China Display Optoelectronics Technology Holdings Limited — Proxy Solicitation & Information Statement 2017

Jan 4, 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

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SUNWAH KINGSWAY CAPITAL HOLDINGS LIMITED 新華滙富金融控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 00188)

MAJOR TRANSACTION ESTABLISHMENT OF THE JV COMPANY

A notice convening the special general meeting of the Company to be held at 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong on Monday, 23 January 2017 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular. A form of proxy for use at the special general meeting is also enclosed.

Whether or not you are able to attend and/or vote at the special general meeting of the Company in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the special general meeting of the Company or any adjournment thereof (as the case may be) should you so wish.

4 January 2017

CONTENTS

		Page
Definitions . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
Appendix I –	Financial Information of the Group . . . . . . . . . . . . . . . . . . . .	13
Appendix II –	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
**Notice of Special **	General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

The following terms have the following meanings in this circular unless the context otherwise requires:

• “associates” has the meaning ascribed to it in the Listing Rules

• “Board” the board of Directors

• “Business Day(s)” any day (excluding Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business in Hong Kong

• “CAD” Canadian dollars, the lawful currency of Canada

• “Chongqing Huiwei”

• Chongqing Huiwei Investment Co., Ltd.*（重慶惠微投資 有限公司）, a limited liability company established under the laws of the PRC, a wholly-owned subsidiary of Hanhua Financial and an Independent Third Party

• “Chongqing Jiangbeizui” Chongqing Jiangbeizui Central Business District Investment Group Co., Ltd.*（重慶市江北嘴中央商務區投 資集團有限公司）, a limited liability company established under the laws of the PRC and an Independent Third Party

• “Company” Sunwah Kingsway Capital Holdings Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Main Board of the Stock Exchange (stock code: 188)

• “Completion”

• completion of the JV Contract

• “connected person(s)”

• has the meaning ascribed to it in the Listing Rules

• “CSRC”

• the China Securities Regulatory Commission

• “Directors” directors of the Company

• “Draft JV Articles”

• the proposed set of articles of association of the JV Company conditionally signed on 1 December 2016 by Kingsway Financial, Hanhua Financial, Chongqing Jiangbeizui, Chongqing Huiwei and Prive Financial, which is subject to the comments and approval of the CSRC

• “Group” the Company and its subsidiaries

– 1 –

DEFINITIONS

“Hanhua Financial” Hanhua Financial Holding Co., Ltd.*（瀚華金控股份有限 公司）, a joint stock limited liability company incorporated in the PRC, whose H shares are listed on the Main Board of the Stock Exchange (stock code: 3903) and an Independent Third Party

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “Independent Third Party(ies)” third party(ies) independent of the Company and its connected persons or any of their respective associates or any parties acting in concert with any of them

• “JV Company” 瀚華證券有限責任公司 (Hanhua Kingsway Securities Co., Ltd.*), a limited liability company to be established under the laws of the PRC pursuant to the JV Contract

• “JV Contract”

• the joint venture contract dated 1 December 2016 and entered into among Kingsway Financial, Hanhua Financial, Chongqing Jiangbeizui, Chongqing Huiwei and Prive Financial in relation to the establishment of the JV Company

• “JV Partners” Kingsway Financial, Hanhua Financial, Chongqing Jiangbeizui, Chongqing Huiwei and Prive Financial (each a “ JV Partner ” and the term “ JV Partners ” shall be construed accordingly as the context may require)

• “JV Preparatory Committee” a steering committee comprising five to seven members that are nominated by the JV partners formed pursuant to the JV Contract for the establishment of the JV Company

• “Kingsway Financial”

• Kingsway Financial Services Group Limited（滙富金融 服務有限公司）, a limited liability company incorporated in Hong Kong and an indirectly wholly-owned subsidiary of the Company, and a licensed corporation to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management) regulated activities under the SFO

• “Latest Practicable Date”

28 December 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

– 2 –

DEFINITIONS

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

• “Ministry of Commerce” the Ministry of Commerce of the PRC “PRC” the People’s Republic of China, and for the purpose of this circular only, excludes Hong Kong, Macau Special Administrative Region of the People’s Republic of China and Taiwan

• “Prive Financial” Prive Financial Limited, a limited liability company incorporated in Hong Kong and an Independent Third Party

• “RMB” Renminbi, the lawful currency of the PRC “SFC” the Securities and Futures Commission of Hong Kong “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time

• “SGM” a special general meeting to be held by the Company to consider and, if thought fit, approve, among other things, the JV Contract and the transactions contemplated thereunder

• “Share(s)” the issued ordinary share in the share capital of the Company

• “Shareholders” holders of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” the Codes on Takeovers and Mergers and Share Buy-backs

• “%” per cent.

For illustration purposes in this circular, the amounts in RMB are translated to HK$ at the rate of RMB1.00 = HK$1.126. No representation is made that any amount in RMB has been or could be converted at the above rate or at any other rates or at all.

* for identification purposes only

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LETTER FROM THE BOARD

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SUNWAH KINGSWAY CAPITAL HOLDINGS LIMITED 新華滙富金融控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 00188)

Chairman: Dr. Jonathan Koon Shum Choi

Executive Director:

Mr. Michael Koon Ming Choi (Chief Executive Officer)

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Non-executive Directors: Ms. Janice Wing Kum Kwan Dr. Lee G. Lam

Independent Non-Executive Directors: Mr. Robert Tsai To Sze Ms. Elizabeth Law Mr. Huanfei Guan

Principal Place of Business in Hong Kong: 7/F, Tower One Lippo Centre 89 Queensway Hong Kong

4 January 2017

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION ESTABLISHMENT OF THE JV COMPANY

INTRODUCTION

Reference is made to the announcement of the Company dated 2 December 2016 in relation to the establishment of the JV Company. On 1 December 2016 (after trading hours), Kingsway Financial, an indirect wholly-owned subsidiary of the Company, entered into the JV Contract with Hanhua Financial, Chongqing Jiangbeizui, Chongqing Huiwei and Prive Financial in relation to the establishment of the JV Company in Chongqing, the PRC. The JV Contract will become effective upon (i) each of the JV Partners and their controlling shareholders, if necessary, having obtained all of the relevant legal and regulatory approvals and authorizations required for the entering into of the JV Contract and the transactions contemplated thereunder; and (ii) the JV Contract having been duly signed by all JV Partners. The establishment of the JV Company is subject to, among other things, the approval by the CSRC, the Ministry of Commerce and other relevant regulatory authorities in the PRC.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further information on the JV Contract; and (ii) the notice of SGM.

THE JV CONTRACT

Major terms of the JV Contract are set out below:

Date: 1 December 2016 (after trading hours)

Parties:

• (1) Hanhua Financial

• (2) Chongqing Jiangbeizui

• (3) Kingsway Financial

• (4) Chongqing Huiwei

• (5) Prive Financial

Shareholding Structure and Capital Contribution

Pursuant to the JV Contract, the parties agreed, among other things, that:

• (i) the total investment amount for the establishment of the JV Company shall be RMB1.5 billion (equivalent to approximately HK$1.7 billion) which, subject to the approval by the CSRC, shall be contributed by the JV Partners as follows:

		Equity interest
		in the JV
JV Partner	Capital Contribution	Company
Hanhua Financial	RMB600 million	40%
Chongqing Jiangbeizui	RMB375 million	25%
Kingsway Financial	RMB330 million	22%
Chongqing Huiwei	RMB150 million	10%
Prive Financial	RMB45 million	3%

• (ii) within 6 months after the approval of the CSRC for the establishment of the JV Company has been obtained, each JV Partner shall pay its capital contribution in one lump-sum within fourteen (14) Business Days of receiving the capital contribution notice from the JV Preparatory Committee; and

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LETTER FROM THE BOARD

• (iii) subject to the JV Company obtaining the final approvals from the CSRC, it is contemplated that the JV Company would be principally engaged in the provision of regulated securities brokerage services, securities underwriting and sponsor services, proprietary trading, securities and asset management and any other business approved by the CSRC in the PRC.

The initial capital requirement of the JV Company was based on the projected needs in the business development plan of the JV Company whereas the respective amounts of capital contributions of the JV Partners were determined after arm’s length negotiation among the JV Partners, taking into account the regulatory requirements for establishing a foreign-invested securities company in the PRC and the internal resources of the Group. It is intended that Kingsway Financial’s capital contribution of RMB330 million will be funded by internal resources of the Group and/or borrowing from financial institutions and/or alternative debt or equity financing that may be obtained by the Group. Based on the Group’s internal resources and/or the Group’s borrowing from financial institutions and/or the alternative debt or equity financing that may be obtained by the Group, as at the Latest Practicable Date, the Directors are of the view that the Group will have sufficient funding for the capital contribution to the JV Company.

Establishment of the JV Company

Pursuant to the JV Contract, the JV Partners agreed to form the JV Preparatory Committee to handle matters related to the establishment of the JV Company, including without limitation, to submit the relevant application documents, confirm the candidates for directors and supervisors according to the respective nominations of the JV Partners, finalise the articles of the JV Company, the rules of procedures for the general meeting, the board of directors and the board of supervisors of the JV Company, according to the comments of the CSRC (if any).

Restrictions on transfer

Pursuant to the JV Contract, no JV Partner may transfer all or any part of its equity interests in the JV Company during the 48-month period (the “ Lock-up Period ”) commencing on the date of establishment of the JV Company. After the Lock-up Period, any transfer of equity interest in the JV Company by a JV Partner to a third party must be approved by more than half of the non-transferring JV Partners. If so approved by more than half of the non-transferring JV Partners, the non-transferring JV Partners shall have a first right to purchase all (but no less than all) of the equity interest proposed to be transferred on the same terms as those offered to the third party.

If the proposed transfer has not been approved by more than half of the non-transferring JV Partners, those non-transferring JV Partners which have not approved the proposed transfer shall jointly purchase all (but no less than all) of the equity interests. If such non-transferring JV Partners do not purchase all of the equity interest proposed to be transferred, they shall be deemed to have agreed to the third party transfer.

All share transfers shall be subject to legal and regulatory approval.

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LETTER FROM THE BOARD

If a shareholder pledges the equity interest of the JV Company, it must be approved by more than 50% of the voting rights held by the other JV Partners attending the general meeting.

Boards of directors and supervisors of the JV Company

According to the Draft JV Articles, the board of directors of the JV Company shall consist of seven (7) directors (two (2) of whom shall be independent directors).

Hanhua Financial is entitled to nominate two (2) directors, while each of Chongqing Jiangbeizui, Kingsway Financial and Chongqing Huiwei is entitled to nominate one (1) director. Each of Hanhua Financial and Chongqing Jiangbeizui is entitled to nominate one (1) independent director. The chairman of the board of directors of the JV Company shall be a director elected by the board of directors of the JV Company.

The board of supervisors of the JV Company shall consist of five (5) supervisors. Pursuant to the Draft JV Articles, each of Chongqing Jiangbeizui, Kingsway Financial and Prive Financial is entitled to nominate one (1) supervisor, while the remaining two (2) employee supervisors shall be elected by the employees’ representative congress. The chairman of the board of supervisors of the JV Company shall be a supervisor elected by the board of supervisors of the JV Company.

Dividend policy

The JV Company shall, after making up the previous year’s losses and contributions to the statutory funds and other reserves, distribute 10% to 50% of the after-tax profits to the JV Partners in the same proportion as their respective interests in the JV Company.

REASONS FOR AND BENEFITS OF THE FORMATION OF THE JV COMPANY

As at the date of this circular, the Company is an investment holding company and the principal activities of the Group include investment in securities, stocks, options, futures and commodities brokerage, provision of financial advisory services, asset management, money lending and other securities related financial services.

As set out in the annual report of the Group for the year ended 30 June 2016, the Group’s business strategies continue to include enlarging the Group’s revenue base through fostering its core businesses. The Group will also continue to explore the business opportunities in the PRC market.

By entering into the JV Contract and committing its resources towards the establishment of the JV Company on the terms of the JV Contract, the Group and the JV Partners expect to rely on Supplement X of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), pursuant to which Hong Kong-funded financial institutions which satisfy the requirements for establishing foreign-invested securities companies may set up one full-licensed joint venture securities company in specified areas in the PRC in accordance with the relevant requirements. The PRC joint venture partners are not restricted to securities companies and the percentage of aggregate equity interest of the Hong Kong – funded financial institutions in the joint venture should not exceed 49%. Following the

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LETTER FROM THE BOARD

execution of the JV Contract, the JV Partners had submitted applications, together with the JV Contract and the Draft JV Articles, to the CSRC for the establishment of and the grant of the regulatory licenses to the JV Company.

The JV Company is proposed to be set up in Chongqing, which is situated in the western part of the PRC. One of the JV Partners, Hanhua Financial, has an existing business presence in Chongqing and is familiar with the local market conditions. In addition, the JV Partners are of the view that the securities market in Chongqing has potential for growth. Subject to the JV Company obtaining the final approvals from the CSRC, it is contemplated that the JV Company would be principally engaged in the provision of regulated securities brokerage services, securities underwriting and sponsor services, proprietary trading, securities and asset management and any other business approved by the CSRC in the PRC. The JV Partners currently have no immediate plans to expand the business operations of the JV Company to other cities in the PRC. However, the comprehensive license applied by the JV Partners would permit the JV Company to expand its business operations to other cities in the PRC.

On 2 December 2016, the JV Partners submitted applications, together with, among other documents, the JV Contract and Draft JV Articles, to the CSRC for the establishment of and the grant of regulatory licenses to the JV Company. Under PRC law, the CSRC will process the application within six months upon issuance of the acknowledgement of receipt. In the event that the CSRC and other regulatory authorities grant the necessary approvals for Kingsway Financial and other JV Partners for the establishment of the JV Company and the making of their respective capital contributions, the Company will make further announcements as and when appropriate in accordance with the Listing Rules.

The Board believes that the participation in the establishment and operation of the JV Company would offer an opportunity for the Company to capitalise on growing opportunities resulting from the PRC’s development and emergence as one of the world’s major economies, which is in line with the Group’s business strategies.

The Directors (including the independent non-executive Directors) consider that the JV Contract and the transactions contemplated thereunder, including the investment in the JV Company by Kingsway Financial, are on normal commercial terms which are fair and reasonable and are in the interest of the Company and its Shareholders as a whole.

INFORMATION ON THE JV COMPANY

The JV Company, when established, will be a limited liability company in the PRC with a registered capital of RMB1.5 billion, which will be contributed and held as to 40% by Hanhua Financial, 25% by Chongqing Jiangbeizui, 22% by Kingsway Financial, 10% by Chongqing Huiwei and 3% by Prive Financial. The JV Company is proposed to be set up in Chongqing, the PRC.

Subject to final approvals of the CSRC, it is contemplated that the JV Company would be principally engaged in the provision of regulated securities brokerage services, securities underwriting and sponsor services, proprietary trading, securities and asset management and any other business approved by the CSRC in the PRC.

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LETTER FROM THE BOARD

The JV Company’s strategic position will initially serve small to medium-sized enterprises in the PRC for different business segments. It is anticipated that the JV Company would strive to become a comprehensive securities company.

It is the preliminary intention of the JV Partners to apply the registered capital of the JV Company to the following segments based on the preliminary financial forecast for the JV Company (which may be subject to change based on regulatory requirements):

	Approximate % of the
	registered capital
Securities brokerage services	1-3
Securities underwriting and sponsor services	2-4
Proprietary trading	38-50
Securities and asset management	15-25
Other investment	5-12
Liquid capital	20-32

The JV Partners expect that the registered capital of RMB1.5 billion, which was determined after arm’s length negotiation among the JV Partners with reference to the projected needs of the JV Company, would be sufficient for the JV Company to implement its business plans to become a comprehensive securities company. The contributions to be made by each JV Partner will be proportional to their equity interests in the JV Company and will be paid in one lump-sum within fourteen (14) Business Days of receiving the capital contribution notice from the JV Preparatory Committee.

INFORMATION ABOUT THE JV PARTNERS

Kingsway Financial is a limited liability company incorporated in Hong Kong and is an indirect wholly-owned subsidiary of the Company. It is a licensed corporation permitted to carry on Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management) regulated activities under the SFO. It is principally engaged in the provision of securities, options, futures and commodities brokerage services in Hong Kong.

Hanhua Financial is a national comprehensive and inclusive financial service provider approved by the State Administration for Industry and Commerce of the PRC, and the PRC’s first national comprehensive and inclusive financial service group listed on the Stock Exchange (stock code: 3903). Hanhua Financial is principally engaged in providing diversified and comprehensive financial services such as credit guarantees, small loans, financial factoring, asset management and financing leases to micro, small and medium-sized enterprises in the PRC.

Chongqing Jiangbeizui is a wholly state-owned enterprise established under the laws of the PRC with investment and financing function approved by the Chongqing Municipal People’s Government, which is principally engaged in land reserve management, engineering construction, housing lease and property management and engineering supervision.

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LETTER FROM THE BOARD

Chongqing Huiwei is a limited liability company established under the laws of the PRC which is principally engaged in external investment business with self-owned funds and a wholly-owned subsidiary of Hanhua Financial.

Prive Financial is a limited liability company incorporated in Hong Kong, focused on offering a variety of financial services on its wealth and asset management platform and software system. Prive Financial is a licensed corporation permitted to carry on Type 1 (dealing in securities) regulated activities under the SFO and is part of a financial technology holding company, Prive Holdings Limited, headquartered in Hong Kong.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, as at the Latest Practicable Date, each of Hanhua Financial, Chongqing Jiangbeizui, Chongqing Huiwei and Prive Financial and their respective ultimate beneficial owners are Independent Third Parties.

FINANCIAL EFFECTS OF THE FORMATION OF THE JV COMPANY

Effect on assets and liabilities of the Group

Based on the audited consolidated financial statements of the Company for the year ended 30 June 2016, the total assets and total liabilities of the Group were approximately HK$1,148 million and HK$179 million respectively. Assuming the JV Company had been established and the capital contribution of RMB330 million (equivalent to approximately HK$372 million) into the JV Company had been made by Kingsway Financial, the total assets of the Group would be impacted as follows:

• (i) an increase in the Group’s investment in joint venture of RMB330 million (equivalent to approximately HK$372 million) when the capital contribution of approximately HK$372 million into the JV Company by Kingsway Financial had been made, using the equity method to account for such investment in the JV Company; and

• (ii) a decrease in the Group’s cash and bank balances and financial assets at fair value through profit or loss of approximately HK$222 million and an increase in bank loans of approximately HK$150 million to settle the capital contribution of RMB330 million (equivalent to approximately HK$372 million) to be made into the JV Company.

As at 30 June 2016, the gearing ratio calculated as a percentage of bank borrowings over Shareholders’ equity was approximately 2%. Assuming that the capital contribution had taken place as at 30 June 2016 and the contribution will be financed by bank loans of approximately HK$150 million, the gearing ratio calculated as a percentage of bank borrowings over Shareholders’ equity would be approximately 17%. However, there would be no material impact on the Group’s net asset value.

Effect on earnings of the Group

Based on the audited consolidated financial statements of the Company for the year ended 30 June 2016, the Group recorded a net loss attributable to owners of the Company of approximately HK$70 million. Assuming the JV Company had been established and the

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LETTER FROM THE BOARD

capital contribution of RMB330 million (equivalent to approximately HK$372 million) made by Kingsway Financial into the JV Company had been fully financed by the Group’s internal resources and/or borrowing from financial institutions, it is expected that the share of 22% of the net results of the JV Company will be taken up by the Group after the Completion. As such, the impact on the earnings of the Group would depend on the actual financial performance of the JV Company in the future.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios calculated by reference to Rule 14.07 of the Listing Rules in respect of the capital commitment of Kingsway Financial under the JV Contract are more than 25% but all of the applicable percentage ratios are less than 100%, the entering into of the JV Contract and the transactions contemplated thereunder constitute a major transaction of the Company under Chapter 14 of the Listing Rules and are subject to the reporting, announcement and shareholders’ approval requirements.

To the best of the Directors’ information, knowledge and belief having made all reasonable enquiries, as at the Latest Practicable Date, no Shareholder had any material interest in the JV Contract and the respective transactions contemplated thereunder that is materially different from the other Shareholders. Therefore, no Shareholder and his/her/its close associates are required to abstain from voting on the resolutions to be proposed at the SGM.

SGM

The Company will convene an SGM for the Shareholders to consider and, if thought fit, approve by way of poll, the JV Contract and the transactions contemplated thereunder. A notice convening the SGM to be held at 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong on Monday, 23 January 2017 at 10:00 a.m. is set out on pages SGM-1 to SGM-2 of this circular.

Whether or not you are able to attend and/or vote at the SGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s Share Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from subsequently attending and voting in person at the SGM or any adjournment thereof (as the case may be) should you so wish.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information contained in the appendices to this circular.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors are of the view that the terms of the JV Contract and the transactions contemplated thereunder, including the investment in the JV Company by Kingsway Financial, are on normal commercial terms which are fair and reasonable and are in the interests of the Company and the Shareholders as a whole and, recommend the Shareholders to vote in favour of the relevant resolutions to be proposed at the SGM to approve the JV Contract and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the Board Sunwah Kingsway Capital Holdings Limited Michael Koon Ming Choi Chief Executive Officer & Executive Director

– 12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. THREE-YEAR AUDITED FINANCIAL INFORMATION

The audited consolidated financial statements of the Group for the years ended 30 June 2014, 2015 and 2016 together with the relevant notes thereto can be found from pages 33 to 102 of the annual report of the Company for the year ended 30 June 2014 published on 9 October 2014, pages 31 to 102 of the annual report of the Company for the year ended 30 June 2015 published on 15 October 2015 and pages 32 to 106 of the annual report of the Company for the year ended 30 June 2016 published on 20 October 2016, respectively.

The said annual reports of the Company are available on the Company’s website at www.sunwahkingsway.com and the website of the Stock Exchange at www.hkexnews.hk.

2. INDEBTEDNESS STATEMENT

As at the close of business on 30 November 2016, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the total indebtedness of the Group was as follows:

Banking facilities

The Group held banking facilities of approximately HK$239 million granted from banks, which are secured by listed debt securities, land and building held for own use and a corporate guarantee provided by the Company. As at 30 November 2016, the Group had outstanding secured and guaranteed bank borrowings of approximately HK$75 million.

Contingent liabilities

The Group did not have any material contingent liabilities as at 30 November 2016.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, as at 30 November 2016, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, and term loans, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptance (other than normal trade bills) or acceptance credits or hire purchase commitments, mortgages, charges, contingent liabilities or guarantees.

3. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse changes in the financial or trading position or prospects of the Group since 30 June 2016, being the date to which the latest audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. WORKING CAPITAL

The Directors are of the opinion that, in the absence of unforeseeable circumstances, assuming the completion of the formation of the JV Company, and taking into account the present internal financial resources available to the Group and the existing banking facilities available to the Group, the Group will have sufficient working capital for its present requirements and the requirements for the next twelve months from the date of this circular.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Company is an investment holding company and the principal activities of the Group include investment in securities, stocks, options, futures and commodities brokerage, provision of financial advisory services, asset management, money lending and other securities related financial services.

For the year ending 30 June 2017, our business strategies continue to include enlarging our revenue base through fostering our core businesses, and tapping into new emerging markets with expanded business initiatives. While applying our professional operational capabilities to serve our clients, the Group will devote increased resources to business diversification and acquisition when opportunities arise, with the view to strengthening our all-rounded business position in Hong Kong and beyond. The Group will continue to explore business opportunities in the PRC market. At the same time, the Group also keeps a firm grasp on the business opportunities with comparable growth and return in the local financial market where more resources will then be devoted. As at the Latest Practicable Date, the Company had no intention to, nor was it under negotiation for the purpose of entering into any agreement, arrangement or understanding, regarding any potential acquisition or disposal.

Brokerage

The brokerage division is working continuously to improve its services delivery standard by upgrading its technology, amid strong competition from banks and other service providers.

The growth in the Group’s margin lending book was driven by an increased demand from the Group’s corporate clients and high net worth clients. Looking ahead, the Group will continue to seek different opportunities to expand its loan financing business.

Corporate Finance and Capital Markets

The number of newly listed companies on the Stock Exchange of Hong Kong during the six months ended 30 June 2016 was 82, compared with 86 companies in the same period of 2015. However, the funds raised from initial public offerings dropped significantly from HK$277 billion for the six months ended 30 June 2015 to HK$174 billion for the six months ended 30 June 2016.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The corporate finance and capital markets division completed more than ten placing transactions in the six months ended 30 June 2016. However, the fund size of the fund raising transactions participated in by the division decreased, hence, the underwriting and placing commission income also decreased.

Asset Management

The asset management division faced great challenges with poor market sentiment and increasing number of market competitors during the six months ended 30 June 2016.

Proprietary Investment

The Group continued to diversify its investment portfolio and invested in listed equities and derivatives, listed debt securities, unlisted private investment fund, unlisted convertible bonds and investment properties. As market dynamics are changing rapidly, more flexibility in investment horizons and products structuring is required. Management therefore merged the investment in securities and structured investment divisions into proprietary investment division to better manage our portfolio.

6. FOREIGN EXCHANGE EXPOSURE

The Group’s assets are mainly in Hong Kong and the PRC and most of the monetary assets and liabilities of the Group are denominated in HK$. As part of our investment monitoring, financial assets denominated in foreign currencies, including equity and debt investments, are monitored on a daily basis together with the changes in market value of these investments. Financial instruments may be used as part of the overall investment strategy if deemed necessary by the investment managers. The Group purchased properties in the PRC for its own use and for investment purpose and debt securities denominated in RMB for proprietary trading. Taking into account all relevant macroeconomic factors and the size of assets held, the Group believes that there is no need to hedge these assets denominated in RMB. Management will monitor the situation closely and introduce suitable hedging measures if there are any material adverse changes. The Group does not have other material exposure to fluctuation in exchange rates and no hedging instruments are used.

7. EMPLOYEES

As at 30 June 2016, there were 99 full time employees in the Group. Remunerations and bonuses are based on performance and are reviewed annually in conjunction with the annual employee performance appraisal. It also takes into consideration the results of the division to which the employee belongs and the Group as a whole. The Group provides a full induction program and in-house training courses to all staff – particularly professionals registered with relevant regulatory bodies who must meet their mandatory continued professional training requirements.

A share option scheme is available to directors, employees and consultants of the Group (the “ Share Option Scheme ”). As at the Latest Practicable Date, there were no outstanding exercisable options that were granted under the Share Option Scheme.

– 15 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material aspects 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

Interests of Directors and chief executive in the Company or any of its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive 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 required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which the Directors and chief executive were taken or deemed to have under such provisions of the SFO), or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange were as follows:

• (i) Interest in long positions of Shares

		Number of
	Type of	ordinary	% of total
Name of Director	interest	Shares	issued Shares
Dr. Jonathan Koon Shum Choi*	Corporate	2,391,447,327	43.31%
Dr. Jonathan Koon Shum Choi	Personal	667,880,473	12.10%
Mr. Michael Koon Ming Choi	Personal	19,270,203	0.35%

• Dr. Jonathan Koon Shum Choi is deemed to be interested in 2,391,447,327 ordinary Shares by virtue of the SFO. Such interest in Shares is also set out under the paragraph headed “Interests of substantial Shareholders” in this appendix.

– 16 –

GENERAL INFORMATION

APPENDIX II

• (ii) Interest in long positions of common shares of Sunwah International Limited (“ SIL ”), the ultimate holding company of the Company

			Total
			number of	% of total
	Personal	Corporate	common	issued
Name of Director	interest	interest	shares	shares
Dr. Jonathan Koon Shum Choi*	10,653,096	74,371,646	85,024,742	91.3%
		(Note 1)
Mr. Michael Koon Ming Choi	118,937	23,405,487	23,524,424	25.3%
		(Note 2)

• By virtue of his interest in SIL, Dr. Jonathan Koon Shum Choi is deemed to be interested in the shares of the subsidiaries (including the Company as disclosed in paragraph (i) above) of SIL under the SFO.

Notes:

• (1) Of these, 36,966,159 shares are held by Sun Wah Capital Limited, 14,000,000 shares are held by Scarlet Red Limited and the remaining 23,405,487 shares are held by Perfect Dream Holdings Limited. Dr. Jonathan Koon Shum Choi is deemed to be interested in these shares as he is entitled to exercise, or control the exercise of, one third or more of the voting power at the general meetings of each of Sun Wah Capital Limited, Scarlet Red Limited and Perfect Dream Holdings Limited.

• (2) The 23,405,487 shares are held by Perfect Dream Holdings Limited. Mr. Michael Koon Ming Choi is deemed to be interested in these shares as he is entitled to exercise, or control the exercise of, one third or more of the voting power at the general meeting of Perfect Dream Holdings Limited.

• (iii) Interest in unsecured debentures issued by SIL

		Principal
		amount of
Name of Director	Type of interest	debentures
Dr. Jonathan Koon Shum Choi*	Corporate	CAD4,500,000
Mr. Michael Koon Ming Choi**	Corporate	CAD1,500,000

• The debentures are held by Sun Wah Capital Limited. Dr. Jonathan Koon Shum Choi is deemed to be interested in these debentures as he is entitled to exercise, or control the exercise of, one third or more of the voting power at the general meetings of Sun Wah Capital Limited.

• ** The debentures are held by Ideal Performance Limited, a company wholly-owned by Mr. Michael Koon Ming Choi who is deemed to be interested in these debentures.

Note:

The debentures bear an interest at the rate of 8% per annum payable semi-annually and mature on 19 September 2017.

– 17 –

GENERAL INFORMATION

APPENDIX II

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions 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 were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which the Directors and chief executive were taken or deemed to have under such provisions of the SFO), or were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies in the Listing Rules to be notified to the Company and the Stock Exchange.

Interests of substantial Shareholders

So far as is known to the Directors or the chief executive of the Company, as at the Latest Practicable Date, the persons other than a Director or chief executive of the Company who had an interest or short position in the shares and 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 were as follows:

	**Number of **	**Shares **	held
	(long position)			Approximate
			Deemed	% of total
Name	Direct interest		interest	issued Shares	Note
World Developments Limited	2,391,447,327		–	43.31	1
Innovation Assets Limited	–	2,391,447,327		43.31	1
SIL	–	2,391,447,327		43.31	1
Sun Wah Capital Limited	–	2,391,447,327		43.31	1
廣州匯垠發展投資合夥企業	290,000,000		–	5.25

Note:

1. These Shares represent the same interest and are therefore duplicated amongst World Developments Limited, Innovation Assets Limited, SIL and Sun Wah Capital Limited. World Developments Limited is a wholly-owned subsidiary of Innovation Assets Limited whose entire issued share capital is beneficially owned by SIL. Sun Wah Capital Limited beneficially owns approximately 40% of the issued share capital of SIL and therefore is deemed (by virtue of the SFO) to be interested in these 2,391,447,327 Shares. Dr. Jonathan Koon Shum Choi beneficially owns or has control of more than one third of the issued share capital of SIL and Sun Wah Capital Limited and therefore is deemed (by virtue of the SFO) to be interested in these 2,391,447,327 shares. Ms. Janice Wing Kum Kwan, the spouse of Dr. Choi, is deemed (by virtue of the SFO) to be interested in the 2,391,447,327 Shares.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware that there was any person (other than a Director or chief executive of the Company) who had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

– 18 –

GENERAL INFORMATION

APPENDIX II

Service Contracts

As at the Latest Practicable Date, there was no existing or proposed service contract between any of the Directors and the Company or any member of the Group excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

Interests in other competing business

Each of the Directors has confirmed that so far as they are aware, the Directors and their respective close associates do not have any interests in a business apart from the Group’s business which competes or is likely to compete with the Group.

Interests in assets

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 30 June 2016 being the date to which the latest published audited accounts of the Company were made up.

Interests in contract or arrangement

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting which is significant in relation to the business of the Group.

3. LITIGATION

During the year ended 30 June 2011, the Group deposited an amount of HK$40,000,000 (the “ Escrow Funds ”), into an escrow account maintained by an international law firm in Hong Kong pursuant to the terms of an escrow agreement dated 28 March 2011. As has been widely reported, a partner of the law firm with which the funds were deposited had been arrested by the Hong Kong Police and charged with theft and forgery with respect to monies held in the law firm’s escrow account. In August 2013, it was reported that the partner pleaded guilty to fraud and money laundering and was sentenced to jail for 12 years.

The law firm has not returned the Escrow Funds despite a demand for payment by the Group. The Group has commenced legal proceedings against the law firm and its partners for recovery of the Escrow Funds. As at the Latest Practicable Date, the said legal proceedings is pending.

Save as disclosed herein, as at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.

– 19 –

GENERAL INFORMATION

APPENDIX II

4. MATERIAL CONTRACT

The following contract (not being a contract entered into in the ordinary course of business) had been entered into by members of the Group within the two years immediately preceding the date of this circular which is or may be material:

• (a) the joint venture contract dated 1 December 2016 and entered into among Kingsway Financial, Hanhua Financial, Chongqing Jiangbeizui, Chongqing Huiwei and Prive Financial in relation to the establishment of the JV Company.

5. GENERAL

• (a) The secretary of the Company is Mr. Vincent Wai Shun Lai. Mr. Lai is also the Chief Administrative Officer of the Company and a director of several subsidiaries of the Group. Mr. Lai is a qualified solicitor of the High Court of the Hong Kong Special Administrative Region and an Attorney at Law of the State of New York, USA.

• (b) The registered office of the Company is situated at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

• (c) The head office and principal place of business of the Company is situated at 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong.

• (d) The Hong Kong branch share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited, located at Room 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (e) The Bermuda principal share registrar and transfer office of the Company is MUFG Fund Services (Bermuda) Limited, located at the Belvedere Building, 69 Pitts Bay Road, Pembroke HM08, Bermuda.

• (f) In the event of inconsistency, the English text shall prevail over the Chinese text.

6. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during 9:00 a.m. to 6:00 p.m. at the head office and principal place of business of the Company at 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong from the date of this circular up to and including the date of the SGM:

• (a) the memorandum and bye-laws of the Company;

• (b) the annual reports of the Company for the three years ended 30 June 2014, 30 June 2015 and 30 June 2016;

• (c) the material contract referred to under the section headed “Material Contract” in this appendix; and

• (d) this circular.

– 20 –

NOTICE OF SPECIAL GENERAL MEETING

==> picture [92 x 41] intentionally omitted <==

SUNWAH KINGSWAY CAPITAL HOLDINGS LIMITED 新華滙富金融控股有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 00188)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE is hereby given that a special general meeting of Sunwah Kingsway Capital Holdings Limited (the “ Company ”) will be held at 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong at 10:00 a.m. on Monday, 23 January 2017 (the “ SGM ”) for the purpose of considering, and if thought fit, passing, with or without amendments or modifications, the following as an ordinary resolution of the Company:

ORDINARY RESOLUTION

1. “ THAT :

2. (a) the entering into of the joint venture contract dated 1 December 2016 entered into among Kingsway Financial Services Group Limited, 瀚華金控股份有限公司 (transliterated as Hanhua Financial Holding Co., Ltd.), 重慶市江北嘴中央商務區投資 集團有限公司 (transliterated as Chongqing Jiangbeizui Central Business District Investment Group Co., Ltd.), 重慶惠微投資有限公司 (transliterated as Chongqing Huiwei Investment Co., Ltd.) and Prive Financial Limited (the “ JV Contract ”, a copy of which has been produced to the SGM and marked “A” and initialled by the chairman of the SGM for the purposes of identification) in relation to the establishment of 瀚華證券有限責任公司 (transliterated as Hanhua Kingsway Securities Co., Ltd.) (the “ JV Company ”), details of which are set out in the circular of the Company dated 4 January 2017 (the “ Circular* ”, a copy of which has been produced to the SGM and marked “B” and initialled by the chairman of the SGM for the purposes of identification) and the terms thereof be and are hereby confirmed, approved and ratified;

3. (b) all the transactions contemplated under the JV Contract including but not limited to the capital contribution by Kingsway Financial Services Group Limited into the JV Company be and are hereby confirmed and approved; and

– SGM-1 –

NOTICE OF SPECIAL GENERAL MEETING

• (c) any one or more directors of the Company (“ Directors ”) be and is/are hereby authorised to do such acts and things, to sign and execute all such further documents and to take such steps as such Director(s) may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the JV Contract and any transactions contemplated thereunder.

By Order of the Board of Sunwah Kingsway Capital Holdings Limited Michael Koon Ming Choi Chief Executive Officer & Executive Director

Hong Kong, 4 January 2017

Registered Office:

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Notes:

1. A member entitled to attend and vote at the special general meeting is entitled to appoint one or more proxies to attend and on a poll vote instead of him. A proxy need not be a member of the Company.

2. In order to be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power of authority, must be deposited with the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time fixed for holding the meeting or any adjourned meeting thereof. Completion and return of the form of proxy will not preclude any member from attending and voting in person at the special general meeting or any adjourned meeting thereof should he so wishes.

3. In case of joint shareholdings, the vote of the senior joint shareholder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint shareholder(s) and for this purposes seniority will be determined by the order in which the names stand in the Register of Members of the Company in respect of the joint shareholding.

4. Completion and return of the form of proxy will not preclude shareholders from attending and voting in person at the meeting if shareholders so wish.

5. Pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the resolution set out in this notice of special general meeting will be put to the shareholders to vote taken by way of a poll.

As at the date of this notice, the Directors are Jonathan Koon Shum Choi as Chairman, Michael Koon Ming Choi as Chief Executive Officer & Executive Director, Janice Wing Kum Kwan and Lee G. Lam as Non-Executive Directors, Robert Tsai To Sze, Elizabeth Law and Huanfei Guan as Independent Non-Executive Directors.

– SGM-2 –