both Parties shall be discharged from performance in relation to such transaction.

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LETTER FROM THE BOARD

Historical transaction amounts

For the three years ended 31 December 2016, 2017 and 2018, the Group did not purchase any Pasta Product from Guangdong Kangli for sale to its customers.

Annual Caps

The Master Purchase Agreement shall be subject to the following Annual Caps:

	Annual Caps
	(RMB’000)
During the period from the Commencement Date to
31 December 2019	12,000
For the year ending 31 December 2020	80,000
For the year ending 31 December 2021	100,000

The Annual Caps are determined with reference to a number of factors including, among others:

• (i) the expected demand for the Pasta Products in the PRC, comprising (a) the expected demand from the clients shared by Guangdong Kangli under the Master Purchase Agreement; and (b) the expected demand of the Group leveraging on its brand reputation, complementary products and extensive sales and distribution networks;

• (ii) the historical data of the sales of the Pasta Products by Guangdong Kangli; and

• (iii) the expected growth in the sales of the Pasta Products through the Group’s nationwide distribution network and the Group’s marketing plan.

INTERNAL CONTROL MEASURES GOVERNING THE MASTER PURCHASE AGREEMENT

The following internal control procedures will be established to govern the Master Purchase Agreement:

• (i) The Procurement Team will conduct periodic review on the prices of pasta products of similar specification and quality in the market and ensure that the purchase prices of the Pasta Products are no less favourable than those in the market.

• (ii) In order to ensure that the proposed Annual Caps will not be exceeded, the designated staff of the finance and accounting team of the Group will closely monitor and record the transaction amount of each order under the Master Purchase Agreement and report the status to the financial controller of the Group on bi-weekly basis.

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LETTER FROM THE BOARD

• (iii) The management of the Company will discuss with the independent non-executive Directors if there is any potential compliance issue during the term of the Master Purchase Agreement and where necessary, seek advice from professional parties such as legal advisers and/or auditor.

• (iv) The independent non-executive Directors will perform annual review pursuant to Rule 14A.55 of the Listing Rules on whether the transactions under the Master Purchase Agreement are conducted (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) according to the Master Purchase Agreement governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole.

• (v) The Company’s auditor will confirm pursuant to Rule 14A.56 of the Listing Rules on, among others, whether (a) the transactions under the Master Purchase Agreement have been approved by the Board; (b) the transactions were entered into, in all material respects, in accordance with the Master Purchase Agreement governing the transactions; and (c) the proposed Annual Caps have not been exceeded.

REASONS FOR AND BENEFITS OF THE ENTERING INTO OF THE MASTER PURCHASE AGREEMENT

The Group has been exploring opportunity to enter into other sectors in the food industry and increase its product offerings. As the Group recognises a growing demand towards healthy food from the consumers, it plans to accommodate the contemporary market trend by launching and sourcing products with healthier ingredients.

Pasta is rich in carbohydrate and has a good mineral content including, among others, calcium, magnesium, as well as B vitamins. Guangdong Kangli is a long-established and leading enterprise in the production of pasta in the PRC, the quality of its wide range of products has been well-recognised. The Pasta products purchased from Guangdong Kangli under the Master Purchase Agreement would be sold through the Group’s extensive nationwide distribution channel, thereby increasing the penetration and sales of the Pasta Products and generating synergy to both Parties. As Guangdong Kangli agreed to share its existing customer resources from the pasta sector with the Group pursuant to the Master Purchase Agreement, the customer base of the Group is expected to be broadened. The Board further believes that sourcing the Pasta Products from Guangdong Kangli is consistent with its business plan mentioned above, which will enhance the product portfolio and earnings potential of the Group.

The Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from the Independent Financial Adviser) are of the view that the terms of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) are fair and reasonable, conducted in the ordinary and usual course of business of the Group, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Group is principally engaged in manufacture and sale of biscuits in the PRC and Hong Kong.

INFORMATION ON GUANGDONG KANGLI

Guangdong Kangli is a limited liability company established in the PRC on 24 September 1998. It is principally engaged in the manufacture and sale of pasta products.

IMPLICATIONS UNDER THE LISTING RULES

As at the Latest Practicable Date, Guangdong Kangli is wholly-owned by Guangdong Zhongchen Industrial Group Company Limited* (廣東中晨實業集團有限公司) (‘‘Zhongchen’’), a limited liability company owned as to 80% by Mr. Huang, 5% by Ms. Huang Cuihong (the spouse of Mr. Huang), 5% by Ms. Huang Xianxian (a sister of Mr. Huang), 5% by Ms. Huang Rujiao (a sister of Mr. Huang) and 5% by Ms. Huang Rujun (a sister of Mr. Huang). As Mr. Huang is an executive Director, the chairman and a controlling shareholder of the Company, Guangdong Kangli is a connected person of the Company. Accordingly, the entering into of the Master Purchase Agreement and the transactions contemplated thereunder will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

At the Board meeting held to approve the Master Purchase Agreement, Mr. Huang was considered to be interested in the transactions contemplated under the Master Purchase Agreement, and had abstained from voting on the relevant Board resolutions relating to the Master Purchase Agreement and the transactions contemplated thereunder. Apart from the aforesaid, none of the Directors have any material interest in the abovementioned transactions and are required to abstain from voting on the relevant Board resolutions.

As the highest applicable percentage ratio (other than the profits ratio) as defined under the Listing Rules for the Annual Caps exceeds 5%, the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) are subject to the reporting, announcement, annual review, circular and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

EGM

A resolution approving the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) shall be proposed at the EGM.

As Mr. Huang has a material interest in the Master Purchase Agreement and the transactions contemplated thereunder, Mr. Huang and his associates, including Kaiyuan, who together are interested in 252,572,000 Shares, representing approximately 60.86% of the issued share capital of the Company, are required under the Listing Rules to abstain from voting on the relevant resolutions at the EGM in respect of the Master Purchase Agreement (including the Annual Caps).

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LETTER FROM THE BOARD

A notice convening the EGM to be held at 10/F., United Centre, 95 Queensway, Admiralty, Hong Kong on Thursday, 28 November 2019 at 3 p.m. is set out on pages EGM1 to EGM-2 of this circular.

A form of proxy for the EGM is enclosed herewith. Whether or not shareholders are able to attend and vote at the EGM, they are requested to complete the enclosed form of proxy and return the same to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investor Services Limited, Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not later than 48 hours (excluding any part of a day that is a public holiday) before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy as instructed will not prevent shareholders from subsequently attending and voting at the EGM or any adjourned meeting if they so wish.

RECOMMENDATION

The Directors (including the independent non-executive Directors after considering the advice from the Independent Financial Adviser) are of the view that the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) have been conducted on normal commercial terms, were entered into in the ordinary and usual course of business of the Group, are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Directors therefore recommend the Independent Shareholders to vote in favour of the relevant resolution set out in the notice of the EGM.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all three independent non-executive Directors, namely Mr. Kam Robert, Ms. Ho Man Kay and Mr. Ma Xiaoqiang, has been appointed to advise the Independent Shareholders in respect of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps). Lego Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in such regard. Accordingly, your attention is drawn to the letter from the Independent Board Committee set out on pages 11 to 12 of this circular, which contains its advice to the Independent Shareholders, and the letter from Independent Financial Adviser set out on pages 13 to 26 of this circular, which contains its advice to the Independent Board Committee and the Independent Shareholders.

Your attention is also drawn to the letter from the Independent Board Committee, the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders and the additional information set out in the appendix to this circular.

By Order of the Board Jiashili Group Limited Huang Xianming Chairman and Executive Director

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

嘉士利集團有限公司

Jiashili Group Limited

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(incorporated in the Cayman Islands with limited liability)

(Stock code: 1285)

12 November 2019

To: the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE MASTER PURCHASE AGREEMENT

We refer to the circular of the Company dated 12 November 2019 (the ‘‘Circular’’) to the Shareholders, of which this letter forms part. Terms defined in the Circular have the same meanings in this letter unless the context otherwise requires.

In compliance with the Listing Rules, we have been appointed to advise the Independent Shareholders as to whether, in our opinion, the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) are entered into by the Group in its ordinary and usual course of business, on normal commercial terms, in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. In this connection, Lego Corporate Finance Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps).

We wish to draw your attention to the letter from the Board set out on pages 4 to 10 of the Circular, and the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders set out on pages 13 to 26 of the Circular which contains its opinion in respect of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps).

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the advice of the Independent Financial Adviser and its recommendation in relation thereto, we consider that the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) are entered into by the Group in its ordinary and usual course of business, on normal commercial terms, in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend that you vote in favour of the relevant resolution set out in the notice of the EGM.

Yours faithfully, Independent Board Committee Mr. Kam Robert Ms. Ho Man Kay Mr. Ma Xiaoqiang Independent Non-executive Independent Non-executive Independent Non-executive Director Director Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from the Independent Financial Adviser setting out its advice to the Independent Board Committee and the Independent Shareholders in relation to the Master Purchase Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this Circular.

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12 November 2019

• To: The Independent Board Committee and the Independent Shareholders of Jiashili Group Limited

Dear Sirs and Madams,

CONTINUING CONNECTED TRANSACTIONS IN RELATION TO THE MASTER PURCHASE AGREEMENT

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Master Purchase Agreement and the transactions contemplated thereunder, details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular of the Company dated 12 November 2019 (the ‘‘Circular’’), of which this letter forms part. Unless specified otherwise, capitalised terms used herein shall have the same meanings as those defined in the Circular.

Reference is made to the announcement of the Company dated 17 October 2019, according to which on 17 October 2019, Guangdong Jiashili and Guangdong Kangli entered into the Master Purchase Agreement pursuant to which the Group agreed to purchase the Pasta Products from Guangdong Kangli. The term of the Master Purchase Agreement shall commence from the Commencement Date until 31 December 2021 (both days inclusive).

As the Latest Practicable Date, Guangdong Kangli is wholly-owned by Guangdong Zhongchen Industrial Group Company Limited* (‘‘Zhongchen’’), a limited liability company owned as to 80% by Mr. Huang, 5% by Ms. Huang Cuihong (the spouse of Mr. Huang), 5% by Ms. Huang Xianxian (a sister of Mr. Huang), 5% by Ms. Huang Rujiao (a sister of Mr. Huang) and 5% by Ms. Huang Rujun (a sister of Mr. Huang). As Mr. Huang is an executive Director, the chairman and a controlling shareholder of the Company, Guangdong Kangli is a connected person of the Company, and hence, the transactions contemplated under the Master Purchase Agreement constitute continuing connected transaction for the Company under Chapter 14A of the Listing Rules. As the highest applicable percentage ratio (other than the profits ratio) as defined under the Listing Rules for the Annual Caps exceeds 5%, the Master Purchase Agreement and the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

transactions contemplated thereunder (including the Annual Caps) are subject to the reporting, announcement, annual review and Independent Shareholders’ approval requirement under Chapter 14A of the Listing Rules.

The EGM will be convened and held for the Independent Shareholders to consider and, if thought fit, pass the ordinary resolutions to approve, among others, the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps). According to the Letter from the Board, Mr. Huang and his associates, including Kaiyuan, who together are interested in 252,572,000 Shares representing approximately 60.86% of the issued share capital of the Company, are regarded as having a material interest in the transactions contemplated under the Master Purchase Agreement (including the Annual Caps), and are required under the Listing Rules to abstain from voting on the relevant resolutions at the EGM.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Kam Robert, Ms. Ho Man Kay and Mr. Ma Xiaoqiang, has been established to advise the Independent Shareholders as regards the terms of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps).

We, Lego Corporate Finance Limited, have been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as regards the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps).

During the past two years, save for the engagement in connection with the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps), we had not been engaged by the Company for the provision of other services that would affect our independence. Apart from the normal professional fees for our services to the Company in connection with the engagement to act as the Independent Financial Adviser, no other arrangement exists whereby we will receive any fees and/or benefits from the Group. As at the Latest Practicable Date, we were not aware of any relationships or interests between us and the Group and Guangdong Kangli or any of their respective substantial shareholders, directors or chief executives, or their respective associates that could reasonably be regarded as relevant to our independence. We are independent under Rule 13.80 of the Listing Rules to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in connection with the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps).

BASIS OF OUR ADVICE

In formulating our opinions and recommendations, we have reviewed, among others, the Master Purchase Agreement, the announcement of the Company dated 17 October 2019, the annual report of the Company for the financial year ended 31 December 2018 (the ‘‘2018 Annual Report’’), the interim report of the Company for the six months ended 30 June

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2019 (the ‘‘2019 Interim Report’’), the internal control policies governing the Master Purchase Agreement and the management accounts of Guangdong Kangli for the three financial years ended 31 December 2018 and six months ended 30 June 2019. We have also reviewed certain information provided by the management of the Company (the ‘‘Management’’) relating to the operations, financial conditions and prospects of the Group. We have also (i) considered such other information, analyses and market data which we deemed relevant; and (ii) conducted verbal discussions with the Management regarding the terms of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps), the businesses and future outlook of the Group. We have taken reasonable steps to ensure that such information and statements, and any representation made to us, which we have relied upon in formulating our opinions, are true, accurate and complete in all material respects as of the Latest Practicable Date and the Shareholders shall be notified of any material changes, if any, as soon as possible.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement herein or in the Circular misleading. We consider that we have been provided with, and we have reviewed, all currently available information and documents which are available under present circumstances to enable us to reach an informed view regarding the terms of and reasons for entering into the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) to justify reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis of our opinion. We have no reasons to suspect that any material information has been withheld by the Directors or the Management, or is misleading, untrue or inaccurate. We have not, however, for the purpose of this exercise, conducted any independent detailed investigation or audit into the business or affairs or future prospects of the Group. Our opinion is necessarily based on financial, economic, market and other conditions in effect, and the information made available to us as at the Latest Practicable Date.

This letter is issued for the information of the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps). Except for its inclusion in the Circular, this letter shall not be quoted or referred to, in whole or in part, nor shall it be used for any other purposes, without our prior written consent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinions in respect of the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps), we have taken into consideration the following principal factors and reasons:

• 1 Financial information of the Group

The Company is an investment holding company, whose subsidiaries are principally engaged in manufacturing and sales of biscuits in the PRC and Hong Kong.

Set out below in Table 1 is certain financial information of the Group for the two financial years ended 31 December 2017 and 2018 as extracted from the 2018 Annual Report, and for the six months ended 30 June 2018 and 2019 as extracted from the 2019 Interim Report, respectively.

Table 1: Financial information of the Group

Revenue Profit and total comprehensive income for the period/year attributable to owners of the Company Non-current assets Current assets Current liabilities Net current assets Non-current liabilities Net assets	For the six months ended 30 June 2019 2018 (unaudited) (unaudited) RMB’000 RMB’000 751,103 634,256 81,533 43,450 As at 30 June 2019 (unaudited) RMB’000 797,611 988,268 819,965 168,303 200,734 765,180	For the year ended 31 December 2018 2017 (audited) (audited) RMB’000 RMB’000 1,449,288 1,174,977 86,479 106,566 As at 31 December 2018 2017 (audited) (audited) RMB’000 RMB’000 642,204 453,770 796,610 672,456 585,142 454,155 211,468 218,301 151,091 13,306 702,581 658,765

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the year ended 31 December 2018

For the year ended 31 December 2018, total revenue of the Group was approximately RMB1,449.29 million, representing an increase of approximately 23.35% as compared to that of approximately RMB1,174.98 million for the year ended 31 December 2017. Based on the 2018 Annual Report, such increase in revenue was mainly driven by (i) the increase in the sales volume of breakfast biscuits series, crisp biscuits series, sandwiches biscuits series and wafer series and (ii) completion of acquisition of 85% equity interest of Dongguan Kamtai Foods Company Limited and Silang Foods (Huaibei) Company Limited in April 2018 (the ‘‘Acquisition’’) which generated additional revenue for the Group from the sales of coarse grain biscuits.

For the year ended 31 December 2018, the Group recognised profit and total comprehensive income for the year attributable to owners of the Company of approximately RMB86.48 million, representing a decrease of approximately 18.85% as compared to that of approximately RMB106.57 million for the year ended 31 December 2017. Based on the 2018 Annual Report, such decrease was mainly due to (i) the increase in selling and distribution expenses of approximately RMB53.14 million as compared with that of 2017 due to the Acquisition; (ii) the increase in administrative expenses due to reorganisation of the Group structure and operating expenses in line with the expansion; as well as (iii) recognition of provision of impairment loss from loan receivables for the year against the impairment provisions write-back gains for the previous year.

As at 31 December 2018, the Group recorded net current assets and net assets of approximately RMB211.47 million and approximately RMB702.58 million, respectively.

For the six months ended 30 June 2019

For the six months ended 30 June 2019, total revenue of the Group amounted to approximately RMB751.10 million, representing an increase of approximately 18.42% from that of RMB634.26 million for the previous corresponding period. Based on the 2019 Interim Report, the increase in revenue was primarily due to improvement of the sales of sandwich biscuits series and coarse grain biscuits series as a result of a more effective pricing strategy adopted by the Group.

For the six months ended 30 June 2019, the Group recognised profit and total comprehensive income for the period attributable to owners of the Company of approximately RMB81.53 million, representing a significant increase of approximately 87.64% as compared to that of approximately RMB43.45 million for the previous corresponding period. Based on the 2019 Interim Report, such improvement was mainly due to the combined effects of the increase in revenue as discussed above and efficient control on operating expenses, leading to an increase in both the gross profit and net profit.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at 30 June 2019, the Group recorded net current assets and net assets of approximately RMB168.30 million and approximately RMB765.18 million, respectively. As at 30 June 2019, the Group was in a net cash position of approximately RMB69.30 million, representing an increase of approximately 268.81% from approximately RMB18.79 million as at 31 December 2018 which indicates a healthy and strong net cash balance available for business expansion.

2 Reasons for and benefits of the entering into of the Master Purchase Agreement and the transactions contemplated thereunder

In considering the reasons for and benefits of entering into the Master Purchase Agreement and the transactions contemplated thereunder, we have primarily taken into account the development of Pasta Products, being a new product segment to the Group as well as the background of Guangdong Kangli.

2.1 Development of the Group’s new product segment

The Group is principally engaged in the manufacturing and sales of biscuits in the PRC and Hong Kong, with four major product segments being breakfast biscuit series, crisp biscuit series, sandwiches biscuits series and wafer series. According to the 2018 Annual Report, in April 2018, the Group completed the Acquisition which enables the Group to capture more market share of customer snacking, resulted in the segment revenue of coarse grain biscuits reaching approximately RMB131.8 million for the year ended 31 December 2018. Accordingly, it is the Group’s long-term strategic plan to extend its business into other sectors of the food and snack industry and increase its product offerings. As the Group recognises a growing demand towards healthy food from the consumers, it plans to accommodate the contemporary market trend by launching and sourcing products with healthier ingredients. The entering into of the Master Purchase Agreement will enable the Group to introduce fresh pasta products and dried pasta products (collectively, the ‘‘Pasta Products’’), which is rich in carbohydrate and has a good mineral content including, among others, calcium, magnesium as well as B vitamins and therefore have healthier ingredients as compared to the existing products of the Group. The Pasta Products will then be developed as a new product offering of the Group. The Pasta Products and breakfast biscuit series, being the only existing major product segment that can be served for regular meal, are complementary to each other in the sense that they aim at customer groups who prefer grain as their regular meals with different food-intake needs which will enable the Group to capture further market shares and revenue by catering customers’ needs alongside the strategic plan.

Also, the Group has nation-wide sales and distribution channel covering various provinces in the PRC. Jiashili, together with multi-brands diversified product category which has seen success in the past, has built up brand loyalty of quality products with the customers. The Pasta Products will be supported by the Group’s strong brand reputation and extensive sales and distribution networks.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Therefore, the entering into of the Master Purchase Agreement will enable the Group to further enrich its product mix and offerings to meet customer demands and capture market share.

2.2 Background information of Guangdong Kangli

Guangdong Kangli, a long-established enterprise founded in 1998, is principally engaged in manufacture and sales of pasta in the PRC and is one of the leading enterprises which has been specialising in the production of pasta and related products in the PRC for more than 30 years. As advised by the Directors, Guangdong Kangli, at full capacity, is capable to produce more than thousands tonnes of spaghetti, macaroni and instant pasta on annual basis, respectively, which could guarantee the Group a sufficient and stable source of pasta supply to satisfy the growing demand of Pasta Products. With reference to the terms of the Master Purchase Agreement, Guangdong Kangli agreed to share its existing client resources, for both wholesale and retail sales clients from the pasta sector, with the Group which will further broaden the customer base of the Group. In light of the business experience, production capacity and the customer base of the Guangdong Kangli which is expected to increase the penetration and sales of Pasta Products and create synergy to both Parties, the earning potential of the Group is expected to enhance.

Taking into account (i) the Group’s strong brand reputation, complementary products and extensive sales and distribution networks; and (ii) Guangdong Kangli’s business experience in relation to pasta, as well as its production capacity and customer base, we are of the view that the entering into of the Master Purchase Agreement and the transactions contemplated thereunder are in the interests of the Company and the Independent Shareholders as a whole.

3 Principal terms of the Master Purchase Agreement and the transactions contemplated thereunder

On 17 October 2019 (after trading hours), Guangdong Jiashili (for itself and on behalf of its subsidiaries) and Guangdong Kangli entered into the Master Purchase Agreement pursuant to which the Group agreed to purchase the Pasta Products from Guangdong Kangli from the Commencement Date to 31 December 2021 (both days inclusive). Details of principal terms of the Master Purchase Agreement are set out in the Letter from the Board.

Pursuant to the Master Purchase Agreement, the Parties agreed to enter into separate purchase orders in respect of each purchase of the Pasta Products specifying details of each purchase including but not limited to the quantities, purchase prices, specifications, quality standard and other relevant terms related to that purchase.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.1 Pricing basis

The price of each purchase of the Pasta Products shall be separately determined on an order-by-order basis by the Parties based on the following principles: (i) the purchase price shall be determined after arm’s length negotiation between the Parties and shall be in accordance with normal and reasonable commercial terms; (ii) the purchase price shall take into account the production costs of the Pasta Products as well as the prevailing market price of similar pasta products; and (iii) the purchase price shall not be higher than those imposed by Guangdong Kangli on other independent customers in respect of the sale of similar Pasta Products.

As advised by the Management and as detailed in the Letter from the Board, before each purchase, the Procurement Team will (i) make enquiries with other independent third-party suppliers and solicit at least three available quotations at the prevailing time on the prices of the Pasta Products of similar specification, quantity and quality and (ii) request Guangdong Kangli to provide the pricing terms of the Pasta Products listed in its recent sales invoices entered into between Guangdong Kangli as supplier and its independent third-party customers, as well as the breakdown of production costs of the Pasta Products. Having conducted a comparison, the Procurement Team will make recommendation to the Management, which will then review and consider the results of the comparison. The Management will instruct the Procurement Team to conduct further negotiations where necessary and contract with the supplier who provides the best commercial terms. In the event that Guangdong Kangli would be able to offer the best commercial terms, the Group shall ensure the purchase price of the Pasta Products shall not be higher than those imposed by Guangdong Kangli on other independent third-party customers prior to placing an order with Guangdong Kangli.

In assessing the fairness and reasonableness of the pricing terms of the Master Purchase Agreement, as the Group did not purchase any Pasta Products for sale to its customers in the past, the historical transactions between the Group as purchaser of Pasta Products and Guangdong Kangli are not available. We have alternatively obtained and reviewed the pricing terms of the Pasta Products listed in five sales invoices (the ‘‘Selected Pasta Products’’) entered between Guangdong Kangli as supplier and its independent third-party customers, with respect to the sales of Pasta Products in 2019. We have also reviewed the proposed pricing terms of the Selected Pasta Products with similar quantities, specifications and quality standard to be offered by Guangdong Kangli to Guangdong Jiashili (the ‘‘Proposed Pricing Terms’’) as well as the breakdown of production costs of Selected Pasta Products. We found that the Proposed Pricing Terms were more favourable than those pricing terms offered to independent third-party customers by Guangdong Kangli. Accordingly, considering that (i) the Proposed Pricing Terms are more favourable than those offered to independent third-party customers by Guangdong Kangli; and (ii) the Procurement Team will cross check the pricing terms offered by independent third-party suppliers with the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

pricing terms offered by Guangdong Kangli to its independent third-party customers, we are of the view that sufficient and effective procedures have been adopted to ensure the price of the Pasta Products are on normal commercial terms and to ensure that the pricing terms offered by Guangdong Kangli to Guangdong Jiashili shall be not less favourable than those offered to its independent thirdparty customers and hence the pricing basis is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

3.2 The proposed Annual Caps for the Master Purchase Agreement

Set out below are the proposed Annual Caps in respect of the Master Purchase Agreement for each of the three financial years.

Annual Caps (RMB’000)

During the period from the Commencement Date to 31 December 2019 For the year ending 31 December 2020 For the year ending 31 December 2021	12,000 80,000 100,000

With reference to the Letter from the Board, in arriving at the proposed Annual Caps, the Directors have considered the following factors:

• (i) the expected demand for the Pasta Products in the PRC, comprising (a) the expected demand from the clients shared by Guangdong Kangli under the Master Purchase Agreement; and (b) the expected demand of the Group leveraging on its brand reputation, complementary products and extensive sales and distribution networks;

• (ii) the historical data of the sales of the Pasta Products by Guangdong Kangli; and

• (iii) the expected growth in the sales of the Pasta Products through the Group’s nationwide distribution network and the Group’s marketing plan.

When assessing the reasonableness of the proposed Annual Caps, we have discussed with the Management on the underlying basis and assumption. The Annual Cap for the year ending 31 December 2019 has been prepared based on the assumption that the Independent Shareholders’ approval of the Master Purchase Agreement would be obtained late this year, which represents the expected transaction amounts for the period from the date of approval of the Master Purchase Agreement to 31 December 2019, and hence a relatively smaller amount as compared to the Annual Caps for the two years ending 31 December 2020 and 2021. We have reviewed the computation of the proposed Annual Caps in respect of the Master Purchase Agreement for each of the three financial years provided

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

by the Management and we noted that each of the Annual Caps is the aggregate sum of (i) the expected demand from the clients shared by Guangdong Kangli under the Master Purchase Agreement; and (ii) the expected demand of the Group leveraging on its brand reputation, complementary products and extensive sales and distribution networks. In assessing the fairness and reasonableness of the Annual Caps, we have taken into account of the following factors:

3.2.1 The expected demand from the clients shared by Guangdong Kangli

With reference to the official website of Guangdong Kangli (http://web.gdklsp.com/), Guangdong Kangli has invested approximately RMB70 million in 2017 for expansion of its production line with respect to instant pasta series including but not limited to spaghetti, macaroni and Italian rice. The expansion of production line reflected its determination and optimism to the prospect of the manufacturing business of Pasta Products. According to the terms of the Master Purchase Agreement, Guangdong Kangli agreed to share its existing client resources, for both wholesale and retail sales clients from the pasta sector, to the Group.

In order to estimate the potential sales amount of the Pasta Products through leveraging on the clients shared by Guangdong Kangli, we have made reference to the historical sales of Pasta Products by Guangdong Kangli to its independent customer and noted that the total sales in relation to the Pasta Products entered between Guangdong Kangli and its independent third-party customers for the two years ended 31 December 2017 and 2018 and the nine months ended 30 September 2019 (the ‘‘Historical Sales Amount’’), on an annualised basis, each accounted for more than half of the Annual Cap for the year ending 31 December 2020. It showed the steady market demand of the Pasta Products of Guangdong Kangli. We also noted that the computation of the Annual Caps in respect of the expected demand from the clients shared by the Guangdong Kangli for the three financial years are generally in line with the Historical Sales Amount.

3.2.2 The expected demand from existing and potential customers of the Group

Being one of the leading business in manufacturing and sales of biscuits in the PRC for years, the Group has already developed nation-wide sales and distribution channels for retail sales. As advised by the Management, the instant pasta products differentiated by types and favours (‘‘Instant Pasta Products’’) represent majority of the types of Pasta Products to be purchased from Guangdong Kangli. Based on the 2018 Annual Report, the Group has more than 1,400 distributors, accounted for approximately 58% of the total number of distributors in the southern regions in the PRC. By aligning with the wide range of distributors through various channels such as supermarkets, shops, convenience stores, the Instant Pasta Products will be

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

sold exclusively through specific channels. Accordingly, demand for Pasta Products is expected to be brought about by leveraging on the Group’s existing sales and distribution networks.

On the other hand, we have discussed with the Management and reviewed the brief three-year development plan, prepared by the Group and Guangdong Kangli with respect to the production and marketing of Pasta Products including but not limited to improving the production efficiency and hence reducing the production cost of the Pasta Products, creating new packaging designs and optimising products quality, cooperating with other retailers which had keen experience in pasta business by setting up sampling and tasting activities, and connecting with large catering enterprise and chain convenience stores to ensure block/shelf display at strategic positions and crowded locations. In this regard, taking into account the plan and efforts to develop the Pasta Products business, it is expected that demand for the Pasta Products by customers of the Group would grow in the future.

• 3.2.3 The expected demand growth arising from the government policy and the economic growth

The Annual Cap for the year ending 31 December 2020 represents an increase of approximately 11.11% from the Annual Cap for the preceding year on an annualised basis, while the Annual Cap for the year ending 31 December 2021 represents an increase of approximately 25.00% from the Annual Cap for the preceding year. In view of the increment of Annual Caps and with reference to the computation of the proposed Annual Caps provided by the Management, we understand that in determining the growth in the Annual Caps, the Company has made reference to (i) the effect from the introduction of the Instant Pasta Products which is expected to enhance the demand of the Pasta Products by leveraging on its sales and distribution networks, details of which are set out in the section headed ‘‘3.2.2 The expected demand from existing and potential customers of the Group’’; (ii) the implementation of the government policy adopted by the PRC; as well as (iii) the forces of economic growth in relation to the domestic consumption of food.

According to (‘‘The Opinions on Accelerating the Structural Reform of the Agricultural Supply and Developing the Grain Industry Economy*’’) 《國務 院辦公廳關於加快推進農業供給側結構性改革大力發展糧食產業經濟的意見》 promulgated in September 2017, it is one of the major objectives to speed up the development of instant food industry by promoting innovation and integration of staple food and instant food products. Also, with reference to Statista, being one of the renowned statistics databases with its platform contains more than one million statistics on more than 0.8 million topics across 170 industries, it showed that the revenue and the consumption in the pasta and noodles segment amounted to over USD20 billion and over 8 million tonnes in the PRC in 2019, respectively. Also, according to the data

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

from National Bureau of Statistics of China issued on 21 January 2019, the growth rate of domestic consumption of food in the PRC reached approximately 10.2% in 2018. Taking into account of (i) the promising prospect of the Instant Pasta Products, being the majority of the types of Pasta Products to be purchased from Guangdong Kangli, which is supported by the government policy, the market size and consumption in the pasta and noodles segment in the PRC; and (ii) the increment of the Annual Caps is generally in line with the expected growing trend arising from the combined effect of the government policy and the aforesaid growth of domestic consumption of food, we are of the view that the determination of the Annual Caps for the three years ending 31 December 2019, 2020 and 2021 are fair and reasonable.

Taking into account that the demand for the Pasta Products will be supported by (i) the clients shared by Guangdong Kangli and (ii) the Group’s existing customers by leveraging on its existing sales and distribution network as well as the government policy, we are of the view that the rationale behind and basis adopted by the Management in determining the proposed Annual Caps under the Master Purchase Agreement are fair and reasonable.

Having considered the above factors and analysis, we are of the view that the principal terms of the Master Purchase Agreement, in particular, the proposed Annual Caps and the pricing basis for the purchase of the Pasta Products are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole.

4 Internal control measures governing the Master Purchase Agreement

As detailed in the Letter from the Board, various internal control measures will be implemented with respect to the continuing connected transaction contemplated under the Master Purchase Agreement, which are subject to, among others, the following factors:

• (i) the Procurement Team will conduct periodic review on the prices of pasta products of similar specification and quality in the market and ensure that the purchase prices of the Pasta Products are no less favourable than those in the market; and

• (ii) in order to ensure that the proposed Annual Caps will not be exceeded, the designated staff of the finance and accounting team of the Group will closely monitor and record the transaction amount of each order under the Master Purchase Agreement and report the status to the financial controller of the Group on biweekly basis.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Further, pursuant to the Rules 14A.55 to 14A.59 of the Listing Rules, the implementation of the continuing connected transactions contemplated under the Master Purchase Agreement are subject to the following annual review requirements:

• (a) the independent non-executive Directors must review the continuing connected transactions every year and confirm in the annual report whether the transactions have been entered into are in the ordinary and usual course of business of the Group; were on normal commercial terms or better; and were according to the Master Purchase Agreement governing them on terms are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole;

• (b) the Management should communicate with auditors of the Company and auditors should confirm whether anything has come to their attention that causes them to believe the continuing connected transactions have not received the approval from the Board of the Company; were not entered into, in all material respects, in accordance with the Master Purchase Agreement governing the transactions; and have exceeded the Annual Cap(s); and

• (c) the Company must promptly notify the Stock Exchange and publish an announcement if the Independent Board Committee and/or auditors of the Company cannot confirm the matters set out in paragraph (a) and/or (b) respectively.

Taking into account the above internal control measures, in particular, (i) the ongoing monitoring of the prices of pasta products of similar types in the market and the Pasta Products offered to Guangdong Jiashili to ensure the pricing terms offered are no less favourable to the Group than those offered in the market; and (ii) the respective annual reviews by external auditors of the Company and independent nonexecutive Directors regarding compliance of the terms under the Master Purchase Agreement, we are of the view that there are adequate measures imposed by the Company to monitor the continuing connected transactions contemplated under Master Purchase Agreement (including the Annual Caps) and thus are in the interests of the Company and Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATIONS

Having considered the above principal factors and reasons, we are of the view that the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps), which are implemented in the ordinary and usual course of business of the Company, are on normal commercial terms, fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we advise the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the ordinary resolutions to be proposed for approving the Master Purchase Agreement and the transactions contemplated thereunder (including the Annual Caps) at the EGM.

Yours faithfully, For and on behalf of Lego Corporate Finance Limited Billy Tang Managing Director

Mr. Billy Tang is a licensed person registered with the Securities and Futures Commission and a responsible officer of Lego Corporate Finance Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 20 years of experience in the corporate finance advisory profession.

• For identification purposes only

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APPENDIX

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the 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) Directors and chief executive

As at the Latest Practicable Date, the interests or short positions in the shares, underlying shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) held by the Directors and chief executive of the Company 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 and short positions which were deemed or taken to have under provisions of the SFO), or have been entered in the register maintained by the Company pursuant to Section 352 of the SFO, or otherwise have been notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies adopted by the Company (the ‘‘Model Code’’) were as follows:

Directors’ interests or short positions in the Shares underlying shares and debentures of the Company or the associated corporation

				Approximate
	Company/name			percentage
Name of	of associated		Number and class	of Issued
Director	corporation	Capacity	of securities	share capital
Mr. Huang	The Company	Interests of controlled	252,572,000(L)(1)	60.86%
		corporation(2)
Mr. Huang	Kaiyuan	Interests of controlled	100 (L)(1)	100%
		corporation(3)
Mr. Huang	Great Logistics	Beneficial owner	1(L)(1)	100%
	Global Limited
	(‘‘Great Logistics’’)

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APPENDIX

GENERAL INFORMATION

Notes:

• (1) The Letter ‘‘L’’ denotes the Directors’ long position in the Shares or the relevant associated corporation.

• (2) The relevant shares are held by Kaiyuan, which is in turn held as to 80% by Great Logistics, a company wholly-owned by Mr. Huang, and the remaining 20% of Kaiyuan are held by four entities wholly-owned by Mr. Huang’s family comprising, Ms. Huang Cuihong, Ms. Huang Rujun, Ms. Huang Rujiao and Ms. Huang Xianxian.

• (3) Kaiyuan is held as to 80% by Great Logistics and 20% by four entities, which are all whollyowned by Mr. Huang’s family comprising, Ms. Huang Cuihong, Ms. Huang Rujun, Ms. Huang Rujiao and Ms. Huang Xianxian.

Save as disclosed above, none of the Directors or chief executive of the Company and/or any of their respective close associates had registered any interests or short positions in any Shares, underlying Shares in, and debentures of, the Company or any associated corporations as at the Latest Practicable Date, as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to Part XV of the SFO or the Model Code.

(b) Substantial Shareholder

As at the Latest Practicable Date, the following person (not being a Director or chief executive of the Company) had interests or short positions in the shares or underlying shares of the Company which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO:

Interests and short positions of the substantial shareholders in Shares and underlying shares of the Company

			Approximate
			percentage of
		Number of	issued share
Name of shareholder	Nature of interest	Shares held	capital
Ms. Huang Cuihong	Interest in controlled corporation(1);	252,572,000	60.86%
	interest in family member(2)
Ms. Huang Xianxian	Interest in controlled corporation(1);	252,572,000	60.86%
	interest in family member(2)
Ms. Huang Rujiao	Interest in controlled corporation(1);	252,572,000	60.86%
	interest in family member(2)
Ms. Huang Rujun	Interest in controlled corporation(1);	252,572,000	60.86%
	interest in family member(2)
Great Logistics	Interest in controlled corporation(1);	251,472,000	60.60%
	interest in family member(2)

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APPENDIX

GENERAL INFORMATION

			Approximate
			percentage of
		Number of	issued share
Name of shareholder	Nature of interest	Shares held	capital
Grand Wing	Interest in controlled corporation(1);	216,168,000	52.09%
Investments Limited	interest in family member(2)
(‘‘Grand Wing’’)
Intelligent Pro	Interest in controlled corporation(1);	216,168,000	52.09%
Investments Limited	interest in family member(2)
(‘‘Intelligent Pro’’)
Jade Isle Global Limited	Interest in controlled corporation(1);	216,168,000	52.09%
(‘‘Jade Isle’’)	interest in family member(2)
Kaiyuan	Beneficial interest	216,168,000	52.09%
Prestige Choice Overseas	Interest in controlled corporation(1);	216,168,000	52.09%
	interest in family member(2)
Actis 4 PCC	Interest in controlled corporation(3)	60,000,000	14.46%
Actis Global 4 LP	Interest in controlled corporation(3)	60,000,000	14.46%
Actis GP LLP	Interest in controlled corporation(3)	60,000,000	14.46%
Actis Investment	Beneficial interest(3)	60,000,000	14.46%
Holdings Ship Limited
(‘‘Actis Ship’’)
Rich Tea Investment	Interest in controlled corporation(3)	60,000,000	14.46%
Limited (‘‘Rich Tea’’)

Notes:

• (1) Kaiyuan was held as to 80% by Mr. Huang (through his investment holding company Great Logistics) and as to 5% by each of Ms. Huang Cuihong, Ms. Huang Xianxian, Ms. Huang Rujiao and Ms. Huang Rujun, through their investment holding companies, namely Jade Isle, Prestige Choice Overseas, Grand Wing and Intelligent Pro respectively.

• (2) In addition to Mr. Huang, Huang’s Family consist of Ms. Huang Cuihong, Ms. Huang Xianxian, Ms. Huang Rujiao and Ms. Huang Rujun. Ms. Huang Cuihong is the spouse of Mr. Huang, while Ms. Huang Xianxian, Ms. Huang Rujiao and Ms. Huang Rujun are the sisters of Mr. Huang, and therefore they are deemed to be parties acting in concert with Mr. Huang and are deemed to be interested in the shares in our Company in which Mr. Huang is interested, and Mr. Huang is deemed to be interested in the shares in which Huang’s Family is interested, and vice versa.

• (3) Actis Ship and Rich Tea are controlled by a group of limited partnerships and protected cell companies, and are parties acting in concert with each other. Therefore, Rich Tea and such group of limited partnerships and protected cell companies are deemed to be interested in the shares held by Actis Ship.

– I-3 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, no person, other than the Directors or chief executive of the Company had, or was deemed or taken to have, an interest or short position in the Shares or underlying Shares which fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable within one year without payment of compensation, other than statutory compensation).

4. COMPETING INTEREST OF DIRECTORS

As at the Latest Practicable Date, none of the Directors or their respective close associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group as required to be disclosed pursuant to the Listing Rules.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2018, being the date to which the latest published audited accounts of the Company were made up.

6. MATERIAL INTERESTS

As at the Latest Practicable Date, none of the Directors (i) had any direct or indirect interest in any assets which had been, since 31 December 2018, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and (ii) was materially interested in any contract or arrangement entered into by any member of the Group subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

– I-4 –

APPENDIX

GENERAL INFORMATION

7. EXPERTS AND CONSENTS

The following are the qualification of the expert who has been named in this circular or has given opinion or advice which is contained in this circular:

Name

Qualification

Lego Corporate a corporation licensed to carry out Type 6 (advising on Finance Limited corporate finance) regulated activity under the SFO

As at the Latest Practicable Date, the above expert:

• (a) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name, in the form and context in which it appears;

• (b) did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and

• (c) did not have any direct or indirect interest in any assets which had been since 31 December 2018 (the date to which the latest published audited consolidated financial statements of the Company were made up), acquired, disposed of by, or leased to any member of the Group or were proposed to be acquired or disposed of by, or leased to any member of the Group.

8. GENERAL

• (a) The registered office of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

• (b) The head office of the Company in the PRC is No. 18 Gangkou Road, Changsha, Kaiping, Guangdong. PRC.

• (c) The principal place of business of the Company in Hong Kong is Flat 10A, 14/F, Splendid Centre, 100 Larch Street, Kowloon, Hong Kong.

• (d) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Investor Services Limited.

• (e) The principal share registrar and transfer office of the Company is Codan Trust Company (Cayman) Limited.

• (f) The company secretary of the Company is Mr. Shoom Chin Wan.

• (g) The English text of this circular shall prevail over their respective Chinese text for the purpose of interpretation.

– I-5 –

APPENDIX

GENERAL INFORMATION

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the Company’s principal place of business in Hong Kong at Flat 10A, 14/F, Splendid Centre, 100 Larch Street, Kowloon, Hong Kong during 9: 00 a.m. to 5: 30 p.m. on any business day in Hong Kong, from the date of this circular for a period of 14 days:

• (a) the Master Purchase Agreement; and

• (b) this circular.

– I-6 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

嘉士利集團有限公司

Jiashili Group Limited

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(incorporated in the Cayman Islands with limited liability)

(Stock code: 1285)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘EGM’’) of Jiashili Group Limited (the ‘‘Company’’) will be held at 3 p.m. on Thursday, 28 November 2019 at 10/F., United Centre, 95 Queensway, Admiralty, Hong Kong for the purpose of considering and, if thought fit, passing the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

1. ‘‘THAT:

2. (a) the Master Purchase Agreement (as defined and described in the circular to the shareholders of the Company dated 12 November 2019 (the ‘‘Circular’’), a copy of which has been produced to the meeting marked ‘‘A’’ and signed by the Chairman of the meeting for the purpose of identification) and the execution thereof and implementation of all transactions thereunder be and are hereby approved, ratified and confirmed;

3. (b) the proposed annual caps of the transactions contemplated under the Master Purchase Agreement as described in the Circular be and are hereby approved, ratified and confirmed; and

4. (c) the directors of the Company or any other person authorized by the directors of the Company be and are hereby authorized to sign, execute, perfect and deliver all such documents and do all such deeds, acts, matters and things as they may in their absolute discretion consider necessary or desirable for the purpose of or in connection with the implementation of the Master Purchase Agreement and all transactions and other matters contemplated thereunder or ancillary thereto, to waive compliance from and/or agree to any amendment or supplement to any of the provisions of the Master Purchase

– EGM-1 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

Agreement which in their opinion is not of a material nature and to effect or implement any other matters referred to in this resolution.’’

Yours faithfully, By Order of the Board Jiashili Group Limited 嘉士利集團有限公司 Huang Xianming Chairman and Executive Director

Hong Kong, 12 November 2019

Notes:

1. A member of the Company entitled to attend and vote at the EGM is entitled to appoint another person at his/her/its proxy to attend and vote in his/her/its stead in accordance with the articles of association of the Company. A proxy needs not be a member of the Company.

2. Whether or not you intend to attend the EGM in person, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of a form of proxy will not preclude member from attending in person and voting at the EGM or any adjournment thereof, should he so wish.

3. In order to be valid, the form of proxy, together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority must be deposited at Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof.

4. In the case of joint holders of shares, any one of such holders may vote at the EGM, either personally or by proxy, in respect of such shares as if he was solely entitled thereto, but if more than one of such joint holders are present at the EGM personally or by proxy, that one of the said persons so present whose name stands first in the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.

As at the date of this notice, the board of directors of the Company comprises Mr. Huang Xianming, Mr. Tan Chaojun and Mr. Chen Songhuan as executive directors; Mr. Lin Xiao as non-executive director; Mr. Kam Robert, Ms. Ho Man Kay and Mr. Ma Xiaoqiang as independent non-executive directors.

– EGM-2 –