BAIOO Family Interactive Limited - Proxy Solicitation & Information Statement 2013

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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant, or other professional advisers.

If you have sold or transferred all your shares in Datronix Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or transferee.

The 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.

DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*] (Incorporated in Bermuda with limited liability) (Stock Code: 889)

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee

A letter from the Board is set out on pages 3 to 15 of this circular. A letter from the Independent Board Committee is set out on page 16 of this circular. A letter from Messis Capital Limited dated 21 November 2013 containing its advice to the Independent Board Committee and Independent Shareholders is incorporated and set out on pages 17 to 31 of this circular.

A notice convening the Special General Meeting to be held at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong on Monday, 9 December 2013 at 11:00 a.m. is set out on pages 37 to 38 of this circular. Whether or not you are able to attend the Special General Meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding such meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you so wish.

21 November 2013

For identification purposes only

		Page
CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		i
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		3
1.	INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
2.	THE 6TH DATATRONIC MASTER SUPPLY AGREEMENT. . . . . . . . . . . . . . . . . . . . .	4
	2.1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
	2.2. The Existing Continuing Connected Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
	2.3. Reason for the Datatronic Continuing Connected Transaction . . . . . . . . . . . . . . . . . . .	6
	2.4. Proposed Cap Amounts and Basis for Determination . . . . . . . . . . . . . . . . . . . . . . . . . .	7
	2.5. Internal Control and Monitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
3.	THE IPI MASTER SUPPLY AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	3.1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	3.2. The New Continuing Connected Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	3.3. Reason for the IPI Continuing Connected Transaction . . . . . . . . . . . . . . . . . . . . . . . . .	11
	3.4. Proposed Cap Amounts and Basis for Determination . . . . . . . . . . . . . . . . . . . . . . . . . .	11
	3.5. Internal Control and Monitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
4.	IMPLICATIONS UNDER LISTING RULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
5.	INDEPENDENT SHAREHOLDERS’ APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
6.	RECOMMENDATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
7.	SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . .		16
LETTER FROM MESSIS CAPITAL LIMITED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
APPENDIX – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		32
NOTICE OF SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		37

– i –

DEFINITIONS

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

“5th Master Supply Agreement”

the agreement entered into by Datatronic and Datatronics Romoland on 28 September 2010

“Board”

the board of directors of the Company

“Company”

Datronix Holdings Limited, an exempted company incorporated in Bermuda with limited liability and the shares of which are listed on the Stock Exchange

“Continuing Connected Transactions”

the transactions under the 6th Datatronic Master Supply Agreement and the IPI Master Supply Agreement

“Datatronic”

Datatronic Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

“6th Datatronic Master Supply Agreement”

the agreement entered into by Datatronic and Datatronics Romoland on 3 September 2013

“Datatronic Continuing Connected Transaction”
the transactions under the 6th Datatronic Master Supply Agreement
“Datatronics Romoland”

Datatronics Romoland, Inc., a company incorporated in the US with limited liability and is a company wholly owned by Mr. Siu Paul Y.

“Group”

the Company and its subsidiaries

“HK$”

Hong Kong dollar(s)

“Independent Board Committee”

an independent board committee of the Company comprising Mr. Chung Pui Lam, Mr. Chan Fai Yue, Leo and Mr. Lee Kit Wah

“Independent Shareholders”

shareholders other than Mr. Siu Paul Y. and his associates as defined in the Listing Rules

“IPI”

Innovative Power, Inc., a company incorporated in US with limited liability and is a wholly-owned subsidiary of the Company

– 1 –

DEFINITIONS

“IPI Continuing Connected the transactions under the IPI Master Supply Agreement Transaction”
“IPI Master Supply Agreement” the agreement entered into by IPI and Datatronics Romoland on 3 September 2013
“Latest Practicable Date” 18 November 2013, 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

“Master Supply Agreement” the agreement entered into by Datatronic and Datatronics Romoland on 6 June 2001
“Mr. Siu Paul Y.” Mr. Siu Paul Y., the chairman and the controlling shareholder of the Company who together with his spouse hold 71.8% of the issued shares of the Company through Onboard Technology Limited

“SFO” Securities and Futures Ordinance of Hong Kong, Chapter 571 of the laws of Hong Kong “Shareholder(s)” holder(s) for the time being of the share(s) of the Company

“Special General Meeting” the special general meeting of the Company to be convened on Monday, 9 December 2013 for the purpose of considering and approving the Continuing Connected Transactions and the respective cap amounts for the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction “Stock Exchange” the Stock Exchange of Hong Kong Limited “subsidiary” shall have the meaning as defined in the Companies Ordinance of Hong Kong, Chapter 32 of the laws of Hong Kong “US” the United States of America

“US$”

US dollars

– 2 –

LETTER FROM THE BOARD

**DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 889)

Executive Directors: SIU Paul Y. (Chairman) SHUI Wai Mei (Vice Chairman) SHEUNG Shing Fai SIU Nina Margaret

Independent Non-executive Directors: CHUNG Pui Lam CHAN Fai Yue, Leo LEE Kit Wah

Registered Office: Clarendon House Hamilton HM11 Bermuda

Principal place of business in Hong Kong: 19th Floor North Point Industrial Building 499 King’s Road North Point Hong Kong

21 November 2013

To the Shareholders

Dear Sir or Madam,

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

1. INTRODUCTION

Existing Continuing Connected Transaction

The Company made disclosure by announcement dated 20 October 2010 of the continuing connected transactions under the 5th Master Supply Agreement to be taken place in the three years ending 31 December 2011, 2012 and 2013 for the cap amounts of HK$135 million, HK$145 million and HK$160 million respectively. It is expected that further Datatronic Continuing Connected Transaction will continue in the three years ending 31 December 2014, 2015 and 2016. Such Datatronic Continuing Connected Transaction is subject to Independent Shareholders’ approval.

For identification purposes only

– 3 –

LETTER FROM THE BOARD

New Continuing Connected Transaction

On 3 September 2013, IPI entered into the IPI Master Supply Agreement with Datatronics Romoland regarding the sales of magnetic products and provision of services to Datatronics Romoland for three years up to 31 December 2016. Such IPI Continuing Connected Transaction is subject to Independent Shareholders’ approval.

The Independent Board Committee has been formed to consider the Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016. The letter from the Independent Board Committee to the Independent Shareholders is included in this circular. An independent financial adviser Messis Capital Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders in respect of the Continuing Connected Transactions, including the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016, and its letter of advice to the Independent Board Committee and Independent Shareholders is included in this circular.

The purpose of this circular is to provide you with further information in relation to the Continuing Connected Transactions, to set out the recommendations of the Independent Board Committee and the letter of advice from Messis Capital Limited to the Independent Board Committee and the Independent Shareholders.

A resolution to approve the Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction will be proposed at the Special General Meeting to be held on 9 December 2013. In accordance with the Listing Rules, Mr. Siu Paul Y. and his associates (as defined by the Listing Rules) will be required to abstain from voting on the resolution to approve the Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction.

2. THE 6TH DATATRONIC MASTER SUPPLY AGREEMENT

2.1. Background

The Group is principally engaged in manufacturing and trading of magnetic components. Datatronics Romoland is a supplier of high reliability and military magnetics to the military and aerospace industries in the US. Datatronic and Datatronics Romoland entered into the Master Supply Agreement on 6 June 2001 and the subsequent master supply agreements ending with the 5th Master Supply Agreement on 28 September 2010 in respect of supply of magnetic products to Datatronics Romoland. The 6th Datatronic Master Supply Agreement was entered into on 3 September 2013 for a term of three years from 1 January 2014 and on effectively the same terms and conditions of the previous master supply agreements.

– 4 –

LETTER FROM THE BOARD

Datatronics Romoland is a company that is 100% owned by Mr. Siu Paul Y. who is the Chairman and controlling shareholder of the Company, who together with his spouse hold 71.8% of the issued shares of the Company through Onboard Technology Limited. The Datatronic Continuing Connected Transaction constitutes connected transactions for the Company under Chapter 14A of the Listing Rules.

The Company made disclosure by announcement dated 20 October 2010 of the continuing connected transactions to be taken place in the three years ending 31 December 2011, 2012 and 2013 for the cap amounts of HK$135 million, HK$145 million and HK$160 million respectively.

None of the directors of the Company and their respective associates are interested in any business apart from the business of the Company, which competes or is likely to compete, either directly or indirectly, with the business of the Company.

2.2. The Existing Continuing Connected Transaction

Terms of the Datatronic Continuing Connected Transaction

The major terms and conditions of the previous master supply agreements including the 5th Master Supply Agreement are of the same terms and are all for an initial term of three years and shall continue thereafter until terminated by either party giving to the other party not less than three months’ written notice. Any continuation after the initial term shall also be subject Independent Shareholders’ approval. Pursuant to the Master Supply Agreement, the selling prices of the magnetics under the Master Supply Agreement are to be agreed between Datatronic and Datatronics Romoland. The Group will determine the price of the magnetics required by Datatronics Romoland according to its pricing policy of obtaining a reasonable profits margin for its sales in accordance with the prevailing market conditions, on normal commercial terms and at arm’s length basis. The Group would ascertain the prevailing market conditions by comparing the sales prices of the other customers of the Group (the “Other Price”) and those of similar products in the market in general (the “Market Price”). Benchmark on reasonable profits margin is set. The Group would closely monitor the sales activities of its customers and would get research reports on its major customers who are listed companies in US from time to time so as to ascertain the prevailing market conditions. The Group will take into account all the factors stated above which include the Other Price and the Market Price and make sure that the profit margin obtained is no less favorable to the Group when compared with the Other price and the Market Price. The Group is granted a first refusal right by Datatronics Romoland to the effect that only if Datatronic declines to supply the magnetics, Datatronics Romoland may source the same from any third-party supplier, provided that the terms of purchase shall not be more favourable than those offered to Datatronic.

– 5 –

LETTER FROM THE BOARD

The 6th Datatronic Master Supply Agreement is on same terms in the previous master supply agreements pursuant to which Datatronic has agreed to sell products to Datatronics Romoland for a three years term up to 31 December 2016 and subject to the terms and conditions set out therein at a price to be agreed by the parties. The products supplied by Datatronic are specially customized for Datatronics Romoland. There are three main types of products supplied to Datatronics Romoland which includes medical, aerospace and military parts.

The Group currently offers credit sales to Datatronics Romoland with a term of payment of 90 days, which is the same to other customers. The payment term and other terms of the Datatronic Continuing Connected Transaction offered by the Group are no less favourable to the Group than those offered to other customers of the Group.

2.3. Reason for the Datatronic Continuing Connected Transaction

The Company considers it in its best interests to generate more income by carrying out the product sales transaction in response to the Datatronics Romoland’s orders, the pricing term under the 6th Datatronic Master Supply Agreement is fair, reasonable and beneficial to Datatronic.

As far as the Board is aware, Datatronics Romoland is one of the few suppliers of high reliability and military magnetics to the US military and aerospace industries and the Group is the sole supplier of high reliability magnetic components to Datatronics Romoland. As the products required by Datatronics Romoland involve more advanced and sophisticated technology and skills, Datatronic can obtain a higher profit margin. According to the historical records of the business between Datatronic and Datatronics Romoland, the profit margin for the sales of such high reliability magnetic components to Datatronics Romoland was substantially higher than those from other customers and Datatronics Romoland has a good payment records. Furthermore, Datatronics Romoland is continually increasing its share of business in the medical-related business which the Group believes the demand from Datatronics Romoland would continue to increase in the future. Based on the above reasons, the Group entered into the Datatronic Continuing Connected Transaction.

– 6 –

LETTER FROM THE BOARD

2.4. Proposed Cap Amounts and Basis for Determination

Set out below are the amounts of Datatronic Continuing Connected Transaction for the years 2010, 2011 and 2012 and six months ended 30 June 2013

	Financial	Financial	Financial	Six months
	year ended	year ended	year ended	ended
	31 December	31 December	31 December	30 June
	2010	2011	2012	2013
	HK$’000	HK$’000	HK$’000	HK$’000
Aggregate consideration of
the Datatronic continuing connected transactions	70,768	59,950	49,214	28,951
Total turnover of the Group	300,255	263,353	262,606	133,926
Percentage of aggregate consideration of
the Datatronic continuing connected transactions to
total turnover of the Group	24%	23%	19%	22%
Annual cap amount	160,000	135,000	145,000	160,000

According to historical records of the transactions made pursuant to the previous master supply agreements between Datatronic and Datatronics Romoland, the Board expects that the sales to be made to Datatronics Romoland will continue for the three years ending 31 December 2014, 2015 and 2016 respectively. The Group shall seek to continue to expand its market with other customers and shall keep the proportion of sales to Datatronics Romoland at an optimal level in that the Board will ensure that not too much reliance shall be placed upon one particular customer.

In addition to the historical records of the cap amounts, the Group also considered the forecast provided by Datatronics Romoland. According to Datatronics Romoland, the forecast is based on following grounds:–

a. Datatronics Romoland had identified new customers and they would start purchasing products from Datatronics Romoland in the coming year.
b. Datatronics Romoland had developed new product lines in the medical area.
c. The established relationship between Datatronics Romoland and its customers had remained stable.
d. According to Datatronics Romoland, there were several projects/programmes that had been partially inactive from 2011. However, the sales under those projects/ programmes have been gradually resumed and it is expected that sales under those projects/programmes would reach HK$15 million to HK$20 million per year in the years ending 31 December 2014, 2015 and 2016.

– 7 –

LETTER FROM THE BOARD

Although the Group has no influence on Datatronics Romoland’s forecasts as Datatronics Romoland operates independently as a company, the Group has assessed the historical figures of the Datatronics Romoland forecasts and considers the forecasts reasonable.

The proposed annual caps are determined as follows:–

(a) Given that the aggregate consideration of the Datatronic Continuing Connected Transaction for the six months ended 30 June 2013 amounted to approximately HK$29 million, the Group expects that the aggregate consideration would amount to approximately HK$60 million to HK$70 million for the year ended 31 December 2013.
(b) By reference to the historical sales records, the costs of sales have been increasing throughout the previous two years. The costs of sale have increased by around 8% to 12% per annum for the period from the 1 January 2011 to the six months ended 30 June 2013 and the Group expects that such increase would continue. The Group would increase the selling price accordingly in 2014 and thereafter and as a result, the Group would expect that such increase in selling price would contribute to an increase of the aggregate consideration by at least 15%. Based on the above, the cap amount for the year ending 31 December 2014 is set at HK$100 million. As the Group expects the costs of sale would continue to increase, the cap amounts for the years ending 31 December 2015 and 2016 are set as HK$110 million and HK$120 million respectively.

Based on the above, the projected amounts of the Datatronic Continuing Connected Transaction for three years are as follows:

Projection for	Projection for	Projection for
the year ending	the year ending	the year ending
31 December	31 December	31 December
2014	2015	2016
HK$’000	HK$’000	HK$’000
100,000	110,000	120,000

The Board is of the view that the 6th Datatronic Master Supply Agreement has been entered into on normal commercial terms, in the ordinary and usual course of business of the Group with terms no less favourable to the Group than those offered to other customers of the Group and is fair and reasonable to the Shareholders taken as a whole and it is in the interest of the Group to continue the Datatronic Continuing Connected Transaction upon the terms and conditions set out in the 6th Datatronic Master Supply Agreement. Therefore based on the above projection, the Board proposes that the cap amounts of the Datatronic Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016 be HK$100 million, HK$110 million and HK$120 million respectively. The Board considers that the cap amounts are fair and reasonable.

– 8 –

LETTER FROM THE BOARD

Up to the Latest Practicable Date, the utilization rate of the Group’s existing production capacity is approximately 65%. The Group plans to invest in equipment, machinery, production setups and others for high automation in production to improve efficiency and increase productivity. In the premises, the Board is of the view that the Group’s existing production capacity is able to cope with the expected increase of the purchase orders for the three years ending 31 December 2014, 2015 and 2016.

2.5. Internal Control and Monitor

All sales transactions of Datatronic with Datatronics Romoland would be reported to the management of the Group on a monthly basis. Internal audit of the Datatronic Continuing Connected Transaction by the audit committee and review by the external auditor would be carried out to scrutinize the Datatronic Continuing Connected Transaction. Analyses of sales by customers and by region and end application markets analysis are made quarterly to enable the management to closely monitor and ensure the Datatronic Continuing Connected Transaction comply with all requirements. The sales administration team of the Group would closely monitor the sales under the Datatronic Continuing Connected Transaction and report to the management of the Group on a monthly basis to make sure that the pricing policy, terms of the Datatronic Continuing Connected Transaction and the cap amounts would be complied with.

3. THE IPI MASTER SUPPLY AGREEMENT

3.1. Background

The Group made an announcement on 26 March 2012 that the Group would acquire assets from Cal-Coil Magnetics, Inc. and Cal-Coil China Ltd pursuant an Asset Purchase Agreement dated 23 March 2012. The Group thereafter had injected the said assets into IPI, a subsidiary set up by the Group for the purpose of providing new magnetic product range and technological services. The management expects that orders for the new magnetic product and/or the technological services from Datatronics Romoland would be fulfilled by IPI. On such premises, IPI entered into the IPI Master Supply Agreement with Datatronics Romoland on 3 September 2013 for a term of three years from 1 January 2014 up to 31 December 2016 for the supply of new magnetic products range and for provision of technological services to Datatronics Romoland.

– 9 –

LETTER FROM THE BOARD

3.2. The New Continuing Connected Transaction

Terms of the IPI Continuing Connected Transaction

The major terms and conditions of the IPI Master Supply Agreement are as follows:

The IPI Master Supply Agreement is for an initial term of three years from 1 January 2014 and shall continue thereafter until terminated by either party giving the other party not less than three months’ written notice. Any continuation after the initial term shall also be subjected to Independent Shareholders’ approval.

Pursuant to IPI Master Supply Agreement, IPI has agreed to sell products and/or to provide technological services to Datatronics Romoland for a three years term up to 31 December 2016 and subject to the terms and condition set out therein at a price to be agreed by the parties. The products supplied by IPI are different to those supplied by Datatronic. IPI is the only company in the Group that supplies telemetric coil and perfect layered wounds coils and provide technological services to Datatronics Romoland. The technological services include but not limited to engineering consultation, manufacturing procedure advisory and material application advisory.

The Group will determine the price of the products required by Datatronics Romoland according to its pricing policy of obtaining a reasonable profits margin for its sales in accordance with the prevailing market conditions, on normal commercial terms and at arm’s length basis. The Group would ascertain the prevailing market conditions by comparing the Other Price and Market Price. Benchmark on reasonable profits margin is set. The Group would closely monitor the sales activities of its customers and would get research reports on its major customers who are listed companies in US from time to time so as to ascertain the prevailing market conditions. The Group will take into account all the factors stated above, namely the Other Price and the Market Price and make sure that the profit margin obtained is no less favorable to the Group when compared with the Other price and the Market Price. In relation to the technological service fee, the Group would determine the same by reference to the actual time spent by the in-house expertise and the degree of complication of the services rendered. The Group would determine the service fee by reference to fees charged by IPI for similar services and by reference to the fee charged by other companies providing service in similar nature.

The Group shall credit sales to Datatronics Romoland with a term of payment of 90 days, which is the same to other customers. The payment term and other terms of the IPI Continuing Connected Transaction offered by the Group are no less favourable to the Group than those offered to other customers of the Group.

– 10 –

LETTER FROM THE BOARD

Under the IPI Master Supply Agreement, the Group is granted a first refusal right by Datatronics Romoland to the effect that only if the Group declines to supply the magnetics, Datatronics Romoland may source the same from any third-party supplier, provided that the terms of purchase shall not be more favourable than those offered to the Group. As a result, the Board believes that Datatronics Romoland will continue to purchase from the Group and the volume will continue to grow steadily.

3.3. Reason for the IPI Continuing Connected Transaction

The Company considers it in its best interests to generate more income by carrying out the product sales transaction in response to the Datatronics Romoland’s orders, the pricing term under IPI Master Supply Agreement is fair, reasonable and beneficial to IPI.

3.4. Proposed Cap Amounts and Basis for Determination

Datatronics Romoland has provided with the Group with a forecast of sales for the IPI Continuing Connected Transaction. According to Datatronics Romoland, the forecast is based on following grounds:–

a. Datatronics Romoland had identified new customers in the medical area and they would start purchasing products from Datatronics Romoland in the coming year.
b. IPI had unique and highly advanced technology in the area of telemetric coils and perfect layered wound. Such product line would help Datatronics Romoland to strengthen its business for existing and new customers in the medical area.
c. Datatronics Romoland would obtain consulting and manufacturing services from IPI.

– 11 –

LETTER FROM THE BOARD

The quantitative basis for determining the cap amounts are as follows:–

(a) According to Datatronics Romoland, they have been in negotiation with 4 customers and it is highly likely that they would place orders in the total sum around US$950,000 per year;
(b) The costs of sale of the Group have increased by around 8% to 12% per annum for the period from 1 January 2011 to the six months ended 30 June 2013 and the Group expects that such increase would continue. Given the costs of sales would continue to increase, the Group would transfer such increase to the customers that would be reflected in the overall increase in the selling price of the products of IPI accordingly.

After the injection of the acquired assets to IPI, the products of IPI would be manufactured both in our US factory and PRC factory. The current utilization rate of our PRC factory is approximately 65%. Therefore, the Group would have sufficient capacity and capability to manufacture the products to the proposed cap amounts of the IPI Continuing Connected Transaction. Therefore, based on the above, the projected amounts of the IPI Continuing Connected Transaction for the three years are as follows:

Projection for	Projection for	Projection for
the year ending	the year ending	the year ending
31 December	31 December	31 December
2014	2015	2016
HK$’000	HK$’000	HK$’000
9,000	10,000	11,000

The Board is of the view that the IPI Master Supply Agreement has been entered into on normal commercial terms, in the ordinary and usual course of business of the Group with terms no less favourable than those offered to other customers of the Group and is fair and reasonable to the Shareholders taken as a whole and it is in the interest of the Group to enter into the IPI Continuing Connected Transaction upon the terms and conditions set out in the IPI Master Supply Agreement. Therefore, based on the above projection, the Board proposes that the cap amounts of the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016 be HK$9 million, HK$10 million and HK$11 million respectively. The Board considers that the cap amounts are fair and reasonable.

– 12 –

LETTER FROM THE BOARD

3.5. Internal Control and Monitor

All sales transactions of IPI with Datatronics Romoland would be reported to the management of the Group on a monthly basis. Internal audit of the IPI Continuing Connected Transaction by the audit committee and review by the external auditor would be carried out to scrutinize the IPI Continuing Connected Transaction. Analyses of sales by customers and by region and end application markets analysis are made quarterly per year to enable the management to closely monitor and ensure the IPI Continuing Connected Transaction comply with all requirements. The sales administration team of the Group would closely monitor the sales under the IPI Continuing Connected Transaction and report to the management of the Group on a monthly basis to make sure that the pricing policy, terms of the IPI Continuing Connected Transaction and the cap amounts would be complied with.

4. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

The continuing connected transactions under the 6th Datatronic Master Supply Agreement and IPI Master Supply Agreement are aggregated pursuant to Rule 14A.25 of the Listing Rules, as they are entered into by the subsidiaries of the Group which are connected or otherwise associated with one another. Based on the respective proposed cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016, one or more of the relevant percentage ratios (as defined under Rule 14.07 of the Listing Rules) are more than 5%. The Continuing Connected Transactions constitute a non-exempt continuing connected transactions for the Company under the Listing Rules and therefore the transactions and the respective proposed cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction for the three years ending 2014, 2015 and 2016 are subject to Independent Shareholders’ approval.

The continuing connected transactions under the 5th Master Supply Agreement currently contribute approximately 30% of the turnover of the Group. It is contemplated that the Continuing Connected Transactions will contribute approximately 30% of the turnover of the Group.

The Group would like to stress that Datatronics Romoland is the supplier of those end customers in the military, aerospace and medical-related markets. These end customers recognized Datatronic and/or IPI as the manufacturers of the products. In order to minimize the insurance, traveling costs and customer services costs as well as the related time costs which will be incurred in the direct sales by the Group from Hong Kong to the end customers, the Group chooses to sell the products to various end customers via Datatronics Romoland in the United States. In addition, as the products supplied to Datatronics Romoland involve more advanced technology and skills, the Group is able to obtain a higher profit margin when compare with other customers of the Group.

– 13 –

LETTER FROM THE BOARD

Internal audit of the Continuing Connected Transactions by the audit committee and review by the external auditor would help to ensure that respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction are not exceeded and that over-reliance by the Group on the Continuing Connected Transactions is prevented. Auditors of the Group would review annually to confirm that the transactions were approved by the Board, conducted in accordance with the pricing policy and have not exceeded the respective cap amounts. In addition, the Group would work on a long-term plan to explore and market its high-end products to end customers of similar nature to that of Datatronics Romoland in other parts of the global market with a view to minimize the reliance on Datatronics Romoland.

5. INDEPENDENT SHAREHOLDERS’ APPROVAL

As Datatronics Romoland is a company owned 100% by Mr. Siu Paul Y., each of the Continuing Connected Transactions constitute connected transactions for the Company under Chapter 14A of the Listing Rules and would (if not exempted thereunder) require approval of the Independent Shareholders of the Company pursuant to Rule 14A.48 of the Listing Rules.

The Company will ensure that each of the Continuing Connected Transactions are in compliance with the provisions of Chapter 14A of the Listing Rules and in particulars Rules 14A.35 to 14A.41 and 14A.46 governing continuing connected transactions.

The Company would seek approval of the Independent Shareholders of each of the Continuing Connected Transactions and their respective cap amounts for the three years ending 31 December 2014, 2015 and 2016 pursuant to Rules 14A.35 and 14A.48 of the Listing Rules.

Mr. Siu Paul Y. and his associates will abstain from voting at the Special General Meeting.

Mr. Siu Paul Y. and his associates are entitled to exercise control over the voting rights in their respective shares in the Company.

6. RECOMMENDATIONS

The Board has appointed the Independent Board Committee to consider and advise the Independent Shareholders on the terms of the Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016.

The Independent Board Committee, having taken into account the advice of Messis Capital Limited, considers that the terms of each of the Continuing Connected Transactions and their respective cap amounts are fair and reasonable insofar as the Independent Shareholders are concerned. Accordingly, it recommends that the Independent Shareholders vote in favour of the respective resolutions to approve each of the Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction.

– 14 –

LETTER FROM THE BOARD

The Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction are independent and separated from each other. If either one of the Continuing Connected Transactions is approved by the Independent Shareholders, such continuing connected transaction shall be carried out by the Group irrespective of whether the Independent Shareholders approve the other continuing connected transaction.

7. SPECIAL GENERAL MEETING

A Special General Meeting of the Company will be convened to approve each of the Continuing Connected Transactions and their respective cap amounts for the three years ending 31 December 2014, 2015 and 2016 by the way of poll.

An independent financial adviser Messis Capital Limited has been appointed to advise the Independent Board Committee and the Independent Shareholders.

Pursuant to Bye-law 66 of the Company, a poll may be demanded by the chairman of the meeting or by at least 3 members present in person (or in case of a member being a corporation by its duly authorized representative) or by proxy for the time being entitled to vote at the meeting or by a member or members present in person (or in case of a member being a corporation by its duly authorized representative) or by proxy and representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting or by a member or members present in person (or in case of a member being a corporation by its duly authorized representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all shares conferring that right. The vote will be taken by poll.

Yours faithfully,

By order of the Board Sheung Shing Fai Executive Director

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

**DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 889)

21 November 2013

To the Independent Shareholders

Dear Sir or Madam,

APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company to the Shareholders dated 21 November 2013 (the “Circular”), of which this letter forms part. Terms defined therein shall have the same meaning when used in this letter unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders as to whether the terms of agreements for the the Continuing Connected Transactions and their respective cap amounts for the three years ending 31 December 2014, 2015 and 2016 are fair and reasonable so far as the Independent Shareholders are concerned. Details of the Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction are set out in the letter from the Board contained in the Circular on pages 3 to 15. Messis Capital Limited has been appointed as the independent financial adviser to advise us in respect of the Continuing Connected Transactions. We wish to draw your attention to the letter of advice from Messis Capital Limited dated 21 November 2013, which is incorporated and set out on pages 17 to 31 of the Circular.

Having considered the terms of the Continuing Connected Transactions and their respective cap amounts, and having taken into account the advice and recommendations of Messis Capital Limited contained in its letter, we are of the opinion that the Continuing Connected Transactions is in the ordinary and usual course of business of the Company and the terms and conditions of the agreements for the Continuing Connected Transactions, including their respective cap amounts for the three years ending 31 December 2014, 2015 and 2016, are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and are in the interest of the Company and the Independent Shareholders as a whole. We therefore advise and recommend that the Independent Shareholders should vote in favour of the resolutions to approve the respective Continuing Connected Transactions and the respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction to be proposed at the Special General Meeting.

Yours faithfully, For and on behalf of

the Independent Board Committee Chung Pui Lam Chan Fai Yue, Leo Lee Kit Wah

Independent Non-executive Directors

For identification purposes only

– 16 –

LETTER FROM MESSIS CAPITAL LIMITED

The following is the text of a letter from Messis in connection with the advice to the Independent Board Committee and the Independent Shareholders on the terms of the Continuing Connected Transactions and the respective cap amounts for the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction; which has been prepared for the purpose of inclusion in this circular:

21 November 2013

To the Independent Board Committee and the Independent Shareholders of the Company

Dear Sirs/Madams,

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders on whether (i) each of the Continuing Connected Transactions contemplated under the 6th Datatronic Master Supply Agreement and the IPI Master Supply Agreement is in the interest of the Company and the Shareholders as a whole; (ii) each of the Continuing Connected Transactions is entered into on normal commercial terms and within the ordinary and usual course of businesses of the Company; and (iii) the terms of each of the Continuing Connected Transactions and the their respective cap amounts for the three years ending 31 December 2014, 2015 and 2016 are fair and reasonable, details of which are set out in the “Letter from the Board” in the circular (the “Circular”) issued by the Company to the Shareholders dated 21 November 2013 of which this letter forms part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

Datatronic and Datatronics Romoland entered into the Master Supply Agreement on 6 June 2001 and the subsequent master supply agreements ending with the 5th Master Supply Agreement on 28 September 2010 in respect of supply of magnetic products to Datatronics Romoland. The 6th Datatronic Master Supply Agreement for a term of three years from 1 January 2014 and on effectively the same terms and conditions of the previous master supply agreements.

Datatronics Romoland is a company that is 100% owned by Mr. Siu Paul Y. who is the chairman of the Company, who together with his spouse hold 71.8% of the issued shares of the Company through Onboard Technology Limited. Each of the Continuing Connected Transactions constitutes connected transaction for the Company under the Listing Rules.

– 17 –

LETTER FROM MESSIS CAPITAL LIMITED

In formulating our opinion, we have relied on the accuracy of the information and representations contained in the Circular which have been provided to us by the Directors and which the Directors consider to be complete and relevant, and have assumed that the statements made were true, accurate and complete at the time they were made and continue to be true on the date of the Circular. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due and careful enquiry and are based on honestly-held opinions. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and we have been advised by the Directors that no material facts have been omitted from the information and representations provided in and referred to in the Circular.

We consider that we have received sufficient information to enable us to reach an informed view and to justify our reliance on the accuracy of the information and representations contained in the Circular and to provide a reasonable basis for our view and recommendation. We have no reason to suspect that any material information has been withheld by the Company or by the Directors. We have not, however, carried out any independent investigation into the business and affairs of the Group. We have taken all reasonable steps pursuant to the Listing Rules which include the following:

(a) obtaining all the information and documents relevant to an assessment of the fairness and reasonableness of the terms of the Continuing Connected Transactions and their respective cap amounts, including but not limited to, the Letter from the Board, the Master Supply Agreement on 6 June 2001, the 6th Datatronic Master Supply Agreement, the analysis of the transactions of the magnetics including both to Datatronics Romoland and to independent third parties in 2013 (the “Sales Analysis”), the annual report of the Company for the year ended 31 December 2012 (the “AR2012”) and the interim report of the Company for six months ended 30 June 2013 (the “IR2013”) respectively;
(b) reviewing the performance and financial situation of the Company as well as the reasons and background of the Continuing Connected Transactions;
(c) reviewing the terms of the 6th Datatronic Master Supply Agreement and the IPI Master Supply Agreement;
(d) reviewing the orders on hand and the projected amounts of the Continuing Connected Transactions provided by Datatronics Romoland for those three years ended 31 December 2016; and
(e) reviewing the Sales Analysis of certain magnetic products.

– 18 –

LETTER FROM MESSIS CAPITAL LIMITED

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion regarding whether the Continuing Connected Transactions are in the interest of the Company and the Independent Shareholders as a whole and whether the terms of each of the Continuing Connected Transactions and the their respective cap amounts are fair and reasonable, we have considered the following principal factors and reasons:

I. THE 6TH DATATRONIC MASTER SUPPLY AGREEMENT

A. Background

Datatronic and Datatronics Romoland entered into the Master Supply Agreement on 6 June 2001 and the subsequent master supply agreements ending with the 5th Master Supply Agreement on 28 September 2010 in respect of supply of magnetic products to Datatronics Romoland. The 6th Datatronic Master Supply Agreement was entered into on 3 September 2013 for a term of three years from 1 January 2014 and on effectively the same terms and conditions of the previous master supply agreements.

– 19 –

LETTER FROM MESSIS CAPITAL LIMITED

B. Reason for the Datatronic Continuing Connected Transaction

As far as the Board is aware, Datatronics Romoland is one of the few suppliers of high reliability and military magnetics to the US military and aerospace industries and the Group is the sole supplier of high reliability magnetic components to Datatronics Romoland. As the products required by Datatronics Romoland involve more advanced and sophisticated technology and skills, Datatronic can obtain a higher profit margin. According to the historical records of the business between Datatronic and Datatronics Romoland, the profit margin for the sales of such high reliability magnetic components to Datatronics Romoland (the “Historical Margin”) was substantially higher than those from other customers and Datatronics Romoland has a good payment records. Furthermore, Datatronics Romoland is continually increasing its share of business in the medical-related business which the Group believes the demand from Datatronics Romoland would continue to increase in the future. Based on the above reasons, the Group entered into the Datatronic Continuing Connected Transaction.

Datatronics Romoland is the supplier of those end customers in the military, aerospace and medical-related markets. These end customers recognized Datatronic and/ or IPI as the manufacturers of the products. In order to minimize the insurance, traveling costs and customer services costs as well as the related time costs which will be incurred in the direct sales by the Group from Hong Kong to the end customers, the Group chooses to sell the products to various end customers via Datatronics Romoland in the United States. In addition, as the products supplied to Datatronics Romoland involve more advanced technology and skills, the Group is able to obtain a higher profit margin when compare with other customers of the Group.

We have reviewed the nature of business of the Group set out in the AR2012 and the IR2013 and note that the manufacturing and trading of the magnetic components is the main business of the Group. We have also reviewed the Company’s prospectus dated 12 June 2001 in relation to the magnetic products and note that the Datatronic Continuing Connected Transaction has been commenced for years since 2001. Accordingly, we are of the view that the Datatronic Continuing Connected Transaction for the period from 1 January 2014 to 31 December 2016 are within the ordinary and usual course of business of the Company.

Based on the Sales Analysis, we note that the Datatronic Continuing Connected Transaction were approximately 24%, 23%, 19% and 22% of the total turnover of the Group for the financial years ended 31 December 2010, 2011, 2012 and the six months ended 30 June 2013 respectively and that the Datatronic Continuing Connected Transaction are expected to contribute to the turnover of the Group for 2014, 2015 and 2016. We are of the view that the Datatronic Continuing Connected Transaction, being expected to contribute to the turnovers of the Group, is in the interest of the Company and the Shareholders as a whole.

– 20 –

LETTER FROM MESSIS CAPITAL LIMITED

C. The Existing Continuing Connected Transaction

Terms of the Datatronic Continuing Connected Transaction

The major terms and conditions of the previous master supply agreements including the 5th Master Supply Agreement are of the same terms and are all for an initial term of three years and shall continue thereafter until terminated by either party giving to the other party not less than three months’ written notice. Any continuation after the initial term shall also be subject to Independent Shareholders’ approval. Pursuant to the Master Supply Agreement, the selling prices of the magnetics under the Master Supply Agreement are to be agreed between Datatronic and Datatronics Romoland. The Group will determine the price of the magnetics required by Datatronics Romoland according to its pricing policy of obtaining a reasonable profits margin for its sales in accordance with the prevailing market conditions, on normal commercial terms and at arm’s length basis. The Group would ascertain the prevailing market conditions by comparing the sales prices of the other customers of the Group (the “Other Price”) and those of similar products in the market in general (the “Market Price”). Benchmark on reasonable profits margin is set. The Group would closely monitor the sales activities of its customers and would get research reports on its major customers who are listed companies in US from time to time so as to ascertain the prevailing market conditions. The Group will take into account all the factors stated above which include the Other Price and the Market Price and make sure that the profit margin obtained is no less favorable to the Group when compared with the Other Price and the Market Price. The Group is granted a first refusal right by Datatronics Romoland to the effect that only if Datatronic declines to supply the magnetics, Datatronics Romoland may source the same from any third-party supplier, provided that the terms of purchase shall not be more favourable than those offered to Datatronic. We have reviewed the Sales Analysis provided by the Company and note that (i) the Historical Margin has been substantially higher than the average profit margin of the sales to the other customers; and (ii) the selling price of the products under the Datatronic Continuing Connected Transaction is not lower than the Other Price and the Market Price; which means no less favorable to the Group when compared with the Other Price and the Market Price.

– 21 –

LETTER FROM MESSIS CAPITAL LIMITED

Having considered that (i) the Historical Margin has been substantially higher than the average profit margin of the sales to the other customers; (ii) the selling price of the products under the Datatronic Continuing Connected Transaction is not lower than the Other Price and the Market Price; and (iii) the Group currently offers credit sales to Datatronics Romoland with a term of payment of 90 days, which is no less favorable to the Group when compared with the sales of similar products to other customers; we are of the view that the terms of the 6th Datatronic Master Supply Agreement are fair and reasonable so far as the Company and the Independent Shareholders are concerned.

We have reviewed the Master Supply Agreement, the subsequent master supply agreements ending with the 5th Master Supply Agreement and the 6th Datatronic Master Supply Agreement. No irregular terms are noted. Based on the existing terms including but not limited to, (i) the Group being granted a first refusal right by Datatronics Romoland; (ii) the payment term and other terms of the Datatronic Continuing Connected Transaction offered by the Group are no less favourable to the Group than those offered to other customers of the Group; and (iii) the Group offering credit sales to Datatronics Romoland with a term of payment of 90 days same as to other customers; we are of the view that the terms of the 6th Datatronic Master Supply Agreement are on normal commercial basis and fair and reasonable so far as the Independent Shareholders are concerned.

– 22 –

LETTER FROM MESSIS CAPITAL LIMITED

D. Proposed Cap Amounts and Basis for Determination

Set out below are the amounts of Datatronic continuing connected transactions for the years 2010, 2011 and 2012 and six months ended 30 June 2013

	Financial	Financial	Financial	Six months
	year ended	year ended	year ended	ended
	31 December	31 December	31 December	30 June
	2010	2011	2012	2013
	HK$’000	HK$’000	HK$’000	HK$’000
Aggregate consideration of the Datatronic
continuing connected transactions	70,768	59,950	49,214	28,951
Total turnover of the Group	300,255	263,353	262,606	133,926
Percentage of aggregate consideration of
the Datatronic continuing connected
transactions to total turnover of the Group	24%	23%	19%	22%
Annual cap amount	160,000	135,000	145,000	160,000

According to historical records of the transaction made pursuant to the previous master supply agreements between Datatronic and Datatronics Romoland together with the projection provided by Datatronics Romoland, the Board expects that the sales to be made to Datatronics Romoland will continue for the three years ending 31 December 2014, 2015 and 2016 respectively. The Group shall seek to continue to expand its market with other customers and shall keep the proportion of sales to Datatronics Romoland at an optimal level in that the Board will ensure that not too much reliance shall be placed upon one particular customer.

a. Datatronics Romoland had identified new customers and they would start purchasing products from Datatronics Romoland in the coming year.
b. Datatronics Romoland had developed new product lines in the medical area.
c. The established relationship between Datatronics Romoland and its customers had remained stable.

– 23 –

LETTER FROM MESSIS CAPITAL LIMITED

d. According to Datatronics Romoland, there were several projects/programmes that had been partially inactive from 2011. However, the sales under those projects/programmes have been gradually resumed and it is expected that sales under those projects/programmes would reach HK$15 million to HK$20 millions per year in the years ending 31 December 2014, 2015 and 2016.

Although the Group has no influence on Datatronics Romoland’s forecasts as Datatronics Romoland operates independently as a company and the Group has assessed the historical figures of the Datatronics Romoland forecasts.

The proposed annual caps are determined as follows:–

(a) Given that the aggregate consideration of the Datatronic Continuing Connected Transaction for the six months ended 30 June 2013 amounted to approximately HK$29 million, the Group expects that the aggregate consideration would amount to approximately HK$60 million to HK$70 million for the year ended 31 December 2013.
(b) By reference to the historical sales records, the costs of sales have been increasing throughout the previous two years. The costs of sales has increased by around 8% to 12 % per annum for the period from 2011 to the six months ended 30 June 2013 and the Group expects that such increase would continue. The Group would increase the selling price accordingly in 2014 and thereafter and as a result, the Group would expect that such increase in selling price would contribute to an increase of the aggregate consideration by at least 15%. Based on the above, the cap amount for the year ending 31 December 2014 is set at HK$100 million. As the Group expects the costs of sale would continue to increase, the cap amounts for the years ending 31 December 2015 and 2016 are set as HK$110 million and HK$120 million respectively.

Based on the above, the projected amounts of the Datatronic Continuing Connected Transaction for three years are as follows:

Projection for	Projection for	Projection for
the year ending	the year ending	the year ending
31 December	31 December	31 December
2014	2015	2016
HK$’000	HK$’000	HK$’000
100,000	110,000	120,000

– 24 –

LETTER FROM MESSIS CAPITAL LIMITED

The Board is of the view that the 6th Datatronic Master Supply Agreement has been entered into on normal commercial terms, in the ordinary and usual course of business of the Group with terms no less favourable to the Group than those offered to other customers of the Group and is fair and reasonable to the Shareholders taken as a whole and it is in the interest of the Group to continue the Datatronic Continuing Connected Transaction upon the terms and conditions set out in the 6th Datatronic Master Supply Agreement. Therefore, based on the above projection, the Board proposes that the cap amounts of the Datatronic Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016 be HK$100 million, HK$110 million and HK$120 million respectively.

Up to the Latest Practicable Date, the utilization rate of the Group’s existing production capacity is approximately 65%. The Group plans to invest in equipment, machinery, production set-ups and others for high automation in production to improve efficiency and increase productivity. In the premises, the Board is of the view that the Group’s existing production capacity is able to cope with the expected increase of the purchase orders for the three years ending 31 December 2014, 2015 and 2016.

The annual cap amount for the whole year ended 31 December 2013 is HK$160 million. Based on the current financial projections and the information on the value of purchase orders on hands provided by Datatronics Romoland, the Board expects that additional purchase orders of magnetics will be placed by Datatronics Romoland during the remainder of the year ending 31 December 2013 and onward and further holds the view that the total amount of purchase orders placed by Datatronics Romoland in the whole year ended 31 December 2013 will be within the cap amount of HK$160 million.

We have discussed with the Board in relation to the basis of the cap amounts of Datatronic continuing connected transactions with reference to various factors, including (a) the transaction volume in the past 13 years since 2001; (b) the value of purchase orders on hands provided by Datatronics Romoland; and (c) the various assumptions and forecast as set out in the Board Letter; including (i) the Datatronic Continuing Connected Transaction is expected to contribute to the turnovers of the Group; (ii) the Historical Margin will continue to be higher than the average profit margin of the sales to the other customers; (iii) Datatronics Romoland identified new customers would start purchasing products from Datatronics Romoland in the coming year; (iv) Datatronics Romoland has developed new product lines in the medical area; (v) the established relationship between Datatronics Romoland and its customers will remain stable; (vi) the sales under some projects/programmes have been gradually resumed; (vii) the Group expects that the aggregate consideration would amount to approximately HK$60 to HK$70 million for the year ended 31 December 2013; (viii) the costs of sales have been increasing throughout the previous two years; and (ix) the anticipated implicit growth rates for the years ending 31 December 2014 and 2015 respectively which are based on the increase in cost of sales in each year; we are of the view that the cap amounts of the Datatronic Continuing Connected Transaction made by the Board is made based on reasonable assumption as disclosed in the Board Letter which is in compliance with the Rule 14A.35(2) of the Listing Rules as well as are fair and reasonable so far as the Independent Shareholders are concerned.

– 25 –

LETTER FROM MESSIS CAPITAL LIMITED

II. THE IPI MASTER SUPPLY AGREEMENT

A. Background

The Group made an announcement on 26 March 2012 that the Group would acquire assets from Cal-Coil Magnetics, Inc. and Cal-Coil China Limited pursuant an Asset Purchase Agreement dated 23 March 2012. The Group thereafter had injected the said assets into IPI, a subsidiary set up by the Group for the purpose of providing new range of magnetic products and technological services. The management expects that orders for the new magnetic products and/or the technological services from Datatronics Romoland would be fulfilled by IPI. On such premises, IPI entered into the IPI Master Supply Agreement with Datatronics Romoland on 3 September 2013 for a term of three years from 1 January 2014 up to 31 December 2016 for the supply of new magnetic products range and for provision of technological services to the Datatronics Romoland.

B. Reason for the IPI Continuing Connected Transaction

IPI specializes in the area of telemetric coil and perfect layered wound coils which are new products and area for Datatronics Romoland to market for their high reliability medical customers. However, the use of telemetric coil and perfect layered wound coils is not limited to manufacturing products for use in medical area but also in aerospace and military industries. The Group believes IPI is a valuable source for quick turn samples to Datatronics Romoland’s existing customers. According to historical records of business between the Group and Datatronics Romoland, Datatronics Romoland is a good credit rating customer to the Group. We are of the view that since IPI has already been a subsidiary of the Group, the sales of the new telemetric coil and perfect layered wound coils of IPI is within the ordinary and usual course of business of the Group. We are of the view that the IPI Continuing Connected Transaction, being expected to contribute to the turnovers of the Group, is in the interest of the Company and the Shareholders as a whole.

– 26 –

LETTER FROM MESSIS CAPITAL LIMITED

C. The New Continuing Connected Transaction

Terms of the IPI Continuing Connected Transaction

The major terms and conditions of the IPI Master Supply Agreement are as follows:

Pursuant to the IPI Master Supply Agreement, IPI has agreed to sell products and/or to provide technological services to Datatronics Romoland for a three years term up to 31 December 2016 and subject to the terms and condition set out therein at a price to be agreed by the parties. The products supplied by IPI are different to those supplied by Datatronic. IPI is the only company in the Group that supplies telemetric coil and perfect layered wounds coils and provide technological services to Datatronics Romoland. The technological services include but not limited to engineering consultation, manufacturing procedure advisory and material application advisory.

The Group will determine the price of the products required by Datatronics Romoland according to its pricing policy of obtaining a reasonable profits margin for its sales in accordance with the prevailing market conditions, on normal commercial terms and at arm’s length basis. The Group would ascertain the prevailing market conditions by comparing the Other Price and the Market Price. Benchmark on reasonable profits margin is set. The Group would closely monitor the sales activities of its customers and would get research reports on its major customers who are listed companies in US from time to time so as to ascertain the prevailing market conditions. The Group will take into account all the factors stated above which include the Other Price and the Market Price and make sure that the profit margin obtained is no less favorable to the Group when compared with the Other Price and the Market Price. In relation to the technological service fee, the Group would determine the same by reference to the actual time spent by the in-house expertise and the degree of complication of the services rendered. The Group would determine the service fee by reference to fees charged by IPI for similar services and by reference to the fee charged by other companies providing service in similar nature.

– 27 –

LETTER FROM MESSIS CAPITAL LIMITED

We have reviewed the IPI Master Supply Agreement. No irregular terms are noted. Based on the existing terms including but not limited to (i) the pricing policy of obtaining a reasonable profits margin on the products and the technological services required by Datatronics Romoland; (ii) the Group shall offer credit sales to Datatronics Romoland with a term of payment of 90 days, which is the same to other customers; (iii) the payment term and other terms of the IPI Continuing Connected Transaction offered by the Group are no less favourable to the Group than those offered to other customers of the Group; (iv) the Group being granted a first refusal right by Datatronics Romoland; we are of the view that the terms of the IPI Master Supply Agreement are on normal commercial basis and fair and reasonable so far as the Company and the Independent Shareholders are concerned.

D. Proposed Cap Amounts and Basis for Determination

a. Datatronics Romoland had identified new customers in the medical area and they would start purchasing products from Datatronics Romoland in the coming year.
b. IPI had unique and highly advanced technology in the area of telemetric coils and perfect layered wound. Such product line would help Datatronics Romoland to strengthen its business for existing and new customers in the medical area.
c. Datatronics Romoland would obtain consulting and manufacturing services from IPI.

– 28 –

LETTER FROM MESSIS CAPITAL LIMITED

The Group has no influence on Datatronics Romoland’s forecasts as Datatronics Romoland operates independently as a company and the Group has assessed the historical figures of the Datatronics Romoland forecasts.

The quantitative basis for determining the cap amounts are as follows:–

(a) According to Datatronics Romoland, they have been in negotiation with 4 customers and it is highly likely that they would place orders in the total sum around US$950,000 per year;
(b) The costs of sale of the Group have increased by for around 8% to 12% per annum for the period from 2011 to the six months ended 30 June 2013 and the Group expects that such increase would continue. Given the costs of sales would continue to increase, the Group would transfer such increase to the customers that would be reflected in the overall increase in the selling price of the products of IPI accordingly.

After the injection of the acquired assets to IPI, the products of IPI would be manufactured both in our US factory and PRC factory. The current utilization rate of our PRC factory is approximately 65%. Therefore, the Group still has sufficient capacity and capability to manufacture the products with the additions to the proposed cap amounts of the IPI Continuing Connected Transaction. Therefore, based on the above reasons, the projected amounts of the IPI Continuing Connected Transaction for the three years are as follows:

Projection for	Projection for	Projection for
the year ending	the year ending	the year ending
31 December	31 December	31 December
2014	2015	2016
HK$’000	HK$’000	HK$’000
9,000	10,000	11,000

The Board is of the view that the IPI Master Supply Agreement has been entered into on normal commercial terms, in the ordinary and usual course of business of the Group with terms no less favourable to the Group than those offered to other customers of the Group and is fair and reasonable to the Shareholders taken as a whole and it is in the interest of the Group to enter into the IPI Continuing Connected Transaction upon the terms and conditions set out in the IPI Master Supply Agreement. Therefore, based on the above projection, the Board proposes that the cap amounts of the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016 be HK$9 million, HK$10 million and HK$11 million respectively.

– 29 –

LETTER FROM MESSIS CAPITAL LIMITED

We have discussed with the Board in relation to the basis of the cap amounts of the IPI Continuing Connected Transaction with reference to various factors, including the various assumptions and forecast as set out in the Board Letter; including (i) Datatronics Romoland had identified new customers in the medical area and they would start purchasing products from Datatronics Romoland in the coming year; (ii) IPI had unique and highly advanced technology in the area of telemetric coils and perfect layered wound. Such product line would help Datatronics Romoland to strengthen its business for existing and new customers in the medical area; (iii) Datatronics Romoland would obtain consulting and manufacturing services from IPI; (iv) the IPI Continuing Connected Transaction is expected to contribute to the turnovers of the Group; and (v) the terms of the IPI Master Supply Agreement are on normal commercial basis; we are of the view that the cap amounts of the IPI Continuing Connected Transaction made by the Board is made based on reasonable assumption as disclosed in the Board Letter which is in compliance with the Rule 14A.35(2) of the Listing Rules as well as are fair and reasonable so far as the Independent Shareholders are concerned.

INTERNAL CONTROL AND MONITOR

Being set out in the Board Letter that (i) all sales transactions of Datatronic or IPI with Datatronics Romoland will be reported to the management of the Group on a monthly basis. Internal audit of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction by the audit committee and review by the external auditor would be carried out to scrutinize the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction. Analyses of sales by customers and by region and end application markets analysis are made quarterly per year to enable the management to closely monitor and ensure the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction comply with all requirements; (ii) internal audit of the Continuing Connected Transactions by the audit committee and review by the external auditor would help to ensure that respective cap amounts of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction are not exceeded and that over-reliance by the Group on the Continuing Connected Transactions is prevented; (iii) the sales administration team of the Group would closely monitor the sales under the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction and report to the management of the Group on a monthly basis to make sure that the pricing policy, terms of the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction and the respective cap amounts would be complied with; and (iv) in addition, the Group would work on a long-term plan the Group would work on a long-term plan to explore and market its high-end products to end customers of similar nature to that of Datatronics Romoland in other parts of the global market with a view to minimize the reliance on Datatronics Romoland. We are of the view that the above mentioned internal control and monitoring, including the monthly monitoring of the sales under the Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction on a monthly basis, are sufficient and in the interest of the Company and the Shareholders as a whole.

– 30 –

LETTER FROM MESSIS CAPITAL LIMITED

According to the historical records of the business between Datatronic and Datatronics Romoland, the Historical Margin was substantially higher than those from other customers. We are of the view that for the time being, higher profit margin Continuing Connected Transactions are in the interest of the Company; however, for minimizing the reliance on Datatronics Romoland, it is fair and reasonable for the Group to explore and market its high-end products to end customers of similar nature to that of Datatronics Romoland in other parts of the global market.

RECOMMENDATION

Having taken into account of the factors and reasons set out in the above sections, we are of the view that (i) the entering into the 6th Datatronic Master Supply Agreement and the IPI Master Supply Agreement together with the Continuing Connected Transactions contemplated thereunder are in the interest of the Company and the Shareholders as a whole; (ii) the 6th Datatronic Master Supply Agreement and the IPI Master Supply Agreement are entered into on normal commercial terms and within the Company’s ordinary and usual course of business; and (iii) the terms of each of the Continuing Connected Transactions, including the respective cap amount for Datatronic Continuing Connected Transaction and the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016, are fair and reasonable so far as the Independent Shareholders are concerned.

Accordingly, we recommend the Independent Board Committee and the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the Special General Meeting to approve each of the Continuing Connected Transactions and their respective cap amounts for the three years ending 31 December 2014, 2015, and 2016.

Yours faithfully, For and on behalf of

Messis Capital Limited Michael Leung

Director

– 31 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this Circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors’ Interests in Share Capital

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows: –

(i) The Company

			Ordinary shares of HK$0.1 each	Ordinary shares of HK$0.1 each
						Percentage
	Personal	Family	Corporate	Other	Total no.	in total
Name	Interests	interests	interests	Interest	of shares	share capital
Mr. Siu Paul Y.	–	–	229,876,000	–	229,876,000	71.8%
			(note 1)

(ii) Associated Corporation – Datatronic

		Non-voting deferred shares of	Non-voting deferred shares of	HK$1.00 each
	Personal	Family	Corporate		Total no.
Name	Interests	interests	interests	Other Interest	of shares
Mr. Siu Paul Y.	1	–	199,999	–	200,000
			(note 2)

– 32 –

GENERAL INFORMATION

APPENDIX

Notes:

These shares are held by Onboard Technology Limited, a company incorporated in the British Virgin Islands, and in which Mr. Siu Paul Y. and Ms. Shui Wai Mei, spouse of Mr. Siu Paul Y., hold 90% and 10% of its issued share capital respectively.
These shares are held by Data Express Limited, a company incorporated in the Republic of Liberia, whose entire issued share capital is owned by Mr. Siu Paul Y.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company or their respective associates had any interests or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO) or which were required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

(b) Substantial Shareholders

As at the Latest Practicable Date, the Directors are not aware of any other person who has an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other member of the Group.

Under the Company’s share option scheme adopted in 2001, the Company may grant options to executive directors and full-time employees of the Group to subscribe for shares in the Company, subject to a maximum of 10% of the issued share capital of the Company, from time to time, excluding for this purpose shares issued on exercise of share options. The subscription price is to be determined by directors, and is not to be less than the higher of (i) the nominal value of the Company’s shares, and (ii) 80% of the average of the closing price of the Company’s shares quoted on the Stock Exchange of Hong Kong Limited on the five trading days immediately preceding the date of grant. Upon acceptance of options, the grantee shall pay HK$1 to the Company as consideration for the grant.

No options have been granted since the adoption of the share option scheme.

– 33 –

GENERAL INFORMATION

APPENDIX

3. DIRECTORS’ INTERESTS IN CONTRACTS

(a) Amongst the Executive Directors, Mr. Siu Paul Y., Ms. Shui Wai Mei and Mr. Sheung Shing Fai have each entered into a service contract with the Company for an initial fixed term of three years commencing from 22 June 2001 while Ms. Siu Nina Margaret has entered into a service contract with the Company for an initial fixed term of three years commencing from 1 January 2013. Such contracts will continue thereafter until terminated by not less than three month’s notice in writing served by either party on the other. Each of these Directors is entitled to a basic salary, which is determined on the basis of his/her qualification, experience, involvement in and contribution to the Company and by reference to the market rate.

In addition, the Executive Directors are also entitled to a management bonus of a sum at the discretion of the Directors. An Executive Director may not vote on any resolution of the Directors regarding the amount of the management bonus payable to him. The current basic annual salaries of the Executive Directors under their service contracts as follows:

Name of Director	Annual basic salary
Mr. Siu Paul Y.	HK$3,000,000
Ms. Shui Wai Mei	HK$300,000
Mr. Sheung Shing Fai	HK$1,200,000
Ms. Siu Nina Margaret	HK$600,000

Save as aforesaid, none of the Directors has any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

(b) Mr. Siu Paul Y. is interested in the Continuing Connected Transactions as disclosed in this circular.
(c) Save as disclosed in 3(b) above, as at the Latest Practicable Date, none of the Directors or the independent financial adviser Messis Capital Limited has any direct or indirect interest in any assets which have been, since 31 December 2012, the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by, or leased to the Company or any member of the Group, or are proposed to be acquired or disposed of by, or leased to, any member of the Group.
(d) Save as disclosed in 3(a) and 3(b) above, as at the Latest Practicable Date, none of the Directors is materially interested in any contract or arrangement subsisting at the date of the circular and which is significant in relation to the business of the Group.

– 34 –

GENERAL INFORMATION

APPENDIX

4. CONSENT AND QUALIFICATION OF EXPERT

(a) Messis Capital Limited is a deemed licensed corporation under SFO.
(b) As at the Latest Practicable Date, Messis Capital Limited has no shareholding interest 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 of any member of the Group.
(c) Messis Capital Limited 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 they respectively appear.

5. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2012, being the date to which the latest published audited consolidated financial statements of the Company were made up.

6. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company during normal business hours from the date of this circular up to and including 9 December 2013:

(a) the Master Supply Agreement;
(b) the 2nd Master Supply Agreement;
(c) the 3rd Master Supply Agreement;
(d) the 4th Master Supply Agreement;
(e) the 5th Master Supply Agreement
(f) the 6th Datatronic Master Supply Agreement
(g) the IPI Master Supply Agreement
(h) the service agreements with the Directors referred to in section 3(a) of this appendix;

– 35 –

GENERAL INFORMATION

APPENDIX

(i) the letter from the Independent Board Committee as set out in this circular;
(j) the letter from Messis Capital Limited as set out in this circular; and
(k) the written consent of Messis Capital Limited referred to in section 4(c) of this appendix.

7. MISCELLANEOUS

(a) The secretary of the Company is Leung Sau Fong, ACIS, LLB(Hons).
(b) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.
(c) The head office and principal place of business of the Company is situated at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong.
(d) The branch share registrar of the Company in Hong Kong is Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(e) The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

– 36 –

NOTICE OF SPECIAL GENERAL MEETING

**DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 889)

NOTICE IS HEREBY GIVEN that a special general meeting of the shareholders of Datronix Holdings Limited (the “Company”) will be held at 19th Floor, North Point Industrial Building, 499 King’s Road, North Point, Hong Kong on Monday, 9 December 2013 at 11:00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions, with or without modification, as ordinary resolutions of the Company:

ORDINARY RESOLUTION

“THAT:

(a) the Datatronic Continuing Connected Transaction (as defined in a circular dated 21 November 2013 of the Company (the “Circular”)) and the cap amounts of the Datatronic Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016 be and are hereby approved and confirmed; and
(b) the board of directors of the Company be and is hereby authorized to do all such further acts and things and execute such further documents and take all such steps which in its opinion may be necessary, desirable and expedient to implement and/or give effect to the Datatronic Continuing Connected Transaction (as defined in the Circular). For the avoidance of doubt, all such further acts and things and such further documents and all such steps to be done, executed or taken are limited to acts, things, documents and steps that are ancillary to the 6th Datatronic Master Supply Agreement (as defined in the Circular) and of administrative nature”

ORDINARY RESOLUTION

“THAT:

(a) the IPI Continuing Connected Transaction (as defined in a circular dated 21 November 2013 of the Company (the “Circular”)) and the cap amounts of the IPI Continuing Connected Transaction for the three years ending 31 December 2014, 2015 and 2016 be and are hereby approved and confirmed; and

For identification purposes only

– 37 –

NOTICE OF SPECIAL GENERAL MEETING

(b) the board of directors of the Company be and is hereby authorized to do all such further acts and things and execute such further documents and take all such steps which in its opinion may be necessary, desirable and expedient to implement and/or give effect to the IPI Continuing Connected Transactions (as defined in the Circular). For the avoidance of doubt, all such further acts and things and such further documents and all such steps to be done, executed or taken are limited to acts, things, documents and steps that are ancillary to the IPI Master Supply Agreement (as defined in the Circular) and of administrative nature”

By order of the Board Leung Sau Fong Company Secretary

Hong Kong, 21 November 2013

Notes:

A member who is the holder of two or more shares in the Company may appoint one or more proxies. A proxy need not be a member of the Company but must be present to represent the member.
In the case of the joint holders of shares in the Company, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s), seniority being determined by the order in which names stand in the register of members. In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation, either under seal, or under the hand of an officer or attorney or other person duly authorised, and must be deposited with the Hong Kong branch share registrar of the Company, Hong Kong Registrars Limited at Rooms 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) not less than 48 hours before the time fixed for holding of the special general meeting or any adjournment thereof.
A form of proxy for use at the special general meeting is enclosed.

– 38 –

AI assistant

BAIOO Family Interactive Limited — Proxy Solicitation & Information Statement 2013

50369_rns_2013-11-20_199c5744-c2b6-423c-a135-d974adcac69e.pdf

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee

CONTENTS

DEFINITIONS

DEFINITIONS

DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

1. INTRODUCTION

Existing Continuing Connected Transaction

New Continuing Connected Transaction

2. THE 6TH DATATRONIC MASTER SUPPLY AGREEMENT

2.1. Background

LETTER FROM THE BOARD

2.2. The Existing Continuing Connected Transaction

Terms of the Datatronic Continuing Connected Transaction

2.3. Reason for the Datatronic Continuing Connected Transaction

2.4. Proposed Cap Amounts and Basis for Determination

2.5. Internal Control and Monitor

3. THE IPI MASTER SUPPLY AGREEMENT

3.1. Background

3.2. The New Continuing Connected Transaction

Terms of the IPI Continuing Connected Transaction

3.3. Reason for the IPI Continuing Connected Transaction

3.4. Proposed Cap Amounts and Basis for Determination

3.5. Internal Control and Monitor

4. IMPLICATIONS UNDER THE HONG KONG LISTING RULES

LETTER FROM THE BOARD

5. INDEPENDENT SHAREHOLDERS’ APPROVAL

6. RECOMMENDATIONS

7. SPECIAL GENERAL MEETING

DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]

APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

INDEPENDENT SHAREHOLDERS’ APPROVAL FOR CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. THE 6TH DATATRONIC MASTER SUPPLY AGREEMENT

A. Background

B. Reason for the Datatronic Continuing Connected Transaction

C. The Existing Continuing Connected Transaction

D. Proposed Cap Amounts and Basis for Determination

LETTER FROM MESSIS CAPITAL LIMITED

II. THE IPI MASTER SUPPLY AGREEMENT

A. Background

B. Reason for the IPI Continuing Connected Transaction

C. The New Continuing Connected Transaction

D. Proposed Cap Amounts and Basis for Determination

LETTER FROM MESSIS CAPITAL LIMITED

INTERNAL CONTROL AND MONITOR

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(a) Directors’ Interests in Share Capital

(i) The Company

(ii) Associated Corporation – Datatronic

APPENDIX

(b) Substantial Shareholders

3. DIRECTORS’ INTERESTS IN CONTRACTS

4. CONSENT AND QUALIFICATION OF EXPERT

5. MATERIAL ADVERSE CHANGE

6. DOCUMENTS AVAILABLE FOR INSPECTION

7. MISCELLANEOUS

DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]

ORDINARY RESOLUTION

“THAT:

ORDINARY RESOLUTION

“THAT:

More from BAIOO Family Interactive Limited

BAIOO Family Interactive Limited Proxy Solicitation & Information Statement 2013

**DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]**

**DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]**

**DATRONIX HOLDINGS LIMITED 連達科技控股有限公司[*]**