Virtual Mind Holding Company Limited — Proxy Solicitation & Information Statement 2016

Nov 4, 2016

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 licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Runway Global Holdings Company Limited (the “ Company ”), you should at once hand this circular together with the accompanying form of proxy, to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agents through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

RUNWAY GLOBAL HOLDINGS COMPANY LIMITED 時尚環球控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1520)

(I) DISCLOSEABLE TRANSACTION ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF DELTA WEALTH FINANCE LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND (II) NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening an extraordinary general meeting of the Company (the “ EGM ”) to be held at 14th Floor, PeakCastle, 476 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on Monday, 21 November 2016 at 11:00 a.m. is set out on pages EGM-1 to EGM-3 of this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same as soon as possible and in any event not later than 48 hours before the time appointed for holding the EGM or any adjournment thereof to 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. Completion and return of the proxy will not preclude you from attending and voting at the EGM or any adjournment thereof should you so wish.

4 November 2016

CONTENTS

	Page
DEFINITIONS.................................................................................................................	1
LETTER FROM THE BOARD.....................................................................................	4
NOTICE OF EGM...........................................................................................................	EGM-1

– i –

DEFINITIONS

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

• “Acquisition”

the acquisition of the Sale Shares by the Purchaser from the Vendor and the assignment of the Sale Loan by the Vendor to the Purchaser pursuant to the Sale and Purchase Agreement

• “Board” the board of Directors

• “Business Day(s)”

• a day on which licensed banks in Hong Kong are open for normal banking business (excluding Saturdays, Sundays, public holidays and any day on which a tropical cyclone warning no. 8 or above or a “black” rainstorm warning is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.)

• “BVI” British Virgin Islands

• “Company”

• Runway Global Holdings Company Limited, a company incorporated in the Cayman Islands with limited liability, the issued Shares of which are listed on the Main Board of the Stock Exchange

• “Completion” completion of the Acquisition in accordance with the terms of the Sale and Purchase Agreement

• “Completion Date”

• the date on which Completion takes place, which shall be any Business Day falling within five (5) Business Days after satisfaction and/or fulfilment and/or waiver (as the case may be) of all the conditions precedent to the Sale and Purchase Agreement (or such other date as shall be agreed in writing between the Parties)

• “connected persons” has the meaning ascribed to it under the Listing Rules

• “Consideration”

• the aggregate sum of HK$63,500,001 to be paid by the Purchaser to the Vendor for the Acquisition

• “Consideration Shares” refers to the 110,000,000 new Shares to be allotted and issued by the Company at the issue price of HK$0.35 per new Share for settlement and discharge of HK$38,500,000 of the Consideration

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

– 1 –

DEFINITIONS

• “EGM” the extraordinary general meeting of the Company to be convened and held for the Shareholders to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder, including the issue of the Consideration Shares pursuant to the Specific Mandate

• “Group” collectively, the Company and its subsidiaries

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Latest Practicable Date” 2 November 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information in this circular

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Long Stop Date” 30 November 2016

• “Parties” the Vendor, the Vendor’s Guarantor, the Purchaser and the Company, being parties to the Sale and Purchase Agreement

• “Purchaser” Smart Dream Limited, a company incorporated in the BVI with limited liability, and is a wholly-owned subsidiary of the Company

• “Sale and Purchase Agreement” the sale and purchase agreement dated 5 September 2016 entered into between the Vendor, the Vendor’s Guarantor, the Purchaser and the Company in relation to the Acquisition

• “Sale Loan” the amount owing by the Target Company to the Vendor in respect of loans repayable on demand made by the Vendor to the Target Company and all obligations, liabilities and debts owing or incurred by the Target Company to the Vendor on or at any time prior to Completion whether actual, contingent or deferred and irrespective of whether or not the same is due and payable on Completion which as at 31 March 2016, amounted to HK$4,465,804

• “Sale Shares” 1,000,000 ordinary shares of the Target Company, representing the entire issued share capital in the Target Company as at the date of the Sale and Purchase Agreement

• “Share(s)”

• ordinary share(s) of HK$0.01 each in the issued share capital of the Company

– 2 –

DEFINITIONS

“Shareholder(s)” holder(s) of the Share(s) “Specific Mandate” the specific mandate proposed to be granted to the Directors in relation to the allotment and issue of the Consideration Shares at the EGM “Stock Exchange” The Stock Exchange of Hong Kong Limited “Target Company” Delta Wealth Finance Limited (濱海融富信貸有限公司 a company of limited liability incorporated in Hong Kong which is principally engaged in the provision of money lending services “Vendor” Favor Way Investments Limited, a company incorporated in the BVI with limited liability “Vendor’s Guarantor” Ms. Tin Yuen Sin Carol or “Ms. Tin” “HK$” Hong Kong dollar(s), the lawful currency of Hong Kong “%” per cent.

– 3 –

LETTER FROM THE BOARD

RUNWAY GLOBAL HOLDINGS COMPANY LIMITED 時尚環球控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1520)

Executive Directors: Mr. Hubert Tien (Chairman) Mr. Chen Gang Mr. Qu Chengbiao Mr. Yeung Kwok Leung

Independent Non-executive Directors: Mr. Chan Kin Sang Mr. Tang Shu Pui, Simon Ms. Luo Dan Mr. Tse Yuen Ming Mr. Hon Ming Sang

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal place of business in Hong Kong: 14th Floor, PeakCastle 476 Castle Peak Road Cheung Sha Wan Kowloon Hong Kong

4 November 2016

To the Shareholders

Dear Sir/Madam,

(I) DISCLOSEABLE TRANSACTION ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF DELTA WEALTH FINANCE LIMITED INVOLVING ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE; AND (II) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcement of the Company dated 5 September 2016 in relation to, among other things, the Acquisition involving issue of Consideration Shares.

On 5 September 2016 (after trading hours), the Vendor, the Vendor’s Guarantor, the Purchaser, a wholly-owned subsidiary of the Company and the Company entered into the Sale and Purchase Agreement, pursuant to which (i) the Vendor has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from the Vendor, the Sale Shares, and (ii) the Vendor has agreed to assign to the Purchaser, and the Purchaser has agreed to receive the assignment of, the Sale Loan.

– 4 –

LETTER FROM THE BOARD

The Consideration for the Sale Shares and Sale Loan are in the sum of HK$63,500,001, which shall be satisfied in HK$25,000,001 by cash and in HK$38,500,000 by allotment and issuance of 110,000,000 Consideration Shares at HK$0.35 per Consideration Share under the Specific Mandate.

The purpose of this circular is to provide you with, among other things, further details of (i) the Acquisition and the transactions contemplated thereunder; (ii) the Specific Mandate; and (iii) the notice of the EGM.

THE ACQUISITION

The Board is pleased to announce that on 5 September 2016 (after trading hours), the Vendor, the Vendor’s Guarantor, the Purchaser, a wholly-owned subsidiary of the Company and the Company entered into the Sale and Purchase Agreement, pursuant to which (i) the Vendor has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from the Vendor, the Sale Shares, and (ii) the Vendor has agreed to assign to the Purchaser, and the Purchaser has agreed to receive the assignment of, the Sale Loan.

Major terms of the Sale and Purchase Agreement are set out below.

THE SALE AND PURCHASE AGREEMENT

Date: 5 September 2016 (after trading hours)

• Parties: (i) Favor Way Investments Limited, a company incorporated in the BVI with limited liability, as the Vendor;

• (ii) Ms. Tin Yuen Sin Carol, as the Vendor’s Guarantor;

• (iii) Smart Dream Limited, a company incorporated in the BVI with limited liability, and a wholly-owned subsidiary of the Company, as the Purchaser; and

• (iv) the Company.

As at the Latest Practicable Date, the Vendor is wholly-owned by the Vendor’s Guarantor. The Vendor is a company incorporated in the BVI with limited liability and is principally engaged in investment holding.

Ms. Tin, the Vendor’s Guarantor, is an entrepreneur operating business including money lending business and fine dining business. Ms. Tin also has extensive experience in trading business in Hong Kong and China. Ms. Tin was an executive director of Carnival Group International Holdings Limited (“ Carnival ”) (formerly known as Oriental Ginza Holding Limited and CASH Retail Management Group Limited) (Stock code: 996) for the period from 2005 to 2011. Ms. Tin also served as chairperson of Carnival from 2006 to 2011 and was responsible for the overall strategic planning and policy making.

As at the Latest Practicable Date, the Company intends not to appoint Ms. Tin as a Director following the Completion.

– 5 –

LETTER FROM THE BOARD

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the date of the Sale and Purchase Agreement and the Latest Practicable Date, the Vendor, the Vendor’s Guarantor and their ultimate beneficial owners (where applicable) are third parties independent of the Company and its connected persons.

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, (i) the Vendor has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from the Vendor, the Sale Shares, which represent the entire issued share capital of the Target Company as at the date of the Sale and Purchase Agreement and as at the Latest Practicable Date and (ii) the Vendor has agreed to assign to the Purchaser, and the Purchaser has agreed to receive the assignment of, the Sale Loan.

As at the Latest Practicable Date, the Sale Loan in the aggregate sum of HK$6,480,000 is due and owing by the Target Company to the Vendor, which is interest free and has no fixed date of repayment.

The Purchaser shall not be obliged to complete the Acquisition unless the sale and purchase of the Sale Shares and the Sale Loan are completed simultaneously.

Consideration

The Consideration, in the aggregate sum of HK$63,500,001 (comprising the Sale Shares consideration and the Sale Loan consideration in the amount of HK$63,500,000 and HK$1, respectively), which shall be settled and discharged by the Purchaser in accordance with the time, mode and manner as set out under the Sale and Purchase Agreement:

• (i) forthwith upon the execution of the Sale and Purchase Agreement, the Purchaser shall pay the sum of HK$20,000,001 by cashier’s order to the Vendor or its nominee as refundable deposit (the “ Deposit ”), and the Deposit shall be applied for part payment of the Consideration at Completion;

• (ii) at Completion, the Purchaser shall pay a further sum of HK$5,000,000 by cashier’s order to the Vendor or its nominee for further settlement of the Consideration; and

• (iii) the remaining balance of the Consideration in the sum of HK$38,500,000 shall be settled and discharged by the Company’s allotment and issuance of the Consideration Shares to the Vendor or its nominee at Completion.

As at the Latest Practicable Date, the Deposit has been paid by the Purchaser to the Vendor.

The Consideration was determined after arm’s length negotiations among the Company, the Purchaser and the Vendor taking into account (i) the range of price-to-earnings ratios of industry comparables and (ii) the monetary value of the Sale Loan.

– 6 –

LETTER FROM THE BOARD

Based on the preliminary research by the Company, five companies listed on the Stock Exchange which are principally engaged in the business of loan financing and/or money lending (the “ Comparable Companies ”), have been identified. In considering the appropriateness of the Comparable Companies for comparison, the Company has taken into account (i) the similarity of the business nature between the Comparable Companies and the Target Company; (ii) the Comparable Companies are listed on the Stock Exchange; and (iii) the profit-making track record of the Comparable Companies in the latest financial year such that price-to-earnings ratios could be computed. While the preliminary research does not contain an exhaustive list of industry players, the Directors consider that the Comparable Companies are reputed in the industry and the price-toearnings ratio of the Comparable Companies would be a meaningful indicator in valuing the Target Company.

The details of the Comparable Companies are set out as follows:

		Price to
Comparable Company	Stock code	earnings ratio
		(times)
Global International Credit Group Limited	1669	12.0
Oi Wah Pawnshop Credit Holdings Limited	1319	11.7
Hong Kong Finance Group Limited	1273	7.3
First Credit Finance Group Limited	8215	50.3
Credit China Holdings Limited	8207	184.6*
	Maximum	184.6
	Minimum	7.3
	Average	53.2

As tabulated above, the price-to-earnings ratio of the Comparable Companies ranges from 7.3x to 184.6x based on the closing price thereof as at 2 September 2016. The price-to-earnings ratio of the Target Company, based on the Consideration of HK$63,500,001 and its profit after taxation of approximately HK$4,006,477 for the year ended 31 March 2016, is approximately 15.85x, which is lower than the average price-to-earnings ratio of 53.2 of that of the Comparable Companies and lower than the adjusted average price-to-earnings ratio of 20.3 of that of the Comparable Companies (excluding the extremity of the price-to-earnings ratio of Credit China Holdings Limited of 184.6x).

In light of the above, the Directors consider that the Acquisition is on normal commercial terms, which are fair and reasonable and in the interests of the Company and Shareholders as a whole.

• As the annual report of Credit China Holdings Limited for the year ended 31 December 2015 is presented in RMB, the relevant financial figure is exchanged into HK$ at the approximate exchange rate of RMB1.00 to HK$1.16 for illustration purpose only.

– 7 –

LETTER FROM THE BOARD

Issue of the Consideration Shares

The Consideration Shares of 110,000,000 Shares represent:

• (i) approximately 15.28% of the issued share capital of the Company as at the Latest Practicable Date; and

• (ii) approximately 13.25% of the issued share capital of the Company as enlarged by the allotment and issuance of the Consideration Shares.

Issue Price

The issue price of HK$0.35 per Consideration Share (the “ Issue Price ”) represents:

• (a) a discount of approximately 31.37% to the closing price of HK$0.51 per Share as quoted on the Stock Exchange on the date of the Sale and Purchase Agreement;

• (b) a discount of approximately 30.83% to the average closing price of approximately HK$0.506 per Share as quoted on the Stock Exchange for the last five (5) consecutive trading days up to and including the date of the Sale and Purchase Agreement;

• (c) a discount of approximately 31.77% to the average closing price of approximately HK$0.513 per Share as quoted on the Stock Exchange for the last ten (10) consecutive trading days up to and including the date of the Sale and Purchase Agreement;

• (d) a discount of approximately 47.76% to the closing price of approximately HK$0.67 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and

• (e) a premium of approximately 78.57% over the unaudited consolidated net asset value per Share of approximately HK$0.196 as at 30 June 2016.

The Issue Price was determined after arm’s length negotiations between the Parties with reference to, among other things, the current financial performance and the net asset value of the Group.

Reference is made to the announcement of the Company dated 19 August 2016 (the “ Placing Announcement ”) in relation to, among other things, the placing of Shares under general mandate of the Company (the “ Placing ”) under which the placing price per placing Share was HK$0.52. Subsequently, the Company published its interim result announcement on 29 August 2016. In arriving at the Issue Price, the Company has considered the significant deterioration of the operating result of the Company’s apparel business for the six months ended 30 June 2016.

Based on the unaudited condensed consolidated statement of comprehensive income of the Company, the Company has recorded a net loss after tax of approximately HK$16,984,000 for the six months ended 30 June 2016, which increased by approximately 126.7% from that for the six months ended 30 June 2015. In view of the worsening industry environment and unsatisfactory financial performance of the Company, the Company considers that it is appropriate for it to offer the Consideration Shares at a discount so as to increase the attractiveness of the Consideration Shares.

– 8 –

LETTER FROM THE BOARD

Based on the above and upon discussion among the Parties and taking into account the fact that the Issue Price represents a significant premium of approximately 78.57% to the unaudited net asset value per Share of approximately HK$0.196 as at 30 June 2016, the Company is of the view that the Issue Price is fair and reasonable.

In the course of negotiation over the Issue Price, the Company has also made reference to notifiable transactions of other listed issuers on the Stock Exchange that were announced within one month prior to the execution of the Sale and Purchase Agreement involving acquisition with issuance of consideration shares.

The details of the notifiable transactions are set out as follows:

			Premium/
			(discount)
			of the issue
			price to
			the closing price
			on the last trading
			day/the date
Date of			of the relevant
announcement	Name of listed issuer	Stock code	announcement
			approximately
5 August 2016	Sino Haijing Holdings Limited	1106	(9.78)%
8 August 2016	SMI Holdings Group Limited	198	8.87%
9 August 2016	Lisi Group (Holdings) Limited	526	(43.76)%
10 August 2016	China Opto Holdings Limited	1332	0.00%
10 August 2016	China 3D Digital Entertainment Limited	8078	(31.60)%
11 August 2016	China 3D Digital Entertainment Limited	8078	(24.48)%
18 August 2016	WLS Holdings Limited	8021	(36.61)%
25 August 2016	Asian Citrus Holdings Limited	73	(19.35)%
30 August 2016	Phoenix Healthcare Group Co. Ltd	1515	(11.60)%
30 August 2016	Imagi International Holdings Limited	585	(1.48)%
30 August 2016	China E-learning Group Limited	8055	(16.00)%
5 September 2016	The Company	1520	(31.37)%

– 9 –

LETTER FROM THE BOARD

Based on the Company’s preliminary research set out above, the issue of consideration shares for the notifiable transactions during the one-month period ranged from a discount of approximately 43.76% to market price to a premium of approximately 8.87% over market price. The Issue Price of the Consideration Shares, on the other hand, represents a discount of approximately 31.37% to the closing price of HK$0.51 per Share as quoted on the Stock Exchange on the date of the Sale and Purchase Agreement. As the discount of the Issue Price to market price falls within the market range, the Board is of the view that the Issue Price is fair and reasonable.

Further, as the issue of the Consideration Shares in lieu of cash would reduce the immediate cash outflow of the Group, the partial settlement of the Consideration by way of the issue of the Consideration Shares at the Issue Price is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

The Consideration Shares will be issued under the Specific Mandate. The Consideration Shares to be allotted and issued shall rank pari passu among themselves and with all Shares in issue on the date of issue of the Consideration Shares. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

Conditions Precedent

Completion shall be subject to the following conditions:

• (i) (if required) necessary consent, approval and authorisations (if any) by regulators pursuant to the Money Lenders Ordinance and any other statutes, rules and regulations which may be applicable to the Acquisition having been obtained by the Vendor (collectively, the “ Vendor Necessary Approvals ”), and such Vendor Necessary Approvals shall be valid and effective and not threatened with any withdrawal, revocation or cancellation at all times prior to Completion;

• (ii) the Shareholders having passed the necessary resolutions to approve the Acquisition and the allotment and issue of the Consideration Shares, and all necessary consent, approval and authorisation (if any) by regulators pursuant to the Listing Rules and any other rules and regulations which may be applicable to the Acquisition having been obtained by the Purchaser (collectively, the “ Purchaser Necessary Approvals ”) and such Purchaser Necessary Approvals shall be valid and effective and not threatened with any withdrawal, revocation or cancellation at all times prior to Completion;

• (iii) the Listing Committee of the Stock Exchange having approved the listing of and permission to deal in the Consideration Shares;

• (iv) the Target Company continuing with its normal and usual businesses, and its money lender licence not being threatened with any revocation, withdrawal or suspension;

• (v) the Vendor remaining at all times up to Completion as the sole legal and beneficial owner of the Sale Shares and the Sale Loan free from any encumbrance whatsoever;

– 10 –

LETTER FROM THE BOARD

• (vi) the Vendor having passed to the Purchaser true and complete photostatic copy each of the audited accounts of the Target Company with respect to the period up to and including 31 March 2016 and the management accounts of the Target Company up to and including 30 June 2016;

• (vii) the Parties having performed or complied, in all material respects, with their respective undertakings, covenants and agreements contained in the Sale and Purchase Agreement, and no Party having breached any provision therein; and

• (viii) all warranties under the Sale and Purchase Agreement remaining true, correct, valid, binding and effective.

Save and except that the above conditions precedent (iv) and (vi) to (viii) which may be waived by the Purchaser at any time prior to the Long Stop Date by notice in writing to the Vendor, no other conditions precedent can be waived by any Party, and the Parties shall use their respective best endeavours to ensure that the conditions precedent (save and except such conditions waived or to be waived pursuant to the Sale and Purchase Agreement) shall be fulfilled and satisfied as soon as possible after the execution of the Sale and Purchase Agreement, and in any event, no later than the Long Stop Date.

As at the Latest Practicable Date, conditions precedent (iv), (v), (vii) and (viii) have been fulfilled and none of the other conditions precedent have been fulfilled. As at the Latest Practicable Date, the Purchaser has no intention to waive any of the conditions precedent.

Save as otherwise stated, if any of the conditions precedent set out above shall not have been fulfilled or satisfied (or waived pursuant to the above paragraph) by 5:00 p.m. on the Long Stop Date, the Sale and Purchase Agreement shall, unless the Parties agree in writing to postpone the Long Stop Date to another date (being a Business Day), automatically terminate and cease to be of any effect except for terms expressed to have continuing effect pursuant to the Sale and Purchase Agreement, which shall remain in force, and none of the Parties shall have any claim of any nature or liabilities thereunder whatsoever against the other Party save for the refund and any antecedent breaches of the terms thereof, and the entire amount of the Deposit shall be refunded to the Purchaser (without interest) within 30 Business Days of such premature termination of the Sale and Purchase Agreement.

Completion

Subject to satisfaction and/or fulfillment, as the case may be, waiver of the abovementioned conditions, Completion shall take place on the Completion Date (or at such other time as shall be mutually agreed in writing by the Vendor and the Purchaser).

Upon Completion, the Company will be indirectly interested in the entire issued share capital of the Target Company and subject to audit, the Target Company will be accounted for as a subsidiary of the Company and its financial results will be consolidated into the financial statements of the Group.

– 11 –

LETTER FROM THE BOARD

EFFECT OF THE ACQUISITION ON THE SHAREHOLDING STRUCTURE

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after the Completion and the allotment and issue of the Consideration Shares in full:

Shareholders All Divine Limited Hua Zhen Vendor Other public Shareholders Total	Immediately after the Completion and the As at the Latest allotment and issue of the Practicable Date Consideration Shares in full No. of Shares approx. % No. of Shares approx. % 138,000,000 19.17% 138,000,000 16.63% 87,000,000 12.08% 87,000,000 10.48% – – 110,000,000 13.25% 495,000,000 68.75% 495,000,000 59.64% 720,000,000 100.00% 830,000,000 100.00%

INFORMATION OF THE TARGET COMPANY

The Target Company is a company of limited liability incorporated in Hong Kong on 10 May 2007 which is principally engaged in the provision of money lending services. Types of loan granted by the Target Company are mortgage loans, secured loans, pawn loans and personal loans with (aggregate outstanding principal) amount of approximately HK$2,850,000, approximately HK$27,500,000, approximately HK$10,000,000 and approximately HK$6,150,000 respectively as at the Latest Practicable Date. As at the Latest Practicable Date, the Target Company holds a money lender license issued under and pursuant to the Money Lenders Ordinance (Chapter 163 of the Laws of Hong Kong). As at the date of the Sale and Purchase Agreement, the Target Company has issued 1,000,000 shares, and immediately prior to the execution of the Sale and Purchase Agreement, the Vendor is the sole legal and beneficial owner of these 1,000,000 shares.

Business model

The primary source of revenue for the Target Company is generated from interest received from loans provided to customers. The Target Company operated its money lending business through different channels such as advertisement in well-known search engine web sites, walk-in customers, referral by existing customers and referral by peer money lenders.

Interest rates for each individual borrower are calculated on a case-by-case basis, in accordance with the Target Company’s internal credit guidelines and consideration to various factors including, amongst others, the overall credit history and profile of the applicant and the underlying assets as security.

– 12 –

LETTER FROM THE BOARD

In general, the Target Company offers its customers two loan repayment methods (i) interest only, whereby its customer makes monthly instalments of interest on the loan and makes a oneoff repayment of loan principal upon maturity; and (ii) amortisation, whereby its customer makes monthly instalments of both interest and loan principal.

The Target Company has obtained a bank loan facility from Bank of East Asia, Limited at a rate equivalent to 5.25% per annum.

The major customers of the Target Company are corporate clients with solid background. Save as the relationship between the Target Company as lender and its customers as borrowers, as at the Latest Practicable Date, there are no other business relationship between the Target Company and its customers. The loan term of the corporate clients of the Target Company are mainly one year. Over the years, there had not been any material changes in the major customers of the Target Company.

Loan portfolio

Based on the audited statement of financial position of the Target Company, as at 31 March 2016, the total assets of the Target Company of approximately HK$42,200,000 consists of (i) approximately HK$42,100,000 of loan and interest receivables; and (ii) approximately HK$100,000 of cash and bank balances.

Business prospects

As at the Latest Practicable Date, the Target Company has adequate and qualified staffing in operating its business and the director and manager of the Target Company have over nine years of relevant experience in the money lending industry. As at the Latest Practicable Date, the Target Company has four staff, most of whom have over 5 years of services in the Target Company. Following the Completion and depending on the then market demand for the Target Company’s loan products, the Target Company may further expand its staff size so as to provide quality loan financing services to its clients.

Based on the employment contract entered into between the Target Company and Ms. Tin dated 31 October 2016 regarding the appointment of Ms. Tin as the chief executive officer of the Target Company, it is expected that Ms. Tin will involve in the management of the Target Company for two years from 1 November 2016. The Target Company has engaged in the loan financing business for over eight years and has formulated its marketing strategy to retain and deal with potential and existing clients. Furthermore, it is expected that a new marketing campaign will be launched in the coming few months. Therefore, the Directors consider that the client base of the Target Company would not be adversely affected in the event that Ms. Tin no longer participates in the business of the Target Company following Completion.

– 13 –

LETTER FROM THE BOARD

The growth and development of the loan financing business of the Target Company will not be dependent on any single personnel but the synergy and contribution of the team of the Target Company as a whole. Looking forward, the Target Company will continue its marketing campaign to further promote the image and reputation of the Target Company and aim to attract new clients outside the existing client pool. With the supervision of the Board and the assistance from Ms. Tin following the Completion, the Target Company will use its best endeavour to grow and develop in the loan financing industry.

Set out below is the summary of the audited financial figures of the Target Company prepared under the Hong Kong Financial Reporting Standard for Private Entities issued by the Hong Kong Institute of Certified Public Accountants for the financial years ended 31 March 2015 and 2016.

	For the year ended For the year ended	For the year ended For the year ended
	31 March 2016	31 March 2015
	(HK$)	(HK$)
Revenue	7,613,448	3,296,380
Proft/(Loss) before tax Proft/(Loss) after tax	4,798,176 4,006,477	(3,815,026) (3,815,026)
Total Assets	42,241,847	55,089,386
Net Asset Value	5,470,330	16,463,853

The average interest rate charged by the Target Company for the loans granted in the year ended 31 March 2015 was approximately 10%. Subsequent to the promotion campaign conducted in 2015, more customers approached the Target Company for new loans and the Target Company increased the interest rate for the loans granted in year ended 31 March 2016. The risk profile of the major customers of the Company remained relatively stable in 2015 and 2016. According to the Vendor, the Target Company made loans to borrowers with higher interest rates, ranging from 20% to 26% in 2016, compared with relatively lower interest rate in 2015. The cost structure of the Target Company mainly consists of its cost of lending. The Target Company had been successful in obtaining bank loans with a lower interest rate, together with the implementation of its cost control plan in the year ended 31 March 2016, which resulted in the increased profit margin for its money lending business for the year ended 31 March 2016. Therefore the Target Company turnaround from the net loss in 2015 to a net profit in 2016. Further, according to the Vendor, the Target Company paid a dividend of HK$15,000,000 to its shareholder in February 2016, which was the main reason for the decrease in the net asset value of the Target Company in 2016.

– 14 –

LETTER FROM THE BOARD

REASONS AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in designing, manufacturing and trading of apparels.

The apparel industry remained difficult in the year of 2015 as stated in the annual report 2015 of the Company. As the global trade environment has further deteriorated, the growth of profit of the Group continues to experience downward pressure. As disclosed in the annual report 2015 of the Company, the net profit after tax of the Company suffered a drop of approximately 38.74% from approximately HK$25,679,000 for the year ended 31 December 2014 to approximately HK$15,732,000 for the year ended 31 December 2015. The Directors consider that the worsening performance of the Company is in line with the industry downward trend, which resulted in challenging business environment for the Company’s apparel business. In view of the above, the Company considers exploring business opportunities in tertiary industry instead of solely in the secondary industry such that the business risk of the Group could be diversified.

The Target Company is principally engaged in money lending business. With reference to the statistics of loans and advances granted by authorised institutions as published by the Hong Kong Monetary Authority as a proxy to the credit market growth, the amount of loans and advances granted by authorised institutions for use in Hong Kong has been growing over the years from approximately HK$3,299 billion as at 30 June 2011 to approximately HK$4,948 billion as at 30 June 2016, representing an annual growth rate of approximately 8.4% during the period. In light of the above, the Directors consider that the business of provision of money lending services will have a promising prospect and the expansion into the loan financing business will diversify the Group’s business scope and broaden revenue sources of the Group.

Further, as opposed to many other industries, the loan financing business mainly requires cash and management expertise for operations but little investment in hardware. As such, the entry barrier to the loan financing business is relatively low. As the Target Company is currently operating an established loan financing business which is profit-generating, the Company is of view that the Acquisition will benefit the Company from not being required to apply for a separate money lender license and thus eliminate all the uncertainty and saving time on the money lender license application. The Company is confident that, together with Mr. Yeung Kwok Leung, the Director who is experienced in the loan financing industry, the Board will supervise and manage the operation of the Target Company and it is expected that the Target Company will quickly adopt to the highly competitive industry and will implement its business plan in a timely manner.

Following the Completion, subject to the financial performance of the Target Company and the then market circumstances, the Company may or may not require further capital for the operation and development of the Target Company. As at the Latest Practicable Date, the Company has no intention to conduct any equity fundraising activities for the future business operation and development of the Target Company. The Company will monitor the business development of the Target Company for further funding requirement.

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LETTER FROM THE BOARD

The Company has been exploring new business opportunities and reviewing its operating strategies from time to time such that the business and operating risk of the Group could be reduced or diversified. Following the Completion, the Company will continue to operate its apparels business. Having considered (i) the unfavorable market environment for the production of the Company’s apparel products in the People’s Republic of China; (ii) the cost and benefit imbalances in respect of the apparels manufacturing business of the Group; and (iii) the competitive advantage that the Company may possess if it were to move its apparels manufacturing operation to Southeast Asian countries, the Company will continue to consummate its operating strategies by all necessary means and measures to improve the financial performance of its existing businesses. In view of the challenging industry environment, the Company expects that its apparel business will be under pressure and the revenue generated therefrom is expected to account for a smaller portion in the total revenue of the Company in the future.

Further to the above reasons, as a major portion of the Consideration shall be satisfied in the form of Consideration Shares as opposed to cash payment, the Board is of the view that the settlement arrangement of the Consideration will also help reduce the pressure on the cash resources of the Company, which can otherwise be utilised for the Group’s general working capital and for further development of the Group’s businesses.

Based on the above, the Directors are of the view that the terms of the Sale and Purchase Agreement and the Acquisition are on normal commercial terms, fair and reasonable, and in the interests of the Company and the Shareholders as a whole.

APPLICATION FOR LISTING

Application will be made to the Listing Committee of the Stock Exchange for the approval for the listing of, and permission to deal in, the Consideration Shares.

EGM

The Consideration Shares will be allotted and issued under the Specific Mandate to be sought from the Shareholders at the EGM to allot and issue 110,000,000 Consideration Shares to the Vendor pursuant to the terms and conditions of the Sale and Purchase Agreement.

The EGM will be convened and held at 14th Floor, PeakCastle, 476 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on Monday, 21 November 2016 at 11:00 a.m., the notice of which is set out on pages EGM-1 to EGM-3 of this circular, to consider and, if thought fit, approve the allotment and issue of the Consideration Shares pursuant to the Specific Mandate.

To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, no Shareholder has material interest in the Sale and Purchase Agreement and therefore, no Shareholder would be required to abstain from voting at the EGM. The resolution(s) proposed to be approved at the EGM will be taken by poll and an announcement will be made by the Company on the results of the EGM.

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LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon as soon as possible and, in any event not later than 48 hours before the time appointed for holding of the EGM or any adjournment thereof to 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. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjournment thereof should you so wish.

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.

RECOMMENDATION

On the basis of the information set out in this circular, the Directors consider that the Acquisition and the proposed grant of the Specific Mandate to allot and issue the Consideration Shares is in the interests of the Company and the Shareholders as a whole and is for the benefits of the Shareholders, and accordingly, recommend the Shareholders to vote in favour of the ordinary resolution(s) to be proposed at the EGM to approve the proposed grant of the Specific Mandate to allot and issue the Consideration Shares and the transactions contemplated thereunder.

By Order of the Board Runway Global Holdings Company Limited Hubert Tien Chairman

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NOTICE OF EGM

RUNWAY GLOBAL HOLDINGS COMPANY LIMITED 時尚環球控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 1520)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ Meeting ”) of Runway Global Holdings Company Limited (the “ Company ”) will be held at 14th Floor, PeakCastle, 476 Castle Peak Road, Cheung Sha Wan, Kowloon, Hong Kong on Monday, 21 November 2016 at 11:00 a.m. to consider and, if thought fit, pass the following ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

• (a) the conditional sale and purchase agreement dated 5 September 2016 (the “ Sale and Purchase Agreement ”) (a copy of which has been produced to the meeting marked “A” and initialled by the chairman of the meeting for the purpose of identification purpose) entered into between Favor Way Investments Limited, as the vendor (the “ Vendor ”), Ms. Tin Yuen Sin Carol, as the vendor’s guarantor, Smart Dream Limited, a wholly-owned subsidiary of the Company, as the purchaser, and the Company in relation to the acquisition (the “ Acquisition ”) of 1,000,000 shares of Delta Wealth Finance Limited (the “ Target Company ”) representing the entire issued share capital of Delta Wealth Finance Limited and the amount owing by the Target Company to the Vendor in respect of the loans repayable on demand made by the Vendor to the Target Company and all obligations, liabilities and debts owing or incurred by the Target Company to the Vendor on or at any time prior to completion whether actual, contingent or deferred and irrespective of whether or not the same is due and payable on completion, at the aggregate consideration of HK$63,500,001, HK$38,500,000 of which shall be settled and discharged by the Company’s allotment and issuance of 110,000,000 new ordinary share(s) of HK$0.01 (the “ Consideration Shares ”) each in the share capital of the Company at the issue price of HK$0.35 per Consideration Share to Favor Way Investments Limited or its nominee on the terms and subject to the conditions set out in the Sale and Purchase Agreement and all the transactions contemplated thereunder be and are hereby ratified, confirmed and approved;

• (b) conditional upon, among others, The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Consideration Shares, the directors of the Company (the “ Directors ”) be and are hereby granted a specific mandate to allot and issue the 110,000,000 Consideration Shares pursuant and subject to the terms and conditions of the Sale and Purchase Agreement; and

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NOTICE OF EGM

• (c) any one Director be and is hereby authorised to execute all such documents, instruments, agreements and deeds and do all such acts, matters and things that are of administrative nature only and ancillary to the Acquisition, as he/she may in his or her absolute discretion consider necessary or desirable for the purpose of and in connection with the implementation of the Sale and Purchase Agreement and the transactions contemplated thereunder, including the allotment and issuance of the Consideration Shares, and to agree to such variations of the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder that are of administrative nature only as he or she may in his or her absolute discretion consider necessary or desirable.”

By Order of the Board Runway Global Holdings Company Limited Hubert Tien Chairman

Hong Kong, 4 November 2016

As at the date hereof, the board of the Company comprised the following Directors:

Executive Directors

Mr. Hubert Tien (Chairman) Mr. Chen Gang Mr. Qu Chengbiao Mr. Yeung Kwok Leung

Independent non-executive Directors

Mr. Chan Kin Sang Mr. Tang Shu Pui, Simon Ms. Luo Dan Mr. Tse Yuen Ming Mr. Hon Ming Sang

Head office and principal place of business 14th Floor, PeakCastle in Hong Kong 476 Castle Peak Road Cheung Sha Wan Kowloon Hong Kong

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NOTICE OF EGM

Notes:

• (a) Any shareholders entitled to attend and vote at the Meeting is entitled to appoint one or, if he/she is the holder of two or more shares, more than one proxy to attend and vote on his/her behalf in accordance with the articles of association of the Company. A proxy need not be a shareholder.

• (b) To be valid, a form of proxy and the 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 the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Service Limited, at Level 22, Hopewell Centre, 28 Queen’s Road East, Hong Kong not less than 48 hours before the time appointed for holding of the Meeting or any adjournment thereof.

• (c) Delivery of an instrument appointing a proxy shall not preclude a shareholder from attending and voting in person at the Meeting or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.

• (d) In the case of joint holders of a share, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she was solely entitled thereto if more than one of such joint holders are present at the 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. For this purpose, seniority shall be determined by the order in which the names stand first in the Register of Shareholders in respect of the joint holding.

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